How youth unemployment is keeping Greece from default

The consequences of Europe's economic downturn are being acutely felt by young adults in terms of high unemployment and crippling debt.

The headlines still focus on Greece. It is broke. Here is Lucas Papademos, describing what an orderly default would mean. In the Telegraph:

“The savings of the citizens would be at risk. The state would be unable to pay salaries, pensions, and cover basic functions, such as hospitals and schools, and…the country — public and private sector alike — would lose all access to borrowing and liquidity would shrink.

“The living standards of Greeks would collapse. The country would drift into a long spiral of recession, instability, unemployment and prolonged misery. These developments would lead, sooner or later, to exit from the euro.”

Sounds good to us! The Greeks have been living beyond their means. Living standards must fall. Best to get on with it.

But the efforts of a whole class of over-paid meddlers have been directed at trying to avoid this outcome. They’ve hesitated…prevaricated…vacillated…and generally fornicated up the situation.

They’ve swept so much dirt under the rug that there’s now an Everest in the middle of the room… It can no longer be ignored.

But Greece isn’t the only country to live beyond its means. And the Greeks aren’t the only ones to suffer. In Britain, the economy is holding its own…but only by loading the young with debt in order to continue supporting the old in the style to which they’ve become accustomed.

Here, The New York Times reports:

Perhaps the most debilitating consequence of the euro zone’s economic downturn and its debt-driven austerity crusade has been the soaring rate of youth unemployment. Spain’s jobless rate for people ages 16 to 24 is approaching 50 percent. Greece’s is 48 percent, and Portugal’s and Italy’s, 30 percent. Here in Britain, the rate is 22.3 percent, the highest since such data began being collected in 1992. (The comparable rate for Americans is 18 percent.)

Classified by statisticians as NEETs (not in education, employment or training), they number about 1.3 million, or one of every five 16-to-24-year-olds in the country.

Lower incomes…unemployment…fewer benefits… Get used to it.

There have always been booms and busts. There were years of good harvests…and years of bad ones. The prudent farmer saved some grain…just in case.

But in the 20th century real money — gold — was replaced by paper money and ‘just in case’ became ‘just in time.’

Even John Maynard Keynes, the architect of modern government meddling in the economy, suggested that governments should save money so they would have something to spend when the private sector cut back.

But the feds didn’t save. They spent. And when times got tough, they spent even more money. Trouble is, without savings, they had to borrow the money to spend…which means taking it out of the very economy that is short on money already.

The only other option is to print up extra money — in effect, creating it ‘out of thin air.’ But if you could just print ‘money’ and make yourself better off, everyone would do it. People are not made richer just by printing up pieces of paper with green ink on them. They get richer by having real purchasing power…and real resources at their command…and by being able to produce goods and services that people want.

*** Hillary Clinton calls up Egypt, Syria, Libya, and China to “democratize.” But democracy, as practiced by the US and other developed countries, is a fraud. It is just a way for the insiders to scam money and power from the outsiders, by pretending that the voters are in charge.

Just ask how many taxpayers would vote to spend about $10,000 each on the war against Iraq?

How many would vote to spend $1.60 cents for every dollar in tax revenue?

How many would vote for the latest mortgage deal…where homeowners who saved their money and paid their mortgages are forced to make up for those who bought houses recklessly…and then couldn’t make their payments?

How many would vote to bail out Goldman Sachs…Bank of America…or Citigroup?

But voters never get a chance to vote on the issues. They vote for candidates…financed by insiders, with agendas the outsiders cannot even imagine.

The word ‘democracy’ arose in small, Greek city states, where the voters actually voted on the concrete issues, not just the slippery candidates. Citizens voted to go to war…knowing not only that they would have to pay for it…but that they could be killed in the battles themselves. War was a matter of life and death, not just a campaign slogan of a chubby, middle-aged draft-dodger.

The Italian city states practiced real democracy too. In 15th century Florence, for example, citizens voted on whether or not to build a cathedral… Then, they voted on what shape it should take.

A scale model was built. Citizens knew what it would look like. They understood how it was built and how much it would cost them. They cast their ballots and took responsibility for the outcome.

American democracy, circa 2012, has no more in common with real democracy than American capitalism has in common with real capitalism. Both are degenerate…corrupt…and geriatric.

Bill Bonner
 for The Daily Reckoning