George Malouchos has an article in ToVima today one of the main Greek newspapers. In it he declares that inflation is the only thing that can “save” Greece and it is Germany’s irrational fear of hyper inflation that is stopping the inflation from being created in the Eurozone.
It is unfortunate that George Malouchos has chosen to write about economics, something he clearly has no idea about.
One thing that should be praised about George Malouchos’s article is its honesty. Ill go over some of the highlights.
The article starts with this
The benefit of the Germans in the Weimar Republic as an excuse to ban the printing of money in the euro area, ie the only weapon that could support a sustained gradual exit from the crisis, is known
Known to who exactly?
Why is George Malouchos condoning the wiping out of people’s savings and pensions?
Inflation could be argued as a way out but one has to ask the question, in Malouchos’s world what is wrong with defaulting on debt?
Why does Malouchos not “recommend” Greece defaulting on its debt, especially when you consider that a huge portion of the debt is admittedly fraudulent. This would be the most logical and fairest solution to the Greek government’s debt problem. Those that took the risk in lending the Greek government money are the ones that pay the price. And these lenders then are well within their rights to sue the ECB for compiling fraudulent figures which led them to believe the financial position of the Greek government was sounder than reality.
But I do not believe Malouchos has an agenda I believe he is simply misinformed.
Malouchos goes on
alleged ghost of hyperinflation is not threatening anyone – eg the U.S. and Japan ever printed money at the same time without a crisis of such depth, never question has arisen as inflation risk.
Again, Malouchos demonstrates that his knowledge of the current economic environment in the EU and in the USA comes solely from what he sees on the television.
If there is one thing that is threatening the US economy it is inflation. The Federal reserve holds a third of the US Government’s 10 year debt. One of two things is going to happen. Either the Fed is going to stop its purchases which will see interest rates go through the roof as the US government entices parties to buy its debt.
the Fed keeps monetising this debt which will at some point blow through the blockage that is stopping mass inflation from occurring at the moment.
Either way money printing started the bond bubble and in one way or another money printing is going to destroy the US dollar.
These are facts of the US economy at the moment and to a lesser extent the UK economy. For Malouchos to imply that hyperinflation is not even a ghost is simply wrong.
Malouchos then goes onto to make an alarmist statement which has no grounding in reality.
In Berlin believe that fortifying the euro with the internal Greek bankruptcy, have solved the problem. They make a huge mistake: the risk of destabilization not only passes through the dashboard of international exchanges…but..social collapse.
Malouchos seems to believe that the international currency exchanges and stock markets have not already priced in a Greek default. Again, this is simply not the case. For all intents and purposes, Greece has already defaulted in the eyes of international investors and money managers. To suggest that the Euro will be destabilised by a Greek default is pure fantasy.
Malouchos then uses the term “social collapse” which is a common phrase used by Greek politicians but it is also a term that has not been defined, in essence it is simply a term that is used to frighten the population.
The default of Detroit should be a lesson to Malouchos. It should have taught him that a government default can pass by unnoticed by the population.
The government in Detroit has defaulted on billions of Dollars of its debts and yet pensions & benefits are still being paid. The water & sewage system still works, there is just as much law and order as there was before and there is still electricity.
What Detroit has had to do is simply cut out all of the waste in government and concentrate on its core services.
The Greek government should and could do the same.
George Malouchos in this article is doing nothing more than fear mongering whether that was his intention or not is besides the point.