Friday, October 7, 2011

Can the EU Really?

The last couple of days the stock market has been on a tear upwards because the European Union is expected to bailout Greece. First off, this is one of many reported stories. Secondly, what's the real plan? Lastly, will it work?

Since the financial crisis started back in September 2007 the world markets have been uneasy. As the saying goes when the United States economy sneezes the world catches a cold. Eventually it was reported that many countries in Europe were in serious trouble and they needed to take "austerity" measures. Greece took center stage and riots ensued because "austerity" means regular working people take pay cuts to pay for the bad banker loans. Government expenditures have to be reduced to pay interest on debt which of course in paid to the banks. If you stop and think about this for one second you say to yourself, does this need to happen? The answer is NO. Governments have the ability to issue currency through their treasury. Governments do not need to borrow from a central bank at interest which the people have to pay. As long as the governments spend what they take in in taxes you will never see any inflation. The inflation is the governments deficits. Inflation occurs when the government borrows from the central bank to cover the fiscal deficit. The point is the only solution is to borrow more money which we already can't pay back. Bottom line is you can't solve a debt crisis by issuing more debt.

The real plan comes because the bankers know the countries can't pay. Then, the bankers request privatizing the countries power, water, and transportation systems. This means selling the people's assets to banker's cronies a discount to pay for debts caused by the bankers in the first place. It's the Hegelian dialectic of problem, reaction, and solution. The banks caused the problem, the people have reacted, and the bankers have their solution. This really is a racket!

Will the EU bailout work? Like I stated earlier, is you can't solve a debt crisis by issuing more debt. I give this 2 more weeks and the markets will go much lower.

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