WORLD ON A PRECIPICE - THE GREEK ECONOMIC DEBACLE

Greece has become the "poster child" for a looming problem that faces every nation with debt. The root of Greece's problem, is the root problem for all nations: interest and it's relation to value. The concept of "interest" has long plagued the economic scholars, and debate on the issue continues to this day. "Interest", the price paid for capital, adds nothing to the true value of goods and services generated by society. Interest, as an economic function, is an enabler; it enables one access to and the use capital one does not have. The common form for "interest" is the "time payment" plan most consumers and citizens are familiar with. For reasons that are more academic then practical "interest", the cost of capital, has been added to, rather then deducted from "value" resulting in artificial values that exceed real value, and higher GDP rates. Such anomalous accounting has political import, but distorts a nations true ability to meet sovereign debt obligations. One begins to realize both the scope and magnitude of the problem when the Greek circumstance is considered. The problem is a world problem that all debtor nations face, the U.S. included. Financial markets are based on a contrived house of cards; credit extensions only aggravate fundamental structural problems. Immediate national financial problems, i.e., Greece, cannot be resolved without making fundamental structural changes to real world economic beliefs and policy.

All central banks including that of China, should enter into a binding compact
mandating and limiting "cost of funds" to a range between 4% to 6% ; this range would be fixed for ten (10) years; and, thereafter fixed, subject to range adjustment, for incremental periods of ten (10) years. Cost of funds would be deducted from adjusted GDP, with credit being limited to 25% of adjusted annual, calendar year based, GDP. Participating bank and institution accounting would be based on the calendar year. Extensions of credit would only be available to corporations and entities based on the calendar year, January 1 to December 31. The word economy must be in sync before national issues like Greece can be effectively addressed. The Greek problem is solvable but not by going in current directions. The world problem of mounting sovereign debt cannot be resolved by "theory" nor by extensions of existing credit by whatever semantic label that becomes the flavor of the day. The real challenge is for the nations of the world, is to abandon traditional alliances, ideological differences and thinking when it comes to economic order. The Greek situation is a test. If it fails, all will fail, and the world will enter a period of economic chaos and decline.