Greece Heads for Default, Despite Media Predictions It Wouldn’t

May 18th, 2012 2:32 PM

Greece is the perfect example of the eventual outcome of unchecked spending – especially as it creeps closer and closer to defaulting on its massive debts, despite multiple government bailouts in May 2011. One recent BBC News headline warned: “Greece: ‘Default within the euro is possible’.”

But, looking back, some journalists predicted the opposite: that the Greek economy would survive because of government bailouts. Huge fan of government-deficit spending, Paul Krugman, has been writing about Greece a lot, arguing that its trouble is proof that austerity doesn’t work.

CNBC’s Jim Cramer was confident Greece’s desperate situation would be “resolved one way or another” as recently as March 7, 2012. He said on “Today” “I feel Greece will be resolved one way or another. It’s going to look bad in the headlines, but it will be, in the end, a neutral. It will not help us or hurt us here.”

CNN supplied a video called “Why Greece won’t default” on June 21, 2011 that featured Fortune’s Katie Benner saying “No.” Benner said that the lesson learned from Lehman Brothers was that the government will step in if “they think it is absolutely necessary.” She also wrote a piece for CNN Money in which she said “the rational market is no match for a group of determined government mandarins who will prop things up once they realize how high the stakes are.”

Numerous economic analysts predicted that the Greek economy would inevitably default – and there were journalists agreed with them. But the journalists, like Cramer, who remained convinced that Greece would not go into default echoed the reassurances of Greek politicians, European politicians, and IMF officials, who swore “we won’t let Greece fall” and that the Greek economy would not default “if the Greeks do what they have to do.” Jamie Dimon, the embattled CEO of JP Morgan Chase, also argued that Greece would not default.

This vote of confidence was echoed by Obama’s endorsement of that bailout.  An official Feb. 21, 2011 White House statement declared that he “welcomed last night's agreement in Europe on a new rescue program for Greece to help reduce its debt to sustainable levels.”

The looming failure of the Greek bailouts merely proves that unchecked government spending for years eventually becomes unsustainable – despite current media claims that the recent European elections are further proof that slashing spending is the wrong approach..

The liberal news media is often wrong when it comes to financial matters. Looking to Greece, it appears some of them may be wrong again.