Socialism is Like a Nude Beach – Sounds Like a Great Idea Until You Get There
By Jared Dillian, Editor, Bull’s Eye Investor
For quite some time, I have been keeping an eye on the political landscape in Greece, particularly the rise of the Syriza party. They began to gain significant traction in the polls approximately three to four years ago.
Syriza’s slogan resonates deeply with many Greeks: an opposition to Germany’s influence. The term they frequently use to describe Greece’s experience since the debt crisis is “humiliation.”
To put it candidly, if you find yourself in considerable debt, it’s not uncommon to feel resentful towards your creditors. When Greece’s debt underwent restructuring, none of it was truly forgiven; instead, the repayment deadlines were simply pushed far into the future. Given that Greece struggles with growth due to various structural, demographic, and cultural issues, this strategy is often referred to as “extend and pretend.” Even back then, it was evident that refinancing would be Greece’s only escape from default.
In recent years, the financial burden has weighed heavily on the Greek populace, leading many to feel like mere subjects of the debt. While there is widespread anger directed at Europe, Greece is reluctant to sever ties with the euro, as membership offers significant benefits, including increased purchasing power and lower interest rates.
Consequently, the objective seems to be to enjoy the benefits of both worlds.
Some Nice Folks
Alexis Tsipras, the leader of Syriza, often resorts to threats of non-payment to achieve his objectives. It remains to be seen if Germany will test his resolve. Many Germans currently harbor unfavorable views of Greece, so if it becomes politically feasible, Chancellor Merkel might consider expelling Greece from the eurozone.
However, Tsipras does possess a potential bargaining chip: he claims he can boost tax revenues by enhancing enforcement, as Greeks have a reputation for tax evasion. Should he succeed in this endeavor, Greece might just avoid default.
Nonetheless, I find this narrative unconvincing. The likelihood of increased tax revenue seems bleak; it feels more like empty promises.
It’s essential to delve into who Syriza truly represents, as mainstream media frequently labels them merely as an “anti-austerity” party. In reality, they are teetering on the brink of outright communism.
For further insight, consider the Syriza Wikipedia page. SYRIZA, an acronym for Coalition of the Radical Left, was, until recently, not genuinely a party but a coalition of various groups united primarily to oppose creditor demands.
Here’s a list of the organizations that came together under the Syriza banner:
Active Citizens, Anticapitalist Political Group, Citizens’ Association of Riga, Communist Organization of Greece (KOE), Communist Platform of Syriza (the Greek section of the International Marxist Tendency), Democratic Social Movement (DIKKI), Ecosocialists of Greece, Internationalist Workers’ Left (DEA), Movement for the United in Action Left (KEDA), New Fighter, Radical Left Group Roza, Radicals, Red, Renewing Communist Ecological Left (AKOA), Synaspismós, Union of the Democratic Centre, Unitary Movement, along with numerous independent leftist activists.
Strikingly, this collection of parties hardly sounds like the kind of group you’d invite over for a casual dinner and a game of Trivial Pursuit.
In addition to seeking debt forgiveness, Syriza advocates for a range of measures, including alleviation of banking debts for those unable to pay. It’s notable that when snap elections were announced, the Greek stock market plummeted by 13 percent, heavily influenced by banking stocks.
Historically, it is challenging to find a more left-leaning national government in Europe since World War II than what Greece currently has.
The New Greek Experiment
In full transparency, I position myself firmly in the free-market camp, believing that unfavorable conditions for markets should be met with resistance. I am concerned that the Syriza experiment will yield negative consequences, ultimately leading to a significant decline in the Greek standard of living.
If Greece exits the euro, the immediate aftermath could involve the emergence of a weak drachma, elevated interest rates, and potentially rampant inflation. Such a scenario may prompt food and energy shortages, reminiscent of conditions in Cuba and Venezuela, though less severe. Economic hardship could become widespread, and it’s worth noting that such environments often struggle to maintain democratic governance.
The financial world occasionally presents us with unique opportunities to observe how contrasting economic ideologies unfold. Historical examples include the divisions of East and West Germany, North and South Korea, and even the varied economic systems among the fifty U.S. states. By examining different regions, we can discern what strategies succeed and which fail.
Although many regard Scandinavian countries as socialist, they are, in reality, capitalist economies with significant levels of redistribution. Sweden did adopt socialist policies from 1968 to 1993, but that’s not the current case. Greece, in contrast, faces a dysfunctional economy that is poised to deteriorate further. We are about to witness what occurs in this Marxist enclave, once an esteemed member of the European Economic Community.
However, it’s crucial to emphasize that, as of now, Greece remains a member state.
The financial landscape is straightforward. In a nation where property rights are tenuous at best, establishing a functional stock market is inherently challenging. The prospects for bank loans or bonds are stark when the government can arbitrarily declare debts void. The absence of robust capital markets is detrimental, counter to some prevailing opinions.
While it may seem unconventional, I firmly believe that any Greek stock trading above zero presents a potential short opportunity. Political dynamics, similar to stock market trends, have a tendency to sustain for extended periods.
Sincerely,
Jared Dillian
For Economic Prism
[Editor’s Note: The Federal Reserve has thrust everyday Americans and investors into uncharted economic waters. Their policies of money-printing have propelled the markets upward, igniting a new asset bubble post-crash. This constant manipulation of prices creates a cycle of booms and busts. Find out how to navigate investments in this environment. The article Socialism is Like a Nude Beach – Sounds Like a Great Idea Until You Get There was originally published at mauldineconomics.com.]
