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Should Germany bail out Greece?

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    Posted: 06 Nov 2011 at 01:21
http://globalpublicsquare.blogs.cnn.com/2011/11/04/zakaria-in-defense-of-german-sluggishness/?hpt=hp_t2

so should Germany bail Greece out? Is it economically and politically solvent to help Greece in a time of need?

Edited by SPQR - 06 Nov 2011 at 01:31
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Post Options Post Options   Thanks (2) Thanks(2)   Quote Parnell Quote  Post ReplyReply Direct Link To This Post Posted: 06 Nov 2011 at 02:57
Germany and the Germans know very well that by bailing out Greece they are bailing themselves. Oh I know the Germans and the Northern Europeans like to think they were virtuous and spendthrift during the boom... but in reality all they did was subsidise spending booms in southern Europe and in places like Ireland by enabling cheap credit and acting as our loan sharks. They're obviously tetchy about the possibility of not seeing any of that cash coming back their way.

I dislike the premises involved here. True, Greece is a dysfunctional, clientalist state with a welfare state bordering on a mass delusion... but never forget where the money came from in the first place, or from which countries that debt accumulated from. By bailing out Greece and looking to calm the European debt crisis Germany is serving its own interests.

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Post Options Post Options   Thanks (0) Thanks(0)   Quote Harburs Quote  Post ReplyReply Direct Link To This Post Posted: 06 Nov 2011 at 03:02
No, let the Greeks taste what will happen when all cheat on their taxes. Ireland, Portugal and Spain should learn how to deal with the problem as well.


Edited by Harburs - 06 Nov 2011 at 03:04
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Al Jassas Quote  Post ReplyReply Direct Link To This Post Posted: 06 Nov 2011 at 03:35
Originally posted by SPQR SPQR wrote:

http://globalpublicsquare.blogs.cnn.com/2011/11/04/zakaria-in-defense-of-german-sluggishness/?hpt=hp_t2

so should Germany bail Greece out? Is it economically and politically solvent to help Greece in a time of need?
 
Of course they should bail Greece out, its their own survival that is at stake not Greece's.
 
Germany is an export based heavily industrialised economy. What has been driving the current German boom (+3% growth, 6% unemployment and low inflation) is the declining value of the euro due to the current crisis. A Greek default will immediately trigger a massive banking crisis especially in France where most of its banks invested in Greek debt as well as in Germany where several banks are also involved. The euro will take a hard hit and will have to be devalued which will trigger an inflation as well as many headaches that won't end.
 
The real question that one might ask is "should have Greece been allowed into the Euro in the first place?" The answer is no.
 
As for the rest of the PIIGS, their situation isn't as horrible as Greece, indeed Spain used to have a budget surplus as late as 2008. It was the mismanagement of the crisis that exacerabated the situation there.
 
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Harburs Quote  Post ReplyReply Direct Link To This Post Posted: 06 Nov 2011 at 03:41
Al you are right about not letting Greece in first place, but what will happen if this bail out doesn't help the euro just like the other ones? The money will be funneled to a hole named Greece, and social unrest sparkles over Germany! Euro has to cut the infected organ otherwise the whole Europe will be in crisis very soon. (Greece should be let out of EU as an example)


Edited by Harburs - 06 Nov 2011 at 03:45
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Al Jassas Quote  Post ReplyReply Direct Link To This Post Posted: 06 Nov 2011 at 04:18
Originally posted by Harburs Harburs wrote:

Al you are right about not letting Greece in first place, but what will happen if this bail out doesn't help the euro just like the other ones? The money will be funneled to a hole named Greece, and social unrest sparkles over Germany! Euro has to cut the infected organ otherwise the whole Europe will be in crisis very soon. (Greece should be let out of EU as an example)
 
The reason why the other bailouts didn't work was because the Greek situation is so desparate. Greece has no real economic sector of value other than tourism and even there the competition from Turkey, Italy and now Croatia is sapping from it. Plus it still insist on spending programs that make absolutely no sense like defense programs including buying very expensive Russian SAM systems as well as fighters that are not necessary since Greece has already upgraded its military several times since the 1980s.
 
This bailout is different and is structured differently giving the ultimate authority to the people who actually control the money supply not the guys who borrow money to buy weapons with which is it has a great chance of success. The issue here is will Greece and Greeks accept the German takeover of their sovereignty?
 
As for the future of the euro, well seeing how bad all other currencies are the euro is still a good bet. The problem right now is to correct the structural mistakes done when the currency originally began. This means more power to unelected EU bureacrats, cancelling all sovereign CBs and making bond issuing an EU power rather than a national one. I hardly can see any country accepting this solution.
 
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Harburs Quote  Post ReplyReply Direct Link To This Post Posted: 06 Nov 2011 at 05:28
This bail out weakens Greek national government significantly. I would say they have to liquidate the weapons they bought with borrowed money, cancel unnecessary programs and spending, collect taxes from those who cheated specially big companies, revitalize and empower the old currency (drachma), and negotiate for lower interest rate.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Flipper Quote  Post ReplyReply Direct Link To This Post Posted: 06 Nov 2011 at 06:14
Originally posted by Harburs Harburs wrote:

No, let the Greeks taste what will happen when all cheat on their taxes. Ireland, Portugal and Spain should learn how to deal with the problem as well.


Well, how do you feel when people make cliché comments and put you in the same pot with people you don't belong to? Who told you that I and a majority of people around me cheat on their taxes? I have been always paying my share to the society, so I don't understand exactly what I should taste? I know the money I have been paying for tax went to a black hole. I know that 54 billion of the tax money went to support banks between 2008 and 2009 and that those banks now refuse to finance healthy companies that pay their taxes and their employees. I know that a huge amount of the taxes were used for buying weapons for a "supposed" threat. I know that most of the money were spent on overpricing made by national and international giants, who pay well under the table those who would sign it. I was paying the asphalt of my street triple and quadruple the price it actually cost. So what else shall I taste?

You know, it reminds me once a sick discussion I had with an American, one of his kind, who was blaming the Africans for being enslaved. It was their fault according to him, because their mentality allowed them to be suitable for slaves. Go figure...
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Harburs Quote  Post ReplyReply Direct Link To This Post Posted: 06 Nov 2011 at 06:21
Before taking your anger on me read my third post carefully. (It is a well-known fact that many Greeks cheat on their taxes, so you better ventilate that anger somewhere to make a difference. It was your countrymen who busted the Greece economy not mine).


Edited by Harburs - 06 Nov 2011 at 06:31
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Flipper Quote  Post ReplyReply Direct Link To This Post Posted: 06 Nov 2011 at 06:44
Originally posted by Harburs Harburs wrote:

Before taking your anger on me read my third post carefully. (It is a well-known fact that many Greeks cheat on their taxes, so you better ventilate that anger somewhere to make a difference. It was your countrymen who busted the Greece economy not mine).


Define many Greeks...Is it big companies? If yes, then I agree, however those will not be the ones to taste anything because they are the last to have a problem. Those who will taste what you say have nothing to do with tax cheating. Many Greeks might have responsibilities about other things concerning this problem, but definitely not the taxes.

And I am not taking out any anger on you specifically. My reaction goes to what you comment reflects. Judging from your 3rd post, your first post is words from what you have been reading in media from time to time.
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Major and minor business owners in Greece. Well, my knowledge about Greece definitely comes from Media what else do you expect? I saw two documentaries about Greece debt crisis on BBC. All indicating about wrong culture of evading taxes by many business owners. Greek tax collectors and some hotel owners were interviewed in the documentary.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Flipper Quote  Post ReplyReply Direct Link To This Post Posted: 06 Nov 2011 at 07:18
Originally posted by Harburs Harburs wrote:

All indicating about wrong culture of evading taxes by many business owners.


Absolutely true...If I remember the numbers well, just 14 companies owe 31 billion in taxes to the state...Meanwhile we're struggling to find 8 billion for the next months and instead of simply collecting those money from those giants we're waiting for "Merkozy" to find a solution.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Harburs Quote  Post ReplyReply Direct Link To This Post Posted: 06 Nov 2011 at 07:33
Originally posted by Flipper Flipper wrote:

Originally posted by Harburs Harburs wrote:

All indicating about wrong culture of evading taxes by many business owners.


Absolutely true...If I remember the numbers well, just 14 companies owe 31 billion in taxes to the state...Meanwhile we're struggling to find 8 billion for the next months and instead of simply collecting those money from those giants we're waiting for "Merkozy" to find a solution.
Why government doesn't confiscate their assets? If they can't pay their taxes their properties should be taken just like any other country.
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The ultimate fact is world economy isn't sustainable. Hungry hungry hippo consumer system about to collapse. This will not happen at once. You will see that as declining of life standarts all over globe. It will start from well develeped countries with aged population. Developing countries will follow later them, depending on their own unique conditions. I believe it's the sunset of humankind. I didn't meaning there will be no human on planet. But civilisation will gradually decline, population too (steadily). But anyone may keep believe that illusion of permanent progress which is non-exists. It's a well known fact, entropy of a system cannot be recoverable.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Flipper Quote  Post ReplyReply Direct Link To This Post Posted: 06 Nov 2011 at 15:43
Originally posted by Harburs Harburs wrote:

Why government doesn't confiscate their assets? If they can't pay their taxes their properties should be taken just like any other country.


What you say is what they should do. Now, the real question is why aren't they doing it? From this point I let everyone make their own conclusions.

Also, another thing...Since the crisis came up certain universities published reports on new natural resources found within Greek borders. Amongst them there is oil and natural gas. Nobody has done anything about this...Note, that those resources are not in places where they can cause conflict with neighbours. Have a look at Cyprus for example...They had a similar problem with Greece and the first thing they did was to start taking advantage of their natural gas.
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Originally posted by Paradigm of Humanity Paradigm of Humanity wrote:

The ultimate fact is world economy isn't sustainable. Hungry hungry hippo consumer system about to collapse. This will not happen at once. You will see that as declining of life standarts all over globe. It will start from well develeped countries with aged population. Developing countries will follow later them, depending on their own unique conditions. I believe it's the sunset of humankind. I didn't meaning there will be no human on planet. But civilisation will gradually decline, population too (steadily). But anyone may keep believe that illusion of permanent progress which is non-exists. It's a well known fact, entropy of a system cannot be recoverable.


I agree but not on the fact that civilization will decline. At some point we will drop the current economic system and pass onto a new system that is less problematic and certainly more society oriented. Sometimes, I hear those economists and they say things that make me wonder if they are robots or humans. It is like they forget that the most important thing in the world is a healthy civilization with healthy societies, not the economic system. There can be no economic system with a society that is getting sicker and sicker. The economic system has an expiration date.

Oh, dear I always think of the Lydians and what they would think/do if they knew what their creation (money) would do to the world. Funny though, gamble seems also to have been invented in Lydia, at the same period. LOL It is also interesting that the first story telling us that happiness does not equate to money comes from Lydia as well, that is to say Croesus vs Solon about who is the happiest man in the world.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Paradigm of Humanity Quote  Post ReplyReply Direct Link To This Post Posted: 06 Nov 2011 at 16:34
Originally posted by Flipper Flipper wrote:


Oh, dear I always think of the Lydians and what they would think/do if they knew what their creation (money) would do to the world. Funny though, gamble seems also to have been invented in Lydia, at the same period. LOL It is also interesting that the first story telling us that happiness does not equate to money comes from Lydia as well, that is to say Croesus vs Solon about who is the happiest man in the world.

Well, problem is not money itself, problem is "fiat money" which has no real value. Almost all currencies at this time are fiat moneys. They are just paper. Their golden reserve backups are too weak. There is no gold enough to backup all money in the world.


Edited by Paradigm of Humanity - 06 Nov 2011 at 18:06
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Flipper Quote  Post ReplyReply Direct Link To This Post Posted: 06 Nov 2011 at 17:31
Originally posted by Paradigm of Humanity Paradigm of Humanity wrote:


Well, problem is not money itself, problem is "fiat money" which has no real value. Almost all currencies at this time are fiat moneys. They are just paper. Their golden reserve backups are too weak. Their is no gold enough to backup all money in the world.


Exactly! Thanks for clarifying that Smile
Basically, most of the "money" in the world does not exist physically.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Al Jassas Quote  Post ReplyReply Direct Link To This Post Posted: 06 Nov 2011 at 19:00
Originally posted by Paradigm of Humanity Paradigm of Humanity wrote:

Originally posted by Flipper Flipper wrote:


Oh, dear I always think of the Lydians and what they would think/do if they knew what their creation (money) would do to the world. Funny though, gamble seems also to have been invented in Lydia, at the same period. LOL It is also interesting that the first story telling us that happiness does not equate to money comes from Lydia as well, that is to say Croesus vs Solon about who is the happiest man in the world.

Well, problem is not money itself, problem is "fiat money" which has no real value. Almost all currencies at this time are fiat moneys. They are just paper. Their golden reserve backups are too weak. There is no gold enough to backup all money in the world.
 
Sorry paradigm but all the gold in the world isn't enough to back the Turkish Lira let alone the euro or the dollar.
 
There is a good reason why the gold standard was dropped. It choked economic expansion for countries that have a general deficit in either current account or budget or both. Back in 1971 when the US dropped the gold standard the US actually literally ran out of gold to pay its trade deficit with the UK. Floating the US dollar meant the dollar not gold was used to pay debt and the US can print dollars but can't invent gold. The dollar kept its value and indeed it gained against gold before the oil crisis and even that didn't destroy the dollar but actually strengthened it since oil is traded with the dollar not gold.
 
Plus the idea that fiat currency isn't "backed" by anything is absurd. Fiat currency is backed primarily by the strength of the economy of the country that issue it, its current account/budget deficits/surpluses, inflation, growth and of course goods that are traded by it.
 
Oil is traded with dollar and the entire world buys dollars from the US to buy oil and it is this reason why the dollar will always be strong and the current political theater in the US is just nonsense. More dollars are bought every month from the US than all the US yearly deficits combined and then some.
 
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Yes, it is backed by goods and services. But there's far more money in market. Whoever has large funds he can easily suck value of money on your pocket. Total purchasing power of all money remains same. But some leechers costantly giving 10 times more credits than their real funds. This virtual money cause devaluation, of course...


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Originally posted by Paradigm of Humanity Paradigm of Humanity wrote:

Yes, it is backed by goods and services. But there's far more money in market. Whoever has large funds he can easily suck value of money on your pocket. Total purchasing power of all money remains same. But some leechers costantly giving 10 times more credits than their real funds. This virtual money cause devaluation, of course...


 
And devaluation is bad because?
 
The gold standard makes manipulating money supply almost impossible which lead to very prolonged bouts of economic stagnation if not outright deflation which is much worse than inflation. This is what happened in the truely great depression from 1873 to about 1900. As your graph above shows the value of money actually increased in that period. This forced prices and most importantly wages down. With little or no growth the whole economy suffered. Same thing happened in the great depression.
 
Inflation, which is the primary cause of purchasing power loss, is much less serious than inflation, indeed it may in certain cases (like Turkey nowadays) be a good thing since its most direct result (devaluation of currency) makes national companies much more competetive in the export market. Not to mention the fact that inflation makes debt pressures (and Turkey has alot of it) less apparent. The loss of purchasing power can be easily managed using currency manipulation, thing that you can't do with a gold standard.
 
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Problem lies right there. This system gives government ultimate power to manipulate market which always favors interests of big companies. The market must be only dependent on supply and demand. I strictly oppose government intervention, their job is just regulating market not manipulating it. A government "cannot" mint to cover his expenses. Otherwise that virtual money goes to hedge funds as happened in US government's economical encouragement package. Trust me, only a small portion of it really goes to economy.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Al Jassas Quote  Post ReplyReply Direct Link To This Post Posted: 07 Nov 2011 at 01:16
Originally posted by Paradigm of Humanity Paradigm of Humanity wrote:

Problem lies right there. This system gives government ultimate power to manipulate market which always favors interests of big companies. The market must be only dependent on supply and demand. I strictly oppose government intervention, their job is just regulating market not manipulating it. A government "cannot" mint to cover his expenses. Otherwise that virtual money goes to hedge funds as happened in US government's economical encouragement package. Trust me, only a small portion of it really goes to economy.
 
Since issuing money is a fundamental right of the government then it is quite natural for it to control the money supply as it sees fit. How it affect the general population that depends entirely on the policy makers if they are corrupt or honest. Unfortunately even honest people have to sacrifice certain principles and save the companies for the greater good. Case in point the bailouts.
 
Without the 2008-2009 bailouts and the trillions of free loans to banks the entire world banking system would have crashed. In the US alone some $5 trillion of depositer money deposited by George, Jane and your average ma' and pa' store would have simply evaporated into thin air.
 
As for supply and demand, that is a myth. First you must create perfect free market conditions (which is simply impossible) and then you can speak of supply and demand and free market forces. And government can mint its way out of deficits (provided it does that in a carefull and calculated manner). This is what gold producing countries did back during the gold standard era and this is what every country can do when they feel to.
 
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Paradigm of Humanity Quote  Post ReplyReply Direct Link To This Post Posted: 07 Nov 2011 at 01:43
I don't believe non of your arguments as I don't believe my own. But we can argue this for many pages. Clearly, I got bored. But maybe you realised that, I didn't suggested a better system, just realised system is already broken and it is unrecovarable.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Harburs Quote  Post ReplyReply Direct Link To This Post Posted: 07 Nov 2011 at 01:51
On the other hand having money only based on gold reserves can kill the economic growth and freeze the market. If I am not mistaking US experienced it during Pres. Andrew Jackson. He smashed the federal bank and banned the paper money printing based on a fraction value. During his presidency gold and silver became so scarce that people could not pay their bills, people started trading with goods instead of money. It also caused panic of 1837 which devastated the people.


Edited by Harburs - 07 Nov 2011 at 02:06
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Greece should just leave the Euro and allowed to default. Merkel, Sarkozy and even Cameron's insistence that it should remain at all costs I think is indicative of another globalist agenda actually.  In fact rather than letting Greece go and sort out it's own problems they would prefer to shackle the Greek people with generations worth of debt and instead push for proper fiscal standardisation across the Eurozone which would in fact simply be the second step in creating a united states of Europe. 

It has reached such ridiculous proportions that Sarkozy and Merkel are scaremongering and promising a future of war and conflict should the Euro collapse and even more ridiculously attributing the last 60 years of peace in Western Europe to the Euro which has only been around a decade.

They are just finger muppets of the banking dynasties.


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Hey folks, except as bangles for the vainglorious, gold is worthless as an instrument of economic productivity and wealth. You can not consume it; it is certainly a poor insulator against the vagaries of weather; and, as an "investment" its value is purely arbitrary. Might as well begin collecting cowry shells.
Honi soit qui mal y pense
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Flipper Quote  Post ReplyReply Direct Link To This Post Posted: 08 Nov 2011 at 17:22
Originally posted by Zagros Zagros wrote:

Greece should just leave the Euro and allowed to default. Merkel, Sarkozy and even Cameron's insistence that it should remain at all costs I think is indicative of another globalist agenda actually.  In fact rather than letting Greece go and sort out it's own problems they would prefer to shackle the Greek people with generations worth of debt and instead push for proper fiscal standardisation across the Eurozone which would in fact simply be the second step in creating a united states of Europe. 

It has reached such ridiculous proportions that Sarkozy and Merkel are scaremongering and promising a future of war and conflict should the Euro collapse and even more ridiculously attributing the last 60 years of peace in Western Europe to the Euro which has only been around a decade.

They are just finger muppets of the banking dynasties.




There must be a good reason for not letting Greece to default like that. Most probably there is something on the euro backstage that cannot be put on risk. On the other hand a default is easier to say than do. Until very recently a big percentage of the population prefer to default since there were many politic and parapolitic powers who were using it as an agenda. While time passed and people looked closely to the "essense" of a default they prefer to have some income than putting themselves to the idea to have no income at all. All those who have even a small debt to a bank in euros will need to pay it in a underestimated currency which would be unbearable.

Some say "look at Argentina" based only on the development Argentina had after the default. However, did anyone examine the conditions of living of the population during that default? My point is that it is more complex than just saying "lets default". Btw, does anyone know how things are in Iceland?
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Flipper Quote  Post ReplyReply Direct Link To This Post Posted: 08 Nov 2011 at 17:25
Originally posted by drgonzaga drgonzaga wrote:

Hey folks, except as bangles for the vainglorious, gold is worthless as an instrument of economic productivity and wealth. You can not consume it; it is certainly a poor insulator against the vagaries of weather; and, as an "investment" its value is purely arbitrary. Might as well begin collecting cowry shells.


Maybe, our economies are right now too big to base them on gold because simply it is not enough. That doesn't mean that our system is insufficient and with a expiration date. Maybe, we left gold back for a good reason, but in the same way we need to find an improvement to our current system. Easy to say, but we cannot lay back and believe everything will be ok in the future.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Zagros Quote  Post ReplyReply Direct Link To This Post Posted: 08 Nov 2011 at 19:21
Originally posted by Flipper Flipper wrote:

Originally posted by Zagros Zagros wrote:

Greece should just leave the Euro and allowed to default. Merkel, Sarkozy and even Cameron's insistence that it should remain at all costs I think is indicative of another globalist agenda actually.  In fact rather than letting Greece go and sort out it's own problems they would prefer to shackle the Greek people with generations worth of debt and instead push for proper fiscal standardisation across the Eurozone which would in fact simply be the second step in creating a united states of Europe. 

It has reached such ridiculous proportions that Sarkozy and Merkel are scaremongering and promising a future of war and conflict should the Euro collapse and even more ridiculously attributing the last 60 years of peace in Western Europe to the Euro which has only been around a decade.

They are just finger muppets of the banking dynasties.




There must be a good reason for not letting Greece to default like that. Most probably there is something on the euro backstage that cannot be put on risk. On the other hand a default is easier to say than do. Until very recently a big percentage of the population prefer to default since there were many politic and parapolitic powers who were using it as an agenda. While time passed and people looked closely to the "essense" of a default they prefer to have some income than putting themselves to the idea to have no income at all. All those who have even a small debt to a bank in euros will need to pay it in a underestimated currency which would be unbearable.

Some say "look at Argentina" based only on the development Argentina had after the default. However, did anyone examine the conditions of living of the population during that default? My point is that it is more complex than just saying "lets default". Btw, does anyone know how things are in Iceland?


A decade of struggle and national unity vrs a generation or more of debt enslavement.  It's not the fault of the Greek people, it is the fault of corrupt/deluded politicians and a mixture of incompetent and devious financiers that the world economy is in such a mess.  We supposedly live in a capitalist free market environment yet we will not allow banks to fail because of their own stupidity.  What message does that send out?  Greece should default on its debt and the rest of Europe needs to man up and take it else we will be stuck in an endless cycle of economic rescue packages and near failures until there is one gargantuan catastrophe.  Greece is just peripheral in scale to the likes of Spain and Italy.  To finance debt with debt with more debt, THIS is SPARTA lunacy  (sorry couldn't resist).


"There was glory in pissing, Corabb decided as he watched the stream curve out and make that familiar but unique sound as it hit the ground." So true.
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