February 23, 2015

Frankfurt’s way over the top

Posted in Sunday Business Post · 93 comments ·
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This weekend, we are faced with the possibility of either a European Germany or a German Europe. It sounds stark, but there it is.

Even though Greece backed down in order to secure a bridging loan to stave off bankruptcy for another four months, the problem hasn’t gone away. That’s something the EU has to figure out in the months ahead. The question is: can it?

A unified EU maybe has a hope of solving its massive debt problem, but a divided Europe is quite a different beast. In the past few days, we’ve seen new battle lines drawn in Europe.

It comes down to the Baltic versus the Mediterranean. Which do you prefer – the cold, icy water of the Baltic or the warm waves of the Med?

On Friday night, Germany – the big fish of the Baltic – gathered around it the other Baltic nations of Finland, Estonia, Latvia and Poland to give Greece an ultimatum: pay everything or we will force a bank run on you. Now, clearly, it isn’t the Germans’ fault and there wouldn’t be a bank run if the Greeks trusted that their money was safe in their banks, but the German tactic was abrupt.

It is clear that the Germans are prepared to let the Greeks leave the euro if needs be. They obviously think it’s better to amputate the leg than let the gangrene spread. It is significant that none of the non-Baltic nations are in this new Teutonic camp. Even the parsimonious but consensual Netherlands is keeping quiet. Britain is playing the long game, knowing that this inter-European shambles plays right into the hands of its Eurosceptics. And while they might not have been explicitly saying so, the Mediterranean nations France, Italy and Spain are on Greece’s side. And even if they are not explicitly on the Greek side, the Germans seem to think they are.

An indication into the way the German delegation sees Europe was let slip by one of Mr Schaueble’s aides on Thursday when he was quoted in the Financial Times as saying:

“If we go deeper into the [debt] discount debate, there will be no more reforms in Europe. There will be joyful celebrations in the Elysée and probably in Rome, too, if we go down this path.”

This really sums up the German fears. Deep down the Germans think they are in a union, not of economic equals, but of financial delinquents, ready at any opportunity to default on their obligations. This is a bizarre way to talk about their best customers and it is historically inaccurate because France and Italy have a much better record of paying their debts than either Germany or Poland, but why let the facts get in the way of a good story.

Germany defaulted unilaterally in the 1930s and got massive debt relief in 1953 and as for plucky Poland, it was the only post-Soviet country to get its very large debts written off completely, at the urging of the US, as a “present” to make sure that the newly democratic Poland of 1989 thrived.

In fact, in the case of Germany, the first lesson is that the more unstable, threatening and irrational your government is, the better chance it has of getting debt relief. The second lesson is that the more disruptive you have been in the past, the more focused are your creditors’ minds.

Historically, one of France’s perennial problems is that it has always paid its debts even when it was destroying the economy. Successive French governments have shown willingness to turn the country into a large debt service agency when the alternative was to appear fiscally undisciplined. This sorry history stretches all the way back to the 1900s and was on display all through the First World War, the 1920s and into the Great Depression.

Did the French get rewards for this fiscal stoicism? They did in their Swiss: they got invaded! You may find it unusual to bring in these historical stories today in the 21st century when the EU is already a well-established and successful political entity.

But the national stories matter because these are the collective experiences that create nations. In the end no one cares about financial or economic targets – it’s only money.

Do you think the story of Spain, its national narrative, alludes to its debt/GDP ratio or budget deficit? Do you think when the French are singing La Marseillaise next week they will be dreaming about the French bond yield? Not at all. The national story is the sum of the politics of the nation. So, for Greece, it’s the fact that the Greek resistance beat the Nazis in 1944 – as any reader of Captain Correlli’s Mandolin could tell you!

So when Germany decides to lead a monetary crusade against others, the financial story may say one thing, but the proper politics screams something totally different. For example, everyone also knows that the reason the small fry of the Baltic have lined up behind Germany is because of their fear of Russia and Orthodox Russia’s close ties with Orthodox Greece. Everyone has their fears and prejudices.

These deep connections are above politics; they are the real heart and soul of nations.

And these stereotypes are why the Germans don’t trust the French or Italians completely (as revealed by the aide’s quote to the FT). It’s not because of what the French and Italians have actually done, it’s what they signify in the German mind.

Over these national differences, the EU institutions have managed to stretch a gossamer thin veil of common interest. No one, apart form the European political elite, really believes in the project. We go along with it because there aren’t enough hours in the day to worry about it and it doesn’t seem too onerous.

This weekend’s bridging loan won’t solve the Greek debt problem. The country is bust. It is bust not only because it borrowed too much but also because it was lent too much. There are delinquent lenders as well as delinquent borrowers. Both lenders and borrowers have to share this pain. It is called co-responsibility. In a crisis, lenders and borrowers are responsible.

France, Italy, Britain and Spain understand this. Germany (the lender), worried that acknowledging this fact would cause contagion all over Europe (including here), seems to think that it can squeeze Greece until we hear her pips squeak.

But does this policy work? Destroying a country in order to rebuild it? When Winston Churchill said, “Squeeze them until you can hear their pips squeak”?, what country do you think he was referring to? Why, Germany. Germany after the First World War. We know what happened there.

Greece, for all its faults, is a broken country. Its economy is in tatters. Its people have been humiliated and left in poverty. Greece deserves our support, not our condemnation. It is at times like this that the EU has to work for everyone, not just delinquent creditors. If it doesn’t work in a crisis, what’s it for?


    • GF

      Hi all
      I have been reading/listening to David since his earlier years on Newstalk when I was renting a house in Celbridge commuting for five hours a day to get into Waterloo Road in Dublin 4 – a round trip of 28km that on some days took me 7.5 hours to complete.

      I remember the Celbridge train station (Hazelhatch) had two trains in the morning, one at 5.40am and one at 10.45am. Both only went to Heston Station. The buses were in the same traffic as the cars, there was no bus lanes.

      The year was 2001.

      We moved out of Celbridge early, promising never to return, and moved to Dublin 6 – renting as prices just kept rising and catching up seemed not only impossible but likely a bad mistake.

      Watching the madness escalate, listening to the economists, experts and consultants for key reports, the politicians, the bill boards, the vested media, the unvested car manufacturers, listening to the endless talking heads, endless words and sound bites. This time is different. Full employment. You can never go wrong with bricks and mortar. New planning laws will ensure all apartments constructed are designed so families can live in them. Playgrounds for all. Integrated joined-up planning. Amenities. 10% Social Housing. Utility Rooms in Every Apartment. Dual Aspect. This time remains different. Insulation and sound proofing to be part of planning process. Fire Walls. Soft Landing. Infrastructure and Public Transport to be key part of all planning. Soft Landing. Banks are fully capitalised. Building for the future. Building high (skyscrapers) will ruin Dublin’s sky line, what sky line.

      No bailout.
      Soft-tish landing.
      Fully Capitalised.
      Not our fault.
      Guarantee.

      Ghost Estates, too many properties, evil developers, evil bankers, evil people for borrowing too much. Evil planning, evil politicians. Germany’s fault. Europe’s fault.

      Too many houses built. Population of Dublin drops by 120,000. Unemployment at 14.7%.

      Rents going up. Cash Buyers. China money.

      Not enough houses. More need to be built. Planning laws need to be loosened to make it cheaper for builders. Builders need hand-out to help kick start construction.

      It is now 2015 and I just bought a house in Celbridge.

      All these sound bites, all these words, these points of view, these reports. All these voices, these suits, these hand gestures. These opposing views, these updates, these changes for the better, these improvements. All these fully loaded reports, reviews, research’s, reveals, retweets. These hand-outs, these independent media outlets. These, disease.

      Your tail can only be wagged for so long. Then you die. And your children’s tails are wagged instead.

      • Deco

        Ah yes, Ireland’s public transport “system” – one of the factors that drives up the cost of living here.

        Badly in the need of an overhaul.

      • mcsean2163

        I used to commute four hours to swords from castleknock.

        Torture. I don’t know how you did 7.5. I was considering living in a tent rather than bus some days!

  1. Robert Mc Call

    I’d say it’s a case of buying time to find Yanis Varoufakis’ weak points and THEN, apply pressure – it’s what these evil zeocon bastards do !

    The Troika today will be v.telling also!

    [parsimonious ...where's my dictionary?]

    • Hopefully Yanis, being a game theorist, is going to use the 4 months to devise a cunning master plan and rightly shaft the Troika and the horse they rode into town on.

      • sdempsey

        Not all of Syriza support staying in the Eurozone. If their strategy forces them out of the Eurozone, they’ll deal with it. However, we should view this as a warning that we’ve signed up to a totalitarian regime that places a programme of technical economic reforms towards complete European economic integration above the physical wellbeing of its citizens.

    • Tomviejo

      If I remember rightly the Greek government presented fictitious accounts when applying to join the Euro,in reality they never met the joining requirementsThey then accepted Billions of Euro which they spent on a bloated Public Sector which contributed little except employment and now it’s Germany’s fault when it comes to payback.Where have I heard this story before?

  2. denisjk

    Hi David, I have been a long time reader of your blog and have much respect for your economic opinions.
    I often wonder when reading your articles, why over the years your have never addressed the root cause and mechanics of monetary creation?? It is the absolute basics of the issues you constantly discuss. And I don’t mean this in some kind of lefty argument.
    I have even seen on many occasion other readers asking you the same question and still not addressed.
    Any thoughts? Is it something you believe is worth discussing? Would love to hear your thoughts!!

      • Robert Mc Call

        That could prove difficult lads,but with the “obvious realities” of a Drachma possibly resurfacing, David too must be contemplating the if’s? it’d be a pity if Gene Kerrigan got in there before you David.

        Why hasn’t it happened already? Sound money perhaps too fantastical a proposal? or maybe the cogent conclusion is that DMW’s clients refuse him permission ?

        An Punt nua ? Yeaaaahh !

        https://www.youtube.com/watch?v=eoOAf4pQnl0

        or has David been blogging amongst us all the time?

        .
        this blog has too many secrets

        • Robert Mc Call

          i poached and saved this many moons ago; …

          “If Joseph the father of Jesus would have invested one penny at his birth at 5% interest, and Jesus would have returned to the same bank in 1990 – at the time of the German unification – he would have been able to buy, with the money accrued in the meantime, 134 billion balls of gold of the weight of the earth, based on the official price of gold at this time.

          This shows mathematically that the continual payment of interest and compound interest over a longer period of time is practically impossible. And explains why we have economic and social breakdowns.”

          kinda sums it all up,doesn’t it!

          • EugeneN

            Are the goldbugs opposed to usury now? Of course it all depends on inflation of the currency he originally invested in. Since it no longer exists he wouldn’t have anything.

  3. michaelcoughlan

    Hi David,

    I responded to your previous article with the suggestion that what Germany really wants is to exercise the liens on Greek assets. I still think this to be the case. The article linked below gives a very good analysis and insight which supports my hypothesis;

    From the article:

    “The fact that the north European German-led austerity coalition can only see ongoing and dramatic reductions in Greek living standards as the means to the achievement of the north’s objectives suggests that the objectives themselves are not transparent. My guess is that the northern countries will change tack only when the Greek government has no more assets to sell. Then, when the Greek economy eventually revives, large income streams that would previously have gone to the Greek government will go instead to the new owners of those assets”

    The reason that Germany wants this to happen may not be so much greed evil etc. it may have to do with something you pointed out many times previously about trade surpluses: If everyone in Europe is trading internally they can’t ALL have trade surpluses so from the article;

    “The obvious solution for this decade would be for the trade flows within the Euro zone to reverse, with goods flowing from south to north, with debts being settled in the process. But no, the north is not interested. The north refuses to run the trade deficits necessary if its loans to the south are to be settled. The north wants to keep those loans unsettled, as assets.

    What the north wants of Greece (and ipso facto of other southern Euro zone countries), is for the southern countries to run trade surpluses with out-of-Eurozone countries. This makes southern European debt look good on northern European balance-sheets.

    The northern countries also want the southern governments to sell their public utilities (and anything else that they might own) to global plutocrats. That is what northern policy-makers are really holding out for.

    The strategy to get countries like Greece to run trade surpluses with non-Euro countries has been partially successful. First the BRICS (Brazil, Russia, India, China, South Africa – add Indonesia and Turkey) were running the required deficits (or smaller surpluses than usual), then the UK and the USA were helping by buying more imports”

    Happy reading.

    Michael.

    http://www.scoop.co.nz/stories/HL1502/S00148/thought-for-the-day-greece-unshackling.htm

    • This makes the most sense to me, to sum up, Germany and it’s associates banks and oligarchs want to own Greek assets to use as wells to great income streams going to the oligarchs.

      • michaelcoughlan

        Hi Scania,

        The underlying reason may not be as cynical as it seems. The oligarchs obtaining control of the assets would have the knock on effect of strengthening the balance sheet of German banks. By forcing the Greeks to trade outside of Europe it prevents the weakening of the trade advantage Germany has over the rest of Europe. It also would reduce the need for printing more money if the Greeks can start to stand on their own two feet.

        So Merkle’s job is to serve her countries interests and if she does this she certainly would achieve that goal.

        Michael.

  4. In west Germany they still complain about having to subsidise eastern Germany (It would be a bit like us complaining about Shannon airport being built). If there is not even an economically united Germany in the minds of Germans, then there could never be an truly united Eurozone.

    • Deco

      Yes, but in Eastern Germany, they also talk about the fact that Ossis at least have enough kindness in them to want o have children.

      There are serious problems in the NW part of Germany with regard to demographics.

      The DDR has bailed out Western Germany, providing high quality German speaking engineers.

  5. “They did in their Swiss”! haha – like it David!

  6. johnmaile

    in defence of winston churchill the pips squeak quote is one of the few in the history of english oratory that is not by him but rather from someone called Sir Eric Geddes (1875-1937). sorry to be pedantic, especially when the article as a whole makes such an insightful contribution to understanding the current european problems – on behalf of your many UK subscribers please keep up the good work, if we had to rely on our woeful UK press we we really would not have a clue. rgds john

  7. BrianC

    We in the final phase of the Euro becoming the Duro.

  8. BrianC

    We in the final phase of the Euro becoming the Duro.

  9. BrianC

    We in the final phase of the Euro becoming the Duro.

    • Robert Mc Call

      i’ve seen ‘glitches’ but that’s doggone spooky ! they’re onto you ! don’t panic .change your handle immediately and find the nearest telephone box.

  10. Deco

    [
    Greece, for all its faults, is a broken country. Its economy is in tatters. Its people have been humiliated and left in poverty. Greece deserves our support, not our condemnation. It is at times like this that the EU has to work for everyone, not just delinquent creditors. If it doesn’t work in a crisis, what’s it for?
    ]

    The fact is that Brussels is even less forgiving of Greece, than Germany.

    In fact the EU is getting a free pass here, and lobbing the blame for cruelty on Germany. Large proportions of the German population are in poverty. The idea is being deliberately cruel is not correct. Germany is merely trying to keep the thing from falling apart.

    The new Greek government is an affront to EU authority. It is encouragement to left wing Euro scepticism in Italy, Spain Portugal and perhaps other places.

    The new Greek government are more realistic that any Greek government to date. They are also more disobedient than any Greek government to date.

    My recommendation to Greece would be to quit the EU, and the Eurozone. The idea that Greek will have no “friends” is absurd, considering that the current “friends” are behaving like enemies.

    I don’t blame any of this on Germany, and very little of this on the Greeks.

    The EU has failed. And it is getting a free PR stunt out of having the Germans (plus perhaps the Finns and the Dutch) take the blame.

    “with friends like these, Greece does no longer needs enemies”.

    The entire “regime change” and resulting civil war in Ukraine is designed to great an absurd sense of panic in Eastern Europe, so as to further centralize Europe. Washington and Brussels are both trying to play Bismarck, and the Ems telegram.

    The objective of Washington’s policy and the lobbyists in Brussels and Frankfurt is a more centralized (and more oppressive EU).

    If Greece quits, I will go there on holiday. I think I will now quote Victoria Nuland…..

  11. DC

    Game theory my A*se.

    Greece capitulated and this was always on the cards, as soon an syriza stated that they wished to remain in the Euro, they were finished.

    Lets face facts – Syriza ultimately believed the same Socialist meme that is doing the rounds in Ireland from our own breed of financial blaggers. Be it Sinn Fein’s hijacking of the water charges issue and talk about a wealth tax, or Ruth Coppinger stating that she would privatise Dell on Newstalk Radio.

    Syriza demanded no more bailouts whilst they are allowed to increase the minimum wage, increase pensions and halt public sector cuts.

    Tax the rich, Tax Capital, and redistribute wealth to pay for society’s needs and more importantly society’s wants. That’s fine as long as it doesn’t impact investment and it always does.

    As Thatcher said the problem with Socialism is that you eventually run out of other peoples money.

    Well its not as simple as that, and putting a gun to your own head and threatening to pull the trigger unless your paymaster coughs up is just lunacy.

    Bailouts are useless unless they aid capital investment and business dynamism. Greece needs total reform of its economic, Banking, political,and societal attitude with respect to membership of the EU & Euro.
    Even before the crisis struck, Greece was a laggard. In 2008 only a third of households had the internet, the lowest share in Europe. Levels of youth unemployment and government debt were already among the continent’s highest.
    If Greece really wants to change then it must default & exit the Euro, it must face hard times and real fiscal discipline. But they are already suffering hardship and for what? to appease a cruel and predatory ECB, Troika etc. Yes it would be difficult and extraordinary measures would have to be applied but it has been done before in other situations.
    At least the privations would be for the good of a Sovereign Greece determined to reform and hold its head high amongst other nations instead of constantly being referred to as the problem member of the family.

    Greece also hold approx 6 billion in gold and may have other hard assets.

    Syriza had their opportunity for real change in these negotiations but ultimately the need for the next fiscal hit from their financial opium lords was just too hard to resist.

    The lesson for Syriza must be – don’t go to a Gunfight with a Knife.

    • Robert Mc Call

      @DC

      +1

      The welfare state and welfare mentality enslaves us too.

      So many shackles !

      old article but the the comments section is enlightening to say the least.

      http://www.zerohedge.com/news/2015-01-10/ron-paul-reality-now-setting-america-it-was-all-based-lies-ignorance

      • Robert Mc Call

        a link from above article …Tony Brogan will smile.Good.

        http://www.converge.org.nz/evcnz/resources/money.pdf

        • Thanks Robert
          Lets hope the great unwashed on this blog get to read it!!! :)

          On the subject of money and why gold is the perfect (or yet to be improved upon currency) substance for a world wide currency.

          First I will dispense with outlining the physical aspects of gold that make it unique.

          Second we assume that there is about 180,000 tonnes of mined gold in above ground stockpiles.

          Thirdly we assume it is widely disbursed.

          Fourthly we assume the world comes to its senses and listens to its forefathers wisdom and bans interest charges.

          Then there is always enough money in the world for any economy to operate at any level at any time.

          About 32,000 tones of gold is said to be in central banks and some other circulates in private hands. That is less than 20% of the gold in existence can readily move into circulation and the balance acts as a reserve of, a pool, of potential money.

          This is how it works.

          As an economy grows the demand for money may increase. Like everything else this causes its value to increase. As the value of the money increases it takes less money to buy what is wanted. (Mild deflation here) So those who have savings find their purchasing power improved and may be tempted to go out and buy something with a portion of their savings. (Much like when a sale is offered by a store)This action puts their savings back into circulation and increases the money supply.

          The collective actions of people doing this add and subtract to the money supply on their own whim or decision and thus a sort of equilibrium is reached where the value of money is relatively stable with low volatility, unlike the paper money of today that is gyrating in value by 10-30% within a year.

          In the greater scheme of the money supply , the 80% of gold currently in the pool of savings will remain there but if there is a major change in the economic growth patterns stand ready to be released into circulation at any time.

          alternatively if the economy falters then people will save and less money will be in circulation.

          The major benefit here is not the use of gold itself but the fact that the money supply issuance or redemption is self regulated and not subject to the whims of politicians or bureaucrats. In fact if the politicians debase any local currency then it will lose value as the people move out of the local currency into a self sustaining one.

          A major problem at present is that politicians are allowing regulators to turn a blind eye to the manipulation of currencies and in particular to the manipulation of the precious metal currencies.

          This has allowed a ponzi scheme currency to be foisted upon the peoples of the world. This is so egregious that in any other area of activity it would be declared fraud. A fraud so huge that life prison terms would by now have been implemented.

          The reason this is allowed is that a stable ‘natural’ currency would long ago have been shown that the fiat currencies are a continuous exponential tax upon all peoples. The interest charged on this debt based currency is huge and rising exponentially. It is not considered to be 40% of the cost of everyhting that is purchased.

          Where does this interest go. It goes to the instigators of the current central banking scheme who knew well what they were achieving. They will be identified as being less than 1% of the so called 1%.
          Just a handful of people siphoning off the wealth of the world to themselves, at first surreptitiously and now more overtly. Cunningly they divert attention from themselves by allowing others to appear to be the wealthy beneficiaries. That is where our attention is diverted.

          Further commentary from Craig Paul Roberts
          http://thenewsdoctors.com/whatever-became-of-economists-and-the-american-economy-dr-paul-craig-roberts/

          Take up his challenge David, and our requests and do us all a favour!!
          It is time a real economist stepped up and told the people as it really is.

          • Robert Mc Call

            Superman stuff Tony.

            [Not that i’ve read Nietzsche and i hope i’m not taking this quote out of context

            - ” The man of knowledge must be able not only to love his enemies,but also to hate his friends.”

            That doesn’t sit well with me.How about you Tony?

            and a favourite of mine for the late night revellers;

            “You respect me; but how if one day your respect should tumble? Take care that a falling statue does not strike you dead!”

        • feelslikeacircle

          @Robert

          “We seek not merely to be free from oligarchy; we seek to be free from oligarchy, because not to do so would be to betray the divine spark of reason in ourselves and in others”

    • Deco

      [ As Thatcher said the problem with Socialism is that you eventually run out of other peoples money. ].

      Kind of like what happens in Monetarist housing booms also, like the ones that Thatcher pioneered ?

      The problem with Thatcherite monetarism is that you eventually end up borrowing more of other people’s money than you an afford to pay back !

      • EugeneN

        Yeah.

        It should be within the wit of man to design growth strategies which depend on real wealth being created not asset bubbles and busts. Quite simple really. QE could buy fiscal bonds which could be used (and only used) for infrastructure, energy and house building. Yes, the State should get back into that. At the moment money is spent to prop up private landlordism, in houses where families are less stable ( the owner can move his own family in at any time by law) and which keeps a floor on private sector rents. The state ends up reacting to market rent increases, and garners no rent or has any capital stock. The private sector renter who is too well off to avail of rent assitance has his wages garnered to pay for others to compete with him in the market ( as opposed to them not being in the private market at all), which also — in keeping a floor on rent – artificially maintains house prices making it harder to get on the Ladder. Its a policy to enrich landlords. Social housing, properly built, is a win win.

        Other fiscal policies could include more capital investment in green energy ( and that does work, ignore the luddites) and public transport.

        We are printing money anyway, rather than funnel it through financial organisations to pump up assets, lets use it to back up fiscal bonds from the EIB.

    • Deco

      [
      Bailouts are useless unless they aid capital investment and business dynamism. Greece needs total reform of its economic, Banking, political, and societal attitude with respect to membership of the EU & Euro.
      ]

      No. Greece needs to realign itself, for it’s own sake. And drop the EU and the Eurozone. Because these aspects have facilitated a fraud, that benefited a small elite, and punished the masses.

      Doing anything for the sake of the EU, is absurd. Greece is living proof of that.

  12. Mike Lucey

    DMcW sums up the situation well and there is very little ‘union’ is whats going on.

    His bottom line of, “If it doesn’t work in a crisis, whats it for?”, is the big question.

    Could the EU be a failed experiment, one that attempted to control the European continent via Germany under the vassalage of the Globalists. I’m beginning to thinks so.

    The Globalist Agenda
    http://www.globalistagenda.org/

    • Deco

      “union” is a complete misnomer.

      It is centralized rule by stooges, for the benefit of the very wealthiest of lobbyists.

    • cooldude

      I agree fully with your analysis Mike. The Euro was designed in the full knowledge that it would produce crises which would eventually lead to full political union. It wasn’t supposed to work in a crisis it was supposed to create them in order to create further political union.

      Had a quick look at that website. Seems fairly spot on to me.

    • extract

      “”The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in iniquity and born in sin. Bankers own the Earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough money to buy it back again…Take this great power away from them and all great fortunes like mine will disappear, and they ought to disappear, for then this would be a better and happier world to live in. But if you want to continue to be slaves of the banks and pay the cost of your own slavery, then let bankers continue to create money and control credit.”
      - Josiah Stamp, former Governor of the Bank of England during the 1920′s

  13. Deco

    Route out for Greece.

    1. Quit the Euro, and issue a new currency.
    2. Quit the EU.
    3. Default on the national debt.
    5. Start from scratch.
    6. Rationalize the entire state and semi-state system, and lay off people who really should be on welfare. It will increase employment, but it will reduce the overall state expenditure.
    6. Follow the Singapore model.
    7. Operate a balanced budget henceforth, and build up reserves.
    8. Watch Brussels cringe in desperation.

    • Deco

      9. Do a deal with Moscow to sell fresh fruit and vegetables to the Russians. Highly labour intensive, and it will bring money into Greece, and build up income streams and the small scale private sector economy.

      Greece is a debt slave country. Time to break free.

      • Agree
        All countries are the same.
        Debt slaves to the fiat money central banking system.
        Ground to penury by debt and interest.
        Any new currency must be issued debt free and carry no interest.
        Oops it already exists.
        It just needs adopting
        Gold is the universal currency. Greece like every people must realize money is no man’s possession or a states possession either. It is simply a medium of exchanged to facilitate trade and or be a method of saving wealth accrued.

        That will not disallow a nationally introduced currency but it must have with it the removal of legal tender laws to keep the national currency honest. Let the people choose. If the states money is abused then it will be quickly spent and the good money used as savings.

        Our overall problem is that people are not educated to this . Neither are the politicians who are swayed by bankers and programmed economists. Presently, corruption rules.

        • jaysus

          One thing with your love of gold Tony, its a finite commodity. There simply isnt enough of the stuff to allow all the countries of the world to take it as a standard.
          Plus the environmental cost of mining it is horrendous from the CO2 amounts to the toxic chemicals used to wash it out, including cyanide, its filthy. Have a look at the destruction of once pristine areas after gold mining has taken place!I hate the stuff and hope there will never will be a gold standard for these reasons alone.
          Bitcoin is the way to go. Keep it digital.

          Otherwise I love your economic commentary, keep it up.

          • Hi Jaysus
            I am not in love with gold per se. I just observe what works.

            Not enough gold is incorrect. Any amount of gold is enough, even if there was never another ounce mined.

            Bitcoin is touted and one of its beneficial features is that it is of fixed supply, totally limited to a maximum. There will always be enough bitcoins. Bitcoins were designed to be as much like gold as possible because gold as money really does work.

            Gold is easily digitized and as posted here there is a company producing notes with gold attached in amounts as little as 1/10th of a gram. currently with a buying power of about $5. The gold on the note can be recovered and converted back to bullion if wished.

            Thanks for your interest.

  14. DarraghD

    I’m finding some of these views on Greece a bit hard to listen to at this stage. It reminds me of Ireland before the shít hit the fan back in 2008. We had the best paid public servants on earth who were still getting nationally agreed pay increases, as the cabinet were discussing what were collapsing domestic tax revenues. It was around this time that if your car was out of tax and you were driving around in it for a few months and had the luck to not drive into a checkpoint in that time, that you could just get a form stamped to say the car had been off the road for 3-6 months and you could save yourself 50% on what you would otherwise have paid in motor tax, had you decided to be properly tax compliant!

    All across this country at the time, you could blag things in this manner. The whole social partnership process was one huge big blag where pay increases were obtained for absolutely nothing in return by way of productivity improvements! We know full well that whether it was decentralisation, PPARS, E-Voting, or HSE spending, that money was basically fúcked at the problem of the day, with little or no regard for how the money was spent, the value that was extracted for the money that was spent, etc.

    As we know, we have had to cop on and even yet, although we have turned off the wastage tap to some degree, we still have a HSE where money is wasted on a huge scale and we only have to look at Irish Water to see another example of huge sums of money being thrown at a problem in an attempt to fix something.

    Taxpayers money is not an infinite resource, we have learnt the hard way that we have to spend with an eye on value and return, we have learnt that this is how the world turns, so why do we have different expectations of Greece???

    Why do we think that Greece can sort out it’s problems when it still can’t collect the tax revenue due to it?!? Why do we think that Greece should be given a bail out or a debt haircut when it is appears to be living on some parallel universe when it comes to attempting to run a country along some kind of realistic lines?

    It seems to me that the agenda of the left is spend spend spend and then it can fall to someone else to pay the bill when it lands, usually as we have seen in this country, it’s “tax the rich” or whatever, maybe these guys just need to get with the program that the rest of us have rightfully had to adapt to since 2008?

    • You talk about the wastage of taxpayers money and don’t seem to recall that the biggest waste of all, putting all other examples in the shade, was the bailout of financial gambling casinos. You are right, taxpayers money is not an infinite resource, and the last people to learn this are the super-rich gamblers. Have they suffered any austerity? I think not. They skedaddled to other jurisdictions where they have hoped to avoid retribution. It seems that, to reverse your agenda, that the agenda of the right is to accumulate taxpayers money and then to penalize the taxpayer (they having avoided falling into this category).

      • paddythepig

        Wrong. The bailout of the public service and the welfare state in ireland, vastly exceeded the cost of the bank bailout.

      • Daithi7

        Yeah, I think on last count the cost of public sector over spending added five times more debt to the national debt than the cost of bailing out the banks.

        Also bear in mind we are stuck with the artificially high legacy costs of a bloated public service (thanks to Bertie the socialist and the social partners), (with Irish public sector workers paid more than 1.4 times the salaries of their private sector equivalents, BEFORE allowing for permanency of tenure and pension entitlements that you simply could not purchase in the private sector). More depressingly these costs are an annual overrun versus income whereas at least the cost of bailing out the banks was a once off!!

        And our taoiseach still thinks he deserves to be paid more than the PM of the UK. Stop the lights!!

  15. DC

    [The problem with Thatcherite monetarism is that you eventually end up borrowing more of other people’s money than you an afford to pay back !]

    Britain was Bailed out by the IMF in 1976 under a labour Govt, Thatcher was merely the effect, Unions and leftist socialist mismanagement was the cause.

    [No. Greece needs to realign itself, for it’s own sake. And drop the EU and the Eurozone. Because these aspects have facilitated a fraud, that benefited a small elite, and punished the masses. ]

    Greece does not have to leave the Euro and would be unwise to do so.
    It has significant benefits from EU membership.

    http://www.voxeu.org/article/how-poorer-nations-benefit-eu-membership

  16. DC

    apologies typo – Greece does not have to leave the EU

  17. DC

    Something you wont see in Irish MSM.

    http://www.zerohedge.com/news/2015-02-23/biggest-problem-facing-world-today-9-countries-have-debt-gdp-over-300.

    Quite a few more Debt slaves in there, Interesting to see some of our Northern European partners heavily in hoc also.

  18. Adelaide

    As David never addresses the root cause of the problems he so brilliantly articulates, and the posters’ solutions are a whirlwind of noise, I’d suggest you familiarise yourself with the one defining simple solution to all our financial woes.

    Google ‘EC.Riegel 1879-1953′/’The Political Money System’/'Valun Money’.

    There is a small online community spreading the logic of ‘Valun Money’, despite Riegel’s democratic monetary model being 60 years old it’s simple obvious logic attracts a faithful following.

    “Our present monetary model, not money, is the root of all our suffering.” E. C. Riegel 1946

    • michaelcoughlan

      Hi,

      I only read the info briefly but two things stand out. First of all if the value of a Valun appreciates against the fiat the valun will cease to circulate as a bad currency drives out a good one. In other words the valun will be used for savings.

      The other problem is that if the valuns are bought with fiat they will still carry the interest bearing debt element. You could get around that problem by only accepting one and two Euro coins in exchange for valuns as coins are issued by the mint interest free.

      As people exchanged Euro notes for valun notes backed by Euro coins the Euro notes would be used to buy coins from the mint and the mint would have to destroy the notes on issuance of coins for the obvious reason of not increasing the money supply. This would mean that the banks which issued the notes would have to cancel the debt against the note taken out of circulation.

      You then have the problem of storing the coins. You could get around that by entering into a contract for supply of coin from the mint instead of coin itself in the event that a drawdown was necessary should a citizen require his valuns to be redeemed in coin.

      Regarding the post by other members and contributing to noise you too are part of that.

      Best regards,

      Michael.

      • michaelcoughlan

        Hi,

        My analysis above still doesn’t deal with the problem that the politicians are still in a position to increase the supply of coin over an above the combined value of increase in the supply of goods and services leading to inflation which would defeat the whole project one way or the other.

        Best thing to do is to decentralise the ownership of money so that no bank or country can fuck around with the supply to suit their own agenda.

        Michael.

        • Robert Mc Call

          @Michael

          When one makes the elementary mistake of confusing money and the monetary model,it’s actually kind of Adelaide to be that patient with us. Let’s face it,she’d be well justified to give most of us a dose of deafening silence! Ahh,the penny droppeth …her recent absence, explained.

          i’m on catch up but what’s new !!!

          How frustrating !

          https://www.youtube.com/watch?v=nWRxPDhd3d0

        • Robert Mc Call

          no, no, i erred Michael

          let’s call it a blood rush of self aggrandizement

        • Adelaide

          “Best thing to do is to decentralise the ownership of money so that no bank or country can..”.
          Riegel spent his life devising a monetary system to achieve that very goal.

          A decentralised money issued by the People for the People, controlled by no entity, his simple solution was simply each citizen begins with a neutral zero balance of Valuns, from there you issue your own Valuns from your balance and likewise accept them in the course of trade, this mathematically assures that the system’s overall balance (being the sum of all individuals’ balances) remains a constant sum of zero, thus no inflation/deflation, the Valun maintains its value, to safeguard against freeloaders there is an ingenious method which is too long to describe, in short it is a democratic monetary model that can not be corrupted or debased and gives each citizen access to the market place by the self-issuance of their own Valun in a zero-sum mathematical framework.

          As Riegel said, “The only question one needs to ask is ‘Who issues the money?’. Everything else is a deliberate distraction.”

          ps Riegel devised Valun in the 40′s/50′s but it has since been updated and simplified in the context of modern technology.

          • michaelcoughlan

            Thanks for this response.

            For valuns to work the person must have produced something of value PRIOR to issuing valuns or the valuns will have no purchase.

            For example:

            I will issue myself 300k valuns and will you sell me your house in return?

            If I swap my 300k valuns for 300k euros all I am doing is changing the bearer instrument (paper) itself. The interest bearing credit has already been issued by the banks.

            respectfully,

            Michael.

          • Adelaide

            Hi Michael
            “For valuns to work the person must have produced something of value PRIOR to issuing valuns or the valuns will have no purchase.”?

            Your question sounds logical if you share the general misconception that money is a unit of value, or that something of value must back money, Riegel admitted that this mass misconception was his biggest obstacle, “So long as the People’s ignorance on the intrinsic value of money lasts, so too will their suffering.”

            Once you accept Riegel’s logic that the only thing that gives money any meaningful value is the people’s trust in continuing to use it (regardless of what is backing it) then you conclude money is faith-based, and the question becomes how do your retain that faith, when gold supply can be manipulated, so too oil, and governments or central banks can be corrupted, Riegel realised that the one thing that can not be manipulated or corrupted is mathematics, hence his zero-sum monetary model.

            You ask “I will issue myself 300k valuns and will you sell me your house in return?”. Of course I will, if I have faith, I have trust, that another seller will equally accept my 300k valun for a purchase, and likewise for that seller and so on and so on. This is the nature of money. It is a circle of trust.

            Riegel summed it up brilliantly.
            “Trust makes the world go round.’

          • michaelcoughlan

            Hi Adelaide.

            Thanks for this. You are my favourite poster because your posts are so well informed, respectful, well written and thought out.

            However I must disagree in this instance. Let me explain:

            I will self issue the 300k valuns and send them to you. You send me the deed of the house and I will admire your faith in accepting the responsibility to find a third party to trade you valuns for in exchange for their goods or service.

            To be more succinct: The proposal requires the supplier of the goods or services to be the one having faith and not the originator of the currency (Valuns) which is different to money, money having one of it’s attributes a capacity to act as a store of value.

            Therefore self issued valuns are worthless unless they are backed by items of real value.

            Land is the ultimate store of value. Zero increase in supply and no futures market I know off preventing manipulation. A fund invested in land could have its shares used as money no problem. You could even use a block chain as shares even better still.

            Take care,

            Michael.

          • Adelaide

            Hi Michael

            “Therefore self issued valuns are worthless unless they are backed by items of real value.”

            With your analysis you would then concede that the Euro, Dollar, Yen and every other FIAT currency is ‘worthless’, I know it, you know it, but we still trade with these ‘worthless’ monies, simply because we have faith, trust, that other traders will accept them to facilitate trade. Riegel takes this self-evident truth and democratises the process out of the hands of Private Banks into the public domain with his Valun Money.

            Your preference for money is the old ‘commodity money’ which is where each unit of money is a direct claim on a unit of commodity, be it gold or land or silver or whatever, but that is an unnecessary appendage when it is self-evident that people are happy to trade with worthless monies in the faith/trust/knowledge that other people will and feel and do likewise.

          • michaelcoughlan

            Hi Adelaide,

            “With your analysis you would then concede that the Euro, Dollar, Yen and every other FIAT currency is ‘worthless’”

            Yes. Most certainly. However the faith element is backed by the wealth creating capacity of the economy from which the fiat is issued. Since wealth destruction is wholesale people are losing faith in Fiat.

            I have been musing about Riegel and I am a fan for a long time now. What I have come to think and it is still a work in progress is the following and incorporates all the points you make re technology, faith, decentralisation etc:

            Establish a not for profit organisation and create a website. The purpose is to issue an alternative currency called valuns. The organisation will act as a clearing operation as follows. Adelaide sends a cheque for 1000 Euros. This 1000 Euros is sent to the CB in exchange for a contract to supply 1000 1 Euro coins on demand. This contract is held in a vault of the not for profit. The not for profit issues 1000 valuns to Adelaide in a block chain format. The CB will have to extinguish the notes received for the contract to supply issued as the money supply would increase otherwise. This act AUTOMATICALLY cancels the corresponding debt owed to the CB with a reduction of the interest paying part of the debt on the exchequer purse.

            Adelaide will then be able to find willing and ready people to accept her valuns in exchange for goods and services with the following desirable benefits:

            Adelaide has converted 1000 Euros of interest bearing banker owned faith based fiat for 1000 interest free public owned valuns block chains backed by the equivalent 1000 Euros.

            The block change technology facilitates the use of modern technology. As wealth in the future is created there is no limit to the currency EACH CITIZEN can create of interest free Euro backed decentralised valuns to facilitate their own personal trade. Since valuns created in this manner are a complimentary Euro based currency it shouldn’t fall foul of the government but there may well be a threat from the bankers. You could also organise a paper note with the block chain and a slight content of Gold like Tony Brogan has been saying to have the extra security of a small percentage gold hedge in case the block chain infrastructure went down.

            The valun complimentary currency remains faith based.

            This for me is still work ongoing so if there are errors please highlight them.

            I just rang the CB they said if you want large volumes of coin you need to organise it with your branch but I am sure there is a way around this.

            Michael.

    • Basically agree with the concept of. “It’s the money system stupid.”

      Also I might add “Empty kettles make most noise”!!

      David studiously refuses debate on this fundamental premise. He too is a part of the problem.

    • As bit coin is designed to look like gold in digits it reminds me of margarine made to look like butter.
      It turned out, as some of us insisted for 40 years, that “Butter is better” .

    • ” It is championed by people who would, if they could, return to a gold standard – “

    • ” it will dramatise one of the key arguments of anti-establishment economists like Varoufakis: that states – not markets – create money.”

      And there is Varoufakis Achilles Heel. He is a socialist. He believes that the state creates money. He does not believe it belongs to no one. That it is a universal utility, a medium of exchange does not seem to be a part of his understanding.

      It is that money has been commandeered by the state that leads to and allows all the problems we have of a debt based currency charging usury for usage. This in turn leads to the corrupt practice of of huge manipulation of fiat currencies now called competitive devaluations.
      To hide the devastation this is causing world wide it is essential gold is hidden from view as it is the one true real money that has no debt attached. There is no counterparty to have to rely on. Thus gold is bear naked shorted in the derivative futures markets. This is an illegal, criminal, fraudulent happening allowed by the blind eye of the regulators.

      That is how scared the central bankers are of real honest money. They deride it, devalue it, and try to dismiss gold at all costs. Do not be deceived by such deception.

  19. Putting silver to work in the real economy as money.
    HSP had the inspiration and I have promoted this many times.

    http://www.sprottmoney.com/news/ask-the-expert-hugo-salinas-price-february-2015

  20. http://kingworldnews.com/paul-craig-roberts-governments-media-lying-people-elites-enslave-humanity/

    “Consider “globalism.” Every country has been convinced that globalism is imperative and that not to be part of the “global economy” means economic death. In fact, to be part of the global economy means death.”"

    So by reduction a little globalism means a near death experience.!! It is called the EU. Any country worth its salt will remove itself from the clutches of Brussels.

    Do not believe any hairbrained statements that any economy is on the mend let alone the EU or US

  21. Reality Check

    Love it Deco! I’m going to have to borrow that for the Aural ponderment of the next Stooge that comes my way!

  22. Mike Lucey

    Greece debt crisis: Eurozone backs reform plans
    http://www.bbc.com/news/world-europe-31606986

    Tsipras looks to have balanced the demands of the creditors and his pre-election pledges as the ‘can kicking’ measure is going to be rubber stamped by the EU finance ministers although Christine Lagarde is not happy with everything.

    It will be interesting to see how the land lays in 4 months time. I must check with Paddy Power (as good as any forecaster) to see what the odds are of Greece staying in the club.

    • Pat Flannery

      Mike, it will be interesting to watch the Dail debate its now EU-mandated rubber stamping of the Greek reform priorities: tax evasion and corruption, rather than squeezing the last penny from the working people.

      The party spin artists will be busy coaching Enda and Noonan on how to balance their “best little country in the world to do business in” with tackling Ireland’s systemic tax evasion and corruption, which Irish governments depend upon for power.

  23. Major banks are under investigation for fraudulent practices.
    What could the Fed be afraid of by being audited by congress which Congress has every legal right to do.

    http://www.nysun.com/editorials/janet-yellens-audit/89061/

  24. Allow me to run this one up a flagpole and see who salutes it

    “The Tax Wall Street Party: America’s Answer To Syriza”

    http://21stcenturywire.com/2015/02/23/the-tax-wall-street-party-americas-answer-to-syriza/

  25. 11. Gold is always rallying in one currency or another

    This is a statement of fact – especially in this era of currency devaluations andcurrency wars.

    http://www.goldcore.com/ie/wp-content/uploads/sites/19/2015/02/goldcore_bloomberg_chart2_25-02-15.png?b6bb99

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