Monday, June 29, 2015

Banksters at the Pass

The upcoming referendum in Greece will determine if it is still the cradle of democracy. Greeks do not want to exit the euro zone, but neither do they want their government bossed by IMF and EU bankers. They elected Alex Tsipras to negotiate a deal, but despite his best efforts too many austerity pills remain to be swallowed by Greeks, so the snap referendum is scheduled for Sunday. Before then a 1.6bn€ debt payment is due on Tuesday. So far banksters have refused Greece any further extension of credit, even to allow the democratic process to play out. That refusal speaks volumes about the banksters' bottom line. Until the referendum takes place, the Greek government has imposed capital controls to prevent a run on deposits. Banks are shut until Monday. A technical default looks likely. Using the word "betrayal" in these circumstance is the height of hypocrisy. The referendum does not mention the much anticipated Greek exit from the euro, it simply asks if Greeks should agree to the terms submitted by Greece's creditors. After all, its their money.

US Person has argued before that Greece should look to Iceland and Argentina for inspiration in its current crisis.{01.11.11, Greece DOA} A return to the drachma will be unpleasant at first, but not as grinding as more austerity. Besides, the Greek economy is already in deep depression, having shrunk by 30%. By creating an opportunity for Greece to pay back its debts in a devalued currency will accomplish two important goals. The drachma will give back control of the nation's budget back to elected Greek leaders, and allow the government to shrink the size of its outstanding debts while regaining a competitive edge. No one so far is suggesting that the euro would cease to circulate in Greece if it decided, or more likely, is expelled from the euro zone. The British devalued its sacrosanct pound after the world war for many of the same economic reasons. It was deep in war debt, had lost its trade competitiveness and its economy was moribund. A one-off devaluation of 30% could boost Greece's economic output by up to 20% depending on the government's achieving other needed reforms, such as collecting more taxes, reducing the public sector costs and enforcing anti-corruption laws. Yes, Hannah, Greece will survive this crisis and prove once again its people are true democrats.