Letter to someone in Greece who wants to know what solution would solve Greece's economic problems according to an analysis from effective demand.

A.

I have seen enough in the numbers so far to know that the basic solution for Greece is simple.

Raise wages 2% per month.

People will see that as time goes by businesses will make more money from better sales. And they won’t have to fire workers. Tax revenue will slowly rise, so the government will not have to lay off workers.

Effective demand needs to be raised.

Greece cannot depend on exports, so they shouldn’t try to lower wages to compete. Imports are falling too. The key is to raise domestic demand, which means raising the purchasing power of the people. Let the people use the money to purchase what they need. The people then slowly decide (with their purchases) which businesses can survive, and which businesses should fail for the good of society. Let the purchasing power of the people decide the efficiency of the economy.

The economy is suffering because people do not have money. The solution is simple. Raise wages so that people have more money. but it has to be done slowly and consistently over many, many months. Each month... people will expect higher incomes and businesses will expect higher sales.

People will spend the money because they don’t have money to buy the things they really need. The money will return to businesses each month through increased sales.

This solution needs to be implemented by the end of the year, because the business cycle in Greece still has profit traction potential to overcome an increase in labor costs. If Greece waits until next year, time will be running out on this solution and all other solutions.

If labor share is allowed to continue its fall, the economy in Greece will far beyond pathetic.

Edward