Melinda Romanoff, via email;
As the wringing of Other People's Money from the Terrible Towel For The Bar Only finds its dreary end, Ambrose Evans-Pritchard has found the grenade that is the just dessert of all that is current Europe, the internal balance of payments system known as Target2. The easiest way to envision it is by imagining that each country's Central Bank is like a local branch of the ECB and at the end of each business day, the accounts of the whole bank must be matched up. Big branches lend, daily, to their poorer cousins branches so that no one is in default. Only now, the rub is that no one wants to lend to the Greek Branch any more, although the Germans are already on the hook for a massive amount via the ECB, where they have NO vote. We have reached the fulcrum where politics and free markets meet.
I'm sure Putin is very well aware of these developments.
Everyone is desperately hoping they can paper over their own problems for a little while longer, hoping that the other guy's problem blows up first.
Whose Problem will be the one?
The one that will blows up the house of cards?
The one that everyone else can blame for causing their country's problems?
No, It wasn't us! It was those other guys! It's all their Fault! Blame them, and keep re-electing us.
Greece and Germany will come to another temporary agreement.
It is crap like this that gives rise to nationalist fascist parties. they become a voice for PO'd blue collar workers sick and tired of getting ripped off by the bureaucrats.
This cant and wont end well for Germany any way you slice it. Angela Merkel is finished. who replaces her well let's see just how PO'D the German people are come next election. Lots of anti euro sentiment, lots of anti Muslim sentiment growing ....the future is yet to be written.
And it will belong to those who show up.
Here is another display of Corporate communism, Klepto-socialism, Commie capitalism - call it what you will, it is a government and their banking cronies making national economic decisions with other peoples money and debt.
When you come to think of it we (just folks) have been at war with forces who believe only governments have the right to decide who has capital and where it is spent as opposed to paleo-capitalism and classic liberalism which holds only private individuals hold capital in a free supply-demand meritocracy system and government is there only to keep things fair.
We as a species have been in conflict over this internally and internationally ( almost turning the earth into a toxic isotope dump over it) for the better side of a century. The fact that the many triumphs of free society married to free market capitalism has freed the greatest number of people from poverty and that communism/statist socialism has murdered and impoverished more than it has helped is a self evident fact of history.
- but here we are still having failed governing systems shoved at us and being plundered by the same old errant collectivist centralized power and economic structures - can't you just wait for world government? - I mean our socialist/commie rulers have demonstrated how adept they are at spreading freedom and prosperity so well.
Watching the dismal performance and intellectually/morally bankrupt dithering of government everywhere, I shiver to think how we will handle the next great human conflict - the question of artificial intellect and who will own it and how it will be used - the NSA is tipping us off to the direction big centralized governments are moving 0n this.
The fundamental reality is that the Greek economy does not generate enough wealth to pay back the debts, and Greece will default on them. This is not a legal/moral/ethical issue; it is pure economic law.
However, the Germans need to keep the other debtors in line, especially Portugal, Spain and Italy, and they will destroy Greece to send a message. To wit:
The German finance minister Wolfgang Schaeuble says: "Elections change nothing. There are rules".
The president of the European Commission Jean-Claude Juncker said "there can be no democratic choice against the European treaties".
Greece was allowed a debt “haircut” of more than 100 billion euros in exchange for agreeing to reduce government spending. Now that Greece appears to renege on its agreement, the forgiven debt should be reinstated. Otherwise debtors will use the Greek example to escape their obligations.
Greece's problem is that Greeks with get up and go got up and left.
given European history, Juncker might want to reconsider his statement.
Sometime in the future this situation will be studied much like the "powderkeg" that resulted in the Great War.....
I suspect that the root cause will be that Greece has enough revenue if their citizens would actually pay their taxes.....and their mortgages.....and show up to work....
Greece went off the rails when it allowed foreign banks to issue it's currency and make its loans instead of its national mint (which must live within its means for the currency to float)
Germany went off the rails in this EU socialist banking scheme that has the productive nation's tax payer underwriting the non productivity of other nations. Doomed from day one.
The EU was a vast collectivist cluster frig which attempted to pool debt and spread fiscal liabilities over a wide tax base using a common currency as the incentive to be productive - another socialist confidence racket gone bad. Socialist backwaters in the plan used the enhanced debt ceiling of the union to buy votes with borrowed cash ( as do all degenerate socialist political cabals)- leaving the productive nations to make up the deficiency.
We have the same Ponzi scheme in the socialist Canadian confederation - except we call it "equalization" payments.
the greek problem is that their constituents are greek. If you ever had to deal with some of these fools you would understand what I am saying, ben there done that.
'There is no macro-economic argument for further fiscal tightening. The only reason for doing so is on punitive grounds,' says Greece's Yanis Varoufakis.
So forgiving 100 billion euros is punitive. Communist prick. Just boot them out of the Euro zone. Then we will see how many bonds they can sell.
In the long run, the best thing that could happen is for Greece to default. It would drag both the Greek and German citizens back to reality.
Greece would have to balance revenue and spending as few would be willing to lend to them. And Germany would stop trying to play Santa Claus to the rest of Europe, and let other nations sink or swim on their own.
I'll have the souvlaki with tzatziki sauce and a shot of ouzo. And stop smashing those plates, they cost money!
Occam - Klepto-socialism = what a great term. It means taking money and finding high minded, deeply valid reasons for not repaying it. Basically, it's just not reasonable or right to expect us to pay our bills.
The problem is that someone will continue to lend to them.
The world financial system is in debt crack. They have to paper over their mistakes otherwise people might start actually questioning central banks competence.
The idea of paying your bills and actually paying off debt died back in the'80's. Conservative governments have jumped on the band wagon because they cannot get elected otherwise. Any attempts to explain finance has been abandoned as well.
I say let it burn, we can't stop it and we didn't create it in the first place so just get back a safe distance and watch.
Currency unions without political unions can't work and the Euro Project was doomed from the start. Like Kate says, the world needs a famine, this seems like a likely place for it to start.
I notice the article quotes former Enron adviser Paul Krugman. Sort of defeats its credibility.
This is the point where, as Margaret Thatcher said, they have run out of other people's money.
Can you say Green jobs in the USA funded by the taxpayers.
Yuck, what a failure rate. Let Greece sink, cause if not. The funding will never end and we all go down with them.
The problem with the Euro that it was run for the benefit of Germany only. The Euro was stronger than the Latin currencies it replaces but weaker than the Deutsch mark. So Germany benefited from having an artificially cheap currency whole Greece, Italy etc struggled with an artificially strong currency. The ECB ran a monetary policy to assist Germany as it went through its own economic restructuring. Too much easy money was lent out to Southern Europe by northern European banks. This resulted in amongst other things, a massive credit funded property booms in Spain and Ireland, and a massive debt-fuelled spending binge by corrupt Greek politicos (who were all too happy to take bribes from large German corporations to award them).
The harsh terms imposed on Greece, Spain, Ireland etc. were done for the purpose of saving German and French banks without adopting the politically awkward course (for Angela Merkel) of printing of money by the ECB. Basically a bunch of weaker cou.tries have been under bussed to make life easier for the bankers and politicians of a few larger countries.
TSB;
I guess any suggestion that Greece, Spain and Portugal were along for a free ride is out of the question? That Ireland actually over extended themselves is out of the question?
Not all economies within the EU are created equally. Greeks assuming they could draw the same benefits as German's was grossly irresponsible IMO. Closer to home it is like suggesting the Canadian economy is fundamentally as strong as the USA. It simply is not as diversified, not as strong. Canada has access to NA market which is a good thing but thinking that debt can be taken on at the same rate is very foolish. Yet we do. If the Canadian housing market collapses do we blame the Americans for that?
I didn't hear of any of the countries above clamouring to leave the EU prior to the debt crisis. They went along because it was their best option but they screwed it up with greed.
TSB
Greece has been a sh!t hole before the "union", their ppl were considered the dumb workers in Europe, the basic uneducated low class. Their economy was 50% cash no tax 30 years ago. Even going bankrupt was a step up for them. In general they are not smart business ppl, the rise of the middle class bypassed them:-)))
Looks like they blinked. The Greeks got a 4 month reprieve.
The EU knows if Greece gets tossed under the bus the effect will be the 'house of cards' that is the EU will surely collapse. Then nobody gets paid.
It's only a matter of time.
Will there be anyone to study the history?