Greek Debt Crisis - Austerity at its Worst

Dear Friends,

If you are like me, you are having trouble understanding all the details of the Greek debt crisis.  Now that things are clearly coming to a dramatic head, I have found two articles that simplify the crisis, both are from The New York Times.  I would strongly recommend that you read them.  The first one is an article by Liz Alderman entitled "Explaining the Greek Debt Crisis and What It Means for the Eurozone" (here).  It is short, very readable and factually balanced.  The second is an op-ed piece by Paul Krugman entitled "Greece Over the Brink" (here).  He has written frequently about the Greek debt crisis, including two other pieces in the last week, entitled "Europe's Moment of Truth" (here) and "Breaking Greece" (here).

In my view, the entire crisis is the fault of the so-called troika (the International Monetary Fund, the European Central Bank and the European Commission) on behalf of Greek's creditors.  The troika has force incredible austerity on Greece over the past five years.  Despite the claims of conservatives, forcing such extreme austerity causes economic depression.  As Krugman points out the severe cuts in Greek government spending were by themselves sufficient to erase their deficits, but they caused a severe economic depression which dramatically reduced revenues and made the crisis even worse.  This crisis is not caused by Greece's excessive spending pre-2008, it is caused by the austerity measures force on it by the troika and Greece's in ability to offset that austerity by devaluing its currency. Krugman concludes that the only hope for Greece is for it to leave the Eurozone and adopt its own currency again.

While the troika is European, the United States is not without influence because of its participation in the International Monetary Fund.  President Obama has not spoken out on behalf of Greece.  Hillary Clinton does not appear to have addressed this crisis.  Bernie Sanders has called for the Fed to bailout  Greece and give their economy a chance to recover.

The domestic lesson for the United States to learn is that austerity does not work to solve a nation's debt problems, not in Greece (which is further hampered because it does not have its own currency) or in the United States.  One of the critical jobs of a government is to stimulate the economy through spending in order to stimulate an economy in economic depression.  Anybody that refutes that has failed to learn from history.

Thanks for reading and please comment,
The Unabashed Liberal