Cash is a scarce commodity in Greece.
In June, Greek banks declared a surprise limitation on how much could be withdrawn from an account. At present, the government still limits the cash withdrawals of its citizens.
Of course, this is just the most recent development in a series of events that make up the cash squeeze. In response, Greeks have done what all people do when they cannot get enough currency – improvise.
Since 2010, several alternative systems of payment for goods and services have cropped up in Greece. One is TEM, which allows people to accrue monetary credit online and then use that credit to pay others. Another is the Athens Time Bank, which logs time units and allows individuals to pay each other with their time; the services provided can be anything from language lessons to medical consultations. And still, other systems are popping up, as Greeks, cut off from their own savings in the banks, seek out any method of payment other than the euro. As expected, barter is becoming commonplace.
Greece is right where Weimar Germany was in late 1922. The 1919 Treaty of Versailles required Germany to pay reparations for WWI. But after losing the war, Germany was already on the ropes economically, and the conditions of the treaty amounted to an unpayable level of debt. As it became apparent that the debt was impossible to pay, the Allies squeezed harder. Economic conditions in Germany dramatically worsened, not unlike those in Greece today, and for the same reason.
Germans did their best to sidestep the economic squeeze. As the cost of goods and services was rapidly rising (on a daily basis), they learned that it was best to spend Reichsmarks as quickly as possible on anything that was holding its value better than banknotes were.
Interestingly, in 1922, virtually no one felt that currency was the problem. German politicians blamed the Allies, particularly the French, for demanding that Germany fulfill the terms of the treaty. Bankers often blamed foreign currencies for rising against the mark. And the people of Germany generally placed the blame on the most immediate symptom – the fact that costs were rising more quickly than wages. Although they were pleased when their own wages went up, they wanted the prices of commodities to remain the same. The common people therefore blamed the merchants (particularly the many Jewish merchants) for raising the prices of their goods every time wages increased. They called it “Jewish greed” and failed to understand that every time wages increased, the cost of production increased, and in turn, this increase was passed to the merchants.
If Greece in 2015 mirrors Germany in 1922, then we might expect Greece in 2016 to resemble Germany in 1923.
But what about the rest of us? We’re not in the same financial state as Greece – at least not yet. But the whole of the EU, the U.S., Canada, and many other “First World” countries are following the same destructive economic path. We just aren’t quite as far along as Weimar Germany in 1923.
For decades, political leaders have been squeezing the economy for all they can get. As they’ve reached the point of diminishing returns, they’ve done what politicians always do: increase debt to prolong and increase their intake of wealth.
These actions can be likened to those of a farmer who, wanting more milk than a cow can produce, milks it dry, and then, refusing to admit his folly, starts draining the cow of its blood. He may claim that the increasing need will be satisfied by increasing the removal of blood and, on a temporary basis, this claim will allow him to continue making use of the cow. However, it is a certainty that, at some point very soon, the cow will collapse.
This was the case in Germany in 1923, and this is the case in much of the world now.
Full article: Currency Collapse (Jeff Thomas | Sprott Money)