The Rise and Fall of Greco-Roman Man…the Collapse of the Euro-Empire
by Dene McGriff and Doug Krieger
The PIIGS [ an acronym used by international bond analysts, academics, and the economic press that refers to the economies of Portugal, Italy, Greece, and Spain – and sometimes Ireland ] are in the Parlor and it’s not a pretty scene. First Greece, now Italy. So you wonder why the stock market has been a whip saw for the past six months – sometimes going up or down 3 to 4 percent a day depending on the news from the Euro Zone. Will they save the Euro or not? Of course not! The collapse is inevitable. The only question is when will it collapse? Italy is following the same path as Greece. Interest rates on bonds are now above 7 percent, beyond the point of no return – even the experts call these rates unsustainable. The big difference is that Italy’s economy is six times larger than that of Greece and Italy is the third largest economy in Europe.
- “The window of opportunity to save the euro is rapidly closing, as the sovereign debt crisis erodes the solvency of Europe’s banks and drives up borrowing rates for even once rock-solid countries like France…
- “Looming over all the discussions of reform and financing mechanisms is the slowdown in Europe’s already anemic growth rate to 0.5 percent in 2012…
- “That calls into doubt the adequacy of the eurozone’s latest attempt to place the markets, the lagging effort to bolster the $605 billion European Financial Stability Facility to $1.4 trillion or to find other funding. The task will become that much harder in a recessionary environment, especially as France’s credibility with investors begins to fall.” (The Sacramento Bee, 11/13/11 by Nicholas Kulish and Steven Erlanger, New York Times)
They are worried about the domino effect, as well they should be. There is a blurry line between European countries and their banks; one might say a cozy relationship. Governments are always dipping directly into their accounts for their own use and issuing IOUs (i.e., bonds – a promise to pay them back). The banks then take these bonds and buy credit default swaps, a kind of insurance/derivative and these “instruments” are packaged and resold to other banks, funds and investors resulting in leveraging them up to 50 times their original value. The effect is to take $10 billion in bonds and turn them into $500 billion.
Derivatives have been called “financial weapons of mass destruction”. According to the New York Times, “More recently, swaps have emerged as one of the most powerful and mysterious forces in the crisis shaking Greece and other members of the euro zone. And they have become the subject of antitrust investigations in both the United States and the European Union.” We thought that after the 2008 banking crisis that the use of derivatives would have been curtailed. Instead, they continue to grow. Derivatives increase the liability by up to 40 times the original face value of the debt.
Besides the trillions in total debt, the European welfare state is at risk. You may recall Dene’s recent articles entitled “Europe Crumbles, America – the only game in town and “Class Warfare has Arrived”. The ancient Greeks of Plato’s time went through this. When the masses learn they can vote for a government that covers them from cradle to grave, they do. Who wouldn’t want to retire with full pay in their 50’s, have a couple of months vacation (all of August plus all of the holidays), free healthcare and dozens of other welfare benefits? The New York Times reports Europeans fear the loss of their liberal benefits. “Europeans have boasted about their social model, with its generous vacations and early retirements, its national health care systems and extensive welfare benefits, contrasting it with the comparative harshness of American capitalism.”
The truth of the matter is that they just can’t afford it. But as the “Arab Spring” morphs into the “Occupy…” movements and begins to spread around the world, the masses are sure to rise up and demand what they believe: What’s yours is mine and what’s mine is non-negotiable! The current depression (yes, that’s what it is and certainly it’s the worst since the 1930s and not likely to get better any time soon) is exacerbated by an aging population, government deficits and falling tax revenues. The hole is too deep to dig out of and the masses are not about to give in – only demand more. Continued deficits will lead to the creation of more money which will lead to massive inflation: Willkommen in der Weimarer Republik (Welcome to the Weimar Republic); where revolution and chaos abounds!
Italy has begun the “death spiral” following in Greece’s footsteps. Unsustainable interest rates lead to more bailouts for the banks (who would go under if not paid) which will lead to even higher rates and eventual default bringing down banks in Europe. Greece and Ireland were small potatoes (no offense to the Irish) but Italy may indeed be too big to bailout. The fact of the matter is France and England are not in that much better shape, plus they are heavily invested in the “Sovereign Debt” of the PIIGS (Portugal, Italy, Ireland, Greece and Spain). You see, they are all intertwined and the only way out in the end is default and collapse of the Euro.
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And just in case you feel I am picking on Europe, I’m not. The rest of the world is awash in debt. It is just too tempting for any sovereign government to want to print their problems away. This only has one possible outcome – the complete destruction of their currency a la don’t-cry-for-me-Argentina, Bolivia or Zimbabwe. Every “fiat” paper currency in the world has failed. “In fact, EVERY fiat currency since the Romans first began the practice in the first century has ended in devaluation and eventual collapse, of not only the currency, but of the economy that housed the fiat currency as well”. (The Daily Reckoning) The article just quoted is a very interesting history of fiat currency going back to ancient times.
The temptation to inflate your way out of debt is just too great. It is the highest tax you will ever pay. I remember being married with two small children and surviving very well on a Fellowship which paid $240 a month. Your dollar is worth about 2% of what it was worth when the Federal Reserve was formed a hundred years ago. Please see Chapters 10 to 17 on the economy that I wrote years ago on the banking system, derivatives, etc.
Everyone in the current Euro Crisis is lying. Greece is lying about paying lenders back. The lenders are lying about the borrowed/leveraged money they are lending. And the whole world has its head in the sand when it comes to the inevitable outcome. It is as if the crew in charge of maintaining a dam is running around trying to apply patches every time they see a new water leak but the dam is so full of holes, it is just a matter of time before the trickle becomes a rush, the rush a torrent and the torrent total collapse.
The only way out is austerity, cuts, cuts and more cuts. Do you know what the Euro Zone thinks of that? Just watch the riots on the nightly news. People do not easily give up what they think they have “earned.” It is easier to “give” than to “give back”. And to make matters worse, who is going to be hurt the most in the Euro Zone? Who is going to have the hardest time finding a job? The poor, and who are the poor? Mainly Muslim immigrants from the Middle East and North Africa whose population growth rate far exceeds the local population increase. Europeans are growing concerned not only with Islam’s numbers but the radicalization of the unemployed, uneducated and increasingly violent minorities.
“Democracy” is a funny thing. What is now a post-Christian Europe may well be a pre-Islamic Europe. Down through history, the masses win the battle because in the end, numbers trump everything, including guns. The greedy elites lose it and a dictator comes in to fill the void.
Here’s the bad news. The problem doesn’t stop with Europe. The debt crisis can’t be solved. It really is too big. They built a society designed to provide everyone with incredibly rich benefits. The more they provide, the more they tax and ultimately, the more they take away from the productive sector. The more they take away, the angrier the people will be. The more they will take to the streets, the more government will crack down, the less they will produce. The issue is the role of government. Is government the solution to all problems? How big should it get? What services should it provide? Who provides better for people – the people themselves or the faceless government?
Debt and worthless fiat currency is endemic all around the world. And the people are on the move, not about to be denied what is rightfully theirs. So the clash is coming. Class warfare is coming! The culture wars are coming! The clash of civilizations is coming! Just as things are really going downhill, people will be looking for someone to take control. Any guess who that will be?
Allow us to refresh your fading memory: This “thing” is a LOT worse than 2008 when it appeared that the banks were imploding and Lehman Brothers became the sacrificial lamb, among others. But we seem to conveniently forget that the Federal Reserve did a very clever little “off balance sheet” maneuver wherein $16.1 TRILLION was simply “given” to the American banks and, forbid, over $5 Trillion of it was given to foreign banks (sorry about our international audience – you didn’t see any of it in any event) – and we’re falling all over President Obama’s $800 Billion Stimulus, while just months ago our penny-pinching Congress nearly had a meltdown over cutting $37 Billion from our bloated budget – the financial hypocrisy astounds! Where in the blazes (for it came from hell) did we get that $16.1T mullah?
Tell us, thirty percent of American homes are “under water” – i.e., not only is there no equity in the home, they owe more than it’s worth – and a lot more than it’s worth. Since 2006 the American housing (not commercial – that’s really bad) lost $9 Trillion in equity – and that was a year ago (Dec. 2010 – since then we’ve dropped another $2 Trillion and counting – a whooping $11 Trillion – talk about a “monster bubble from the abyss.” And, this “thing” isn’t over by a long shot – some predict we’re going to drop another $5Trillion between now and 2015 when the “housing market” MAY begin to recover! So if you want to know where the $16.1 Trillion went – it went out your front door!
Daniel the prophet had to contend with the charlatans of his era in the courts of Nebuchadnezzar and Belshazzar. Magicians, soothsayers, astrologers and a lump sum of Chaldeans (a pleasant little antiquity catchall for diviners and every evil bird flyin’ through town) – among other enchantments, this gang of bozos constituted the king’s court and lapped up the goodies, while living off the king’s largess – while Daniel did the heavy lifting. Yep, the more things change, the more they remain the same – and don’t you just love these ornate expressions of antiquity, it’s been so long ago: YES WE CAN…say what? CHANGE! Now we’ve got the protesters chanting “Where’s Our Change?”
Hey, I got an idea. Let’s all go down to the lake and take a gander at the Black Swan – there’s got to be at least one down there somewhere.
REDISTRIBUTION OF WEALTH
“I want MY money and I want it now!” This little ditty is an ad shown on TV and dramatized by a bunch of folks determined to somehow get their money back from a tight-fisted bank or investment fund – the goal of the advertising is lost in the dramatization. One is left with a sort of “shouting match” to someone out there in order to get “what’s theirs” or else! It’s not that these people in the ad are screaming about someone else’s money – they’re screaming about their own money that they somehow can’t get their hands on.
Trust us, if you think for one Wall Street minute that greed and irresponsible entrepreneurship – let alone the foxes countin’ eggs on your behalf at the world’s legislative hen houses – has any intention of giving you “theirs” – you can forget about that little number as well. Besides, yonder media keeps pounding away at the righteous cause unraveling in the streets of the industrialized world; and even in the streets of the developing world. Go figure, once the dam begins to leak – here comes the flood. The little Dutchman plugging holes in the dike is somewhat of a metaphor to embrace, just about this time. The deal is, as long as he keeps his finger in the dike, all is well – but as soon as he takes it out – it’s all over but the gusher! Here comes the Atlantic Ocean overwhelming everything in sight – including Hans Brinker whose finger was getting a little raw in the first place. Isn’t “domino” an Italian word? Well, first Greece, then Italy – behold, the domino effect is happening before your very eyes…Greco-Roman Man is comin’ down!
That dripping sound you’re hearing over in Europe is about to become a cascade – an overwhelming tide of financial ruin with the governments and their crony banks, propped up by bogus central bank shenanigans and financial magic lying left and right and holding (the G20 crowd) their gazillioneth meeting to resolve the ever-expanding crisis. One thing about travel, communications and the electronic age – things happen fast, real fast. We don’t have to wait around for several hundred years or so for Greece and Rome to implode on their own financial fiascoes – we can have “fast and furious” weapons of mass economic destruction that night on your TV.
So…as most guilty democracies are prone to do – throw out the bums and bring in someone who can “give us our cake so we can eat it too” – after all, wasn’t it Berlusconi and Papadopoulos who got us into this mess in the first place? It’s time to bring in a new tag team and keep the party going. Meanwhile, the French are way over their sovereign debt heads in their commitment to the PIIGS (Portugal, Italy, Ireland, Greece and Spain) – forget the numbers – they don’t mean beans to anyone who’s still counting! And, if the Germans have to bail out the whole mess (along with the Chinese and the Americans) – we’ve got news for you…we’re selling wheel barrels at discount prices held over from the Weimar days when the Deutsche Mark was used as kindling. Have you notice lately that nervous smile on Merkel’s face – she flits in and out of those G20 meetings like getting her caffeine at Starbucks…she’s got to have that “fix” to wake up from this nightmare…but every day’s Groundhog Day for Germany! It’s like Doug’s Swedish-American friend, Ron, who returned from Zimbabwe with millions of Zimbabwe dollars – that’s right – Ron gave out a million ZDs each (on one bill) to his friends to thank them for all their support while he was on his life-time, and much-deserved, world tour. Then he had the audacity to tell his friends that that $1,000,000 ZD Fiat Baloney (another Italian expression) was worth less than 1 cent! But, that’s O.K. because President Robert Mugabe cares for the people and is “redistributing the wealth!”…What is wrong with this picture?
THE GOSPEL OF THE KINGDOM TO THE RESCUE
Theological redistribution can be seen in all its malevolent forms as well – for if the legislatures fail us, along with the gamblers operating these banks as credit swamp casinos (at your expense) – then let’s either riot (which we believers can’t honestly do) – or let’s develop a theological system damning the greedy and letting the poor know we understand their plight…we’re on your side. Hey, it’s all part and parcel of being in a “just war” or was that “class warfare”? – Never mind, earthlings delight in knowing, like Michael Moore – “it’s us vs. them” one way or another. Indeed, “you’re either for us or against us” – a familiar theme these days when economic warfare is lauded. Do we sound conflicted? Absolutely! How’s that? Well, there’s more greed and economic aggrandizement to go around – more disparity of wealth than ever – and more poor folk than you can shake a stick at. Really? Yes, of course, it’s the “paper poor” – the student debt, the “under water housing fiasco” and a host of entitlements and pension funds that are flat broke.
No wonder the Pope’s answer to all this is setting up some kind of international one world economic banking cartel governing the ungovernable of the earth and thereby making sure the poor get their just due…oh, and by the way…we just spotted some really pink elephants flying overhead…just thought you’d like to know. Man, talk about the fulfillment of Bible prophecy and the New World Order financial system – hey, where do I get the MARK so I can buy and sell?
Thus, on the one hand “the chickens have come home to roost and they stopped laying eggs!” Enter: The Vatican’s Idea of a World Bank! And, you should know what’s up here because the plutocrats can’t solve the problem – so… “The Vatican called on Monday for the establishment of a ‘global public authority’ and a ‘central world bank’ to rule over financial institutions that have become outdated and often ineffective in dealing fairly with crises. “A major document from the Vatican’s Justice and Peace department should be music to the ears of the ‘Occupy Wall Street’ demonstrators and similar movements around the world who have protested against the economic downturn. “The 18-page document, ‘Towards Reforming the International Financial and Monetary Systems in the Context of a Global Public Authority,’ was at times very specific, calling, for example, for taxation measures on financial transactions.
“‘The economic and financial crisis which the world is going through calls everyone, individuals and peoples, to examine in depth the principles and the cultural and moral values at the basis of social coexistence,’ it said.
“It condemned what it called ‘the idolatry of the market’ as well as a ‘neo-liberal thinking’ that it said looked exclusively at technical solutions to economic problems.
“‘In fact, the crisis has revealed behaviors like selfishness, collective greed and hoarding of goods on a great scale,’ it said, adding that world economics needed an ‘ethic of solidarity’ among rich and poor nations.” (Vatican Calls for ‘Central World Bank’ to Be Set Up, Reuters, October 24, 2011)
Hey, and don’t you think the Vatican Bank elites ought to know how scandalous bank operations happen in the oddest ways – do yeah think? (Vatican Bank mired in laundering scandal, USA Today, 12/12/10)…now that’s one classy bank operation if there ever were one!
Alas! The greatest plans of mice and men crumble beneath their grandiose social justice systems – while the workers (or at least those who can still find work), muse about the streets scavenging for morsels off the tables of the Wall Street elite. By the way, whoever said life is fair or equitable or “let’s just share the wealth?” Listen, the system is set and the order must be maintained…furthermore, the days of the free ride appear more than over…it’s like playing musical chairs. The music stopped and now you’re sittin’ on the street – but wait – now they’re carting you off in the paddy wagon…man, something in here stinks and you don’t have to look far to find out where the smell’s coming from.
“Even so, COME LORD JESUS!” (Revelation 22:20) – that’s the only Bail Out that will work…but who’s listening?
Copyright 2011 Dene McGriff and Doug Krieger
Presented with permission