I) IS IT POSSIBLE FOR GREECE TO EXIT EURO AND PRINT ITS OWN CURRENCY?
Based on the article here
and the belief of many commentators it may be the only option open to Greece
Let’s dismiss certain myths about money. Money is not pegged to gold. Money is not scarce that Greece have to beg or borrow from other countries. It is perfectly possible for Greece to ignore current monies, exit Euro and print new currency.
Yes they may make it tough on Greece but if we digest the thrust of the article above, the European banks imposed additional loans on Greece not to save Greece but to save their own banks.
“Between 2010 and 2012, Greece was bailed out with around 200 billion euros ($220 billion at current rates). More than half of that went right out the door to French, Swiss, and German banks. In other words, the Greek bailouts were really just a backdoor bailout for EU banks.”
And Greece Prime Minister just announced that he just signed a deal with Russian President Putin for a Russian pipeline. That is how Greece is going to survive by thumbing its nose to Europe. New friends, new projects, new economy.
II) IT IS POSSIBLE IS IT NOT FOR BANKS TO WRITE OFF DEBTS, AND INTERNATIONAL BANKS TO WRITE OFF A CERTAIN COUNTRY’S INTERNATIONAL DEBT?
If they do that then they are practising ayat 280 surah AlBaqarah although of course their loan was with interest and not of the qardhul hasan (benevolent loan) kind to assist a friend in need.
Sahih International (AlBaqarah 280)
“And if someone is in hardship, then [let there be] postponement until [a time of] ease. But if you give [from your right as] charity, then it is better for you, if you only knew.”
The Debt Mess we are observing in the world today is the living manifestation of the evil of riba as espoused in the Quran and Hadith principally Surah AlBaqarah ayat 275 to 280.
If you imagine two scenarios.
In country A they are 10 companies operating in the economy on profit or loss basis. In country B they are 10 companies- 9 operating on profit and loss basis and 1 on lending on riba basis.
What you will find is that in country A – some companies do well and others don’t and the results may change from year to year.
In country B – the 9 companies have its ups and downs but the 1 lender with interest forever wins. This is the injustice of riba.
Now lets imagine this lender with interest is a certain group of people who specialises in lending with interest for centuries and centuries. You will see they will amass this unholy and God forbidden wealth over the centuries.
With this wealth they then abuse a certain country’s democratic process and becomes the power behind the superpower.
And they establish a riba based banking system internationally with them at the top of the food chain.
And the beautiful part is to them they even got Muslim countries and Muslims supporting this system!
And hence you see today the living manisfestation of the evil of riba as espoused in ayat Quran AlBaqarah 276 to 280.
And especially why Allah and His Rasul declare war on the practitioners of riba as in ayat 278-279 Al Baqarah.
Sahih International (AlBaqarah 278)
O you who have believed, fear Allah and give up what remains [due to you] of interest, if you should be believers.
Sahih International (AlBaqarah 279)
And if you do not, then be informed of a war [against you] from Allah and His Messenger. But if you repent, you may have your principal – [thus] you do no wrong, nor are you wronged
III) IS IT POSSIBLE FOR A COUNTRY TO PRINT NEW MONEY WITHOUT ASSETS AND COLLATERAL, AS GREECE MIGHT DO?
It is perfectly possible today for countries to print new money without assets or collateral.
A little bit of history on money creation.
During the days of the Gold Standard countries in the world print no more money than the amount of gold they have.
Then they abandoned this Standard to go the Gold Exchange Standard. This means they print a little bit more money than they have gold for.
After the War at the Bretton Woods Agreement in 1944 nations of the world agree that the USD be pegged against gold and all other nations pegged their currencies against the USD. They call this the Dollar Gold Standard. The argument by the US then was that they held the largest amount of gold reserves in the world as their shipment of armaments to WW2 Europe was paid by shiploads of gold.
So the USD notes called greenbacks can actually be exchanged for a certain amount of gold in New York.
The US Gold was kept in Fort Knox and things went on fine for while.
Then came the Vietnam War which was very expensive for the US. Now one of the distinct advantages of your currency being the international reserve currency of the world is that it is constantly in demand by everyone in the world. President Nixon knew this. He did the despicable. He printed lots of USD surreptitiously without anyone knowing to pay for the Vietnam War. In other words he printed more USD than he had gold for. Nobody is the wiser as there is constant demand for USD for reserves, import, exports, tourism etc.
Then some leaders of the world felt something is not right. President De Gaulle of France then called President Nixon and told him in no uncertain terms that he will be arriving in New York on a certain Monday with 3 planeloads of greenbacks and would like to exchange it for gold as promised under Bretton Woods.
Nixon was trapped and on the particular Sunday before the Monday in 1971 unilaterally declared that the US will no longer honour the Bretton Woods commitment of exchanging gold for money. There are intriguing stories about whether the gold still exists in Fort Knox but that is a different story.
From that day onwards any pretense that nations’ currencies are backed by gold are smashed to smithereens. The world currencies are backed by USD which in turned is backed by nothing. And we hear that every new US President since have been printing USD endlessly and the current President have been printing on average USD200 billion per month. Intelligent central bankers not clouded by the wining and dining and red carpet treatment by the IMF and the Bank of International Settlements will ask what really is the value of the USD as backing for his or her country’s currency. Intelligent central bankers as found in the BRICS countries will amass gold.
So yes countries can and do print a new currency. This happened in many countries many times throughout history.
IV) CAN A COUNTRY SOLVE ITS INTERNATIONAL DEBT ISSUES BY SIMPLY PRINTING THE NATIONS CURRENCY TO PAY FOR THE DEBT?
This is now in the realms of money supply. Paper notes and coins represent on average only 10% of a nation’s money supply. 90% of a nation’s money supply are cheque book money created by banks when they lend and relend the same amount of money you deposited. Anyway that’s the old belief the current understanding is bank create money out of thin air when they want to make a loan. Anyway that’s a different topic.
A nation cannot arbitrarily increase its money supply either by printing or increasing bank created money. Internally it reduces the purchasing power of money. Externally it deteriorates the currency’s exchange rate vis a vis other countries. This is not good, other people’s goods and services become expensive. FDIs will stop through bad reputation of the country’s exchange rate collapse. It’s not unlike the game of monopoly. The banker can introduce more money but no new goods and services are created, property prices goes up but it does not help you buy anything because all prices goes up. In effect the value of money goes down.
In other words taking this path will take the country enroute to Zimbabwe.