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As I have repeatedly pointed out there is no mechanism available to force a nation out of either the Euro or EU.

That simply does not exist.

The rhetoric that if you vote against "austerity" and paying back the debt you are inherently voting to leave the EU is false.  That lie is being promulgated by people who you ought to declare are acting in treason against your nation and issue arrest warrants for them.

However, this does not mean that defaulting is "cost free" or will be easy.  It will not.  Defaulting will force you to deal with the following facts which you cannot avoid whether you default or not:

  • The government cannot spend more than it taxes.  Not now, not ever.  Period.  Deficit spending is exactly identical, mathematically, to a tax of the exact same amount in that when you issue currency to fund a deficit you are diluting the purchasing power of everyone who holds it.  In the EU, however, you cannot employ that mechanism freely because you are not your own currency issuer (as the United States is.)  If you return to the Drachma, however, you still cannot freely spend more than you take in via taxes because doing so is exactly identical to taxing the same amount.  In other words having the Euro means you must honestly deal with your budget issues rather than trying to lie about them.

  • The people of your nation must decide how much government you want, and then you must pay for it in the present tense.  This is the inescapable conclusion of the fact above.  Your nation, like so many others, has lied about this for decades.  You must stop, and you must stop now.  Neither I or anyone else can tell you how much government you "should" have; that's a political decision for all of you to make as Greek citizens.

So what does defaulting do for you?

Simple: It removes from your balance sheet the arguably-illegal debt that was taken on in your name and forces those who hold it to eat it.  This will make the issuance of future debt by anyone else in the EU more expensive, but it should be expensive to borrow; borrowed money is a tool that has as its only legitimate purpose short-term, existential threat-related needs such as repelling an invasion by a foreign power.

Yes, on the 5th you should vote to reject the so-called "program" and deliver to your government a mandate to repudiate all of the debt contracted since you entered into the EU.  All of that was entered into under false pretense with explicit conspiracy between your former government, EU government organs and international banking institutions including the ECB.

You must also pry loose the documentation that Bloomberg, along with others, has requested on these schemes and scams and then issue indictments against those who caused your nation to fall under this burden.  These acts were arguably criminal frauds and must be prosecuted.  It is utterly essential that those who commit such acts not get away with it, as the only deterrence available against future frauds is the certainty of punishment when caught committing them.

This transition will be very difficult for you to stomach, for you have been lied to for a very long time.  You have been told you can spend more than you make on an indefinite basis.  This is a pernicious and outrageous lie but arithmetic cannot be bargained with; it just is.  The fundamental nature of exponents means that any such attempt is doomed to spectacular failure and the only means to prevent it is not to engage in such foolishness.

A "Yes" vote on the 5th will be a vote for economic slavery.  You must not engage in such as your children, grandchildren and those not yet born not only have no obligation to allow you to get away with that you have no right to attempt it.  Instead you must vote NO and then live within your means, holding the political debate on what sort and size of government you wish to have, funding each and every obligation it contracts with current taxes.

Throw off the previous frauds, to be certain, for you must do that in order to recover as a people and economy.

But you must, at the same time, stop lying to both yourself and others.


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It appears that Tsipras has the game figured out.

I also suspect he (and Varoufakis) know where there trash is hidden, and that the ECB and European Union cannot withstand having it demonstrated to be worthless.

The "creditors", of course, maintain otherwise. But they have a good reason to lie.  Further, the other issue that nobody wants to talk about is that if Greece leaves or extracts concessions either result in a tremendous problem for Germany with regard to Spain, Italy and even France.

The "talking heads" are all running their mouths saying that the "polls" are running 2:1 in favor of knuckling under to whatever "the creditors" demand.  I don't buy it.  Greece has gone through this for several years and has plenty of experience with it sucking bilge water; for exactly how long do you continue to do that with no evidence that it will or does get better before you opt for a different path?

So what Tsipras wants is essentially a permanent tit that Greece can suck off and both he and the Greek people are willing to try to extract that tit out of Merkel's shirt.

This will be amusing to watch, if indeed that's Tsipras' gambit......

PS: Succeed or fail that's gambit that cannot lead to a positive outcome so the selloff that is taking place makes perfect sense.  Look forward to a few LLD overnights as this continues, if indeed I'm right on the thought process involved.  The simple reality is that math always wins and whether Germany or anyone else likes it or not it's time to pay the check.  Incidentally, what Greece should accept (and I suspect they would) is a ~75% write-down on the principal and a 1% 30 year amortization on the rest, with the argument being that the rest of the debt was illegally contracted and thus void.  The problem for the "creditors" proposing such a thing is that Spain, Italy and perhaps even France (along with others) then can come and demand the same thing and that instantly detonates in Merkel's and the ECB's face.

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This is about as clean as it gets, when you boil it all down.

It has also come to the understanding of the Committee that the unsustainability of the Greek public debt was evident from the outset to the international creditors, the Greek authorities, and the corporate media. Yet, the Greek authorities, together with some other governments in the EU, conspired against the restructuring of public debt in 2010 in order to protect financial institutions. The corporate media hid the truth from the public by depicting a situation in which the bailout was argued to benefit Greece, whilst spinning a narrative intended to portray the population as deservers of their own wrongdoings.


Chapter 7, Legal issues surrounding the MOU and Loan Agreements, argues there has been a breach of human rights obligations on the part of Greece itself and the lenders, that is the Euro Area (Lender) Member States, the European Commission, the European Central Bank, and the International Monetary Fund, who imposed these measures on Greece. All these actors failed to assess the human rights violations as an outcome of the policies they obliged Greece to pursue, and also directly violated the Greek constitution by effectively stripping Greece of most of its sovereign rights. The agreements contain abusive clauses, effectively coercing Greece to surrender significant aspects of its sovereignty. This is imprinted in the choice of the English law as governing law for those agreements, which facilitated the circumvention of the Greek Constitution and international human rights obligations. Conflicts with human rights and customary obligations, several indications of contracting parties acting in bad faith, which together with the unconscionable character of the agreements, render these agreements invalid.

It gets better; the document argues that the alleged "debts" are in fact illegal and this voidable because, among other things, the IMF breached it's own statutesthe EFSF violated clause 122(2) of the European Union treaty (TFEU), bilateral loans are illegal since they contravened the Greek Constitution and were entered into with entities that committed clear misconduct and private creditor debt is illegal as many of them (e.g. hedge funds) acted in bad faith and, in addition, these served to recapitalize private banks on the back of taxpayers.

In conclusion, from the summary:

Several legal arguments permit a State to unilaterally repudiate its illegal, odious, and illegitimate debt. In the Greek case, such a unilateral act may be based on the following arguments: the bad faith of the creditors that pushed Greece to violate national law and international obligations related to human rights; preeminence of human rights over agreements such as those signed by previous governments with creditors or the Troika; coercion; unfair terms flagrantly violating Greek sovereignty and violating the Constitution; and finally, the right recognized in international law for a State to take countermeasures against illegal acts by its creditors , which purposefully damage its fiscal sovereignty, oblige it to assume odious, illegal and illegitimate debt, violate economic self-determination and fundamental human rights.


Now let's see if the Greeks act on it.

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This is amusing as all get-out.

ATHENS — As it tries to negotiate a new bailout deal with creditors, Greece got some breathing room on Thursday by deferring a series of debt payments until the end of the month.

This was widely expected; Greece owes the IMF a number of payments this month, so they decided (which they have the right to do) to pay them "all at once" on the day of the last payment, called "bundling."

This is convenient, and in normal times doesn't mean much.  In this case, however, it means that formally recognizing that Greece is bankrupt will occur on June 30th (when they will have to fork up €1.5 billion.)

They don't have it, of course, and have no means of acquiring it either since they're spending more than they make -- still.

What Tsipras is going to do now (today, in fact) is go to his Parliament and ask them for permission, basically, to accept what the Troika has demanded that the Greeks "eat", which is in direct opposition to what he was elected upon and which members of his Parliament have threatened to schism the government over.

We'll see how this turns out.... as I've repeatedly written there is no cheap or easy way out of this box, but the worst thing the Greeks can do is to accept that the sins of the so-called "institutions" are theirs to bear alone -- and that's quite-clearly what the Troika intends.

Someone needs to give the banksters the finger and mean it.

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2015-06-02 06:50 by Karl Denninger
in International , 144 references

Here it comes....

Eurozone governments and the IMF have agreed to press Greece for far-reaching economic overhauls, while the IMF has softened its insistence that Europe offer explicit commitments to relieve some of Greece’s debt burden, the people said.

In other words it's not a negotiation; it's an ultimatum.

The problem with the ultimatum is that there is no solution found in accepting it.  That is, if the Greek government "takes" the "deal" there is nothing permanent in resolution that flows from it.  It is only a can-kick and yet at the same time it will increase the pain level in the Greek economy and people.

The resolution of the problem in Greece, as with here in the United States and elsewhere, is found only in the permanent cessation of deficit spending -- not before interest payments but in total.

The remaining question before any government that is currently deficit spending is whether to repudiate (that is, default) existing debt or not.  For those governments that can pay down the debt through curtailment of services, structural reform of what they spend the money on (e.g. the US and the medical industry) or similar this is an option and is the superior choice.

But Greece, like many nations, doesn't have that choice as they have borrowed enough to make that no longer viable due to the interest payments that must be made and the fact that their deficits are not due to monopolist industries that have woven their way into the fabric of government programs but rather due to outright bogus accounting entered into by the government and bankers in previous years.

In the end socialism doesn't work; rank socialism has never worked on a durable basis as you can't force people to work and when you pay people not to that's what you get more of.  Eventually this produces a structural imbalance that destroys your government and nation.

Nobody wants to talk about the real issues either here or in Greece; I've seen exactly zero on it.  But in reality we're on the same road as Greece, but with the means and opportunity to fix it.

Greece, not so much -- and those who think they (and Europe) are going to be fine have, I suspect, another think coming.

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