Like the oldest societies, ours has its myths. And among these myths, one of the most important, although it is not recognized as such, is from a very special film genre, westerns, before being included in the screenplay of a large number of films. According to this myth, the hero is almost at his worse until the arrival of a saviour: the cavalry coming to save the stagecoach.
It is in terms of this myth that people today reflect upon the economic crisis. They believe a solution will be found before the disaster, the cavalry will arrive in time. Even if they do not say it, it is the hope of all: the worst is not possible.
And the facts seem to prove them right: the European States seem to have found at the very last moment, a solution to the crisis in Greece, and the risk of contagion. A Fund will henceforth allow to borrow what is needed to reassure the markets, with the European Union making more progress in ten days than it did in ten years. Whatever their leaders said was absurd and impossible, with a a scornful smile, a week ago, is suddenly becoming possible on a Sunday of panic. We even found a very clever solution to create European Treasury bonds without modifying the European Treaty.
But in reality, the cavalry is not as convincing as one might think at first: coming far too late with too little ammunition.
First, the newly created Fund has insufficient resources to finance debt relief for countries in the front line (Italy, Spain, Portugal, Ireland), ten times superior to that of Greece, four times superior to the guarantees given by the new Fund. Then nobody knows who will repay this new debt from penniless countries. Worse yet, to fill this gap, we ask the Central Bank to lend, too, to those governments, which amounts to trigger the money printing and contradicts the mission of the Bank, which is to support the Euro prices. Finally, while Europe gives itself the means to go into more debt, very little is said about the means given to force the countries heavily in debt to reduce their States, or to finance this debt by new taxes.
In reality, about cavalry, this is not that of the westerns which just arrived to save the stagecoach, but one that is well-known, by penniless debtors: the banking cavalry.
And the worst; because we are now, in fact, by this plan, asking the debtors to lend money to their creditors. Thus, Greece, the debtor, is asked to participate in a fund established to help its creditors; and we will ask tomorrow countries to finance the losses which Central Bank will inevitably make while buying today Treasury bonds from countries deeply in debt: the central bank covers today the losses of countries, which in return will cover tomorrow the losses of the Central bank!
We must abandon these dreams. We must create genuine European Treasury Bonds, without relying on the Central Bank; resources put in front of these loans must be real, and to do everything, by saving, not to have the need to use them. Otherwise, after public debt replaces private debt, will come printing money and we will continue inexorably to move towards the worst.