Underlying much of what we see and don’t see regarding the modern-day tragedy that is Greece, is all about preserving the dream of a pan European nation state, a United States of Europe if you will. Only secondarily is it about the solvency of the Greek nation and about bailing out the foreign bank holders of Greek sovereign debt. Let me explain my perspective. Words: 627
So said Arnold Bock (www.FinancialArticleSummariesToday.com) in an email to Lorimer Wilson, editor of www.munKNEE.com (Your Key to making Money!), which can be found below in its entirety. (This paragraph must be included in any article re-posting to avoid copyright infringement.)
When I first wrote about the Greek debt issue (Greece: a Greek Tragedy or a Greek Comedy (of Fiscal Mismanagement)?) I said it wasn’t about bailing out an insolvent Greece, rather it was about preventing the bankruptcies of foreign banks which held Greek debt. All the talk in the mainstream media at that time focused on the solvency of Greece itself. Now the crisis has mutated into preserving the ongoing European political project of one united European nation, although the mainstream media for the most part still does not understand this reality.
Interest rates on Euro sovereign debt in every member nation were always very low because there was always a misplaced belief in the soundness of the EU and the Euro. In addition, everyone seemed to believe that there was also an implicit guarantee that the Euro currency and Euro sovereign debt would ultimately be backstopped by the European Central Bank, the EU and, if necessary, the IMF and the US Federal Reserve Bank.
More recent actions show that:
- the prevailing belief in the soundness of the EU and the Euro is misplaced,
- the European Central Bank, the EU, IMF and the US Fed will go to seemingly any length to protect the foreign banks which hold Euro sovereign debt, and that
- the collective dream of establishing a single political entity, a pan European nation state, is slowly slipping away.
Indeed, perhaps it is their attempt to salvage the pan European nation state goal which explains so many of the somewhat ‘senseless’ measures that have been taken, or not taken, to preserve Greece. To let Greece out, or to force Greece out, of the Euro zone, would create a precedent for the other weak links such as Portugal, Spain and Italy to follow suit. The domino effect of any measure applied to other ailing Euro member nations would effectively kill any chances of the formation of a United States of Europe. Most policy makers in Europe are not ready to think seriously about discarding that fading dream – yet.
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In the meantime, the measures being taken are simply designed to maintain the status quo:
- don’t let Greece out, don’t force Greece out, of the Euro zone,
- don’t let Greece become insolvent,
- don’t let Greece become a negative precedent to apply to the other sick Euro nations,
- don’t allow the banks which hold Euro sovereign debt be seen to be bankrupt, even though most are if accounting shenanigans and vast infusions of new digital Euros had not become their current salvation.
By bailing out Greece and the foreign bank holders of European sovereign debt, the pan European political dream remains intact…for now. Current and future actions, therefore, are designed to simply buy more time to preserve the political dream of a future United States of Europe.
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If the implications of the current Greek tragedy were not so serious it would have been seen more as a Greek comedy (of fiscal errors). In fact, however, to deploy another metaphor, Greece’s sovereign debt is seen as the proverbial canary in the coal mine – a microcosm of the relentlessly growing sovereign debt that has taken much of Europe by storm and is threatening to spread to the U.S.. Words: 1008
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What event could trigger an unstoppable domino affect leading to a financial meltdown? You may think [that such a possibility is extremly unlikely] but daily we move closer to the real possibility that a major fiat currency such as the US Dollar or the Euro could collapse in the blink of an eye. [Let’s take a look […]
The magnitude of current private and government debt, coupled with massive unfunded contingent liabilities for promises of future services to their citizens, will prove to be impossible for many nations to fund. Massive inflation in the money supply will become the preferred vehicle to deflect the default monster and will result in vastly devalued currencies and price inflation as a prelude to default. Such action will be a desperate attempt to buy time to stave off the inevitable and will result in social unrest caused by persons whose comfortable lifestyle and elevated standard of living is about to disintegrate before their very eyes. Words: 1525
It is clearly evident that America’s debt picture is truly astronomical and, like the situation with Greece, the debt cannot, and never will, be repaid. Indeed, any way you look at it, the consequences for the United States, let alone the many other haunted economies, are grim, dismal – even disastrous. Words: 1166
It is appropriate that the fiscal crisis of the West has begun in Greece, the birthplace of Western civilization. Soon it will cross the channel to Britain. The key question, however, is when that crisis will reach the last bastion of Western power, on the other side of the Atlantic. Words: 609