My Big Fat Greek Default

BREAKING NEWS: Greece has defaulted on its debts! Oh, wait. Apparently it hasn't happened yet. Most media commentators are still talking about a second bailout of over 100 billion euros (it may be a gazillion, I can't quite remember). This will arrive if the Greek prime minister, George Papandreou, who survived a vote of confidence, can push through yet more austerity measures, of the sort only previously imposed by the IMF on banana republics whose rulers dispense financial advice to their people down the barrel of a gun.

Many wise words have been spilled explaining the dangers of 'contagion' to the rest of the eurozone and the whole banking system. We are supposed to believe that a Greek default would be a catastrophe for mankind: something like a massive asteroid that could wipe out all of Europe's bankers, politicians and media pundits at a stroke. Only the thing is this: it has already happened. For the Greek people, it has been happening for the past year already and the pain will continue indefinitely.

What would Socrates do?

Now for a lesson in semantics. Q: What is the difference between a 'bailout' and a 'default'? A: Nothing, except:

1) It is the ordinary citizens of Greece and Europe generally who are paying the whole price, instead of the bond holders - i.e. the banks who hold Greek debt and whose irresponsible lending created the crisis. The wealthy bond holders don't lose a cent. Isn't that nice? They get all their money back, with increased interest, and their risk is nil. Nada. Zilch.

2) A 'bailout' does nothing to wipe the slate clean. It's like going on a savage cocaine bender just to get over the terrible depression that followed the last one, knowing full well that the black dog will return again tomorrow, with a whole pack of its mates.

To take the drug analogy further, who do we blame? The seedy dealer, peddling empty promises of endless sunny illusions? Or the poor sap who believed those promises? The analogy isn't quite precise, in this case, because politicians act as a kind of middle man between the bankers and the people. It's the politicians who sell those promises and take a cut on the deal, which is why they are always on the side of the bankers, of course. Both parties to the deal are somewhat to blame, but most people can see that it is the drug pushers who bear the greater share of responsibility and deserve to be punished (whilst the addict goes into rehab).

In this case, the drug pushers, far from being punished, are put in charge of solving the problem. Funnily enough, they prescribe another dose of drugs, only the price has gone up - way up - and the addict has to sell all his possessions just so he can afford to keep taking the drugs. Meanwhile, the addict's friends and family (who are also on the same drugs), have to chip in to help him pay.

What is the real solution to this problem? It is called the Red Pill, my friends. The Red Pill dispels illusions. What is that great big fat mountain of debt, really? It is nothing: an illusion, a simulacrum, a scam, a confidence trick. Where did it come from? It was created by banks (97% of it) out of thin air. That which is created from nothing can go back to nothing. So what if a lot of imaginary money disappears from whence it came? Give the problem back to the banks. They created it. They can sort it out. A lot of rich people will get slightly miffed. Default.

Footnote: In the case of Greece, the drug also goes by the steet name of 'the euro'. This drug releases a steady stream of cheap credit into the user's blood system, causing a feeling of intense euphoria and a craving for German imports, which can last for years.

Update 28/6/11: I hope I made it very clear above that the EU/IMF/ECB bailouts are not designed to assist the Greek economy at all, but simply to allow private bondholders to cut and run before Greece inevitably defaults. This is easy to see if you understand that 70% of Greek debt was in private hands last year, but this is now down to about 50% and falling. Here is another article explaining how Greece is being hung out to dry, by former Citibank economist, Michael Burke. The people of Greece, thankfully, are not easily fooled any more. They have had enough of venal, worm-tongued politicians in league with fraudulent bankers. The corporate media is mostly arrogant and complacent about the extent of popular anger, as well as the causes of the crisis and I suspect they will be in for a shock. It would not surprise me at all if the Greek government were toppled by force within the next two weeks.