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Source link: http://archive.mises.org/12690/a-greek-tragedy-in-the-making/

A Greek Tragedy in the Making

May 12, 2010 by

The bailout of the PIIGS sets the stage for similar bailouts of bankrupt US states and cities. The world is firmly ensconced on the path to an inflationary depression. FULL ARTICLE by Ganesh Rathnam

{ 10 comments }

Ben Ranson May 12, 2010 at 9:12 am

It is good to see some analysis of the current European situation here. I agree with the essay, except for two points.

“Higher taxes would… lower tax revenues” Very possible, but hard to tell at this point.

“Inflationary depressions transfer wealth from holders of paper assets to holders of hard assets.” In the end, someone who owns X amount of gold still owns X amount of gold. He hasn’t lost his shirt, but is he really wealthier? Possibly, but only if the demand for gold increases in terms of other goods and services.

While the inflation continues, it would be more appropriate to say that debtors benefit at the expense of those who’s wealth can be expropriated through inflation.

Jason Pacifico May 12, 2010 at 11:56 am

In regard to, “The FED would then use the EUROS to either directly or indirectly purchase the debt of the EURO ZONE nations. The ECB in turn would use the dollars to purchase US Treasury debt,” I think the FED is perpetuating the DEBT PEONAGE issues in re: to buying worthless EURO paper, RATHER THAN, get stock in the bank’s that hold the debt in the PIIGS nations.

In addition, the only solution is to let the PIIGS nations absolutely DEFAULTon the 3.8 trillion in debt, and let the PRIVATE INTERNATIONAL BANKLS DEFAULT– and go bankrupt (always the issues and on elite “class” of 1/2 percent of the World’s Population in which the media, etc. will not discuss issues– as I am– because they are similarly in on the interlocutionary progressive perspective (Nilsen ratings multipliers, etc) without dealing w/ the Debt Peonage issues (that enriches only private where).

The US holding shares (markets!) could reorganizes the INTERNATIONAL PRIVAT BANKS and a better World Economy or GLOBALIZATION with the PIIGS nations being DEBT-FREE ECONOMIES on new business formation, PRODUCTION of businesses, products, jobs, and commodities for their domestic markets and for their export markets.

Similarly CALIFORNIA, if the FED increases CALIFORNIA’s tax revenue and incoming lottery revenues: multiplier to 3 to 1 (currently at 1.2-1.9 etc., 15-20 billion on a 3 to 1 multiplier would be 45-60 billion dollars in tax revenues– multiplied accordingly which are on– target multiplier revenue allocations to: education, infrastructure repairs, transportation and pensions, for example, there would be no debt or deficit issues in CALIFORNIA. The FED has uniformly cut the MULTIPLRER ratio historically of STATE GOVERNMENT, which I wrote in regard and had the policy reversed in the early 1981 and 1994. (I was reported in the New York Times)

Tim Kern May 12, 2010 at 12:29 pm

Several things come to mind while reading this. First, the stock markets did apparently rejoice; doesn’t anyone realize that this bailout covers monies ALREADY LOST? Second, I fail to understand why our government is so very interested in bailing out economic competitors in Europe. They ought to be saving up to bail out California… Lastly, our paper money will never be worthless. Our government accepts it in payment for taxes, and taxes are our largest expenses. In fact, the higher the taxes (the larger portion of our production they consume), the more our “worthless” paper money will be worth.

Ned Netterville May 12, 2010 at 12:33 pm

“The bailout has bought a modicum of time for the PIIGS before the noose tightens once again. Fortunately, it has also provided time for the prudent and informed to prepare for the crisis and acquire hard assets while the getting is still good.” Mr. Rasham, I congratulate you on being an impassioned libertarian. Your clarion call to purchase hard assets is being tolled and heard around the globe. Witness the price of gold!

No currency is safe from depredation by its issuing government. It isn’t a question of whether or not governments will inflate their currencies; they have no choice but to do so. The people, whose governments we are talking about, believe they are entitled to receive and continue receiving the many benefits that governments have been providing them, essentially through moderate inflation and deficit spending. With the spigot essentially closed on government borrowing to finance the many promised benefits, the only way for government to continue delivering the goodies is through less-moderate inflation. People, generally ignorant of economics and incapable of neatly assessing the damage to their welfare that inflation inflicts, will gladly accept inflation rather than give up their benefits. The riots in Greece prove this proposition. Furthermore, there probably aren’t more than one or two legislators in all of the nations of Europe and the Americas who would risk not being re-elected by opposing inflation to finance the continuation of entitlements. I guess it can be said that people are entitled to cut their own throats.

But not your throat nor mine, fellow Austrians. For as the author says, we can cope with inflation to a certain extent by keeping our assets hard, and I would add, liquid. To me that means gold, which is in essence the only real money available. I personally believe that the market, comprised as it is of everybody in the world, which includes some pretty ingenious people, will find a way to force the governments of the world to accept gold as universal legal tender. And if the dollar remains exchangeable for gold, I suspect that the exchange rate of dollars for gold will be many times gold’s current value in those fiat dollars.

Patrick Barron May 12, 2010 at 4:39 pm

There is a way out–abolish the discredited welfare state in one stroke. Let everyone riot who wants to riot and tell them that the government will NOT rebuild what they destroy. Allow people to arm themselves in order to protect their property, and support these people in courts of law. Adopt laissez faire capitalism. Allow private money to circulate. Greece could become an example for the rest of us to follow.

RTB May 12, 2010 at 10:02 pm

And create pigs who can fly.

Gernot Hassenpflug May 12, 2010 at 11:55 pm

“Inflationary depressions transfer wealth from holders of paper assets to holders of hard assets.”

Where hard assets are presumably commodity assets; i.e., things that have a value on the free market apart from their use as money (as which they may then be used in addition).

Sally C. May 13, 2010 at 12:14 pm

Great article Ganesh. My husband and I have been accumulating gold mining shares and some physical gold, but what does all this money printing mean for stock markets more broadly or the property market? I feel that gold and silver are literally the only assets that will maintain their value in the dire situation that you describe.

dan allen May 13, 2010 at 1:29 pm

Since when did the CSM turn into a teabag rag?

El Tonno May 13, 2010 at 7:23 pm

Teabaggers are not necessarily wrong you know, even if they seem to be considered the most terrible thing since at least AIDS by so-called “Progressive” outfits.

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