Global Economic Intersection
Advertisement
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
Global Economic Intersection
No Result
View All Result

EU Showdown: Greece Takes on the Vampire Squid

admin by admin
January 9, 2015
in Uncategorized
0
0
SHARES
0
VIEWS
Share on FacebookShare on Twitter

by Ellen Brown, Web of Debt

Greece and the troika (the International Monetary Fund, the EU, and the European Central Bank) are in a dangerous game of chicken. The Greeks have been threatened with a “Cyprus-Style prolonged bank holiday” if they “vote wrong.” But they have been bullied for too long and are saying “no more.”

A return to the polls was triggered in December, when the Parliament rejected Prime Minister Antonis Samaras’ pro-austerity candidate for president. In a general election, now set for January 25th, the EU-skeptic, anti-austerity, leftist Syriza party is likely to prevail. Syriza captured a 3% lead in the polls following mass public discontent over the harsh austerity measures Athens was forced to accept in return for a €240 billion bailout.

Austerity has plunged the economy into conditions worse than in the Great Depression. As Professor Bill Black observes, the question is not why the Greek people are rising up to reject the barbarous measures but what took them so long.

Ireland was similarly forced into an EU bailout with painful austerity measures attached. A series of letters has recently come to light showing that the Irish government was effectively blackmailed into it, with the threat that the ECB would otherwise cut off liquidity funding to Ireland’s banks. The same sort of threat has been leveled at the Greeks, but this time they are not taking the bait.

Squeezed by the Squid

The veiled threat to the Greek Parliament was in a December memo from investment bank Goldman Sachs – the same bank that was earlier blamed for inducing the Greek crisis. Rolling Stone journalist Matt Taibbi wrote colorfully of it:

The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who’s Who of Goldman Sachs graduates.

Goldman has spawned an unusual number of EU and US officials with dictatorial power to promote and protect big-bank interests. They include US Treasury Secretary Robert Rubin, who brokered the repeal of the Glass-Steagall Act in 1999 and passage of the Commodity Futures Modernization Act in 2000; Treasury Secretary Henry Paulson, who presided over the 2008 Wall Street bailout; Mario Draghi, current head of the European Central Bank; Mario Monti, who led a government of technocrats as Italian prime minister; and Bank of England Governor Mark Carney, chair of the Financial Stability Board that sets financial regulations for the G20 countries.

Goldman’s role in the Greek crisis goes back to 2001. The vampire squid, smelling money in Greece’s debt problems, jabbed its blood funnel into Greek fiscal management, sucking out high fees to hide the extent of Greece’s debt in complicated derivatives. The squid then hedged its bets by shorting Greek debt. Bearish bets on Greek debt launched by heavyweight hedge funds in late 2009 put selling pressure on the euro, forcing Greece into the bailout and austerity measures that have since destroyed its economy.

Before the December 2014 parliamentary vote that brought down the Greek government, Goldman repeated the power play that has long held the eurozone in thrall to an unelected banking elite. In a note titled “From GRecovery to GRelapse,” reprinted on Zerohedge, it warned that “the room for Greece to meaningfully backtrack from the reforms that have already been implemented is very limited.”

Why? Because bank “liquidity” could be cut in the event of “a severe clash between Greece and international lenders.” The central bank could cut liquidity or not, at its whim; and without it, the banks would be insolvent.

As the late Murray Rothbard pointed out, all banks are technically insolvent. They all lend money they don’t have. They rely on being able to borrow from other banks, the money market, or the central bank as needed to balance their books. The central bank, which has the power to print money, is the ultimate backstop in this sleight of hand and is therefore in the driver’s seat. If that source of liquidity dries up, the banks go down.

The Goldman memo warned:

The Biggest Risk is an Interruption of the Funding of Greek Banks by The ECB.

Pressing as the government refinancing schedule may look on the surface, it is unlikely to become a real issue as long as the ECB stands behind the Greek banking system. . . .

But herein lies the main risk for Greece. The economy needs the only lender of last resort to the banking system to maintain ample provision of liquidity. And this is not just because banks may require resources to help reduce future refinancing risks for the sovereign. But also because banks are already reliant on government issued or government guaranteed securities to maintain the current levels of liquidity constant. . . .

In the event of a severe Greek government clash with international lenders, interruption of liquidity provision to Greek banks by the ECB could potentially even lead to a Cyprus-style prolonged “bank holiday”. And market fears for potential Euro-exit risks could rise at that point. [Emphasis added.]

The condition of the Greek banks was not the issue. The gun being held to the banks’ heads was the threat that the central bank’s critical credit line could be cut unless financial “reforms” were complied with. Indeed, any country that resists going along with the program could find that its banks have been cut off from that critical liquidity.

That is actually what happened in Cyprus in 2013. The banks declared insolvent had passed the latest round of ECB stress tests and were no less salvageable than many other banks – until the troika demanded an additional €600 billion to maintain the central bank’s credit line.

That was the threat leveled at the Irish government before it agreed to a bailout with strings attached, and it was the threat aimed in December at Greece. Greek Finance Minister Gikas Hardouvelis stated in an interview:

The key to . . . our economy’s future in 2015 and later is held by the European Central Bank. . . . This key can easily and abruptly be used to block funding to banks and therefore strangle the Greek economy in no time at all.

Europe’s Lehman Moment?

That was the threat, but as noted on Zerohedge, the ECB’s hands may be tied in this case:

[S]hould Greece decide to default it would mean those several hundred billion Greek bonds currently held in official accounts would go from par to worthless overnight, leading to massive unaccounted for impairments on Europe’s pristine balance sheets, which also confirms that Greece once again has all the negotiating leverage.

Despite that risk, on January 3rd Der Spiegel reported that the German government believes the Eurozone would now be able to cope with a Greek exit from the euro. The risk of “contagion” is now limited because major banks are protected by the new European Banking Union.

The banks are protected but the depositors may not be. Under the new “bail-in” rules imposed by the Financial Stability Board, confirmed in the European Banking Union agreed to last spring, any EU government bailout must be preceded by the bail-in (confiscation) of creditor funds, including depositor funds. As in Cyprus, it could be the depositors, not the banks, picking up the tab.

What about deposit insurance? That was supposed to be the third pillar of the Banking Union, but a eurozone-wide insurance scheme was never agreed to. That means depositors will be left to the resources of their bankrupt local government, which are liable to be sparse.

What the bail-in protocol does guarantee are the derivatives bets of Goldman and other international megabanks. In a May 2013 article in Forbes titled “The Cyprus Bank ‘Bail-In’ Is Another Crony Bankster Scam,” Nathan Lewis laid the scheme bare:

At first glance, the “bail-in” resembles the normal capitalist process of liabilities restructuring that should occur when a bank becomes insolvent. . . .

The difference with the “bail-in” is that the order of creditor seniority is changed. In the end, it amounts to the cronies (other banks and government) and non-cronies. The cronies get 100% or more; the non-cronies, including non-interest-bearing depositors who should be super-senior, get a kick in the guts instead. . . .

In principle, depositors are the most senior creditors in a bank. However, that was changed in the 2005 bankruptcy law, which made derivatives liabilities most senior. In other words, derivatives liabilities get paid before all other creditors – certainly before non-crony creditors like depositors. Considering the extreme levels of derivatives liabilities that many large banks have, and the opportunity to stuff any bank with derivatives liabilities in the last moment, other creditors could easily find there is nothing left for them at all.

Even in the worst of the Great Depression bank bankruptcies, said Lewis, creditors eventually recovered nearly all of their money. He concluded:

When super-senior depositors have huge losses of 50% or more, after a “bail-in” restructuring, you know that a crime was committed.

Goodbye Euro?

Greece can regain its sovereignty by defaulting on its debt, abandoning the ECB and the euro, and issuing its own national currency (the drachma) through its own central bank. But that would destabilize the eurozone and might end in its breakup.

Will the troika take that risk? 2015 is shaping up to be an interesting year.

Previous Post

Dialectics

Next Post

In-the-Money Covered Calls as a Conservative Income Generator

Related Posts

Web3 Company To Run Super Bowl Ad For NFT Game As Crypto Is Ignored
Business

Web3 Company To Run Super Bowl Ad For NFT Game As Crypto Is Ignored

by John Wanguba
February 8, 2023
Google Introduces ChatGPT Rival Bard, AI Search Plans Accelerate In Battle With Microsoft
Business

Google Introduces ChatGPT Rival Bard, AI Search Plans Accelerate In Battle With Microsoft

by John Wanguba
February 8, 2023
BP Earns Record Profit In 2022, Slows Shift From Oil
Business

BP Earns Record Profit In 2022, Slows Shift From Oil

by John Wanguba
February 8, 2023
How To Mine Bitcoin At Home
Econ Intersect News

How To Mine Bitcoin At Home

by John Wanguba
February 7, 2023
Adani's Market Losses Exceeded $100B As Crisis Shockwaves Extended
Business

Adani’s Market Losses Exceeded $100B As Crisis Shockwaves Extended

by John Wanguba
February 7, 2023
Next Post

In-the-Money Covered Calls as a Conservative Income Generator

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Browse by Category

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Browse by Tags

adoption altcoins banking banks Binance Bitcoin Bitcoin adoption Bitcoin market Bitcoin mining blockchain BTC business China crypto crypto adoption cryptocurrency crypto exchange crypto market crypto regulation decentralized finance DeFi Elon Musk ETH Ethereum Europe finance FTX inflation investment market analysis markets Metaverse mining NFT nonfungible tokens oil market price analysis recession regulation Russia technology Tesla the UK the US Twitter

Archives

  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • August 2010
  • August 2009

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized
Global Economic Intersection

After nearly 11 years of 24/7/365 operation, Global Economic Intersection co-founders Steven Hansen and John Lounsbury are retiring. The new owner, a global media company in London, is in the process of completing the set-up of Global Economic Intersection files in their system and publishing platform. The official website ownership transfer took place on 24 August.

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Recent Posts

  • Web3 Company To Run Super Bowl Ad For NFT Game As Crypto Is Ignored
  • Google Introduces ChatGPT Rival Bard, AI Search Plans Accelerate In Battle With Microsoft
  • BP Earns Record Profit In 2022, Slows Shift From Oil

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

No Result
View All Result
  • Home
  • Contact Us
  • Bitcoin Robot
    • Bitcoin Profit
    • Bitcoin Code
    • Quantum AI
    • eKrona Cryptocurrency
    • Bitcoin Up
    • Bitcoin Prime
    • Yuan Pay Group
    • Immediate Profit
    • BitIQ
    • Bitcoin Loophole
    • Crypto Boom
    • Bitcoin Era
    • Bitcoin Treasure
    • Bitcoin Lucro
    • Bitcoin System
    • Oil Profit
    • The News Spy
    • British Bitcoin Profit
    • Bitcoin Trader
  • Bitcoin Reddit

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

en English
ar Arabicbg Bulgarianda Danishnl Dutchen Englishfi Finnishfr Frenchde Germanel Greekit Italianja Japaneselv Latvianno Norwegianpl Polishpt Portuguesero Romanianes Spanishsv Swedish