Last last week, while I was driving around Newfoundland, the collective hallucination that is our global economy took a pretty big beating. Greece tried to quit the Eurozone but somehow got pulled back in, despite a significant vote by her population to pull the D-ring and go their own way. I can only imagine that’ll lead to a lot of yelling, lighting things on fire and general hooliganism as the people who were already under fairly restrictive austerity measures are told to buckle down and smarten up.
A bunch of American news pundits did things like comparing Greece’s pull-out from the Euro to something like Alabama leaving the US. At only 2% of the GDP of the total population, it wouldn’t really have that great an effect, they said. What they didn’t say is that if Alabama were to leave the US, a whole bunch of other states who don’t agree with the government might also consider walking away and take their smaller economies with them causing the whole system to fall over. It’s no stretch to imagine other countries fed up with unemployment and heavy taxes deciding to go their own way.
What I find really interesting about this whole thing is that the central banking authority of Europe, under the control/guidance of Germany, essentially forced the Greek government to do something its people had voted against. That doesn’t feel like a democratic thing to me, but it does underline how serious the European authority deemed Greece’s departure to be to their economy.
Apparently China’s stock market’s got a little shaky too. Trading stopped on a set of big stocks that were deemed too volatile to keep active. I don’t fully understand what happened, but the gist of it from the hairsprayed CNN avatar seemed to be that a bunch of people invested in the stock market, saw profits and started taking their money out which destabilized the whole thing. We’re assured China is a bedrock of economic stability, though.
Back in Canada, our prime lending rate’s been dropped to 0.5%. A historic low, but it’s not a recession, we are assured. Now our dollar’s trading at 70¢ US and likely to fall more. We’re seeing an uptick in inflation – reportedly 1% last month with spikey provinces claiming 1.6+ because of rising food prices. Just in time for elections!
The illusion of money only works when the system is stable. When things start to get weird, the machine gets shaky. When people worry that their money’s not secure, they try to get their savings and investments into a more tangible format. That usually means pulling it out of whatever currency lockup they have it stored in: stocks, banks, pickle barrels. When everybody pulls out at the same time, the banks aren’t able to produce currency because there isn’t enough actual money in the system. It’s fiction.
Why the hell am I talking about economics? I don’t know, but it feels like the world’s wobbling a bit on its axis right now. Imagine this ending with a scary pie chart.
— Hernán R. Colmeiro (@peregrinogris) July 19, 2015
another edit: probably should have been a bar graph.