Membership in the EU comes at a price. That price is a limit on deficits. This aspect of the EU treaty was meant to insure the solvency of its member nations and so support the Euro currency itself. No member can unilaterally revalue its currency as it is, by treaty, an abstraction of the net worth of the various member's ability to back it. This severely limits the unilateral options for dealing with sovereign debt by member countries, which in turn opened up unusual opportunities for member countries to be exploited by international banking.
While there are treaty limits on debt incurred by member countries, there are no constraints on banks lending to them. What evolved in the Greek sovereign debt crisis is a massive short opportunity on the Euro, had you known it was developing. And who would know outside of Greek government and the banking and finance community like Goldman Sachs or JP Morgan?
The early banking intercessions that propped up the appearance of Greek solvency were likely simple and direct exploitations of an economy in distress. The New York Times reported in February:
Despite persistently high deficits, a 1996 derivative helped bring Italy's budget into line by swapping currency with JPMorgan at a favorable exchange rate...In what amounted to a garage sale on a national scale, Greek officials essentially mortgaged the country's airports and highways to raise much-needed money...A similar deal in 2000 called Ariadne devoured the revenue that the [Greek] government collected from its national lottery.
These deals were undertaken as accounting camouflage for debt as a sale or leveraged investment to obtain or protect membership in the EU. In Greece's case, it got out of control. Like a pay day loan operation, the debt deadlines were deferred again and again, and the practical cost of that debt is as unfathomable as the derivatives on which it was leveraged. It has been the most massive and sophisticated pay day loan scam in history.
By treaty, the EU is now obligated to loan to and otherwise support the Greek government in order to keep it in the union. So by feeding the logarithmic debt appetite built on snowballing usurious opportunism by global banking, Greece became a liability for the entire EU. Now the errant child is in such duress that it must beg the more solvent siblings for a bail out. The question is, who would have loaned to Greece without the certainties of backstop involved in the EU treaty? Puts one in mind of the relationship between AIG and Goldman Sachs with the U.S.A. as guarantor of both of their counterparty positions.
It's a whole new business model contrived in the cauldrons of "financial innovation". It operates with all the cravenness of the fabled Mexican jail. Take a hostage through peri-legal means in order to extort the family of the prisoner/hostage. Greece is the hostage and the EU is the family.
Greece is not so much an example of a failed socialist philosophy as it is an example of exploitation as rich in deceit as was the defrauding of this nation's pension and endowment funds with fraudulently rated securitized debt instruments. Greece's debt may have remained under control except for the collusion of banking and Greek government that then ran afoul of EU treaty accounting misadventures. The lesson in this is that even socialists need to be mindful of pay day lenders in a global capitalist system that does not care about consequences other than personal profit. Greece needed a global consumer protection agency on the nation state scale.
Someone will make money off of Greece's bailout or default, and you can bet that Goldman Sachs has shorted the Euro.
Zach Carter: Tom Carper Is Attacking Consumers and Defending Wall Street
There are two consumer protection amendments getting serious attention on the Senate floor this week, one of them positive, one of them incredibly destructive -- the kind of amendment that can actually sink the bill if adopted.
Sen. Tom Harkin: Protecting Consumers From Unfair ATM Fees
Currently, there is no limit on what the operator of an ATM can charge a consumer for using that machine. This is unfair and it is a policy we must address head on.
Not a single thing that is ==real== happened as a result of these "magical transactions" EXCEPT that the Government of Greece suddenly decided that it could no longer "afford to" do all of those ==real== things or to maintain those ==real== assets (which are still out there, by the way).
"Dollars," like "Euros," are not ==real== things. They are a medium of exchange. Transactions in currency have meaning only to the extent that they correspond to ==real== DOMESTIC production of ==real== things.
Wall Street bankers (and plenty of governments) are quick to proclaim that they are insanely rich! But... their "riches" can disappear in fifteen minutes, only to reappear in another fifteen. (Olive trees can't do that. Neither can airports.)
Meanwhile: all the rest of us are "forever buried in debt" ... to them, of course.
Take off your illusion spectacles before they kill you.
That's a deep and profound question. hmmm. I can't, for the life of me, figure out the answer to such a deep question. Who, who makes money when you borrow and don't pay it back?
Profound? Here's a hint. If you say something profound, others will tell you. To declare yourself profound merely makes you appear immature.
"When you owe the Bank 50 Dollars, that is your problem. When you owe the Bank 50 Million Dollars, that is the Bank's problem."
Moral: Always gamble with other people's money.
Humpty Dumpty was pushed!!!
Those of U.S. that pay close attention have clearly observed the leverage applied to assure that the shot positions would be rewarded.
The same players that placed their bets against the housing market and the weaker governments, worked their magic money manipulations in the energy markets to guarantee their positions.
The most effective way to insure an individual, a company, a city, state or country will struggle or fail to meet it's obligations is to break it's budget.
The Wall Street wizards/banksters, cornered and horded vast portions of the energy futures market with the Enron model as their guide. They drove up energy costs at rates that could not be sustained by the vast majority of marginal borrowers, breaking budgets from kitchen tables to board rooms to city counsels to national assemblies far and wide.
Remember, everything you touch has an energy component contributing to it's cost, EVERYTHING!!!
When you have been assured by your well oiled insider government servants that regardless of the cost, your guarantors will be funded and no haircut to you will be required, whats the risk?
Humpty Dumpty was definitely pushed!!!
Those of U.S. that pay close attention have clearly observed the leverage applied to assure that the shot positions would be rewarded.
The same players that placed their bets against the housing market and the weaker governments, worked their magic money manipulations in the energy markets to guarantee their positions.
The most effective way to insure an individual, a company, a city, state or country will struggle or fail to meet it's obligations is to break it's budget.
The Wall Street wizards/banksters, cornered and horded vast portions of the energy futures market with the Enron model as their guide. They drove up energy costs at rates that could not be sustained by the vast majority of marginal borrowers, breaking budgets from kitchen tables to board rooms to city counsels to national assemblies far and wide.
Remember, everything you touch has an energy component contributing to it's cost, EVERYTHING!!!
When you have been assured by your well oiled insider government servants that regardless of the cost, your guarantors will be funded and no haircut to you will be required, whats the risk?
Humpty Dumpty was definitely pushed!!!
Consider yourself Sacked!!!!!
Author had the misfortune of posting before $1T EU bailout, making much of it irrelevant.
Maybe the Euros have done enough, maybe not. one day of trading won't tell us the whole story.
Investments should be about the future, long term, and long, not short. otherwise you end up with a country that values paper currency and lottery schemes over true manufacturing...that is, like U.S.
Since the model is naturally perfect, any failure to predict is necessarily caused by a defect in the reality...
And it's not even a joke...
How are the other EU nations going to pay this back?