Greece, part II
Albert Einstein once said, to paraphrase… “Insanity: doing the same thing over and over again and expecting different results.”
The European Union is trying to save Greece from default is like watching two people in a car. They are driving down a steep hill rapidly approaching a cliff… and the car’s brakes fail!
The passenger (the EU Troika) screams at the driver (Greece’s Prime Minister) to press harder on the brake pedal already at the floor. They hope it may (like magic) work to stop the car going over the edge… or not.
Sadly, it will. And I don’t mean the brakes will suddenly work.
Greece may now be loaned just enough money to make its debt service repayments to the Troika, plus a few Euros left over to stop the Greek public from starving. It’s another kicking the can down the road exercise.
Their creditors are loaning just enough money that must be used to make the debt service payments! It will probably be held in escrow by a third-party so Greece can’t use it for something else.
It’s called delaying the inevitable; probably so all of the principal actors in this theatrical production can quit and let someone else get caught holding the bag.
Greece has been cornered by the European Troika, the European Commission (EC), the International Monetary Fund (IMF), and the European Central Bank (ECB), and notably by Germany.
In this instance, the IMF is not at all happy (IMF report) at throwing good money after bad, and they are very public about it. This reminds me of the book – Confessions of an Economic Hit Man.
I expect that the prime minister of Greece will resign once the initial bailout has been concluded, as he does not want to be stuck in the hot seat when the music stops. Which it why somebody else will have to take the blame for the bankruptcy in Greece, and he does not want to go into the history books as the one.
The same thing happened to the United Kingdom in 1944 at the Bretton Woods conference in New Hampshire, where Britain was desperate for money, weapons and food to continue the war against the Axis. It was forced to give up the British pound as the preeminent reserve currency to the United States dollar. The IMF was organized at this conference as well.
After surrendering the Pound Sterling, Britain started to go into a serious decline (rationing continued for nearly fifteen years after the war) and the United States became much stronger.
It’s been said that the 20th century was America’s century. I doubt that will be said about this one. It’s so sad as it doesn’t have to happen. The problem is that our congresspeople no longer act like children, but more like babies.
We face the same transfer of currency stewardship when the next president faces something similar in 2018 or 2019. That’s probably Mrs. Clinton, who will live to regret actually winning since she will be blamed for everything even though George W. Bush started the ball rolling to the cliff edge.
We will have a crisis and the only country that can bail us out will be China. They have trillions of dollars in reserve; we have nothing but ever increasing debt.
As in 1944 they will demand that the United States give up its dollar role as the premier reserve currency and defer to the Chinese yuan. They are already doing currency swaps bypassing the dollar in international trade. It will make China the preeminent country as a global power. We will have a slow decline.
It doesn’t have to happen. There is a simple fix.
