The Greek Coup: Liquidity as a Weapon of Coercion

“My father made him an offer he couldn’t refuse. Luca Brasi held a gun to his head and my father assured him that either his brains, or his signature, would be on the contract.”                                                                                                                                                 — The Godfather (1972)

In the modern global banking system, all banks need a credit line with the central bank in order to be part of the payments system. Choking off that credit line was a form of blackmail the Greek government couldn’t refuse. 

Former Greek finance minister Yanis Varoufakis is now being charged with treason for exploring the possibility of an alternative payment system in the event of a Greek exit from the euro. The irony of it all was underscored by Raúl Ilargi Meijer, who opined in a July 27th blog:

The fact that these things were taken into consideration doesn’t mean Syriza was planning a coup . . . . If you want a coup, look instead at the Troika having wrestled control over Greek domestic finances. That’s a coup if you ever saw one.

Let’s have an independent commission look into how on earth it is possible that a cabal of unelected movers and shakers gets full control over the entire financial structure of a democratically elected eurozone member government. By all means, let’s see the legal arguments for this.

So how was that coup pulled off? The answer seems to be through extortion. The European Central Bank threatened to turn off the liquidity that all banks – even solvent ones – need to maintain their day-to-day accounting balances. That threat was made good in the run-up to the Greek referendum, when the ECB did turn off the liquidity tap and Greek banks had to close their doors. Businesses were left without supplies and pensioners without food. How was that apparently criminal act justified? Here is the rather tortured reasoning of ECB President Mario Draghi at a press conference on July 16:

There is an article in the [Maastricht] Treaty that says that basically the ECB has the responsibility to promote the smooth functioning of the payment system. But this has to do with . . . the distribution of notes, coins. So not with the provision of liquidity, which actually is regulated by a different provision, in Article 18.1 in the ECB Statute: “In order to achieve the objectives of the ESCB [European System of Central Banks], the ECB and the national central banks may conduct credit operations with credit institutions and other market participants, with lending based on adequate collateral.” This is the Treaty provision. But our operations were not monetary policy operations, but ELA [Emergency Liquidity Assistance] operations, and so they are regulated by a separate agreement, which makes explicit reference to the necessity to have sufficient collateral. So, all in all, liquidity provision has never been unconditional and unlimited. [Emphasis added.]

In a July 23rd post on Naked Capitalism, Nathan Tankus calls this “a truly shocking statement.” Why? Because all banks rely on their central banks to settle payments with other banks. “If the smooth functioning of the payments system is defined as the ability of depository institutions to clear payments,” says Tankus, “the central bank must ensure that settlement balances are available at some price.”

How the Payments System Works

The role of the central bank in the payments system is explained by the Bank for International Settlements like this:

One of the principal functions of central banks is to be the guardian of public confidence in money, and this confidence depends crucially on the ability of economic agents to transmit money and financial instruments smoothly and securely through payment and settlement systems. . . . [C]entral banks provide a safe settlement asset and in most cases they operate systems which allow for the transfer of that settlement asset.

Internationally before 1971, this “settlement asset” was gold. Later, it became electronic “settlement balances” or “reserves” maintained at the central bank. Today, when money travels by check from Bank A to Bank B, the central bank settles the transfer simply by adjusting the banks’ respective reserve balances, subtracting from one and adding to the other.

Checks continue to fly back and forth all day. If a bank’s reserve account comes up short at the end of the day, the central bank treats it as an automatic overdraft in the bank’s reserve account, effectively lending the bank the money in the form of electronic “liquidity” until the overdraft can be cleared. The bank can cure the deficit by attracting new deposits or by borrowing from another bank with excess reserves; and if the whole system is short of reserves, the central bank creates more to maintain the liquidity of the system.

The most dramatic exercise of this liquidity function was seen after the banking crisis of 2008, when credit was frozen and banks had largely stopped lending to each other. The US Federal Reserve then stepped in and advanced over $16 trillion to financial institutions through the TAF (Term Asset Facility), the TALF (Term Asset-backed Securities Loan Facility), and similar facilities, at near-zero interest. Toxic unmarketable assets were converted into “good collateral” so the banks could remain solvent and keep their doors open.

Liquidity as a Tool of Coercion

That is how the Fed sees its role, but the ECB evidently has other ideas about this liquidity tool. Whether a country’s banks are allowed to “access monetary policy operations” is seen by the ECB not as mandatory but as discretionary with the central bank. And as a condition of that access, if a country’s bonds are “below investment grade,” the country must be under an IMF program — meaning it must subject itself to forced austerity measures. According to ECB Vice President Constâncio at the same press conference:

[W]hen a country has a rating which is below the investment grade which is the minimum, then to access monetary policy operations, it has to have a waiver. And the waiver is granted if there are two conditions. The first condition is that the country must be under a programme with the EU and IMF; and second, we have to assess that there is credible compliance with such a programme. [Emphasis added]

Liquidity is provided only on “adequate collateral” — usually government bonds. But whether the bonds are “adequate” is not determined by their market price. Rather, political concessions are demanded. The government must sell off public assets, slash public services, lay off public workers, and subject its fiscal policies to oversight by unelected bureaucrats who can dictate every line item in the national budget.

Tankus observes:

Europe now has a system where liquidity and insolvency problems can occur and can be deliberately generated (at least in part) by the central bank. Then the Troika can force that country into an “IMF program” if it wants to continue having a functioning banking system. Alternatively, the central bank can choose to simply “suspend convertibility” to the unit of account [i.e. cut off the supply of Euros] and force the write down of deposits [haircuts and bail-ins] until the banks are solvent again.

Pushed to the Cliff by the Financial Mafia

Were liquidity and insolvency problems intentionally generated in Greece’s case, as Tankus suggests? Let’s review.

First there was the derivatives scheme sold to Greece by Goldman Sachs in 2001, which nearly doubled the nation’s debt by 2005.

Then there was the bank-induced credit crisis of 2008, when the ECB coerced Greece to bail out its insolvent private banks, throwing the country itself into bankruptcy.

This was followed in late 2009 by the intentional overstatement of Greece’s debt by a Eurostat agent who was later tried criminally for it, triggering the first bailout and accompanying austerity measures.

The Greek prime minister was later replaced with an unelected technocrat, former governor of the Bank of Greece and later vice president of the ECB, who refused a debt restructuring and instead oversaw a second massive bailout and further austerity measures. An estimated 90% of the bailout money went right back into the coffers of the banks.

In December 2014, Goldman Sachs warned the Greek Parliament that central bank liquidity could be cut off if the Syriza Party were elected. When it was elected in January, the ECB made good on the threat, cutting bank liquidity to a trickle.

When Prime Minister Tsipras called a public referendum in July at which the voters rejected the brutal austerity being imposed on them, the ECB shuttered the banks.

The Greek government was thus broken Mafia-style at the knees, until it was forced to abandon its national sovereignty and watch its public treasures sold off piece by piece. Suspicious minds might infer that this was a calculated plot designed from the beginning to throw Greece’s prized assets onto the auction block, a hostile takeover and asset stripping for the benefit of those well-heeled entities in a position to purchase them, including the very banks, hedge funds and speculators instrumental in driving up Greek debt and destroying the economy.

No Sovereignty Without Control Over Currency and Credit

In the taped conference call for which Yanis Varoufakis is currently facing treason charges, he exposed the trap that eurozone countries are now in. It seems there is virtually no legal way to break free of the euro and the domination of the troika. The government has no access to the critical data files of its own banks, which are controlled by the ECB.

Varoufakis said this should alarm every EU government. As Canadian Prime Minister William Lyon Mackenzie King warned in 1935:

Once a nation parts with the control of its currency and credit, it matters not who makes the nation’s laws.  Usury, once in control, will wreck any nation.

For a nation to regain control of its currency and credit, it needs a central bank with a mandate to serve the interests of the nation. Banking should be a public utility, serving the economy and the people.

____________________

Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books including the best-selling Web of Debt. Her latest book, The Public Bank Solution, explores successful public banking models historically and globally. Her 300+ blog articles are at EllenBrown.com. Listen to “It’s Our Money with Ellen Brown” on PRN.FM.

“We’re All Greeks Now” — Stephen Lendman on “It’s Our Money”

It isn’t just the Greeks, or the Cypriots, or the Irish, or the Icelanders suffering the price of financial terrorism – the extractive demands of global central banks on display in Greece are actively draining the marrow of impoverished communities the world over. Ellen speaks with author and expert Stephen Lendman about the financial powers forcibly overruling Greek democracy, and their intentions to do so everywhere.  Co-host Walt McRee speaks with an official of one California county government pushing back against convicted bank felons, and later discusses new human evolutionary awareness about our relationship with money with philosopher Robert Bows.  And Matt Stannard discusses our myths about “the Great American Entrepreneur” on the Public Banking Report.

Listen here.

Grexit or Jubilee? How Greek Debt Can Be Annulled

The crushing Greek debt could be canceled the way it was made – by sleight of hand. But saving the Greek people and their economy is evidently not in the game plan of the Eurocrats.

Greece’s creditors have finally brought the country to its knees, forcing President Alexis Tsipras to agree to austerity and privatization measures more severe than those overwhelmingly rejected by popular vote a week earlier. No write-down of Greece’s debt was included in the deal, although the IMF has warned that the current debt is unsustainable.

Former Greek finance minister Yanis Varoufakis calls the deal “a new Versailles Treaty” and “the politics of humiliation.” Greek defense minister Panos Kammenos calls it a “coup d’état” done by “blackmailing the Greek prime minister with collapse of the banks and a complete haircut on deposits.” Continue reading

Paul Craig Roberts on “It’s Our Money” — “Greece-y Mess”

There are many reasons to keep our focus on Greece — self-interest being one.  Dr. Paul Craig Roberts returns to disclose the backstory of the political-bankster collaboration that has brought Greece to its knees and threatens economies the world over, including ours. Ellen suggests a solution for how the Greeks can proceed from here. Matt Stannard takes a historical look at German/Greek finances and we discuss the important leadership of Pope Francis’ review of what’s really important in any economy. Hint: it’s not about your wallet.  

Listen here.

“Guerrilla Warfare Against a Hegemonic Power”: The Challenge and Promise of Greece

Banks create money when they make loans. Greece could restore the liquidity desperately needed by its banks and its economy by nationalizing the banks and issuing digital loans backed by government guarantees to its ailing businesses. Greece could provide an inspiring model of sustainable prosperity for the world. But it is being strangled by a hegemonic power in a financial war that is being waged against us all.  

On July 4, 2015, one day before the national vote on the austerity demands of Greece’s creditors, it was rumored in the Financial Times that Greek banks were preparing to “bail in” (or confiscate) depositor funds to replace the liquidity choked off by the European Central Bank.

The response of the Syriza government, to its credit, was “no way.” As reported in Zerohedge, the government was prepared to pursue three “nuclear options” to protect the deposits of the Greek people: Continue reading

A Revolutionary Pope Calls for Rethinking the Outdated Criteria That Rule the World

Pope Francis’ revolutionary encyclical addresses not just climate change but the banking crisis. Interestingly, the solution to that crisis may have been modeled in the Middle Ages by Franciscan monks following the Saint from whom the Pope took his name.

Pope Francis has been called “the revolutionary Pope.” Before he became Pope Francis, he was a Jesuit Cardinal in Argentina named Jorge Mario Bergoglio, the son of a rail worker. Moments after his election, he made history by taking on the name Francis, after Saint Francis of Assisi, the leader of a rival order known to have shunned wealth to live in poverty.

Pope Francis’ June 2015 encyclical is called “Praised Be,” a title based on an ancient song attributed to St. Francis. Most papal encyclicals are addressed only to Roman Catholics, but this one is addressed to the world. And while its main focus is considered to be climate change, its 184 pages cover much more than that. Among other sweeping reforms, it calls for a radical overhaul of the banking system. It states in Section IV: Continue reading

Today on “It’s Our Money” — “Mad as Hell” Over Fast Track

Anchorman Howard Beale’s outburst that mobilized a nation to scream out their windows in anger at the tyranny of the powers-that-be makes an apt sequel to this week’s news that Fast Track approval of the TPP appears imminent. Ellen speaks with Kevin Zeese, the foremost leader of national citizen’s campaigns pushing back against the obvious collusion of government leaders and corporate interests. It will have you heading toward your own windows. Co-host Walt McRee speaks with Chuck Watts of the Empathy Surplus Project about the power of language in creating the new economy and a new generation of public policy, while Matt Stannard reflects on Wells Fargo’s recent efforts at impacting social justice.

Listen at noon pst/3 pm est here or archived thereafter here.

USAWatchDog: Obama Secret Trade Deal Serves Corporations and Banks

“Sentence First, Verdict Afterwards”: The Alice in Wonderland World of Fast-tracked Secret Trade Agreements

`Let the jury consider their verdict,’ the King said, for about the twentieth time that day.

`No, no!’ said the Queen. `Sentence first–verdict afterwards.’

`Stuff and nonsense!’ said Alice loudly. `The idea of having the sentence first!’

`Hold your tongue!’ said the Queen, turning purple.

`I won’t!’ said Alice.

`Off with her head!’ the Queen shouted at the top of her voice.

                    — Lewis Carroll, “Alice’s Adventures in Wonderland”

Fast-track authority is being sought in the Senate this week for the Trans-Pacific Partnership (TPP), along with the Trade in Services Agreement (TiSA) and any other such trade agreements coming down the pike in the next six years. The terms of the TPP and the TiSA are so secret that drafts of the negotiations are to remain classified for four years or five years, respectively, after the deals have been passed into law. How can laws be enforced against people and governments who are not allowed to know what was negotiated? Continue reading

New on “It’s Our Money” — Monetary Reform: Trending

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Remarkable changes are underway in the world of monetary policy, theory and even the forms of money itself.  Beyond just technology, these new forms and re-forms of the dominant money control systems are being pushed by the need for fairer economic distribution as well as raging battles between global private banks and citizens of Greece, Spain, Canada and more.  This week Ellen speaks with Uli Kortsch, president of Global Partners Investments, who advocates replacing money creation by private banks through “fractional reserve lending” with government-issued money, and we visit with colleagues in London working on something similar.  Co-host Walt McRee discusses a new series of workbooks designed to enable more local investment while Matt Stannard discusses the humanitarian concerns imposed by the Trans-Pacific Partnership. Listen to the podcast here.

Fast-track Hands the Money Monopoly to Private Banks — Permanently

It is well enough that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.                                                                                                                                                                        — Attributed to Henry Ford

In March 2014, the Bank of England let the cat out of the bag: money is just an IOU, and the banks are rolling in it. So wrote David Graeber in The Guardian the same month, referring to a BOE paper called “Money Creation in the Modern Economy.” The paper stated outright that most common assumptions of how banking works are simply wrong. The result, said Graeber, was to throw the entire theoretical basis for austerity out of the window.

The revelation may have done more than that. The entire basis for maintaining our private extractive banking monopoly may have been thrown out the window. And that could help explain the desperate rush to “fast track” not only the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Partnership (TTIP), but the Trade in Services Agreement (TiSA). TiSA would nip attempts to implement public banking and other monetary reforms in the bud. Continue reading

Upcoming conference in Claremont, CA — “Seizing an Alternative” ; and Dr. John Cobb talks about it on “It’s Our Money”

On June 4-7, 2015, we aim to create Pandomonium! 
“Seizing an Alternative: Toward an Ecological Civilization”

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“Seizing an Alternative: Toward an Ecological Civilization”focuses on the big ideas that matter for a thriving ecosphere, featuring some seven hundred presenters and more than eighty areas of specialty. For details, see here. And to hear about it, listen to founder Dr. John Cobb interviewed on “It’s Our Money with Ellen Brown”, here.

Derailing Amtrak: Tracking the Latest Disaster in the Infrastructure Crisis

The dangerous underfunding of US infrastructure was underscored by a fatal train derailment on May 12th. The tragedy did not deter the House Appropriations Committee from voting to slash Amtrak funding the very next day. There are ways Congress could fund its massive infrastructure bill without raising taxes. But the conservative-controlled Congress seems to have other plans for the nation’s profitable public assets. Continue reading

Dane Wigington, Matt Stannard, Marc Armstrong on “It’s Our Money”

Connecting the Dots – 05.06.15

At what point are you willing to challenge your own notions of what’s really going on? Can you even imagine that the mavens of the Money Power would threaten human survival to serve themselves for even bigger personal profits? Ellen’s guest, researcher Dane Wigington, has a trove of data to suggest that they would. And they do so in the form of geoengineering, a covert tool allegedly being used to control natural systems for private profit. We also hear commentary from Matt Stannard about the economics of the Baltimore uprising and from Marc Armstrong about America’s only publicly-owned depository bank, the Bank of North Dakota, which just issued its latest annual report — it’s another record-setting winner!

Listen here.

The Trans-Pacific Partnership and the Death of the Republic

The United States shall guarantee to every State in this Union a Republican Form of Government.    — Article IV, Section 4, US Constitution

A republican form of government is one in which power resides in elected officials representing the citizens, and government leaders exercise power according to the rule of law. In The Federalist Papers, James Madison defined a republic as “a government which derives all its powers directly or indirectly from the great body of the people . . . .”

On April 22, 2015, the Senate Finance Committee approved a bill to fast-track the Trans-Pacific Partnership (TPP), a massive trade agreement that would override our republican form of government and hand judicial and legislative authority to a foreign three-person panel of corporate lawyers. Continue reading

Gar Alperovitz on “It’s Our Money” with Ellen Brown

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In the world of monetary reformists, there’s a clear understanding that things not only shouldn’t continue as they are, they can’t continue as they are – that systemic failure is upon us as current social and political outcomes tear at the fabric of civil life. Ellen speaks with Gar Alperovitz, one of America’s most venerable reformist thinkers and policy experts, about his new “The Next System Project” to help design and precipitate what should happen next. Also, maybe the national debt is unnecessary after all – author Scott Baker talks with co-host Walt McRee about his new book “America is Not Broke,” and Matt Stannard reports on the financial travesties imposed by Wall Street on American cities.

Archived here.

USAWatchDog: No Backup Plan for California Drought

How America Became an Oligarchy

The politicians are put there to give you the idea that you have freedom of choice. You don’t. . . . You have owners.                                                                                                — George Carlin, The American Dream

According to a new study from Princeton University, American democracy no longer exists. Using data from over 1,800 policy initiatives from 1981 to 2002, researchers Martin Gilens and Benjamin Page concluded that rich, well-connected individuals on the political scene now steer the direction of the country, regardless of – or even against – the will of the majority of voters. America’s political system has transformed from a democracy into an oligarchy, where power is wielded by wealthy elites. Continue reading

California Water Wars: Another Form of Asset Stripping?

In California’s epic drought, wars over water rights continue, while innovative alternatives for increasing the available water supply go untapped.

Wars over California’s limited water supply have been going on for at least a century. Water wars have been the subject of some vintage movies, including the 1958 hit The Big Country starring Gregory Peck, Clint Eastwood’s 1985 Pale Rider, 1995’s Waterworld with Kevin Costner, and the 2005 film Batman Begins. Most acclaimed was the 1975 Academy Award winner Chinatown with Jack Nicholson and Faye Dunaway, involving a plot between a corrupt Los Angeles politician and land speculators to fabricate the 1937 drought in order to force farmers to sell their land at low prices. The plot was rooted in historical fact, reflecting battles between Owens Valley farmers and Los Angeles urbanites over water rights.

Today the water wars continue on a larger scale with new players. It’s no longer just the farmers against the ranchers or the urbanites. It’s the people against the new “water barons”  – Goldman Sachs, JPMorgan Chase, Monsanto, the Bush family, and their ilk – who are buying up water all over the world at an unprecedented pace. Continue reading

The ECB’s Noose Around Greece: How Central Banks Harness Governments

Remember when the infamous Goldman Sachs delivered a thinly-veiled threat to the Greek Parliament in December, warning them to elect a pro-austerity prime minister or risk having central bank liquidity cut off to their banks? (See January 6th post here.) It seems the European Central Bank (headed by Mario Draghi, former managing director of Goldman Sachs International) has now made good on the threat. Continue reading

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