I think I’ve struck on a way to understand the Greece financial crisis.

Greece is like an Arizona real estate investor caught up in the housing boom and bust.

  1. Greece took out a bunch of mortgages.
  2. Greece lied on their loan applications. (It turns out the Greek government cooked the books and their finance statistics were all a fraud.)
  3. The loan officer didn’t verify their stated income. (The German and French banks knew the Greek financials were whacked but they didn’t want to question the official Greece government statistics… and jeopardize their big commission checks.)
  4. In addition to a McMansion, Greece bought a BMW, an Escalade and a bunch of other luxury stuff they couldn’t afford. (The retirement age in Greece is 50.)
  5. Eventually, Greece couldn’t make the full monthly payments anymore.

Now, this is where Greece departs from our Arizona real estate investor.

The Arizona Real Estate Investor Ending

  1. The property is foreclosed on.
  2. The bank takes a huge loss.

End of story.

The Greek Ending

  1. Greece tells the German and French banks, “We can only pay you 50 cents on the drachma.”
  2. The French and German banks scream “It’s the end of the world as we know it!” “The European Union and the IMF [using U.S. taxpayer money] must bail out the banks poor little Greece or it will be the end of poor little Greece, the European Union, the world economy, capitalism, kittens and unicorns.”
  3. Greece and the banks talk Greece’s uncles (EU and IMF) into borrowing money from the banks which the uncles loan to Greece so that Greece can keep paying the banks. The banks are happy because they get to keep making money and delay taking huge losses, and Greece is happy because they get to keep the Escalade a little while longer.
  4. Eventually, after the loans from the uncles run out, Greece defaults anyway. All the money from the uncles was totally wasted, it just bailed out the German and French banks and let Greece put off facing reality.
  5. Greece’s uncles end up with huge debts.

This story never ends.