Greece Bailout Financed by Inflationism and the Cross of Gold Speech

Hello inflationism.

The Greece bailout has gradually been revealing this option.

From the Financial Times (bold emphasis mine)

European leaders are for the first time prepared to accept that Athens should default on some of its bonds as part of a new bail-out plan for Greece that would put the country’s overall debt levels on a sustainable footing.

The new strategy, to be discussed at a Brussels meeting of eurozone finance ministers on Monday, could also include new concessions by Greece’s European lenders to reduce Athens’ debt, such as further lowering interest rates on bail-out loans and a broad-based bond buyback programme. It also marks the possible abandonment of a French-backed plan for banks to roll-over their Greek debt.

As European leaders work on the details for the Greece Bailout 2.0, financial markets are putting pressure on another member of the crisis affected PIIGS: Italy

Again from the Financial Times,

US hedge funds are placing large bets against the value of Italian government debt, directly shorting the bonds of the eurozone’s third-largest economy.

The funds have increased the size of short positions in the last month, speculating that investor concerns over the country’s ability to fund itself may spread from Europe’s periphery to Italy, according to investors in the funds briefed on the strategy.

So as the market pressure intensifies on the PIIGS, the serial bailouts will mostly be financed by inflationism. (of course part of the orchestrated interventions would imply price controls such as restriction of short sales)

As I previously noted,

So like the US, the above only reveals that the Eurozone crisis will mean that Greece and the PIIGS will experience bailouts after bailouts after bailouts. Thus, an implied currency war in the process until the unsustainable system of fiat money collapses or people awaken to the risk thereof and apply political discipline.

For now, the policy of bailouts and inflationism will continue to be the central feature of today’s global policy making process where currency values will be determined by the degree of relative inflationism applied.

This reminds me of the champion of inflationism in the US, William Bryan Jennings who made this stirring ‘Cross of Gold’ speech on July 8, 1896 or about 115 years ago.

To quote Bradley Jansen at freebanking.org,

History reminds us that Bryan campaigned not only for monetary debasement but prohibition of alcohol and the teaching of evolution (he wanted it banned in church-related as well as public schools). In fact, the chief proponent of monetary debasement was also the leading light against the teaching of evolution at the Skopes trial in 1925.

The Jennings creed of monetary debasement has been the central dictum of policymaking around the world, embodied by central banking.

Yet, with the entitlement-welfare crisis in parts of Europe, the looming debt crisis in the US and several developed economies, and with gold knocking at near record highs, William Bryan Jennings must be spinning in his grave.