Saturday, January 31, 2015

Greece is the Word: Here We Go Again, Or Socialists Run Out Of Other Peoples Money And Still Can't Figure Out Who's Fault It Is..

There isn't any doubt that the IMF imposed austerity programs have been a leading cause of the deterioration of the Greek's standard of living and the subsequent violent social unrest.  Unfortunately the new government is most shortsightedly confusing the symptoms with the disease.

Rather than face the harsh realities of bankruptcy, enduring the pain of restructuring, exiting the EURO and moving forward, both sides have engaged in playing blame games, avoiding responsibility and postponing the inevitable.

The truth is there is more than enough blame to go around.  Previous leftwing Greek governments saw joining the EURO  zone as the ticket to every good socialist's dream; the ever expanding welfare state and the government dependent population.   Their fellow traveling leftist bureaucrats in Brussels willfully ignored the utter unsuitability of the Greek economy to join the common currency union, more concerned as they were with their fetid dreams of a united Europe and their own centralized control.

Like all socialists of every strip, they live in a world constructed of an unrealistic and unattainable dream.  Namely that economies and economics can be infinitely forced to conform to their political will.  Unfortunately ignoring history and its lessons doesn't change them.

So now the socialist bureaucrats in Brussels have an internal rebellion on their hands.  A rebellion born of former Greek governments borrowing and spending their way to reelection after reelection and lining their own pockets in the process, all with the complicity of Brussels.  But now the unattainable dream is unravelling faster than a ball of yarn set upon by a litter of kittens.

 The socialists in Athens think that they can selectively abrogate all or part of Greece's debt without consequences for the entire financial house of cards.  The failure of the Credit Default Swaps on Greek debt alone could push the likes of Bank of America and J. P. Morgan/Chase into a naked and undeniable insolvency that will make 2008 look like a joke.  But the bureaucrats in Brussels are continuing on with their unattainable dream by threatening Athens that if they don't come to a new agreement with the Troika, the ECB will cut off the Greek banks from any further funding.  Threatening the bankrupt with bankruptcy is either the pinnacle of absurdity or hubris.

Sadly the new government in Greece is only partially right.  There is no solution for Greece within the context of the ECB or the European Union.  Neither is there a solution in returning to the Drachma and hyperinflation in order to continue the welfare state just so a new batch politicians can buy their reelections and line their pockets.

The reality no one wants to deal with is that there is no viable solution for any of us within the context of private central banks and trying to solve the problems of too much debt by going further into debt.

Only the repudiation of national debts, ALL national debts and the return to asset based currencies will set the world on a path to a production and employment driven recovery.

Alexander Hamilton's reports on banking and manufacturing were right two hundred twenty five years ago.  They still hold powerful lessons for today.

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