Beware Of Greeks Bearing Referenda

Tyler Durden's picture

Authored by Russell Napier, originally posted at,

'And so it did happen, like it could have been foreseen
The timeless explosion of fantasy's dream
At the peak of the night, the king and the queen
Tumbled all down into pieces.'


Bob Dylan- Ballad in Plain D (1964)

For many years this analyst has expressed the opinion that the political dream that is the Euro would only end with the destruction of a democracy. Only at that point will the political elite of Europe, who genuinely believed that a single currency would reduce the risk to democracy in Europe, understand how the Euro can destroy democracy. That realisation would indeed be the ‘ explosion of fantasy’s dream’ for Europe’s political elite and lead them to reconsider their commitment to a single currency at all costs.

The Constant Scapegoat… Easily Undone

And so ‘at the peak of the night’ on June 28th 2015 ‘it did happen, like it could have been foreseen’ by anybody prepared to even countenance that the sovereign peoples of Europe would not go gently into a Federal States of Europe. Investors need to prepare for the inevitable political solution: referendums across Europe on the constitution of the Federal States of Europe needed to sustain the Euro. Events this weekend will trigger the search for the democratic legitimacy for the single currency and the centralised constitution it requires.

Each One Of Them Suffering From The Failures Of Their Day

There can be no two figures more symbolic of Europe’s ruling political elite than Jean-Claude Junker (President of the European Commission) and Christine Lagarde (Managing Director of the IMF). While market commentary will no doubt focus on the political failure of Greece, it is the political failure of the un-elected ‘ king and the queen’ of European political integration that will be marked by the events of Sunday June 28th 2015. Their failure will signal the turning point when the political incumbents of Europe realise that a political integration of the Eurozone must urgently seek democratic legitimacy. Without political integration fiscal integration cannot be legitimate, and without fiscal integration the Euro cannot function as a single currency.

Answers Of Emptiness

The political integration so urgently sought requires the greatest peacetime constitutional change ever seen in Europe, and it must thus be clearly defined and then democratically endorsed. And as no blueprint for the final constitution of the Federal States of Europe has ever been put to a vote in Europe, no democratic legitimacy for that massive constitutional change exists. Events in Greece starkly show the democratic deficit that Euro participants pay for single-currency membership. If events in Greece do not force Europe’s political incumbents to seek democratic legitimacy for the new constitution, their replacement by more strident voices is inevitable:

“I’ll be Madame Frexit if the European Union doesn’t give us back our monetary, legislative, territorial and budget sovereignty,”

Marine Le Pen June 23rd

The Solid Ground has remarked before, with reference to the ex Managing Director of the IMF, Dominique Strauss-Kahn, that lawyers make bad economists and that a bad economist , while able to count, really does not know what he is counting. Junker and Lagarde, like Strauss- Kahn, trained as lawyers and evolved into finance ministers and economists. They have shown a mastery of legal prescriptions and also that they are capable of counting, but these skills are more suited to an accountant than an architect of a new currency.

The Tombstones of Damage

The Euro will represent the zenith of this approach to economics that focuses on clearing prices, but ignores the socio-political consequences of achieving clearing prices. If you want to know how long the socio-political consequences of a search for ‘clearing prices’ can last, visit any major Irish sporting event. At some stage in proceedings you will hear sung “The Fields of Athenry”--- a lament for the consequences of Sir Charles Trevelyan’s policy in the 1840s of allowing the export of grain from a starving Ireland in pursuit of market clearing prices. The result was over 1 million deaths and, when combined with mass immigration, a forty percent decline in the population of Ireland between 1841 to 1881. The population of Ireland still sing the song, 170 years on, in memory of how market prices were allowed to clear, but how society paid the price. One day, but not yet, there may be more people on the island of Ireland to sing it than when Sir Charles introduced his market solution for famine in 1846.

All is gone, all is gone

Trevelyan’s policy succeeded in its own terms, but the human misery it created produced a political legacy that has lasted for more than a century and a half. When an economic system enforces such misery on a people in pursuit of clearing prices, it is the system that eventually changes. So Greece must leave the Euro and live with a market clearing mechanism which is compatible with the chosen goals of that democracy. Much more importantly the Euro experiment itself must change to recognise the political impossibility that reaching clearing prices, while maintaining political and social stability, can be achieved. That change began this weekend.

What’s wrong and what’s exactly the matter?

If only the lawyers running the Euro would listen to the world’s smartest lawyer, Charlie Munger:

' Never, ever, think about something else when you should be thinking about the power of incentives.'
Charlie Munger

There are incentives above economic welfare in Europe. They are incentives of sovereignty, pride and dignity which are preventing clearing prices delivering the single currency and the Federal States of Europe needed for any single currency to work. It may be that the people of Greece are not yet finished with this political experiment. They may respond to the increased pain inflicted by the ‘king and the queen’ to vote ‘Yes’ in next Sunday’s referendum. This does not mean that the political experiment of the Euro has succeeded. That day will still mark a failure for the great political experiment because it will mark yet another milestone along its journey (or perhaps millstone around its neck) when the political dream of a single currency was achieved at the expense of political rights.

In A Screaming Battleground

Whether the vote on July 5th will see Greece survive with a democratically elected government must be in severe doubt, whatever the result. The ‘king and the queen’ will then increasingly be seen as sovereigns over a system which destroys rather than promotes democracy. That system will then fail. Lawyers are trained to argue either side of an argument. Their ability to do so is wonderfully enhanced when both sides have the ability to pay. The lawyers running the Euro now realise that the economic clearing mechanism imposed by the single currency is bringing political change, and so a new argument is needed. It is needed because the coming political change endangers the careers of those incumbents.

With Strings Of Guilt They Tried Hard To Guide Us

Given the reality of this political clearing, what is the legal solution? Referendums across the Euro Zone. This permits the incumbents to argue for the Euro, but to permit the people to choose the outcome. It permits the incumbents to potentially keep their jobs and possibly even their single currency. Referendums across the Eurozone that spell out the degree of fiscal and political integration necessary to sustain the single currency are now all but inevitable.

The Lies That I Told… In Hopes Not To Lose

The people of Europe walked into a Euro without any understanding of just how far fiscal and political integration would have to go. How much farther that process still has to go is now clearer, as is the tactics of the end-game required for the degree of political integration necessary to receive a democratic endorsement. The events in Greece at the weekend make it even clearer to the incumbents that they will have to go for that democratic sanction sooner rather than later, or hear much more from ‘Madame Frexit’ and her like. It is not just Greece and the United Kingdom that will see referendums to decide their constitutional relationships within a Federal States of Europe.

Are Birds Free From The Chains Of The Skyway?

The loss of democracy and the imposition of capital controls in Europe was a dreadful forecast for this analyst to make almost six years ago. It will get worse from here. More capital controls will be essential when the incumbent politicians finally go to the polls to seek a democratic mandate for the Federal States of Europe. The uncertainty associated with such polls will create massive movements of capital that could very well create massive economic volatility ahead of such polls.

From Silhouetted Anger To Manufactured Peace

The imposition of ‘temporary’ capital controls would thus be seen as politically necessary to permit the people of Europe to vote for their future without this economic gun to their head. So the real news from Athens on the last weekend in June 2015 was not that Greece would have a referendum on membership of the single currency and capital control; it was that the whole of Europe would come to have referendums on membership of the single currency and capital controls. It is not often that The Solid Ground strays beyond the words of Bob Dylan for inspiration, but on this occasion only Dickens, writing about a revolution in France, can accurately describe the scale of uncertainty which faces the populations of Europe as they search for a new post-war constitutional settlement that, we must hope, is delivered via the ballot box:

"It was the best of times, it was the worst of times,
it was the age of wisdom, it was the age of foolishness,
it was the epoch of belief, it was the epoch of incredulity,
it was the season of Light, it was the season of Darkness,
it was the spring of hope, it was the winter of despair,
we had everything before us, we had nothing before us,
we were all going direct to Heaven, we were all going direct the other way."


Charles Dickens: A Tale of Two Cities (1859)

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ted41776's picture

the EU will not fail because of Greece, the EU will fail because of the EU

kaiserhoff's picture

The writer expects to see consent of the governed.

  Good luck with that.

The reference to the Irish famine is more than a little misleading.  At the time, such things were thought to be acts of god, about which no mortal force could successfully intervene.  It is precisely such disasters, and the response of Dickens and others to them, that created the modern welfare state.

The pendulum always swings too far.

PoasterToaster's picture
PoasterToaster (not verified) kaiserhoff Jul 2, 2015 11:58 AM

But as we all know most such disasters are the result of pernicious "government" policies and accomplish their monstrous ends by design, not accident.  Irish Famine, Holodomor, and so on.

People are less exploitable these days because there is no scarcity, and we all know it. 

Looney's picture

The EU is one big CRAP CIRCLE.

The EuroGroup is a bunch of swollen prostates with over-sized egos.


jefferson32's picture

It's not the denial of democracy. To the contrary, it's its glory, its epitomization. It's the integration of democracy - on a Continental Level.

But democracy itself is the problem, not whether it is imposed upon to 11 or upon 500 million of individuals at a time. A republican form of government, decentralized and superseded by the governed, by definition abhors democractic mob rule.

Food for thought: if individuals indeed supersede the institution, it means the latter can have no prerogative which cannot have been delegated to it by its masters, the individuals - i.e. if neighbours club together to hire a common security guard, that guard cannot do anything that cannot be done by his employers, and anything that has not been explicitely delegated to him. So he can confront burglars, but cannot force his way into anyone's home to rearrange the furniture. He cannot extort additional money for his services, or take the wife's earrings away. Whether a subset of his employers want it or not. That's a good way to answer for a neophyte the question "should the government do this", whatever "this" is.


joseJimenez's picture

There will be soon! This is exactly what the Globalists are conjuring up with all this theater.  Once all of it come crashing down, they will step in with" "Wanna eat you must submit".  I bet a nicle on that

Eugend66's picture

There IS scarcity and it comes through rising prices! No matter we are talking about price caps or free market, rationing take care of the scarcity. Fix the price of something and you will get less of it. Rise the price of the same something and most of the people will go without.

silvermail's picture

1. Most Greeks say "No!".
2. Through the Western media will be announced that the vote count was rigged.
3. The opposition take to the streets to protest against electoral fraud and announced that he does not recognize the results of the referendum.
4. Mass riots and clashes with the police will begin.
5. Unidentified snipers will be shoting the opposition demonstration.
6. To suppress the well-organized and well-armed rebels, the Greek government will be forced to use the army.
7. The Government of Greece will be announced "not legitimate." Because the Greek Government is "using snipers and army" against the "peaceful and democratic", but very well-armed opposition.
8. After that, they will create the club of "Friends of Greece," led by the United States.
9. In Greece, will be introduced "no-fly zone."
10. "The dictatorial regime of Greece and his army" will be destroyed bombings of the Air Force of NATO.

11. The minority opposition will be represented as the Western media as "the people of Greece." Most of the people of Greece will be represented as the Western media as a "separatist".

Save_America1st's picture

I think they want Greece to vote no so the ECB can unleash QE forever.  And when all that printing eventually fails they will just blame it on Greece and all the rest of the countries who will also default.

disabledvet's picture

This vote is irrelevant to any of us here.

It does matter to the GOVERNMET of Greece which will fall if the Greeks vote "yes"...but the "song remains the same"...there are only dollars to be had if you can find them.

We'll see who else. starts demanding "free dollars from the IMF" over there

kaiserhoff's picture

Just so.

Nothing about this vote makes money magicly appear.

Peribanu's picture

If they can print 2 trillion in Q€, they can print 50bn for Greece. Drop in the ocean.

prudent1nvestor's picture

They are allowing a HUGE amount of media attention to be focused on Greece. Something big must be going on elsewhere..

Tall Tom's picture

Douche Bunk Derivatives Meltdown.


When Germany points the finger at Greece then you really need to be looking at Germany.

Peribanu's picture

Yep, note how they've been declaring publically that GREECE HASN'T DEFAULTED, it's just fallen into a little sticky patch called "arrears", but all's well, don't panic, DON'T PANIC!!!!

Chuck Knoblauch's picture

Vote for your FREEDOM.

Don't be a Scottish pussy.

Scottland's new flag has a big, fat pussy on it.

Supernova Born's picture

Screaming FREEDOM! scares the hell out of Granny.

Kirk2NCC1701's picture

Scotland's new battle cry: "FREEEEDUUUMB!"

Scotland: Where women wear the pants, and men wear skorts and do as they are told.  Lest they be accused of being aggressive, unattentive, insensitive and sexist.  

The only place where men are allowed to still hold their own, is in front of a urinal.

p.s. 'Kirk' is Scots for 'Church'. 

VWAndy's picture

I cant wait to see the word salad the Greek people will be voting on.

  A yes vote for slavery.

 A no vote for unpaid work.

 Choose well suckers.

Kirk2NCC1701's picture

Cliff Notes version, please. 

These days, Info Overload is everywhere.  A person has only so much time and bandwidth. 

lawyer4anarchists's picture

Governments are built on lies by their nature. They are designed to rob the people.  Our own country's founding was no different.  Whatever the outcome of this referendum, the die is cast. The people have been screwed and will continue to be, until such time as the people wake up to the realities.

Joebloinvestor's picture

A doomed to failure SCAM from the start.

Tie everyone to a FIAT that is not a political union and can be printed with abandon.

Been tried before in the EU and FAILED.

Joebloinvestor's picture

Vanity Fair had the Greeks pegged  5 years ago (note the author).

Bill of Rights's picture

If this is an electronic vote IE Diebold, its already programed in...Note to Greeks do a show of hands vote instead, even paper votes are a scam as the people counting them are secretly bribed.

KnuckleDragger-X's picture

They looked at America and wanted a European empire of their own. Unfortunately they never bothered to study history. If they had, they would have noted that the United States expanded using the old Roman method of colonization and killing whoever got in their way. The EU won't die quickly or easily, but it's nearly certain to be quite bloody......

Buster Cherry's picture

How can a band of countries, with different languages, cultures and even values ever have though they could come together as a union??

PoasterToaster's picture
PoasterToaster (not verified) Jul 2, 2015 11:56 AM

Maybe the plan to sneakily steal everything and turn people into landlass peasants using the weapon of "banking" is failing.

Peribanu's picture

Wolferi must be on vacation in Greece, 'cos he's been awfully quiet recently.

Squid Viscous's picture

Beware of Zios bearing more debt....

escapeefromOZ's picture

There is no democratic legitimacy in the EU . The EU commissioners are appointed by politicians . The Politicians are self appointed and there is no referenda on major issues . Actually the EU is very much opposed to people expressing their point of view . I ,as a citizen,was never consulted on the EU policy to extend the EU to Eastern Europe . I was never consulted on the need to destabilize and change governments in Eastern Europe . I was never consulted on NATO troops sent to Afghanistan, Iraq or the ones sent to defend tha Apartheid state from Hetzballah . I was never consuted on the Euro.  The Greek disaster shows that incompetents are in charge of the EU Titanic . Greece only ows 330 billions of debt and the idiots in charge could not wipe out that debt but the same idiots would print over one trillions to give to the zombie banks of the EU . 

Pathetic morons . When the next PIG country will be in trouble it will be very interesting . As Nuland famously  said " Fu....  Europe  " of vassals and traitors politicians  . 

smacker's picture

" that point will the political elite of Europe, who genuinely believed that a single currency would reduce the risk to democracy in Europe"

I don't buy this. The other view is that the Euro - like the EU itself - was/is all part of the step-by-step march towards a United States of Europe. As in all socialist utopian dreams the end always justifies the means.

What the EU political junkets failed to consider seriously is that for the EZ to work at all, it also has to be a "transfer union", where large sums are transferred annually to the poorer members to keep them afloat. As we know, few member states will tolerate this (or at least their citizens won't) and at this time of economic depression, there is no other solution immediately on the horizon.

The EU has created a monster that it knows not how to slay and will lead to catastrophe across Europe when it finally implodes. War may follow and Mutti - if she has not already burnt her bridges with Russia after US pressure and sanctions - will pivot to the East for its future. France and Italy will fall to pieces and ClubMed will sink into the sunset, leaving the EU-crats to wonder where it all went wrong.

MEFOBILLS's picture

From Peribanu


If they can print 2 trillion in Q€, they can print 50bn for Greece. Drop in the ocean.


QE is not printing, it is swapping.  General purchasing power (Central Bank Money) is created on a keyboard, and it is swpaped for a debt instrument.

This changes the ratio composition of money supply to more money and less debt instruments. 

Since most of the debt insturments are in reserve channels of banks, then new purchasing power channel locks at banks.  The transmission path to the general economy is weak.


Printing implies creating new money (especially new money without debts) and spending it into the general money supply. That is not happening.  

LetsGetPhysical's picture

Ultimately the Greeks will take whatever pain and debt is coming their way, becauese... THEY DO NOT WANT TO LEAVE THE EURO. Whatever the outcome of this vote they will stay in the EU...FULL STOP. You would see some actual real austerity if they went it alone or (chuckle) sided with Russia. Expect a serious good ole fashion can-kicking to happen. 

Dekyus's picture

In France the people voted NO to the European Constitution in 2005 ! and the corrupt politicians didn't respect the people's choice !


Democracy is a politician lie !

MEFOBILLS's picture

The Euro is a flawed system.  The Euro does not have the below features which are necessary for a Credit System:

Passing familiarity with Godley’s Sectoral Balance equations shows that the Euro cannot work.  A central bank should fund the Government Sector so that people can have savings and pay private debts.

Central bank should fund government and not private banks.   Central Bank can also create needed credit to bail out municipalities in distress, say after a Tsunami or other disaster.  Once back on their feet, municipality pays loan off.

Debt instruments that fund government are then locked at the Central Banks.  General purchasing power (money) that government then issues is effectively debt free.  By law, the debt instrument is never paid off, unless redemption is required to limit inflation.

This debt free money then circulates to do low friction, low cost transactions.   It also becomes savings, thus people can pool their money.

Some of this Government sector money is taken up by private banks as needed to pay the interest.  This usury may flux back out to pay for salaries, buildings, risk loss, etc.  As long as the private bank does not have doubling loans and other schemes to take excess usury, it is reasonable profit.

A third type of bank (State Banks) that operates on FEEs instead of an exponential of interest can be used to have low cost housing, with the caveat that land is taxed.  This will then prevent bid up of prices on homes.  Housing/land is fixed supply, ergo too much credit should not chase a fixed asset class or there is a housing bubble.  The debt instruments can also be channel locked so they don’t fly off to markets, or get tranched and converted to MBS’s etc.  This fee credit bank can be used only one time to get a house loan; this to get started in life and to become an asset owner.

A fourth bank can be investment and high risk, such as wall street bank.  If debt instruments are created here, they need to stay in Wall Street.  If debt instruments go to overseas markets, then they cannot be used to collapse exchange rates.

A fifth type of bank can be savings and loans, where people pool their savings to make money loans (not credit).  This interest will recycle to re-enter into the transaction economy, where it will be of benefit.

National money should be disallowed from going overseas, to other economies.

Sovereign money systems are superior to credit systems.  They hold government accountable and give people control over their money instead of banks.


  But, if mankind is so hypnotized he has to have private credit and debts originating in banks, then there are certain things that have to be done.  The creators of the Euro were either operating under bad assumptions, or they had nefarious plans.

Hongcha's picture

Greece will stay in.  Maybe that is how it will be going forward.  If you breed out the instinct for freedom, for liberty, then you have a population ideal for shearing and milking, and when you need the meat, for slaughtering.  I honestly believe this is the goal, whether the perpetrators have it consciously worked out or not.  As an American, seeing the changes in this country, I am confident that is the end in mind; water down the stock, bring in lesser breeds to control the whole of it.

Slarti Bartfast's picture

That realisation would indeed be the ‘ explosion of fantasy’s dream’ for Europe’s political elite and lead them to reconsider their commitment to a single currency at all costs.

The elite won't give up anything that might mean a risk to their power, prestige and jobs. Loss of democracy is part of their plan.

chinooky47's picture

We are still anguishing over slavery after 150 years?  There are certain groups that don't want us to forget.

Buster Cherry's picture

When are the pyramids in Egypt going to be demolished??

Aren't those symbols of slavery too?








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