The stock market dives. Woe! Woe! Woe!

The news this week appears to be focused on the stock markets around the world seemingly going into a dive. One of the things that puzzles me is why this is regarded as such a disaster. I accept that if some investor actually badly needs money and has to sell, this is not good news, but apart from that, and apart from speculators getting it wrong (and here I have little sympathy) what is the problem? If the number of people employed stays the same, the amount produced stays the same, the wages and salaries stay the same, what is important stays the same. What matters in a business is cash flow. If raw materials are available, if costs are stable, if interest rates are low, and if sales are constant, variations in stock prices seem to me to be irrelevant.

Maybe we are all a bunch of wailers! Recall that as oil prices kept rising, there was a general wailing that energy costs would stifle the market. Well, now oil prices seem to be as low as ever, thanks to fracking, and there is general wailing, seemingly because the oil merchants are no longer able to extort such high profits from everyone. (Although, from the price of petrol locally, I rather fancy oil companies are doing rather well out of this too. Prices go up very quickly, and down rather slowly.) It seems to me quite probable that if oil prices stayed the same, there would also be general wailing.

In the alleged “bad news” column, growth in China is falling. The most pessimistic prediction I have seen is that it will fall to (horrors) 5 % this year. So, there may be problems. Thus the Australian mining sector will suffer because construction in China is slowing to a more sustainable level. So? Who else is growing at 5%? If growth were universally zero, would not things be the same as last year? Was last year that bad?

So the European economies are falling backwards. The Greek financial mess is at least partly the fault of the rest of Europe. The huge number of asylum-seekers from the muslim regions also hardly helps, but surely that is a problem Europe has to face. The sanctions against Russia is self-imposed. Cutting off your biggest markets carries a price, and politicians should have made preparations for those consequences, but they did not. The inability to make good predictions and then act on them was also a failure. Consider the dairy industry. A year or so ago there were very high prices. However, the sanctions against Russia removed one of the bigger consumers, and worse, only too many farmers thought the dairy prices were so high they had to get into it. A major reduction in the market size, and a major increase in production meant that prices would collapse. All the money you pay in taxes and that leads to information gathering might have been analysed and appropriate advice given. Of course this presupposes governments are interested in their citizens.

I suspect reality has little to do with the collapse. Quantitative easing pushed too much money into the system for too long. Low interest rates have forced people to invest in stocks because they are one of the few assets that would normally give much better returns in period of low interest. There was too much cash chasing too few stocks, and the prices rose to ridiculous levels. The price to earnings ratios of many mature shares exceeded 17, and that was in a period of high earnings. Those who know would have decided this could be the time to liquidate. The problem is, once some start selling, everyone wants to sell and the stock prices tank, an issue compounded by computerized trading.

Is this all that bad? If you are a long term investor, or a value investor, this is good, because as the prices tumble, there are bargains out there if you know what you are doing. Those that get hurt are the greedy ones who do not know what they are doing, and surely there is some justice in that.

Remote control – the digital virus

I rather think that sometimes governments do some stupid things, usually while patting themselves on the back as a reward for their supreme cleverness. As an example, have you ever heard of Stuxnet? This was some sort of digital virus allegedly designed by the US and Israeli governments and targeted at Iranian nuclear enrichment equipment. What it did was to embed itself in the Iranian computers that were controlling the enrichment, and essentially stop them working properly. As far as we know, nobody got hurt, and as far as we know, it delayed Iranian uranium enrichment long enough that now negotiations have persuaded Iran not to make the bomb. (No discussion will be entered into as to whether they were going to, or whether they will anyway.)

So, why do I think this was a prime example of stupidity? The problem is, once the virus is embedded, the code is available at the other end. What you have done is to show the guys you are trying to hurt, and who want to hurt you back, how to do it, and to give them example code to take bits from to build up their retaliation.

There was an interesting article in the August, 2015, edition of Chemistry World. According to it, cybercrime is estimated to cost the UK £27 billion every year. My guess is, it will be worse in the US, if for no other reason both the population and the economy are bigger. But that is just ordinary crime; what Stuxnet opened the door to was cyber terrorism. The same article noted that the US had 41 cyber attacks on industrial installations in 2010, and 245 in 2014. So far, these attacks have been largely criminal in nature, and as such, reasonably harmless to everyone not directly involved. Criminals want money, so they steal.

Terrorists are a different problem. Now, in many companies, this will not matter. If a mechanical assembly plant goes wrong, it is a nuisance. You may even injure the odd worker, but consider what happens in a chemical plant. These are very sophisticated, and they often operate at either high pressure or higher temperatures, and control is exercised by ensuring that the feed is at exactly the correct rate to maintain the reaction conditions and to control the heat. If the heat is not controlled properly, reactions accelerate, and in some cases, could explode, or cause a major fire. The recent accident in China is probably at the very largest scale of what could go wrong, but even if an oil refinery caught fire and did not explode, it would be virtually impossible to put out and evacuation of nearby people would be the best thing to do. If a major chemical plant does explode, the damage could be quite horrendous and there will be no time to evacuate.

How hard would it be? Well, every major chemical plant (or nuclear power station) will have computer control, and invariably they will be hooked up to the web so that the conditions can be accessed remotely. An important problem is the controlling system will be intended to operate for well over a decade, and since the process is continuous, it is very difficult to update software. It may take up to a week to turn off a chemical plant, to let it cool down in a controlled fashion (and the same to get it started again). If the temperature changes are not carefully controlled, the equipment may be damaged irreversibly. Carelessness at the control panel can do what ordinary terrorists never could. Look at Fukushima. And even if you get it right, there will probably be a huge mess to clean up. Now, imagine what deliberate loss of control could do.

So now, what do you think of driverless cars? The terrorists’ prime piece of equipment. No need to even persuade the driver to commit suicide! I started my novel Puppeteer with the premise that in the future, terrorists could hack into the controls of cruise missiles and turn them around to serve their purposes. At the time I thought it would take to 2030 to learn to do that. I suspect the time required may have been grossly underestimated.

Now, a couple of personal things. I did another interview toexplain myself, and it can be found at: http://jimvinespresents.blogspot.com/2015/08/indie-author-spotlight-ian-miller.html

Finally, starting August 20, I am having a Kindle Countdown discount on my novel A Face On Cydonia. This is the first of a trilogy, and I shall discount the other two volumes in sequence. A Face On Cydonia gives an account of a quest to make contact with aliens, and to show why aliens would not want to contact us, even if they knew about us, but that is only part of the purpose of the trilogy. The trilogy is really about how a young man who has ambition far in excess of his ability can slide into evil, and how combating evil takes much more than the desire to do good. It is also shows a proposed new form of government that superficially seems so desirable, but ends up deeply flawed because the people who gain power through it are deeply flawed.

The Fermi paradox.

The paradox, which is not really a paradox, and which was stated by Enrico Fermi, the famous physicist, goes like this: There are an enormous number of stars in the Universe, and we can assume many of them have planets, which means there must be an enormous number of civilizations out there. The question is, where are they? Why haven’t we seen any sign of them? There are all sorts of answers to this, and if you think about it, the real question is, why would we expect to see them?

One answer to the “paradox” is, we have: they are called UFOs. And here we reach the first example of faulty logic that pervades this sort of discussion. A logical argument starts with a premise, and in this case it might be:
UFOs are alien space vessels,
Hold the howls of laughter, please. This is patently nonsense, but it also an extremely bad premise, and the easiest way to see this is to think of the opposite statement:
UFOs are not alien space vessels.
Can you say with absolute certainty that there has never been an alien space vessel? The short answer is, no. The fact that almost all UFO sightings are simply natural phenomena is beside the point, after all everyone has seen flying objects, and sooner or later, one will be unidentified by someone. A statement usually needs qualifiers, thus if we rearrange our second statement to
No UFO is an alien space vessel,
we see at once the problem, and we stop the discussion right there. So, when making statements, we should all make sure we qualify our terms so we say exactly what we mean, and not bend to stupid exaggeration. As an aside, if we did that, an awful lot of silly political posturing would have to cease.

The second option is that stars are too far apart, and the distance is an inhibition to interstellar travel. After all, why invest a huge amount of money to build a starship when those building it will never get any information or benefit from it (because they will all be dead long before it reaches its target.)? Further, if you cannot get to relativistic velocities, so will the crew. A further problem might be that unless you know the destination is going to be useful, who wants to go? They might have come here once before, gone home and filed the information. Why come again?

A third reason is the age difference between stars, and this also applies to SETI, and may be a reason why that hears nothing. Suppose those sending a signal wish to minimize expense? If so, to keep the signal strength to a detectable level over the very long distances they would target their signal. Now, suppose citizens of Kepler452b reached our level of civilization at about the same time, and decided to transmit and aimed at us, because we are around a G2 star. They would have to keep at it for 1.5 billion years or so before we could conceivably detect it. Of course they might now seek out stars of an equal age, but now they are starting to make things difficult because they may have to go quite enormous distances to find the right star. But even more problematical, consider the issue from military strategy. When you send, you identify yourself, but since you send because you cannot go, any alien that picks up the signal and comes to visit will be extremely more advanced technically than you are, and if they are warlike, you lose.

Finally, there is the option I opted for in my “First Contact” SF trilogy: when humans managed to find a way of contacting a highly moral alien race, they were told that while what they had done was clever, it was unfortunately premature, and humans were simply not ready for contact with such aliens. One particular problem was that they had to stop fighting amongst themselves, the argument being, if you hate each other this much, how could you be let loose on aliens? Even though the example ism fiction, why would an alien race want to have fundamentalist terrorists on the loose? Then, if they are moral, they would not wish to contact us because such contact would severely damage us. Moral aliens will not give us technology. If you want to know what happens when a more advanced race meets a lesser one, look no further that what happened to the indigenous people of America.

Finally, or those interested in seeing more of the arguments in this last paragraph, the first book in this trilogy, A Face on Cydonia will be on a discount for a few days, starting on August 20.

Economics and self-interest

A significant part of my science fiction writing involves matters of economics, and one of the things that often annoy me on many discussions of economics, and the positions people take, the advocates do not take themselves out of the picture. In short, their positions tend to be in their own self-interest. Ha! you say, what is so different about me? The simplest answer is that in my novels, I am not advocating the answer, but rather I am pointing out some things that can go wrong. One obvious source of fraud is when there is shortage of accurate information. Fraud thrives when the real situation is difficult to uncover. The most obvious source is obfuscation.

Stock fraud is often accompanied by a plethora of different companies, but deep down, they are essentially the same, and only there to confuse. This situation is difficult to pin down early because there are often good reasons during the start of a venture for a number of companies. During the initial period entrepreneurs may not know where they are going, and may want to plant different assets in different companies to protect themselves, and this is quite legitimate. Another good reason can come from international trading. As an example, I am associated with a company that makes skin gel products. They started out under the name “Sports Essentials Ltd”, but now they are “Nemidon Ltd.” The reason – the first name had been taken by another company in part of the US, so we needed another name for the same organization, and not to sell in the US makes little sense.

When writing a novel, of course, the author tries to accentuate the points he is trying to make. Thus in my Red Gold, which was about the colonization of Mars, a basic problem arose because one of the characters was involved in floating stock relating to new Martian ventures on the Earth stock exchange, and he had the basic problem that he did not have anything that was particularly legitimate. The problem I was showing was the effects of the lack of proper information. On Mars, of course, verification of anything from Earth was very nearly impossible, so the door was open for fraud, and if anything has been shown relating to money, if there is an opportunity for fraud, there will be fraud.

Just recently in Britain, a trader, Tom Hayes, has been convicted of manipulating the Libor (London interbank offered rate, which determines interest rates on interbank lending) so that he could manipulate trades and make quite a bit of money while doing so based on his manipulations. One way the rates can be manipulated comes from the way the Libor is calculated, which involves banks estimating what they would pay to borrow currencies. Because the rates are then calculated and do not involve actual transactions, faulty information alters the rate, and it is alleged that a number of banks conspired to submit false rates, and then take advantage of the result. This type of fraud is simply a consequence of the financial system finding an easy way to operate, and thus giving a limited few a remarkable advantage in transactions. A handful of people in a special position in a bank and operating for themselves could generate the opportunities to make millions. Wherever there is such advantage, people will take it.

Another thing that annoys me is the hypocrisy of the privileged. The following link contains an example:
http://arstechnica.com/science/2015/08/editorial-utilities-love-the-free-market-until-they-dont/
The basic point was that when it suited it, FirstEnergy Corp., an Ohio-based utility, was strong advocate of deregulation and the free market. As it got what it wanted, it made big bets on coal and nuclear, as these were sources of electricity with stable prices. However, since then, in part due to fracking, which it did not foresee, gas prices have plunged. It bet heavily and lost so what does it do now? It wants ratepayers to cover the full costs from some of its biggest generating plants, even if other sources of electricity would be cheaper for consumers. Apparently FirstEnergy has also lobbied strongly to slow the adoption of energy efficiency technology and to stop implementation of renewable energy requirements. In other words, such advocates of the free market want the market to be free while they are raking in the cash, and to have rescue packages imposed on all and sundry when they are not.

This is not a one-off event. Now that President Obama has signaled the requirement for the reduction of carbon dioxide emissions, we see the coal industry lobbying strongly to overturn this advance. This is an overall problem for governance, and now, confession time, everything I have advocated in my books relating to economics has been the subject of the plot in which every good system I can come up with ends up subverted subverted. And that, I suspect, is the real message from economics: no system will work better than its participants will let it, and where money is involved, letting it work is not a priority for some. Not a pleasant thought.

Another Earth?

We just get used to seeing those magnificent images of Pluto, then we find an attempt to upstage it with the discovery from the Kepler space telescope of a planet circling a star (Kepler 452) of similar size to our sun at a similar distance to us. More specifically, it is 1.046 times as far from a star that is 1.037 times the mass of our sun. The star is approximately 6 Gy old (our sun is approximately 4.56 Gy old) and it has a moderately higher metallicity than our star. In the absence of a greenhouse effect, it would have an average temperature of about minus 8 degrees Centigrade, which is a little warmer than Earth would be. The orbital eccentricity is quite low, although because the discovery was by transiting, this is a little less certain. So far there is only one planet known, but we can draw little from that. Look up the number of times we see a transit of Venus, and that is in our system, and solar systems are more or less in a plane, at least for significant planets.

So, what do we know about such a planet? The short answer is, not much more than what is listed above. However, if I assume that my theory of planetary formation is correct, as outlined in my ebook “Planetary Formation and Biogenesis”, this is most likely to be an Earth equivalent. The alternatives would be an ice-world, such as something dislodged from the Jupiter orbits, but this is less likely because the eccentricity would be expected to be higher. If it were a rocky planet, as an earth equivalent, it would have formed in the same way Earth did, and should have granitic continents, and a good layer of water. Here I have the first uncertainty. According to this theory, the first stage of the accretion of a rocky planet involves small rocky material being cemented together with material separated during the hot phase of stellar accretion, and it is this cement that separates early and forms the continents. When the planet gets big enough, it accretes everything by gravity, and this material mainly forms basalt. How much basalt depends on how much rock is around, how much water is available to set cement, and how long it grows. This latter length of time is dependent on how soon the star expels the accretion dust, and our star apparently did this rather quickly. This rocky planet is somewhat bigger than Earth, so it may have a greater fraction of basalt. Venus has a higher fraction of basalt, presumably because it grew later, in part because the temperatures were hotter and it is harder to set the cement, which is why it is smaller than Earth.

Materials such as nitrogen and carbon (essential for life) are accreted as solids, and become volatile on reaction with water within the planet. (In my view, it is because in reactions involving water, hydrogen reacts faster than deuterium, which explains why Venus has high levels of deuterium in the atmosphere.) So, what about this planet? Because we don’t know how long the star stayed accreting, I cannot predict how much water would be there, but there should be a reasonable amount, as apart from hydrogen and helium, water is one of the most common ingredients of the material that forms stars, and it accreted at a similar temperature. Similarly, the nitrogen and the carbon are dependent on the temperatures reached in forming the star, and since the star is about the same size as sol, the planet should have accreted similar amounts of carbon and nitrogen.

So, what would it be like? I would expect continents just like those on Earth but because the gravitational field on the surface would be stronger (because the planet has more mass, being roughly twice as big as Earth) the mountains would not be as tall. The climate would be similar, but perhaps a bit warmer (because the star is slightly hotter and bigger) and trees would be shorter and thicker. The distribution of continents is important, because if this is unsatisfactory, even if there are large seas, there can still be a lot of desert.

Accordingly, I think the prospects for life there are quite strong. So, why do we not see signs of intelligence, given that it has had a lot more time to evolve? There can be many reasons. If the star is 1.5 billion years older, it has possibly formed and died out. It could be there, but is somewhat disinterested in us. It could be studying us. There is no way of knowing, short of going there, and that is not going to happen any time soon.

What have we learned about Pluto so far?

New Horizons has caught our attention, or at least it should have. Pluto is about 5,874,000,000 km from the sun, or 39.26 times as far from the sun as Earth is. The reason I say “about” is that the orbit is eccentric, and sometimes is closer to the sun than Neptune is, but it is an orbital resonance with Neptune, so it will never collide with it (unless something else disturbs the resonance). The space craft flew by Pluto at about 50,000 km, so think of the triumph of getting that accuracy. The cameras can see objects down to about a kilometer in size.

Pluto is actually smaller than our moon, and has only 18% of our moon’s mass, but because it is about 1/3 ice, it has more water than Earth. When Pluto gets closer to the sun, it has a weak atmosphere of nitrogen, and probably some carbon monoxide and maybe methane and argon. As it gets further from the sun, these gases snow out. The surface temperature varies, but is in the order of minus 230 degrees Centigrade. That much we knew.

Pluto has an interesting history, in that it was predicted by Percival Lowell in 1915 based on deviations found in the orbits of Neptune and Uranus. Neptune itself was discovered because the orbit of Uranus did not follow Newton’s laws exactly, but it would if there were another giant planet pulling on it. Accordingly, astronomers could predict where Neptune would be, they looked, and there it was. A triumph for physics. However, Neptune’s orbit was still not right, so Lowell predicted a further planet, calculated where it should be, and Clyde Tombaugh found it in 1930. Another triumph! Nevertheless, this shows an important fact, namely just because you can predict something that turns up, that does not mean the basis of the prediction was correct, as Pluto is far too small to account for what Lowell calculated. The discovery was a happy accident.

So, what have we discovered about Pluto? In my opinion, so far, not a lot, but that is mainly because most of the data will not come in for months. We have corrected Pluto’s size, but that is not a huge achievement. However, the images have given us a lot to think about. The one thing that has surprised us is that Pluto is geologically active, and far more so than anyone might have expected. I have seen statements that it must have been essentially resurfaced about a hundred million years ago. I am not too sure about that, as it is based on crater count, and I doubt anyone has any good data on collisions that far out. Furthermore, if the bodies out there are largely icy, and Pluto’s surface is mainly ice, then because collision velocities will be a lot slower out there, it is possible that collisions will not excavate a crater, but rather the energy will melt the ice, it will flow, then re-freeze, thus not forming a crater. Nevertheless, the mountains, canyons, and the flat areas are indicative that there has been significant internal heat. That could come from a number of sources, such as radioactive decay, collisions, one of which may have formed the moon system, and possibly even a little chemistry.

The heat may not have to be intense if it is uneven, because it would volatalise gases such as nitrogen, and that would create a lot of internal stress. Another form of internal stress may come from freezing water. If the outer layers are largely free of rock, that having sunk to the core, then because water expands a little on freezing, that “little” will be magnified into quite a change of length over the circumference even of a dwarf planet, and with nowhere to go, there could be considerable additional warpage. That is unlikely to account for all the mountains, etc, but it may add to the cause and magnify it.

What do we think we know about Pluto? Try this link: http://www.forbes.com/sites/fayeflam/2015/07/21/the-weirdest-reason-pluto-didnt-become-a-real-planet/
Here, they argue Pluto grew in the region of Jupiter/Saturn, and with Uranus and Neptune, were thrown out into the outer solar system, where there is not enough material to grow. I don’t believe that, because I don’t believe the standard theory of planetary formation, which starts off by assuming that the dust accretes into planetesimals by some unknown mechanism, and these collide to form larger objects, and finally, planets. The reason the outer giants had to start in the Jupiter/Saturn region is that collisional probabilities are too low to get giants much further out under this mechanism. In my “Planetary Formation and Biogenesis”, I argue the first step is actually based on physical chemistry, essentially the same mechanism as forming a snowball, and the planets form at temperatiures where the various ices assist. Ion this theory, Pluto, and the other Kuiper Belt objects formed by the same mechanism that Neptune formed, but because the temperatures were starting to get too low, accretion was slow, but because they were far enough away, they did not get “collected” by Neptune.

So, will we find out more? Basically, we now have to wait for more data, but in the meantime we should congratulate NASA on a truly great achievement. They still have “the right stuff”.

Logic, and the premises behind Greece’s decision to accept greater austerity.

Greece has voted against austerity, then in a true example of democracy at work, the government has decided to accept even more austerity from the EU than they rejected. What will happen is anyone’s guess, but there are two interesting developments. The first is the IMF has apparently warned the Eurozone members that what they are imposing on Greece simply will not work. The second is that the European Commission is proposing to use the mothballed European stabilization mechanism to provide the money for the bailout. This means that all EU members have to pay to protect the Euro, irrespective of whether they use it. Great news for Britain, whose objections are being turned away by, as you might guess Wolfgang Schauble, the German finance minister. The mess was caused at least in part by German banks, Germany got the ECB to save them at the expense of Greece, and now Germany wants to spread the consequent price. A vote in the EU will mean all the euro users will vote to minimize their own payments. Truly, democracy at work, where self-interest beats the numerically inferior over the head as often as they can get away with.

The question then is, why did Greece not simply pull out of the Euro? Logically, it should do whatever it can to better its situation, but it seems to have done the opposite. I saw an item on the web by Dimitrios Giokas that claimed there would be twelve devastating consequences if Greece returns to the drachma, and perhaps this sort of reasoning led to this form of stupidity. Let us look at these devastating consequences.
1. Rapid devaluation of the drachma against other currencies. The answer to that is to let it float. Yes, it may drop dramatically at first. In the mid 1980s, a New Zealand government under financial strain (although not as bad as Greece’s) floated the dollar and in an hour or so, it lost over a quarter of its value. Basically, the speculators piled in and shorted it. But, at a later date, they have to cover their bets, so within a month, it started to rise again. Note that none of the speculators will have drachma, so they have to cover quickly.
2. The devaluation will lead to skyrocketing inflation. That is sheer speculation, and it depends on government policy. Hitler defaulted, introduced a new currency, and there was no inflation. On a milder side, when the New Zealand dollar lost a quarter of its value, yes, there was some inflation, but not excessive inflation. On the bad side, as one commentator noted, Greek governments are not very good at doing things, so this one is up in the air. It is not necessary, but it could happen.
3. Capital flight and a sharp increase in non-performing loans. First, there will be no significant capital flight, because it has already flown, and in any case, that can easily be stopped. As for non-performing loans, who owns them? If weak companies go bankrupt, that is sad, but does anyone seriously think that more austerity from Merkel is going to save them?
4. In such an eventuality the wage and pension freeze payment will be inevitable. Not necessarily because the money to pay wages have to come from somewhere, but so what? As for a pension freeze, Merkel the merciless is imposing pension cuts. The author says there will be social unrest. There will be social unrest if there is more austerity. There is no way it would be worse with the drachma, and it might be better. The real danger is with greater austerity the pain level is too great and Greece has a military coup to put in more effective policy implementation. (Whether it will be is beside the point; coups always believe they are the solution, even if they are not.)
5. Gross domestic product will likely shrink to about 2/3 of the current level. Why? Where did this figure come from? I cannot help thinking that this author made up figures to make his case. In any case, bowing to austerity will greatly increase the debt load, and GDP has been calculated to drop by at least 10% of current by respectable economists.
6. The public debt of Greece, totaling 322 billion euros, will increase automatically. Um, if you default, the debt vanishes. Yes, you do not get credit, but so what? The interesting thing about 322 billion euros is, if you are going to default, you do not have the problem: the other banks do. They get nothing if they impose conditions on you that make it impossible to pay back anything.
7. Even if, after bankruptcy, a partial debt restructuring follows, it will not be painless. It will be accompanied by a new rescue package (only from the IMF now) and very burdensome fiscal adjustment measures. Not if you default. Certainly, you get no credit, but remember, you were always in a no-win situation.
8. There will be an equal increase of private debt through the skyrocketing of lending and depositing rates in an effort to control inflation. Interest rates will have to be high, but who is lending? You cannot lend drachma if you haven’t got any, so euros will have to return. There will have to be controls, and some of the regulations will not be pleasant for some, but stamping down on speculators will probably keep this under control.
9 Suffocation of import business due to a weakened market and lack of credit. Certainly, but this is to some extent what is required to get the Greek economy back on its feet, and it is hard to see greater austerity leading to an import boom.
10. Failure of imports will bring shortage of essential items on the market. The “essential items” noted are food, and this is serious. If other countries absolutely refuse to provide Greece with any access to foreign currency, it is in a serious mess, but do countries want to be known as the countries that are starving the Greeks out of spite?
11. Invasion of predatory foreign investors. Not a problem. Prevent them from taking advantage of the situation. Note also that under Merkel’s proposal, 50 billion Euros of Greek assets will be sold. Why is this not a predatory invasion?
12 Diplomatic and economic isolation of Greece, and a problem with defence. Certainly there will be consequences, but defence is not a problem. Greece will remain a member of NATO, and even if Germany would be reluctant to help, can you think of any neighbor that is just aching to take on the US military?

To summarize, in my opinion, people who think like Giokas are stuck in thinking that Greece has to follow their rules. That does not have to be the case. Recall that Germany defaulted several times in the 1920s, then Hitler stabilized it. Quite simply, foreign predators were told to leave, now. Repayments of debt were not paid. Inflation did not go rampant, in fact rather dramatic inflation was stopped. There was no capital flight, and no businesses were allowed to suffocate. Capital flight did not occur, fraud stopped, speculation more or less stopped, and everyone played by the rules to stabilize the country. Of course, this was in part because there was Oranienburg for those who refused to cooperate, and that might be a step too far for Greece, but even under lighter enforcement of rules, you can get out of this. Argentina did. It is not easy, and if the Greeks want to live well, then they will have to accept work and taxes, but there will also be new opportunities. The Greeks have to take them when they arise.

The real problem for Greece is that it has to persuade the Greeks to work competitively and to pay their taxes. There has to be a stop to consumption based on borrowing, and replaced with consumption based on work. There has to be investment and Greece has to develop a more education-based economy. That is the real problem for Greece, but austerity is not going to help in the slightest.