The Shylocks at the IMF, the ECB and the European Commision want their pound of flesh. They are saying that the Greek goverment has to cave in to their demands, or else.
I think it is time to make a few basic facts clear. Between 2013 and 2014, the Greek government cut public sector debt by 0.7% – from €319 billion to €317 billion. Over the same period, Cameron and Osborne increased UK public sector debt by 14.6%, from €1794 billion to €2055 billion. Which Government is being the most irresponsible?
In April 2015, Greece was forced to pay 12% interest on its public sector debt. The Germans only paid 0.56% on their debt – currently the largest in the European Union – no less than €2180 billion at the end of 2014. Amazingly, Luxembourg is only paying 0.06% interest on its public sector debt. Why the difference?
I’ll tell you why. It’s because governments are forced to borrow money from the commercial banking system, and that banking system has the power to blackmail governments who don’t do what they are told.
But the really shocking fact that Alexis Tsipras should bring out into the open, is the fact that the Commercial Banks who lend money to governments don’t actually need to have any money to make those loans. They have a licence to create infinite amounts of “money” that they can lend to governments. If the government in question plays ball, then they get a AAA or a AA- rating from the ratings agencies. (Fitch, Moody’s and Standard and Poors). And if they have a nice high rating like that, the Banks can literally create as much “money” to make loans as they like – because the wonderful Basel Banking Regulations stipulates that lending money to such governments has a risk-weighting of 0%. They therefore need no capital at all – and can create infinite amounts of debt.
In contrast, when the ratings agencies decide to give countries like Greece a rating of CCC, those loans made with fictitious money created out of thin air suddenly have a risk-weighting of 150% – meaning that for every €1 billion in loans, the Banks have to hold capital reserves of something like €150 billion. Since they don’t have that level of capital, a country like Greece will no longer be able to borrow at all.
Dear God….market yields being equated to coupons, the yield on Greek Treasuries being applied to the entire Greek public debt when near all is owed to the IMF, ECB and EFSF on concessionary terms, it’s actually the ECB which determines the capital requirements for holding those Treasuries through the operation of the ELA, being out in capital requirements by two, count them two, orders of magnitude and then starting off with the Shylocks, meaning it’s all the fault of the Joos.
Amazingly, this man has the vote.
And, Oh Boy:
When I’m not writing my blog, my day-job is as the Director of the Brain and Cognition Research Center (CerCo) in Toulouse, France. It’s a lab with about 85 people, many of whom are keen young scientists working for a Masters, a PhD thesis or as a postdoc.
Run for the hills time…..