From The Gowdie Letter (Australia)-
‘Icarus, son of Daedalus who dared to fly too near the sun on wings of feathers and wax. Daedalus had been imprisoned by King Minos of Crete within the walls of his own invention, the Labyrinth. But the great craftsman’s genius would not suffer captivity. He made two pairs of wings by adhering feathers to a wooden frame with wax. Giving one pair to his son [Icarus], he cautioned him that flying too near the sun would cause the wax to melt. But Icarus became ecstatic with the ability to fly and forgot his father’s warning. The feathers came loose and Icarus plunged to his death in the sea.’
— Greek mythology
Greece is a country that flew too high and came crashing down in 2011.
Five years later, I find a Greece that is still caught in a deflationary bind.
My first question to the Athens businessman was, ‘How’s business?’
‘Not good. Provided I don’t declare all my income, then it is not too bad.’
‘Well, the tax rates are too high. If I tell the government my real income, I would never survive,’ he says.‘The government knows that I am not going to declare everything I earn so we [the government and the citizens] have a compromise. The government doubles the tax rate and I declare half my income. The system sort of evens itself out.’
This was part of the conversation I had last week with Frank, an owner of a transportation business in Athens. Frank by name and frank by nature.
Frank has a fleet of 13 trucks, transporting goods around Athens and the city surrounds. Frank tells me a good percentage of his business is conducted in cash.
Not paying tax is a national pastime in Greece.
Greece’s tax collection problem is far from fixed. I asked whether the 24% GST, which appears on the invoice for our coffee, is paid to the government.
‘It is supposed to be,’ was the reply.
‘Are capital controls still in place?’ I ask.
‘Yes. The maximum weekly cash withdrawal for Greeks is €450.’
When the Greek banks were in trouble in June 2015, there was no bail-in.
Deposits above €100,000 (the limit for the deposit guarantee) were not confiscated.
Although Frank did tell me a lot of cash had already left the banks before the capital controls were enacted…so there may not have been a lot of cash above the €100,000 to raid.
‘With the capital controls in place, how do you transact business — pay accounts and receive deposits?’
‘We can still transfer funds electronically. But we are restricted in accessing the physical cash.’
This is what I have written about previously when discussing what a banking crisis might look like in Australia…