How Greece Got Quantitatively Eased

One thing we need to understand about bailouts is this – those who get bailed out don’t really get any money. So it was for Greece; she did’t get any either. Where did the money go? To the rightful owners of all the money, of course, the bankers. I used to work for a bank, so I know a little bit about it, although my station in the pecking order was way below the billion dollar bailout levels.

Here is how I think it went down. Greece had issues with political corruption, tax evasion etc. So people (by which I mean bankers) started to get nervous about lending her money. As a result, Greece began to find it too difficult to run the country. At that point, the EU stepped in and announced very publicly that they were bailing Greece out. What actually happened was that the EU gave the banks guarantees on the loans they were to offer Greece. Now, Greece had atrocious credit ratings, so the bankers were, in effect, guaranteed insanely high returns on the loans, but with remarkably low risk, because of the guarantee.

In return for the comprehensive quantitative easing that she enjoyed, Greece was forced to adopt strict austerity measures. Now, look at the end results — banks just invested, in effect, money that didn’t belong to them (the bailout money), and kept the returns. If the austerity measures worked, the returns would come from the Greeks. If not, the Germans and the other European taxpayers would foot the bill — exactly the kind of one-way risk taking that the bankers are so fond of.

Right now, it looks as thought the Greeks have had enough of getting eased. It may be that they may have to relinquish Euro. So what? It might work out better for them. I remember the gloom and doom predicted during the Asian currency crisis, when Malaysia tightened their currency conversion rules to prevent money from getting drained from the country. Nothing happened. If anything, they are doing better now than ever. So, power to the Greeks. I think their defaulting on their bailout conditions or ditching the Euro altogether is the risk that the bankers assumed when the loaned out the money. Just that they assumed it on behalf of the European taxpayers.

Okay, I took some poetic license in ridiculing the bankers as though they were a bunch of short, bald, evil geniuses working in some dark shady room nursing their diabolic designs for the world. Sure, they do make a lot of money, a lot more than they should, but the real bulk of the loot goes to those who own the banks. A bit may come your way as well, as the returns on your pension fund, and the minuscule interest on your CDs etc. So nobody is really innocent of this sin – the easing of Greece.