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The Financial Attack On Greece: Where Do We Go From Here?

Tyler Durden's picture




 

Submitted by Michael Hudson via CounterPunch,

The major financial problem tearing economies apart over the past century has stemmed more from official inter-governmental debt than with private-sector debt. That is why the global economy today faces a similar breakdown to the Depression years of 1929-31, when it became apparent that the volume of official inter-government debts could not be paid. The Versailles Treaty had imposed impossibly high reparations demands on Germany, and the United States imposed equally destructive requirements on the Allies to use their reparations receipts to pay back World War I arms debts to the U.S. Government.

Legal procedures are well established to cope with corporate and personal bankruptcy. Courts write down personal and business debts either under “debtor in control” procedures or foreclosure, and creditors take a loss on loans that go bad. Personal bankruptcy permits individuals to make a fresh start with a Clean Slate.

It is much harder to write down debts owed to or guaranteed by governments. U.S. student loan debt cannot be written off, but remains a lingering burden to prevent graduates from earning enough take-home pay (after debt service and FICA Social Security tax withholding is taken out of their paychecks) to get married, start families and buy homes of their own. Only the banks get bailed out, now that they have become in effect the economy’s central planners.

Most of all, there is no legal framework for writing down debts owed to the IMF, the European Central Bank (ECB), or to European and American creditor governments. Since the 1960s entire nations have been subjected to austerity and economic shrinkage that makes it less and less possible to extricate themselves from debt. Governments are unforgiving, and the IMF and ECB act on behalf of banks and bondholders – and are ideologically captured by anti-labor, anti-government financial warriors.

The result is not the “free market economy” it pretends to be, nor is it the rule of economically rational law. A genuine market economy would recognize financial reality and write down debts in keeping with their ability to be paid. But inter-government debt overrides markets and refuses to acknowledge the need for a Clean Slate. Today’s guiding theory – backed by monetarist junk economics – is that debts of any size can be paid, simply by reducing labor’s wages and living standards, plus by selling off a nation’s public domain – its land, oil and gas reserves, minerals and water distribution, roads and transport systems, power plants and sewage systems, and public infrastructure of all forms.

Imposed by the monopoly of inter-governmental financial institutions – the IMF, ECB, U.S. Treasury, and so forth – creditor financial leverage has become the 21st century’s new mode of warfare. It is as devastating as military war in its effect on population: rising suicide rates, shorter lifespans, and emigration of the age-cohort that always have been the major casualties of war, young adults. Instead of being drafted into the army to fight foreign foes, they are driven from their homes to find work abroad. What used to be a rural exodus from the land to the cities from the 17th century onward is now a “debtor exodus” from countries whose governments owe unpayably high sums to creditor governments and to the banks and bondholders on whose behalf they impose their policy.

While pushing the world economy into a state of war internationally, high finance also is waging a class war against labor – and ultimately against governments and thus against democracy. The ECB’s policy has been brutal toward Greece this year: “If you do not re-elect a right-wing party or coalition, we will destroy your banking system. If you do not sell off your public domain to buyers we will make life even harder for you.”

No wonder Greece’s former Finance Minister Janis Varoufakis called the Troika’s negotiating position “financial terrorism.” Their idea of “negotiation” is surrender. They are unyielding. Official creditor institutions threaten to isolate, sanction and destroy entire economies, including their industry as well as labor. It transforms the 19th-century class war into a purely destructive meltdown.

That is the great difference between today and 1929-31. Then, the world’s leading governments finally recognized that debts could not be paid and suspended German reparations and Inter-Ally debts. Today’s the unpayability of debts is used as leverage in class war.

The immediate political aim of this financial warfare in Greece is to replace its elected government (supported by a remarkable July 5 referendum vote of 61 to 39) with foreign creditor control by “technocrats,” that is, bank lobbyists, factotums and former Goldman Sachs managers. The long-term aim is to impose a war against labor – in the form of austerity – and against the power of governments to determine their own tax policy, financial policy and public regulatory policy.

Fortunately, there is an alternative. Here is what is needed. (I outlined my proposals in a presentation before the Brussels Parliament on July 3, following an earlier advocacy at The Delphi Initiative in Greece, convened by Left Syriza the preceding week.)

A declaration reaffirming the rights of sovereign nations

Sovereign nations have a right to put their own growth ahead of foreign creditors. No nation should be obliged to impose chronic depression and unemployment or polarize the distribution of wealth and income in order to pay debts.

Every nation has the right to the basic criteria of nationhood: the right to issue its own money, to levy taxes, and to write its laws, including those governing relations between creditors and debtors, especially the terms of bankruptcy and debt forgiveness.

Economic logic dictates what was recognized by the end of the 1920s: When debts reach the level that they disturb basic economic balance and derange society, they should be annulled. Another way of saying this is that the volume of debt – and its carrying charges – must be brought within the reasonable ability to pay.

Rejecting the “hard money” (really a “hard creditor”) position of anti-German, anti-labor economists Bertil Ohlin and Jacques Rueff, Keynes argued that creditors had an obligation to explain to Germany just how they would enable it to pay its reparations. At that time, Keynes meant specifically that France, Britain and other recipients of reparations should specify just what German exports they would agree to buy. But today, creditors define a nation’s ability to pay not in terms of how it can earn the money to pay down the debt, but rather what public domain assets it can sell off in what is essentially a national bankruptcy proceeding. Debtor countries are compelled to let their public infrastructure be sold off to rent-extractors to create a neofeudal tollbooth economy.

Under international law, no nation is legally obliged to do this. And under the moral definition of nationhood, they should not be forced to do so. Their right to resist this form of debt blackmail is what makes them sovereign, after all.

It is true that the principle of the European Union was that individual nations would cede their rights to a larger entity. The union itself was to exercise the rights of nationhood, democratically on the basis of a pan-European constituency.

But this is not what has happened. The EU has no common ability to tax and spend; those powers remain local. The one area where it does govern taxes is dysfunctional: EU ideologues insist on taxing consumers (via the Value Added Tax, VAT) and labor via pension set-asides.

More fatally, the eurozone has no ability – or at least, no willingness – to create money to fund deficit spending. What it calls a “central bank” is only designed to provide money to domestic banks and, even worse, to lobby for the interest of private bankers against the principle of public central bank money creation.

The EU does not even have a meaningful legal system empowered to fight fraud and financial crime, prosecute or clean up insider dealing and corrupt oligarchies. In the case of Greece, where the ECB at least insisted on the need to clean up such behavior, it was only to “free” more revenue for foreign investors from public agencies scheduled to be privatized to pay debts to the ECB and its crony institutions for the money they had paid private bondholders and banks in the face of economies shrinking from a combination of debt deflation and fiscal deflation.

Taken together, these defects mean that the Eurozone and EU were malstructured from the start. Control was placed so firmly in the hands of bankers and anti-labor ideologues that it may not be reformable – in which case a new start must be made.

In any event, here are the institutional reforms that are urgently needed. In view of the financial sector’s control of the main institutions, these reforms require entirely new institutions not governed by the pro-rentier logic that has deformed the eurozone. The most pressing needs are for the following institutions.

An international forum to adjudicate the ability (or inability) to pay debts

What is needed to put this basic principle into practice is creation of a new international forum to adjudicate how much debt can reasonably be paid – and how much should be annulled. In 1929 the Young Plan (which replaced the Dawes Plan to deal more rationally with German reparations) called for creation of such an institution – what became the Bank for International Settlements (BIS) in 1931 to stop the economic destruction of Germany by bringing its reparations back within the ability to pay.

The BIS no longer can play such a role, because it has become the main meeting place for the world’s central banks, and as such has adopted the hardline “all debts must be paid” position that it originally was intended to oppose.

Likewise the IMF no longer can play this position. It is hopelessly politicized. Despite its technical staff ruling in 2010-11 that Greece’s foreign debts could not be paid and hence needed to be written off, its heads – first Dominique Strauss-Kahn and then Christine Lagarde – acted in blatant conflict of interest to support the French bankers demands for payment in full, and U.S. demands by President Obama and Wall Street lobbyist Tim Geithner to insist that there be no writedown at all. That was the price for French bank support for Strauss-Kahn’s intended bid for the French presidency, and more recently backing for Lagarde’s rise to power at IMF. Given the U.S. veto power by Wall Street and the insistence that right-wing anti-labor ideologues (usually French) be appointed head of the IMF, a new organization representing the kind of economic logic outlined by Keynes, Harold Moulton and others in the 1920s is necessary.

Creation of such an institution should be a leading plank of Euro-left politics.

A Law of Fraudulent Conveyance, applicable to governments

The private sector has long had laws that prevent money-lenders from lending a borrower more funds than the debtor can reasonably be expected to pay back in the normal course of business. If a lender advances, say, $10,000 as a mortgage loan against a house worth more (say, $100,000), and then insists that the debtor pay or lose his home, the courts may assume that the loan was made with this aim in mind, and annul the debt.

Likewise, if a company is raided by borrowers who load it down with high-interest junk bonds, and then seize its pension funds and sell off assets to pay their debts, the company under attack can sue under fraudulent conveyance rules. They did so in the 1980s.

This lend-to-foreclose ploy is the very game that the Troika have played with Greece. They lent its government money that the IMF economists explained quite clearly in 2010-11 (and reaffirmed this year just before the Greek referendum) could not be paid. But the ECB then swooped in and said: Sell off your infrastructure, sell your ports, your gas rights in the Aegean, and entire islands, to get the money to pay what the IMF and ECB have paid French, German and other bondholders on your behalf (while saving U.S. investment banks and hedge funds from losing their bets that Greek debts would indeed be paid).

Application of this principle requires an international court to rule on the point at which debt service becomes intrusive, and write down debts accordingly.

No such set of institutions exists today.

Creation of Treasuries as national central banks to monetize deficit spending

Central banks today only lend money to banks, for the purpose of loading economies down with debt. The irrational demand by bankers to prevent a public option from creating credit on its own computer keyboards (the same way that banks create loans and deposits) is designed simply to create a private monopoly to extract economic rent n the form of interest, fees, and finally to foreclose on defaulting creditors – all guaranteed by “taxpayers.”

The European Central Bank is not suited for this duty. First of all, it is based on the ideology that public money creation is inflationary. The reality is that central bank money creation has just financed the greatest inflation of modern history – asset price inflation of the real estate market by junk mortgages, inflation of stock prices by junk bond issues, and central bank Quantitative Easing to create the fastest and largest bond market rally in history. The post-1980 experience with central banks has removed any moral or economic logic in their behavior as lobbyists for commercial banks, defenders of their special privileges, deregulator of financial crime, and extremist right-wing blockers of a public option in banking to bring basic services in line with actual costs. In short, if commercial banking systems in nearly every country have become de-industrialized and perverse, their enablers have been the central banks.

The remedy is to replace these central banks with what preceded them: national Treasuries, whose proper function is to monetize government spending into the economy. The basic principle at work should be that any economy’s monetary and credit needs should be met by public spending and monetization, not by commercial banks creating interest-bearing credit to finance the transfer of assets (e.g., real estate mortgages, corporate buyouts and raids, arbitrage and casino-capitalist gambles).

Summary

Every nation has a right to defend itself against attack – financial attack just as overt military attack. That is an essential element in the principle of self-determination.

Greece, Spain, Portugal, Italy and other debtor countries have been under the same mode of attack that was waged by the IMF and its austerity doctrine that bankrupted Latin America from the 1970s onward. International law needs to be updated to recognize that finance has become the modern-day mode of warfare. Its objectives are the same: acquisition of land, raw materials and monopolies.

A byproduct of this warfare has been to make today’s financial network so dysfunctional that nations need a financial Clean Slate. The most successful one in modern times was Germany’s Economic Miracle – the post-World War II Allied Monetary Reform. All domestic German debts were annulled, except employer wage debts to their labor force, and basic working balances. Later, in 1953, its international debts were written down. The logic prompting both these acts needs to be re-applied today.

With specific regard to Greece, Syriza’s leaders have said that they want to save Europe. First of all, from the eurozone’s destructive economic irrationality in not having a real central bank. This defect was deliberately built into the eurozone, to enforce a monopoly of commercial banks and bondholders powerful enough to gain control of governments, overruling democratic politics and referendums.

Current eurozone rules – the Maastricht and Lisbon treaties – aim to block governments from running budget deficits in a way that spend money into the economy to revive employment. The new goal is only to rescue bondholders and banks from making bad loans and even fraudulent loans, bailing them out at public expense. Economies are obliged to turn to commercial banks for loans to obtain the money that any economy needs to grow. This principle needs to be rejected on grounds that it violates a basic sovereign right of governments and economic democracy.

Once an economy is fiscally crippled by (1) not having a central bank to finance government spending, and (2) by limiting government budget deficits to just 3% of GDP, the economy must shrink. A shrinking economy will mean fewer tax revenues, and hence deeper government budget deficits and rising government debt.

The ultimate killer is for the ECB, IMF and EC to demand that governments pay their debts by privatizing public infrastructure, natural resources, land and other assets in the public domain. To compound this demand, the Troika have blocked Greece from selling to the highest bidder, if that turns out to be Gazprom or another Russian company. Financial politics thus has become militarized as part of NATO’s New Cold War politics. Debtor economies are directed to sell to euro-kleptocrats – on terms financed by banks, so that interest charges on the deal absorb all the profits, leaving governments without much income tax.

 

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Fri, 07/10/2015 - 21:05 | 6297810 Publicus
Publicus's picture

World War 3

Fri, 07/10/2015 - 21:18 | 6297868 fudge
fudge's picture

works for me, and will solve the pension problem for quite a few years ,,,, win, win and win some moar.

Fri, 07/10/2015 - 21:35 | 6297920 whoflungdung
whoflungdung's picture
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. http://cluborlov.blogspot.co.nz/2015/07/financial-nonsense-overload.html
Fri, 07/10/2015 - 21:44 | 6297951 BuddyEffed
BuddyEffed's picture

In the way that it is set up, this is their way of controlling the degrowth that is baked in due to resource depletions.

Sat, 07/11/2015 - 10:16 | 6298965 mvsjcl
mvsjcl's picture

Hey Mike Hudson! No mention of the onerous nature of a debt-based money system? Where its only purpose is to extract sovereign wealth? Where it's a mathematical certainty that bankruptcy is its eventual end? Unless you address this issue you're just pissin' in the wind. 

Sat, 07/11/2015 - 14:33 | 6299595 Bullionaire
Bullionaire's picture

You missed it:

Creation of Treasuries as national central banks to monetize deficit spending

Central banks today only lend money to banks, for the purpose of loading economies down with debt. The irrational demand by bankers to prevent a public option from creating credit on its own computer keyboards (the same way that banks create loans and deposits) is designed simply to create a private monopoly to extract economic rent n the form of interest, fees, and finally to foreclose on defaulting creditors – all guaranteed by “taxpayers.”

 

Try Ellen Brown's blog.

Sat, 07/11/2015 - 15:41 | 6299770 MEFOBILLS
MEFOBILLS's picture

Creation of State Banks to monetize...

See previous entry.  No missing of "it."

http://www.zerohedge.com/news/2015-07-10/financial-attack-greece-where-d...

Ellen is an apologist for State Banks, and the public option to create credit.  

So, answer the question:  Where is the debt instrument?  Who holds it?  It is something like "where's Waldo?"   In a credit system, whereby there is a mix of State Banks and Private Banks, the Debt instrument will be held by credit creating Banks, or possibly on-sold into "markets."  This defacto makes people commodities to be bought and sold.  Also, the "creditor" bank created the money from nothing, usually by hypothecating some sort of fungible good.  This good is usually a house or property, which has lines of law that allows debt to be collapsed in a grabbing exercise.  Why the hell would a society give legal sanction to a private company to create credit and make profits, when money is of the commons.  Public banks are in alignment with the idea money is of the commons, but they still concentrate debt instruments by a Government body.   Not the best solution.

State Banks and Public options paper over the problem with DEBT instruments that create our transaction medium...money.  Note that the fungible item on the ledger will have credit channel toward it, thus holding its value up artifically.  Housing bubble is this in action.  Double entry mechanics MUST have an entry to create credit.

Money should only come into being as related to real targets that people need, and that is labor, goods, and services.  It is not so easy to create money against the real transaction needs of an economy, as double entry doesn't allow it.  Money should flux in accordance with the productivity of a country and its wealth, and expressely not relate to any sort of hypothecation from debt instruments.

Only a sovereign system puts money into its proper legal context, and balances creditor and debtor relations.  A saver will hold a debt instrument against a debtor, therefore citizens who have skin in the contract are primary debt holders.  The debt instruments should not be concentrated into Banks, and should not be on-sold into markets.   Concentrated debts are a feature of any Credit money system.

In the West, tangible coins are created by Treasury, bills are created by Central Banks, and most of the rest of the supply is bank credit.  Credit is paid for with money, only bankers are tryiing to make Credit become  Money by getting rid of currency.  This is a perversion.  Money itself should represent wealth, not finance.   Ledger entries, tangible paper money, and coins should all be wealth based demand for goods and services.  No amount of public option and debt haircuts will mitigate the fact that debt money systems suck, and are a perversion.

Debt as money was created by the Goldmen, and was fraud from the beginning.  

Sat, 07/11/2015 - 16:17 | 6299858 Boop
Boop's picture

For that, you could look here, an interview of Hudson with The Real News Network: <a href="http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&I..." target="_blank">Capitalism and Government Debt at Odds in Greece (1/2)</A> (Transcript below the video at the link).

Fri, 07/10/2015 - 21:15 | 6297849 disabledvet
disabledvet's picture

"Easin down the highway in a new Cadillac I had a fine foxy broad
AND HAD THREE MORE IN THE BACK

Wearing short dresses and spoke heel shoes
Smoking Licky Strikes AND WEARING NYLONS TOO!

Yeah we bad

NATION-WIDE

Sat, 07/11/2015 - 07:52 | 6298693 disabledvet
disabledvet's picture

Too funny.

NEITHER THE ATHENS EXCHANGE NOR ANY BANKS HAVE REOPENED YOU FUCKING IDIOTS.

WHEN THEY DO THEY WILL OPEN AT ZERO YOU STUPID ASSHOLES AND NOBODY WILL HAVE A GOD DAMN FUCKING LINCOLN FUCKING PENNY IN ALL OF EUROPE.

SO FUCKING BLOW ME YOU IGNORANT COCKFAGS.

Fri, 07/10/2015 - 21:16 | 6297854 Totentänzerlied
Totentänzerlied's picture

Begging people to give you more money despite your being a serial deadbeat with no income is not an "attack" financial or otherwise.

The words "accountability of the public" and "personal responsility" and "civic conscience" are mysteriously absent from this and every other idiotic victim-screed, as if no Greek ever participated in an election, as if the party and candidate they voted for didn't deliver exactly what they promised, as if actions legitimately taken in one's name (consent or assent, doesn't matter) and for one's direct material benefit can not be allowed to have negative consequences, period.

This narrative has become as blatantly absurd as the "Israel has done nothing wrong (since last Tuesday, anyway)" bullshit.

Sat, 07/11/2015 - 01:11 | 6298387 hwertz
hwertz's picture

"Begging people to give you more money despite your being a serial deadbeat with no income is not an "attack" financial or otherwise."

     On the one hand, I do agree with the article's point that there are regulations in place for any other kind of loan to prevent loans under repayment terms that are so harsh as to be effectively unrepayable, and that the loans to Greece should probably have not been made (either not at all, or under more flexible repayment terms.)  And that some leeway in terms of restructuring it should be allowed; this using a good portion of a new IMF loan to make a pretty big lump sum payment on an old IMF loan does seem a bit silly, if the goal is to jumpstart the economy it makes sense to have it jumpstarted first before they start expecting significant repayment on the debt.  I do have to agree, IMF loans rarely seem to have the intended consequences.  I don't buy into the "print money to make the problem go away" view though.

 

    On the other hand, you're 100% right -- Greece has been fiscally irresponsible, and nobody forced them to take any loans.  I don't know that they are deadbeat, people in Greece seem to have taken quite a financial haircut as it were.  But, it is indeed not some kind of "attack" for Greece to expect further loans while refusing repayment terms on existing ones.

Fri, 07/10/2015 - 21:16 | 6297855 Oldwood
Oldwood's picture

A financial clean slate is exactly what they are hoping for. An opportunity to rewrite the laws to be even more complex and opaque, to rest power away from individuals and autonomous entities, and put all power in the hands of a few wise and benevolent leaders.....maybe an incredible and incorruptible computer algo that will take all of these worries away.

Sat, 07/11/2015 - 09:36 | 6298858 Icelandicsaga.....
Icelandicsaga...............................................'s picture

You are 100 percent correct. Last night some ZH commentators talked about how it is likely that Tsirpas and the other guy . were manchurian candidates.. far more than they were some leftist scvum bags. same as Obama . .bring the system to its knees before the bankers rush in and FIX the problem with a BIG CENTRAL BANK in Brussels as well as a stronger more technocrat UNION .. it very well could be Greeks have been played by both sides.. left and right . controlled by the SAME forces .. that make bankers wars and destroy people and nations with the power to extract assets and make policy.

Fri, 07/10/2015 - 21:17 | 6297860 Captain Willard
Captain Willard's picture

This guy believes in fairies and unicorns. Complete horse shit. We can all perhaps agree that the restructuring of Greek debt in 2012 was too little too late.

But precisely how would a debtor nation obtain credit in his framework? What sucker would extend credit knowing some tribunal of wise men would adjudicate at a later date if the credit was excessive or not?

He is right that his solution would end excessive debt. But it would do so by ending international lending and sovereign lending as we know it. Maybe that's better after all - fewer innocent victims.

Sat, 07/11/2015 - 02:13 | 6298453 Cast Iron Skillet
Cast Iron Skillet's picture

How would a debtor nation obtain credit? The same way that a person or company in the States obtains credit. Lenders run the risk of borrower bankruptcy and loan default all the time. 

The lender would have to exercise due diligence about the the risk of the loan not being paid back and either adjust the interest accordingly, or refuse to loan money.

Sat, 07/11/2015 - 06:05 | 6298604 HowdyDoody
HowdyDoody's picture

From Graeber's Debt: The First 500 Years

"Surely one has to pay one's debts."

... that's not an economic statement: it's a moral statement. After all, isn't paying one's debts what morality is supposed to be all about? Giving people what is due to them. Accepting one's responsibilities. Fullfilling one's obligations to others, just as one would expect them to fulfill their obligations to you. What could be a more obvious of shirking one's responsibilities than reneging on a promise or refusing to pay a debt?

It was that very self-evidence, I realized, that made the statement so insidious. This was the kind of line that could make terrible things appear utterly bland and unremarkable. [The author then describes the effects of an IMF loan to Madagascar - IMF-imposed austerity meant cutting support to a malaria eradication program. That resulted in tens of thousands losing their lives] One would think it would be hard to make a case that the loss of ten thousand human lives is really justified in order to ensure that Citibank wouldn't have to cut it's losses on one irresponsible loan that wasn't particularly important to its balance sheet anyway.

End of quote

A loan arrangement is two way, both sides have obligations. They both should be reasonably sure that the borrower can pay back the loan according to the terms of the loan. In the end, the lender has ultimate say as they have the money. This gives them greater responsibility to ensure the deal is economically sound. However, if the system is changed such that repayment can be extracted from others than those who receive direct benefit of the loan, then the whole economic structure of the loan is destroyed. Lenders would lend any amount to anyone irrespective of their ability to pay as repayment would be obtained from others.

Fri, 07/10/2015 - 21:19 | 6297872 Usurious
Usurious's picture

''Decolonisation did not take place until the former colonial powers and the empires of capital on whose behalf they operated had established other means of retaining control. Some, like the IMF and World Bank, have remained almost unchanged. Others, like the programme of extraordinary rendition, evolved in response to new challenges to global hegemony.''

''The bid for power, oil and spheres of influence that Bush and Blair launched in Mesopotamia, using the traditional camouflage of the civilising mission; the colonial war still being fought in Afghanistan, 199 years after the Great Game began; the global policing functions the great powers have arrogated to themselves; the one-sided justice dispensed by international law: all these suggest that imperialism never ended, but merely mutated into new forms. The virtual empire knows no boundaries.''

http://www.monbiot.com/2012/04/30/empire-of-capital/

Sat, 07/11/2015 - 01:11 | 6298386 Yen Cross
Yen Cross's picture

 That was a nice post. I'd like to know why the dissolution of EX/IM (export/import bank) was kept so quiet?

 Free, Jeffrey Immelt and that clown at Boeing <> aka Dennis A. Muilenburg.

 The export import bank is toast, and carries the legacy of almost 30 criminal indictments with it.( on going)

Sat, 07/11/2015 - 05:25 | 6298585 cossack55
cossack55's picture

Your criminal CONgress will bring it back just as quietly. Soon.

Fri, 07/10/2015 - 21:36 | 6297922 ThroxxOfVron
ThroxxOfVron's picture

"Every nation has the right to the basic criteria of nationhood: the right to issue its own money, to levy taxes, and to write its laws, including those governing relations between creditors and debtors, especially the terms of bankruptcy and debt forgiveness. "

 

"What is needed to put this basic principle into practice is creation of a new international forum to adjudicate how much debt can reasonably be paid – and how much should be annulled. "

 

Are these two concepts compatible?

 

IF 'every nation has a right to write it's own laws...including those governing relations between creditors and debtors' how can 'a new international forum...adjudicate how much debt can reasonably be paid'?

 

This sounds horrendous.  Who would be installed -er, I mean 'elected' to make these decisions on behalf of entire national populations?

Will they be bound by treaty/sanctions/

Will this debt ratio be stringently applied to commercial banks, investment banks, hedge funds, corporations and/or individuals?

 

It sounds as if it would be much simpler to deny any form of privatization of commercial losses incurred in bankruptcies, push derivatives on balance sheet and off the FDIC, bring back MTM accounting and re-instate Glass-Steagal...

Fri, 07/10/2015 - 21:44 | 6297950 Catullus
Catullus's picture

I hate everything about this article. There's hardly a shred that is factually correct. Apparently not printing money to subsidize government deficits is an act of war.

Let me offer a summary: government bonds are deals made with creditors (who are people with other people's money) that allows the government to get money now in exchange for future tax loot. The creditors aren't taking over anything. It's not even that sinister. It's a very straight-forward process of fucking your citizens of their wealth.

And democracy? All these citizens ever vote for is to either to get something that benefits them directly as the money is borrowed or foist the tax burden on another group of people. Or really, since the Welfare State is already in place, they're voting to NOT have things taken away or NOT be taxed more.

You'd think that by reading this a central bank was some sort of savior of the people.

Fri, 07/10/2015 - 21:49 | 6297962 kaiserhoff
kaiserhoff's picture

Commie fool night on ZH.

Guten Nacht.

Fri, 07/10/2015 - 22:03 | 6298001 kowalli
kowalli's picture

Tsipras: The Greeks did not give the government a mandate to break with Europe

Fri, 07/10/2015 - 23:04 | 6298140 Kirk2NCC1701
Kirk2NCC1701's picture

Yes they did, in a way:

They gave PM Tippyass the mandate to play Hardball, not Pocketpool.

If the only outcome is a Grexit, then so be it.

Fri, 07/10/2015 - 23:14 | 6298164 xcehn
xcehn's picture

Except that the sheeple want to eat their cake and have it too, Kirk.

Fri, 07/10/2015 - 23:06 | 6298008 litemine
litemine's picture

What I see is that the Power given to bankers who do Non_Productive Work control the Worlds Financial Controls.

Those who own the shares in the central banks (FEDERAL RESERVE) along with support from the Pompass Leaderships and Congress who thru Lobbiest gain Insider Information profit threw Coruption.

The Fed, unelected have the Power to DEMAND to the Elected.

The American Military will extort control on other Nations thru any means possible. The CIA is nothing but American Corporate Control who have overthrown the ELECTED and put in puppets who stole wealth from Countries who in turn become Bankrupt. Look at TPP.....more of this same Control.

Yes Sir....The Free American way has created what is coming. Those who are suffering....It's your fault as well, you have let it happen.  Those who don't see what is Happening, It's your fault.....You are not doing enough  .............................And those who Have been part either in leadership or acting as a Minions.....You too will get yours......When the revolt happens your extreme wealth will make you a target as will that of any offspring you might have sired. Why is it that morals is loss on these sub-Humans? Always requiring "MOAR".

It seems the Non_Elected are The Puppet Masters..The ELECTED get corrupted and mainstreet loses.....The Pendulum will swing the other way and smash this system............If atomic bombs are unleashed whole countries will be destroyed.....................lands ruined forever. We must Band Together and change this before this train Wreck Occults.

 

Fri, 07/10/2015 - 22:19 | 6298039 talisman
talisman's picture

Nice artlcle, but I would like to have some of whatever you have been smoking

Fri, 07/10/2015 - 22:22 | 6298047 talisman
talisman's picture

Banking terrorists don't need nukes when they can use unsustainable debt

Fri, 07/10/2015 - 22:30 | 6298072 Chris88
Chris88's picture

Oh boy another bullshit socialist apologist article.  ZeroHedge:  Can you stop writing articles for the free shit army?  This is getting sad.

Fri, 07/10/2015 - 23:34 | 6298207 HenryHall
HenryHall's picture

A sovereign nation is free to sell off public assets such as real estate for money. And then the next day confiscate those same assets without compensation on suspicion of the asset being used to support terrorism.

No proof is needed, mere assertion of suspicion of the purchaser by the sovereign nation is quite sufficient.

Fri, 07/10/2015 - 23:50 | 6298236 john3-17
john3-17's picture

To you communists, socialists, liberals and demoncrats, everbody's a victim.  To the greeks pay your bills.

 

Sat, 07/11/2015 - 00:44 | 6298339 Elliott Eldrich
Elliott Eldrich's picture

"Taken together, these defects mean that the Eurozone and EU were malstructured from the start. Control was placed so firmly in the hands of bankers and anti-labor ideologues that it may not be reformable – in which case a new start must be made."

This is a very powerful statement in and of itself, and well worth careful consideration. How is it that the EU was able to be so throughly controlled by these factions? Taking into account how very interconnected the global economy is, what does this imply about the people in charge of other countries, particularly the major players on the global stage; are they similarly influenced to the point where control is placed firmly in the hands of bankers and anti-labor ideologues?

Res Ipsa Loquitur

Sat, 07/11/2015 - 01:48 | 6298423 David Rockefeller
David Rockefeller's picture

Interesting article.  Hudson says:  The remedy is to replace these central banks with what preceded them: national Treasuries, whose proper function is to monetize government spending into the economy.

Yes, that is one remedy.  We know what the remedies are: More freedom and equality, no billionaires, justice, peace, sustainability.  To begin with, we need to see the whole picture.  See, for instance, just from today:

http://www.informationclearinghouse.info/article42349.htm

http://www.veteranstoday.com/2015/07/10/the-revolution-is-being-televised-pope-francis-in-bolivia/

But how do we get there?  That is the one question few dare ask.  The answer--the only answer--is this:  Revolution. 

Sat, 07/11/2015 - 02:44 | 6298478 Seek_Truth
Seek_Truth's picture

"But how do we get there?  That is the one question few dare ask.  The answer--the only answer--is this:  Revolution."

But how do we get there?  That is the one question few dare ask.  The answer--the only answer--is this:  Revelation.

FIFY

Sat, 07/11/2015 - 02:37 | 6298469 assistedliving
assistedliving's picture

what alot of verbiage and still fails to recognize the Golden Rules of Finance.

1.  Don't borrow what you know you can't pay back

2.  See rule no. 1

Sat, 07/11/2015 - 06:04 | 6298609 HowdyDoody
HowdyDoody's picture

You missed the most important rule

0. Don't make a loan to those who can't repay.

The person with the money has all the power. Who is responsible if they make a loan to someone who clearly can't pay it back?

Sat, 07/11/2015 - 04:33 | 6298549 MEFOBILLS
MEFOBILLS's picture

Relations between creditors and debtors can be fraudulent. 

This notion that you must pay back debts is hardwired into most people who are moral.  It is part of our evolutionary consciousness.  Because it is hardwired, it can overcome brain function.

There is another group of people who like to take what they haven’t earned.  This group of people often are creditors.  These creditors think they are immaculate, and their debts are above all law.

Fraudulent conveyance laws exist to prevent predatory creditors from stealing via rent schemes.  These conveyance laws are used to cancel odious private debts.

Let’s say a widow has a nice home, but is short of cash, and needs groceries.  She borrows money against her house.  The creditor knows that she cannot pay it back, and his intent is to grab the house in foreclosure.  In this case, the creditor perpetrated fraud with intent to deceive.   Later when she cannot pay, he takes the entire estate, pocketing many multiples on his “investment.”

Let’s say the IMF creates a loan to give to Greece.  But, the real target is German and French banks, the main bondholders of Greek Debt.  Some other bondholders in the marketplace have also bought Greek debts for pennies on the Euro, and then get full face value as payola.  (The IMF loan passes through Greek economy, vectoring elsewhere, then pays market speculators and French/German banks.)  New loan has debt instrument hung on the entire population of Greece, putting them on the hook for money they never got to use.  This is fraudulent conveyance, a rent scheme, which is a form of usury.  The evolutionary moral to pay back a creditor is not operative in this case.  The creditor is a thief.

The one percenters - who typically are large holders of debts - then want to smash and grab national resources in a magick trading swap.  Trading real national resources in order to erase debts is the ultimate scheme to take over a country without firing a shot.

The scheme with the Widow is similar to the scheme that ECB and IMF are running to take over Greece. 

It is a rent scheme designed to shift earned wealth to those who haven’t earned it, and in the process destroy a nation.  The Earned wealth is all of the lands and infrastructure of a country built up over generations, the patrimonial birthright of a people.  Once dispossessed of lands and ability to labor and work, then the country is undone.  The ability to labor and work, and trade ones output, is predicated on having a money medium that allows transactions. 

By denying liquidity to banks, ECB creditors are acting illegally, and causing prices to decline in Austerity, which then allows foreign oligarchs to buy up the country on the cheap.  This is yet more fraud.

Ironically, Versaille debts were odious, and hung on the entire German people, similar to what is happening in Greece.   Germany was required to pay debts, but was then disallowed to work and sell goods in export surplus.  Germany couldn’t acquire the dollars and pounds needed to pay the allies, and hence her exchange rates came under pressure, ultimately leading to the hyperinflation.

The hyperinflation then led to Germany electing Hitler, and then to WW2. 

Odious debt should be canceled.  Even better, how about a money system not based on debts?  Law money that relates to goods and services is a far better solution.  The debt money system should be flushed.

 

www.sovereignmoney.eu

Sat, 07/11/2015 - 05:12 | 6298572 assistedliving
assistedliving's picture

Greece is no "widow". (see list of Greek GS ex-employees)

Greece is not at War (the kind w/ artillery, planes and guns etc)

Greeks do not pay taxes and have a history from what I've read, collect early & underserved pensions vs.

their Euro compatriots and lied to get into the EU to begin.

Now what were you saying?

As Gen Y'akis was saying, the true target is France (why not, throw in the other PIIGS as well).  There will be debt reduction but it must be so onerous, humiliating and painful that the French have second thoughts before facing the Germans.  We all know how that turned out last time.  

Gonna be ugly, prob ugliest of all times, but workouts usually are.

One of the only good things to hopefully come out of this is for the world to see the debt devils come out of the sinking ship like the rats they are.  But it is a Greek responsibility first and foremost

 

Sat, 07/11/2015 - 05:04 | 6298560 MEFOBILLS
MEFOBILLS's picture

Creation of Treasuries to Monetize Government Spending.

 

Wynne Godley’s Sector equations show that that a Central Bank for Government is necessary in a private credit money system (debt money system).  Today, central banks direct their credit at private banks not governemnt. Central Banks will loan a government money in trade for a bond at interest.  Commercial banks in Europe will also loan new Euros for a new bond.

 In Europe, the ECB credit firehose is capitalizing the banks, but not a nations people.   Brussels in fact is taking away liquidity rather than providing it. 

By contrast exogneous Treasury money becomes savings for the population, and also base money used in bank reserve loops.  Endogenous bank money disappears while exogenous treasury money, if available. has a chance to hang around and be useful.

The Treasury money, if spent properly into inelastic markets, creates efficiencies on its trajectory.  This is how the U.S. got rich, by spending into inelastic sectors on ports, bridges, sewers, clean water – basically improving the commons so that everybody would be healthy, well educated, and acquires high labor value.  An efficient labor force leads directly to the formation of a large middle class.

This “treasury/government” spending into inelastic markets channeled new money to then make productivity, and the money went on to become savings, and then some further went into private banks.  Exogenous “Treasury” money entered into the endogenous banking system.

Today, virtually all money is endogenous.  Endogenous money is created by a bank bay hypothecating a new creditor in a loan.  The asset side of the ledger holds the new debt instrument, and the liability side of banker double entry ledger holds the new “credit money” just created.

If a country has a money supply that is all “private banker credit” meaning all endogenous money, it is a foregone conclusion that the country will eventually collapse.  The collapse is predicated as finance oligarchy takes over.  If all money is private bank credit which comes at interest, then the system must drain the real working economy of its transaction medium.

 

Collapse is the drama we are seeing, and it will spread as the debts grow exponentially while the money supply needed for transaction is drained. Creditors holding debt instruments will demand real resources from producers in what is a usurious relation. 

Sat, 07/11/2015 - 05:20 | 6298582 TeraByte
TeraByte's picture

Only two options are left for EU:
multi exit of dysfunctional economies or
permanent  transfer union
but the both are dead ends.

 

 

Sat, 07/11/2015 - 05:41 | 6298592 falak pema
falak pema's picture

"Our money your problem" and "the MOnetary Sin of the west" ; aka BW revoke and petrodollar hegemony; have created this financial crap house.

Well done Pax Americana. You reap what you sow and the Pentagon says : We need perpetual war.

That never worked for Rome nor Charles V...

So please remember history rhymes! 

Sat, 07/11/2015 - 07:37 | 6298679 eforce
eforce's picture

More socialist tosh.

Sat, 07/11/2015 - 08:17 | 6298718 HenryHall
HenryHall's picture

Time for elections perhaps.

Next Greek government - a coalition of Golden Dawn and KKE.

Sat, 07/11/2015 - 08:22 | 6298720 Kokulakai
Kokulakai's picture

The Greek government does not repudiate the debt.

The point at issue is who shall bear the brunt of the repayment burden.

Centuries of clientelistic rousfeti have wrung the Greek turnip dry.

People can't give what they don't have.

Sat, 07/11/2015 - 08:45 | 6298741 HenryHall
HenryHall's picture

"We don't repudiate the debt.

We just say we can't repay it and so -

we won't make any installment payments for at least another 50 years.

After our economy has improved.

We don't call that default, we have no control over what you call it."

Sat, 07/11/2015 - 08:39 | 6298731 gcjohns1971
gcjohns1971's picture

Monetization is not an alternative to default.

Monetization IS default.

It is the particular form of default that allows the most guilty to pretend innocence.

It is the default in which Napoleon enters a 2 Meter  minimum basketball club by means of redefining the measure of a meter...which does nothing to improve his game.

In this case it allows the Greek government, who cooled their books to enter, and the Greek people, who believe their government is obliged to give them more than it has, to turn their plight into a claim on the lives and fortunes of those who took care of themselves, and produced more than consumed.

If entertained there will be no reason to work, because it will have become slavery to the unprincipled.

Sat, 07/11/2015 - 09:27 | 6298834 JLM
JLM's picture

Reads like something Luther might have penned and fixed to the door of the Holy Roman Empire with a dagger!

Sat, 07/11/2015 - 10:21 | 6298977 Dr. Nick Riviera
Dr. Nick Riviera's picture

Greece is not a victim in this mess. They chose to live well above their means on borrowed money for years, knowing full well the BORROWED money was not charity. Being asked to pay back the money you borrowed is not a financial attack. I know the system sucks, but you can't play along with the system when you gain from it and throw a tantrum when you lose. Greece put themselves in this position quite willingly. They have no one to blame but themselves. They still want the € for crying out loud!

Sat, 07/11/2015 - 11:57 | 6299197 Fed-up with bei...
Fed-up with being Sick and Tired's picture

How is Greece any different, in the end, from the excessive debts here (Student loans, Cars, borrowing against them, for God's sakes) ... we are in fact the larget debtor nation in history.   We have TRILLIONS in Shadow Banking that no one talks about.  I personally know two young couples, one is a COWBOY and his wife is a receptionist (making $22K a year), who borrowed over $500K to buy a house in 2007 and then defaulted...no problems, and they have now borrowed again!

Sat, 07/11/2015 - 11:11 | 6299087 numapepi
numapepi's picture

The Greek economy, and indeed the fundamental problem with all governments, is the lack of incentive to maintain fiscal responcibility.

 

It is the addiction to government spending that is the problem...  http://incapp.org/blog/?p=2602

Sat, 07/11/2015 - 11:54 | 6299192 Fed-up with bei...
Fed-up with being Sick and Tired's picture

There was one statement there, about how the EU has no specific structure to punish theft, make me LOL.   In America, there is a complete structure to pound on theft, and so on, and in fact we have SEVERAL such Government entities.  The scarcity of Actual TRUE elitists head-chopping, or going to jail, is amazing and not covered by many people any longer here.   Jamie Dimon was brought before the Congress and the Press talked about his amazing performance!    It is sickening therefore that all we do is finger point and really the disqusting theft here over time just makes me sick.

Sat, 07/11/2015 - 11:29 | 6299129 Sanity Bear
Sanity Bear's picture

author makes the error of assuming that financial repression is not a major goal of "Euro-left politics" - this IS the situation they want, everyone dependent on government, with the edge of ruin keeping the plebes in the fold

Sat, 07/11/2015 - 11:50 | 6299178 Fed-up with bei...
Fed-up with being Sick and Tired's picture

I think that the author makes your point.   I read it differently.   IT IS PURPOSEFUL and the reversal of how we manage these debts is the entire point of the treatise.

Sat, 07/11/2015 - 12:11 | 6299241 MEFOBILLS
MEFOBILLS's picture

From Huber, a sane voice:

http://www.sovereignmoney.eu/what-is-sovereign-money

 

quote

 

In addition to the regular seigniorage which accrues from increases in the stock of money, a transition from bank money to sovereign money would furthermore entail a huge one-off seigniorage. Similar to when private banknotes were phased out and replaced with central-bank notes in the 19th century, an analogous transition today has to substitute sovereign money-on-account for bank-created demand deposits. This will be a continuous process over several years, depending on maturities of loans outstanding.

Measured by current figures in the euro area, such a substitution would phase out about 4,894 billion euros and replace them with a comparable amount of sovereign money. That amount represents on average 60 per cent of total public debt at 8,279 billion euros.[5] The one-off substitution seigniorage thus offers a historically unique opportunity to pay down sovereign debt to a considerable extent—with no need for negative deposit interest or inflation, and without expecting 'haircuts' of creditors or imposing devastating austerity measures on nations involved.

What is preventing the elites and the democratic sovereign to embrace the opportunity?

Sat, 07/11/2015 - 14:06 | 6299511 MEFOBILLS
MEFOBILLS's picture

A money system where banks INTERMEDIATE existing money, will prevent Creditor/Debtor fraud at the source.  Why?  Because both Creditor and Debtors are the primary party, and banker is merely an agent consumating the deal.  Creditor and Debtor both have skin in the game, and the creditor has 'stored" life savings.  This life savings relates to goods and services, it did not pop into existence as accounting entries based on a debt instrument.

OK, it won't fix all fraud at the source.  At the beginning of Venice, a legal authority would inspect the contracts to insure against fraud, especially fraud perpetrated against widows.  Certain contracts, say a risky fishing expedition required both creditor and debtor to take losses.  Both had skin in the game.

By contrast, a Credit Money System, where banks create new credit at moment of hypothecation, transfers risk to debtor.  If you don't pay on time, then creditor (usually the bank) will then harvest debtor. 

Corporatocracy is related to credit finance, in that large companies are body parts of small companies.  Usually, early in life,  "debtor" company cannot pay, and then must sell its patents and assets in foreclosure.  The risk period where the company is developing products can be a long time, before product can become prices to then attract money from supply.  

Intermediation type money, meaning real sovereign money, can handle this long time lag between development of goods and when they can be converted to prices.

Even in Venice, they still had to have legal mechanisms to settle fraudulent contracts, and their system was a currency system based on Gold and Gold equivalent ledger entries.  Venice always recalled its gold in export surplus, which is why their gold system worked.  A sovereign system would also have to have legal fraudulent conveyance laws as well.  So, Hudson's point is still relevant, despite the money system.

(I am talking about Venice before they started importing Jews and then subsequently fell into the trap of usury and making predatory loans.  Venice further declined by extracting Silver from the West to pay exchange rate differences to Jewish traders for gold, and also to sell slaves to said traders.  Jews were go betweens for Christian West and Mulslims who desired slaves.)

Humans are rent seekers, and some groups (Jews especially) have indurated it down to practice or even codified it in religion.  The debt money system is a  slavery system, although it clever and sneaky in that it harvests people in prices.  Those that benefit directly from banker Credit money will be its staunchist defenders.

Simply buying a home will take a lifetime of earnings, when banker simply made keyboard entries.  The seigniorage on the loan, meaning the first use of the credit money, as all loans pay interest first, represents a tremendous shift from producers to unproductive finance - it is usury.  Interest on credit loan can easily double or triple the principle, and this usury is a transfer of wealth.

Intermediation of funds is entirely different, in that debtor is paying a saving Creditor - and the saver is most likely a neighbor or fellow citizen, and hence the interest/usury will recycle back into the producing consuming economy.  Any aggregates, or trying to monopolize money supply should have conveyance laws,  and especially taxes to punish monopoly and rent seeking.

Below link is more on why intermediation of loanable funds vs credit creation is important.  Switching over to real lawfull money should be part of the discussion, not just "haircutting" credit of private debt money system.  As smart as Hudson is, he should have figured it out by now.

http://www.bankofengland.co.uk/research/Documents/workingpapers/2015/wp5...

 

 

Sat, 07/11/2015 - 14:19 | 6299562 q99x2
q99x2's picture

The Financial Attack On Greece: Where Do We Go From Here?

Deliver the arrest warrants straight to the desks of Blankfein and Dimon.

Do NOT follow this link or you will be banned from the site!