The result of forcing the real economy to cover the losses that the banks should have taken instead if the blueprint had been followed is austerity. The blog describes the austerity facing Greek citizens.
A businessman ... described the country, "as gripped in an economic death spiral."
Yiannis Varoufakis, a professor of economics at Athens University was just as blunt when he told me, “This is Greece's Great Depression. If you look at the statistics it is indeed a deeper slump than what Greece went through in the 1930s.”...
Imagine for a moment taking a 40 percent pay cut. Then suffer an increase in sales tax to 23 percent. Add on increased rates for electricity, a new tax on heating oil and the cost of a gallon of gas hitting almost $10. Oh and your pension is not secure, and your kids stay home because there aren't enough teachers. It is enough to make you sick.
And that's precisely what the Greeks are doing. Getting ill. Hospital admissions are up 25 percent. At the same time hospital budgets have been cut 40 percent so there are shortages of medicine and staff.Because it bears repeating: Wall Street can rescue Main Street.
Banks have the ability to both absorb the losses on all the excesses in the financial system today and to rebuild their book capital through future retained earnings and equity issuance.
Because of this ability, global policymakers and financial regulators face a choice. Either they can use the banking system as the circuit breaker that it is and get the global economy moving again or they can inflict austerity.