Tuesday, May 29, 2012

What Greece Should Do

There are two roads Greece can choose at this point. Greece can abandon the euro and return to the drachma or it can remain in the eurozone.

Staying in the eurozone will mean that the country will be lorded over by bankster operatives. They will provide enough money to keep the country alive, but they will also demand allegiance to their plans of "austerity", which will mean more cuts in government services, higher taxes and better tax collection methods. It won't be pleasant for anyone in Greece.

The hints of a "growth" plan are nothing but code for more inflation and for the propping up of the state apparatus.

But there is a better alternative . That alternative is for Greece to leave the eurozone and return to the drachma.

Here's how this could be done in a way that could put Greece on its way to a miracle economic recovery:

Replace every euro held in Greek banks with drachna, on a one-to-one basis.

Provide every Greek citizen the opportunity to turn in their euros held in the form of cash for drachma,on a one-to-one basis. This window of opportunity should be open for only a week.

The Greek government should default on all its debt---and not pay off any of it, ever. In this way, the major pain would be suffered by those who financed the crazy debt.

The Greek government should then announce that over time it will stop making all other payments, including retirement payments, unemployment payments and payments to all national government employees.

The government should then calculate how much money would be required to give government employees two months severance pay, the unemployed one months pay and those receiving retirement benefits six months of benefits. The government should then print enough drachma to meet these obligations. Yes, I know inflation is theft, but I view this as a necessary evil to keep these people from rioting. Anyone caught protesting the plan in the streets, if they are to receive money from the government under the plan, will be removed from those eligible to receive the money and will be required to pay back any money they received under the program  . The government should then, via fire sale, liquidate all its buildings, land and other properties and pay the money out to all Greek citizens who did not receive money from the employee/unemployment/retirement program.

All taxes at the national level should be abolished. Only municipalities should be allowed to tax, and then only on a per capita basis. All anti-employment laws, including minimum wage laws, should be abolished. All regulations making it difficult for businesses, new and old, to operate,  should be abolished.

The money supply should be frozen at the amount created under this plan. The role of the Greek Treasury should be one of doing nothing but replacing worn bills.

Obviously, this is just an outline of what can be done, details must be filled in. It is an attempt to demonstrate that the situation for the Greeks is not hopeless and that a non-inflationary economic structure can be created  that, with a bedrock of laissez-faire principles, can immediately start moving Greece in the direction of becoming a prosperous country. Freed from the ruinous economic and financial structure created by banksters and other ruling global elite.

23 comments:

  1. I like this train of thought. But why couldn't they simply default and stay with the euro and implement things like those delineated above. Why will the other countries pick on them? Greece would become a better country to do business with in the future.

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  2. the howls of outrage would be glorious to behold. But probably the Libyan example would be the outcome of such an occurance.

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  3. Same as Greece returning to the Drachma and getting off the Euro poison, in the U.S. there should be state currencies convertible into Fed Reserve bucks, or usable among the states(or whoever would take them). Some states are experimenting with metal backing, so their currencies could become very sought after if they were perceived to have real 'price stability.'

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  4. Don't forget to abolish their central bank.

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  5. Yeah right... who would turn in their Euros for Drachma at that point? Also, it would be politically impossible to cut all of those benefit payments.

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    1. Greece will go from poor to destitute then. This is the problem with today's adults: they don't want to go through the necessary pain for the opportunity of a better life. They can't see that today's policies are destroying wealth that took centuries to build. They think all the crap they have was wished into existence and took no capital, planning,immense hard work and creativity.

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  6. Nice, clear example of a plausible path to recovery, Bob.

    I hope that cooler heads prevail, and ultimately take a path similar to what you lay out.

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  7. Default on all public and private debt. Ban central bank. Divide country into 100 city states and islands. Ban all taxes and regulation at federal level.

    Can all be done before lunch tomorrow.

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  8. Forget it, it won't happen. Greeks is controlled by powerful public sector labor unions. Those folks will eventually find less pain in submitting to the Troika to keep their socialist paradise afloat, though with diminished entitlements. Michael Lewis summed up Greece best in his book Boomerang.

    "As it turns out, what the Greeks wanted to do, once the lights went out and they were alone in the dark with a pile of borrowed money, was turn their government into a piƱata stuffed with fantastic sums and give as many citizens as possible a whack at it. In just the past twelve years the wage bill of the Greek public sector has doubled, in real terms – and that number doesn’t take into account the bribes collected by public officials. The average government job pays almost three times the average private-sector job. The national railroad has annual revenues of 100 million euros against an annual wage bill of 400 million, plus 300 million euros in other expenses. The average state railroad employee earns 65,000 euros a years. Twenty years ago a successful businessman turned minister of finance….pointed out that it would be cheaper to put all Greece’s rail passengers into taxicabs: it’s still true. “We have a railroad company which is bankrupt beyond comprehension…..and there isn’t a single private company in Greece with that kind of average pay.”

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  9. Drachma would have to be issued at probably 4 to euro with 6 given within first week to those exchanging (drachma prob 8 to 1 internationally within week) Greece has 83billion in gold reserves (it is in much better condition than UK where Gordan Brown lost all its reserves) which it needs to sell for dollars to refinance its banks. Europeans and US etc buying Drachma's for holiday and trade will eventually create a base for Drachma from which Greece can rebuild its economy from that competative base.

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  10. Pie in the sky, Bob. If Greek politicians could muster the cojones to tell the unions and pensioners that they're not going to get their benefits anymore, almost any plan would work. The problem isn't in the mathematics. It's in the will of the governors and the governed. The Greek public will ultimately lose all of their benefits because they are unwilling to give up part of them. It's sort of like declining life-saving surgery because it will hurt.

    But let's not be too hard on the Greeks. We're doing the same thing over here.

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    1. au contraire, we need to be hard on them. It's called tough love. Even love hurts at first, being screwed over several times, it won't hurt as much as they think it will.

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  11. With the US dollar going down sometime, the Greeks may as well latch on to this turkey for a while. Should be no problem for Bernanke to print what they need. Let the presses roll.

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  12. robert: i see you had a couple of drinks at lunch...

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  13. Why print money to pay public servants retrenchment packages before liquidating state assets? Why not liquidate state assets and use the proceeds for the riot-quelling severance pay? Additional proceeds can go to non-state citizens. Any meaningful money printing will see such a fast exit from drachma cash balances that the whole reform programme will rapidly deteriorate into hyperinflation and die a quick death.

    A far less inflationist plan would simply be to abolish legal tender in Greece (turning it into a truly laissez faire currency zone), default on 100% of the outstanding national debt, end all state expenditures save for state employee severance packages, then once this bill is paid abolish national tax and liquidate all state assets for gold distributing the proceeds to citizens in physical specie in proportion to say their last 40-years tax contribution (this rightly skews payouts to the old in need of retirement funds). Simultaneously, end the police service and fully privatise security and defence services, while abolishing all weapon control laws.

    No more state debt; a tiny, neutered state with fully privatised economy; sound, competing currency; no printing press or central bank or drachmacula; private protection of private assets against rioters; happy pensioners; booming economy.

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  14. Why doesn't Greece just pass a law (re)creating the drachma and specifying that it is legal tender for all euro debts. That means, a 1000 euro debt could be paid off with either 1000 euros or 1000 drachma, whichever the debtor prefers. Then the Greek government could pay off its euro debts using drachma which (unlike the euro), it is allowed to freely print. Also euro bank accounts would be instantly converted to drachma accounts. And the Greek government could then implement deposit insurance for Greek banks, ending bank runs. If people started closing their accounts, the Greek government could print any amount of drachmas required. Also Greek government employees could be paid in drachmas which the Greek government would freely print. The drachma would quickly devalue wrt. the euro, making Greece a travel bargain and allowing Greece to export once again.

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  15. The Greeks should buy gold with their Euros & make the drachma a gold-backed currency.

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  16. Rob said: "But let's not be too hard on the Greeks. We're doing the same thing over here."
    In reality, as Porter Stansberry noted, the accumulated national debt, the shotfall of Medicare and Medicaid, Social Security, state debt, and personal debt amount to $700,000 per each man, woman and child in America.
    Can it ever be paid?

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  17. this guy is an economic idiot....thanks for the laughs

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  18. Here is an idea, default on all debt & make gold/silver the official currency of the state while allowing private currencies to compete.

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  19. I have a little chuckle every time I hear the term "Greek Bailout".

    Nothing going on in this Greek Tragedy is about bailing out Greece - or even helping Greece.

    It's entirely about bailing out the idiots who lent too much money to Greece, and face ruinous consequences if Greece defaults.

    The fools are working desperately to not be parted from their money.

    Mario Blejer (Argentina’s central bank manager during/after the world’s biggest sovereign default) said about Greece in an interview last September:
    “This debt is unpayable”
    “Greece should default, and default big. A small default is worse than a big default and also worse than no default.”

    What is arguably best for Greece IS NOT best for anyone outside Greece, so as long as Greece remains a minion to the EU monetary overlords it has no hope of "pulling off an Iceland" and starting to rebuild any time soon.

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  20. Until we stop trusting the gov't--any gov't to decide what 'needs to be done' and simply decide ourselves how to run our lives, whether or what to use as currency, we will have no peace.

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  21. All the Americans are doing is living off the rest of planet earth. Is it not any wonder the Greeks picked up on the idea. It is bound to end in tears. But just when is anybodys guess. They keep kicking the can down the road.

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