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This thought from James Kunstler on the Greek bailout:
"Few people grok that Greece is an entity with an economy not much bigger than North Carolina’s, yet it is burdened with roughly $350 billion of old debt that will never be paid back. The only thing at issue is how it will not be paid back, that is, what mode of pretense will be employed to disguise the inability to pay back this debt. The mode du jour has been the crude one of lending Greece more money to pay back the interest on the old debt. A seven-year-old ought to be able to understand where that leads."
Debt, the new tool of imperialism, control a nation's debt and you have a form of control that almost guarantees an open door to monetary hegemony and it's corollary the structural adjustment plan (SAP) that has worked so well for the IMF and the World Bank. EU structural adjustment will be just as efficient at cementing the economic relations between the elites and others in the EU. This from the Social Science Network:
Abstract:
This article argues that the Economic Adjustment Programmes (EAP) that came with loans to peripheral Eurozone members Greece, Ireland, and Portugal are very similar to the loans with conditionality, also known as Structural Adjustment Programs, that international financial institutions have used as a policy tool in the 1980s and 1990s. It defines structural adjustment programs and then shows how Eurozone rules plus the Economic Adjustment Programmes resemble them. It then canvasses the literature evaluating structural adjustment in the developing world in order to formulate expectations for its performance in Europe. The null hypotheses from the large literature on structural adjustment policies suggest that the EAPs will: be badly implemented; be neutral or bad for growth; be bad for equity and the poor; have unpredictable policy consequences; and will allow incumbent elites to preserve their positions. Preliminary evidence from the three peripheral countries confirms that the same problems are afflicting EAPs.
It could be that Greece's creditors all around Europe don't want the $350 billion owed to them to vaporize. It would be understandable that seeing Greece work through repayment is more beneficial than kicking them out.
Greece is stuck in a corner too. Suppose they go ahead and default to clear themselves of that $350 billion in debt. Then what? Does Greece have much of an industry to speak of for rebuilding their economy? Where will they get the capital to invest in building it up? The resulting bad blood from defaulting on their loans means that nobody will want to lend to or trade with them afterwards.
Greece is stuck in a corner too. Suppose they go ahead and default to clear themselves of that $350 billion in debt. Then what? Does Greece have much of an industry to speak of for rebuilding their economy? Where will they get the capital to invest in building it up? The resulting bad blood from defaulting on their loans means that nobody will want to lend to or trade with them afterwards.
*sigh*
The capital comes out of thin air. Poof!
Greece just has to devalue its own currency to make exports attractive to other countries.
Cynically, because at the start of the crisis years ago European banks (especially German and to a lesser degree French banks) had a lot of exposure to Greek debt. Now most of the money is owed to European governments and government-funded institutions and they don't want Greece to default because they're the ones holding the bag, which is why you see not just the additional bailout money on offer, but also the not-so-veiled-threats by the Germans to try to toss the Greeks out of the Euro if they go for default.
You may think it's cynical to think that way, but I'm pretty sure you're a lot closer to the truth than is commonly discussed. It goes back to the basic addage about lending:
"If you owe a bank thousands, you have a problem; owe a bank millions, the bank has a problem"
One thing that is interesting to note is what was the biggest banknote of the currencies of these countries before the changeover to the Euro.
The 10,000 drachmas note was worth 29.35 euros .
While Spain had a 10,000 peseta banknote worth 60.1 euros it was relatively rare, and the 5000 peseta banknote was worth 30.05 euros. Portugal had a 10,000 escudo banknote worth 49.88 euros. Except for the very end of the existence of the Italian lira (1997 to 1 January 2002), the biggest banknote was 100,000 lira worth 51.65 euros.
The denomination of these banknotes reflected the normal transactions in these countries. In a similar fashion, the largest banknote commonly seen in Mexico is 500 pesos = US$34.33
Today the normal ATM transaction is in 50 euro notes. The Mediterranean countries are awash on 100, 200, and 500 euro notes where they fuel an underground economy in drugs and illegal immigration. These denominations were appropriate to Germany and the Netherlands.
Even today the British pound comes in denominations of 50 pounds = 65 euros or less. Almost all cash transactions are carried out with the 20 pound banknote. They have outright banned the buying and selling of the 500 euro note within the UK. They are not interested in the economy (mostly illegal) of large banknotes.
The denominations of the banknotes give you solid proof that the economies required different currencies.
Last edited by PacoMartin; 02-27-2015 at 05:45 PM..
drop greece like a bad habit--because thats what they are!
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