QUESTION:
Marty,
With the default of Greece and their exit from the Euro, what is likely to happen to the debt and what rate would you expect the drachma to be established?
I really don’t think you can possibly know how much this blog is appreciated. I’m not in the finance industry but have followed you since your (enforced) holiday. Ever since it has been a daily awakening. Many, many thanks.
AB
ANSWER: In the past, governments have defaulted in one of two ways, and so far I have not seen a third option materialize. That is our proposed solution. Either a nation defaults entirely on everyone, or they default partially on external debt that is justified by the claims that foreigners have exploited their country.
I understand that this subject was never taught in school. I believe that was part of our “conditioning” by government to accept them as our savior. My eyes opened when I stumbled upon a very rare book – “Herbert Hoover’s Memoirs”. He did not want to appear to have profited from the Great Depression, so he demanded that the publisher not make any money. As a result, they published 500 copies. I stumbled upon a copy in an antique bookstore in London. When I read his chapter on 1931, everything I learned in school collapsed. It became obvious, if you wanted to know history, you had to go to contemporary sources and become self-taught, seeking the truth, rather than being fed propaganda. The classic book that defined the Great Depression was Galbraith’s “The Great Crash 1929”. It became obvious that it was just propaganda with no mention of any government ever defaulting in 1931.
Ukraine is already looking at the debt, and is arguing for the default on external debt that has exploited their country. This will include Russia, but there will be others caught up as well. The USA will guarantee new debt to keep the borrowing cycle going.
When I was in Poland, the response of the crowd was not to join the euro, for they feared what happened to Greece and Spain would happen to them – smart move. Politicians want to rule the world and assume they can just write a law and make things happen. They are DEAD WRONG, but unfortunately its our dead bodies that result from their stupid actions.
The stupidity of creating the euro without consolidating the debt, when debt is used as money and reserves of banks. The debt of Greece was converted to euros, and then the euro rose from $0.80 cents to $1.60, and Greece then had to pay back twice as much. The new government is looking at selling national assets to pay off these debts. They will lose the entire country because politicians cannot grasp what they have done to the country.
So what value the drachma would have if it is reintroduced depends entirely upon how much more they allow the strip-mining of the nation. This is a crazy period where lawyers acting as politicians have ruined our society and our future.
Greece should default on external debt, at the very least. What they are doing is trying to honor the debt at the demand of Brussels, and this is destroying the future. Eventually, the Greek government will be forced to default on the entire debt, bringing about social unrest in Greece that will not end nicely. They have to wake up before it is too late.
For the individual, hoard dollars not euros. I seriously doubt the USA will be able to cancel dollars, but the ECB can cancel the euro overnight.
