“Because all of the large nations in the Eurozone are still suffering from deficits above the supposedly required debt-to-GDP limit of 3%, none of them is in a position to bail out the PIIGS without borrowing even more. The PIIGS’ solution — which is nothing but a stopgap measure — is for the semi-profligate governments in the North to co-sign on the bank’s loans for the totally profligate PIIGS. The banks will lend to the North, and the North will then buy Eurobonds, which do not yet exist and are unconstitutional. The semi-solvent North can delay immediate default by PIIGS by lending them money to pay the banks interest on their
existing debt. No one will pay down principal. Every nation will steadily borrow more. This is Ponzi-scheme finance, and everyone knows it.
The debate is over which profligate nation’s signature on the debt will persuade lenders to buy the new debt at low interest rates. The lenders know that these loans will not be repaid. All investors in sovereign debt, from the Great Depression until today, have assumed this. Liquidity is provided by other buyers. If anyone wants to sell his bonds, there supposedly will be buyers. The sellers assume that they will be able pass on the Old Maid: the IOU-fiat-money certificates issued by fiscally profligate, deficit-running governments.” – Dr. Gary North