Dean – 150 billion? Yeah, sounds realistic.
I think we all know this is going to have to come and some point, the figures put out by the Eurogroup, as we have discussed before, bear no relationship with reality. The problem is for a 150 billion Euro haircut, the creditors are going to want their pound (or tonne in the case of Greek citizens) of flesh which is why we see the Greek government on its kamikaze course.
The international banks know that there is no way the Greek government is going to be able to get its finances in order which is why they are allowing (if not) recommending the exact measures the government is carrying out.
The measures are not intended to put the Greek government’s finances on an even keel. It would take a complete idiot not to notice the fact that GDP is decreasing meaning the debt to GDP is increasing, it would take a complete idiot not to notice that as GDP shrinks so does tax revenue, it would take a complete idiot not to notice that unpaid taxes are going through the roof (tax debts are increasing at over a billion Euros a month for 2011 until November and I think we all know this rate is going to increase).
Which leads us to why?
Why, if these measures are obviously destroying the Greek government’s balance sheet are they continuing on the same course?
Well the government reasons are obvious. If it keeps them and their friends in power a year or two longer then it is worth doing.
But why are the banks allowing it to happen, why are investors continuing to let the Greek government debt increase?
To state the obvious they are not doing it to lose money.
Let me outline the master plan. The Greek government is passing simply massive tax increases. The purpose of this is to pass their debt onto the private sector. How are they doing this?
Through income tax increases and more sinisterly, through taxes which are not connected to income, for example OAEE, Property Taxes, Fuel Duty, VAT, Electricity, Gas, Heating Oil etc etc. They like the fixed taxes because they are less effected by GDP/Income drops.
So what do we have happening?
The Greek government predicting that tax revenues will be X. The Greek government is failing to collect because people don’t have the money but lo and behold, they don’t have the revenue but they have the unpaid taxes as assets on their books.
So even though the government is not collecting taxes, their assets are increasing regardless.
Which brings us on to the end game.
There is going to come a point when the Greek government says the unpaid tax situation is going to “destroy” the country, that the situation is a “catastrophe” and because the situation is so “grave” they are going to say “we must start collecting these unpaid taxes extra judicially, the “country” simply does not have time to go through the legal system” And then you are going to see the government taking peoples houses, land, boats, cars etc on a wholesale basis
And if it is not the government doing then it will be the banks. The government will pass laws which allow banks to seize assets extra judicially and it will be the banks on a wholesale repossession mission.
And this is how the Greek governments creditors are going to get their money. Only when they have repossessed enough private assets to offset the 150 billion haircut or however much it will be will, only then will the haircut happen.
So to summarize. The Greek government is building up its “assets” in the form of unpaid taxes. And this is how they will transfer their debts onto the private sector and this is how the creditors will get their money while granting the government a haircut.
I hope I am wrong, but seeing what I am seeing it is the only possible explanation.
The solution? The Greek government must default (immediately) and equally importantly stay in the Eurozone. The Greek government will only be kept honest if they remain in the Eurozone, ie when they do not have the power to print their own money.
But let me tell you what will happen. It will go as far as the seizures and things will get bad and out of the blue will come a 150 billion Euro haircut and Greeks will be told that the haircut can only come if Yanis Varoufakis’s plan is implemented.
In short the whole crisis is created to make Yanis’s plan palatable.
I know Yanis’s plan is not malicious, I believe he has the best intentions but I also believe he is naive in the extreme if he thinks you can give a monopolistic power to a small group of people and not expect them to abuse it.
I am sure Yanis will be amongst the first to attack large corporations with government perks, why he believes the type of people running these entities are different if the entity is called “government” or a “government agency” I do not know.