Chapter 51 - Greece has Hoarded Money Disease

We now look at a country that is suffering from a lack of credit that has caused a horrendous fall in the money supply. This graph shows that the banks stopped the supply of credit in Greece.

Bank Lending and Credit for Greece. Graph by Andy Chalkley. Creative Commons Attribute

The banks were lending vigorously up until 2008, then they stopped lending. The result was a massive fall in the Money Supply as shown in this graph:

A graph of Money Supply for the Greece. Graph by Andy Chalkley. Creative Commons Attribute

The orange is the Cash Currency which is the Euro paper notes created by the ECB. The green is the Bank Credit as listed in bank accounts. The green is the money that the bank lends out when people borrow money. All of the green is the result of bank ‘lending’. You can see that lending by the banks was plentiful until 2008. This was the year that international banks nearly imploded the finance system with their dangerous practices.

The effect of refusing to issue fresh credit is to destroy the Money Supply. Money in the modern world is monetized credit in bank accounts. The volume of monetized credit in bank accounts fell. This next graph shows the level of debt in Greece. Like every nation operating under a debt banking system, the debt is unpayable. It is also uncollectible. It is the same in every country in Europe. No country in Europe can repay its debts. A closed debt based banking system made sure of that. Greece actually paid off some of its debt.

A graph of Money Supply and Debt for the Greece. The debt vastly exceeds the capacity to pay. An impossible contract has occurred. Graph by Andy Chalkley. Creative Commons Attribute

The drastic fall in lending also caused the Greek debt to fall. You might also notice that the debt exceeds the volume of money. It is impossible to pay off the debt because there is ‘more debt than money’. Any attempt to pay off the debt destroys the vital circulating medium. The creditors have created a situation where they cannot collect their debts without further loans being created. The debt vastly exceeds the capacity to pay. An impossible contract has occurred. The banks are insolvent because their debts cannot be collected. There is no choice for the banks but to extend further loans. Banks have clearly lent money that can never be repaid. They will try and put conditions on these loans but these can be ignored because they have to lend more to prevent Greece calling the bluff of the banks. Greece has to pay otherwise it would create a contagion where other nations would also refuse to pay. This would collapse the debt money system. Greece has to do a favor to the banks and pay. If Greece fails to pay, Greece will survive but the banks won’t. King Edward the third of England refused to pay the Venetian bankers in 1342. This collapsed the Venetian money system in 1345 which led to the death of around one-third of the population of Europe. You may be shouting for King Edward the third, but the result was a collapse of the banks. “Hurrah”, you might shout, but the collapse of the banks collapsed the money system and one third of the population was extinguished. A collapse of the system is worse than the debt. We can live with debt. We can live with unpayable debt, but we cannot live with collapse. We cannot live because there are no tokens with which to trade. The debt is impossible to pay without further loans, so there has to be further loans. These loans are described as ‘bailouts’ to suggest that it is the fault of the Greek government. The implication is that the new loan is a ‘bailout’ for the nation. More realistically, it is a bailout for the banks. When the banks reach the limit of asset stripping, they can obtain no more from the nation. The asset striping is done to favor the corporations of which the banks own shares.

A graph of Money Supply and Debt for the Greece. This debt can never be repaid with this. So do not try to repay it. Graph by Andy Chalkley. Creative Commons Attribute
IMF

New Messiah says: “Never forget that money is a freely created commodity.”


Money can be printed in any quantity at no cost. Numbers can be added to computer registers to create vast quantitis of Bank Credit. Banks can lend out any amount of money because they just type numbers into a computer screen. Banks do not lend money, they create it.

The money lent to Greece did not come from the European Central Bank as cash currency. It did not come from a printing press. So what did the IMF and other banks lend to Greece?

The ECB states on it website: “The ECB has the exclusive right to authorize the issuance of banknotes within the euro area.”. Interestingly, nowhere on their website does it say that they have the “exclusive right to create the money of Europe”. [5]

Have a look at this table with data on government debt and private debt. Look for something unusual.

2014 Money Supply Government Debt Private Debt
€ billion € billion € billion
Belgium 522 557 818
Bulgaria 80 BGN 11.6
Czech Republic 3882 CZK 1836 CZK 3814 CZK
Denmark 687 DKK 647 DKK 4675 DKK
Germany 2797 2170 3183
Estonia 1.4 2.1
Ireland 215 203 500
Greece 162 317 231
Spain 1199 1034 1930
France 2255 2038 3833
Croatia 83 HRK 289 HRK ?
Italy 1458 2135 1957
Cyprus 23 EUR 18.8 EUR ?
Latvia 12 (M2) 9.6
Lithuania 24 14.8 ?
Luxembourg 335 11 230
Hungary 19940 HUF 25430 HUF 36080 HUF
Malta 17 5.8
Netherlands 894 451 1574
Austria 306 278 473
Poland 1265 Zloty 203 1396 Zloty
Portugal 190 225 359
Romania 314 RON 255 RON ?
Slovenia 22.7 EUR 30
Slovakia 56 EUR 40.3
Finland 158 121 354
Sweden 2992 SEK 1347 SEK 9748 SEK
United Kingdom 2636 GBP 2055 2899 Pound
Norway 2028 NOK 596 NOK 6785 NOK
Euro area (19 countries) 9292.6
EU (27 countries) 12058
EU (All Sectors) 10304 16592
Total Debt Europe 28650.4
Source: 2014 Government Debt from Eurostat
Source: 2014 Private Debt from BIS
Source: 2015 M3 from Trading Economics
http://ec.europa.eu/eurostat/tgm/download.do?tab=table&language=en&pcode=teina225
This was tedious to put together. There may be transposition errors, errors in the source data, and unit errors. Use this as a comparison exercise only.

You may have noticed that they are all negative. None are positive. All countries are in debt. Money is a freely created commodity but they are all in debt. Have a look through this table. There no nation that can pay off its debts. If they paid off the debt, they would have no circulating medium.

map of Europe with debts. Graph by Andy Chalkley. Creative Commons Attribute

When the Money Supply falls, a recession follows. The ensuing depression destroyed the GDP of Greece as shown in the following graph. Most tax is taken as Income Tax, Company Tax, and Sales Tax. These taxes rely on successful business transactions. With a fall in business transactions, there is a fall in government revenue. Government expenses tend to rise as unemployment increased and more guns were needed to potentially shoot the new welfare recipients as they protested. If the Money Supply falls, there is no escaping a budget deficit when tax depends on transactions. The fault lies with the banks and their failure to maintain a steady Money Supply. In this next graph we can see the devastation inflicted on the GDP:

GDP Greece. Graph by Andy Chalkley. Data: Eurostat. Creative Commons Attribute

Around 82% of the Money Supply is Bank Credit. [6] It is numbers in bank accounts. It never existed as Cash Currency. In 2016, there was €28.6 billion Cash Currency in folding notes in Greece. [6] The M3 Money Supply was €162 billion. [6] Thus there was €133 billion listed in bank accounts. [6] The money in bank accounts is generated as the credit component of a fresh loan. When a bank lends one million euro to purchase a house, it writes one million euro with a plus sign into the account of the seller and one million euro with a minus sign into the account of the buyer. From that moment, there is one million euro more money in Greece and one million euro more debt. The Money Supply is dominated with money created this way. All the green section in the red and green graph is Bank Credit. The orange Cash Currency is the euro bank notes printed by the ECB branch in Greece. With the Money Supply dominated by Bank Credit, it is essential that fresh loans are issued at a steady rate. If fresh loans dry up, the Money Supply shrinks as repayments are harvested by the banks. The Greek Tragedy is simply due to the lack of fresh credit. A lack of fresh credit caused the Greek depression. Simple logic says that the solution is more credit which means more loans. But this is poor logic. What is needed is for money to move. The solution is an increase in the movement of money. An urgent increase in velocity is required.

As the GDP falls, the unemployment rises as shown in this next graph:

GDP Unemployment. Graph by Andy Chalkley. Creative Commons Attribute. Data:Greece Unemployment API_SL.UEM.TOTL.ZS_DS2_en_excel_v2.xls at World Bank

The magnitude of the money supply needs to rise at a slow steady pace for a healthy economy. It should neither rise too quickly, nor too slowly. As the major part of the money supply is bank credit, (83% at 2015) a steady supply of fresh credit is needed to replace loans that are repaid. In the following graph, you can see the erratic credit creation of the private banks:

Bank Lending and Credit Private Sector Change for Greece. Graph by Andy Chalkley. Creative Commons Attribute Data: Bank of Greece

For novelty, I show you this graph that has a maximum of 239% change in one year for loans to financial corporations excluding banks (OFIs & ICPFs). This is after my six-month averaging procedure.

Bank Lending and Credit Private Sector Change for Greece. Graph by Andy Chalkley. Creative Commons Attribute Data: Bank of Greece

Other nations have this same issue where there is more debt than money. This graph is for those Greek people with relatives in Australia.

Australia Money Supply. Creative Commons Attribute - Andy Chalkley. www.andychalkley.com.au
Great Depression of the USA

The graph of money supply in Greece is remarkably similar to the graph for Money Supply for the USA during the ‘Great Depression’:

A graph of the Great Depression in the USA. Creative Commons Attribute - Andy Chalkley. www.andychalkley.com.au

Great effort was made to rescue the situation in the USA. The opposite is being done to Greece.

During the Great Depression, the Money Supply fell precipitously. The banks had ceased lending. The velocity also fell. The cure came with a dramatic rise in the Money Supply as can be seen in the graph. It is not recognized that a rise in the velocity would have had a similar effect. Greece cannot lift the Money Supply because the banks will not extend credit. Under such a constraint, Greece can teach the world that extra money is not required. The situation can be repaired by lifting the velocity. To lift the velocity it is necessary to remove Hoarded Money and spend it into circulation.

Can Germany Pay Its Debts?

Germany is demanding that Greece pay on its debts, but can Germany pay its debts? Germany can only pay interest. In Germany, the banks keep lending money which enables Germany to pay interest on previous debts. Germany, like every nation in Europe, is swimming in unpayable debt.

Germany Money Supply and Debt. Creative Commons Attribute - Andy Chalkley. www.andychalkley.com.au
What the Banks Did to the Money Supply of Spain
Spain Money Supply and Debt. Creative Commons Attribute - Andy Chalkley. www.andychalkley.com.au
Euro Area

The whole of the Euro Area suffered in the straightjacket that is the private bank lending scheme with a puppet Central Bank. The ECB is working for the interests of the banks rather than the interests of the nations. Their motivation is bank profit, not national prosperity. Here is the lending pattern for the banks in the Euro Area:

Euro Area lending. Data: Economagic. Creative Commons Attribute - Andy Chalkley. www.andychalkley.com.au

Here is the money and debt for the combined nations in the Euro Area:

Euro Area Money and Debt. Data: BIS. Creative Commons Attribute - Andy Chalkley. www.andychalkley.com.au

New Messiah says: “Money is a freely created commodity.”


Money

It costs nothing to make money. It is printed on paper or entered into computer registers. When the nation-state was invented, it was the king who was given the authority to create the money of the nation. Since the power of the kings was removed and in some cases, the head of the king was removed, the authority to create the money of the nation was given to the government. However, governments have given away the authority to create money to institutions that are independent of government. The usual promotion is along the lines of “Keep the central bank free from political influence”. Democracy disappeared from money creation and the central banks became controlled by bankers. This is a workable solution except for some minor issues:

A Greek Public Bank

A public bank would be one solution that would work for Greece. A public bank is a bank owned by the government. The public bank extends credit for the benefit of the nation. It ensures that all levels of enterprise have adequate finance. The public bank is not prone to the stop-start lending patterns that afflict the private banks. When a public bank lends to the government, the government owes money to the government making the debt somewhat irrelevant. If the Greek government is to owe an unpayable debt, it might as well be to itself. The private banks operating under the ECB are unlikely to tolerate competition to their money creation monopoly. A public bank is a luxury that is unlikely to occur in Greece. A money creation monopoly could feasibly work but the existing private group monopoly has demonstrated that it is incapable of maintaining a steady flow of credit to maintain a steady Money Supply. Many countries have run public banks with startling results. The economic rise of China is largely due to the operations of the China National Bank and the China National Development Bank. A Greek Public Bank would repair the damage done to the devastated Money Supply very quickly.

Let us have a look at the velocity of money in Greece. The velocity of money is a calculation of the number of times that money changes hands in one year. Consider a fruit seller. A fruit seller sells his fruit and restocks each day. The fruit seller represents a velocity of 365. A typical employee has no money left at the end of the week. The employee represents a velocity of 52. A shop might restock each week. The shop represents a velocity of 52. Greece has a velocity of less than one. Most money in Greece spends lengthy periods of time sitting idle in bank accounts. The money in Greece is not creating the transactions that enable a vibrant civilized society. If I go to Syntagma Square and give the accordion player a ten euro note. He might go to the kebab shop next to the bus stop and buy a kebab. The kebab shop owner might immediately pay his cook the ten euros in wages owed. The cook goes down the road and gets a haircut. The hairdresser goes and spends the ten euro on a spinach pie. The café owner buys some apples. The fruit stall pays his debt at the newspaper kiosk. The kiosk gives it to his son as wages. The son buys a new tyre for his trick bicycle as a replacement for the one he damaged bouncing off a café wall down near Monastiraki Metro Station. In a few hours, this ten euro note has enabled ten transactions in less than a day. This represents €100 in transactions which is equivalent to a €36 500 annual contribution to the GDP. This note represents a velocity of 3650. But this money in Greece only manages one €10 transaction in a complete year. Money is being worshiped as idle savings in bank accounts. The people with this idle money are those that have ‘more money than they can spend’. They are the well off. There is a lack of money for the real economy because money in Greece is idle. It is not the poor that are idle. There are many looking for work that is not there to be found. It is the money that is idle in the bank accounts of those with ‘more money than they can spend’.

Here is the shocking graph of the velocity of money in Greece:

Greece velocity of money. Graph by Andy Chalkley. Creative Commons Attribute Data: Bank of Greece and OECDstat

The low velocity indicates that money is not being used for productive purposes. Numerous other countries also have horrendous values for the velocity of money. The only reason that it is not shocking to economists is that most countries also have similarly shocking graphs:

The velocity of money in numerous countries. Graph by Andy Chalkley. Creative Commons Attribute. Data: World Bank

[The data is from the World Bank. The World Bank is not owned by the world. It is a private bank owned by private interests.]

I have developed a method of determining how much money is hoarded. I classify money that changes hands within one month as Circulating Money. This is money that is passing from person to business to person creating the goods and services in the real economy. It is the movement of money in the real economy that enables civilized life. It is only the Circulating Money that is feeding us, putting us in homes, and entertaining us. Money that sits in bank accounts for more than one month is classified as Hoarded Money. This money does almost nothing for society except pad the accounts of those with ‘more money than they can spend’.

Velocity equals One by Andy Chalkley. Creative Commons Attribute. www.andychalkley.com.au

In Greece, 8% of the Money Supply is changing hands in less than one month. 92% is sitting idle in bank accounts for excessive lengths of time. When the government removes tax as Income Tax, Sales Tax, and Company Tax, it takes it from Circulating Money. The reason is that these taxes are taken from money as the result of transactions. Almost no money is taken from Hoarded Money. Hoarded Money remains hoarded.

Tax is taken from Circulating Money by Andy Chalkley. Creative Commons Attribute. www.andychalkley.com.au

Luckily, when the government spends tax, it tends to spend it back into the Circulating Money. When the bank takes interest repayments, it takes the money from Circulating Money. The reason is that people that hoard money do not need to borrow. Only those without money borrow. All bank repayments come from Circulating Money.

Bank repayments are taken from Circulating Money by Andy Chalkley. Creative Commons Attribute. www.andychalkley.com.au

A strange problem occurs when the banks take more repayments than they lend. Hoarders do not borrow and nor do they pay repayments. It is the Circulating Money that falls. During a fall in the Money Supply, Circulating Money falls which is reflected by a fall in the velocity. This is the primary reason for a fall in the velocity. The economists usually give inappropriate answers. They suggest that the people are hoarding. This is wrong because, in a downturn, the people have even less money than usual and tend to be penniless by the end of the week. The workers are maintaining a velocity of 52. The workers are not hoarding money, they are spending every cent they earn. The hoarders are skilled at keeping their hoards. They are very competitive at keeping and magnifying their hoards. They have managed to manipulate the tax system to avoid taxing their hoards and to avoid taxing money that may become hoarded.

When the Money Supply falls, Hoarded Money remains hoarded. The fall is taken from the circulating component of the Money Supply. The effect is a fall in the Circulating Money which is reflected as a fall in the velocity. This is why small falls in the Money Supply can cause large falls in the GDP.

A one percent fall in the Money Supply can cause a twelve percent fall in the circulating money which can cause a twelve percent fall in the GDP by Andy Chalkley. Creative Commons Attribute. www.andychalkley.com.au

The building of hoards brings a cost to society as a whole. The cost is a lack of circulating medium. This graph shows the Money Supply for Greece. It shows the hoarded money in gray. The money that is actually moving is the Circulating Money shown in light blue:

A graph of Circulating Money and Hoarded Money for Greece. Graph by Andy Chalkley. Creative Commons Attribute Data: Bank of Greece

In Greece, the Money Supply has fallen. The damaging part was the fall in the Circulating Money (light blue). It is the fall in Circulating Money that causes the damage to the economy. Here is the Circulating Money magnified:

A graph of Circulating Money for Greece. Graph by Andy Chalkley. Creative Commons Attribute Data: Bank of Greece

In this following graph, you can see that every time there is a fall in Circulating Money, there is a corresponding but larger rise in unemployment. This is not a fuzzy scatter graph. This is a direct correlation. Unemployment is light blue. The change in Circuiting Money is dark blue.

A graph comparing the change in Circulating Money and Unemployment for Greece. Graph by Andy Chalkley. Creative Commons Attribute Data: Bank of Greece

This next graph will tax your understanding. In the following graph, a fall in bank lending causes a fall in the Money Supply which causes a fall in the Circulating Money which causes a fall in the Tax Revenue, whilst the government gets the blame for not balancing the budget. The government won’t be able to balance the budget because the businesses are not paying tax because they are going broke for lack of available credit to keep the Circulating Money topped up. The order is this:

A fall in bank lending causes a fall in the Money Supply which causes a fall in the Circulating Money which causes a fall in the Tax Revenue. Graph by Andy Chalkley. Creative Commons Attribute Data: Bank of Greece and OECDstat

Attempts to collect more tax have been futile. They have failed to increase tax revenue. [1] Besides the brain drain caused by the excessive tax rates, increased tax rates have not produced a greater tax revenue as expected by illogical economists. The logic is not difficult to follow. A fall in the level of loans issued whilst the banks continue to remove repayments will cause the Money Supply to fall. Hoarded Money remains hoarded because almost no tax is removed from Hoarded Money. The tax system is skewed in favor of those living in the suburbs where even the dog might be wearing a fur coat. One shop displays a bowtie dinner suit for a child and the underwear shop sells items that would suit a stylish prostitute. A battered train brings people from areas with inadequate rental apartments to lavish areas where people pay remarkably little tax. Their wealth is not the problem. It is the hoarding of money that is a problem. The hoarders are remarkably efficient at maintaining and magnifying their hoards. The less well off aspire to become wealthy hoarders. It is not the ownership of these notes that makes a society wealthy.

Five euro note by Andy Chalkley. Creative Commons Attribute. www.andychalkley.com.au

It is the movement of these notes that allows these things to be built. (Σταθμός Μαρουσίου):

Marousi Metro Station, Σταθμός Μαρουσίου Athens by Andy Chalkley. Creative Commons Attribute. www.andychalkley.com.au

A nation becomes wealthy not by ownership of five-euro notes, but by the movement of five-euro notes. The notes cost nothing to print. If they are printed and hoarded they remain worthless. Putting five-euro notes under the mattress makes a nation poor. Rapid movement of five-euro notes makes a society affluent. If the five-euro notes move, skyscrapers are built. Rapidly moving five-euro notes will build a powerful nation. The very same notes, when hoarded will starve a nation. The five-euro note, above will starve or feed a nation depending on how it is used. That is the magic of money. If Greece was given a swimming pool ful of money, it would be of no use if the money stayed in the swimming pool.

Money was a gift from one of our ancestors for us to circulate and give us an affluent lifestyle free from chasing pigs through forests with spears whilst wearing animal skins. A five-euro note that does not move is as useless a hunter-gather without a spear to chase the pig.

The Destruction of Circulating Medium by Taxation

Tax is taken from Circulating Money as Income Tax, Company Tax, and Sales Tax. This table gives a breakdown of revenue sources for Greece. Almost all the tax is taken as the result of transactions. Almost all tax is taken from Circulating Money:

2013
Taxes on income, profits, and capital gainsBad22%Taken from Circulating Money
Personal income, profits, and gainsBad17%Taken from Circulating Money
Corporate income and gainsBad3%Taken from Circulating Money
Social security contributionsBad30%Taken from Circulating Money
Taxes on goods and servicesBad39%Taken from Circulating Money
Property TaxesGood8%Taken from Hoarded Money and Circulating Money

Only the last item is not damaging to the economy. The property tax will probabbly fall at the behest of the affluent.

However, the government spends the tax revenue back into society. The government taxes money from Circulating money and spends money back into Circulating Money. The government action is more helpful to the economy if some of the taxation is from Hoarded Money. Hoarded Money then moves from Hoarded Money to Circulating Money.

Tax is taken from Circulating Money by Andy Chalkley. Creative Commons Attribute. www.andychalkley.com.au

It is unhelpful if the government taxes and refuses to spend back into Circulating Money. This happens when the government imposes Austerity Economics. Under Austerity Economics, the government attempts to increase taxation and cuts back on spending. This is the reverse of what is needed to make the economy thrive. The first mistake is to increase tax rates. This tends to be revenue negative. Increased tax rates tend to stifle the very transactions that the government is taxing. It is like an arctic explorer eating the dogs that might drag him to safety. It is like setting the house on fire to keep warm. Government collects plentiful tax from a thriving business sector and the employees of these businesses. If the government destroys the productivity of business by harsh taxation it destroys government income. It is not wise to kill the business that provides government with taxation. The second mistake is that the Money Supply of a nation needs to be maintained or mildly expanded. Whilst governments continue to borrow money rather than create money, it is necessary to maintain the level of debt. If the citizens are not borrowing, it is necessary for the government to take on additional debt. The debts are not repayable and so it is pointless for the government to even try to repay debt. Inflation will tend to make the debt less significant.

The Destruction of Circulating Medium by Repayments

It is a similar issue with bank repayments. Repayments are taken from Circulating Money because those with Hoarded Money do not need to borrow. When the banks cut back on lending, almost all the reduction is taken from money that is circulating in the real economy. This is often noticed as a slight fall in the velocity of money. Hoarded Money remains hoarded and money is removed from money that is moving in business transactions.

Bank repayments are taken from Circulating Money by Andy Chalkley. Creative Commons Attribute. www.andychalkley.com.au

The fall in Circuiting Money adversely affects business. The consequence is a dramatic reduction in the tax revenue. Tax is taken when money carries out its designed duty of enabling the very transactions that enable civilized life. Humans exist by trading with each other. Hoarded Money sits idle in bank accounts adding nothing to economic activity, yet it is not taxed.

Greece is not short of money. Greece has money but it is not moving. All that has to be done is to make the money dance for the real economy. The task is to stop the hoarding of money. Tell the hunter-gatherer not to burn his spear and tell the clowns not to hoard their five euro notes. Chase the pig and make the money move. One form of Demurrage Money is reported to have reached a velocity of 23. [3]

National currencies tend to have a low velocity. West Bank and Gaza managed to reach a dizzy velocity of 6.5 in 2012. Only demurrage money manages to break the economic speed record with reported velocities between 11 and 23. [3] The velocity of Greece is now below one. This means that on average, the money in Greece is changing hands less than once each year. Please don’t blame the ordinary people. They are broke at the end of each week. All their money is spent on living and has evaporated by the end of the week. Some people have money and are hoarding it.

The assumption is that Greece needs more money. Just make existing money move a little more often. There is not much point in having money and not allowing it to conduct transactions. In Greece, there is €162 billion in the Money Supply. With a population of 10.9 million, this is equates to €14900 per Greek. The problem is that this €14900 is barely moving. Not many Greeks have €14900 in their bank accounts. Most have close to zero. Most Greeks are spending their meagre earnings as soon as it arrives. This money is hoarded in the hands of the very small percentage of persons that don’t struggle to pay their rent at the end of each week. All that is needed for a Greek recovery is for those that have money stashed in banks to spend some of it on a regular basis. The poor people are doing their part by spending what little they have on a weekly basis. The poor represent a velocity of fifty-two.

In Greece, money has been hoarded by those that are luck to have some money. The poor are not hoarding money because they don’t have any. Money cannot circulate because it is locked in the bank accounts of people with ‘more money than they can spend’. The medium of exchange has all but evaporated. Only 8% of Greek money changes with any regularity. That regularity is one month.

The Banks stop lending which causes a fall in the Money Supply which causes a recession by Andy Chalkley. Creative Commons Attribute
The Magic Cure

The magic cure is to bring money out of hibernation. To do this it is necessary to create two new very small taxes. The taxes are Demurrage Tax and Transaction Tax.

Demurrage Tax

A typical Demurrage Tax is a small tax of 1% charged monthly on money holdings. In bank accounts, this is removed from accounts monthly. In a steady state economy, this tax encourages citizens to spend money in a short time frame. A Demurrage Tax is a strong disincentive to the hoarding of money. Citizens wishing to save are thus encouraged to save in any other medium except money.

In a steady state economy, Demurrage Tax is an excellent way of decreasing the volume of Hoarded Money. It is somewhat like a negative interest rate. If you spend money, there is no charge. If you hold onto money, there is Demurrage Tax to pay. The tax is typically charged on a monthly basis. There are numerous examples of Demurrage Money in history from the successful stamp scripts during the mislabeled ‘Great Depression’ to the Grain Banks and Grain Receipts of the Dark ages, Middle Ages and Ancient Mesopotamia, and Ancient Egypt.

Transaction Tax

A Transaction Tax should be implemented on all transactions at about €1 per €1000 (0.1%) or less. This is much less than the current Sales Tax of €100 per €1000 and income tax of about €300 per €1000. Individuals already pay private transaction fees to banks on general transactions and credit card transactions at a higher rate than would be charged by a Transaction Tax. The Transaction Tax is same as a Robin Hood Tax except that it is applied to all transactions.

Many people already pay the equivalent of a transaction tax in the form of transaction fees on credit cards. To the cardholder, the fee is mentally incorporated into the cost and the minor fee is considered a convenience fee. A Transaction Tax is of the order of one-twentieth of a credit card transaction fee. Transaction Tax would be of the order of 0.1% as against a credit card fee of 2%.

A diagram comparing a Transaction Tax at 0.1%, Sales Tax at 10% and Income Tax at 30%. Creative Commons Attribute - Andy Chalkley. www.andychalkley.com.au
Cost of Money

Greece has a velocity of about one. This means that only 8% of the Money Supply is changing hands each month. 92% of money is idle in the hands of people who hold it rather than spend it. The 8% of money that is circulating is doing the work of money in the real economy that feeds, clothes, and houses the Greek people. In Greece, there is three and a half times as much debt as money. Total Debt is €548.06 billion. If the average interest rate in Greece is 5%, there is €27.4 billion in interest. For the €14.6 billion that is working as Circulating Money, there is an associated interest of €27.4 billion. (People with hoarded money do not pay interest.) For each €1000 that is working, there is an annual interest of €1877. It is costing Greek citizens €1877 in interest charges to lenders for each €1000 that is circulating. These interest charges by lenders for the provision of a circulating medium are a little on the high side. If the velocity was brought up to say: two or three or four or five, the charge would be brought down significantly. These interest charges appear to be quite unique and make it quite difficult to escape the debtor’s bind as alluded to by Moses in Deuteronomy and Mohamed in the Quran.

The monetary straightjacket of the EEC is a significant problem, but the immediate problem is that the money that actually exists in Greece simply is not moving. Money must be taken from Hoarded Money as a Demurrage Tax on ‘Minimum Monthly Balance’. Money must also be taken from money likely to become Hoarded Money. A miniscule transaction tax needs to be implemented. This is very likely to be 0.1% of every transaction occurring in Greece, without any exceptions. Land Taxes of all types should be increased. Circulating Money can be treated more kindly than at present by relaxing depreciation rules and the non-deductibility for trading stock.

Implosion

The bank system is not protected against implosion. Glass-Steagall is needed to accomplish the protection. A secondary protection is a public bank.

The Cure

The cure for Greece is to get the money that exists in the nation to move by any means possible. Greece has taught us many things through the centuries. The time has come for Greece to lead the world and show how to escape the Houdini grip of the money hoarders. Freedom starts beyond the four walls that is your money system. Greece has a money shortage that is not a money shortage. Greece needs a velocity repair.

The bailouts are a pretense that the banking establishment are saving Greece. Money is a freely created commodity. The bailouts are saving the banker’s money system. Without the bailouts, the money system goes down.