Controlled Demolition of Greek Economy

It is obvious to anyone who walks down a commercial street in any city in Greece that a carefully constructed plan is being executed

The economy is slowly but surely being taken apart piece by piece. Or more specifically, the actual hard cash in circulation is slowly but surely being extracted from the economy.

I have covered this issue before but the effects are becoming more and more apparent with each passing day. I have stated that Greece should default as soon as possible, ie default while people still have hard cash in their pockets.

But as everyday passes and hard cash is becoming more scarce the Greek people are becoming weaker and weaker and less able to deal with a default if and when it happens.

Now I come to the controlled demolition part, as I mentioned elsewhere the IMF has specifically advised London that to get through tough times they should reduce taxes for the short-term to “stimulate growth”. Yet the Greek government is doing the exact opposite.

What is the benefit of weakening the Greek economy as much as possible before the default?

Well there is an obvious benefit, the international banks get as much money out of the Greeks as possible before the country defaults. ie they are getting their money while they can. This is a very short-term philosophy, it is selfish and it could also be called cruel.

But there is a possibility that there is a longer term plan. What would happen to Greece in an environment where the banks have closed and hard cash is hard to come by? What is going to be the attitude of the people? What will they do? What will they expect to happen?

I don’t have the answer to this question.

There is a lot of talk about the Aegean sea containing large reserves of oil. I do not know if this is true, but if it were true the destruction of Greece would be inline with the destruction of Libya, a country that also has large oil reserves. There are political problems in Yemen, Somalia, Sudan and Syria also, and all these countries of oil reserves to larger or lesser extents and/or significant geographical significance.

Like I said, I have no idea if it is true that there is oil in the Aegean, if you have some evidence please let me know, but assuming there is, how does an economy in disarray help a country that wants to extract this oil?

Someone said to me that if Greece defaults people will be using their apartments to buy a loaf of bread. This may have been true in Russia but as I have mentioned elsewhere, a Greek default will be unique in the fact that the country will still have a currency that is worth something after the default, not like in Russia where the Rouble became worthless.

As long as there is money in circulation the Greek situation should not be as painful. But it does open up another question. What do international bankers gain by extracting the hard cash out of the Greek economy before allowing a default?

Could it be as simple as wanting to get money while they can? Or is there a bigger picture? In Russia the default wiped out people’s wealth, in Greece this will not happen as long as people still have cash.

Looking at the Russia default, what did international banks gain by wiping out people’s wealth? I suppose it made Russian assets much cheaper to foreigners because the Russians were desperate to get hold of hard currency like the dollar.

Maybe I have stumbled across the reason for the controlled demolition of the Greek economy. It is simply a means by which to get assets and rock bottom prices from people who are desperate for hard currency.

Looking at the plan Papandreou has, he wants to continue to increase Greek debt so the government will be tied over until a point in the future where the government books are balanced. But then where will we be?

The Greek people will have larger interest payments than they do now and the economy will be in worse shape because of the higher taxes. Sorry, where is the light at the end of this tunnel?

The result is an engrossing inside account of how, despite the best of intentions, the Fund’s two loans to Argentina in 2001 ended up merely prolonging the country’s agony and increasing its debt burden. The Economist has 2 excellent articles regarding the Argentinian default

From what I can see, the goal of the austerity measures will be to get to a point where Greeks will be in a position to pay higher interest payments on loans, in a situation where they will be able to do this on a long-term basis, 30 years, 50 years and not be in danger of defaulting.

ie Greece will be stable enough for creditors not to have to worry about not getting their interest payments. I am sorry, but where is the plus point for the Greek people in this scenario? Personally, I do not see one.
[youtube

And as for the interest payments, even if the Greek government does balance the books, where is the money going to come from to pay the interest? Greece has a trade deficit which shows no sign of balancing and Greece cannot print money. So where exactly is the money for the interest payments going to come from?

Seriously, the more I think about the whole situation the more absurd it seems. Papandreou does not seem to have a clue that his actions will lead Greece into the abyss. Either he has been brainwashed by socialist economics professors or is fully aware of the consequences of his actions.

I believe there is a way out, there is a way to force the hand of the government and that is for all businesses to work three day weeks or to cut their hours in half. This will cripple the government as tax revenues will crash forcing them to default earlier.

I believe the goal of the Greek people should be to force the government to default, to force the government to wipe their debts and start from a fresh slate. This can only be done by slashing the government’s money supply, take away the money, take away their power.

Get the latest updates in your inbox