This metaphor is an attempt to describe the Greece crisis in layman’s terms (if anyone agrees, disagrees or can state it in a better way please let me know)!
As the owner of a title insurance firm who witnessed firsthand the financial market and real estate industry meltdowns due to people getting in over their heads, it is unfortunately a familiar story on a sovereign scale.
Greek Tragedy – A Metaphor!
Imagine that one of your relatives was accepted into a club that they were not qualified for, say a fictitious ‘Millionaires Club’, and was then tasked with a job they were not capable of doing.
Compounding the issue, in order for your relative to qualify for the ‘Millionaires Club’, you had to lend him money knowing that he would have a questionable ability to actually pay it back.
And if that inability to pay you back were to unfortunately come to fruition, it would put your own financial stability along with the financial stability of the rest of your extended family at risk.
Under this umbrella of non-repayment of the loan, options may be limited.
It could be that the only viable ‘solution’ to the problem is to throw good money after bad, lending him more money with stipulation that he tighten his belt and stop spending wildly (all the while knowing that this prescription would likely still not right the ship).
You insist that he can no longer help his retired and needy mother with the money that she desperately needs just to pay her basic costs of living.
Further, you instruct him that his family must live with only the bare necessities.
Finally, one other condition is that he must put money aside each week, a tax if you will, so that the loans you have made might someday be paid back.
If your relative refuses to comply, you tell him that he will be thrown out of the club where he did not belong as a member in the first place, and that all financial aid from the extended family will be cut-off.
The result for the relative will be poverty for the foreseeable future with his family in turmoil.
But, because the relative knows the impact on the rest of the family were he to be thrown-out and financial aid cutoff, he believes that he has a certain amount of negotiating leverage.
Your relative comes back at you with a contrary bargaining position including a restructuring of the debt that he owes, because on some level he knows that you cannot, unless under extreme duress, let him fail.
If any of this sad story rings a bell it’s because this ‘money game’ is the charade that is currently playing out with Greece and the EU with potentially massive ramifications.
Greece was admitted into the EU based on what has been reported to be some degree of financial manipulation, has borrowed and spent irresponsibly and is on the verge of (or actually already has) defaulting on its debt obligations.
The EU has drawn a line in the sand demanding additional austerity measures, new taxes and an addressing of Greece’s massive pension obligations in order to once again come to the rescue.
Greece on Monday said no-go, setting-up a referendum vote this coming Sunday to decide whether the country wants to remain in the EU.
The result of that position was that financial markets around the world were roiled and the Dow Jones dropped 350 points.
Today it looks as if Greece may have blinked and as a result financial markets are rallying, although no firm plan is on the table.
What will happen today, tomorrow and into the future?
Your guess is as good as anyone else’s but, in conjunction with other financial problems around the globe including Puerto Rico in the United States, it is one that bears watching!
Article author Michael Haltman is the President of Hallmark Abstract Service in New York.
HAS is a provider of title insurance in New York State for residential and commercial real estate transactions.