The question of our time

Economist Scott Grannis at his blog the Calafia Beach Pundit has an excellent post from May 5 entitled "The silver lining to the Greek crisis."

Towards the end of the post, after discussing some of the implications of the market reactions in bond yields and currencies around the world, he provides a completely different paradigm for viewing the ongoing Greek debt problem, as opposed to the point-of-view being offered by the financial media, which consistently depicts the situation in Greece as a major threat to the world economy.

Mr. Grannis writes: "Call me an eternal optimist, but this 'crisis' has a bright silver lining, since it focuses the world's attention on one of the biggest problems faced by all major economies these days: bloated government."

He goes on to ask, "What is so scary about cutting government spending? The only ones who will suffer will be the government workers that have been enjoying rising salaries, supremely generous pension and retirement benefits, and job security."

This is an exceptionally important point, and it highlights the issue of our time (or at least one of the top contenders for that title), which is that the cost of the generous pensions promised by many governments such as those in Greece and California (as well as by a few now-bankrupt automobile manufacturers) are unsustainable.

In order to receive a bail-out, the Greek government has had to enact "austerity measures," which is to say austere in comparison to the ridiculously lavish benefits they have grown used to. Predictably, there has been a backlash -- in this case a backlash that has proved to be both violent and deadly.

In the financial world, markets are down, and pundits in the media speak with concerned expressions in serious tones about what it all means for Europe and the world. However, to the extent that the crisis in Greece focuses attention on this issue -- truly one of the foremost economic issues we face in the current century, as well as the one fought over for most of the previous century -- we would join Scott Grannis in saying that there is a silver lining to the clouds over Greece.

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For later posts on this same topic, see also: