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Rapier, I have seen two descriptions of how it would work, both by major bank people, and both say it would be “armageddon” for the Greek people – but then they would say that, wouldn’t they?
It is easy to print Drachmas, but difficult to get anyone to buy them with “real” currency to give it some international value. If the EU chooses to be really nasty about it, they could refuse to create an exchange rate at all. But Russia has implied that it would do so, and presumably China would do the same.
There would be conditions, of course. These might include Greece joining the East Eurasian Union, hosting naval bases, making the Russian-Turkish-Greek gas pipeline work, and leaving NATO (this is in Syriza’s party policy already). International banking transactions would be handled by Russia’s RosSWIFT alternative the the west’s SWIFT system. It would mean a huge upheaval for Greece, but they could blame all their problems on the nasty Europeans.
Russia is also courting Cyprus to do the same (Egypt too), and Greece is intimately close to Cyprus. It could be the answer to both their prayers. Maybe Russia could even broker a peace deal between Greece, Cyprus and Turkey – something that it has never been in the UK’s interests to do.
The BRICS plus the EEU, plus Greece, Cyprus, Syria, Iran, Egypt, Venezuela, Argentina, Bolivia, Cuba, etc would be a bloc with over half the world’s population, and a good percentage of its productive capacity.
It is a mistake to say Saudi Arabia is just the “Royal” family. The Saud clan do all the dirty work of international relations with the Infidel, OPEC, finance, armaments, etc. But the Wahhab clan run all the religious side – they are the Keepers of the Holy Shrines (Mecca and Medina), run the Hajj, issue fatwas, and run the madrassas from which emerge the Sharia judges and lawyers and jihadists.
It is the Wahhabs that created ISIS, and the Sauds are scared of them, because ISIS (aka the Caliphate) can never rest until they control all the Holy Shrines. The Saud-Wahhab alliance is MUCH stronger than the Saud-US alliance, and the Sauds are rapidly losing room to manoeuvre.
I’m sure the Sauds understand that price cuts will hurt all producers, but their real target is likely to be whoever is increasing their expensive output – the US. Why should Saudi Arabia continue to act as the swing producer, when the US continues to overproduce?
If the oil majors don’t think tight oil is profitable, why do the banks keep lending to the oil minors to keep drilling? They must surely demand a business plan, and they must know what will work and what won’t. Or perhaps USG and the Fed have told them to make sub-prime loans to keep the oil flowing – they have rigged all the other markets, so why not oil too? Of course it will all end up in default, unless …
Mostly I wonder about what TPTB think they are going to do when TSHTF. Plan A is not going to keep working for much longer, and yet we haven’t seen any sign of Plan B, or have we? The only thing I can think of is that they will declare an emergency that triggers a whole new set of governmental powers, and new economic rules. That would explain the totally unreasonable raising of tensions against Russia, and the ridiculous push against ISIS with no boots on the ground and without natural allies Syria and Iran. They want the tension levels high, so that a mere cyber-attack (we can’t give you the details) will be enough to trigger what seems likely to lead to WW3.
A war economy gives them the right to reorganise who manufactures what, with directed labour, and the conscription of angry young men in the streets into the army. Gasoline and electricity rationing. Currency controls. War bonds to soak up peoples’ savings. Severe crackdown on dissent, using NSA surveillance tools and militarised police. And of course a full spectrum propaganda exercise through the media. Plan B has been in full view all along.
If I was them, I might well be thinking we could pull that off OK. The trick then would be to keep the war bubbling along without it going nuclear, but sounding incredibly serious on TV News. “Are you a patriot, or not?”
Since Lehmann the trick has been to feed precisely as much stimulus into the economy to prevent deflation and excessive inflation, and they have kept the show on the road for six years, which is not bad. But the road has been getting narrower and narrower, until now it is like a knife edge. One wobble and it comes off the knife edge in one of two unpleasant ways.
As the Fed and all the other central banks are working with data that is out of date as soon as it is collected, no one can predict which wobble will be the critical one, or which side of the knife edge we will fall into.
The big banks are even more constrained in how they can react to circumstances, tied up as they are in derivative contracts and “making markets” for yet more of the things.
So when the crash comes it is bound to be a black swan event. The only sure-fire thing Washington can do is start WW3 and put the economy on a war footing. This will allow them to do all kinds of “emergency” things that makes analysis based on the current rules meaningless. Fuel and electricity rationing. Currency controls. Increased censorship, surveillance and police/FBI/HS/NSA crackdown on dissent. Getting angry young men off the streets and into the army or internment camps. Directing labor and factories into war-time production.
And if/when we come out the other side, we can all start again, only there won’t be the energy available to rebuild until humanity is prepared to struggle to get up to a modest, sustainable lifestyle in harmony with what remains of the Earth.