I admire the great courage that Greece has to threaten the forces of the dark side of the force coming from Europe, but then what will be the price of such bold courage?
Suppose that Greece, can somehow return to the drachma, and that this new currency could devalue rapidly in a ratio for example 50% (which I can’t believe at all), meaning it would take two drachmas to make 1 euro. The drachma would be an independent currency with a relatively stable floating exchange rate.
But the exit of the euro, will always be subject to no scrutiny and this will prevent a negotiation with the markets. From the moment they trace this path, it will be the starting point for people will run for the banks, forcing the government to freeze the accounts. Then, some time would be needed to make money and while there were no new money, it would be inevitable the rationing of food. I think it is unwise for D.Quixotes, expect the solidarity of the European imperialists in grant free goods while waiting for the gallant and courageous Greeks solve their problems.
Then Greece must prepare for the abrupt disruption of all economic and trade relations with the rest of the eurozone and even the world and thus must prepare for a humanitarian crisis and once again the brave Greeks would have to appeal to Europe for food.
The Greek government would have to be even more courageous and to prevent the banking system from collapse would have to proceed with the nationalization of banks and prepare for a long and deep recession due to the end of confidence in the system.
Well, it is good that the Greek government prepar for long nights because it would have to try to fund in other markets in order to meet the basic needs of the population and finance the economy. The more predictable Greek default on its foreign debt, yes, because the debt still exists and now would no longer be 320,000,000,000 euros, but 640,000,000,000 drachmas. Sorry, I know that there are many zeros.
Of course, the brave of Olympus, without much to lose, can just say that all these zeros are only this: Zeros and refuse to pay whatever it is. Then all the Greeks brave defenders can jump for joy, for a 1st phase the Greek government will have money to pay pensions and salaries, but after a while this money will end up and Greece would tremendously require funding only for companies and the State continue to operate. After that, it would be the turn of the companies being nationalized.
However, dear reader, get ready to bail you out banks and their state, because after the refusal of the Greek government to pay what they should, someone has to pay it, right? Surely you will not be thinking that it would be the banks to pay or the states. I regret to inform, but the state money is your money and state responsibilities, are your responsibility. As for the Banking, if this fails, then be prepared to see your deposits fly away. I am sure that you, solidarity as you are, will be willing to see the rent of your home increase, your taxes increase and you tightening the belt.
Returning to Greece, when the machines finally manage to “make” money, the new drachma will go into circulation, but it will be a weaker currency than the euro and thus the imports would become more expensive and inflation will skyrocket to levels that the Greeks already do not recall and that will open new pages in the Guiness. And it’s good that the Greeks prepare for more shortages of essential goods, bankruptcies of the few companies that have not been nationalized and the paralysis of the entire economic sector, cuts in energy, stoppage of road networks and who knows interruption of water networks, etc.
But if Greece survive all this perhaps will be able to recover. It is very likely that it can increase their revenues by cheap tourism. The nationalization of banking and currency devaluation may be accompanied by capital control measures making the economy grow.
If this recovery takes place, then the door would be open for other countries to question the austerity policies and the output of the single currency would be an option when the first difficulties arose, but this will make the entire European project to be at risk. But be careful with this way!
If Greece survive all this and make the reforms it never made, you might come to know new markets for their products, because will compete with European markets. Perhaps the Greeks citizens achieve a rise in employment levels for the low cost of labor, but they will also see their salaries reduced by half and unable to buy what they do not produce. The Greek taxpayer will have to prepare for the harsh reality of paying taxes on low income, leading to an inevitable obstruction of the economy by the weight of the tax system.
Over time, it is normal that Greek salaries might even rise, but this will make it reaches the end that competitive edge. And without the protection of the euro, no one in their right mind will want to lend money to Greece, because everyone will fear further defaults and even new currencies.
A few companies may have access to funding and perhaps can watch payments in dollars or euros, but is very unlikely that families will have access to that currency. Ordinary people will never again have confidence in the system and banks as we know them can become a memory. Similar to of what happens in many countries, it is natural that those who have some money, would send it to the outside leaving the country without capital.
In a country without any confidence, I think unlikely that there is room for foreign investment and if it come to exist, it will be sectoral and very scarce, perhaps in new forms of economic, market or raw materials. As a result, the economy enters a new phase of stagnation and the government will have to return to the old and repeated devaluation policies, increase in inflation, price controls. And then, with a deprived economy there is little room for more taxation and few means of obtaining revenue. The result is simply what still remains of the welfare state, health policy, education. Who knows if Greece does not have to rethink, if not already rethought, whether or not to remain a democracy. Perhaps, intellectuals, by failing to take the euro to blame, pass to blame democracy or even the Mediterranean.
It remains to know how much the Greek people will be subjected to lower the cost of their labor and lowering their quality of life. We may watch a Cuba in Europe. A cheap place for sightseeing and a market of cheap goods. But other countries that remained in the euro area, can respond to the threat of a cheap market, imposing restrictions on trade and even the cheap tourism and above all, can not simply accept the drachma as a currency trading, leaving Greece to resort to tourist currencies.
The great truth of monetary autonomy is simple. This autonomy only serves for states to limit the imports, which will serve to reduce the standard of living of its citizens, because in general, these countries are extremely deficient in the production of basic goods.
The reader will say: But this is very good because these countries will go to manufacture these products for consumption and even for export.
Make no mistake, because this requires a huge investment and this is something that countries that are in these conditions, will not have the means to do so and the financial markets will be closed.
I confess I do not quite understand what those who advocate the exit of the euro or preach monetary autonomy want, because in practice they argue that wealth should be concentrated in the minority population, while the rest will just destined to be a source of cheap labor and without any future.
Monetary autonomy yes, but for those who have the conditions to do so, a situation that unfortunately that Greece or even Portugal are not able to accomplish.
The question remains: And now Greece?