Today the small European nation of Greece erupted in public outrage of such proportions that even the American media has covered it. In stead of reporting on the outrage, I'll just provide a link: http://www.nytimes.com/2011/06/29/world/europe/29greece.html?_r=1&hp
This shortcut saves some time for me to get to what I really wanted to say on this subject. It's not laziness, it allows me to get right down to the red meat. So with no further delay I present to you...
The people of Greece and Americans have a common enemy, Wall Street U.S.A. The reason why Greece is in this predicament is because they invested so much of their entire wealth in American investment banks that when the house of cards that is our financial system came crashing down, their whole economy crashed as well, as in Great Depression crashed. The American banking cartel sold them an exorbitant amount of mortgage backed securities that were in turn insured by the absolutely insane idea of credit default swaps. For those of you who aren't economists, I'll try to break it down. Bear with me, it doesn't even make sense if you understand it! Here it goes:
Money isn't real! There, I said it. MONEY IS NOT REAL. It is an abstract theory invented by the oligarchy to keep themselves in power and the rest of us subservient slaves. Ask someone to define money and they rarely have a good answer, and even if they do and you follow it up with the question- Why? - they will be stopped dead in their tracks. Money = debt. When you deposit $1 into your bank account, contrary to popular myth, they don't put it in an account that you own! They lend that dollar out as $10 to someone else that ends up going in on form or another right back into the bank, and then they take the $10 and loan it out to someone else as $100. Actually, the reserve requirement is closer to 3% for most banks, and larger investment banks is 10%. That simply means that a bank has to only posses 3% of the money it lends. Crazy, isn't it? You might ask, how could that be? The answer is simple... as long as everyone doesn't ask for their money at the same time, they can pull it from somewhere else to give you. Basically, as long as you believe that your money is there and safe, it is!
I know this is off the subject of Greek austerity, but I promise I'll try to wrap it up all together. Ask someone why a dollar is worth an dollar and some will say 'it's backed by gold'. WRONG. It's not. Ladies and gentleman, there is no gold in Fort Knox. Even if it was backed by gold, it doesn't make it worth anything at all! Gold is just a shiny rock they dig out of the earth. Like lead or iron, it's just another metal. It is the belief that gold is worth money and money is worth gold that keeps to whole facade intact. It's all in your head. If money is real, how can there always be more of it? Prices go up, wages (kind of) go up, home values, and so on. How in the hell is that possible?!?! Because they make it up. It's all make believe.
Alright, now that's out of the way, I'll explain mortgage backed securities and credit default swaps, or at least attempt to. If you're not already confused enough- this part will make your head spin. A mortgage backed security is another magic trick that our good friends on Wall Street have created for their own benefit. Firms began to compile thousands of individual mortgages and bundle them into packages. They sold slices of these packages off to investment banks and made a killing at in the process. As long as housing prices went up, the investors made a healthy profit. When all the existing mortgages were were already sold, the call was made to create more mortgages. The problem was that people with good credit mostly had mortgages, so naturally they lessened the requirements to attain a home loan. Poor credit and no money down. The banks knew that these were shit mortgages, but they could make so much money by selling the security bundles that shortsightedly they did it anyway... The way they looked at it was hey, who doesn't want to own their own house? So naturally people went for it. They figured that if the bank said they could afford it, they really could. The bank must know what they're doing. The problem was that in order to qualify more people, they used adjustable rate mortgages with teaser rates so that the monthly payments would initially be lower to convince people that they could afford the loan. When the teaser rate went up on the loan, many simply could not pay up, and defaulted. As this process repeated itself thousands of times nation wide, the bundles of mortgages became more and more toxic and eventually worth next to nothing. They had already lent out the money they made on the mortgage backed securities and so naturally had all these commitments and no capital to back it up. They were left holding all the worthless mortgages on their spreadsheets and investors took notice. When investors tried to get their money back, it wasn't there prompting a run on the banks. The whole time that the investment banks were selling these securities, they also purchased insurance on them. That is what a credit default swap is. An insurance policy. AIG was the company that insured nearly all the securities and when the banks wanted to cash in on their insurance for the wrecked mortgage backed securities the losses were in the hundreds of billions. AIG did not have the capital to cover loses on all of the policies at once. They never thought they would have to, and they began to sink as well which further exacerbated the meltdown. The default swap was a guarantee that mortgage backed securites were stable and would retain value.
One of the heavy purchasers of these securities was the Greek government. They lost everything. They had no money to pay for their own nations commitments to it's citizens. Pensions, education, health care. Everything. Worse for them, no one wanted to invest in the Greek economy or loan any money to it, as it was seen as a bad deal. They hid their actual debt from the world and when it was discovered they became radio-active. The European Union bailed the Greeks out to the tune of $160,000,000,000. It still was not enough and they had to introduce austerity measures. Cutting spending and raising taxes. Sound familiar? The Unites States is in the beginning phases of austerity.Will we be the next ones rioting in the streets? It's certainly possible... I could go on with this forever, but I'll have to follow up some other time. I know this is more of a rant than anything, but with so much to cover, it's hard to stay on point! Anyway, till next time...