Greece, Rehypothecation and Slavery

Rehypothecation – do you know what that is? It’s a really great big word that means stealing. Slavery is a hot button word that is alive and well in societies around the world.

The stealing part is what’s happening in Greece right now. It’s what happened in Cyprus two years ago. Puerto Rico is on the verge of bankruptcy, unable to meet its obligations on $70bn of debt. Spain has a weak economy and might be next. Will they follow the examples set by members of the European Union?

As an individual, when you put your money – the dough you earned by working and earning a living – into a bank or mutual fund or other ‘paper’ investment, that money is no longer yours. It is theirs. The place into which you put it takes it. It does not go into a little box with your name on it. It gets pooled with everyone else’s, and then it gets loaned out. On one dollar deposited, they can borrow ten.

Now, if that person or entity to which the loan is made defaults, if they don’t pay their debt, there’s usually an asset of some type. A home loan is made against the physical structure. If the borrower defaults, the bank takes the house. It can resell that house and collect at least some of the money it loaned against it.

In the case of a loan to a nation – like Cyprus or Greece – there is no single physical asset that stands as collateral. Because of that, the loans made to countries with weak economies are bad investments.

Because the European Union, European Central Bank (ECB) and International Monetary Fund (IMF) made loans to economies that were teetering on the edge of default and bankruptcy, the lenders – the other members of the European Union – are in a fix right now. There is nothing they can sell to get back their money – your money, since you’re the one who put the money into the bank in the first place.

Greece, with 26% unemployment and 30% of its citizens retired has more people unemployed or retired than working. More of their working citizens work for the government than for private business. Their debt to GDP ratio is astronomical – they are spending far more than they are earning. It’s like you, earning minimum wage and spending like George Soros.

As a result of its profligate spending (17.5% of GDP) on social benefits – pensions and such - it is in no position to repay the billions of Euros loaned to them in the past few years.

This leaves the ECB, IMF and the Greek government with limited choices.

They can do a public bail-in, like Cyprus did in 2013-2014. That was a very popular move. Take the money from depositors – steal it – so you can shore up a failing institution. Now, out of the kindness of their good little hearts, the bankers didn’t steal the money of the mom and pop depositors. They focused on the big kids – depositors with more than 100,000 Euros – with ample warning beforehand so those big depositors had time to shift the bulk of their wealth off-shore.

Right now, this week, Greece is quietly doing this – without the forewarning Cyprus offered. After all, the wealthy investors from Russia and other European countries probably didn’t make the same mistake twice. Instead of depositing in ‘iffy’ places like the Med, they’ve probably already shifted their deposits to more stable places – like Switzerland, the Bahamas and the Cayman Islands.

In the meantime, hurting those mom and pop depositors the most, banks in Greece are closed this week. The Greek stock market is closed, at least through Tuesday. Depositors who have their savings in the bank, if they wait long enough through the queue and if the reserve isn’t drained by the time they get to the front of the line, may (with the government’s permission), withdraw a whopping 60 EU per day - the equivalent of $66. No checks will be honored. In other words, the money that people have in their bank accounts is no longer theirs. It belongs to the bank and to the ECB and IMF.

Why is it like this? It’s simple. It is because the socialist model doesn’t work. They, the noblesse oblige governments, have run out of other people’s money.

They ran out of their own, from their own citizens, several years ago. Then they turned to the primary members of the EU and held out their hand, ‘help us, please’. The EU obliged by handing over billions of their citizen’s money to failing economies.

Socialism has never worked. Not once. It’s a wonderful ideal – if you’re lazy and don’t want to work hard to earn your keep. Take what others make – the ‘from each according to their ability’ theft of another’s labor.

Socialism is, in its most fundamental definition, slavery.

Stop and study that Marxist ideal: From each according to his ability, to each according to his need.

In other words, simple words, take from those who are able and give it to someone else.

When you have a society that hands out more than it takes in – the second half of the Marx ideal of ‘from each according to their ability, to each according to their need’ – you have a failing system. It is not sustainable.

At a ratio of 2:1 non-workers to workers, it becomes a slave state. Look at Greece.

The one worker is toiling to support two people. Never mind that the worker wants to enjoy the fruits of their labor, too. They do not willingly get up in the morning and go to work so they can be slaves who support the non-workers. At that point, they are slaves; nothing more, nothing less because their effort is given away to support someone else. They are not a free individual, using the gifts given to them by Fate or God or whatever. They Are A Slave.

That’s where Greece is now. The workers are working harder and harder to pay the taxes and the fees and the levies that provide the pension funds to the non-workers.

It didn’t work in the Soviet Union – the Soviet Socialist Republic that died in the 1980’s – a mere 70 years after starting. It isn’t working in Greece now. The only question remaining is how long it will take to collapse and who will be next.