Debt Rattle February 23 2015

[Raúl Ilargi Meijer]

DPC “Ice fountain on Washington Boulevard, Detroit” 1906 • 1 In 3 Americans On Verge Of Financial Ruin (MarketWatch) • BofA Leads Charge Into Bonds as
[See the full post at: Debt Rattle February 23 2015]

[jal]

” … a multitude of CDO’s and other debt bombs go off. ”

Everything will be okay … the greek gov. also bought CDO’s

hehehehehehe

[Gravity]

The greek government suddenly referring to the troika as ‘the institutions’ is dishonest, who do they think they’re fooling with this silly semantic misdirection? Surely the greek people are paying close enough attention to notice this change immediately. It only makes the greek government seem afraid to confront the electorate with the fact that they’re still submitting to this troika terror.
Whatever else the negotiations may change, Syriza’s previous standpoint that they would not be dictated terms by the troika has been repudiated most awkwardly.

And has the odious debt even been discussed? Of course the troika institutions will never acknowledge the concept of odious debt and usurous interest, the profitability of the banking cartels and IMF fully depend on enforcing it. Maybe a legal challenge of this debt could be made some other way if grexit does eventually happen.

A parallel currency accepted as legal tender besides the euro may be necessary to buffer the worst of deflation if grexit doesn’t happen soon enough. Some form of scrip or digital coin could serve as means of payment, but greek banks would have to be compelled to accept this currency as monetary reserve in order to improve liquidity and credit issuance. But then the ECB might not allow this, unless such banks were first nationalised.
As bad money drives out good money, people may tend to preferentially spend this new funny money, pay their taxes and bills with it but hide their precious euros, so euro velocity may then drop even further in response, requiring further issuance of new scrip and so on.
The other problem with a digital coin, besides its transaction needing anonymity, is that it only has value because it takes significant effort to produce and securely encrypt, and is therefore scarce in exact proportion to computing power. The government may not be able to produce it quickly enough without weakening the encryption protocol to the point of easy replication, making it untrustworthy.

[gezelle]

Gravity, I think ” the institution ” is a very clever, subtle and necessary reframe of the situation.
The Troika was a very overblown and grandiose name implying an historical tradition of importance and gravitas…people of stature and power to be obeyed and venerated.
“The Institution ” reduces everything to a colorless nonhuman entity: a cold and impersonal ‘Thingness” devoid of humanity and run on a computer program rather than human understanding and caring…..the Borg as it were.
This is a nice step in altering people’s perception of TPTB and their power over us.

These people are showing a bit of real sly intelligence and forward thinking, they are not the inexperienced, hapless duo the media lapdogs are trying to make them out to be.
Remaking this on a human scale as a problem for people and their communities not merely an accounting and bureaucratic exercise of the great and powerful.

[Gravity]

@ gezelle,
Yes, I suppose that explanation of the switch from ‘Troika’ to ‘institutions’ would make more sense, so that its only to delegitimise the troika by declaring them to be mere bureaucrats.
But on the other hand, Varoufakis has also used ‘our partners’ to diplomatically denote those same institutions recently, which seemingly promotes them to being equals in an amiable partnership with Greece, which is not intended then.

I’m also confused as to how a state-sponsored digital scrip may be fractionally banked?
If the exchange were enforced at parity with the euro for some period, could banks be allowed to issue an equivalent credit in euros if they keep such a scrip as reserve? Supposedly there are ways to make a parallel currency work to lessen deflation, Greece should try it anyway, it could hardly make things any worse.

[John Rempel]

The list of Greek proposals is available at:
https://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_24/02/2015_547577

[Dr. Diablo]

The Greeks are still up to something. Give them time.

Yesterday meeting on Chinese warships, presumably a place on earth where their discussions cannot be overheard.

[gezelle]

Dr Diablo…also a very different setting from Davos and all that implies, no?!

[V. Arnold]

@ DD
Yesterday meeting on Chinese warships, presumably a place on earth where their discussions cannot be overheard.

Probably a Faraday Cage.

[Gravity]

“…the Greek government also committed to working in close agreement with European partners and institutions…”
My bad, I guess the ‘partners’ are not the same parties as the ‘institutions’, so by ‘partners’ Varoufakis must mean countries like Germany, most diplomatic.

“If the Greek government issued a parallel digital currency, and forced banks and businesses to use it, this would boost the money supply in defiance of the policy of the European Central Bank, said Varoufakis.”

If banks were compelled to accept digital scrip as legal tender and therefore use it as currency reserve, they would presumably be able to fractionate its deposits and issue euro credit proportionate to reserve requirements. So if deposited, 30 billion of this costless parallel currency could multiply to 300 billion euros if banks could find enough solvent parties to extend credit to.
But how is this scheme better than directly counterfeiting german euros, which could be issued without interest and without having to rely on banks to extend credit? Can collateral assets denominated in euros reflate by the price support of a parallel currency, or would such scrip have to be exchanged for euros through the banking system first?

Thats an ambitious list of proposals.
“• Ensure that its fight against the humanitarian crisis has no negative fiscal effect.”

This point seems difficult, even non-pecuniary social support programs like foodstamps consume funds to organise. But alleviating absolute poverty may produce fiscal and social multipliers.

[Author]

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