The rape of Europa by Titian ( c. 1560)
Money creation VS debt creation
Debt and money are frequently confused. We read about money creation, "money created out of thin air", and we imagine printing presses spewing out tons of paper bank notes.
The only drawback of money creation is the erosion of the value of the currency (inflation) because of excessive supply. To illustrate this process, imagine a gigantic oil field were to be found in Siberia tomorrow; it would reduce the price for oil because of the increased supply.
In this sense, money creation impacts every operator (banks, states, citizens) holding money, by decreasing the value of their holding. The more money that exists, the less it is valued, like most other commodities.
The exponential growth of world debt
Currently, the world money supply is equal to $68 trillion, while debt stands at $137 trillion. This is a 2:1 ratio, and the gap keeps widening. World debt grows exponentially, far faster than the global economy, therefore debt smothers the economy by demanding more and more output to cover interest payments.
In addition, since debt volume exceeds money volume, there's simply not enough money to repay the outstanding debt. Sooner or later, someone somewhere won't be able to repay his debt, not because he personally can't pay, but because there isn't the money, anywhere, to pay it.
In this scenario, we shift from the virtual debt world (book entries) to the real world where the defaulting citizen/state will get his very real assets (house, car, public services, infrastructure) seized by the creditors (private banks). It's a crafty maneuver that appears to be specifically designed to bankrupt as many people and states on the planet as possible.
Debt creation is indeed far more twisted than money creation. Debt is asymmetric. The lender gets his money back and he cashes in the interest while the borrower has to pay back the loan and pay the interest. At the end of the day, the lender (who is usually rich since he can lend money) is richer, and the borrower (who is usually poor) gets poorer.
Interest rates for developing countries and developed countries (1990-2003)
In a fair world, shouldn't the poor pay less and the rich pay more?
Note also that even the infamous 'quantitative easing' is not pure money creation ("money printing"), but also debt creation. Indeed, the US Federal Reserve - which is actually neither federal nor a reserve - creates money to buy treasury bonds from the US government. This is a somewhat complicated way of saying that the Fed prints money and gives (loans) it to the US government at a small rate of interest.
For centuries, in order to fund the development of the country, a nation-state directly created money (interest free). But today, groups of greedy politicians forming cliques known as 'governments' get the population of a country into debt in order to get money that is usually spent by private banks on destructive 'market speculation' (gambling), rather than on public services for the good of the people.
That is precisely the source of the "debt" of the Greek people.
The Greek case
The Greek people supposedly owe €310 billion. That's 174% of Greek GDP (a figure that has actually increased by almost one third since the current financial siege of Greece began). Does that seem high to you? Well, many individuals have outstanding debt that far exceeds 1.7 times their annual income, and they're not labeled 'bankrupt'. Japan's debt is 221% of its GDP, and it's not considered to be "in crisis". Why so?
While Japanese debt is issued in Yen by the Japanese central bank, most of Greek debt is issued in Euros by European authorities, including the European Central bank (ECB).
We can assume that the objective of the Japanese central bank is to serve the interest of Japan by allowing the necessary level of debt, but is that the case of the ECB relative to Greece?
The capacity of a country to repay its debt is not so much linked to its total amount than to the repayment terms. While Japan borrowed at a virtually negative interest rate and spread repayment over decades, Greece borrowed from the ECB via private banks at substantial positive interest rates and was forced to repay quickly.
2013 Greek budget
Until 2011, private banks over-lent and owned most of the Greek debt while cashing in on billions in interest payments. But when Greece was deemed "on the verge of bankruptcy", the debt was shifted from the banks to the public. As Joe Quinn has repeatedly stated, all debt in this world is fundamentally underwritten by the energy of every human being on the planet.
Bankers and other pathologically greedy and power-hungry types justify this process through a doctrine of "privatize the profit, socialize the loss", or 'steal their cash and charge the people for the privilege', as I like to call it. So if there's a Greek default, it's not the private banks who created the problem in the first place who must pay the bill, but the European tax-payers, especially the poorest.
The "socializing of loss" was disguised as a package to "save" Greece, the infamous bail-outs of which less than 10% reached the Greek economy. The "bails-outs" didn't relieve the Greek debt burden; they added to it by increasing Greek debt from 133% of GDP in 2010 to 174% today.
The Euro doctrine
The ECB headquarters in Frankfurt, Germany
The primary objective of the ECB is to insure "price stability" (see article 2 of the its statutes). Price stability means limiting inflation, i.e. maintaining a strong Euro. Why such a definite doctrine? After all, there are plenty of historical cases showing the benefits of healthy inflation, or beneficial devaluations.
The German economy is a very strong exporter. Exports represent almost half its GDP and its economy does very well with a strong Euro. Germany is the 8th richest country in the world (in terms of GNI per capita, and PPP). For example, BMW cars are competitive; they sell very well, even at a high price. So why sell it a lower price (i.e. via devaluation of the Euro)?
The problem is European economies are very different from each other. Most European countries, particularly Southern ones, need a weaker Euro to reduce prices and increase competitiveness for their products on international markets. They also desperately need money creation (which weakens the Euro) in order to increase investment, wages and consumption.
The US funded its lavish lifestyle at the expense of the rest of the world through the compulsory use of petrodollars. In a similar vein, Germany funded its success at the expense of Europe through maintaining a strong Euro currency.
And this is one of the reasons why German chancellor Merkel and her dastardly side-kick, Finance Minister Schauble, are so inflexible about Greek debt. They don't want to encourage debt creation because it is detrimental to the industrialists and financiers who put them in power. To set an example and discourage other countries from following the path of desperately needed financial easing, they are only too happy to sacrifice the Greek people.
Historical perspective
The mainstream media is claiming that Greece is the first "developed" country to miss an IMF payment. This is not true. Since 1983, 29 countries had protracted arrears (delayed payment) to the IMF, including two developed European countries: Yugoslavia and, later, Bosnia.
The same goes for debt relief, which is far more widespread than you would think: 39 countries have benefited from debt relief since 1996. Germany, which is taking the hardest line on any debt relief for Greece, was itself saved by debt relief on two occasions.
Piraeus, Greece after German bombing (1941)
The 20 billion in war reparations that Germany actually paid amounted to a mere 2.4% of its national income between 1919 and 1932.
A few decades later, history repeated. Nazi Germany triggered WW2 by invading and occupying several European countries. Thanks to Russia's phenomenal defense and liberation of Europe, in 1945 Germany capitulated. This time, almost no war reparations were demanded (Potsdam conference).
Germany paid a minimal $5.2 billion in reparations, indemnities and restitution. That's equivalent to 32% of German annual exports.
And yet, earlier in 1940, France was initially defeated by Germany and had to pay reparations. The amount extracted during the occupation (1940-1945) was absolutely enormous: $80 billion, or 16 times the amount of reparations demanded of Germany in 1945!
Meanwhile, through the Marshall Plan, Germany was given a whopping $17 billion in subventions (that's three times the amount of reparations demanded of Germany).
The story doesn't end there. After WW2, Germany was on the verge of bankruptcy, its debt was over 200% of its GDP (higher than today's Greek figures). But in 1953, Germany saw 39 billion marks worth of debt reduced to 14 billion. That is a 63% debt relief.
And here's the cherry on the pie; the debt repayment was spread over such a long time that it never exceeded 4.2% of its export revenues. This is known as the London Agreement, and one of the countries that agreed with this substantial debt relief is none other than... Greece.
The Treaty of Versailles conference room.
The mainstream media would have us believe that the humiliating terms of the Treaty of Versailles were the cause for WW2.
First, let's remember that the highest war reparations ever paid dates back to 1815 after the defeat of Napoleon. Prussia (modern day Germany) demanded almost 2 billion Francs or roughly 400% of total French exports. Foreign troops occupied France until the last cent was paid. As a direct consequence the country was plunged into a severe economic depression.
Second, the 1815 reparations were not an isolated event. When France lost the 1870 Franco-Prussian war, it was condemned to pay 5 billion Francs, 170% of total French exports. Prussian troops again occupied France until it paid the whole amount, which it did in less than 3 years.
Third, as we have seen previously, most reparations demanded from Germany by the Treaty of Versailles were canceled. Not only that, during the 1920s, the amount of money received by Germany exceeded the amount of reparations it had paid. From this perspective, it is not the Versailles Treaty that triggered WW2 but the cancellation of the Versailles Treaty and the massive injection of funds into Germany that enabled it to arm itself and prepare for WW2.
Adolph Hitler and Paul Von Hindenburg
Fourth, in 2010 the mainstream media extensively applauded the final payment for WW1 reparations made by Germany and presented it as proof of the country's honesty and reliability. Of, course no mention was made of the fact that Germany had paid less than 85% of the sum that was agreed to in the terms of the Versailles Treaty. The mainstream media also failed to mention that the 200 million euro that Germany paid over the 1990-2010 period of reparations represented a mere 0.01% of German exports over that same period.
So, in the interest of clarity, let's recap... 1815, 1870, 1940: France loses wars and pays tremendous reparations to the last cent - in the latter two cases to Germany. 1914, 1945: Germany loses wars (that it started), paid almost no reparations, and instead got funding. Is it any wonder why Germany dominates Europe today? Does anyone believe that the German-French alliance, alleged cornerstone of the European Union, is a balanced relationship?
The EU is a purely economical and tyrannical system that is made by Germany and for Germany at the expense of other poorer countries, including of course the so-called 'privileged partner' France.
History is highly ironic. Germany imposed a strong Euro doctrine because it serves its industrial competitiveness, which drastically increased after the massive 1953 debt relief. Isn't it totally cynical for Germany to oppose any Greek debt relief in order to maintain the competitiveness and privileges it acquired thanks to post-WW2 debt relief?
The infamous Greece-EU "agreement"
Ex Greece Finance Minister Varoufakis: "Eurozone is a very inhospitable place for decent people"
In this sense, the 2008 subprime crisis and the various national crises, including the Greek one, are very similar. Individuals or states are forced into excessive levels of debt, then lending conditions are tightened (increased interest rate, unavailability of extra loans) until the individual/state defaults. At this point the creditors (banking institutions) seize the assets. After having paid obscene amounts of interest, the individual is stripped of his car and house, the country is stripped of its ports, airports, utility companies, healthcare system, mining resources, whole islands - anything that can generate profit is taken away.
Even the workforce is 'seized' in the sense that wages have to be drastically reduced (one of those IMF-demanded 'structural adjustments'), providing cheap labor (and therefore extra profits) for foreign corporations involved in the looting process.
The only difference between Greece and the previously 'shocked' countries is that, this time, the looting hides behind a politically correct varnish called a "trust fund". What a nice name that is. But don't be misled. The so-called 'trust fund' has nothing to do with trust and everything to do with funds. It is in charge of "buying" €50 billion of Greek assets. The "agreement" clearly states that it will be controlled by the creditors (IMF, ECB, and private banks). In short: outright theft.
According to financial analyst Georges Pearkes, the trust fund will be managed by KfW, a German investment bank, whose chairman is (drum-roll please)... Wolfgang Schauble, the German finance minister. Schauble is one of the main actors in the destruction of the Greek economy. When describing the submission of France to Germany at the recent EU Eurogroup meeting, here is what Varoufakis stated:
"When Schäuble responded and effectively determined the official line, the French Finance Minister in the end would always fold and accept."The official purpose of the fund is to "pay off the creditors", so there won't be any objective
German finance minister Wolf-gang Schauble
By the way, what about the Greek debt? That's the central problem, isn't it? One might hope that, after all the sacrifices conceded by the Greek government (reduction of pensions and wages, privatization of public services, increase in taxes, etc), a write-off of their alleged debt, if only minor, would be finally approved.
Nice try.
Any "haircut" (debt reduction) was ruled out by the greedy Germans. Instead, in order to deal with the alleged Greek 'debt', the Troika might eventually approve an €86 billion bail-out in the form of yet more high-interest, tightened loan access. So, in order to solve the Greek debt problem, deemed as unsustainable even by the IMF, the Troika has decided to increase the level of debt! This is not an innocent move: more debt means more interest payments, more financial dependency, and ultimately more asset-seizing.
Yes, the vultures are circling over the Greek corpse and they won't leave a single piece of flesh behind.
Conclusion
Food distribution in Greece
No doubt, Angie! Knowing what we now know, we understand why Merkel is rather reluctant to draw a parallel between the Greek "deal" and the Versailles Treaty.
History shows that Germany has immensely benefited from massive and repeated debt relief. A minimal political conscience, an ounce of historical awareness, or just basic human compassion, should prompt Germany to help the 11 million Greek people in the same way that Germany was helped.
Plus, Greece didn't start any war, Greece didn't lose any war, Greece didn't repeatedly destroy Europe. But this cabal of psychopaths in Brussels who delight in human suffering and are obsessed with money, just destroyed Greece.
They're undoubtedly very satisfied with themselves.
For the sake of more clarity, I would here like to define "interest" as "money you have to give somebody because hey're huge fucking assholes". Really, I think that's a pretty accurate description of what interest is. Interest does not exist in a reasonable society. Interest is a creation of psychopaths.
So in other words, in 4 years, Greece had to pay €53 billion for no good reason.
That's how fucked up things are.