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The Great Greek Bank Robbery
The Great Greek Bank Robbery
ATHENS – Since 2008, bank bailouts have entailed a significant transfer of private losses to taxpayers in Europe and the United States. The latest Greek bank bailout constitutes a cautionary tale about how politics – in this case, Europe’s – is geared toward maximizing public losses for questionable private benefits.
In 2012, the insolvent Greek state borrowed €41 billion ($45 billion, or 22% of Greece’s shrinking national income) from European taxpayers to recapitalize the country’s insolvent commercial banks. For an economy in the clutches of unsustainable debt, and the associated debt-deflation spiral, the new loan and the stringent austerity on which it was conditioned were a ball and chain. At least, Greeks were promised, this bailout would secure the country’s banks once and for all.
A few months later, in the autumn of 2013, a second recapitalization was orchestrated, with a new share issue. To make the new shares attractive to private investors, Greece’s “troika” of official creditors (the International Monetary Fund, European Central Bank, and the European Commission) approved offering them at a remarkable 80% discount on the prices that the HFSF, on behalf of European taxpayers, had paid a few months earlier. Crucially, the HFSF was prevented from participating, imposing upon taxpayers a massive dilution of their equity stake.
Sensing potential gains at taxpayers’ expense, foreign hedge funds rushed in to take advantage. As if to prove that it understood the impropriety involved, the Troika compelled Greece’s government to immunize the HFSF board members from criminal prosecution for not participating in the new share offer and for the resulting disappearance of half of the taxpayers’ €41 billion capital injection.
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Introduction: Bank-Money
Introduction: Bank-Money
‘BANK ROBBERY’ is not a book about how to rob a bank: it’s about how banks rob us. The title sounds a bit sensationalist: perhaps people think it’s not meant to be taken too seriously. Banks don’t actually rob us, surely: they provide a service – even if they do charge too much, and behave badly when they think they can get away with it.
But actually, the title is to be taken literally. Robbery means ‘theft backed up by violence, or by threat of violence’. The theft in banking is that banks create money out of nothing for the use of themselves and selected others: the overall effect of this is a continual transfer of assets from the rest of us to governments and a financial elite. The violence, or threat of violence, is what the state may use, to back up the rule of law: in this case, to enforce the laws that allow banks to create money.
It’s obvious to most people that if there is to be a functioning rule of law, the State must be able to use force when necessary to back it up. So it’s our responsibility, as citizens and voters, to make sure that the laws are just. In the West, we tend to assume that if an unjust law does exist it will soon be changed, because public opinion will not put up with it.
There have been many unjust laws in our history: the Corn Laws, laws supporting the slave trade, laws about who is entitled to vote, laws about the property rights of married women are a few examples. Many of these unjust laws lasted for generations before they were changed or repealed.
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