One of the assumptions of the eurozone – those 19 countries in Europe that use the euro as their national currencies – is that if any country left the zone, economic disaster would follow in its wake.

Only a few days ago, it appeared that heavily indebted Greece might be forced to drop the euro and return to the drachma, the currency it used before the euro.

During the 1990s and early 2000s, Greece was spending money like a sailor on shore leave with a limitless credit card. The government ran up debts amounting to hundreds of billions of dollars to prepare for the 2004 Olympics, among many other infrastructure projects. It also promised retired Greek citizens some of the cushiest pensions in the EU.

In 2002, Greece was among the first EU members to adopt the euro. Entrance into the eurozone was contingent on Greece's accomplishing certain reforms and demonstrating a threshold level of economic prudence. Among the requirements was to maintain a budget deficit of less than 3% and a total government debt under 60% of GDP.

Greece never even came close to meeting these targets. To make it look as if it were, Greek politicians engaged in such sleights of hand as not counting military spending as a government expenditure. But if it wanted to join the euro, Greece needed to do more. And Greek politicians weren't about to ask voters permission to dismantle the cradle-to-grave welfare state financed by borrowed money.

To solve the problem, the government hired Goldman Sachs to help tidy up its balance sheet. Goldman created a series of currency swap arrangements using fictional exchange rates. The swaps took billions of dollars of debt off Greece's balance sheet and allowed the country to issue far more debt than what was actually showing up in its account ledgers. Goldman used similar financial engineering to help prop up ill-fated energy trader Enron Corp., and we all know how well that experiment turned out.

In other words, Greece never, ever should have been allowed to join the eurozone. But now that it's part of it, there seems to be no end to the willingness of EU politicians to throw money at Greece to keep it from leaving.

The Greek euro-farce escalated in 2010, when what has become known as the "troika" – the European Commission (the executive body of the EU), the International Monetary Fund (IMF) and the European Central Bank (ECB) – agreed to a €110 billion bailout after Greece agreed to draconian austerity measures. Then, in 2011, the EU agreed to second bailout, this time to the tune of €130 billion.

And Greece did deliver some of the promised reforms. Taxes were raised, pension payments were cut, and the cradle-to-grave welfare state was partially dismantled. Government salaries were frozen. Annual government spending fell nearly 25% from 2011 to 2015.

But austerity alone wasn't enough, as the Greek economy also shrank 25% during this period. More than one in four Greeks of working age are unemployed. As matters now stand, while Greece's budgetary position is much improved, with a 2014 deficit of only 2.5% of GDP, its debt-to-GDP ratio is much worse than it was in 2010: 175% vs. 130%.

In a sane world, the EU never would have allowed Greece to become part of the eurozone. And as soon as the EU understood the extent of the Goldman-inspired subterfuge to allow Greece into the eurozone, it would have forced Greece out of it.

You could also be excused for thinking that the election last month of former communist youth activist Alexis Tsipras as prime minister of Greece might have been the end of the charade. Tsipras, whom I wrote about in this essay examining the political impact of austerity measures, campaigned on a promise to end them. (Yes, I "called it"!)

Among other goodies, Tsipras promised free electricity and food stamps for the poor, and boosts in pension payments. He also promised an end to privatizations of government-owned shipping facilities, airports, and energy companies.

The election of Tsipras sparked a fresh euro crisis. But all is now smoothed over. Tsipras has promised the EU to resume the process of reform, even at the risk of setting off a revolt from his leftist backers. In return, the EU has given him four months to start implementing the promised reforms. My guess is that Tsipras will be back in Brussels in four months, asking for more money. And the troika, spineless as an amoeba, will comply with the request.

Of course, Greece is only the most recent and most visible example of this "kick the problem down the road" farce. Central banks worldwide are engaged in desperate and increasingly futile efforts to rejuvenate growth and price inflation through quantitative easing and other stimulus measures.

The wholesale failure of these policies worldwide places central banks in a real bind. You can be sure that Alexis Tsipras won't be the only politician from a small, heavily indebted EU country to ask for further handouts, at the same time resisting the demanded reforms.

Even in the US, the one country where some sluggish real economic growth has resumed, the Federal Reserve is under attack. The "audit the Fed" movement has, for the first time, real bipartisan support. No less an authority than Fed Chairwoman Janet Yellen warned last week of the dire consequences of auditing a central bank.

What is it that the central bankers fear most? Here it is: The policies they have put in place to encourage one asset bubble after another can no longer be sustained. Having inflated the biggest financial bubble in history, they are terrified that it will pop, with devastating economic consequences, leading to a global deflationary depression that will make the recession of 2008-2009 look mild by comparison.

The beneficiaries of central banks' largesse – governments, money center banks, and stock market investors worldwide – are equally terrified. And if they're not, they should be.

I don't know when it will happen, but there will be, as my former boss Bill Bonner says, a "day of reckoning." Only this debacle will not be sorted out in a day. Ordinary citizens who realize that central banks are powerless to stop the unraveling of the bubbles created by quantitative easing and similar measures won't be happy. They will elect men like Alexis Tsipras who promise an end to austerity. But without a greater fool – central banks creating money out of thin air – they won't be able to deliver on their promises.

Things could get really ugly for a while, as all the fiat money-created bubbles in real estate, stocks, and commodities collapse. Political and social unrest will become part of daily life in many countries, as it already is in Greece.

How do you protect yourself? For starters, don't believe the establishment claptrap trumpeted by the mainstream media. Central banks can't solve the problems they've created with their easy-money policies. And since the bubbles will collapse, make sure you're out of real estate and other inflated assets before they do (other than possibly your own home and property you own debt free). Keep your liquid assets in physical currency or in strong, highly capitalized banks. Gold is fine, too, but since it's a commodity, don't be surprised if it falls in value along with everything else when serious deflation begins.

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