A central bank governor in Athens conspires with the President of the Republic to sabotage the negotiation strategy of his government to weaken it in its negotiations with the European Central Bank. After the government has capitulated, this governor, who is a close friend of the new finance minister and boss of the finance ministers wife, and the President of the Republic travel together to the ECB to collect their praise and rewards. This is not an invention, this is now documented.…Real-World Economics Review Blog
A Greek conspiracy: How the ECB crushed Varoufakis’ plans
Norbert Häring, Handelsblatt
Time for a military take-over again...
ReplyDeleteGreece *have* to regain their monetary sovereignty. I would recommend imposing a land value tax in 'Drachmas' and creating a land registry.
ReplyDeleteWhat government can do, by virtue of the licence that pegs the liabilities of commercial banks to the central bank, is force commercial banks to lend money to the government sector.
Bank ‘reserves’ are called reserves because they are a reserve liability of the government sector to the commercial bank. To the commercial bank they are an asset. In effect the commercial bank has made a loan to the central bank arm of government.
And of course by accounting identity when a bank makes a loan it makes a deposit – which ends up in the hands of the person the government is paying.
So what government can do is *force* commercial banks to expand their balance sheets by spending and *force* them to shrink their balance sheets by taxing. In other words the control of a bank’s balance sheet isn’t entirely in the hands of the bank – if they want the bank’s deposits to be known as ‘Drachmas’.
So you don’t need the central bank or Treasury at all. They are surplus to requirements. All you need is the legal right to force commercial banks to create loans for your benefit – at whatever interest rate and term you demand.