Greece and the Money Lie

"The German chancellor Angela Merkel has ruled out debt cuts for Greece, saying Athens had already been forgiven billions of euros by private creditors and banks." So go the headlines. The Germans are acting like they stand to lose money if Greek debts are forgiven. This is a big lie. The money loaned to Greece was created out of thin air by banks. They charge rent on that thin air, which is the only real money that changes hands.

What those banks stand to lose is not money, but a revenue stream. The Banks themselves have been bailed out to the tune of trillions of pounds resulting from massive losses caused by malpractice and malfeasance. They don't pay tax on the rent they earn and they aren't lending to local business, so none of the rent goes back into the European economy.

The whole thing is a farce. Greece is on track to become a third world country. Merkel fiddles while Europe burns. The Germans are not prudent, they are stupid. We've seen Germans blindly following an ideology before, you'd think they'd have learned their lesson. We can only hope that the new government holds its nerve and tells Merkel to get stuffed.

UPDATE. An article by Francis Coppola reinforces the point. So Whose Problem Is Greek Debt, Anyway? She says "all but about 11% of the bailout money went straight back to the holders of Greek debt by one route or another"

So the money loaned to Greece to help with its debt problem, went straight back to the lending institutions. Almost none of it went to improving the situation in Greece.

However Coppola believes that the problem is not so much the debt as the austerity requirements which make it impossible for the Greeks to pay back the loan. She also thinks that Greek debt is everyone's problem, that the new Greek government is in a much stronger position than people seem to realise, because were they to default on loan payments and exit the Euro, it would signal the end of the Euro.