Crippled by space money

In the South Park episode Pinewood Derby (originally aired 15.4.2009) the countries around the globe get their hands on a pile of what they think is stolen space cash. When the Intergalactic Police comes to make inquiries about the cash, the countries deny knowledge of such money. Instead they go on a spending spree not realizing that the cash actually holds no value but the value the countries themselves give to it. Amidst the folly, Finland is the only country who would like to come clean. As a result Finland faces the fate of an unwilling martyr, whereas the rest of the countries later end up realizing that through all the lies they were in fact condemning themselves to a life without a possibility for real growth.

Somehow, all of this sounds awfully familiar.

A pile of space cashA huge pile of space cash as depicted in the South Park episode

What we're now experiencing in Europe is the result of another type of space money. Greece, most notably, did what the countries in South Park did: it lied. In other words, it misrepresented its fiscal statistics in order to join the party and get its share of the space money. As a result it got money for a cheaper price that would have been fundamentally justified - just because it was part of the monetary union. As years passed, the illusion of a steady source of money led to deeper debt, which would eventually explode into a myriad of problems for the neighbouring countries as well.

Just like in the real world, the ultimate breakdown didn't occur all of a sudden in the South Park episode either. In the television series, as countries such as Mexico and Japan were spending huge amounts of money on water parks and giant robots, the Intergalactic Police expressed suspicion. Still, the nations kept lying and were thus sweeping the issue under the carpet. The constant yet obviously inadequate attempts at bailing out the troubled economies could be considered as a real world equivalent to this: lending money to the troubled economy can in fact be just postponing the inevitable.

Since a financial breakdown is an unpleasant scenario with a highly unpredictable outcome, it's tempting to try to keep it away for as long as possible, even if it would be likely to make it even worse in the end. No one wants to be the one to cause an economic crash or to be a party pooper. Accordingly "not on my watch" may in practice be a major guideline for many politicians: if the problem culminates after their watch they might not be the ones to blame.

In South Park, Finland tried to "spoil the party" by bringing the downward spiral of lying to a stop, but the other nations literally shot the messenger before it could act. This was undeniably bad judgment and a disaster not only for Finland but for the rest of mankind as well. In our actual debt crisis, Finland has also taken the role of a troublemaker of sorts by demanding collateral from Greece. Greece and Finland even made a bilateral deal about it four weeks ago. Even if its idea of using cash as collateral for cash seemed absurd to begin with and was abandoned as such by the rest of the union, the underlying message might have been a bit different: the whole bailout is an act of folly, since Greece will default any way.

Greece's default is just around the corner. One of the few questions remaining are what would be the best time for the default to happen and when will it actually occur. An essential factor related to the latter question is how the timing will affect the other troubled economies like Portugal, Ireland and Spain. In any case, postponing has already been going on for 1,5 years and banks have had plenty of time to react to this, so couldn't it already be time to let go and just recapitalize the banks where necessary?

The people in the world of South Park were put to the test when they got the space money, and they failed miserably. As Greece falls, EMU and the euro will be put to the test as well. We'll probably do better than they did on South Park, but it still might be a bumpy ride.

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