Greece Is Going Bust And the U.S. Is Following Right Behind

"The more stable the currency was, the more stable society would be – And the more successful as well." – Matthew Lynn, quoting Friedrich Hayek in Lynn's new book, BUST
Greece has a downright depressing record of managing its money and paying its debts. Is the U.S. following Greece's example? Yes…

If you happened to have $10 quadrillion in U.S. dollars back in 1900, and you converted it into Greek currency, it would have been worth less than $1 a hundred years later.

The previous century in Greece was just as bad. According the book This Time is Different, by Rogoff and Reinhardt, "From 1800 until well after World War II, Greece found itself virtually in continual default [on its debts]."

For the opposite end of the spectrum, consider Switzerland…

If you had $10,000 in U.S. dollars back in 1971, and you converted it into Swiss francs, it would be worth over $50,000 today (not including interest on your money).


Switzerland has had the most stable money over the last 40 years. And as Hayek predicted, the society with the most stable currency is the most stable and successful as well.

The numbers don't lie… Income per head in Switzerland is $69,000 today, versus $47,000 in the U.S. and $28,000 in Greece.

In his book BUST: Greece, the Euro, and the Sovereign Debt Crisis, Matthew Lynn explains Greece's repeating pattern through history:

A new government comes in, it embarks on an extravagant spending program, then the economy crashes, and there is an austerity budget and a [European loan] bailout.

Like the old Greek currency, the U.S. dollar has not kept its purchasing power… Today, you must spend $1 to get what would have cost you $0.18 in 1970 – a fall in purchasing power of 82%.


In Greece today, the people want their government to fulfill all its promises for pensions and wages. The problem is, the promises were too big, and now Greece is broke. There is no money to pay for the promises.

The story in the U.S. is the same. New governments come in and embark on extravagant spending programs. The economy has now crashed. And the government doesn't have the money to pay for the spending programs as promised.

But the people don't want to hear it. How is that different than Greece?

Politically, the government won't be able to cut near enough spending. And it'll be difficult to raise taxes as well. The easiest way out for the government – whether it's Greece or the U.S. – is to let its currency crash.

Friedrich Hayek explained the inevitable outcome decades ago, in his booklet Choice in Currency: A Way to Stop Inflation:

As has sooner or later happened everywhere, government control of the quantity of money has once again proved fatal.

I do not want to question that a very intelligent and wholly independent national or international monetary authority might do better than international gold standard, or any other sort of automatic system. But I see not the slightest hope that any government, or any institution subject to political pressure, will ever be able to act in such a manner.

The U.S. is already going down this road. A decade ago, $300 in U.S. dollars would buy you an ounce of gold. Today, it takes over $1,500 to buy an ounce of gold.

The U.S. has been a great country, for centuries. But that doesn't mean it's immune from the simple truth above – printing money is politically easier than cutting spending or raising taxes.

Stable money can lead to a stable and successful society. Right now, U.S. money is unstable. And our society is suffering for it. Banks don't want to lend for the long term. And companies don't want to invest.

What can you do? Make sure you have money outside of U.S. dollars and in history's most stable form of money… gold.

Good investing,

Steve