In the middle ages nations used to default on their debts all the time. The reason is because the major banks of the days lent money to the monarchies, not to the nations themselves.

As James Steuart explained in 1767, royal borrowings remained private affairs rather than truly public debts. For a sovereign’s debts to become binding upon the entire nation, elected representatives had to enact the taxes to pay their interest charges.

By giving the people a voice in their nation's affairs, they also took on the responsibilities. No longer did creditors have to worry about their loans being canceled when a king died or was overthrown.Capitalists backing democracy became strictly a wise business decision.

However, it was never a real alliance. The primary interest of capitalists was to get their money back, with interest, and to gather power unto themselves. For instance, they have never supported real democracy, because democracies tend to support ideas that are for the greater good of the most people.

For instance, for the last century popular (and short-lived) governments in Africa, Asia and Latin America that tried to introduce much-needed land reforms were quickly labeled "communist" and overthrown by CIA agents, the local aristocracy, and the Marines (if all else fails).

Nevertheless, the financiers of the world allowed modest social programs and reforms (within limits) in the name of battling a much greater threat to their wealth and power - communism. Through their fully-owned media outlets and think tanks, they constantly pushed the idea that capitalism and democracy were one and the same.

Sometimes, like in America, the propaganda works.

Remember in the days after 9/11? The first-responders, the firemen and policemen of America, were heroes of the right-wing. Brave and selfless.

Once push came to shove with the economic meltdown in 2008, those very same first responders were now "parasites living off the public dole". At least to the right-wing. Their bravery and selflessness was completely forgotten.

With the fall of the Soviet Union, that threat ended. The primary reason to endorse democracy ended. Now they only desire compliance. Now they only endorse the appearance of democracy.

You are allowed to vote, but only if your vote doesn't matter.

The ongoing global debt crisis has exposed this for all to see.

The overthrow of democracy in Europe

Greek Prime Minister George Papandreou made a HUGE mistake.

When confronted with the latest round of austerity the financial leaders wanted to impose on his tiny country, he decided to hold a referendum with the Greek people.

There was an immediate revolt within his country, in the rest of the Europe, and in the financial markets. The people of Greece couldn't be trusted to do the "right thing".

The referendum idea was scrapped three days later. Less than a week after that he was pushed out of office for making the foolish choice of actually using democracy to make a decision.

An unelected technocrat from Goldman Sachs was put in his place. Someone the bankers could trust.

The bankers had spoken.

They weren't going to let democracy get in the way of their profits again.

The last time they made that mistake, Iceland voters rejected a generation-long future of debt peonage to foreign banks.

The bankers then put another Goldman Sachs man in power in Italy. However, with the debt crisis spreading, installing unelected technocrats in every country to push through "reforms" that weren't in the public's interest was inefficient and a little too obvious.

For starters, the bankers need to keep up the appearances of democracy, and that is hard to do while you are overthrowing democratic governments.

Secondly, other governments weren't falling into line. They actually had the nerve to stand to the banks. This time it was Hungary.

The currency’s 40 percent slump against the franc has raised repayment costs, pushing mortgage arrears to a two-decade high and prompting Prime Minister Viktor Orban’s government to brand the loans “debt slavery.”

To help homeowners, Orban imposed currency losses on banks including Erste Group Bank AG and Raiffeisen Bank International AG (RBI) that may total 900 million euros ($1.2 billion), according to Cristina Marzea, an analyst at Barclays Capital. Faced with the risk Orban would impose further measures, lenders have offered to accept $2.2 billion of additional losses if the government promised to take no further action. If it doesn’t, banks are threatening they may withdraw from the country...

Almost 18 months after Orban was elected in April 2010, he passed a law allowing Hungarians to repay mortgages denominated in foreign currencies at discount of about 25 percent to today’s exchange rate. As long as a client applies before Dec. 31 and repays the entire loan before Feb. 28, the banks have to make up the difference.

“I paid it back last week,” Bod said. “I’m free of debt slavery,” said the former industry minister. The plan “is easy to explain from a political viewpoint. It’s cheap for the government, expensive for the banks, good for voters.”

Make no mistake - this is a large step beyond what Iceland has done. This is a government that is helping the working class at the expense of the bankers.This is a threat to the status quo and to bank profits. The EU and IMF have broken off talks with Hungary in response to this defiance.Hungary's deficit is below the treaty imposed limit of 3% of GDP and their current account is in surplus. It'll be hard to justify the IMF and EU cracking down on them.

Hungary, by standing up for their citizens against the international bankers and forcing them to take losses, could be setting a precedent. You can be sure that the rest of eastern Europe is watching closely.

So bankers have decided to take a different strategy - using a less democratic institution.

A new treaty to impose tighter discipline among the 17 nations in the European Union that use the euro will come into force once nine countries approve it, according to a draft released Friday. That potentially reduces the threat that disapproval by one nation could scuttle the pact.

The treaty is intended to help improve confidence in the euro by tightening the coordination of the 17 euro zone economies, requiring nations to balance their budgets and cut debt.

The EU has never been able to make changes in its constitution unless ALL the nations agreed to the change.Now they want to dump that democratic tradition because without severe austerity and sacrifice by the working class, the bankers can't be assured of being fully compensated on their leveraged bets.Fortunately, this treaty change is being fought by the governments of Hungary and the Czech Republic

End Game

Make no mistake - the efforts by the bankers to usurp democracy in order to defend their huge gambling debts will ultimately fail.

With every public bailout they simply double-down their bets. This can't be sustained. Unpayable debts won't be paid. The only question now is how much damage will they do before the global economy crumbles around them, or before the public stands up to the oligarchy, whichever comes first?

I don't know how this will all play out. We are talking the politics of dozens of countries. Chances are the end results will be uneven.

But I can say that the gloves are coming off. The pretense of democracy is vanishing, and the oligarchy is pulling out all the stops.

What the public needs to do is to do nothing more than to stop listening to the propaganda and read a little history.