The Beatles sing about Greece & the Troika: “You say yes, I say no. You say stop but I say go, go, go. Oh no. You say goodbye and I say hello. Hello, hello. I don’t know why you say goodbye. I say hello …”

Just one example from each side of the aisle:

Yes:

A No vote would bring a new economic darkness. There is widespread agreement that the initial period would be characterised by default on Greece’s obligations to creditors, a chronic liquidity contraction and a solvency crisis in the banking sector, which would keep the banks shut. It would see a sclerotic blockage of most forms of economic activity. A further sharp GDP contraction would ensue. Whether or not the government chose to introduce a parallel currency to pay wages, pensions and other bills in the interim, a “new drachma” would be introduced. The currency would almost certainly drop sharply, most likely by about 50 per cent at first. Behind the wall of capital controls, the Bank of Greece would then print money. The risk of Greek deflation would disappear at a stroke. Banks would re-open, supported by the central bank and by a government programme to recapitalise them.

So Syriza would finally have re-taken control of Greece’s economic destiny. But it is unlikely to be successful in delivering a bright economic future, without help, for at least three reasons.

No:

This Sunday, the Greek people will finally face a decisive choice, yay or nay, to stay in the eurozone. In the humble opinion of this writer, the Greeks should reject Europe’s terms, ditch the euro, and take their chances restarting their own currency.

I’m certainly not the first or the smartest person to recommend this course. But there’s an extra wrinkle to add: Along with its own self-preservation, Greece should do it for the sake of its fellow European nations, since a Grexit might just shock Europe out of its crazed economic murder-suicide pact.

Images of Greece & Others

Contrast this chart

Beatles-Greece_1

With this

Beatles-Greece_2

Here Greece doesn´t standout at all, it´s super boom Ireland!

But Greece notches the biggest drop from the peak

Beatles-Greece_3

Dives just as deep but stays there for longer than the US during the Great Depression

Beatles-Greece_4

Comparing the “heathens” along “sacred” dimensions

Beatles-Greece_5

Beatles-Greece_6

Beatles-Greece_7

Except for the pre-crisis debt level, no great (and unsurmountable) differences

Which leads me to endorse David Beckworth´s argument in The Monetary Origins of the Eurozone Crisis;

The Eurozone crisis is one of the greatest economic tragedies of the past century. It has caused immense human suffering and continues to this day. The standard view attributes it to a pre-crisis buildup of public and private debt augmented by the imposition of austerity during the crisis. While there is evidence of a relationship between these developments and economic growth during the crisis, this evidence upon closer examination points to the common monetary policy shared by these countries as the real culprit for the sharp decline in economic activity. In particular, the ECB’s tightening of monetary policy in 2008 and 2010-2011 seem to have not only caused two recessions but sparked the sovereign debt crisis and gave teeth to the austerity programs. This finding points to the need for a new monetary policy regime in the Eurozone. The case is made that the new regime should be a growth path target for total money spending.

The illustrative pictures

Beatles-Greece_8

Bottom Line: Greece, more than the rest had (has) enormous structural issues, but the Gordian knot of monetary policy only helped strangle it!

5 thoughts on “The Beatles sing about Greece & the Troika: “You say yes, I say no. You say stop but I say go, go, go. Oh no. You say goodbye and I say hello. Hello, hello. I don’t know why you say goodbye. I say hello …”

  1. Hello Marcus-I’m assuming you wrote this though the author is ‘uncategorized.’ This is something with which I can agree wholeheartedly with you and Beckworth: the nature of the problem is monetary.

    The monetary solution is for Greece to leave the euro. I too suspect this may lead to an unwinding of the whole sorry euro project.

  2. The Euro project is part of a good idea, a Single European Market. Neo-liberals should welcome a barrier-less free trade zone in goods, services and labour. Poor monetary policy combined with local governments controlled by big-union backed leftist politicians promising the earth will never end well.

  3. See that’s where I’m misunderstood. I don’t disagree with everything MM, I just don’t agree with everything either. Clearly the real problem there is the monetary straitjacket they’re in.

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