Total financial collapse, once a problem only for developing countries, has now come to Europe. The International Monetary Fund is imposing its "austerity measures" on the outer circle of the European Union, with Greece, Iceland and Latvia the hardest hit. But these are not your ordinary third world debtor supplicants. Historically, the Vikings of Iceland successfully invaded Britain; Latvian tribes repulsed even the Vikings; and the Greeks conquered the whole Persian empire. If anyone can stand up to the IMF, these stalwart European warriors can.
Dozens of countries have defaulted on their debts in recent decades, the most recent being Dubai, which declared a debt moratorium on November 26, 2009. If the once lavishly-rich Arab emirate can default, more desperate countries can; and when the alternative is to destroy the local economy, it is hard to argue that they shouldn't. That is particularly true when the creditors are largely responsible for the debtor's troubles, and there are good grounds for arguing the debts are not owed. Greece's troubles originated when low interest rates that were inappropriate for Greece were maintained to rescue Germany from an economic slump. And Iceland and Latvia have been saddled with responsibility for private obligations to which they were not parties.
The Dysfunctional EU: Where a Common Currency Fails
Greece may be the first in the EU outer circle to revolt. According to Ambrose Evans-Pritchard in Sunday's Daily Telegraph, "Greece has become the first country on the distressed fringes of Europe's monetary union to defy Brussels and reject the Dark Age leech-cure of wage deflation." Prime Minister George Papandreou said on Friday:
Salaried workers will not pay for this situation: we will not proceed with wage freezes or cuts. We did not come to power to tear down the social state.
Notes Evans-Pritchard:
Mr Papandreou has good reason to throw the gauntlet at Europe's feet. Greece is being told to adopt an IMF-style austerity package, without the devaluation so central to IMF plans. The prescription is ruinous and patently self-defeating.
The currency cannot be devalued because the same Euro is used by all. That means that while the country's ability to repay is being crippled by austerity measures, there is no way to lower the cost of the debt. Evans-Pritchard concludes:
The deeper truth that few in Euroland are willing to discuss is that EMU is inherently dysfunctional - for Greece, for Germany, for everybody.
Which is all the more reason that Iceland, which is not yet a member of the EU, might want to reconsider its position. Iceland is being required as a condition of membership to endorse an agreement in which it would reimburse Dutch and British depositors who lost money in the collapse of IceSave, an offshore division of Iceland's leading private bank. Eva Joly, a Norwegian-French magistrate hired to investigate the Icelandic bank collapse, calls it blackmail. She warns that succumbing to the EU's demands will drain Iceland of its resources and its people, who are being forced to emigrate to find work.
Latvia is a member of the EU and is expected to adopt the Euro, but it has not yet reached that stage. Meanwhile, the EU and IMF have told the government to borrow foreign currency to stabilize the exchange rate of the local currency, in order to help borrowers pay mortgages taken out in foreign currencies from foreign banks. As a condition of IMF funding, the usual government cutbacks are also being required. Nils Muiznieks, head of the Advanced Social and Political Research Institute in Riga, Latvia, complained:
The rest of the world is implementing stimulus packages ranging from anywhere between one percent and ten percent of GDP but at the same time, Latvia has been asked to make deep cuts in spending - a total of about 38 percent this year in the public sector - and raise taxes to meet budget shortfalls.
In November, the Latvian government adopted its harshest budget of recent years, with cuts of nearly 11%. The government had already raised taxes, slashed public spending and government wages, and shut dozens of schools and hospitals. As a result, the national bank forecasts a 17.5% decline in the economy this year, just when it needs a productive economy to get back on its feet. In Iceland, the economy contracted by 7.2% during the third quarter, the biggest fall on record. As in other countries squeezed by neo-liberal tourniquets on productivity, employment and output are being crippled, bringing these economies to their knees.
The cynical view is that that may have been the intent. Instead of helping post-Soviet nations develop self-reliant economies, writes Marshall Auerback, "the West has viewed them as economic oysters to be broken up to indebt them in order to extract interest charges and capital gains, leaving them empty shells."
But the people are not submitting quietly to all this. In Latvia last week, while the Parliament debated what to do about the nation's debt, thousands of demonstrating students and teachers filled the streets, protesting the closing of a hundred schools and reductions in teacher salaries of up to 60%. Demonstrators held signs saying, "They have sold their souls to the devil" and "We are against poverty." In the Iceland Parliament, the IceSave debate had been going on for over 140 hours at last report, a new record; and a growing portion of the population opposes underwriting a debt they believe the government does not owe.
In a December 3 article in The Daily Mail titled "What Iceland Can Teach the Tories," Mary Ellen Synon wrote that ever since the Icelandic economy collapsed last year, "the empire builders of Brussels have been confident that the bankrupt and frightened Icelanders must finally be ready to exchange their independence for the 'stability' of EU membership." But last month, an opinion poll showed that 54 percent of all Icelanders oppose membership, with just 29 percent in favor. Synon wrote:
The Icelanders may have been scared out of their wits last year, but they are now climbing out from under the ruins of their prosperity and have decided that the most valuable thing they have left is their independence. They are not willing to trade it, not even for the possibility of a bail-out by the European Central Bank.
Iceland, Latvia and Greece are all in a position to call the bluff of the IMF and EU. In an October 1 article called "Latvia - the Insanity Continues," Marshall Auerback maintained that Latvia's debt problem could be fixed over a weekend, by a list of measures including (1) not answering the phone when foreign creditors call the government; (2) declaring the banks insolvent, converting their external debt to equity, and having them reopen with full deposit insurance guaranteed in local currency; and (3) offering "a local currency minimum wage job that includes healthcare to anyone willing and able to work as was done in Argentina after the Kirchner regime repudiated the IMF's toxic package of debt repayment."
Evans-Pritchard suggested a similar remedy for Greece, which he said could break out of its death loop by following the lead of Argentina. It could "restore its currency, devalue, pass a law switching internal euro debt into [the local currency], and 'restructure' foreign contracts."
The Road Less Traveled: Saying No to the IMF
Standing up to the IMF is not a well-worn path, but Argentina forged the trail. In the face of dire predictions that the economy would collapse without foreign credit, in 2001 it defied its creditors and simply walked away from its debts. By the fall of 2004, three years after a record default on a debt of more than $100 billion, the country was well on the road to recovery; and it achieved this feat without foreign help. The economy grew by 8 percent for 2 consecutive years. Exports increased, the currency was stable, investors were returning, and unemployment had eased. "This is a remarkable historical event, one that challenges 25 years of failed policies," said economist Mark Weisbrot in a 2004 interview quoted in The New York Times. "While other countries are just limping along, Argentina is experiencing very healthy growth with no sign that it is unsustainable, and they've done it without having to make any concessions to get foreign capital inflows."
Weisbrot is co-director of a Washington-based think tank called the Center for Economic and Policy Research, which put out a study in October 2009 of 41 IMF debtor countries. The study found that the austere policies imposed by the IMF, including cutting spending and tightening monetary policy, were more likely to damage than help those economies.
That was also the conclusion of a study released last February by Yonca Özdemir from the Middle East Technical University in Ankara, comparing IMF assistance in Argentina and Turkey. Both emerging markets faced severe economic crises in 2001, but where Argentina broke ranks with the IMF, Turkey followed its advice at every turn. The end result was that Argentina bounced back, while Turkey is still in financial crisis. Argentina chose to direct its resources inward, developing its domestic economy.
To find the money for this development, Argentina did not need foreign investors. It issued its own money and credit through its own central bank. Earlier, when the national currency collapsed completely in 1995 and again after 2000, Argentine local governments issued local bonds that traded as currency. Provinces paid their employees with paper receipts called "Debt-Cancelling Bonds" that were in currency units equivalent to the Argentine Peso. The bonds canceled the provinces' debts to their employees and could be spent in the community. The provinces had actually "monetized" their debts, turning their bonds into legal tender.
Issuing and lending currency is the sovereign right of governments, and it is a right that small European countries lose when they join the EU. Argentina is a large country with more resources than Iceland, Latvia or Greece, but new technologies are now available that could make even small countries self-sufficient. See David Blume, Alcohol Can Be a Gas.
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EB: "when the national currency collapsed completely in 1995 and again after 2000, Argentine local governments issued local bonds that traded as currency. Provinces paid their employees with paper receipts called "Debt-Cancelling Bonds" that were in currency units equivalent to the Argentine Peso. The bonds canceled the provinces' debts to their employees and could be spent in the community. The provinces had actually "monetized" their debts, turning their bonds into legal tender. Issuing and lending currency is the sovereign right of governments"
A country’s control of its own money supply is tantamount to control of its own destiny.
From "Understanding Money," by by John H. Hotson (http://www.pcdf.org/1996/15hotson.htm):
1. No sovereign government should ever, under any circumstances, give over democratic control of its money supply to bankers.
2. No sovereign government should ever, under any circumstances, borrow any money from any private bank.
3. No national, provincial, or local government should borrow foreign money to increase purchases abroad when there is excessive domestic unemployment.
4. Governments, like businesses, should distinguish between "capital" and "current" expenditures, and when it is prudent to do so, finance capital improvements with money the government has created for itself.
While everyone likes to slam the government (perhaps for some good reason) after the current turmoil there, few use facts to talk of its economy. Despite the huge oil revenues, all Persian Gulf state economies are in heavy debt as we have seen the case of Dubai. Iran is an exception: because of its relative economic disconnect to the western world, it is the only Gulf nation with over $82B in the black. While the government owns 60% of the economy, the president there has publically auctioned government companies in the Tehran Exchange, with 51% of all shares going to the workers and the poor. They received the first dividen reimbursement last may just before the election, which is to continue to be paid quarterly. Watch the Saudi economy, it is the next to go under specially that now they are also fighting a war in Yemen.
One wonders if Greece, Latvia, Iceland and the like could form a supranational "El Barzon" and deal with the skullduggery emanating from The City of London and Wall Street?
There is no way to eliminate the corrupt nature of the world's monetary systems as they entice fraud by their design. Monetary systems have always been, and always will be corrupted by those in control of the money. Always. There is no way for a monetary system to NOT be corrupted because money is just an abstraction, and at this time in history, truly based in fantasy.
Auditing the Fed, ending the Fed, sound money(gold etc), more regulations, whatever people here think would solve the problem, WON'T.The solution is to END THE MONETARY SYSTEMS that spawn corruption, murder, wars, poverty, you name it. There are very FEW issues facing the world today that do not come full circle back to MONEY. Love of money truly is the root of all evil. It always has been and always will be.
We need to stop trying to "fix" the systems of debt slavery that is designed by a group of elites to maintain control over the masses and instead look at alternatives to the paradigm we have all been trapped in.
Peter Joseph's thezeitgeistmovement.com is a good place to start.
The IMF is the banking arm for the New World Order envisioned by Milton Friedman who also came up with "supply-side economics" and got a whole country to play with in the 70's; Chile, where we installed Augusto Pinochet. It took 20 years to over throw that guy by the poor peasants of that nation during which many were "disappeared".
The IMF was failing in the last 5-10 years until America gave it a lifeline in the last Afghan War Supplemental which us progressives fought hard against. Included in an amendment was 5 billion for the IMF to work it's dastardly deeds on vulnerable economies, including OURS, I guess. It passed, of course.
As bad as the "health care reform" bill is. It's absolutely terrifying that the government under the whip of the IMF is willing at a time like this, to cut back on the social programs including Social Security after the banks took everyone's pensions and retirement funds...and got rewarded for it.
That's why Chavez in Venezuela is so unpopular with the elites; he stood up to US corporations, threw them out, and is helping not only his own citizens, but the citizens of other countries in South America who are being bullied by the IMF.
You really HAVE to find out what is happening here and everywhere to realize what we're up against.