By Katie Kieffer
Helen of Troy by Dante Gabriel Rossetti, 1863, oil on panel
I’m sure you’ve heard of Helen of Troy from Greek Mythology. After Paris of Troy abducted Helen from her husband, Menelaus, the Greeks launched the Trojan War to win her back. Her beauty and power were undeniable. She crushed and melted the hearts of the strongest men.
In Greek Mythology, heroes were mortals who overcame the fear of death, typically during a heroic battle such as the Trojan War, to achieve “kleos” or glory. Helen of Troy is a Greek myth. “Hell in Troy” is a Greek reality. Let me tell you the tale of Hell in Troy.
Greece is one of the most beautiful countries in the world, surrounded by the Ionian, Aegean and Mediterranean Seas. It is rich in history and culture. All this is about to come tumbling to the ground. Greece has roughly $72 billion in debt due in 2010 and the world markets are concerned by Greece’s downturn.
Hell in Troy is the “battle” that Greece faces today. I am pointing out Greece’s economic challenges in hopes that they might help us understand the U.S.’s economic situation and avoid Greece’s pitfalls.
- Government growth:
On Feb. 24, about 50,000 Greek union workers went on strike in the streets to protest the Greek government’s proposal to cut their salaries in a desperate attempt to control the country’s debt debacle.Meanwhile, the average federal government employee in the U.S. makes over $75,000 and President Obama has approved a 1.4 percent salary increase for federal workers. In the private sector, the average employee only makes around $42,000 – if they haven’t already taken a pay cut or been laid off.
The U.S. needs to be careful because the Greek union workers are comparable to U.S. federal employees. If the U.S. government tries to reduce its debt by legitimately cutting federal employee salaries, there will be a Greek-style strike. The U.S. is setting itself up for problems by irresponsibly bloating the federal payroll.
Greek rioters clash with police officers during a worker's strike in Athens on Feb. 24, 2010. Image credit: EPA/BGNES
- Poor government fiscal policy: As I proved here, the U.S. recession was caused by loose government policy, not greed on Wall Street. Similarly, the primary source of Greece’s economic downturn is the Greek government’s (i.e. the European Union’s) loose communal fiscal policy and the Greek government’s wild spending habits.
The media, the U.S. government and many European officials are blaming Greece’s misfortunes on Wall Street’s “most successful” bank, Goldman Sachs. It is unfair for the U.S. government and the European Union to lambaste Goldman Sachs for participating in a 2001 currency trade that effectively acted as a loan to help “Athens meet Europe’s deficit rules while continuing to spend beyond its means.” Here’s why:
Goldman Sachs CEO, Lloyd Blankfein. Image: Smialowski/Bloomberg
Fed Chairman, Ben Bernanke, recently announced that the U.S. would be strictly scrutinizing Goldman Sachs’ business relations with Greece. What Bernanke failed to admit is that Goldman Sachs absolutely did not create the loose rules of the game – in the U.S. or in the European Union – the U.S. government and the European Union created them respectively.
Goldman Sachs is “the most successful bank on Wall Street” because it takes risks and plays the existing rules to the fullest. In 2001, this swap was considered legal under loose European Union policy. The European Union previously approved of similar swaps by other banks including JP Morgan and Merril Lynch for Italy and Greece.
Goldman Sachs is receiving an undue amount of attention and blame for ineffective rules and systems within the European Union. Certainly there were unscrupulous Goldman Sachs employees who took advantage of loose government monetary policies, but they did not cause Greece’s woes. At the end of the day, Greece spent herself into debt on her own.
You start to question the credibility of the Federal Reserve, which stubbornly resists full transparency and audit itself and works hand-in-hand with a Treasury Department that revised its benchmark reports on Feb. 26, 2010 to show that, “China’s holdings of U.S. Treasury securities stood at US$894.8 billion at the end of December, keeping it in first place ahead of Japan. On Feb. 16, the government reported data that showed China had been surpassed by Japan.“
It seems a bit strange that this revision came out in the wake of reports that China is losing interest in buying U.S. debt. Will the government soon announce that the “revised” U.S. unemployment rate is three percent?
- Reliance on a common currency and an economic union: The U.S. does not want to follow in the EU’s or the euro’s footsteps if she wishes to climb out of recession. A common currency and economic union have teed Europe up for communal economic disaster. The British politician and Member of the European Parliament, representing South East England for the Conservative Party, Daniel Hannan, recently discussed Europe’s financial woes with Glenn Beck:
Daniel Hannan
The United Kingdom would be in financial peril, Hannan said, “if we had joined the Euro. Thank heaven we kept the pound. Because, like I say, Greece’s deficit is 12.7 percent. Ours is 12.6 percent. The only thing that saved us from a Greece-like collapse is the fact that we were able to have a devaluation of our currency instead of having that devaluation in output and jobs. You guys wouldn’t want to swap your problems for Europe, as severe as your problems are with the way things are going there. But I’ll tell you another thing. The war cry of tax without representation doesn’t really apply so much these days in the U.S. Yes, your taxes are too high and they’re rising but at least they’re set by people you can vote for. Increasingly, the European Union is starting to levy, if you like, federal taxation, and so the protest of no taxation without representation is now much more relevant in Europe, because we feel that we have impulse being levied on us that we can’t get rid of.”
In order to end this “Hell in Troy,” and win the “glory” of overcoming economic death, Greece needs to bring out its Trojan Horses: Free market principles and small government. The U.S. needs to learn from Greece’s mistakes and to do the same.
Trojan Horse
