Greece Remains Defiant as It Seeks Creditor Deal This Week

May 21st, 2015
in Op Ed

by Rodger Malcolm Mitchell,

Greece's government said it won't back down on election pledges to end austerity.

Nikos Filis, spokesman for the parliamentary group of Prime Minister Alexis Tsipras's Syriza party said:

"Our mandate from the Greek people is to reach an agreement where we stay in the euro area without harsh austerity measures."

Follow up:

Have the Greek leaders caved from "end austerity" to "end harsh austerity"? Does this mean austerity has become O.K., so long as it isn't "harsh" austerity (whatever that means)?

Tsipras's so-called red lines include no further cuts to wages and pensions.

That's all well and good, but what about taxes? Should the impoverished Greek people suffer even more taxes, to pay the EU bankers?

And what about all the other national needs a government is expected to provide for?

Like Chicago, Cook County and Illinois, Greece is monetarily non-sovereign. It has no sovereign currency. Greece uses a currency, the euro, over which it has no control.

Unlike the U.S., Canada, Australia, China and other Monetarily Sovereign nations, monetarily non-sovereign entities can and do run short of money.

Chicago has. Illinois has. Greece has. Greece is broke - more than broke it is deeply, hopelessly in debt.

There is no way Greece can earn enough euros to pay its debts - not this year, not next decade, not next century.

Like all monetarily non-sovereign governments, Greece has but two sources of money: Taxes and net exports.

But its people are too broke to pay more taxes, and Greece is a net importer. Year after year, billions of net euros flow out of Greece.

monetary sovereignty

So, since it's people are broke and the world doesn't want to buy what Greece is selling, how will Greece obtain the money to pay its debts?

The EU solution is for Greece to increase its debts by borrowing more.

If that makes sense to you, congratulations. You are well on your way to being an EU economist.

Of course, the EU cares nothing about Greece or the Greek people. The EU cares about two things only:

First, the EU wants to protect the banks. Rich bankers own and run Europe, and the European politicians are their well-paid puppets.

Second, the EU wants to protect the euro. It is the euro that has given the European politicians their well-bribed jobs at the expense of the taxpayers.

German Vice Chancellor Sigmar Gabriel said:

"A "third aid package for Athens is only possible if reforms are also implemented. A Greek exit from the euro would pose a political challenge and not an economic one, but "no one would have trust anymore in Europe if, in the first big crisis," a currency member quits, he said.

Translation: The word "reforms" means that the Greek people must suffer more, so that wealthy European bankers can be paid and the politicians can keep their cushy jobs.

The sole purpose of any Greek government is to benefit Greek citizens, not to benefit foreign bankers and politicians.

Here is what Greece's politicians should do:

1. Re-adopt the drachma as Greece's sovereign currency.
2. Pay all debts in drachmas on a 1-to-1 basis. Any creditors refusing drachmas would receive nothing.
3. Convert all Greek bank accounts containing euros to drachmas, on a 1-to-1 basis.
4. Cut Greek taxes. All remaining taxes would be paid only in drachmas.
5. Increase Greece's spending (in drachmas) on social programs infrastructure, R&D and jobs programs.
6. Raise interest rates, if necessary to control inflation.
7. Cut borrowing. As a Monetarily Sovereign nation, Greece would have no need to borrow drachmas(Someone should tell this to American politicians). Sell bonds only as an interest rate control.

Whether Greece would stay in the EU as a non-euro member (ala the UK) is a question, though a relatively unimportant question. The EU at best, is a trading and travel convenience.

Considering the negative effects (i.e terrorism) that open borders have facilitated, many European nations may now wish they could control their immigration. (Visualize the U.S. having a no-deportations, open border with Mexico, and you'll get the idea.)

From my vantage point, it seems that the EU wants more from Greece than Greece needs from the EU.

To the Greek people: Grexit just as fast as you can, and a year or two from now, you can thumb your noses at the foreign bankers.

Think about it: What do you have to lose?

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia.
1. A growing economy requires a growing supply of dollars (GDP=Federal Spending + Non-federal Spending + Net Exports)
2. All deficit spending grows the supply of dollars
3. The limit to federal deficit spending is an inflation that cannot be cured with interest rate control.
4. The limit to non-federal deficit spending is the ability to borrow.

Monetary Sovereignty

Monetary Sovereignty
Vertical gray bars mark recessions.

As the federal deficit growth lines drop, we approach recession, which will be cured only when the growth lines rise. Increasing federal deficit growth (aka "stimulus") is necessary for long-term economic growth.

Mitchell's laws:

  • Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
  • The more federal budgets are cut and taxes increased, the weaker an economy becomes.
  • Liberals think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless.
  • The single most important problem in economics is the gap between rich and poor.
  • Austerity is the government's method for widening the gap between rich and poor.
  • Until the 99% understand the need for federal deficits, the upper 1% will rule.
  • To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
  • Everything in economics devolves to motive, and the motive is the Gap.

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted. You can also comment using Facebook directly using he comment block below.



Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2018 Econintersect LLC - all rights reserved