There is no production capacity shortage forcing scarcity on Greece. There is no physical scarcity. The scarcity is of liquidity, imposed by policy decision. Austerity economics is creating scarcity where none need exist. Austerity in Greece is not a physical necessity but an ideological creation of obsolete, feudal economic theory. Banks should lend freely to Greece as the Fed gave freely to AIG so it could buy T-bills at 3% and keep restructuring or rolling over the 0% loans.

When Roosevelt gave in and tried to balance the US budget in 1938, another recession resulted. Same with Japan in 1999. And of course we all know that Reagan proved deficits don't matter.

The Fed right now has $1.7 trillion in "toxic assets" on its balance sheet. In return, primary dealers got $1.7 trillion in deposit accounts at the Fed. No one else was going to lend to those dealers; they were tapped out, couldn't roll over their funding. But the Fed extended its unlimited safety net to them. Why not give Greece the same courtesy?

Loans create deposits. The banks are insured and hedged anyway. Any loss is tiny because banks regularly book future cash flows today as 'Net Worth', paying themselves handsome bonuses and salaries. Central banks such as the ECB expand their balance sheets at zero cost to taxpayers. When the ECB needed dollars in 2008, the Fed gave them an unlimited swap line. The ECB can easily afford to forgive the Greek debt, with no cost to any taxpayer.

Greece had external shocks. When Germany had external shocks, the Fed bailed them out (unlimited swap lines to the ECB and Deutsche Bank, for example). Greece should charge royalties for every use of a word derived from the Greek language, and for every democratic institution.

You are mistaken; money is created out of nothing every day in the private sector. Total mortgage debt was $10.6 trillion in the US in 2007; but derivatives based on that debt were $62 trillion. ( Source: The Rise and Fall of the U.S. Mortgage and Credit Markets.) The difference is pure money creation by the private sector.

As for the IMF funding, consider this passage from International Monetary Fund: Background and Issues for Congress , page 23:

In 1967, the President's Commission on Budget Concepts recommended that U.S. transfers to the IMF be reflected on the federal budget as an exchange of monetary assets of equivalent value to the United States from the IMF, and therefore that they not be recorded in the federal budget as an outlay.

At the time of the next IMF quota increase, which became effective on October 30, 1970, the new budgetary concepts applicable to U.S. transactions with the IMF were not fully implemented. As a result, the transaction was treated as an exchange of assets rather than as an outlay in the official budget, as recommended by the President's Commission on Budget Concepts. For the next quota increase, which became effective in 1978, the U.S. share was subject to the budgetary treatment recommended by the commission: the quota increase was an exchange of monetary assets involving no budgetary outlay and requiring no appropriation.

Remember AIG and the $85 billion bailout the Fed gave it? Then remember how the Fed restructured the loan twice more, giving AIG something like $150 billion in total? Remember Neil Barofsky's testimony before Congress, that the US government made $23.7 trillion available to financial institutions during the crisis? Greece is small potatoes compared to the amounts the Fed created to bail out the very banks that are pressuring Greece now. Shameful.

Germany started the war; Germany got some $1.5 billion in 1950 dollars. It ended up repaying less than $1 billion. Greece got $376 million, so Germany was given more money for free than Greece got total.

Greece should ally with Putin. Oil for Russian bases on the Mediterranian!

The Marshall Plan gave West Germany almost 4 times as much as Greece.

If you were alive then, you ought to mention the free money given to you under the Marshall Plan. Double standard, much?

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Eu has been very cruel to Greece and the Greek people.

Imf and troika already admitted through internal and leaked reports that Greek debt needs to be restructured. Yet they purposely are throwing Greece under the bus in an act of financial war. (to make them fall in line through force)

Hopefully this is the first step in dismantling the unelected eurocrats in ecb and troika who are destroying the European continent.

Greece will stay in Europe and the euro but start the process of fixing the euro so that it works for the piigs too.

Central banks are not funded by taxpayers. The IMF for example was funded by the US in a budget-neutral manner, as an exchange of assets. Translation: the IMF's money is created out of thin air. That the IMF won't give Greece any of their created money is shameful, sociopathic, criminal, and utterly unnecessary.

How quickly you forget the unlimited swap lines the Fed opened for European banks, including the ECB, during the most recent financial crisis. You would be insolvent now if it weren't for the Fed's largesse, yet you criticize Greece for asking to borrow a tiny fraction of the amount you borrowed? As Bagehot said, "Men of business have keen sensations but short memories."

Linus:

"It's like Moore's law - yeah, it's very impressive when something can (almost) be plotted on an exponential curve for a long time. Very impressive indeed when it's over many decades. But it's _still_ just the beginning of the "S curve". Anybody who thinks any different is just deluding themselves. There are no unending exponentials."

Cromwell's Rule:

"If the prior probability assigned to a hypothesis is 0 or 1, then, by Bayes' theorem, the posterior probability (probability of the hypothesis, given the evidence) is forced to be 0 or 1 as well; no evidence, no matter how strong, could have any influence."