Thursday, August 18, 2011

Greece, America--Whatever

When we think of Greece—and frankly, most of us do not think of the small Mediterranean nation very often—we are more likely to think about My Big, Fat Greek Wedding; Troy; or 300 before we consider the ins and outs of international finance. More than 2,000 years ago, Greece was indeed a major player in the world, ruling over an empire that stretched eastward to India thanks to the military might of the Greek army led by Alexander the Great. However, since Greece's absorption into the Roman Empire, its influence has been cultural, not political.

Yet, the summer of 2011 has seen the eyes of the powerful turn their gaze on poor, little Greece. The nation belongs to an unfortunate subset of the European Union (EU) called the PIGS, named after Portugal, Italy, Greece, and Spain (recently, Ireland has frequently replaced or joined Italy in this group, making the acronym read "PIIGS"). These four or five countries are the economically soft underbelly of the EU, having high social spending, large public-sector workforces, and extremely high debt. Greece has become the poster-child of this group, being the first to succumb to the heavy weight of its liabilities.

Last year, Greece was loaned 110 billion euros ($156 billion) to rescue its faltering economy, and it now needs another infusion of cash to stave off going into default. Its current debt is around 340 billion euros ($483 billion). The latest EU plan is to give Greece more time to pay off its debts to banks and private investors, while the Eurozone and the IMF feed it new rescue loans. This partial renege on its loans will result in a "selective default" rating, meaning that the terms of the Greek bond have been altered, which will allow Athens to avoid actual default, although it will lower the country's financial rating still further and complicate future rescue plans. In reality, it is a last-ditch effort that will hold off inevitable default for a short while.

Greece may be a small nation—in fact, its economy is only about two percent of America's—but its recent experience in rising debt and near-default is a cautionary tale for the United States and any other nation in the same financial straits. And as the saying goes, the bigger they are, the harder they fall. If America wants to avoid following Greece down the economic drain, actions must be taken now to stop the money leak.

Former Nixon speechwriter and current political pundit, Pat Buchanan, combines the debt crisis in Greece with demographic trends across the West in a recent column. In a nutshell, people in the developed nations of European ancestry (as well as others) are not reproducing at a high enough rate to replace their populations. Buchanan uses Greece as an example:

According to the most recent revision of the U.N.'s "World Population Prospects," Greece in 2010 had 11.2 million people.

More than 24 percent were 60 or above, more than 18 percent 65 or older. Three percent were 80 or above. And, every year, for every nine Greeks who are born, 10 Greeks die.

Greece is slowly passing away.
According to the CIA World Factbook, Greece's fertility rate is 1.38. A fertility rate of 2.1 births per woman is considered even replacement. As the reference work explains:
Rates below two children indicate populations decreasing in size and growing older. Global fertility rates are in general decline and this trend is most pronounced in industrialized countries, especially Western Europe, where populations are projected to decline dramatically over the next 50 years.
Buchanan echoes this:
[By 2050] Greece's population will have fallen by 300,000 to 10.8 million. The median age will have risen by eight years to 49.5. Half the population will be 50 or older. More critically, the share of Greece's population 60 or older will be 37.4 percent, with 31.3 percent over 65. One in nine Greeks will be over 80.
Therefore, if Athens is struggling to pay the pensions of its retirees now, it is only going to get worse—much worse. The larger point is that Greece is far from alone in this predicament, and the one nation that may be hit the hardest is none other than the United States of America, which of debtor nations is the largest and most heavily indebted. And who among the nations of the world will bail America out of its mess?

America's fertility rate teeters at 2.1 births per woman. However, as Buchanan notes, by 2041, Americans of European descent will comprise only half of the population. The combined populations of America's minorities—whose birthrates far outstrip European Americans'—will soon surge into majority status (see Deuteronomy 28:43-44). Some might shrug and say, "No matter! America is still growing! Unlike Europe, we will continue our dominance!"

But when other factors are figured in, this argument proves hollow. Unfortunately, American minorities lack the education or skills to compete for jobs in our cutting-edge industries—the ones that keep America at the forefront of technology, efficiency, and productivity. While that could change, the trends say otherwise; the education gap remains the same and in some areas is even widening. In other words, the U.S. will not be able to maintain its dominance in most areas that matter, a fact that is already being seen as other nations take the lead in major technological, industrial, and manufacturing sectors.

In addition, nearly half of America's citizens pay no taxes. The unemployment rate is creeping toward ten percent, and it measures only those who are still looking for work. Forty-four million people—nearly fifteen percent—receive food stamps. Social Security already pays out more than it takes in, and the boondoggle of Obamacare looms. Nor can we forget that the U.S. owes a national debt upwards of $14.5 trillion, which does not include about the same amount of private debt, not to mention student loan debt, state indebtedness, unfunded pension plans, etc.

On top of all this, we need to remember that the largest generation of Americans ever, the Baby Boomers, is beginning to retire, expecting to receive large sums from the government, corporations, pension funds, and investment firms for their many years of labor, saving, and investing. It sounds suspiciously like the problem Greece faces. Sadly, American "leaders" are acting like children in their laughable attempts to solve the debt problem politically (see Isaiah 3:4).

Now we are beginning to see the wisdom in the Bible's well-known but oft-neglected proverb: "The borrower is servant to the lender" (Proverbs 22:7).