the new red scare

The Global Debt Crisis Is the New Cold War

The news from Greece today is … well, it’s not good. Greek citizens are angry, European politicians are testy, equity investors worldwide are getting nervous, and the headlines are getting increasingly hysterical. This morning, things even took a dip into surreality when Greece’s Deputy Prime Minister Theodoros Pangalos, frustrated by Germany’s criticism of his country’s accounting skills, actually whipped out the Hitler card.

They [the Nazis] took away the Greek gold that was in the Bank of Greece, they took away the Greek money and they never gave it back,” he said. “I don’t say they have to give back the money necessarily,” he remarked to the BBC. “But they have to say thanks.”

Compared to that, the Times sounded like the voice of reason with their story pinning blame on our old friend credit default swaps, which prompted Fed Chairman Ben Bernanke to announce he would investigate Goldman Sachs and financial institutions that might use instruments “in a way that intentionally destabilizes” the country. But is the rising price of insuring for risky assets, like Greek bonds, really driven by dastardly speculation, or just common sense? Remember, you can only bet against Greece if you find someone willing to bet for Greece.

Meanwhile, in Nature magazine, Jared Diamond, an esteemed scholar of societal collapse, has cited a parallel between the current crisis and the one suffered by Greece in, yes, the Bronze Age, when an advanced society was plunged into 400 years of illiteracy. This made us feel a bit better, actually. Because we strongly suspect that ain’t gonna happen this time. (Three hundred years, maybe.)

What we do think will happen is that the Greek debt crisis will, before too long, go the way of the Dubai debt crisis. Which is to say, this is a problem that we’ll soon stop having to worry about, because it will get superseded by other problems, such as fiscal crises in Portugal, Spain, Italy, Ireland, Japan, the Baltics, or — can’t wait! — here.

Or we can just worry about where the next earthquake is going to strike.

In terms of wading through each day’s swamp of bad economic news, it can be helpful to think of the global debt crisis as the new Cold War — an era-defining phenomenon that’s going to be with us for a long bloody time, occasionally flaring up into panics and associated freak-outs that will usually amount to nothing. Along the way, there will be endless fearmongering, and many alleged experts who speak now with unimpeachable authority will turn out to be dead wrong, like all those poor Sovietologists. So we might as well relax and get used to it.

We might also counsel the Greeks to relish their moment in the media glare — after all, it’s been centuries since anyone considered their country integral to the world economy. If some accounts are to be believed, it’s pretty difficult to tell the difference between a normal day in Athens and one in which half the country is on strike. Provided they don’t burn their own country down to show those evil bond traders how wrong they are, we might even plan a vacation to those lovely isles of theirs, aiding their economic recovery and our peace of mind in one fell swoop.

The Global Debt Crisis Is the New Cold War