IMF, ECB and Greece, oh my! How the innocent are led to slaughter by the incompetent.

Mitchell’s laws:
●The more budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor,
which leads to civil disorder.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.


Exclusive: IMF, EU clash over Greece’s bailout prospects
By Dina Kyriakidou and Lesley Wroughton
ATHENS/WASHINGTON | Wed Sep 26, 2012 9:59am EDT

(Reuters) – Greece’s international lenders are at loggerheads over how to solve Athens’ debt crisis, threatening more trouble for the euro as the IMF demands European governments write off some of the Greek debt they hold.

“The problem is not between the IMF and Athens, it’s between the IMF and the EU,” one Greek official said. Already facing an electoral backlash over bailouts and austerity, EU leaders do not relish IMF proposals that they swallow tens of billions of euros of losses on their holdings of Greek government bonds.

Greece remains deeply in debt. Being monetarily non-sovereign (they have no sovereign currency), Greece has no source of incoming funds, with which to pay their debts. So my question is: Why would anyone have lent them money, and why would these lenders have expected to be paid?

They remind me of the U.S. banks that gave mortgages to people with insufficient income to pay the mortgage – with one difference. The U.S. banks didn’t care. They immediately sold the mortgages to Fannie Mae et al who bundled the mortgages into securities rated AAA (by the crooked bond rating agencies), and sold them to the crooked big banks, who in turn sold them to unsuspecting investors, who believed the AAA rating. Lenders to Greece weren’t that clever.

The Fund, brought in for its expertise, global financial firepower and reputation for imposing fiscal discipline, is for its part keen to protect the hard-earned credibility it put on the line by joining in a bailout package that set Greece a target of cutting its deficit to under 120 percent of GDP by 2020.

If there is an agency in the world, that has less economic expertise than the IMF, I’ve yet to hear about it. This is a group that thinks the treatment for anemia is to apply leeches. They insist debtor nations stop creating the money needed to pay their debts, and instead borrow more money, to go deeper into debt.

I can’t imagine who gave the IMF “credibility,” but this organization has been a disaster, with no redeeming characteristics. Loans to monetarily non-sovereign, indebted governments only exacerbate their debt situation, and Monetarily Sovereign nations don’t need loans. So what good is the IMF?

German Finance Minister Wolfgang Schaeuble, whose own creditor government has been concerned at slippage in Greece’s efforts to cut spending and raise taxes, gave a rare public hint of IMF concerns last week: “You should ask around about what the mood is like in the IMF,” he told reporters in Berlin, “In having to deal constantly with these European problems and the repeated failure of the Europeans to meet agreed targets.”

Translation: “Oh woe is us! We told the naughty euro nations to raise taxes and cut spending, thereby guaranteeing their further economic disaster. But, they have failed to meet those targets. Our life is difficult.”

Germany has overplayed its hand. It had hoped that by being a creditor to other monetary non-sovereign euro nations, it could dominate them — Germany’s World War II goal. Deutschland uber alles.

But these nations refuse to be dominated, and now are on the verge of sticking Germany with a ton of bad debt.

A restructuring – essentially requiring the ECB and European governments to take losses on nearly 200 billion euros in Greek debt they hold – could ease Greece’s burden.

Yes, that will “ease” the burden by transferring the burden from Greece to Germany.

Private investors took such a “haircut” this year, but with reforms being held up and a recession much deeper than expected, Greece seems likely to have to suffer more pain itself, or inflict more on its creditors, if it is to put its finances on a sustainable footing and resume market borrowing.

Translation: “Sustainable footing” means to borrow when there is insufficient income with which to pay back, screw the creditors (politely called a “haircut”), then borrow more. This has been the IMF/ECB “plan” for years.

Out of the Greece’s 204 billion-euro official debt, 20 billion is owed to the IMF, which would be repaid in full in the event of an official-sector restructuring. The ECB has so far refused to face any losses on the bonds it has purchased over past years to prop up Greek debt, estimated at about 50 billion.

The IMF and ECB first must be paid in full. Then the other creditors can fight over the scraps. The irony: The ECB is the only entity that can create euros, so is least in need of being paid back.

“It is now clear to the IMF that Greece will need more time or more money or both,” a troika official told Reuters.

Greece has asked for an extra two years to meet interim targets and European leaders appear to agree. Stournaras, the finance minister, told Reuters on Tuesday that such an extension would cost an additional 13-15 billion euros, which could be covered without further pain for European taxpayers.

What about Greek taxpayers? This is an example of IMF economic brilliance. They now have discovered that a monetarily non-sovereign nation, with no source of income, needs more money. Who’da thunk it? So Greece will be allowed more time to meet its target of further impoverishing its citizenry.

Soon, the citizenry will rise up, and the sounds of the Guillotine will be heard in Greek-land.

Such a gap could be covered through the issuance of more short-term debt, by seeking lower interest rates from the ongoing bailout loans or a rollover of debt held by the

More IMF brilliance: Provide more short term debt to a debtor that cannot pay its debts. Or ask lenders, who already are on the hook for Greece’s bad debts, to lower interest rates on those bad debts.

A senior Greek government official told Reuters, however, that the IMF preferred to see Europeans take losses on some of their previous loans to Athens, blocking any agreement: “The IMF wants an official-sector restructuring but we can’t do that,” the official said. “No one else wants it.”

Translation: “You euro nations take the losses. We at the IMF won’t, despite the fact that we helped create the problem. Then, after you take losses on existing loans, give Greece more loans.”

Disputes within the rescue mission, however, also reflect deeper concerns about Greece’s ability to slash its debt-to-GDP ratio from a current level around 160 percent and to recover the confidence of private investors willing to buy its bonds.

The statement is senseless. They want to lower the debt/GDP ratio, so they can sell more debt, which would increase the debt/GDP ratio? Huh?

In any event, the debt/GDP ratio is completely meaningless. It doesn’t predict solvency or prosperity. It doesn’t predict anything. But being useless explains why the IMF and the crooked rating agencies love it.

“Lots of … bankers in the chorus seem to indicate they would be quite happy for Greece to leave the euro.”

Amen to that. Within two years of leaving the euro, Greece will be well on its way to prosperity – if its leaders understand Monetary Sovereignty – while those nations, still burdened with the euro, sink ever deeper into despair.

You are watching a euro train wreck — in agonizingly slow motion. As always, the only long-term solutions are:
1. Greece and all other euro nations, re-adopt their own sovereign currencies
2. The euro nations form a fiscal federation, in which the EU provide euros as needed.

Meanwhile, the innocent citizens suffer. It’s a foretaste of what debt hawks are doing to the U.S.

Rodger Malcolm Mitchell
Monetary Sovereignty


Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Medicare — parts A, B & D — for everyone
3. Send every American citizen an annual check for $5,000 or give every state $5,000 per capita (Click here)
4. Long-term nursing care for everyone
5. Free education (including post-grad) for everyone
6. Salary for attending school (Click here)
7. Eliminate corporate taxes
8. Increase the standard income tax deduction annually
9. Increase federal spending on the myriad initiatives that benefit America’s 99%

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports


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