Understanding the IMF/EU Bluff

The unprecedented IMF/EU bailout of Greece has to be viewed as the greatest bluff in the history of world finance. It is a stop-gap measure that won't solve the financial problems in Greece, more importantly, it won't solve the problem for the PIIGS overall.

The fundamental problem with the PIIGS is that they have governments and economies structured to fail financially. They give and give (money) to the politically favored and tax and tax the ever shrinking productive elements in their countries--and they attempt to borrow whatever they can't squeeze out in taxes to continue their giveaways.

The first point of collapse  in this mad scheme is, of course, the bond market when bond buyers realize they might not get paid. That's what the soaring interest rates on Greek debt last week was all about. It was early stage panic. A crazed economic structure was about to collapse. It should have been allowed to do so.  It would have hurt the international bankers that held the Greek debt, but that would have been about all.

Instead, the international bankster controlled IMF and EU stepped in to bailout the, well, the international banksters. The plan is to squeeze the Greeks with even more taxes to kick upstream to the banksters. In the interim, other EU members and the IMF will provide emergency money that will also be kicked upstairs to the international banksters. Even Americans will pay a bit out of their pockets as the IMF kicks in $40 billion, with the U.S. member quota roughly 17%, that's a ding to the U.S. of $6.8 billion.

But, as large as this bailout is, it is a bluff. It is an attempt to calm the markets before the Mother PIIG has to rise money, Spain.

For the IMF and EU to bailout Spain based on the same formula as Greece, the Spanish tab would not be  the record breaking $146 billion announced for Greece. It would be $544 billion.

By bailing out Greece, the IMF/EU is hoping that this calms the markets enough so that there is no panic out of Spanish debt. No one knows if it will work. If the markets are not calmed, the question then becomes one of whether the Germans, the IMF and EU are willing to run the check writing drill again. This time for checks five times the size.

All this check writing, mind you, is only stop gap as long as the PIIGS continue their current socialized economic structures that provide huge disincentives for productive work. The PIIGS will get fatter with debt and stuck deeper in the  mud of their economic structure.The bailouts do nothing but hose the PIIGS down before they head back into the mud and the debt feeding troughs. Eventually, the problem will become  so large that only massive money printing or massive bankruptcies will solve the problem.

The realeconomik solution is to end the EU in its current format, make it a NAFTA-like trade organization, with every country returning to its own currency, and thus allowing every country to fend for itself, versus creating these huge pyramid type structures that will grow and grow until it all results in a huge global collapse.