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Jim Cook

 

RUNAWAY SOCIAL SYMPATHY

Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

 
Best of Andy Sutton
March 26, 2012
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The financial woes of Greece have been fairly well documented over the past year and a half that is for sure. The deduction many analysts, myself included, that the country would end up defaulting on the majority of its debt was a foregone conclusion. For the technocrats to pull a default, and then call it a bond swap, was an exercise in semantics that even Roget himself would have been proud of. The very idea of calling it a swap presents the idea that the bondholders got something other than an empty bag, when an empty bag is exactly what they got.

But Greece’s problems didn’t start in 2010. They started from the very day the country was admitted into the then fledgling European Union. All sorts of rules had to be bent just to get Greece accepted. And there were other cases too where the good old economic shoehorn was pulled off the shelf to guarantee admittance. Most notably, measurements relating to debt were ignored, and it is a near certainty that the Greek government (and others) was cooking the books on its end as well.

Many have asked why the Greeks simply couldn’t do what we here in America have done and just print the money they needed to pay their bills. There are some subtle and not-so-subtle differences in play here when one seeks to answer this seemingly simple question. It ends up getting pretty complicated rather quickly, so I’m going to break it down into its component parts for easy reading.

The Central Bank and Currency System

Most people who are up to speed on global banking systems would look at Greece and the United States and point out that Greece cannot print money to pay for its largesse because it has ceded that bit of sovereignty over to the EU when it joined over a decade ago.  So in that regard, Greece is dependent on the European Central Bank (ECB) for this particular bailout; throw in the IMF and World Bank too for good measure. In other words, the government of Greece will do whatever the banking establishment wants or else no more money comes in. Sounds like freedom, doesn’t it?

Here is where it gets ugly. Let’s look past Greece for a minute shall we? Because it just so happens that we’ve got our own little debt problem brewing here in America. But we’re different – the news people say so!  We can print the money we need to pay our bills. And there are no consequences….Right?

Well, not exactly. Our Treasury sells billions of dollars of new debt (in the form of Treasury bonds) each week. This debt is bought by a broad mix of players from banks to hedge funds to sovereign nations, and even the federal reserve. Whoever ends up owning those bonds becomes a creditor of the government (the people) of the United States. The US government cannot print the money to pay its bills because it no longer issues money. Sure the US Mint produces all our money, but the money itself is issued by the fed – at interest. So when we talk about trillion dollar deficits for the next decade, that money is going to have to come from somewhere. The fed will issue it – at interest, and then presumably buy an ever-increasing share of the bonds because the rest of the world is tired of swapping goods and services for our paper tickets. In this way our fed will become even more like the ECB where the control of money is concerned.