Posted on 06/29/2015 12:03:00 PM PDT by Sean_Anthony
And probably leave the Eurozone too.
If you want to know what happens when a nation absolutely refuses to reform its insane spending - even when it finds itself at the brink of fiscal collapse - I give you Greece. Not that you want it. The International Monetary Fund doesn’t. The Eurozone doesn’t. The Greek banking system is now shut down, and we’re a day away from Greece defaulting on its IMF bailout loans. When the Europeans presented Greece with an ultimatum - reform the spending now or be cut off - the most the Greek politicians were willing to do was call a referendum on the matter. And as we now see, that’s not anywhere near good enough:
The arguments have raged for five months. The Greeks had their red lines. They would not adopt any new measures that deepened austerity, and they needed a commitment to discuss debt relief.
They made some concessions on taxes and pension reform, but they were not enough for the EU-IMF creditors. Trust had all but vanished; they doubted the reforms would be implemented.
(Excerpt) Read more at canadafreepress.com ...
“Greece was a socialist country with all the ridiculousness and corruption that goes with it.”
I live in a country that sounds just like that!
IMF's operating profit is about a third extracted from this Greek debt.
They were in no condition to take out this loan and I believe it represents something like 600% of the nations GNP.
Socialism always works until you run out of other peoples money.
I would like Greece to repudiate their debt, just to see what would happen. The Western World will be tripping over themselves to loan (give) them more money! They will force money on Greece. Someone will volunteer to pay their debt gratis (USA?). That’s how insane the West has become.
Few have discussed what will happen and likely happen next.
Once Greece reintroduces the Drachma, they will likely start it as a fractional currency compared to the Euro. So let’s speculate, and say 100 Drachma for every Euro. (When Greece adopted the Euro, it was about 340 Drachma for a Euro.)
They will likely pass a law that currency conversion must be at the government rate, and include incentives to swap Euros for Drachmas.
The idea behind this is for Euros to flow to the government so they can pay for essential European goods cash up front.
After that has maxed out, then the government starts a program of double digit inflation, for several reasons.
1) Inflation favors debtors, but does not favor those on fixed, if bloated, incomes. This is back door austerity.
2) Inflation also encourages Greeks to spend locally and more rapidly than they would otherwise. This accelerates the Drachma, making it a stronger currency.
Well, why should they? They didn’t learn anything from the USSR fiasco
Personally I don't think there is the collective IQ level in our government to recognize the problem. Let alone do anything about it.
What do you mean by Nope. Putin. ? That Pooty will bail them (Greece) out?
Yup. Pipeline.
The Greek social service system is just too generous even by Scandinavian standards. No wonder why Greece will default on its debt within two days.
“They will likely pass a law that currency conversion must be at the government rate”
That fixed rate business didn’t work out so hot for Venezuela. All it did was drive the economy (such as it was) underground and halt all business dependent upon foreign supplies, which is pretty much most business in Venezuela. The only reason Venezuela hasn’t collapsed altogether is that it’s a major oil producer, so it at least has something it can trade for some hard foreign currency, whereas Greece actually has to import their oil and gas.
No matter how the Greek government pegs the Drachma, it’ll be worthless outside of Greece and nearly worthless inside of Greece. The result will make what’s happening in Venezuela look like a picnic compared to what’s going to happen in Greece.
If government spending creates wealth, shouldn’t Greece be the richest country in Europe? Interesting how that works in reality.
Typically yes, but this would optimally be done as part of a phase into a new program.
The most successful recovery of a collapsed currency was the move from the hyper-inflated Papiermark, through the Rentenmark, and into the Deutschmark that happened in the Weimar Republic. But Greece is several steps before even this could happen.
The way it worked in Weimar, during the collapse of the fiat Papiermark, was to set up a gold backed currency, but only for use by the government, banks, and major corporations, not the public. This was the Rentenmark, which was very stable as a currency, and allowed them to get some order back in the economy.
Once this was done, the Reichmark was introduced for public use, also as a gold backed currency. It was so very stable that even the Nazis retained it throughout WWII.
But after Greece has converted back to the Drachma, exchanging it for a lot of Euros held by the public in phase I, (this is where the currency conversion law comes into play) then phase II makes most conversions done mostly at the government and banking level.
The big goal is to prevent a big rush of Euros or Drachmas entering or leaving the country.
Phase III is inflation austerity. It could end up with a ratio of 10,000 Drachmas to 1 Euro. Then a currency devaluation, so that 10,000 Drachmas is now equal to 10 “New Drachmas”.
It’s quite a process.
And just exactly how much gold does Greece have to back the New Drachma?
Okay, I know a lot of people are rooting for Greece to dump the IMF and EU, which is fine. But if they do not reform their welfare state they are truly doomed in the long.. or short... run anyway
political deadlines are always very arbitrary
Kind of pointless to repudiate the debt if they do not reform their welfare state
HEB looked a bit like that when they had 2Ltr bottles of soda on sale 3 for $3
That is a very good question. Weimar Germany was also thought to be stripped of gold by that time, as part of its war reparations. But in short order, likely with some outside help, they were able to assemble enough to back the Rentenmark.
Granted, the number of Rentenmark was tiny compared to how many Reichsmark were eventually needed, once the economy had stabilized, which meant that Germany quickly got a lot more gold from somewhere.
Thinking back on it, remember all the talk about “Nazi gold”? The Nazis were always very careful to smelt and re-mint their gold as Nazi gold, which (at least back then) erased all indication of its origins. Yet they seemed to have an enormous supply of gold from somewhere.
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