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On Friday, April 23, Greece asked its fellow Euro Zone countries and the IMF Fund to bail it out. The debate now begins regarding whether the requested $60 billion by Greece will solve the country’s problems or just delay the inevitable. Many are asking if Greece will tighten its belt and endure the years of economic pain needed to turn its economy around.
We as Americans need to watch this scenario for many reasons. Let’s face it, America has a tremendous amount of debt outstanding. The Chinese hold a great deal of our U.S. Treasury bonds. I often have discussions with concerned U.S. citizens and how the American/Chinese politics will pan out.
Well, can history be our guide? How have we handled similar situations? I am confident a super power that is financially reliant on other countries will be vulnerable. Case in point, in 1956, Britain and France were challenging each other’s control of the Suez Canal with Egypt. The Soviet Union raised the stakes by threatening to intervene on Egypt’s behalf and create a showdown between Washington and Moscow. At the time, guess who owned and controlled the bulk of Britain’s foreign debt? The United States government, who also didn’t want a showdown with Russia. President Eisenhower demanded that the British and French withdraw. When both countries refused, the United States threatened to sell off a substantial amount of holdings in the British pound and wreak havoc with Britain’s currency. Within weeks, both Britain and France withdrew from the Suez.
I am reminded of a quote from Mayer Amsted Rothschild, who was the founder of one of the most powerful banking families in Europe, “Give me control of a nation’s money supply and I care not who makes the laws.” Let’s keep a close eye on how this Greek tragedy unfolds and hope that America doesn’t let history repeat itself with our country being at the opposite end of the outcome this time.
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Greg
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