July 1, 2015

Central Bank Swindling in Action: A Grecian Example

By In Blogs, C.Jay Engel

David Stockman comments on the Greek debt epidemic, and includes an interesting point that part of the result of the central banking shenanigans in Europe has been a massive transfer of wealth from the “taxpayer” to the gambling class– the financiers under the Keynesian regime of easy money and monetary manipulation.

In 2009, private creditors had debt exposures to a considerable amount of Greek debt.  And yet by 2014, these private exposures had scaled back tremendously. Stockman: “In the case of the French, German, Dutch and Italian banks and other private lenders, for example, outstandings have been cut from $100 billion in 2009 to barely $15 billion today.” See the graph below. How did that happen? Obviously Greece did not pay simply off its debts!

greek-debt6-15.jpg

 

 

 

 

 

 

 

 

What happened is Central Banking and a grand push toward the expansion of the money supply.  Via the printing press, governments were able sop up Greek bonds while the private creditors who sold their positions to the governments made a killing in the process.  The private creditors were able to escape their exposure because they sold the Greek bonds to the governments who were buying with freshly printed money.  While the above graph shows the shocking shift in private exposure, check out the results:

greek-debt6-15a.jpg

 

Stockman writes:

Moreover, as the New York Times noted with respect to this massive shift, the most aggressive punters have made a killing. One of them noted quite explicitly that when hedge funds started buying Greek government bonds in 2012:

“People made their careers on that trade,” Mr. Linatsas said.”

In other words, these private hedge funds were paid royally by governments/central banks, making their entire careers on the price spread between the 12 cents on the euro and the 60 cents.  These are some massive profits with the amount of money that these guys play with.  And yet, all we hear about is the tragedies of the “free market” and the “1%.” But this is cronyism at its finest. The taxpayers were handed the bill for the massive “bailout” that the fund managers received in the form of a shift from private ownership of Greek bonds to government ownership.

Any complaint of “modern inequality” is to be responded to with a pointing finger in the direction of the fraudulent nature of central banking.

 

Written by C.Jay Engel

Editor and creator of The Reformed Libertarian. Living in Northern California with his wife, he writes on everything from politics to theology and from culture to economic theory. You can send an email to reformedlibertarian@gmail.com