In today's Daily Reckoning, we'll do something we can barely stand to do: we're going to write one more time about Greece. If you can stand to read it, you may come to the same conclusion we reached.

--That conclusion is simple: what's going on Europe has nothing to do with solving a debt crisis and everything to do with preserving a corrupt system based on limitless debt and growing government power. The sooner you understand that the sooner you'll be able to prepare for what happens next. There are two options for what happens next, and we'll get to those shortly.

--First, though, doesn't it strike you as strange that all of Europe can be brought to its knees by tiny little Greece? Greek GDP is just 2.4% of Europe's GDP. In economic terms, Greece doesn't matter. Its lack of growth or economic competitiveness shouldn't be factors that can destroy Europe's 13-year single currency experiment.

--Yet Greece obviously does matter, or else markets wouldn't be anxiously waiting for tonight's announcement of a second bailout totalling €130 billion. The correct question, then, is why does Greece still matter? If you rule out the obvious things that don't matter, that leaves everything else. Or as Sherlock Holmes was fond of saying, "when you have eliminated the impossible, whatever remains, however improbable, must be the truth."

--First, let's see why the possible explanations for Greece's importance to the world are actually impossible. Take the issue of debt reduction. As we wrote last week, the deal before Europe would reduce Greek debt to 120% of GDP by 2020. The IMF says that level is sustainable.

--Back in a universe where common sense prevails, you can see that the plan is a joke, at least in terms of debt reduction. A plan to reduce Greek's debt to 120% of GDP...EIGHT YEARS FROM NOW...is not a serious plan about debt. Therefore the plan cannot be about debt reduction.

--Will the plan make Greece more competitive in the long run? Well, probably not. In order to get more money by March 20th, the Greek Parliament had to agree to certain structural reforms. Some of those reforms might even be a good idea. But cutting the minimum wage isn't going to be popular. And with Greek GDP shrinking by 7% in the fourth quarter, years of austerity won't make Greece more competitive. The lifestyle of the Greeks will be destroyed and the debt will remain. Therefore the plan cannot be about making Greece more competitive.

--Does saving Greece save the euro? Not at all. The euro would be better off without Greece and Greece would be better off without the euro. The

--It gets even murkier here. The ISDA essentially represents the global banking system. In Europe, the banking system is full of government bonds. Those bonds are nominally assets. If Greece defaults, it sets a precedent for how other countries might deal with unsustainable debt levels. This imperils the collateral of Europe's entire banking system.

--If you want to put it in simpler terms, let's say that Europe's banking system is full of rotting meat. Some investors bought that meat thinking they were going to get prime rib. But they can smell the stink of the meat from a mile away. They want to be compensated for the bad meat. The ISDA, which owns the freezer in which the meat went bad, says, "Well, we've decided the meat isn't bad after all. And you have less of it than you thought anyway, as of now."

--This is a crude analogy. But you can see the basic problem: everyone else knows that if Greece defaults, the value of other government bonds in Spain and Italy and Portugal will plummet too. A Greek default wouldn't be important because of the size of the default (although French and German banks would stand to lose a fair bit). It would be important because it would begin the process of blowing up bank balance sheets all over Europe.

--When you realise that the ISDA and the ECB and the EU are in league to save their financial skins, you realise that the Greek rescue plans is about preventing other countries from realising that default is an option. In fact, it's not even about preventing the realisation. It's about making it impossible for a country to default on its obligations...even if it means selling the population into servitude for years to come.

--If the centralised European Welfare State model is to survive, banks must not take losses on their government bond holdings. Individual and private investors, on the other hand, will be forced to take losses through a "collective action clause". This clause allows your securities to be revalued without your consent if a majority of other bondholders agree to it.

--Now we're coming to the real nuts and bolts of what's at stake. The technocrats in Europe are at war with private investors. The members of the ISDA are in league with the technocrats to preserve their system. That part is easy to understand.

--The technocrats are employed by government and get to spend your money. This system is good for them. It's good for the members of the ISDA too. Loaning money to the government is good business. Collecting rent off the expansion of credit is easy money. They want the system to last as well.

--Who is the system not good for? Everybody else who's on the outside looking in. Investors who want their capital to be productive are out of luck. And taxpayers who question the value of austerity measures and debt reduction plans that don't really reduce debt are also out of luck. No wonder they are angry.

--We've come a long way, then. Greece isn't about saving Greece. The only reason something so small and insignificant can matter so much is that it matters in a way no one is willing to say. It's about the subversion of sovereignty and democratic processes by removing decisions from people and giving them to trans-national financial elites. It's about preserving a global system that's based on the accumulation of debt and growing government power because there are two groups of people who benefit tremendously from that system, even if most people don't.

--Maybe we're reading too much into what's going on in Europe. It could be all about vanity. Europe's policy makers believe they can move Heaven and Earth and make even the most unworkable economic model work. They refuse to chuck their theory aside in the face of reality. They've spit the dummy.

--Or maybe this really is a struggle over the power and influence of the financial sector and the government in our lives. Hmm. What do you reckon? Who's going to win? Send us your thoughts to letters@dailyreckoning.com.au

Regards,

Dan Denning
for The Daily Reckoning

Borrowing Your Way Out of Debt and Other Normal Abnormalities
By Bill Bonner

Reckoning from Buenos Aires, Argentina...

Almost all the news is good. It looks like recovery is finally here.

Or, are we just getting used to a punky economy...where even a little improvement looks like a boom?

As far as we know, the US economy is still in a Great Correction...with plenty more correction ahead.

But people get used to correction...and used to the feds pumping in cash and credit to keep things from getting too rough. It is not exactly "normal" for a central bank to lend money below the rate of consumer price inflation. And it is not exactly "normal" for the government to run a deficit equal to 8% of GDP...or for it to spend $1.50 for every dollar it gets in tax revenues.

A lot of things aren't "normal." But if you do them for long enough, people get used to them. Even giving away money begins to seem normal.

The feds didn't invent their EZ money theories. John Maynard Keynes came up with the goofy program many years ago. He met with Franklin Roosevelt and explained the idea. Roosevelt later confessed that he had no idea what Keynes was talking about. But he liked Keynes' palaver. Because it gave him a theoretical justification for taking control of the economy.

Keynes' basic idea was stolen from the Old Testament. Pharaoh stored up grain during the years when harvests were good. Then, he gave out the grain when they were bad. He looked like a genius. FDR probably wanted to look like a genius too.

But governments found it a lot easier to spend during the lean years than to save during the fat ones. In practice, they didn't save at all. And then, when trouble came, they had no real resources with which to do any good.

Instead, they could only borrow money...or print it.

The real problem now is that the private sector has debt to settle. But you can't settle debt with more debt.

No, dear reader, you can't borrow your way out of debt. But you can sure in-debt your way out of borrowing. That is, you can run up so much debt that no one wants to lend you any more money. And when that happens...you're like Greece.

But the USA isn't Greece - except in the important ways. Both nations spend more than they can afford, depending on debt to make up the difference. And it works...sometimes for longer than you might imagine.

And while it's working, everybody is pretty happy.

Investors seem to think our problems are behind us. But are they? We turn our heads to look back. Yes, we see a few problems back there. Households have reduced their debt-to-GDP ratio by 15%. Unfortunately, they've got a long way to go. At least another 15%. Maybe another 50%.

And as long as they're working on it...there can't be a genuine recovery.

All the feds are doing is setting us up for more, worse trouble. Government debt is rising fast.

So...how does this eventually resolve itself? Badly is our guess...

But wait.

You probably think the feds are smart people. If they're running up big debts, it must be for a good reason, right? And they must know what they're doing, right?

And if things start to go bad, they'll see the error of their ways and change direction, right? Hey, that's what's nice about modern democratic government! The people control it. They'll always do what's best for themselves, right? And what's best for the people is best for the country.

On the other hand, nobody wants the country to go broke, do they? So, it won't happen, will it? Isn't that the way things work?

No, afraid not. Often things happen that no one wants to happen. Who wants a $15 trillion US national debt? Who wants 25 million people without jobs? Who wants Mitt Romney or Barack Obama in the White House?

'Nuff said.

And one more thought...

On Thursday, we begin a 2-month sabbatical. That is, after working day in and day out since 1973...and writing The Daily Reckoning since 1998, we're ready for a break

What are we going to do?

Well, we're going to dig up dirt...mix it with water...and use it to lay up stones. Then we're going to pour concrete and make arches...and then put vaulted ceilings on top of them. Then, we will build a cupola in the centre of it and heap dirt over the entire roof. With a little luck, the thing won't fall down or cave in.

We'll let you know how it goes.

Regards,

Bill Bonner
for The Daily Reckoning