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The ECB Is Considering A Parallel Greek Currency
As we first reported yesterday, one of the proposed measures to be implemented in Greece just before, or during its default and/or exit from the Eurozone, in addition to pervasive capital controls of course, is the implementation of a parallel "currency", or as explained yesterday, a government paying its citizens with IOUs.
This is what we said less than 24 hours ago:
Greece might resort to IOUs and/or capital controls to avoid a disorderly default and keep the banks afloat for now. But such measures would offer a temporary solution at best and could be the first steps towards a euro-zone exit.
Assuming that a deal is not reached next week, there are a couple of routes that the Greek Government might take to avert disaster in the short term. First, it could issue IOUs to pay public sector workers and pensioners and free up money to repay its debts. But this could cause economic chaos if fears that the IOUs would never be paid sparked riots or public sector employees simply refused to work.
Even if Greek people accepted IOUs, they could only function for a very short period. Before long, those receiving incomes in IOUs could only afford to pay their taxes through the same medium. And given that the Government’s international creditors would not accept IOUs as repayment, this would still lead to a debt default. Effectively, the IOUs would become a parallel currency whose value was deemed lower than that of a normal euro. This would be akin to a euro-zone exit.
Today, to our dismay, we find that the ECB has not only considered a "parallel currency" alternative but for Greece this may be a reality before long. According to Reuters, the ECB "has analyzed a scenario in which Greece runs out of money and starts paying civil servants with IOUs, creating a virtual second currency within the euro bloc, people with knowledge of the exercise told Reuters."
"The fact is we are not seeing any progress... So we have to look at these scenarios," said one person with knowledge of the matter.
A spokesman for the ECB said it "does not engage in speculation about how specific scenarios regarding Greece could unfold."
One Greek government official, who declined to be named, said there was no need to examine such a scenario because Athens was optimistic it would reach a deal with its international lenders by the end of the month.
Not surprisingly, "experts at the ECB have concluded that using IOUs to pay public sector wages would probably fail to avert a full-blown crisis and could even threaten Greece's future in the 19-country euro zone."
This is precisely what we warned about yesterday when we further noted that "Greece is already issuing the rough equivalent of those in the form of Greek T-bills which are sitting on the books of the very same Greek banks which, in the event the IOU solution is pursued, will be besieged by the very same citizens to whom the IOUs are issued."
What is most surprising is how eager the ECB is to instill a banking sector panic and a self-fulfilling prophecy of a terminal bank run. In fact, as we noted first back in February, based on the rhetoric out of the Eurozone the eurocrats are practically desperate to crush the Greek financial system (perhaps in order to teach the Syriza government a lesson) where it is a miracle there are still any deposits left.
What is disturbing is the lack of vision on behalf of the ECB about what will surely happen to every peripheral European country's deposits once it is revealed that what was, according to Draghi, an "unbreakable" union is quite fragile and where the safety of one's lifetime savings is entirely contingent on not electing a government which the Troika deems unworthy.
Back to the ECB and its calculations:
Those officials believe that up to 30 percent of Greeks would end up receiving such government IOUs rather than payment in euros, which would only put further pressure on Greek banks because those workers were likely then to plunder their savings.
The banks would then be forced to tap increasing amounts of emergency liquidity funding or boost their capital base.
But the banks could not use the IOUs as security for drawing down the emergency credit because the ECB would not accept them.
"The IOUs, I just don't think it can work," said the first person who spoke to Reuters. "That could effectively be it, they would be out (of the euro)."
Those fears were voiced by others familiar with ECB thinking.
"With a parallel currency ... you are getting to something so tailored that you are almost in Grexit," said a second person. "It is something that is outside the institutional set-up."
Perhaps the only question at this point is whether Bloomberg (which today showed beyond a reasonable doubt it is as systematically important as any financial institution when 2 hours of downtime led to a worldwide panic), will show the XGD first...
or the XIOU?
In any event, it is only a matter of time before the Drachma, which may or may not look as rendered below, is now officially back.
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Ahh, ye ol company script. Now we're evolving.
I don't see the difference between this an normal fiat notes.
Don't you plebes worry one second, there's no way this move will be hyper-inflationary. Just keep slaving away for your devalued, err, I mean re-denominated pension and benefits.
"What is disturbing is the lack of vision on behalf of the ECB..."
No it isn't any such thing. It's an intentional lack of transparency. Just because they don't share the real plans doesn't mean there aren't any.
Problem, reaction, solution.
They're creating the mandate for the fiscal union in the EU in order to "save it."
Greece is fucked regardless. So what better to do than to create an NWO omelet from all of these broken eggs of state? The upcoming contagion panic will ensure acquiescence from any opposition.
This shit ain't that hard, Tyler.
Maybe this time, we will get to see the actual "tanks in the streets"...
Anyway, seems Greece is now truly on its own. Nobody giving anymore money and the markets are barfing up all over the map.
Douchebank is down considerably from its peak April 6th and almost back to pre ECB QE b.s.
If there's contagion, it would show up at DB..
People should start paying their taxes with IOUs....
Exactly correct. True sociopaths will never let a crisis go to waste... especially one they have engineered. Blow that bubble sky high, then pop the bitch. Panic the sheeple into supporting anything that will "save" them, when all that is really done is fleece them. Pump & Dump. Rinse & Repeat. Coming to a debt ridden soverign near you. I always said MyRA sounded Greek.
Hehe :)
Europe has something up it’s sleeve that’s a bit more dramatic.
The question is how it will be perceived by the public of greece, but when a government falls in a european country, and the ountry can’t for a new government and all the public services shut down, europe HAS TO STEP IN.
Step in and take control and restore the system.
How all the debt shit is settled is a big question but my guess it that they’ll take over, restructure the public service and try, not actually succeed but try to build the country.
It’s called phase 2 of e europn plan where all local governments hand over their power to europe and let it be governed bythe European non elected rulers.
And greece is the example to make the other southern countries feel envie and do the same.
it’s all such joke. It’s like watching the movie titanic while everybody is calling you a spoiler because you repeat them how it eventually will end.
Europe is now transitioning into a 1 government system with as a third goal becomming a powerhouse thus creating a bigger european army.
You must have choked on a fat fry typing that.
Or he could have been choking on a fat fry when he overheard it... since he lives in the evil little corner of EUrope where those perverted fetishes and fantasies are more frequent...
With new notes come a fresh opportunity for daisy-chaining leveraged debts a) from scratch based on the new note, and b) w.r.t. to EUR.
"That's as good as money, malaka. Those are IOUs."
That actually makes sense.
Paper paper paper. Oy Vey! Always with the paper!
You have to pull a tick out, or burn it out; they never leave on their own.
Someday the Greeks will realize this.
I don't see where you're going with this "burning out" suggestion. Nope, fail to see it.
Nice mashup. Mr. Panos' voice, with Harry Dunne's logic.
alternatives: IOTTB (I owe to the banks) IOTE(I owe to everybody) IOUAT ( I owe you a testicle).
in reality, as i live in greece it seems like the majority of people that support drachma are unemployed for a long time (so nothing to loose) and anarchists (childern of quite rich people so nothing to lose and let's change the world)
well, the difference is that it can't be used to pay off Euro denominated debt. So, even if it "worked", as the article points out, it's still just a matter of very short time before the Euro based debt default occurs. Anyone buying into this is doing so because of the weeks or months it may buy a few financial VIPs to unwind before the melt.
Sixteen tons of BS
https://www.youtube.com/watch?v=zUpTJg2EBpw
I'm still trying to figure out a way to transfer over to our parallel universe: Bizarro World, where everything is the opposite. I figure that place would be mercifully uneventful.
The people that I see pull that off all have their head up their ass, FWIW.
(Barbara Bush's "beautiful mind" for example)
xzactly - the scrpit will only be acceptd at the gov't stores
I think, I can never earn over which I paid by my precedent employer, but I was wrong, world is so large to try their fate.but now I am making $92/hr even more, can easily minimum $1700/week, on the experience everyone must try to do work online, easy way to earn, here's an example what I do... www.globe-report.com
the Skidro ?
No. MEFO Bills. https://en.wikipedia.org/wiki/Mefo_bills
A Mefo bill (sometimes written as MEFO bill), named after the company Metallurgische Forschungsgesellschaft (Metallurgical Research Corporation), was a Promissory Note used for a system of deferred payment to finance the German rearmament, devised by the German Central Bank President, Hjalmar Schacht, in 1934.
Mefo bills followed the scheme for which the Öffa bills were the blueprint. https://en.wikipedia.org/wiki/Oeffa_bills (Öffentliche Arbeit = Public Works)
As Germany was rearming against the terms of the Treaty of Versailles they needed a way to fund rearming without leaving a paper trail; Schacht created this system as a temporary method to fund rearming with only one million Reichsmarks in capital. Schacht has later said that the device "enabled the Reichsbank to lend by a subterfuge to the Government what it normally or legally could not do".
Hjalmar Schacht formed the limited liability company Metallurgische Forschungsgesellschaft, m.b.H., or "MEFO" for short. The company's "Mefo bills" served as bills of exchange, convertible into Reichsmark upon demand. MEFO had no actual existence or operations and was solely a balance sheet entity. The bills were mainly issued as payment to armaments manufacturers.
Mefo bills were issued to last for six months initially, but with the provision for indefinite three-month extensions. The total amount of mefo bills issued was kept secret.
Essentially, Mefo bills enabled the German Reich to run a greater deficit than it would normally have done. By 1939, there were 12 billion Reichsmark of mefo bills, compared to 19 billion of normal government bonds. This enabled the government to reinflate their economy, which culminated in its eventual rearmament.
How ironic would it be, if Greece used the German/Nazi monetary model to re-invent and retool its own currency?
MEFO = Motherfucking Economist Fuck Off
Good analogies. Greece is being saddled with debts they cannot service just like Germany after WW1. Germany emerged from the depression and had gigantic infrastructure projects as well as a massive military buildup. Maybe that will happen in Greece once they find their mojo? (holding my breath.... passing out... dead)
GGBs are IOUs with a coupon.
+1
MEFO Bills and Rentenmarks.
I would do it right here in the US.
IF I had my way: I would also TARIFF the living shit out of absolutely any imports that were produced anywhere by anyone that did not conform 100% to the labor/taxation/workplace safety/environmental laws governing the United States.
IF the laws are just and reasoned there is absolutely no defensible reason to allow arbitrage of them by anyone for any goddamned reason. Conform fully or pay the tariffs.
hopefully the local grocer and bank will accept the iou so the workers can still eat and pay their mortgage?
who cares about the mortgage?
"No Plan B" ???
Parallel currencies!
Doing just this in order to mitigate Trade imbalances affecting mortgage/investment transactions in local/domestic markets, etc., and employment of other Tiffin Dillema-esque avoidance techniques symptomatic of corporate and international infringements on local/domestic economic trasactions have long been discussed elesewhere by your's truly and many others.
It looks like the derision and isolation phase of alternative monetary policy consideration discussions that do not eminate out of ivory towers and Central Bank closed-door meetings is finally coming to a close...
Drachma for domestic. Euro for international.
............And in the UNITED STATES????
PARALLEL CURRENCIES FOR PARALLEL ECONOMIES!
As a way to leverage the Constitution, its Preamble, the Bill of Rights and Natural Laws -- to vote against the Default (Fraudulent) Economy of the Usurpers.
Parallel Currencies: PM bullion/coins, Crypto-Currencies, Barter-Based Labor.
Parallel Economy: Private Exchange of Labor, Goods and Services, using Barter and Parallel Currencies as a Medium of Exchange.
Starve the Ponzi Casino and its parasitic, self-chosen owners!
"PARALLEL CURRENCIES FOR PARALLEL ECONOMIES! "
Yes.
No need to put eveyone into the one size fits all noose and then let the largest players and those closest to the politicians and bankers drink the entire monetary milkshake.
What looks to work in the EU would do a lot to mitigate the very same problems plaguing the States in the US and put an end to regional imbalances and forced federalist re-distributionisms and congressional pork games here as well.
Keep hammering on the MEFO Bills, Kirk. Big +1 over here for your continued insistence on proting the issue.
Sooner or later the final curtain is going to fall on this shit-show and there is going be a period of splendid (re)invention. WE have to be ready with plans or the NWO/Fiat Ponzi/MMT Nutjobs are going to play the same kind of Head-I-win/tails-You-lose games on all of us all over again...
There is a whiff of panic coming from the ECB and I can't wait to see what's next.....
That "whiff of panic" that you smell. Smells more like they are filling their pants to me.
I'm glad everybody else in the world will still accept our IOU's
How does an "IOU" differ from any other debt instrument?
Sound like a new currency to me....
I hear they're going to call the IOUs 'Drachmas'.
They should make them green and call them 'Gollars', most people wouldn't notice the difference.
'Dramas' would be equally fitting.
Pretty soon I'd expect the Gates of Babylon to open with a view of Mammon coming over the crack of doom.
It is German or Yiddish...but "Dreckmas" may fit.
The parasite will do anything to keep sucking...
BARTER.
They don't pay taxes anyway.
This new Greek IOU will only "work" if it is like a "Silver Certificate", to be paid 'on demand' at a Greek bank, paid back in tangible physical SILVER only.
Of course, the Greek Government will never pay off in Silver...but it will 'look good' and maybe some hucksters will sucker a few.
The new paper must have written on it something like "Silver Certificate" or "Only Payable in Silver"...etc.
We are reaching the end time of this fiat era...so all paper fiats globally will need the extra kick of a physical payoff...for anyone to accept the paper scraps as "money".
I remain "floored", that in this bizarro-world, I can still buy new silver Eagles for ~$20.
Amazing.
With spot silver at $16.22 you are willing to pay $20.00??
For Eagles? Absolutely. As Comex paper prices fall premiums go up, otherwise supply leaves the market with only "X week long waiting lists for the next Mint delivery to dealers" as the only option.
Greece needs to set up a parallel currency (Drachmas) without the ECB so they can pull the plug on the Euro, the EU, and the troika when the time comes.
Greece would be better off allying with Russia, and maybe China.
Which makes perfect sense in a parallel Keynesian universe
Its alway better to have two irons in the fire; two dicks instead of one!
Not so sure it is the Troika crushing Greece.
After all, is it the Repo man who makes you poor?
Of is the Repo man there because you couldn't pay your bills...i.e. you were poor?
So is this effectively what Jim willie is calling for in the U.S.? A new currency (ious) that would immediately fall in relation to the old dollar, which is used to pay off foreign creditors?
California issued IOUs I believe 10 years ago or so. And there was no shouting or screaming. The only point is whether Greek banks accept and cash IOUs or not. But Greek banks are owned by ECB so probably not. So Syriza will screw up its electorate again after paying off IMF fascist with Greek retirement money. What a bunch of clowns. As I said if blood is not flowing it aint for real.
The CA situation immediatley produce an secondary market wherein the holders could sell them off at a steep discount. The buyers then collected what they could from the government.
So let's get over there and standby to buy,Buy! BUY!!!
My recollection (perhaps flawed) is that the State then tried to break the secondary market first by ruling that any assignments of the registered warrants had to be notified, and then by saying that only registered securities dealers could make a market in them.
That broke the secondary market, so Ma and Pa Kettle couldn't watch the quoted price decline.
Just a different roll of "shit" paper, and it's not new and improved!
Shit...it's all shit!
Yeah, but he thinks his shit don't stink, that's the diff.
Yeah the drachma.
Why not just monetise turds? We could all shit in a bucket and everybody would be rich!
I say, go straight to the magic beans.
Or clam shells.
The IOUs are just a typically sneaky bureaucratic way to lower civil servants' wages by 10 or 20%.
If they did pay these saps with IOU's, they'd undoubtedly trade at a discount, so the wage cut would be immediate, although the government and the troika could say that wasn't the intention.
And these poor schmucks won't know any better anyway.
So far no has posted that this idea (conspiracy) was around years ago for the US. An international US currency with a separate domestic US currency.
I have no thoughts on this except it is another failure and the serfs pay again.
robbing Peter to pay Peter's loan shark.
cute.
Google "Wörgl".
Not IOU but bitcoin. Expect a possible Greek/Cyprus tag team with an Iceland style Auroracoin parallel currency thrown into the mix. As long as it is convertible to bitcoin it works on the global stage without having to invest in any infrastructure to get it going. Key point is the convertibility is already there aka RUB/BTC, USD/BTC, EUR/BTC, etc. Just got open their own exchange and only offer a GRC (GreekCoin)/BTC trading pair. You'll see some serious liquidity flows in the billions through cryptocurrency exchanges if that happens and it is all going to flow right into GRC since once that happens it is pretty much all upside potential from there. It is just a question of how to peg GRC to something outside external market's manipulating forces, i.e. don't peg it to bitcoin. Infact if you are going to go full Grexit peg it initially to Auroracoin instead since it is state backed cryptocurrency.
Yeah, sure. Because the segment of Greek civil servants who are armed to the teeth will accept payment in funny money issued by anarcho-communists. Yanis might as well be asking the army to drag him and Danae into Constitution Square and empty an Uzi into their skulls.
There will be no IOUs. There will be no Grexit. One of two things will happen.
There is no third scenario. The banksters have seen to it that only they will leave the Fourth Reich alive.
"a government paying its citizens with IOUs."
Long Gasoline, Soap, Wine Bottles, and Rags.
Pay the troika with IOU's.
By euro or by crook, the plunder and pounds of flesh must continue flowing to Zion.
The banksters need to repay us.
The aggressives by the ECB were completely unnecessary. An aggresssive act of economic warfare by European oligarachs. http://ellenbrown.com/2015/03/10/the-ecbs-noose-around-greece-how-centra...
"Remember when the infamous Goldman Sachs delivered a thinly-veiled threat to the Greek Parliament in December, warning them to elect a pro-austerity prime minister or risk having central bank liquidity cut off to their banks? (See January 6th post here.) It seems the European Central Bank (headed by Mario Draghi, former managing director of Goldman Sachs International) has now made good on the threat'..........
"Weisbrot observed that the troika had plunged the Eurozone into at least two additional years of unnecessary recession beginning in 2011, because “they were playing a similar game of chicken. . . . [T]he ECB deliberately allowed these market actors to create an existential crisis for the euro, in order to force concessions from the governments of Spain, Italy, Greece, Portugal, and Ireland.”..........
'Adding insult to injury, the ballooning Greek debt was incurred to save the very international banks to which it is now largely owed. Worse, those banks bought the debt with cheap loans from the ECB! Pepe Escobar writes:'
ROTFLMFAO! The idea of a >northern and southern< European currency idea is as old as the wrinkles on Greenspams nuts. That's exactly what this is... When the rest of the PIGlets get wind they'll jump on the train, and woolahhh, you've got Whimpy Burgers for everyone.
I'll gladly pay you Tuesday for those IOU's you wrote me from OPM today...
Portugal Italy Spain and Greece should unite and issue a joint currency then renegotiate their debt collectively as they adjust their economies jointly.
Greece..........the first country to use 100% legit monopoly money straight from Hasbro. No shit, if they can do this, they can declare buckets of fucking dirt legal currency.
Since they shut down the mine, even a bucket of dirt may be off limits.
Greece should simply print lots more of the Greek marked euro notes, since the ECB won't provide funds.
That is exactly what the ECB does not want them to do since it would not only devalue all such notes now circulating in Europe but trigger a market of differential value for euro notes marked as produced by other weak economies.
Greece should float a bond to print the IOU's.
That's the ticket...........
What the hell is going to happen to the UK pound when we get a YidYin / JewJock coalition running the country?
I think we may need a few IOU's
If the EU came up with lame brained idea - then Greece should just print up IOUs and pay off their debts.
Save what's left of the "real" money for the workers and pensions. Greece really needs to leave the EU - this will never ever work out for them.
The Greek IOUs could be called Greek-Euros and printed in Athens, would not be legal tender in the Eurozone, only in Greece, but could be exchanged for Euros on demand at Greek banks, with the central bank setting the Greek-Euro exchange and interest rate.
If they backed the Greek-Euros with 1% gold exchange, so a Gold-Greek-Euro, they would always be worth more than Euros, unless the gold price tanks (unlikely) and so people would be more inclined to save and not exchange them, so no paper Euro liquidity problems.
Spot gold is currently 35.82 Euros per gram, so introducing a domestic Gold-Greek-Euro (the IOU) exchangeable for 1% bullion, with a 1 to 1 Euro starting exchange rate, would be a promissory note for 0.000279g of gold, without any need for gold coins at all. There would have to be a minimum exchange of 1g of gold at banks, at of course 35.82 Gold-Greek-Euros. Any paper IOUs would be denominated in Euros anyway.
Banks would have to create separate Gold-Greek-Euro and Euro accounts, or have their Euro accounts optionally converted to Gold-Greek-Euro accounts if their savings were under 25k Euro. More than that and you’d need two accounts with 25k Euro max transferable. Government employees would need the new accounts to get paid in Gold-Greek-Euros.
Dunno about you, but I’d rather get rid of my paper Euros and be paid in Gold-Greek-Euros!
The Gold-Greek-Euro might not ever devalue against the Euro (it would likely appreciate against all fiat currencies) and for a Greek average M1 (money supply) of 50bn Euros, that’s only 13.95 metric tonnes of gold, of which Greece already has 122 metric tonnes.
Creating 50bn Gold-Greek-Euros would be a lot of lolly, but Greece could potentially create 437bn Gold-Greek-Euros legally with their current gold stash and that would be the maximum in cash (231bn GGEs) and deposits (206bn GGEs) possible unless they increased their gold holdings.
They don’t have to back a Greek-Euro (IOU) with gold, but it would likely depreciate, be seen as worthless and retain the same big Euro liquidity problem, so they will be much more likely to back it with 1% gold exchange for stability. Gold-Greek-Drachma might be better as the denominations would be better for small change (in paper notes) instead of having to stamp new small denomination coins in GGE.
"The ECB Is Considering A Parallel Greek Currency"
Hence:
The ECB is not considering a Greek exit
Easy.
People can not pay when Greece is bankrupt. The Euro will not be valid in Greece. They need any currency - so they will give a parallel to them.