Banks create money when they make loans. Greece could restore the liquidity desperately needed by its banks and its economy by nationalizing the banks and issuing digital loans backed by government guarantees to its ailing businesses. Greece could provide an inspiring model of sustainable prosperity for the world. But it is being strangled by a hegemonic power in a financial war that is being waged against us all. Â
On July 4, 2015, one day before the national vote on the austerity demands of Greece’s creditors, it was rumored in the Financial Times that Greek banks were preparing to “bail in†(or confiscate) depositor funds to replace the liquidity choked off by the European Central Bank.
The response of the Syriza government, to its credit, was “no way.â€Â As reported in Zerohedge, the government was prepared to pursue three “nuclear options†to protect the deposits of the Greek people:
- nationalize the banks,
- launch a parallel currency in the form of electronic California-style IOUs, and
- use the Greek central bank’s printing press to issue euros.
Ambrose Evans-Pritchard wrote in the UK Telegraph:
Syriza sources say the Greek ministry of finance is examining options to take direct control of the banking system if need be rather than accept a draconian seizure of depositor savings – reportedly a ‘bail-in’ above a threshhold of €8,000 – and to prevent any banks being shut down on the orders of the ECB.
Government officials recognize that this would lead to an unprecedented rift with the EU authorities. But Syriza’s attitude at this stage is that their only defense against a hegemonic power is to fight guerrilla warfare.
The Hegemonic Power of the ECB
The Greek crisis is a banking crisis, and it was precipitated largely by the Mafia-like tactics of the European Central Bank and the international banks it serves (notably Goldman Sachs). As Jeffrey Sachs observed in the Financial Times in 2012:
The Greek economy is collapsing not mainly from fiscal austerity or the lack of external competitiveness but from the chronic lack of working capital. Greece’s small and medium-sized enterprises can no longer obtain funding. . . . The shutdown of Greece’s banking sector brings to mind the dramatic shrinkage of bank lending during 1929-33 in the Great Depression.
Economist James Galbraith explains the critical role of the ECB in this shutdown:
A central bank is supposed to protect the financial stability of solvent banks. But from early February, the ECB cut off direct financing of Greek banks, instead drip-feeding them expensive liquidity on special “emergency†terms. This promoted a slow run on the banks and paralyzed economic activity. When the negotiations broke down, the ECB capped the assistance, prompting a fast bank run and giving them an excuse to impose capital controls and effectively shut them down.
