Imploding economy could lead to uncontainable explosions

In Apollo 13 the spacecraft is damaged and its energy depleted. It is too far out to simply turn around, the energy will not suffice. The only way to get the crew back is to send them orbiting around the moon, conserve as much energy as possible and full throttle at the right moment turning the circular energy from the moon into linear, thus shooting the shuttle off towards safety. In other words the only way to safely turn around is to go further away!

This is a parable for an economy with growth momentum which is leaking energy left and right due to corruption, trade deficits, structural problems etc. Trying to stop and turn it around (austerity) is a sure way to kill the crew and loose the spacecraft. Intelligent engineers would send it further along (growth) while trying to save as much energy as possible (adjustments and reforms) while doing so.

Greece is like Apollo 13 in the hands of incompetent engineers who on the one hand moralize by blaming the crew for the piece of junk of a spacecraft they found themselves in and on the other hand they blame the moon for being where it is… These engineers chose to turn the spacecraft around and we are about to loose the crew, the spacecraft and our dignity as a continent.

Unemployment we learned yesterday jumped at 26% in the 4th quarter of 2012 up from 24.8% in the 3rd quarter but this number doesn’t begin to capture the extend of decay in the Greek society. Talking with people on the ground I know of construction entrepreneurs, teachers, small manufacturing companies, scientists, doctors, chemists, workers, students. I know that their situation is worse than you could ever imagine based on this 26%. Those that can are fleeing the country the others are on the verge of depression. Families and livelihoods are torn apart in the process.

This was a hard winter and I don’t think the country will be able to make it through another one like it. People have been burning doors, old furniture and all kinds of chemically treated wood to heat their houses, creating an unprecedented smog in the cities. I am told that if you went out at night you came back smelling of smoke and out of breath. Public lights are not being repaired, schools go without heating, and reports of unpaid workers (for 8 months) who are forced to sign papers that they were paid, are getting more frequent. A new oxymoron of people with high grade homes and zero income is reality. Long term (over two years) unemployment is everywhere. The reason the explosion hasn’t happened yet has a lot to do with the fact that the country is rapidly approaching the boundaries of a humanitarian catastrophe.

This winter has burned the last fat that was still left and depleted the last emergency reserves. As we all wait for this German election year to come to an end (on the 100th anniversary of 1914) allowing the country to implode while holding our breath we may not get another chance at preventing the explosion which is more likely to come in 2014 than the elusive recovery the IMF is now mumbling about.

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