Greek Strike Coverage Continued: the Risk of Civil Unrest and Defaults
This is the BBC coverage of the strikes. They talk about the serious situation Greece is in and how Europe is putting a ton of pressure on Greeks to manage their deficits, because they are in danger of “default”. Again, see my post on the debt situation in Greece and how it mirrors California’s budget situation (in some ways). The worry over Greece is that it might default on its loans.
In my post on Cali/Greece, I talk a bit about the way loans are used to make money off of debt. One thing I didn’t get into, is how the loan situation with these countries are a bit like the sub-prime loans in that they are often insured with Credit Default Swaps or CDS.
Credit Default Swaps are like insurance policies on debt that lenders take out. These insurance policies are profitable in the short term because of credit bubbles. When a lot of credit is being lent out quickly, nobody defaults right away. Thus, its a bit like selling life insurance when no one is dying— you get a lot of money and don’t have to pay any of it back out. The problem is, when people start defaulting, you are actually responsible for a crap-load of money.
This is why AIG went under. AIG was not a bank, it was an INSURANCE agency. It’s main business, was CDS for lenders. When everyone defaulted, it didn’t have the funds to cover everyone.
Nonetheless, towards the end of the video, the reporter says: the real danger is contagion and political unrest. This says it all. The economic situations these different countries are in differs from country to country, but what they all have in common is workers who may or may not put up with being made to shoulder the economic crisis.
Why are they all in this situation? That is a complicated question, but the most basic point is this: these countries have been home to people who’ve made a ton of money using all kinds of debt and financial instruments, and in the case of Greece, there’s been outright thievery and corruption.
What happens when a lot of people get very rich, very quickly, and the state facilitates this? There is an accumulation of value (fake value, via financial instruments) and real value, in the hands of a few private hands and there’s not enough circulating in the public for the government to tax.
What is the solution to this? Well the sanctity of private property does not let the government take the money back from the rich. Expropriating all the profit back from the rich that they made when they were swindling everyone blind would go against the sacred rules of capitalism. It would also go against the constituency politicians answer to (namely, the ruling class, the rich). Thus, in the mainstream capitalist-sympathetic media, the only possible answer is that governments had better collect revenue, not from the capitalists of course, (who’ve successfully expropriated workers and the economy) but from the workers.