Stories by Napoleon Linardatos

Greece Defies Reform

September 20th, 2011 at 2:57 pm 35 Comments

Back in May of 2010 it became clear that Greece could no longer finance her debt and her budget deficit through the markets. Since then the nations of the European Union (and the IMF) have covered the borrowing needs of Greece with new loans.

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Turning A Crisis Into A Greek Tragedy

June 27th, 2011 at 12:30 pm 8 Comments

Looking back at historic events, say the protracted tragedy of World War One, one is frequently puzzled by the inability of the actors involved to understand the futility of their actions. The temptation is to rationalize away such obtuseness as being the product of the backwardness of an earlier age. However, today one can can recognize similar epically-scaled ineptitude in the management of the ongoing Greek crisis.

The political management of the Greek financial crisis is akin to the generalship exhibited in World War One — and, depending on the final outcome, the fluid situation in Athens could have similar catastrophic consequences for the political unity of Europe.

There are the three major players in the Greek financial crisis:

The Greek administration. The issue here is not just the ruling socialist party. The reality is the Greek political class, in general, has lost the skills necessary for governing. After decades where governing meant spending borrowed money, hiring huge numbers of public servants and giving voters generous early retirement packages, problem solving, budgeting, awareness of market forces etc. are not in the skill sets of any possible administration. Things are more complicated for the present government since it is being called on to implement a reform program  it doesn’t believe in — actually, a program it campaigned against in the last elections. The current administration, after making some general cuts in government salaries and pensions, has made every excuse possible to avoid any meaningful reform. It is a government now pledged to make budget cuts but which has vigorously pursued more tax revenue from a weak and shrinking private sector. The socialist government will not touch the annual 603 million euro subsidy to employees of the public electric company, but it is ready to slap people making a thousand euros a month with a retroactive tax on past income. It’s no surprise that a strategy of making an inefficient system somewhat less expensive and then taxing the heck out of the rest doesn’t seem to inspire much confidence in the people or the financial markets.

The European Union. Trying to work with a Greek government during the worst financial crisis since the Great Depression could be described as many things — but certainly not as a pleasant task. And, unfortunately, the European Union for the time being remains a big part of the problem rather than a vehicle which will provide a solution to Greece’s potential descent into default. It doesn’t really know how to handle the Greek political class, it doesn’t know how to communicate with the Greek public and, worst of all, it’s unable to avoid its own institutionalized bad habits. It treats all budgetary questions from a rather neutral point of view — budget cuts are equal to tax increases and vice versa. The Greek government has to reach a certain debt-to-GDP ratio this year — but how Greece will actually acheieve this to be a non-issue for the EU. Can you make budget cuts? Good. Can you make tax increases? Great. But budget cuts and tax increases are not equal: especially, in the case of Greece where — despite the widely-held stereotypes about rampant tax evasion and avoidance — the tax revenues are rather close to the European average. However, the government imposes huge tax, regulatory and corruption costs on an already squeezed private sector — structural problems which will have to be addressed sooner rather than later. So instead of dealing with the issue of the Greek insolvency, the EU treats the whole issue as a liquidity problem in the hope that at a future date things will be more manageable. Adding debt to more debt, glossing over important policy questions and being hostile to the Greek conservative party (it is opposed to the tax increases) because it’s not willing to sign up to the socialist government’s ruinous program is simply the wrong way to go.

The Greek public. Despite all the reports and video footage of continuous riots and demonstrations, the vast Greek silent majority remains dumfounded by the unfolding news. Its assumptions and expectations about life have been dramatically altered. Gradually, albeit slowly, it has come to the realization that the economic system it embraced for the last 30 years is not sustainable. The problem here is that if a program of reform is not put in place soon — one which offers some realistic hope of both avoiding default and stimulating economic growth — Greek society will regress to its old default positions of victimhood and isolationism. And such a withdrawal inwards will only further hamper efforts to resolve the country’s deeply entrenched fiscal woes..

Up until now the Greek government and the EU have played the game according to the traditional rules. The problem is that the conditions have changed dramatically but, like the generals who presided over the carnage of 1914-1918, they are fighting the last war. The brief, heady belle époque of the euro is over. What Greece needs now is an orderly restructuring of its debts which will reduce them at least by half. Such restructuring needs to be be yoked to a drastic — but gradual — reduction of the humongous Greek public sector: that’s the tricky  but unavoidable part.

But without such urgent and overdue remedial action, the Greek government and the EU run the very real risk of transforming a crisis into an economic cataclysm — one which will produce another “lost generation” of Europeans.

Breaking the Buckley Rule

September 24th, 2010 at 9:40 am 24 Comments

On Wednesday, cure Andrew C. McCarthy, published an article on National Review Online making the case against the Buckley Rule, namely, that a Republican should always vote for the most conservative politician electable.

Certain passages in his article deserve a response.

McCarthy writes:

As a class, politicians are not think-outside-the-box types, which is not a good thing when the frontiers of your box are fixed by Interstate 495.

It’s highly ironic that this sentence appears in an article defending a crop of politicians that includes some whose entire political education starts and ends in an enumeration of well-worn slogans, clichés etc. (see Angle, O’Donnell)


These are not ordinary times. The nation is in the grip of post-sovereign leftists who reject the premise that the country is essentially good — that’s why, they say, it needs “fundamental change.” They are locking in their redistributionist vision by borrowing the terrifying trillions they spend.

Yes, these are not ordinary times. The Democrats have a big majority in the Senate so let’s make sure we put up some unelectable candidates, so the Democrats keep their majority, pass some bills and confirm Obama’s appointees.


To hear the pundits tell it, the highest Republican interest is control of the government. The holy grail is winning enough seats to take over the House, the Senate, and the constituent committees of both chambers. Ideological purity is secondary to wielding the levers of power.

This would be an acceptable response if the Buckley rule said: choose the most electable Republican no matter what. Of course the rule says choose the most electable conservative. That’s a big difference. It’s a difference that McCarthy completely avoids grappling with, a contrast which if dealt with would have actually added something to the debate.


But to the tea party — belittling shorthand for what used to be known as the “silent majority” — this arrangement and its underlying assumptions are exactly the problem. Sure, they’d like the candidates of their choosing to wield the levers of power. But that is a decidedly secondary concern. They want the Titanic stripped down to a reasonably efficient cruiser that does the few things we absolutely need a government to do and nothing more.

How exactly do you strip down the Titanic to “a reasonably efficient cruiser” if you don’t have the power to do so? How do you do that when the time came and you had the opportunity to gain the influence to do so, but you chose instead to do something that drove you back to minority status? Is the false sense of some ideological purity worth having your ship going down to the bottom of the ocean?


At every turn, the GOP-controlled Congress — at the urging of weathervane RINOs and a punditocracy consumed by tactical politics at the expense of limited-government principle — was Big Government Lite.

It’s a bit of a surprise to the rest of us, but it appears that in the period of complete Republican dominance, 2001-2007, it was Olympia Snowe and Susan Collins who ran the show.

If I recall correctly, the big government items of that period originated from the White House. A White House, so admired by the base of the party, which in order to appeal to the rest of the country could only come up with liberal policies (prescription drugs, immigration).

Perhaps that period should have prompted McCarthy to ponder three very important points:

1)   Ideological purity or the perception thereof, does not guarantee the implementation of conservative policies (see Texan president with southern/conservative dominated Congress)

2)   Ideological purity does not mean much if it cannot achieve results that are viewed by a large part of the country as successful.

3)   Ideological purity doesn’t do much good if it is peddled by generally unattractive candidates, yakking extreme and often bizarre stuff. Hard as it may appear to many nowadays, politics often requires persuasion.


The movement now ascendant in the country is not about anything so small as the question of which party has control over the Senate in 2011. It is about the future of freedom and prosperity, about the kind of nation we will be.

The question then is how the primary victories of Angle and O’Donnell advance that conversation or agenda? In what sense does the addition of inarticulate and problematic Republican candidacies advance the conservative case for the nation’s future? Is there magic involved? Does O’Donnell know something we don’t?


The Buckley Rule has no place in that enterprise. The object is to make Big Government pols of both parties members of an endangered species.

It’s hard to turn a type of a politician into an endangered species if you make easy or easier for them to get elected – ask Harry Reid.


The GOP establishment will either get the message or it will go the way of the failed candidates it has backed. If it had done its job, if it had undertaken to represent rather than thwart the public will, it wouldn’t now be asking itself how you get Christine O’Donnell elected. It would have found a better Christine O’Donnell.

But isn’t O’Donnell good enough? Why do we need all of a sudden a “better O’Donnell”? What would be the characteristics of a better O’Donnell? May we say that this better O’Donnell would actually be an electable kind of conservative in Delaware?

If McCarthy had started to write his article with this paragraph, which happens to be his last, perhaps he would have never bothered to challenge Buckley’s rule.

O’Donnell’s Identity Politics Playbook

September 18th, 2010 at 12:26 pm 21 Comments

httpvh://www.youtube.com/watch?v=-npEhuweIyA

I found watching a YouTube video of Christine O’Donnell at a recent town hall particularly painful. Not only for the fact that she could never seem to master that verb and subject agreement thingy but mostly for the message that she so excruciatingly tried to communicate.

What chiefly struck me was her phrase that we need people who will be “advocates for the constitution, advocates for the United States.” It’s rather telling that in defending conservative principles she was using the language that the left often uses to express support for special interest groups.  O’Donnell belongs to a growing part of the conservative movement that is unconsciously adopting the left’s identity politics.

In the old days when conservatives fought against what they called elitism they meant the tendency of modern liberalism to dictate the minutiae of daily life. Exceptional minds of the right, from Hayek and Friedman to Charles Murray, developed a serious political literature expatiating on the inability of big government to solve many if not most societal problems.

For the new idiotic right it appears that policy differences are merely the excuse for something that goes a lot deeper. The new war on elitism is not so much about policy but about identity. The elitism they oppose is not a set of policy proposals; the new elitism has a face and often a name. A relatively old Club for Growth political commercial was pointing to the latte drinking, Volvo driving and New York Times reading constituency of Howard Dean. You see, it’s not the policy anymore – it’s the people. The real America versus the coastal elites and their groupies as  Sarah Palin would most likely term it.

The new idiotic right has managed to insert resentment and envy into the conservative movement; A kind of class warfare without the ransom note. We need average people in Congress says Christine O’Donnell. Do we? Who of us would consider Washington or any of the founding fathers average? Who of us would even consider present day political figures like Mitch Daniels and Chris Christie average?

I want my government limited but in no way would I like its managers to be average at all.

Viewing again that O’Donnell video one thing comes to mind, something that Noel Coward said: Never mind, dear, we’re all made the same, though some more than others.

Attack Politics 101

September 14th, 2010 at 11:00 am 2 Comments

Republicans who are ready and eager to throw the wildest accusations or insults at President Obama should take some advice on the art of the political attack from Tony Blair.

In his new memoir, rx A Journey, buy Blair writes of how he handled his Conservative Party opponents:

So I defined Major as weak; Hague as better at jokes than judgment; Howard as an opportunist; Cameron as a flip-flop, cialis not knowing where he wanted to go. … Expressed like that, these attacks seem flat, rather mundane almost, and not exactly inspiring—but that’s their appeal. Any one of those charges, if it comes to be believed, is actually fatal. Yes, it’s not like calling your opponent a liar, or a fraud, or a villain or a hypocrite, but the middle-ground floating voter kind of shrugs their shoulders at those claims. They don’t chime. They’re too over the top, too heavy, and they represent an insult, not an argument. Whereas the lesser charge, because it’s more accurate and precisely because it’s more low-key, can stick. And if it does, that’s that. Because in each case, it means they’re not a good leader. So game over.

Bringing Out the Worst in Europe

May 24th, 2010 at 2:13 pm 4 Comments

Like most postwar European institutions, the Eurovision song contest was born decadent and since then it has only gotten worse.  Eurovision, is the annual contest that brings together 39 countries, the vast majority of them European, in a competition of previously unpublished songs. Eurovision started in 1956 as an effort to bring together the countries of war-torn Europe.

It was a plan by a European committee and consequently it came with the usual package: naïve in intention, shady in action and really pathetic in end results. Starting with the initial intention to bring the European countries together, Eurovision has instead reaffirmed national and regional biases. Scandinavian countries vote for each other, the same goes for the Balkans as well, and somehow the Greeks almost always find the best song to be a Cyprian one and vice versa.

While geography, history and cultural ties benefit some, it’s clearly a detriment for some others. In 2009, Terry Wogan, presenter of Eurovision in the UK for 38 years, said that it was all “rubbish.” He added that “Britain has attacked nearly every country in Europe and people don’t forget.” People in Europe don’t forget and that’s very true; if it makes sense to be refighting Agincourt every year in a song competition is another story though.

Nevertheless the UK along with France, Germany and Spain will automatically make it to the finals since they contribute the most funding for the competition. It’s a tad peculiar: just consider if Canada in the most recent Olympic Games was guaranteed a place in the top five in every sport it participated in, just because it paid for the games.  Americans would have made the operation profitable and given each country a share of the profits equal to its contribution. Europeans, having long-standing issues with profitability, prefer to openly rig the competition.

And that brings us to the final consequence of the competition. Eurovision like so many other European institutions established to bring Europeans together somehow manages to bring the worst out of them. And it’s not just the biased voting, the peculiar mechanisms, et cetera, but mainly the unabashedly, exceedingly awful music that gets produced. It’s almost mind bungling to have countries with such rich cultural heritage trying and succeeding in surpassing Americans in the production of really bad songs. There are exceptions every now and then, which nonetheless, validate the general rule. On a yearly basis Europe tries and succeeds in outperforming America in the production of cultural trash. One has only to look at the 2008 Spanish entry “Baila el chiki chiki” which would aesthetically offend even the most arduous consumer of musical rubbish.  Or take this year’s entry from the Netherlands “Ik Ben Verliefd” which proves that Lawrence Welk is still alive, well and hard at work in Amsterdam. Belarus entry “Butterflies”  give you a pretty good idea about the kind of lyrics one has to endure:

And we’re like butterflies
Flying to the sun

The sun will never
Let us look inside
I believe
That all’ll be opened up
But in the right time

Open-hearted wait for it

And all the secrets will come out…

I don’t want those secrets coming out.

I do wonder how Kenneth Clark would cover the whole spectacle in his series Civilisation, perhaps, a special chapter entitled, From the Skin of Our Teeth to the Fat of Our Belly.

There is something more embarrassing than having your own country default on its debts, and that is having her participate in the Eurovision song contest. Kudos to Italy for staying out.


America’s Unfolding Greek Tragedy

May 13th, 2010 at 7:17 am 76 Comments

I should point out first the agreements between Eli Lehrer and me in this debate. Obviously there are big quantitative and qualitative differences between the American and the Greek economy. Let me also concede that even if these differences were minimal, seek even a slight variation in time of occurrence of a debt crisis and other factors could result in an important differentiation of outcomes.

So if and when the U.S. has to face a debt crisis the circumstances of the moment will determine a lot. I think Eli Lehrer like many others believes in an American economic exceptionalism.  That certainly has been true in the past and continues to be so up to a degree even now.  The U.S. has indeed been slower than Western Europe in expanding the welfare and regulatory state. But here we must note that the emphasis is on slower.

American conservatives may be reluctant to admit that the U.S. has already a welfare state. Lehrer mentions the COBRA subsidy but what about Social Security, physician Medicare and Medicaid? Those are the big government programs, which if they are not reformed will generate debt in the trillions of dollars.

America may be exceptional in many things except its welfare state. The American welfare state in many ways functions like a European one. It’s expensive, redistributive, provides the wrong incentives to too many people, and has strong political support.  Watching the debate over Obamacare, it wasn’t surprising to see Republicans oppose it because it would cut Medicare and Democrats support it because it would be as ‘good’ as Medicare.

David Leonhardt of the Times estimates that in order to avoid serious debt problems “the government will need to find spending cuts and tax increases equal to 7 to 10 percent of G.D.P. The longer we wait, the bigger the cuts will need to be (because of the accumulating interest costs). Seven percent of G.D.P. is about $1 trillion today. In concrete terms, Medicare’s entire budget is about $450 billion. The combined budgets of the Education, Energy, Homeland Security, Justice, Labor, State, Transportation and Veterans Affairs Departments are less than $600 billion.”

Of course, we will not increase taxes or cut spending by a trillion now or even later. The most likely scenario is that we will be increasing our debt as much as possible while avoiding tax increases and spending cuts. At certain points and depending on the political winds we will have some spending cuts and/or tax increases. In the long run we will have reductions in the rate of growth of the welfare state accompanied by rising tax rates and debt levels.

It is this combination of events that makes a crisis like the one that Greece faces now possible for the U.S. America is indeed a very productive country but it’s becoming less so. One has only to look at the current account deficit.  That’s an important similarity between Greece and the US. Another one is the percentage of consumption as part of GDP. In both cases consumption and economic growth has been recently financed by debt.

Up to now it has been very difficult for the American political class to reform the entitlements in order to make them economically viable. If the Republican party does not find a way to articulate a convincing political narrative out of this mess, the future will be one of slow growth, high taxes and loads of debt.

At some point bond investors will take another look at the U.S. balance sheet and they will realize the unsustainability of the whole enterprise. Interest rates will start to rise and pretty soon we might find ourselves in a very Greek predicament.

All the certainties that for so long we have held sacrosanct will be quickly transformed to the peculiar superstitions of yesteryear. All of a sudden, we will be wiser but at a very high price.

Greece Could Happen Here

May 10th, 2010 at 11:42 am 32 Comments

Eli Lehrer in a recent post argued that a crisis similar to the one that Greece faces now is unlikely in America because the U.S. has strong fundamentals, look much lower debt than Greece, see Americans work hard, pharmacy the Fed can manipulate the dollar and the U.S. government has more political legitimacy.

Of all the points the only one that works in favor of Lehrer’s argument is the ability of the U.S. to manipulate its currency. Being able to devalue the dollar gives America a more politically safe way of managing a debt crisis. Nevertheless such a tool might mitigate a crisis but might not be able to halt many of the negative consequences.

At this point the Greek crisis becomes relevant to the United States. The Greek government is not any less legitimate in the eyes of its citizens than the American one. Greece has been using the parliamentary system for many decades and the public is quite used to it – so much so that the Greeks don’t like the idea of making it more representative. The government is as legitimate as the Clinton presidency was (he never got a majority of Americans voting for him) or the first Bush presidency (which came second in the vote count) or the filibustering U.S. Senate.

Greece used to be very productive as well. In the 50s it was only second to Japan in economic growth and in the 60s and 70s with a fast developing tourism industry it experienced high growth as well. Greece’s debt in 1981 was 31.2% of its GDP, a number that would be desired by even the most responsible nations today.

Greece in the 80s started to do what America commenced in the 2000s under Bush and now the Obama administration: transferring income from future generations to itself with a vengeance. The most destructive effect of debt wasn’t the magnitude of the debt per se but the socioeconomic consequences and the revolution in social norms and expectations. When I was starting primary school in the early eighties young people wanted to open their own business. When I was finishing high school near the mid-nineties young people were dreaming of a government job. It was a change so roundabout but universal that only in retrospect one may realize the rapidity of its progress.

As debt was financing the dependency habits of the general population it was also creating an infantilized political class that was unable to govern and manage any crisis effectively, be it natural, diplomatic or political. Whatever the political costs of a mismanaged crisis, the government always expected to be able to recover by throwing money in some new government handout.

Debt growth had the effect of robbing society of the ability to deal with the consequences of a debt crisis, leaving on the one hand, a society pretty sclerotic in its expectations, and on the other, a political class exceedingly incompetent when it comes to governing.

So yes, Greece is not able to manipulate its currency. This is a major disadvantage. Nevertheless, the situation could have been manageable or at least have had a reasonable hope for success if Greece had not made it so difficult for itself.

As the global sovereign debt bubble gathers more attention by the day, issues like that will become central in European politics. European political classes and societies might find themselves awfully lacking in dealing with a dramatic swift change in expectations about sovereign debt. A revolution in investors’ confidence and perception could expose the ominous contradictions and inadequacies of the European welfare model that has been decades in the making.

The American governing majorities seem very eager to follow the European path while ignoring the consequences of such a choice. Not only will they make America vulnerable to present financial crises but they will also create the conditions for almost certain mismanagement of future ones. If there is no change of the present course the future may look very Greek.

Daniels Shows Obama How It’s Done

March 5th, 2010 at 12:04 pm 3 Comments

Indiana Governor Mitch Daniels’s recent statements that he was “open” to a 2012 run should keep the Obama administration up at night.  In office, Daniels has managed to do what Obama has not: create new jobs and extend health benefits to the poor all while trimming government and keeping taxes low.

Since he became governor Mitch Daniels has been obsessed with getting jobs for the people of Indiana. Companies like Honda, Nestle, and BP among others have invested more than $15 billion in the state since he became governor. A typical announcement of the governor runs like this:

Governor Mitch Daniels says economic development deals announced today continue a diversification of Indiana’s economy and serve as a buffer from the turmoil in the nation’s financial and credit markets. This morning, health care equipment manager TriMedxsaid it will expand its national headquarters in Indianapolis, creating more than 100 jobs over the next five years. This afternoon, Italy’s Brevini Co. will confirm plans to re-locate its U.S. headquarters from Illinois to Delaware County. The company will also build its first U.S. manufacturing facility there, creating approximately 455 jobs. Brevini will manufacture gears and components for use in the wind power sector.

In his campaign for reelection in 2008, Daniels was keen to show to audiences a powerpoint presentation that I believe he probably used in meetings with business leaders.  The presentation pointed out that Indiana ranked

#1 in the Midwest and #12 nationally for business climate in the country, #8 for overall cost of doing business and #1 in international investment in our country in 2007.  CEO Magazine has rated Indiana #4 in the Midwest and #8 nationally for the best place to do business.  Since taking office 60,000 new good-paying jobs have been committed by 2012 and now 50,000 more Hoosiers have jobs than in 2005.  New jobs created in Indiana have an average annual salary of more than $39,000 which is about $5,500 more than the average Hoosier salary.

None of this of course was accidental. Since Daniels became governor he followed a very meticulous path in order to restore the finances of the state and keep taxes low. He cut more than $250 in spending and renegotiated state contracts saving another $190 million. A tax amnesty bill brought in another $224 million and he reduced the state government payroll by five thousand employees. He reduced the growth of government spending from 5.6% to 2.8% and eventually an $800 million deficit became a $1 billion surplus. For the first time in its history Indiana got a AAA rating.

One of his most important decisions was to privatize the toll road connecting Chicago and Ohio in northern Indiana.  Selling a 75 year lease to a European company proved initially a very unpopular decision. In a MitchTV video available on YouTube, Daniels gets an earful from an elderly voter in a diner. He calmly and attentively explains the benefits of the decision. The old system generated only $130 million in profits for the state in over 50 years of operation. A figure that would be surpassed in one year only from the interest generated by the $3.85 billion Indiana got the private company.  Over time the vast majority of Hoosiers came to see the deal Daniels’s way.

But Daniels proved to be something more than the typical business-friendly Republican governor. In 2007, he passed the Healthy Indiana Plan which covers Hoosiers who earn lees than 200% of the federal poverty level.  The plan established a health savings account where the state contributes $1,100.00 and the individual up to 5% of his income to provide for basic health benefits. If the funds are depleted catastrophic coverage kicks in.  It’s a plan that covers the uninsured while it helps them develop healthy habits and it does so by keeping the costs of the state down and introducing consumer choice in the healthcare system. The Healthy Indiana Plan is very popular with Hoosiers.

It’s a great example of how Republicans can find a way of providing conservative solutions for the problems that the voters face today. As Daniels said to National Review’s Mark Hemingway:“Our health-care plan is health savings accounts for poor people. Our telecommunications policy is deregulation. Our infrastructure policy was the biggest privatization in state history.”

Hoosiers gave him an 18% reelection victory in 2008 at the same time as they were voting to elect Obama for president. Daniels won by gathering an unusual electoral coalition for a Republican in that year. As Mona Charen noted, Daniels’s “margin of victory included 24 percent of Democrats, 20 percent of African-Americans, 51 percent of the youth vote, 67 percent of the elderly, and 57 percent of independents.”

His Indiana record and his appeal to groups that Republicans don’t seem to do well with recently have brought Daniels to the spotlight for the 2012 presidential election. It also helps that Daniels has solid Washington experience having been Reagan’s policy director and George W. Bush’s budget director. Add to that his private sector resume of having been head of Eli Lilly’s North American operations and chief executive of the Hudson Institute and you’ve got yourself a very attractive candidate.

Simple, direct, knowledgeable, effective and conservative. Sounds like the man that Americans may be looking for in 2012.

The Greek Path to Fiscal Disaster

February 11th, 2010 at 2:01 pm 5 Comments

Being a proud native of a nation in the cutting edge of societal decline I am here to offer you five easy steps that would make your country – no matter how small – the epicenter of world finance. This is the golden age of sovereign debt or as it is otherwise known the great sovereign debt bubble. By following these five easy steps your country can be part of it. No money down and no commitment are necessary. The plan comes with a 30 years free trial.

Step 1:
Generate huge multiyear budget deficits. It’s the first very important step to financial turmoil. Of course not every budget deficit is the same. Consistency is important (multiyear) but also quality. Deficits that are generated by spending in a multitude of programs serving a plethora of constituencies are to be strongly preferred to those generated by tax cuts.

Step 2:
Focus on creating a sclerotic labor market and lots of government red tape. This might seem tangentially related but it is actually very crucial. What you are looking for is an economic environment where economic growth is steadily below debt growth. In Greece people in their 20s and 30s have a 25% chance of being unemployed while at the same time the government bureaucratic costs to the economy are estimated to be around 6% of the GDP.

Step 3:
Do absolutely nothing about the incentive structure of government entitlements. Furthermore convince yourself that any new expansion of any entitlement without any fundamental change in its architecture will lead somehow to the process by which its long-term costs will come under control (see Krugman, sovaldi sale Paul)

Step 4:
Ignore demographic trends. Make the central and implicit assumption of all your budgeting the absolutely false certainty of many future baby booms. Make sure that the costs of retirement and care of an exploding growing elderly population are borne by an already heavily taxed and shrinking young demographic.

Step 5:
Assume that the many special interests heavy on tax consumption will act altruistically in a time of crisis. This will be the final blow as the political class will belatedly realize that not only has it created a sclerotic economy but also an equally inflexible political environment that makes adjustments to mitigate grave crises politically untenable.