Posts tagged ‘Finem Respice’

The Greek Problem is Not a New Thing

I found this quote from an older Finem Respice article about Greek financial problems in the mid-20th-century to be pretty funny:

So hopeless was the state of Greek finances that, even as [the Nazis] routinely hung with piano wire prominent citizens and officials on the thinnest of provocations, and even given three years to do it, the Nazi's were somehow unable to compel what amounted to a totally subservient collaborator government to put its fiscal house in order.

The Axis administration soon realised it would be a waste of effort to get the Greek government to balance its accounts.

Later, in 1945, it was a British problem.  These problems from the late 1940's should sound really familiar:

Fortunately for Germany, by the time the matter came to a head the Germans had RSVP'd to Scobie and Greece was Britain's problem. It wasn't just partisans the British would end up having to fight....

What followed could only be described as a comic progression of populist pandering, the spread to the national economy of a series of parasitic labor unions and cabals, and a confidence on the part of the Allies in their own fiscal administration abilities that was as enduring as it was inflated.

At first [British Treasury Secretary] Waley sold gold to support the drachma, conditioning the sale on a series of fiscal and monetary reforms the Greeks adopted in principle and promised to implement– at some later date when it was somewhat more convenient. It was around this time Waley quipped:

...the Greek government are in effect paying doles to a large part of the population who spend all day parading in the streets in idleness with political demonstrations as their chief occupation.9

Liberation governments, fearing popular backlash were terrified of taxing the Greeks. Instead they continued to look for sources of wealth to redistribute, and were happy to resort to even the most gamey monetary policies to buy time. After raiding "punitively" the only entities with wealth of any kind (businesses) in 1945 in order to buy popular support with cheap food and wage increases, the Greeks were, again, running out of options.

The whole thing is interesting, and depressing.


Yesterday I mentioned the Doublespeak definition of insurance as used in the health care field, when a public policy person can say with a straight face that a particular health care policy is "bad" because it only covers catastrophes.  Finem Respice had a good article several years ago on the history of insurance and current efforts to affect redistribution through mispricing risk.  The article is written about housing but could easily have been about health care as well.

No one has put a number on this, but my gut feel is that the largest new source of funding for health care in the plan is not new taxes (though they are large) nor price controls on doctors (though these are onerous) nor deficit spending (though this is likely to be substantial) but an implicit premium subsidy from young to old.  Since insurers are extremely limited in how much they can raise the price to risky groups, healthier and younger people will have to pay absurdly high premiums for what they get to subsidize the policies of the old and sick.   In a normal market young people would just refuse to buy such policies -- thus the individual mandate.  They must be forced to buy them, because their purchase of these overpriced, and to them, likely useless policies will fund most of the system.

Greece: Where Default is, err, the Default State

One might think a line like about Greek finances was printed just this week

What followed could only be described as a comic progression of populist pandering [and] the spread to the national economy of a series of parasitic labor unions and cabals

But in fact it is describing Greek conditions circa 1944.

A while back I observed that the difference between Greek and US finances is that the US needs to return to a spending level circa 2007, while Greece has no similar default state of relative fiscal sanity it can return to.  This article in Finem Respice reinforces this premise by discussing the absolute insanity of Greek fiscal management before and after and even during WWII, which was characterized by all the exact same problems that have driven the current crisis.  Good background reading.

Greece, then as now, was dominated by an expensive public sector funded insufficiently by a tax system that did not work.  As may happen soon, Greece was not able to borrow, so all they could do was print money and inflation soared.  Only one man was able to stop the inflation, and I won't spoil the ending by the humorous way he did so.