Observe a Greek tragedy, courtesy of the European Union, which insists that Greece reduce its deficit, i.e. reduce its money supply in the face of a recession, where money already is in short supply. This is akin to applying leeches as a cure for anemia.

Read this quote from an article today (2/27/10):

“ATHENS (Reuters) – Greece must take further measures to reduce the deficit or it will face sanctions, Eurogroup chairman Jean-Claude Juncker (said) . . . Greece has until March 16 to convince EU . . . that proposed measures to cut its budget shortfall this year to 8.7 percent of gross domestic product from 12.7 percent in 2009 are sufficient.

“‘Greece must intensify its efforts and move to further actions to reduce its deficit,’ (said) Juncker, ‘If it doesn’t convince us then it will possibly face sanctions. Greece must understand that the taxpayers in Germany, Belgium or Luxembourg are not ready to fix the mistakes of Greece’s fiscal policy,’ Juncker said.”
(Reporting by Lefteris Papadimas; editing by Ingrid Melander and Philippa Fletcher)

The mistakes were not of Greek policy, but of EU policy. The creation of the euro pegged all nations to the same money, exactly what the failed gold standard did.

In short, the EU expects Greece to tax itself into prosperity. Sadly, this may be a perfect test of the debt-hawk theory that cutting deficits benefits an economy. Heaven help the Greeks.

And don’t think it couldn’t happen in America. The debt-hawks control most of the media, politicians and economists. Congress’s and the President’s stated mission to minimize or even eliminate federal deficits, could make the Greek tragedy resemble a musical comedy compared to what would happen here.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com