From today’s Open Europe news summary:
Troika may show flexibility as Greece admits it cannot meet reform targets Greek Administrative Reform Minister Kyriakos Mitsotakis admitted yesterday that it is unlikely that Greece will be able to meet its reform targets and civil servant job cuts in time for the latest bailout review. However, Kathimerini reports that a deal may still be agreed, with the EU/IMF/ECB Troika showing some willingness to be flexible. The pressure is on to reach an agreement today to allow for the next disbursement of bailout funds to be approved at Monday’s meeting of eurozone finance ministers. Otherwise, Greece could have to wait until September for the next tranche of funds. Kathimerini Kathimerini 2 Kathimerini 3 Kathimerini 4
It now appears that whether or not Greece or any other eurozone country in crisis actually meets its agreed upon reforms, the EU/IMF/ECB Troika will disperse money anyway. Furthermore, the headline news is full of the crisis in Portugal, and all betting is that it will need another bailout. Of course, both countries will get what they want! We all must remember that no member of the Troika is using its own money; it is using money either entrusted to it by others or money that it can print in any quantities desired. Unlike the case when dispersing one’s own personal money, the bureaucrats running the Troika have no concern over losing their personal wealth. The same is true of the US Federal Reserve Bank’s quantitative easing program. Despite hints by Fed Chairman Bernanke that the Fed may “taper” the program toward an eventual end, the political pressure will always prevail to ensure that the program never ends, as was predicted by Detlev Schlichter in his recent essay End of QE?–I don’t buy it. Any “taper” toward less money printing must cause the demise of those businesses that can survive only with more money printing. In the short run unemployment will rise, tax receipts will fall, businesses will default on bank loans, etc. The short term consequences are all negative and will always trump the long term benefits.
This monetary rule predominates: If you can print money, you will print money. Therefore, we must move to a new monetary regime where government cannot print money that it forces on the rest of society. This means that legal tender laws must be revoked, so that the incentives will change for money producers to produce better and better money chosen by the free market. Only then will governments be forced by their creditors to face reality. Patrick Barron