Today is a broken record day, you've been warned.
Repeat after me: Greece does not have a credit crunch. And again. And again. Now say it like you mean it. There is no credit crunch: The fact that you live in the midst of a crisis does not mean that your crisis is either glamorously 'made in the USA' or someone else's fault.
I know I've said it before, but after 9 solid days of hearing Greeks bemoan 'the international crisis' it's obvious that when I last said it nobody was listening.
You hear it on the Greek news: 'Greece is in the grip of a global credit crunch'. You hear it in the shops. Even the baker near my parents bemoaned the credit crisis. Apparently it was to blame for the reduced profiteroles sales. Even though profiteroles don't sell well in summer. Ever.
But everyone wants a share of the misery pie that is the crisis. It gives everyone a reason to moan and we all love a good moan. It gives everyone a reason to ask for reductions to commercial rent, retail prices, hotel bills. And it gives the authors of Greece's actual crisis (because as we've said before, it does have one) a perfect excuse to hide behind. Not only is this crisis not our fault, not only is it not in our power to resolve it but all the cool kids have the same crisis too.
Well. Not quite.
The cool kids have an actual credit crunch courtesy of American bankers who over-leveraged and decided, to put it as simply as it deserves to be put, that the unemployed and the under-employed living in trailer parks were not likely to default on their rent or mortgage payments and buying up that risk would make a good product for their clients. My seven-year old cousin could tell you what would happen next: the bottom of the food chain did what it was always going to do (it defaulted) and the repackaged financial products that transferred parceled-up risk across the globe made a single mother's rent woes a global financial headache. Apply the same model to repackaged credit card debt and you have a lot of corporate bankers feeling stupid and a lot of their clients losing serious amounts of money.
Now these financial products are created and consumed within a rather narrow (large but still narrow) community of financial services players, all of whom are big corporate entities and not individuals. In other words, this crisis was internal to the system that caused it and could have stayed there. But that would have pretty much killed the system in its present form and would have hurt the people who run and benefit from it, so it didn't stay there. It was shared out and we all got to feel the pain. First the pain was shared with the rest of their organizations and, though their commercial banking sections, with the public. And we all got to join in the fun.
First it was our mortgages. Then it was residential rent prices. Then it was interest rates. Then it was salary freezes and job cuts. Then it was consumer goods and everything else you can think of.
What was the alternative, you ask?
The only alternative would have been for the whole financial services community, globally, to go down in flames. Corporations would lose money, financial products would lose all credibility, the financial services sector would self-combust and stop selling hot air (futures, options, repackaged debt) thus causing massive unemployment in the financial sector and all those servicing said sector. We would have had a crisis then as well. But we would have had the right kind of crisis and the system would have purged itself, possibly into extinction. Now we are all counting our pennies and the way banking is carried out is largely unchanged.
Is it simplistic to suggest that they could have protected the consumer from feeling the pinch? Yes, slightly. But given the choice between sharing the pain or losing not just their jobs and their bonuses but also their entire industry, big banks decided to engage in some displacement activity. Anything else would have involved radical change in the banking sector and who wants that? Not the boys in the big offices. So the pain was shared out and, before you know it, everyone is feeling the pinch. Retail spending goes down and marketing shifts to adjust to the new patterns. Advertising is withdrawn so newspapers are slashing journalists' jobs; bankers and lawyers are being sacked so the sandwich shops, dry cleaners' and retail units all around their offices are shutting down too, for lack of custom; financial services businesses are cutting costs and the support staff (cleaners, receptionists, maintenance staff and canteen workers) made redundant go on the dole, become exempt from paying council tax for a while and, before you know it, councils are slashing mother and toddler aqua classes, teachers' posts and your second rubbish collection every week.
Of course it's a cycle.
Of course Greece is part of the global cycle of woe, doom and gloom.
But the credit crunch hit Greece in a localised and specific manner. Mortgages were affected. But the percentage of Greeks carrying a mortgage is tiny compared to the rest of Europe. Shipping was affected, but that is a small and self-contained community. Import-exports were affected and that spilled into retail. Tourism was affected but we are yet to feel the after-shock for that one.
But was your Joe Public affected? No. Because his salary was so low already and the cost of living so high already that he hardly felt the additional spike. Now he's told it's all down to the credit crunch and he buys it because there is a global credit crunch and it's affecting the whole world so why not us? And if we haven't caused it, we can't fix it so the government can sit on its ass while the few businesses that are benefiting from this all are pushing prices higher and higher and salaries lower and lower.
It's a good plan. Only there is a flaw in it that will become apparent when the credit crunch passes, because it will at some point, and the Greek financial crisis remains. And remain it will because it has nothing to do with the credit crunch and everything to do with public mismanagement of tax revenue, high unemployment and under-employment, low salaries crippling the spending power of an entire generation, insufficient public investment, an ailing agricultural sector and dying manufacturing.
Add to that a banking sector that is almost entirely outside state control and effective scrutiny thus managing to get away with the biggest differential between interest rates on loans and interest rates on savings in the whole of Europe. One has to wonder who pockets the difference. I guess it's the same someone who benefits from the numerous repossessions, unlawful banking charges and other benefits brought to you by the small print that keeps being challenged by domestic and European courts to no avail.
This is not a global tsunami. This crisis has everything to do with Greece.
It has everything to do with unfair taxation, targeting those who don't tax evade and crippling them. It has everything to do with non-existent fiscal policy, with empty coffers and no ideas. And I mean no ideas. The government's latest money-making scheme is to tax mobile phone usage, per minute. Credit crunch that.
This crisis has everything to do with an economy that has not been properly tended since the military experiment of the 60s and 70s ended, and anything that is left untended goes to hell. If you use and abuse it on top, it goes to hell even faster.
So crisis? Yes.
Credit crunch? No.
And as the problems will persist even after the credit crunch goes, what I want to know is this: when the rest of the world has recovered and our home-grown crisis is still going strong, what are we going to call it then, to avoid having to deal with it?
