A Greek Tragedy

The world watches as the European Union debt saga begins to rotate faster and faster – soon to come flying apart at the seams. We were initially told by the media propagandists that a mere $30 billion Euros would solve the problems in Athens. Now we see a proposed bailout less than a month later of $110 billion Euros. What is going on? Will the Greek economy survive?

We are about to see a country in the depths of public upheaval. The International Monetary Fund (IMF – international bankers) have become involved in the bailout of Greece, just like they had planned to all along.

Most of the bailout money is coming from other European Union countries (governments), but the “meat” of the new “austerity measures” are coming from the bankers in the form of the IMF. The bankers have set Greece up to fail, and to be the catalyst that will be the eventual undoing of Portugal, Spain, Ireland, and most likely Italy.

Let me be clear. The international bankers are the enemies of the various governments of the world – controlling the macro economies of every developed nation. Meanwhile, the governments of the world have grown evil by building immense power structures in an effort to keep the bankers happy as well as gain influence, greed, and pride. What I’m saying is this: The citizens of the various countries actually have two enemies to contend with: 1) International bankers, and 2) Tyrannical governments. It doesn’t please me to write this, but truth must be presented plainly and accurately.

The citizens of Greece are about to be forced to enter into a major depression. I use the term “depression” as meaning they will succumb to a greater than 10% cut in their nation’s GDP that they have grown accustomed to. This will not be taken lying down – especially in a country that is known for very violent protests. We need to be praying for those that will be fighting for freedom and liberty, as well as praying that those fighting for a return to the government handouts they have so long enjoyed will be convicted of their sins and seek repentance.

Here’s what will be playing out in Greece as things move forward. Public and private employers will be taking significant cuts in their wages. They will also see a number of government issued “bonuses” that they’re used to each year disappear. In addition to this, they will be paying a Value Added Tax (VAT) that is 4% higher than the 21% that they currently pay. What result will this have on the Greek consumer?

Consumer spending in Greece will nosedive. International banks already have the “credit valve” shut off, so there will be no place for consumers to turn to obtain debt leverage. A lack of spending and debt creation will cause the “velocity” of their money supply to decelerate at an alarming rate. Money will change hands much more slowly. New “money” in the form of new debt will be vastly reduced, while credit (debt) destruction will pick up pace as citizens find they are unable to service their existing debt obligations. The nation’s money supply will deteriorate rapidly.

What is the “normal” response of governments when faced with the described scenario? The Keynesian response would be for the government to go on a “debt binge” – selling Treasury securities as fast as they can and undertaking all forms of “stimulus” spending. They do this in an effort to mask the true effects of what is economically happening in their nation, and to maintain their power structure that they so desperately crave. But guess what? The Greek government won’t be able to do this under the terms of the “austerity measures”. There will be no “masking” taking place. The citizens will immediately realize the depths of a large economic depression. There will be no gradual warming of the water in the pot for the Greek frogs. They will all be scalded with boiling water in very short order. This is why the citizens will revolt, and revolt strongly.

There is a relatively simple means to measure when the “switch” will be thrown on the European Union economic structure. Those of you reading the Hamill Economic Update for some period of time will remember the currency benchmarks that I used to include in most updates. The level set for the US Dollar vs. the Euro was 1.25. The value was at 1.50 not very long ago – and people thought that the EU was in a stronger financial position than the US. They were wrong. The value stands at 1.2965 as I type this. I don’t have a crystal ball to know if/when the exchange rate will drop below 1.25. However, if/when it does will mark the next crisis of currency unraveling assuming it stays there or gets worse.

It is my firm opinion that families should work as hard as possible at getting out of existing debt and becoming as “liquid” as possible in their finances. This opinion should not be taken as financial advice, but as a piece of information to consider and pray over.

Nobody is talking about what is going on with China’s economy right now. Also, very few are talking about the economic depression that our nation is currently experiencing. Yes, I said depression. Yes, that means a greater than 10% drop in GDP. I’ll explain next time.

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