Oedipus, my lord, I've got some bad news for you.
I solved the riddle of the Sphinx, I'm king of Thebes, and my wife Jocasta is a smoking hot MILF. What could be wrong, Soothsayer?
It's the budget deficit, Oedipus. I'm afraid it's a bit larger than we first thought when you assumed the throne.
How much larger?
It's almost 13% of our GNP. We have to raise 23 billion drachmas by the month of the goddess Maia just to service the debt.
Great Zeus! How could it possibly be so large? There isn't that many drachmas in all of Greece!
It seems that Laius, the previous king, hid the true size of the deficit through some sorcery called "derivatives." It allowed him to transmute loans into “currency exchanges” he kept off the scrolls.
He was an evil king. I’m glad I slew him. But why would he do such a thing? Didn't he know that Athena, the goddess of wisdom, has said there is no such thing as a free lunch?
He wanted Thebes to join the Grecian Union. The only way he could do that was by hiding the size of Thebes' debt.
Well, thank the gods we are members. Surely the GU will bail us out now in the time of Thebes' greatest need.
I’m not so sure, my lord. Queen Germanicus of Sparta is balking at the cost. As you know, Sparta is the richest city state in the GU. Queen Germanicus says why should spartan Sparta pay to keep spendthrift Thebes rolling in grape leaves? (She is up for re-election this year.) She will not lend Thebes one drachma until we enact budget reforms.
Very well, we will have to institute an austerity budget. Summon Draconicus, my chief budget officer, and have him make the necessary cuts.
It’s not so simple, my lord. All of the government workers, anticipating the budget cuts, have gone out on strike—including Draconicus.
What? Treason! Call out the Hoplites! Have them all arrested and executed!
I'm sorry, my lord, but the Hoplites have also gone out on strike. You still haven't paid them for the Peloponnesian War.
The Furies take them! Can we not just default on these loans? What do they expect us to do—sell our islands? Rent out the Parthenon?
If we default, Thebes' credit will be ruined. We'll never be able to borrow again.
That would not be such a bad thing. "Neither a borrower nor a lender be," as somebody will say a couple of centuries hence.
The drachma would fall, the cost of sovereign debt would rise, and several other heavily leveraged kingdoms in the drachma zone—Spain, Portugal, Italy, maybe even Ireland and England—would also collapse.
Let them collapse. What have they ever done for Thebes, besides flood us with tourists in the summer months?
It might trigger a global recession the likes of which has not been seen since, well, the last global recession.
Damn it to Hades! Where are these sorcerers that conjured these "derivatives" in the first place? I will cut off their heads and impale them on pikes outside the city walls as a warning against all such future necromancy and speculation.
Gone, my lord. These goldmen sacked us worse than Troy, then fled to America.
America? What is this America? I have never heard of such a place.
A shadowy netherworld, my lord. A land of illusions where the streets are paved with gold, you can get something for nothing, and there's a sucker born every minute
But to what end, Soothsayer? Surely if Thebes' economy sinks beneath the waves of Poseidon, these derivative sellers will drown beneath a tide of red ink as well.
They would, my lord—if they actually still owned the securities.
Uh oh. You don't need to be the Delphic Oracle to prophesize where this is going. Who did these charlatans resell their derivatives to?
The Royal Bank of Thebes, my lord, among many others.
Doh! You mean we actually own some of these worthless securities we are about to default on?
Yes, my lord. It is a major part of our portfolio. It is what the philosopher Ironicus calls "getting screwed coming and going." But there is more...
More?! How can there be more? We have already been golden fleeced!
That is where the real sorcery comes in, my lord. Through some transubstantiation called "credit default swaps," these magicians actually make money if we default on our loans.
"Credit default what?" It's Greek to me. Speak plainly, Soothsayer, or I will cut out your tongue.
Then, in plain English, my lord, it's the financial equivalent of arson. Lenders make bad loans, then insure them to the hilt. When the borrowers default, the lenders clean up. And the worst part is, credit default swaps are unregulated, so it's all perfectly legal.
Legal, mayhap, but still a crime against nature. Pluto must have a special place reserved in the underworld for such abominations. In the meantime, what can be done to save Thebes?
There is still one chance, my lord—the IMF.
The Imph? What manner of beast is this? Does it have the head of a woman, the body of a lion, the wings of an eagle, the tail of a snake?
More like the Hydra. The IMF has many heads, but the one that speaks with the loudest voice is from America.
What?! The same accursed land where the derivative sorcerers come from?
It is either that or the GU, my lord. The IMF may lend us the necessary drachmas with fewer stings attached—or more.
We're trapped between Scylla and Charybdis. I’m getting a headache. I’m going to retire to my bedchambers and “relax.” At least I still have Jocasta. They can’t take that away from me.
Uh, Oedipus, there’s something else I’ve been meaning to tell you…