The headline in yesterday's Guardian
read Eurozone rescues failed Spanish banks in exchange for brutal cuts
. Exactly how much of a rescue this was can be seen from the fact that it was "tens of thousands of small retail bondholders" who were "hammered".
It is always the small bondholders, the "little people" who pay the price; as the Eurocrats and the banksters sit in their multi-storey office blocks handing out their edicts, you can be sure it is not them who will suffer however many public services are cut to the bone, however many real jobs are destroyed because of the mere shortage of bits of paper. Yet there is a positive alternative: we can all tell the banksters to shove it, and default. Oh no, you can't do that, they cry like Chicken Little, for if you do, the sky will fall. Well, guess what, governments have defaulted before, and the sky is still there.
After the great Haiti earthquake, the banks wrote off all the island nation's debts under pressure from politicians - which shows that not all of them are all bad, and even the bad ones are not as bad as most people think. Back in the 1980s, a foul-mouthed musician from Belfast started a movement that changed the world, and resulted in the banks slashing African debt
with a stroke of the pen, again under pressure from politicians and world leaders, including one who even today is best known
for being unable to keep it in his trousers rather than for his real achievements. There have been other so-called defaults too. The bottom line is that these defaults are not really defaults or readjustments, they are the nullification of credit that has no real existence.
Imagine your neighbour says to you, "Lend me a grand and I'll pay you back at the end of the month", and kind-hearted soul that you are, you do. Now he nips across the road to William Hill
blows the lot on the 3.30 at Newmarket, and leaves town. You've lost your thousand pounds, all of it, and you ain't never gonna see it again.
What happens though if he manages to dupe his bank manager with that story? Here is what happens, where you took £1,000 in cash out of your pocket and gave it to him, his bank manager takes out his ledger - which will probably be kept on the bank's computer, and does the following. On the left hand side he writes:
on the right hand side he writes:
Liabilities: £1,000 + £12 loan fee.
And if your neighbour takes his loan as a cheque, no cash actually changes hands. He loses this money, and at the end of the day, the manager of the betting shop pays the cheque into the company's account. The money supply has increased by £1,000.
But what about those liabilities, you say? Precisely. At some point in the not too distant future they will be written down quietly as losses, and no one will be any the wiser until someone like Congressman Alan Grayson comes along and asks:
"Where is that missing grand?" or more likely
"Where is that one trillion dollars that went missing last September?
And guess what, no one will be able to tell him where it went, nor the other eight trillion dollars that followed it!
A Greek default, Spanish default or even a UK default will not be anywhere near as big as this; for one thing, the principal on these so-called loans has in most cases been repaid, quite likely many times over due to the compounded interest. If you had loaned your neighbour £1,000 at 10% interest and he paid you back £1,010 instead of £1,100, you could not in all honesty claim to have lost £90.
No one should be taken in by the latest drivel churned out by the Institute for Fiscal Studies
about years of austerity ahead. These self-styled independent think tanks have a vested interest in promoting such doom and gloom. There is a real alternative to austerity, and only one. By defaulting
, the governments of Greece, Spain, Britain and elsewhere would not only relieve their peoples of crippling taxation, they would stimulate growth, and open the door to a new European and even global financial system, one that is based not on imaginary debts, but on sound money.