I've not blogged much on Greece as I think they are only the sideshow, but they do provide a small-scale experiment, much like Argentina a decade ago, to demonstrate what the political elites are going to attempt in the U.S. and throughout Europe when the debt bomb goes off in the "core" of those regions.
Imagine trying to enforce this on your citizens, lowering pay retroactively:Greek austerity moves leave nation's economic safety net in tatters
Roy Gutman, McClatchy Newspapers, Febuary 9, 2012
...As Greece's political leaders struggle to reach an agreement with international lenders before a March 30 deadline, the toll is growing from an austerity program that promises only to get tougher. Greece has been living beyond its means for decades, and now the little man is paying the price...
...For Delpina Koutsoumba, however, this is a winter of discontent. She's 37, a trained archaeologist with a master's degree who works for the ministry of culture's department of "aquatic antiquities," issuing licenses and supervising construction of ports, hotels and other investments on Greece's storied coastline. Her take-home pay last month was $860.
"I'm an archaeologist, married with a child. Of course, I cannot live on this," she said.
Nominally, she earns $1,190, but late last year the government announced that it was lowering salaries retroactively - and docking everyone's pay accordingly.
"They told us: 'You owe us money from last year.' And they take whatever money they want," she said. So for three months, it's a starvation salary. Her apartment alone costs $730 monthly...
This is another example of the "brittleness" that worries me so much about our current system. If a crash hits, then everything goes down at once. Docking pay has massive knock-on effects. It will kill debt service, which will exacerbate the situation. Docking pay and layoffs have to happen, though, due to the massive amounts of leverage in the system and because the financial elites own the governing structures and are preventing Greece from pulling an Iceland and defaulting on the debt. This leads to further unrest, an excuse for more anger, and feeds conspiracy theories.
This is coming to North America. It will leave no one untouched.