A day hasn't gone by, in the last 2-3 months, that we don't see dozens of articles about Greece's economic fate, the first, second, third loan bail-out, the revolt of the people in the streets, etc. Really, though, why are these Greek people in the street whining? Why do they think that the Eurozone or the IMF "owes" it to them to lend them the money they need? Or, are they right? The general thinking is that massive overspending on social programs; years of capitulation to union labor’s unreasonable demands; mind bending corruption at every level; and tax evasion on a grand scale is what had brought Greece to its knees. No-one can argue with all that, but the problem is much deeper than that. For example, why were the Greeks given all that money to spend (borrowed money) in the first place? Who helped them make all those investments in "junk" bonds, that made money for the "consultants", and why? BTW, parenthetically, Greece is NOT the only country that is in dire economic conditions, for the same exact reasons. Many other European countries, and the USA, are right there besides Greece. The culprit is called "deficit spending"! That's how they all got in trouble.
Back in 1967, Greenspan - a great economists before he became part of the establishment, said, "Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process.It stands as a protector of property rights". And, that was only about 5 years before USA abandoned the gold standard, a sad day in its economic history.
Anyway, back to Greece. It should NOT have adopted the euro, ten or so years ago. Once they did that, control over their economy was handed over to the European regulators and they lost the freedom to deflate their currency, when needed, to increase tourism and improve their economic picture. Having said that, talk about dropping the euro now and moving back to drachma, is just that, talk - it doesn't make much sense. Their debt would still be in expensive euros, the drachma would de-valuate the day after they adopted it, based on their economic state, and thus their real debt would double overnight.
Plus, the European leaders would not allow that to happen, because it would signal that other countries in economic trouble could do the same thing. So, what is going to happen? Or, what should happen? Should Greece refuse the new aid package, that would force new austerity measures, and just go bankrupt?
The Europen Union will NOT allow that to happen. Once again, if they allowed Greece to default, that would signal that everyone in economic trouble could just default and face no consequences.
So, what will happen? It's not very clear, I guess we'll have to wait and see.
