The government of Greece borrowed a lot more money than their economy can repay. They borrowed that money mostly from banks in other European countries. Now Europe is proposing to create more European debt to “bail out” Greece by “giving” them money to give back to the European banks, which would only be stupidly circular, except that above and beyond the amount that Greece owes, they still also have to fund their government.
“The structure of the deal puts the IMF/EU/ECB clearly in control of the finances of Greece so they have replaced some sort of Czar with the bureaucrats of the Troika and the country no longer will control its own finances as they traded away their sovereignty for cash. In fact, an escrow account will be set up for Greece which will be controlled by the Troika and Greece is being forced to change their Constitution pledging to pay their creditors before providing any money for the country. A quick study of the math reveals that Greece will get about 19 cents on the Dollar and the rest of the money is the sovereign nations of Europe paying back their banks with the money they have supposedly lent to Greece. Greece is now nothing more than a conduit for the nations of Europe to pay back their own financial institutions.” [Source]
So the deal basically says that Europe is going to borrow money to lend Greece money and 80% of that money is going to Europe’s banks and 20% is going to fund Greece.
But that level of funding for Greece means crushing austerity for the Greek people and at the same time, the rest of Europe is bailing out its own banks via piling more debt on top of Europe’s and Greece’s already too much debt, and they are paying a 20% premium on that bailout money to Greece.
And all of this makes sense for exactly whom?
In a nutshell, Europe is creating new debt and paying an extra 20% and the Greek people are going to live in a hell-realm so that a handful of fat bureaucrats can keep their jobs.
Whether or not the European taxpayers should bail out the European banks at all is a question I’ll leave to another time, but even if one believed this was a good idea, it would clearly be better for them to give the money directly to the banks and skip the 20% premium to Greece.
On the other side of the picture, the Greek people would be FAR better to default on their debt, leave the Euro, devalue the reinstated Drachma, and start rebuilding their economy from the base of an incredible advantage they would have in the tourism industry and whatever exports they brought to the market with a local currency that was very cheap against the Euro.
So it’s far better for the European people for Greece to default and leave the Euro, and it’s far better for the Greek people for Greece to default and leave the Euro. If Europe directly bailed out the European banks that are holding Greek debt, it would be a wash to the banks. So the only tiny group of players in this drama who are benefitting from the farce of “bailing” Greece out are the bloated eurocrats — the people whose jobs and twisted little fiefdoms depend on shoring up the terminally flawed Euro.
Right, business as usual then.
RE: Social Fractals and the Corruption of America
Please see this excellent article by Charles Hugh Smith
I recently had an insight about what appears to me as the fundamental driving force beneath the corruption that you wrote about in your article today. It’s not a new insight in any way — there have been many people who have said this in one way or another, and it is the essential basis for the whole concept of “sound money” but it hit me in a decisive way recently.
If you consider that the primary “fabric” of society, the sum total of our relationships with everyone, is a web of energetic exchange that we all participate in by working, employing, bartering, buying, selling, etc. … And if you accept that money is a representation of energy whose utility is in making the exchanges of energy that underpin society more convenient by both storing energy as well as providing a standardized unit of account and value for all work and property in energetic terms…
Then if you simply run a thought experiment about what would happen to the nature of exchange — again, the “fabric” of society, and most significantly, our RELATIONAL landscape — if you allowed the supply of money to be massively manipulated such that it no longer represented the sum total of real energy (whether stored in the form of “real capital” or potential in the form of “work”) available to be exchanged.
I believe that fractional reserve banking, in and of itself, inevitably leads to the forms of corruption that you write about and that we can observe in the US and the world in general. By systematically misrepresenting the energetic “content” of money, by turning the basis of our relational exchange into fraud, you create an uncertainty and sense of wealth scarcity while simultaneously creating a playing field that incentivizes people to game and exploit each other in order to horde a larger and larger share of an uncertain pie for their own security.
Where the very nature of relational exchange has itself been made fraudulent, how can a society built on that foundation be anything other than fraudulent?
Which Debt to Refuse?
The official U.S. Debt recently ticked up over 15 trillion dollars. At this writing, the official estimate of the total number of U.S. Citizens is 312,804,515. If you do the math, you will discover that officially then, the federal government of the United States of America has incurred about $48,000 of debt on behalf of every living American citizen.
For the 2010 tax year, there were a total of about 141,536,000 U.S. taxpayers. So if you calculate the official debt per taxpayer, it comes out to about $106,000. That literally means that officially speaking, if you are a U.S. taxpayer, you have been indebted by your government in the amount of $106,000.
I don’t know about you, but I simply refuse to be involuntarily encumbered in that manner. But wait, it gets worse. Much, much worse.
Lawrence J. Kotlikoff, a former senior economist on Ronald Reagan’s Council of Economic Advisors, has the following to say about the official U.S. debt:
“If you add up all the promises that have been made for spending obligations, including defense expenditures, and you subtract all the taxes that we expect to collect, the difference is $211 trillion. That’s the fiscal gap,” he says. “That’s our true indebtedness.”
Let’s re-do the calculations based on Kotlikoff’s estimated true U.S. debt. Based on $211 trillion, the total debt per U.S. citizen comes to about $675,000 and the total debt per U.S. taxpayer comes to about $1.49 million.
Pardon, but I have to repeat that last number in a way that it somehow seems less abstract. Based on Kotlikoff’s estimate of total U.S. indebtedness, every taxpaying citizen of the United States is on the hook for about ONE AND A HALF MILLION US DOLLARS.
Here are some data sources for this post:
A National Debt Of $14 Trillion? Try $211 Trillion
U.S. & World Population Clocks
Total Tax returns filed for 2010
True confession. I’m almost fifty years old and I have never voted in my life.
I probably can’t fully justify it, but in a nutshell the truth is that I have never seen a candidate for a political office that I trusted enough, even in a lesser of evils way, to affirm with a vote.
But unless something changes, come 2012, I will be voting for the first time because for the first time there is a candidate running for office that I feel good about voting for.
If you’ve been reading along here at all, it should be obvious that there is a lot in Ron Paul’s economic platform that I fervently agree with. But to be clear, there are things that he says that make me cringe. There are other areas of his platform that I firmly disagree with. Those disagreements I can live with.
What I can’t live with is another in an endless line of assholes who has never produced a straight answer to a simple question in his life; whose convictions bend like grass in the wind; who says whatever, whenever in order to garner votes; whose allegiance is for sale to the highest bidder; whose first and last thought is for their personal gain while they mouth the platitudes of “public service”.
Ron Paul is the only politician that I have seen who has never compromised his principles for political expedience. His voting record is clear and always 100% perfectly aligned with what he says. He has been walking his talk in congress for 35 years. I believe with no doubt at all that he is his own man, ideologically clean, unbeholden to special interests.
I may disagree with some of his beliefs, but I trust him. At this stage that is far more important to me, and I think more important to the nation, than someone whose platform I agree with completely.
It’s time for trust and integrity in government.
Ron Paul 2012.