Tags: Greece | Default | Meaningless | Detroit

Greece's Default Would Be as Meaningless as Detroit's

By    |   Friday, 26 June 2015 07:40 PM

Greece and Detroit have much in common. Both have honored places in history. Among other notable achievements, Greece was the birthplace of democracy and Detroit was the birthplace of the mass-produced automobile.

The country and the city also have about the same level of economic output. According to the U.S. Department of Commerce, the Detroit metropolitan area produced more than $224 billion worth of goods and services in 2013. Greece’s economy is just slightly bigger with output of $242 billion according to the World Bank.

Both Greece and Detroit also share a history of financial mismanagement. The difference is Detroit passed through its crisis while Greece’s crisis continues to unfold.

Detroit has completed its pass through bankruptcy. Creditors survived the fallout from the process and government employees continue to receive benefits. In many cases, benefit payments have been reduced but they still provide income to those who depended on those payments before the bankruptcy.

Greece now faces the same bleak future. Tax receipts don’t cover expenses and the bond market is unwilling to bail out the country knowing there is a strong likelihood of default in the future. The impending default by Greece is likely to have the same kinds of impact Detroit’s default had.

Those receiving pensions will most likely be the hardest hit. Creditors will take losses and continue to do business as they always have. Normalcy will return after the crisis has passed.

Detroit’s bankruptcy had no impact on the broader economy. Greece’s default is unlikely to have a broad impact beyond its borders. Since the impact will be small, now is a good time for Greece to simply default so everyone can move on to the next meaningless crisis spot.

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MichaelCarr
Greece and Detroit have much in common. Both have honored places in history. Among other notable achievements, Greece was the birthplace of democracy and Detroit was the birthplace of the mass-produced automobile.
Greece, Default, Meaningless, Detroit
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2015-40-26
Friday, 26 June 2015 07:40 PM
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