Germany then also owed billions thanks to a treaty that was made in a French-speaking country along with an offer that couldn’t be refused, back then Versailles, this time Maastricht.
Back then government employees were demanding their wages, unions were on strike, the coffers were empty, and the government of the day chose to inflate away the problem. That is one of the options presented to Greece today--they can leave the Euro, default on the debts, and inflate away the cost of the commitments made by previous governments to unions, pensioners, and government employees.
There are two other alternatives;
- The first is austerity, although it’s getting harder to do the austerity thing these days, now that it’s considered politically incorrect to shoot at rioters with live ammunition, which wasn’t an issue in 1923.
- The other way is to sell up the assets of the country; which was an idea the French came up with when they occupied the industrial heartland of Germany in order to convince them to “honor their obligations”.
First the Greek state postal system probably has a negative NPV, and the Acropolis, well I know it would look great as an anchor attraction in a theme park in Düsseldorf, but you can’t be serious!!
The second is that in any case the full resources of the joke which passes for the fragmented European “defense” capability is currently engaged doing, I’m not quite sure what, or for what objective, in Libya. Although, it must be said, Germany elected not to participate in that Charlie Foxtrot…so perhaps they were saving themselves up for a spot of asset-stripping?
Everyone knows the story of hyperinflation in the Weimar Republic. Not so many know how Germany was transformed from basket-case to embark on seven “Golden Years” that lasted until the 1929 US Stock-market Crash.
In the chaos that followed the stock-market crash Hitler saw his chance to seize power; by then Germany was strong enough to go to war against the whole world. To understand how that was done you have to understand the flaw in the New-World-Order financial system.
When Alan Greenspan got interrogated by Congress, just before all the excitement of financial Armageddon was really starting and what seems like many-many years ago; he famously said, “We found a flaw”.
He was talking about a flaw in Econ-101 and the base-assumptions about how high-finance works (as in the stuff you smoke), which provided the base-foundation for “inflation-targeting”, “affordability”, and all the other nonsense that is still endlessly regurgitated by PhD economists.
What he didn’t say was what the flaw was?
Well it’s not a new idea, and it’s not complicated. It’s the same “flaw” that the Merchant of Venice got hammered by, which is that you can’t eat a pound of a man’s flesh, and you can’t cut out that flesh without spilling blood.
That wasn’t a new idea then either, in Islam it says something along the lines that it is dirty to profit from someone else’s misfortune, and that’s not just in the eyes of your fellow man, it’s in the eyes of God too.
Financial Bubbles are all about profiting from someone else’s misfortune, that’s because they are zero-sum. In aggregate no wealth is created; for everyone who wins, someone else must loose; hence the mantra that used to be rolled out as a clever in-joke on Wall Street, “The value of something is what you can sell it for to someone dumber than you”.
The reality was that no one cared so long as there was a good story line, and the legal work on the “Pound of Flesh” clause had been done properly.
As we speak, bankers in Germany and France are lining up in a big long queue to extract their pound of flesh from Greece. And the threat is that if they don’t get it they will trash Greece’s credit score.
And they have every right to do that, both under the Law, and from their perspective, morally, because the core of the belief-system of every atheist is that in a “free market” the law on profiting from other people’s misfortune (or stupidity), is a “Just Law”.
And sure, the behavior (in the past) of the government that racked up those debts was no different from a glazed-eyed drug addict. They lied, they cheated, and when they got the money they blew it buying election-candy and apartments for their mistresses.
Therefore “someone” should be punished. Money was lent, so money should be paid back, with interest; and if not the stupid population which voted that stupid corrupt government into power, in “democratic” elections, should be made to lie down and have pounds of flesh cut out of the part of their chest closest to their hearts, until such a time as they “learn” better.
This is how that works, all the banks in the world operate a cartel to protect each other, so if you borrow money from a moron in Bank A, and you don’t pay it back, then there is a back-to-back agreement with ALL the other banks in the world, that says they won’t lend you any money, regardless of how perfect your collateral is.
So you can’t go to Bank B to get credit collateralized by the virginity of your six-year-old grand-daughter, or something equally valuable. No first you have to pay Bank A, then we talk.
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| Source: WSJ.com (added by EconMatters) |
If that’s not anti-trust and collusion to make the customers pay more, I don’t know what is? But that’s how the great New-World-Order financial system works, except for one small problem, it doesn’t work.
There’s got to be a better way!
In the case of the Weimar Republic, a new currency was collateralized by land and by other tangible assets. In the case of the contemporary Greece, a step away from the abyss would be to issue new debt, collateralized by tangible assets.
But what assets have they got?
Well, Greece’s biggest industry and major source of foreign exchange is it’s tourism industry, which coincidentally also provides the main conduit that Greeks and foreigners investing in Greece use to avoid paying tax, which is one of the reasons Greece got into the mess in the first place. (See Chart Added by EconMatters)
The way that works is that when you sell a holiday to a German for $2,000 which includes for supply of airport transfers, a nice hotel room with a sea-view, and full board, you “sell” that service and the room to your relative or whatever in Germany for $500 and you cleverly manage to make a small operating loss on your hotel (in Greece), so you don’t pay any tax in Greece.
And you don’t pay much tax in Germany either, because you spend the $1,500 that the Greek tax-man doesn’t know about on the cost of employing your relatives to “market” the holiday in Germany, and then you can slip the nice clean crisp Euro’s back into Greece so that you can live in the style to which you have been accustomed. And it’s not just the Greeks who work that scam, lots of Germans do too.
It’s not hard to stop that. Just impose a tax on hotel rooms, depending on the category, and if the taxes don’t get paid you simply confiscate them and put them into a pool to securitize the debt.
That’s not nice, but someone has to pay taxes, sometime, and a good place to start on that, is to go after the people who can afford to pay them. And for collection, well, you could put all the recently retired civil servants on commission.
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