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Thursday, February 11, 2010

Greece and Goldman Sachs

This story is interesting. On the Communism Channel, I saw the comedians joking about Greece's financial crisis. What they failed to mention is how Goldman Sachs facilitated the crisis. Traders at Goldman Sachs made a fortune, at the expense of people living in Greece.

In the USA, the Federal government controls both government debt and the monetary unit, although the money-printing power was delegated to the Federal Reserve. All of the US Federal government's debt is in its own money. As long as the slaves use Federal Reserve points as money, the US government can't be bankrupted. The US government is a unique position, because all its debt is denominated in its own money. State insiders can always print more money to roll over the national debt. Technically, more Treasury debt is printed, which is then sold to the Federal Reserve and the financial industry. All Congress has to do is say "We're raising the debt ceiling!", and that solves the problem. Viewed this way, the national debt is merely an accounting fiction, since Congress can raise the debt ceiling whenever they choose.

The national debt isn't free. The cost of the national debt isn't deferred to the future, although taxes collected for interest on the national debt subsidize bank profits. The cost of deficit spending is immediately paid as inflation. For each $1 of deficit spending by the government, everyone else holding dollars experiences $1 of inflation. The purchasing power of your savings is continuously eroded via inflation. Due to the Compound Interest Paradox, the national debt cannot be repaid; there's more debt than money. It's statistically necessary to balance out a fundamentally corrupt debt-based monetary system.

In the European Union, it's different. No single country controls the Euro. The Euro is a fiat debt-based monetary unit just like the US dollar. The European Control Board (ECB) is the central bank for the Euro, but it's not controlled by any single member country. Even more than the Federal Reserve, it's "politically independent", which is pro-State troll for "The banksters may steal as much as they want without accountability."

The EU developed rules regarding how much debt a single country can take on. State insiders in Greece, colluding with Goldman Sachs traders, found a loophole. According to that article, in 2002, State insiders in Greece made a bunch of complicated derivative contracts and currency swaps. This gave them a bunch of money to spend immediately, that didn't count towards their official debt. However, those derivative contracts are coming due soon, and Greece's government will owe a huge bill.

Due to EU rules, politicians in Greece can't roll over the debt by issuing more and more bonds, like politicians in the USA.

This derivative trade had no legitimate purpose. It was merely a loophole around the national debt cap.

Of course, State insiders in Greece loved this arrangement. It was free money!

Traders at Goldman Sachs loved this arrangement. They borrowed from the Federal Reserve or European Central bank at artificially low rates, and financed the trade. The traders paid themselves huge salaries and bonuses off the profits and commissions from the trade. Literally, they borrowed at 1% (or whatever interest rates were at the time), and lent Greece money at 5% or whatever. The details of the derivative contract were not disclosed in the article I read.

This isn't free. The cost was paid immediately as inflation. When Goldman Sachs borrowed to lend Greece money, brand new money was created. Later, the people in Greece will have to pay higher taxes to pay off the debt. In the meantime, State parasites in Greece made off with the stolen booty. They gained money on the derivative contracts, and used it on pork projects for their friends. State parasites at Goldman Sachs also made off with stolen booty, via huge salaries and bonuses.

This was not a bona fide trade. It existed solely to exploit the loophole of the EU debt cap restriction. Negative real interest rates, subsidized by a central bank credit monopoly, financed the trade. Greece will repay the debt, because the full violence of the State taxation power backs the debt.

There's another clever loophole. The traders at Goldman Sachs think of everything! A few years later, Goldman Sachs sold the derivative contracts to a Greek bank. Now, State insiders can't say "HAHAHA!! We're not paying Goldman Sachs! They're rich enough already!" They'd be refusing to pay a Greek bank. That bank can profitably lobby Greece's government to prevent a default.

Did traders at Goldman Sachs unload this derivative contract from their books, knowing it would explode eventually in a public scandal?

The primary beneficiaries of the "national debt" are financial industry insiders. This story is an excellent example.

Instead of saying "OMFG! Greece must raise taxes!" or "OMFG! Greece must be bailed out!", why can't Greece just default? The trade was obviously fraudulent.

Why not hold the traders at Goldman Sachs accountable? There is precedent for such a thing. AIG and Berkshire Hawthaway made complicated reinsurance contracts for the sole purpose of inflating their earnings. This incident is no different. In that case, the executives were fined, but the fine was ultimately paid by AIG. The executives suffered no negative responsibility for their misconduct. Corporate insiders are protected by sovereign immunity.

According to natural law, this derivative contract isn't a valid contract. Goldman Sachs did no real work financing the trade. They merely borrowed from the central bank, printing new money, to finance the trade. Technically speaking, all national debt isn't valid, because the primary beneficiary of the national debt is State parasites.

The only way to avoid supporting illegitimate national debt is via agorism. Boycott the State's worthless paper money. To do this, you must also bypass taxes, which must be paid in the State's paper money.

This is an excellent example of financial industry insiders looting and pillaging. Either there will be an inflationary bailout, or higher taxes, or a combination of both.

"The national debt is sacred and must be paid!" is an evil fnord. That is merely an excuse for high taxes, with the profits going to State parasites.

Greece's government must be bailed out, if only to pay the salary of policeman and State parasites. Otherwise, the State would collapse as policemen walked off the job when their paycheck bounced.

All taxation is theft. All countries have an unfair monetary system. The economic and political system is set up to benefit State parasites at the expense of productive workers.

1 comment:

Anonymous said...

Excellent article!

I had heard much news of Greece's troubles on the television, but your article clearly explained to me what went on.

Thanks for your good work. Keep it up.

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