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Financial Nonsense Overload
Submitted by Dmitry Orlov via Club Orlov blog,
“Those whom the gods wish to destroy they first make mad” goes a quote wrongly attributed to Euripides. It seems to describe the current state of affairs with regard to the unfolding Greek imbroglio. It is a Greek tragedy all right: we have the various Eurocrats—elected, unelected, and soon-to-be-unelected—stumbling about the stage spewing forth fanciful nonsense, and we have the choir of the Greek electorate loudly announcing to the world what fanciful nonsense this is by means of a referendum.
As most of you probably know, Greece is saddled with more debt than it can possibly hope to ever repay. Documents recently released by the International Monetary Fund conceded this point. A lot of this bad debt was incurred in order to pay back German and French banks for previous bad debt. The debt was bad to begin with, because it was made based on very faulty projections of Greece's potential for economic growth. The lenders behaved irresponsibly in offering the loans in the first place, and they deserve to lose their money.
However, Greece's creditors refuse to consider declaring all of this bad debt null and void—not because of anything having to do with Greece, which is small enough to be forgiven much of its bad debt without causing major damage, but because of Spain, Italy and others, which, if similarly forgiven, would blow up the finances of the entire European Union. Thus, it is rather obvious that Greece is being punished to keep other countries in line. Collective punishment of a country—in the form of extracting payments for onerous debt incurred under false pretenses—is bad enough; but collective punishment of one country to have it serve as a warning to others is beyond the pale.
Add to this a double-helping of double standards. The IMF won't lend to Greece because it requires some assurance of repayment; but it will continue to lend to the Ukraine, which is in default and collapsing rapidly, without any such assurances because, you see, the decision is a political one. The European Central Bank no longer accepts Greek bonds as collateral because, you see, it considers them to be junk; but it will continue to suck in all sorts of other financial garbage and use it to spew forth Euros without comment, keeping other European countries on financial life support simply because they aren't Greece. The German government insists on Greek repayment, considering this stance to be highly moral, ignoring the fact that Germany is the defaultiest country in all of Europe. If Germany were not repeatedly forgiven its debt it would be much poorer, and in much worse shape, than Greece.
The brazen hypocrisy of all this cannot but have a destabilizing effect on Europe's politics, with the political center cratering and being replaced with radical left-right coalitions. Note how quickly France's right-wing presidential front-runner Marine Le Pen applauded the result of the Greek referendum organized by Greece's left-wing government. The disgust with officialdom that pervades the European Union is beginning to transcend political boundaries, making for strange bedfellows.
In the end, finance—at any level—has to be about rules and numbers, or it becomes about nonsense. Break enough of your own rules, and your money turns to garbage, because in a world where money is debt and debt is garbage, money is garbage. But there is a proven method for solving this problem and moving on: it's called national bankruptcy. Greece is bankrupt; if its resolution brings on the bankruptcy of Spain, Italy and others, and if that in turn bankrupts the entire Eurozone, then that's exactly what must happen.
But something else might happen instead. The Eurocrats are already appalled by the Greek show of democracy, and will work hard to derail any such democratic effort in the future using all of the means of political and economic manipulation at their disposal—all simply to muddle along for a bit longer, making the end-game, when it finally comes, all the more painful. I am sure that the Eurocrats plan to follow model of the British Civil Service, which reached its maximum staffing level right when the British Empire ceased to exist. Let's look for ways to not help them do this.
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How I feel when I turn on the idiot box nowadays...
"In the end, finance—at any level—has to be about rules and numbers, or it becomes about nonsense."
Sounds like bitcoin to me.
In a rational financial world we would do rational things. However, we are in a centrally planned world where politicians have their oversized ego's and false promises of unending stability and never ending prosperity to honor. They will prove it to your last dollar and economic destruction.
It is essentially, elitism, arrogance and a dash of narcissism based on bad theory. Unfortunately, we usually pay while they walk away.
"If I have access to the printing press I'm gonna use it."
It's that simple to me.
I have ZERO insight or knowledge as to what is going on over there...nor what it would mean if Greece did do a Bernanke here...but no country that can print it's own currency has ever had a debt problem and never will.
I would posit that no one actually knows the long term consequences of any choices. This is less true in a rational free economy and actually more true in a manipulated semi-controlled one.
"...but because of Spain, Italy and others, which, if similarly forgiven, would blow up the finances of the entire European Union...."
Kids with IEP's (i.e. Greece) get graded on a different curve. Everybody else in class knows about it and moves on...
jb
We can SPECULATE but we cannot "know."
Should would nice to have the end always known when it comes to money.
But then it wouldn't be money I guess.
I'll be the first to admit I saw a hyperinflation in the USA as a consequence of 20008 and the "Wall Street Bailouts."
We have had an inflation...but not nearly to the extent to which we have had defaults.
So absolutely you are right: the future is always uncertain.
But not so human nature.
You, as I frequently am, are way too serious. My advice to you ? Start drinking heavily.
The lemmings are runnin' toward the cliff and there ain't nothin' we can do about it.
Let 'em run.
agreed, except that i think the bad theory is actually good theory for a small group and their ability to steal and control, sold to the sheeple as a way to bring about utopia.
orlov touches on the real reason for not letting greece declare bankruptcy, but only applies it to "italy, spain, and others". he needs to extrapolate that out. the fact of the matter is that all banks are bankrupt, and have been since the day they were created thanks to fractional reserve banking. additionally, all governments, save a very small handful, are also completely bankript. greece is the smallest player, so the rules of the game are being set now to discourage, not just the PIIS, but the rest of the world. if the house of cards that is debt based money created out of nothing and fractional reserve banking is exposed through a bankruptcy in greece, the entire world financial system falls.
A selective default to all central banks is very reasonable. The central banks bring debt-money into existence with no skin in the game. It is as you say garbage.
Other money, while looking the same is earned through labor and value creation. Those whose money is earned through labor should be protected. Those who are given garbage money deserve no such protection. It is simple.
Yes, banks serve a purpose. But they have overstepped their purpose to insist that everyone bow down to their money creation monopoly, be enslaved, worship them and be happy for the crumbs that fall their way.
It is time for some balance. Maybe the current set of technocratic bankers are incapable of human balance. That is a shame because they could have been helpful to humanity if properly aligned.
Nicely stated, thumbs up.
I'm a big fan of nonsense when it's in the form of cartoons.
Deflation only wipes out malinvestment and fraudulant assets, I would say by definition. Good for the people. It's torment for banks. Yet banks choose this path and make bankrupcies and write-downs inevitable. Its bizzare to watch once you know the history of it.
For those who count paper as gold: deflation commeth.
the real question is "whose if not Euripides?"
(otherwise, I concur)
It's the arbitrary application of the laws, accelerated since Lehman failed and the others were bailed out, that is the most dangerous aspect of the last seven years. There are no rules if the rules keep changing. Central banks are out of control globally. In politics, change only happens during a crisis. If we keep extending and pretending and throwing freshly printed money and/or new debt at things to stave off a crisis, nothing ever gets resolved.
Wholesale debt monetization schemes are against the law.
"The Fed did it anyways."
Let those who violate the law suffer the consequences (Detroit, etc.)
Don't tell me "you didn't see it coming" though. There is a reason these schemes are illegal...and it has nothing to do with the law. "We are our own worst enemy" afterall.
The is no law but that which is applied equally to all men. Once a society has different rules for different classes of huma beings, it ceases to be a society of men ruled by law and becomes a society of animals ruled by men.
That is why we call the rule of law the rule of law. This is what the words mean.
You may wish to live in a modern world with bankers who escape censure for their crimes, but I want a pony made of ice cream that tells me I'm beautiful. (and other stuff) it isn't going to happen, because some things are mutually exclusive.
The bank owners, and the politicians they pay, need to be held to account if we are to keep living in the world that was built by the rule of law.
Or, more realistically by approximations to that idea. The reality is that a perfect rule of law never existed. But it is also a reality that the closer we get to the ideal, the better we all live.
In a thousand years, central banking will be as human sacrifice is to us living today: the insane superstitions of a stupid, rude people being exploited by criminals.
Arrest 'em all and throw in jail works for me just fine!
To my knowledge this has not happened to any of "them."
Am I wrong?
wrong, you give us too much credit. 90% of people have always been and will always be filler. About 10% of the human population actually do more than survive. Lying cheats will always take advantage of this statistic.
" Whom God's Destroy" Season three episode 14 of Star Trek. The original story of The World According to Garth...... Lord Garth that is.
http://youtu.be/crP0H-xBqzI
Very entertaining commentary from Dmitry Orlov as usual, he knows how to cut through the BS.
Iceland is a test case and Greece should look to how they pulled it off.
Walk away from the debt. Return to the drachma.
Take on a cash and carry economy for a short while and then see the picture turn sunny and hopeful in less than 2 years.
Whose gonna pay all those pensions? They can't tax enough to meet their obligations.
Who says that? THe MSM is lying about this. If Greece has no debt to pay off then they will have the tax base they need to maintain current spending. It is the interest on their debt that is the issue and if that is eliminated then Greece no only will find the road ahead more even but will be able to attract more tourism at cheaper prices.
We are still paying for the Vietnam war,and wounded and PTSD effected Veterans.The Veterans of the past and current mideast wars will be a huge healthcare bill for future generations.Why we haven't done a false flag and invaded Iran escapes me.Now all the dual citizen types in the US State Dept. want us to invade the Ukraine.I would like to stop here and chat about gentleman's agreements: when we avoided nuclear war over Cuba,the USA gave an agreement to NOT INVADE CUBA IN THE FUTURE.We have kept our bargain.The Russians would REMOVE ALL NUKES AND DELIVERY SYSTEMS.The Russians kept their end of the bargain.As a side sweetener the USA WOULD REMOVE THE AGEING GERMAN DESIGNED A-4S BASED IN TURKEY.We kept this bargain.The diplomacy for the newly liberated Warsaw-pact countries would be (hopefully) a non-aligned status with lots of defensive minefields.This has not occurred because A) they wish to keep a mission or justification for NATO to exist now and in the future,and B) the individual defense bill for NATO must be enormous and they wish to spread the bill to a larger taxpayer base.People seem to forget that there are still several million Syrian refugees in tent cities on the Turkish border.Also forgotten are the villagers displaced in the Ukrainian area.This was due to USA foreign policy,giving military and financial aid to proxies.I only hope the media scrum nail Hilary with some tough questions,but I doubt it.And lastly, FIFTY YEARS OF AUSTERITY HAS WORKED SO WELL IN CUBA...
Think i'll buy an open top double decker bus and promote myself. Get my name out there!
This is a comedy Shakespeare would loved to have gotten his teeth into; or would it be a tragedy or a comic-tragedy . . . possibilities are endless.
Surely we don't have to wait or depend on the French Farmers for some Action.
As always, Orlov cuts to the chase. Only one disagreemnt. Germany's WWI debt (reparations), unjustly imposed by a vengeful French leadership, were not forgiven, and became the cause of WWII.
in a world where money is debt and debt is garbage, money is garbage - quote of the month!