EXCERPT/ Investors Any Grexit GREECE
https://moneymorning.com/2017/04/19/investors...ny-grexit/
Poor, beleaguered Greece hopes to get its next €7.1 billion ($7.5 billion) bailout payment in June, just in time to make roughly €6 billion ($6.5 billion) in payments to creditors in July.
Now, tense negotiations in Valetta, Malta, last month appeared to smooth some stumbling blocks to releasing the latest tranche of the €86 billion ($92 billion) "rescue package," but this deal is not a done deal.
Then again, it's likely Greece will get its next handout… but there's a better than even chance it might be its last.
Since, as always, we're being honest here: Greece lied and cheated its way into the European Union. They had a lot of help from Goldman Sachs.
Under the Maastricht Treaty, the rules that govern the European Union and created the euro, a country that wanted into the Union and the common currency had to have "sound fiscal policies," including debt limited to 60% of GDP and annual deficits not greater than 3% of GDP.
Goldman Sachs created a series of massive currency swaps that essentially masked Greece's true economic condition by burying, temporarily, the extent of Greece's budget deficit.
Whether it was a game that economically strong EU countries knew was being played has never been openly questioned. However, in all likelihood, it was no secret.
The euro was initially a boon to all countries that adopted it, but lately, it's tough to escape the fact that it's serving some countries better than others lately.
A Union with a common currency would eliminate cross-currency differences and make Germany's exports to the rest of the Eurozone appear to be cheaper – or at least not an obstacle in terms of currency differentials.
And since it was easier to borrow in a common currency, interest rates came down and euro loans became readily available in quantity across the continent.
Greece borrowed and spent while Germany exported more and more.
Then of course came the financial crisis of 2008 and the global Great Recession that followed. Southern European countries that had converted to the euro and borrowed heavily were leveraged close to insolvency and had to be bailed out.
The backing for all those bailouts came from none other than the European Central Bank (ECB), the Union's collective central bank.
And we all know how helpful and honest and altruistic central banks are…
In Reality, the ECB Is a Fantasy (and a Scam)
The ECB, like our own central bank, the U.S. Federal Reserve System, doesn't actually have capital like, you know, a real bank.
Central banks are "fiat" banks; they're banks because they call themselves banks (or, in our case, a "system"
. People believe they have unlimited "capital," and central bankers do nothing to disabuse them of the idea.
The only capital they really have is (misplaced, unearned) trust, because everyone who trusts the world's banking system buys in – literally – to the fantasy that these central banks have unlimited capital.
In reality, the ECB has a tiny amount of capital, contributed by some of the countries in the EU. Not that it's important, because the fantasy is such a given, but several of the countries who pledged capital to the ECB never bothered to actually fork it over.
So in order to pull off Greece's third bailout, the ECB has had to supply money (which it doesn't have) to badly damaged, extremely shaky European banks, so that they may buy the debt Greece issues to keep paying off previous bailout loans it's been racking up.
Without the ECB promising to guarantee Greece's debt and lend money to the banks that are buying Greece's bonds, there wouldn't have been any bailout of Greece, and it would have stopped paying its debts.
https://moneymorning.com/2017/04/19/investors...ny-grexit/
Poor, beleaguered Greece hopes to get its next €7.1 billion ($7.5 billion) bailout payment in June, just in time to make roughly €6 billion ($6.5 billion) in payments to creditors in July.
Now, tense negotiations in Valetta, Malta, last month appeared to smooth some stumbling blocks to releasing the latest tranche of the €86 billion ($92 billion) "rescue package," but this deal is not a done deal.
Then again, it's likely Greece will get its next handout… but there's a better than even chance it might be its last.
Since, as always, we're being honest here: Greece lied and cheated its way into the European Union. They had a lot of help from Goldman Sachs.
Under the Maastricht Treaty, the rules that govern the European Union and created the euro, a country that wanted into the Union and the common currency had to have "sound fiscal policies," including debt limited to 60% of GDP and annual deficits not greater than 3% of GDP.
Goldman Sachs created a series of massive currency swaps that essentially masked Greece's true economic condition by burying, temporarily, the extent of Greece's budget deficit.
Whether it was a game that economically strong EU countries knew was being played has never been openly questioned. However, in all likelihood, it was no secret.
The euro was initially a boon to all countries that adopted it, but lately, it's tough to escape the fact that it's serving some countries better than others lately.
A Union with a common currency would eliminate cross-currency differences and make Germany's exports to the rest of the Eurozone appear to be cheaper – or at least not an obstacle in terms of currency differentials.
And since it was easier to borrow in a common currency, interest rates came down and euro loans became readily available in quantity across the continent.
Greece borrowed and spent while Germany exported more and more.
Then of course came the financial crisis of 2008 and the global Great Recession that followed. Southern European countries that had converted to the euro and borrowed heavily were leveraged close to insolvency and had to be bailed out.
The backing for all those bailouts came from none other than the European Central Bank (ECB), the Union's collective central bank.
And we all know how helpful and honest and altruistic central banks are…
In Reality, the ECB Is a Fantasy (and a Scam)
The ECB, like our own central bank, the U.S. Federal Reserve System, doesn't actually have capital like, you know, a real bank.
Central banks are "fiat" banks; they're banks because they call themselves banks (or, in our case, a "system"
. People believe they have unlimited "capital," and central bankers do nothing to disabuse them of the idea. The only capital they really have is (misplaced, unearned) trust, because everyone who trusts the world's banking system buys in – literally – to the fantasy that these central banks have unlimited capital.
In reality, the ECB has a tiny amount of capital, contributed by some of the countries in the EU. Not that it's important, because the fantasy is such a given, but several of the countries who pledged capital to the ECB never bothered to actually fork it over.
So in order to pull off Greece's third bailout, the ECB has had to supply money (which it doesn't have) to badly damaged, extremely shaky European banks, so that they may buy the debt Greece issues to keep paying off previous bailout loans it's been racking up.
Without the ECB promising to guarantee Greece's debt and lend money to the banks that are buying Greece's bonds, there wouldn't have been any bailout of Greece, and it would have stopped paying its debts.
