Poll:When will the banking system collapse?

[Mr Khan]

SamuelRSmith said:

Mr Khan said:

Yes, but if democracy defies austerity to the utmost, who can win? The banana republics of yore simply defied their debt, like Venezuela, Haiti, and the Dominican Republic

Before we start, I'd just like to say that I had never heard the term "defied debt" until this point. A quick Google search actually did nothing, so I'm just assuming that you mean that they refuse to pay the debt (as I know this is what Venezuela did, and that was one of your examples).

First and foremost, I'm talking about how the soverign debt crisis can lead to a financial system collapse. If Greece defies their debt, the banks who lent out that money will be put into the same financial crisis. The ONLY way a financial crisis will not occur is simply if Greece makes those payments. They cannot do this, so all other routes lead to a financial crisis.

Second, democracy cannot defy austerity. At most, democracy can only lead to sustained deficits. The problem arises with funding these deficits. If Greece cannot borrow the money (which they pretty much can't, and certainly won't be able to if they default/refuse payment), the only means of funding the deficits is through printing money. This cannot be done while Greece is a part of the Eurozone. If Greece took the route of claiming back their own currency, for the simply means of just being able to fund deficits, the currency wouldn't be worth the paper it was printed on, hyper-inflation would set in, and austerity would be forced on the Greeks, that way.

You cannot create wealth from nothing. Any form of deficit spending is merely taking wealth away from the future. When you cannot borrow, it literally becomes physically impossible to run a deficit (any gains made by printing the money to fund the deficit, will be lost in inflation).

I meant it in the context of democratic institutions refusing to impose austerity due to the will of their constituents. I mean, who the hell will take on a platform of "Fewer benefits and higher taxes?"

Papandreu himself seems to have been taken down within his own party under the very idea that he would cooperate with this.

I'm well aware of the economic consequences of this, i'm just saying that they would have to come about if the people will against it, but so much of our modern economy is founded on pure willpower (Confidence itself is the most significant asset, and a lack thereof more damning than any debt) that i imagine a system of wilfully defied debt could work out if everyone agreed to it. Total revolution is also a way to go debt free, since i can't imagine any foreign banks that bought War Bonds off of the Tsar ever saw any of that money, nor American banks who may have lent to the Shah.

My point was rather a missive against democratic institutions and their inability to act responsibly when given direct control over matters of foreign affairs such as this