Greece’s First Mistake
Yanis Varoufakis, Greece’s finance minister, quit because he personally clashed with other finance ministers, whom are clueless. I have listened to Varoufakis articulate the problem through his political assessment. Varoufakis is very smart and has at least a global view. Moreover, he is resigning for what he thinks is the good of his country. Not a single person in Brussels would do the same.
Varoufakis announced the decision in a blog post early Monday, saying there was “a certain preference” among European creditors that he no longer be involved in negotiations. Yet he is precisely the man who should be there. Moreover, there will be NO FURTHER negotiations – all debt will be suspended externally. Varoufakis clashed openly with counterparts, including Wolfgang Schaeuble of Germany, who is economically and will single-handedly destroy Europe.
There is Only One Way Out For Greece
Brussels has been dead wrong. The stupid idea that the euro will bring stability and peace, as it was sold from the outset, has migrated to European domination as if this were “Game of Thrones”. Those in power have misread history, almost at every possible level. The assumption that the D-marks’ strength was a good thing that would transfer to the euro has failed because they failed to comprehend the backdrop to the D-mark.
Germany moved opposite of the USA toward extreme austerity and conservative economics because of its experience with hyperinflation. The USA moved toward stimulation because of the austerity policies that created the Great Depression, which led to a shortage of money, and many cities had to issue their own currency just to function. The federal government thought, like Brussels today, that they had to up the confidence in the bond market and that called for raising taxes and cutting spending at the expense of the people. The same thinking process has played out numerous times throughout history. Our problem is that no one ever asks – Hey, did someone try this before? Did it work? This is why history repeats – we do ZERO research when it comes to economics. It is all hype and self-interest.
Greece should immediately begin to print drachma. By no means has the introduction of a new currency been a walk in the park. There is always a learning curve, as in the case of East Germany’s adoption of the Deutsche mark, the Czech-Slovak divorce of 1993, and the creation of the euro itself . However, the bulk of transactions today are electronic, meaning we are dealing with an accounting issue more than anything. The euro existed electronically BEFORE it became printed money; Greece should do the same right now.
The difference concerning East Germany and others was the fact that there was no history. This is more akin to the 1933 devaluation of the dollar by FDR whereby an executive order reneged on promises to pay prior debt in gold. This would be similar. The new drachma should be issued at two-per euro, only because the people will think the drachma should be worth less than a euro based on pride. If the new drachma is issued at par, the speculators will sell, assuming it will decline. Issue it at 50% and you will eventually see the opposite trend emerge once people see the contagion begin to spread.
Brussels already cut off the banks in Greece. All accounts in Greece should be electronically switched to drachmas. Begin to issue printed drachma for small change. The umbilical cord to Brussels must be cut immediately for Greece to stand on its own. You cannot negotiate with people who will not change their view of the world, for their own self-interest will cloud their perspective.
All EXTERNAL debt should be suspended. Any future resolution of debt should be reduced by 50% to account for the overvaluation of prior debt, thanks to the euro, and any interest previously paid should be deducted from the total loan.
All income tax should be abolished and the only taxation should be indirect. A close examination of the cost of government should be carried out and as many aspects of government as possible should be privatized and put out for bid. For example, motor vehicle and police agencies can privatize, eliminating pensions paid by the government. The size of government must be addressed, or Greece will risk civil war between government workers and private citizens.
Eliminating the income tax is critical and desperately needed for job creation. Small business must be profitable to begin to creating jobs and those who had to leave, whom are the nations’ brightest, will return. Bring your best talent home and build an economy.
Eliminating the debt is critical. Some 20 nations forgave all debt for Germany after World War II. The London Agreement on German External Debts, also known as the London Debt Agreement, was a debt relief treaty between the Federal Republic of Germany and its creditor nations that concluded August 8, 1953.
The London Debt Agreement covered a number of different types of German debt, both public and private, from before and after World War II. Some of them arose directly out of the efforts to finance the reparations system, while others reflect extensive lending, mostly by U.S. investors to German firms and governments. Those who forgave German debt: Belgium, Canada, Denmark, France, Great Britain, Greece, Iran, Ireland, Italy, Liechtenstein, Luxembourg, Norway, Pakistan, Spain, Sweden, Switzerland, South Africa, the United States, Yugoslavia, and others. The total amount under negotiation was 16 billion marks of debt, a result of the Treaty of Versailles after World War I, a debt that went unpaid during the 1930s that Germany decided to repay to restore its reputation. This was money owed to government and private banks in the U.S., France, and Britain. Another 16 billion marks represented postwar loans by the USA. Under the London Debts Agreement of 1953, the repayable amount was reduced by 50% to about 15 billion marks and stretched out over 30 years, and compared to the fast-growing German economy were of minor impact.
Therefore, what enabled Germany to rise from the ashes is a successful model. Greece too must be debt free. End federal borrowing, suspend all debt, and do not accept any more bailouts from Brussels.
The Euro Crisis Will Not End Until the Line Thinking Changes
Luis de Guindos, Spain’s economic minister, illustrates that those in European government remain clueless. He said that Greece should remain part of the Eurozone and the euro. He bluntly stated what Mario Draghi said before – the Euro is irreversible. Without the euro, Brussels fails. The idea of federalizing Europe crashes and burns.
Luis de Guindos said the Spanish government was open to negotiating a third bailout, and any new Greek package should include a comprehensive analysis of Greek needs. This is precisely what I have been warning – solution are never possible with the same line of thinking that created the crisis.
The Audacity of Lagarde – Exempt From Taxes
The audacity of Christine Lagarde, who insulted the Greeks by categorizing the whole nation as tax cheats, is up there with Trump calling all Mexicans drug dealers. Lagarde said the problem was “all these people in Greece who are trying to escape tax”. This is up there with some of the most racist statements about Jews, blacks, Asians, Russians, or other groups.
Well make a statement like that and someone digs. The old saying someone who lives in a glass house should never throw stones. Madam Lagarde, the French elitist who agrees with hunting down people for money and robbing them for the benefit of those in government, admitted that her $467,940 annual salary and $83,760 of additional allowances is entirely tax-free, as the IMF is an international organization. For you see, those in government always find ways to exempt themselves from taxes. That helps when they have to raise money so they never feel the sting of their own demands.
If you work at the IMF, there are special exceptions as an international organization. You see, how can they hire people from different countries if they are taxed based upon the tax rate of their home country? Gee – now that would not be fair since one person would not take home the same amount of money as another. The solution – freedom from taxation. The IMF pays salaries net of tax to ensure equal pay for equal work, regardless of nationality.
Under this theory, I suppose we should have the same tax-free status since we have staff from Asia to the Middle East. Madam Lagarde pays all other taxes levied on her, including local and property taxes in the U.S. and France.
Greece & Brussels’ Quest to Dominate Europe
QUESTION: Marty, I want to say congratulations. You stood up there in Berlin in 2012 and said the Euro-Swiss peg would break and that Greece would ultimately leave the euro. I can’t wait for this year’s Berlin conference. Wonder if the central bank of _________ will attend again? I suspect that Brussels will not back down since this is all about their domination of Europe. Do you see this contagion rapidly tearing Europe apart with separatist movements cropping up everywhere?
All the best
HZ
ANSWER: I cannot comment on who will attend this year. Yes, I was surprised the central bank admitted to everyone who they were and their comments were concerned about our forecast for gold and its impact upon their reserves That aside, the answer is yes. We should begin to see some dissent rise rather rapidly within the scheme of things. I do not know any academic in the USA who even agrees with the policy of Brussels and its drive for austerity. So when the academics do not even support their policy, one must wonder, what is really going on in their minds? It appears to be as I wrote – World War III with a pen and it is all about domination, as you mention.
Podemos, the left-wing party in Spain, is rising and taking on the analogous image of the Syriza party in Greece against the austerity measures in Europe. Podemos is now on par with the two mainstream parties. As poll published on Sunday for the newspaper “El Pais” showed the conservative PP is of Prime Minister Mariano Rajoy with a 23% lead, followed by the socialist opposition at 22.5% and 21.5% for Podemos.
We have a major generational shift going on and it will be out with the old and in with the new. The older generation dominates the world, yet they were supposed to be the hippies who grew up to become the enemy against which they protested in the 1960s. Well the hippies are the old “establishment” crowd and it is time they roll over.
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