I remember reading a little book a while ago, a book that talked about universal human truths, principles and a set of guidelines that should be followed by people and the institutions that govern them.
The book pushed hard on things like working hard, very hard and looking out for those around you in the community and generally paying attention to bigger earthly principles like “every action has a reaction”. Wrapped up in this little book and its suggestions were warnings about a particularly pernicious creature…..CREDIT. The book warns that taking advantage of something or using something or building something before you could pay for it with money already earned would only lead to certain disaster. You know the whole good story about compounding interest and how it compounds and grows and grows and grows. Well, the inverse is also true…if you have credit and borrow and borrow and borrow, it eventually all begins to grow and grow and grow…until it consumes you…..
And consume is exactly what the credit bubble is doing…..not just to individual consumers. And not just to our sinking country….to the entire Western world. Greece is getting lots of attention here lately, but Greece is just a symptom of the cancer that is truly international. As goes Greece, so does the rest of Europe….eventually. The debt ratios that have everyone freaking out about Greece are actually lower than some other countries….but whether it’s Greece or Great Britain or all of America, the problem is all the same….too much credit, too many liabilities, not enough output.
We’re all interconnected and we’re all heading for currency crisis and international collapse. And that book I spoke of earlier….a little book called The Bible:
The rich rules over the poor, and the borrower is the slave of the lender.
He who increases his wealth by exorbitant interest amasses it for another, who will be kind to the poor.
But the point is America is not a credit sucking island sitting alone…..the whole Western world and our “basket of currencies” are a mess, as detailed in the Wall Street Journal…
We are confronting a crisis, all right, but it is not a Greek crisis, unless uncertainty as to the date of that country’s de facto default counts as a crisis.
If the insolvency of that tiny country were the world’s only problem, it would be stretching the word “crisis” to apply it to the travails and insolvency of that tiny country.
What we have come to call the Greek crisis is, first, an international banking crisis. Like Lehman Brothers, Greece is definitely not too big to fail. It is too interconnected to fail, too interconnected to the international banking system, too interconnected to the political ambitions of those who have spent decades replacing the system of nation states with a united Europe.