'Boomerang' By Michael Lewis Makes One Thing Clear About The Greek Crisis

michael lewisMichael Lewis

I’m halfway through Boomerang: Travels in the New Third World

as a book on tape. It is far more entertaining and enlightening than I’d thought and it sheds a clear light on a lot of supposedly complex and confusing current events.For example, the Greek/Euro crisis has always confused me. A 65-year-old California private sector worker does not mind paying high taxes so that a 50-year-old former fire chief can enjoy a $241,000/year public employee pension. Why then do working Germans get so angry that they have to work harder and pay more taxes so that 50-year-old Greeks can enjoy retirement? Is it simply because Germans and Greeks have less in common than the American taxpayer and the American public employee pension collector? News articles have not been helpful in answering this question.

Lewis explains that Greece wanted to join the Eurozone so that it could cut its borrowing costs, borrow a lot of money, and then distribute it among government workers and other citizens. It wouldn’t have been possible to join the Eurozone without meeting some requirements for budget deficit as a percentage of GDP and inflation, so the Greek government falsified its numbers and thereby gained entry into the Eurozone. Once in, the Greeks, sometimes aided by Goldman Sachs, continued to put out absurdly fraudulent numbers, e.g., that their budget deficit was 3% of GDP when in fact it was 15%. The fraud was sort of obvious in that the new debt being issued by the Greek government was at least double the stated budget deficit, but hardly anybody bothered to add up the numbers until 2008 and 2009. Greek banks were relatively conservative. It was the citizens who brought down the banks, not vice versa as in other nations.

So it is not a simple matter of some Europeans working until they drop while others retire comfortably at 50 but rather that there was fraud in how the Greeks presented what they were doing.

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