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How Greece Could Grease Its Own Economy Without Borrowing From Other Countries. [Copy link] 中文

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Post time 2015-7-6 05:18:30 |Display all floors
HOW GREECE CAN REPLACE THE EXPENSIVE EURO WITH COST-FREE EURO-EQUIVALENTS AND PROSPER

LET US SAY THAT THE SUPPLY OF EUROS DECREASES TO THE POINT IT CANNOT SUPPLY THE NEEDS OF THE GREEK ECONOMY . . . WHAT NEXT?

There are many possible answers to this question.

One answer that has not been sufficiently explored is to review the role of the National Bank of Greece, as if it were Greece's ECB or Federal Reserve Bank, and that it is faced with a liquidity shortfall due to some natural or manmade disaster.  The view of the National Bank of Greece (NBG) as an interactive issuer of credit, not just cash, may solve the problem at source.

Let us take for an example the bank account of Mr. Strepsiades, and has € 10,000 in his bank account, which true to form now exists in The Cloud or Nephelai, when the Greek government decided it had to print its own Drachmas at a 1-to-1 exchange rate with the Euro.

What the bank would next do is create two parallel accounts for Strepsiades.  One in Drachmas, and one in Euro-Equivalents.  Thus, his initial € 10,000 creates 10,000 Drachmas, which Strepsiades would be asked to choose if he wants to remain as Drachmas or as Euro-Equivalents.  Since he believes that the Drachma will devaluate against the Euro, he would most likely choose Euro-Equivalents, in which case, 10,000 Drachmas will be debited from his account, and credited as Euro-Equivalents.  So too for every income he receives that he deposits into the bank, he can turn them into Euro-Equivalents at the prevailing Drachma-to-Euro exchange rate, which is to be determined on a day to day basis by the National Bank of Greece.  Now, when he needs Drachmas to buy a piece of furniture with, for example, he can withdraw from his Euro-Equivalents account, and have it converted into Drachmas at the latest official exchange rate.  This ensures that the purchasing value of his deposits will have the same purchasing power of an Euro, without his owning any euros, and without the National Bank of Greece having to borrow tens of billions of Euros, pay billions of Euros of interest on, when all it functions in the Greek economy is merely as a dummy variable.  All official transactions will and must be denominated in Drachmas, as the Euro will cease to circulate in the Greek domestic economy, and whatever Euros the country has will be used by the National Bank of Greece to settle its accounts with foreign countries, including its trade balance and capital accounts.

This, combined with the imposition of import tariffs to protect Greek producers from unfair competition from other countries, will ensure that the people will finally be able to produce that it needs, and if it gets to be pretty efficient at this, there is always the opportunity for Greece to export them to earn some foreign currency reserves in the process, thereby paving the way for its return to normal international commerce.





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Post time 2015-7-6 05:34:32 |Display all floors
They need to bite the bullett take the pain to move forward

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Post time 2015-7-6 06:04:51 |Display all floors
The Greeks will do well to cut their dependency on the supply of Euros and grab the opportunity to ensure themselves of the infinite liquidity of creating their own money.  By treating each deposit of Drachma into a Greek bank as in Euro-equivalents, they obviate their need to hold Euros as a store of value.  By mandating the use of Drachmas in all domestic transactions, they obviate the need for Euros as a domestic medium of exchange.  By the fact that it costs nothing for Greece to create credit for its banks, it ensures that all interest payments end up in the coffers of their own national bank, which can be used to issue more credits, increase the purchasing power of the Drachma, and build up Greece instead of starving it to death.

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Post time 2015-7-6 07:24:03 |Display all floors
THE EMPIRE STRIKES BACK . . .

With the recent announcement that the European Council will hold its meeting at 6 PM of July 7, 2015, it is clear that the hope of Varoufakis that there would be an agreement signed within 48 hours of the referendum result would not be fulfilled.  What happens in the next two days would be a nightmare for the Greek government and people, as the Greek banks run out of Euros.  It would be the equivalent of the country running out of food and water.

In short, the European Council is forcing Greece to print its own money, the Drachma, thereby fulfilling the conditions as spelled out by Schulz for the EC to regard Greece as having voluntarily left the Eurozone.

If Varoufakis failed to understand this, or was misled into not anticipating this, then he has less than 24 hours to begin issuing Drachmas, or if can borrow from another country some foreign currency he can put into ATMs that are equivalent in value to Euros, such as dollars, yens or yuans, to borrow foreign currencies in cash form, provided they can fit the ATM machines.

More likely, he would have to adopt a variation of the above mechanism, to create a Euro-Equivalent form of currency that exists only inside bank accounts, which transform Drachma deposits into Euro-Equivalents, and disburse Drachmas later on, also based on their Euro-Equivalents.  It can therefore make use of the Drachma/Euro exchange rate, to calculate the value of Drachmas deposited and withdrawn, without needing to hold actual Euros in its vaults.  This alone will save Greece tens of billions of Euros in interest payment each year.

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Post time 2015-7-6 07:34:14 |Display all floors
Greece has voted 'no'

I like this outcome.


It means the Greek problem will be isolated.............an end to the uncertainties.....Let them use their dachma or go into extreme austerity.

it is clear no new money will flow into Greece.







I've made my living, Mr. Thompson, in large part as a gambler. Some days I make twenty bets, some days I make none. There are weeks, sometimes months, in fact, when I don't make any bet at all because ...

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Post time 2015-7-6 07:40:07 |Display all floors
Commonwealth Bank analysts concur further external financial assistance is unlikely.

"The odds of Greece defaulting on upcoming debt obligations is high and the probability Greece exits the eurozone is rising."

If the emergency funding is cut off, Greece will need to scramble towards a new currency. Currency printing firms, such as Britain's De La Rue, which prints 150 currencies, are believed to have been contacted, reports The Telegraph.




a no vote iproduces more certainty than a yes vote.


For this reason, it should be better for financial markets ( outside Greece).






I've made my living, Mr. Thompson, in large part as a gambler. Some days I make twenty bets, some days I make none. There are weeks, sometimes months, in fact, when I don't make any bet at all because ...

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Post time 2015-7-6 07:41:52 |Display all floors
Revolutionar Post time: 2015-7-6 07:34
Greece has voted 'no'

I like this outcome.

Aren't you concerned about the potential for people dying from starvation and untreated illnesses?  I thought you were civilized.  Greece is the grandfather of Western civilization.

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