To understand what's happening with Greece and the Eurozone, think about a dinner party.
If you're cooking just for yourself and your spouse, it's easy: you make something you
both like. But if you've got guests, things get harder. If you need to accommodate a vegetarian,
and someone who is gluten free, and someone with a soy allergy, your options get really
limited. And that's the problem with Europe's idea of having a whole bunch of countries
all use the same currency. So Greece's economy is in a disaster. A quarter of the population
is unemployed, and it has this very high debt burden. Normally, if you've got really high
unemployment, what happens is that a country makes its currency cheaper by printing extra
money. That makes its products cheaper on world markets, it makes it a more attractive
tourist destination, and it means that foreign investors can get great bargains. But if unemployment
is really low, a country likes to have an expensive currency. That increases people's
purchasing power and it keeps prices down. And in Europe, you have a bunch of economies
that are really different. A price of Euros that's appropriate for Greece, where they
have a 25% unemployment rate is way too low for Germany, where the unemployment rate is
below 5%. And Greece's problem is that it's small, poor, and geographically isolated from
the rest of the Eurozone. It's like the only vegetarian at a barbeque, except when it comes
to currencies, there's no side dishes. And so there's plenty of specific decisions we
can second-guess, plenty of things Greece did and various banks did that we can question,
but fundamentally having all these countries come to a dinner party with only one dish
on the menu was a mistake. The euro was a project that Europe set about on for really
political reasons. It was a symbol of their determination to have peace on the continent,
but they didn't really take the economics of it seriously. So Greece joins the euro
in 2001 and initially, it works out great for Greece because all of a sudden everyone
was like 'yeah, sure, let's lend them money.' So they borrowed lots and lots and lots of
euros, except that didn't change the fact that their economy is a lot weaker than some
of the other European countries. So to really work, you would need a much, much, much closer
union, where you had big financial transfers coming from the richer places to the poorer
places all the time. In the United States, the poor states like Kentucky, Mississippi,
Alabama, they're constantly getting money from the richer states like Massachusetts,
California, New York, through the welfare system, through Social Security, through Medicare,
through Medicaid. And you know, people may complain about this or that program, but we
don't dispute the idea that it's all one country so money is going to circulate around. Europeans,
you know, they just don't feel that way. Germans are willing to support poor German people,
but they don't want to support Greek people with their tax dollars. So they're kind of
like half-way integrated in a way that doesn't really work.