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January 23, 2012

Greece Shows All the Signs of a Depression

I want to take a moment and address a point I heard someone make about Greece last week. What I heard was that Greece was going to get a "free pass" for the debt and spending mistakes it has made and will be bailed out collectively by the European Union and private creditors. The comment insinuated that the Greece economy and its people had not felt the pain of the mistakes made by the Greek government.

On the contrary, the data shows Greece is in a full blown economic depression.

Sidenote: Greek Stock Market Index, January 2008: 5,200

January 2012: 645.00

While it may not be the best of resources, Wikipedia offers a good, concise definition of what an economic depression is:

"a depression is characterized by its length, by abnormally large increases in unemployment, falls in the availability of credit— often due to some kind of banking or financial crisis, shrinking output—as buyers dry up and suppliers cut back on production, and investment, large number of bankruptcies—including sovereign debt defaults, significantly reduced amounts of trade and commerce—especially international, as well as highly volatile relative currency value fluctuations—most often due to devaluations. Price deflation, financial crises and bank failures are also common elements of a depression that are not normally a part of a recession."

Trade and Commerce

While exports have somewhat recovered from their drop in 2009, recently, they've showed signs of another decline. This is disturbing considering the depreciation of the euro currency. Typically, a depreciating currency makes domestic goods more attractive to international buyers (since the currency, thus the product is cheaper). This raises concerns that Greece may have disturbances in its production supply.



The Greek economy has suffered month after month of production declines going back to October 2008. In year over year comparisons of each of these months, there was a 10% or greater decline in production in 11 of these months, including 4 of the last six months. This shows that Greece's economy is still worsening after three plus years in recession.

Economic Growth and Unemployment

Economic growth declines have actually steepened since the recession started. This has likely come from the inability to attain credit from within the country. Unemployment, on the same path, has neared 20% and is showing no signs of plateauing.

Economic growth


A Note on Government Spending

The socialists in Greece followed several countries paths when the recession hit in 2009, they spent. In fact, from early 2008 to late 2009, quarterly government spending increased by 20%!! Looks like the United States isn't the only country to waste money on "stimulus."

Quarterly Government Spending

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