Trickle Down Effects

The business cycle in Greece and the Eurozone Adam Smith’s invisible hand has its “scuffed” spots, as Obama will surley point out. Greece knows all too well the rough edges of the business cycle. In recent months Greece has suffered a sever contraction in their economic cycle. Recent figures point out that Greece’s GDP is on a downward trajectory, and it does not seem like it will get any better soon. Greece’s unemployment rate is at 20% and rising. These resources of labor will never be utilized, they are wasted, forever. Unemployment tends to increase social costs for the country as a whole. Certainly crime and poverty rates per capita have increased. Furthermore, many are migrating from Greece to other locations. An interesting thing is that Greece’s currency has not devalued relative to Greece’s losses. The reason for this is apparent, because Greece uses the Euro, which is backed by many other member nations of the European Union. Greece is burdened with a deficit. It is predicted that in 20 years Greece MAY be able to reach a debt to GDP ratio of 120%. This leverage has caused Greece’s output to reduce substantially. Inventory fluctuations are likely to be high in Greece. Thus retailers are not buying from suppliers, who in turn are not producing as much. Demand for many goods has decreased sufficiently. This has an adverse (arguably minimal) effect on our economy. What may be the saddest of all is the fact that Greece’s economic loss can never be made up for. In 20 years time, when Greece has figured out all of their economic problems, if you draw a line of their then GDP’s possible trajectory, it will never reach the level that it could have if they had not entered into this mess. Likewise, the USA’s financial crisis of 2009 has caused trillions of dollars in damages and ultimately, the loss of life for many in Africa (and other impoverished nations) that would have had much (more) economic prosperity if the USA had avoided the financial mess. One day Greece will again produce along it’s PPF, unemployment will decrease and GDP increase, however only Mr. Fusion and the Flux Capacitor can reverse the economic damage done. I hope you and I think of the trickle down effects when we make public policies, because for many, economic prosperity is life or death.