I ran into a rather amazing find last week when I heard an Australian radio interview with a Greek economist named Yanis Varoufakis on the topic of the insanity in the Eurozone. Aside from having an awesome name, Dr. Varoufakis is sharp, articulate, and a contrarian. He was saying things I generally agree with but with an angle I hadn’t heard before, and what he said made a lot of sense.
You can listen to the interview here. It really is worth the time. The gist is this: Varoufakis holds that the entire structure of the bailout and so-called austerity is twisted. Greece’s debt keeps going up, so the austerity isn’t working obviously. The reason it isn’t working is that the bankrupt Greek state keeps borrowing money from the EFSF bailout fund to repay the ECB on bonds they bought from Greece to support Greek debt when no one else was buying those bonds. So in repaying the ECB via money from the EFSF, the ECB makes $800 million, and the Greek government goes deeper into debt.
Read that again, and you’ll see that the bailout fund is actually serving to drive Greece deeper into debt while letting the ECB profit off of it, and Greece is only “privileged” to continue this rape if it keeps it’s “austerity” which isn’t balancing its budget anyway.
That is why, says Dr. Varoufakis, the way things are going, the Eurozone will disintegrate entirely, as this domino effect will hit the rest of the PIIGS and the EU will self destruct along with the Eurozone.
Varoufakis’ solution is simple: Europeanize every bank in the Eurozone and have the ECB issue bonds in their name that people will buy. So you don’t have Spanish banks anymore – you have Eurobanks in Spain. The ECB issues bonds and becomes the switchboard, everything goes through the ECB, and now totally centralized, they can navigate forward. Wow does that sound Keynesian.
Varoufakis helped shed the light for me on the nature of this “bailout” and that’s why I like him, but he’s a Keynesian, and doesn’t realize that Keynesianism got us into this mess in the first place. Another example: I read another article he wrote about how Greece can’t be Argentina, which defaulted a decade ago, devalued its currency, and then rebounded. Greece, says Varoufakis, cannot be Argentina because Greece has no currency to devalue. He’s right, but the point is this:
Devaluing a currency, he says, is beneficial for any nation in debt, because it allows the nation to get out of debt. Well sure, a State can get out of debt by pillaging the value of its citizen’s savings and destroying its peoples’ wealth and paying debt back in garbage. They call that “devaluing a currency” in Orwellian language. What it really means is STEALING from citizenry. One day a government spends too much money so it decides to make your money worthless so it can pay back in worthless junk. Sounds great.
Varoufakis, for a Keynesian, is very smart, but he is a Keynesian nonetheless. He’s an economic tactician, recommending tactical moves to get out of a crisis without understanding the real, root cause of it all – a MORAL cause. Maybe Europeanizing everything and having the ECB issue bonds will technically get Europe out of debt in a mega Keynesian centralized way. But everyone will be dirt poor if it succeeds, because it means that the ECB will steal the value of every Euro in Europe by printing it into oblivion to pay the bonds it issues for the rest of Europe.
Why the circuitous Orwellian route of “ECB Bonds”? Just tell it like it is. Steal value from European savers. Just take it. Have the ECB issue bonds and then print the money to pay for them. Why not just do it more directly? Have the Eurozone completely centralized and pass a law that every Eurozone bank account has to give X% of their savings to pay the Euro debt. Just steal the money outright instead of printing it into oblivion.
So Varoufakis’ solution is basically: If European governments don’t get their act together and steal much more money much more quickly from the people, then the Eurozone will collapse.
Well OK. But the root cause of it all is the very fact that you allow a government to print money.
My solution? Get rid of the Eurozone and privatize money. Let people use what they want to use, and the best money will have the most value.
Never again will a government be able to simply steal your money by printing it.
Much like Leftists here in Israel who keep trying to find the perfect way to make peace, who do not realize that peace talks are inherently immoral if they give up Jewish land as a precondition, economic Leftists, or Keynesians, do not realize that the inherent structure of the system of currency backed by force is immoral and must be torn down. Israel leftists will never find peace beyond theft of Jewish land. Keynesians will never find economic solutions beyond theft either.