How the #Greek debt crisis exposes the danger of using the #Euro

The Greek government debt crisis if nothing else, shows how dangerous and how vulnerable a country becomes when it adopts a currency that is controlled by a foreign entity/

Without same major economic disruption it is almost impossible for Greece to leave the Euro

Which means that Greece (and any other country using the Euro) are completely controlled by the people that control the Euro system ie the ECB.

The Greek government is simply not willing or able to work within the constraints of a defacto gold standard.

This means that previous debt obligations that were serviceable with 20% annual inflation rapidly get out of control.

And the Greek government and Greek banks are left in the situation they are in today.

Neither party can depend on inflation to inflate away their debt obligations.

And the transition from the Euro to the new Drachma will certainly lead to a period of unstability.

Not least because the people who would be controlling the new Drachma would be the same people who oversaw Greece’s entry in the Euro, namely the Greek central bank.

There is no way the Greek central bank would make it easy for the Greek economy to transition back to their home currency. Primarily, if nothing else, to set an example to any other countries in the Eurozone who are thinking about taking the same course of action.

If Greece were to transition back to the Drachma today, the physical cash in circulation would continue to circulate.

The problem for the Greek economy would be the electronic cash trapped in the Greek banking system.

It would not be possible for the Greek government, even with a nationalised central bank, to continue to print the Euro currency inside Greece.

Wars have started for much less.

So the electronic Euros held in Greek banks would need to be converted into the new Drachma and until the economy had stabilised or until people are used to the new currency, in the international stage, the new Drachma will have very little credibility at the start.

However the abolishment of all property taxes, the use of a low flat tax rate and the abolishment of VAT, the Greek government would put the foundations in place for foreign banks to come in and lend into the Greek economy using whichever currency they wished. Swiss france, US dollars, Euros etc etc.

Of course this is completely pie in the sky stuff. For a start the Greek government has zero credibility.

Who knows what the Greek government will do in the next 5 years, let alone the next 10 or 25 years.

Fundamentally the whole problems comes down to one of education.

As long as the majority believe that a strong central government is needed, there is literally no hope.

People need to understand that power has to be pushed as close as possible to the individual, only when truly libertarian parties are in power, only when people embrace what they know to be right and start voting for libertarian parties will the change that is needed happen.

As long as socialism is thought of as a legitimate political philosophy, Greece will always be under the control of the current political class, be they in Greece or in the EU.


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