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The major financial problem tearing economies apart over the past century has lain more with official inter-governmental debt than with private-sector debt. That is why the global economy today faces a similar breakdown to 1929-31, when it became apparent that the volume of official inter-government debts could not be paid. The Versailles Treaty had imposed impossibly high reparations demands on Germany, and the United States imposed equally destructive demands on the Allies to use their reparations receipts to pay World War I arms debts to the U.S. Government.1

Legal procedures are well established to cope with corporate and personal bankruptcy. Courts write down personal and business debts either under “debtor in control” procedures or foreclosure, and creditors take a loss on loans gone bad. Personal bankruptcy permits individuals to make a fresh start with a Clean Slate.

It is much harder to write down debts owed to or guaranteed by governments. U.S. student loan debt cannot be written off, but remains to prevent graduates from earning enough take-home pay (after debt service and FICA Social Security tax withholding is taken out of their paychecks) to get married, start families and buy homes of their own. Only the banks get bailed out, now that they have become in effect the economy’s central planners.

Most of all, there is no legal framework for writing down debts owed to the IMF, the European Central Bank (ECB), or to European and American creditor governments. Since the 1960s entire nations have been subjected to austerity and economic shrinkage that makes it less and less possible to extricate themselves from debt. Governments are unforgiving, and the IMF and ECB act on behalf of banks and bondholders – and are ideologically captured by anti-labor, anti-government financial warriors.

The result is not the “free market economy” it pretends to be, nor is it the rule of economically rational law. A genuine market economy would recognize financial reality and writes down debts in keeping with the ability to be paid, inter-government debt overrides markets and refuses to acknowledge the need for a Clean Slate. Today’s guiding theory – backed by monetarist junk economics – is that debts of any size can be paid, simply by reducing labor’s wages and living standards plus selling off a nation’s public domain – its land, oil and gas reserves, minerals and water distribution, roads and transport systems, power plants and sewage systems, and public infrastructure of all forms.

Imposed by the monopoly of inter-governmental financial institutions – the IMF, ECB, U.S. Treasury, and so forth – creditor financial leverage has become the 21st century’s new mode of warfare. It is as devastating as military war in its effect on population: rising suicide rates, shorter lifespans, and emigration of the age-cohort that always have been the major casualties of war: young adults. Instead of being drafted into the army to fight foreign foes, they are driven from their homes to find work abroad. What used to be a rural exodus from the land to the cities from the 17th century onward is now a “debtor exodus” from countries whose governments owe unpayably high sums to creditor governments and to the banks and bondholders on whose behalf they impose their policy.

While pushing the world economy into a state of war internationally, high finance also is waging a class war against labor – and ultimately against governments and thus against democracy. The ECB’s policy has been brutal toward Greece this year: “If you do not re-elect a right-wing party or coalition, we will destroy your banking system. If you do not sell off your public domain to buyers we will make life even harder for you.”

No wonder Greek Finance Minister Janis Varoufakis called the Troika’s negotiating position “financial terrorism.” Their idea of “negotiation” is surrender. They are unyielding. Official creditor institutions threaten to isolate, sanction and destroy entire economies, including their industry as well as labor. It transforms the 19th-century class war into a purely destructive meltdown.

That is the great difference between today and 1929-31. Then, the world’s leading governments finally recognized that debts could not be paid and suspended German reparations and Inter-Ally debts. Today’s situation is using the unpayability of debts as leverage as class war.

The immediate political aim of this financial warfare in Greece is to replace its elected government (supported by a remarkable July 5 referendum vote of 61 to 39) with foreign creditor control by “technocrats,” that is, bank lobbyists, factotums and former Goldman Sachs managers. The long-term aim is to impose a war against labor – in the form of austerity – and against the power of governments to determine their own tax policy, financial policy and public regulatory policy.

Fortunately, there is an alternative. Here is what is needed. (I outlined my proposals in a presentation before the Brussels Parliament on July 3,2 following an earlier advocacy at The Delphi Initiative in Greece, convened by Left Syriza the preceding week.3)

 

A declaration reaffirming the rights of sovereign nations

Sovereign nations have a right to put their own growth ahead of foreign creditors. No nation should be obliged to impose chronic depression and unemployment or polarize the distribution of wealth and income in order to pay debts.

Every nation has the right to the key criteria of nationhood: the rights to issue its own money, to levy taxes, and to write its laws, including those governing relations between creditors and debtors, especially the terms of bankruptcy and debt forgiveness.

Economic logic dictates what was recognized by the end of the 1920s: When debts reach the level that they disturb basic economic balance and derange society, they should be annulled. Another way of saying this is that the volume of debt – and its carrying charges – must be brought within the reasonable ability to pay.

ORDER IT NOW

Rejecting the “hard money” (really a “hard creditor”) position of anti-German, anti-labor economists Bertil Ohlin and Jacques Rueff, Keynes argued that creditors had an obligation to explain to Germany just how they would enable it to pay its reparations.4 He meant at that time specifically that France, Britain and other recipients of reparations should specify just what German exports they would agree to buy. But today, creditors define a nation’s ability to pay not in terms of how it can earn the money to pay, but rather what public domain assets it can sell off in what is a national bankruptcy proceeding. Debtor countries are to let their public infrastructure be sold off to rent-extractors to create what a neofeudal tollbooth economy.

Under international law, no nation is legally obliged to do this. And under the moral definition of nationhood, they should not be forced to do so. Their right to resist this is what makes them sovereign, after all.

 

An international forum to adjudicate the ability (or inability) to pay debts

What is needed to put this basic principle into practice is creation of a new international forum to adjudicate how much debt can reasonably be paid – and how much should be annulled. In 1929 the Young Plan (which replaced the Dawes Plan to deal more rationally with German reparations) called for creation of such an institution – what became the Bank for International Settlements (BIS) in 1931 to stop the economic destruction of Germany by bringing its reparations back within the ability to pay.

The BIS no longer can play such a role, because it has become the main meeting place for the world’s central banks, and as such has adopted the hardline “all debts must be paid” position that it originally was intended to oppose.

Likewise the IMF no longer can play this position. It is hopelessly political. Despite its technical staff ruling in 2010-11 that Greece’s foreign debts could not be paid and hence needed to be written off, its heads – first Dominique Strauss-Kahn and then Lagarde – acted in blatant conflict of interest to support the French bankers demands for payment in full, and U.S. demands by President Obama and Wall Street lobbyist Tim Geithner to insist that there be no writedown at all. That was the price for French bank support for Strauss-Kahn’s intended bid for the French presidency, and recently for Lagarde’s support. Given the U.S. veto power by Wall Street and the insistence that right-wing anti-labor ideologues (usually French) be appointed head of the IMF, a new organization representing the kind of economic logic outlined by Keynes, Harold Moulton and others in the 1920s is necessary.

Creation of such an institution should be a leading plank of Euro-left politics.

 

A Law of Fraudulent Conveyance, applicable to governments

The private sector has long had laws that prevent money-lenders from lending a borrower more funds than the debtor can reasonably be expected to pay back in the normal course of business. If a lender advances, say, $10,000 as a mortgage loan against a house worth more (say, $100,000), and then insists that the debtor pay or lose his home, the courts may assume that the loan was made with this aim in mind, and annul the debt.

Likewise, if a company is raided by borrowers loading it down with high-interest junk bonds, and then seize its pension funds and sell off assets to pay their debts, the company under attack can sue under fraudulent conveyance rules. They did so in the 1980s.

This lend-to-foreclose ploy is the game that the Troika have played with Greece. They lent its government money that the IMF economists explained quite clearly in 2010-11 (and reaffirmed this year just before the Greek referendum) could not be paid. But the ECB then came in and said, “Sell off your infrastructure, sell your ports, your gas rights in the Aegean, and entire islands, to get the money to pay what the IMF and ECB have paid French, German and other bondholders on your behalf (while saving U.S. investment banks and hedge funds from losing their bets that Greek debts would indeed be paid).

Application of this principle requires an international court to rule on the point at which debt service becomes intrusive, and write down debts accordingly.

No such set of institutions exists today.

 

Creation of Treasuries as national central banks to monetize deficit spending

Central banks today only lend money to banks, for the purpose of loading economies down with debt. The irrational demand by bankers to prevent a public option from creating credit on its own computer keyboards (the same way that banks create loans and deposits) is designed simply to create a private monopoly to extract economic rent n the form of interest, fees, and finally to foreclose on defaulting creditors – all guaranteed by “taxpayers.”

The European Central Bank is not suited for this duty. First of all, it is based on the ideology that public money creation is inflationary. The reality is that central bank money creation has just financed the greatest inflation of modern history – asset price inflation of the real estate market by junk mortgages, inflation of stock prices by junk bond issues, and central bank Quantitative Easing to create the fastest and largest bond market rally in history. The post-1980 experience with central banks has removed any moral or economic logic in their behavior as lobbyists for commercial banks, defenders of their special privileges, deregulator of financial crime, and extremist right-wing blockers of a public option in banking to bring basic services in line with actual costs. In short, if commercial banking systems in nearly every country have become de-industrialized and perverse, their enablers have become central banks.

The remedy is to replace these central banks with what preceded them: national Treasuries, whose proper function is to monetize government spending into the economy. The basic principle at work should be that any economy’s monetary and credit needs should be met by public spending and monetization, not by commercial banks creating interest-bearing credit to finance the transfer of assets (e.g., real estate mortgages, corporate buyouts and raids, arbitrage and casino-capitalist gambles).

 

Summary

Every nation has a right to defend itself against attack – financial attack just as overt military attack. That is part of the principle of self-determination.

Greece, Spain, Portugal, Italy and other debtor countries have been under the same mode of attack as that of the IMF and its austerity doctrine that bankrupted Latin America from the 1970s onward. International law needs to be updated to recognize that finance has become the modern-day mode of warfare. Its objectives are the same: acquisition of land, raw materials and monopolies.

ORDER IT NOW

A byproduct of this warfare has been to make today’s financial network so dysfunctional that nations need a financial Clean Slate. The most successful one in modern times was Germany’s Economic Miracle – the post-World War II Allied Monetary Reform. All domestic German debts were annulled, except employer wage debts to their labor force, and basic working balances. Later, in 1953, its international debts were written down. The logic prompting both these acts needs to be re-applied today.

With specific regard to Greece, Syriza’s leaders have said that they want to save Europe. First of all, from the eurozone’s destructive economic irrationality in not having a real central bank. This defect was deliberately built into the eurozone, to enforce a monopoly of commercial banks and bondholders powerful enough to gain control of governments, overruling democratic politics and referendums.

Eurozone rules – the Maastricht and Lisbon treaties – aimed at blocking governments from running budget deficits in a way that spend money into the economy to revive employment. The new aim is only to rescue bondholders and banks from making bad loans and even fraudulent loans, bailing them out at public expense. Economies are obliged to turn to commercial banks for loans to obtain the money that any economy needs to grow. this principle needs to be rejected on grounds that it violates a basic sovereign right of governments and economic democracy.

Once an economy is fiscally crippled by (1) not having a central bank to finance government spending, and (2) by limiting government budget deficits to just 3% of GDP, the economy must shrink. A shrinking economy will mean fewer tax revenues, and hence deeper government budget deficits and rising government debt.

The ultimate killer is for the ECB, IMF and EC to demand that governments pay their debts by privatizing public infrastructure, natural resources, land and other assets in the public domain. To compound this demand, the Troika have blocked Greece from selling to the highest bidder, if that turns out to be Gazprom or another Russian company. Financial politics thus has become militarized as part of NATO New Cold War politics. Debtor economies are directed to sell to euro-kleptocrats – on terms financed by banks, so that interest charges on the deal absorb all the profits, leaving governments without much income tax.

1 This is the theme of my Super Imperialism: The Economic Strategy of American Empire (1972, new ed., 2002).

4 I summarize this debate between Keynes and his antagonists in Trade, Development and Foreign Debt (new ed. ISLET 2009), chapter 16.

 
• Category: Economics, Foreign Policy • Tags: Eurozone, Greece, IMF, Wall Street 
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  1. 22pp22 says:

    If I were Greek, I would vote Golden Dawn even if they are thugs. The current government is all for mass immigration when theyhave over 50% youth unemployment. Really smart. They are not the solution, they are part of the problem.

    • Replies: @Anonymous
  2. Anonymous • Disclaimer says:
    @22pp22

    They should change their name to Golden Grease or Greasy Dawn. It would resonate more with voters and bring them more electoral success.

  3. The Anglo-American MSM has already come out full-force in favor of still more bailouts for Greece. Do we really need these daily screechings of Michael Hudson as well? Do they add anything?

    Extend and pretend, kick the can further down the road, and forever reward profligacy and irresponsibility. But save the bacon of some really wealthy international bond holders, right? So the last few remaining can get out clean while the debt is socialised and taxpayers get saddled with the bill.

    Visit Greece if you dare. Along with an over-proud, indolent populace you’ll find colossal graft and corruption, tax evasion on a truly astonishing scale, luxury mansions by the thousand, yachts filling the harbors, privately- and publicly-owned islands; countless billions in marketable assets which could quickly be sold to help pay down the nation’s debts. But why lift a finger to sell or to work when you can blame Germans and get more ‘free money’?

    Look up James Angelos: “The Full Catastrophe: Travels among the New Greek Ruins”

    • Replies: @Anonymous
    , @Flower
  4. Anonymous • Disclaimer says:
    @Kyle McKenna

    They should be allowed to write off the debts on the condition that the nation must formally and officially change its name to Greece and the name of its citizenry to Greaseballs.

  5. The private sector has long had laws that prevent money-lenders from lending a borrower more funds than the debtor can reasonably be expected to pay back in the normal course of business. If a lender advances, say, $10,000 as a mortgage loan against a house worth more (say, $100,000), and then insists that the debtor pay or lose his home, the courts may assume that the loan was made with this aim in mind, and annul the debt.

    I used to work in a law firm that handled a large number of foreclosures and debt collection actions. I never heard of such a defense and banks routinely lend less money than a property is worth (or at least appraised at). If the debtor doesn’t pay, and the bank forecloses, the debtor has a homestead exemption, and keeps the proceeds of a sale after expenses of sale and debts and liens. But annulling the entire debt? Citation please!

    Perhaps the author meant lending $110,000 against a property worth $100,000? That might be predatory lending although I’m personally suspicious of debtor claims that “the bank wanted his property all along.” Banks are usually interested in an income stream, not a chunk of real estate. I admit the situation might be different at the national level.

    • Replies: @Flower
  6. “Bailouts for Greece” for those not paying attention, are transfers of money from European taxpayers transiting via the Greek black box out the other side into various private speculators and loan shark operations. It is socializing private losses into public losses, by bailing out not Greece, but making the exercise one of private profit. In this way known risk becomes risk free. There is no greater moral hazard than lenders and banks who cannot lose money no matter how risky they know their loans to be. Democracy is subverted, because the exercise is conducted behind the backs of the voters impoverished and with intentional deception by those who intend to benefit. Only the referendum offered the hope of democratic accountability at long last.

    • Replies: @Flower
    , @Kiza
  7. Greece: Hey guys I see you’ve built a nice team, can I join?

    Eurozone: Sorry Greece but you have a shit economy, soooo NO.

    Greece: Wait man! Check my report card. It’s signed by Goldman Sachs. They say I have a great economy.

    Eurozone: Hmm, yeah seems legit… Ok here’s your free money, use it to invest in infrastructure and innovation. DON’T SPEND IT ON YOUR CORRUPT STATE.

    Greece: Spend it on the State, Gotcha!

    Eurozone: Wait what?

    After a few years:

    Eurozone: So Greece what have you been up to?

    Greece: Fuck it man I’m up to my eyeballs in debt, I don’t know how I’m gonna pay 1 million government workers plus all the 50yr old retirees. I guess I’ll default.

    Eurozone: WHAAAAAAT?

    Greece: Unless you give me more money…

    Eurozone: Ok , I’ve written down your debt and given you money but now you’ll listen to me. You’ll have to reform your State enterprises, open up the economy, cut government wages etc

    Greece: Sorry didn’t hear you, I was playing with my new iPhone that I just bought with the money you gave me.

    Eurozone: WHAAAAAAT? You dumb lazy Greek bastards…

    Greece: Why you bully poor old Greece? You fucking Nazi, capitalist imperialist scuuuuuuum. This is economic warfare blah blah Soros, blah blah Jews, blah blah CIA, blah blah Wall Street. Fuck it I’m not paying.

    Eurozone: Fuuuuuuuuuuuuck

    • Replies: @nemo
    , @Anonymous
  8. eah says:

    It’s more like the financial suicide of Greece — the “attack” is just organizations that loaned Greece money wanting the money repaid as agreed. But whatever.

  9. […] The Financial Attack on Greece by Michael Hudson. […]

  10. Flower says:
    @Kyle McKenna

    Kyle, if I didn’t know any better, I’d say you were trolling for a position in the KKK. Does Greece have a KKK? You should start a branch there. You can then rail about “indolent” Greeks AND those lazy, good-for-nothing nigga’s too! Do they have Walmart’s in Greece? You should get one, and then go there. Then you can step back and laugh at all those “indolent” Greeks being forced to try to survive on Chinese junk, so mega-mega corp Walmart can squeeze another off-shore billion in hidden tax dollars.

  11. Flower says:
    @Diversity Heretic

    Why does the amount make a difference if the loan was “predatory” or not? You can lend $10,000 dollars to an 8 year-old if you want to, but good luck being paid back. You can go after the kid’s parents, if you want, but why stop there? Go after his aunts, uncles, grandparents, sisters, brothers too! Why not? Hey, it’s money!

    • Replies: @Diversity Heretic
  12. Dan says:

    Europeans acting surprised at the “news” that Greece cooked the books to join the Euro is laughable. The Eurocrats were fully on board when the Greek government cooked the books to join the EURO and they were ones who actually encouraged it since it was profitable and enabled their businesses to sell overpriced products to Greece and their banks to lend Greece at low rates knowing this was money they could never get back. Sorry, but when you loan someone you take a risk, if you loaned someone that you know he can’t pay you back it’s your fault if you don’t get that money back not the debtor’s. What they did with the so-called bailout (bank bailout) was to transfer all the these toxic loans held by banks to the E.U. taxpayers while the banks were paid in full, money they never deserved to get back (just as it happened in America).

  13. nemo says:
    @Christos the Greek

    Would you lend to someone who was not responsible? And if you did who’s fault would that be?

  14. @nemo

    No I would not. Nor would I agree to any foreign aid or central bank purchases to bail out the parties to the transaction.

    Greece can repudiate the debt and live within its means from now on.

  15. A lot of people here and elsewhere seem to think that the issue is at hand is whether an “irresponsible” troop of grasshoppers should be forced to suffer in order to “pay its debts” to a hill of “responsible” ants (the Germans). It also seems to be assumed that failing to pay debts is a grave and mortal sin.

    One finds oneself amazed.

    A few points:
    – Due to the way compound interest works, debt grows exponentially. If I lend you 100 dollars at 5% interest per day, and you give me back 4 dollars every day, in a year you will have given me back somewhat more than $1000, and would still owe me more (far more) than the $100 I first gave you. This is ridiculous and is probably one of the major causes of the regular economic crisis that have plagued the world over the last 2-3 centuries. It also means that (limited) inflation is not only good but necessary.
    – Usury was frowned upon in the Classical Age, and was frankly considered a sin by the Church. The West has a 2000+ year old tradition of considering usury an unmitigated evil. The Greeks have made an honest effort to pay. They have paid much. Now they are just being squeezed dry by crazed usurers.
    – The justification for allowing interest stated in textbooks is this: The lenders takes a certain risk that the borrower will default; and the borrower pays interest due to that risk and as a sort of a rent on capital. Such are the rules of the game. Well, lending to Greece was a gamble and it failed. Clear the slate and move on. Bankruptcy is not the end of the world – Trump has declared bankruptcy God knows how many times – and look at him go.
    – The EU clearly disproportionately benefits Germany. The Germans get a damping influence on a currency they dominate, captive markets for their developed industry and heavily-subsidized agriculture, cheap labor, and various other boons. It now also seems that these benefits arrive at the detriment of peripheral and weaker nations such as Greece and Portugal. Thus one of the aspects of the Greek question is this: Will Europe work for the benefit of a sort of a German Fourth Reich, or will Europe function for the benefit of all Europeans?

    • Replies: @Anonymous
  16. @nemo

    The fault lies with both parties, that’s true. However do you understand what will happen if Greece doesn’t get access to more EU funding?

  17. tbraton says:

    Since the Germans have become such sticklers for being responsible and paying back one’s debts, perhaps we should ask Germany to repay us for those debts of Germany we wrote off in 1953—with interest, of course.

  18. Big Bill says:

    I am surprised that Hudson did not mention Keynes’ famous 1919 book “The Economic Consequences of The Peace”, which pointed out the insanity of burying Germany in war reparations debt after WWI.

    The book made Keynes’ reputation. You can find it here:

    http://www.gutenberg.org/files/15776/15776-h/15776-h.htm

  19. Anonymous • Disclaimer says:
    @jimbojones

    *Complains that Greek debt crisis is unduly condensed into a simplistic “morality tale”.*

    *Then starts raving about the “German Fourth Reich”*

    Nuance for me, broad smears for thee.

  20. @Flower

    Predatory lending generally refers lending on terms that the borrower simply doesn’t understand (even though, I agree, they should). Teaser rates, confession of judgment clauses, cross-collateral security agreements and general insecurity clauses could all be part of a predatory loan. Sad to say, most borrowers just look at the initial monthly payments in a decision whether they can afford the loan or not. Other borrowers just make the minimum payment on their credit card debt, although the practice blows the cost of borrowing through the roof. Disclosure regulations are better today, but lots of people just don’t pay attention. Governments, on the other hand, don’t have this excuse.

    • Replies: @Flower
  21. Kiza says:
    @Fran Macadam

    Very clear and crucial point. Yes, in finance it is always about the risk and the return. Can a bankster make his profit private and his loss social. Communism for the bankers and capitalism for the rest.

    The naive European banksters did not know that Goldman Sacs was cooking the Greek books, just like the subprime mortgages in the US were cooked up into AAA risk-free investment? They did not find a corrupt local (Greek) elite and then extend loans way beyond the acceptable level of risk?

    But the debt trap works in an amazingly simple way:
    1) When you extend loans the debtor has AA+ rating and the interest rate is x%.
    2) Then it is discovered that the debtor has gone from AA+ to CCC and the interest rate goes to 10 times x%.
    Then the debt can never be repaid, even the interest is a problem. As long as the debtor is trying to repay the new interest rate, the bank is enjoying profits. Once the gravy train stops, the banksters ask for a bailout from its own state because the whole financial system is at risk now.

    Simple, is it not?

  22. Flower says:
    @Diversity Heretic

    Predatory Lending is a short con. The Mark is convinced that they want the loan and that they can afford it. The usual target of the con is whatever the Mark used for collateral.

    • Replies: @Diversity Heretic
  23. @Flower

    You’re right: a predatory loan is a loan which has as its objective the acquisition of the collateral (usually real estate) at less than its fair market value. Some of the things that I mentioned in my previous post are tools for the predatory loan. If you start with high rates of interest, then add late fees, default interest and attorneys fees, it’s not too difficult to generate a debt unpayable by a debtor. But it’s not a foolproof strategy. In the commercial world obtaining collateral via a predatory loan is more difficult than it sounds; there are equitable and statutory rights of redemption that give a debtor an opportunity to sell the property at something close to fair market value before the lender can obtain clear title.

    One of the clients for which I worked made lots of high-interest, high-risk mortgage loans. Although debtors often accused the client of predatory lending, I never once heard any interest expressed on the part of the client in actually obtaining the collateral (usually a third-rate apartment building). They were thrilled when someone outbid them at the foreclosure sale and gave the m the proceeds in the form of a certified check.

    But I admit loans to sovereign countries might involve different motives and different rules.

    • Replies: @Flower
  24. Two comments:
    I disagree with your assertion that “there is no legal framework for writing down debts owed to the IMF, the European Central Bank (ECB), or to European and American creditor governments. Since the 1960s entire nations have been subjected to austerity and economic shrinkage that makes it less and less possible to extricate themselves from debt. .”
    There have been numerous instances since World War II where the sovereign debts have been reduced. In the post 1983 LDC debt crisis, the eventual solution entailed reduction of debt for most countries in Latin America (and some former communist countries) that was accepted by their private bank creditors with the support of many of the entities that you mention such as the IMF and the major creditor countries. Furthermore many governments have reduced their debts to developing (or former Communist) countries, either as part of general debt relief agreements or as independent actions by governments. The Paris Club was the main recognized forum to discuss and harmonize policies towards emerging markets with excessive debt to governments.
    Whether you like or dislike the bankers and financiers, they are irrelevant. Greece has already reduced its debt to private creditors. (I know because I own Greek government bonds.) It may be also added that private investors were induced to lend to Greece because the rules of the Eurozone precluded devaluation, thus theoretically removing currency risk. At this point private creditors have no interest in lending to Greece and all additional funding will come from governments. Thus any future funding of Greece must be supplied by the taxpayers of the Eurozone.
    I also disagree with the characterization of European governments as “Governments are unforgiving, and the IMF and ECB act on behalf of banks and bondholders – and are ideologically captured by anti-labor, anti-government financial warriors.” First of all, how can a government be captured by “anti-government financial warriors?” Second, this characterization pits a helpless Greece against heartless governments that are manipulated by banks and financiers. Greece is currently led by an extreme left government which would oppose any serious attempts to dismantle the country’s welfare state. Public opinion in northern members of the Eurozone opposes any additional aid to Greece and would be pleased to see Greece leave the Eurozone. We are probably near a state in which Greece cannot extract any further support from Eurozone governments and each side is trying to blame the other for the failure.
    Posturing aside, the least painful solution would probably involve, devaluation (i.e. exit from the Eurozone), attempts to inflate the currency and debt reduction.
    In retrospect it was plainly a mistake for Greece to adopt the Euro. Indeed, European Monetary Union may have been a monumental mistake. History is full of bad ideas.

  25. Flower says:
    @Diversity Heretic

    Yes, your technical description is fine, but you are thinking too pedantically, even short cons like this take some preparation. The description of Predatory Loans the description you give depends upon the mark remaining stupid and is based upon the false premise that the Troika is “here to help”. In the USSA, that is, the mark remaining stupid means everything is normal. However, you need to take yet another step back and reexamine the situation. The tansactions has nothing to do with points, or assessments, or interest rates, that is something legitimate, honorable business people dp, this is a scheme, a swindle, based upon one objective:
    How to turn this pile of useless fiat pieces of toilet paper in my corporate computer, into hard, real, physical assets?

    To take a short-cut on all of this, think of a business deal, then think of the most dishonest, low-down, dirty rotten huckster way to do that business deal, and that’s the way the Troika will do it. Until they get caught at it, then they are suddenly Shirley Temple. The problem that most folks are having with understanding this issue with Greece is that they actually think that the Troika is there to HELP Greece, and nothing could be further from the truth. The Troika is there to help the Troika, and no one else, in fact, there is no “Troika”, Greece (and the rest of us) are dealing a single monster, but with three heads. It makes it look friendlier.

    That problem is compounded when you realize that all the “money” that the Troika is dealing with is not real, it is simply numbers in a computer. In any dealing with the Troika remember this: the Troika is NOT dealing with their money, they aren’t even dealing with money; the Greeks (and us) however, are dealing their homes, their lives, their life’s work. Who would you say has the advantage?

    • Replies: @Diversity Heretic
  26. @Flower

    The people that I worked with never had the capacity to create their own money. The ECB does. That’s a big difference.

  27. Anonymous • Disclaimer says:
    @Christos the Greek

    Except that the eurozone never gave Greece any free money, private or public, or Greece would not have been near default.

    • Replies: @Wally
  28. Wally says: • Website
    @Anonymous

    Why should anyone give the lazy, unproductive, Marxist Greeks free money?
    There is no such thing anyway … econ 101.

    They repeatedly took other peoples’ money, the terms were known, no one forced them, and they know their laughable drachma will be a joke as it always has been.

    Now that Greece has defrauded the EU, typical of Greece, they don’t have the nerve to stand on their own two feet. They don’t have the backbone to leave the EU. Call their bluff and all you get is more whining ‘victim’ excuses. Screw ’em.

    They made their own bed, let them sleep in it. No pity for the lazy.

    Retirements at 50 yrs of age, do nothing govt. jobs, right.

    see:
    Greece: A Financial Zombie State
    http://www.alt-m.org/2015/06/29/greece-a-financial-zombie-state/

    • Replies: @annamaria
  29. annamaria says:
    @Wally

    Some people take pleasure in attacking the supposedly lazy common Greeks that have been suffering from the crookery of politicians and banksters. The commoners in Greek did not see the bulk of the bailout money; the money went directly to banksters that made wrong bets and were supposed to lose, according to the fairy tale of invisible hand and free market. The fairy tale has been exposed through the battery of Quantitative Easing (in hundreds of billions of dollars for the US and EU crooks) and by the lack of lengthy prison terms for too-big-to-jail. In other words, we live in times of Communism for banksters (and mega-“haves”) and capitalism for everybody else.
    Here is a story for you about massive off-shoring by the wealthy Europeans. http://www.cnbc.com/2015/04/30/why-did-the-us-pay-this-former-swiss-banker-104m.html
    It was a whistleblower that was punished for uncovering the financial crimes, while the banksters tried their best to shield the rentiers:
    http://www.theguardian.com/world/2013/apr/26/lagarde-list-whistleblower-extradition-verdict
    “money laundering, drug trafficking and terrorist financing risks” – this is the list of ordinary activities by the mega-banks. But agains, some people hate “unproductive Marxists Greeks” that are in reality the hard working people suffering from the vicious new-feodalism imposed by plutocracy.

  30. […] The major financial problem tearing economies apart over the past century has lain more with official inter-governmental debt than with private-sector debt. That is why the global economy today faces a similar breakdown to 1929-31, when it became apparent that the volume of official inter-government debts could not be paid. The Versailles Treaty had imposed impossibly high reparations demands on Germany, and the United States imposed equally destructive demands on the Allies to use their reparations receipts to pay World War I arms debts to the U.S. Government.1 […]

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