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Mon Jun 8, 2015, 04:40 PM

"we need to fix the banking system, not Greece, and let Greece fix itself." --In a nutshell & YES

Taken from full article:

Greece's and the Eurozone's Best Move -- Adopt Limited Purpose Banking and Then Default

http://www.forbes.com/sites/kotlikoff/2015/06/08/greeces-and-the-eurozones-best-move-adopt-limited-purpose-banking-and-then-default/

In other words, the so-called Greek crisis is not really about Greece, but about the chance that if Greece does what it clearly must do, namely default, its banking system and everyone else’s will collapse. If that’s the case, we need to fix the banking system, not Greece, and let Greece fix itself.

But can a bank run in relatively tiny Greece represent such a big concern? Yes. Recall the December 2013 banking crisis in Cyprus, whose economy is peanut-sized. The prospect of Cypriot bank runs triggering bank runs throughout the Eurozone sent shivers down European Central Bank chairman, Mario Draghi’s, spine. He quickly came to the rescue. Draghi was not taking a chance, however small, of a massive, collective loss of trust like that triggered by Lehman Brothers’ bankruptcy.

But why is the banking system so fragile? The answer is simple. No other industry in the world operates so deeply in the dark. No other industry provides so little disclosure of what it owes and owns. No other industry has such eye-popping leverage – leverage that is little changed despite Dodd-Frank, Basel III, the Vickers Commission, and other so-called U.S. and international banking reforms. And no other industry engages in such rampant and unabashed deceit, corruption, malfeasance, and political bribery.

Pervasive opacity, extreme leverage, and rarely prosecuted criminality – those are the terrible hallmarks of the world’s Wall Streets. One can’t conceive of a more dangerous way to run any economic sector, let alone one that constitutes a critical public good, namely the financial exchange system.

The Greeks fully understand their potential to gravely damage EU unity and the global built-to-fail, faith-based banking system. Indeed, this is their main negotiating trump card. But blackmailing their partners and abjuring major fiscal reform (required with or without default) is not in Greece’s long-term interest. Nor is it in the interest of other EU members to perpetually police Greece’s fiscal behavior. What’s needed is a way for Greece to default without bringing down the Greek financial system, let alone overall financial exchange
.

Article written by: Laurence Kotlikoff, professor of economics at Boston University, a Fellow of the American Academy of Arts and Sciences, a Research Associate of the National Bureau of Economic Research, a contributor to Bloomberg, the FT, the Economist, Forbes, and other media and President of Economic Security Planning, Inc.
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Comments welcome. I can't believe someone actually had the audacity to come out and say it, it's the banks...OF COURSE. While we await an outcome, the truth is...well...apparent. Yet, what direction will be taken is not clear...since it's been said default is possible with or without leaving...which is really what we want to know. We know the debt is crazy & unsustainable, it's the interest too, it's all crazy, all this austerity, all the beggary thy neighbor, the disaster, predatory capitalism, the corrupt entities that all made it possible...damn that Troika!

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Reply "we need to fix the banking system, not Greece, and let Greece fix itself." --In a nutshell & YES (Original post)
mother earth Jun 2015 OP
salib Jun 2015 #1
mother earth Jun 2015 #4
salib Jun 2015 #2
mother earth Jun 2015 #3

Response to mother earth (Original post)

Mon Jun 8, 2015, 05:01 PM

1. "The global built-to-fail, faith-based banking system"

Seems apropos to me.

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Response to salib (Reply #1)

Mon Jun 8, 2015, 05:40 PM

4. Here is Varoufakis' plan:

http://yanisvaroufakis.eu/2015/05/15/a-blueprint-for-greeces-recovery-within-a-consolidating-europe-brussels-keynote-7th-may-2015/#more-7867

SLIDE 4: LOOKING FORWARD-INVESTMENT

Imagine a Development Bank levering up collateral comprising the equity the state shall retain after privatisations as well as other assets (e.g. real estate) whose value can be easily enhanced (and collateralised) through reforming their property rights. Imagine that it links up the European Investment Bank, the Juncker Plan etc. with Greece’s private sector. Privatisation suddenly escapes any association with fire sales and becomes part of a grand developmental public-private partnership.

SLIDE 5: LOOKING FORWARD-BANKS

Imagine further a Bad Bank that helps the banks shed their legacy non-performing mortgages and unclog their financial plumbing. In concert with the Development Bank’s virtuous impact, credit and investment flows will flood the hitherto arid realms of Greece’s economy eventually helping the Bad Bank turn a profit, and turning… ‘good’ in the process.


(The full transcript is available at the above link, but who knows what "vision" will prevail in these "negotiations". No matter, Syriza is in power & Tsipras & Varoufakis are clearly following theirs.)


A Blueprint for Greece’s Recovery within a Consolidating Europe
Published on May 13, 2015
Speech given in Brussels, at the EBS Conference, 7th May 2015

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Response to mother earth (Original post)

Mon Jun 8, 2015, 05:08 PM

2. However, the solution proposed ("pandered" really) here is a ticket to disaster also.

So-called "Limited Purpose Banking (LPB)" would take all control over the sovereignty of national backs in Greece away from the Greeks. Just as the Euro has done.

Disaster capitalism all over again.

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Response to salib (Reply #2)

Mon Jun 8, 2015, 05:25 PM

3. Duly noted. I can't believe, however, someone has openly said the real issue at hand is

the corruption of banking, plain as day, in print, not like we didn't already know it, but at long last...it is spoken in regard to the Greece fiasco.

Forbes is tricky sometimes.

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