Copyright 2012 by John T. Reed
Greece defaulted on its national debt in March 2012. To borrow money to pay government bills, they are having to cut pensions, lay off government employees, cut benefits—all the same stuff we are going to have to do in several years.
I thought when the world bond market stopped buying U.S. government bonds, our politicians would hyperinflate the U.S. dollar, that is, simply “print” legal counterfeit dollars to pay the government’s bills. But that “printing” cause the purchasing power of the dollar to plummet to nothing. For example, a Big Mac might cost $50,000. (That link takes you to the Economist magazine Big Mac index.)
I still figure that. But I also figured the Democrats and Republicans would not be run out of Washington until after that went on for a year or two and they were forced to start actually cutting spending because residents of the U.S., not just bond buyers, would stop accepting U.S. dollars for any payment.
Then, finally, I figured the people would wise up and throw the bums out. Not just the individual elected officials, but both major parties because they are both the ones who got us into this mess then tried to cover up their misbehavior with hyperinflation.
Turns out that process is already happening in Greece. By virtue of the euro zone—17 European countries that use the euro currency—for monetary purposes, Greece is like a U.S. state. Unlike the U.S., Greece can no longer “print” money. They could if they left the euro zone, but as long as they are in the euro zone, only the European Central Bank can “print” euros.
So unlike the U.S., Greece has been forced to make the spending cuts that we will only make after we first try hyperinflation. The Greek public, predictably, does not like the cuts. The 3/28/12 Wall Street Journal says the Greek people have decided not to vote for the two long-time major political parties that have been running Greece.
Good. But this is so unexpected that there is no one waiting in the wings to take advantage of the public’s new found interest in good government. So they are having to turn to various fringe parties like the Communists and anti-immigrant neo-Nazis. If those parties win enough to prevent major party majority, as expected, they will undo the austerity measures, which will undo the bailout from the other euro countries, which will probably get Greece thrown out of the euro zone which will enable Greece to “print” drachmas, the traditional Greek currency and they will hyperinflate their country into monetary chaos. At that point, the black market will be the only market, which we libertarians welcome because the black market is also known as the free market.
Greece will have their next election in April or May. Promises Greece made to the bailout lenders include new austerity measures that must be passed after those elections. The two major parties who have thus far supported the austerity measures, but they almost certainly will not have the votes in parliament to keep those promises about new austerity measures. Then, boom! No bailout, not enough money to pay the bills. Time to finally elect some grown-ups to run the country, and for the Greek people to grow up.
Coming soon to a country where you live
Memo to the U.S. Libertarian Party: Get ready and get real. People may actually vote for you in future elections. Ditto, the Communist Party of the U.S.A., although they would not know what to do unless the Soviet Union restarts to give them their marching orders. Probably there will be a “solve all problems by taxing the rich” party, a “solve all problems by deporting immigrants and enacting protectionist measures” party, and a “we have to cut spending” party. The public may try the painless solutions parties first, but eventually the cut spending party will will out because they are the only party connected to reality.
The Greek fringe parties are currently vowing to “fight against” the austerity measures. What the hell does that mean? You’re broke. You have bills to pay. Who are you going to punch in the nose? Your creditors? Toward what end? To force them to lend you even more money? They can financially wall your country off from the rest of the world—make you barter or pay stable currency for everything you want and need, like oil. Are you going to “fight” to get oil without paying for it from foreign countries?
The Journal article ends with the words,
Even radical opponents of austerity, who reject the bailout as a form of German imperialism, have trouble saying what they would do instead.
Instead of niggling around the edges as Paul Ryan and the other Republicans are doing, those who want to be elected federal officials in the future and those who want good government need to start building the brand of a new party to take over after the Democrats and Republicans are thrown on the ash heap of history. Those two long-established parties have destroyed the federal government and have destroyed their brands. Having been associated with them in the past, like Ryan, may destroy current Democrats and Republicans. To paraphrase the notorious McCarthy era Congressional hearing question,
Are you now, or have you ever been, a member of the Democrat or Republican parties?
Will the Tea Party inherit the earth? I think only real parties will. You can’t beat something with nothing and the Tea Party is sort of nothing. No platform. No roster of members. No ballot access. No money. No staff. No mailing address. No phone number.
I have lately been urging readers to get their money out of U.S. dollar-denominated assets and into the currencies of the well-managed, honest, economically free countries, namely
A Greek quoted in the Journal article teaches German for a living and says business is booming because Greeks want to emigrate out of Greece. “Young, educated people are packing their bags,” says the Journal. Me, too, and I’m not young. But after researching my hyperinflation book, I sure am educated. Actually, I am not yet packing bags, but I am putting money overseas and starting to look at blogs by expat Americans living in the countries in question and at the air fares and flight times.
I know the feeling. I have vicariously experienced what they are going through by watching the old silent Greta Garbo film the Joyless Street and reading the book When Money Dies and the hyperinflation diary of Anna Eisenmenger, all three of which are about hyperinflation in early 1920s Germany, Austria, and Hungary. As I read the books, I kept writing in the margin,“ why did they not leave the country!?”
When you cannot get fresh food or medicine or fuel for heat and hot water and roving bands of robbers are trying to take anything you have including your shoes and clothes, you need to get the hell out of Dodge.
I have lately been perusing web sites about dual passports. The U.S. did not used to allow that. My wife was born in Indonesia of American expatriate parents. She had dual Indonesian and American nationality until she turned 18 at which time she had to pick only one nation. She picked U.S. Now, Americans are allowed to have citizenship in more than one country although the State Department makes an unhappy face when you do it.
Dual passports is a misnomer. You can have more than one. When you use a passport—you just show one of them—your choice, and need not mention the other. There is no such thing as a passport with two countries written on it. You just have more than one passport legally. If the U.S. government outlaws leaving the country with valuables—a typical law that accompanies hyperinflation—and you have another passport, you simply show the other non-U.S. passport when you check in at the airport and carry your valuables onto the plane immune to the law. It looks like you generally have to live in the other country permanently for five years to apply for citizenship there. There are some shorter paths for stateless persons, asylum seekers, and other reasons. You have to check it out one country at a time.
But although a passport sort of guarantees you can pass through immigration at the departure and arrival destinations, absent Berlin Wall type laws, you can still leave the U.S. as a tourist and you can be a permanent tourist. You typically can only stay in a country without a special visa for three to five months per year. So fine, get the visa or go to another country when that time runs out. But don’t just sit in a country with hyperinflation and lack of food and other necessities as a result.
Of course, you need money when you are forced out of your country because of stupid policies like running the federal government off a fiscal cliff. Real money, that is, not U.S. dollars at that stage, is necessary to live anywhere and especially on non-hyperinflated countries. That i why I have been writing article lately about getting your cash out of U.S. dollars and out of U.S. banks. If you have money in foreign currencies in foreign banks in foreign countries, you should be able to simply leave the U.S. and live in any country that does not have capital controls and access your foreign no matter what country it is in. For example, if you have money in Australian dollars in Australia, you should have no trouble accessing it from, and spending it in, Canada. If we have capital controls in the U.S. however, you would be prohibited from accessing, possessing, and spending your Australian dollars in the U.S.
The consequences of overspending by Greece government are readily visible and even smellable (odor of burned-out buildings from the riots) in Greece. More homeless. More “for rent” signs. Unrepaired vandalized buildings from the riots.
Will the U.S. several-years-from-now future be exactly the same as Greece’s? No, but it is approximately what is in store for us.
People who currently get regular checks from the federal government are going to get much smaller checks or no checks. That’s the way it is and there is not avoiding it, only postponing it, which will make the cuts deeper. A stitch in times saves nine and the American people are saying “We prefer nine.”
So be it. Get your money out of Dodge. And prepare to get yourself out of Dodge if necessary.
John T. Reed