My take on Greece (Introduction)

Greece is again in the headlines and the numbers are staggering. As a consequence, people are worried and looking for answers. They feel that the utterances of politicians (who themselves, of course, have no clue) make no sense and confuse them further. Worse, economists that appear on Austrian and German TV contradict each other as to what the right medicine is – the predictable result of empiricism and relativism gone wild in mainstream economics.

The thing is already getting nasty with nations blaming each other, as we already hear how somehow the “German mind” is different from the rest of the world and simply “doesn’t get it” – good, old Marxian Polylogism. This is especially embarrassing for the progressive Germans (and Austrians) who base their very identity on being different from their forefathers in all respects and want to be loved by the world, not hated. I watched in awe how the other day on German TV a leftist politician hysterically bullied her conservative counterpart.

I can’t help to notice that our supposedly advanced and rational society somehow looks a bit superstitious.

Friends keep asking me about my opinion repeating the questions that are constantly pounded in the media: “will there be a Grexit?”… “Does Greece fit “culturally” into the Eurozone?”…”What will happen to the Euro, if Greece is kicked out?”…“Whose fault is it?”…”Shouldn’t we show solidarity, since we have profited so much from the Euro?”…”what do you think about the Drachma”…and, of course: “when will it be over?”

Unfortunately, save for the last question – this won’t be over for a long, long time – all other questions either do not make sense, or cannot be answered in a short and concise way.

A typical senseless question goes like this: “is it the Greeks or the Germans that have profited more from the Euro?” This is mostly supported with cherry picked statistics in an effort to somehow introduce an obligation (cash, no advice) of one towards the other, but also to convince the German electorate whose real wages, ahem, have been stagnating for a long time that the Euro has been better than the DM-Mark for them (unfortunately, it hasn’t).

Far from providing a satisfactory answer, it only shows how collectivist our view of the world has become. Most are not able to grasp the fundamental truth that only individuals can profit or loose. Concepts, such as profit and loss, guilt or justice are meaningless when applied to a collective. Yes, some Greeks have profited from the Euro, as have some Germans; but some Germans undoubtedly have lost as well, as have some Greeks. In the same vein, not every Greek has borrowed irresponsibly and cheated on taxes, neither is every German a law-abiding saver. It is obvious that nothing (and certainly no moral or financial obligations) can be deduced from these facts.

Further, it becomes evident that empiricism, the main toolkit of modern social scientists, fails when applied to complex problems. Merely looking at aggregate data and correlating them, or constantly polling people at the street of Athens and Berlin – while certainly capable of stirring emotions – does not help at all to understand the problem at hand.

To illustrate, just look at the holy grail of the modern macro economist: “Gross Domestic Product” aka GDP. Below I have plotted the “PPP adjusted GDP per capita” of Greece and Germany since 2002, the year the Euro was introduced,


Now, try to answer: who has profited more from the Euro “the Germans” or “the Greeks”!

Maybe you will disagree, but to me the data doesn’t give a clear answer: initially the average income in Greece (blue line) was growing much faster than in Germany, only since 2009 has the trend turned. Who says that’s permanent? Maybe, it has nothing to do with the Euro, but is somehow connected to the financial crisis? Maybe it is about to turn again, who knows? One could also argue that the introduction of the Euro should be dated much earlier, with the introduction of the ECU. And so on, and so forth…

In other words – and not at all atypical – depending on when (and how) you look at macro-data, you get different answers to this question, never a clear one – unless you are Paul Krugman.

To make it clear: this is a nonsensical approach. It confuses more than it clarifies.

Unfortunately, most economists who appear on TV are macro-economists who only deal with aggregates and try to answer just these types of nonsensical questions. This is irrelevant when your only goal is to get a tenure at a university where you are shielded from real life market forces, it however helps little in solving real world problems. Worse, given that the problems these experts formulate can only be defined within their faulty and simplistic models (“liquidity trap”, “austerity”), their language constantly confuses ordinary people.

And I think it is important that ordinary people understand what’s going on, if you want to have a meaningful chance of managing this huge mess.

In truth, complex social phenomena can only be grasped with a proper theory, not just by collecting data. By proper I refer to a theory that allows us to deduce the effects of market phenomena on the actions of individual agents, i.e. more micro, less macro. This has the advantage to automatically link solutions to actionable goals and as such it also is intelligible to the interested layman, i.e. politicians and voters. Of course, data are important, but one needs a theory first.

In this series of posts I will try to do just that: analyze the Greek tragedy from an Austrian perspective which in my view is sorely underrepresented. But, before I start with my analysis, it is necessary to take a critical look at the mainstream’s take on Greece and the Euro in the second part…



  1. Looking forward to it! We have been discussing the topic of Greece on our private Slack-powered forum tied into our Austrian econ study group. I’ve linked the group to your upcoming series.

  2. Hello,

    Are you actually located in Austria? We’re a family considering a move to Austria for various reasons and I’m trying to figure out how feasible it would be to continue living off my trading, considering local taxes i.e. if it’s better to offshore a fund or just locally trade. Would be greatly appreciated if you could direct us to some resources.

    Many thanks in advance!

  3. The controversial introduction of mandatory cashpoint charges still requires approval by the European Central Bank but is expected to amount to €1 for every €1,000 transaction. While the measure is unlikely to impact on day-to-day withdrawals, Greece hopes it will deter citizens clearing out their bank accounts.

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