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I was among those cheering loudly as the Greeks stood up to the classroom bullies of the IMF, ECB and EC at their referendum, delighted that they chose, against the terrorist tactics of the Troika, to vote “Okhi” (No) to more austerity. Finally, a triumph of democracy over crony fiat capitalism. Or so we thought. Unfortunately, the man with the mettle, Yanis Varoufakis left the stage too early, and PM Tsipras failed to hold his ground amongst the high power stakes of Merkel, Lagarde and Tusk.
When he offered the Greek people the referendum on accepting creditor terms, Tsipras foolishly indicated that a “No” vote didn’t mean an automatic Grexit. He shouldn’t have said this. Unless he could manage to get significant amounts of Greece’s debts cancelled, any kind of bailout deal (which is a prerequisite for staying in the Euro) would automatically involve more austerity pain for Greece. Yet the people having voted no to more austerity, Tsipras returned from Brussels with a deal broadly as bad as they one they threw out in the referendum the week before. It was Alexis Tsipras’s Neville Chamberlain paper-waving moment.
What happened In Brussels? Did they wear him down with their terrorist tactics, interrogation, humiliation and water boarding? Who knows, but Tsipras’s actions cannot be seen as anything more than an gigantic about-turn, and a betrayal of democracy in action. The global financial system is in a proper mess, and those who run the IMF, EC and ECB have demonstrated they care little for Greece, and even less for democracy. Merkel et-al serve the banks, and the banks want their repayments, never mind the human cost.
Moving away from the politics of the situation, let’s asses the roles individuals are playing here. The Troika is a predatory lender, the European equivalent of payday lender Wonga. Greece is the un credit-worthy borrower whose debt repayments are taking a huge chunk out of his monthly income, to the point that he is living a meagre existence, and not really spending. He cannot afford to pay off his significant debts.
What happens next is well known, having sucked in the borrower with money conjured out of thin air, the lender wants his pound of flesh, so he seeks to acquire the assets from the individual who ’borrowed’ money from him. The bailiffs come and take your TV, sofa, your car, perhaps even your house. And so it is with Greece; the creditors want to take Greece’s assets to cover the debts it cannot possibly repay. In return Greece gets to stay in the Euro. Great.
If we accept the nature of money as debt, then what is happening in Greece at the moment is a perfect illustration of fiat currency in action. Debt + compound interest makes bankers rich, and extracts value from everyone else making them poor. The reason I emphasise the word “lend”, is because the debt is conjured out of nothing by banks, so there is no end to the amount of “lending” they can do. It’s not like they have taken money from a pot of physical gold and given it to the Greek people (if this were the case, we would not be in this mess as the money would have run out long ago). Banks merely type numbers into a computer programme and expand the money supply. These are numbers the banks are on the hook for, but fabricated numbers all the same. But never fear. We have the lender of last resort, the central bank, to back the shoddy system up. When debts go bad, insolvent banks are bailed out by central banks like the ECB, which just print money and give it to the banks.
If you were a far better poker player than I, and each time I lost a round, you asked me to promise ever greater amounts of money or collateral to you, for the chance to cancel my losses – money that I didn’t have, and would struggle to find in my lifetime – at what point would you pull the plug on the whole charade? Would you keep going until I had nothing? Perhaps this is a question I should direct at Angela Merkel and her banker friends.
In 2010 Greece was bankrupt, and its creditors (commercial banks in Germany and France) who “lent“ money to Greece at 5% were clearly not going to get their money back. They had big negative holes in their balance sheets. At this stage Merkel decided to use the Greek people to bail out her friends at Deutsche Bank, Société Genèrale etc who otherwise stood to go under (they didn’t stand to lose anything because the money they “lent” was fabricated out of nothing in the first place, so in effect the bank owed the money to itself). After all what is more important, the sovereignty and economic functionality of a country like Greece, or keeping banks trading? I know what Merkel’s answer would be.
The German and French commercial banks which made these poor “lending” decisions were bailed out by the ECB via Greece. Overnight, a Greek private debt issue became a Greek sovereign debt issue, and just as occurred in the bank bailouts in the UK, USA and Ireland in 2008/2009, billions of potentially private losses were transferred to the public purse. In fiat money, the bankers are privatising profits and socialising losses. In this instance, rather than letting Deutsche Bank & Société Genèrale go bust, Merkel transferred the debt to the Greek people instead. Nice lady, that Merkel.
So Germany and France seek to impose austerity on a heavily indebted Greek economy because it saves Deutsche Bank, Société Genèrale etc from bankruptcy (for now). All of that money goes into Greece, and straight back out again to Germany and France. It’s the same racket the Bank of England and the Fed have been playing with their QE over the last 5 years. They print money, give it to banks so they can cover the holes in their balance sheets caused by their poorly judged loans and derivatives.
In all of this, the human cost to Greece is ignored, as is the fact that the Greek people unanimously voted against more ECB bailouts for bankrupt banks to be lumped onto the Greek taxpayer. The Greeks took to the streets, it was democracy in action. Except what we are seeing in the aftermath, played out clearly on the world stage, is politicians’ contempt of democracy. They much prefer to tell the Greeks “Just do what you’re told, never mind what you want”. We are discovering what really matters to politicians; money, pleasing their banker friends, and financial warfare where the tanks have been replaced by banks.
The irony in the situation is that the Euro was conceived as a means to bring European countries together, but as long as money is created by banks, and used as a political weapon, it will drive Europe further apart. This will add more power to the right wing parties, who are the only ones willing to be honest with the (understandably angry) people, just as Hitler rose up in the tough years following the last fiat money bust. Deutsche Bank gets its repayments, and meanwhile Europe is falling apart at the seams. We don’t need fascism to tear us apart, we have something far worse, we have fiat currency.
What is happening in Greece is fascinating, from the perspective of political and national intentions, and from the perspective of watching the giant fiat money experiment self-destructing before our very eyes. It may take a while to unravel, and there will be inevitable pain, but for Greece, the sticking plaster of bailouts will be less painfully removed if done so quickly. This means: grexit, debt default, a new currency (not debt based), a locally focussed economy geared towards maximum money velocity, and a politician with the balls to make this big decision sooner rather than later. Greece needs a leader, and one with a vision for the future. The rest of the world should take note also, because this scenario is coming for you too. It is just a matter of time.
Tsipras, by his actions to date, does not appear to be that man, and I suspect he won’t last much longer. Yanis Varoufakis is that man, but I see him as more as a moral philosopher than as a Prime Minister, and his libertarian views are the antithesis of the bureaucracy endemic in the political sphere. If the Greeks continue to deal with Brussels, they will lose their sovereignty, their democracy, their country will fall to the right wingers, and eventually they will leave the Euro, depleted of all their income producing assets. Destitute at the hands of the banking classes.
What we are seeing in Greece is a classic leveraged buyout, the modern way that bankers use their privilege to create money (debt) to steal others’ assets. It’s especially great when bankers can create money at zero interest, or zero cost. It seems modern day bankers are no longer tempted by the piddly returns from companies. Why execute a leveraged buy out on a company, when you can do it on a whole proud nation! and humiliate them in the process?
Never let it be said that monetary policy is not important. Everyone should know that what is happening here: National sacrifice of the founders of democracy, at the hands of the high priests of the church of fiat currency.
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