Greece has taken giant steps toward realizing that bailout money really does not actually go to Greeks. It is immediately transferred to international bankers to make them whole on their bad loans. Bailouts are just a mechanism to get the banks out whole and saddle the citizenry of Europe with the banks' bad loan positions.
And it hasn't stopped. Now the ECB is lending $68 billion to Greek bankers to make their lenders whole. Who are these lenders? Other European banks.
So now you see how the game is played. Just as in America, bankers make stupid loans using too much debt leverage. Predictably, the loans go bad and this causes the banks' debts to go bad. Rather than having the banks take the hit for their poor business and lending decisions, the government comes in and bails out the banks' debt investors, leaving the taxpayer on the hook for all the bad debt.
Why has the Greek debt crisis dragged out so long? Because it took this long to get all the international banks' money out of the Greek government and Greek banks. Enticed by promised 17% yields, now most of the Greek bank and country debt is held by small investors or by citizens indirectly through government agencies like the IMF and the ECB. The banks have left the building.
So, is it too late to default? Maybe it is too late to teach the banks a lesson, but not too late to awaken European citizens to what their government agencies are doing with their tax dollars solely to benefit big banks. And if the citizens of the world cut off funding to their central banks, the international banks will ultimately get the message that bailouts will stop.
Greece needs to default. Give it a fresh start. Default on 100% of all government debt, default on 100% of all Greek bank debt, write off half of its banks' assets as bad loans, exit the Euro and print enough drachmas so it can guarantee all depositor money at a one for one exchange rate with the Euro. Then prohibit your banks from ever leveraging up with debt by more than three times their equity base. In this, you will have created a model that the world's financial system should eventually emulate if we want to avoid future crises and depressions.
And one more thing, after printing the initial supply of drachmas, turn off the printing press permanently. Do not allow any new printing of drachmas. And limit your government's ability to borrow. If you cannot balance your budget and you run out of money on December 15th, so be it, have your government workers go unpaid for two weeks. That will quickly change the mentality of government workers from budget free spenders to budget hawks.
Some will say that a government needs the ability to print money to stimulate an economy after a crash. But, there can be no crash without a preceding boom, and you can't have a boom without a government printing money or banks' lending gone wild because they are so highly leveraged with other people's money. One only needs to look at the US to see the evils of printing money; the US dollar has depreciated 98% relative to gold over the last fifty years, and this in the biggest most powerful economy in the world.
It is not Greece that is broken, it is the world's financial system and banks that need repair. And that cannot happen given their lobbying control over our governments. So, we are asking Greece to do the right thing, not just for Greece, but for the rest of us on the planet as well. It is time once again for Greece to be the bright shining beacon of democratic light in the world that it has become famous for.
John R. Talbott is a bestselling author whose books predicted the dot.com crash, the housing crash, the banking crisis and the global economic collapse. You can read more about his books and the accuracy of his predictions at www.stopthelying.com