By Mike McCune
Trojan Horse: A Greek strategy used to end the Trojan War. It is intended to perform, simultaneously, a desirable effect and a covert effect.
Over the past week I received numerous comments regarding “my fixation on Greek debt”. The questions centered on why I was looking at Greece’s situation when our own country was in such poor shape and why I didn’t stick with U.S. economic conditions. The Senate’s passage of authorization for raising another $1.2T in the debt ceiling speaks for itself.
Contrary to the surge on Wall Street, the fact is, you and I, as United States taxpayers, are funding the bailout of Greece through the printing press at the Federal Reserve. Ben Bernanke has studiously avoided any mention of QE3 for a couple of months but the press at the Federal Reserve is running hotter than ever and the flow of dollars is aimed directly at the European Central Bank, hoping to ease the euro into a graceful Greek default. It a world QE3 old BS is trying and there is no doubt this effort will be as big a dud as the first two tries.
The real world threat is runaway debt. Running the printing press just adds to it.
The ECB, for its part, is providing funds to all the Euro Union’s bankers at miniscule interest rates. These bankers are then buying the Greek bonds with large interest rates–making enormous profits with our dollars which they won’t repay. It is part of the on-going misconception in Washington, that the government is obligated to keep dead “men” (businesses or countries) walking.
Ottmar Issing, of the ECB, put it straight to the American taxpayer last weekend when he said, “The problem of ‘too-big-to-fail’ is that it has made society–directly the taxpayer–hostage to the survival of individual financial institutions. The rescue of systemic institutions has dealt a big blow to confidence in free markets and is now a threat to free societies.” He basically admitting the economic game is being rigged by politicians across the globe.
Greece, along with the rest of developed countries, has papered the world with its worthless, junk bonds. But here comes Bernanke with the U.S. printing press to insure payment will be made. Suddenly the worthless bond achieves status because it will be “paid.” But who holds those bonds in reality? Look in the mirror, those bonds are propping up your local bank as regulators catagorize public debt paper as a great asset and thus they are definitely propping up any retirement account, including those inviolate IRAs your local bank is holding for you, your company’s pension plan and your savings accounts in the form of government-backed securities.
Central bankers are getting richer, the Euro Union seems more stable and the American taxpayer, with more debt than ever and eyeballing daily a struggling economy, is watching all those dollars aid foreign countries while his own country is in decline even though he will be asked to pay the bill evenutally. We are the rube in the game the big bankers are playing and getting consistently poorer as we allow our chips to be moved into their piles without a whimper of protest.
It is true Greece’s annual debt is less than a week’s overspending by our federal government (notice, not what the feds spend but what they spend in excess of revenues for any given week) but the Greeks have no way of repaying those bonds in the foreseeable future; meaning they will come back again and again with their hand out for more backing with default the inevitable result. The dollars we are shipping them could just as easily be shredded but because they are floating around in the world’s markets. Thus the dollars in our banks, our pockets, our retirement funds are being steadily eroded by inflation. At the same time we are adding to our debt (unacknowledged debt since the Fed Reserve is receiving ECB bonds in exchange). This swap of one government bond for another is listed hopefully by the Fed as “an exchange of currency”. In reality the U.S. is making a loan on which no repayment is possible.
Pontificating politicians around the world seem very concerned by a Greek default, but why? Greece has declared bankruptcy (default) two dozen times before and the world has survived; why is this time different? Because it isn’t just one country’s economy at stake. Every Euro Union member is in jeopardy of winding up in the gutter, with the U.S. resolutely following the same course.
In this case the world’s markets are the Trojans, wildly celebrating any hint of good news from the defunct Greeks. The Greeks have no intention of changing their ways, they are resolute in not wanting change. That is the desirable effect the world’s bankers want.
Ah, but the covert effect is the renewed interest in Greek bond buying is masking the fact the world’s economy is in a mess. Nothing has been allowed to fail for far too long and the stress is putting cracks into the structure, a condition which our Fed seems blithely unaware. If a stress test was done on the Federal Reserve today, it would fail miserably. It is alive because the beating heart of the printing press still has ink, paper and power. But to show how wrong our Fed policies are their claim is America will have 3-3.5% inflation in food this year for “a slight increase over 2011′s rate. Where do they get this stuff? I defy anyone to compare a grocery bill from January 2011 to December 2011 and find “only a 3% difference” on identical items. Unless the December purchase was a tremendous sale, food inflation was closer to 10%. Which doesn’t support confidence in what our Fed Chairman is stating.
Just as Greece’s debt woes threaten the euro stability, our Fed’s reckless, backdoor support of the bankers is pushing us even more rapidly towards insolvency. It is poison and that is why Bernanke is being circumspect in his announcements. It is just one more step in a game that has but one outcome, the demise of the American Experiment.”
The industrial might we relied on in the 1960s to mitigate the effects of burdensome economic cycles is not available now. When Greece does capitulate and default, the Trojan Horse it leaves behind will be aimed directly at the once-mighty U.S. dollar. This is because Europeans would hold dollars, an IOU from the U.S., and we would hold bonds repayable in euros–which would no longer exist. Thus the EU would be able to freely spend dollars and the U.S. would be even further in debt; possibly fatally so.
Greece might beat the odds and default with a minimum economic ripple, but Italy or Spain or even America is next on the default hit parade and those wrecks won’t be ripples but might be equivalent to 10 on the Richter scale.
America can’t recover from what ails America’s economy; the economy dies when there isn’t any other country willing to dig its own Trojan Horse grave to help Americans handle their debt as we are currently helping the euro. Only then will a new economic structure be born and that among the misery left after several generations have passed.
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