"It's barbarism. I see it coming masqueraded under lawless alliances and predetermined enslavements. It may not be about Hitler's
furnaces, but about the methodical and quasi-scientific subjugation of Man. His absolute humiliation. His disgrace"
Odysseas Elytis, Greek poet, in a press conference on the occasion of receiving the Nobel Prize (1979)
One of "innovations" of neoliberalism was extension known since Ancient Greece concept of debt slavery to the whole countries. Here
is description based on Debt bondage - Wikipedia, the free encyclopedia
Debt bondage (also known as debt slavery or bonded labor) is a person's pledge of their labor or services
as security for the repayment for a debt or other obligation. The services required to repay the debt may be undefined, and the services'
duration may be undefined. Debt bondage can be passed on from generation to generation.
Debt bondage has been described
by the United Nations as a form of "modern day
slavery" and the [3] Most
countries are parties to the Convention, but the practice is still prevalent in
South Asia.
Debt bondage in India was legally abolished in
1976 but remains prevalent.
Debt bondage was very common in Ancient Greece. In ancient
Athens, Solon forbade taking out loans using oneself as a security
and ended such debts.
Europe
Classical antiquity
Debt bondage was "quite normal" in [4]
The poor or those who had fallen irredeemably in debt might place themselves into bondage "voluntarily"—or more precisely, might
be compelled by circumstances to choose debt bondage as a way to anticipate and avoid worse terms that their creditors might impose
on them.[5] In the
Greco-Roman world, debt bondage was a distinct legal
category into which a free person might fall, in theory
temporarily, distinguished from the pervasive practice of
slavery, which included enslavement as a result
of defaulting on debt. Many forms of debt bondage existed in both
ancient Greece and
[6].
Debt bondage was widespread in ancient Greece. The only city-state
known to have abolished it is Athens, as early as the
Archaic period under the debt reform legislation of
[7] Both enslavement for debt and debt
bondage were practiced in [8]
By the Hellenistic period, the limited evidence indicates
that debt bondage had replaced outright enslavement for debt.[8]
The most onerous debt bondage was various forms of paramonē, "indentured
labor." As a matter of law, a person subjected to paramonē was categorically free, and not a slave, but in practice his
freedom was severely constrained by his servitude. Solon's reforms occurred in the context of
democratic politics at Athens that required clearer
distinctions between "free" and "slave"; as a perverse consequence.
The selling of one's own child into slavery is likely in most cases to have resulted from extreme poverty or debt, but strictly
speaking is a form of chattel slavery, not debt bondage. The exact legal circumstances in Greece, however, are far more poorly documented
than in ancient Rome.
Nexum was a debt bondage contract in the early Roman
Republic. Within the Roman legal system, it was a form
of mancipatio. Though the terms of the contract would
vary, essentially a free man pledged himself as a bond slave (nexus) as surety for a loan. He might also hand over his son
as collateral. Although the bondsman might be subjected to humiliation and abuse, as a
legal citizen he was supposed to be exempt from corporal
punishment. Nexum was abolished by the Lex
Poetelia Papiria in 326 BC, in part to prevent abuses to the physical integrity of citizens who had fallen into debt bondage.
Roman historians illuminated the abolition of
nexum with a traditional story that varied in its particulars; basically, a nexus who was a handsome but upstanding
youth suffered sexual harassment by the holder of the debt. In one version, the youth had gone into debt to pay for his father's
funeral; in others, he had been handed over by his father. In all versions, he is presented as a model of virtue. Historical or not,
the cautionary tale highlighted the incongruities of subjecting one free citizen to another's use, and the legal response was aimed
at establishing the citizen's right to liberty (libertas), as distinguished from the
slave or
[11]
Cicero considered the abolition of nexum primarily a
political maneuver to appease the common people (plebs):
the law was passed during the Conflict of the Orders,
when plebeians were struggling to establish their rights in relation to the hereditary privileges of the
patricians. Although nexum was abolished
as a way to secure a loan, debt bondage might still result after a debtor defaulted.
For more details on indentured servitude in the American colonies, see
Indentured servant.
During the colonial history
of the United States, persons bonded themselves to an owner who paid their passage to the New World. They worked until the
debt of passage was paid off, often for years.[13]
In Peru a
peonage system existed from the 16th century until
land reform in the 1950s. One estate in Peru that existed
from the late 16th century until it ended had up to 1,700 people employed and had a prison. They were expected to work for their
landlord a minimum of three days a week and more if necessary to complete assigned work. Workers were paid a symbolic two cents
per year. Workers were unable to travel outside their assigned lands without permission and were not allowed to organise any independent
community activity. In the Peruvian Amazon, debt peonage is an important aspect of contemporary life
[14]
Asia
The Indian indenture system was an ongoing
system of indenture, based on debt bondage, by which perhaps two million Indians were transported to various colonies of European
powers to provide labour for the (mainly sugar) plantations. It started from the end of slavery in 1833 and until 1920.
Pawnage or pawn slavery is a form of servitude akin to bonded labor under which the debtor provides another human being as
security or collateral for the debt. Until the debt (including interest on it) is paid off, the creditor has the use of the labor
of the pawn.[15]
Debt bondage has been described by the United Nations as a form of "modern day slavery"[3]
and is prohibited by international law. It is specifically
dealt with by article 1(a) of the United Nations 1956
Supplementary Convention
on the Abolition of Slavery. It persists nonetheless especially in developing countries, which have few mechanisms for credit
security or bankruptcy, and where fewer people hold formal
title to land or possessions. According to some economists, for example
Hernando de Soto, this is a major barrier
to development in those countries because, for example, entrepreneurs
do not dare take risks and cannot get credit because they hold no
citation needed
Researcher Siddharth Kara has calculated the number
of slaves in the world by type, and determined that at the end of 2006 there were 18.1 million people subject to debt bondage.[16]
In India, the rise of
Dalit activism, government legislation starting as early as 1949,[17]
as well as ongoing work by NGOs and government offices to enforce labour laws and rehabilitate those in debt, appears to have contributed
to the reduction of bonded labour there. However, according to research papers presented by the International Labour Organization,
there are still many obstacles to the eradication of bonded labour in India.[19]
Reprinted from "SUPER CAPITALISM, SUPER IMPERIALISM by Henry C K Liu"
PART 1: A Structural Link
Robert B Reich, former US Secretary of Labor and resident neo-liberal in the Clinton administration from 1993 to 1997, wrote in
the September 14, 2007 edition of The Wall Street Journal an opinion piece, "CEOs Deserve Their Pay", as part of an orchestrated
campaign to promote his new book: Supercapitalism: The Transformation of Business, Democracy, and Everyday Life (Afred A Knopf).
Hexter Professor of Social and Economic Policy at the Heller School for Social Policy and Management at Brandeis University. He is
currently a professor at the Goldman School of Public Policy at the University of California (Berkley) and a regular liberal gadfly
in the unabashed supply-side Larry Kudlow TV show that celebrates the merits of capitalism.
Reich's Supercapitalism brings to mind Michael Hudson's Super Imperialism: The Economic Strategy of American Empire
(1972-2003). While Reich, a liberal turned neo-liberal, sees "supercapitalism" as the natural evolution of insatiable shareholder
appetite for gain, a polite euphemism for greed, that cannot or should not be reined in by regulation, Hudson, a Marxist heterodox
economist, sees "super imperialism" as the structural outcome of post-World War II superpower geopolitics, with state interests overwhelming
free market forces, making regulation irrelevant. While Hudson is critical of "super imperialism" and thinks that it should be resisted
by the weaker trading partners of the US, Reich gives the impression of being ambivalent about the inevitability, if not the benignity,
of "supercapitalism".
The structural link between capitalism and imperialism was first observed by John Atkinson Hobson (1858-1940), an English economist,
who wrote in 1902 an insightful analysis of the economic basis of imperialism. Hobson provided a humanist critique of neoclassical
economics, rejecting exclusively materialistic definitions of value. With Albert Frederick Mummery (1855-1895), the great British
mountaineer who was killed in 1895 by an avalanche while reconnoitering Nanga Parbat, an 8,000-meter Himalayan peak, Hobson wrote
The Physiology of Industry (1889), which argued that an industrial economy requires government intervention to maintain stability,
and developed the theory of over-saving that was given a glowing tribute by John Maynard Keynes three decades later.
The need for governmental intervention to stabilize an expanding national industrial economy was the rationale for political imperialism.
On the other side of the coin, protectionism was a governmental counter-intervention on the part of weak trading partners for resisting
imperialist expansion of the dominant power. Historically, the processes of globalization have always been the result of active state
policy and action, as opposed to the mere passive surrender of state sovereignty to market forces. Market forces cannot operate in
a vacuum. They are governed by man-made rules. Globalized markets require the acceptance by local authorities of established rules
of the dominant economy. Currency monopoly of course is the most fundamental trade restraint by one single dominant government.
Adam Smith published Wealth of Nations in 1776, the year of US independence. By the time the constitution was framed 11
years later, the US founding fathers were deeply influenced by Smith's ideas, which constituted a reasoned abhorrence of trade monopoly
and government policy in restricting trade. What Smith abhorred most was a policy known as mercantilism, which was practiced by all
the major powers of the time. It is necessary to bear in mind that Smith's notion of the limitation of government action was exclusively
related to mercantilist issues of trade restraint. Smith never advocated government tolerance of trade restraint, whether by big
business monopolies or by other governments in the name of open markets.
A central aim of mercantilism was to ensure that a nation's exports remained higher in value than its imports, the surplus in
that era being paid only in specie money (gold-backed as opposed to fiat money). This trade surplus in gold permitted the surplus
country, such as England, to invest in more factories at home to manufacture more for export, thus bringing home more gold. The importing
regions, such as the American colonies, not only found the gold reserves backing their currency depleted, causing free-fall devaluation
(not unlike that faced today by many emerging-economy currencies), but also wanting in surplus capital for building factories to
produce for domestic consumption and export. So despite plentiful iron ore in America, only pig iron was exported to England in return
for English finished iron goods. The situation was similar to today's oil producing countries where despite plentiful crude oil,
refined petrochemical products such as gasoline and heating oil have to be imported.
In 1795, when the newly independent Americans began finally to wake up to their disadvantaged trade relationship and began to
raise European (mostly French and Dutch) capital to start a manufacturing industry, England decreed the Iron Act, forbidding the
manufacture of iron goods in its American colonies, which caused great dissatisfaction among the prospering colonials. Smith favored
an opposite government policy toward promoting domestic economic production and free foreign trade for the weaker traders, a policy
that came to be known as "laissez faire" (because the English, having nothing to do with such heretical ideas, refuse to give it
an English name). Laissez faire, notwithstanding its literal meaning of "leave alone", meant nothing of the sort. It meant an activist
government policy to counteract mercantilism. Neo-liberal free-market economists are just bad historians, among their other defective
characteristics, when they propagandize "laissez faire" as no government interference in trade affairs.
Friedrich List, in his National System of Political Economy (1841), asserts that political economy as espoused in England,
far from being a valid science universally, was merely British national opinion, suited only to English historical conditions. List's
institutional school of economics asserts that the doctrine of free trade was devised to keep England rich and powerful at the expense
of its trading partners and it must be fought with protective tariffs and other protective devices of economic nationalism by the
weaker countries.
Henry Clay's "American system" was a national system of political economy. US neo-imperialism in the post WWII period disingenuously
promotes neo-liberal free-trade against governmental protectionism to keep the US rich and powerful at the expense of its trading
partners. Before the October Revolution of 1917, many national liberation movements in European colonies and semi-colonies around
the world were influenced by List's economic nationalism. The 1911 Nationalist Revolution in China, led by Sun Yat-sen, was heavily
influenced by Lincoln's political ideas - government of the people, by the people and for the people - and the economic nationalism
of List, until after the October Revolution when Sun realized that the Soviet model was the correct path to national revival.
Hobson's magnum opus, Imperialism, (1902), argues that imperialistic expansion is driven not by state hubris, known in
US history as "manifest destiny", but by an innate quest for new markets and investment opportunities overseas for excess capital
formed by over-saving at home for the benefit of the home state. Over-saving during the industrial age came from Richardo's theory
of the iron law of wages, according to which wages were kept perpetually at subsistence levels as a result of uneven market power
between capital and labor. Today, job outsourcing that returns as low-price imports contributes to the iron law of wages in the US
domestic economy. (See my article
Organization of Labor Exporting Countries [OLEC]).
Hobson's analysis of the phenology (study of life cycles) of capitalism was drawn upon by Lenin to formulate a theory of imperialism
as an advanced stage of capitalism: "Imperialism is capitalism at that stage of development at which the dominance of monopolies
and finance capitalism is established; in which the export of capital has acquired pronounced importance; in which the division of
the world among the international trusts has begun, in which the division of all territories of the globe among the biggest capitalist
powers has been completed." (Vladimir Ilyich Lenin, 1916, Imperialism, the Highest Stage of Capitalism, Chapter 7).
Lenin was also influenced by Rosa Luxemberg, who three year earlier had written her major work, The Accumulation of Capital: A
Contribution to an Economic Explanation of Imperialism (Die Akkumulation des Kapitals: Ein Beitrag zur ökonomischen Erklärung des
Imperialismus), 1913). Luxemberg, together with Karl Liebknecht a founding leader of the Spartacist League (Spartakusbund), a radical
Marxist revolutionary movement that later renamed itself the Communist Party of Germany (Kommunistische Partei Deutschlands, or KPD),
was murdered on January 15, 1919 by members of the Freikorps, rightwing militarists who were the forerunners of the Nazi Sturmabteilung
(SA) led by Ernst Rohm.
The congenital association between capitalism and imperialism requires practically all truly anti-imperialist movements the world
over to be also anti-capitalist. To this day, most nationalist capitalists in emerging economies are unwitting neo-compradors for
super imperialism. Neo-liberalism, in its attempts to break down all national boundaries to facilitate global trade denominated in
fiat dollars, is the ideology of super imperialism.
Hudson, the American heterodox economist, historian of ancient economies and post-WW II international balance-of-payments specialist,
advanced in his 1972 book the notion of 20th century super imperialism. Hudson updated Hobson's idea of 19th century imperialism
of state industrial policy seeking new markets to invest home-grown excess capital. To Hudson, super imperialism is a state financial
strategy to export debt denominated in the state's fiat currency as capital to the new financial colonies to finance the global expansion
of a superpower empire. No necessity, or even intention, was entertained by the superpower of ever having to pay off these paper
debts after the US dollar was taken off gold in 1971.
Monetary Imperialism and Dollar Hegemony
Super imperialism transformed into monetary imperialism after the 1973 Middle East oil crisis with the creation of the petrodollar
and two decades later emerged as dollar hegemony through financial globalization after 1993. As described in my 2002 AToL article,
Dollar hegemony has to go,
a geopolitical phenomenon emerged after the 1973 oil crisis in which the US dollar, a fiat currency since 1971, continues to serve
as the primary reserve currency for international trade because oil continues to be denominated in fiat dollars as a result
of superpower geopolitics, leading to dollar hegemony in 1993 with the globalization of deregulated financial markets.
Three causal developments allowed dollar hegemony to emerge over a span of two decades after 1973 and finally take hold in 1993.
US fiscal deficits from overseas spending since the 1950s caused a massive drain in US gold holdings, forcing the US in 1971 to abandon
the 1945 Bretton Woods regime of fixed exchange rate based on a gold-backed dollar. Under that international financial architecture,
cross-border flow of funds was not considered necessary or desirable for promoting international trade or domestic development. The
collapse of the 1945 Bretton Woods regime in 1971 was the initial development toward dollar hegemony.
The second development was the denomination of oil in dollars after the 1973 Middle East oil crisis. The emergence of petrodollars
was the price the US, still only one of two contending superpowers in 1973, extracted from defenseless oil-producing nations for
allowing them to nationalize the Western-owned oil industry on their soil. As long as oil transactions are denominated in fiat dollars,
the US essentially controls all the oil in the world financially regardless of specific ownership, reducing all oil producing nations
to the status of commodity agents of dollar hegemony.
The third development was the global deregulation of financial markets after the Cold War, making cross-border flow of funds routine,
and a general relaxation of capital and foreign exchange control by most governments involved in international trade. This neo-liberal
trade regime brought into existence a foreign exchange market in which free-floating exchange rates made computerized speculative
attacks on weak currencies a regular occurrence. These three developments permitted the emergence of dollar hegemony after 1994 and
helped the US win the Cold War with financial power derived from fiat money.
Dollar hegemony advanced super imperialism one stage further from the financial to the monetary front. Industrial imperialism
sought to achieve a trade surplus by exporting manufactured good to the colonies for gold to fund investment for more productive
plants at home. Super imperialism sought to extract real wealth from the colonies by paying for it with fiat dollars to sustain a
balance of payments out of an imbalance in the exchange of commodities. Monetary imperialism under dollar hegemony exports debt denominated
in fiat dollars through a permissive trade deficit with the new colonies, only to re-import the debt back to the US as capital account
surplus to finance the US debt bubble.
The circular recycling of dollar-denominated debt was made operative by the dollar, a fiat currency that only the US can print
at will, continuing as the world's prime reserve currency for international trade and finance, backed by US geopolitical superpower.
Dollars are accepted universally because oil is denominated in dollars and everyone needs oil and thus needs dollars to buy oil.
Any nation that seeks to denominate key commodities, such as oil, in currencies other than the dollar will soon find itself invaded
by the sole superpower. Thus the war on Iraq is not about oil, as former Federal Reserve chairman Alan Greenspan suggested recently.
It is about keeping oil denominated in dollars to protect dollar hegemony. The difference is subtle but of essential importance.
Since 1993, central banks of all trading nations around the world, with the exception of the US Federal Reserve, have been forced
to hold more dollar reserves than they otherwise need to ward off the potential of sudden speculative attacks on their currencies
in unregulated global financial markets. Thus "dollar hegemony" prevents the exporting nations, such as the Asian Tigers, from spending
domestically the dollars they earn from the US trade deficit and forces them to fund the US capital account surplus, shipping real
wealth to the US in exchange for the privilege of financing further growth of the US debt economy.
Not only do these exporting nations have to compete by keeping their domestic wages down and by prostituting their environment,
the dollars that they earn cannot be spent at home without causing a monetary crisis in their own currencies because the dollars
they earn have to be exchanged into local currencies before they can be spent domestically, causing an excessive rise in their domestic
money supply which in turn causes domestic inflation-pushed bubbles. While the trade-surplus nations are forced to lend their export
earnings back to the US, these same nations are starved for capital, as global capital denominated in dollars will only invest in
their export sectors to earn more dollars. The domestic sector with local currency earnings remains of little interest to global
capital denominated in dollars. As a result, domestic development stagnates for lack of capital.
Dollar hegemony permits the US to transform itself from a competitor in world markets to earn hard money, to a fiat-money-making
monopoly with fiat dollars that only it can print at will. Every other trading nation has to exchange low-wage goods for dollars
that the US alone can print freely and that can be spent only in the dollar economy without monetary penalty.
The victimization of Japan and China
Japan is a classic victim of monetary imperialism. In 1990, as a result of Japanese export prowess, the Industrial Bank of Japan
was the largest bank in the world, with a market capitalization of $57 billion. The top nine of the 10 largest banks then were all
Japanese, trailed by Canadian Alliance in 10th place. No US bank made the top-10 list. By 2001, the effects of dollar hegemony have
pushed Citigroup into first place with a market capitalization of $260 billion. Seven of the top 10 largest financial institutions
in the world in 2001 were US-based, with descending ranking in market capitalization: Citigroup ($260 billion), AIG ($209 billion),
HSBC (British-$110 billion), Berkshire Hathaway ($100 billion), Bank of America ($99 billion), Fanny Mae ($80 billion), Wells Fargo
($74 billion), JP Morgan Chase ($72 billion), RBS (British-$70 billion) and UBS (Swiss-$67 billion). No Japanese bank survived on
the list.
China is a neoclassic case of dollar hegemony victimization even though its domestic financial markets are still not open and
the yuan is still not freely convertible. With over $1.4 trillion in foreign exchange reserves earned at a previously lower fixed
exchange rate of 8.2 to a dollar set in 1985, now growing at the rate of $1 billion a day at a narrow-range floating exchange rate
of around 7.5 since July 2005, China cannot spend much of it dollar holdings on domestic development without domestic inflation caused
by excessive expansion of its yuan money supply. The Chinese economy is overheating because the bulk of its surplus revenue is in
dollars from exports that cannot be spent inside China without monetary penalty. Chinese wages are too low to absorb sudden expansion
of yuan money supply to develop the domestic economy. And with over $1.4 trillion in foreign exchange reserves, equal to its annual
GDP, China cannot even divest from the dollar without having the market effect of a falling dollar moving against its remaining holdings.
The People's Bank of China announced on July 20, 2005 that effective immediately the yuan exchange rate would go up by 2.1% to
8.11 yuan to the US dollar and that China would drop the dollar peg to its currency. In its place, China would move to a "managed
float" of the yuan, pegging the currency's exchange value to an undisclosed basket of currencies linked to its global trade. In an
effort to limit the amount of volatility, China would not allow the currency to fluctuate by more than 0.3% in any one trading day.
Linking the yuan to a basket of currencies means China's currency is relatively free from market forces acting on the dollar, shifting
to market forces acting on a basket of currencies of China's key trading partners. The basket is composed of the euro, yen and other
Asian currencies as well as the dollar. Though the precise composition of the basket was not disclosed, it can nevertheless be deduced
by China's trade volume with key trading partners and by mathematical calculation from the set-daily exchange rate.
Thus China is trapped in a trade regime operating on an international monetary architecture in which it must continue to export
real wealth in the form of underpaid labor and polluted environment in exchange for dollars that it must reinvest in the US. Ironically,
the recent rise of anti-trade sentiment in US domestic politics offers China a convenient, opportune escape from dollar hegemony
to reduce its dependence on export to concentrate on domestic development. Chinese domestic special interest groups in the export
sector would otherwise oppose any policy to slow the growth in export if not for the rise of US protectionism which causes shot-term
pain for China but long-term benefit in China's need to restructure its economy toward domestic development. Further trade surplus
denominated in dollar is of no advantage to China.
Emerging markets are new colonies of monetary imperialism
Even as the domestic US economy declined after the onset of globalization in the early 1990s, US dominance in global finance has
continued to this day on account of dollar hegemony. It should not be surprising that the nation that can print at will the world's
reserve currency for international trade should come up on top in deregulated global financial markets. The so-called emerging markets
around the world are the new colonies of monetary imperialism in a global neo-liberal trading regime operating under dollar hegemony
geopolitically dominated by the US as the world's sole remaining superpower.
Denial of corporate social responsibility
In Supercapitalism, Reich identifies corporate social responsibility as a diversion from economic efficiency and an un-capitalistic
illusion. Of course the late Milton Friedman had asserted that the only social responsibility of corporations is to maximize profit,
rather than to generate economic well-being and balanced growth through fair profits. There is ample evidence to suggest that a single-minded
quest for maximizing global corporate profit can lead to domestic economic decline in even the world's sole remaining superpower.
The US public is encouraged to blame such decline on the misbehaving trading partners of the US rather than US trade policy that
permits US transnational corporation to exploit workers in all trading nations, including those in the US. It is a policy that devalues
work by over-rewarding financial manipulation.
Yet to Reich, the US corporate income tax is regressive and inequitable and should be abolished so that after-tax corporate profit
can be even further enhanced. This pro-profit position is at odds with even rising US Republican sentiment against transnational
corporations and their global trade strategies. Reich also thinks the concept of corporate criminal liability is based on an "anthropomorphic
fallacy" that ends up hurting innocent people. Reich sees as inevitable an evolutionary path towards an allegedly perfect new world
of a super-energetic capitalism responding to the dictate of all-powerful consumer preference through market democracy.
Reich argues that corporations cannot be expected to be more "socially responsible" than their shareholders or even their consumers,
and he implies that consumer preference and behavior are the proper and effective police forces that supersede the need for market
regulation. He sees corporations, while viewed by law as "legal persons", as merely value-neutral institutional respondents of consumer
preferences in global markets. Reich claims that corporate policies, strategies and behavior in market capitalism are effectively
governed by consumer preferences and need no regulation by government. This is essentially the ideology of neo-liberalism.
Yet US transnational corporations derive profit from global operations serving global consumers to maximize return on global capital.
These transnational corporations will seek to shift production to where labor is cheapest and environmental standards are lowest
and to market their products where prices are highest and consumer purchasing power the strongest. Often, these corporations find
it more profitable to sell products they themselves do not make, controlling only design and marketing, leaving the dirty side of
manufacturing to others with underdeveloped market power. This means if the US wants a trade surplus under the current terms of trade,
it must lower it wages. The decoupling of consumers from producers weakens the conventional effects of market pressure on corporate
social responsibility. Transnational corporations have no home community loyalty. Consumers generally do not care about sweat shop
conditions overseas while overseas workers do not care about product safety on goods they produce but cannot afford to buy. Products
may be made in China, but they are not made by China, but by US transnational corporations which are responsible for the quality
and safety of their products.
Further, it is well recognized that corporations routinely and effectively manipulate consumer preference and market acceptance
often through if not false, at least misleading advertising, not for the benefit of consumers, but to maximize return on faceless
capital raised from global capital markets. The subliminal emphasis by the corporate culture on addictive acquisition of material
things, coupled with a structural deprivation of adequate income to satisfy the manipulated desires, has made consumers less satisfied
than in previous times of less material abundance. Corporations have been allowed to imbed consumption-urging messages into every
aspect of modern life. The result is a disposable culture with packaged waste, an obesity crisis for all age groups, skyrocketing
consumer debt, the privatization of public utilities that demand the same fee for basic services from rich and poor alike, causing
a sharp disparity in affordability. It is a phenomenon described by Karl Marx as "Fetishism of Commodities".
Marx's concept of Fetishism of Commodities
Marx wrote in Das Kapital:[1]
The relation of the producers to the sum total of their own labor is presented to them as a social relation, existing not between
themselves, but between the products of their labor. This is the reason why the products of labor become commodities, social things
whose qualities are at the same time perceptible and imperceptible by the senses … The existence of the things qua commodities,
and the value relation between the products of labor which stamps them as commodities, have absolutely no connection with their
physical properties and with the material relations arising therefrom. It is a definite social relation between men that assumes,
in their eyes, the fantastic form of a relation between things. In order, therefore, to find an analogy, we must have recourse
to the mist-enveloped regions of the religious world. In that world, the productions of the human brain appear as independent
beings endowed with life, and entering into relation both with one another and the human race. So it is in the world of commodities
with the products of men's hands. This I call the Fetishism which attaches itself to the products of labor, as soon as they are
produced as commodities, and which is therefore inseparable from the production of commodities. This Fetishism of Commodities
has its origin … in the peculiar social character of the labor that produces them.
Marx asserts that "the mystical character of commodities does not originate in their use-value" (Section 1, p 71). Market value is
derived from social relations, not from use-value which is a material phenomenon. Thus Marx critiques the Marginal Utility Theory
by pointing out that market value is affected by social relationships. For example, the marginal utility of door locks is a function
of the burglary rate in a neighborhood which in turn is a function of the unemployment rate. Unregulated free markets are a regime
of uninhibited price gouging by monopolies and cartels.
Thus the nature of money cannot be adequately explained even in terms of the material-technical properties of gold, but only in
terms of the factors behind man's desire and need for gold. Similarly, it is not possible to fully understand the price of capital
from the technical nature of the means of production, but only from the social institution of private ownership and the terms of
exchange imposed by uneven market power. Market capitalism is a social institution based on the fetishism of commodities.
Democracy threatened by the corporate state
While Reich is on target in warning about the danger to democracy posed by the corporate state, and in claiming that only people
can be citizens, and only citizens should participate in democratic decision making, he misses the point that transnational corporations
have transcended national boundaries. Yet in each community that these transnational corporations operate, they have the congenital
incentive, the financial means and the legal mandate to manipulate the fetishism of commodities even in distant lands.
Moreover, representative democracy as practiced in the US is increasingly manipulated by corporate lobbying funded from high-profit-driven
corporate financial resources derived from foreign sources controlled by management. Corporate governance is notoriously abusive
of minority shareholder rights on the part of management. Notwithstanding Reich's rationalization of excessive CEO compensation,
CEOs as a class are the most vocal proponents of corporate statehood. Modern corporations are securely insulated from any serious
threats from consumer revolt. Inter-corporate competition presents only superficial and trivial choices for consumers. Motorists
have never been offered any real choice on gasoline by oil companies or alternatives on the gasoline-guzzling internal combustion
engine by car-makers.
High pay for CEOs
Reich asserts in his Wall Street Journal piece that modern CEOs in finance capitalism nowadays deserve their high pay because they
have to be superstars, unlike their bureaucrat-like predecessors during industrial capitalism. Notwithstanding that one would expect
a former labor secretary to argue that workers deserve higher pay, the challenge to corporate leadership in market capitalism has
always been and will always remain management's ruthless pursuit of market leadership power, a euphemism for monopoly, by skirting
the rule of law and regulations, framing legislative regimes through political lobbying, pushing down wages and worker benefits,
increasing productivity by downsizing in an expanding market and manipulating consumer attitude through advertising. At the end of
the day, the bottom line for corporate profit is a factor of lowering wage and benefit levels.
Reich seems to have forgotten that the captains of industry of 19th century free-wheeling capitalism were all superstars who evoked
public admiration by manipulating the awed public into accepting the Horatio Alger myth of success through hard work, honesty and
fairness. The derogatory term "robber barons" was first coined by protest pamphlets circulated by victimized Kansas farmers against
ruthless railroad tycoons during the Great Depression.
The manipulation of the public will by moneyed interests is the most problematic vulnerability of US economic and political democracy.
In an era when class warfare has taken on new sophistication, the accusation of resorting to class warfare argument is widely used
to silence legitimate socio-economic protests. The US media is essentially owned by the moneyed interests. The decline of unionism
in the US has been largely the result of anti-labor propaganda campaigns funded by corporations and government policies influenced
by corporate lobbyists. The infiltration of organized crime was exploited to fan public anti-union sentiments while widespread corporate
white collar crimes were dismissed as mere anomalies. (See
Capitalism's bad apples:
It's the barrel that's rotten)
Superman capitalism
As promoted by his permissive opinion piece, a more apt title for Reich's new book would be Superman Capitalism, in praise
of the super-heroic qualities of successful corporate CEOs who deserve superstar pay. This view goes beyond even fascist superman
ideology. The compensation of corporate CEOs in Nazi Germany never reached such obscene levels as those in US corporate land today.
Reich argues that CEOs deserve their super-high compensation, which has increased 600% in two decades, because corporate profits
have also risen 600% in the same period. The former secretary of labor did not point out that wages rose only 30% in the same period.
The profit/wage disparity is a growing cancer in
the US-dominated global economy, causing over-production resulting from stagnant demand caused by inadequate wages. A true spokesman
for labor would point out that enlightened modern management recognizes that the performance of a corporation is the sum total of
effective team work between management and labor.
System analysis has long shown that collective effort on the part of the entire work force is indispensable to success in any
complex organism. Further, a healthy consumer market depends on a balance between corporate earnings and worker earnings. Reich's
point would be valid if US wages had risen by the same multiple as CEO pay and corporate profit, but he apparently thought that it
would be poor etiquette to raise embarrassing issues as a guest writer in an innately anti-labor journal of Wall Street. Even then,
unless real growth also rose 600% in two decades, the rise in corporate earning may be just an inflation bubble.
An introduction to economic populism
To be fair, Reich did address the income gap issue eight months earlier in another article, "An Introduction to Economic Populism"
in the Jan-Feb, 2007 issue of The American Prospect, a magazine that bills itself as devoted to "liberal ideas". In that article,
Reich relates a "philosophical" discussion he had with fellow neo-liberal cabinet member Robert Rubin, then treasury secretary under
Bill Clinton, on two "simple questions".
The first question was: Suppose a proposed policy will increase the incomes of some people without decreasing the incomes of any
others. Of course Reich must know that it is a question of welfare economics long ago answered by the "pareto optimum", which asserts
that resources are optimally distributed when an individual cannot move into a better position without putting someone else into
a worse position. In an unjust society, the pareto optimum will perpetuate injustice in the name of optimum resource allocation.
"Should it be implemented? Bob and I agreed it should," writes Reich. Not exactly an earth-shaking liberal position. Rather, it is
a classic neo-liberal posture.
And the second question: But suppose the people whose incomes will rise are already wealthier than everyone else. Although no
one will lose ground, inequality will widen. Should it still be implemented? "I won't tell you where he and I came out on that second
question," writes Reich without explaining why. He allows that "we agreed that people who don't share in such gains feel relatively
poorer. Widening inequality also further tips the balance of political power in favor of the wealthy."
Of course, clear thinking would have left the second question mute because it would have invalidated the first question, as the
real income of those whose nominal income has not fallen has indeed fallen relative to those whose nominal income has risen. In a
macro monetary sense, it is not possible to raise the nominal income of some without lowering the real income of others. All incomes
must rise together proportionally or inequality in after-inflation real income will increase.
Inequality only a new worry?
But for the sake of argument, let's go along with Reich's parable on welfare economics and financial equality. That conversation
occurred a decade ago. Reich says in his January 2007 article that "inequality is far more worrisome now", as if it had not been
or that the policies he and his colleagues in the Clinton administration, as evidenced by their answer to their own first question,
did not cause the now "more worrisome" inequality. "The incomes of the bottom 90% of Americans have increased about 2% in real terms
since then, while that of the top 1% has increased over 50%," Reich wrote in the matter of fact tone of an innocent bystander.
It is surprising that a former labor secretary would err even on the record on worker income. The US Internal Revenue Service
reports that while incomes have been rising since 2002, the average income in 2005 was $55,238, nearly 1% less than in 2000 after
adjusting for inflation. Hourly wage costs (including mandatory welfare contributions and benefits) grew more slowly than hourly
productivity from 1993 to late 1997, the years of Reich's tenure as labor secretary. Corporate profit rose until 1997 before declining,
meaning what should have gone to workers from productivity improvements went instead to corporate profits. And corporate profit declined
after 1997 because of the Asian financial crisis, which reduced offshore income for all transnational companies, while domestic purchasing
power remained weak because of sub-par worker income growth.
The break in trends in wages occurred when the unemployment rate sank to 5%, below the 6% threshold of NAIRU (non-accelerating
inflation rate of unemployment) as job creation was robust from 1993 onwards. The "reserve army of labor" in the war against inflation
disappeared after the 1997 Asian crisis when the Federal Reserve injected liquidity into the US banking system to launch the debt
bubble. According to NAIRU, when more than 94% of the labor force is employed, the war on wage-pushed inflation will be on the defensive.
Yet while US inflation was held down by low-price imports from low-wage economies, US domestic wages fell behind productivity growth
from 1993 onward. US wages could have risen without inflationary effects but did not because of the threat of further outsourcing
of US jobs overseas. This caused corporate profit to rise at the expense of labor income during the low-inflation debt bubble years.
Income inequality in the US today has reached extremes not seen since the 1920s, but the trend started three decades earlier.
More than $1 trillion a year in relative income is now being shifted annually from roughly 90,000,000
middle and working class families to the wealthiest households and corporations via corporate profits earned from low-wage workers
overseas. This is why nearly 60% of Republicans polled support more taxes on the rich.
Carter the granddaddy of deregulation
The policies and practices responsible for today's widening income gap date back to the 1977-1981 period of the Carter administration
which is justly known as the administration of deregulation. Carter's deregulation was done in the name of populism but the results
were largely anti-populist. Starting with Carter, policies and practices by both corporations and government underwent a fundamental
shift to restructure the US economy with an overhaul of job markets. This was achieved through widespread de-unionization, breakup
of industry-wide collective bargaining which enabled management to exploit a new international division of labor at the expense of
domestic workers.
The frontal assault on worker collective bargaining power was accompanied by a realigning of the progressive federal tax structure
to cut taxes on the rich, a brutal neo-liberal global free-trade offensive by transnational corporations and anti-labor government
trade policies. The cost shifting of health care and pension plans from corporations to workers was condoned by government policy.
A wave of government-assisted compression of wages and overtime pay narrowed the wage gap between the lowest and highest paid workers
(which will occur when lower-paid workers receive a relatively larger wage increase than the higher-paid workers with all workers
receiving lower pay increases than managers). There was a recurring diversion of inflation-driven social security fund surpluses
to the US fiscal budget to offset recurring inflation-adjusted federal deficits. This was accompanied by wholesale anti-trust deregulation
and privatization of public sectors; and most egregious of all, financial market deregulation.
Carter deregulated the US oil industry four years after the 1973 oil crisis in the name of national security. His Democratic challenger,
Senator Ted Kennedy, advocated outright nationalization. The Carter administration also deregulated the airlines, favoring profitable
hub traffic at the expense of traffic to smaller cities. Air fares fell but service fell further. Delays became routine, frequently
tripling door-to-door travel time. What consumers save in airfare, they pay dearly in time lost in delay and in in-flight discomfort.
The Carter administration also deregulated trucking, which caused the Teamsters Union to support Ronald Reagan in exchange for a
promise to delay trucking deregulation.
Railroads were also deregulated by Railroad Revitalization and Regulatory Reform Act of 1976 which eased regulations on rates,
line abandonment, and mergers to allow the industry to compete with truck and barge transportation that had caused a financial and
physical deterioration of the national rail network railroads. Four years later, Congress followed up with the Staggers Rail Act
of 1980 which provided the railroads with greater pricing freedom, streamlined merger timetables, expedited the line abandonment
process, and allowed confidential contracts with shippers. Although railroads, like other modes of transportation, must purchase
and maintain their own rolling stock and locomotives, they must also, unlike competing modes, construct and maintain their own roadbed,
tracks, terminals, and related facilities. Highway construction and maintenance are paid for by gasoline taxes. In the regulated
environment, recovering these fixed costs hindered profitability for the rail industry.
After deregulation, the railroads sought to enhance their financial situation and improve their operational efficiency with a
mix of strategies to reduce cost and maximize profit, rather than providing needed service to passengers around the nation. These
strategies included network rationalization by shedding unprofitable capacity, raising equipment and operational efficiencies by
new work rules that reduced safety margins and union power, using differential pricing to favor big shippers, and pursuing consolidation,
reducing the number of rail companies from 65 to 5 today. The consequence was a significant increase of market power for the merged
rail companies, decreasing transportation options for consumers and increasing rates for remote, less dense areas.
In the agricultural sector, rail network rationalization has forced shippers to truck their bulk commodity products greater distances
to mainline elevators, resulting in greater pressure on and damage to rural road systems. For inter-modal shippers, profit-based
network rationalization has meant reduced access - physically and economically - to Container on Flat Car (COFC) and Trailer on Flat
Car (TOFC) facilities and services. Rail deregulation, as is true with most transportation and communication deregulation, produces
sector sub-optimization with dubious benefits for the national economy by distorting distributional balance, causing congestion and
inefficient use of land, network and lines.
Carter's Federal Communications Commission's (FCC) approach to radio and television regulation began in the mid-1970s as a search
for relatively minor "regulatory underbrush" that could be
cleared away for more efficient and cost-effective administration of the important rules that would remain. Congress largely went
along with this updating trend, and initiated a few deregulatory moves of its own to make regulation more effective and responsive
to contemporary conditions.
Reagan's anti-government fixation
The Reagan administration under Federal Communications Commission (FCC) chairman Mark Fowler in 1981 shifted deregulation to a
fundamental and ideologically-driven reappraisal of regulations away from long-held principles central to national broadcasting policy
appropriate for a democratic society. The result was removal of many longstanding rules to permit an overall reduction in FCC oversight
of station ownership concentration and network operations. Congress grew increasingly wary of the pace of deregulation, however,
and began to slow the pace of FCC deregulation by the late 1980s.
Specific deregulatory moves included (a) extending television licenses to five years from three in 1981; (b) expanding the number
of television stations any single entity could own from seven in 1981 to 12 in 1985, with further changes in 1995; (c) abolishing
guidelines for minimal amounts of non-entertainment programming in 1985; (d) elimination of the Fairness Doctrine in 1987; (e) dropping,
in 1985, FCC license guidelines for how much advertising could be carried; (f) leaving technical standards increasingly in the hands
of licensees rather than FCC mandates; and (g) deregulation of television's competition, especially cable which went through several
regulatory changes in the decade after 1983.
The 1996 Telecommunications Act eliminated the 40-station ownership cap on radio stations. Since then, the radio industry has
experienced unprecedented consolidation. In June 2003, the FCC voted to overhaul limits on media ownership. Despite having held only
one hearing on the complex issue of media consolidation over a 20-month review period, the FCC, in a party-line vote, voted 3-2 to
overhaul limits on media concentration. The rule would (1) increase the aggregate television ownership cap to enable one company
to own stations reaching 45% of our nation's homes (from 35%), (2) lift the ban on newspaper-television cross-ownership, and (3)
allow a single company to own three television stations in large media markets and two in medium ones. In the largest markets, the
rule would allow a single company to own up to three television stations, eight radio stations, the cable television system, cable
television stations, and a daily newspaper. A wide range of public-interest groups filed an appeal with the Third Circuit, which
stayed the effective date of the new rules.
According to a BIA Financial Network report released in July 2006, a total of 88 television stations had been sold in the first
six months of 2006, generating a transaction value of $15.7 billion. In 2005, the same period saw the sale of just 21 stations at
a value of $244 million, with total year transactions of $2.86 billion.
Congress passed a law in 2004 that forbids any network to own a group of stations that reaches more than 39% of the national television
audience. That is lower than the 45% limit set in 2003, but more than the original cap of 35% set in 1996 under the Clinton administration
- leading public interest groups to argue that the proposed limits lead to a stifling of local voices.
Newspaper-television cross-ownership remains a contentious issue. Currently prohibited, it refers to the "common ownership of
a full-service broadcast station and a daily newspaper when the broadcast station's area of coverage (or "contour") encompasses the
newspaper's city of publication".
Capping of local radio and television ownership is another issue. While the original rule prohibited it, currently a company can
own at least one television and one radio station in a market. In larger markets, "a single entity may own additional radio stations
depending on the number of other independently owned media outlets in the market".
Most broadcasters and newspaper publishers are lobbying to ease or end restrictions on cross-ownership; they say it has to be
the future of the news business. It allows newsgathering costs to be spread across platforms, and delivers multiple revenue streams
in turn. Their argument is also tied to a rapidly changing media consumption market, and to the diversity of opinions available to
the consumer with the rise of the Internet and other digital platforms.
The arguments against relaxing media ownership regulations are put forth by consumer unions and other interest groups on the ground
that consolidation in any form inevitably leads to a lack of diversity of opinion. Cross-ownership limits the choices for consumers,
inhibits localism and gives excessive media power to one entity.
Professional and workers' guilds of the communication industry (the Screen Actors Guild and American Federation of TV and Radio
Artists among others) would like the FCC to keep in mind the independent voice, and want a quarter of all prime-time programming
to come from independent producers. The Children's Media Policy Coalition suggested that the FCC limit local broadcasters to a single
license per market, so that there is enough original programming for children. Other interest groups like the National Association
of Black Owned Broadcasters are worried about what impact the rules might have on station ownership by minorities.
Deregulatory proponents see station licensees not as "public trustees" of the public airwaves requiring the provision of a wide
variety of services to many different listening groups. Instead, broadcasting has been increasingly seen as just another business
operating in a commercial marketplace which did not need its management decisions questioned by government overseers, even though
they are granted permission to use public airways. Opponents argue that deregulation violates a key mandate of the Communications
Act of 1934 which requires licensees to operate in the public interest. Deregulation allows broadcasters to seek profits with little
public service programming.
Clinton and telecommunications deregulation
The Telecommunications Act of 1996 was the first major overhaul of US telecommunications law in nearly 62 years, amending the
Communications Act of 1934, and leading to media consolidation. It was approved by Congress on January 3, 1996 and signed into law
on February 8, 1996 by President Clinton, a Democrat whom some have labeled as the best president the Republicans ever had.
The act claimed to foster competition, but instead it continued the historic industry consolidation begun by Reagan, whose actions
reduced the number of major media companies from around 50 in 1983 to 10 in 1996 and 6 in 2005.
Regulation Q
The Carter administration increased the power of the Federal Reserve through the Depository Institutions and Monetary Control
Act (DIDMCA) of 1980 which was a necessary first step in ending the New Deal restrictions placed upon financial institutions, such
as Regulation Q put in place by the Glass-Steagall Act of 1933 and other restrictions on banks and financial institutions.
The populist Regulation Q imposed limits and ceilings on bank and savings-and-loan (S&L) interest
rates to provide funds for low-risk home mortgages.
But with financial market deregulation, Regulation Q created incentives for US banks to do business outside the reach of US law,
launching finance globalization. London came to dominate this offshore dollar business.
The populist Regulation Q, which regulated for several decades limits and ceilings on bank and S&L interest to serve the home
mortgage sector, was phased out completely in March 1986. Banks were allowed to pay interest on checking account - the NOW accounts
- to lure depositors back from the money markets. The traditional interest-rate advantage of the S&Ls was removed, to provide a "level
playing field", forcing them to take the same risks as commercial banks to survive. Congress also lifted restrictions on S&Ls' commercial
lending, which promptly got the whole industry into trouble that would soon required an unprecedented government bailout of depositors,
with tax money. But the developers who made billions from easy credit were allowed to keep their profits. State usury laws were unilaterally
suspended by an act of Congress in a flagrant intrusion on state rights. Carter, the well-intentioned populist, left a legacy of
anti-populist policies. To this day, Greenspan continues to argue disingenuously that subprime mortgages helped the poor toward home
ownership, instead of generating obscene profit for the debt securitization industry.
The party of Lincoln taken over by corporate interests
During the Reagan administration, corporate lobbying and electoral strategies allowed the corporate
elite to wrest control of the Republican Party, the party of Lincoln, from conservative populists.
In the late 1980s, supply-side economics was promoted to allow corporate interests to dominate US politics at the expense of labor
by arguing that the only way labor can prosper is to let capital achieve high returns, notwithstanding the contradiction that high
returns on capital must come from low wages.
New legislation and laws, executive orders, federal government rule-making, federal agency decisions, and think-tank propaganda,
etc, subsequently followed the new political landscape, assisting the implementation of new corporate policies and practices emerging
from corporate headquarters rather than from the shop floor. Economists and analysts who challenged this voodoo theory were largely
shut out of the media.
Workers by the million were persuaded to abandon their institutional collective defender to fend for themselves individually in
the name of freedom. It was a freedom to see their job security eroded and wages and benefits fall with no recourse.
Note
1. Das Kapital, Volume One, Part I: Commodities and Money, Chapter One: Commodities, Section I.
Next: PART 2: Global war on labor
Henry C K Liu is chairman of a New York-based private investment group. His website is at http://www.henryckliu.com.
@animalogic
respasses, as we forgive those who trespass against us ." is the translation presented in the
Revised Standard Version of the Bible. What is lost in translation is the fact that Jesus
came "to preach the gospel to the poor to preach the acceptable Year of the Lord": He came,
that is, to proclaim a Jubilee Year, a restoration of deror for debtors: He came to institute
a Clean Slate Amnesty (which is what Hebrew דְּרוֹר
connotes in this context).
It is quite possible to have balanced civilizations that lasts for thousands of years;
however it is impossible in the West, since the west is based on faulty assumptions about
reality.
Don't be spooked by those words. Do you know where the words sustainable and inclusive
come from? Tycoons didn't think them up. They're just parroting them to try and twist their
meaning. Those words are from the Addis Ababa consensus. Tycoons give lip service to those
words because if they don't, no one will give them the time of day.
AA is the consensus of the ECOSOC bloc, treaty parties of the ICESCR, 171 of them, the
overwhelming majority of the world. ECOSOC reports to the UNGA, the most participative and
least controllable UN organ. US UN delegates don't even dare mention the AA outcome –
they fixate on the Monterrey Consensus, two documents ago.
Inclusive means, don't let usurers like the IMF get you on the debt hook and immiserize
your people. Sustainable means no pillage of national wealth or resources and no imposition
of externalities (like Chevron did to Ecuador, for instance.) You will see that the outcome
document subordinates everthing the tycoons or the US want to human rights and rule of law.
Economic rights too. The outcome curbs US "Western" corporatist development by pulling WTO
and IMF under the authority of G-192 organizations like UNCTAD and ILO.
It's hard for people in US satellites to interpret this stuff because the underlying
intitiatives of the G-192 (that is, the world) are hidden from you and buried in US
propaganda. Xi is quoting his Five Principles, four of which are straight out of the UN
Charter. China has ratified the ICESCR. So China is not communist. China is not capitalist.
China is a member of the ECOSOC bloc. People in the US or its satellites have no idea what
that is, but it's vastly bigger than the Third International was. It's development based on
human rights. Tycoons and the US hate that shit but they can't stop it.
A couple of things that would go a long way to correct the goddamn stupidity running
rampant in this country are.
Correcting the following horrendous actions: The SCOTUS has passed down egregious
decisions that abridge the First Amendment and show contempt for the concept of
representative democracy. Buckley v. Valeo, 424 U.S. 1976 and exacerbated by continuing
stupid SCOTUS decisions First National Bank of Boston v. Bellotti, Citizens United v. Federal
Election Commission and McCutcheon v. Federal Election Commission.
These decisions have codified that money is free speech thereby giving entities of wealth and
power total influence in elections.
And-
Making it absolutely impossible for anyone to amass more than 100 million dollars extreme
wealth concentrates too much power.
The IMF system was designed to impoverish debtors. The purpose of the IMF was to make other
countries so poor and dependent on the United States so they could never be militarily
independent. In the discussion of the British loan for instance, in the 1930s the discussion in
the London Economic Conference was, "Yes, we're bankrupting Europe, but if we give Europe
enough money to avoid austerity, they're just going to spend the money on the military." That
was said by the Americans in the State Department and the White House again and again,
especially by Raymond Moley who was basically in charge of President Roosevelt's foreign policy
towards Europe.
The question is: how do you create an international financial system designed to promote
prosperity, not austerity? The Bretton Woods is for austerity for everybody except the United
States, which will have a free ride forever. The question that I'm involved with in the work
I'm doing in China and with other countries is how to create a system based on prosperity
instead of austerity, with mutual support between creditors and debtors, without the kind of
financial antagonism that has been built in to the international financial system ever since
World War I. Financial reform involves tax reform as well: how do we end up taxing economic
rent instead of letting the rentiers take over society. That is what classical economics
is all about: how do we revive it?
Oscar Brisset
Final question: these austerity and anti-labor policies which the IMF imposes on countries
of the global South seem to be well known practices from before the IMF was created, from what
you've discussed. Did the IMF invent anything new? In addition, in the 19th century, was
predatory lending something common, or was direct invasion always the go-to method for
subjugating a territory?
Prof Hudson
The 19th century was really the golden age of industrial capitalism. Countries wanted to
invest to make a profit. They didn't want to invest in dismantling an existing industry,
because there wasn't much industry to dismantle. They wanted to make profit by creating
industry. There was a lot of investment in infrastructure, and it almost always lost money. For
instance, there was recently a criticism of China saying, "Doesn't China know that the Panama
Canal went bankrupt again and again, and that all the investments in canals and the railroads
all went broke again and again?" Of course China knows that. The idea is that you make
investment not to make a profit on basic large infrastructure. The 19th century was basically
inter-state lending, inter-governmental lending, public sector lending. That's where the money
was made. The late 20th century was one of financialization, dismantling the industry that was
already in place, not lending to create industry to make a profit. It's asset-stripping, not
profit-seeking
@ uncle tungsten #24 with the appreciated link containing this quote
" A former insider at the World Bank, ex-Senior Counsel Karen Hudes, says the global
financial system is dominated by a small group of corrupt, power-hungry figures centered
around the privately owned U.S. Federal Reserve.
"
The posting ends with this quote
"We have a system of "neo-feudalism" in which all of us and our national governments
are enslaved to debt. This system is governed by the central banks and by the Bank for
International Settlements, and it systematically transfers the wealth of the world out of
our hands and into the hands of the global elite.
But most people have no idea that any of this is happening because the global elite also
control what we see, hear and think about. Today, there are just six giant media
corporations that control more than 90 percent of the news and entertainment that you watch
on your television in the United States."
What an ugly way to run a society. Moving society to public finance and abolishing private
finance is what is needed to save our species and what we can of the world we live in. I am
with China in advocating for Ad Astra because we can see the end of our ability to live on
this planet because of historical faith-based disrespect of it.
No we are not dealing with the analogue of the feudalism of Western Europe, with its
interlocking panoply of mutual obligations that was built around God.
No, we are witnessing the re-birth of the Asiatic mode of production in the Euro-American
countries as the absence of manufacturing production makes itself felt. To wit, like South
American countries, one sees the emergence of two classes, Masters and their Service Servants
(needed for performing all manner of useful but tedious manual service labor, from
dog-walkers to barbers to cooks...)
Significantly, as Americans, French, English and many others sold their jobs to Mexico,
China, Korea, Singapore, and Japan, it was precisely those countries that were given an extra
shot in the arm for breaking from the chains of the Asiatic Mode of Production.
It is particularly interesting that in America, the long-hair guy driving a 50-dollar
Chevy, is supporting Republicans, who have no better future for him than being a servant to
Financiers.
How COVID-19 may help IMF to reshape global economy (Full show) 16 Oct, 2020 20:42 17
Follow RT on
The International Monetary Fund (IMF) is offering loans to the world's poorest 81 countries
to help them rebuild their devastated economies, still reeling from the COVID-19 pandemic. But
accepting such loans paves the way for increased austerity, privatization, and greater income
inequality. RT America's Alex Mihailovich explains. Then former UK MP George Galloway joins RT
America's Faran Fronczak (in for Rick Sanchez) to weigh in. RT's Peter Oliver examines the
skyrocketing number of COVID-19 cases across Europe and the reimposition of harsh restrictions
to stymie its spread. Legal and media analyst Lionel and civil rights attorney Robert Patillo
debate proposals aimed at mitigating the perceived influence of the Federalist Society in US
courts. RT America's Trinity Chavez reports on the recent flyby of Venus where the BepiColombo
probe captured amazing new images of the planet. Plus, RT America's Steve Christakos joins for
"Jock Talk."
The tragedy of this situation the most of people who constitute fifth column will be
royally fleeced if this color revolution succeeds. As Ukrainian experience had shown the
immediate result will be the drop (2-3 times) of national currency against the dollar, mass
sellout of assets to the West at bargain process (for pennies on the dollar) as well as
continuation of the destruction of Soviet infrastructure. Western powers want 90% of
Byelorussian people to live on the level slightly above starvation and they have numerous
methods of achieving this goal directly and indirectly.
In two to three year Belorussia will be a regular debt slave of the West.
27 Sep, 2020 Around 200 have been detained as the Belarusian capital, Minsk and other cities
host rallies, during which the opposition plans to hold a "people's inauguration" of former
presidential candidate Svetlana Tikhanovskaya.
The action was called in response to the secret inauguration staged by long-time President
Alexander Lukashenko for himself earlier this week. Tikhanovskaya won't be attending the
protest, as she fled Belarus for Lithuania after the August 9 election, which the opposition
insists was rigged.
Thousands marched along Independence Avenue in Minsk, despite security forces thoroughly
preparing for the unsanctioned event and urging people to stay at home. Mobile internet speed
has been reduced in the capital. A local mobile operator said it has been ordered to do so by
the government. It may have been done to complicate communication among demonstrators.
The city's largest squares were blocked off, with seven subway stations in the center also
shut down. A convoy of armored vehicles has also been spotted outside Lukashenko's heavily
guarded residence.
Music was played from loudspeakers along the route of the march to drown out the chants of
the demonstrators, calling for Lukashenko's immediate resignation and a new, fair
election.
Police say that almost 200 people have been arrested in Minsk and other cities where
protests took place on Sunday.
The protests in Belarus have been marred by mass arrests from the very start, with
thousands of anti-government demonstrators detained in the weeks since the election. Police
have also been accused of using excessive force against demonstrators and mistreating
detainees. Three protesters have been killed during the unrest, according to official data,
with hundreds, including many officers, wounded.
Selfishness may be exalted as the root and branch of capitalism, but it doesn't make you
look good to the party on the receiving end or those whose sympathy he earns. For that, you
need a government prepared to do four things, which each have separate dictums based on study,
theorization, and experience. Coercion: Force is illegitimate only if you can't sell it.
Persuasion: How do I market thee? Let me count the ways. Bargaining: If you won't scratch my
back, then how about a piece of the pie? Indoctrination: Because I said so. (And paid for the
semantics.)
Predatory capitalism is the control and expropriation of land, labor, and natural resources
by a foreign government via coercion, persuasion, bargaining, and indoctrination.
At the coercive stage, we can expect military and/or police intervention to repress the
subject populace. The persuasive stage will be marked by clientelism, in which a small
percentage of the populace will be rewarded for loyalty, often serving as the capitalists'
administrators, tax collectors, and enforcers. At the bargaining stage, efforts will be made to
include the populace, or a certain percentage of it, in the country's ruling system, and this
is usually marked by steps toward democratic (or, more often, autocratic) governance.
At the fourth stage, the populace is educated by capitalists, such that they continue to
maintain a relationship of dependency.
The Predatory Debt Link
In many cases, post-colonial states were forced to assume the debts of their colonizers. And
where they did not, they were encouraged to become in debt to the West via loans that were
issued through international institutions to ensure they did not fall prey to communism or
pursue other economic policies that were inimical to the West. Debt is the tie that binds
nation states to the geostrategic and economic interests of the West.
As such, the Cold War era was a time of easy credit, luring postcolonial states to undertake
the construction of useless monoliths and monuments, and to even expropriate such loans through
corruption and despotism, thereby making these independent rulers as predatory as colonizers.
While some countries were wiser than others and did use the funds for infrastructural
improvements, these were also things that benefited the West and particularly Western
contractors. In his controversial work Confessions of an Economic Hit Man, John Perkins reveals
that he was a consultant for an American firm (MAIN), whose job was to ensure that states
became indebted beyond their means so they would remain loyal to their creditors, buying them
votes within United Nations organizations, among other things.
Predatory capitalists demand export-orientations as the means to generate foreign currency
with which to pay back debt. In the process, the state must privatize and drastically slash or
eliminate any domestic subsidies which are aimed at helping native industry compete in the
marketplace. Domestic consumption and imports must be radically contained, as shown by the
exchange rate policies recommended by the IMF. The costs of obtaining domestic capital will be
pushed beyond the reach of most native producers, while wages must be depressed to an absolute
bare minimum. In short, the country's land, labor, and natural resources must be sold at
bargain basement prices in order to make these goods competitive, in what one author has called
"a spiraling race to the bottom," as countries producing predominantly the same goods engage in
cutthroat competition whose benefactor is the West.
Under these circumstances, foreign investment is encouraged, but this, too, represents a
loaded situation for countries that open their markets to financial liberalization.
"... In addition to the key international financial institutions, WB and IMF, there are the so-called regional development banks and similar financial institutions, keeping the countries of their respective regions in check. ..."
Imagine, you are living in a world that you are told is a democracy – and you may even
believe it – but in fact your life and fate is in the hands of a few ultra-rich,
ultra-powerful and ultra-inhuman oligarchs. They may be called Deep State, or simply the Beast,
or anything else obscure or untraceable – it doesn't matter. They are less than the
0.0001%.
For lack of a better expression, let's call them for now "obscure individuals".
These obscure individuals who pretend running our world have never been elected . We don't
need to name them. You will figure out who they are, and why they are famous, and some of them
totally invisible. They have created structures, or organisms without any legal format. They
are fully out of international legality. They are a forefront for the Beast. Maybe there are
several competing Beasts. But they have the same objective: A New or One World Order (NWO, or
OWO).
These obscure individuals are running, for example, The World Economic Forum (WEF –
representing Big Industry, Big Finance and Big Fame), the Group of 7 – G7, the Group of
20 – G20 (the leaders of the economically" strongest" nations). There are also some
lesser entities, called the Bilderberg Society, the Council on Foreign Relations (CFR), Chatham
House and more.
The members of all of them are overlapping. Even this expanded forefront combined represents
less than 0.001%. They all have superimposed themselves over sovereign national elected and
constitutional governments, and over THE multinational world body, the United Nations, the
UN.
In fact, they have coopted the UN to do their bidding. UN Director Generals, as well as the
DGs of the multiple UN-suborganizations, are chosen mostly by the US, with the consenting nod
of their European vassals – according to the candidate's political and psychological
profile. If his or her 'performance' as head of the UN or head of one of the UN
suborganizations fails, his or her days are counted. Coopted or created by the Beast(s) are
also, the European Union, the Bretton Woods Organizations, World Bank and IMF, as well as the
World Trade Organization (WTO) – and – make no mistake – the International
Criminal Court (ICC) in The Hague. It has no teeth. Just to make sure the law is always on the
side of the lawless.
In addition to the key international financial institutions, WB and IMF, there are the
so-called regional development banks and similar financial institutions, keeping the countries
of their respective regions in check.
In the end its financial or debt-economy that controls everything. Western neoliberal
banditry has created a system, where political disobedience can be punished by economic
oppression or outright theft of national assets in international territories. The system's
common denominator is the (still) omnipresent US-dollar.
"Unelected Individuals"
The supremacy of these obscure unelected individuals becomes ever more exposed. We, the
People consider it "normal" that they call the shots, not what we call – or once were
proud of calling, our sovereign nations and sovereignly elected governments. They have become a
herd of obedient sheep. The Beast has gradually and quietly taken over. We haven't noticed.
It's the salami tactic: You cut off slice by tiny slice and when the salami is gone, you
realize that you have nothing left, that your freedom, your civil and human rights are gone. By
then it's too late. Case in point is the US Patriot Act. It was prepared way before 9/11. Once
9/11 "happened", the Patriot Legislation was whizzed through Congress in no time – for
the people's future protection – people called for it for fear – and – bingo,
the Patriot Act took about 90% of the American population's freedom and civil rights away. For
good.
We have become enslaved to the Beast. The Beast calls the shots on boom or bust of our
economies, on who should be shackled by debt, when and where a pandemic should break out, and
on the conditions of surviving the pandemic, for example, social confinement. And to top it all
off – the instruments the Beast uses, very cleverly, are a tiny-tiny invisible enemy,
called a virus, and a huge but also invisible monster, called FEAR. That keeps us off the
street, off reunions with our friends, and off our social entertainment, theatre, sports, or a
picnic in the park.
Soon the Beast will decide who will live and who will die, literally – if we let it.
This may be not far away. Another wave of pandemic and people may beg, yell and scream for a
vaccine, for their death knell, and for the super bonanza of Big Pharma – and towards the
objectives of the eugenicists blatantly roaming the world – see this . There
is still time to collectively say NO. Collectively and solidarily.
Take the latest case of blatant imposture. Conveniently, after the first wave of Covid-19
had passed, at least in the Global North, where the major world decisions are made, in early
June 2020, the unelected WEF Chairman, Klaus Schwab , announced "The Great Reset". Taking
advantage of the economic collapse – the crisis shock, as in "The Shock Doctrine" –
Mr. Schwab, one of the Beast's frontrunners, announces openly what the WEF will discuss and
decide for the world-to-come in their next Davos Forum in January 2021. For more details see
this
.
Will, We, The People, accept the agenda of the unelected WEF?
It will opportunely focus on the protection of what's left of Mother Earth; obviously at the
center will be man-made CO2-based "Global Warming". The instrument for that protection of
nature and humankind will be the UN Agenda 2030 – which equals the UN Sustainable
Development Goals (SDG). It will focus on how to rebuild the willfully destroyed global
economy, while respecting the ("green") principles of the 17 SDGs.
Mind you, it's all connected. There are no coincidences. The infamous Agenda 2021 which
coincides with and complements the so-called (UN) Agenda 2030, will be duly inaugurated by the
WEF's official declaration of The Great Reset, in January 2021. Similarly, the implementation
of the agenda of The Great Reset began in January 2020, by the launch of the corona pandemic
– planned for decades with the latest visible events being the 2010 Rockefeller Report
with its "Lockstep Scenario" , and Event 201, of 18 October in NYC which computer-simulated a
corona pandemic, leaving within 18 months 65 million deaths and an economy in ruin, programmed
just a few weeks before the launch of the actual corona pandemic. See COVID-19, We Are Now Living the
"Lock Step Scenario" and
this and this .
The Race
Riots
The racial riots, initiated by the movement Black Lives Matter (funded by the Ford
Foundation and Soros' Open Society Foundation), following the brutal assassination of the
Afro-American George Floyd by a gang of Minneapolis police, and spreading like brush-fire in no
time to more than 160 cities, first in the US, then in Europe – are not only connected to
the Beast's agenda, but they were a convenient deviation from the human catastrophe left behind
by Covid-19. See also this .
The Beast's nefarious plan to implement what's really behind the UN Agenda 2030 is the
little heard-of Agenda ID2020 . See The
Coronavirus COVID-19 Pandemic: The Real Danger is "Agenda ID2020" . It has been created and
funded by the vaccination guru Bill Gates, and so has GAVI (Global Alliance for Vaccines and
Immunizations), the association of Big Pharma – involved in creating the corona vaccines,
and which funds along with the Bill and Melinda Gates Foundation (BMGF) a major proportion of
WHO's budget.
Following the official path of the UN Agenda 2030 of achieving the SDGs, the 'implementing'
Agenda ID2020 – which is currently being tested on school children in Bangladesh –
will provide digitized IDs possibly in the form of nano-chips implanted along with compulsory
vaccination programs, will promote digitization of money and the rolling out of 5G –
which would be needed to upload and monitor personal data on the nano chips and to control the
populace. Agenda ID2020 will most likely also include 'programs' – through vaccination?
– of significantly reducing world population. Eugenics is an important component in the
control of future world population under a NOW / OWO – see also Georgia Guidestones ,
mysteriously built in 1980.
The ruling elite used the lockdown as an instrument to carry out this agenda. Its
implementation would naturally face massive protests, organized and funded along the same lines
as were the BLM protests and demonstrations. They may not be peaceful – and may not be
planned as being peaceful. Because to control the population in the US and in Europe, where
most of the civil unrest would be expected, a total militarization of the people is required.
This is well under preparation.
In his essay "The Big Plantation" , John
Steppling reports from a NYT article that a
"minimum of 93,763 machine guns, 180,718 magazine cartridges, hundreds of silencers and an
unknown number of grenade launchers have been provided to state and local police departments
in the US since 2006. This is in addition to at least 533 planes and helicopters, and 432
MRAPs -- 9-foot high, 30-ton Mine-Resistant Ambush Protected armored vehicles with gun
turrets and more than 44,900 pieces of night vision equipment, regularly used in nighttime
raids in Afghanistan and Iraq."
He adds that this militarization is part of a broader trend. Since the late 1990s, about 89
percent of police departments in the United States serving populations of 50,000 people or more
had a PPU (Police Paramilitary Unit), almost double of what existed in the mid-1980s. He refers
to these militarized police as the new Gestapo.
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Even before Covid, about 15% to 20% of the population was on or below the poverty line in
the United States. The post-covid lockdown economic annihilation will at least double that
percentage – and commensurately increase the risk for civil turbulence and clashes with
authorities – further enhancing the reasoning for a militarized police
force.
China's Crypto RMB
None of these scenarios will, of course, be presented to the public by the WEF in January
2021. These are decisions taken behind closed doors by the key actors for the Beast. However,
this grandiose plan of the Great Reset does not have to happen. There is at least half the
world population and some of the most powerful countries, economically and militarily –
like China and Russia – opposed to it. "Reset" maybe yes, but not in these western terms.
In fact, a reset of kinds is already happening with China about to roll out a new People's Bank
of China backed blockchain-based cryptocurrency, the crypto RMB, or yuan . This is not only a
hard currency based on a solid economy, it is also supported by gold.
While President Trump keeps trashing China for unfair trade, for improperly managing the
covid pandemic, for stealing property rights – China bashing no end – that China
depends on the US and that the US will cut trading ties with China – or cut ties
altogether, China is calling Trump's bluff. China is quietly reorienting herself towards the
ASEAN countries plus Japan (yes, Japan!) and South Korea, where trade already today accounts
for about 15% of all China's trade and is expected to double in the next five years.
Despite the lockdown and the disruption of trade, China's overall exports recovered with a
3.2% increase in April (in relation to April 2019). This overall performance in China exports
was nonetheless accompanied by a dramatic decline in US-China trade.
China exports to the US decreased by 7.9% in April (in relation to April 2019).
It is clear that the vast majority of
US industries could not survive without Chinese supply chains. The western dependence on
Chinese medical supplies is particularly strong. Let alone Chinese dependence by US consumers.
In 2019, US total consumption, about 70% of GDP, amounted to $13.3 trillion, of which a fair
amount is directly imported from China or dependent on ingredients from China.
The WEF-masters are confronted with a real dilemma. Their plan depends very much on the
dollar supremacy which would continue to allow dishing out sanctions and confiscating assets
from those countries opposing US rule; a dollar-hegemony which would allow imposing the
components of The Great Reset scheme, as described above.
At present, the dollar is fiat money, debt-money created from thin air. It has no backing
whatsoever. Therefore, its worth as a reserve currency is increasingly decaying, especially
vis-à-vis the new crypto-yuan from China. In order to compete with the Chinese yuan, the
US Government would have to move away from its monetary Ponzi-scheme, by separating itself from
the 1913 Federal Reserve Act and print her own US-economy- and possibly gold-backed (crypto)
money – not fiat FED-money, as is the case today. That would mean cutting the more than
100-year old ties to the Rothschild and Co. clan-owned FED, and creating a real peoples-owned
central bank. Not impossible, but highly improbable. Here, two Beasts might clash, as world
power is at stake.
Meanwhile, China, with her philosophy of endless creation would continue forging ahead
unstoppably with her mammoth socioeconomic development plan of the 21st Century, the Belt and
Road Initiative, connecting and bridging the world with infrastructure for land and maritime
transport, with joint research and industrial projects, cultural exchanges – and not
least, multinational trade with "win-win" characteristics, equality for all partners –
towards a multi-polar world, towards a world with a common future for mankind.
Today already more than 120 countries are associated with BRI – and the field is wide
open for others to join – and to defy, unmask and unplug The Great Reset of the West.
"... Russia heavily subsidised Ukrainian energy imports for decades – gas and oil. In a similar fashion, Russia is doing this with Belarus until the present time. Russia is the only possible consumer of what Ukraine used to manufacture – a market that has disappeared. Gas turbines used to be made in Ukraine. Now, this has moved to Russia. Of course, the skilled Ukrainians went to Russia with their know-how. ..."
"... To the best of my knowledge the USSR was the only empire that actually subsidized its colonies – Poland, East Germany, Ukraine etc. Russia is far better off without them. ..."
"... Ukrainian supermarkets are overflowing with French/German/Italian products. European supermarkets are devoid of Ukrainian products. ..."
Only a complete and utter incompetent (or a rabid Ukrainian nationalist) can call Ukraine
an independent state. It is de-facto a colony of the West. A debt slave.
I applaud the US response of supporting Ukraine's aspirations for a freer, more
Western-oriented country and that it continues to support Ukraine's territorial interests
over those of Russia's.
This was not about supporting Ukrainian aspirations for a freer, more Western-oriented
country. It is about kicking out Russia from Ukrainian markets and plundering Ukraine all by
themselves. Mainly by Germany and the USA -- to major players of Euromaydan color revolution.
For Germans this is return to "Drang nach Osten" on a new level, on the level of neoliberal
neocolonialism.
They used Western nationalists as their fifth column, but Western Ukrainian suffered from
the results no less then people in Eastern Ukraine. Many now try to move to Kiev, Kiev region
and further East in order to escape poverty and unemployment. Seasonal labor to Russia
(mainly builders) diminished rapidly. Train communication now is blocked, and for Western
Ukraine only Poland now represents a chance to earn money for the family to survive the
winter.
For the USA this is first of all about selling Ukraine expensive weaponry, wasting
precious Ukrainian resources on permanent hostility with Russia (with Donbas conflict as a
real win to further the USA geopolitical ambitions -- in line with the "Full spectrum
dominance" doctrine) , cornering Ukrainian energy market (uranium supplies for power
stations, etc.), destruction, or buy-out of a few competing industries other than extracting
industries and maquiladoras, getting better conditions for the EU exports and multinationals
operating in Ukraine (and initially with plans for re-export products to Russia tax free) and
increasing the country debt to "debt slave" level.
In other words this is a powerful kick in a chin by Obama to Putin. Not a knockdown, but
very close.
For Ukraine first of all that means rapid accumulation of a huge external debt --
conditions of economic slavery, out of which there is no escape. Ukrainian people paid a very
dear price for their Euromaydan illusions. They became mass slave labor in Poland.
Prostitutes in Germany. Seasonal picker of fruits in some other EU countries (GB, France). A
new European blacks, so to speak.
The level of fleecing Ukraine by the USA after Euromaidan can be compared only with
fleecing of Libya. The currency dropped 300%, and 80% Ukrainians now live in abysmal poverty,
while neoliberal oligarchs allied with the West continue to plunder the country. Gold
reserves were moved to the USA.
If I had to choose between two colonizers, I probably would prefer Russians. They are
still colonizers, but they are less ruthless and brutal colonizers.
@likbezIf I had
to choose between two colonizers, I probably would prefer Russians. They are still
colonizers, but they are less ruthless and brutal colonizers.
I agree with 90% of what you wrote, but I would like to correct the above.
Russia heavily subsidised Ukrainian energy imports for decades – gas and oil. In
a similar fashion, Russia is doing this with Belarus until the present time. Russia is the
only possible consumer of what Ukraine used to manufacture – a market that has
disappeared. Gas turbines used to be made in Ukraine. Now, this has moved to Russia. Of
course, the skilled Ukrainians went to Russia with their know-how.
To the best of my knowledge the USSR was the only empire that actually subsidized its
colonies – Poland, East Germany, Ukraine etc. Russia is far better off without
them.
Ukrainian supermarkets are overflowing with French/German/Italian products. European
supermarkets are devoid of Ukrainian products.
Wall Street is a highly influential financial district but its history is rarely talked
about. In order to understand the largesse of Wall Street and the system of global
capitalism, it is crucial to know Wall Street's history. Wall Street was founded on slavery
and, to this day, it remains a key pillar in upholding racial inequality and economic
oppression.
Michael Hudson: Debt, Liberty and "Acts of God"
Posted on
May 26, 2020
by
Yves Smith
Yves here. Michael Hudson recaps the logic of debt jubilees and other forms of debt relief, as practiced in
ancient times, when borrowers through circumstances outside their control were unable to make good. Monarchs
recognized the danger of letting creditors create a permanent underclass.
This is a short, high-level treatment and makes for an easy-to-digest introduction to Hudson's research
and ideas.
Western civilization distinguishes itself from its predecessors in the way it has responded to "acts of
God" disrupting the means of support and leaving debts in their wake.
The great question always has been who will lose under such conditions. Will it be debtors and renters at
the bottom of the economic scale, or creditors and landlords at the top? This age-old confrontation between
creditors and debtors, landlords and tenants over how to deal with the unpaid debts and back rents is at the
economic heart of today's 2020 coronavirus pandemic that has left large and small businesses, farms,
restaurants and neighborhood stores – along with their employees who have been laid off – unable to pay the
rents, mortgages, other debt service and taxes that have accrued.
For thousands of years ancient economies operated on credit during the crop year, with payment falling
due when the harvest was in – typically on the threshing floor. Normally this cycle provided a flow of crops
and corvée labor to the palace and covered the cultivator's spending during the crop year, with interest
owed only when payment was late. But bad harvests, military conflict or simply the normal hardships of life
occasionally prevented this buildup of debt from being paid, threatening citizens with bondage to their
creditors or loss of their land rights.
Mesopotamian palaces had to decide who would bear the loss when drought, flooding, infestation, disease
or military attack disrupted economic activity and prevented the settlement of debts, rents and taxes.
Recognizing that this was an unavoidable fact of life, rulers proclaimed amnesties for taxes and the various
debts that were incurred during the crop year. These acts saved smallholders from having to work off their
debts by personal bondage and ultimately to lose their land.
Classical antiquity, and indeed subsequent Western civilization, rejected such Clean Slates to restore
social balance. Since Roman times it has become normal for creditors to use social misfortune as an
opportunity to gain property and income at the expense of families falling into debt. In the absence of
kings or democratic civic regimes protecting debtor rights and liberty, pro-creditor laws obliged debtors to
lose their land or other means of livelihood to foreclosing creditors, sell it under distress conditions and
fall into bondage to work off their debts, becoming clients or quasi-serfs to their creditors without hope
of recovering their former free status.
Giving priority to creditor claims leads to widespread bankruptcy. At first glance, it seems to violate
our society's ideas of fairness and distributive justice to insist on payment of debt and rent arrears,
threatening to evict debtors from their homes and forfeit whatever property they have if they cannot pay the
rent arrears and other charges without revenue having come in. Bankruptcy proceedings would force businesses
and farms to forfeit what they have invested. It also would force U.S. cities and states to cope with
plunging sales- and income-tax revenue by slashing social services and depleting their pension funds savings
to pay bondholders.
But the West's pro-creditor legal and financial philosophy has long blocked debt relief to renters,
mortgagees and other debtors. Banks, landlords and insurance companies insist that writing down of debts and
rents owed to them by wage-earners and small business is unthinkable. So something has to give: either the
broad economic interest of most of the population, or the interest of the Finance, Insurance and Real Estate
(FIRE) sector. Banks claim that non-payment of rent would cause debt defaults and wipe out bank capital.
Insurance companies claim that to make their policy holders whole would bankrupt them. So the insurance
companies, banks, landlords and bondholders insist that labor, industry and the government bear the cost of
arrears that have built up during the economic slowdown, not themselves.[1]
Yet for thousands of years Near Eastern rulers restored viability for their economies by writing down
debts in emergencies, and more or less regularly to relieve the normal creeping backlog of debts. These
Clean Slates extended from Bronze Age Sumer and Babylonia in the 3
rd
millennium BC down to
classical antiquity through the Near East, including the neo-Assyrian, neo-Babylonian and Persian Empires.
Near Eastern Protection of Economic Resilience in the Face of Acts of God
For the palatial economies of Mesopotamia and its neighbors, resilience meant stabilization of fiscal
revenue. Letting private creditors (often officials in the palace's own bureaucracy) demand payment out of
future production threatened to deprive rulers of crop surpluses and other taxes, and corvée labor or even
service in the military. Individual creditors looked to their own advantage, not that of the overall
economy.
To preserve the flow of rents, taxes and basic corvée labor duties and service in the military, Near
Eastern rulers proclaimed Clean Slates that wiped out personal and agrarian debts. That restored normal
economic relations – an idealized
status quo ante
– by rolling back the consequence of debts –
bondage to creditors, and loss of land and its crop yield. From the palace's point of view as tax collector
and seller of many key goods and services, the alternative would have been for debtors to owe their crops,
labor and even liberty to their creditors, not to the palace. So cancelling debts to restore normalcy was
simply pragmatic, not utopian idealism as was once thought.
The pedigree for "act-of-God" rules specifying what obligations need not be paid when serious disruptions
occur goes back to the laws of Hammurabi c. 1750 BC. Their aim was to restore economic normalcy after major
disruptions. §48 of Hammurabi's laws proclaim a debt and tax amnesty for cultivators if Adad the Storm God
has flooded their fields, or if their crops fail as a result of pests or drought. Crops owed as rent or
fiscal payments were freed from having to be paid. So were consumer debts run up during the crop year,
including tabs at the local ale house and advances or loans from individual creditors. The ale woman
likewise was freed from having to pay for the ale she had received from palace or temples for sale during
the crop year.
Whoever leased an animal that died by an act of God was freed from liability to its owner (§266). A
typical such amnesty occurred if the lamb, ox or ass was eaten by a lion, or if an epidemic broke out.
Likewise, traveling merchants who were robbed while on commercial business were cleared of liability if they
swore an oath that they were not responsible for the loss (§103).
It was realized that hardship was so inevitable that debts tended to accrue even under normal conditions.
Every ruler of Hammurabi's dynasty proclaimed a Clean Slate cancelling personal agrarian debts (but not
normal commercial business loans) upon taking the throne, and when military or other disruptions occurred
during their reign. Hammurabi did this on four occasions.[2]
In an epoch when labor was the scarcest resource, a precondition for survival was to prevent rising
indebtedness from enabling creditors to use debt leverage to obtain the labor of debtors and appropriate
their land. Early communities could not afford to let bondage become chronic, or creditors to become a
wealthy class rivaling the power of palace rulers and seeking gains by impoverishing their debtors.
Yet that is precisely what is occurring as today's economy polarizes between creditors and debtors.
_______
[1]
Lawsuits are exploding over the role of insurance companies supposed to protect business
from such interruptions. See Julia Jacobs, "Arts Groups Fight Their Insurers Over Coverage on Virus Losses,"
The New York Times
, May 6, 2020, reports that "insurance companies have issued a torrent of
denials, prompting lawsuits across the country and legislative efforts on the state and federal levels to
force insurers to make payments. The insurance industry has argued that fulfilling all of these requests
would bankrupt the industry."
[2]I provide a detailed history of Clean Slate acts from the Bronze Age down through Biblical times and
the Byzantine Empire in
" and forgive them their debts"
(ISLET 2018).
The historical overlook ignores the function of bankruptcy to create the clean slate. Sure, a few
sentences are thrown in, but somehow completely overlooks entire types of bankruptcy that allow corporate
and individual restructuring to occur and preserve underlying value.
The whole debt jubilee ideas is just so unfair. Access to debt is by and large a privileged position in
the modern world. The rich have access to huge amount of capital at minimal cost while the poor have to pay
outrageous rates to buy a used car or pay for an emergency. To wipe the slate clean is overwhelmingly
beneficial to the rich and connected, while the poor remains renters stuck in wage slavery. And the
aftermath of a general debt jubilee means the poor will have even greater difficulty with accessing credit
to buy housing, durable goods, and things that allow them to build wealth.
There's already a much better solution that actually stimulates the economy and redistributes wealth.
Just give every natural person the same amount of money until the economy gets to where it needs to be. It
can also be channeled through building public goods like free college education and universal free
healthcare and public housing. For everything else, just let bankruptcies happen and clean out natural and
unnatural persons addicted to debt. Then the natural person get their fresh start and the unnatural
corporate persons can die a well deserved death.
You must be joking re bankruptcy.
And you completely misunderstand what Hudson is talking about for our modern day 'Little people' debt
issues. I suggest a far more thorough reading of Hudson.
"why do people say," you ought to go read what the author REALLY means".. as opposed to looking at
what was said?
I think what Astrid says is completely valid.
What about what was said ,doesn't reflect reality?
There is unequal treatment and how much money /credit you have completely changes "what you can get
away with".
Poor people don't go bankrupt they get evicted they go homeless.. their cars are repossessed. They
don't have the money for a lawyer to file bankruptcy papers..
Donald trump "goes bankrupt".. and comes out smiling on the other side
Just give every natural person the same amount of money until the economy gets to where it needs to
be.
Astrid
Yes, Steve Keen's solution. But also, all government privileges for private credit creation should be
abolished to eliminate perverse incentives to go into debt, which include the punishment of legitimate*
saving.
Also, an ongoing Citizen's Dividend, to replace all fiat creation for private interests, is a way, in
addition to saving, for all citizens to build equity for rainy days such as these.
'Just give every natural person the same amount of money until the economy gets to where it needs to
be'
Astrid – a basic income has been discussed but, due to the structures in our tax system and in the
operation of the so called 'Free Market' (a complete inversion of it's original meaning) -- I would think
that income would immediately be taken away by the fire sector interests and be used to balloon up asset
prices.
The fact that the cost of living – food, rent, housing has gone up is not really a natural market force –
(there is no natural market force or some magical invisible hand or some as yet undetermined phenomena to
be discovered) – because the market is man made.
In my view, the heaping on of debt fueled speculation combined with corruption's many companions –
co-joined political capture and tax favored status is driving the fundamental asset inflation which is
making everything so damned expensive – everything that used to make living and doing business less
expensive has been captured by creditors and their co-joined cohorts.
Below is a comment from the mid 1920's – don't know who wrote it
In spite of the ingenious methods devised by statesmen and financiers to get more revenue from large
fortunes, and regardless of whether the maximum sur tax remains at 25% or is raised or lowered, it is
still true that it would be better to stop the speculative incomes at the source, rather than attempt to
recover them after they have passed into the hands of profiteers.
If a man earns his income by producing wealth nothing should be done to hamper him. For has he not given
employment to labor, and has he not produced goods for our consumption? To cripple or burden such a man
means that he is necessarily forced to employ fewer men, and to make less goods, which tends to decrease
wages, unemployment, and increased cost of living.
If, however, a man's income is not made in producing wealth and employing labor, but is due to
speculation, the case is altogether different. The speculator as a speculator, whether his holdings be
mineral lands, forests, power sites, agricultural lands, or city lots, employs no labor and produces no
wealth. He adds nothing to the riches of the country, but merely takes toll from those who do employ
labor and produce wealth.
If part of the speculator's income – no matter how large a part – be taken in taxation, it will not
decrease employment or lessen the production of wealth. Whereas, if the producer's income be taxed it
will tend to limit employment and stop the production of wealth.
Our lawmakers will do well, therefore, to pay less attention to the rate on incomes, and more to the
source from whence they are drawn.
First pass"the need act"
https://www.congress.gov/bill/112-thcongress/house-bill/2990/text
Then, as the US gov't would be able to create money debt free .
They could distribute the money to Everyone . and not just wall street to get that money into
circulation . and drive the economy .. not too much not too little.
I think you are missing who Hudson said the "clean slates" were for. They were not for the big
creditors and rentiers, rather they were for the farmers and average people who had suffered some loss
that made them unable to provide their payments to their creditors and rentiers. It would be as if today,
those people who cannot work because of Covid-19 were forgiven their debts, so that when this pandemic
was over, they could start out fresh. That would be so much more a help to Main Street's economy than
just giving money to the top corporations.
I'm not against your ideas about free education and universal healthcare and I doubt Hudson is against
those either, but there is much more to the economy that just education and healthcare – things like food
production and the manufacturing of necessary items, and Hudson is looking at what has worked
historically.
Ah, Americans! "If there is nothing in it for me, then I'm against it!"
Haven't we had enough of that kind of thinking? Is someone else getting a break from their debt
REALLY going to hurt the rest of Americans? In fact, if it makes American's Main Street economy
stronger, doesn't that actually help all Americans? I hear that kind of thinking all the time when
I talk about forgiving student debt – as though somehow that debt is coming out of THEIR pockets
when it is not.
Too many Americans sound like temporarily distressed billionaires in their attitudes (it's all
about ME) instead of people who want all Americans to succeed.
Justice is justice and Hudson's plan would do nothing for rent slaves while giving houses to
those who used what is, in essence, the public's credit but for private gain to buy them.
Also, rent slaves tend to be poorer than those who "own" their own homes so Hudson's plan is
a form of welfare for the richer rather than a promotion of the general welfare.
In fact, if it makes American's Main Street economy stronger, doesn't that actually help
all Americans?
The Historian
Our focus should be on citizens, i.e. people, not businesses since justice for people is what
ultimately matters. What you are promoting is Main Street trickle-down.
Astrid, please re-read Hudson's article. He has been studying this subject for years and knows what he
is talking about. He deserves a closer read than what you gave him!
"Access to debt is by and large a privileged position in the modern world." While this statement is
narrowly true, in the US it isn't. Subprime debt, debt laddled onto those least able to pay it, was
behind the largest financial collapse in US history (so far) just 12 years ago.
"To wipe the slate clean is overwhelmingly beneficial to the rich and connected, while the poor
remains renters stuck in wage slavery." In a rentier economy, to eliminate the debts would be to
eliminate income streams for the rich and connected, Jerome Powell and Josh Hawley are already worried
about what it means to not bail out the poor. The Democrats can't hear this from the left, maybe when it
becomes Republican policy they will like it, that's typically how they roll.
"And the aftermath of a general debt jubilee means the poor will have even greater difficulty with
accessing credit to buy housing, durable goods, and things that allow them to build wealth." This is a
studiously complete missreading of the point of the article: centralized State action to relieve debtors
of financial burdens and social stigma, to restore their freedom because their freedom is the strength of
the State or civilization.
Finally, read the article, a few paragraphs, yes they include a few sentences too:
"Giving priority to creditor claims leads to widespread bankruptcy. At first glance, it seems to
violate our society's ideas of fairness and distributive justice to insist on payment of debt and rent
arrears, threatening to evict debtors from their homes and forfeit whatever property they have if they
cannot pay the rent arrears and other charges without revenue having come in. Bankruptcy proceedings
would force businesses and farms to forfeit what they have invested. It also would force U.S. cities and
states to cope with plunging sales- and income-tax revenue by slashing social services and depleting
their pension funds savings to pay bondholders.
But the West's pro-creditor legal and financial philosophy has long blocked debt relief to renters,
mortgagees and other debtors. Banks, landlords and insurance companies insist that writing down of debts
and rents owed to them by wage-earners and small business is unthinkable. So something has to give:
either the broad economic interest of most of the population, or the interest of the Finance, Insurance
and Real Estate (FIRE) sector. Banks claim that non-payment of rent would cause debt defaults and wipe
out bank capital. Insurance companies claim that to make their policy holders whole would bankrupt them.
So the insurance companies, banks, landlords and bondholders insist that labor, industry and the
government bear the cost of arrears that have built up during the economic slowdown, not themselves."
And iuris romana led directly to the serfdom and prolonged depression of the "dark ages", as the church
spread roman law throughout Europe. If Hayak had bothered to study history he would have found that the
"road to serfdom" is (to borrow a locution from one of Hayak's acolytes) always and everywhere a result of
extreme laissez faire, particularly heritable debts. For modern incarnations of serfdom, look at India,
Pakistan and Mali.
Dr. Hudson spends much time in China. It would be interesting if he were to comment upon how debt and
default were handled in China during its many different dynasties. For example, how did ancient Chinese
policies compare with those of the ancient Middle East?
Yes, that should tie him up for several lifetimes and ensure he does not assemble a following in the
world today. We can't have these loose cannon revealing a way out of unfairness and inequality, eh?
Debt looks like the solution to every problem when you use an economics that doesn't consider
debt.
The economics of globalisation has always had an Achilles' heel.
In the US, the 1920s roared with debt based consumption and speculation until it all tipped over into the
debt deflation of the Great Depression. No one realised the problems that were building up in the economy as
they used an economics that doesn't look at private debt, neoclassical economics.
Not considering private debt is the Achilles' heel of neoclassical economics.
The neoliberal ideology was just a wrapper, hiding the dodgy, old 1920s neoclassical economics
lurking underneath.
The international elite swallowed it hook, line and sinker.
Neoclassical economics, probably the worst economics in the world.
(I bet they drink Karlsburg. – UK joke)
The economics of globalisation has always had an Achilles' heel.
In the US, the 1920s roared with debt based consumption and speculation until it all tipped over into the
debt deflation of the Great Depression. No one realised the problems that were building up in the economy
as they used an economics that doesn't look at private debt, neoclassical economics.
Not considering private debt is the Achilles' heel of neoclassical economics.
Policymakers run the economy on debt until they get a financial crisis.
At 25.30 mins you can see the super imposed private debt-to-GDP ratios.
https://www.youtube.com/watch?v=vAStZJCKmbU&list=PLmtuEaMvhDZZQLxg24CAiFgZYldtoCR-R&index=6
Policymakers run the economy on debt until they get a financial crisis.
1929 – US
1991 – Japan
2008 – US, UK and Euro-zone
The PBoC saw the Chinese Minsky Moment coming and you can too by looking at the chart above.
In the beginning it had nothing to do with god. It was unquestioned cooperation. I'll give you help and
you can help me later. It was unspoken. It was spontaneous. Ever notice how careful wild animals are? And,
by contrast, how foolish humans are? That's gotta be because god is our scapegoat. Just suppose that it's
because over the millennia of civilization helping each other was standardized, formalized and abstracted
into money. When money accumulated it became wealth itself, replacing the value of a good society. It
became money without social cooperation. It has even become a medium of exchange and trade. Contracts were
substituted for cooperation. Leaving morality and caution out entirely. There's really nothing moral about
turning debt into an "asset" which can be collected by law or bought and sold for a profit. An asset that
must be paid in full after a certain use, plus interest. Debt itself has become dissociated from society. So
now what have we got? We've got a planet being destroyed not by god, but by humans. From now on in it's
gonna be devastation by "act of man". Full tilt. And poetically, there will be few profits available to
"service" debt. It's time to legislate a few things, like good societies to meet the needs of people and
planet alike. No speculating and no profiteering. And no debt transmogrified into assets. Our debt is to the
planet now. And survival. End of sermon.
>> or creditors to become a wealthy class rivaling the power of palace rulers and seeking gains by
impoverishing their debtors.
Does this make the case that a benevolent individual ruler (i.e. a monarch, or dictator, or tyrant) would
have a natural interest in protecting balance between creditor-debtor so as not to have his power
threatened?
Is formal democracy then more vulnerable to allowing creditors to seize the power of state as there is no
counterbalancing interest? It seems to me that what Prof. Hudson is saying could certainly be interpreted
that way. I believe also originally the concept of a tyrant in ancient Greece was synonymous with just
government (cant provide references right now).
Debt and contract amnesties did not only exist in ancient times. See Terry Boughton's "Taming Democracy"
about how the American Revolutionaries understood currency. The early state of Pennsylvania regularly issued
relief, and the Federal Constitution limited states' abilities to break these contracts due to acts of god.
Boughton's book is eye-opening also in terms of how money works.
Notice that Hudson is discussing the kind of debt that was paid on the threshing floor. These were debts
of the working people. Commercial "silver" debts were not cancelled in a clean slate. Trying to write a
concise report above Hudson did not fully spell this out. Take a look at the very first section of his book,
beginning on page ix.
The Overview beginning on page 1 addresses the issue of how "American" all this is. He traces the history
of the Liberty Bell and the torch of the Statue of Liberty back to ancient clean slates. They ring and shine
with freedom from onerous debt. Yes, the huddled masses were yearning to be free; free from debt! On page 5
he quotes Hammurabi's law epilogue, " that the strong might not oppress the weak, that justice might be
dealt to the orphan and widow I write my precious words on my stele To give justice to the oppressed." And
Hudson was just getting warmed up on why a certain would-be king took a whip to the moneychangers in the
temple!
No new class, policy or ideology is going to fix economic degradation over generations destroying the
work ethic. It's a computer-controlled machine that systematically eliminates people from the economy and
pays its owners in ones and zeros, to consume natural resources ever more efficiently. China was just the
contract manufacturor. Nature is responding.
The economic bridge is all about the multiplier effects of operational leverage. Why would anyone
responsible for multiplier effects work for equal pay, and if an entire generation is pissed off at the
corporations catering to it, why would anyone expect anything other than negative multiplier effects. When
individual rights are removed, there are no rights, for anyone.
There's a reason why monetary expansion has been rotated geographically, to consume natural resources,
and why the globalists cling to electronic money in virtual space – fintech. A debt jubilee doesn't change
the inbred behavior of consumerism.
Me, being a cynic and all – I thought the way trade worked in the real world (not
the one described by well paid economists) was a multi step process
1) target developing country by undermining their core farming, self sustaining activity
and export industries through cheap importation of grains and crops and other goods –
thus making it impossible for locals to survive through their own industry
2) simultaneous loans (investment) to the country (economic aid) and corruption of
political leaders designed to enable step three
3) Whence said country is indebted – force country to export whatever (mineral)
wealth onto a glutted market to pay back its debts – this is easily done as the labor
component is ripe for the picking/ fleecing
4) crush the country into economic austerity for as long as it takes to enslave its
citizens and grab everything of value from the country
5) pretend that the IMF etc did such a great job – but the countries people
(victims) or government did not do enough and must take care of themselves better
I think that you covered the Standard Operation Procedure here in better detail than I
could. I would only add to point 2) that the bankers will go to these local leaders and show
them how to hide their money and help them set up accounts in a place like the Caymans as part
of the service.
And if that economist wants to find where all of Africa's wealth is going, he might want to
start in the City of London and New York first.
[Iraq] will have to borrow a lot of money most likely from the IMF. The money may come
with U.S. conditions.
BM: Hmm. Iraq has a big pile of problems on its hands, but the way the "answer" is worded
seems rather USA-flavoured, as though Iraq borrowing from the IMF is even remotely viable
politically, given that would automatically make its other political problems far more
intractible. Does not sound like a "Bernhard" statement to me. may come with U.S.
conditions.??? Is that what is commonly referred to as an "understatement"?
Piotr: Actually, this is a HUGE blunder in the article. I have only one data point:
Trump administration threatened to freeze 35 billions on Iraqi funds in American banks if
Iraq completes the expulsion of American forces. One f...d up thing in Iraq is the failure of
restoring electricity production, and the dependence on Iranian electricity and Iranian gas
for the power station. As we know, it is much cheaper to build power stations that run on
natural gas than on crude or coal, and the fuel costs are lower, so it seems that Americans
blocked the most economic solutions to the problem. And as a bonus (for Americans), the
failures in electricity supplies were a major motivation in riots that caused government
crisis.
This there is no problem with IMF borrowing money to Iraq or not, but the direct
dependency on USA that can give the access to Iraq's money or not. Extremely colonial
dependency, without using "international tools" like IMF.
"... Pretty near stopped reading right there. IMF and World Bank are primary tools of imposing empire on the rest of the world. There is no reason to pay the slightest attention to any of their predictions, except to keep up with what is this week's propaganda. ..."
"... with the neoliberal reforms of 1975-1997, the IMF quickly rose in importance. Mexico's bankruptcy of the mid-1980s was just the prelude. Then the USSR dissolved, and the IMF suddenly took the WB's place as the capitalist spearhead in the Third World. It's prestige spiked through the roof with the subjugation of Russia (Yeltsin Era), Latin America (specially Argentina and Brazil) and others. When the Asian Tigers crisis broke out (1997), the IMF gained police power, which only rose its importance as a capitalist instrument of hegemony. By 2001 - when the Asian Tigers crisis was essentially over - the IMF basically became sacrosanct, a fact of life of capitalism, a status it still enjoys in the present. ..."
"... IMF's accidental rise to power - coupled with the decline of the World Bank - is a very strong evidence and a poetic illustration of the metamorphosis of the American Empire from an industrial-financial superpower (i.e. a capitalist superpower) to a strictly financial superpower. ..."
"... YES to that. IMF is the imperialist tool of enslavement. It is the entry point for private capital hoarders to prise loose the fabric of social cohesion and turn the threads into rope to bind the people to repay national debt. What did Joe Biden do in Ukraine? He arranged US and IMF loans to the government, stole a larger chunk of the deposit through his son and other vectors via the Burisma board etc as he slinked off back home. Then tried the same in China where he was perhaps ensnared in a compromise sting. In all cases the public repays the debt to the IMF or USA. ..."
>Gita Gopinath, the super-smart Director of the IMF's Research Department,
Pretty near stopped reading right there. IMF and World Bank are primary tools of imposing
empire on the rest of the world. There is no reason to pay the slightest attention to any of
their predictions, except to keep up with what is this week's propaganda.
Posted by: Trailer Trash | May 9 2020 18:41 utc | 20
Same. Maybe the crazies are right, is b even here anymore?
@ Posted by: Trailer Trash | May 9 2020 18:41 utc | 20
The history of the IMF is a curious one. It was one of the many international post-war
institutions created in 1944-45, during the world peace hysteria that accompanied the Cold
War.
Initially, though, it was expected that the IMF would play, at best, a very peripheral
role. It should be, in theory, just a fund to be used in exceptional circumstances, for very
tiny problems. Maybe some basket case in Africa would need a couple billions to fix itself
someday, but nothing more than that. It was definitely not taken seriously, and was just a
footnote in the long list of newly founded international institutions.
The capitalist star of the show during the High Cold War (1945-1975) was the World Bank,
more specifically, its infrastructure investment branch, the IBRD.
However, with the neoliberal reforms of 1975-1997, the IMF quickly rose in importance.
Mexico's bankruptcy of the mid-1980s was just the prelude. Then the USSR dissolved, and the
IMF suddenly took the WB's place as the capitalist spearhead in the Third World. It's
prestige spiked through the roof with the subjugation of Russia (Yeltsin Era), Latin America
(specially Argentina and Brazil) and others. When the Asian Tigers crisis broke out (1997),
the IMF gained police power, which only rose its importance as a capitalist instrument of
hegemony. By 2001 - when the Asian Tigers crisis was essentially over - the IMF basically
became sacrosanct, a fact of life of capitalism, a status it still enjoys in the present.
IMF's accidental rise to power - coupled with the decline of the World Bank - is a very
strong evidence and a poetic illustration of the metamorphosis of the American Empire from an
industrial-financial superpower (i.e. a capitalist superpower) to a strictly financial
superpower.
YES to that. IMF is the imperialist tool of enslavement. It is the entry point for private
capital hoarders to prise loose the fabric of social cohesion and turn the threads into rope
to bind the people to repay national debt. What did Joe Biden do in Ukraine? He arranged US
and IMF loans to the government, stole a larger chunk of the deposit through his son and
other vectors via the Burisma board etc as he slinked off back home. Then tried the same in
China where he was perhaps ensnared in a compromise sting. In all cases the public repays the
debt to the IMF or USA.
The IMF employs connivers in the service of global private finance. Some might call them
super-smart but 'criminally smart' would be a better term.
The world's largest evangelist of neoliberalism, the International Monetary Fund, has
admitted that it's not all it's cracked up to be.
Neoliberalism refers to capitalism in its purest form. It is an economic philosophy espoused
by libertarians -- and repeated endlessly by many mainstream economists -- one that insists
that privatization, deregulation, the opening up of domestic markets to foreign competition,
the cutting of government spending, the shrinking of the state, and the "freeing of the market"
are the keys to a healthy and flourishing economy.
Yet now top researchers at the International Monetary Fund, or IMF, the economic institution
that has proselytized -- and often forcefully imposed -- neoliberal policies for decades, have
conceded that the "benefits of some policies that are an important part of the neoliberal
agenda appear to have been somewhat overplayed."
"There are aspects of the neoliberal agenda that have not delivered as expected," the
economists write in " Neoliberalism: Oversold? ", a
study published in the June volume of the IMF's quarterly magazine Finance &
Development.
In analyzing two of neoliberalism's most fundamental policies, austerity and the removing of
restrictions on the movement of capital, the IMF researchers say they reached "three
disquieting conclusions."
One, neoliberal policies result in "little benefit in growth."
Two, neoliberal policies increase inequality, which produces further economic harms in a
"trade-off" between growth and inequality.
And three, this "increased inequality in turn hurts the level and sustainability of
growth."
The top researchers conclude noting that the "evidence of the economic damage from
inequality suggests that policymakers should be more open to redistribution than they are."
In some cases, they add, the consequences "will have to be remedied after they occur by
using taxes and government spending to redistribute income."
"Fortunately, the fear that such policies will themselves necessarily hurt growth is
unfounded," the IMF economists stress -- that is to say, increasing taxes and boosting
government spending will not necessarily hurt growth.
The collapse of neoliberalism
These statements represent an enormous reversal for the IMF. It is somewhat like the Pope
declaring that there is no God; it is a volte-face on almost everything that the IMF has ever
stood for.
Since the 2008 financial collapse, widespread rebellions have been waged against these
failed neoliberal policies, with Occupy Wall Street in the U.S. and similar grassroots
movements around the world.
Before the 1970s, neoliberalism was relegated to the obscure margins of mainstream
economics, preached by free-market fundamentalists like Milton Friedman and Friedrich
Hayek.
In the last few decades, however, it became the hegemonic ideology. The IMF has been one of
the most crucial institutions, along with the World Bank, in the spread of neoliberalism.
By the end of the Cold War, socialist alternatives to capitalism had been brutally crushed
in a long series of wars. By the 1980s, with the rise of Prime Minister Margaret Thatcher in
the U.K. and President Ronald Reagan in the U.S., neoliberalism had come to dominate the new
world order.
Even before the Thatchers and the Reagans, however, there were the Pinochets. The policies
the IMF advocated for decades were rooted in extreme violence and repression.
Chile's
violent neoliberal dictatorship
Chile was the first country to implement neoliberal policies. Still today, neoliberal
ideologues quote Milton Friedman, speaking of the legacy of the reign of far-right, U.S.-backed
capitalist dictator Augusto Pinochet as Chile's "economic miracle." What they overlook is how
Pinochet used a bloodstained iron fist to implement these neoliberal policies.
A
bloody CIA-backed 1973 coup toppled Chile's popular democratically elected Marxist leader,
Salvador Allende, and replaced him with Pinochet. For millions of Chileans, his "economic
miracle" was a disaster.
Pinochet combined fascistic police state repression with extreme free-market policies,
killing, disappearing and torturing tens of thousands of Chilean leftists, labor organizers and
journalists, forcing hundreds of thousands more into exile.
"Chile's pioneering experience with neoliberalism received high praise from Nobel laureate
Friedman, but many economists have now come around to" more nuanced views, the IMF researchers
note in their article.
Boom and bust cycles 'are the main story'
The study was co-authored by three members of the IMF's research department -- Jonathan
Ostry, the deputy director, Prakash Loungani, a division chief, and Davide Furceri, an
economist.
The researchers don't throw neoliberalism out completely. "There is much to cheer in the
neoliberal agenda," they write. But it fails in some crucial regards.
For one, opening emerging economies up to some types of unrestricted foreign capital inflows
frequently leads to financial crises, the IMF researchers note, which in turn create large
declines in economic output and "appreciably" increase inequality.
These boom and bust cycles are not merely "a sideshow they are the main story," the
economists add.
"Capital controls are a viable, and sometimes the only, option," the IMF concludes. This is
a huge reversal. The researchers themselves point out that "the IMF's view has also changed --
from one that considered capital controls as almost always counterproductive to greater
acceptance of controls to deal with the volatility of capital flows."
Austerity can lead
to an 'adverse loop' of economic decline
Moreover, the study notes that it is often better for indebted governments to allow "the
debt ratio to decline organically through growth," rather than to impose austerity. This is
another reversal.
The IMF has for many years ordered countries to cut spending, gutting social services in
order to pay off debt. This has in turn led to a shrinking of the economy, trapping countries
in a spiral of debt.
Greece is a painful contemporary example , although there are many more.
"Austerity policies not only generate substantial welfare costs," the IMF researchers
continue, "they also hurt demand -- and thus worsen employment and unemployment."
Austerity results in "drops rather than by expansions in output." Studies show that, when
government deficits and debts are reduced with a fiscal consolidation of 1 percent of a
country's GDP, the long-term unemployment rate often increases by 0.6 percentage point and
income inequality grows by 1.5 percent within five years.
Taken in conjunction, these effects could lead to an "adverse loop," the IMF warns, where
austerity fuels inequality, which decreases growth that neoliberals insist must be cured with
more austerity.
"The increase in inequality engendered by financial openness and austerity might itself
undercut growth, the very thing that the neoliberal agenda is intent on boosting," the IMF
researchers write. "There is now strong evidence that inequality can significantly lower both
the level and the durability of growth."
The importance of this study is hard to overstate. The IMF is essentially admitted that many
of the policies that it demanded countries implement for decades only made things worse.
The International Monetary Fund appears to be inching toward a more Keynesian economic
position.
To be clear, just because IMF researchers acknowledge the economic reality billions of
working people in the world intimately understand does not mean the IMF as an institution will
act on their research and end these policies -- just as the U.S. government does not
necessarily act on the research of State Department, which has
acknowledged Israel's crimes .
But the IMF's recognition that neoliberalism is not the panacea that cures all economic ills
establishes an incredibly significant precedent, and is a huge victory in the fight for
economic justice -- and in the class war.
Ben Norton Ben Norton
is a journalist, writer, and filmmaker. He is the assistant editor of The Grayzone, and the
producer of the Moderate Rebels
podcast, which he co-hosts with editor Max Blumenthal. His website is BenNorton.com and he tweets at @ BenjaminNorton . bennorton.com
Jewish financists are no longer Jewish, much like a socialist who became minister is no
longer a socialist minister. Unregulated finance promotes a set of destructive behaviors which
has nothing to do with nationality or ethnicity.
Of course that Joyce is peddling his own obsessions, but I have to admit that Singer &
comp. are detestable. I know that what they're doing is not illegal, but it should be (in my
opinion), and those who are involved in such affairs are somehow odious. The same goes for Icahn,
Soros etc. Still Ethnic angle is evident, too: how come Singer works exclusively with his
co-ethnics in this multi-ethnic USA? Non-Jewish & most Jewish entrepreneurs don't behave that
way.
It was very gratifying to see Tucker Carlson's
recent attack on the activities of Paul Singer's vulture fund, Elliot Associates, a group I
first
profiled four years ago. In many respects, it is truly remarkable that vulture funds like
Singer's escaped major media attention prior to this, especially when one considers how
extraordinarily harmful and exploitative they are. Many countries are now in very significant
debt to groups like Elliot Associates and, as Tucker's segment very starkly illustrated, their
reach has now extended into the very heart of small-town America. Shining a spotlight on the
spread of this virus is definitely welcome. I strongly believe, however, that the problem
presented by these cabals of exploitative financiers will only be solved if their true nature
is fully discerned. Thus far, the descriptive terminology employed in discussing their
activities has revolved only around the scavenging and parasitic nature of their activities.
Elliot Associates have therefore been described as a quintessential example of a "vulture fund"
practicing "vulture capitalism." But these funds aren't run by carrion birds. They are operated
almost exclusively by Jews. In the following essay, I want us to examine the largest and most
influential "vulture funds," to assess their leadership, ethos, financial practices, and how
they disseminate their dubiously acquired wealth. I want us to set aside colorful metaphors. I
want us to strike through the mask.
It is commonly agreed that the most significant global vulture funds are Elliot Management,
Cerberus, FG Hemisphere, Autonomy Capital, Baupost Group, Canyon Capital Advisors, Monarch
Alternative Capital, GoldenTree Asset Management, Aurelius Capital Management, OakTree Capital,
Fundamental Advisors, and Tilden Park Investment Master Fund LP. The names of these groups are
very interesting, being either blankly nondescript or evoking vague inklings of Anglo-Saxon or
rural/pastoral origins (note the prevalence of oak, trees, parks, canyons, monarchs, or the use
of names like Aurelius and Elliot). This is the same tactic employed by the Jew Jordan Belfort,
the "Wolf of Wall Street," who operated multiple major frauds under the business name Stratton
Oakmont.
These names are masks. They are designed to cultivate trust and obscure the real background
of the various groupings of financiers. None of these groups have Anglo-Saxon or venerable
origins. None are based in rural idylls. All of the vulture funds named above were founded by,
and continue to be operated by, ethnocentric, globalist, urban-dwelling Jews. A quick review of
each of their websites reveals their founders and central figures to be:
Elliot Management
-- Paul Singer, Zion Shohet, Jesse Cohn, Stephen Taub, Elliot Greenberg and Richard Zabel
Cerberus -- Stephen Feinberg, Lee Millstein, Jeffrey Lomasky, Seth Plattus, Joshua Weintraub,
Daniel Wolf, David Teitelbaum FG Hemisphere -- Peter Grossman Autonomy Capital -- Derek Goodman
Baupost Group -- Seth Klarman, Jordan Baruch, Isaac Auerbach Canyon Capital Advisors -- Joshua
Friedman, Mitchell Julis Monarch Alternative Capital -- Andrew Herenstein, Michael Weinstock
GoldenTree Asset Management -- Steven Tananbaum, Steven Shapiro Aurelius Capital Management --
Mark Brodsky, Samuel Rubin, Eleazer Klein, Jason Kaplan OakTree Capital -- Howard Marks, Bruce
Karsh, Jay Wintrob, John Frank, Sheldon Stone Fundamental Advisors -- Laurence Gottlieb,
Jonathan Stern Tilden Park Investment Master Fund LP -- Josh Birnbaum, Sam Alcoff
The fact that all of these vulture funds, widely acknowledged as the most influential and
predatory, are owned and operated by Jews is remarkable in itself, especially in a contemporary
context in which we are constantly bombarded with the suggestion that Jews don't have a special
relationship with money or usury, and that any such idea is an example of ignorant prejudice.
Equally remarkable, however, is the fact that Jewish representation saturates the board level
of these companies also, suggesting that their beginnings and methods of internal promotion and
operation rely heavily on ethnic-communal origins, and religious and social cohesion more
generally. As such, these Jewish funds provide an excellent opportunity to examine their
financial and political activities as expressions of Jewishness, and can thus be placed in the
broader framework of the Jewish group evolutionary strategy and the long historical trajectory
of Jewish-European relations.
How They Feed
In May 2018, Puerto Rico declared a form of municipal bankruptcy after falling into more
than
$74.8 billion in debt, of which more than $34 billion is interest and fees. The debt was
owed to
all of the Jewish capitalists named above, with the exception of Stephen Feinberg's
Cerberus group. In order to commence payments, the government had instituted a policy of fiscal
austerity, closing schools and raising utility bills, but when Hurricane Maria hit the island
in September 2017, Puerto Rico was forced to stop transfers to their Jewish creditors. This
provoked an aggressive attempt by the Jewish funds to seize assets from an island suffering
from an 80% power outage, with the addition of further interest and fees. Protests broke out in
several US cities calling for the debt to be forgiven. After a quick stop in Puerto Rico in
late 2018, Donald Trump pandered to this sentiment when he told Fox News, "They owe a lot of
money to your friends on Wall Street, and we're going to have to wipe that out." But Trump's
statement, like all of Trump's statements, had no substance. The following day, the director of
the White House budget office, Mick Mulvaney, told reporters: "I think what you heard the
president say is that Puerto Rico is going to have to figure out a way to solve its debt
problem." In other words, Puerto Rico is going to have to figure out a way to pay its Jews.
Trump's reversal is hardly surprising, given that the President is considered extremely
friendly to Jewish financial power. When he referred to "your friends on Wall Street" he really
meant his friends on Wall Street. One of his closest allies is Stephen Feinberg, founder
and CEO of Cerberus, a war-profiteering vulture fund that has now accumulated
more than $1.5 billion in Irish debt , leaving the country prone to a "
wave of home repossessions " on a scale not seen since the Jewish mortgage traders behind
Quicken Loans (Daniel Gilbert) and Ameriquest (Roland Arnall)
made thousands of Americans homeless . Feinberg has also been associated with mass
evictions in Spain, causing a collective of Barcelona anarchists to
label him a "Jewish mega parasite" in charge of the "world's vilest vulture fund." In May
2018, Trump made Feinberg
chair of his Intelligence Advisory Board , and one of the reasons for Trump's sluggish
retreat from Afghanistan has been the fact Feinberg's DynCorp has enjoyed years of lucrative government
defense contracts training Afghan police and providing ancillary services to the military.
But Trump's association with Jewish vultures goes far beyond Feinberg. A recent piece
in the New York Post declared "Orthodox Jews are opening up their wallets for Trump in
2020." This is a predictable outcome of the period 2016 to 2020, an era that could be neatly
characterised as How Jews learned to stop worrying and love the Don. Jewish financiers
are opening their wallets for Trump because it is now clear he utterly failed to fulfil
promises on mass immigration to White America, while pledging his commitment to Zionism and to
socially destructive Jewish side projects like the promotion of homosexuality. These actions,
coupled with his commuting
of Hasidic meatpacking boss Sholom Rubashkin 's 27-year-sentence for bank fraud and money
laundering in 2017, have sent a message to Jewish finance that Trump is someone they can do
business with. Since these globalist exploiters are essentially politically amorphous, knowing
no loyalty but that to their own tribe and its interests, there is significant drift of Jewish
mega-money between the Democratic and Republican parties. The New York Post reports, for
example, that when Trump attended a $25,000-per-couple luncheon in November at a Midtown hotel,
where 400 moneyed Jews raised at least $4 million for the America First [!] SuperPAC, the
luncheon organiser Kelly Sadler, told reporters, "We screened all of the people in attendance,
and we were surprised to see how many have given before to Democrats, but never a Republican.
People were standing up on their chairs chanting eight more years." The reality, of course, is
that these people are not Democrats or Republicans, but Jews, willing to push their money in
whatever direction the wind of Jewish interests is blowing.
The collapse of Puerto Rico under Jewish debt and elite courting of Jewish financial
predators is certainly nothing new. Congo , Zambia , Liberia ,
Argentina , Peru ,
Panama , Ecuador ,
Vietnam , Poland , and
Ireland are just some of the countries that have slipped fatefully into the hands of the
Jews listed above, and these same people are now closely watching
Greece and
India . The methodology used to acquire such leverage is as simple as it is ruthless. On
its most basic level, "vulture capitalism" is really just a combination of the
continued intense relationship between Jews and usury and Jewish involvement in medieval
tax farming. On the older practice, Salo Baron writes in Economic History of the Jews
that Jewish speculators would pay a lump sum to the treasury before mercilessly turning on the
peasantry to obtain "considerable surpluses if need be, by ruthless methods." [1] S. Baron
(ed) Economic History of the Jews (New York, 1976), 46-7. The activities of the
Jewish vulture funds are essentially the same speculation in debt, except here the trade in
usury is carried out on a global scale with the feudal peasants of old now replaced with entire
nations. Wealthy Jews pool resources, purchase debts, add astronomical fees and interests, and
when the inevitable default occurs they engage in aggressive legal activity to seize assets,
bringing waves of jobs losses and home repossessions.
This type of predation is so pernicious and morally perverse that both the
Belgian and
UK governments have taken steps to ban these Jewish firms from using their court systems to
sue for distressed debt owed by poor nations. Tucker Carlson, commenting on Paul Singer's
predation and the ruin of the town of Sidney, Nebraska, has said:
It couldn't be uglier or more destructive. So why is it still allowed in the United
States? The short answer: Because people like Paul Singer have tremendous influence over our
political process. Singer himself was the second largest donor to the Republican Party in
2016. He's given millions to a super-PAC that supports Republican senators. You may never
have heard of Paul Singer -- which tells you a lot in itself -- but in Washington, he's
rock-star famous. And that is why he is almost certainly paying a lower effective tax rate
than your average fireman, just in case you were still wondering if our system is rigged. Oh
yeah, it is.
Aside from direct political donations, these Jewish financiers also escape scrutiny by
hiding behind a mask of simplistic anti-socialist rhetoric that is common in the American
Right, especially the older, Christian, and pro-Zionist demographic. Rod Dreher, in a
commentary on Carlson's
piece at the American Conservative , points out that Singer gave a speech in May
2019 attacking the "rising threat of socialism within the Democratic Party." Singer continued,
"They call it socialism, but it is more accurately described as left-wing statism lubricated by
showers of free stuff promised by politicians who believe that money comes from a printing
press rather than the productive efforts of businesspeople and workers." Dreher comments: "The
productive efforts of businesspeople and workers"? The gall of that man, after what he did to
the people of Sidney."
What Singer and the other Jewish vultures engage in is not productive, and isn't even any
recognisable form of work or business. It is greed-motivated parasitism carried out on a
perversely extravagant and highly nepotistic scale. In truth, it is Singer and his co-ethnics
who believe that money can be printed on the backs of productive workers, and who ultimately
believe they have a right to be "showered by free stuff promised by politicians." Singer places
himself in an infantile paradigm meant to entertain the goyim, that of Free Enterprise vs
Socialism, but, as Carlson points out, "this is not the free enterprise that we all learned
about." That's because it's Jewish enterprise -- exploitative, inorganic, and attached to
socio-political goals that have nothing to do with individual freedom and private property.
This might not be the free enterprise Carlson learned about, but it's clearly the free
enterprise Jews learn about -- as illustrated in their extraordinary
over-representation in all forms of financial exploitation and white collar crime. The
Talmud, whether actively studied or culturally absorbed, is their code of ethics and their
curriculum in regards to fraud, fraudulent bankruptcy, embezzlement, usury, and financial
exploitation. Vulture capitalism is Jewish capitalism.
Whom They Feed
Singer's duplicity is a perfect example of the way in which Jewish finance postures as
conservative while conserving nothing. Indeed, Jewish capitalism may be regarded as the root
cause of the rise of Conservative Inc., a form or shadow of right wing politics reduced solely
to fiscal concerns that are ultimately, in themselves, harmful to the interests of the majority
of those who stupidly support them. The spirit of Jewish capitalism, ultimately, can be
discerned not in insincere bleating about socialism and business, intended merely to entertain
semi-educated Zio-patriots, but in the manner in which the Jewish vulture funds disseminate the
proceeds of their parasitism. Real vultures are weak, so will gorge at a carcass and
regurgitate food to feed their young. So then, who sits in the nests of the vulture funds,
awaiting the regurgitated remains of troubled nations?
Boston-based Seth Klarman (net worth $1.5 billion), who like Paul Singer has
declared "free enterprise has been good for me," is a rapacious debt exploiter who was
integral to the financial collapse of Puerto Rico, where he hid much of activities behind a
series of shell companies. Investigative journalists eventually discovered that Klarman's
Baupost group was behind much of the aggressive legal action intended to squeeze the decimated
island for bond payments. It's clear that the Jews involved in these companies are very much
aware that what they are doing is wrong, and they are careful to avoid too much reputational
damage, whether to themselves individually or to their ethnic group. Puerto Rican journalists,
investigating the debt trail to Klarman, recall trying to follow one of the shell companies
(Decagon) to Baupost via a shell company lawyer (and yet another Jew) named Jeffrey Katz:
Returning to the Ropes & Gray thread, we identified several attorneys who had worked
with the Baupost Group, and one, Jeffrey Katz, who -- in addition to having worked directly
with Baupost -- seemed to describe a particularly close and longstanding relationship with a
firm fitting Baupost's profile on his experience page. I called
Katz and he picked up, to my surprise. I identified myself, as well as my affiliation with
the Public Accountability Initiative, and asked if he was the right person to talk to about
Decagon Holdings and Baupost. He paused, started to respond, and then evidently thought
better of it and said that he was actually in a meeting, and that I would need to call back
(apparently, this high-powered lawyer picks up calls from strange numbers when he is in
important meetings). As he was telling me to call back, I asked him again if he was the right
person to talk to about Decagon, and that I wouldn't call back if he wasn't, and he seemed to
get even more flustered. At that point he started talking too much, about how he was a lawyer
and has clients, how I must think I'm onto some kind of big scoop, and how there was a person
standing right in front of him -- literally, standing right in front of him -- while I rudely
insisted on keeping him on the line.
One of the reasons for such secrecy is the intensive Jewish philanthropy engaged in by
Klarman under his Klarman Family
Foundation . While Puerto Rican schools are being closed, and pensions and health
provisions slashed, Klarman is regurgitating the proceeds of massive debt speculation to his "
areas of
focus " which prominently includes " Supporting the global Jewish community
and Israel ." While plundering the treasuries of the crippled nations of the goyim, Klarman
and his co-ethnic associates have committed themselves to "improving the quality of life and
access to opportunities for all Israeli citizens so that they may benefit from the country's
prosperity." Among those in Klarman's nest, their beaks agape for Puerto Rican debt interest,
are the American Jewish Committee, Boston's Combined Jewish Philanthropies, the Holocaust
Memorial Museum, the Honeymoon Israel Foundation, Israel-America Academic Exchange, and the
Israel Project. Klarman, like Singer, has also been an enthusiastic proponent of liberalising
attitudes to homosexuality, donating $1 million to a Republican super PAC aimed at supporting
pro-gay marriage GOP candidates in 2014 (Singer donated $1.75 million). Klarman, who also
contributes to candidates
who support immigration reform, including a path to citizenship for undocumented immigrants,
has said "The right to gay marriage is the largest remaining civil rights issue of our time. I
work one-on-one with individual Republicans to try to get them to realize they are being
Neanderthals on this issue."
Steven Tananbaum's GoldenTree Asset Management has also fed well on Puerto Rico, owning $2.5
billion of the island's debt. The Centre for Economic and Policy Research has
commented :
Steven Tananbaum, GoldenTree's chief investment officer, told a business conference in
September (after Hurricane Irma, but before Hurricane Maria) that he continued to view Puerto
Rican bonds as an attractive investment. GoldenTree is spearheading a group of COFINA
bondholders that collectively holds about $3.3 billion in bonds. But with Puerto Rico facing
an unprecedented humanitarian crisis, and lacking enough funds to even begin to pay back its
massive debt load, these vulture funds are relying on their ability to convince politicians
and the courts to make them whole. The COFINA bondholder group has spent
$610,000 to lobby Congress over the last two years, while GoldenTree itself
made $64,000 in political contributions to federal candidates in the 2016 cycle. For
vulture funds like GoldenTree, the destruction of Puerto Rico is yet another opportunity for
exorbitant profits.
Whom does Tananbaum feed with these profits? A brief glance at the spending of the
Lisa and Steven Tananbaum Charitable Trust reveals a relatively short list of beneficiaries
including United Jewish Appeal Foundation, American Friends of Israel Museum, Jewish Community
Center, to be among the most generously funded, with sizeable donations also going to museums
specialising in the display of degenerate and demoralising art.
Following the collapse in Irish asset values in 2008, Jewish vulture funds including OakTree
Capital swooped on mortgagee debt to seize tens of thousands of Irish homes, shopping malls,
and utilities (Steve Feinberg's Cerberus took control of public waste disposal). In 2011,
Ireland emerged as a hotspot for distressed property assets, after its bad banks began selling
loans that had once been held by struggling financial institutions. These loans were quickly
purchased at knockdown prices by Jewish fund managers, who then aggressively sought the
eviction of residents in order to sell them for a fast profit. Michael Byrne, a researcher at
the School of Social Policy at University College Dublin, Ireland's largest university,
comments : "The
aggressive strategies used by vulture funds lead to human tragedies." One homeowner, Anna Flynn
recalls how her mortgage fell into the hands of Mars Capital, an affiliate of Oaktree Capital,
owned and operated by the Los Angeles-based Jews Howard Marks and Bruce Karsh. They were "very,
very difficult to deal with," said Flynn, a mother of four. "All [Mars] wanted was for me to
leave the house; they didn't want a solution [to ensure I could retain my home]."
When Bruce Karsh isn't making Irish people homeless, whom does he feed with his profits? A
brief glance at the spending of the
Karsh Family Foundation reveals millions of dollars of donations to the Jewish Federation,
Jewish Community Center, and the United Jewish Fund.
Paul Singer, his son Gordin, and their Elliot Associates colleagues Zion Shohet, Jesse Cohn,
Stephen Taub, Elliot Greenberg and Richard Zabel, have a foothold in almost every country, and
have a stake in every company you're likely to be familiar with, from book stores to dollar
stores. With the profits of exploitation, they
fund campaigns for homosexuality and mass migration , boost Zionist politics,
invest millions in security for Jews , and promote wars for Israel. Singer is a Republican,
and is on the Board of the Republican Jewish Coalition. He is a former board member of the
Jewish Institute for National Security Affairs, has funded neoconservative research groups like
the Middle East Media Research Institute and the Center for Security Policy, and is among the
largest funders of the neoconservative Foundation for Defense of Democracies. He was also
connected to the pro-Iraq War advocacy group Freedom's Watch. Another key Singer project was
the Foreign Policy Initiative (FPI), a Washington D.C.-based advocacy group that was founded in
2009 by several high-profile Jewish neoconservative figures to promote militaristic U.S.
policies in the Middle East on behalf of Israel and which received its seed money from
Singer.
Although Singer was initially anti-Trump, and although Trump once
attacked Singer for his pro-immigration politics ("Paul Singer represents amnesty and he
represents illegal immigration pouring into the country"), Trump is now essentially funded by
three Jews -- Singer, Bernard Marcus, and Sheldon Adelson, together accounting for over $250
million in pro-Trump political money . In return, they want war with Iran. Employees of
Elliott Management were one of the main sources of funding for the 2014 candidacy of the
Senate's most outspoken Iran hawk, Sen. Tom Cotton (R-AR), who urged Trump to conduct a
"retaliatory strike" against Iran for purportedly attacking two commercial tankers. These
exploitative Jewish financiers have been clear that they expect a war with Iran, and they are
lobbying hard and preparing to call in their pound of flesh. As one political commentator put
it, "These donors have made their policy preferences on Iran plainly known. They surely expect
a return on their investment in Trump's GOP."
The same pattern is witnessed again and again, illustrating the stark reality that the
prosperity and influence of Zionist globalism rests to an overwhelming degree on the predations
of the most successful and ruthless Jewish financial parasites. This is not conjecture,
exaggeration, or hyperbole. This is simply a matter of striking through the mask, looking at
the heads of the world's most predatory financial funds, and following the direction of
regurgitated profits.
Make no mistake, these cabals are everywhere and growing. They could be ignored when they
preyed on distant small nations, but their intention was always to come for you too. They are
now on your doorstep. The working people of Sidney, Nebraska probably had no idea what a
vulture fund was until their factories closed and their homes were taken. These funds will move
onto the next town. And the next. And another after that. They won't be stopped through blunt
support of "free enterprise," and they won't be stopped by simply calling them "vulture
capitalists."
Strike through the mask!
Notes
[1] S.
Baron (ed) Economic History of the Jews (New York, 1976), 46-7.
To what extent is Jewish success a product of Jewish intellect and industry versus being a
result of a willingness to use low, dirty, honorless and anti-social tactics which, while
maybe not in violation of the word of the law, certainly violate its spirit?
An application of "chutzpah" to business, if you will -- the gall to break social
conventions to get what you want, while making other people feel uncomfortable; to wheedle
your way in at the joints of social norms and conventions -- not illegal, but selfish and
rude.
Krav Maga applies the same concept to the martial arts: You're taught to go after the
things that every other martial art forbids you to target: the eyes, the testicles, etc. In
other sports this is considered "low" and "cheap." In Krav Maga, as perhaps a metaphor for
Jewish behavior in general, nothing is too low because it's all about winning .
There's a rather good article on the New Yorker discussing the Sacklers and the
Oxycontin epidemic. It focusses on the dichotomy between the family's ruthless promotion of
the drug and their lavish philanthropy. 'Leave the world a better place for your presence'
and similar pieties and Oxycontin.
The article lightly touches on the extent of their giving to Hebrew University of
Jerusalem -- but in general, treads lightly when it comes to their Judaism.
understandably. The New Yorker isn't exactly alt-right country, after all. But can
Joyce or anyone else provide a more exact breakdown on the Sacklers' giving? Are they genuine
philanthropists, or is it mostly for the Cause?
@anon'To what extent is Jewish success a product of Jewish intellect and industry versus being
a result of a willingness to use low, dirty, honorless and anti-social tactics which, while
maybe not in violation of the word of the law, certainly violate its spirit? '
It's important not to get carried away with this. Figures such as Andrew Carnegie, while
impeccably gentile, were hardly paragons of scrupulous ethics and disinterested virtue.
I won't defend high finance because I don't like it either. But this is a retarded and highly
uninformed attack on it.
1. The article bounces back and forth between two completely different fields: private
equity and distressed debt funds. The latter is completely defensible. A lot of bondholders,
probably the majority, cannot hold distressed or defaulted debt. Insurance companies often
can't by law. Bond mutual funds set out in their prospectuses they don't invest in anything
rated lower than A, AA, or whatever. Even those allowed to hold distressed debt don't want
the extra costs involved with doing so, such as carefully following bankruptcy proceedings
and dealing with delayed and irregular payments.
As a result, it is natural that normal investors sell off such debt at a discount to funds
that specialize in it.
2. Joyce defends large borrowers that default on their debt. Maybe the laws protecting
bankrupts and insolvents should be stronger. But you do that, and lenders become more
conservative, investment declines, and worthy businesses can't get investments. I think
myself the laws in the US are too favorable to lenders, but there's definitely a tradeoff,
and the question is where the happy middle ground is. In Florida a creditor can't force the
sale of a primary residence, even if it is worth $20 million. That's going too far in the
other direction.
3. " either blankly nondescript or evoking vague inklings of Anglo-Saxon or rural/pastoral
origins "
More retardation. Cerberus is a greek dog monster guarding the gates of hell. Aurelius is
from the Latin word for gold. "Hemisphere" isn't an Anglosaxon word nor does in invoke rural
origins.
Besides being retardedly wrong, the broader point is likewise retarded: when
English-speaking Jews name their businesses they shouldn't use English words. Naming a
company "Oaktree" should be limited to those of purely English blood! Jews must name their
companies "Cosmopolitan Capital" or RosenMoses Chutzpah Advisors."
4. The final and most general point: it's trivially easy to attack particular excesses of
capitalism. Fixing the excesses without creating bigger problem is the hard part. Two ideas I
favor are usury laws and Tobin taxes.
Jewishness aside, maximizing shareholder is the holy grail of all capitalist enterprises. The
capitalist rush to abandon the American working class when tariff barriers evaporated is just
another case of vulturism. Tax corporations based on the domestic content of their products
and ban usury and vulturism will evaporate.
Someone with the username kikz posted a link to this article in the occidental observer. I
read it and thought it was a great article. I'm glad it's featured here.
The article goes straight for the jugular and pulls no punches. It hits hard. I like
that:
1. It shines a light on the some of the scummiest of the scummiest Wall Street
players.
2. It names names. From the actual vulture funds to the rollcall of Jewish actors running
each. It's astounding how ethnically uniform it is.
3. It proves Trump's ties with the most successful Vulture kingpin, Singer.
4. It shows how money flows from the fund owners to Zionist and Jewish causes.
This thing reads like a court indictment. It puts real world examples to many of the
theories that are represents on this site. Excellent article.
Elliott Management is perhaps most notorious for its 15-year battle with the government
of Argentina, whose bonds were owned by the hedge fund. When Argentine president Cristina
Kirchner attempted to restructure the debt, Elliott -- unlike most of the bonds' owners --
refused to accept a large loss on its investment. It successfully sued in US courts, and in
pursuit of Argentine assets, convinced a court in Ghana to detain an Argentine naval
training vessel, then docked outside Accra with a crew of 22o. After a change of its
government, Argentina eventually settled and Singer's fund received $2.4 billion, almost
four times its initial investment. Kirchner, meanwhile, has been indicted for
corruption.
@Lot
You give partial information which seem misleading and use arguments which are also weak and
not enlightening.
1- Even if its natural that unsafe bonds are sold, this doesn't justify the practices and
methods of those vulture fonds which buy those fonds which are socially damaging. I'm not
certain of the details because it's an old case and people should seek more information. Very
broadly, in the case of Argentina most funds accepted to make an agreement with the country
and reduce their demands. Investors have to accept risks and losses. Paul Singer bought some
financial papers for nothing at that time and forced Argentina to pay the whole price. For
years Argentina refused to pay, but with the help of New York courts and the new Argentinian
president they were forced to pay Singer. This was not conservative capitalism but
imperialism. You can only act like Singer if you have the backing of courts, of a government
which you control and of an army like the US army. A fast internet search for titles of
articles: "Hedge fund billionaire Paul Singer's ruthless strategies include bullying CEOs,
suing governments and seizing their navy's ships". "How one hedge fund made $2 billion from
Argentina's economic colapse".
Andrew Sayer, professor in an English university, says in his book "Why we can't afford
the rich" that finances as they are practiced now may cost more than bring any value to a
society. It's a problem if some sectors of finances make outsized profits and use methods
which are more than questionable.
2- You say that if borrowers become more protected "lenders become more conservative,
investment declines, and worthy businesses can't get investments." I doubt this is true. In
the first place, risk investments by vulture fonds probably don't create any social value.
The original lenders who sold their bonds to such vulture fonds have anyway big or near total
losses in some cases and in spite of that they keep doing business. Why should we support
vulture fonds, what for? What positive function they play in society? In Germany, capitalism
was much more social in old days before a neoliberal wave forced Germany to change Rhine
capitalism. Local banks lended money to local business which they knew and which they had an
interest that they prosper. Larger banks lended money to big firms. Speculation like in
neoliberal capitalism wasn't needed.
3- The point which you didn't grasp is that there is a component of those business which
isn't publicly clear, the fact that they funcion along ethnic lines.
4- It would be easy to fix excesses of capitalism. The problem is that the people who
profit the most from the system also have the power to prevent any change.
@Robjil
This is an example of what I was saying. Less Euro whites in the world is not going to be a
good world for Big Js. Non-Euros believe in freedom of speech.
Jewish Bigwigs can't get control of businesses in East Asia. They have been trying. Paul
Singer tried and failed. In Argentina he got lots of "success". Why? Lots of descendants of
Europeans there went along with "decisions" laid out by New York Jews.
Little Paulie tried to get control of Samsung. No such luck for him in Korea. In Korea
there are many family monopolies, chaebols. A Korean chaebol stopped him. Jewish Daniel Loeb
tried to get a board seat on Sony. He was rebuffed.
I was moved to reflect on the universality of this theme recently when surveying media
coverage on Korean and Argentinian responses to the activities of Paul Singer and his
co-ethnic shareholders at Elliott Associates, an arm of Singer's Elliott Management hedge
fund. The Korean story has its origins in the efforts of Samsung's holding company, Cheil
Industries, to buy Samsung C&T, the engineering and construction arm of the wider
Samsung family of businesses. The move can be seen as part of an effort to reinforce
control of the conglomerate by the founding Lee family and its heir apparent, Lee Jae-yong.
Trouble emerged when Singer's company, which holds a 7.12% stake in Samsung C&T and is
itself attempting to expand its influence and control over Far East tech companies,
objected to the move. The story is fairly typical of Jewish difficulties in penetrating
business cultures in the Far East, where impenetrable family monopolies, known in Korea as
chaebols, are common. This new story reminded me very strongly of last year's efforts by
Jewish financier Daniel Loeb to obtain a board seat at Sony. Loeb was repeatedly rebuffed
by COO Kazuo Hirai, eventually selling his stake in Sony Corp. in frustration.
Here is how the Koreans fought off Paul Singer.
The predominantly Jewish-owned and operated Elliott Associates has a wealth of
self-interest in preventing the Lee family from consolidating its control over the Samsung
conglomerate. As racial outsiders, however, Singer's firm were forced into several tactical
measures in their 52-day attempt to thwart the merger. First came lawsuits. When those
failed, Singer and his associates then postured themselves as defending Korean interests,
starting a Korean-language website and arguing that their position was really just in aid
of helping domestic Korean shareholders. This variation on the familiar theme of Jewish
crypsis was quite unsuccessful. The Lee family went on the offensive immediately and,
unlike many Westerners, were not shy in drawing attention to the Jewish nature of Singer's
interference and the sordid and intensely parasitic nature of his fund's other
ventures.
Cartoons were drawn of Singer being a vulture.
Other cartoons appearing at the same time represented Elliott, literally, as humanoid
vultures, with captions referring to the well-known history of the fund. In the above
cartoon, the vulture offers assistance to a needy and destitute figure, but conceals an axe
with which to later bludgeon the unsuspecting pauper.
ADL got all worked about this. The Koreans did not care. It is reality. Freedom of speech
works on these vultures. The west should try some real freedom of speech.
After the cartoons appeared, Singer and other influential Jews, including Abraham
Foxman, cried anti-Semitism. This was despite the fact the cartoons contain no reference
whatsoever to Judaism – unless of course one defines savage economic predation as a
Jewish trait. Samsung denied the cartoons were anti-Semitic and took them off the website,
but the uproar over the cartoons only seemed to spur on even more discussion about Jewish
influence in South Korea than was previously the case. In a piece published a fortnight
ago, Media Pen columnist Kim Ji-ho claimed "Jewish money has long been known to be ruthless
and merciless." Last week, the former South Korean ambassador to Morocco, Park Jae-seon,
expressed his concern about the influence of Jews in finance when he said, "The scary thing
about Jews is they are grabbing the currency markets and financial investment companies.
Their network is tight-knit beyond one's imagination." The next day, cable news channel YTN
aired similar comments by local journalist Park Seong-ho, who stated on air that "it is a
fact that Jews use financial networks and have influence wherever they are born." It goes
without saying that comments like these are unambiguously similar to complaints about
Jewish economic practices in Europe over the course of centuries. The only common
denominator between the context of fourteenth-century France and the context of
twenty-first-century South Korea is, you guessed it, Jewish economic practices.
The Koreans won. Paulie lost. Good win for humanity. The Argentines were not so lucky.
They don't have freedom speech like the Koreans and East Asians have.
In the end, the Lee strategy, based on drawing attention to the alien and exploitative
nature of Elliott Associates, was overwhelmingly effective. Before a crucial shareholder
vote on the Lee's planned merger, Samsung Securities CEO Yoon Yong-am said: "We should
score a victory by a big margin in the first battle, in order to take the upper hand in a
looming war against Elliott, and keep other speculative hedge funds from taking short-term
gains in the domestic market." When the vote finally took place a few days ago, a
conclusive 69.5% of Samsung shareholders voted in favor of the Lee proposal, leaving
Elliott licking its wounds and complaining about the "patriotic marketing" of those behind
the merger.
What our Jewish friends have done to Argentina, through maneuvering the elections, killing
dissidents, and marking territory, is a cautionary tale to anybody woke enough to see with
their own eyes.
Zion had the opportunity to go to Uganda and Ugandans were willing, but NO Zion had to
have Palestine, and they got it through war, deception, and murder. It was funded by usury,
as stolen purchasing power from the Goyim.
The fake country of Israel, is not the biblical Israel, and it came into being by
maneuverings of satanic men determined to get their way no matter what, and is supported by
continuous deception. Even today's Hebrew is resurrected from a dead language, and is fake.
Many fake Jews (who have no blood lineage to Abraham), a fake country, and fake language.
These fakers, usurers, and thieves do indeed have their eyes set on Patagonia, what they call
the practical country.
@Anon
"If debts can simply be repudiated at will, capitalism cannot function."
Is this children's capitalist theory class time? throwing around some simple slogans for a
susceptible congregation of future believers?
Should be quite obvious that people, groups of people, if not whole nations , can be
forced and or seduced into depths by means of certain practices. There are a thousand ways of
such trickery and thievery, these are not in the theory books though. In these books things
all match and work out wonderfully rationally
Then capitalism cannot function? Unfortunately it has become already dysfunctional, if not
a big rotten cancer.
Lobelog ran some articles in Singer, Argentina, Iran Israel and the attorney from Argentina
who died mysteriously . Singer is a loan shark. Argentinian paid dearly .
Google search –
NYT's Argentina Op-Ed Fails to Disclose Authors – LobeLog
https://lobelog.com/tag/paul-singer/
Paul Singer NYT's Argentina Op-Ed Fails to Disclose Authors' Financial Conflict of Interest
by Eli Clifton On Tuesday, Mark Dubowitz and Toby Dershowitz, two executives at the hawkish
Foundation for Defense of Democracies (FDD), took
The Right-Wing Americans Who Made a Doc About Argentina
https://lobelog.com/the-right-wing-americans-who-made-a-doc-about-argentina/
Oct 7, 2015 One might wonder why a movie about Argentina, in Spanish and . of Nisman's and
thought highly of the prosecutor's work, told LobeLog, FDD, for its part, has been an
outspoken critic of Kirchner but has From 2008 to 2011, Paul Singer was the group's
second-largest donor, contributing $3.6 million.
NYT Failed to Note Op-Ed Authors' Funder Has $2 Billion
What our Jewish friends have done to Argentina, through maneuvering the elections,
killing dissidents, and marking territory, is a cautionary tale to anybody woke enough to
see with their own eyes.
http://www.unz.com/mhudson/the-saker-interviews-michael-hudson/
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Introduction: I recently spoke to a
relative of mine who, due to her constant and voluntary exposure to the legacy AngloZionist media, sincerely
believed that the three Baltic states and Poland had undergone some kind of wonderful and quasi-miraculous
economic and cultural renaissance thanks to their resolute break with the putatively horrible Soviet past
and their total submission to the Empire since. Listening to her, I figured that this kind of delusion was
probably common amongst those who still pay attention and even believe the official propaganda. So I asked
Michael Hudson, whom I consider to be the best US economists and who studied the Baltics in great detail, to
reply to a few very basic questions, which he very kindly did in spite of being very pressed on time. Once
again, I want to sincerely thank him for his kind time, support and expertise.
* * *
The Saker:
The US
propaganda often claims that the three Baltic states are a true success, just like Poland is also supposed
to be. Does this notion have a factual basis? Initially it did appear that these states were experiencing
growth, but was that not mostly/entirely due to EU/IMF/US subsidies? Looking specifically at the three
Baltic states, and especially Latvia, these were the "showcase" Soviet republics, with a high standard of
living (at least compared to the other Soviet republics) and a lot of high-tech industries (including
defense contracts). Could you please outline for us what truly happened to these economies following
independence? How did they "reform" their economies going from an ex-Soviet one to the modern "liberal" one?
Michael Hudson:
This is
a trick question, because it all depends on what you mean by "success."
The post-Soviet neoliberalism has been a
great success for kleptocrats at the top. They gave themselves the public domain, from key industries to
prime real estate. But the Balts largely let their Soviet industries collapse, making no effort to salvage
or reorganize them.
Much of the problem, of course, was that all the linkages to Soviet-era
industry were torn apart as the Soviet Union was disbanded. With their supplier and final markets closed
down from Russia to Central Asia, the Baltic economies had to start afresh – with a very right-wing tax
policy and no government help whatsoever, as the government itself had become privatized in the hands of
former officials and grabitizers.
Lithuania was marginally better in having some industrial policy. EU and
NATO accession in 2004, along with easy credit, kicked off property bubbles in the Baltics, largely inflated
by Swedish banks that made a bonanza off these countries that lacked their own banks or public credit
creation. The resulting 2008 crashes were the largest in the world as a percent of GDP, with Latvia
suffering the world's biggest contraction.
The neoliberal western advisors who took
control of these economies – as if this was the only alternative to Soviet bureaucracy – imposed crushing
austerity programs to restore macroeconomic "stability" meaning security of their land and infrastructure
grabs. This was applauded by Europe's bankers, who thought the Balts had discovered a workable recipe
allowing austerity governments to retain power in a seeming democracy. These policies would have collapsed
governments anywhere else, but the ability to emigrate, plus ethnic divisions against Russian speakers,
allowed these governments to survive.
It's a historically specific situation,
but Europe's bankers promote it as a generalized model. George Soros's INET and his associated front
institutions have been leaders in subsidizing this financialization-cum-grabitization. The result has been a
massive exodus of prime working age people from Lithuania and Latvia. (Estonians simply commute to Finland.)
Meanwhile, their economies are buoyed by foreign bank lending, which sends profits back to home countries
and can be reversed at any time.
Politically, the neoliberal revolution also has been a success for U.S.
Cold Warriors, who sent over native Balts from Georgetown and other universities to impose "free market"
doctrine – that is, a market "free" of domestic regulation against theft of the public domain, against
monopolies, against land taxes and other income taxes. The Baltic states, like most of the rest of the
former Soviet Union, became the Wild East.
What was left to the Baltic countries
was land and real estate. Their forests are being cut down to sell wood abroad. I describe all this in my
book
Killing the Host
.
The Saker:
After
independence, the Baltic states had tried to cut as many ties with Russia as possible. This included
building (rather silly looking) fences, to forcing the Russians to develop their ports on the Baltic, to
shutting down large (or selling to foreign interests which then shut them down) and profitable factories
(including a large nuclear plant I believe), etc. What has been the impact of this policy of "economic
de-Sovietization" on the local economies?
Michael Hudson:
Dissolution of the Soviet Union meant
that Baltic countries lost their traditional markets, and had to shift their focus to Western Europe and, to
some extent, Asia.
Latvia and Estonia had been assigned computer and information technology,
and they have found this to be much in demand. When I was in Japan, for instance, CEOs told me that they
were looking to Latvia above all to outsource computer work.
Banking also was a surviving sector.
Gregory Lautchansky, former vice-rector at the University of Riga had been a major player already in the
1980s for moving out Russian oil and KGB money. (His company, Nordex, was sold to Mark Rich.) Many banks
continued to shepherd Russian flight capital via offshore banking centers into the United States, Britain
and other countries. Cyprus of course was another big player in this.
The Saker:
Russians are still considered "non-citizens"
in the Baltic republics; what has been the economic impact of this policy, if any, of anti-Russian
discrimination in the Baltic states?
ORDER IT NOW
Michael Hudson:
Russian-speakers, who do not acquire citizenship (which requires passing local language and history tests),
are blocked from political office and administrative work. While most Russian speakers below retirement age
have now acquired that citizenship, the means by which citizenship must be acquired has caused divisions.
Early on in independence, many Russians
were blocked from government, and they went into business, which was avoided by many native Balts during the
Soviet era because it was not as remunerative as going into government and profiting from corruption. For
instance, real estate was a burden to administer. Russian-speakers, especially Jewish ones, have wisely
focused on real estate.
The largest political party is Harmony
Center, whose members and leadership are mainly Russian-speaking. But the various neoliberal and nationalist
parties have jointed to block its ability to influence law in Parliament.
Since Russian speakers are only able to
"vote with their feet," many have joined in the vast outflow of emigration, either back to Russia or to
other EU countries. Moreover, the poor quality of social benefits has led to few children being born.
The Saker:
I often hear that a huge number of locals
(including non-Russians) have emigrated from the Baltic states. What has caused this and what has been the
impact of this emigration for the Baltic states?
Michael Hudson:
The Baltic states, especially Latvia,
have lost about 30 percent of their population since the 1990s, especially those of working age. In Latvia,
about 10 percent of the loss were Russians who exited shortly after independence. The other 20 percent have
subsequently emigrated.
The European Commission forecasts that Latvia's working-age population
will decline by 1.6% annually for the next 20 years, while the birth rate remains as stagnant as it was in
the late 1980s. The retired population (over age 65) will rise to half a million people by 2030, more than a
quarter of today's population, and perhaps about a third of what remains. This is not a domestic market that
will attract foreign or local investment.
And in any case, the European Union has
viewed the post-Soviet economies simply as markets for their own industrial and agricultural exports, not as
economies to be built up by public subsidy as the European countries themselves, the U.S. and Chinee
economies have done. The European motto is, "Give a man a fish, and he will be fed all day with your surplus
fish and consumer goods – but give him a fishing rod and we will lose a customer."
Readers who are interested might want to
look at the following books and articles. I think the leading work has been done by Jeffrey Sommers and
Charles Woolfson.
The Contradictions of Austerity: The Socio-Economic Costs of the Baltic Model
(London:
Routledge Press, 2014). Editors, J. Sommers & C. Woolfson. Foreword, J. Galbraith. ISBN:
978-0-415-82003-5.
Jeffrey Sommers, "No People, Big Problem': Democracy And Its Discontents In Latvia's National
Elections,"
Social Europe,
October 17, 2018.
Jeffrey Sommers, "Decline of the Demos: Latvia, the Face of New Europe and Austerity's Return," in F.
Jaitner, T. Olteanu and T. Spöri, eds.,
Crises in the Post-Soviet Space: From the dissolution of the
Soviet Union to the conflict in Ukraine
(Routledge Press, 2018) pp. 195-209. ISBN 9780815377245.
Jeffrey Sommers,
"
Austerity as a global prescription and lessons from the neoliberal
Baltic experiment."
Economic & Labour Relations Review.
Keynote article, 25:3 (fall 2014) pp.
1-20. DOI 10.1177/1035304614544091. Co-authored with C. Woolfson and A. Juskaa.
The Saker:
Finally,
what do you believe is the most likely future for these states? Will the succeed in becoming a "tiny
anti-Russia" on Russia's doorstep? The Russians appear to have been very successful in their
import-substitution program, at least when trying to replace the Baltic states: does that mean that the
economic ties between Russia and these states is now gone forever? Is it now too late, or are there still
measures these countries could take to reverse the current trends?
Michael Hudson:
Trump's
trade sanctions against Russia hurt the Baltic countries especially. One of their strong sectors was
agriculture. Lithuania, for instance, was known for its cheese, even in Latvia. The sanctions led Russian
dairy farming to develop their own cheese-making, and agriculture has become one of Russia's strongest
performing sectors.
This is a market that looks like it will
be permanently lost to the Baltic states. In effect, Trump is helping Russia follow precisely the policy
that made American agriculture rich: agricultural isolation has forced domestic replacement for hitherto
foreign food. I expect that this will lead to consumer goods and other products as well.
I am in Tallinn, Estonia right now. Just how good an economy is performing is often hard to determine by
talking to people, because like economists, many people have different perceptions. I was just talking to a
Russian-Estonian who was telling me how much better Lithuanians and Latvians are then Estonians at doing
things and how much cheaper things are there. It is true that things are much cheaper in the other Baltic
countries because Estonia (a tiny country of just over 1 million people) has taken off. Since the 2008
econmic collapse housing prices have shot up and in Tallinn there is building going on all over the city.
But, my acquaintance is wrong about other things. Estonians do things very well and Tallinn is a very nice
city, with beautiful cafes, clean and well kept streets and crime is very low. It is a very good city,
except it is now very expensive, especially considering how much people make here. The weather is not nice,
except for in the summer and there are friendly Estonians but they don't have a reputation for being
particularly friendly, even among themselves. I have not been back to Latvia yet, but when I was in Riga
years ago, it was a gorgeous city, bigger than Tallinn too. I think they do things very well there too. The
Russians I speak to here are often friendly and based on what I have been told, relations between Russians
and Estonians are much better than when I was here in the early 2000's.
No offense is intended to
Russians, but the Baltic countries had large German populations that played a key role in the development of
the cultures and peoples of these countries. There were also many Jews here prior to WW II. By the time WW
II had begun the German populations were much smaller than they had been and at the end of the war the
Jewish populations were much smaller. Jews were targeted in Latvia and Lithuania and many Latvians,
Lithuanians and Estonians were shipped off to far off places in the USSR during the war. I believe the Jews
were largely pro communist and welcomed the Soviet takeover of these countries in 1940, while the Latvian
and Estonian peoples were pro German, thus explaining the hard feelings between Balts and Jews.. They wanted
independence and formed legions to fight alongside the German army during WW II.
These countries were very advanced before WW II, having engineering industries and the Russian Empire's
first auto company was formed in Riga before WW I. While engineering may have been restarted after WW II,
these countries populations were decimated and they never returned to their former heights. Perhaps they
still can.
I'm assuming that these 3 East European countries are being bombarded with the same propaganda as the Ukies
are, so Russian speakers and those intelligent enough to see the game being played will be belittled and
isolated. But the Russian folks living in Russia have a birds eye view of what is going on in the west and
their puppet countries. Russia TV and debate programs, just have to show the delinquencies that are daily
happenings in the States, and Europe, in order to make the Ru people say – No Thanks to that way of life. As
far as the new Russian cheeses that are now in the markets -lol – they make a lightly smoked gouda that is
really good and is about 120-140 roubles a kilo. And, they are making more cheddar that is a white medium
taste as well. No scarcity of good natural food in Russia and No POlice state. Spacibo Unz Rev.
The trade volume between Russia and the Baltic states has actually risen, despite the sanctions. The Baltics
send food products and booze to Russia (and another 150 countries, food exports to Russia actually grew in
2016-2018). As well as chemical products and pharmaceuticals. Meldonium, btw, is made in Latvia and is still
being sent to Russia (as well as 20 other countries), not for athletes, but for regular folks. Work is being
carried out on a new generation Meldonium pill (the biggest market will be Russia).
Growth in the Baltic states has been 3-4% in the last few years. GDP per capita, as well as HDI, is
higher than in Russia. Foreign investment, including from Russia, has been growing (Russia was the second
largest investor in Latvia in 2018). Savings rates are growing, too. After a relative quiet period after
2010, the number of Russian (and other tourists) has grown again.
Estonia's population stopped shrinking in 2016 and is now growing in fact. They've seen immigration from
Finland, Ukraine, Belarus and Russia, as well as returning Estonians.
Emigration is a problem, of course, but this is partly because the Baltic states are the only former USSR
republics whose citizens were even given work permits in the West, imagine what would happen if these
permits were given to Russians from the regions.
Neo-liberal policies are of course bad and certain types of investment should be controlled, but to say
that there are no social services in the Baltic states is complete nonsense. Due to generous parental
payments, birthrates have risen significantly since the 1990s – in fact, birthrates in the Baltics are now
slightly higher than the EU average. Life expectancy is also growing. Latvia covers IVF treatments in full.
There are free school lunches.
Yes, it is true that some of the Soviet era factories should've been salvaged but the problem was they
were not competitive globally at that time (and there was no capital to remodel them). The Soviet market was
a closed one. However, some businesses were salvaged. There is local manufacturing (electronics,
pharmaceuticals, etc).
Not everything is ideal, but it is also not the kind of gloom and doom as you paint.
Saker says:
"Initially it did appear that these states were experiencing growth, but was that not
mostly/entirely due to EU/IMF/US subsidies?"
"Foreign Aid Makes Corrupt Countries More Corrupt":
"Any time a government hands out money, not just foreign aid, it breeds corruption And there are few
better examples than Ukraine – just don't tell the House impeachment hearings. Counting on foreign aid to
reduce corruption is like expecting whiskey to cure alcoholism .If U.S. aid was effective, Ukraine would
have become a rule of law paradise long ago . The surest way to reduce foreign corruption is to end
foreign aid."
@onebornfree
The EU gives every year about 2,500 million euros to the 3 Baltic countries ( 6 million people the three of
them ) , and 9000 million euros to Poland ( 38 million people ) , plus more billions to other eastern
members .
Older members of the EU , spetially the UK which is going out , Greece witch was tortured ( again )
economically by Germany , and south Europe in general are not very happy about admitting so many ex-soviets
countries en the EU and subsidizing them .
Recovery and self-sufficiency since Yeltsin show the brilliance of the Russian people
It's not so much brilliance as sheer necessity to survive under sanctions. But some results were better
than anyone expected. Say, food before sanctions used to be so-so in the provinces and downright bad in
Moscow because of abundance of imported crap. Now the food is exclusively domestic, fresh and tasty. Russia
never had traditions of making fancy cheeses. Now, to bypass sanctions, quite a few Italian and French
cheese-makers started production in Russia, so in the last 2-3 years domestically made excellent fancy
cheeses appeared in supermarkets. Arguably, Russian agriculture benefited by sanctions more than any other
sector, but there are success stories virtually in every industry. Sanctions and Ukrainian stupidity served
as a timely wake up call for Russian elites, who earlier wanted to sell oil and natural gas and buy
everything else. Replacing imports after the sanctions were imposed had a significant cost in the short run,
but in the long run it made Russia much stronger, economically and militarily. Speak of unintended
consequences.
My mom is from Lithuania and I've been there several times. We have second cousins our age.
Her father was
a surveyor for the Republic in the 20s and 30s, charged with breaking up the manors and estates and the
state distributing the land to the peasantry. It was near-feudalism. There was very little
industrialization; that which existed were in a few urban centers. One interesting comment from her was that
the "Jews were communists". From what I've read they were the urban working class, but perhaps part of the
socialist/Jewish Bund?
There is no doubt that the Soviet period unleashed considerable industrialization and modernization.
Lithuania had some of the best infrastructure in the USSR. Its traditional culture was really celebrated.
When I first visited, not long after the fall of the USSR, there were enormous, vacant industrial plants.
The collective farms were in the process of being sold off the western European agribusiness firms. One
relative through marriage was from the Ukraine, with a PhD in Physics and had been employed in the military
industries -- she was cleaning houses thereafter.
Any usable industrial enterprises were quickly sold off. The utilities are all foreign owned. Part of EU
mandates are "open" electricity "markets", which resulting in DC interconnections costing hundreds of
millions with the west to import very high priced electricity. The EU has paid for "Via Baltica", a highway
running from Poland to Estonia; it is choked with trucks carrying imports and there are huge distribution
and fulfillment centers along the highway. Such progress, huh?
There had been good public transport in the earlier years of independence, but that has been replaced
with personal automobiles -- usually western European used cars that pollute a lot. Trakai is a commuter town
to Vilnius with a medieval castle (restored in Soviet times). First time I went it was very pleasant. Second
time in 2018 the place was choked with cars and not very nice at all.
The impact of emigration cannot be over-stated. College educated young people leave by the hundreds of
thousands. Those that remain are paid very low wages (e.g., 1000 euros for a veterinarian or dentist), but
pay west European prices for many essentials. Housing is cheaper than the west.
Last time in Kazlu Ruda there were huge NATO exercises in progress and even bigger ones planned for 2020.
German units were billeted at an airbase nearby, rumored to have been a CIA black site. How fitting, as the
Germans with the Lithuanian Riflemens Union exterminated a quarter of a million Jews in a matter of months
(see Jager Report on Wikipedia). There is a Red Army graveyard in the town that has the remains of perhaps
350 soldiers killed in the area driving out the Nazis. I was frankly surprised it was still there.
Lithuania hasn't been independent since the days of the Pagans and Vytautas. It surely isn't independent
today.
Anecdotal -- yes. But based on personal observation.
@wendy
davis that takes them out. However, for the oligarchs and right wing politicians of
those countries, they pay off. Lots of income from corruption, privatization, etc.
they backfire, indeed. but just now in the global IMF austerity resets, the citizenries
are raising such a ruckus against them that some oligarchical leaders are having to rescind
the 'austeries' put on them. time will tell how it plays out even for ecuador, but for now
the indigenous seem to be winning. wish i had a link at hand.
but this is the brilliant bruce cockburn's ode to the IMF ; ):
The IMF loan seems designed to get Macri past the election. It has been used to support
capital flight: to support the peso, the Central Bank sells dollars to "importers" that then
stash the money abroad. This is illegal according to IMF loan terms but the IMF is looking the
other way. It has been granted unprecedented authority to oversee and overrule the Central Bank,
so its failure to act is really suspicious, and reeks of political pressure to crush the left in
Latin America.
Notable quotes:
"... The government also wasted more than $16 billion in unsuccessful attempts to keep the peso from falling, and greatly increased the more problematic foreign component of the public debt. The result has been near-constant recession and high inflation, enormous interest rates, peso depreciation, financial instability, and the huge run-up in public debt. The debt increase is particularly noteworthy because Mr. Macri inherited a low level of public debt. ..."
"... Ironically, the IMF is well-known in Argentina for promoting similarly unworkable policies during the deep depression of 1998 to 2002 -- comparable to America's Great Depression of the 1930s. Yes, history is repeating itself, although in this case the IMF has a stronger partnership with the government than it had 20 years ago. ..."
"... Millions of Argentines remember the last depression and the role the IMF played. Many also remember the rapid improvement in people's lives over the ensuing decade. This collective memory and consciousness may now determine the outcome of this recurring debate over the economy, and with it, the October election, and possibly much of Argentina's future. ..."
"... The IMF loan seems designed to get Macri past the election. It has been used to support capital flight: to support the peso, the Central Bank sells dollars to "importers" that then stash the money abroad. This is illegal according to IMF loan terms but the IMF is looking the other way. It has been granted unprecedented authority to oversee and overrule the Central Bank, so its failure to act is really suspicious, and reeks of political pressure to crush the left in Latin America. ..."
Who is to Blame for Argentina's Economic Crisis?
By Mark Weisbrot - New York Times
What are we to make of Argentina's surprise election results on Monday, which jolted
pollsters and analysts alike, and roiled the country's financial markets? In the presidential
primary for the country's October election, the opposition ticket of Alberto Fernández
trounced the incumbent president Mauricio Macri by an unexpected margin of 47.7 to 32.1
percent.
The Fernández coalition attributes their victory to Mr. Macri's failed economic
policies, blaming him for the current economic crisis, recession, and high inflation. Mr.
Macri, by contrast, blames the fear of a future government of Kirchnerism -- his label for
the opposition -- for both the postelection financial turbulence and also the problems of the
economy since he took office more than three and a half years ago. He argues that both the
markets and the people have everything to fear from such an outcome.
This disagreement is not just an academic argument, nor one specific to Argentina. It is a
recurring, almost archetypical debate during economic crises that spill over into political
contests. In recent years -- in the UK, Spain, France, Greece, and other countries where
failed economic policies faced left-of-center challengers -- Macri's refrain was a frequent
line of attack by incumbents.
Financial markets can move for many reasons, which can be unclear or even based on
misperceptions of reality. In the case of this week's news, we have electoral losses by a
government whose economic policies have clearly failed; and gains by challengers who hail
from a period of strong and widely shared economic growth. This is not something that is
inherently bad for the economy.
With Kirchnerism, Mr. Macri refers to the policies, followers, and presidential
administrations of the Kirchner family, which held office from 2003 to 2015 -- first
Néstor Kirchner, and then Cristina Fernández de Kirchner. The latter is running
as vice-presidential candidate of Alberto Fernández, and is a prominent leader of the
opposition coalition -- although this coalition is much larger and broader than the
"kirchnerista" base.
From the point of view of an economist or social scientist, it's not clear why Kirchnerism
should inspire fear. Looking at the most important economic and social indicators, the
government of the Kirchner presidencies was one of the most successful in the Western
Hemisphere during this period.
Independent estimates show a decline of 71 percent in poverty, and an 81 percent decline
in extreme poverty. The government instituted one of the biggest conditional cash transfer
programs for the poor in Latin America. According to the International Monetary Fund, gross
domestic product per person grew by 42 percent, almost three times the rate of Mexico.
Unemployment fell by more than half, and inequality also fell considerably.
Although economic growth waned in the last few years, and the government made some
mistakes, the result of these two administrations delivered large increases in living
standards for the vast majority of Argentines, by any reasonable comparison.
Economic growth waned in the last few years of her presidency and her government was dealt
an external economic blow. A 2012 ruling of a federal appeals court in New York, widely
regarded dubious and political, took more than 90 percent of Argentina's creditors hostage in
order to force payment to a small group of "vulture funds," who refused to join the debt
restructuring of the early 2000s. The United States government blocked loans from
international lenders such as the Inter-American Development Bank, at a time when the economy
needed the foreign exchange.
By comparison, poverty has increased significantly, income per person has fallen, and
unemployment has increased during Mr. Macri's term, which began in December 2015. Short-term
interest rates, have shot up from 32 percent to 75 percent today; inflation has risen from 18
percent to 56 percent. The public debt has grown from 53 percent of GDP to more than 86
percent last year.
How much of this economic crisis and poor performance is his predecessor's fault?
In 2018 Mr. Macri signed an agreement for a $57 billion loan -- the largest bailout in
history. The loan agreement, along with the reviews since, spell out the government's
economic goals, strategy, and implementation. There is a lot of information publicly
available that details what went wrong.
The main strategy of the program was to restore investor confidence through tighter fiscal
and monetary policy. But, as has often happened, these measures slowed the economy and
undermined investor confidence. By October, the results were vastly worse than the IMF had
projected. The government and IMF doubled down by increasing both fiscal and monetary
tightening, but this did not help.
The government also wasted more than $16 billion in unsuccessful attempts to keep the peso
from falling, and greatly increased the more problematic foreign component of the public
debt. The result has been near-constant recession and high inflation, enormous interest
rates, peso depreciation, financial instability, and the huge run-up in public debt. The debt
increase is particularly noteworthy because Mr. Macri inherited a low level of public
debt.
Ironically, the IMF is well-known in Argentina for promoting similarly unworkable policies
during the deep depression of 1998 to 2002 -- comparable to America's Great Depression of the
1930s. Yes, history is repeating itself, although in this case the IMF has a stronger
partnership with the government than it had 20 years ago.
The Fernández candidates will have to outline how they would get out of this mess.
They can explain how Argentina exited from a much more severe economic crisis, with an
unemployment more than twice as high, and millions of previously middle class people having
fallen into poverty. They can assure creditors that there is no need for default on the
public debt today, as there was then, because it was completely unpayable. But, as in 2003,
the economy cannot recover under the conditions agreed upon with the IMF, and these will have
to be renegotiated.
Millions of Argentines remember the last depression and the role the IMF played. Many also
remember the rapid improvement in people's lives over the ensuing decade. This collective
memory and consciousness may now determine the outcome of this recurring debate over the
economy, and with it, the October election, and possibly much of Argentina's future.
The IMF has learned nothing since the Washington Consensus started being implemented in the
1980s but at least Argentines are quickly repudiating the neoliberals and their savage
policies, until they forget again in a generation.
The IMF loan seems designed to get Macri past the election. It has been used to support
capital flight: to support the peso, the Central Bank sells dollars to "importers" that then
stash the money abroad. This is illegal according to IMF loan terms but the IMF is looking
the other way. It has been granted unprecedented authority to oversee and overrule the
Central Bank, so its failure to act is really suspicious, and reeks of political pressure to
crush the left in Latin America.
Fernandez has already stated that under current terms the loan is unpayable and the terms
will have to be renegotiated.
The situation is similar to Greece and shows that, absent capital controls and decreased
dependency on imports, having your own currency is not enough protection against bondage to
multinational banks.
The situation is similar to Greece and shows that, absent capital controls and decreased
dependency on imports, having your own currency is not enough protection against bondage to
multinational banks....
[ This was the lesson taught and learned by a few countries in the wake of the Asian
currency crises that developed from 1996-1997. These were really Asian, Latin American
currency crises, but the lesson was indelibly learned in Asia.
There is a reason China and Japan and Korea increased foreign currency reserves from
1997-1998.
"... The trojan horse for the return of neoliberalism in Venezuela, Juan Guaidó, stated that he's going to borrow money from the IMF to fund his government, which would make all Venezuelans indebted to this predatory institution. Guaidó spends the money, the poor and working people work to pay taxes that pay off the principal and the interest. ..."
"... The IMF was created in New Hampshire in 1945 to internationalize and standardize capitalism and its rules in an increasingly globalized and U.S.-dominated world. ..."
"... Its primary function is acting as an international lender-of-last-resort to indebted countries. IMF member states decide which countries will receive loans, but the member states with the largest say are the ones that own the largest share of the IMF's funds, which have always been the United States and its allies. ..."
"... This is why the IMF's standard "structural adjustment program" is based on the so-called Washington Consensus, a set of 10 economic policies entirely concocted by U.S. think tanks, the IMF, the World Bank and the Treasury Department. The Washington Consensus is as follows: ..."
Think about who gets rich off of the Venezuela regime-change agenda. It's the same people
that said we had to invade Iraq in order to prevent nuclear apocalypse. It's the same people
who said the world would stop turning on its axis if we didn't carpet bomb Libya and
Syria.
Transcript -- This video was produced as part of a MintPress News and Grayzone collaboration -- Of all the reasons to
plot an elaborate and risky coup, there's one reason that always stands out: profit. Money
makes the world go around and in far more ways than we might think. Here are the top five
special interest groups and institutions that seek to benefit from the U.S. backed coup in
Venezuela.
Number 1: The International Monetary Fund (IMF), which wants to saddle the
Venezuelan people with enormous debt to the IMF
The trojan horse for the return of neoliberalism in Venezuela, Juan Guaidó, stated
that he's going to borrow money from the IMF to fund his government, which would make all
Venezuelans indebted to this predatory institution. Guaidó spends the money, the poor
and working people work to pay taxes that pay off the principal and the interest.
The IMF was created in New Hampshire in 1945 to internationalize and standardize capitalism
and its rules in an increasingly globalized and U.S.-dominated world.
Its primary function is acting as an international lender-of-last-resort to indebted
countries. IMF member states decide which countries will receive loans, but the member states
with the largest say are the ones that own the largest share of the IMF's funds, which have
always been the United States and its allies.
This is why the IMF's standard "structural adjustment program" is based on the so-called
Washington Consensus, a set of 10 economic policies entirely concocted by U.S. think tanks, the
IMF, the World Bank and the Treasury Department. The Washington Consensus is as follows:
In exchange for a loan, often with a high-interest rate that many would call predatory, the
IMF overhauls the protective and redistributive policies of a country for neoliberal policies,
making the target country ripe for finance capital investment and profit-making.
Number
2: The Oil Industry, out to control the oil reserves
There's little doubt that the oil industry is pushing the U.S. to overthrow the Maduro
government, especially when National Security Advisor John Bolton openly states this on
national television.
Bolton was himself once part of the oil industry, serving as the director of Diamond
Offshore Drilling, Inc. in 2007. He's no stranger to advocating for the interests of the
fossil-fuel industry.
Venezuela has the world's largest oil reserves by far and Washington won't let that wealth
go unexploited, or worse, be shared among its enemies like the Maduro government, Russia,
China, or Iran.
And with so many politicians, Republican and Democratic, bought off by industry players --
companies like ExxonMobil, Koch Industries, and Chevron -- it's impossible to imagine anyone in
Washington successfully advocating for Venezuela maintaining ownership over its own sovereign
natural resources.
Number 3: The Military-Industrial Complex, working to military
dominance and arm another U.S. puppet
One of the most bizarre things about America is that we've created one of the world's
largest private industries around arms dealing. And like any industry, whether it be JDAM bombs
or beef, private businesses often resort to lobbying Congress to squeeze political favors out
of the government in the form of subsidies -- or in the case of the military industrial
complex, a foreign policy of endless war, one based on elusive ideas like combating terrorism
or defending democracy.
You can see that wherever the U.S. goes, expensive construction projects follow. Behind
every multi-billion dollar base construction, some private contractor is there reaping the
profits.
Once our military presence is firmly established, the weapons sales begin. And we all know
no U.S. ally or puppet state is complete without a full fleet of Lockheed Martin F-16s -- then
they'll be able to fend off all of those pesky leftist rebels with freedom missiles.
With Venezuela's neighbors, Colombia and Brazil, growing closer to NATO and accepting U.S.
military presence in their countries, we can only assume Venezuela is Washington's next
target.
As the strategic approach of regime change evolves, new industries arise to meet these
needs.
After the massive anti-war protests following the invasion of Iraq, outright invasion and
occupation are no longer viable strategies, owing to negative public opinion. So Washington
sought to disguise war propaganda using humanitarian rhetoric.
Number 4: "Humanitarian"
NGOs to create and implement the alibi
Privately owned NGOs dedicated to human rights and promoting "American style" democracy have
played a much larger role in regime-change operations in recent years. They serve as soft-power
institutions that attempt to subtly sway a population against its own government through
propaganda laced with words like freedom, democracy, and human rights.
These NGOs are given the full blessing of the U.S. government and the two often work in
tandem. Don't believe me? Take it from former CIA case officer Phillip Agee.
The US Agency for International Development's (USAID) regime-change arm, the National
Endowment for Democracy (NED), funded opposition groups in Nicaragua, Venezuela (during the
2002 coup), Haiti, Ukraine, and most recently China and North Korea. And whenever U.S. foreign
policy sets its sights on a certain target, private industries usually develop to help meet
that goal as well as make a quick buck along the way.
For example, Thor Halvorssen -- the first cousin of Leopoldo Lopez, the founder of Juan
Guaidó's party, Popular Will -- calls himself a human-rights activist. He founded the
notorious Human Rights Foundation (HRF) and makes a living giving speeches and TV appearances
talking about why the governments of Venezuela or North Korea are not legitimate and need to be
overthrown.
Unsurprisingly, HRF is funded by the conservative Sarah Scaife Foundation, which is itself
funded by think tanks like the top neoconservative think tank, the American Enterprise
Institute, as well as the Heritage Foundation. HRF is also funded by the Donors Capital Fund
and the Diana Davis Spencer Foundation, which are also funded by the American Enterprise
Institute. It's one big web of moving money that all leads back to the same cast of
characters.
The crisis in Venezuela has been a huge gift for people like Halvorssen, who use the U.S.'s
war on Venezuela to promote themselves and their organizations.
Number 5: Think Tanks
selling reports that tell the MIC what it wants to hear
Like NGOs, think tanks also play an important role in giving regime change a sense of
legitimacy -- in their case, intellectual legitimacy. Think tanks rely on donations to operate
and many find willing donors among the capitalist class. These fat cats pay for fancy looking
reports meant to justify their desired goal, the delegitimization of socialist governments and
the legitimization of coup governments that uphold the Washington Consensus.
The Cato Institute has been deeply involved in overthrowing the Venezuelan government. In
2008, Cato awarded Venezuelan opposition leader, Yon Goicoechea, the Milton Friedman Prize for
Advancing Liberty and $500,000 for his role in disrupting a constitutional referendum in
Venezuela. That money was used to finance the political rise of Juan Guaidó, and his
clique known as Generation 2007.
These seemingly independent research groups have intimate networks that they leverage to
amplify the message their donors have given them. Here's an article in the Washington
Post written by a fellow at the American Enterprise Institute saying the U.S.'s failure to
intervene in Venezuela has caused the Maduro government to destabilize the region.
Whether it was the bank bailouts following the 2008 crisis, or the lack of action on climate
disaster, in America it seems the government always puts the interests of the rich ahead of the
poor and working class, and the situation in Venezuela is no exception.
As the U.S. continues to attack the Maduro government, keep these special interests in mind.
Think about who gets rich off of the regime-change agenda. It's the same people that said we
had to invade Iraq in order to prevent nuclear apocalypse. It's the same people who said the
world would stop turning on its axis if we didn't carpet bomb Libya and Syria.
Now they're trying to get us to support war in Venezuela. You won't be any freer or more
prosperous after the Maduro government is toppled. It's just war propaganda.
Top photo | A worker counts Venezuelan bolivar notes at a parking lot in Caracas, Venezuela
May 29, 2018. Marco Bello | Reuters
Kei Pritsker is a journalist and activist located in Washington DC. Kei focuses on
international politics and economics. He previously worked as a producer at RT America.
Application of IMF policy in Argentina has brought what is in effect an economic collapse and
astonishing poverty. While this was happening over the months, business news writers were
applauding Argentinian austerity reforms. The data (as I repeatedly showed on Economist's
View) were bad to grim, but business reporting found no problem.
Is this the end of the neoliberal counterrevolution in Argentina ? Moor did its duty moor has
to go -- Macri converted Argentina into the Debt slave again and now to get out of this situation
is nest to impossible.
Argentine president suffers crushing defeat in key primaries ahead of general election
Argentina's President Mauricio Macri suffered a crushing defeat as people voted in party
primaries on Sunday ahead of October's general election.
Given that all of the recession-hit South American country's major parties have already
chosen their presidential candidates, the primaries effectively served as a nationwide
pre-election opinion poll.
Center-left nominee Alberto Fernandez led by around 15 points after partial results were
revealed. Center-right Pro-business Macri admitted it had been "a bad election."
The first round of the presidential election will be held on October 27, with a run-off
– if needed – set for November 24.
With 87 percent of polling station results counted, Fernandez had polled 47.5 percent with
Macri on a little more than 32 percent and centrist former finance minister Roberto Lavagna a
distant third on just 8.3 percent.
Macri had been hoping to earn a second mandate, but his chances appear all but over.
If Fernandez was to register the same result in October, he would be president as
Argentina's electoral law requires a candidate to gain 45 percent for outright victory, or 40
percent and a lead of at least 10 points over the nearest challenger.
Inflation and poverty
"We've had a bad election and that forces us to redouble our efforts from tomorrow," said
Macri, whose popularity has plunged since last year's currency crisis and the much-criticized
56 billion U.S.-dollar bail-out loan he secured from the International Monetary Fund.
"It hurts that we haven't had the support we'd hoped for," he added.
Argentina is currently in a recession and posted 22 percent inflation for the first
half of the year – one of the highest rates in the world. Poverty now affects 32
percent of the population.
Backed by the IMF, Macri has initiated an austerity plan that is deeply unpopular among
ordinary Argentines, who have seen their spending power plummet.
The peso lost half of its value against the dollar last year. The Buenos Aires stock
exchange actually shot up eight percent on Friday amid expectation that Macri would do well
in Sunday's vote.
An important task now is to understand why the IMF assistance to Argentina proved damaging to
the economy from the beginning; the data showed the damage being done. However, there was
almost no mention of the problems that developed outside Argentina and there was surprise
when the failure of the economy was reflected in the serious vote against the current
president.
Of course, Joseph Stiglitz watched the same sort of problems unfold in Argentina almost 20
years ago and was severely criticized for discussing them. How did the problems recur so
readily now? Why is IMF national assistance seemingly so dangerous economically?
"... Wall Street bankers funded all those 'anti colonial movements' in the first place. They wanted to deal with some corrupt brown black politician over an honest White/Japanese colonial officer. ..."
"... What many people do not know is that the after the damage done by the Great Depression (the total Wall Street take over of the US Economy and the looting of independent of American business with the help of the private 'Federal' reserve ), The British Government put restrictions on trade in between the British Empire and USA to protect the economies of Britain and all of her colonies from the Wall Street pigs. ..."
http://www.unz.com/audio/gunsbutter_the-imf-and-world-bank-partners-in-backwardness-407/
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Michael Hudson discusses his seminal work of 1972, Super Imperialism: The Economic Strategy of American Empire,
a critique of how the US exploits foreign economies through IMF and World bank debt; difference between the IMF
and World Bank; World Bank dysfunctional from the outset; loans made in foreign currency only; policy to
provide loans for countries to devote their land to export plantation crops; US food and monetary imperialism;
U.S. agricultural protectionism built into the postwar global system; promotion of dependency on the US as food
supplier; food blackmail; perpetration of world poverty preferred; no encouragement of land reform;
privatization of the public domain; America aided, not foreign economies; exploitation of mineral deposits;
bribery; foreign nations politically controlled at the top; veto power for US only.
This was planned decades ago. That is why Wall Street bankers funded all those 'anti colonial movements' in the
first place. They wanted to deal with some corrupt brown black politician over an honest White/Japanese
colonial officer.
"As far as is known "America's" anti-British policy was first given concrete expression in the brief that
General Marshall took with him to the Quebec Conference in 1943.
This was to the effect that the greatest single obstacle to the expansion of America's export-capitalism after
the war would be not the Soviet Union but the British Empire. What this meant, in practical terms, was that as
soon as the enemies in the field had been disposed of would come the turn of the British Empire to be
progressively destroyed and that means to this end would be shaped even while hostilities raged. The moment
they were over the campaign could begin in real earnest, the signal for which was to be Truman's abrupt
dropping of Lend-Lease to an ally whose economy had been so closely geared to war production that many markets
for her goods had been systematically referred to U.S producers.
The British Empire was not the only ally marked down for liquidation. The Dutch Empire in the East Indies and
the French Empire in Indo-China and Africa were also high on the list "
What many people do not know is that the after the damage done by the Great Depression (the total Wall
Street take over of the US Economy and the looting of independent of American business with the help of the
private 'Federal' reserve ), The British Government put restrictions on trade in between the British Empire and
USA to protect the economies of Britain and all of her colonies from the Wall Street pigs.
In Page 22 of the book we read
"However, as has happened time and again throughout history, the money-lenders had tended to overplay their
hand. The six million German unemployed who were the victims of the "Great Depression" resulted in a formidable
revolt against the Money Power -- the revolt of Adolf Hitler. There was also a rebellion, although of a much
milder kind, in Great Britain and the British nations overseas, whose representatives met in Ottawa in 1932 to
hammer out a system of Imperial Preferences calculated to insulate the British world against Wall St.
amok-runs. These Preferences, as we shall see, incurred the unrelenting hostility of the New York Money Power
and the only reason why a show-down was not forced was the far more serious threat to the international
financial system implicit in the economic doctrines of the Third Reich."
In other words, the Wall street greedy pigs after devouring American industry came to the conclusion that
they faced a major threat from Third Reich Germany (the barter system used by the regime) as well as to a
lesser extent from the British Empire (and other Empires). Hence the war to destroy Third Reich Germany,
Japanese Empire and Italy and then after the war the eventual slow destruction of the European Empires,
especially the British Empire. And hence we suddenly see 'independence movements' sprouting all over the world
and succeeding. Even before the war we had 'independence movements' and 'communist movements' all around the
world thanks to their pet 'Soviet Russia's' agents going all around and 'radicalisng the masses', all with the
blessings of Wall Street Banker pigs.
I'm curious do you live in Britain? I would bet you do because of your relentless protection of the
British Empire. The British Empire has been working on Economic World Domination since Cecil Rhodes established
the Round Table groups. I agree with a comment you made about British citizens not being responsible for their
government's tretment of countries in the colonial era. The same can be said about the American citizen if you
place all the blame on the political class and Wall Street. But then we have to take into consideration the
benefits that the English and American citizen receive from their government's crimminal dealings. As long as
they live better than anyone else in the world, they will not protest against the hand that feed them.
This artilce (audio) uncovers the reason why America and Britian along with their Anglo Saxon partners
Canada and Australia control other country's economies. Creating poverty in other countries keeps the Anglo
Saxon countries ecomomically superiour at the expense of the poor throughout the world. If American and British
citizens stopped their government's continued assault on third world countries the immigration crisis would
end.
America and England have been dominant over other countries with the help of their Jewish partners for a
long time Malla. As you commented to me, they have married into prominent British Society. I'm sorry Malla, but
there is a Mexican saying "Tanta culpa tiene el que mata la vaca que el que detiene la pata". Translation: "The
person that holds the cows feet is as guilty as the one that kills it". Meaning when you unknowingly
participate in a crime you are just as responsible as the one commiting it.
It's hard for decent Americans and British people to see themselves as perpitrators of such horrible
injustices because most of them are very warm and loving Christian people I'm sure. But so are the people of
the countries their government target. Until people stop looking at the problems we are all facing as a
Christian/Muslim – White/Black – High IQ/Low IQ problem, things will only get worse. The real problem as I see
it is a Social Class problem as we can see by this article. The Elites have no problem helping Blacks and other
races as long as they are the Rich Elites. The lower class people can starve white, black, brown, etc. it
doesn't matter just another day in the life of a parasite.
The problem as I see it, can only be solved by the "White" people that are socially below the Elites in
power and take it away from them. The reason why I say that is because history tells us that when the Social
underclass revolts against the oppressor government as so many have in Latin America, the U.S. send their
military to help the crimminal leaders and the people are murdered. The problem needs to be stopped at the
source or else nothing can change. We can talk about the Jews till we're bloe in face, but it is clear as to
who is responsible
@Malla
I am so surprised there are only 2 comments on this article! This is the most important information on this
site I like your comments Malla, you're a very smart Lady me I'm just a Rebel that hates bullies with a
passion! Some of my comments are very rough around the edges depending on the level of racism and ignorance the
commentator writes. But, always respectful to the opposite sex. Thanks for engaging Have a nice day.
Very impressive interview. Indeed, it is shocking when all piracy strategies are put together the brilliante
way Professor Hudson does. A lecture for everybody.
We can talk about the Jews till we're bloe in face, but it is clear as to who is responsible
Who do you think is behind British and American Imperialism? As per Ron Unz's findings, who was behind
Bolshevism? Regarding social and political control, there is always a Zionist element. Look at the World Bank,
the CFR, the Chabad Lubavitch presence behind Netanyahu, Putin and Trump. Look at media, music and education.
What about the Warburgs both in the United States and in Nazi Germany.
https://www.onjewishmatters.com/archives/18428
John Ruskin was the mentor of Cecil Rhodes at Oxford University. Cecil Rhodes was a member of the "Society
of the Elect" along with Rothschild. ( See pg. 311
http://www.carrollquigley.net/pdf/The_Anglo-American_Establishment.pdf
) Rothschild proud founder of the
state of israel. Below are photos of John Ruskin's grave. Why is there a Swastika placed between 1819 and 1900?
Also, why is there a Menorah on his headstone? "The seven branch menorah was used in the ancient temple of
Jerusalem The menorah is part of the coat of arms of the modern State of Israel." –
https://www.judaicawebstore.com/7-branched-menorahs-C918.aspx
Creating poverty in other countries keeps the Anglo Saxon countries ecomomically superiour at the expense
of the poor throughout the world. If American and British citizens stopped their government's continued
assault on third world countries the immigration crisis would end.
I disagree completely. In most brown black countries, the people themselves exploit each other and cause all
the screw ups. Most people here in India (poor or rich) cheat, swindle and ruthlessly exploit others. Of course
you have the IMF gang hovering around for their loot but they are not the main factor in many third world
countries.
Thank you Bonnie for asking the perfect questions and thank you Michael for your ever
incisive and brilliantly clear answers. Together this interview is the perfect Predatory Economics 101 for
ordinary people, i.e. the Bonnie & Michael course
I write this from Athens Greece in 2019, 3 days after our US educated (Harvard & Stanford) oligarchical
class has just been voted back into power with a parliamentary majority in bone-headed but fully deserved
reaction to Tsipras the fake left traitor. Very sad and very silly since Greece is a 100% captive colony of EU
/ Washington. The only upside is that with the Trotskyists out Greeks will be able to keep our icons and our
Orthodoxy, something we shall need more than ever.
"... Kolomoisky is the man who controls the recently elected Jewish president Zelensky -- a comedian. ..."
"... Let's not forget that Theresa May is the one who has worked assiduously on trying to overcome the results of the British referendum. She does not believe in democracy. ..."
"... This man most certainly made a substantial offshore payment to Largarde or her companies or her lawyers. That is how it works everywhere. ..."
She robbed the French taxpayer of some 404 billion Euros. The fact that she is not in
prison while protesters are being injured weekly by the French police tells you a lot about
why these people are protesting.
Since then, she has continued with her corrupt behaviour by greatly enriching the
Ukrainian/Israeli oligarch Kolomoisky -- who robbed his own bank.
How Christine Lagarde, Clinton and Nuland Funded a Massive Ukrainian Ponzi
Scheme
Kolomoisky is the man who controls the recently elected Jewish president Zelensky -- a
comedian.
I think the writer pays too much to the attire of May and Lagarde -- The pearls, the tweed
and gingham suits -- when their corruption is totally 21st century. Let's not forget that
Theresa May is the one who has worked assiduously on trying to overcome the results of the
British referendum. She does not believe in democracy. Replies: @Logan
, @George F.
Held
One of the functions of the International Monetary Fund (IMF) is imposing austerity
measures on the people of poor countries seeking bailouts, so perhaps choosing a corporate
lawyer to run it is fitting.
@Logan
ness tampering. After a high-profile case against public prosecutor Éric de
Montgolfier, he was sentenced in 1995 by the Court of Appeals of Douai to 2 years in prison,
including 8 months non-suspended and 3 years of deprivation of his civic rights.
"... The purpose of a military conquest is to take control of foreign economies, to take control of their land and impose tribute. The genius of the World Bank was to recognize that it's not necessary to occupy a country in order to impose tribute, or to take over its industry, agriculture and land. Instead of bullets, it uses financial maneuvering. As long as other countries play an artificial economic game that U.S. diplomacy can control, finance is able to achieve today what used to require bombing and loss of life by soldiers ..."
"... It was set up basically by the United States in 1944, along with its sister institution, the International Monetary Fund (IMF). Their purpose was to create an international order like a funnel to make other countries economically dependent on the United States ..."
"... American diplomats insisted on the ability to veto any action by the World Bank or IMF. The aim of this veto power was to make sure that any policy was, in Donald Trump's words, to put America first. "We've got to win and they've got to lose." ..."
"... The World Bank was set up from the outset as a branch of the military, of the Defense Department. John J. McCloy (Assistant Secretary of War, 1941-45), was the first full-time president ..."
"... Many countries had two rates: one for goods and services, which was set normally by the market, and then a different exchange rate that was managed for capital movements. That was because countries were trying to prevent capital flight. They didn't want their wealthy classes or foreign investors to make a run on their own currency – an ever-present threat in Latin America. ..."
"... The IMF and the World Bank backed the cosmopolitan classes, the wealthy. Instead of letting countries control their capital outflows and prevent capital flight, the IMF's job is to protect the richest One Percent and foreign investors from balance-of-payments problems ..."
"... The IMF enables its wealthy constituency to move their money out of the country without taking a foreign-exchange loss ..."
"... Wall Street speculators have sold the local currency short to make a killing, George-Soros style. ..."
"... When the debtor-country currency collapses, the debts that these Latin American countries owe are in dollars, and now have to pay much more in their own currency to carry and pay off these debts. ..."
"... Local currency is thrown onto the foreign-exchange market for dollars, lowering the exchange rate. That increases import prices, raising a price umbrella for domestic products. ..."
"... Instead, the IMF says just the opposite: It acts to prevent any move by other countries to bring the debt volume within the ability to be paid. It uses debt leverage as a way to control the monetary lifeline of financially defeated debtor countries. ..."
"... This control by the U.S. financial system and its diplomacy has been built into the world system by the IMF and the World Bank claiming to be international instead of an expression of specifically U.S. New Cold War nationalism. ..."
"... The same thing happened in Greece a few years ago, when almost all of Greece's foreign debt was owed to Greek millionaires holding their money in Switzerland ..."
"... The IMF could have seized this money to pay off the bondholders. Instead, it made the Greek economy pay. It found that it was worth wrecking the Greek economy, forcing emigration and wiping out Greek industry so that French and German bondholding banks would not have to take a loss. That is what makes the IMF so vicious an institution. ..."
"... America was able to grab all of Iran's foreign exchange just by the banks interfering. The CIA has bragged that it can do the same thing with Russia. If Russia does something that U.S. diplomats don't like, the U.S. can use the SWIFT bank payment system to exclude Russia from it, so the Russian banks and the Russian people and industry won't be able to make payments to each other. ..."
"... You can't create the money, especially if you're running a balance of payments deficit and if U.S. foreign policy forces you into deficit by having someone like George Soros make a run on your currency. Look at the Asia crisis in 1997. Wall Street funds bet against foreign currencies, driving them way down, and then used the money to pick up industry cheap in Korea and other Asian countries. ..."
"... This was also done to Russia's ruble. The only country that avoided this was Malaysia, under Mohamed Mahathir, by using capital controls. Malaysia is an object lesson in how to prevent a currency flight. ..."
"... Client kleptocracies take their money and run, moving it abroad to hard currency areas such as the United States, or at least keeping it in dollars in offshore banking centers instead of reinvesting it to help the country catch up by becoming independent agriculturally, in energy, finance and other sectors. ..."
"... But in shaping the World Trade Organization's rules, the United States said that all countries had to promote free trade and could not have government support, except for countries that already had it. We're the only country that had it. That's what's called "grandfathering". ..."
"The purpose of a military conquest is to take control of foreign economies, to take control of their land and impose
tribute. The genius of the World Bank was to recognize that it's not necessary to occupy a country in order to impose tribute,
or to take over its industry, agriculture and land. Instead of bullets, it uses financial maneuvering. As long as other countries
play an artificial economic game that U.S. diplomacy can control, finance is able to achieve today what used to require bombing
and loss of life by soldiers."
I'm Bonnie Faulkner. Today on Guns and Butter: Dr. Michael Hudson. Today's show: The IMF and World Bank: Partners In Backwardness
. Dr. Hudson is a financial economist and historian. He is President of the Institute for the Study of Long-Term Economic Trend,
a Wall Street Financial Analyst, and Distinguished Research Professor of Economics at the University of Missouri, Kansas City.
His most recent books include " and Forgive them Their Debts: Lending, Foreclosure and Redemption from Bronze Age Finance
to the Jubilee Year "; Killing the Host: How Financial Parasites and Debt Destroy the Global Economy , and J Is for
Junk Economics: A Guide to Reality in an Age of Deception . He is also author of Trade, Development and Foreign Debt
, among many other books.
We return today to a discussion of Dr. Hudson's seminal 1972 book, Super Imperialism: The Economic Strategy of American Empire
, a critique of how the United States exploited foreign economies through the IMF and World Bank, with a special emphasis on
food imperialism.
... ... ...
Bonnie Faulkner : In your seminal work form 1972, Super-Imperialism: The Economic Strategy of American Empire ,
you write: "The development lending of the World Bank has been dysfunctional from the outset." When was the World Bank set up and
by whom?
Michael Hudson : It was set up basically by the United States in 1944, along with its sister institution, the International
Monetary Fund (IMF). Their purpose was to create an international order like a funnel to make other countries economically dependent
on the United States. To make sure that no other country or group of countries – even all the rest of the world – could not
dictate U.S. policy. American diplomats insisted on the ability to veto any action by the World Bank or IMF. The aim of this
veto power was to make sure that any policy was, in Donald Trump's words, to put America first. "We've got to win and they've got
to lose."
The World Bank was set up from the outset as a branch of the military, of the Defense Department. John J. McCloy (Assistant
Secretary of War, 1941-45), was the first full-time president. He later became Chairman of Chase Manhattan Bank (1953-60).
McNamara was Secretary of Defense (1961-68), Paul Wolfowitz was Deputy and Under Secretary of Defense (1989-2005), and Robert Zoellick
was Deputy Secretary of State. So I think you can look at the World Bank as the soft shoe of American diplomacy.
Bonnie Faulkner : What is the difference between the World Bank and the International Monetary Fund, the IMF? Is
there a difference?
Michael Hudson : Yes, there is. The World Bank was supposed to make loans for what they call international development.
"Development" was their euphemism for dependency on U.S. exports and finance. This dependency entailed agricultural backwardness
– opposing land reform, family farming to produce domestic food crops, and also monetary backwardness in basing their monetary system
on the dollar.
The World Bank was supposed to provide infrastructure loans that other countries would go into debt to pay American engineering
firms, to build up their export sectors and their plantation sectors by public investment roads and port development for imports
and exports. Essentially, the Bank financed long- investments in the foreign trade sector, in a way that was a natural continuation
of European colonialism.
In 1941, for example, C. L. R. James wrote an article on "Imperialism in Africa" pointing out the fiasco of European railroad
investment in Africa: "Railways must serve flourishing industrial areas, or densely populated agricult5ural regions, or they must
open up new land along which a thriving population develops and provides the railways with traffic. Except in the mining regions
of South Africa, all these conditions are absent. Yet railways were needed, for the benefit of European investors and heavy industry."
That is why, James explained "only governments can afford to operate them," while being burdened with heavy interest obligations.
[1] What was "developed" was Africa's
mining and plantation export sector, not its domestic economies. The World Bank followed this pattern of "development" lending without
apology.
The IMF was in charge of short-term foreign currency loans. Its aim was to prevent countries from imposing capital controls to
protect their balance of payments. Many countries had a dual exchange rate: one for trade in goods and services, the other rate
for capital movements. The function of the IMF and World Bank was essentially to make other countries borrow in dollars, not in
their own currencies, and to make sure that if they could not pay their dollar-denominated debts, they had to impose austerity on
the domestic economy – while subsidizing their import and export sectors and protecting foreign investors, creditors and client
oligarchies from loss.
The IMF developed a junk-economics model pretending that any country can pay any amount of debt to the creditors if it just impoverishes
its labor enough. So when countries were unable to pay their debt service, the IMF tells them to raise their interest rates to bring
on a depression – austerity – and break up the labor unions. That is euphemized as "rationalizing labor markets." The rationalizing
is essentially to disable labor unions and the public sector. The aim – and effect – is to prevent countries from essentially following
the line of development that had made the United States rich – by public subsidy and protection of domestic agriculture, public
subsidy and protection of industry and an active government sector promoting a New Deal democracy. The IMF was essentially promoting
and forcing other countries to balance their trade deficits by letting American and other investors buy control of their commanding
heights, mainly their infrastructure monopolies, and to subsidize their capital flight.
BONNIE FAULKNER : Now, Michael, when you began speaking about the IMF and monetary controls, you mentioned that there
were two exchange rates of currency in countries. What were you referring to?
MICHAEL HUDSON : When I went to work on Wall Street in the '60s, I was balance-of-payments economist for Chase Manhattan,
and we used the IMF's monthly International Financial Statistics every month. At the top of each country's statistics would
be the exchange-rate figures. Many countries had two rates: one for goods and services, which was set normally by the market,
and then a different exchange rate that was managed for capital movements. That was because countries were trying to prevent capital
flight. They didn't want their wealthy classes or foreign investors to make a run on their own currency – an ever-present threat
in Latin America.
The IMF and the World Bank backed the cosmopolitan classes, the wealthy. Instead of letting countries control their capital
outflows and prevent capital flight, the IMF's job is to protect the richest One Percent and foreign investors from balance-of-payments
problems.
The World Bank and American diplomacy have steered them into a chronic currency crisis. The IMF enables its wealthy constituency
to move their money out of the country without taking a foreign-exchange loss. It makes loans to support capital flight out
of domestic currencies into the dollar or other hard currencies. The IMF calls this a "stabilization" program. It is never effective
in helping the debtor economy pay foreign debts out of growth. Instead, the IMF uses currency depreciation and sell-offs of public
infrastructure and other assets to foreign investors after the flight capital has left and currency collapses. Wall Street speculators
have sold the local currency short to make a killing, George-Soros style.
When the debtor-country currency collapses, the debts that these Latin American countries owe are in dollars, and now have
to pay much more in their own currency to carry and pay off these debts. We're talking about enormous penalty rates in domestic
currency for these countries to pay foreign-currency debts – basically taking on to finance a non-development policy and to subsidize
capital flight when that policy "fails" to achieve its pretended objective of growth.
All hyperinflations of Latin America – Chile early on, like Germany after World War I – come from trying to pay foreign debts
beyond the ability to be paid. Local currency is thrown onto the foreign-exchange market for dollars, lowering the exchange
rate. That increases import prices, raising a price umbrella for domestic products.
A really functional and progressive international monetary fund that would try to help countries develop would say: "Okay, banks
and we (the IMF) have made bad loans that the country can't pay. And the World Bank has given it bad advice, distorting its domestic
development to serve foreign customers rather than its own growth. So we're going to write down the loans to the ability to be paid."
That's what happened in 1931, when the world finally stopped German reparations payments and Inter-Ally debts to the United States
stemming from World War I.
Instead, the IMF says just the opposite: It acts to prevent any move by other countries to bring the debt volume within
the ability to be paid. It uses debt leverage as a way to control the monetary lifeline of financially defeated debtor countries.
So if they do something that U.S. diplomats don't approve of, it can pull the plug financially, encouraging a run on their currency
if they act independently of the United States instead of falling in line. This control by the U.S. financial system and its
diplomacy has been built into the world system by the IMF and the World Bank claiming to be international instead of an expression
of specifically U.S. New Cold War nationalism.
BONNIE FAULKNER : How do exchange rates contribute to capital flight?
MICHAEL HUDSON : It's not the exchange rate that contributes. Suppose that you're a millionaire, and you see that your
country is unable to balance its trade under existing production patterns. The money that the government has under control is pesos,
escudos, cruzeiros or some other currency, not dollars or euros. You see that your currency is going to go down relative to the
dollar, so you want to get our money out of the country to preserve your purchasing power.
This has long been institutionalized. By 1990, for instance, Latin American countries had defaulted so much in the wake of the
Mexico defaults in 1982 that I was hired by Scudder Stevens, to help start a Third World Bond Fund (called a "sovereign high-yield
fund"). At the time, Argentina and Brazil were running such serious balance-of-payments deficits that they were having to pay 45
percent per year interest, in dollars, on their dollar debt. Mexico, was paying 22.5 percent on its tesobonos .
Scudders' salesmen went around to the United States and tried to sell shares in the proposed fund, but no Americans would buy
it, despite the enormous yields. They sent their salesmen to Europe and got a similar reaction. They had lost their shirts on Third
World bonds and couldn't see how these countries could pay.
Merrill Lynch was the fund's underwriter. Its office in Brazil and in Argentina proved much more successful in selling investments
in Scudder's these offshore fund established in the Dutch West Indies. It was an offshore fund, so Americans were not able to buy
it. But Brazilian and Argentinian rich families close to the central bank and the president became the major buyers. We realized
that they were buying these funds because they knew that their government was indeed going to pay their stipulated interest charges.
In effect, the bonds were owed ultimately to themselves. So these Yankee dollar bonds were being bought by Brazilians and other
Latin Americans as a vehicle to move their money out of their soft local currency (which was going down), to buy bonds denominated
in hard dollars.
BONNIE FAULKNER : If wealthy families from these countries bought these bonds denominated in dollars, knowing that they
were going to be paid off, who was going to pay them off? The country that was going broke?
MICHAEL HUDSON : Well, countries don't pay; the taxpayers pay, and in the end, labor pays. The IMF certainly doesn't want
to make its wealthy client oligarchies pay. It wants to squeeze ore economic surplus out of the labor force. So countries are told
that the way they can afford to pay their enormously growing dollar-denominated debt is to lower wages even more.
Currency depreciation is an effective way to do this, because what is devalued is basically labor's wages. Other elements of
exports have a common world price: energy, raw materials, capital goods, and credit under the dollar-centered international monetary
system that the IMF seeks to maintain as a financial strait jacket.
According to the IMF's ideological models, there's no limit to how far you can lower wages by enough to make labor competitive
in producing exports. The IMF and World Bank thus use junk economics to pretend that the way to pay debts owed to the wealthiest
creditors and investors is to lower wages and impose regressive excise taxes, to impose special taxes on necessities that labor
needs, from food to energy and basic services supplied by public infrastructure.
BONNIE FAULKNER: So you're saying that labor ultimately has to pay off these junk bonds?
MICHAEL HUDSON: That is the basic aim of IMF. I discuss its fallacies in my Trade Development and Foreign Debt
, which is the academic sister volume to Super Imperialism . These two books show that the World Bank and IMF were viciously
anti-labor from the very outset, working with domestic elites whose fortunes are tied to and loyal to the United States.
BONNIE FAULKNER : With regard to these junk bonds, who was it or what entity
MICHAEL HUDSON : They weren't junk bonds. They were called that because they were high-interest bonds, but they weren't
really junk because they actually were paid. Everybody thought they were junk because no American would have paid 45 percent interest.
Any country that really was self-reliant and was promoting its own economic interest would have said, "You banks and the IMF have
made bad loans, and you've made them under false pretenses – a trade theory that imposes austerity instead of leading to prosperity.
We're not going to pay." They would have seized the capital flight of their comprador elites and said that these dollar bonds were
a rip-off by the corrupt ruling class.
The same thing happened in Greece a few years ago, when almost all of Greece's foreign debt was owed to Greek millionaires
holding their money in Switzerland. The details were published in the "Legarde List." But the IMF said, in effect that its
loyalty was to the Greek millionaires who ha their money in Switzerland. The IMF could have seized this money to pay off the
bondholders. Instead, it made the Greek economy pay. It found that it was worth wrecking the Greek economy, forcing emigration and
wiping out Greek industry so that French and German bondholding banks would not have to take a loss. That is what makes the IMF
so vicious an institution.
BONNIE FAULKNER : So these loans to foreign countries that were regarded as junk bonds really weren't junk, because
they were going to be paid. What group was it that jacked up these interest rates to 45 percent?
MICHAEL HUDSON : The market did. American banks, stock brokers and other investors looked at the balance of payments of
these countries and could not see any reasonable way that they could pay their debts, so they were not going to buy their bonds.
No country subject to democratic politics would have paid debts under these conditions. But the IMF, U.S. and Eurozone diplomacy
overrode democratic choice.
Investors didn't believe that the IMF and the World Bank had such a strangle hold over Latin American, Asian, and African countries
that they could make the countries act in the interest of the United States and the cosmopolitan finance capital, instead of in
their own national interest. They didn't believe that countries would commit financial suicide just to pay their wealthy One Percent.
They were wrong, of course. Countries were quite willing to commit economic suicide if their governments were dictatorships propped
up by the United States. That's why the CIA has assassination teams and actively supports these countries to prevent any party coming
to power that would act in their national interest instead of in the interest of a world division of labor and production along
the lines that the U.S. planners want for the world. Under the banner of what they call a free market, you have the World Bank and
the IMF engage in central planning of a distinctly anti-labor policy. Instead of calling them Third World bonds or junk bonds, you
should call them anti-labor bonds, because they have become a lever to impose austerity throughout the world.
BONNIE FAULKNER : Well, that makes a lot of sense, Michael, and answers a lot of the questions I've put together to ask
you. What about Puerto Rico writing down debt? I thought such debts couldn't be written down.
MICHAEL HUDSON : That's what they all said, but the bonds were trading at about 45 cents on the dollar, the risk of their
not being paid. The Wall Street Journal on June 17, reported that unsecured suppliers and creditors of Puerto Rico, would
only get nine cents on the dollar. The secured bond holders would get maybe 65 cents on the dollar.
The terms are being written down because it's obvious that Puerto Rico can't pay, and that trying to do so is driving the population
to move out of Puerto Rico to the United States. If you don't want Puerto Ricans to act the same way Greeks did and leave Greece
when their industry and economy was shut down, then you're going to have to provide stability or else you're going to have half
of Puerto Rico living in Florida.
BONNIE FAULKNER : Who wrote down the Puerto Rican debt?
MICHAEL HUDSON : A committee was appointed, and it calculated how much Puerto Rico can afford to pay out of its taxes.
Puerto Rico is a U.S. dependency, that is, an economic colony of the United States. It does not have domestic self-reliance. It's
the antithesis of democracy, so it's never been in charge of its own economic policy and essentially has to do whatever the United
States tells it to do. There was a reaction after the hurricane and insufficient U.S. support to protect the island and the enormous
waste and corruption involved in the U.S. aid. The U.S. response was simply: "We won you fair and square in the Spanish-American
war and you're an occupied country, and we're going to keep you that way." Obviously this is causing a political resentment.
BONNIE FAULKNER : You've already touched on this, but why has the World Bank traditionally been headed by a U.S. secretary
of defense?
MICHAEL HUDSON : Its job is to do in the financial sphere what, in the past, was done by military force. The purpose of
a military conquest is to take control of foreign economies, to take control of their land and impose tribute. The genius of the
World Bank was to recognize that it's not necessary to occupy a country in order to impose tribute, or to take over its industry,
agriculture and land. Instead of bullets, it uses financial maneuvering. As long as other countries play an artificial economic
game that U.S. diplomacy can control, finance is able to achieve today what used to require bombing and loss of life by soldiers.
In this case the loss of life occurs in the debtor countries. Population growth shrinks, suicides go up. The World Bank engages
in economic warfare that is just as destructive as military warfare. At the end of the Yeltsin period Russia's President Putin said
that American neoliberalism destroyed more of Russia's population than did World War II. Such neoliberalism, which basically is
the doctrine of American supremacy and foreign dependency, is the policy of the World Bank and IMF.
BONNIE FAULKNER : Why has World Bank policy since its inception been to provide loans for countries to devote their land
to export crops instead of giving priority to feeding themselves? And if this is the case, why do countries want these loans?
MICHAEL HUDSON : One constant of American foreign policy is to make other countries dependent on American grain exports
and food exports. The aim is to buttress America's agricultural trade surplus. So the first thing that the World Bank has done is
not to make any domestic currency loans to help food producers. Its lending has steered client countries to produce tropical export
crops, mainly plantation crops that cannot be grown in the United States. Focusing on export crops leads client countries to become
dependent on American farmers – and political sanctions.
In the 1950s, right after the Chinese revolution, the United States tried to prevent China from succeeding by imposing grain
export controls to starve China into submission by putting sanctions on exports. Canada was the country that broke these export
controls and helped feed China.
The idea is that if you can make other countries export plantation crops, the oversupply will drive down prices for cocoa and
other tropical products, and they won't feed themselves. So instead of backing family farms like the American agricultural policy
does, the World Bank backed plantation agriculture. In Chile, which has the highest natural supply of fertilizer in the world from
its guano deposits, exports guano instead of using it domestically. It also has the most unequal land distribution, blocking it
from growing its own grain or food crops. It's completely dependent on the United States for this, and it pays by exporting copper,
guano and other natural resources.
The idea is to create interdependency – one-sided dependency on the U.S. economy. The United States has always aimed at being
self-sufficient in its own essentials, so that no other country can pull the plug on our economy and say, "We're going to starve
you by not feeding you." Americans can feed themselves. Other countries can't say, "We're going to let you freeze in the dark by
not sending you oil," because America's independent in energy. But America can use the oil control to make other countries freeze
in the dark, and it can starve other countries by food-export sanctions.
So the idea is to give the United States control of the key interconnections of other economies, without letting any country
control something that is vital to the working of the American economy.
There's a double standard here. The United States tells other countries: "Don't do as we do. Do as we say." The only way it can
enforce this is by interfering in the politics of these countries, as it has interfered in Latin America, always pushing the right
wing. For instance, when Hillary's State Department overthrew the Honduras reformer who wanted to undertake land reform and feed
the Hondurans, she said: "This person has to go." That's why there are so many Hondurans trying to get into the United States now,
because they can't live in their own country.
The effect of American coups is the same in Syria and Iraq. They force an exodus of people who no longer can make a living under
the brutal dictatorships supported by the United States to enforce this international dependency system.
BONNIE FAULKNER : So when I asked you why countries would want these loans, I guess you're saying that they wouldn't,
and that's why the U.S. finds it necessary to control them politically.
MICHAEL HUDSON : That's a concise way of putting it Bonnie.
BONNIE FAULKNER : Why are World Bank loans only in foreign currency, not in the domestic currency of the country to which
it is lending?
MICHAEL HUDSON : That's a good point. A basic principle should be to avoid borrowing in a foreign currency. A country
can always pay the loans in its own currency, but there's no way that it can print dollars or euros to pay loans denominated in
these foreign currencies.
Making the dollar central forces other countries to interface with the U.S. banking system. So if a country decides to go its
own way, as Iran did in 1953 when it wanted to take over its oil from British Petroleum (or Anglo Iranian Oil, as it was called
back then), the United States can interfere and overthrow it. The idea is to be able to use the banking system's interconnections
to stop payments from being made.
After America installed the Shah's dictatorship, they were overthrown by Khomeini, and Iran had run up a U.S. dollar debt under
the Shah. It had plenty of dollars. I think Chase Manhattan was its paying agent. So when its quarterly or annual debt payment came
due, Iran told Chase to draw on its accounts and pay the bondholders. But Chase took orders from the State Department or the Defense
Department, I don't know which, and refused to pay. When the payment was not made, America and its allies claimed that Iran was
in default. They demanded the entire debt to be paid, as per the agreement that the Shah's puppet government had signed. America
simply grabbed the deposits that Iran had in the United States. This is the money that was finally returned to Iran without interest
under the agreement of 2016.
America was able to grab all of Iran's foreign exchange just by the banks interfering. The CIA has bragged that it can do
the same thing with Russia. If Russia does something that U.S. diplomats don't like, the U.S. can use the SWIFT bank payment system
to exclude Russia from it, so the Russian banks and the Russian people and industry won't be able to make payments to each other.
This prompted Russia to create its own bank-transfer system, and is leading China, Russia, India and Pakistan to draft plans
to de-dollarize.
BONNIE FAULKNER : I was going to ask you, why would loans in a country's domestic currency be preferable to the country
taking out a loan in a foreign currency? I guess you've explained that if they took out a loan in a domestic currency, they would
be able to repay it.
MICHAEL HUDSON : Yes.
BONNIE FAULKNER : Whereas a loan in a foreign currency would cripple them.
MICHAEL HUDSON : Yes. You can't create the money, especially if you're running a balance of payments deficit and if
U.S. foreign policy forces you into deficit by having someone like George Soros make a run on your currency. Look at the Asia crisis
in 1997. Wall Street funds bet against foreign currencies, driving them way down, and then used the money to pick up industry cheap
in Korea and other Asian countries.
This was also done to Russia's ruble. The only country that avoided this was Malaysia, under Mohamed Mahathir, by using capital
controls. Malaysia is an object lesson in how to prevent a currency flight.
But for Latin America and other countries, much of their foreign debt is held by their own ruling class. Even though it's denominated
in dollars, Americans don't own most of this debt. It's their own ruling class. The IMF and World Bank dictate tax policy to Latin
America – to un-tax wealth and shift the burden onto labor. Client kleptocracies take their money and run, moving it abroad
to hard currency areas such as the United States, or at least keeping it in dollars in offshore banking centers instead of reinvesting
it to help the country catch up by becoming independent agriculturally, in energy, finance and other sectors.
BONNIE FAULKNER : You say that: "While U.S. agricultural protectionism has been built into the postwar global system at
its inception, foreign protectionism is to be nipped in the bud." How has U.S. agricultural protectionism been built into the postwar
global system?
MICHAEL HUDSON : Under Franklin Roosevelt the Agricultural Adjustment Act of 1933 called for price supports for crops
so that farmers could earn enough to invest in equipment and seeds. The Agriculture Department was a wonderful department in spurring
new seed varieties, agricultural extension services, marketing and banking services. It provided public support so that productivity
in American agriculture from the 1930s to '50s was higher over a prolonged period than that of any other sector in history.
But in shaping the World Trade Organization's rules, the United States said that all countries had to promote free trade
and could not have government support, except for countries that already had it. We're the only country that had it. That's what's
called "grandfathering". The Americans said: "We already have this program on the books, so we can keep it. But no other country
can succeed in agriculture in the way that we have done. You must keep your agriculture backward, except for the plantation crops
and growing crops that we can't grow in the United States." That's what's so evil about the World Bank's development plan.
BONNIE FAULKNER : According to your book: "Domestic currency is needed to provide price supports and agricultural extension
services such as have made U.S. agriculture so productive." Why can't infrastructure costs be subsidized to keep down the economy's
overall cost structure if IMF loans are made in foreign currency?
MICHAEL HUDSON : If you're a farmer in Brazil, Argentina or Chile, you're doing business in domestic currency. It doesn't
help if somebody gives you dollars, because your expenses are in domestic currency. So if the World Bank and the IMF can prevent
countries from providing domestic currency support, that means they're not able to give price supports or provide government marketing
services for their agriculture.
America is a mixed economy. Our government has always subsidized capital formation in agriculture and industry, but it insists
that other countries are socialist or communist if they do what the United States is doing and use their government to support the
economy. So it's a double standard. Nobody calls America a socialist country for supporting its farmers, but other countries are
called socialist and are overthrown if they attempt land reform or attempt to feed themselves.
This is what the Catholic Church's Liberation Theology was all about. They backed land reform and agricultural self-sufficiency
in food, realizing that if you're going to support population growth, you have to support the means to feed it. That's why the United
States focused its assassination teams on priests and nuns in Guatemala and Central America for trying to promote domestic self-sufficiency.
BONNIE FAULKNER : If a country takes out an IMF loan, they're obviously going to take it out in dollars. Why can't they
take the dollars and convert them into domestic currency to support local infrastructure costs?
MICHAEL HUDSON : You don't need a dollar loan to do that. Now were getting in to MMT. Any country can create its own currency.
There's no reason to borrow in dollars to create your own currency. You can print it yourself or create it on your computers.
BONNIE FAULKNER: Well, exactly. So why don't these countries simply print up their own domestic currency?
MICHAEL HUDSON : Their leaders don't want to be assassinated. More immediately, if you look at the people in charge of
foreign central banks, almost all have been educated in the United States and essentially brainwashed. It's the mentality of foreign
central bankers. The people who are promoted are those who feel personally loyal to the United States, because they that that's
how to get ahead. Essentially, they're opportunists working against the interests of their own country. You won't have socialist
central bankers as long as central banks are dominated by the International Monetary Fund and the Bank for International Settlements.
BONNIE FAULKNER : So we're back to the main point: The control is by political means, and they control the politics and
the power structure in these countries so that they don't rebel.
MICHAEL HUDSON : That's right. When you have a dysfunctional economic theory that is destructive instead of productive,
this is never an accident. It is always a result of junk economics and dependency economics being sponsored. I've talked to people
at the U.S. Treasury and asked why they all end up following the United States. Treasury officials have told me: "We simply buy
them off. They do it for the money." So you don't need to kill them. All you need to do is find people corrupt enough and opportunist
enough to see where the money is, and you buy them off.
BONNIE FAULKNER : You write that "by following U.S. advice, countries have left themselves open to food blackmail." What
is food blackmail?
MICHAEL HUDSON : If you pursue a foreign policy that we don't like -- for instance, if you trade with Iran, which we're
trying to smash up to grab its oil -- we'll impose financial sanctions against you. We won't sell you food, and you can starve.
And because you've followed World Bank advice and not grown your own food, you will starve, because you're dependent on us, the
United States and our Free World Ó allies. Canada will no longer follow its own policy independently of the United States,
as it did with China in the 1950s when it sold it grain. Europe also is falling in line with U.S. policy.
BONNIE FAULKNER : You write that: "World Bank administrators demand that loan recipients pursue a policy of economic dependency
above all on the United States as food supplier." Was this done to support U.S. agriculture? Obviously it is, but were there other
reasons as well?
MICHAEL HUDSON : Certainly the agricultural lobby was critical in all of this, and I'm not sure at what point this became
thoroughly conscious. I knew some of the World Bank planners, and they had no anticipation that this dependency would be the result.
They believed the free-trade junk economics that's taught in the schools' economics departments and for which Nobel prizes are awarded.
When we're dealing with economic planners, we're dealing with tunnel-visioned people. They stayed in the discipline despite its
unreality because they sort of think that abstractly it makes sense. There's something autistic about most economists, which is
why the French had their non-autistic economic site for many years. The mentality at work is that every country should produce what
it's best at – not realizing that nations also need to be self-sufficient in essentials, because we're in a real world of economic
and military warfare.
BONNIE FAULKNER : Why does the World Bank prefer to perpetrate world poverty instead of adequate overseas capacity to
feed the peoples of developing countries?
MICHAEL HUDSON : World poverty is viewed as solution , not a problem. The World Bank thinks of poverty as low-priced
labor, creating a competitive advantage for countries that produce labor-intensive goods. So poverty and austerity for the World
Bank and IMF is an economic solution that's built into their models. I discuss these in my Trade, Development and Foreign Debt
book. Poverty is to them the solution, because it means low-priced labor, and that means higher profits for the companies bought
out by U.S., British, and European investors. So poverty is part of the class war: profits versus poverty.
BONNIE FAULKNER : In general, what is U.S. food imperialism? How would you characterize it?
MICHAEL HUDSON : Its aim is to make America the producer of essential foods and other countries producing inessential
plantation crops, while remaining dependent on the United States for grain, soy beans and basic food crops.
BONNIE FAULKNER : Does World Bank lending encourage land reform in former colonies?
MICHAEL HUDSON : No. If there is land reform, the CIA sends its assassination teams in and you have mass murder, as you
had in Guatemala, Ecuador, Central America and Columbia. The World Bank is absolutely committed against land reform. When the Forgash
Plan for a World Bank for Economic Acceleration was proposed in the 1950s to emphasize land reform and local-currency loans, a Chase
Manhattan economist to whom the plan was submitted warned that every country that had land reform turned out to be anti-American.
That killed any alternative to the World Bank.
BONNIE FAULKNER : Does the World Bank insist on client governments privatizing their public domain? If so, why, and what
is the effect?
MICHAEL HUDSON : It does indeed insist on privatization, pretending that this is efficient. But what it privatizes are
natural monopolies – the electrical system, the water system and other basic needs. Foreigners take over, essentially finance them
with foreign debt, build the foreign debt that they build into the cost structure, and raise the cost of living and doing business
in these countries, thereby crippling them economically. The effect is to prevent them from competing with the United States and
its European allies.
BONNIE FAULKNER : Would you say then that it is mainly America that has been aided, not foreign economies that borrow
from the World Bank?
MICHAEL HUDSON : That's why the United States is the only country with veto power in the IMF and World Bank – to make
sure that what you just described is exactly what happens.
BONNIE FAULKNER : Why do World Bank programs accelerate the exploitation of mineral deposits for use by other nations?
MICHAEL HUDSON : Most World Bank loans are for transportation, roads, harbor development and other infrastructure needed
to export minerals and plantation crops. The World Bank doesn't make loans for projects that help the country develop in its own
currency. By making only foreign currency loans, in dollars or maybe euros now, the World Bank says that its clients have to repay
by generating foreign currency. The only way they can repay the dollars spent on American engineering firms that have built their
infrastructure is to export – to earn enough dollars to pay back for the money that the World Bank or IMF have lent.
This is what John Perkins' book about being an economic hit man for the World Bank is all about. He realized that his job was
to get countries to borrow dollars to build huge projects that could only be paid for by the country exporting more – which required
breaking its labor unions and lowering wages so that it could be competitive in the race to the bottom that the World Bank and IMF
encourage.
BONNIE FAULKNER : You also point out in Super Imperialism that mineral resources represent diminishing assets,
so these countries that are exporting mineral resources are being depleted while the importing countries aren't.
MICHAEL HUDSON : That's right. They'll end up like Canada. The end result is going to be a big hole in the ground. You've
dug up all your minerals, and in the end you have a hole in the ground and a lot of the refuse and pollution – the mining slag and
what Marx called the excrements of production.
This is not a sustainable development. The World Bank only promotes the U.S. pursuit of sustainable development. So naturally,
they call their "Development," but their focus is on the United States, not the World Bank's client countries.
BONNIE FAULKNER : When Super Imperialism: The Economic Strategy of American Empire was originally published in
1972, how was it received?
MICHAEL HUDSON : Very positively. It enabled my career to take off. I received a phone call a month later by someone from
the Bank of Montreal saying they had just made $240 million on the last paragraph of my book. They asked what it would cost to have
me come up and give a lecture. I began lecturing once a month at $3,500 a day, moving up to $6,500 a day, and became the highest-paid
per diem economist on Wall Street for a few years.
I was immediately hired by the Hudson Institute to explain Super Imperialism to the Defense Department. Herman Kahn said
I showed how U.S. imperialism ran rings around European imperialism. They gave the Institute an $85,000 grant to have me go to the
White House in Washington to explain how American imperialism worked. The Americans used it as a how-to-do-it book.
The socialists, whom I expected to have a response, decided to talk about other than economic topics. So, much to my surprise,
it became a how-to-do-it book for imperialists. It was translated by, I think, the nephew of the Emperor of Japan into Japanese.
He then wrote me that the United States opposed the book being translated into Japanese. It later was translated. It was
received very positively in China, where I think it has sold more copies than in any other country. It was translated into Spanish,
and most recently it was translated into German, and German officials have asked me to come and discuss it with them. So the book
has been accepted all over the world as an explanation of how the system works.
BONNIE FAULKNER : In closing, do you really think that the U.S. government officials and others didn't understand how
their own system worked?
MICHAEL HUDSON : Many might not have understood in 1944 that this would be the consequence. But by the time 50 years went
by, you had an organization called "Fifty Years Is Enough." And by that time everybody should have understood. By the time Joe Stiglitz
became the World Bank's chief economist, there was no excuse for not understanding how the system worked. He was amazed to find
that indeed it didn't work as advertised, and resigned. But he should have known at the very beginning what it was all about. If
he didn't understand how it was until he actually went to work there, you can understand how hard it is for most academics to get
through the vocabulary of junk economics, the patter-talk of free trade and free markets to understand how exploitative and destructive
the system is.
BONNIE FAULKNER : Michael Hudson, thank you very much.
MICHAEL HUDSON : It's always good to be here, Bonnie. I'm glad you ask questions like these.
I've been speaking with Dr. Michael Hudson. Today's show has been: The IMF and World Bank: Partners in Backwardness. Dr.
Hudson is a financial economist and historian. He is president of the Institute for the Study of Long-Term Economic Trend, a Wall
Street financial analyst and Distinguished Research Professor of Economics at the University of Missouri, Kansas City. His 1972
book, Super Imperialism : The Economic Strategy of American Empire , a critique of how the United States exploited foreign economies
through the IMF and World Bank, the subject of today's broadcast, is posted in PDF format on his website at michael-hudson.com.
He is also author of Trade, Development and Foreign Debt , which is the academic sister volume to Super Imperialism. Dr. Hudson
acts as an economic advisor to governments worldwide on finance and tax law. Visit his website at michael-hudson.com.
Guns and Butter is produced by Bonnie Faulkner, Yarrow Mahko and Tony Rango. Visit us at
gunsandbutter.org to listen to past programs, comment on shows, or join
our email list to receive our newsletter that includes recent shows and updates. Email us at
[email protected]. Follow us
on Twitter at #gandbradio.
@Sonofrex
For starters, try reading David Graeber's 'Debt: The first 5000 years' for a comprehensive
account on concepts of money, property, debt and obligation from an anthropological
perspective which soundly buries your cherished assumptions and beliefs about the primacy of
private property and it's conflation with freedom. Perhaps one of the most compelling book
I've read in recent times.
"... Mr. Macri has slashed subsidies for electricity, fuel and transportation, causing prices to skyrocket, and recently prompting Ms. Genovesi, 48, to cut off her gas service, rendering her stove lifeless. Like most of her neighbors, she illegally taps into the power lines that run along the rutted dirt streets. ..."
"... "It's a neoliberal government," she says. "It's a government that does not favor the people." ..."
"... The tribulations playing out under the disintegrating roofs of the poor are a predictable dimension of Mr. Macri's turn away from left-wing populism. He vowed to shrink Argentina's monumental deficits by diminishing the largess of the state. The trouble is that Argentines have yet to collect on the other element the president promised: the economic revival that was supposed to follow the pain. ..."
"... But as Mr. Macri seeks re-election this year, Argentines increasingly lament that they are absorbing all strife and no progress. Even businesses that have benefited from his reforms complain that he has botched the execution, leaving the nation to confront the same concoction of misery that has plagued it for decades. The economy is contracting. Inflation is running above 50 percent, and joblessness is stuck above 9 percent ..."
"... Poverty afflicts a third of the population, and the figure is climbing. ..."
"... Mr. Macri sold his administration as an evolved form of governance for these times, a crucial dose of market forces tempered by social programs. ..."
"... In the most generous reading, the medicine has yet to take effect. But in the view of beleaguered Argentines, the country has merely slipped back into the rut that has framed national life for as long as most people can remember. ..."
"... "We live patching things up," said Roberto Nicoli, 62, who runs a silverware company outside the capital, Buenos Aires. "We never fix things. I always say, 'Whenever we start doing better, I will start getting ready for the next crisis.'" ..."
"... "When our president Cristina was here, they sent people to help us," she says. "Now, if there's problems, nobody helps us. Poor people feel abandoned." ..."
On the ragged streets of the shantytown across the road, where stinking outhouses sit alongside shacks fashioned from rusted sheets
of tin, families have surrendered hopes that sewage lines will ever reach them.
They do not struggle to fashion an explanation for their declining fortunes: Since taking office more than three years ago, President
Mauricio Macri has broken with the budget-busting populism that has dominated Argentina for much of the past century, embracing the
grim arithmetic of economic orthodoxy.
Mr. Macri has slashed subsidies for electricity, fuel and transportation, causing prices to skyrocket, and recently prompting
Ms. Genovesi, 48, to cut off her gas service, rendering her stove lifeless. Like most of her neighbors, she illegally taps into the
power lines that run along the rutted dirt streets.
"It's a neoliberal government," she says. "It's a government that does not favor the people."
The tribulations playing out under the disintegrating roofs of the poor are a predictable dimension of Mr. Macri's turn away
from left-wing populism. He vowed to shrink Argentina's monumental deficits by diminishing the largess of the state. The trouble
is that Argentines have yet to collect on the other element the president promised: the economic revival that was supposed to follow
the pain.
Mr. Macri's supporters heralded his 2015 election as a miraculous outbreak of normalcy in a country with a well-earned reputation
for histrionics. He would cease the reckless spending that had brought Argentina infamy for defaulting on its debts eight times.
Sober-minded austerity would win the trust of international financiers, bringing investment that would yield jobs and fresh opportunities.
But as Mr. Macri seeks re-election this year, Argentines increasingly lament that they are absorbing all strife and no progress.
Even businesses that have benefited from his reforms complain that he has botched the execution, leaving the nation to confront the
same concoction of misery that has plagued it for decades. The economy is contracting. Inflation is running above 50 percent, and
joblessness is stuck above 9 percent.
Poverty afflicts a third of the population, and the figure is climbing.
Far beyond this country of 44 million people, Mr. Macri's tenure is testing ideas that will shape economic policy in an age of
recrimination over widening inequality. His presidency was supposed to offer an escape from the wreckage of profligate spending while
laying down an alternative path for countries grappling with the worldwide rise of populism. Now, his presidency threatens to become
a gateway back to populism. The Argentine economy is contracting. Inflation is running above 50 percent, and joblessness is stuck
above 9 percent. Poverty afflicts a third of the population. Credit Sarah Pabst for The New York Times
Image
The Argentine economy is contracting. Inflation is running above 50 percent, and joblessness is stuck above 9 percent. Poverty afflicts
a third of the population. Credit Sarah Pabst for The New York Times
As the October election approaches, Mr. Macri is contending with the growing prospect of a challenge from the president he succeeded,
Cristina Fernández de Kirchner, who faces a
series of criminal indictments for corruption . Her unbridled spending helped deliver the crisis that Mr. Macri inherited. Her
return would resonate as a rebuke of his market-oriented reforms while potentially yanking Argentina back to its accustomed preserve:
left-wing populism, in uncomfortable proximity to insolvency.
The Argentine peso lost half of its value against the dollar last year, prompting the central bank to lift interest rates to a
commerce-suffocating level above 60 percent. Argentina was forced to secure a $57 billion
rescue from the International
Monetary Fund , a profound indignity given that the fund is widely despised here for the austerity it imposed in the late 1990s,
turning an economic downturn into a depression.
For Mr. Macri, time does not appear to be in abundant supply. The spending cuts he delivered hit the populace immediately. The
promised benefits of his reforms -- a stable currency, tamer inflation, fresh investment and jobs -- could take years to materialize,
leaving Argentines angry and yearning for the past.
In much of South America, left-wing governments have taken power in recent decades as an angry corrective to dogmatic prescriptions
from Washington, where the Treasury and the I.M.F. have focused on the confidence of global investors as the key to development.
Left-wing populism has aimed to redistribute the gains from the wealthy to everyone else. It has aided the poor, while generating
its own woes --
corruption and depression in
Brazil , runaway inflation and financial ruin in Argentina. In Venezuela, uninhibited spending has turned the country with the
world's largest proven oil reserves into a land where
children starve .
Mr. Macri sold his administration as an evolved form of governance for these times, a crucial dose of market forces tempered
by social programs.
In the most generous reading, the medicine has yet to take effect. But in the view of beleaguered Argentines, the country
has merely slipped back into the rut that has framed national life for as long as most people can remember.
"We live patching things up," said Roberto Nicoli, 62, who runs a silverware company outside the capital, Buenos Aires. "We
never fix things. I always say, 'Whenever we start doing better, I will start getting ready for the next crisis.'"
Cultivating wealth
... ... ...
In the beginning, there was Juan Domingo Perón, the charismatic Army general who was president from 1946 to 1955, and then again
from 1973 to 1974. He employed an authoritarian hand and muscular state power to champion the poor. He and his wife, Eva Duarte --
widely known by her nickname, Evita -- would dominate political life long after they died, inspiring politicians across the ideological
spectrum to claim their mantle.
Among the most ardent Peronists were Néstor Kirchner, the president from 2003 to 2007, and his wife, Cristina Fernández de Kirchner,
who took office in 2007, remaining until Mr. Macri was elected in 2015.
Their version of Peronism -- what became known as Kirchnerism -- was decidedly left-wing, disdaining global trade as a malevolent
force. They expanded cash grants to the poor and imposed taxes on farm exports in a bid to keep Argentine food prices low.
As the country's farmers tell it, Kirchnerism is just a fancy term for the confiscation of their wealth and the scattering of
the spoils to the unproductive masses. They point to Ms. Kirchner's 35 percent tax on soybean exports.
"We had a saying," Mr. Tropini says. "'For every three trucks that went to the port, one was for Cristina Kirchner.'"
reduction in export taxes.
"You could breathe finally," Mr. Tropini, the farmer, says.
He was free of the Kirchners, yet stuck with nature. Floods in 2016 wiped out more than half of his crops. A drought last year
wreaked even more havoc.
"This harvest, this year," he says, "is a gift from God."
But if the heavens are now cooperating, and if the people running Buenos Aires represent change, Mr. Tropini is critical of Mr.
Macri's failure to overcome the economic crisis.
A weaker currency makes Argentine soybeans more competitive, but it also increases the cost of the diesel fuel Mr. Tropini needs
to run his machinery. High interest rates make it impossible for him to buy another combine, which would allow him to expand his
farm.
In the first years of Mr. Macri's administration, the government lifted controls on the value of the peso while relaxing export
taxes. The masters of international finance delivered a surge of investment. The economy expanded by nearly 3 percent in 2017, and
then accelerated in the first months of last year.
But as investors grew wary of Argentina's deficits, they fled, sending the peso plunging and inflation soaring. As the rout continued
last year, the central bank mounted a futile effort to support the currency, selling its stash of dollars to try to halt the peso's
descent. As the reserves dwindled, investors absorbed the spectacle of a government failing to restore order. The exodus of money
intensified, and another potential default loomed, leading a chastened Mr. Macri to accept a rescue from the dreaded IMF.
Administration officials described the unraveling as akin to a natural disaster: unforeseeable and unavoidable. The drought hurt
agriculture.
Money was flowing out of developing countries as the Federal Reserve continued to lift interest rates in the United States, making
the American dollar a more attractive investment.
But the impact of the Fed's tightening had been widely anticipated. Economists fault the government for mishaps and complacency
that left the country especially vulnerable.
.... ... ...
Among the most consequential errors was the government's decision to include Argentina's central bank in a December 2017 announcement
that it was raising its inflation target. The markets took that as a signal that the government was surrendering its war on inflation
while opting for a traditional gambit: printing money rather than cutting spending.
... ... ...
The government insists that better days are ahead. The spending cuts have dropped the budget deficit to a manageable 3 percent
of annual economic output. Argentina is again integrated into the global economy.
"We haven't improved, but the foundations of the economy and society are much healthier," said Miguel Braun, secretary of economic
policy at the Treasury Ministry. "Argentina is in a better place to generate a couple of decades of growth."
... ... ...
Their television flashes dire warnings, like "Danger of Hyper Inflation." Throughout the neighborhood, people decry the sense
that they have been forsaken by the government.
Trucks used to come to castrate male dogs to control the packs of feral animals running loose. Not anymore. Health programs for
children are less accessible than they were before, they said.
Daisy Quiroz, 71, a retired maid, lives in a house that regularly floods in the rainy season.
"When our president Cristina was here, they sent people to help us," she says. "Now, if there's problems, nobody helps us.
Poor people feel abandoned."
... ... ...
Daniel Politi contributed reporting from Buenos Aires. Peter S. Goodman is a London-based European economics correspondent.
He was previously a national economic correspondent in New York. He has also worked at The Washington Post as a China correspondent,
and was global editor in chief of the International Business Times. @
petersgoodman
"... Neoliberalism is an integral part of this foreign policy agenda. It constitutes an all encompassing mechanism of economic destabilization. Since the 1997 Asian crisis, the IMF-World Bank structural adjustment program (SAP) has evolved towards a broader framework which consists in ultimately undermining national governments' ability to formulate and implement national economic and social policies. ..."
The world is at a dangerous crossroads. The United States and its allies have launched a military adventure which threatens
the future of humanity. Major military and covert intelligence operations are being undertaken simultaneously in the Middle East,
Eastern Europe, sub-Saharan Africa, Central Asia and the Far East. The US-NATO military agenda combines both major theater operations
as well as covert actions geared towards destabilizing sovereign states.
America's hegemonic project is to destabilize and destroy countries through acts of war, covert operations in support of terrorist
organizations, regime change and economic warfare. The latter includes the imposition of deadly macro-economic reforms on indebted
countries as well the manipulation of financial markets, the engineered collapse of national currencies, the privatization of State
property, the imposition of economic sanctions, the triggering of inflation and black markets.
The economic dimensions of this military agenda must be clearly understood. War and Globalization are intimately related. These
military and intelligence operations are implemented alongside a process of economic and political destabilization targeting specific
countries in all major regions of World.
Neoliberalism is an integral part of this foreign policy agenda. It constitutes an all encompassing mechanism of economic destabilization.
Since the 1997 Asian crisis, the IMF-World Bank structural adjustment program (SAP) has evolved towards a broader framework which
consists in ultimately undermining national governments' ability to formulate and implement national economic and social policies.
In turn, the demise of national sovereignty was also facilitated by the instatement of the World Trade Organization (WTO) in 1995,
evolving towards the global trading agreements (TTIP and TPP) which (if adopted) would essentially transfer state policy entirely
into the hands of corporations. In recent years, neoliberalism has extend its grip from the so-called developing countries to the
developed countries of both Eastern and Western Europe. Bankruptcy programs have been set in motion. Island, Portugal, Greece, Ireland,
etc, have been the target of sweeping austerity measures coupled with the privatization of key sectors of the national economy.
The global economic crisis is intimately related to America's hegemonic agenda. In the US and the EU, a spiralling defense budget
backlashes on the civilian sectors of economic activity. "War is Good for Business": the powerful financial groups which routinely
manipulate stock markets, currency and commodity markets, are also promoting the continuation and escalation of the Middle East war.
A worldwide process of impoverishment is an integral part of the New World Order agenda.
Beyond the Globalization of Poverty
Historically, impoverishment of large sectors of the World population has been engineered through the imposition of IMF-style macro-economic
reforms. Yet, in the course of the last 15 years, a new destructive phase has been set in motion. The World has moved beyond the
"globalization of poverty": countries are transformed in open territories,
State institutions collapse, schools and hospitals are closed down, the legal system disintegrates, borders are redefined, broad
sectors of economic activity including agriculture and manufacturing are precipitated into bankruptcy, all of which ultimately leads
to a process of social collapse, exclusion and destruction of human life including the outbreak of famines, the displacement of entire
populations (refugee crisis).
This "second stage" goes beyond the process of impoverishment instigated in the early 1980s by creditors and international financial
institutions. In this regard, mass poverty resulting from macro-economic reform sets the stage of a process of outright destruction
of human life.
In turn, under conditions of widespread unemployment, the costs of labor in developing countries has plummeted. The driving force
of the global economy is luxury consumption and the weapons industry.
The New World Order
Broadly speaking, the main corporate actors of the New World Order are
Wall Street and the Western banking conglomerates including its offshore money laundering facilities, tax havens, hedge funds
and secret accounts,
the Military Industrial Complex regrouping major "defense contractors", security and mercenary companies, intelligence outfits,
on contract to the Pentagon;
the Anglo-American Oil and Energy Giants,
The Biotech Conglomerates, which increasingly control agriculture and the food chain;
Big Pharma,
The Communication Giants and Media conglomerates, which constitute the propaganda arm of the New World Order.
There is of course overlap, between Big Pharma and the Weapons industry, the oil conglomerates and Wall Street, etc.
These various corporate entities interact with government bodies, international financial institutions, US intelligence. The state
structure has evolved towards what Peter Dale Scott calls the "Deep State", integrated by covert intelligence bodies, think tanks,
secret councils and consultative bodies, where important New World Order decisions are ultimately reached on behalf of powerful corporate
interests.
In turn, intelligence operatives increasingly permeate the United Nations including its specialized agencies, nongovernmental
organizations, trade unions, political parties.
What this means is that the executive and legislature constitute a smokescreen, a mechanism for providing political legitimacy
to decisions taken by the corporate establishment behind closed doors.
Media Propaganda
The corporate media, which constitutes the propaganda arm of the New World Order, has a long history whereby intelligence ops
oversee the news chain. In turn, the corporate media serves the useful purpose of obfuscating war crimes, of presenting a humanitarian
narrative which upholds the legitimacy of politicians in high office.
Acts of war and economic destabilization are granted legitimacy. War is presented as a peace-keeping undertaking.
Both the global economy as well as the political fabric of Western capitalism have become criminalized. The judicial apparatus
at a national level as well the various international human rights tribunals and criminal courts serve the useful function of upholding
the legitimacy of US-NATO led wars and human rights violations.
Destabilizing Competing Poles of Capitalist Development
There are of course significant divisions and capitalist rivalry within the corporate establishment. In the post Cold War era,
the US hegemonic project consists in destabilizing competing poles of capitalist development including China, Russia and Iran as
well as countries such as India, Brazil and Argentina.
In recent developments, the US has also exerted pressure on the capitalist structures of the member states of the European Union.
Washington exerts influence in the election of heads of State including Germany and France, which are increasingly aligned with Washington.
The monetary dimensions are crucial. The international financial system established under Bretton Woods prevails. The global financial
apparatus is dollarized. The powers of money creation are used as a mechanism to appropriate real economy assets. Speculative financial
trade has become an instrument of enrichment at the expense of the real economy. Excess corporate profits and multibillion dollar
speculative earnings (deposited in tax free corporate charities) are also recycled towards the corporate control of politicians,
civil society organizations, not to mention scientists and intellectuals. It's called corruption, co-optation, fraud.
Latin America: The Transition towards a "Democratic Dictatorship"
In Latin America, the military dictatorships of the 1960s and 1970s have in large part been replaced by US proxy regimes, i.e.
a democratic dictatorship has been installed which ensures continuity. At the same time the ruling elites in Latin America have remoulded.
They have become increasingly integrated into the logic of global capitalism, requiring an acceptance of the US hegemonic project.
Macro-economic reform has been conducive to the impoverishment of the entire Latin America region.
In the course of the last 40 years, impoverishment has been triggered by hyperinflation, starting with the 1973 military coup
in Chile and the devastating reforms of the 1980s and early 1990s.
The implementation of these deadly economic reforms including sweeping privatization, trade deregulation, etc. is coordinated
in liaison with US intelligence ops, including the "Dirty war" and Operation Condor, the Contra insurrection in Nicaragua, etc.
The development of a new and privileged elite integrated into the structures of Western investment and consumerism has emerged.
Regime change has been launched against a number of Latin American countries.
Any attempt to introduce reforms which departs from the neoliberal consensus is the object of "dirty tricks" including acts of
infiltration, smear campaigns, political assassinations, interference in national elections and covert operations to foment social
divisions. This process inevitably requires corruption and cooptation at the highest levels of government as well as within the corporate
and financial establishment. In some countries of the region it hinges on the criminalization of the state, the legitimacy of money
laundering and the protection of the drug trade.
The above text is an English summary of Prof. Michel Chossudovsky's Presentation, National Autonomous University of Nicaragua,
May 17, 2016. This presentation took place following the granting of a Doctor Honoris Causa in Humanities to Professor Chossudovsky
by the National Autonomous University of Nicaragua (UNAN)
While Brexit and Trump have been making
the headlines, the Italian economy has been sliding into a technical recession (again). Both the OECD and
the European Central Bank (ECB) have lowered the growth forecasts for Italy to negative numbers, and in what
analysts see as a precautionary move, the ECB is reviving its sovereign bond buying programme, which it had
started to unwind just five months earlier.
"Don't underestimate the impact of the Italian recession," is what French Economy Minister Bruno Le Maire
told Bloomberg News (Horobin 2019). "We talk a lot about Brexit, but we don't talk much about an Italian
recession that will have a significant impact on growth in Europe and can impact France, because it's one of
our most important trading partners." More important than trade, however, and what Le Maire is not stating,
is that French banks are holding around €385 billion of Italian debt, derivatives, credit commitments and
guarantees on their balance sheets, while German banks are holding €126 billion of Italian debt (as of the
third quarter of 2018, according to the Bank for International Settlements).
In light of these exposures to Italian debt, it is no wonder that Le Maire, along with the European
Commission, is worried by Italy's third recession in a decade -- as well as by the growing anti-euro rhetoric
and posturing of Italy's coalition government, comprised by the Five-Star Movement (M5S) and the Lega. The
knowledge that Italy is too big to fail is fuelling the audacity of Italy's coalition government in its
attempt to reclaim fiscal policy space by openly flouting the budgetary rules of the E.U.'s Economic and
Monetary Union (EMU).
The result is a catch-22. The more the European Commission tries to bring the Italian government into
line, the more it will feed the anti-establishment and anti-euro forces in Italy. On the other hand, the
more the European Commission gives in to the demands of the Italian government, the more it will fritter
away its credibility as the guardian of the EMU's Stability and Growth Pact. This stalemate is not going
away as long as Italy's economy remains paralyzed.
A Crisis of the Post-Maastricht Treaty Order of Italian Capitalism
It is therefore vital to understand the true origins of Italy's economic crisis in order to find pathways
out of Italy's permanent stagnation. In a
new paper
, I provide an evidence-based pathology of Italy's recession -- which, I argue, must be regarded
as a crisis of the post-Maastricht Treaty order of Italian capitalism, as Thomas Fazi (2018) calls it. Until
the early 1990s, Italy enjoyed decades of relatively robust economic growth, during which it managed to
catch up with other Eurozone nations in income (per person) (Figure 1). In 1960, Italy's per capita GDP (at
constant 2010 prices) was 85% of French per capita GDP and 74% of (weighted average) per capita GDP in
Belgium, France, Germany and the Netherlands (the Euro-4 economies). By the mid-1990s, Italy had almost
caught up with France (Italian GDP per person equalled 97% of French per capita income) and also with the
Euro-4 (Italian GDP per capita was 94% of per capita GDP in the Euro-4).
Figure 1
Three decades of catching up, 25 years of falling behind: real GDP per person in Italy relative to
France/Euro-4, 1960-2018
Source
: author's calculation based on AMECO data.
But then a very steady decline began (see Figure 1), erasing decades of (income) convergence. The income
gap between Italy and France is now (as of 2018) 18 percentage points, which is more than what it was in
1960; Italian GDP per capita is 76% of per capita GDP in the Euro-4 economies. Beginning in the early to
mid-1990s, Italy's economy began to stumble and then fall behind, as all major indicators -- income per person,
labour productivity, investment, export market shares, etc. -- began a very steady decline.
It is not a coincidence that the sudden reversal of Italy's economic fortunes occurred after Italy's
adoption of the "legal and policy superstructure" imposed by the Maastricht Treaty of 1992, which cleared
the road for the establishment of the EMU in 1999 and the introduction of the common currency in 2002.
Italy, as I show in the paper, has been the star pupil in the Eurozone class -- the one economy that committed
itself most strongly and consistently to the fiscal austerity and structural reforms that form the essence
of the EMU macroeconomic rulebook (Costantini 2017, 2018). Italy kept closer to the rules than France and
Germany and paid heavily for this: The permanent fiscal consolidation, the persistent wage restraint and the
overvalued exchange rate killed Italian aggregate demand -- and the demand shortage asphyxiated the growth of
output, productivity, jobs and incomes. Italy's stasis is an object lesson for all Eurozone economies,
but -- paraphrasing G.B. Shaw -- as a warning, not as an example.
Perpetual Fiscal Austerity
Italy did more than most other Eurozone members in terms of self-imposed austerity and structural reform
in order to satisfy the conditions of EMU (Halevi 2019). This is clear when comparing Italy's fiscal policy
post-1992 to that of France and Germany. Various Italian governments ran continuous primary budget surpluses
(defined as public expenditure excluding interest payments on public debt, minus public revenue), averaging
3% of GDP per year during 1995-2008. French governments, in contrast, ran primary
deficits
of 0.1%
of GDP each year on average during the same period, while German governments managed to generate a primary
surplus of 0.7% on average per year during those same 14 years. Italy's permanent primary surpluses during
1995-2008 would have reduced its public debt-to-GDP ratio by around 40 percentage points -- from 117% in 1994
to 77% in 2008 (while keeping all other factors constant). But slow (nominal) growth relative to high
(nominal) interest rates pushed up the debt ratio by 23 percentage points and washed away more than half of
the public debt-to-GDP reductions of 40 percentage points achieved by austerity. Could it be true that
Italy's permanent austerity, intended to lower the debt ratio by running permanent primary surpluses,
backfired because it slowed down economic growth?
Italy's governments (including the left-of-centre Renzi coalition) continued to run significant primary
budget surpluses (of more than 1.3% of GDP on average per year) during the crisis period of 2008-2018.
Showing permanent fiscal discipline was a top priority, as Prime Minister Mario Monti admitted in a 2012
interview with CNN, even if that meant "destroying domestic demand" and pushing the economy into decline.
Italy's almost "Swabian" commitment to fiscal discipline stands in some contrast to the French ("
laissez
aller
") attitudes: The French government ran primary deficits at an average of 2% of GDP during
2008-2018 and allowed its public debt-to-GDP ratio to rise to almost 100% in 2018. The cumulative fiscal
stimulus thus provided by the French state amounted to €461 billion (in constant 2010 prices), whereas the
cumulative fiscal drain on Italian domestic demand was €227 billion. The Italian budget cuts show up in
non-trivial declines in its public expenditure on social expenditure per person, which is now (as of 2018)
around 70% of public social spending per capita in Germany and France. One doesn't dare speculate what the
"Gilets Jaunes" (yellow vest) protests in France would have looked like if France had put through an
Italian-style fiscal consolidation post-2008.
Permanent Real Wage Restraint
When Italy signed the Maastricht Treaty, its high rates of inflation and unemployment were regarded as
major problems. Inflation was blamed on the "excessive" power of labour unions and an "excessively"
centralized wage bargaining system, which resulted in strong wage-push inflation and a profit squeeze -- as
wage growth tended to exceed labour productivity growth, which lowered the profit share. Seen this way, the
blame for Italy's high unemployment could be shifted onto its "rigid" labour markets and too strongly
protected "worker aristocracy." Bringing down inflation and restoring profitability required wage
moderation, which in turn could only be achieved by a radical deregulation of labour markets, or what is
euphemistically called, "structural reforms."
Italy does not have a statutory minimum wage (unlike France) and also does not have a generous
unemployment benefit system (in terms of unemployment insurance replacement rates and duration, and
entitlement conditions) compared with the E.U. average. Employment protection for regular employees in Italy
is roughly at the same level as job protection in France and Germany. Italy's structural labour market
reforms involved drastically reducing employment protection for temporary workers, and as a result, the
share of temporary workers in total Italian employment increased from 10% during 1991-1993 to 18.5% in 2017.
Between 1992 and 2008, total (net) employment in Italy increased by 2.4 million new jobs, of which almost
three-quarters (73%) were fixed-term jobs. In France, by comparison, (net) employment grew by 3.6 million
jobs during 1992-2008, of which 84% were regular (permanent) jobs and only 16% were temporary positions.
In addition, the bargaining power of unions was reduced by the abandoning of the target of full
employment in favour of public debt reduction (Costantini 2017) and by a much more restrictive
(anti-inflation) central bank policy and the fixed exchange rate. As a result, real wage growth per
employee, which averaged 3.2% per year during 1960-1992, was lowered to a mere 0.1% per year during the
period 1992-1999 and to 0.6% per annum during 1999-2008. Within the E.U., Italy's turnaround was remarkable:
From 1992 through 2008, the growth of Italian real wages per worker (0.35% per year) was only half the real
wage growth in the Euro-4 (0.7% per annum) and it was even lower compared to real wage growth in France
(0.9% per year). Interestingly, from 1992 through2008, Italian real wage growth per employee was slightly
lower than (already stingy) German real wage growth (0.4% per year). To see the long-run picture, Figure 2
plots the ratio of the real wage of an Italian worker to the real wage of the average French, German and
Euro-4 worker from 1960 through2018. In the early 1960s, the average wage of Italian workers was about 85%
of the French wage, and this ratio increased to 92% in 1990-1991. Starting in 1992, the Italian real wage
began a steady decline in terms of the average French wage -- and in 2018, the average Italian employee earned
only 75% of the wage earned by her/his French comrade. The wage gap between Italy and France is bigger today
than it was in the 1960s. The same pattern holds when one compares Italian wages to German and/or Euro-4
wages.
Figure 2
Three decades of catching up, 25 years of falling behind: real wage per employee in Italy relative to
France / Germany / Euro-4, 1960-2018
Source
: author's calculation based on AMECO data.
Italy's wage moderation proved an effective strategy to kill three (not just two) birds with only one
stone. First, wage restraint helped to bring down inflation -- to 3.4% on average per year from 1992 through
1999 (from 9.6% on average per annum from 1960-1992) and further down to 2.5% per year from 1999 through
2008 and 1.1% from 2008 through 2018. Italy is no longer prone, in a structural sense, to high and
accelerating inflation. Second, wage restraint increased the labour intensity of Italy's GDP growth -- and thus
reduced unemployment. Italy's unemployment rate peaked in the mid-1990s at more than 11%, but labour market
deregulation and wage restraint successfully brought down unemployment to 6.1% in 2007 and 6.7% in
2008 -- which was lower than the unemployment rates of France (which equaled 8% in 2007 and 7.4% in 2008) and
Germany (where unemployment was 8.5% in 2007 and 7.4% in 2008). Finally, as intended, wage moderation led to
a substantial increase in the profit share of Italy's GDP: The profit share rose by more than 5.5 percentage
points, from 36% in 1991 to about 41.5% from 2000 through 2002, after which it stabilized around 40% until
2008. During the 1990s, the recovery of the profit share was considerably stronger in Italy than in France,
and comparable to what happened in Germany -- notwithstanding the fact that Italy's profit share was already
relatively high to begin with.
Italy's structural reforms of the 1990s paid off handsomely in terms of a higher profit share, in other
words, and Italy's profit share remained substantially higher than that of France and Germany. With lowered
inflation, effective wage restraint, declining unemployment, public indebtedness on the decline and the
profit share considerably raised, Italy appeared to be set for a long period of strong growth. It did not
happen. The operation was carried out successfully, but the patient died. According to the coroner's
post-mortem, the cause of death was a structural lack of aggregate demand.
The Suffocation of Italian Aggregate Demand after 1992
By keeping close to the EMU rulebook, Italian economic policy created a chronic shortage of (domestic)
demand. Domestic demand growth per Italian averaged 0.25% per year from 1992 through2018 -- a sharp decline
compared to the domestic demand growth (of 3.3% per year) recorded from 1960 through1992 and also much below
domestic demand growth (of 1.1% per person per year) in the Euro-4 countries. Italy's real export growth
(per person) also declined, from 6.6% on average per year from 1960 through 1992 to 3% per year from 1992
through 2018. Average annual export growth (per person) was 4.4% in the Euro-4 countries from 1992 through
2018. Italy's chronic demand shortage reduced capacity utilization (especially in manufacturing) and this,
in turn, lowered the profit rate. According to my estimates, capacity utilization in Italian manufacturing
declined by a staggering 30 percentage points relative to capacity utilization in French manufacturing
between 1992 and 2015.
The utilization rate of Italian manufacturing relative to German manufacturing declined from 110% in 1995
to 76% in 2008, and sunk further to 63% in 2015 -- a decline by a stunning 47 percentage points. Lower capacity
utilization reduced the rate of profit in Italian manufacturing by 3 to 4 percentage points relative to
French and German profit rates. This must have considerably depressed Italian manufacturing investment and
growth. Let me emphasize the fact that Italy's profit rate declined even when the share of profits in income
increased. This means that Italy's strategy of fiscal austerity and wage restraint proved to be
counterproductive, because it failed to improve the profit rate: The drop in demand and capacity utilization
had a bigger (negative) impact on firm profitability than the increase in the profit share.
As I argue in the paper, this condition of chronic demand shortage was created, in particular, by (
a
)
perpetual fiscal austerity, (
b
) permanent real wage restraint, and (
c
) a lack of
technological competitiveness which, in combination with an unfavourable (euro) exchange rate, reduces the
ability of Italian firms to maintain their export market shares in the face of increasing competition of
low-wage countries (China in particular). These three factors are depressing demand; reducing capacity
utilization and lowering firm profitability; and hurting investment, innovation, and productivity growth.
They are hence locking the country into a state of permanent decline, characterized by the impoverishment of
the productive matrix of the Italian economy and the quality composition of its trade flows (Simonazzi et
al. 2013).
Italy's manufacturing sector is not "technology intensive" and suffers from stagnating productivity. As
Figures 3 and 4 illustrate, the cost competitiveness of Italian manufacturers vis-à-vis the Euro-4 countries
depends on low wages and not on superior productivity performance. Whereas industrial workers in France and
Germany were earning €35 per hour (in constant 2010 prices) in 2015, and their colleagues in Belgium and the
Netherlands earned even more, Italian workers in manufacturing were bringing home only €23 per hour (in
constant 2010 prices) -- or one-third less (see Figure 3). But at the same time, industrial labour productivity
per hour of work is considerably higher in France and Germany (at €53 per hour in constant 2010 prices) than
in Italy, where it is around €33 per hour (Figure 4). Italian manufacturers are thus taking the low road,
while firms in the Euro-4 countries are travelling on the high road. Or in other words, compared with German
and French manufacturers, Italian firms suffer from a lack of technological strength, which in Germany is
based on high productivity, innovative efforts and high product quality. True, Italian firms do stand out
for their high relative quality in more traditional, lower-tech export products such as footwear, textiles,
and other non-metallic mineral products. But they have been steadily losing ground in export markets of more
dynamic products characterized by higher levels of R&D and technology intensity, such as chemicals,
pharmaceuticals and communications equipment (Bugamelli
et al.
2018).
Locked into a Position of Structural Weakness
For two reasons, this specialization in low- and low-medium technology activities locks the country into
a quasi-permanent position of structural weakness. The first is that the exchange-rate elasticity of export
demand is larger for traditional exports than for medium- and high-tech exports. As a result, the
appreciation of the euro did hurt Italian exporters of traditional products harder than German and French
firms exporting more "dynamic" goods and services. Thus, the overvalued euro penalizes Italian export growth
more than it damages export growth in the Euro-4 economies.
The second factor is that Italian firms are operating in global markets which are more strongly exposed
to the growing competition of low-wage countries and China in particular. In 1999, 67% of Italy's exports
consisted of (traditional) products exposed to medium to high competition from Chinese firms -- compared to a
similar exposure to Chinese competition of 45% of exports in France and 50% of exports in Germany (Bugamelli
et al
. 2018). The share of Italy's exports in world imports declined from 4.5% in 1999 to 2.9% in
2016 -- and the market share loss was heavily concentrated in more traditional market segments characterized by
high exposure to Chinese competition (Bugamelli
et al.
2018). As Chinese and other developing
economy firms continue to expand their production capabilities and to upscale, competitive pressures will
mount in medium- and medium-high tech segments as well. Italian firms have difficulties facing competition
from low-wage countries: They are generally too small to wield any pricing power, too often single-product
producers unable to diversify market risks, and too dependent on foreign markets, because their home market
is in the doldrums.
Figure 3
Real wage per hour of work in manufacturing: Italy versus the Euro-4 countries, 1970-2015 (euro's,
constant 2010 prices)
Source
: author's calculation based on EU-KLEMS (Jäger 2017).
Figure 4
Manufacturing labour productivity per hour of work: Italy versus the Euro-4
countries, 1970-2015 (euro's, constant 2010 prices)
Source
: author's calculation based on EU-KLEMS (Jäger 2017).
Italy's Permanent Crisis Is a Warning for the Eurozone
There are rational ways to get the Italian economy out of the current paralysis -- none of them easy, and
all of them founded on a long-term strategy of "walking on two legs": (a) reviving domestic (and export)
demand, and (b) diversifying and upgrading the productive structure and innovative capabilities and
strengthening the technological competitiveness of Italy's exports (to get away from direct wage-cost
competition with China). This means that both austerity and real wage growth suppression must stop. Instead,
the Italian government should gear up for providing unambiguous directional thrust to the economy by means
of higher public investment (in public infrastructure and "greening" and decarbonizing energy and
transportation systems) and novel industrial policies to promote innovation, entrepreneurship and stronger
technological competitiveness.
There is no dearth of constructive proposals by Italian economists to help their economy out of the
current mess -- including Guarascio and Simonazzi (2016), Lucchese et al. (2016), Pianta et al. (2016),
Mazzucato (2013), Dosi (2016), and Celi et al. (2018). These proposals all centre on creating a
self-reinforcing process of investment-led and innovation-driven growth, orchestrated by an "entrepreneurial
state" and founded on relatively regulated and co-ordinated firm-worker relationships, rather than on
deregulated labour markets and hyper-flexible employment relations. These proposals might work well.
The same cannot be said, however, of the "one-leg" fiscal stimulus proposed by the M5S-Lega coalition
government, the aim of which is a short-run revival of domestic demand by means of higher public
(consumption) spending. None of the proposed spending will help solving Italy's structural problems. What is
completely lacking is any longer-term directional thrust, or the second leg of a viable strategy -- which the
neoliberal Lega will be unwilling to provide and the "progressive-in-name-only" M5S seems incapable of
devising (Fazio 2018). Plus ça change, plus c'est la même chose.
More importantly, any rational "two-leg" developmental strategy will be incompatible with sticking to the
EMU macroeconomic rulebook and keeping financial markets calm, which are supposed to act as the
disciplinarian of Eurozone sovereigns (Costantini 2018; Halevi 2019). This is clear from what happened when
the M5S-Lega government came up with an expansionary Draft Budgetary Plan (DBP) for 2019. The total impact
of the one-leg fiscal stimulus initially proposed in the 2019 DBP amounted to an estimated 1.2% of GDP in
2019, 1.4% in 2020 and 1.3% in 2021 -- and even this minute budgetary expansion triggered strong negative
responses from the European Commission and increases in Italian bond yields.
Blanchard
et al.
(2018, p. 2) formalize this status quo in a mechanical debt-dynamics model and
conclude that the 2019 DBP risks triggering "unmanageable spreads and serious crisis, including involuntary
exit from the Eurozone." Blanchard
et al
. (2018, p. 16) argue for a fiscally neutral budget, which
they think would lead to lower interest rates and "probably" (in their words) to higher growth and
employment. Equations, graphs and technocratic econospeak are competently used to turn what in fact
constitutes a very modest transgression of the EMU rulebook into a low-probability- catastrophic event -- which
everyone would want to avoid (see Costantini 2018). What is tragic is that the 2019 DBP does not come close
to what would be needed for a rational strategy. All the sound and fury is for nothing.
Worse still is the fact that maintaining Italy's status quo, which is what a fiscally neutral budget
would mean, carries a real, but unrecognized low-probability, high-impact risk: a breakdown of political and
social stability in the country. Continued stagnation will feed the resentment and anti-establishment,
anti-euro forces in Italy. This will destabilize not just Italy, but the entire Eurozone. Italy's crisis
thus constitutes a warning to the Eurozone as a whole: Continued austerity and real wage restraint, in
combination with the de-democratization of macroeconomic policymaking, make for a "dangerous game" (Costantini
2018) -- a game which risks further empowering anti-establishment forces elsewhere in the Eurozone as well.
This is like opening Pandora's box. No one can tell where this will end. Economists (including Italians)
carry an enormous responsibility in all this, both because they are much to blame for the chaos and because
they fail to continue to unite behind rational strategic solutions to resolve the Italian crisis. "Perhaps,"
John Maynard Keynes wrote, "it is historically true that no order of society ever perishes save by its own
hand" (Keynes 1919). Rational economists have to prove Keynes' verdict wrong, starting in Italy -- if only
because the Brexit mess appears to be beyond redemption.
Article seems to ignore why Germany is holding so much Italian Debt, which to my reading is Germany wanted
to create a captured market and kill off export competition with the foundation of a currency union at the
exchange rates set and provision of easy credit for German goods, with the long term goal of creating a 4th
Reich by means of capital slavery. Like climate change, many Italian intellectual elite knew this was going to
happen, but that it would enrich them at the cost to both the old capital elite and working classes, with the
bill falling due long after they had passed away.
When people talk about Italy being unstable: From the post, which describes the stability of austerity >
Italy kept closer to the rules than France and Germany and paid heavily for this: The permanent fiscal
consolidation, the persistent wage restraint and the overvalued exchange rate killed Italian aggregate
demand -- and the demand shortage asphyxiated the growth of output, productivity, jobs and incomes. Italy's
stasis is an object lesson for all Eurozone economies, but -- paraphrasing G.B. Shaw -- as a warning, not as an
example.
And people wonder why the Movimento Cinque Stelle arose? Or why Matteo Salvini, Trump imitator, now has so
much influence?
All of the graphs show that the average person in Italy has been made poorer because of EU policies and the
euro. The remarkable thing is that Italians still want to remain in the EU and in the euro because these
supranational structures keep the Italian state in line. Yet job creation is stalled. There is a considerable
brain drain. The Mezzogiorno is gradually losing population–emptying out because the economic prospects are so
dire.
And the left is in collapse because of years of Renzi's Blairism / Clintonism.
"... "They're only up in arms if they believe that there is an alternative." ..."
"... "Evil essentially is predatory and destructive behavior. Socrates said that it ultimately is ignorance, because nobody would set out intentionally to do it. But in that case, evil would be an educational system that imposes ignorance and tunnel vision, distracting attention from understanding how economic society actually works in destructive ways." ..."
"... MH: It's becoming a second Gilded Age. An abrupt change of direction in economic trends occurred after Ronald Reagan and Margaret Thatcher were elected in 1979/80. The result has been to invert what the 19th-century economists understood to be a free market -- that is, a market free from a privileged hereditary class living on unearned income in the form of land rent, monopoly rent and financial extraction. ..."
"... JS: I was in my first few years of college when Thatcher came in in 1979, and when Reagan was elected in 1980. I asked my economics professors what was going on, but I could not find a single professor to coherently describe the U-turn that was occurring. It certainly wasn't in Paul Samuelson's textbook that we were given. ..."
"... Neoliberalism actually started with Carter in the late 1970's, and it was Volcker's monetary assault that helped lose him the election (and of course the Iran hostage crisis). ..."
"... The outcomes were not so predetermined and could have been Carter-Callaghan rather than the Reagan-Thatcher duo that did so much to force the world along the neoliberal path, and bring us "New" Neoliberal Labour (that Thatcher actually stated was her greatest achievement) ..."
"... I think evil takes on a life of its own. Over the course of civilization it gets standardized. But what I see happening right now is a bunch of apoplectic, frantic "oligarchs" with egg on their face begging us all to help them change. ..."
"... I don't wish to mount a defense of the Republican Elite; the system did pressure towards money-love. However, there were counter balancing features. Money was vital, but so was virtue. Honour, courage, dignity were ..."
"... A Roman aristocrat had to perform the minimum set required military campaigns. Only intellectual freaks such as Cicero could climb the hierarchy without making somekind of significant military achievement. ..."
"... Caesar won the Laural crown (?) through genuine acts of bravery. Roman aristocrats risked their lives & died in war. And their troops knew it. ..."
"... Systems of Survival ..."
"... Money addiction -- I have trouble reconciling that concept with the short-term biases of the wealthy and their seeming lack of interest in economic growth. They aren't happy with a bigger slice of pie from a bigger pie. They want grow their slice from the pie relative to everyone else -- even if the pie grows smaller. Money as power, and an insatiable lust for power is more consistent with the actions of the oligarchs. ..."
"... "That leaves the question facing us today: Is the American oligarchy and state as rapacious as that of Rome?" -- I'm not sure this post really answered that opening question. I believe the American oligarchy, while continuing in the long tradition of oligarchic depredation, is much more rapacious than that of Rome and much more dangerous as the world rushes toward collapse. After the fossil fuels are gone there are no more. The Climate is already lurching into chaos and may have already crossed a point of no near-term return to the relatively mild and stable climate immediately preceding the Anthropocene. ..."
Money-love [φιλοχρηματία, philochrêmatia] has always been extreme because wealth is addictive
From what I've been able to glean regarding Roman society, wealth acquisition was strongly driven by the demands of a political
order that was relatively unstructured and unstable, depending on imperial whims, favoritism, influence purchasing. In the eyes
of a pleb it might look like elites were just whooping it up -- and that was certainly true -- but their fun had a systemic driver
to it. To be sure you're in favor, or that your coalition is holding up, you need sesterces.
That's what the Romans told their provinces. Everything they did was always to preserve "good order," meaning open opportunities
for their own wealth grabbing. They never said they were out to destroy and loot other societies.
This is largely true, but I was gobsmacked to find Caesar, in his Commentary on the Gallic Wars, serving up an extended quote
of a Gallic "state" leader exhorting his followers to fight Caesar in order to escape slavery. Caesar even allows the guy to distinguish
between earlier conflicts, in which another state would invade, plunder, and then leave, from conflicts with the Romans, in which
the state would be occupied forever and its people enslaved. Brunt cites Caesar as boasting the wars gained 1,000,000 slaves,
a figure he regards as inflated, but he also notes that other writers of the time didn't strongly dispute it.
I've got it on Kindle, so why not let Caesar report Critognatus' speech:
The Cimbri, after laying Gaul waste, and inflicting great calamities, at length departed from our country, and sought other
lands; they left us our rights, laws, lands, and liberty.
But what other motive or wish have the Romans, than, induced by envy, to settle in the lands and states of those whom they
have learned by fame to be noble and powerful in war, and impose on them perpetual slavery?
For they never have carried on wars on any other terms.
There's little logic for neoliberalism beyond a faith that short-term greed is the best way to optimize long-term
growth.
Or as George H.W. Bush said: Voodoo economics. But he didn't stick to that position very long once Reagan took him on
board.
Thanks again to NC for the great series. However this non economics person will very humbly repeat my objection that while
money equals power, power doesn't necessarily have to be about money. I recently read a book about the history of the Plains indians
and for them power was represented by horses–a kind of wealth to be sure–but also by bravery and skill at violence. So perhaps
what we are really talking about is not economic systems and theories but this will to dominate that causes power to corrupt and
creates the mindset that "too much is never enough." In other words the problem is really all about psychology with economics
as a subbranch. A future era of better psychologists may produce better economists. Or here's hoping.
"They're only up in arms if they believe that there is an alternative."
"Evil essentially is predatory and destructive behavior. Socrates said that it ultimately is ignorance, because nobody
would set out intentionally to do it. But in that case, evil would be an educational system that imposes ignorance and tunnel
vision, distracting attention from understanding how economic society actually works in destructive ways."
"If we don't go for it then somebody will and we'll lose out" was the frustrating bottom line for an iron worker I was speaking
with about the proposal to drop a new NFL tax payer subsidized practice facility into our already development gridlocked area.
Every point I made to him circled right back to this justification.
He just couldn't conceive of an alternative and I wasn't prepared enough to offer him others.
Because nowadays we must consider the economic tradeoff on everything–just like we are told.
which brings up that sweet definition of evil by MH–within the context of JS's question about enabling Climate Change
As soon as that guy becomes more concerned about feeding his kids, and less concerned about football stadiums, it's possible
he'll be much more focused, more understanding, and willing to listen to your opinion.
MH: It's becoming a second Gilded Age. An abrupt change of direction in economic trends occurred after Ronald Reagan and
Margaret Thatcher were elected in 1979/80. The result has been to invert what the 19th-century economists understood to be a free
market -- that is, a market free from a privileged hereditary class living on unearned income in the form of land rent, monopoly
rent and financial extraction.
JS: I was in my first few years of college when Thatcher came in in 1979, and when Reagan was elected in 1980. I asked my
economics professors what was going on, but I could not find a single professor to coherently describe the U-turn that was occurring.
It certainly wasn't in Paul Samuelson's textbook that we were given.
This interview with Mr. Hudson has been a fascinating education. Thank you, Yves.
That said, there is a tendency, at least in the tone of the interview, to ascribe a kind of insuperable power to top-down manipulation
and control by the oligarchies of which Hudson speaks. My sense is that, instead, sometimes the mass of people want to be so free
of one perceived set of problems that they support stepping into another -- as in the early 1980s.
MMT and "intelligent jubilee" (i.e., the opposite of what Geithner/Obama/Benanke did) supporters -- of which I am one -- might
do well to consider what preceded the so-called Reagan revolution:
Rising inflation and unemployment in the 1970s were perceived to becoming inescapable in the US political landscape of the
time.
The bad news about life in the Soviet Union was leaking out faster and faster in the late 1970s, once the American media lionized
the cause of refuseniks like Natan Sharansky during the Carter years. (Remember Peter Jennings covering the trials and persecution
of sweet, innocent, Natan Sharansky -- the wolf who dropped his sheep's clothing once he arrived in Israel?) Sometimes bad guys
provoke important news about other, more powerful, bad guys.
Thousands of American workers came home from Moscow after Carter cancelled US participation in the 1980 Olympics -- with shocking
tales of just how crappy the Russians had it.
Reagan beat Carter and Anderson 51-41-7 in 1980, and Reagan then whooped Mondale 59-41 in the 1984 popular vote. Job growth
had picked up, the American media was generally happy to lead cheers for the US while pummeling the nasty Soviets. It felt like
the Bear that is misfortune had been satisfied with catching the Russkis.
The old joke points out that we humans instinctively know we can't outrun the Bear; the natural tendency is to therefore sometimes
focus on outrunning our neighbors, so the Bear is satisfied to get them. Our ancestors were selected for that feature.
As 'hemeantwell' noted, the fact that Caesar brought home lots of slaves casts a broader light (than Mr. Hudson's interview)
on for whom Caesar's revolution was intended. How might MMT advocates wrestle with the push and pull of similar 'social identity'
competitions when the Bear is seen to be coming?
The bear was frightened, I can tell you, I lived behind the Iron Curtain.
But there was a lot of talk about peace. A lot. Like – everywhere. And it was not fake. People looked on Americans with genuine
interest and a bit of trepidation, and of course (what proved unhealthful) desire to emulate. And they wanted to be friends and
learn from them. Look at C-SPAN videos of 1989, 1990 – for example one of Soviet banking officials at a seminar with US bankers
– and you will see genuine, practically childlike belief that what the US experts and and banking practitioners were saying was
gospel.
Btw I don't know whether the same talk of peace was present in the US at the time. What continually strikes me is how talk
of peace is utterly absent in MSM now, has been for the last 20 years that I have observed.
It's so beneficial to have Mr. Hudson and others who have studied ancient history from the point of view of how money and indebtedness
works to share all this learning with us. How little is the difference between ancient oligarchs and modern ones! We think our
civilization is so wonderful and enlightened when it is just another part of the old system of inequality playing itself out over
and over again. I too wonder how long the wheel of fortune will take to complete this particular circuit, but with climate change
skulking so near, it may not be long.
Neoliberalism actually started with Carter in the late 1970's, and it was Volcker's monetary assault that helped lose him
the election (and of course the Iran hostage crisis). The same in the UK, with the Labour government bringing in the IMF
and fighting with the unions in the later 1970s to cause the "winter of discontent" that brought in Thatcher (and without the
Falklands War Thatcher would have been out after one term). Labour could have called an earlier election and probably won, but
decided not to in a huge tactical mistake.
The outcomes were not so predetermined and could have been Carter-Callaghan rather than the Reagan-Thatcher duo that did
so much to force the world along the neoliberal path, and bring us "New" Neoliberal Labour (that Thatcher actually stated was
her greatest achievement)
My only quibble would be to point out that you are referring to the neoliberal implementation -- it's tenets are rather older,
dating back at least to the 1938 Walter Lippmann Colloquium.
And well before that, as demonstrated clearly in Quinn Slobodian's recent "Globalists".
This stimulating book considers the historical development of the nexus of ideas and policy initiatives that fall under the
umbrella term 'neoliberalism' -- the political-economic structures and processes that have given us expanding 'globalizing financialization',
legal trade agreements that constrain national sovereignty, massively increasing asset and income disparities, and the consequent
precariousness and stress -- even misery -- afflicting most of us.
Though neoliberalism's origin is commonly associated with the Mont Pèlerin Society, founded in 1947, and prominently with the
figures of Ludwig von Mises, Friedrich von Hayek, and more recently with Milton Friedman and the "Chicago Boys", Slobodian demonstrates
that neoliberalism's roots reach much deeper -- into the collapse of the Austro-Hungarian Empire -- indeed of all traditional
off-shore empires -- following WW1, and in subsequent decolonization and the rise of new nations with aspirations of their own.
In large part, neoliberal order, with its international trade deals, was a response to the "problem" posed by the demands of these
diverse new nations to join the 'developed' world on an equal footing with their erstwhile colonial overlords, and to take sovereign
control of their own resources.
So, contrary to conventional understanding, neoliberalism did not spring fully-formed, post-WW2, from the foreheads of Walter
Lippman, von Mises, or Hayek; indeed, the cast of characters playing their parts in this developing drama is a rather large one,
and their origins, interconnections, and contributions are many and diverse, and often surprising.
Mankind survived the collapse of Rome. Barbarism was ascendent in the West. Civilization rose again. This time the collapse
will result in barbarism at the best.
The world problem is Climate Change. Climate change is a product of overpopulation & portable energy as that which creates
Climate change.
The US Treasury creates currency when Congress Votes a Bill that requires it. What is required is an MMT principled Fund that
pays for renewables, energy capture, nuclear power and those new machines that suck CO2 out of the air & turn it into clean hydrocarbon
fuels. The machine has been invented by Carbon Engineering. Takes up 30 acres. Hundreds of thousands are needed to stabilize CO2
levels in the atmosphere.
Methane was never factored in very well into the 1970s understanding of what was then called Ecology. Now we know that the
Methane being released by fracking and permafrost melting is already happening and will keep happening and accelerating so that
there will be a Methane Bubble Melt. 10 to 15 years and all the Methane will melt.
I see what was expected to happen to earth with a population of 9 billion as happening at 7.5 billon or exactly where we are
now. The expectation was that 9 billion was sustainable. 13 billion was said to be sustainable for 3 weeks.
Coral reefs are dying. Insects are dying. Diatoms are the bottom of the food chain in the oceans. They are dependent on coral
reefs. Birds depend on insects and their populations are dwindling.
I consider MMT, the work of conceptual art that allows currency to be generated by bills passed by governments, or a World
government, as a Last Chance Concept.
"The civilized work for what they want, while the barbarians steal what they want." In my civilization I am paid to do work.
Concepts are made real as money is given out for what is not yet real. The young want to have families and the old want the world
they helped build and make safe survive. Such compulsions are innate and often ethical. It is simply unethical to leave the world
worse than you found it.
Idea to idea to real & Ideal is ideal. The American philosophy is ethical eclectic pragmatism. Climate Change is not just to
be fought because it will get hotter but because the food chain will collapse. Other than from the MMT Funding for what it will
take to possibly protect the food chain, what have we?
I think evil takes on a life of its own. Over the course of civilization it gets standardized. But what I see happening
right now is a bunch of apoplectic, frantic "oligarchs" with egg on their face begging us all to help them change.
And none of us feel much warmth toward them. Somehow in the late 70s we the people, the laborers, small farmers, and mom &
pops and small business got blamed for everything that went wrong. And austerity was force-fed to us. What went wrong was actually
military hubris. Now there's an example of non-productive interest inflating away the empire. If the money had been used rationally
we'd have created an equal, balanced society and encouraged others by our example. Humans have always chosen the things that work
best. Somewhere, mid-century we freaked out and decided that we needed to control oil and growth but we were literally overtaken
by our own successes – big agriculture, population growth and ponzi economics. The thing we have to do now is bring this mess
back down to Earth. Requiring a fundamental change.
To change everything and turn it around. No more little tweaks of denial. Instead of the once successful "industrial" capitalism,
what we must have now is environmental capitalism. Value and share the gains of preserving the planet. It sounds like a full reversion
to a time before money, which is the symbol of material exploitation.
And it just so happens we still have the instinct for cooperation. The gains can be distributed to everyone. We just must find
ways that preserve rather than destroy the planet. Same idea, different god. There are plenty of jobs to go around. We have good
science and technology. We're not total idiots, yet. It only takes a minority of people to see the light and everything will change.
I do think we are already there, except for the shouting, as they say.
But those holding and near the levers of power are really sick and deluded individuals. And we have to understand this about
the nukes (post 1945): They exist in case the USA loses a big war or doesn't get its way. Yes, that is the level of depravity
that has developed.
Thanks so much for this series of posts on the ancient world and its comparison to today. I once read Seneca's "Letters from
a Stoic" and was surprised to see/realize the considerable apparent overlap between stoicism – which was itself the continuation
of an earlier tradition – and the early Christian church.
A great article this with lots to chew on. What he says rings true from what I have read. After the second Punic war, Roman
veterans found that the wealthy had seized their small farm holdings while they were gone and incorporated them into their own
estates. These were to become the great Latifundium. Meanwhile, the dispossessed Romans veterans made their way to Rome and joined
the plebs there. Over time, as the Roman army could not recruit these same type of landed men as the smaller holdings were being
eliminated, the Romans had to resort to a professional standing body which no longer owed their allegiance to Rome but to whatever
Roman general paid them – with disastrous results. Caesar was not the first here and the name Sulla also comes to mind. By the
end of the empire the Romans were resorting to paying barbarian tribes to fight for them which worked, until it didn't. So in
short, the greed of the wealthy in Rome destroyed the very thing that had made Rome so successful and resilient.
I don't wish to mount a defense of the Republican Elite; the system did pressure towards money-love. However, there were
counter balancing features. Money was vital, but so was virtue. Honour, courage, dignity were required.
A Roman aristocrat had to perform the minimum set required military campaigns. Only intellectual freaks such as Cicero
could climb the hierarchy without making somekind of significant military achievement.
Caesar won the Laural crown (?) through genuine acts of bravery. Roman aristocrats risked their lives & died in war. And
their troops knew it.
Other factors also tended to mitigate against the oligarchic instinct. For instance, Senators were legally barred from trade
or money lending (& yes, they often got around such bans. ) Sumptuary laws were tried (& failed).
It should also be remembered that for all the economic polarisation, Roman citizenship was highly valued. The Roman's won the
2nd Punic , essentially because Hannibal fundamentally miscalculated -- Roman allies, Latins etc did not go over to Hannibal in
hordes. They stayed loyal.
In Systems of Survival , Jane Jacobs meditated on different power structures. Some required virtus , steadfastness,
etc., others, notably money power didn't.
Somebody, somewhere, wrote about alchemy's response to money, in seeking the Philosopher's Stone. That would be a chemical
that could be transformed into anything in a chemical reaction, rather as money could in the market. I thought it was in Graeber's
Debt , but it's not showing up there.
Philosopher's Stone= the Replicator Tech in Star Trek. costless production of basic needs. add in warp drive(=unlimited expansion,
limited time-cost), and the inherent human traits that cause all the problems(ie: greed, etc) are overcome without having to fix/eliminate
them just give them somewhere to go.(this is why i'm all for asteroid mining)
Several things trouble me about this post. People believe there is no alternative -- I disagree with that view. I'd restate
the assertion as great efforts are and have been made to convince people there is no alternative. You don't need to be my age
to learn a little about tax rates in the Eisenhower years. The economy did all right then. My impression talking with young people
isn't that they believe there is no alternative, instead they have no idea how to make things change for the better, and neither
do us old farts. Our democracy is broken. It no longer cares for the public good.
Money addiction -- I have trouble reconciling that concept with the short-term biases of the wealthy and their seeming
lack of interest in economic growth. They aren't happy with a bigger slice of pie from a bigger pie. They want grow their slice
from the pie relative to everyone else -- even if the pie grows smaller. Money as power, and an insatiable lust for power is more
consistent with the actions of the oligarchs.
I think the concept of growth which shows up in several parts of the post needs some adjustment. Growth is tied to the consumption
of fossil fuels as is increased CO2 in the atmosphere. Fossil fuels are nearing points of declining and unstable production. Unless
growth can be decoupled from fossil fuels all the imperial control of what fossil fuels remain will do little but extend our time
at the expense of others as we all race toward a point of collapse.
Some of the discussion of Neoliberalism confuses me. -- Neoliberalism is not the same as laissez-faire or neoclassical economics.
"That leaves the question facing us today: Is the American oligarchy and state as rapacious as that of Rome?" -- I'm not
sure this post really answered that opening question. I believe the American oligarchy, while continuing in the long tradition
of oligarchic depredation, is much more rapacious than that of Rome and much more dangerous as the world rushes toward collapse.
After the fossil fuels are gone there are no more. The Climate is already lurching into chaos and may have already crossed a point
of no near-term return to the relatively mild and stable climate immediately preceding the Anthropocene.
Thermonuclear weapons scattered in many hands adds existential danger to the threats posed by the American oligarchy and Power
Elite structures and their insane lust for power.
Other than these quibbles, this is a remarkable series of posts presenting what to me is a very new view of the ancient world.
It offers a much better understanding of the ancient world and some of its key literature and early writings. Time to order some
books [I still haven't ordered a copy of "Forgive Them Their Debts" and now have to add a copy of this most recent book.]
Had lunch with one of the "Chicago Boys" that Hudson describes as the source of economics current woes.
After that lunch, which was a discussion of many of Michael's themes, I completely agree with his assessment of what they have
wrought. While the Chicago Boys may profess to have Mill and Ricardo as hero's, as Hudson does, Mills and Ricardo's theories are
obliterated by the way the Chicago Boys have completely fallen in love with Ayn Rand's philosophy. Everyone is on their own. The
rich are rich because they are naturally better at stuff than those who are not. They hate government regulation, they view government
as the creator of problems, they have no compunction for watching the population sink into debt and penury. After all "it's their
own look out".
Funny, when you read things abstractly on a wonderful site like Naked Capitalism, but then witness this terrible philosophy
first hand, suddenly things are not so abstract. Michael's right.
Note: Michael Hudson published and forgive them their debts: Lending, Foreclosure, and
Redemption From Bronze Age Finance to the Jubilee Year in November of last year. It is the
first volume in what will be a trilogy on the long history of the tyranny of debt. I have
interviewed him extensively as he writes the second volume, The Collapse of
Antiquity.
John Siman : Michael, in the first volume of your history of debt -- "
ORDER IT NOW
and forgive them their debts , dealing with the Bronze Age Near East, Judaism and
early Christianity -- you showed how over thousands of years, going back to the invention of
interest-bearing loans in Mesopotamia in the third millennium BC, many kings from a variety of
Mesopotamian civilizations proclaimed Clean Slate debt cancellations on a more or less regular
basis. And you showed that these royal proclamations of debt amnesty rescued the lower classes
from debt bondage, maintaining a workable economic balance over many centuries. Because these
kings were so powerful -- and, let's say, enlightened -- they were able to prevent the social
and economic polarization that is inevitable when there is no check on an oligarchic creditor
class extracting exponentially increasing interest from debtors.
But now, as you write the second volume, your theme gets turned upside down. You are showing
how the Greeks and the Romans learned about interest-bearing debt from their contacts with
Middle Eastern civilizations, but tragically failed to institute programs of Clean Slate debt
amnesty. Their failure has been a kind of albatross around the neck of Western economies ever
since.
So I'd like to start this conversation in the late 500s BC, because we can see at that time
the beginnings of both the Athenian democracy and the Roman Republic, plus of two more
important civilizations. First was the Athens of Cleisthenes, who had led the overthrow the
"tyrant" Hippias and became the father of Athenian democracy. Second, there was the Roman
Republic of Lucius Junius Brutus, who overthrew the last of Rome's legendary kings, the
"tyrant" Tarquinius Superbus.Third was the Persian civilization of Cyrus the Great. He was a
"divine king," in many ways in the ancient tradition of Hammurabi. Fourth were the post-exilic
Jews of Ezra and Nehemiah, who returned to Jerusalem, rebuilt the Temple and redacted the
Bible. They were the inventors of the Jubilee years of Clean Slate debt forgiveness, even
though they depicted the teaching as coming from Moses.
So, beginning with the late 500s BC, to what extent was the notion of Clean Slate debt
amnesty remembered, and to what extent was it rejected?
Michael Hudson : Every kind of reform, from Mesopotamia to Greece, was put forth as
if it simply restored the way things were in the beginning. There was no concept of linear
progress in Antiquity. They thought that there was only one way to do things, so any reform
must be the way the world was meant to be in the very beginning. All reformers would say that
in the beginning everybody must have been equal. Their reform was aimed at restoring this state
of affairs.
That's why, when Plutarch and even the Spartan kings in the third century BC talked about
canceling debts and promoting equality, they said that they were simply restoring the original
system that Lycurgus had created. But there was no sign that Lycurgus had really done these
things. It was made up. Lycurgus was a legendary figure. So was Moses in the Jewish tradition.
When the Bible was redacted and put together after the return from Babylon, they put debt
cancellation and land redistribution -- the Jubilee Year -- right in the center of Mosaic Law.
So it seemed that this was not an innovation, but what Moses said in the beginning. They
created a Moses figure much like the Greeks created a Lycurgus figure. They said that this is
how things were meant to be. This is how it was in the beginning -- and it just happened to be
their own program.
This was a projection backwards: a retrojection. Felix Jacoby wrote that Athenian history
was that way, basically party pamphleteering projecting their ideal program back to Solon or to
whomever one might choose as a good guy to model. Writers would then say that this original
good guy supported the program that they were proposing in their epoch. This was the ancient
analogy to "Constitutional Originalism" in the United States as a frame for right-wing
policies.
JS : So, ever since the 500s BC, the surefire way to critique the status quo has been
to say you are trying to go back to the Garden of Eden or to some other pristine Saturnian
Golden Age.
MH : Yes, you want to say that the unfair world around you isn't what was meant, so
this couldn't have been the original plan, because the past had to be a successful takeoff. So
the program that reformers always turned out to be what the Founding Fathers meant.
JS : That's veryinspirational!
MH : The key is to appear as a conservative, not a radical. You accuse the existing
status quo as being the beneficiaries of the radicals who have distorted the original Fair Plan
that you're trying to restore.
JS : So in the 500s BC we have Cyrus -- and his inscription on the Cyrus Cylinder --
boasting that he freed the Babylonians from their tax debt and bonds, and we have the
post-exilic Jews proclaiming d'ror
[דְּרֹ֛ור] in Leviticus 25, proclaiming
"liberty throughout the land." We also have the reforms of Cleisthenes in Athens,
isonomia [ἰσονομία, literally, equality
under the law], a genuine attempt at democracy. But let's start with Rome. What do you want to
say about the nova libertas , the "new liberty" proclaimed in Rome after the last king
was expelled and the Republic was founded? Didn't Brutus and his wellborn friends boast that
they were the institutors of true liberty?
MH : Liberty for them was the liberty to destroy that of the population at large.
Instead of cancelling debts and restoring land tenure to the population, the oligarchy created
the Senate that protected the right of creditors to enslave labor and seize public as well as
private lands (just as had occurred in Athens before Solon). Instead of restoring a status
quo ante of free cultivators -- free of debt and tax obligations, as Sumerian amargi
and Babylonian misharum and andurarum meant -- the Roman oligarchy accused anyone
of supporting debtor rights and opposing its land grabs of "seeking kingship." Such men were
murdered, century after century.
Rome was turned into an oligarchy, an autocracy of the senatorial families. Their "liberty"
was an early example of Orwellian Doublethink. It was to destroy everybody else's
liberty so they could grab whatever they could, enslave the debtors and create the polarized
society that Rome became.
JS : OK, but this program worked. The Republic grew and grew and conquered everyone
else for century after century. Then the Principate became the supreme power in the Western
world for several more centuries.
MH : It worked by looting and stripping other societies. That can only continue as
long as there is some society to loot and destroy. Once there were no more kingdoms for Rome to
destroy, it collapsed from within. It was basically a looting economy. And it didn't do more
than the British colonialists did: It only scratched the surface. It didn't put in place the
means of production that would create enough money for them to grow productively. Essentially,
Rome was a financial rentier state .
Rentiers don't create production. They live off existing production, they don't
create it. That's why the classical economists said they were supporting industrial
capitalists, not British landlords, not monopolists and not predatory banks.
JS : This has all been forgotten, both in the United States and in England --
MH : Let's say, expurgated from the curriculum.
JS : Worse than forgotten!
MH : That's why you don't have any history of economic thought taught anymore in the
United States. Because then you'd see that Adam Smith, John Stuart Mill and the "Ricardian
socialists" and indeed most of the 19th century had a completely opposite idea of what
constituted a free market.
JS : Opposite? How so?
MH : Opposite from the neoliberal idea that freedom means freedom for the wealthy to
indebt and destroy the economy. Opposite from the liberty of Brutus to overthrow the Roman
kings and establish an autocratic oligarchy.
JS : So do we want to see the Roman kings as defenders of the people -- defending
them from predatory oligarchs?
MH : Yes, especially Servius Tullius. There was a great flowering of Rome, making it
attractive to immigrants by making the city livable for newcomers. They did this because at
that time, in the 6th century BC, all societies had a shortage of labor. Labor was the factor
of production in short supply, not land. Not even in Athens was land in short supply in the 6th
and 5th centuries. You needed labor, and so you had to make it attractive for immigrants to
join your society instead of having your people run away, as they would in a society run by
creditors reducing clients to bondage.
JS : So you are writing about how Roman liberty was actually the liberty of
oligarchic creditors from populist pressures for debt forgiveness. What of the
d'ror of Leviticus 25 -- the liberty of the postexilic Jews? Did they actually proclaim
years of Jubilee in which debts were forgiven and bondservants were returned to their
families?
MH : After the Babylonian Jews returned to Jerusalem, I'm sure that they said that it
was time for the land to be returned to its original owners -- and their families, by the way,
were the original owners who were exiled in the Babylonian Captivity. I rely largely on Baruch
Levine for this idea of the ge'ullah
[גְּאֻלָּה], saying give us back our
ancestral lands. [See thecolloquium Levine and Hudson co-edited on Land and Urbanization in
the Ancient Near East , and their preceding volume on ancient privatization.] There must
have been some kind of settlement along those lines. Unfortunately, the Judaic lands did not
keep their records on on clay tablets that could be thrown out and recovered thousands of years
later. We don't have any record of their economic history after the Return.
JS : Now I've brought along the transcriptions of several Egyptian papyri for you to
look at. I also want to show you a papyrus in Aramaic from Judæa. It's not direct
evidence that the post-exilic Jews were having Jubilee years, but it's indirect evidence,
because it says that a particular debt has to be paid, even during a time of general debt
amnesty, even if it falls due in a shmita [שמיטה], a
sabbath year. So it sounds like the Jews were finding loopholes --
MH : It certainly sounds like it! Babylonian creditors tried a similar ploy, but this
was disallowed. (We have court records confirming the realm's misharum acts.)
JS : In the Mosaic commandments to forgive debt, can we infer that there was some
sort of program of debt forgiveness in place already in place in postexilic Jerusalem?
MH : Yes, but it ended with Rabbi Hillel and the Prozbul clause. Debtors had to sign
this clause at the end of their debt contracts saying that they waived their rights under the
Jubilee year in order to get a loan. That was why Jesus fought against the Pharisees and the
rabbinical leadership. That's what Luke 4 is all about [ And there was delivered unto him
the book of the prophet Isaiah. And when he had opened the book, he found the place where it
was written, "The Spirit of the Lord is upon me, because he hath anointed me to preach the
gospel to the poor; he hath sent me to heal the brokenhearted, to preach deliverance to the
captives, and recovering of sight to the blind, to set at liberty them that are bruised, to
preach the acceptable year of the Lord" = the Jubilee year.] Luke also pointed out that the
Pharisees loved money!
JS : Let me ask you about Egypt here. Unfortunately, as you said, the postexilic Jews
did not leave us any clay tablets and almost no papyri, but we do have loads of papyri
concerning the Ptolemaic kings of Egypt. So from, say, 300 B.C. to the death of Cleopatra, we
have official evidence that the Egyptian kings proclaimed debt amnesties. Maybe one of the
reasons, or perhaps the main reason for this, is because they were so powerful, like the
Mesopotamian kings. So even though the Ptolemaic kings were biologically and genetically
Macedonian Greek -- married to their sisters, too -- they aspired to rule in the ancient
Egyptian pharaonic tradition of We Are God-Kings and We Own Everything in the Kingdom.
MH : Certainly the Hellenistic kings had the ancient pharaonic Sed festivals, which
go back thousands of years and were a kind of jubilee. The Egyptians had regular debt
cancellations, because under the pharaohs the debts that would have been cancelled were
basically tax debts. They were owed to the crown, so he was cancelling debts owed to himself
ultimately. And we see this thousands of years later in the trilingual stone, the Rosetta
Stone, which the priests wrote for that young boy who was Ptolemy V. They explained to him that
this is how Egypt always had done it, and to act as a pharaoh, he had to do the same.
JS : And I think it is worth pointing out here that the same verb-plus-noun
combination for forgiving debts that the priests used in Greek on the Rosetta Stone is also
used by Matthew in the Lord's Prayer
[ἀφῆκεν/ἄφες
ὀφειλήματα, aphēken/aphes
opheilēmata]. It shows up in lots of papyri. The same Greek verb and noun, again and again
and again.
But let's go back to the Greeks of the 500s BC. They are a couple of hundred years out of
their Dark Age, so their society has been reconstituted after the demographic wipeout. It's
been reconstituted, but without Near Eastern-style "divine kingship" and its Clean Slate
proclamations. Just the opposite. Socrates had conversations with the rhapsodes who had
memorized and recited the Iliad . Even in their great epic, the Greeks' legendary king
of kings Agamemnon comes across as a kind of narcissistic loser. How would you describe Greek
kingship, especially the so-called tyrants?
MH : There never really were Greek kings of the type found throughout the Bronze Age
Near East and surviving into the first millennium in Assyria and even in Persia. The Greek
polities that emerged from their Dark Age were run by what shrewd Classicists call
mafiosi , something like the post-Soviet kleptocrats. They formed closed political
monopolies reducing local populations to clientage and dependency. In one polity after another
they were overthrown and exiled, mainly by aristocratic reformers from the elite families
(often secondary branches, as was Solon). Later oligarchic writers called them "tyrants" as an
invective, much as the word rex -- king -- became an invective in oligarchic Rome.
These tyrant-reformers consolidated their power by redistributing land from the leading
families (or in Sparta, land conquered from Messenia, along with its population reduced to
helotage) to the citizen-army at large all over Greece – except in Athens. That was one
of the most reactionary cities in the 7th century, as shown by what is known about the laws of
Draco. After some abortive coups in the seventh century, Solon was appointed in 594 to avoid
the kind of revolution that had led reformer "tyrants" to overthrow narrow aristocracies in
neighboring Megara and Corinth. Solon decreed a half-way reform, abolishing debt slavery (but
not the debtor's obligation to work off debts with his own labor), and did not redistribute
Athenian land from the city's elites.
Athens was one of the last to reform but then because it was such a badly polarized
autocratic society, it swung -- like Newton's Third Law of Motion: every action has an equal
and opposite reaction -- it swung to become the most democratic of all the Greek polities.
Some historians in the past speculated that Solon might somehow have been influenced by
Judaic law or other Near Eastern practice, but this is not realistic. I think Solon was simply
a pragmatist responding to widespread demands that he do what the reformers -- the so-called
tyrants -- were doing throughout Greece. He didn't redistribute the land like they did, but he
at least ended outright debt slavery. Free debtors (mainly cultivators on the land) were being
seized and sold outside of Athens to slave dealers. Solon also tried to recover some of the
land that wealthy families had grabbed. At least, that's what he wrote in his poems describing
his actions.
So to answer your question, I think debt cancellations were not a diffusionist policy from
the East, but a spontaneous pragmatic response such as was being widely advocated as far west
as Rome with its Secession of the Plebs a century later -- followed by much of Greece in the
4th century BC, and Sparta's kings in the late 3rd century BC.
Poorer Athenians were so angry with Solon for being not revolutionary enough that he went
into exile for 10 years. The real creators of Athenian democracy were Peisistratos [died 528/7
BC], his sons, also called tyrants, and then Cleisthenes in 507. He was a member of the wealthy
but outcast family, the Alcmaeonidae, who had been expelled in the 7th century. Solon had
allowed them to return, and they were backed by Delphi (to which the family contributed
heavily). Cleisthenes fought against the other oligarchic families and restructured Athenian
politics on the basis of locality instead of clan membership. Servius Tullius is credited for
enacting much the same reform in Rome. Lewis Henry Morgan's Ancient Society [1877]
described this restructuring of voting districts as the great watershed creation of
western-style democracy.
JS : Let me go back now to the way Athens and the other poleis emerged from
the Dark Age.
MH : Judging from the art and pottery, Greece didn't begin to recover until the 8th
century BC.
JS : So we're talking about the 700s BC. As Greece was learning from the Near Eastern
civilizations, everything from mythology to the alphabet to weights and measures --
MH : And commercial practices, credit practices.
JS : Yes, all this came from the Near East, including the practice of charging
interest. But what about Clean Slate debt amnesty? I want to argue logically here -- not from
any hard historical evidence, but only deductively -- that the Greeks would have wanted the
concept of Clean Slate debt forgiveness, they would have wanted to learn this too from the Near
East, but they could not do it because they were always going to lack a Hammurabi-style "divine
king."
MH : I think you miss the whole point of how Western civilization evolved here. First
of all, who "wanted" Near Eastern kingship? Certainly not the emerging oligarchies. The ruling
elites wanted to use interest-bearing debt to enrich themselves – by obtaining control
over the labor power of debtors.
Second, I don't think the Greeks and Italians knew about Near Eastern royal proclamations,
except as an alien practice much further East than Asia Minor. Falling into debt was a disaster
for the poor, but a means for their Western patrons to gain power, land and wealth. There is no
record of anyone suggesting that they should be in the Near East. The connection between the
Near East and Greece or Italy was via traders. If you're a Phoenician or Syrian merchant with
the Aegean or Italy, you're going to set up a temple as an intermediary, typically on an
island. Such temples became the cosmopolitan meeting places where you had the oligarchs of the
leading families of Greek cities visiting each other as part of a Pan-Hellenic group. You could
say that Delphi was the "Davos" of its day.
It was through these trading centers that culture diffused – via the wealthiest
families who travelled and established relationships with other leading families. Finance and
trade have always been cosmopolitan. These families learned about debt obligations and
contracts from the Near East, and ended up reducing much of their local populations to
clientage, without kings to overrule them. That would have been the last thing they wanted.
JS : So absent Hammurabi-style "divine kingship," is debt bondage and brutal
polarization almost inevitably going to happen in any society that adopts interest-bearing
debt?
MH : We see a balance of forces in the ancient Near East, thanks to the fact that its
rulers had authority to cancel debt and restore land that wealthy individuals had taken from
smallholders. These kings were powerful enough to prevent the rise of oligarchies that would
reduce the population to debt peonage and bondage (and in the process, deprive the palace of
revenue and corvée labor, and even the military service of debtors owing their labor to
their private creditors). We don't have any similar protection in today's Western Civilization.
That's what separates Western Civilization from the earlier Near Eastern stage. Modern
financialized civilization has stripped away the power to prevent a land-grabbing creditor
oligarchy from controlling society and its laws.
So you could characterize Western Civilization is being decadent. It's reducing populations
to austerity on a road to debt peonage. Today's new oligarchy calls this a "free market," but
it is the opposite of freedom. You can think of the Greek and Roman decontextualization of Near
Eastern economic regulations as if the IMF had been put in charge of Greece and Rome, poisoning
its legal and political philosophy at the outset. So Western Civilization may be just a vast
detour. That's what my forthcoming book, The Collapse of Antiquity, is all about. That
will be the second volume in my trilogy on the history of debt.
JS : So are we just a vast detour?
MH : We have to restore a balanced economy where the oligarchy is controlled, so as
to prevent the financial sector from impoverishing society, imposing austerity and reducing the
population to clientage and debt serfdom.
JS : How do you do that without a Hammurabi-style "divine kingship"?
MH : You need civil law to do what Near Eastern kings once did. You need a body of
civil law with a strong democratic government acting to shape markets in society's overall
long-term interest, not that of the One Percent obtaining wealth by impoverishing the 99
Percent. You need civil law that protects the population from an oligarchy whose business plan
is to accumulate wealth in ways that impoverish the economy at large. This requires a body of
civil law that would cancel debts when they grow too large for the population to pay. That
probably requires public banking and credit – in other words, deprivatization of banking
that has become dysfunctional.
All this requires a mixed economy, such as the Bronze Age Near Eastern economies were. The
palace, temples, private sector and entrepreneurs acted as checks and balances on each other.
Western Civilization isn't a mixed economy. Socialism was an attempt to create a mixed economy,
but the oligarchs fought back. What they call a "free market" is an unmixed monolithic,
centrally planned financialized economy with freedom for the oligarchy to impoverish the rest
of society. That was achieved by landlordism monopolizing the land in feudal Europe, and it is
done by finance today.
John Siman : Could you define what you mean by a mixed economy ?
Michael Hudson : There are many degrees of how "mixed" an economy will be -- meaning
in practice, how active its government sector will be in regulating markets, prices and credit,
and investing in public infrastructure.
In the 20 th century's Progressive Era a century ago, a "mixed economy" meant
keeping natural monopolies in the public sector: transportation, the post office, education,
health care, and so forth. The aim was to save the economy from monopoly rent by a either
direct public ownership or government regulation to prevent price gouging by monopolies.
The kind of "mixed economy" envisioned by Adam Smith, John Stuart Mill and other classical
19 th century free market economists aimed at saving the economy from land rent paid
to Europe's hereditary landlord class. Either the government would tax away the land's rent, or
would nationalize it by taking land out of the hands of landlords. The idea was to free markets
from economic rent ("unearned income") in general, including monopoly rents, and also to
subsidize basic needs to create a price-competitive national economy.
Long before that, in the Bronze Age -- which I describe in and forgive them their
debts -- the palace reversed the buildup of personal and agrarian debts by annulling them
on a more or less regular basis. This freed the economy from the overgrowth of debt that tended
to build up chronically from the mathematical dynamics of compound interest, and from crop
failures or other normal "market" phenomenon.
In all these cases a mixed economy was designed to maintain stability and avoid exploitation
that otherwise would lead to economic polarization.
JS: So a mixed economy is still a market economy?
MH : Yes. All these degrees of "mixed economy" were market economies. But their
markets were regulated and subordinated to broad social and political objectives rather than to
personal rent-seeking or creditor gains. Their economic philosophy was long-term, not
short-term, and aimed at preventing economic imbalance from debt and land monopoly.
Today's "mixed economy" usually means an active public sector undertaking investment in
infrastructure and controlling money and credit, and shaping the context of laws within which
the economy operates. This is best understood by contrasting it to what neoliberals call a
"pure" or "market" economy – including what the Trump administration accuses China of
when it proposes countervailing tariffs to shape the U.S. and international market in a way
that favors American corporations and banks.
So it is necessary to clear the terminological slate before going into more detail. Every
economy is a "market economy" of some sort or another. What is at issue is how large a role
governments will play -- specifically, how much it will regulate, how much it will tax, how
much it will invest directly into the economy's infrastructure and other means of production or
act as a creditor and regulator of the monetary and banking system.
JS: What can we learn from the mixed economies of the Ancient Near East? Why were
they so prosperous and also stable for so long?
MH : The Bronze Age mixed economies of Sumer, Babylonia, Egypt and their Near Eastern
neighbors were subject to "divine kingship," that is, the ability of kings to intervene to keep
restoring an economy free of personal and rural debt, so as to maintain a situation where the
citizenry on the land was able to serve in the military, provide corvée labor to create
basic infrastructure, and pay fees or taxes to the palace and temples.
Mesopotamian rulers proclaimed Clean Slates to keep restoring an idealized status quo
ante of free labor (free from debt bondage). Babylonian rulers had a more realistic view of
the economy than today's mainstream economists. They recognized that economies tended to
polarize between wealthy creditors and debtors if what today are called "market forces" are not
overridden -- especially the "market forces" of debt, personal liberty or bondage, and land
rent. The task of Bronze Age rulers in their kind of mixed economy was to act from
"above" the market so as to prevent creditors from reducing the king's subjects (who were their
military defense force) to bondage from appropriating their land tenure rights. By protecting
debtors, strong rulers also prevented creditors from becoming an oligarchic power in opposition
to themselves.
JS: What kind of economic theories and economic models are the critics of mixed
economies trying to advance?
MH : Opponents of a mixed economy have developed an "equilibrium theory" claiming to
show that markets come to a natural, fair and stable balance without any government
"interference." Their promise is that if governments will refrain from regulating prices and
credit, from investing and from providing public services, economies will settle naturally at a
highly efficient level. This level will be stable, unless "destabilized" by government
"interference." Instead of viewing public investment as saving the economy from monopoly rent
and debt peonage, the government itself is described as a "rent seeker" exploiting and
impoverishing the economy.
JS: But is this sort of economic theory legitimate, or just a libertarian-sounding
camouflage for neoliberal pillage?
MH : It's Orwellian Doublethink. Today's neoliberal theory justifies oligarchies
breaking free of public control to appropriate the economic surplus by indebting economies to
skim off the economic surplus as interest and then foreclose on personal landholdings and
public property, overthrowing "mixed economies" to create a "pure oligarchy." Their idea of a
free market is one free for creditors and monopolists to deny economic freedom to the rest of
the population. The political extension of this approach in antiquity was to unseat kings and
civic regimes, to concentrate power in the hands of an increasingly predatory class reducing
the economy to bondage, impoverishing it, and ultimately leaving it to be conquered by
outsiders. That is what happened to Rome in Late Antiquity.
Advocates of strong government have a diametrically opposite mathematical model. Ever since
the Bronze Age, they recognized that the "natural" tendency of economies is to polarize between
a wealthy creditor and land-owning class and the rest of society. Bronze Age rulers recognized
that debts tend to grow faster than the ability to pay (that is, faster than the economy).
Babylonian rulers recognized that if rulers did not intervene to cancel personal debts (mainly
agrarian debts by cultivators) when crops failed, when military action interfered, or simply
when debts built up over time, then creditors would end up taking the crop surplus and even the
labor services of debtors as interest, and finally foreclosing on the land. This would have
deprived the palatial economy of land and labor contributions. And by enriching an independent
class of creditors (on their way to becoming large landowners) outside of the palace, financial
wealth would express itself in economic and even military power. An incipient financial and
landholding oligarchy would mount its own military and political campaign to unseat rulers and
dismantle the mixed palatial/private economy to create one that was owned and controlled by
oligarchies.
The result in Classical Antiquity was economic polarization leading to austerity and
bondage, grinding the economy to a halt. That is the tendency of economies in "unmixed"
economies where the public sector is privatized and economic regulation is dismantled. Land and
credit was monopolized and smallholders became dependent clients and ultimately were replaced
by slaves.
Mixed economies by the late 19 th century aimed at minimizing market prices for
real estate and monopoly goods, and for credit. The economic aim was to minimize the cost of
living and doing business so as to make economies more productive. This was called "socialism"
as the natural outgrowth of industrial capitalism protecting itself from the most burdensome
legacies of feudalism: an absentee landlord class, and a banking class whose money-lending was
not productive but predatory.
JS: So mixed economies require strong and ultimately good governments.
MH : Any "mixed" economy has some basic economic theory of what the proper role of
government is. At the very least, as in the 20 th century, this included the
limitation of monopoly rents. The neoclassical (that is, anti-classical) reaction was to
formulate a euphemistic theory of consumer "demand" -- as if American consumers "demand" to pay
high prices for pharmaceuticals and health care. Likewise in the case of housing prices for
renters or, for owner-occupied housing, mortgage charges: Do renters and home buyers really
"demand" to pay higher and higher rents and larger and larger mortgages? Or are they compelled
to pay out of need, paying whatever their suppliers demand ( e.g ., as in "Your money or
your life/health").
So to answer your question, a mixed economy is one in which governments and society at large
realize that economies need to be regulated and monopolies (headed by credit and land
ownership) kept out of the hands of private rent-seekers in order to keep the economy free and
efficient.
JS : Has there ever been a civil society that effectively implemented a mixed economy
since, say, 500 BC?
MH : All successful economies have been mixed economies. And the more "mixed" they
are, the more successful, stable and long-lasting they have been as a result of their mutual
public/private checks and balances.
America was a mixed economy in the late 19th century. It became the world's most successful
industrial economy because it didn't have an absentee landlord class like Europe did (except
for the railroad octopus), and it enacted protective tariffs to endow a domestic manufacturing
class to catch up with and overtake England.
JS : Other countries?
MH : Germany began to be a mixed economy in the decades leading up to World War I.
But it had a mentally retarded king whom they didn't know how to restrain, given their cultural
faith in royalty. China is of course the most successful recent mixed economy.
JS : Isn't it pretty brutal in China for most of the population?
MH : Most of the population does not find it brutal there. It was brutal under
colonialism and later still, under Mao's Cultural Revolution. But now, most people in China
seem to want to get rich. That's why you're having a consolidation period of trying to get rid
of the local corruption, especially in the rural areas. You're seeing a consolidation period
that requires clamping down on a lot of people who became successful through shady
operations.
JS : So how would you describe an ideal society without a Hammurabi-style "divine
kingship"? An ideal mixed economy?
MH : The credit system would be public. That way, public banks could create credit
for socially productive purposes -- and could cancel the occasional overgrowth of debts without
causing private creditors to lose and protest. The public sector also would own and operate the
natural infrastructure monopolies. That was the basic principle of classical economics from
Adam Smith to Marx, even for erstwhile libertarians such as Henry George. Everybody in the 19th
century expected a mixed economy with governments playing a growing role, replacing absentee
landlords, bankers and monopolists with public collection of economic rent, public control of
the credit system and provider of basic needs.
JS : How extensive should the public sector be?
MH : A classical public sector would include the natural monopolies that otherwise
would engage in price gouging, especially the credit and banking system. These sectors should
be public in character. For one thing, only a public bank can write down the debts -- like
student debts today -- without hurting an independent oligarchic financial class. If student
debts and mortgage debts were owed to public banks, they could be written down in keeping with
the reasonable ability to be paid. Also, public banks wouldn't make junk mortgage loans to
NINJA borrowers, as did Citibank and the other crooked banks. A public bank wouldn't make
predatory corporate raiding and takeover loans, or finance and speculate in derivative
gambles.
Most of all, when the debt overhead becomes too large -- when a large corporation that is
essential to the economy can't pay its debts -- public banks can write down the debt so that
the company isn't forced into bankruptcy and sold to an American vulture fund or other vulture
fund. It can keep operating. In China the government provides this essential service of public
banks.
The key public concern throughout history has been to prevent debt from crippling society.
That aim is what Babylonian and other third-millennium and second-millennium Near Eastern
rulers recognized clearly enough, with their mathematical models. To make an ideal society you
need the government to control the basic utilities -- land, finance, mineral wealth, natural
resources and infrastructure monopolies (including the Internet today), pharmaceuticals and
health care so their basic services can be supplied at the lowest price.
All this was spelled out in the 19 th century by business school analysts in the
United States. Simon Patten [1852-1922] who said that public investment is the "fourth factor
of production." But its aim isn't to make a profit for itself. Rather, it's to lower the cost
of living and of doing business, by providing basic needs either on a subsidized basis or for
free. The aim was to create a low-cost society without a rentier class siphoning off
unearned income and making this economic rent a hereditary burden on the economy at large. You
want to prevent unearned income.
To do that, you need a concept to define economic rent as unearned and hence unnecessary
income. A well-managed economy would do what Adam Smith, David Ricardo, John Stuart Mill, Marx
and Veblen recommended: It would prevent a hereditary rentier class living off unearned
income and increasing society's economic overhead. It's okay to make a profit, but not to make
extractive monopoly rent, land rent or financial usury rent.
JS : Will human beings ever create such a society?
MH : If they don't, we're going to have a new Dark Age.
JS : That's one thing that especially surprises me about the United States. Is it not
clear to educated people here that our ruling class is fundamentally extractive and
exploitative?
MH : A lot of these educated people are part of the ruling class, and simply taking
their money and running. They are disinvesting, not investing in industry. They're saying, "The
financial rentier game is ending, so let's sell everything and maybe buy a farm in New
Zealand to go to when there is a big war." So the financial elite is quite aware that they are
getting rich by running the economy into the ground, and that this must end at the point where
they've taken everything and left a debt-ridden shell behind.
JS : I guess this gets back to what you were saying: The history of economics has
been expurgated from the curriculum.
MH : Once you strip away economic history and the history of economic thought, you
wipe out memory of the vocabulary that people have used to criticize rent seeking and other
unproductive activity. You then are in a position to redefine words and ideals along the lines
that euphemize predatory and parasitic activities as if they are productive and desirable, even
natural. You can rewrite history to suppress the idea that all this is the opposite of what
Adam Smith and the classicaleconomists down through Marx advocated.
Today's neoliberal wasteland is basically a reaction against the 19 th century
reformers, against the logic of classical British political economy. The hatred of Marx is
ultimately the hatred of Adam Smith and John Stuart Mill, because neoliberals realize that
Smith and Mill and Ricardo were all leading to Marx. He was the culmination of their free
market views -- a market free from rentiers and monopolists.
That was the immediate aim of socialism in the late 19 th century. The logic of
classical political economy was leading to a socialist mixed economy. In order to fight
Marxism, you have to fight classical economics and erase memory of how civilization has dealt
with (or failed to deal with) the debt and rent-extracting problems through the ages. The
history of economic thought and the original free-market economics has to be suppressed.
Today's choice is therefore between socialism or barbarism, as Rosa Luxemburg said.
JS : Let's consider barbarism: When I observe the neoliberal ruling class -- the
people who control the finance sector and the managerial class on Wall Street -- I often wonder
if they're historically exceptional because they've gone beyond simple greed and lust for
wealth. They now seek above all some barbaric and sadistic pleasure in the financial
destruction and humiliation of other people. Or is this historically normal?
MH : The financial class has always lived in the short run, and you can make
short-term money much quicker by asset stripping and being predatory can by being productive.
Moses Finley wrote that there was not a single productive loan in all of Antiquity. That was
quite an overstatement, but he was making the point that there were no productive financial
markets in Antiquity. Almost all manufacturing, industry, and agriculture was self-financed. So
the reader of Finley likely infers that we modern people have progressed in a fundamental way
beyond Antiquity. They were characterized by the homo politicus , greedy for status. We
have evolved into homo œconomicus , savvy enough to live in stable safety and
comfort.
We are supposedly the beneficiaries of the revolution of industrial capitalism, as if all
the predatory, polarizing, usurious lending that you had from feudal times (and before that,
from Antiquity), was replaced by productive lending that finances means of production and
actual economic growth.
But in reality, modern banks don't lend money for production. They say, "That's the job of
the stock market." Banks only lend if there's collateral to grab. They lend against assets in
place. So the result of more bank lending is to increase the price of the assets that banks
lend against -- on credit! This way of "wealth creation" via asset-price inflation is the
opposite of real substantive progress. It enriches the narrow class of asset holders at the top
of the economic pyramid.
JS : What about the stock market?
MH : The stock market no longer primarily provides money for capital investment. It
has become a vehicle for bondholders and corporate raiders to borrow from banks and private
funds to buy corporate stockholders, take the companies private, downsize them, break them up
or strip their assets, and borrow more to buy back their stocks to create asset-price gains
without increasing the economy's tangible real asset base. So the financial sector, except for
a brief period in the late 19th century, especially in Germany, has rarely financed productive
growth. Financial engineering has replaced industrial engineering, just as in Antiquity
creditors were asset strippers.
The one productive activity that the financial sector engaged in from the Bronze Age onward
was to finance foreign trade. The original interest-bearing debt was owed by merchants to
reimburse their silent partners, typically the palace or the temples, and in time wealthy
individuals. But apart from financing trade – in products that were already produced
– you've rarely had finance increase the means of production or economic growth. It's
almost always been to extract income. The income that finance extracts is at the expense of the
rest of society. So the richer the financial sector is, the more austerity is imposed on the
non-financial sector.
JS : That's pretty depressing.
MH : When I did the show with Jimmy Dore [ https://www.youtube.com/watch?v=PSvcB55R8jM
], he saw that the most important dynamic to understand is that debts grow more rapidly than
the economy at large. The rate of interest is higher than the rate of growth. It may not be
higher than the profit rate, but it's higher than the rate of growth. So every society that has
interest-bearing debt is going to end up deeper and deeper in debt. At a certain point the
creditors are paid at the expense of production and investment -- and soon enough they
foreclose.
JS : And then?
MH : Then you have debt deflation. That is the norm. Austerity. It is not an anomaly,
but the essence. The Babylonians knew this, and they tried to avoid debt deflation by wiping
out the predatory personal debts, not the business debts that were commercial and productive.
Only the non-commercial debts were wiped out.
JS : How could Modern Monetary Theory be used now, effectively?
MH : The main way is to say that governments don't have to borrow at interest from
existing financial "savers," mainly the One Percent. The government can do what America did
during the Civil War: print greenbacks. (The MMT version is the Trillion-dollar platinum coin.)
The Treasury can provide the money needed by the economy. It does that by running a budget
deficit and spending money into the economy. If you don't do that, if you do what Bill
Clinton did in the last years of his presidency and run a budget surplus, then you force the
economy to depend on banks for credit.
The problem is that bank credit is essentially predatory and extractive. The same thing
happens in Europe. The Eurozone governments cannot run a budget deficit of more than 3 percent,
so the government is unable to spend enough money to invest in public infrastructure or
anything else. As a result, the Eurozone economy is subject to debt deflation, which is
exacerbated by people having to borrow from the banks at high interest rates that far exceeds
the rate of growth. So Europe is suffering an even more serious debt deflation than the United
States.
JS : Is any of this going to change, either in Europe or here?
MH : Not until there's a crash. Not until it gets serious enough that people realize
that there has to be an alternative. Right now Margaret Thatcher and the neoliberals have won.
She said there was no alternative, and as long as people believe There Is No Alternative,
they're not going to realize that it doesn't have to be this way, and that you don't need a
private banking sector. A public banking sector would be much more efficient.
JS : How would you sum up Wall Street right now? Is it entirely predatory? Entirely
parasitical? What are Wall Street's essential functions now?
MH : Number one, to run a casino. By far the largest volume at stake is betting on
whether interest rates, foreign exchange rates or stock prices will go up or down. So the
financial system has turned into a gambling casino. Its second aim is to load the economy down
with as much debt as possible. Debt is the banking system's "product," and the GDP counts its
"carried interest" penalties and late fees, its short-term trading gains as "financial
services" counted as part of Gross Domestic Product (GDP).
The aim is to get as much of these financial returns as possible, and finally to foreclose
on as much property of defaulting debtors as possible. The business plan -- as I learned at
Chase Manhattan years ago -- is to transfer all economic growth into the hands of financial
investors, the One Percent. The financial business plan is to create a set of laws and mount a
campaign of regulatory capture so that all the growth in the economy accrues to the One
Percent, not the 99 Percent. That means that as the One Percent's rentier income grows,
the 99 Percent gets less and less each year, until finally it emigrates or dies off, or is put
into a for-profit prison, which looks like a growth industry today.
JS : Is there a single good thing that Wall Street does? Is there anything good that
comes out of Wall Street?
MH: You have to look at it as a system. You can't segregate a particular action from
the overall economy. If the overall system aims at making money in predatory ways at somebody
else's expense, then it is a zero-sum game. That is essentially a short-run business model. And
politically, it involves opposing a mixed economy. At least, the "old fashioned" socialist
mixed economy in which governments subordinate short-term gain-seeking to long-term objectives
uplifting the entire economy.
As the Greek philosophers recognized, wealthy people define their power by their ability to
injure the rest of society, so as to lord it over them. That was the Greek philosophy of
money-lust [πλεονεξία, pleonexia ]
and hubris [ὕβρις] -- not merely arrogance, but behavior that was
injurious to others.
Rentier income is injurious to society at large. Rentiers define a "free
market" as one in which they are free to deny economic freedom to their customers,
employees and other victims. The rentier model is to enrich the oligarchy to a point
where it is able to capture the government.
John Siman : It seems that unless there's a Hammurabi-style "divine king" or some
elected civic regulatory authority, oligarchies will arise and exploit their societies as much
as they can, while trying to prevent the victimized economy from defending itself.
Michael Hudson : Near Eastern rulers kept credit and land ownership subordinate to
the aim of maintaining overall growth and balance. They prevented creditors from turning
citizens into indebted clients obliged to work off their debts instead of serving in the
military, providing corvée labor and paying crop rents or other fees to the palatial
sector.
JS : So looking at history going back to 2000 or 3000 BC, once we no longer have the
powerful Near Eastern "divine kings," there seems not to have been a stable and free economy.
Debts kept mounting up to cause political revolts. In Rome, this started with the Secession of
the Plebs in 494 BC, a century after Solon's debt cancellation resolved a similar Athenian
crisis.
MH : Near Eastern debt cancellations continued into the Neo-Assyrian and
Neo-Babylonian Empires in the first millennium BC, and also into the Persian Empire. Debt
amnesties and laws protecting debtors prevented the debt slavery that is found in Greece and
Rome. What modern language would call the Near Eastern "economic model" recognized that
economies tended to become unbalanced, largely as a result of buildup of debt and various
arrears on payments. Economic survival in fact required an ethic of growth and rights for the
citizenry (who manned the army) to be self-supporting without running into debt and losing
their economic liberty and personal freedom. Instead of the West's ultimate drastic solution of
banning interest, rulers cancelled the buildup of personal debts to restore an idealized order
"as it was in the beginning."
This ideology has always needed to be sanctified by religion or at least by democratic
ideology in order to prevent the predatory privatization of land, credit, and ultimately the
government. Greek philosophy warned against monetary greed
[πλεονεξία, pleonexia ] and
money-love [φιλοχρηματία,
philochrêmatia ] from Sparta's mythical lawgiver Lycurgus to Solon's poems
describing his debt cancellation in 594 and the subsequent philosophy of Plato and Socrates, as
well as the plays of Aristophanes. The Delphic Oracle warned that money-love was the only thing
that could destroy Sparta [Diodorus Siculus 7.5]. That indeed happened after 404 BC when the
war with Athens ended and foreign tribute poured into Sparta's almost un-monetized regulated
economy.
The problem, as famously described in The Republic and handed down in Stoic
philosophy, was how to prevent a wealthy class from becoming wealth-addicted, hubristic and
injurious to society. The 7 th -century "tyrants" were followed by Solon in Athens
in banning luxuries and public shows of wealth, most notoriously at funerals for one's
ancestors. Socrates went barefoot
[ἀνυπόδητος, anupodêtos ] to
show his contempt for wealth, and hence his freedom from its inherent personality defects. Yet
despite this universal ideal of avoiding extremes, oligarchic rule became economically
polarizing and destructive, writing laws to make its creditor claims and the loss of land by
smallholders irreversible. That was the opposite of Near Eastern Clean Slates and their
offshoot, Judaism's Jubilee Year.
JS : So despite the ideals of their philosophy, Greek political systems had no
function like that of Hammurabi-like kings -- or philosopher-kings for that matter -- empowered
to hold financial oligarchies in check. This state of affairs led philosophers to develop an
economic tradition of lamentation instead. Socrates, Plato and Aristotle, Livy and Plutarch
bemoaned the behavior of the money-loving oligarchy. But they did not develop a program to
rectify matters. The best they could do was to inspire and educate individuals -- most of whom
were their wealthy students and readers. As you said, they bequeathed a legacy of Stoicism.
Seeing that the problem was not going to be solved in their lifetimes, they produced a
beautiful body of literature praising philosophical virtue.
MH : The University of Chicago, where I was an undergraduate in the 1950s, focused on
Greek philosophy. We read Plato's Republic , but they skipped over the discussion of
wealth-addiction. They talked about philosopher-kings without explaining that Socrates' point
was that rulers must not own land and other wealth, so as not to have the egotistical tunnel
vision that characterized creditors monopolizing control over land and labor.
JS : In Book 8 of the Republic , Socrates condemns oligarchies as being
characterized by an insatiable greed [ἀπληστία,
aplêstia ] for money and specifically criticizes them for allowing polarization
between the super-rich
[ὑπέρπλουτοι, hyper-ploutoi
] and the poor [πένητες, penêtes ], who are made
utterly resourceless [ἄποροι, aporoi ].
MH : One needs to know the context of Greek economic history in order to understand
The Republic 's main concern. Popular demands for land redistribution and debt
cancellation were resisted with increasing violence. Yet few histories of Classical Antiquity
focus on this financial dimension of the distribution of land, money and wealth.
Socrates said that if you let the wealthiest landowners and creditors become the government,
they're probably going to be wealth-addicted and turn the government into a vehicle to help
them exploit the rest of society. There was no idea at Chicago of this central argument made by
Socrates about rulers falling subject to wealth-addiction. The word "oligarchy" never came up
in my undergraduate training, and the "free market" business school's Ayn Rand philosophy of
selfishness is as opposite from Greek philosophy as it is from Judeo-Christian religion.
JS : The word "oligarchy" comes up a lot in book 8 of Plato's Republic . Here
are 3 passages:
1. At Stephanus page 550c "And what kind of a regime," said he, "do you understand by
oligarchy [ὀλιγαρχία]?" "That based on a
property qualification," said I, "wherein the rich
[πλούσιοι] hold office [550d] and the poor man
[πένης, penês ] is excluded.
2. at 552a "Consider now whether this polity [ i.e . oligarchy] is not the first that
admits that which is the greatest of all such evils." "What?" "The allowing a man to sell all
his possessions, which another is permitted to acquire, and after selling them to go on living
in the city, but as no part of it, neither a money-maker, nor a craftsman, nor a knight, nor a
foot-soldier, but classified only as a pauper [πένης, penês
] and a dependent [ἄπορος, aporos ]." [552b] "This
is the first," he said. "There certainly is no prohibition of that sort of thing in
oligarchical states. Otherwise some of their citizens would not be excessively rich
[ὑπέρπλουτοι, hyper-ploutoi
], and others out and out paupers [πένητες,
penêtes ]."
3 at 555b: "Then," said I, "is not the transition from oligarchy to democracy effected in
some such way as this -- by the insatiate greed
[ἀπληστία, aplêstia ] for that which
oligarchy set before itself as the good, the attainment of the greatest possible wealth?"
MH : By contrast, look where Antiquity ended up by the 2 nd century BC.
Rome physically devastated Athens, Sparta, Corinth and the rest of Greece. By the Mithridatic
Wars (88-63 BC) their temples were looted and their cities driven into unpayably high debt to
Roman tax collectors and Italian moneylenders. Subsequent Western civilization developed not
from the democracy in Athens but from oligarchies supported by Rome. Democratic states were
physically destroyed, blocking civic regulatory power and imposing pro-creditor legal
principles making foreclosures and forced land sales irreversible.
JS: It seems that Greek and Roman Antiquity could not solve the problem of economic
polarization. That makes me want to ask about our own country: To what extent does America
resemble Rome under the emperors?
MH: Wealthy families have always tried to break "free" from central political power
-- free to destroy the freedom of people they get into debt and take their land and property.
Successful societies maintain balance. That requires public power to check and reverse the
excesses of personal wealth seeking, especially debt secured by the debtor's labor and land or
other means of self-support. Balanced societies need the power to reverse the tendency of debts
to grow faster than the ability to be paid. That tendency runs like a red thread through Greek
and Roman history.
This overgrowth of debt is also destabilizing today's U.S. and other financialized
economies. Banking and financial interests have broken free of tax liability since 1980, and
are enriching themselves not by helping the overall economy grow and raising living standards,
but just the opposite: by getting the bulk of society into debt to themselves.
This financial class is also indebting governments and taking payment in the form of
privatizing the public domain. (Greece is a conspicuous recent example.) This road to
privatization, deregulation and un-taxing of wealth really took off with Margaret Thatcher and
Ronald Reagan cheerleading the anti-classical philosophy of Frederick von Hayek and the
anti-classical economics of Milton Friedman and the Chicago Boys.
Something much like this happened in Rome. Arnold Toynbee described its oligarchic land grab
that endowed its ruling aristocracy with unprecedented wealth as Hannibal's Revenge. That was
the main legacy of Rome's Punic Wars with Carthage ending around 200 BC. Rome's wealthy
families who had contributed their jewelry and money to the war effort, made their power grab
and said that what originally appeared to be patriotic contributions should be viewed as having
been a loan. The Roman treasury was bare, so the government (controlled by these wealthy
families) gave them public land, the ager publicus that otherwise would have been used
to settle war veterans and other needy.
Once you inherit wealth, you tend to think that it's naturally yours, not part of society's
patrimony for mutual aid. You see society in terms of yourself, not yourself as part of
society. You become selfish and increasingly predatory as the economy shrinks as a result of
your indebting it and monopolizing its land and property. You see yourself as exceptional, and
justify this by thinking of yourself as what Donald Trump would call "a winner," not subject to
the rules of "losers," that is, the rest of society. That's a major theme in Greek philosophy
from Socrates andPlato and Aristotle through the Stoics. They saw an inherent danger posed by
an increasingly wealthy landholding and creditor ruling class atop an indebted population at
large. If you let such a class emerge independently of social regulation and checks on personal
egotism and hubris, the economic and political system becomes predatory. Yet that has been the
history of Western civilization.
Lacking a tradition of subordinating debt and land foreclosure from smallholders, the Greek
and Italian states that emerged in the 7 th century BC took a different political
course from the Near East. Subsequent Western civilization lacked a regime of oversight to
alleviate debt problems and keep the means of self-support broadly distributed.
The social democratic movements that flowered from the late 19 th century until
the 1980s sought to re-create such regulatory mechanisms, as in Teddy Roosevelt's trust
busting, the income tax, Franklin Roosevelt's New Deal, postwar British social democracy. But
these moves to reverse economic inequality and polarization are now being rolled back, causing
austerity, debt deflation and the concentration of wealth at the top of the economic pyramid.
As oligarchies take over government, they lorded it over the rest of society much like feudal
lords who emerged from the wreckage of the Roman Empire in the West.
The tendency is for political power to reflect wealth. Rome's constitution weighted voting
power in proportion to one's landholdings, minimizing the voting power of the non-wealthy.
Today's private funding of political campaigns in the United States is more indirect in
shifting political power to the Donor Class, away from the Voting Class. The effect is to turn
governments to serve a financial and property-owning class instead of prosperity for the
economy at large. We thus are in a position much like that of Rome in 509 BC, when the kings
were overthrown by an oligarchy claiming to "free" their society from any power able to control
the wealthy. The call for "free markets" today is for deregulation of rentier wealth,
turning the economy into a free-for-all.
Classical Greece and Italy had a fatal flaw: From their inception they had no tradition of a
mixed public/private economy such as characterized in the Near East, whose palatial economy and
temples produced the main economic surplus and infrastructure. Lacking royal overrides, the
West never developed policies to prevent a creditor oligarchy from reducing the indebted
population to debt bondage, and foreclosing on the land of smallholders. Advocates of debt
amnesties were accused of "seeking kingship" in Rome, or aspiring to "tyranny"(in Greece).
JS: It seems to me that you're saying this economic failure is Antiquity's original
sin as well as fatal flaw. We have inherited a great philosophic and literary tradition from
them analyzing and lamenting this failure, but without a viable program to set it right.
MH: That insight unfortunately has been stripped out of the curriculum of classical
studies, just as the economics discipline sidesteps the phenomenon of wealth addiction. If you
take an economics course, the first thing you're taught in price theory is diminishing marginal
utility: The more of anything you have, the less you need it or enjoy it. You can't enjoy
consuming it beyond a point. But Socrates and Aristophanes emphasized, accumulating money is
not like eating bananas, chocolate or any other consumable commodity. Money is different
because, as Socrates said, it is addictive, and soon becomes an insatiable desire
[ἀπληστία, aplêstia ].
JS: Yes, I understand! Bananas are fundamentally different from money because you can
get sick of bananas, but you can never have too much money! In your forthcoming book, The
Collapse of Antiquity , you quote what Aristophanes says in his play Plutus (the god
of wealth and money). The old man Chremylus -- his name is based on the Greek word for money,
chrêmata [χρήματα] -- Chremylus and his slave
perform a duet in praise of Plutus as the prime cause of everything in the world, reciting a
long list. The point is that money is a singular special thing: "O Money-god, people never get
sick of your gifts. They get tired of everything else; they get tired of love and bread, of
music and honors, of treats and military advancement, of lentil soup, etc., etc. But they never
get tired of money. If a man has thirteen talents of silver -- 13 million dollars, say -- he
wants sixteen; and if he gets sixteen, he will want forty, and so forth, and he will complain
of being short of cash the whole time."
MH: Socrates's problem was to figure out a way to have government that did not serve
the wealthy acting in socially destructive ways. Given that his student Platowas an aristocrat
and that Plato's students in the Academy werearistocratsas well, how can you have a government
run by philosopher-kings? Socrates's solution was not practical at that time: Rulers should not
have money or property. But all governments were based on the property qualification, so his
proposal for philosopher-kings lacking wealth was utopian. And like Plato and other Greek
aristocrats, they disapproved of debt cancellations, accusing these of being promoted by
populist leaders seeking to become tyrants.
JS: Looking over the broad sweep of Roman history, your book describes how, century
after century, oligarchs were whacking every energetic popular advocate whose policies
threatened their monopoly of political power, and their economic power as creditors and
privatizers of the public domain, Rome's ager publicus , for themselves.
I brought with me on the train Cæsar's Gallic War . What do you think of
Cæsar and how historians have interpreted his role?
MH: The late 1 st century BC was a bloodbath for two generations before
Cæsar was killed by oligarchic senators. I think his career exemplifies what Aristotle
said of aristocracies turning into democracies: He sought to take the majority of citizens into
their own camp to oppose the aristocratic monopolies of landholding, the courts and political
power.
Cæsar sought to ameliorate the oligarchic Senate's worst abuses that were stifling
Rome's economy and even much of the aristocracy. Mommsen is the most famous historian
describing how rigidly and unyieldingly the Senate opposed democratic attempts to achieve a
role in policy-making for the population at large, or to defend the debtors losing their land
to creditors, who were running the government for their own personal benefit. He described how
Sulla strengthened the oligarchy against Marius, and Pompey backed the Senate against Caesar.
But competition for the consulship and other offices was basically just a personal struggle
among rival individuals, not rival concrete political programs. Roman politics was autocratic
from the very start of the Republic when the aristocracy overthrew the kings in 509 BC. Roman
politics during the entire Republic was a fight by the oligarchy against democracy and the
populace as a whole.
The patricians used violence to "free" themselves from any public authority able to check
their own monopoly of power, money and land acquisition by expropriating smallholders and
grabbing the public domain being captured from neighboring peoples. Roman history from one
century to the next is a narrative of killing advocates of redistributing public land to the
people instead of letting it be grabbed by the patricians, or who called for a debt
cancellation or even just an amelioration of the cruel debts laws.
On the one hand, Mommsen idolized Cæsar as if he were a kind of revolutionary
democrat. But given the oligarchy's total monopoly on political power and force, Mommsen
recognized that under these conditions there could not be any political solution to Rome's
economic polarization and impoverishment. There could only be anarchy or a dictatorship. So
Caesar's role was that of a Dictator -- vastly outnumbered by his opposition.
A generation before Caesar, Sulla seized power militarily, bringing his army to conquer Rome
and making himself Dictator in 82 BC. He drew up a list of his populist opponents to be
murdered and their estates confiscated by their killers. He was followed by Pompey, who could
have become a dictator but didn't have much political sense, so Caesar emerged victorious.
Unlike Sulla or Pompey, he sought a more reformist policy to check the senatorial corruption
and self-dealing.
The oligarchic Senate's only "political program" was opposition to "kingship" or any such
power able to check its land grabbing and corruption. The oligarchs assassinated him, as they
had killed Tiberius and Gaius Gracchus in 133 and 121, the praetor Asellio who sought to
alleviate the population's debt burden in 88 by trying to enforce pro-creditor laws, and of
course the populist advocates of debt cancellation such as Catiline and his supporters.
Would-be reformers were assassinated from the very start of the Republic after the aristocracy
overthrew Rome's kings.
JS: If Caesar had been successful, what kind of ruler might he have been?
MH: In many ways he was like the reformer-tyrants of the 7 th and 6
th centuries in Corinth, Megara and other Greek cities. They all were members of the
ruling elite. He tried to check the oligarchy's worst excesses and land grabs, and like
Catiline, Marius and the Gracchi brothers before him, to ameliorate the problems faced by
debtors. But by his time the poorer Romans already had lost their land, so the major debts were
owed by wealthier landowners. His bankruptcy law only benefited the well-to-do who had bought
land on credit and could not pay their moneylenders as Rome's long Civil War disrupted the
economy. The poor already had been ground down. They supported him mainly for his moves toward
democratizing politics at the expense of the Senate.
JS: After his assassination we get Caesar's heir Octavian, who becomes Augustus. So
we have the official end of the Republic and the beginning of a long line of emperors, the
Principate. Yet despite the Senate's authority being permanently diminished, there is continued
widening of economic polarization. Why couldn't the Emperors save Rome?
MH: Here's an analogy for you: Just as nineteenth-century industrial reformers
thought that capitalism's political role was to reform the economy by stripping away the legacy
of feudalism -- a hereditary landed aristocracy and predatory financial system based mainly on
usury -- what occurred was not an evolution of industrial capitalism into socialism. Instead,
industrial capitalism turned into finance capitalism. In Rome you had the end of the senatorial
oligarchy followed not by a powerful, debt-forgiving central authority (as Mommsen believed
that Caesar was moving toward, and as many Romans hoped that he was moving towards), but to an
even more polarized imperial garrison state.
JS: That's indeed what happened. The emperors who ruled in the centuries after
Cæsar insisted on being deified -- they were officially "divine," according to their own
propaganda. Didn't any of them have the potential power to reverse the Roman economy's
ever-widening polarization of the, like the Near Eastern "divine kings" from the third
millennium BC into the Neo-Assyrian, Neo-Babylonian and even the Persian Empire in the first
millennium?
MH: The inertia of Rome's status quo and vested interests among patrician nobility
was so strong that emperors didn't have that much power. Most of all, they didn't have a
conceptual intellectual framework for changing the economy's basic structure as economic life
became de-urbanized and shifted to self-sufficient quasi-feudal manor estates. Debt amnesties
and protection of small self-sufficient tax-paying landholders as the military base was
achieved only in the Eastern Roman Empire, in Byzantium under the 9 th – and
10 th -century emperors (as I've described in my history of debt cancellations in
and forgive them their debts ).
The Byzantine emperors were able to do what Western Roman emperors could not. They reversed
the expropriation of smallholders and annulled their debts in order to keep a free tax-paying
citizenry able to serve in the army and provide public labor duties. But by the 11
th and 12 th centuries, Byzantium's prosperity enabled its oligarchy to
create private armies of their own to fight against centralized authority able to prevent their
grabbing of land and labor.
It seems that Rome's late kings did something like this. That is what attracted immigrants
to Rome and fueled its takeoff. But with prosperity came rising power of patrician families,
who moved to unseat the kings. Their rule was followed by a depression and walkouts by the bulk
of the population to try and force better policy. But that could no be achieved without
democratic voting power, so faith was put in personal leader -- subject to patrician violence
to abort any real economic democracy.
In Byzantium's case, the tax-avoiding oligarchy weakened the imperial economy to the point
where the Crusaders were able to loot and destroy Constantinople. Islamic invaders were then
able to pick up the pieces.
The most relevant point of studying history today should be how the economic conflict
between creditors and debtors affected the distribution of land and money. Indeed, the tendency
of a wealthy overclass to pursue self-destructive policies that impoverish society should be
what economic theory is all about. We'll discuss this in Part 4.
John Siman: I want to spell out the implications of the points that Socrates brought
up, and with which you and I agree. That leaves the question facing us today: Is the American
oligarchy and state as rapacious as that of Rome? Or is it universally the nature of oligarchy
in any historical setting to be rapacious? And if so, where is it all leading?
Michael Hudson : If Antiquity had followed the "free market" policies of modern
neoliberal economics, the Near East, Greece and Rome would never have gained momentum. Any such
"free market" avoiding mutual aid and permitting a wealthy class to emerge and enslave the bulk
of the population by getting it into debt and taking its land would have shrunk, or been
conquered from without or by revolution from within. That's why the revolutions of the 7
th century BC, led to reformers subsequently called "tyrants" in Greece (and "kings"
in Rome) were necessary to attract populations rather than reduce them to bondage.
So of course it is hard for mainstream economists to acknowledge that Classical Antiquity
fell because it failed to regulate and tax the wealthy financial and landowning classes, and
failed to respond to popular demands to cancel personal debts and redistribute the land that
had been monopolized by the wealthy.
The wealth of the Greek and Roman oligarchies was the ancient counterpart to today's
Finance, Insurance and Real Estate (FIRE) sector, and their extractive and predatory behavior
is what destroyed Antiquity. The perpetuation of this problem even today, two thousand years
later, should establish that the debt/credit dynamic and polarization of wealth is a central
problem of Western civilization.
JS : So what were -- and are -- the political and social dynamic at work?
MH : The key is the concept of wealth addiction and how it leads to hubris --
arrogance that seeks to increase power in ways that hurt other people. Hubris is not merely
over-reaching; it is socially injurious. The wealthy or power injure other people knowingly, to
establish their power and status.
That is what Aristophanes meant when his characters say that wealth is not like bananas or
lentil soup. Wealth has no object but itself . Wealth is status -- and also political
control. The creditor's wealth is the debtor's liability. The key to its dynamic is not
production and consumption, but assets and liabilities -- the economy's balance sheet. Wealth
and status in the sense of who/whom. It seeks to increase without limit, and Socrates and
Aristotle found the major example to be creditors charging interest for lending "barren" money.
Interest had to be paid out of the debtor's own product, income or finally, forfeiture of
property; creditors did not provide means of making interest to pay off the loan.
This is the opposite of Austrian School theories that interest is a bargain to share the
gains to be made from the loan "fairly" between creditor and debtor. It also is the opposite of
neoclassical price theory. The economics taught in universities today is based on a price
theory that does not even touch on this point. The liberty that oligarchs claim is the right to
indebt the rest of society and then demand full payment or forfeiture of the debtor's
collateral. This leads to massive expropriations, as did the Junk Mortgage foreclosures after
2008 when President Obama failed to write down debts to realistic market values for real estate
financed on loans far beyond the buyer's ability to pay. The result was 10 million
foreclosures.
Yet today's mainstream economics treats the normal tendency to polarize between creditors
and debtors, the wealthy and the have-nots, as an anomaly. It has been the norm for the last
five thousand years, but economics sidesteps actual empirical history as if it is an anomaly in
the fictional parallel universe created by the mainstream's unrealistic assumptions. Instead of
being a science, such economics is science fiction.It trains students in cognitive dissonance
that distracts them from understanding Classical Antiquity and the driving dynamics of Western
civilization.
JS: This gets us back to the question of whether universities should just be shut
down and started up all over again.
MH: You don't shut them down, you create a new group of universities with a different
curriculum. The path of least resistance is to house this more functional curriculum in new
institutions. That's what America's Republican and pro-industrial leaders recognized after the
Civil War ended in 1865. They didn't shut down Harvard and Yale and Princeton and the Christian
free-trade Anglophile colleges. They created state colleges funded by land grants, such as
Cornell in upstate New York, and business schools such as the Wharton School at the University
of Pennsylvania, endowed by industrialists to providing an economic logic for the state's
steel-making and related industrial protectionism. The result was an alternative economics to
describe how America should develop as what they saw as a new civilization, free of the
vestiges of Europe's feudal privileges, absentee ownership and colonialist mentality.
The Republicans and industrialists saw that America's prestige colleges had been founded
long before the Civil War, basically as religious colleges to train the clergy. They taught
British free trade theory, serving the New England commercial and banking interests and
Southern plantation owners. But free trade kept the United States dependent on England. My book
America's Protectionist Takeoff describes how the American School of Political Economy,
led by Henry Carey and E. Peshine Smith (William Seward's law partner), developed an
alternative to what was being taught in the religious colleges.
This led to a new view of the history of Western civilization and America's role in fighting
against entrenched privilege. William Draper's Intellectual Development of Europe , and
Andrew Dixon White's History of the Warfare of Science with Theology saw the United
States as breaking free from the feudal aristocracies that were a product of the way in which
antiquity collapsed, economically and culturally.
JS : So business schools were originally progressive!
MH : Surprising as it may seem, the answer is Yes, to the extent that they described
the global economy as tending to polarize under free trade and an absence of government
protectionism, not to become more equal. They incorporated technology, energy-use and the
environmental consequences of trade patterns into economic theory, such as soil depletion
resulting from plantation monocultures. Mainstream economics fought against such analysis
because it advocated markets "free" for polluters, "free" for nations to pursue policies that
made them poorer and dependent on foreign credit.
JS : So this is how the Wharton School's first professor of economics, Simon Patten,
one of the founders of American sociology, fits into this anti- rentier tradition! That
is such a revelation to me! They developed an analysis of technology's effects on the economy,
of monopoly pricing and economic rent as unearned income that increases the cost of living and
cost of production. They explained the benefits of public infrastructure investment. Today that
is called "socialism," but it was industrial capitalists who took the lead in urging such
public investment, so as to lower their cost of doing business.
MH : The first U.S. business schools in the late 19 th century described
rentiers as unproductive. That is why today's neoliberals are trying to rewrite the
history of Institutionalism in a way that expurgates the Americans who wanted the government to
provide public infrastructure to make America a low-cost economy, undersell England and other
countries, and evolve into the industrial giant it became by the 1920s.
JS : That was Simon Patten's teaching at the Wharton School -- government-subsidized
public infrastructure as the fourth factor of production.
MH : Yes. America's ruling political class tried to make the United States a dominant
economy instead of a rentier economy of landlords and financial manipulators.
JS : How did the robber barons fit into this story?
MH : Not as industrialists or manufacturers, but as monopolists opposed by the
industrial interests. It was Teddy Roosevelt's trust-busting and the Republicans that enacted
the Sherman antitrust act. Its spirit was continued by Franklin Roosevelt.
JS :Is today's economy a second age of robber barons?
MH : It's becoming a second Gilded Age. An abrupt change of direction in economic
trends occurred after Ronald Reagan and Margaret Thatcher were elected in 1979/80. The result
has been to invert what the 19 th -century economists understood to be a free market
-- that is, a market free from a privileged hereditary class living on unearned income in the
form of land rent, monopoly rent and financial extraction.
JS : I was in my first few years of college when Thatcher came in in 1979, and when
Reagan was elected in 1980. I asked my economics professors what was going on, but I could not
find a single professor to coherently describe the U-turn that was occurring. It certainly
wasn't in Paul Samuelson's textbook that we were given.
MH : There's little logic for neoliberalism beyond a faith that short-term greed is
the best way to optimize long-term growth. It is natural for the wealthiest classes to have
this faith. Neoliberalism doesn't look at the economy as a social system, and it excludes as
"externalities" concerns with the environment, debt dependency and economic polarization. It
only asks how to make a short-term hit-and-run gain, regardless of whether this is done in a
way that has a positive or negative overall social effect. Realistic economic logic is social
in scope, and distinguishes between earned and unearned income. That is why economists such as
Simon Patten and Thorstein Veblen decided to start afresh and create the discipline of
sociology, to go beyond narrow individualistic economics being taught.
Today's mathematical economics is based on circular reasoning that treats all that has
happened as having been inevitable. It is all survival of the fittest, so it seems that there
is no alternative. This policy conclusion is built into economic methodology. If we weren't the
fittest, we wouldn't have survived, so by definition (that is, circular reasoning), any
alternative is less than fit.
Regarding the fact that you had to read Samuelson when you were in college, he was famous
for his Factor Price Equalization Theorem claiming to prove mathematically that everybody and
every nation tends naturally to become more and more equal (if government stands aside). He
denied that the tendency of the global economy is to polarize, not equalize. The political
essence of this equilibrium theory is its claim that economies tend to settle in a stable
balance. In reality they polarize and then collapse if they do not reverse their polarizing
financial and productivity and wealth dynamics are.
The starting point of economic theorizing should explain the dynamic that lead economics to
polarize and collapse. That is the lesson of studying antiquity that we have discussed in our
earlier talks. Writers in classical antiquity, like Bronze Age Near Eastern rulers before them
and the Biblical prophets, recognized that a rentier economy tends to destroy the
economy's productivity and widespread prosperity, and ultimately its survival. In today's world
the Finance, Insurance,and Real Estate [FIRE] sector and monopolies are destroying the rest of
the economy, using financial wealth to take over the government and disable its ability to
prevent their operating in corrosive and predatory ways.
JS : Why aren't more people up in arms?
MH : They're only up in arms if they believe that there is an alternative. As long as
the vested interests can suppress any idea that there is an alternative, that matters
don't have to be this way, people just get depressed. In our third interview you spoke about
Socrates and the Stoics producing a philosophy of lamentation and resignation. By his day there
seemed no solution except to denounce wealth. When matters got much worse in the Roman Empire,
wealth was abhorred. That became the message of Christianity.
What is needed is to define the scope of the alternative that you want. How can the economy
grow when households, business, and government have to pay more and more of their revenue to
the financial sector, which then turns around and lends its interest and related income out to
indebt the economy even more? The effect is to extract even more income. Rising government debt
and tax cuts for the rentiers lead to the privatization of public infrastructure and
natural monopolies. Higher prices are charged for tolls to pay for public healthcare,
education, roads and other services that were expected to be provided for free a century ago.
Financialized privatization thus creates a high-rent, high-cost economy -- the opposite of
industrial capitalism evolving into socialism to finally free society from rentier
income.
JS: Wouldn't that be based on the insatiable desire
[ἀπληστία, aplêstia ] for money and the
super-rich [ὑπέρπλουτοι,
hyper-ploutoi ] oligarchs in Book 8 of Plato's Republic ? So we get back to my
question: Is the behavior of the super-rich a constant in human nature?
MH: Money-love
[φιλοχρηματία,
philochrêmatia ] has always been extreme because wealth is addictive. But their
dynamic of credit -- other peoples' debts -- increasing at compound interest is mathematized
and the economy is put on automatic pilot to self-destruct. Its business plan to "create
wealth" by making financial gains at somebody else's expense, without limit. This kind of
financial wealth is a zero-sum activity. The wealth of the creditor class, the One Percent, is
achieved by indebting the 99 Percent.
JS: Why is it a zero-sum activity?
MH: A zero-sum activity is when one party's gain is another's loss. Instead of income
paid to creditors being reinvested in means of production to help the economy grow, it's spent
on buying more assets. The most wasteful examples are corporate stock buyback programs and
financial raids. And the largest effect of financialization occurs as loans and Quantitative
Easing simply bid up the price of real estate, stocks, bonds and other assets. The effect is to
put housing and a retirement income further out of range of people who have to live by working
for wages and salaries instead of living off absentee ownership, interest and financial
asset-price gains.
JS: Why is this being done instead of investing in the economy to help the population
live a better and more prosperous life?
MH: The tax and regulatory system is set up to make financial gains or create
monopoly privileges. That is quicker and more certain, especially in an economy shrinking as a
result of financialization and the austerity it imposes. It's hard to make profits by investing
in a shrinking economy suffering from debt deflation and a squeeze on family budgets to pay for
health care, education and other basic needs.
JS: So it becomes more about extraction. Let's come back to Global Climate Change and
rising sea levels as a foundation of American foreign policy.
MH: Since the 19th century, American policy has been based on the recognition that
GDP growth reflects rising energy use per capita. Rising productivity is almost identical with
the curve of energy use per worker. That was the basic premise of E. Peshine Smith in 1853, and
subsequent writers, whom I describe in America's Protectionist Takeoff: 1918-1914 . The
policy conclusion is that if you can control the source of energy -- which remains mainly oil
and coal -- then you can control global GDP growth. That is why Dick Cheney invaded Iraq: to
grab its oil. It is why Trump announced his intention to topple Venezuela and take its oil.
If other nations are obliged to buy their oil from the United States or its companies, then
it's in a monopoly position to turn off their electricity (like the United States did to
Venezuela) and hurt their economies if they don't acquiesce in a world system that lets
American financial firms come in and buy out their most productive monopolies and privatize
theirpublic domain. That's why America's foreign policy is to monopolize the world's oil, gas
and coal in order to have a stranglehold on the rate of growth of other countries by being able
to deny them energy. It's like denying countries food in order to starve them out. The aim isto
exploit Europe, Asia, Africa and Latin America what Rome exploited its Empire.
JS: Would you be comfortable using words like evil to describe what's going on
now?
MH : Evil essentially is predatory and destructive behavior. Socrates said that it
ultimately is ignorance, because nobody would set out intentionally to do it. But in that case,
evil would be an educational system that imposes ignorance and tunnel vision, distracting
attention from understanding how economic society actually works in destructive ways. On that
logic, post-classical neoliberal economics and the Chicago Boys are evil because their ideology
breeds ignorance and leads its believers to act in ways that are injurious to society,
preventing personal fulfillment through economic growth. Evil is a policy that makes most of
society poorer, simply in order to enrich an increasingly wealth-addictive rentier layer
at the top. Werner Sombart described the bourgeoisie as floating like a globules of fat on top
of a soup.
JS: This is now happening on a path that follows an exponential extreme. I guess
global warming makes it particularly evil. We're not simply talking about taking advantage of
other people within a society, we're talking about destruction of the planet and its
environment.
MH: Economists dismiss this as an "externality," that is, outside the scope of their
models. So these models are deliberately ignorant. You could say that this makes them evil.
JS: That is what I've suspected since we started the Iraq War in 2003.
MH: America's military buildup, its anti-environmental policy and global wars are
part of the same symbiotic strategy. The reason why America will not be part of a real effort
to mitigate global warming is that its policy is still based on grabbing the oil resources of
the Near East, Venezuela, and everywhere else that it can. Also, the oil industry is the most
tax-exempt and politically powerful sector. If it also happens to be the primary cause of
global warming, that is viewed as just collateral damage to America's attempt to control the
world by controlling the oil supply. In that sense the environmental impasse is a byproduct of
American imperialism.
JS: What's hopeful in the United States right now? What is a possible good
outcome?
MH: T he precondition would be for people to realize that there is an
alternative. Starting with wiping out of student debts, they can realize that the overall debt
overhead can be wiped out without hurting the economy -- and indeed, rescuing it from the
financial rentier class inasmuch as all debts on the liabilities side of the balance
sheet have their counterpart on the asset side as the savings of today's financial oligarchy,
which is doing to the U.S. economy what Rome's Senate did to the ancient world.
JS: How can people proceed from here?
MH: Understanding must come first. Once you have to have a sense of history, you
realize that there is an alternative. You also see what happens when a creditor
oligarchy gets strong enough to prevent any public power from writing down debts and to prevent
attempts to tax it.
You have to do to America today what the Republicans did after the Civil War: You have to
have a new university curriculum dealing with economic history, the history of economic thought
and the real world's long-term development.
JS: And what would be the premise for such economic history?
MH: T he starting point is to realize that civilization began in the ancient Near
East, and made a turn to oppose a strong public regulatory sector in Classical Greece and Rome.
The long-term tension is the eternal fight by the oligarchy of creditors and large land owners
to reduce the rest of society to serfdom, and to oppose strong rulers empowered to act in the
economy's long-term interest by creating checks against this polarization.
JS : So how much longer does this go on -- for months, for years, for decades?
MH : It always goes on longer than you think it will. Inertia has a great elastic
self-reinforcing power. Polarization will widen until people believe that there is an
alternative and decide to fight for it. Two things are required for this to happen: First, a
large proportion of people need to see that the economy is impoverishing them, and that the
existing picture of what is happening is misleading. Instead of wealth trickling down, it is
defying gravity and sucking income up from the base of the economic pyramid. People are having
to work harder just to stay in place, until their life style breaks down.
Second, people must realize that it doesn't have to be this way. There is an
alternative
JS : Right now most people think that government regulation and progressive taxation
will make things worse, and that the wealthy are job creators, not job destroyers. They think
that the system needs to be bolstered, not replaced, because the alternative is "socialism" --
that is, what the Soviets did, not what Franklin Roosevelt was doing. But today bailing out the
banks and giving subsidies to new employers is said to be for our own good.
MH : That's what the Romans told their provinces. Everything they did was always to
preserve "good order," meaning open opportunities for their own wealth grabbing. They never
said they were out to destroy and loot other societies. Madeline Albright followed this
rhetorical pattern in describing as being, like the Romans and France's brutal mission
civilisatrice , a program to uplift the world free-market efficiency. For performing this
service, the imperial power takes all the money that its colonies, provinces and allies can
generate. That's why the U.S. meddles in foreign politics, as we have just seen in Ukraine,
Libya and Syria.
JS : You've described the greatest meddling as distorting the narrative of history to
depict creditor and rentier drives toward oligarchy as being democratic and helping to raise
living standards and culture. Your books show just the opposite.
MH : Thank you. (Republished from
Naked Capitalism by permission of author or representative)
Questions for Dr. Hudson: Why should a public banking system charge interest at all on loans?
Could they not merely charge a one-time service fee to cover the cost of loan administration
and a one-time insurance fee to cover the costs of defaulting on the loan? After all, they
are not actually loaning money – they are creating money at minimal risk to the bank.
Charging interest to create money strikes me as mere theft.
Charging interest to create money strikes me as mere theft.
The school of Salamanca is where this idea of interest on money was codified, where the
Jesuit priests proclaimed it as a loss of wants. That is, since people loaned out their
money, they didn't get use of it, so they should be paid for their loss.
If you examine how banking works, banks hypothecate new money the moment you sign a debt
instrument. Both the new bank credit and debt instrument pop into being simultaneously.
To ask for compounding interest on this simple legerdemain is an outrageous abuse, so you
are right it is theft.
There are situations where it is not usurious. For example, Schacht's MefoBills scheme,
the interest fluxed outward from Reichsbank to the bill holder. A bill would be
presented to industry, and said industry would then start work making goods. Bill would then
be presented for discount, which is fancy way of saying paid for, or paid off. Upon discount,
bill would be examined to see if goods were produced. Then the bill would be paid its full
face value AND the interest it accrued.
Reichsmarks flowed from Reichsbank to the bill holder, who was paid interest. The bill
holder then spent his new Reichsmarks into the money supply.
Benjamin Franklin's public bank spent into the commons the extra money necessary
for debtors to pay interest on their loans. The commons were improved, so one could view this
as non usurious, even though it was positive interest. For the most part, FEES are all that
should accompany new loans, not compounding interest.
Canada had a quasi sovereign economy 1938 to 1974 and spent debt free into the
commons and on public infrastructure, their economy did not polarize toward creditors. The
Ministry of Finance owned all the common shares of Bank of Canada. BOC was a crown bank.
Note in all the "good" examples, interest flowed outward from an exogenous creator toward
the population. In bad examples of interest, it drains purchasing power from the
population.
By the way, a MEFOBILL scheme today could be used to release debts. The bill is created
exogenously by Treasury or even a shell company. The bill has a drawer, payee and drawee. It
is like a check. It channels toward a specific goal. For example, if you wanted to pay off
student debts, then the bill would aim at the student, who then presents bill to bank holding
student's debt instrument. Bill would eventually make its way to the FED through bank reserve
loops, and FED would expand their ledger. FED would use their keyboard to make new dollars,
which flow back into private bank system to pay off the students debt instrument. So double
entry mechanic laws are not abrogated. Student's debt disappeared, and Mefobill stays on FED
ledger forever, not accruing interest. Or, you could specify a small amount of interest to
the bank as a fee for their operations.
U.S. could use Mefobill scheme to lure industry back to the U.S. as it specifically
channels toward a goal.
The money system is something we humans created, it can be used for good or ill. To
paraphrase Michael, we need good civil law that codes for morality.
That was a soul-transforming read. It put into words what I could never put into words, but
on an instinctive level I have always felt these things. I have always had this irrational
hatred of bankers, landlords, capitalists, and any one else who dances to that faggy Gordon
Gekko tune. But I could never figure out why, let alone explain it clearly. This article has
done that for me right here and right now today. I am so grateful. This one is a keeper, now
I finally understand my hate. And I am proud of it. This is why Hitler was a good person, he
made these little bitch finance fags squeal and screech like the untermenschen they really
are.
It is interesting to note that the facts explored in this article corroborate and
synchronize with the facts explored in an amateur work titled "The Sumerian Swindle: How the
Jews Betrayed Mankind." If you look you can print the book free off the internet
somewhere.
From now on I only see humans in two distinct groups: productive people who work for a
living, and parasitic leeches who exploit the former. Twas ever thus. Let us successfully
genocide the latter in the near future.
The book sounds extremely interesting. I will probably get it, but that thing about the
Kaiser is a bad mistake. The German nation had been subjected to France and its proxies
marching across it for centuries. As always happens it unified in the face of threat, but
financially the structure was still harking back to the Holy Roman Empire. Being
decentralised as far as raising revenues was concerned, the Kaiser was unable to exert the
full strength of Germany. The Weimar government instituted reforms were intended to remedy
that for defensive purposes, but unfortunately Hitler inherited those reforms and that extra
wherewithal was a major reason for the early military successes in WW2 that set the world
agog.
Germany began to be a mixed economy in the decades leading up to World War I. But it had
a mentally retarded king whom they didn't know how to restrain, given their cultural faith
in royalty. China is of course the most successful recent mixed economy.
Dubious.France had financed massive military preparation by Russia, and Poincaire (cousin
of the brilliant physicist) was fixated with recovering Alsace and Lorraine (where he was
born). The military situation was gravely deteriorating for Germany partly because Germany.
The Kaiser did not attack France in 1905 when Britain had a tiny army and Russia was in
chaos. That was the craziest thing he did as leader.
Mr. Hudson thinks we can get the desirable results of Divine Kingship without having Divine
Kings, simply by enacting "laws" that promote a broad distribution of wealth. But he also
says that the oligarchy makes the laws and appoints the "elected" lawmakers. So he's engaged
in an exercise in wishful thinking. There is no democratic path to his desired result.
An excellent tour de force completely relevant to the major problems we face today, so
thank you , Ron Unz!
and turn the government into a vehicle to help them exploit the rest of society.
It's extremely obvious that's is exactly what our "constitution" was designed to do.
Hudson's insistence that debt must be government controlled runs into the problem
consistently, which both he and the interviewer discuss.
Essentially, the problem is that whoever gets the power will abuse it. "The government" is
no more a disinterested group of parties than the oligarchs or the plutocrats. The best
answer is to have a noble ruling class, but good luck with that; it will never happen at
least on a permanent basis.
So what's the answer? I wish I knew
The best [the Greek philosophers] could do was to inspire and educate individuals
I highly doubt anyone can do much more, but the last thing to do is to hope for some
Messiah, especially a rich one. Are you tRumpeteers listening?
PS: I liked the mention of Aristophanes. All of his plays are as instructive as they are
amusing and should be read by all. Same with Lucian of Samosata and Juvenal to mention just a
few.
JS said: "Right now most people think that government regulation and progressive taxation
will make things worse,"
Er, no, most people do not "think" that [ if they "think" at all].
They mostly "think" the exact opposite.
Due to their public [ie government funded] er,"education" [ie brainwashing], they are
actually dumb enough to believe that more government, and more regulations will make things
better for them, despite the fact that more than any other factor, it is the size and scope
of government that has directly caused the financial problems most of them are now
experiencing. "Stupid is a stupid does".
In fact, more, bigger government and more regulations will only further increase poverty
and make things even worse for them all than they are today.
This just in:
"Because they are all ultimately funded via both direct and indirect theft [taxes], and
counterfeiting [central bank monopolies], all governments are essentially, at their very
cores, 100% corrupt criminal scams which cannot be "reformed","improved", nor "limited" in
scope, simply because of their innate criminal nature." onebornfree
Government doesn't work" Harry Browne
"Taking the State wherever found, striking into its history at any point, one sees no way
to differentiate the activities of its founders, administrators and beneficiaries from those
of a professional-criminal class." Albert J. Nock
"Everything government touches turns to crap" Ringo Starr
"The kind of man who wants the government to adopt and enforce his ideas is always the
kind of man whose ideas are idiotic" H.L.Mencken
There was no concept of linear progress in Antiquity. They thought that there was only
one way to do things, so any reform must be the way the world was meant to be in the very
beginning.
The Hebrews had their liberation from captivity, Hesiod had his three prior ages "before
there was iron," Odysseus travels the world observing the various ways of men, Plato
envisions a radical transformation of human society, Aristotle compares the constitutions of
various Greek city-states, Thucydides resorts to archaeology to show that the Athenians were
not the original inhabitants of the Attic Peninsula.
It's not difficult to come up with what seem to be counter examples to Hudson's assertion
that there was no "linear progress" and no vision of other ways of doing things in Antiquity.
Ancient Mediterranean societies did see humanity as moving in a direction, evolving by
discovery and by making new institutions to address novel problems.
I found that peculiar as well. Another thing that was out of place was the "deification"
of Teddy Roosevelt and his so called trust busting as well as FDR's continuously "evolving"
New Deals. Both Roosevelts and their programs were tRump-like frauds whose main interest was
self aggrandizement at whatever cost.
Like tRump, the rhetoric was grand but the motive and execution left much to be desired.
While I get what Hudson is saying when he sez "there oughta be a law," I think history has
proven, repeatedly, that while there's a possibility that there ought to be one, it's not
likely it'll do much good, and certainly no permanent good.
The greatest debt creator in the history of America is the zionists privately owned FED and
the zionist owned central banks in every country in the world that create money out of thin
air and charge the goyim/proles for the use of this zionist created charade, which started in
1913 here in the zio/US with the diabolical draconian demonic FED.
Free America, abolish the FED and return to government created , debt free money as was
the case prior to December 23, 1913!
@G.
Poulin G. Poulin says: "Mr. Hudson thinks we can get the desirable results of Divine
Kingship without having Divine Kings, simply by enacting "laws" that promote a broad
distribution of wealth. "
Yup. The whole, as per usual, "benevolent dictator" fantasy writ large, yet once again. It
never stops.
You'd think that by now, this late in the game, and given history, that most people would
have finally figured out that government "solutions" never worked , and never can, or
will.
But no, luckily for governments, there's always a plentiful supply of new, brainwashed
dreamer/fantasists [or "suckers" as P.T Barnum reportedly called them], who are ever more
eager for a government that does what they think it should do, and who "think" that it/they
actually will, despite all the historical evidence directly contradicting their inane
fantasies.
"Sometimes it is said that man cannot be trusted with the
government of himself. Can he, then, be trusted with the
government of others? Or have we found angels in the form of
kings to govern him? Let history answer this question."
–Thomas Jefferson: 1st Inaugural, 1801.
" idealists and realists begin to get on each other's nerves. But the real difference is
in the capacity for appreciating the immense gap of blue inane which separates earth from
heaven, and in the realist's unwillingness to assume that men have angels' wings. "
@onebornfree
oneborn free, your screed is you projecting fears about abusive government.
Hudson just explained in historical terms that it is only properly constructed government
that can reign in Oligarchy. It is clear that society WILL polarize toward creditors if
certain safeguards are not put in place.
So, you will have to come to grips with your cognitive dissonance.
Hudson also sets the framework for governments "proper role." Anything outside of that
role is government overstepping its bounds.
By providing the framework, Hudson is doing the world a tremendous service, and as such he
will go down as one of the great men of history.
New glasses are being put on your nose, but you prefer to wear your old glasses that make
you see improperly?
It reminds me of all the wishful thinking about China, how their ghost cities are going to
do them in, and their economy cannot keep doing so well, and so on. It is people not
believing what is right in front of their eyes, or their inability to see outside of their
brainwashed mentality.
Hudson says that public banks are an option for erasing debts.
China does this now with their state banks, which is one of their secret weapons.
In the mid 90's China swept all of their old communist era debt into the trash can. This
then made their "books" look good to Western Finance standards, and China was essentially
given MFN status.
Then it was game on! Wall Street soon greenmailed American industry to leave for China, to
then get some of that wage arbitrage. We are living in the aftermath of this civilization
destroying decision making by our ruling finance class.
China has helped the wall street finance class loot America, as China creates new Yuans
from their state banks to match their countries growth rate. These new Yuans have to be there
in order to swap for dollars won in trade. The dollars end up in China's state banks, and are
recycled back to the U.S. to buy TBills instead of buying goods from mainstreet.
Today and reality is staring you in the face. Look at it. America's finance class did
indeed export jobs and our patrimony, and china did indeed use their public banking system.
China is working for their people's benefit, while a traitor class of finance oligarchy is
working against the public interest in America.
Those of you who are against Public banks need to get real and look at actual data. For
example, the bank of North Dakota is a public bank and has a good track record. Please, use
data and think for yourself rather than being a brainwashed dupe.
Another way is to continue to use PRIVATE BANKS, and have public money. The money supply
is nationalized, not the bank. All new money comes into being from a monetary authority or
Treasury as per the constitution. Banks then become gyro, which is a fancy word for
inter-mediation. Banks stop making money with a new debt instrument, but instead only match
up new creditors and debtors with existing money.
Within each private bank are two piles of numbers: 1) Pile A is people's savings, which
preferably was debt free at inception 2) Pile B is government credit, or national credit.
National Credit can be channeled toward specific goals that the country has agreed is in
its interests.
You as a debtor can borrow from either pile. The national credit creates a debt instrument
that can be easily jubileed in the same easy way as could a debt instrument hypothecated at a
public bank.
Public banks to my mind are a little too close to government even though they have a good
history. Nationalizing the money supply instead is better. Why? A good percentage of supply
becomes floating money (debt free) and this component becomes a permanent inheritance to the
people, giving them freedom to do commerce. An economically free people are also politically
free.
@onebornfreeSavior? Nothing can stop what has been set in motion, namely, Earth's Sixth Mass
Extinction, as the climate shifts rapidly to a
New Cretaceous "hothouse" climate. Neither voting nor your anarchism can invalidate
scientific evidence. Apparently, you can't read, because McPherson's Paradox
explains humanity's conundrum in plain terms: (a) continuing to evaporate Earth's coal beds
and oil fields into the atmosphere ensures our quick extinction from global warming, and (b)
stopping fossil fuel use only hastens our demise, because of "global masking effect" or "
global dimming
." Do you really think that evaporating coal beds and oil fields into the atmosphere has no
consequences?
"[T]heir complete extinction (in the co-extinction scenario) was abrupt, and
happened far from their tolerance limits, and close to global diversity collapse (
around 5 °C of heating )"
Co-extinctions annihilate planetary life during extreme environmental change
(Scientific Reports volume 8, Article number: 16724, published 13 November 2018) http://www.nature.com/articles/s41598-018-35068-1
Remember, Trump has already promised 4 °C of heating is baked into the cake,
and stopping fossil fuel use would remove the "global dimming" effect of air pollution and
lead to a near instantaneous rise of 2°C. A true paradox has no solution.
1. Please use your commenting privilege to address the substance of the articles. The
sentence that you first quote is ancillary to this one, but you've plucked it out as a wedge
for your umpteenth anarchic strut.
2. Why so frequently insulting? I happen to share your general perspective, but if you're
prosletyzing your style stinks.
3. If nothing else, please realize that you only need to piss once on each hydrant to
leave your mark.
@Dutch
Boy Unfortunately, Dr. Hudson never attacks the "Elephant in the Room -- –The
Control of Economies by the Magic Jews." The Jews control all pathways including media,
social and economic which they will never relinquish because with the money they make they
control the world's politicians by using the greed of mankind against them.
The Jews use the Holocaust to intimidate stupid whites in Western Civilization with guilt
and control everything including our foreign policy to immigration. Civilization will not
survive as long as the power of the Jews continue to rule mankind.
@Dutch
Boy Consider that a 10 year loan at 4% now would then have a fee (simple, not even
compound interest) of 40% of the principle.
It defeats the purpose of a loan paying over time. Even the 20% down is for equity, not
prepayment of interest.
Or you could simply roll the fees in. There is a House for sale for $200,000. The bank
buys it but then to get ownership with lein, and you have to pay the bank $300,000 to cover
everything (do you get any equity before going positive?).
How about just saving money including gold in your mattress until you can afford
something?
@MEFOBILLS
Federal Reserve, TARP, and QE – the debts of the banksters were erased and they paid
themselves bonuses, and it took more cash that would pay off every mortgage of those who lost
their homes
Unfortunately, Dr. Hudson never attacks the "Elephant in the Room -- –The Control
of Economies by the Magic Jews."
Hudson does but in a peripheral way. See below. Our (((friends))) like to use their
capital rather than labor. They use usury as a weapon, and tend to be among the Oligarch
class. Why? Because their religion gives cover and sanction for predatory behavior. Note that
our friends adore Hillel. Jewish religion went off the rails after Hillel, and is now an
apologist for the creditor class, and hence against a balanced logos type world.
Hudson cannot go after the Jews, but I can and so can you. It is ok to point out where
Jewish ideology becomes "Crime Inc." In fact, I find the most moral people to be
anti-semites, so Hudson who obviously has a strong moral basis, is smart enough to NOT touch
the Jewish third rail, or he would become persona non-grata.
There is no question Hudson possesses a first class mind, and by not touching the third
rail he is preserving his career. It is up to us to decode what he is saying and we can be
more blunt about things.
You don't have to be Jewish to be a predator, and by association most of us can decode
what he is saying.
MH: Yes, but it ended with Rabbi Hillel and the Prozbul clause. Debtors had to sign this
clause at the end of their debt contracts saying that they waived their rights under the
Jubilee year in order to get a loan. That was why Jesus fought against the Pharisees and
the rabbinical leadership. That's what Luke 4 is all about
@jacques
sheete He also seems very keen on China's policy. From what I can make out this is
because the government loans the money and can cancel the debt. So China being locked into
growth by massively Keynesian policies that cannot be haltet for fear of global economic
collapse is a good thing it seems. Hmmm.
@tz1
Federal Reserve, TARP, and QE – the debts of the banksters were erased and they paid
themselves bonuses, and it took more cash that would pay off every mortgage of those who lost
their homes
Yes of course. It would have been much better to take over the banks and give the "bond
holders" a haircut.
What the haircut means is that the debt instrument cannot make claims on the future. The
amount it can claim is written down to what the real economy can pay.
Our financial oligarchy did not want to take a haircut, and since they own the government,
they made their politician puppets dance.
We cannot see what is in the bill till we pass the bill.
Some here have pointed out that democracy is a joke. Yes it is. Universal Suffrage
democracy, where any rube can vote is especially bad.
You do need a ruling class which looks like the people it rules over. This ruling class
also has to be servants of their people.
China's ruling class is constantly polling their people to get data on how they are doing.
If a politician is found to be corrupt, they are killed or ejected. Think of it like your
body, bad elements and parasites are attacked by the immune system, otherwise you (the host)
will die.
@Biff
"You're a broken record that needs to be tossed up in the air in front of a twelve gauge."
Seem like a lot of trouble to go to – especially as I might be carrying a 12 gauge,
or similar, myself
This just in: there's an "ignore" button – I suggest you learn how to use it.
But regardless of whether the "commniunist" label is completely accurate or not, he's just
yet another in a long line of naive intellectuals who thinks that the government can solve
problems, problems it alone created.
"The kind of man who wants the government to adopt and enforce his ideas is always the
kind of man whose ideas are idiotic" H.L.Mencken
@tz1
Fee's on a loan should cover the bank's cost, which is a tiny fraction of what they take now
in the form of usury.
Think closely on this, the bank makes a loan, and it is only a matter of typing of a debt
instrument. Today with computers that amounts to a few minutes of work. They then on-sale the
debt instrument to another, usually TBTF bank, and get rid of any risk.
The better way is for people to pool their savings, and the bank is gyro. Debtor then buys
a house borrowing your savings. The old savings and loan system worked like this.
In Canada, when they had a sovereign banking system (1938 to 1974) they used trusts. Banks
were not allowed to hypothecate new housing loans. Trusts and savings and loans both pool
existing money and loan it out.
It was a beneficial cycle where the young borrowed from the old, and the old benefited
from some interest income, to then buy goods and services produced by the young.
Interest isn't always bad, but you have to look at it in context. About 70% of debt
instruments resident at banks are hypothecated against land. This is so finance oligarchy can
GRAB THE LAND in a depression via swaps or other schemes. Depressions are inevitable when M2
is always draining to pay debts at interest.
In the case of Canada's trust system, the interest was cycling back to the young (interest
was pointing outward to the population) to buy goods and services they produced.
@MEFOBILLS
MEFOBILLS says: "Hudson just explained in historical terms that it is only properly
constructed government that can reign in Oligarchy. It is clear that society WILL polarize
toward creditors if certain safeguards are not put in place.So, you will have to come to
grips with your cognitive dissonance. Hudson also sets the framework for governments "proper
role." Anything outside of that role is government overstepping its bounds."
Short answer: "The kind of man who wants the government to adopt and enforce his ideas is
always the kind of man whose ideas are idiotic" H.L.Mencken
MEFOBILLS says: "Hudson also sets the framework for governments "proper role.""
This just in: it's "proper role" [ in the US] was already [supposedly ]"set" via
the Declaration of Independence, the Articles of Confederation, and more famously via a coup
d'etat which resulted in the scam called "The Constitution and Bill of Rights" .
Although the Constitution remains a scam to this day, a return to its supposed limits
would, at least temporarily, drastically downsize the federal government, which would be step
in the right direction.
For government is the problem, never the solution.
But of course, yourself [and most others here] remain too brainwashed [by the government,
and with your money] to ever understand that
Ya gotta watch out when someone takes Marx's economic observations (which were impressive) as
an automatic pass for his social prescriptions (which were a gateway to hell on earth).
@Dutch
Boy As a matter of logic aren't those creators of money reducing the value of the money
held by those who have saved to get it? So doesn't fairness require that they use interest
rates to maimtain the stability of the currency's value?
@Max So
you advocate euthanasia (when you are feeling nice rather than cruel and vengeful) of the
rapidly increasing retired population? Understood that you need to support the infant
generation but Hitler had the answer for that one didn't he: euthanasia of those who wouldn't
be able to contribute. How long do we indulge people with an unemployment benefit?
@jacques
sheete Which US subsidy programs might be regarded as proleptic jubilees? And writeoffs
like that massive solar energy disaster under Obama are surely equivalent to the jubilees.
And welfare payments are surely jubilees in advance.
@Sollipsist
Sollipsist says: "Ya gotta watch out when someone takes Marx's economic observations
(which were impressive) as an automatic pass for his social prescriptions (which were a
gateway to hell on earth)."
Wrongo. Marx's economic theories were as as idiotic as his social prescriptions- in fact,
his "social prescriptions" were directly derived from his idiotic economic theories, which is
exactly why such "social prescriptions" are, as you say, "a gateway to hell on earth".
As for the author of this article , pure Marxist or not, his own "social prescriptions"
are, like Marx's , the mere pontifications of a pseudo-intellectual statist, fantasizing
about solving social problems via that which he worships and adores , that is , yet more
government [of the "right" kind, mind you, and despite its obvious failure to do any such
thing to date].
Another case of "the blind leading the blind", I'm afraid, just more of the same old
hackneyed "government should do this- government can solve this " claptrap .
Hudson spent half the article talking about mixed economies being the best and only type
to work.
Also, it was the JEWISH CREDITOR CLASS, that funded Bolshevism. Wall Street Jews and some
London money funded the Bolsheviks.
Bolshevism in turn was not what Marx had intended.
Marx thought that industrial capitalism, especially that of the type he witnessed in
Germany, would evolve into an advanced form of socialism mixed economy. It would evolve after
industrial capitalism failed, or industrial capitalism would have evolved.
Instead, finance capitalism, that of the rentier credit class won out .
When Marx died, he said "I am a most unhappy man."
Instead of getting caught up in labels, look at the data or what they actually believe in.
It takes a little bit more energy and effort, rather than falling for simple platitudes.
Hudson's childhood background was Bolshevik, but he didn't pick his parents. If you look
at his actual body of work, he is analyzing where all economic systems fail.
Russian and Chinese communism failed because markets are not purely inelastic. You cannot
pretend that every market type needs government control, especially when pricing signals will
work. Systems that are predicated on lies, will not survive in the long term.
For government is the problem, never the solution.
Simple minded platitudes.
ALL COMPLEX SYSTEMS HAVE HIERARCHY!
All advanced civilizations have hierarchy.
There has to be a "brain" for any complex organization, it will not self organize.
This whole market is your god, or gold is your god is the rentier class duping you with
hypnosis.
Funny thing about Libertarian-tards and their junk economics, the very thing they want
they cannot have because their ideology brings about what they don't want – economic
slavery.
Free markets are free for the rentier to take his gains on your life energy and turn you
into his debt slave.
• This is the "anarchy" of the future stateless society which Marx and Engels had
accepted in 1872. Man becomes "his own master – free". The first condition for this
full-fledged freedom is: freedom from the state, not of the state, nor merely in the state.
As far as Marx's eye could see, the state is not the guarantor of freedom http://www.marxists.org/archive/draper/1970/xx/state.html
This is one the most brilliant things I've ever read here. I've read a great deal about the
various facts and events Mr. Hudson talks about but I've never been able to put them together
like Mr. Hudson. He's provided a framework for realizing how all these seemingly disparate
events fit together. I'm very grateful.
@Wizard of
Oz Retirees weren't regarded as parasites by National Socialism, Schlomo. Your
parasitic ilk, however, were.
"The Nazi social welfare provisions included old age insurance , rent
supplements, unemployment and disability benefits, old-age homes the NSV often
refused to provide aid to Jews " – National Socialist
People's Welfare
This is fake history. Mythology becoming history. A Jewish speciality.
1- The Jews were never in Ancient Egypt – or the Egyptians would have documented
it.
2- There is absolutely no archeological artifact from the Palestine region that show that
they were there before their exile. Plenty of proof that the Egyptians had been there earlier
on.
3- Palestine was desert at that time and had been abandoned by the Egyptians as it was
infertile – not a land of milk and honey. Yemen was agricultural and prosperous.
4- The Jews were exiled from Yemen – because they and non-Jewish Arabs (the Jews and
Arabs were the same people at that time), continued to raid the caravans bringing goods from
Yemen to Petra. The Babylonians punished them by taking them back to Babylon. After the
Persians liberated them, some went back to Yemen and some went to Palestine.
5- Locations in the Old Testament correspond to places in Yemen and Hejaz. Even their
names.
The best counter to Robert Michels's iron law of oligarchy (whatever the ostensible form of
government, it turns out in practice to be oligarchic rule by the group that has the real
power) was devised by Cleisthenes in Athens shortly before 500 B.C.: give power to average
citizens by appointing to offices ordinary citizens randomly chosen. It worked, as is shown
by how deeply resented it was by oligarchs like Plato.
Is a U.S. Presidential Executive Order signed on April 5, 1933 , by President
Franklin D. Roosevelt forbidding the hoarding of gold within the continental United
States .
It required all persons to deliver on or before May 1, 1933, all but a small amount
of gold coin, gold bullion, and gold certificates owned by them to the Federal Reserve
, in exchange for $20.67 (consumer price index, adjusted value of $400 today) per troy
ounce. Under the Trading with the Enemy Act of 1917, as amended by the recently passed
Emergency Banking Act of March 9, 1933, violation of the order was punishable by fine up
to $10,000 (equivalent to $193,548 today) or up to ten years in prison, or both .
Order 6102 specifically exempted "customary use in industry, profession or art", a
provision that covered artists, jewelers, dentists, and sign makers among others. The order
further permitted any person to own up to $100 in gold coins (a face value equivalent to 5
troy ounces (160 g) of gold valued at about $6,339 in 2016).
@MEFOBILLS
MEFOBILLS says: "All advanced civilizations have hierarchy.There has to be a "brain" for
any complex organization, it will not self organize. "
So presumably, a half wit such as yourself knows exactly what that hierarchy should be,
who the "brain" "should" be and exactly what and where everyone's "correct" place within it
"should" be, because people cannot self organize.
Sieg Heil, mein fuhrer! You're an even dumber sheep than I had initially suspected!
"Because they are all ultimately funded via both direct and indirect theft [taxes], and
counterfeiting [central bank monopolies], all governments are essentially, at their very
cores, 100% corrupt criminal scams which cannot be "reformed","improved", nor "limited" in
scope, simply because of their innate criminal nature." onebornfree
"Taking the State wherever found, striking into its history at any point, one sees no way
to differentiate the activities of its founders, administrators and beneficiaries from those
of a professional-criminal class." Albert J. Nock
"Everything government touches turns to crap" Ringo Starr
"The kind of man who wants the government to adopt and enforce his ideas is always the
kind of man whose ideas are idiotic" H.L.Mencken
There are several problems with Dr. Hudson's views here. Some have referenced some. I would
point out that we already have laws and practices to restrict the use of wealth from
impoverishing the population. But you have to have a leadership willing to enforce or apply
them. We have had no less than three major financial bailouts of the financial class in the
US. And at no time was the bailout extended to the industries consumers. I am unclear what
the prescription is to divorce the political class from the financial class.
The only new law that would make sense are laws that bar legislators from owning, stocks,
sitting on the boards of stocks or any financial institution they manage. And that would have
to extend to all immediate family members. Further, one has to completely cut off funds from
lobbyists, activists and the corporate class entities.
The economy is already comprised of mixed practices: private ownership and wealth
creation, government employment, non-profit entities and taxation and other programs that
assist citizens, i.e. welfare
The one over riding observation I would make about the economy is that we continue to have a
trade imbalance, which according to an old rule of thumb suggests that economy is not really
growing.
@G.
Poulin Mr. Hudson makes his contribution towards the greater good by educating the
populace. What's your problem? -- He is not a fairy. He is a knowledgeable and honest person;
the former requires a lot of willpower, the second requires courage.
@MEFOBILLS
Libertarians were invented and constructed on purpose to serve as the useful idiots of
oligarchs whom they worship and do everything to protect their right to be oligarchs while at
the same time being sodomized by them.
I am very happy to read this interview, because for me, this is the first time that I have
completely understood Michael Hudson's work. And I say this after watching countless of his
interviews over the past 8 years.
Before this interview here, I had always wanted to ask him if the Clean Slate policies
disappeared over 3000 years ago, then what was he saying in his books and lectures? If the
entirety of Western Civilization is based on oligarchy, rentiers, then what hope is there for
anything? I mean the Romans lasted a thousand years doing this rentier stuff. That's a long
time for misery.
Now, with this interview I understand more fully the period after the Civil War and into
the FDR Presidency as a partially-successful attempt to make things in the country different,
more egalitarian, more correct. And after this interview, I understand Hudson's main point:
the road to change lies in understanding the failures of antiquity.
Looking at things through the rentier oligarchy lens has been the revelation in my life in
the past 10 years. I never undeststood Chile & Allende until then. Likewise with
antiquity and likewise with the history of the United States. But those of us who do
understand these things, thanks in great part to Michael Hudson, are few.
As part of a very late stage college degree I earned 4 years ago, I took an Econ class in
my last semester. The class featured certain films as it related to economics and that was
indeed very interesting (I had never seen Coppola's "Tucker: The Man And His Dream" before so
that was "entertaining"), but the text book for the class was Friedman. I read it and could
not believe how dunderheaded, how wrong it was. And I realized from communication with the
professor that he believed all of it. His attitude seemed to be: who are you to question
economics orthodoxy, you uppity undergrad.
This interview above was both enlightening and depressing. How many decades longer do we
have to go before things change?
I would say that the opioid addition epidemics reveals not only greed of Big Pharma, but also strongly resembles the epidemics
of alcoholism in the USSR in late 70th and 1980th.
It probably might be viewed as yet another sign of the despair of people with the current economic and social conditions. And
also sign of crisis of neoliberalism as an ideology much like Marxism before it
Only a complete idiot now believe in "shareholder value" mantra, or "free market" hype ( "free" for whom, why" free" and nor
"fair" ), or the USA "democracy promotion" policies abroad (which for some reason always accompanied by looting of the target
country)
A large percentage of students at universities laugh about the content of their "neo-classical" economics courses behind the
professor back and view them as just an exercise in hypocrisy necessary to get the diploma.
Milton Friedman now is viewed not as a respectable scholar but as a criminal who supported Pinochet and despicable intellectual
prostitute of the financial oligarchy.
What is interesting is that the current economic conditions as dismal as they are still much better in the USA than in other
societies in which people were converted into debt slaves and country are mercilessly looted by the local neoliberal oligarchy
and international financial institutions.
So it might be that not the absolute level that matters, but the level of and the speed of deterioration of the standard of
living and social security. As well as the general understanding that "the train left the station" and the situation will only
deteriorate.
A couple of relevant quotes from Pope Francis Evangelii Gaudium (2013):
55. One cause of this situation is found in our relationship with money, since we calmly accept its dominion over ourselves
and our societies. The current financial crisis can make us overlook the fact that it originated in a profound human crisis:
the denial of the primacy of the human person! We have created new idols. The worship of the ancient golden calf (cf. Ex 32:1-35)
has returned in a new and ruthless guise in the idolatry of money and the dictatorship of an impersonal economy lacking a truly
human purpose. The worldwide crisis affecting finance and the economy lays bare their imbalances and, above all, their lack
of real concern for human beings; man is reduced to one of his needs alone: consumption.
And another:
Human beings are themselves considered consumer goods to be used and then discarded. We have created a "disposable" culture
which is now spreading. It is no longer simply about exploitation and oppression, but something new.
Exclusion ultimately has to do with what it means to be a part of the society in which we live; those excluded are no longer
society's underside or its fringes or it's disenfranchised – they are no longer even a part of it.
The excluded are not the "exploited" but the outcast, the "leftovers".
In any case, it is indisputable that in the USA under neoliberalism in 40 years or so the standard of living of middle class
deteriorated and good job disappeared. In this sense, the opioids epidemics is just the tip of the iceberg.
Trump election is another manifestation of the same -- rejection by people of the neoliberal establishment -- the middle finger
to the ruling elite.
The USA is not an exception. In most countries, far-right is gaining strength politically, like in 1920th. And that's a dangerous
development which in the USA is strengthened by imperial thinking of the elite (aka "Full Spectrum Dominance") that decimates
the standard of living of the middle class due to the current level of military expenditures needed to maintain absolute military
superiority and the cost of permanent neo-colonial wars.
So the "Full Spectrum Dominance" might be a mousetrap from which the USA can't escape without major damage.
Still, as corrupt and despicable as the current neoliberal elite is (Biden, Hillary, Pelosi, Trump, and so on and forth), they are preferable
to neo-fascists.
" Second, Venezuela's central bankers were persuaded to pledge their oil reserves and all
assets of the state oil sector (including Citgo) as collateral for its foreign debt. This
meant that if Venezuela defaulted (or was forced into default by U.S. banks refusing to make
timely payment on its foreign debt), bondholders and U.S. oil majors would be in a legal
position to take possession of Venezuelan oil assets."
Solid proof that it was the empire who invented the practice of "debt trap" and is still
flourishing with it.
hunor, February 7, 2019 at 6:24 am GMT
Thank you ! Made it very clear. Perfect reflection of the " Values of Western Civilization ".
Reaching to grab the whole universe, with no holds barred . And never show of any interest for the " truth". They are not
even pretending anymore , awakening will be very painful for some.
Reuben Kaspate, February 7, 2019 at 2:38 pm GMT • 100 Words
Why would the U. S. based White-Protestant aristocracy care a hoot about the Brown-Catholic elites in the far off land?
They don't! The comprador aristocracy in question isn't what it seems It's the same group that plagues the Americans.
The rootless louts, whose only raison d'ê·tre is to milk everything in sight and then retire to coastal cities, i.e. San
Francisco, if you are a homosexual or New York City and State, if you are somewhat religious.
Poor Venezuelans don't stand a chance against the shysters!
While the US Midwest suffers with Arctic temperatures, winter tightens its icy stranglehold
on Europe, where a considerable number of people are struggling to keep their homes warm.
Statista's Niall McCarthy reports that, according to new data released by Eurostat ,
eight percent of the EU population couldn't afford to adequately heat
their homes in 2017. That still represents an improvement on recent years, particularly 2012
when it peaked at 11 percent.
Among member
states , the largest share of people who could not afford to properly heat their home was
recorded in Bulgaria at 36.5 percent. It was followed by Lithuania (28.9 percent) and Greece
(25.7 percent). The lowest figures were recorded in Luxembourg (1.9 percent), Finland (2.0
percent) and Sweden (2.1 percent).
López Obrador comes to the presidency as a man of the left, but the space for
maneuvering that he has for a left agenda is minimal. Mexico's economy, through geography and
trade agreements, is fused with that of the United States. More than 80 percent of Mexico's
exports go to its neighbor to the north, while Mexico's financial sector is almost entirely at
the mercy of Northern banks.
Already, López Obrador has had to deal with the leash from Northern banks that
sits tightly around Mexico's throat. On October 28, after the election, López
Obrador canceled the project to build a new airport for Mexico City. This new airport -- at a
cost of US$13.4 billion -- is seen as far too expensive (Istanbul has just inaugurated a new
airport, far bigger, for almost US$2 billion less). The peso fell, the Mexican stock market
fell, Fitch downgraded Mexico to "negative," and international investors frowned.
Then, in early November, legislators from López Obrador's party -- Morena --
proposed laws to limit bank fees. Mexico's stock market collapsed. It was the worst single-day
loss of the BMV stock index in seven years. The bankers sent López Obrador a
message: don't rock the boat.
Hastily, López Obrador's choice for the finance ministry -- Carlos
Urzúa -- scolded the legislators and winked to the banks. Urzúa, an
economist, has spent years consulting for the World Bank and other such agencies. It is hard to
find an economist these days who has not put his fingers into a consultancy for either the
World Bank or the International Monetary Fund (IMF). The economics profession has slid almost
wholesale into the pocket of international agencies that are committed to a very asphyxiating
version of public policy -- one that goes by the name of neoliberalism. It is a policy
framework that favors multinational corporations over workers, one that seeks to control
inflation rather than find ways to improve the livelihood of people. Finance is the religion,
while Money is God.
López Obrador and Urzúa do not have the political power to
challenge the order of things.
IMF Comes to Mexico City
Just a month before López Obrador takes office, the IMF sent a team to Mexico.
This team came to do a study based on the IMF charter's Article IV. Its
report set limits on what López Obrador's government can do. There is the
usual verbal concern expressed for inequality and poverty, but this is just window-dressing.
Nothing in the IMF staff statement indicated a policy that would tackle Mexico's grave problems
of poverty and inequality.
What the report details instead is a caution that López Obrador must not try to
invest funds in infrastructure that benefits the Mexican people -- investment, for instance, in
the sclerotic oil industry (Pemex). Mexico, an oil exporting state, imports oil because it has
limited refining capacity. López Obrador has said he wants Mexico to properly
develop the state-run oil firm Pemex. But the IMF staff statement says that "further
improvements of Pemex's financial situation are a prerequisite before new investments in
refining can be contemplated." López Obrador will be forced to make drastic cuts
in Pemex and to continue to drain the exchequer to import oil. No structural change is going to
be possible here without a negative IMF report, which would further encourage an investment
strike into Mexico.
Someone should encourage the IMF to stop sending staff teams into countries like Mexico.
Each report is identical to the previous one. Nothing seems to be learned by these teams. Years
ago, a senior IMF economist told me that when he arrived in a Central Asian country he knew
nothing of that country, he got to see nothing of it when he was there and he knew virtually
nothing when he drafted the Article IV review. All he did in the country was sit in one
air-conditioned room after another, listen to canned reports from nervous finance ministry
officials and then develop the report based on the IMF's same old recipe -- make cuts, target
welfare, privatize and make sure that the banks are happy.
Latitude for creative policy making is simply not available. The IMF comes to town to tell
new governments to behave. López Obrador and his cabinet will have to listen. Any
deviation from the IMF recipe will make investors flee and foreign investment dry up. It is so
easy these days to suffocate a country.
IMF Comes to Buenos Aires
For the past two decades, the IMF had found it difficult to dictate terms in Latin America.
From 2002 to 2007, left-leaning governments governed most of the region, where economic
activity was helped along by high commodity prices (including oil prices) and high remittance
payments.
Even Mexico's conservative President Felipe Calderón (2006-2012) had to lean
into the prevailing winds of Bolivarianism. In 2011, at the Community of Latin American and
Caribbean States, Calderón championed integration of Latin America -- something
that is least to be expected from a Mexican head of government, because Mexico is firmly
integrated into the United States.
The world financial crisis from 2007 hit Latin America hard. Calderón went to
Davos the next year and said that Latin America would be insulated from the crisis. Far from
it, Mexico had already begun to suffer job loss as the economy of its main trade partner -- the
United States -- contracted. An IMF
study found that Latin America lost 40 percent of its wealth in 2008. Public finances
contracted, and public investments declined. Inflation led to higher poverty rates and to
social instability.
A quick summary: Why did Latin America's economies suffer a crisis after 2007? It was not
because of the left-leaning governments and their policies. It was because of the
over-leveraged financial system, only one of whose asset bubbles -- U.S. housing prices --
collapsed. Deep integration into and reliance upon the U.S.-dominated financial system, and
poor diversification of their economies from the U.S. market, meant that as the U.S. banks
contracted, Latin America felt the pain. Over 80 percent of Argentina's private debt was in
dollars in 2002, while only a quarter of Argentina's economy was geared toward exports. This
was the fuel that was fated to burst into flame. It is this dollar reliance that could not be
corrected.
The exported economic problem had a political impact. It weakened the left-leaning
governments, even as these governments tried to ameliorate the crisis. Many of these
governments -- from Argentina to Brazil -- lost elections, while social turmoil struck others
-- from Venezuela to Nicaragua. It is in this context that the International Monetary Fund
returned to Latin America with a vengeance.
After two decades of relative absence, the IMF has now returned to Argentina (on which
please see this dossier from
Tricontinental: Institute for Social Research). Its Article IV staff
statement from December last year pointed to the problems of high borrowing in foreign
currency, a problem that was recognized in 2001-2002. But the power of international finance --
centered at Wall Street and the City of London -- prevented any easy pivot out of this problem.
It was easier to demand cuts from the already meager incomes of ordinary people.
In 1994, Mexico suffered from what became known as the "tequila crisis," as the peso
collapsed when international capital fled the country. The government would not place capital
controls to protect the peso against currency speculators. The "tequila effect" then spread to
South America. No one was prepared to stand up to the dollar and the speculators. From the
forests of Chiapas, Subcomandante Marcos of the Zapatistas spoke out in favor of the pockets of
the forgotten, the people who did not cause the crisis but who would bear the cost of these
financial shenanigans. Once more, with help from the IMF, the pockets of the forgotten from
Argentina to Mexico will suffer so that finance is left intact.
This article was produced by Globetrotter , a project of the
Independent Media Institute.
Naomi Klein's book "Shock Doctrine", encapsulated by this post as "global elites used periods of crisis around the world to force
damaging neoliberal policies derived from the Chicago School and Washington Consensus upon unhappy populations that suffered greatly
as a result."
Notable quotes:
"... Eventually, Poland emerged as the major US agent of influence within the EU (along with GB) with the adamant anti-Russian stance. Which taking into account the real state of Polish manufacturing deprived of the major market is very questionable. Later by joining sanctions, they lost Russian agricultural market (including all apple market in which they have a prominent position). ..."
"... Gowan's book, Global Gamble, is also good on the details of shock therapy in the former Warsaw Pact nations. One key problem was that shock therapy partly rested on he assumption that western European buyers would want to invest in modernizing plant and equipment in industries they acquired, but it quickly turned out that the German and other western buyers were really interested only in acquiring new MARKETS for their own products. ..."
"... I remember a couple of paragraphs about Poland in my Economics 101 course, some 20 years ago. Was it in in Mankiw's book? or Lipsey-Chrystal? I do not remember anymore. One of those vicious neoliberal propaganda mouthpieces, anyway. The textbook pitched Poland's success story against Russia's abject failure, claiming that the former had dismantled and shut down all its inefficient state-run companies, while the latter still kept its unprofitable heavy industry on life support. ..."
"... Somehow neoclassical economists always distort history into a cartoonish parody that confirms their models. ..."
"... If you looked carefully, you could still find older books, barely touched, that touted Albania as a neoliberal success story along the same lines as Poland. Albania almost collapsed in civil war in 1998. ..."
"... The author's criticism doesn't really address Klein's central points at all, which would be that the crisis was used as leverage to ram through otherwise politically unpalatable change, and that a great deal of the constraint forcing that was provided by actors both undemocratic and external. He seems to be of the school that regards such niceties as beside the point, as long as various macroaggregates eventually rose. ..."
"... Any discussion of the Polish economy that completely ignores this massive level of economic outmigration, and it's continued rise among the young, misses a great deal. In a vibrant economy, it seems unlikely that so many educated Poles would find, for example, lower tier jobs in Britain to be their best path forward. ..."
"... Out-migration is a huge factor in eastern and central Europe and without it, the picture would look entirely different. The Baltics, Bulgaria and Romania are even more affected. ..."
"... Inter-war Poland is celebrated a lot in Poland these days, conveniently ignoring the facts it was really a totalitarian state – when Czechoslovakia was Muniched in 1938, Poles (and Hugarians) were quick to grab bits of territory right after that. ..."
"... Poland has taken around a million Ukrainians over the past ten years so while many Poles are emigrating to Europe, they are being replaced by Ukrainians, who are ethnically and linguistically fairly similar to Poles. ..."
The argument largely seems to hold for the original poster boy example in Chile with the Pinochet coup against the socialist Allende
regime. A military coup replaced a democratically government. Whiole Chlle was experiencing a serious inflation, it was not in a
full-blown economic collapse. The coup was supported by US leaders Nixon and Kissinger, who saw themselves preventing the emergence
of pro-Soviet regime resembling Castro's Cuba. Thousands were killed, and a sweeping set of laisssez faire policies were imposed
with the active participation of "Chicago Boys" associated with Milton Friedman. In fact, aside from bringing down inflation these
rreforms did not initially improve economic performance, even as foreign capital flowed in, especially into the copper industry,
although the core of that industry remained nationalized. After several years the Chicago Boys were sent away and more moderate policies,
including a reimposition of controls on foreign capital flows, the economy did grow quite rapidly. But this left a deeply unequal
income distribution in place, which would largely remain the case even after Pinochet was removed from power and parliamentary democracy
returned.
This scenario was argued to happen in many other narions, especially those in the former Sovit bloc as the soviet Union disintegrated
and its successor states and the former members of the Soviet bloc in the CMEA and Warsaw Pact also moved to some sort of market
capitalism imposed from outside with policies funded by the IMF and following the Washington Consensus. Although he has since expressed
regret for this role in this, a key player linking what was done in several Latin American nations and what went down after 1989
in Eastern and Central Europe was Jeffrey Sachs. Klein's discussion especially of what went down in Russia also looks pretty sound
by and large, wtthout dragging through the details, although in these cases the political shift was from dictatorships run by Communist
parties dominated out of Moscow to at least somewhat more democratic governments, although not in all of the former Soviet republics
such as in Central Asia and with many of these later backsliding towards more authoritarian governments later. In Russia and in many
oothers large numbers of people were thrown into poverty from which they have not recovered. Klein has also extended this argument
to other nations, including South Africa after the end of apartheid.
likbez
The level of the naivety of Barkley Rosser is astounding.
Poland was a political project, the showcase for the neoliberal project in Eastern Europe and the USSR. EU was pressed to provide
large subsidies, and that marionette complied. The commenter ilpalazzo (above) is right that there has been " a tremendous development
in real estate and infrastructure mostly funded by the EU that has been a serious engine of growth." Like in Baltics and Ukraine,
German, French, Swedish and other Western buyers were most interested in opening market for their products and getting rid of
local and xUSSR competitors (and this supported and promoted Russophobia). With very few exceptions. University education system
also was partially destroyed, but still fared better than most manufacturing industries.
I remember talking to one of the Polish professors of economics when I was in Poland around 1992. He said that no matter how
things will develop, the Polish economy will never be allowed to fail as the USA is interested in propelling it at all costs.
That means that there was no CIA activity to undermine the financial system, deindustrialize the country, and possibly to partition
the county like it was in Russia with Harvard mafia (Summers, Shleifer, etc.)
Still, they lost quite a bit of manufacturing: for example all shipbuilding, which is ironic as Lech Wałęsa and Solidarity
emerged in this industry.
Eventually, Poland emerged as the major US agent of influence within the EU (along with GB) with the adamant anti-Russian
stance. Which taking into account the real state of Polish manufacturing deprived of the major market is very questionable. Later
by joining sanctions, they lost Russian agricultural market (including all apple market in which they have a prominent position).
But they have a large gas pipeline on their territory, so I suspect that like Ukraine they make a lot of money via transit
fees simply due to geographic. So they parochially live off rent -- that why they bark so much at North Stream 2.
Polish elite is a real horror show, almost beyond redemption, and not only in economics. I do not remember, but I think it
was Churchill who said " Poland is a greedy hyena of Europe." This is as true now as it was before WWII.
Now they are propelled by cheap labor from Ukraine, which they helped to destroy (along with Sweden and Germany)
My post seem to have vanished into oblivion so I'm pasting from the clipboard.
I am a Pole and have been a daily reader here since 2008. I hope a better versed compatriot will come out of the closet and
give a better picture (I know there are a few).
Let's just say the shock was pretty bad. In terms of amount of human suffering the worst was dissolving state owned farms.
Hundreds of thousands of people were just let go without any help, although many farms were profitable and others could be restructured
or converted into collectives etc. I live in a small town where there was a huge state farm and I can see former employees started
to recover and get by just recently judging by the looks of their dwellings.
Most of the manufacturing and heavy industry was sold off and extinguished. We used to have pretty decent capital producing
capabilities like tooling etc. Not a trace of that now. There is a lot being manufactured now here but mostly simple components
for german industry to assemble.
Pension system was thoroughly looted by you know who and is a ticking time bomb. Most of it was quasi privatized – that is
managed by western companies but still part of the state system. There were supposed to be individual saving accounts managed
by sophisticated investment specialists but the money ended up invested in state bonds, issued to subsidize it. Managing fee 7
– 10 percent charge on every payment into the system, regardless of performance, anyone? It was a heist of the century.
The ticking time bomb is because a large part of young people working now are working on non – permanent contracts that don't
pay benefits. These people won't have any pension at all and there are a lot of them.
Healthcare is single payer fund but heavily underfunded. Private practice and hospitals are allowed and skim most profitable
procedures leaving the rest to public fund. There are unrealistic limits on number of procedures so if you need to see a specialist
in July or later prepare to pay cash or wait till January.
Municipal service companies, at least the most lucrative ones have ben sold off to foreign investment funds. A few of our cities'
municipal companies, like central heating or energy have been sold off to german municipal companies (!). State telecom has been
sold off to french state telecom (and one of the biggest and most famous fortunes made).
Local printed press is 90% german corps owned.
This is a map of state rail company railways in 1988 and 2009 . It
has been a meme here for some time. It is true. Cancelled lines are the subsidized ones workers relied on to get to job. I closely
know a thousand years old town that had rail built in 1860 by germans and liquidated right in 1990. The populace is now halved,
all young emigrated, businesses dead. There have been a huge investment in freeways and other kind of roads so every one has to
own a car to get to her job. Most cars are used 10+ year old german imports. Polish car mechanic and body shops are the best in
the world specialists of german automotive produce.
I live in a small contry town that was a home to a wealthy aristocrat. There is a beautiful baroque palace and huge park, the
complex is literally a third part of town. After the war it was nationalized, there were sporting facilities built in the park
for locals and school pupils to use. The palace was re-purposed as medical facility and office complex for state farm management.
In the nineties the whole thing was given back to aristocrat descendants – a shady bunch hiding in Argentina AFAIR. They couldn't
afford to keep it so they sold it to a nouveau – riche real estate developer. He fenced the whole thing off and refurbished into
a sort of conference complex – it is underway and still not clear what's gonna happen with it. The effect is that a third of my
town that used to be public space is fenced off and off limits now.
To conclude, there has been a tremendous development in real estate and infrastructure mostly funded by the EU that has been
a serious engine of growth. Lot of people got mortgage and financed homes or flats and there has been a whole industry created
around it. A few crown jewel companies (copper mining, petroleum and other chemistry) are state owned. But most of the sophisticated
furnishings used in real estate are german made (there is german made nat gas furnace in 95% of newly built homes) etc. Two million
young people emigrated to work mostly to UK and Ireland. I'd lived in Dublin for a year in 2003 and there were Chinese people
as salespersons in groceries and seven – elevens everywhere, now there are Poles instead.
Recommended reading about the transformation years dealing is this book:
Thanks for this. Gowan's book, Global Gamble, is also good on the details of shock therapy in the former Warsaw Pact nations.
One key problem was that shock therapy partly rested on he assumption that western European buyers would want to invest in modernizing
plant and equipment in industries they acquired, but it quickly turned out that the German and other western buyers were really
interested only in acquiring new MARKETS for their own products.
And in agriculture, they both insisted on the elimination of subsidies within the eastern nations, and proceeded to use the
area as a dumping ground for their own (often subsidized) agricultural surpluses.
All this gets back, in my minuscule view, to failure to have a decent answer to one little question:
What kind of political economy do "we, the mopes" want to live within?
And related to that, what steps can and must "we, the mopes" take to get to that hopefully wiser, more decent, more homeostatic
and sustainable, political economy?
And it likely doesn't matter for us old folks (obligatory blast at Boomers as cause of all problems and distresses, dismissing
the roots and branches of "civilization," current patterns of consumption, and millennia of Progress), given what is "baked in"
and the current distribution of weatlhandpower. But maybe "we, the mopes" can at least go down fighting. Gilets Jaunes, 150 million
Indians, all that
But without an answer to the first question, though, not much chance of "better," is there? Except maybe locally, for the tiny
set of us mopes who know how to do community and commensalism and some other "C" words
"We, the mopes" could make some important and effective changes. Enough of us, and soon enough, to avoid or mitigate the Jackpot?
Thanks very much for this. Very graphic. So, if you would, could you explain who the Law and Justice Party is, and why they
won the election, and what exactly are they doing to make themselves popular? Are they in fact enacting certain social programs
that we can read about or are they primarily relying on something else, like mainly Catholic traditionalism, for their political
power?
I remember a couple of paragraphs about Poland in my Economics 101 course, some 20 years ago. Was it in in Mankiw's book?
or Lipsey-Chrystal? I do not remember anymore. One of those vicious neoliberal propaganda mouthpieces, anyway. The textbook pitched
Poland's success story against Russia's abject failure, claiming that the former had dismantled and shut down all its inefficient
state-run companies, while the latter still kept its unprofitable heavy industry on life support.
It is unsurprising to read that Poland followed a more nuanced approach. Somehow neoclassical economists always distort
history into a cartoonish parody that confirms their models.
That was in the early 2000s. The university was then brand new and was still filling the shelves of the library. If you
looked carefully, you could still find older books, barely touched, that touted Albania as a neoliberal success story along the
same lines as Poland. Albania almost collapsed in civil war in 1998.
Klein at least provided footnotes, and sources for her claims. Which are conspicuously absent from this piece.
The World Bank, (World Development Indicators, 2006), one of Klein's sources, has a nationwide poverty rate only for 1993,
and has it at 23% at that point, or between 2.3 times and more than 4 time the most common estimate he cites under the ancient
regime.
The same source has unemployment averaging 19.9% in 1990-92, and 19% in 2000-2004.
As to the later poverty rate, Klein's source is Przemyslaw Wielgosz, then editor of the Polish edition of le Monde Diplomatique,
who gives this: " Poles living below the 'social minimum' (defined as a living standard of £130 (192,4 EUR) per person and £297
(440,4 EUR) for a three person family per month) affecting 15% of the population in 1989 to 47% in 1996, and 59% in 2003." but
whence he obtains these figures he does not say. Given that it falls in a period when unemployment was pushing 20% for a prolonged
period, and that both the EU's subsidies and outmigration to the EU as an escape valve only start to kick in in 2003, the figure
seems not wildly implausible.
The author's criticism doesn't really address Klein's central points at all, which would be that the crisis was used as
leverage to ram through otherwise politically unpalatable change, and that a great deal of the constraint forcing that was provided
by actors both undemocratic and external. He seems to be of the school that regards such niceties as beside the point, as long
as various macroaggregates eventually rose.
The contrast between what was done, and what Solidarnosc had claimed to be all about when in opposition is incredibly striking,
basically the difference between libertarian Communism and uber Dirigisme style capitalism.
Any discussion of the Polish economy that completely ignores this massive level of economic outmigration, and it's continued
rise among the young, misses a great deal. In a vibrant economy, it seems unlikely that so many educated Poles would find, for
example, lower tier jobs in Britain to be their best path forward.
Yes, your unemployment and poverty rates are lower if a significant fraction of the population works elsewhere in the EU, and
reatriates the money. Though the pattern may cause a few other problems. (while many nations like to export their unemployment,
not everybody wants to import it.)
Out-migration is a huge factor in eastern and central Europe and without it, the picture would look entirely different.
The Baltics, Bulgaria and Romania are even more affected.
The migration from Poland does not have only economic reasons. A lot of Poles migrate because they find the polish society
(especially small towns and rural) very stiffling.
A friend of mine left Poland the moment she got her MSc – literally, the same day she was on a bus to Germany. She's now a
sucessfull woman, director level at a large consultancy. Yet her father calls her "old spinster" (this is the polite version),
as she wasn't maried by 30, and she basically avoids going to Poland.
She says she could never be as sucessfull in Poland, being a woman, and not being keen on marrying. I've heard similar stories
from young Poles, not just women.
Inter-war Poland is celebrated a lot in Poland these days, conveniently ignoring the facts it was really a totalitarian
state – when Czechoslovakia was Muniched in 1938, Poles (and Hugarians) were quick to grab bits of territory right after that.
Kasia, January 10, 2019 at 5:17 pm
Poland has taken around a million Ukrainians over the past ten years so while many Poles are emigrating to Europe, they
are being replaced by Ukrainians, who are ethnically and linguistically fairly similar to Poles.
So Poland is proof that nationalist, populist policies can indeed work. Poland has had to taken rough measures with our judicial
system and media to ensure globalist forces do not undermine our successes. No one, I mean no one, in Poland mouths the words,
"diversity is our strength". Internationalist, liberal minded people who are so susceptible to globalist propaganda, are generally
the ones leaving the nation. Indigenous Western Europeans who are suffering the joys of cultural enrichment and vibrant diversity
are starting to buy property in Eastern Europe - more Hungary than Poland - but as the globalists push even more multiculturalism
and continue to impoverish indigenous Europeans, Eastern Europe will become a shining beacon on the hill free of many of the evils
of globalisation.
CIA democrats of which Obama is a prominent example (and Hillary is another one) are are Werewolfs, very dangerous political beasts,
probably more dangerous to the world then Republicans like George W Bush. But in case of Ukraine, it was easily pushed into Baltic orbit,
because it has all the preconditions for that. So Nuland has an relatively easy, albeit dirty task. Also all this
probably that "in five years we will be living like French" was pretty effective. Now the population faces
consequences of its own stupidity. This is just neoliberal business as usual or neocolonialism.
Notable quotes:
"... populists on the right ..."
"... hired members of Ukraine's two racist-fascist, or nazi, political parties ..."
"... Disclaimer: No Russian, living or dead, had anything to do with the posting of this proudly home-grown comment ..."
Let's recap what Obama's coup
in Ukraine has led to shall we? Maybe installing and blatantly backing Neo Nazis in Ukraine might have something to do with the
rise of " populists on the right " that is spreading through Europe and this country, Hillary.
America's criminal 'news' media never even reported the coup, nor that in 2011 the Obama regime began
planning for
a coup in Ukraine . And that by 1 March 2013 they started organizing it
inside the
U.S. Embassy there . And that they hired members of Ukraine's two racist-fascist, or nazi, political parties , Right
Sector and Svoboda (which latter had been called the Social Nationalist Party of Ukraine until the CIA advised them to change
it to Freedom Party, or "Svoboda" instead). And that in February 2014 they did it (and here's the
4 February 2014 phone call instructing the U.S. Ambassador
whom to place in charge of the new regime when the coup will be completed), under the cover of authentic anti-corruption demonstrations
that the Embassy organized on the Maidan Square in Kiev, demonstrations that the criminal U.S. 'news' media misrepresented as
'democracy demonstrations ,' though Ukraine already had democracy (but still lots of corruption, even more than today's U.S. does,
and the pontificating Obama said he was trying to end Ukraine's corruption -- which instead actually soared after his coup there).
But wait there's more .... Remember
that caravan of refugees making their way through Mexico? Guess where a number of them came from? Honduras. Yep. Another coup that
happened during Obama's and Hillary's tenure.
In a recent op-ed in The Washington Post, former Secretary of State Hillary Clinton
used a review of Henry Kissinger's latest book, "World Order ," to lay out her vision for "sustaining America's leadership
in the world." In the midst of numerous global crises, she called for return to a foreign policy with purpose, strategy and pragmatism.
She also highlighted some of these policy choices in her memoir "Hard Choices" and how they contributed to the challenges that
Barack Obama's administration now faces.
**
The chapter on Latin America, particularly the section on Honduras, a major source of the child migrants currently pouring into
the United States, has gone largely unnoticed. In letters to Clinton and her successor, John Kerry, more than 100 members of Congress
have repeatedly warned about the deteriorating security situation in Honduras, especially since the 2009 military coup that ousted
the country's democratically elected President Manuel Zelaya. As Honduran scholar Dana Frank points out in Foreign Affairs, the
U.S.-backed post-coup government "rewarded coup loyalists with top ministries," opening the door for further "violence and anarchy."
The homicide rate in Honduras, already the highest in the world, increased by 50 percent from 2008 to 2011; political repression,
the murder of opposition political candidates, peasant organizers and LGBT activists increased and continue to this day. Femicides
skyrocketed. The violence and insecurity were exacerbated by a generalized institutional collapse. Drug-related violence has worsened
amid allegations of rampant corruption in Honduras' police and government. While the gangs are responsible for much of the violence,
Honduran security forces have engaged in a wave of killings and other human rights crimes with impunity.
Despite this, however, both under Clinton and Kerry, the State Department's response to the violence and military and police
impunity has largely been silence, along with continued U.S. aid to Honduran security forces. In "Hard Choices," Clinton describes
her role in the aftermath of the coup that brought about this dire situation. Her firsthand account is significant both for the
confession of an important truth and for a crucial false testimony.
First, the confession: Clinton admits that she used the power of her office to make sure that Zelaya would not return to office.
"In the subsequent days [after the coup] I spoke with my counterparts around the hemisphere, including Secretary [Patricia] Espinosa
in Mexico," Clinton writes. "We strategized on a plan to restore order in Honduras and ensure that free and fair elections could
be held quickly and legitimately, which would render the question of Zelaya moot."
Clinton's position on Latin America in her bid for the presidency is another example of how the far right exerts disproportionate
influence on US foreign policy in the hemisphere. up 24 users have voted. --
Disclaimer: No Russian, living or dead, had anything to do with the posting of this proudly home-grown comment
@snoopydawg@snoopydawg
Obama, Hillary and the rest of that administration knew it was a coup because that was the goal.
"..4. (C) In our view, none of the above arguments has any substantive validity under the Honduran constitution. Some are outright
false. Others are mere supposition or ex-post rationalizations of a patently illegal act. Essentially: --
the military had no authority to remove Zelaya from the country;
-- Congress has no constitutional authority to remove a Honduran president;
-- Congress and the judiciary removed Zelaya on the basis of a hasty, ad-hoc, extralegal, secret, 48-hour process;
-- the purported "resignation" letter was a fabrication and was not even the basis for Congress's action of June 28; and
-- Zelaya's arrest and forced removal from the country violated multiple constitutional guarantees, including the prohibition
on expatriation, presumption of innocence and right to due process. " https://www.wikileaks.org/plusd/cables/09TEGUCIGALPA645_a.html
That evil woman thinks she has the right to preach to others about how to handle the very fallout from the horrific disasters
that she HERself created? Hillary, look in the mirror, you evil woman.
Clinton said rightwing populists in the west met "a psychological as much as political yearning to be told what to do, and
where to go, and how to live and have their press basically stifled and so be given one version of reality.
" The whole American system was designed so that you would eliminate the threat from a strong, authoritarian king or
other leader and maybe people are just tired of it. They don't want that much responsibility and freedom. They want to be told
what to do and where to go and how to live and only given one version of reality.
"I don't know why at this moment that is so attractive to people, but it's a serious threat to our freedom and our democratic
institutions, and it goes very deep and very far and we've got to do a better job of shining a light on it and trying to combat
it."
This arrogance of looking down on the populace is very part and parcel of the neoliberal attitude of the ruling class takes
to the rest of us peons. They created this unreality for the American people and have suppressed our right to know what is really
happening in the world. Obama destroyed the Occupy Movement with violent police attacks and kettling. And then disgustingly, Clinton
comes out with her hubristic victim blaming.
The Clintons are nearly single handedly responsible for much of the destruction of the American middle class and the repression
of poor and black people under Bill and the violent destruction of many countries under Hillary. And yet neither Clinton is willing
to own up for all the human misery that they have caused wherever they go. Unfortunately, the one place they refuse to go is just
away forever.
The belief that HRC & her circle are principled & progressive is just as fictitious as the belief that they lost to a reality
TV host because of stolen emails, social media trolls, & a (fictitious) conspiracy between the reality TV host & the Kremlin:
https://t.co/iyTC1M6uws
Clinton says Europe should make clear that "we are not going to be able to continue provide refuge & support." Isn't this
the attitude we denounce Trump for? Speaking of irony, Clinton's regime wars in Libya & Syria (& Iraq, indirectly) fueled the
migration she wants to stop. https://t.co/CIkkGRRKNd
This ego-maniac sees the world's problems - which she had a huge hand in creating - only through the lens of her electability.
Apparently, the only problems the world has are the one's that keep her from sitting in the Oval Office. Everything else is
fine. She is deplorable.
That evil woman thinks she has the right to preach to others about how to handle the very fallout from the horrific disasters
that she HERself created? Hillary, look in the mirror, you evil woman.
Clinton said rightwing populists in the west met "a psychological as much as political yearning to be told what to do,
and where to go, and how to live and have their press basically stifled and so be given one version of reality.
" The whole American system was designed so that you would eliminate the threat from a strong, authoritarian king
or other leader and maybe people are just tired of it. They don't want that much responsibility and freedom. They want to
be told what to do and where to go and how to live and only given one version of reality.
"I don't know why at this moment that is so attractive to people, but it's a serious threat to our freedom and our democratic
institutions, and it goes very deep and very far and we've got to do a better job of shining a light on it and trying to
combat it."
This arrogance of looking down on the populace is very part and parcel of the neoliberal attitude of the ruling class takes
to the rest of us peons. They created this unreality for the American people and have suppressed our right to know what is
really happening in the world. Obama destroyed the Occupy Movement with violent police attacks and kettling. And then disgustingly,
Clinton comes out with her hubristic victim blaming.
The Clintons are nearly single handedly responsible for much of the destruction of the American middle class and the repression
of poor and black people under Bill and the violent destruction of many countries under Hillary. And yet neither Clinton is
willing to own up for all the human misery that they have caused wherever they go. Unfortunately, the one place they refuse
to go is just away forever.
@gulfgal98 Because they just HAVE to get a rich, far-right, patriarchal white woman elected at any cost for the sake
of 'making history'. If these idiots really wanted to make history, they'd work like hell to put someone in charge who actually
had the balls to hang the pigs and their collaborators for their crimes.
The belief that HRC & her circle are principled & progressive is just as fictitious as the belief that they lost to a
reality TV host because of stolen emails, social media trolls, & a (fictitious) conspiracy between the reality TV host &
the Kremlin: https://t.co/iyTC1M6uws
Clinton says Europe should make clear that "we are not going to be able to continue provide refuge & support." Isn't
this the attitude we denounce Trump for? Speaking of irony, Clinton's regime wars in Libya & Syria (& Iraq, indirectly)
fueled the migration she wants to stop. https://t.co/CIkkGRRKNd
This ego-maniac sees the world's problems - which she had a huge hand in creating - only through the lens of her electability.
Apparently, the only problems the world has are the one's that keep her from sitting in the Oval Office. Everything else
is fine. She is deplorable.
A new collection of essays, edited by former Congresswoman Cynthia McKinney, clearly shows
that it is the U.S. that is largely responsible for the poverty and suffering in these very
nations, says Robert Fantina.
By Robert Fantina
In two years, the world has become
accustomed to being shocked by the words and actions of United States President Donald Trump.
In January of this year, he again showed his lack of diplomacy, tack and common decency, when
he referred to many poorer countries as "sh*ithole countries", asking, "Why do we want all
these people from sh*thole countries coming here?" Former member of the House of
Representatives Cynthia McKinney, in the new book she has edited, How the US Creates 'Sh*thole' Countries ,
(Clarity Press) has gathered a collection of essays, including one of her own, that clearly
shows that it is the U.S. that is largely responsible for the poverty and suffering in these
very nations.
The first series of essays describes U.S. foreign policy, and its true motives. In the
essay, The End of Washington's 'Wars on the Cheap' , The Saker sums up U.S. foreign
policy as follows: "Here's the template for typical Empire action: find some weak country,
subvert it, accuse it of human right violations, slap economic sanctions, trigger riots and
intervene militarily in 'defense' of 'democracy', 'freedom' and 'self-determination' (or some
other combo of equally pious and meaningless concepts)." The hypocrisy of such a policy is
obvious. A weak and vulnerable nation is victimized by a far more powerful one. The U.S. has
done this countless times in its history, and there appears to be no appetite in the government
to change.
This introduction and explanation of U.S. foreign policy is followed by essays on some, but
certainly not all, of the countries that have been victimized by the United States, usually
following this template. As McKinney says in her essay, Somalia: Is Somalia the U.S.
Template for All of Africa , " while mouthing freedom, democracy, and liberty, the United
States has denied these very aspirations to others, especially when it inconvenienced the US or
its allies. In Mozambique and Angola, the US stood with Portugal until it was the Portuguese
people, themselves, who threw off their government and voted in a socialist government that
vowed to free Portugal of its colonies."
In the essay, How the U.S. Perpetuates the Palestinian Tragedy', Sami Al-Arian
writes:
" It might be understandable, if detestable, for Israel and its Zionist defenders to
circulate false characterizations of history and myths to advance their political agenda. But
it is incomprehensible, indeed reprehensible, for those who claim to advocate the rule of
law, believe in the principle of self-determination, and call for freedom and justice to fall
for this propaganda or to become its willing accomplices. In following much of American
political leaders' rhetoric or media coverage of the conflict, one is struck by the lack of
historical context, the deliberate disregard of empirical facts, and the contempt for
established legal constructs and precedents."
The U.S. leads in these distortions, with its
officials proclaiming, each time that Israel bombs Gaza, that "Israel has a right to defend
itself". There is hardly mention of the brutal, illegal occupation and blockade; never a
discussion of the fact that Palestine has no army, navy or air force, and Israel's military is
one of the world's most powerful thanks to the U.S. It is never stated that international law
allows an occupied people to resist the occupation in any way possible, including armed
struggle. The countless United Nations resolutions condemning Israeli actions in Palestine are
ignored by U.S. officials.
Once again, U.S. hypocrisy is on very public display.
The third section of this informative book describes the United States' mostly-successful
efforts to camouflage its vile intentions and international crimes. Christopher Black, in his
essay Western Imperialism and the Use of Propaganda", clearly articulates how this is
done:
" The primary concern they [U.S. government officials] have, in order to preserve their
control, is for the preservation of the new feudal mythology that they have created: that the
world is a dangerous place, that they are the protectors, that the danger is omnipresent,
eternal, and omnidirectional, comes from without, and comes from within. The mythology is
constructed and presented through all media; journals, films, television, radio, music,
advertising, books, the internet in all its variety. All available information systems are used
to create and maintain scenarios and dramas to convince the people that they, the protectors,
are the good and all others are the bad. We are bombarded with this message incessantly."
Our memories are short, indeed, if we have forgotten both President George W. Bush and his
Secretary of State, Colin Powell, telling the world from the United Nations the blatant lie
that Iraq had weapons of mass destruction, threatening civilization. We are not paying
attention if we are unaware of the many innuendos given of the 'dangers' of all Muslims. Yes,
the government fosters fear, proclaiming subtly and not so subtly that there is danger
everywhere, and it is the role of the mighty United States to protect the world, whether or not
such protection is wanted or needed.
Lastly, the U.S. Itself can be described as a 'sh*thole' country. Its many violations of
international law, and crimes against humanity, are summarized by Richard Falk, in his essay
The Sh*thole Phenomenon at Home and Abroad:
" This kind of nationalist pride covered up and blindsided crimes of the greatest severity
that were being committed from the time of the earliest settlements: genocide against native
Americans, reliance on the barbarism of slavery to facilitate profitable cotton production
and the supposedly genteel life style of the Southern plantations. This unflattering national
picture should be enlarged to include the exploitation of the resources and good will of
peoples throughout Latin America, who, once freed from Spanish colonial rule, quickly found
themselves victimized by American gunboat diplomacy that paved the way for American investors
or joined in crushing those bold and brave enough to engage in national resistance against
the abuse of their homelands."
The final essay is the Report of the Special Rapporteur on Extreme Poverty and Human
Rights on his Mission to the United States of America, authored by Philip Alston. While
Trump decries "sh*thole" countries, the conditions that the U.S. put those countries in are not
unknown in the U.S. A few facts from Alston's report will suffice:
The U.S.'s " immense
wealth and expertise stand in shocking contrast with the conditions in which vast numbers of
its citizens live. About 40 million live in poverty, 18.5 million in extreme poverty, and 5.3
million live in Third World conditions of absolute poverty. It has the highest youth poverty
rate in the Organization for Economic Cooperation and Development (OECD), and the highest
infant mortality rates among comparable OECD States. Its citizens live shorter and sicker lives
compared to those living in all other rich democracies, eradicable tropical diseases are
increasingly prevalent, and it has the world's highest incarceration rate, one of the lowest
levels of voter registrations in among OECD countries and the highest obesity levels in the
developed world." " The United States has the highest rate of income inequality among Western
countries. The $1.5 trillion in tax cuts in December 2017 overwhelmingly benefited the wealthy
and worsened inequality." " For almost five decades the overall policy response has been
neglectful at best, but the policies pursued over the past year seem deliberately designed to
remove basic protections from the poorest, punish those who are not in employment and make even
basic health care into a privilege to be earned rather than a right of citizenship."
The information in these essays is all rigorously documented with extensive footnotes. The
writing is clear and the facts are presented in a concise manner that is highly beneficial for
the average reader or academic.
For anyone who questions U.S. policies, at home or abroad, and who has perhaps become more
aware of such issues since Trump's election,
"... Alberto Nisman and Argentina's History of Assassinations and Suspicious Suicides ..."
"... Whether the crusading prosecutor's death is found to be a suicide or homicide, many Argentines probably won't believe it. The past has taught them to always look for the sinister explanation. ..."
"... Decades after the military murdered thousands, Mothers of Plaza de Mayo warn that the current era of alternative facts poses a new threat ..."
"... They'll gain the world but lose their souls They'll gain the world but lose their souls ..."
"... Don't believe politicians and thieves They want our people on their bended knees Pirates and robbers, liars and thieves You come like the wolf but dressed like the sheep ..."
"... If you go to Lagos what you find, vampires If you go to Kinshasa what you find, vampires If you go to Darfur what you find, vampires If you go to Malabo what you find, vampires ..."
"... Lies and theft Guns and debt Life and death IMF ..."
"... When the bank man comes to your door Better know you'll always be poor Bank loans and policies They can't make our people free ..."
"... You live on the blood of my people Everyone knows you've come to steal You come like the thieves in the night The whole world is ready to fight ..."
SHARMINI PERIES: It's The Real News Network. I'm Sharmini Peries, coming to you from
Baltimore.
For several months now. Argentines have been taking to the streets to protest against
neoliberal austerity measures of President Mauricio Macri. The most recent such protest took
place on July 9 on Argentine's Independence Day. There has also been three general strikes thus
far. In the two years since he took office, President Macri has laid off as many as 76,000
public sector workers, and slashed gas and water and electricity subsidies, leading to a
tenfold increase in prices, in some cases.
Now, the government argues that all of this is necessary in order to stem inflation, and the
decline of the currency's value. Last month, Macri received the backing of the International
Monetary Fund. The IMF agreed to provide Argentina with a $50 billion loan, one of the largest
in IMF history. In exchange, the Macri government will deepen the austerity measures already in
place.
Joining me now to analyze Argentina's economic situation and its new IMF loan is Michael
Hudson. Michael is a distinguished research professor of economics at the University of
Missouri Kansas City. Welcome back, Michael.
MICHAEL HUDSON: Good to be back, Sharmini.
SHARMINI PERIES: Michael, why is it that Argentina needs such a huge credit line from the
IMF?
MICHAEL HUDSON: For precisely the reason that you explained. The neoliberal policy has its
aim rolling back any of the wage increases in employment that Mrs. Kirschner, the former
president, implied, as part of the class war. So in order to shrink the economy, you have to
basically cut back business, cut back employment. And so the purpose of the IMF loan was to
enable the wealthy Argentinians, the oligarchy that's run the country for a century, to get all
its money out and run. So like almost all IMF loans, the purpose is to subsidize capital flight
out of Argentina so that the wealthy Argentinians can take their money and run before the
currency collapses.
The aim of the loan is to indebt Argentina so much that its currency will continue to go
down and down and down, essentially wrecking the economy. That's what the IMF does. That's its
business plan. It makes a loan to subsidize capital flight, emptying out the economy of cash,
leading the currency to collapse, as it is recently collapsed. As soon as the $50 billion was
expended, or wasted, in letting wealthy Argentinians take their pesos, convert them into
dollars, move them offshore to the United States, to England, to the Dutch West Indies, and
offshore banking centers. Then they let the currency collapse so that the IMF model, which it's
announced for the last 50 years, the model is if you can depreciate a currency what you're
really lowering is the price of labor. Because raw materials and capital have an international
price. But when a currency goes down it makes imports much more expensive, and that causes a
price umbrella over the cost of living; that labor has to pay the equivalent international
price for grain, for food, for oil and gas, for everything else.
And so what Macri has done is they agree with the IMF to wage class war with a vengeance,
devaluation, leaving Argentina so hopelessly indebted that it can't possibly repay the IMF
loan. So what we're seeing is a replay of what happened in 2001.
SHARMINI PERIES: Exactly. I was going to ask you, now, that was only 17 years ago, Michael.
Argentinians do have memory here. They know what happened. They experienced it as well. Now,
that was back in 2001 during the economic crisis when unemployment had increased so
dramatically. That country went through a series of presidents and went through a series of
crises. And we saw images of, you know, very similar to what we had seen in, in Greece not too
long ago. Now, tell us more about that history. What exactly happened during that crisis, and
then eventually how did Nestor Kirschner relieve the economy and come out of that crisis?
MICHAEL HUDSON: Well, the IMF staff said, don't make the loan. There's no possible way
Argentina can pay the loan. It's all going to be made to the oligarchy for capital flight.
You're giving the IMF money for crooks, and you're expecting the Argentine people to have to
pay. So Argentina very quickly was left totally broke, as the IMF intended it to be. And so
although it was 17 years ago, for the last 17 years the IMF has had a slogan: No more
Argentinas. In other words, they said, we're never going to make the loan that is only given to
oligarchs for capital flight to steal. It's as if you make a loan to the Ukraine, or to the
Russian kleptocrats, or to the Greek banks to move offshore.
And yet here, here again, we're having a replay of what happened was, after Mrs. Kirschner
came in, it was obvious to the [inaudible] to everybody, as it had been to the IMF staff, many
of whom had resigned, that Argentina couldn't pay. So about 80 percent of Argentines'
bondholders agreed to write down the debt to something that could be paid. They said, OK, you
know, either it's a total default because they can't pay anything, or we'll write it down very
substantially to what could be paid. Because the IMF really made a completely incompetent- not
incompetent, directly corrupt insider deal. Well, unfortunately, the oligarchy had a fatal
clause put in the original bond issue, saying they would agree to U.S. arbitration and to U.S.
law if there was any dispute.
Well, after the old Argentine bonds depreciated in price, the bonds that were not
renegotiated as part of the 80 percent, you had vulture funds buy them out. Especially Paul
Singer, the Republican campaign donor who tends to buy politicians, along with foreign
government bonds. And sued, and said, we want 100 percent on the dollar, not, you know, the 40
cents on the dollar or whatever they'd settled. And the case went to a senile, dying judge,
Griesa in New York City, who said, well, there was something that's about a clause that said
investors have to be treated separately. And Argentina said, well, that's fine, we'll pay the
other 20 percent [inaudible] the 80 percent of all agreed to. The majority rules. And Griesa
said, no, no, you have to pay the 80 percent all the money that the 20 percent demands. That's
symmetry, because only if you let the hedge funds win can you go bankrupt again, wreck the
government, and bring in oligarchy.
And so that ruling caused absolute turmoil. The United States State Department set out to
support the oligarchy by doing everything it could to destabilize Argentina. And the Argentine
people said, well, we'd better vote in a government that's supported by the United States.
Maybe it will be nice to us. I don't know why foreign countries think that way, but they
thought maybe if they voted the neoliberal that the United States would agree to forgive some
of its debt. Well, that's not what neoliberals do. The neoliberal did just what you said at the
beginning of the program; announced that he was going to cut employment, lower, stop inflation
by making the working class bail, bear all of the costs, and would borrow- actually, it was the
largest loan in IMF history, the $50 billion to enable the Argentine wealthy class to move its
money offshore, leaving the economy a bankrupt shell. That's what the IMF does.
SHARMINI PERIES: Right. So let's imagine you are given the opportunity to resolve this
issue. How would you be advising the Argentine government in terms of what can they do to
stabilize the economy, given the circumstances they're facing right now?
MICHAEL HUDSON: Very simple. I'd say this debt is an odious debt. There is no way that
Argentina can pay. The clause that bankrupted us was put in as a result of tens of thousands of
professors, labor leaders, [land] people being assassinated. The United States financed an
assassination team throughout Latin America after Pinochet in Chile to have basically a proxy
government, and the Argentine loan that said we will, we will follow U.S. rules, not Argentine
rules, basically should disqualify that debt from having to be paid. And it should say the IMF
debt is an odious debt. It was given under fraudulent purposes solely for purposes of capital
flight. We will not pay.
SHARMINI PERIES: Now, Michael, just one last question. Did you want to add something to what
you were saying?
MICHAEL HUDSON: Well, once it doesn't pay the foreign debt, its balance of payments will be,
will be there. The problem is that the creditors have always used violence in order to get
their way. I don't see how the Argentina situation can be solved without violence, because the
creditors are using police force, covert assassination. They're just as bad as the dirty war
that had that mass assassination period in the late, into the early '90s. There's obviously
going to be not only the demonstrations that you showed, but an outright war, because it's
broken out in Argentina more drastically than anywhere else right now in Latin America, except
in Venezuela.
SHARMINI PERIES: Michael, at the moment, the Fed is gradually increasing interest rates and
the dollar is gaining in value. This is sucking the financial capital not only in Argentina but
in many places around the world. Also, you know, they're going to be soon in crisis as well.
What is, what can the developing economies do?
MICHAEL HUDSON: Here's the problem. When the United States raises interest rates, that
causes foreign money to flow, flow into the dollar, because the rest of the world, Europe and
other areas, are keeping low interest rates. So as money goes into the dollar, to take
advantage of the rising interest rates, the dollar rises. Now, that makes it necessary for
Argentina or any other country, third world country, to pay more and more pesos in order to buy
the dollars to pay that foreign debt. Because Argentina and third world countries have violated
the prime rule of credit. And that is never to denominate a debt in another currency that you
can't pay. And all of a sudden, the dollar debts become much more expensive in peso terms, and
as a result, all throughout the world right now you're having a collapse of bond prices of
third world debt. Argentine bonds, Chilean bonds, African bonds, near Eastern bonds. Third
world debt bonds are plunging, because the investors realize that the countries can't pay. The
game looks like it may be over.
The good side of this is that Argentina now can join with other third world countries and
say we are going to redenominate the debts in our own currency, or we just won't pay, or we
will do what the world did in 1931 and announce a moratorium on intergovernmental debts. Now,
that was done on German reparations and the World War I inter-ally debts. Something like that.
Some international conference to declare a moratorium and say, what is the amount that actually
can be paid? And to write down third world debts to the amount that should be paid.
Because the principle that countries have to say is that no country should be obliged to
sacrifice its own economy, its own employment, and its own independence to pay foreign
creditors. Every country has a right to put its own citizens first and its own economy first
before foreign creditors, especially when the loans are made under false pretenses, as the IMF
has made pretending to stabilize the currency instead of subsidizing capital flight to
destabilize the currency.
SHARMINI PERIES: All right, Michael. I thank you so much. And we'll continue this
conversation. There's so much more to discuss, and so many countries here in this situation for
that discussion as well. I thank you so much for joining us today.
MICHAEL HUDSON: Thanks. I think it's going to get worse, so we'll have a lot to discuss.
SHARMINI PERIES: And thank you for joining us here on The Real News Network.
Why does the IMF have a US dollar credit line at the US FED, and Argentina does not;
countries like Canada do, as do companies like Harley Davidson. Why the discrimination?
"The IMF was originally laid out as a part of the Bretton Woods system exchange agreement
in 1944. During the Great Depression, countries sharply raised barriers to trade in an
attempt to improve their failing economies. This led to the devaluation of national
currencies and a decline in world trade."
IMF is an anachronism, a perpetual organization seeking new reasons for its continued
existence.
And like all Western post WW II institutions, is part of the Cold War. Of course any
actions by US connected entities in Latin America/Caribbean are part of the Monroe Doctrine
;-(
Gas prices in Egypt have just been raised by 75% as part of the austerity measures
attached to the $12bn loan granted by the IMF. Regular folk barely have two pennies to rub
together and have been battered by this and other measures ostensibly designed to "lift the
economy and lure back investors (as per the IMF rationale behind these crushing loan
conditions). I wonder if the same sleight of hand outlined by Prof Hudson applies here (I.e.
whether this is an IMF subsidised capital flight scheme designed to aid the Egyptian
oligarchy in repatriating its loot) and whether we should cast a suspicious eye towards the
oligarchs in any country the IMF extends a loan to.
This puts me in mind of a blog that I came across sometime ago at http://ferfal.blogspot.com/ which has relevance here.
Yeah, he tries to flog a lot of survival gear and the like but this site came out of his
experiences in the first crash in Argentina in 2001. If you are prepared to dig deep into his
files you will find all sorts of stories about what life was like in Argentina and it was
awful and desperate. Probably the best place to start is at http://ferfal.blogspot.com/search/label/Argentine%20Collapse
From your link, this jumped out, as agnotological apologetics:
" Right now with President Mauricio Macri there's hope, but the change the country needs
will take decades "
He didn't make much of an effort to clarify, who holds this "hope" nor what "change the
country needs". OTOH Michael Hudson, in his last two interviews on NC, did. He (Feral) also
seems oblivious to the neoliberal projects role in Latin America, and in Argentina's 2001
crises.
And this:
"Anyway, that's what happened in Argentina and this is why in spite of the good president
we now have we need another 10 or 20 years for an entire generation of people to know
something other than populism and corruption as a way of life."
Again, oblivious to the neoliberal projects role in Latin America, and in Argentina's 2001
crises. Who benefits from austerity, and how?
"As soon as the $50 billion was expended, or wasted, in letting wealthy Argentinians take
their pesos, convert them into dollars, move them offshore to the United States, to England,
to the Dutch West Indies, and offshore banking centers"
Not sure I understand this. Who is converting the Oligarch pesos to dollars? Crooks in the
Argentine government?
As I understand it, it's the Oligarchs' butlers and footmen in the Argentine government
that do it. If the Argentine government has a policy of pegging the peso at some set number
of pesos per dollar, then the government is obliged to hand over this many dollars in
exchange for that many pesos. That's what a peg is. One way to get the dollars would be
through a loan which the IMF would "reluctantly" give them, conditional on a few crushing
social policies.
Like I said before, this so much resembles a leveraged buy-out.
Could someone please explain the mechanisms by which the $50B loan leaves the country.
Exactly how do the elites get their hands on this money and then get it out of the
country?
If you haven't already read it, check
Prof. Hudson's previous article . It describes more about the methods.
Of course, if you have, then I'm not helping.
They convert their liquid cash into Dollars.
Then wire it to Banks outside the Argentine, and invest, (typically buy property). In addition, they take out loans against their Argentinian assets or property,
and convert those pesos into dollars,
and export those dollars as well.
All legal and above board.
When the peso collapses, they repatriate some of their dollars, and pay of the now
deflated loans.
'The Argentine loan that said we will, we will follow U.S. rules, not Argentine rules,
basically should disqualify that debt from having to be paid.'
Most foreign currency bonds floated by developing economies specify New York or London
legal jurisdiction because of (1) well-developed case law; (2) creditors don't trust the
objectivity of courts in borrower countries.
If all developing country debt were considered "odious" merely because of New York or
English legal jurisdiction, lending to developing countries would stop cold.
'I don't see how the Argentina situation can be solved without violence, because the
creditors are using police force, covert assassination.'
Cite one -- just one -- link showing "covert assassination" occurring in Argentina. The
Dirty War of the 1970s and early 1980s doesn't count. You can't keep waving the bloody shirt
of military dictatorship in South America more than thirty years after it ended.
I'm sure there is a nice polite clear unassailable explanation for what happened in this
instance:
" Alberto Nisman and Argentina's History of Assassinations and Suspicious
Suicides
Whether the crusading prosecutor's death is found to be a suicide or homicide, many
Argentines probably won't believe it. The past has taught them to always look for the
sinister explanation. "
And maybe creditors like to have their loan docs choose US/NY courts and law as the basis
for dispute resolution because both are stacked in favor of creditors? Home court "white shoe
lawyer" advantage? No history of support for the great creditor scams of the past? the word
"jackal" has no meaning? There was no reason for that guy to write a sequel to "Confessions
of an Economic Hit Man"?
Really, there's no need for the "bloody shirt," now is there, given current right-wing
dictators supported by "us," what the Empire and Banksters and the rest are doing in and to
central and South America, now is there? But it's a great distraction, I'll grant, and might
even work as impeachment for some folks
"No country should be obliged to pay its bondholders if the price of paying means austerity,
unemployment, shrinking population, emigration, rising suicide rates, abolition of public
health standards, and selloffs of the public domain to monopolists."
These sorts of rules would put a dead stop to foreign loans.
Something always bothers me about the "bondholder" sanctity meme. Bonds are "investments,"
right? And there are RISKS associated with investments, right? And there's supposed to be a
"risk premium" built into the "price" of the bond, right?
At least Investopedia and other sources say so, basically that these are NOT God-sanctioned
absolute-right deals where the bondholder takes priority over everyone else in the world,
right? https://www.investopedia.com/ask/answers/05/bondrisks.asp
And bonds are sort of contracts, subject to the rules and defenses that apply in contract
disputes, albeit specialized rules, right? Impossibility and stuff? Fraud?
So why are the rest of us, like where "the government" is dumb or corrupt (CalPERS?)enough
to "obligate" the wealth and future of a country by "selling bonds" to "investors," as
security for "loans" that get siphoned off by corruption and stupidity, dumb enough to
usually just roll over and accept that we have to live like serfs to "pay off the bonds?"
Especially when the same scam has been pulled by the same set of Banksters over and over?
And yes, in the financialized westernized world, we mopes are tied to the "paying for
progress [some definition of same] by borrowing," aren't we?
Interesting that the hated Sharia Law, the banking and investment part of it, kind of
makes those allegedly risk-free kinds of fee- and profit- and reacketeer-generating "deals"
not only unlawful, but against the will of G_D? https://shariabanking.com/
How telling. Was only 7 years ago that the torture-murderer of mothers and nuns, the
Blonde Angel of Death himself, Alfredo Ignacio Astiz, was sentenced to life in prison. Per
Wikipedia:
Astiz, a specialist in the infiltration of human rights organizations, was implicated in
the December 1977 kidnapping of twelve human rights activists, including Azucena Villaflor
and two other founders of the Mothers of the Plaza de Mayo, and two French nationals,
Léonie Duquet and Alice Domon, who were Catholic nuns. None of the twelve was seen
alive again outside detention and all were believed killed, rumored to be among the bodies
washed up on beaches south of Buenos Aires in late 1977.
To this day, torturers and murderers hold public offices. But I'm sure that's all in the
past. Anyone who still talks about the US-sponsored 16 years of Dirty War, from 1967-1983, is
a bloody shirt-waving fool, amirite Jim?
BUENOS
AIRES, Argentina (CNN) [2 March 1998] -- Argentina's "dirty war" ended 15 years ago,
but it is an ugly episode that cannot be buried and refuses to be silenced.
Aging mothers and grandmothers march each week as the Mothers of Plaza de Mayo, carrying
banners and chanting, "We will not be stopped. We will not be broken. We have held on for
20 years."
They demand to know the whereabouts of sons and daughters and husbands and wives who
were detained by the ruling military junta between 1976 and 1983, and then disappeared.
The junta seized power in Argentina in March 1976 and began a systematic campaign to
wipe out left-wing terrorism. But the terror it spread exceeded anything the leftists ever
dreamed of, claiming the lives of dissidents as well as innocent civilians.
More than 9,000 people disappeared during the dirty war, and some human rights groups
say as many as 30,000 may have been tortured and killed.
"We only want to know where our sons and daughters are -- alive or dead," says one
woman. "We are anguished because we don't know whether they are sick or hungry or cold. We
don't know anything. We are desperate, desperate because we don't know who to turn to.
"Consulates, embassies, government ministries, churches. Every place is closed to us.
Everywhere they shut us out. We beg you to help us. We beg you."
Decades after the military murdered thousands, Mothers of Plaza de Mayo warn that
the current era of alternative facts poses a new threat
Torturers and murderers hold public office, thanks to an amnesty. But I'm sure no one
today, in the whole of Argentina, would ever consider what well, actually has long been
standard operating procedure in Argentina.
While not precisely on point, reminds me of a monologue to music titled "FMI", the
Portuguese abbreviation for IMF, by Portuguese poet Mario Branco. Salient lyrics (English
translation) of IMF:
"It's 'Monetary Internationalism' The IMF doesn't exist The IMF is a mask."
"There can't exist a reason for so much suffering."
Thievery Corporation were far more brutal in their Fela-Kuti-inspired "Vampires"
Lyrics (abridged):
They'll gain the world but lose their souls
They'll gain the world but lose their souls
Don't believe politicians and thieves
They want our people on their bended knees
Pirates and robbers, liars and thieves
You come like the wolf but dressed like the sheep
If you go to Lagos what you find, vampires
If you go to Kinshasa what you find, vampires
If you go to Darfur what you find, vampires
If you go to Malabo what you find, vampires
Lies and theft
Guns and debt
Life and death
IMF
When the bank man comes to your door
Better know you'll always be poor
Bank loans and policies
They can't make our people free
You live on the blood of my people
Everyone knows you've come to steal
You come like the thieves in the night
The whole world is ready to fight
The clause that bankrupted us was put in as a result of tens of thousands of professors,
labor leaders, [land] people being assassinated. The United States financed an
assassination team throughout Latin America after Pinochet in Chile to have basically a
proxy government, and the Argentine loan that said we will, we will follow U.S. rules, not
Argentine rules, basically should disqualify that debt from having to be paid. And it
should say the IMF debt is an odious debt. It was given under fraudulent purposes solely
for purposes of capital flight. We will not pay.
And this:
The problem is that the creditors have always used violence in order to get their
way.
Are why I so love Michael Hudson. There's the blood so studiously avoided in the
desanguinated language of "economics." Its absence is the tell-tale of the kind of
disembodiment described by Nancy Krieger
(h/t
Lambert ).
Embodiment, in other words, is literal. The
ecosocial premise is that clues to current and
changing population patterns of health, includ-
ing social disparities in health, are to be found
chiefly in the dynamic social, material, and
ecological contexts into which we are born,
develop, interact, and endeavour to live mean-
ingful lives. The contrast is to pervasive aetiolo-
gical hypotheses concerned mainly with
decontextualised and disembodied ''behaviours''
and ''exposures'' interacting with equally decon-
textualised and disembodied ''genes.'' The dis-
tinction is more than simply between
''determinants'' and ''mechanisms.'' Consider,
for example, contending -- and longstanding --
claims about racism compared with ''race'' as
causes of racial/ethnic disparities in health.
An embodied approach promotes testing hypoth-
eses to ascertain if the observed disparities are a
biological expression of racial discrimination,
past and present; by contrast, a disembodied
and decontextualised approach promulgates
research focused on detrimental genes and/or
''lifestyles.'' The vastly different implications
of these approaches for generating epidemiolo-
gical knowledge and informing policy underscore
the utility of clarifying the significance of
''embodiment'' for epidemiological inquiry.
[Footnotes omitted, emphasis added.]
Ah yes, but talking about our ideas about the problem, or talking about the talking about
the problem, is so much better for catapulting the propaganda.
Also, if it looks, walks, and bankrupts Argentina over and over exactly like an Economic
Hit Job aka mass murder and looting under the color of law by the Suits in broad g.d.
daylight, then yes. Yes it is.
In the '70s at the best universities Ecology Classes were instituted and the young well
off students were told first, that the climate was being altered as a result of human
activities.
Nixon was told by the CIA that overpopulation was the main treat to future US Security.
The Vatican quashed that way of looking at it. Gopsay policies are all the same as Vatican
policies.
Loyalty to the nation of their birth for a rich person & their wealthy families was
thrown out the window.
The jetsetter class now buys the best deal far as taxes and protections.
Their goal is to eliminate any harm to them or their families from "Forces beyond their
control." If the leaders of the world are going to co-operate with them, those leaders will
be paid. For the majority who are born to labor and become labor those things done by bankers
and their leaders become for them "Forces beyond their control."
The rich know that overpopulation is already the fact at 7.5 billion. They will bond
together on the tarmacs hanging around their jets for little talks as took place between Bill
Clinton and Lauretta Lynch.
"All those people that don't like how we get rich, who are taking up space we want, well, let
them starve. The science says there are too many of them anyway."
(Wasn't a discussion of how to engineer revolts wonderful to crush, but is used as
illustrative of how jet setters get around to meetings that lead to this or that policy of
the day.)
This is the essence of "Scientific Socialism". Current Trump Administration policies will
cause the withdrawal of US lands devoted to agriculture. What was for Stalin destruction of
the Kulaks and collectivization starvation of Armenians, or Peasants, or the Intellogemtsia,
or all those ambivalent about who is in power and are therefore Counter-Revolutionaries,
starving them all leaves only the ignorant, cowed, or lucky alive.
Creating the conditions for civil wars is a great thing for the banks and their loyal
patrons, the war materiel`s industries. The people rebel and oligarchs at the top have them
killed.
Trotsky made the point that the weapons in the arsenals are the peoples. Somehow soldiers
and police in nation after nation don't see it that way. In the US the police are made
soldiers in the drug war. Keeping the peace is not their primary job. No pot smoking
peaceniks are to be hired so the ranks are securely filled by thugs and incompetents made
special by law. They shoot Black people at the drop of a hat. They shoot the poor driven
crazy pretty often as well.
Somebody wondered why in the US Blues & Reds or Democrats, the Leftists silo and don't
talk civilly to each other. Trump supporters show and shoot guns or as in Charlottesville
Virginia run as many people as possible over and are obviously willing to kill other
Americans. In Weimar Germany the "Scientific Socialists" had their uniformed enforcers.
Dictators have their own organizations exultant at the opportunity to be rewarded for
beating and killing the people who object to the destruction of civilization. Spectaculars in
stadiums, like Trump's to come Military Parade become more common as if such is civilization
when it is more indicative of a break down of civilization itself.
I have no means to remove myself and my wife from the roiling clouds of more murder in the
streets. I'll be "collapsing in place" as described by Lambert Strether. These things and the
ideologies behind them happening are not accidental of "Forces Beyond My Control".
The true purposes of the IMF loan are questionable to me.
1.) Over the past few years, we have seen market rigging by large transnational banks in
both the LIBOR and foreign exchange markets. This raises the question of whether there was
covert market manipulation to rapidly drop the Argentine peso and coerce the Argentine
government to borrow funds from the IMF to defend the peso in order to assure that nation was
able to pay for necessary imports?
2.) Was this debt undertaken to facilitate capital flight for a small, wealthy segment of
the Argentine population without the consent of or benefit to the people of Argentina, or for
some other unstated reason?
If either of these is true, this debt can legitimately be considered as "odious debt" by
the people of Argentina and potentially repudiated.
It also appears to me that there is a high probability that the austerity measures likely
to be imposed under this $50 billion loan to Argentina by the IMF could violate the
International Covenant on Economic, Social and Cultural Rights.
Not an attorney, nor knowledgeable about international law. Just my opinion as an ordinary
citizen based on my reading of the post and Wikipedia.
"... This financial dynamic has hijacked industrial capitalism. It is leading economies to polarize and ultimately collapse under the weight of their debt burden. That is the inherent dynamic of finance capitalism. The debt overhead leads to a financial crisis that becomes an opportunity to impose emergency rule to replace democratic lawmaking. So contrary to Hayek's anti-government "free enterprise" warnings, "slippery slope" to totalitarianism is not by socialist reforms limiting the rentier class's extraction of economic rent and interest, but just the opposite: the failure of society to check the rentier extraction of income vesting a hereditary autocracy whose financial and rent-seeking business plan impoverishes the economy at large. ..."
Text of Michael Hudson's speech on debt and the world economy, presented at Peking
University's School of Marxist Studies, May 5-6, 2018.
Volumes II and III of Marx's Capital describe how debt grows exponentially, burdening the
economy with carrying charges. This overhead is subjecting today's Western finance-capitalist
economies to austerity, shrinking living standards and capital investment while increasing
their cost of living and doing business. That is the main reason why they are losing their
export markets and becoming de-industrialized.
What policies are best suited for China to avoid this neo-rentier disease while raising
living standards in a fair and efficient low-cost economy? The most pressing policy challenge
is to keep down the cost of housing. Rising housing prices mean larger and larger debts
extracting interest out of the economy. The strongest way to prevent this is to tax away the
rise in land prices, collecting the rental value for the government instead of letting it be
pledged to the banks as mortgage interest.
The same logic applies to public collection of natural resource and monopoly rents. Failure
to tax them away will enable banks to create debt against these rents, building financial and
other rentier charges into the pricing of basic needs.
U.S. and European business schools are part of the problem, not part of the solution. They
teach the tactics of asset stripping and how to replace industrial engineering with financial
engineering, as if financialization creates wealth faster than the debt burden. Having rapidly
pulled ahead over the past three decades, China must remain free of rentier ideology that
imagines wealth to be created by debt-leveraged inflation of real-estate and financial asset
prices.
Western capitalism has not turned out the way that Marx expected. He was optimistic in
forecasting that industrial capitalists would gain control of government to free economies from
unnecessary costs of production in the form of rent and interest that increase the cost of
living (and hence, the break-even wage level). Along with most other economists of his day, he
expected rentier income and the ownership of land, natural resources and banking to be taken
out of the hands of the hereditary aristocracies that had held them since Europe's feudal
epoch. Socialism was seen as the logical extension of classical political economy, whose main
policy was to abolish rent paid to landlords and interest paid to banks and bondholders.
A century ago there was an almost universal belief in mixed economies. Governments were
expected to tax away land rent and natural resource rent, regulate monopolies to bring prices
in line with actual cost value, and create basic infrastructure with money created by their own
treasury or central bank. Socializing land rent was the core of Physiocracy and the economics
of Adam Smith, whose logic was refined by Alfred Marshall, Simon Patten and other bourgeois
economists of the late 19th century. That was the path that European and American capitalism
seemed to be following in the decades leading up to World War I. That logic sought to use the
government to support industry instead of the landlord and financial classes.
China is progressing along this "mixed economy" road to socialism, but Western economies are
suffering from a resurgence of the pre-capitalist rentier classes. Their slogan of "small
government" means a shift in planning to finance, real estate and monopolies. This economic
philosophy is reversing the logic of industrial capitalism, replacing public investment and
subsidy with privatization and rent extraction. The Western economies' tax shift favoring
finance and real estate is a case in point. It reverses John Stuart Mill's "Ricardian
socialism" based on public collection of the land's rental value and the "unearned increment"
of rising land prices.
Defining economic rent as the unnecessary margin of prices over intrinsic cost value,
classical economists through Marx described rentiers as being economically parasitic, not
productive. Rentiers do not "earn" their land rent, interest or monopoly rent, because it has
no basis in real cost-value (ultimately reducible to labor costs). The political, fiscal and
regulatory reforms that followed from this value and rent theory were an important factor
leading to Marx's value theory and historical materialism. The political thrust of this theory
explains why it is no longer being taught.
By the late 19th century the rentiers fought back, sponsoring reaction against the socialist
implications of classical value and rent theory. In America, John Bates Clark denied that
economic rent was unearned. He redefined it as payment for the landlords' labor and enterprise,
not as accruing "in their sleep," as J. S. Mill had characterized it. Interest was depicted as
payment for the "service" of lending productively, not as exploitation. Everyone's income and
wealth was held to represent payment for their contribution to production. The thrust of this
approach was epitomized by Milton Friedman's Chicago School claim that "there is no such thing
as a free lunch" – in contrast to classical economics saying that feudalism's legacy of
privatized land ownership, bank credit and monopolies was all about how to get a free lunch, by
exploitation.
The other major reaction against classical and Marxist theory was English and Austrian
"utility" theory. Focusing on consumer psychology instead of production costs, it claimed that
there is no difference between value and price. A price is whatever consumers "choose" to pay
for commodities, based on the "utility" that these provide – defined by circular
reasoning as being equal to the price they pay. Producers are assumed to invest and produce
goods to "satisfy consumer demand," as if consumers are the driving force of economies, not
capitalists, property owners or financial managers.
Using junk-psychology, interest was portrayed as what bankers or bondholders "abstain" from
consuming, lending their self-denial of spending to "impatient" consumers and "credit-worthy"
entrepreneurs. This view opposed the idea of interest as a predatory charge levied by
hereditary wealth and the privatized monopoly right to create bank credit. Marx quipped that in
this view, the Rothschilds must be Europe's most self-depriving and abstaining family, not as
suffering from wealth-addiction.
These theories that all income is earned and that consumers (the bourgeois term for
wage-earners) instead of capitalists determine economic policy were a reaction against the
classical value and rent theory that paved the way for Marx's analysis. After analyzing
industrial business cycles in terms of under-consumption or over-production in Volume I of
Capital, Volume III dealt with the precapitalist financial problem inherited from feudalism and
the earlier "ancient" mode of production: the tendency of an economy's debts to grow by the
"purely mathematical law" of compound interest.
Any rate of interest may be thought of as a doubling time. What doubles is not real growth,
but the parasitic financial burden on this growth. The more the debt burden grows, the less
income is left for spending on goods and services. More than any of his contemporaries, Marx
emphasized the tendency for debt to grow exponentially, at compound interest, extracting more
and more income from the economy at large as debts double and redouble, beyond the ability of
debtors to pay. This slows investment in new means of production, because it shrinks domestic
markets for output.
Marx explained that the credit system is external to the means of production. It existed in
ancient times, feudal Europe, and has survived industrial capitalism to exist even in socialist
economies. At issue in all these economic systems is how to prevent the growth of debt and its
interest charge from shrinking economies. Marx believed that the natural thrust of industrial
capitalism was to replace private banking and money creation with public money and credit. He
distinguished interest-bearing debt under industrial capitalism as, for the first time, a means
of financing capital investment. It thus was potentially productive by funding capital to
produce a profit that was sufficient to pay off the debt.
Industrial banking was expected to finance industrial capital formation, as was occurring in
Germany in Marx's day. Marx's examples of industrial balance sheets accordingly assumed debt.
In contrast to Ricardo's analysis of capitalism's Armageddon resulting from rising land-rent,
Marx expected capitalism to free itself from political dominance by the landlord class, as well
as from the precapitalist legacy of usury.
This kind of classical free market viewed capitalism's historical role as being to free the
economy from the overhead of unproductive "usury" debt, along with the problem of absentee
landownership and private ownership of monopolies – what Lenin called the economy's
"commanding heights" in the form of basic infrastructure. Governments would make industries
competitive by providing basic needs freely or at least at much lower public prices than
privatized economies could match.
This reform program of industrial capitalism was beginning to occur in Germany and the
United States, but Marx recognized that such evolution would not be smooth and automatic.
Managing economies in the interest of the wage earners who formed the majority of the
population would require revolution where reactionary interests fought to prevent society from
going beyond the "bourgeois socialism" that stopped short of nationalizing the land, monopolies
and banking.
World War I untracked even this path of "bourgeois socialism." Rentier forces fought to
prevent reform, and banks focused on lending against collateral already in place, not on
financing new means of production. The result of this return to pre-industrial bank credit is
that some 80 percent of bank lending in the United States and Britain now takes the form of
real estate mortgages. The effect is to turn the land's rental yield into interest.
That rent-into-interest transformation gives bankers a strong motive to oppose taxing land
rent, knowing that they will end up with whatever the tax collector relinquishes. Most of the
remaining bank lending is concentrated in loans for corporate takeovers, mergers and
acquisitions, and consumer loans. Corporate capital investment in today's West is not financed
by bank credit, but almost entirely out of retained corporate earnings, and secondarily out of
stock issues.
The stock market itself has become extractive. Corporate earnings are used for stock
buybacks and higher dividend payouts, not for new tangible investment. This financial strategy
was made explicit by Harvard Business School Professor Michael Jensen, who advocated that
salaries and bonuses for corporate managers should be based on how much they can increase the
price of their companies' stock, not on how much they increased or production and/or business
size. Some 92 percent of corporate profits in recent years have been spent on stock buyback
programs and dividend payouts. That leaves only about 8 percent available to be re-invested in
new means of production and hiring. Corporate America's financial managers are turning
financialized companies into debt-ridden corporate shells.
A major advantage of a government as chief banker and credit creator is that when debts come
to outstrip the means to pay, the government can write down the debt. That is how China's banks
have operated. It is a prerequisite for saving companies from bankruptcy and preventing their
ownership from being transferred to foreigners, raiders or vultures.
Classical tax and banking policies were expected to streamline industrial economies,
lowering their cost structures as governments replaced landlords as owner of the land and
natural resources (as in China today) and creating their own money and credit. But despite
Marx's understanding that this would have been the most logical way for industrial capitalism
to evolve, finance capitalism has failed to fund capital formation. Finance capitalism has
hijacked industrial capitalism, and neoliberalism is its anti-classical ideology.
The result of today's alliance of the Finance, Insurance and Real Estate (FIRE) sector with
natural resource and infrastructure monopolies has been to reverse that the 20th century's
reforms promoting progressive taxation of wealth and income. Industrial capitalism in the West
has been detoured along the road to rent-extracting privatization, austerity and debt
serfdom.
The result is a double-crisis: austerity stemming from debt deflation, while public health,
communications, information technology, transportation and other basic infrastructure are
privatized by corporate monopolies that raise prices charged to labor and industry. The debt
crisis spans government debt (state and local as well as national), corporate debt, real estate
mortgage debt and personal debt, causing austerity that shrinks the "real" economy as its
assets and income are stripped away to service the exponentially growing debt overhead. The
economy polarizes as income and wealth ownership are shifted to the neo-rentier alliance headed
by the financial sector.
This veritable counter-revolution has inverted the classical concept of free markets.
Instead of advocating a public role to lower the cost structure of business and labor, the
neoliberal ideal excludes public infrastructure and government ownership of natural monopolies,
not to speak of industrial production. Led by bank lobbyists, neoliberalism even opposes public
regulation of finance and monopolies to keep their prices in line with socially necessary cost
of production.
To defend this economic counter-revolution, the National Income and Product Accounts (NIPA)
and Gross Domestic Product (GDP) measures now used throughout the world were inspired by
opposition to progressive taxation and public ownership of land and banks. These statistical
measures depicting finance, insurance and real estate as the leaders of wealth creation, not
the creators merely of debt and rentier overhead.
What is China's "Real" GDP and "real wealth creation"?
Rejection of classical value theory's focus on economic rent – the excess of market
price over intrinsic labor cost – underlies the post-classical concept of GDP. Classical
rent theory warned against the FIRE sector siphoning off nominal growth in wealth and income.
The economics of Adam Smith, David Ricardo, J.S. Mill and Marx share in common the view that
this rentier revenue should be treated as an overhead charge and, as such, subtracted from
national income and product because it is not production-related. Being extraneous to the
production process, this rentier overhead is responsible for today's debt deflation and
economically extractive privatization that is imposing austerity and shrinking markets from
North America to Europe.
The West's debt crisis is aggravated by privatizing monopolies (on credit) that historically
have belonged to the public sector. Instead of recognizing the virtues of a mixed economy,
Frederick Hayek and his followers from Ayn Rand to Margaret Thatcher, Ronald Reagan, the
Chicago School and libertarian Republicans have claimed that any public ownership or regulation
is, ipso facto, a step toward totalitarian politics.
Following this ideology, Alan Greenspan aborted economic regulation and decriminalized
financial fraud. He believed that in principle, the massive bank fraud, junk-mortgage lending
and corporate raiding that led up to the 2008 crisis was more efficient than regulating such
activities or prosecuting fraudsters.
This is the neoliberal ideology taught in U.S. and European business schools. It assumes
that whatever increases financial wealth most quickly is the most efficient for society as a
whole. It also assumes that bankers will find honest dealing to be more in their economic
self-interest than fraud, because customers would shun fraudulent bankers. But along with the
mathematics of compound interest, the inherent dynamic of finance capitalism is to establish a
monopoly and capture government regulatory agencies, the justice system, central bank and
Treasury to prevent any alternative policy and the prosecution of fraud.
The aim is to get rich by purely financial means – by increasing stock-market prices,
not by tangible capital formation. That is the opposite of the industrial logic of expanding
the economy and its markets. Instead of creating a more productive economy and raising living
standards, finance capitalism is imposing austerity by diverting wage income and also corporate
income to pay rising debt service, health insurance and payments to privatized monopolies.
Progressive income and wealth taxation has been reversed, siphoning off wages to subsidize
privatization by the rentier class.
This combination of debt overgrowth and regressive fiscal policy has produced two results.
First, combining debt deflation with fiscal deflation leaves only about a third of wage income
available to be spent on the products of labor. Paying interest, rents and taxes – and
monopoly prices – shrinks the domestic market for goods and services.
Second, adding debt service, monopoly prices and a tax shift to the cost of living and doing
business renders neo-rentier economies high-cost. That is why the U.S. economy has been
deindustrialized and its Midwest turned into a Rust Belt.
How Marx's economic schema explains the West's neo-rentier problem
In Volume I of Capital, Marx described the dynamics and "law of motion" of industrial
capitalism and its periodic crises. The basic internal contradiction that capitalism has to
solve is the inability of wage earners to be paid enough to buy the commodities they produce.
This has been called overproduction or underconsumption, but Marx believed that the problem was
in principle only temporary, not permanent.
Volumes II and III of Marx's Capital described a pre-capitalist form of crisis, independent
of the industrial economy: Debt grows exponentially, burdening the economy and finally bringing
its expansion to an end with a financial crash. That descent into bankruptcy, foreclosure and
the transfer of property from debtors to creditors is the dynamic of Western finance
capitalism. Subjecting economies to austerity, economic shrinkage, emigration, shorter life
spans and hence depopulation, it is at the root of the 2008 debt legacy and the fate of the
Baltic states, Ireland, Greece and the rest of southern Europe, as it was earlier the financial
dynamic of Third World countries in the 1960s through 1990s under IMF austerity programs. When
public policy is turned over to creditors, they use their power for is asset stripping,
insisting that all debts must be paid without regard for how this destroys the economy at
large.
China has managed to avoid this dynamic. But to the extent that it sends its students to
study in U.S. and European business schools, they are taught the tactics of asset stripping
instead of capital formation – how to be extractive, not productive. They are taught that
privatization is more desirable than public ownership, and that financialization creates wealth
faster than it creates a debt burden. The product of such education therefore is not knowledge
but ignorance and a distortion of good policy analysis. Baltic austerity is applauded as the
"Baltic Miracle," not as demographic collapse and economic shrinkage.
The experience of post-Soviet economies when neoliberals were given a free hand after 1991
provides an object lesson. Much the same fate has befallen Greece, along with the rising
indebtedness of other economies to foreign bondholders and to their own rentier class operating
out of capital-flight centers. Economies are obliged to suspend democratic government policy in
favor of emergency creditor control.
The slow economic crash and debt deflation of these economies is depicted as a result of
"market choice." It turns out to be a "choice" for economic stagnation. All this is
rationalized by the economic theory taught in Western economics departments and business
schools. Such education is an indoctrination in stupidity – the kind of tunnel vision
that Thorstein Veblen called the "trained incapacity" to understand how economies really
work.
Most private fortunes in the West have stemmed from housing and other real estate financed
by debt. Until the 2008 crisis the magnitude of this property wealth was expanded largely by
asset-price inflation, aggravated by the reluctance of governments to do what Adams Smith, John
Stuart Mill, Alfred Marshall and nearly all 19th-century classical economists recommended: to
keep land rent out of private hands, and to make the rise in land's rental value serve as the
tax base.
Failure to tax the land leaves its rental value "free" to be pledged as interest to banks
– which make larger and larger loans by lending against rising debt ratios. This "easy
credit" raises the price of obtaining home ownership. Sellers celebrate the result as "wealth
creation," and the mainstream media depict the middle class as growing richer by higher prices
for the homes its members have bought. But the debt-financed rise in housing prices ultimately
creates wealth mainly for banks and their bondholders.
Americans now have to pay up to 43 percent of their income for mortgage debt service,
federally guaranteed. This imposes such high costs for home ownership that it is pricing the
products of U.S. labor out of world markets. The pretense is that using bank credit (that is,
homebuyers' mortgage debt) to inflate the price of housing makes U.S. workers and the middle
class prosperous by enabling them to sell their homes to a new generation of buyers at higher
and higher prices each generation. This certainly does not make the buyers more prosperous. It
diverts their income away from buying the products of labor to pay interest to banks for
housing prices inflated on bank credit.
Consumer spending throughout most of the world aims above all at achieving status. In the
West this status rests largely on one's home and neighborhood, its schools, transportation and
other public investment. Land-price gains resulting from public investment in transportation,
parks and schools, other urban amenities and infrastructure, and from re-zoning land use. In
the West this rising rental value is turned into a cost, falling on homebuyers, who must borrow
more from the banks. The result is that public spending ultimately enriches the banks –
at the tax collector's expense.
Debt is the great threat to modern China's development. Burdening economies with a rentier
overhead imposes the quasi-feudal charges from which classical 19th-century economists hoped to
free industrial capitalism. The best protection against this rentier burden is simple: first,
tax away the land's rising rental valuation to prevent it from being paid out for bank loans;
and second, keep control of banks in public hands. Credit is necessary, but should be directed
productively and debts written down when paying them threatens to create financial
Armageddon.
Marx's views on the broad dynamics of economic history
Plato and Aristotle described a grand pattern of history. In their minds, this pattern was
eternally recurrent. Looking over three centuries of Greek experience, Aristotle found a
perpetual triangular sequence of democracy turning into oligarchy, whose members made
themselves into a hereditary aristocracy – and then some families sought to take the
demos into their own camp by sponsoring democracy, which in turn led to wealthy families
replacing it with an oligarchy, and so on.
The medieval Islamic philosopher Ibn Khaldun saw history as a rise and fall. Societies rose
to prosperity and power when leaders mobilized the ethic of mutual aid to gain broad support as
a communal spirit raised all members. But prosperity tended to breed selfishness, especially in
ruling dynasties, which Ibn Khaldun thought had a life cycle of only about 120 years. By the
19th century, Scottish Enlightenment philosophers elaborated this rise-and-fall theory,
applying it to regimes whose success bred arrogance and oligarchy.
Marx saw the long sweep of history as following a steady upward secular trend, from the
ancient slavery-and-usury mode of production through feudalism to industrial capitalism. And
not only Marx but nearly all 19th-century classical economists assumed that socialism in one
form or another would be the stage following industrial capitalism in this upward technological
and economic trajectory.
Instead, Western industrial capitalism turned into finance capitalism. In Aristotelian terms
the shift was from proto-democracy to oligarchy. Instead of freeing industrial capitalism from
landlords, natural resource owners and monopolists, Western banks and bondholders joined forces
with them, seeing them as major customers for as much interest-bearing credit as would absorb
the economic rent that governments would refrain from taxing. Their success has enabled banks
and bondholders to replace landlords as the major rentier class. Antithetical to socialism,
this retrogression towards feudal rentier privilege let real estate, financial interests and
monopolists exploit the economy by creating an expanding debt wedge.
Marx's Theories of Surplus Value (German Mehrwert), his history of classical political
economy, poked fun at David Ricardo's warning of economic Armageddon if economies let landlords
siphon off of all industrial profits to pay land rent. Profits and hence capital investment
would grind to a halt. But as matters have turned out, Ricardo's rentier Armageddon is being
created by his own banking class. Corporate profits are being devoured by interest payments for
corporate takeover debts and related financial charges to reward bondholders and raiders, and
by financial engineering using stock buybacks and higher dividend payouts to create "capital"
gains at the expense of tangible capital formation. Profits also are reduced by firms having to
pay higher wages to cover the cost of debt-financed housing, education and other basic expenses
for workers.
This financial dynamic has hijacked industrial capitalism. It is leading economies to
polarize and ultimately collapse under the weight of their debt burden. That is the inherent
dynamic of finance capitalism. The debt overhead leads to a financial crisis that becomes an
opportunity to impose emergency rule to replace democratic lawmaking. So contrary to Hayek's
anti-government "free enterprise" warnings, "slippery slope" to totalitarianism is not by
socialist reforms limiting the rentier class's extraction of economic rent and interest, but
just the opposite: the failure of society to check the rentier extraction of income vesting a
hereditary autocracy whose financial and rent-seeking business plan impoverishes the economy at
large.
Greece's debt crisis has all but abolished its democracy as foreign creditors have taken
control, superseding the authority of elected officials. From New York City's bankruptcy to
Puerto Rico's insolvency and Third World debtors subjected to IMF "austerity programs,"
national bankruptcies shift control to centralized financial planners in what Naomi Klein has
called Crisis Capitalism. Planning ends up centralized not in the hands of elected government
but in financial centers, which become the de facto government.
England and America set their economic path on this road under Margaret Thatcher and Ronald
Reagan by 1980. They were followed by even more pro-financial privatization leaders in Tony
Blair's New Labour Party and Bill Clinton's New Democrats seeking to roll back a century of
classical reforms and policies that gradually were moving capitalism toward socialism. Instead,
these countries are suffering a rollback to neofeudalism, whose neo-rentiereconomic and
political ideology has become mainstream throughout the West. Despite seeing that this policy
has led to North America and Europe losing their former economic lead, the financial power
elite is simply taking its money and running.
So we are brought back to the question of what this means for China's educational policy and
also how it depicts economic statistics to distinguish between wealth and overhead. The great
advantage of such a distinction is to help steer economic growth along productive lines
favoring tangible capital formation instead of policies to get rich by taking on more and more
debt and by prying property away from the public domain.
If China's main social objective is to increase real output to raise living standards for
its population – while minimizing unproductive overhead and economic inequality –
then it is time to consider developing its own accounting format to trace its progress (or
shortcomings) along these lines. Measuring how its income and wealth are being obtained would
track how the economy is moving closer toward what Marx called socialism.
Of special importance, such an accounting format would revive Marx's classical distinction
between earned and unearned income. Its statistics would show how much of the rise in wealth
(and expenditure) in China – or any other nation – is a result of new tangible
capital formation as compared to higher rents, lending and interest, or the stock market.
These statistics would isolate income and fortunes obtained by zero-sum transfer payments
such as the rising rental value of land sites, natural resources and basic infrastructure
monopolies. National accounts also would trace overhead charges for interest and related
financial charges, as well as the economy's evolving credit and debt structure. That would
enable China to measure the economic effects of the banking privileges and other property
rights given to some people.
That is not the aim of Western national income statistics. In fact, applying the accounting
structure described above would track how Western economies are polarizing as a result of their
higher economic rent and interest payments crowding out spending on actual goods and services.
This kind of contrast would help explain global trends in pricing and competitiveness.
Distinguishing the FIRE sector from the rest of the economy would enable China to compare its
economic cost trends and overhead relative to those of other nations. I believe that these
statistics would show that its progress toward socialism also will explain the remarkable
economic advantage it has obtained. If China does indeed make this change, it will help people
both in and out of China see even more clearly what your government is doing on behalf of the
majority of its people. This may help other governments – including my own – learn
from your example and praise it instead of fearing it.
"... Turkey fell into the same deep state bankers financial trap, that Spain Greece Italy fell for. Bail out a vunrable country then pull the rug out ! You own them ! So I would slightly disagree with it being entirely of there own making. I blame the Rothchild family. ..."
At the beginning of the year one U.S. dollar cost 3.5 lira. At the beginning of August it
cost 4.80 lira. It then went up to 7.00 lira/$ and at Friday's closing it was down again at
6.00 TL/$. But Monday morning lira will again
lose more of its value:
Turkey's credit rating was cut further into junk Friday by S&P Global Ratings and Moody's
Investors Service, which said the volatile lira and wide current-account deficit may
undermine the Middle East's largest economy.
S&P reduced Turkey's foreign-currency rating to four notches below investment grade at
B+ from BB-, on par with Argentina, Greece and Fiji. Moody's lowered its grade to Ba3 from
Ba2, three notches below investment grade. The ratings companies said the weak currency,
runaway inflation and current-account deficit are Turkey's key vulnerabilities .
Turkey's crisis is
homemade . The current spat with the United States only exaggerates it. For years Turkey
borrowed large amounts of money from abroad and invested it into local infrastructure instead
of producing exportable products. Its current account deficit this year will again be some $50
to $60 billion. International banks and other foreign lenders now demand interests rates above
20% from Turkish lenders because the chance of losing the lent money is high.
After the 17% crash on August 13 down to 7 TL/$ the Turkish Central Bank used some one-time
measures to support the currency without raising its interest rate. The Turkish president
Erdogan is ideologically adverse to interests and keeps the bank from doing what it must do to
cool the Turkish economy and to stabilize the currency.
Erdogan asked Russia for help but received nothing but good advice. He also called in
favors. When in June 2017 Saudi Arabia's clown prince Mohammed bin Salman (MbS) tried to take
over Qatar and to steal its juicy $350 billion sovereign wealth fund, the emir of Qatar called
on Turkey for help. Erdogan sent the Turkish army and air force. His troops protected Qatar
from a Saudi invasion.
With the lira in trouble the emir flew to Ankara and promised a new $15 billion investment
into Turkey. Additionally some mysterious cargo was unloaded from his plane. That
saved the lira for a few days. But Turkey's structural problems are unsolved. Erdogan is no
longer trusted and his son in law, who he made finance minister, lacks the necessary
qualification for the job.
Thus :
"We forecast a recession next year," S&P said. "Inflation will peak at 22 percent over
the next four months, before subsiding to below 20 percent by mid-2019."
The Qatari move came a few days before its arch enemy Saudi Arabia also moved into the area.
On Friday the U.S. announced that Saudi Arabia would support the U.S. occupied north-east Syria
with 100 million
dollar . The Wahhabi Saudis are now financing the secular Kurdish terror organization
PKK/YPG, the local U.S. proxy in north-east Syria.
If the Saudi clown prince MbS wants to take revenge on Turkey's Erdogan for messing up his
plans for Qatar, he now has his chance.
Posted by b on August 18, 2018 at 03:56 PM |
Permalink
One refinement to add to 'b's outstanding post (how the hell does he do it, miraculous !) as
far as I can see Turkey fell into the same deep state bankers financial trap, that Spain
Greece Italy fell for. Bail out a vunrable country then pull the rug out ! You own them ! So
I would slightly disagree with it being entirely of there own making. I blame the Rothchild
family.
Moody's and S&P ratings agencies are fraudulent institutions. For having AAA rated
billions worth of junk mortgages, they should have been indicted and prosecuted.
Excellent analysis again, b. You surpass yourself. There is something you talk about that has
always intrigued me
"For years Turkey borrowed large amounts of money from abroad and invested it into local
infrastructure instead of producing exportable products."
There is a parallel here with Spain. From entry into the Euro in 1999 the floodgates of
credit opened. Bankers, politicians and builders were involved in creating vast swathes of
speculative urbanization; two airports were built which now stand empty, a formula 1 track
hosted five races before closing, a phantom theme park; huge, almost empty accommodation
complexes, and the list goes on. The ghost airport in Ciudad Real, which cost £1.2
million euros, was sold off to Chinese buyers for a mere 10,000 euros. The "Cajas", the
regional banks, were all bailed out by the government.
Apart from local corruption, which is nothing new, I think there must have been a
deliberate strategy on the part of EU elites not to finance industrial projects that would
generate export currency, and hence compete with EU industrial powers such as Germany (I once
read Spanish academic paper arguing this but have not managed to track it down). When the
same happens in Turkey, obviously not an EU country, you have to wonder whether is it part of
a transatlantic banker strategy: corrupt national elites finance corrupt local elites to
build ghost infrastructures as cheap and shoddy as you can get, the banks that financed it
get bailed out if it all crashes. What's not to like?
Turks can't avoid Greek-style crisis now. The solution calls for a violent swing in trade
balance from huge deficit to sizable surplus, somewhere in a range of $100B. That can't
happen unless people of Turkey are warehoused in slave-labor-condition factories that can be
competitive enough to displace Asian players. That entails bone-crushing fall in living
standards.
All in all, 20 percent decline in GDP is now all but certainty. The longer Erdogan tries to
avoid the harsh medicine, the deeper this cancer goes. He should either bow to IMF, or to
exit NATO, join BRICS and ask for loans from that grouping.
Of course, Turkish military can say bye-bye to its present size. It's unsustainable.
Financial crunch will reduce Turkish armed forces to less than half of their present
size.
And if Erdogan wants to keep his soldiers well-equipped for half the price - which he should
- he'll have to switch to much more reasonably priced Russian weaponry. Once he does that,
even Russia may contribute $10B to his bailout kitty.
Otherwise, Erdogan is a dead man. The economic hurricane barreling his way is only gathering
strength with every passing day. And all he is doing is unfurling umbrellas and increasing
the volume of music.
That list of infrastructure @ Lochern mentions looks geared toward the holiday industry which
in the past has been a major income for Turkey ! Worth at the time perhaps investing in. Very
popular with Eurapians but very popular with Russians. My wild guess would be---- some dodgey
ploy by the west to drive a wedge between Russia and Turky, devideding and ruling both! By
meens of conflict and bank debt .The gains would be numerous long term and short term. But as
already mentioned may back fire and bring Russia and Turkey closer. I hope so.
Much of Turkeys external debt is private and not government . Their BIS controlled central
bank kept interest rates high. This forced Turkish banks to take out loans in USD or Euro
which had lower interest rates to meet loan demands in the private corporate sector , which
they made at higher interest rates after exchanging for Lira. More profitable. The assumption
was there would be a relatively stable exchange rate. So there was risk.
That risk made them vulnerable fx attack by the globalist banking cartel. When Erdogan
took over more control from the TCB last month to reduce interest rates and reduce demand for
foreign loans this was seen as an act of war. The independence of the central bank must be
defended. Trumps additional tarrif increases, mild as they were were simply a symbolic
barking of orders to take Turkey down
Looking at the broader picture. Since the 2008 financial blowout there has been "carry
trade" fueled by zero-cost liquidity pumped into the global system by quantitative easing,
which was then shipped to high-interest emerging markets such as Brazil, Turkey and other
countries.
With the beginning of the Fed's "tapering" of QE and rising interest rates since 2015, the
whole financial system has triggered a "reverse carry trade" where dollars flow out of
emerging markets back to safer havens. This is what you are seeing in Turkey, Argentina,
Russia, Brazil, etc.
The last 10 years are a replay of the decade running up to the 1997/1998 crisis. While the
1985 'Plaza Accord' dollar devaluation was not exactly QE, it had the same intent and results
– a flood of cheap money and dollar debt, and therefore growing global dependence on
the dollar and vulnerability to US monetary and economic policy
Some say countries like Turkey should know better, but countries have little control over
their monetary policy under the global and independent central banking system forced on them.
Go against this system and you will be hit with sanctions , subject to regime change or will
be invaded
So call it a homegrown crisis if thats the reality you choose to live in. Who am I to say
otherwise?
These rating agencies are the same ones that rated junk mortgage bonds AA. They are for sale
to highest bidder or since they haven't been prosecuted for their criminal behavior,
vulnerable to threats from the same political machine that turned a blind eye in 2008.
Turkey may have homegrown economic problems as you have pointed out but they certainly have
even more problems with a vindictive and extremely corrupt Uncle Sam who ruthlessly punish
any and all independent actions.
Another excellent blog B. I agree with many of the above commenters that the breadth and
depth of the analysis on MOA is truly amazing.
Pft@13. Good analysis as well.
However, I would expect that Turkey will not be another Greece. Rather I expect Turkey to
get help from its friends to stabilize its economic position, resist U.S. sanctions and avoid
an IMF bail-out.
With the support of Qatar, and I would expect China as well, I would expect Turkey to
protect its banks. However, it is also possible that they will let some private Turkish
companies, with dollar denominated debts, default. Such defaults, combined with the pressure
that declining dollar liquidity is already putting on other emerging markets and Italy, would
be destabilizing for the Western financial system. Sooner or later, and I suspect sooner, the
FED will be required to start printing money again, which will reverse the dollar's recent
strength and relieve the pressure on Turkey.
At the end of the day, however, I expect that this episode will be another step in the
direction of de-dollarization and will further reduce the ability of the U.S. to use economic
sanctions to bully its adversaries.
A strange paradox of life !
Owe your bank 1000 the bank manager will make you bankrupt, owe the bank a million and he'll
invite you home for dinner ! More to lose !
By this token I'd like to think, the more country's that refuse there debt, the less power
the west will have ! The less credibility and the less fear and influence they can inflict
.
If the west wants to weaponise banking so be it ! Bring it on. Let's pull the rug out from
under the banks/Rothchilds.
Feet ! Natural justice !
Pft @ 13 said:"Some say countries like Turkey should know better, but countries have little
control over their monetary policy under the global and independent central banking system
forced on them. Go against this system and you will be hit with sanctions , subject to regime
change or will be invaded."
CDWaller @ 15 said:"These rating agencies are the same ones that rated junk mortgage bonds
AA. They are for sale to highest bidder or since they haven't been prosecuted for their
criminal behavior, vulnerable to threats from the same political machine that turned a blind
eye in 2008."
"... So why should you care? Why does that matter to you or me? Well, like most emerging market financial crisis there is the danger of contagion . ..."
"... Turkey's economy is four times the size of Greece, and roughly equal in size to Lehman Brothers circa 2008. ..."
"... Turkey's other borders face six nations: Georgia, Iran, Iraq, Syria, Armenia, and Nakhchivan, a territory affiliated with Azerbaijan. Five of those are involved in ongoing armed conflicts or outright war. ..."
"... NATO has long outlived its' usefulness. Cancel its' stipend and bring our soldiers, marines, sailors and airmen and women home! Put them to work here. Fighting fires. ..."
"... NATO only seems to be useful to the hegemony that supports it. Peace is not it's mission. ..."
By now you've probably heard that Turkey is having a financial crisis, and Trump appears to be pouring gasoline on it.
But you may not understand what is happening, or you may not know why it's important.
So let's do a quick recap
.
Turkey's currency fell to a new record low today. Year to date it's lost almost half its value, leading some investors and
lenders inside and outside of Turkey to lose confidence in the Turkish economy.
...
"Ninety percent of external public and private sector debt is denominated in foreign currencies," he said.
Here's the problem. Because of the country's falling currency, that debt just got a lot more expensive.
A Turkish business now effectively owes twice as much as it did at the beginning of the year. "You are indebted in the U.S.
dollar or euro, but your revenue is in your local currency," explained Lale Akoner, a market strategist with Bank of New York
Mellon's Asset Management business. She said Turkey's private sector currently owes around $240 billion in foreign debt.
This is all about hot money that has been washing around in a world of artificially low interest rates, and now, finally, an
external shock happened. As it
always happens .
The bid-ask spread, or the difference between the price dealers are willing to buy and sell the lira at, has widened beyond
the gap seen at the depth of the global financial crisis in 2008, following Lehman Brothers Holdings Inc.'s collapse.
So why should you care? Why does that matter to you or me? Well, like most emerging market financial crisis there is the
danger of contagion
.
The turmoil follows a similar currency crash in Argentina that led to a rescue by the International Monetary Fund. In recent
days, the Russian ruble, Indian rupee and South African rand have also tumbled dramatically.
Investors are waiting for the next domino to fall. They're on the lookout for signs of a repeat of the 1997-1998 Asian financial
crisis that began when the Thai baht imploded.
A minor currency devaluation of the Thai baht in 1997 eventually led to 20% of the world's population being thrust into poverty.
It led to Russia defaulting in 1998, LTCM requiring a Federal Reserve bailout, and eventually Argentina defaulting in 2001.
Turkey's economy is four times the size of Greece, and roughly equal in size to Lehman Brothers circa 2008.
The markets want Turkey to run to the IMF for a loan, but that would require a huge interest rate hike and austerity measures
that would thrust Turkey into a long depression. However, that isn't the
biggest obstacle .
The second is that Erdogan would have to bury his hatchet with the United States, which remains the IMF's largest shareholder.
Without U.S. support, Turkey has no chance of securing an IMF bailout program.
There is another danger, a political one and not so much an economic one, that could have dramatic implications.
If Erdogan isn't overthrown, or humbled, then there is an ironclad certainty that Turkey will
leave NATO and
the West.
Turkey, unlike Argentina, does not seem poised to turn to the International Monetary Fund in order to stave off financial collapse,
nor to mend relations with Washington.
If anything, the Turkish President looks to be doubling down in challenging the US and the global financial markets -- two
formidable opponents.
...
Turkey would probably no longer view the US as a reliable partner and strategic ally.
Whoever ends up leading the country, a wounded Turkey would most likely seek to shift the center of gravity away from the West
and toward Russia, Iran and Eurasia.
It would make Turkey less in tune with US and European objectives in the Middle East, meaning Turkey would seek to assert a
more independent security and defense policy.
Erdogan has warned Trump that Turkey would
"seek new friends" , although Russia and China haven't yet stepped up to the plate to bat for him.
Russia, Iran and China do have a common interest when in comes to undermining the
petrodollar . Pulling Turkey into their sphere of influence would be a coup.
Turkey lies at a historic, strategic crossroad. The
bridge between the peaceful West and the war-ridden dictatorships of the East that the West likes to bomb.
On its Western flank, Turkey borders Greece and Bulgaria, Western-facing members of the European Union. A few years ago, Turkey
-- a member of NATO -- was preparing the join Europe as a full member.
Turkey's other borders face six nations: Georgia, Iran, Iraq, Syria, Armenia, and Nakhchivan, a territory affiliated with
Azerbaijan. Five of those are involved in ongoing armed conflicts or outright war.
Losing Turkey would be a huge setback for NATO, the MIC, and the permanent war machine.
more struggling economies are starting to get it. Trade wealth for the rulers (IMF supporters) to be paid by the rest of us.
Fight back. Squeeze the bankers balls. Can't have our resources, now way, no how, without a fight.
in a flailing Turkey? Weren't there some outside potential takers encouraging China when it floated its currency proposal?
Nastarana on Tue, 08/14/2018 - 8:41pm
NATO has long outlived its' usefulness. Cancel its' stipend and bring our soldiers, marines, sailors and airmen and women home! Put them to work here. Fighting fires.
Patrolling our shores for drug running and toxic dumping. Teaching school, 10 kids per class maximum. Refurbishing buildings and
housing stock. Post Cold War, an military alliance with Turkey makes no sense.
So most folks never heard of a guy named Hillel. He was a Baghdad Jew who moved to Judea
about 60 years before Christ was born.
His great influence on Judaism was a novel invention to get around the Jubilee which many
civilizations employed snd was part of Judaism Mosaic Law. Basically every 7 years debts were
cancelled to prevent the elites from accumulating all the land and wealth and enslaving the
bottom 99% and causing rebellion. Much of the debt forgiven was owed to the state in the form
of taxes but individuals and business also were indebted to money lenders . Debt of
individuals acquired to pay taxes, farm, etc was forgiven by the Jubilee. Business /Merchant
debts had to be repaid
The rabbiis of the Pharisees under the suggestion of Hillel the Elder, created a loophole
in Jewish law, in which a legal document would accompany the interest-free loans (charging
interest to fellow Jews was forbidden in the Torah) issued by individuals that stated that
the loans were to be transferred to the courts as the law of remission does not apply In this
case.
It was called a Prosbul.
This led to great unrest among Jews and non Jews alike. This unrest led to a Jewish
activist named Jesus leading a protest against the Pharisees and the money lenders. Michael
Hudson has a theory backed up by historical documents in the original Aramaic,Hebrew and
Greek that Mosaic Law is mostly about the prohibitions of the sins related to debt and the
sinful practices of creditors to secure repayment. Translations into English and other
languages have obscured this.
Christianity was formed after Jesus was executed to protect the money lenders .
Unfortunately the Romans were pro creditor and then Constantine hijacked the religion a
couple of centuries later , and aside from a prohibition on usury by the Roman Church the
Jubilee was no more. When the Roman Empire fell the Byzantine Emperor reinstated the Jubilee
from 7th-10th Century and abandoned this . I imagine this wad due to the Islamic Wars that
required external loans to finance at interest.
Judaism still use the prosbul today , at least in Orthodox , to escape the Jubilee called
for in Mosaic Law . That applied only for loans to Jews in any event. Prohibitions of usury
in the Christian world ended pretty much with the Reformation and Calvinism. Even so in the
US their were limits on usury in many US states until early 1980's when neoliberalism crushed
that. Now the poor get charged as much as 30% on credit card debt while earning 2% on savings
and they cant even declare bankruptcy like Trump did 6 times
Islamic banking is interest free though under Sharia Law. "Loans are equity-based,
asset-backed. In lieu of interest the banks rely on cost-plus financing (murabaha),
profit-sharing (mudaraba), leasing (ijara), partnership (musharaka) and forward sale
(bay'salam).
"This prohibition is based on arguments of social justice, equality, and property rights.
Islam encourages the earning of profits but forbids the charging of interest because profits,
determined ex post, symbolize successful entrepreneurship and creation of additional wealth
whereas interest, determined ex ante, is a cost that is accrued irrespective of the outcome
of business operations and may not create wealth if there are business losses. Social justice
demands that borrowers and lenders share rewards as well as losses in an equitable fashion
and that the process of wealth accumulation and distribution in the economy be fair and
representative of true productivity.
"Risk sharing. Because interest is prohibited, suppliers of funds become investors instead of
creditors. The provider of financial capital and the entrepreneur share business risks in
return for shares of the profits."
"Money as "potential" capital. Money is treated as "potential" capital -- that is, it
becomes actual capital only when it joins hands with other resources to undertake a
productive activity. Islam recognizes the time value of money, but only when it acts as
capital, not when it is "potential" capital."
"Prohibition of speculative behavior. An Islamic financial system discourages hoarding and
prohibits transactions featuring extreme uncertainties, gambling, and risks."
So maybe the war against Islam has another component?
Getting back to Jesus. Hudson says the Pharisees decided that Jesus' growing popularity
was a threat to their authority and wealth.
"They said 'we've got to get rid of this guy and rewrite Judaism and make it about sex
instead of a class war', which is really what the whole Old Testament is about,"
"That was that was where Christianity got perverted. Christianity turned so
anti-Jesus, it was the equivalent of the American Tea Party, applauding wealth and even
greed, Ayn-Rand style."
"Over the last 1000 years the Catholic Church has been saying it's noble to be
poor. But Jesus never said it was good to be poor. What he said was that rich people are
greedy and corrupt. That's what Socrates was saying, as well as Aristotle and the Stoic Roman
philosophers, the biblical prophets in Isaiah."
"Neither did Jesus say that it was good to be poor because it made you noble.
"What Jesus did say is that say if you have money, you should share it with other
people."
"American Fundamentalist Christians say don't share a penny. King Jesus is
going to make you rich. Don't tax millionaires. Jesus may help me win the lottery. Tax poor
people whom the Lord has left behind – no doubt for their sins. There's nothing about
the Jubilee Year here."
Hudson has a book coming out next week on the subject
The second neoliberalization of Argentina turned into second financial crash. Brazil is probably next. And Argentina and Brazil
were two contires in which neoliberal staged a counterrevolution after financial crisi of 2008.
The IMF is back in Argentina: "an economic and social crisis, even more serious than the present one, looms large on the horizon"
1. The vicious circle of illegitimate debt grapples the Argentine people once again
2. IMF's $ 50 billion loan surpasses Greece's previous record
Sergio Ferrari from Berne, Switzerland interviewed Eric Toussaint, international debt specialist
After more than a decade of Argentina's official "distance" from the International Monetary Fund (IMF), Mauricio Macri's government
has just knocked on the doors of the world's financial police. The $ 50 billion credit granted by the organization during the first
week of June sets an international record and will directly impact the economic and social situation of this South American country.
Eric Toussaint, Belgian historian and economist, an eminent specialist in this field and spokesperson for the Committee for the Abolition
of Illegitimate Debt (CADTM), based in Brussels, pointed this out. Interview follows. Q: Why did the Argentine government turn
to the IMF , in full view of Argentina's
relations with this international organization in the late 1990s and their dire political consequences? Is the financial top brass
of the Macri team despairing?
Eric Toussaint (ET): Since the Mauricio Macri government assumed office in December 2015, its policies have led to a critical
situation. Sharp reduction in export taxes have brought down tax revenues, the debt servicing expenditure has been significantly
increased (100% higher in 2018 than in 2017). The country is running out of dollars. Currency reserves fell by $ 8 billion earlier
this year. Macri needs this IMF loan to continue debt servicing. Private international lenders require such a loan as a prerequisite
for continued credit to Argentina. A very large chunk of the IMF loan will be used directly to repay foreign creditors in dollars.
Q: If we look at the Argentine history of the 1990s, this seems to be a scheme of playing with fire
ET: Yes, of course. But I would like to further explore the background of this appeal to the IMF
Q- Please go ahead!
ET: This shows that the government's policy is an abject failure: with a peso that devalued fast; with the
interest rate set at a high 40% by the Argentine Republic's
Central Bank ; with the $ 8 billion reduction in international reserves
that keep declining. And with a debt service that has increased by
100% compared to 2017. Faced with a balance sheet of such a nature,
undoubtedly it is a total failure. Macri claimed that a high growth level and a viable debt would be ensured by paying the debt –
between end-2015 and early-2016 – and by compensating the
vulture funds , in keeping with Judge Thomas Griesa's
verdict. He knelt before the vulture funds (see:
http://www.cadtm.org/Reject-the-Imminent-Agreement-with
). But the facts confirm that this plan did not work. Debt rose at a whirling pace and it's startling to see how fast it snowballed.
As a result, it became impossible to convince the creditors that Argentina could repay its debt in the future. That's why Macri is
asking for this $ 50 billion credit. We must remember that when Greece received $ 30 billion from the IMF in 2010 in the backdrop
of a dramatic situation, it was a record amount!
Q: Some analysts say that President Macri is trying to breathe in some fresh air with the help of this loan, before commanding
a comfortable position in the October 2019 elections.
ET: I would not like to engage in farfetched political speculations. I prefer facts. I have read the contents of the agreement
signed with the IMF and it has imposed a severe reduction in general social benefits and wages of the public servants. Public investment
will be almost wiped out and it will lead to an economic depression. Debt repayment will increase and the IMF charges high
interest rates . The government will impose taxes with elevated
rates on the public to repay the debt, while continuing to hand out fiscal perks to the capitalists. The government will encourage
the export of the maximum number of agricultural products and raw materials to the global market by reinforcing the extractivist-exporting
model. IMF's policy will lead the country to an economic and social crisis even more serious than what it suffered before this loan
was sanctioned. Let's go back to your question. It is very likely that, politically, Macri will claim that what he is doing is not
his project, but what the IMF demands from him.
Q: This brings us back to a not-so-distant past and I would like to highlight that: the decade of indebtedness and the IMF's
role in the 1990s that eventually led to the social outburst of 2001. Can history repeat itself without tragedy?
ET: History is repeating itself in a country that is a serial debt payer. It started with the illegitimate and odious debt inherited
from the military dictatorship of the 1970s. IMF's support was crucial for this dictatorship to continue until the early 1980s. The
vicious circle of illegitimate debts persisted during the 1990s with President Carlos Menem followed by Fernando De la Rúa. Their
allegiance to the IMF's recommendations led to the great social crisis of late 2001. President Rodríguez Saá, in his few days or
Presidency at end-2001, announced the suspension of debt repayment to allay popular anger. The debt was restructured in 2005, then
re-negotiated with creditors who had not participated before. It caused a crisis in the government and evoked sharp criticism from
the people (see the section on Argentina here
http://www.cadtm.org/Restructuration-Audit-Suspension,11723
). Former minister Roberto Lavagna, who had negotiated the 2005 restructuring, objected to negotiations with outsider creditors.
The Argentine authorities never wanted to do what Ecuador did in 2007-2008: to carry out a debt audit with citizens' participation,
which could have defined the odious and illegitimate part of the debt (see:
http://www.cadtm.org/Video-The-Ecuador-debt-audit-a
and http://www.cadtm.org/Vulture-funds-are-the-vanguard
). This, along with the inconsistency of the Cristina Fernandez government's national sovereignty discourse, frustrated people. This
partly explains Macri's electoral victory in 2015.
Q: A course over several decades where illegitimate debts condition government policies without ever finding structural solutions
ET: Yes. And that led today to this new mega-loan from the IMF. From now on, it can be included in the category of odious and
illegitimate debts. An odious debt is a debt contracted against the people's interests, and the creditors know that it is illegitimate.
Evidently a new illegitimate and odious debt is taking shape.
Q: What about future prospects?
ET: I have already spoken about the deteriorating economic and social crisis. I hope for a strong popular reaction in the coming
months. I also hope that the popular forces will not take too long to consolidate their strength to oppose even more vigorously the
Macri government and the pressures of the IMF and other international creditors.
Part I:
Commercial Paper Market Seizure turns Banks into their
own Vulture Investors
This article appeared in
AToL
on November 27, 2007
Vulture restructuring is a purging cure for a
malignant debt cancer. The reckoning of systemic debt presents regulators with a choice of facing the cancer
frontally and honestly by excising the invasive malignancy immediately or let it metastasize over the entire
financial system over the painful course of several quarters or even years and decades by feeding it with more
dilapidating debt.
But the strategy of being your own vulture started
with Goldman Sachs, the star Wall Street firm known for its prowess in alternative asset management, producing
spectacular profits by manipulating debt coming and going amid unfathomable market anomalies and contradictions
during years of liquidity boom. The alternative asset management industry deals with active, dynamic
investments in derivative asset classes other than standard equity or fixed income products. Alternative
investments can include hedge funds, private equity, special purpose vehicles, managed futures, currency
arbitrage and other structured finance products. Counterbalancing opposite risks in mutually canceling paired
speculative positions to achieve gains from neutralized risk exposure is the basic logic for hedged fund
investments.
Hedge Funds
The wide spread in return on investment
between hedge funds and mutual funds is primarily due to differences in trading strategies. One fundamental
difference is that hedge funds deploy dynamic trading strategies to profit from arbitraging price anomalies
caused by market inefficiencies independent of market movements whereas mutual funds employ a static
buy-and-hold strategy to profit from economic growth. An important operational difference is the use of
leverage. Hedge funds typically leverage their informed stakes by margining their positions and hedging their
risk exposure through the use of short sales, or counter-positions in convergence or divergent pairs. In
contrast, the use of leverage is often limited if not entirely restricted for mutual funds.
The classic model of hedge funds
developed by Alfred Winslow Jones (1910-1989) takes long and short positions in equities simultaneously to
limit exposures to volatility in the stock market. Jones, Australian-born, Harvard and Columbia educated
sociologist turned financial journalist, came upon a key insight that one could combine two opposing investment
positions: buying stocks and selling short paired stocks, each position by itself being risky and speculative,
but when properly combined would result in a conservative portfolio that could yield market-neutral outsized
gains with leverage. The realization that one could couple opposing speculative plays to achieve conservative
ends was the most important step in the development of hedged funds.
The
Credit Guns of August
Yet the credit guns of August 2007 did
not spare Goldman's high-flying hedge funds. Goldman, the biggest
US
investment bank by market value, saw its Global Equity Opportunities Fund suffer a 28% decline with assets
dropping by $1.4 billion to $3.6 billion in the first week of August as the fund's computerized quantitative
investment strategies fumbled over sudden sharp declines in stock prices worldwide.
The Standard & Poor's 500 Index, a
measure of large-capitalization stocks, fell 44.4 points or 2.96% on August 9. On August 14, the S&P 500 fell
another 26.38 points or 1.83%, followed by another fall of 19.84 points to 1,370.50 or 1.39% on August 15,
totaling 9.4% from its record high reached on July 19, but still substantially higher than its low of 801
reached on
March 11, 2003
.
Goldman explained the setback in Global
Equity Opportunities in a statement: "Across most sectors, there has been an increase in overlapping trades, a
surge in volatility and an increase in correlations. These factors have combined to challenge many of the
trading algorithms used in quantitative strategies. We believe the current values that the market is assigning
to the assets underlying various funds represent a discount that is not supported by the fundamentals." The
statement is a conceptual stretch of the meaning of "fundamentals" which Goldman defines as value marked to
model based on a liquidity boom rather than marked to market, even as the model has been rendered dysfunctional
by the reality of a liquidity bust.
The market value in mid August of two
other Goldman funds: Global Alpha and North American Equity Opportunities also suffered big losses. Global
Alpha fell 27% in the year-to-date period, with half of the decline occurring in the first week of August.
North American Equity Opportunities, which started the year with about $767 million in assets, was down more
than 15% through July 27. The losses had been magnified by high leverage employed by the funds' trading
strategies. Goldman said both risk-taking and leverage in these two funds had since been reduced by 75% to cut
future losses. Similarly, leverage employed by Global Equity Opportunities had been reduced to 3.5 times equity
from 6 times. The three funds together normally managed about $10 billion of assets.
Feeding
on One's Own Death Flesh
Facing pending losses, Goldman Chairman
Lloyd Blankfein was reported to have posed a question to his distraught fund managers: if a similar distress
opportunity such as Goldman's own Global Equity Opportunities presented itself in the open market outside of
Goldman, would Goldman invest in it as a vulture deal. The answer was a resounding yes. Thus the strategy of
feeding on one's own dead flesh to survive, if not to profit, took form.
Goldman would moderate its pending
losses by profiting as vulture investor in its own distressed funds. The loss from one pocket would flow into
another pocket as gains that, with a bit of luck, could produce spectacular net profit in the long run if the
abnormally high valuations could be manipulated to hold, or the staying power from new capital injection could
allow the fund to ride out the temporary sharp fall in market value. It was the ultimate hedge: profiting from
one's own distress. The success of the strategy depends on whether the losses are in fact caused by temporary
anomalies rather than fundamental adjustment. Otherwise, it would be throwing good money after bad.
The Fed
Held Firm on Inflation Bias
The Fed, in its Tuesday, August 7 Fed
Open Market Committee (FOMC) meeting, defied market expectation and decided against lowering interest rates
with a bias against growth and focused instead on inflation threats. In response, the S&P 500 index, with
profit margin at 9% against a historical average of 6%, fell 44.4 points or 2.96% to 1,427 on August 9. The Dow
Jones Industrial Average (DJIA) dropped 387 points to 13,504 on the same day, even as the Federal Reserve
pumped $62 billion of new liquidity into the banking system to help relieve seizure in the debt market.
On the following Monday, August 13,
Goldman announced it would injected $2 billion of new equity from its own funds into its floundering Global
Equity Opportunities fund, along with another $1 billion from big-ticket investors, including CV Starr & Co.,
controlled by former American International Group (AIG) chairman Maurice "Hank" Greenberg, California real
estate developer Eli Broad who helped found SunAmerica and later sold it to AIG, and hedge fund Perry Capital
LLC, which is run by Richard Perry, a former Goldman Sachs equity trader.
The new equity injection was intended
to help shore up the long/short equity fund, which was down almost 30% in the previous week, to keep the fund
from forced sales of assets at drastic discount long enough for markets to stabilize and for the fund to get
out of the tricky leveraged bets it took before the credit markets went haywire in mid August. Global Equity
"suffered significantly" as global markets sold off on worries about debt defaults credit draught, dragging the
perceived value of its assets down to $3.6 billion, from about $5 billion.
Goldman chief financial officer David
Viniair on a conference call with analysts was emphatic that the move was not a rescue but to capture "a good
opportunity". After more than a week of panic over the disorderly state of global capital markets, Goldman
Sachs pulled a kicking live rabbit magically out of its distressed asset hat.
On a conference call to discuss the
additional equity investment in the $3.6 billion Global Equity Opportunities fund, Goldman executives insisted
the move would not add to moral hazard (encouraging expectations that lead investors to take more risk than
they otherwise might because they expect to be bailed out), but would merely reflect the firm's belief that the
value of the fund's underlying assets was out of whack with "fundamentals" and that sooner or later the losses
would be recouped when an orderly market returns.
"We believe the current values that the
market is assigning to the assets underlying various funds represent a discount that is not supported by the
fundamentals," Goldman explained in a statement. A day later, on August 14, the S&P 500 fell another 26.38
points or 1.83%, followed by another fall of 19.84 points or 1.39% on August 15, notwithstanding that a chorus
of respected voices were assuring the public that the sub-prime mortgage crisis had been contained and would
not spread to the entire financial system.
But Goldman did not inject more equity
into two of its other funds: Global Alpha and North American Equity Opportunities that had also suffered sharp
losses. Goldman said it was reducing leverage in the funds, a process that was mostly complete, but added that
it was not unwinding Global Alpha, down 27% this year through August 13, about half of that in the previous
week alone. Unlike Global Equity Opportunities, Goldman did not bolster its Global Alpha quantitative fund.
Investors had reportedly asked to withdraw $1.6 billion, leaving Global Alpha with about $6.8 billion in assets
after forced liquidation to pay the withdrawals.
Ireland
registered Global Alpha, originally seeded in 1995 with just $10 million and returned 140% in its first full
year of operation, was started by Mark Carhart and Raymond Iwanowski, young students of finance professor
Eugene Fama of the
University
of
Chicago
.
Fama's concept of efficient markets is based on his portfolio theory which states that rational investors will
use diversification to optimize their portfolios based on precise pricing of risky assets.
Global Alpha soon became the Rolls
Royce of a fleet of alternative investment vehicles that returned over 48% before fees annually. Hedge funds
usually charge management fees of up to 2% of assets under management and 20% of investment gains as incentive
fees. Global Alpha fees soared to $739 million in first quarter of 2006, from $131 million just a year earlier
and boosted earnings rise at the blue-chip Goldman Sachs by 64% to $2.48 billion, the biggest 2006
first-quarter gain of any major Wall Street firm. Goldman is one of the world's largest hedge fund managers,
with $29.5 billion in assets under management in an industry that oversees $2.7 trillion globally. Goldman
reported in October 2006 that its asset management and securities services division produced $485 million, or
21% of its $2.36 billion in pretax profit for the fiscal third quarter.
For 2006, Global Alpha dropped 11.6%
through the end of November and end up dropping 9% for the year yet still generating over $700 million in fees
from earlier quarters. That was the first annual decline in seven years and followed an almost 40% gain for all
of 2005. The fund took a hit misjudging the direction of global stock and currency markets, specifically that
the Norwegian krone and Japanese yen would decline against the dollar. Global Alpha lost money partly on
wrong-way bets that equities in
Japan
would
rise, stocks in the rest of
Asia
and the
US
would fall and the dollar would strengthen. Before August 2007, the fund had lost almost 10% on wrong bet in
global bond markets.
Goldman's smaller $600 million North
American Equity Opportunities fund had also hit rough waters, losing 15% this year. There was real danger of a
rush of redemptions from nervous investors that would force the funds to sell securities in a market that had
all but seized up, forcing down asset prices to fire sale levels. Global Equity Opportunities investors were
entitled to pull their money monthly with a 15-day warning, meaning notices for Aug. 31 were due on August 16.
Global Alpha investors could redeem quarterly, and certain share classes also must notify the fund by the week
of August 13.
Hedge funds are private, largely
unregulated pools of capital whose managers command largely unrestricted authority to buy or sell any assets
within the bounds of their disclosed strategies and participate in gains but not losses from investment. The
industry has been growing over 20% annually due to its above-market performance. Still, Carhart and Iwanowski,
both in their early forties, had not been able to take any of their 20% incentive fees since Global Alpha fell
from its 2006 peak. They would have to make good about 60% of their previous incentive fees from profit, if
any, in future quarters before they could resume taking a cut of the fund's future gains.
The Fed
Wavered
By August 16, the DJIA fell way below
13,000 to an intraday low of 12,445, losing 1,212 points from its 13,657 close on August 8. The next day,
August 17, the Fed while keeping the Fed Funds rate target unchanged at 5.25%, lowered the Discount Rate by 50
basis points to 5.75%, reducing the gap from the conventional 100 basis points by half to 50 basis points and
changed the rules for access by banks to the Fed discount window.
In an accompanying statement, the Fed
said: "To promote the restoration of orderly conditions in financial markets, the Federal Reserve Board
approved temporary changes to its primary credit discount window facility. The Board approved a 50 basis point
reduction in the primary credit rate to 5-3/4 percent, to narrow the spread between the primary credit rate and
the Federal Open Market Committee's target federal funds rate to 50 basis points. The Board is also announcing
a change to the Reserve Banks' usual practices to allow the provision of term financing for as long as 30 days,
renewable by the borrower. These changes will remain in place until the Federal Reserve determines that market
liquidity has improved materially. These changes are designed to provide depositories with greater assurance
about the cost and availability of funding. The Federal Reserve will continue to accept a broad range of
collateral for discount window loans, including home mortgages and related assets. Existing collateral margins
will be maintained. In taking this action, the Board approved the requests submitted by the Boards of Directors
of the Federal Reserve Banks of New York and
San Francisco
."
The Fed
Panicked
A month later, on September 18,
brushing aside a DJIA closing at a respectable 13,403 the day before even in the face of poor employment data
for August, the Fed panicked over the unemployment data and lowered both the Fed Funds rate target and the
Discount Rate each by 50 basis points to 4.75% and 5.25% respectively. The rate cuts gave the DJIA a continuous
rally for 9 consecutive days that ended on October 1 at 14,087. Obviously, the Fed knew something ominous about
the credit market that was not reflected in the DJIA index.
The Global Equity Opportunities fund,
now with about $6.6 billion in asset value, was using six times leverage before the capital infusion. Like many
other managers, Goldman was experiencing the same problems with its so-called quantitative funds. Quant funds
use computerized models to make opportunistic investment decisions on minute statistic disparities in asset
prices caused by market inefficiency. When the short-term credit market seized up, the quant models turned
dysfunctional.
Funds caught with significant losses in
credit and bond investments had to sell stock holdings to lower the risks profile of their overall portfolios,
and the herd selling in the stock market magnified the price shift in a downward spiral. Stocks that were held
long fell in price, and stocks that were held short rose, exacerbating losses.
Opacity
Fueled Market Rumors
As required, quant fund managers have
been disclosing losses to investors but they are not required to disclose to the market. The opacity fueled the
rumor mill. Renaissance Technology's $26 billion institutional equities fund was reportedly down 7% for the
year. Some of the funds Applied Quantitative Research (AQR) managed were down as well, as were quant funds at
Tykhe Capital, Highbridge Capital and D.E. Shaw (of which Lehman now owns 20%).
Vulture
Opportunities in Distressed Funds
At Goldman, quant funds made up half of
the $151 billion of alternative investments under management, and half of which was the sort of long-short
equity quant funds that had been having trouble. But Goldman executives began to see opportunities in
distressed funds. The highly respected AQR was raking in new funds to invest in distressed situations, as were
other astute fund managers. AQR is an investment management firm employing a disciplined multi-asset, global
research process, with investment products provided through a limited set of collective investment vehicles and
separate accounts that deploy all or a subset of AQR's investment strategies. These investment products span
from aggressive high volatility market-neutral hedge funds, to low volatility benchmark-driven traditional
products. AQR's founder is
Clifford S. Asness, a
Goldman alumni where he was Director of Quantitative Research for the Asset Management Division responsible for
building quantitative models to add value in global equity, fixed income and currency markets.
H
e
was another of Fama's students at the
University
of
Chicago
.
Goldman was putting its own money down
alongside that of select outside investors, an expression of its faith in the fund's ability to recoup. The
situation differed from that of Bear Stearns which had to loan $1.6 billion to bail out one of two internal
hedge funds that had big problems with exposure to mortgage-related securities.
The
First Wave of Warnings
Goldman, one of the world's premiere
financial companies, had joined Bear Stearns and
France
's
BNP Paribas in revealing that its hedge funds had been hit by the credit market crisis. Bear Stearns earlier in
the summer disclosed that two of its multibillion dollar hedge funds were wiped out because of wrong bets on
mortgage-backed securities. BNP Paribas announced a few weeks later it would freeze three funds invested in US
asset-backed securities.
The assets of the two troubled Bear
Stearns hedge funds had been battered by turmoil in the credit market linked to sub-prime mortgage securities.
On
Jun 20, 2007
, $850 million of the funds' assets held as
collateral was sold at greatly discounted prices by their creditor, Merrill Lynch & Co. The assets sold
included mortgage-backed securities (MBS), collateralized debt obligations (CDO) and credit default swaps
(CDS). JP Morgan, another Bear Stearns creditor, had also planned an auction for some of the collateralized
assets of the Bear Stearns funds, but cancelled the auction to negotiate directly with the Bear Stearns funds
to unwind positions via private transactions to avoid setting a market price occasioned by market seizure.
The two Bear Stearns funds: High-Grade
Structured Credit Strategies Enhanced Leverage Fund and High-Grade Structured Credit Strategies Fund, run by
mortgage veteran Ralph Cioffi, were facing shut-down as the rescue plans fell apart. The funds had slumped in
the first four months of 2007 as the subprime mortgage market went against their positions and investors began
asking for their money back. The High-Grade Structured Credit Strategies Enhanced Leverage Fund sold roughly
$4 billion of subprime mortgage-backed securities in mid June, selling its highest-rated and most heavily
traded securities first to raise cash to meet redemption requests from investors and margin calls from
creditors, leaving the riskier, lower-rated assets in its portfolio that had difficulty finding buyers.
Collateral Debt Obligation Crisis
CDOs are illiquid assets that normally
trade only infrequently as institutional investor had not intended to trade such securities. Demand for them
is not strong even in normal times. In a credit crunch, demand became extremely weak. Sellers typically give
investors one or two days to price the assets and bid in order to get the best price. Bid lists were now sent
out for execution within roughly an hour, which was unusual and suggested that sellers were keen to sell the
assets quickly at any price.
Bear Stearns' High-Grade Structured
Credit Strategies Enhanced Leverage Fund sold close to $4 billion worth of AAA and AA rated securities. The
fund was started less than a year ago with $600 million in assets, but used leverage to expand its holdings to
more than $6 billion. But subprime mortgage trades that went wrong left the fund down 23% in the first four
months of 2007. The fund was selling its highest-rated and most tradable securities first to raise cash to meet
expected redemption requests and margin calls. Buyers were found for the bonds but the fund still had to retain
lower-rated subprime mortgage-based securities which had triggered its losses earlier in the year.
Bear Stearns was highly leveraged in an
illiquid market and was faced with the prospect that its funds were going to start getting margin calls so it
tried to sell ahead of being in the worst spot possible. Subprime mortgages were offered at low initial rates
to home buyers with blemished credit ratings who could not carry the adjusted payments if and when rates rise.
This was not a problem as long as prices for houses continued to rise, allowing the lenders to shift loan
repayment assurance from the borrower's income to the rising value of the collateral. Thus subprime mortgages
lenders were not particularly concerned about borrower income for they were merely using home buyers as needed
intermediaries to profit from the debt–driven housing boom. This strategy worked until the debt balloon burst.
Rising delinquencies and defaults in this once-booming part of the mortgage market had triggered a credit
crunch earlier in the year that left several lenders bankrupt. Many hedge funds had generated big gains for
several years on this unstainable liquidity boom. The premature bears who shorted the market repeated lost
money as the Fed continued to feed the debt balloon to sustain the unsustainable.
As delinquencies and foreclosures rose
finally, losses first hit the riskiest tranches of subprime mortgage-backed securities (MBS). The losses were
subsequently transmitted to collateralized debt obligations (CDOs) which invested in the higher-rated tranches
of subprime MBS that did not have an active market since they were bought by institutions with the intention to
hold until maturity. Such securities were super safe as long as their ratings remain high.
Hedge funds have become big
credit-market players in recent years, and many firms trade the riskiest tranches of subprime MBS and
higher-rated CDOs tranches to profit from the return spread. While some funds, such those managed by Cheyne
Capital and Cambridge Place Investment Management, had suffered sudden losses, some hedge funds made handsome
gains in February 2007 betting that a subprime mortgage crisis would hit.
As the number of market participants
increased and the packaging of the CDO became more exoteric over the liquidity boom years, it became impossible
to know who were holding the "toxic" tranches and how precisely the losses would spread, since the risk profile
of each tranche would be affected by the default rates of other tranches. The difficulty in identifying the
precise locations of risk exposure caused a sharp rise in perceived risk exposure system wide. This sudden risk
aversion led to rating downgrades of the high-rated tranches, forcing their holders to sell into a market with
few buyers.
The Federal Deposit Insurance
Corporation, which monitors risk in the banking system, tracks bank holdings of MBS, but not specific tranches
of CDOs. It has no information on which bank holds CDOs and how much, since such instruments are held by the
finance subsidiaries of bank holding companies, off the balance sheets of banks. Asian investors, particularly
those in
Japan
, had been eager to seek
off-shore assets yielding more than the near zero or even negative interest rates offered at home. Many
Japanese as well as foreign investors participated in currency "carry trade" to arbitrage interest rate spreads
between the Japanese yen and other higher interest rate currencies and assets denominated in dollars, fueling a
liquidity boom in US markets. The
US
trade
deficit fed the
US
capital account surplus as
the surplus trade partners found that they could not convert the dollars they earned from export to the
US
into local currencies without suffering undesirable rise in money supply.
The trade surplus dollars went into the
US
credit market.
The growth of CDOs has been explosive
during the past decade. In 1995, there were hardly any. By 2006, more than $500 billion worth was issued. About
40% of CDO collateral was residential MBS, with three quarters in subprime and home-equity loans, and the rest
in high-rated prime home loans. CDOs became an important part of the mortgage market because their issuers also
bought the riskier tranches of MBS that others investors shunned. The high-rated tranches of MBS were sold
easily to pension funds and insurers. But the ultra-high rated tranches paid such low returns because of their
perceived safety that few buyers were interested, forcing the banks which structured them to hold them
themselves. The issuers often hold the more riskier tranches to sell at later dates for profit when the value
of the collateral rose with rising home prices. But when the riskier tranches could not be sold as home prices
fell and mortgage default rose, the higher rating tranches suffered rating drops and institutional buyers were
prevented by regulation to hold the ones they had bought and from buying new ones. When the ultra safe
tranches held by banks are downgraded, banks are forced to writedown their value. With CDOs withdrawing from
the residential MBS market, mortgage lenders were unable to sell the loans they had originated for new funds to
finance new mortgages.
The chain of derivative structures that
turns home loans into CDOs begins when a mortgage is packaged together with other mortgages into an MBS. The
MBS is then sliced up into different CDO tranches that pay on a range of interest rates tied to risk levels.
Mortgage payments go first to the highest-rated tranches with the lowest interest rates. The remaining funds
then flows down to the next risky tranches until all are paid. The riskiest CDO tranches get paid last, but
they offer the highest interest rates to attract investor with strong risk appetite.
In theory, all trenches have the same
risk/return ratio. As the liquidity boom has gone on for years with the help of the Fed, historical data would
suggest that risks of default should be minimal. Yet when losses actually occurred from unanticipated mortgage
defaults and foreclosures, the riskiest tranches were hit first, while the top-rated tranches were hit last.
But until losses occurred, the riskier tranches got the higher returns. Over the years, the riskier tranches
generated big profit for hedge funds when the risks did not materialize to overwhelm the high returns. The
problem was that the profitability drove new issues of MBS at a faster pace than maturing MBS, with the number
and amount of outstanding securities getting bigger with each passing year, exposing investors to aggregate
risk higher than the accumulated gains. Because of the complexity and opacity of the CDO market, institutional
investors were not alerted by rating agencies of the fact that their individual safety actually caused a sharp
rise in systemic risk. They felt comfortable as long as assets they acquired were rated AAA and deemed
bankruptcy-remote, not realizing the system might seize up some Wednesday morning. That Wednesday came on
August 15, 2007
.
CDOs, a cross between an investment
fund and an asset-backed security (ABS), perform this slicing process of risk/reward unbundling repeatedly to
keep money recycling and money supply growing in the mortgage market. While CDOs lubricate the credit market to
make more home financing affordable to more home buyers, it raises the price of home and its financing cost
beyond the carrying capability of almost all home buyers when the bursting of the debt bubble resets interest
rates to normal levels, making a rising default rate inevitable.
Hedge funds are attracted by the high
returns offered by the lowest-rated tranches of subprime MBS undbubled by CDOs, the so-called equity tranches
which sink underwater as home prices fall. Many hedge funds arbitrage the wide return spread with low-cost
funds borrowed in the commercial paper market and magnify the return with high leverage through bank loans.
They often hedge against risk by holding derivatives that are expected to rise in value when housing prices
fall, such as interest rate swaps. They also hedge against defaults with credit default swaps. These hedges
failed when risk was re-priced by the market at rollover time for short-term securities which could be every 30
days.
CDOs
and Commercial Paper
Much of the money used to buy CDOs come
form the commercial paper market. Commercial paper consists of short-term, unsecured promissary notes issued
primarily by financial and non-financial corporations. Maturities range up to 270 days but average about 30
days. Many companies use commercial paper to raise cash needed for current transactions, and many find it to be
a lower-cost alternative to bank loans. Financial companies use high-rated CDO tranches as collateral to back
their commercial paper issues.
Because commercial paper maturities do
not exceed nine months and proceeds typically are used only for current transactions, the notes are exempt from
registration as securities with the United States Securities and Exchange Commission.
Large institutions have long managed
their short-term cash needs by buying and selling securities in the money market since the early 1970's. Today,
a broad array of domestic and foreign investors uses these versatile, short-term securities to help to make the
money market the largest, most efficient credit market in the world driving assets from $4 billion in 1975 to
more than $1.8 trillion today. This money market is a fixed income market, similar to the bond market. The
major difference being that the money market specializes in very short term debt securities.
The money market is a securities market
dealing in short-term debt and monetary instruments. Money market instruments are forms of debt that mature in
less than one year and are very liquid but traded only high denominations. The easiest way for individual
investor to gain access is through money market mutual funds, or sometimes through a money market bank account.
These accounts and funds pool together the assets of thousands of investors and buy the money market securities
on their behalf.
Borrowing short-term money from banks
is often a labored and uneasy situation for many corporations. Their desire to avoid banks as much as they can
has led to the popularity of commercial paper. For the most part, commercial paper is a very safe investment
because the financial situation of a large company can easily be predicted over a few months. Furthermore,
typically only companies with high credit ratings and credit worthiness issue commercial paper and over the
past 35 years there have only been a handful of cases where corporations defaulted on their commercial paper
repayment.
ABCP
Conduits
Asset backed commercial paper (ABCP) is
a device used by banks to get operating assets, such as trade receivables, funded by the issuance of
securities. Traditionally, banks devised ABCP conduits as a device to put their current asset credits off their
balance sheets and yet provide liquidity support to their clients. Conduits raise money by selling short-term
debt and using the proceeds to invest in assets with longer maturities, like mortgage-backed bonds. Conduits
typically have guarantees from banks, which promise to lend them money up to the amount of the SIVs the banks
structure.
A bank with a client whose working
capital needs are funded by the bank can release the regulatory capital that is locked in this credit asset by
setting up a conduit, essentially a special purpose vehicle (SPV) that issues commercial paper, such as the
ones used by Enron that led to its downfall. The conduit will buy the receivables of the client and get the
same funded by issuance of commercial paper. The bank will be required to provide some liquidity support to the
conduit, as it is practically impossible to match the maturities of the commercial paper to the realization of
trade receivables. Thus, the credit asset is moved off the balance sheet giving the bank a regulatory relief.
Depending upon whether the bank provides full or partial liquidity support to the conduit, ABCP can be either
fully supported or partly supported.
ABCP conduits are virtual subsets of
the parent bank. If the bank provides full liquidity support to the conduit, for regulatory purposes, the
liquidity support given by the bank may be treated as a direct credit substitute in which case the assets held
by the conduit are aggregated with those of the bank. ABCP conduits are also set up large issuers that are not
banks.
The key weakness in the entire credit
superstructure lies in the practice by intermediaries of credit to borrow short term to finance long term. This
term carry is magical in an expanding economy when the gap between short term and long term credit is narrower
than gains from long term asset appreciation. But in a contracting economy, it can be a fatal scenario,
particularly if falls in short term rates raise the credit rating requirement of the short term borrower,
putting previously qualified loans in technical default. Securities that face difficulty in rolling over at
maturity are known as "toxic" in the trade.
Lethal
Derivatives
The credit default swap market is a
microcosm of investor confidence. Credit default swaps are insurance for bad debt. Insured creditors are
compensated by the seller of the insurance if a debtor defaults on a loan. When the threat of default rises in
the market, the insurance premium rises, just as Katrina boosted hurricane insurance premium. This is known in
the business as re-pricing of risk. The cost of credit default swaps written on investment banks such as Bear
Stearns and Goldman Sachs and on commercial banks such as Citibank have soared in the past few months amid
worries that troubles in the subprime-mortgage market and the leveraged-buyout market could leave them with
massive loan defaults. The financial industry tracks mortgage-linked securities via the ABX index, which
calculates the prices of a basket of assets backed by subprime loans.
The ongoing crisis in the
US
housing market has pushed the ABX, a key mortgage-linked derivatives index,
to new lows, threatening to unleash a further bout of credit market upheaval. Price swing in the ABX can
reduce the value of ultra-safe credit instruments that carried high credit ratings, forcing banks and other
regulated investors to make further large write-downs on their credit market holdings, on top of the huge
losses several major
US
and foreign banks
suffered from credit turmoil that began in August.
As the
US
mortgages market deteriorates, financial sector losses will accumulate.
Secondary market price movements indicate that losses on mortgage inventory are likely to be larger in coming
quarters. Before July, the part of the ABX index that tracks AAA debt was trading almost at face value.
However, in the last three weeks in October, it has fallen sharply due to downgrades by credit rating agencies
and continuing bad data from the housing sector.
As a result, the so-called ABX 07-1
index – which tracks AAA mortgage bonds originated in the first half of this year – fell to a record low close
of 79 on October 30, meaning that traders reckon these bonds are worth only 79 cents on the dollar. The ABX
"BBB" 07-1 index measures the performance of loans made during the second half of 2006, when many home purchase
loans were made to buyers with shaky credit standings. The index traded around 44, or 44 cents on a dollar,
nearly its weakest level ever.
The swing is creating real pain for
investors, since in recent years numerous firms have created trading strategies which have loaded large debt
levels onto these "safe" securities, precisely because these instruments were not expected to fluctuate in
price. Investors normally hold such "safe" securities to maturity thus there is no demand for a ready market
for them. But as the credit rating of these securities falls, investor cannot find buyer for them at any
reasonable price. The last week in October saw the worst falls in the ABX market this year, especially higher
up the capital structure with highly rated debt.
Pension funds and insurance companies
hold the less risky, senior CDO tranches because regulatory rules restrict them from investing in lower-rated
securities. When the low-rated tranches default in large numbers, the high-rated tranches lose rating and these
regulated institutions are forced to sell their non-conforming holdings into a market with few buyers.
Pension funds, insurance companies and
university endowment funds have also invested in hedge funds that hold the riskier CDO tranches to get higher
returns. In recent years, CDO issuance has exploded and many hedge funds have been buying the riskiest
tranches of MBS that are backed by subprime loans. Mortgages closed by
4 pm
New York
time were sent electronically to back-office locations in
India
to be packaged into CDO tranches and resent electronically to
New York
at
9:30 am
the next day to be sold
in the credit market, generating huge fees and profits for Wall Street firms every day.
Rating
Agencies Under Pressure
Moody's Investors Services, an
influential rating agency, warned in late July that defaults and downgrades of subprime MBS could have "severe"
consequences for CDOs that invested heavily in the sector. CDOs that Moody's rated from 2003 to 2006 had 45%
exposure to subprime MBS on average. But that varied widely from almost zero to 90% with recent CDOs having the
high concentrations of such collateral, the potential downgrade for which could be 10 or more notches in
rating. The secondary market for CDOs responded to these heightened risks, pushing prices down and widening
spreads - the difference between interest rates on riskier debt and measures of short-term borrowing costs such
as the London Interbank Offered Rate (LIBOR) or commercial paper rates. Spreads on BBB-rated asset-backed
securities (ABS) CDOs over LIBOR have widened by roughly 125 basis points to 657 basis points since the end of
2006.
Structured investment vehicles (SIVs)
Although the first structured
investment vehicles (SIVs) appeared in the structured finance world some 15 years ago, and the growth of SIVs
had been somewhat limited, (there are fewer than 20 vehicles globally), there is no doubt that these
sophisticated bankruptcy-remote structures have strongly influenced other funding vehicles and asset management
businesses. Since 2002, there has been renewed interest by different types of financial institutions in
starting up SIVs or SIV-like structures with evolved capital structures embracing new classes of financial
instruments.
The first SIVs were founded in the
mid-1980s as bankruptcy-remote entities and were sponsored by large banks or investment managers for the
purpose of generating leveraged returns by exploiting the differences in yields between the longer-dated assets
managed and the short-term liabilities issued. The balance sheet of a structured investment vehicle typically
contains assets such as asset-backed securities (ABS) and other high-grade securities that are funded through
issued liabilities in the form of commercial paper (CP) and medium-term note (MTN) and subordinate capital
notes. SIVs typically hedge out all interest and currency risks using swaps and other derivative instruments.
Overall, CP and MTN issuance shot up
dramatically in 2004, up US$25.7 billion to US$133.1 billion at year-end, with capital investments at an
all-time high. In general, advances in capital structures and asset portfolio management have invigorated
interest from investors and prospective sponsors.
SIVs,
Conduits and Asset-Backed Commercial Paper (ABCP)
SIVs are typically funded in the low
interest short-term asset-backed commercial paper (ABCP) market to invest in high-return long-term securities
for profit. The viability of the stratagem depends on the ability to roll over the short-term commercial paper
when they mature in typically less than 120 days. To keep the liquidity risk at a minimum, issuers stagger the
maturity so that only a small portion of the loan needs to be refunded in any one week. The credit market
crisis in mid 2007 created a break in short-term debt rollovers to cause a funding mismatch in long-term assets
positions because investors have stopped buying new ABCP issued by some SIVs and conduits.
What separates a SIV from other
investment vehicles is the nature of its ongoing relationship with rating agencies – from the originating
qualification process to the continuous monitoring of its asset diversification, risk management and funding
practices. These guidelines include frequent reporting of operating parameters such as portfolio credit
quality, portfolio diversification, asset and liability maturity, market risk limitations, leverage and capital
adequacy requirements, and liquidity requirements.
The rigorous monitoring allows SIVs to
be highly capital efficient, enabling them to be leveraged on an average of 12 times the capital base, with
exceptions. Unlike related traditional asset backed commercial paper (ABCP) conduits, SIVs do not require 100%
liquidity support and credit enhancement.
Many SIVs faced trouble in the summer
of 2007 as they were hit by both sharp falls in the value of their investments, mainly financial debt and
asset-backed bonds, and a lack of access to new refinancing as investors shunned short-term commercial paper
debt linked to asset-backed securities (ABCP).
Most CDOs are cash flow transactions
not directly sensitive to the market value of their underlying assets as long as the cash flow is undisturbed.
But if a CDO manager needs to sell an asset quickly even at a loss because of ratings agency downgrade, the CDO
manager will be forced to carry the remaining assets at a lower value, upsetting both collateral for the agreed
cash flow and the balance sheet of the participants.
While some hedge funds have profited
from the sublime mortgage meltdown, other funds have been hit hard, resulting in a deteriorating financial
sector as asset values plummeted faster than potential gains by vultures.
Other big lenders that raised warning
flags earlier about bad-performing debt portfolios included Washington Mutual, New Century Financial and
Marshall & IIsley Corporation. Foreclosures jumped 35% in December 2006 versus a year earlier. For the fifth
straight month, more than 100,000 properties entered foreclosure because the owner couldn't keep up with their
loan payments. In January 2007, Washington Mutual disclosed that its mortgage business lost $122 million in the
fourth quarter, highlighting the weak sub-prime market.
New
York Attorney General Sues Appraisal Company
New York Attorney General Andrew Cuomo,
a potential Democrat gubernatorial candidate for New York, has filed suit against eAppraiseIT (EA), a real
estate appraisal management subsidiary of First American Corporation, for having "caved to pressure from
Washington Mutual" to inflate property values of homes. Washington Mutual allegedly complained to EA that "its
appraisals weren't high enough." Cuomo said in a statement that "consumers are harmed because they are misled
as to the value of their homes, increasing the risk of foreclosure and hindering their ability to make sound
economic decisions. Investors are hurt by such fraud because it skews the value and risk of loans that are sold
in financial markets." The bank is also facing a number of class action suits from irate borrowers.
Shares of government sponsored mortgage
lenders Fannie Mae and Freddie Mac tumbled after receiving subpoenas seeking information on loans they bought
from Washington Mutual and other banks. Cuomo said he uncovered a "pattern of collusion" between lenders and
appraisers, and is seeking documents that may prove the lenders inflated appraisal values. The subpoenas also
seek information on Fannie and Freddie's due diligence practices. If decided that they own or guarantee
mortgages with inflated appraisals, company policy dictates that the lenders buy back the loans. "In order to
fulfill their duty to consumers and investors, Fannie Mae and Freddie Mac must ensure that Washington Mutual's
mortgages have not been corrupted by inflated appraisals," Cuomo said. In 2007, WaMu is Fannie Mae's
third-largest loan provider, selling it $24.7 billion and Freddie Mac's fourteenth largest at $7.8 billion.
Washingtom Mutual share fell 17% after it announced it would set aside $1.3 billion fourth quarter 2007 for
credit losses, up from $967 million in the third quarter.
Mortgage Lenders
Fell Like Flies
The handwriting had been clearly on the wall. Back on February 6, New Century
Financial shares plunged 29% after the mortgage services provider slashed its forecast for loan production
for 2007 because early-payment defaults and loan repurchases had led to tighter underwriting guidelines. A week
later, Pasadena, Calif.-based IndyMac Bancorp Inc. which sold Alt-A mortgages for borrowers who were not
required to submit conforming income and financial documents necessary to quality for conventional conforming
mortgages, warned that its quarterly earnings would come in well short of analyst expectations because of
increased loan losses and delinquencies. Other lenders were also squeezed by deteriorating credit. Marshall &
IIsley reported a jump in non-performing assets in the quarter, while Bank of the Ozarks reported a 69%
increase in problem loans. US Bancorp predicted an increase in retail loan charge-offs and commercial loan
losses in coming quarters. Wells Fargo warned it expected net credit losses from wholesale banking to increase
in 2007.
Britain
's
Barclays PLC, in the midst of an unsuccessful takeover battle for ABN Amro, was reported as among the banks
that were having trouble with bad loans and its hedge funds. Barclays Global Investors was one of the world's
biggest fund managers, with some $2 trillion in assets under management.
The Case of Countrywide Financial
Non-conforming mortgages securities packaged by
Countrywide Financial needed to be sold in the private, secondary market to alternative investors, instead of
the agency market. On
August 3, 2007
, this secondary market
collapsed and essentially stopped the sales of most non-conforming securities. Alt-A mortgages (loans given to
self-declared creditworthy borrowers without supporting documentation) completely stopped trading and the
seizure extended to even AAA-rated mortgage-backed securities. Only securities with conforming mortgages were
trading. Unfazed, Countrywide Financial issued a reassuring statement that its mortgage business had access to
a nearly $50 billion funding cushion.
In reality, the sub-prime mortgage meltdown put
Countrywide Financial, along with many other mortgage lenders, in a crisis situation of holding drastically
devalued loan portfolios that could not be sold at any price. Amid rising defaults, investors have fled from
mortgage-related investments, drying up market demand. The ongoing credit crunch threatened Countrywide's
normal access to cash.
After the collapse of American Home
Mortgage on August 6, the market's attention returned to Countrywide Financial which at the time had issued
about 17% of all mortgages in the
United States
.
Days later, Countrywide Financial disclosed to the SEC that disruptions in the secondary mortgage markets could
adversely affect it financially. The news raised speculation that Countrywide was a potential bankruptcy risk.
On August 10, a run on the Countrywide Bank began as the secondary mortgage market shutdown, curtailing new
mortgage funding.
The perceived risk of Countrywide bonds
rose sharply. Credit ratings agencies downgraded Countrywide to near
junk
status. The cost of insuring
its bonds rose 22% overnight. This development limited Countrywide access to the short-term commercial paper
debt market which normally provides cheaper money than bank loans. Institutional investors were trying
desperately to unload outstanding Countrywide paper held in their portfolios. Some 50 other mortgage lenders
had already filed for Chapter 11 bankruptcy, and Countrywide Financial was cited as a possible bankruptcy risk
by Merrill Lynch and others on August 15. This combined with news that its ability to issue new commercial
paper might be severely hampered put severe pressure on the stock. Countrywide shares fell $3.17 to $21.29,
which was its biggest fall in a single day since the crash of 1987 when the shares fell 50% for the year. The
52-week low to date was $12.07 per share.
On Thursday, August 16, having
expressed concerns over liquidity because of the decline of the secondary market for securitized mortgage
obligations, Countrywide also announced its intention to draw on the entire $11.5 billion credit line from a
group of 40 banks. On Friday August 17, many depositors sought to withdraw their bank accounts from
Countrywide. It also planned to make 90% of its loans conforming. By this point stock shares had lost about
75% of their peak value and speculation of bankruptcy broadened.
The Fed
Discount Window Accepts Toxic Collateral from Banks
At the same time the Federal Reserve
lowered the discount rate 50 basis points in a last-minute, early morning conference call. The Fed also
accepted $17.2 billion in repurchase agreements for mortgage backed securities to provide liquidity in the
credit market. This helped calm the stock market and investors promptly responded positively with the Dow
posting temporary gains.
Additionally, Countrywide was forced to
restate income it had claimed from accrued but unpaid interest on "exotic" mortgages in which the initial pay
rate was less than the amortization rate. By mid 2007, it became apparent much of this accrued interest had
become uncollectible. In a letter dated August 20, Federal Reserve agreed to waive banking regulations at the
request of Citigroup and Bank of America to exempt both banks from rules that limited the amount that
federally-insured banks can lend to related brokerage companies to 10% of bank capital, by increasing the limit
to 30%. Until then, banking regulations restricted banks with federally insured deposits from putting
themselves at risk by brokerage subsidiaries' activities. On August 23, Citibank and Bank of America said that
they and two other banks accessed $500 million in 30-day financing at the Fed's discount window at the new low
rate of 5.25%.
On the next day, Countrywide Financial
obtained $2 billion of new capital from Bank of America Corp, the banking holding parent. In exchange, the Bank
of America brokerage arm would get convertible preferred stock yielding 7.3%, a profitable spread over its Fed
discount rate of 5.25% and the Fed funds rate of 4.75%. The preferred stocks can be converted into common stock
at $18 per share (trading around $12 on October 25). This gave the distressed mortgage lender a much-needed
cash infusion amid a crippling credit crunch. Countrywide shares soared 20.01%, or $4.37, to $26.19 after hours
on the news. Bank of America shares rose 1.9%, or 98 cents, to $52.63 (trading around $46.75 on October 25
after announcing third quarter earning dropping 32%).
SEC to
Scrutinize Security Valuation
The Securities and Exchange Commission
(SEC) is reportedly looking into the accounting and securities valuation practices at Wall Street investment
banks to ensure consistency and clarity for investors. Meanwhile, major financial institutions were lining up
to announce write-downs on their sub-prime mortgage exposures. Merrill Lynch wrote down $5.5 billion which was
later revised to $8 billion; Citigroup $3.3 billion which was later revised to $11 billion; Goldman Sachs $1.7
billion, Lehman Brothers $1 billion, Morgan Stanley $0.9 billion and Bear Sterns $0.7 billion. Many in the
market expect further write downs in coming quarters. Already Merrill Lynch write down is widely put at more
than $14 billion and few believe that Citigroup's loss could be kept to $11 billion in coming quarters. The
heads of Merrill, UBS and Citigroup all resigned.
Wachovia, the fourth-largest
US
bank by assets, estimated on Friday, November 9 that the value of its
subprime mortgage-related securities had fallen $1.1 billion in October. It said loan-loss provisions would be
increased by as much as $600 million in the fourth quarter due to "dramatic declines" in home values. The
announcement came three weeks after Wachovia reported writedowns of $1.3 billion in the third quarter and
posted its first earnings drop in six years.
Morgan Stanley, the second-biggest
U.S.
securities firm, said on November 7 its subprime mortgages and related
securities lost $3.7 billion in the past two months, after prices sank further than the firm's traders
anticipated. The decline may cut fourth-quarter earnings by $2.5 billion. Colm Kelleher, Morgan Stanley chief
financial officer to the Financial Times in an interview: "You need to see some of these long positions
reduced, you need to see buyers coming in, you need to see an easing of liquidity in the market." Kelleher said
credit markets would take three or four quarters to recover, instead of the one or two he estimated when the
firm reported third-quarter results on September 19.
Concerns about potential writedowns at
Morgan Stanley have pushed the stock lower this week, bringing the year-to-date decline to 24 percent. The
stock fell $3.32, or 6.9%, to $51.19 in New York Stock Exchange composite trading on November 8. Analysts
estimate the firm would lose about $4 billion on asset- backed securities and collateralized debt obligations
and expected the remaining losses to be booked on residual mortgage interest and on credit lines to structured
investment vehicles.
Being
Right Can lead to Losses through Aggressive Hedging
Part of the losses Morgan Stanley
incurred stemmed from derivative contracts the firm's proprietary trading unit wrote earlier in the year. The
traders anticipated correctly a decline in the value of subprime securities and took up short positions and the
contracts made money for the firm in the second quarter. But the contracts started losing money when prices
fell below the level the traders had anticipated. As markets continued to decline, the firm's risk exposure
swung from short, to flat to long because the structure of the book had big negative convexity. For any given
bond, a graph of the relationship between price and yield is a convex curve rather than a linear straight-line.
As a bond's price goes up, its yield goes down, and vice versa. The degree to which the graph is curved shows
how much a bond's yield changes in response to a change in price. Negative convexity gives the investor a
greater loss in the event of a 50 basis points drop in yields than his gain in the event of a 50 basis points
rise in yields. For any given move in interest rates, the downside is bigger than the upside to give a built-in
loss for a short position with negative convexity. Sophisticated traders can create instruments which have so
much negative convexity that the price might start off moving in one direction as yields start moving, and then
eventually start moving in the opposite direction beyond a given range. The hedge then begins to cannibalize
profitability.For any given move in interest rates, the downside is bigger than the upside to give a built-in
loss for a short position with negative convexity, thus producing losses. For positive convexity, the upside is
bigger than the down side, thus giving short positions an advantage. Morgan Stanley's short positions
allegedly turned against them by negative convexity; at least that was how they explained the loss. Some
analysts think there must be more than meets the eye, assuming Morgan management itself even know. The people
who put on the bad trades were fired and not there to answer questions.
It is one thing to lose money, but it
is quite another to lose money without knowing why and how. Morgan Stanley, Citibank, and the rest still have
difficulty figuring out how they lost money last quarter and how much loss is waiting in future quarters. They
only know the numbers came in very bad.
SEC
Concern over Accuracy of Writedowns
US
market regulators have been working with investment banks and accounting
firms over the past few months to keep tabs on how they are dealing with changes to the accounting treatment of
securities that were introduced this year by the US Financial Accounting Standards Board (FASB). The SEC has
been particularly concerned during the third quarter earnings season, which resulted in billions of dollars in
write-downs at investment banks after problems in the sub-prime mortgage markets that triggered a wider credit
crisis. At issue is whether these write-downs accurately reflect the total financial impact of the credit
crisis on the banks and their investors.
The
SMELEC Super Fund Proposal
Citigroup, Bank of America and JP
Morgan/Chase announced on Monday, October 15, plans for a super fund to buy mortgage-linked securities in an
attempt to allay fears of a downward price-spiral that would hit the balance sheets of big banks.
US
banks collectively would put up credit guarantees up to $100 billion for
the fund, named the Single-Master Liquidity Enhancement Conduit (SMLEC).
The concept of an SMLEC first emerged
three weeks earlier when the US Treasury summoned leading bankers to discuss ways to revive the mortgage-linked
securities market and to deal with the threat to the credit market posed by structured investment vehicles
(SIVs) and conduits. The Treasury said it acted as a "neutral third party" in the discussions, but Henry
Paulson, Treasury secretary, was reportedly strongly in support of the initiative.
Robert Steel, under-secretary for
domestic finance, led the US Treasury side of the discussions, with the day-to-day work handled by Anthony
Ryan, assistant secretary. The plan is an attempt to address concerns about SIVs and conduits, vehicles that
are off-balance sheet but closely affiliated to banks.
Fears emerged that some SIVs might be
pushed into forced sales of assets, prompting further declines in the market price of mortgage-linked
securities as a class that could hurt the balance sheets of all lending institutions. SMLEC, designed as a
superfund to preserve the theoretical value of the high-rated tranches by creating a ready buyer for them, is
likely to be unpopular with some banks and non-bank institutions which have already started trading in
distressed low-rated subprime securities at knockdown prices.
SMLEC as proposed is intended as a
restructuring vehicle, repackaging credit securities to make them more transparent than existing SIV commercial
paper and less risky to investors. It would only deal in "highly-rated" assets. Although it is envisaged that
the scheme will initially focus on vehicles in the dollar market held by US banks, it is expected to extend to
non-US banks as well, and may even be extended to the euro market. The US Treasury declined to provide official
comment on the reported proposal.
In October, Citigroup Inc. posted a 57%
slump in third-quarter net income at $2.38 billion, or 47 cents a share, from $5.51 billion, or $1.10 a share,
a year earlier. The latest quarterly results included $1.35 billion of pretax write-down in the value of loans
that helped finance the leveraged-buyout boom and $1.56 billion of pretax losses tied to loans and sub-prime
mortgages. A couple of weeks after the SMLEC proposal, Citigroup announced a write down of $3.3 billion which
was later revised to $11 billion and that its Chairman resigned after an emergency board meeting on the first
Saturday of November.
SMLEC is in essence a big bet that a
consortium of banking giants, at the prodding of the US Treasury, can persuade investors to pour new money into
the troubled credit market to buy the assets of troubled SIVs to prevent the pending loss faced by the
sponsoring institutions.
Alan Greenspan, former Fed chairman,
immediately raised serious doubts over SMLEC, warning that it could prevent the market from establishing true
clearing prices for asset-backed securities. "It is not clear to me that the benefits exceed the risks,"
Greenspan told
Emerging Markets
, adding, "The experience I have had with that sort of intervention is
very mixed." As the person most responsible for a macro liquidity boom that had prevented "the market from
establishing true clearing prices for assets of all types", Greenspan is critical of the effort of the Treasury
to do the same thing on a micro level to save the banking system.
Greenspan explained: "What creates
strong markets is a belief in the investment community that everybody has been scared out of the market,
pressed prices too low and there are wildly attractive bargaining prices out there." He added: "if you
intervene in the system, the vultures stay away. The vultures are sometimes very useful." Goldman Sachs must
have heard the message loud and clear and decided to act as its own home-grown vulture.
Greenspan's remarks came amid growing
speculation on Wall Street that the current Federal Reserve sees potential benefits in the SMLEC proposal in
terms of preventing a possible fire sale of assets, and does not think it has been designed to allow financial
institutions to avoid recognizing losses. But the Fed is concern that the superfund plan could exacerbate
growing investor anxiety, and thinks markets might normalize faster if at least some troubled SIV assets were
sold in the market to allow prices to find a floor. Fed officials have been officially silent on the superfund
plan, leading to the impression that the Fed wants to keep its distance. The Treasury regards the Fed's
silence as simply reflecting the separation of powers and responsibilities between the institutions. In
reality, the Treasury leads the Fed on issues of national economic security, notwithstanding the Fed's claim of
independence.
Greenspan defended the 1998
Fed-sponsored rescue of Long-Term Capital Management (LTCM) by a group of creditor banks, saying it worked
because it took a set of assets that would otherwise have been dumped at fire-sale prices off the market,
allowing prices of the remaining assets to find a true equilibrium. But he said today "we are dealing with a
much larger market." To those who still have reliable memory, the justification for the Fed managed rescue of
LTCM was to prevent the total collapse of the financial market because of the dominant size and high leverage
of LTCM. Other distressed hedge funds would also have survived with a Fed managed bailout, but they did not
qualify as being "too big to fail".
Frederic Mishkin, a Federal Reserve
governor, admitted to the Financial Times that although the central bank could use monetary policy to offset
the macroeconomic risk arising from the credit squeeze, it was "powerless" to deal with "valuation risk" – the
difficulty assessing the value of complex or opaque securities.
Robert J Shiller, Yale economist of "
Irrational
Exuberance
" fame (2000), writing in the October 14 edition of the New York Times:
Sniffles That Precede
a Recession
: "While it may seem as though these private banks could have met by themselves and agreed to
create a fund without pressure from Treasury to do so, apparently there are times when the private sector
cannot take care of itself and it needs the government to intervene and prod it in the right direction, at
least that appears to be the attitude at Treasury (and I wonder if there will be government guarantees of any
sort as part of the bargain, a situation that rules out the private sector doing it on its own, but also a
situation that more explicitly recognizes the existence of market failure and the need for government
intervention to overcome it). It would be refreshing to see this same attitude extended by the administration
to other markets that cannot coordinate properly or that suffer from significant market failures of other
types, markets that produce outcomes where, say, children are left without health coverage. But don't get your
hopes up."
Warren Buffett, the Pied Piper of other
awed investors, told Fox Business Network that "pooling a bunch of mortgages, changing the ownership" would not
change the viability of the mortgage instrument itself. "It would be better to have them on the balance sheets
so everyone would know what's going on." Bill Gross, chief investment officer of Pimco, the giant bond fund
manager, called the superfund idea "pretty lame". Investors need to know what their portfolio is really worth
at any moment in time, not merely constructed value if conditions should hold.
The root is neoliberal government that came to power in 2015
Notable quotes:
"... Why is any of this still "surprising" ..."
"... Economist Ha Joon Chang popularized the term "ladder kicking" to describe the way in which most developed countries used tariffs and trade restrictions to ascent to the top but are all for "free trade" now. ..."
"... Once again, so long as "Original Sin" is a reality, there is little hope. Keynes' BANCOR was the idea to begin to fix this, but short of some other global currency initiative, we're left to the International Finance Vultures as the primary arbiters of what's possible. ..."
Thanks for the link. I will be spending some time thinking of what Argentina would best
employ as best practices from where it is.
Would they be best off if they stopped issuing such high paying bonds? Should they pay them
all off and stop with it. It does appear to me that issuing bond after bond is one of the
single most dangerous things you can do.
It would appear to me to be a superior practice to sell what you produce for the best price
you can get on the open markets and dictate the value of your currency.
I'll have to do some more study here.
Again, thanks for the link.
You're uttering the discourse of the most recalcitrant neo-liberal cum
austerity-fundamentalists around.
The US doesn't tax soybean exports. Argentina needs to maximize its exports to earn
foreign exchange.'
it's misleading to say the least to draw a comparison between how the US handles soybean
exports and Argentina does it. They're around a quarter of the latter's exports, barely a
hundredth of the latter's.
The US will never have forex issues, Argentina does have them, and they are very serious.
You make it as if simply exporting commodities will fill the country's economy with USD,
while in truth those dollars will be neatly parked in tax heavens. Eliminating tax and
controls over Argentina's biggest exports -agricultural commodities- is in practice as if
these commodities were produced not in this country but in some foreign territory over which
only the very few who hold most of the land are sovereign. Which is what the current
administration has been doing for the past two years.
You also make it as if the current situation where the value of the peso is given over
completely to whatever short-term speculators feel like doing with it whenever LEBACs are due
is more desirable than the capital controls imposed by the previous government. These
prevented the hurtful rapid rise we're seeing in the exchange rate and reduced the negative
consequences of the fiscal deficit thus allowing significant investment in and expansion of
the real economy.
Addressing the fiscal deficit through increased value added and income tax is something
that clearly benefits the owner over the working class and depresses private consumption. I
can only sarcastically wonder who would want such a thing.
I don't feel the need or the duty to defend the previous government, but victimization of
the Sociedad Rural is something I just lack the words to condemn strongly enough
Argentina is probably the most self sufficient country on earth. It has everything,
fertile land that produces an abundance of wheat, barley, oats, rye, wine grapes. As well as
oil, gas. uranium, silver, gold, lead, copper, zinc. Foreigners are well aware of the wealth
in Argentina and are more than willing to lend to Argentinian governments and companies. This
is why Cristina Kirchner refused to give in to the US vulture funds as it dissuaded
foreigners from believing that reckless lending would always be rewarded. Macri ponied up,
restarting the old familiar economic doom cycle. As always its the old dog for the long road
and the pup for the puddle. Macri is now in a place that he chose, the puddle. As long as
foreig lenders remain reckless Argentina will remain mired in the mud, well short of its
potential. I was last there in 2008 when the country was booming. When I heard of Macri's
plan to pay the vulture funds I knew they were headed for disaster. This is just the
beginning.
Those "foreign lenders" can't be called "reckless." Some, maybe most among them always
seem to profit from the looting, whether by "bailouts" or "backstops" from governments like
the US that for "geopolitical reasons" facilitate that lending, or by extortion after the
first-round lenders (who know the risks, of course -- they are big boys and girls after all)
have been forestalled.
Call them "wreckers," maybe. Like early denizens of the Florida Keys, and other places,
who set fires or put up lamps that resembled lighthouses to lure passing ships onto the sands
and rocks where their cargoes and the valuables of their drowned passengers and crews could
be stripped.
Why is any of this still "surprising" to anyone?! Most countries in the world
(non G7/G8) are forced to go into foreign debt in order to pursue their "development"
initiatives. They are told they can export themselves out of trouble but the "free
trade" (more like unfair trade!) mantra puts them at a distinct disadvantage –
"unequal
exchange" was the term Marx used for it.
Economist Ha Joon Chang popularized the term
"ladder kicking" to describe the way in which most developed countries used tariffs and
trade restrictions to ascent to the top but are all for "free trade" now.
Once again, so long as "Original Sin" is a reality, there is little
hope. Keynes' BANCOR was
the idea to begin to fix this, but short of some other global currency initiative, we're left
to the International Finance Vultures as the primary arbiters of what's possible.
Latvia now is a typical neoliberal debt slave and flourishing sex trafficking market. Not
that different from other Baltic states, Ukraine, Moldavia and generally all xUSSR space.
Bill mentions the brain drain from Latvia, but I seem to recall a quite massive general
emigration from the country during austerity, which also helped to "reduce unemployment" as
well. The neoliberal "methodology" for "showing economic success" is moral and economic
bankruptcy masquerading as "science". And wow. So we have Latvia to thank for the coming
nuclear holocaust as well. A true neoliberal market miracle.
Lambert's two principles of neoliberalism are once again brought to mind:
All those 'excess' workers who left were helping keep wages low in the EU
In the sense that Latvia's future productivity is sacrificed for short-term benefits on the
books, it starts to look like another asset-stripping scheme, and the costs are borne by
workers in the EU.
Latvia already has one of the highest levels of poverty and income inequality in the EU
and its population has dropped by about a fifth in the past 18 years which is a bit of a
record considering that there was no war, that is, unless you count the neoliberal war on
people. Some moved to the capital Riga but most bailed out of the country altogether and are
not coming back. You can find whole blocks of empty buildings in some towns.
But don't worry. The Latvians are on the case. The head of the Latvian Central Bank detained
for extortion and the Latvian Ministry of Defense both blame, you guessed it, Russia!
Lambert's two principles of neoliberalism may have to be updated. He already has
#1 Because markets.
#2 Go die.
He may have to modify the second one to say
#2 Go die or get the hell outta Dodge.
Now I may be prejudiced because the Gs came from deepest darkest Lithuania–and we're
talking out in the endless woods in a village along a lake.
When people talk about population decline in Latvia, you are talking about part of the
corruption. The native Latvians wanted a way of getting rid of the Russian population, many
of whom are considered immigrants. So dropping 20 percent of the population means throwing
out the Russians. When your "population policy " is based on something like that, you can
image what the country's economic policies are like.
In contrast–although Lithuania, too, has lost some 10 – 15 percent of its
population since restored independence–the Lithuanians came to terms, imperfect terms,
with their smaller Polish and Russian minorities. Nevertheless, the Lithuanians didn't go
whole-hog free-market fundamentalism. And when a recent president was found to be corrupt,
they impeached him and threw him out.
So you have different models for how to survive as a Baltic State. Latvia has made a mess
of its "model."
"Now of course that's still in a land where they had really severely repressed wages for
the working class and for middle class, and continued to tolerate a fair degree of
unemployment and underemployment for folks, as well. So, yeah it works really well for the
oligarchs. And they do employ people. The unemployment rate drops, but the country
invariably becomes extremely corrupt."
Was he still talking about Latvia or did he switch over to the USA?
Half a decade ago when Latvia was considered a success story for neoliberal austerity, one
animator made this great satire video making fun of how farcical it was to consider it
such.
Latvia also being part of that running sore which involves according to the US state
department's last global estimate, about 800,000 to a million victims per annum of people
trafficking. Of which around 80% are female, with a not stated amount being children, used
for both labour & sexual purposes.
I suppose that it comes as little surprise that the 2 main flows of these commodities is
from East to West & South to North.
THE EARTHQUAKE that shook Haiti's capital Port-au-Prince on January 12 is one of the worst
disasters in human history. The quake flattened houses, hotels, and government buildings,
including the National Palace and UN headquarters. By some estimates, 60 percent of
Port-au-Prince's buildings collapsed. Even more damage struck some of the smaller towns near
the capital like Leogane and Jacmel. At least 230,000 people were left dead, 300,000 in need of
medical attention, 1.5 million homeless, and over 2 million bereft of food and water.
The Obama administration reacted immediately. "I have directed my administration to respond
with a swift, coordinated, and aggressive effort to save lives," Obama told the nation in a
speech he delivered the day after the quake. "The people of Haiti will have the full support of
the United States in the urgent effort to rescue those trapped beneath the rubble, and to
deliver the humanitarian relief -- the food, water, and medicine -- that Haitians will need in
the coming days. In that effort, our government, especially USAID and the Departments of State
and Defense are working closely together and with our partners in Haiti, the region, and around
the world." 1
This seemed a far cry from the reaction of the Bush administration to Hurricane Katrina,
where tens of thousands of the city's poor, mostly Black, residents were left stranded and
without help as Bush sent troops and Blackwater paramilitaries to police the city. The lack of
a prompt humanitarian response prompted rap artist Kanye West to famously state, "George Bush
doesn't care about Black people."
Yet while Obama said all the right things, the gap between his words and deeds has been
immense. When all is said and done, the Haitian relief effort looks eerily like a replay of
Katrina, only on a larger scale. A month into the disaster, the U.S. and UN were managing to
feed only 1 million people, leaving more than a million people without relief aid. 2
Instead of mobilizing to provide water, food, and housing for the victims, the U.S. focused on
occupying the country with 20,000 U.S. troops and surrounding it with a flotilla of U.S. Navy
and Coast Guard ships.
This military effort actually impeded the delivery of urgent aid. In an op-ed piece in the
Wall Street Journal entitled "Haiti: Obama's Katrina," three doctors who volunteered
to provide emergency services wrote, "Four years ago the initial medical response to Hurricane
Katrina was ill equipped, understaffed, poorly coordinated and delayed. Criticism of the paltry
federal efforts was immediate and fierce. Unfortunately, the response to the latest
international disaster in Haiti has been no better, compounding the catastrophe." After they
describe the horrific conditions in Haiti's hospitals, the doctors continue, "The U.S. response
to the earthquake should be considered an embarrassment. Our operation received virtually no
support from any branch of the U.S. government, including the State Department . Later, as we
were leaving Haiti, we were appalled to see warehouse-size quantities of unused medicines, food
and other supplies at the airport, surrounded by hundreds of U.S. and international soldiers
standing around aimlessly." 3
The U.S. government and media have covered up these realities with puff pieces about the
supposed success of U.S. relief efforts. They have also wrongly portrayed this catastrophe as
simply a natural disaster, ignoring the historical and social causes of Haiti's poverty --
principally the imperialist stranglehold over the nation -- that exacerbated the impact of the
earthquake.
If the military flotilla is not there to deliver aid, why is it there? The Obama
administration has used the cover of humanitarian aid to occupy the country in pursuit of
several goals. First and foremost, after disastrous wars that have discredited U.S.
interventionism, Obama hopes through the operation in Haiti to win back domestic support for
military intervention. What better means to do that than to present a military invasion and
occupation as a humanitarian relief effort?
With a flotilla of ships surrounding the country, the U.S. also aims to repatriate desperate
Haitians and prevent a wave of refugees reaching Florida. Through this assertion of power, the
U.S. aims also to reassert its dominance in the Caribbean and Latin America over regional
rivals like Venezuela and international ones like China. Finally, the U.S. intends to impose a
traditional neoliberal economic program on Haiti itself in the interest of U.S. multinational
corporations and the Haitian ruling class.
Not just a natural disaster
Most of the media reported the earthquake as a natural disaster. While this is no doubt true,
that is only part of the story. Certainly, there was talk of Haiti being the poorest country in
the Western Hemisphere, with over 80 percent of its population making about $2 a day. Media
acknowledged that the Haitian state was completely unprepared and unable to respond to the
crisis not only in Port-au-Prince, but throughout the country. However, the reason for these
conditions -- the historical context -- is left out. The story of Haiti's poverty is merely an
excuse to further justify why Haiti needs help from the United States, even though the "help"
Haiti has received from the U.S. and other world powers is precisely the reason for Haiti's
extreme poverty.
Some conservative commentators blamed Haitians for their situation. Pat Robertson on The
700 Club claimed that the disaster was the result of a pact that Haitians made with the
devil during their revolution from 1791 to 1804. The devil was merely taking his revenge on
Haitians more than 200 years later. 4 In a more polite, but no less racist manner,
David Brooks argued that the root cause of the social problems in Haiti was their
"progress-resistant" culture. He claimed,
There is the influence of the voodoo religion, which spreads the message that life is
capricious and planning futile. There are high levels of social mistrust. Responsibility is
often not internalized. Child-rearing practices often involve neglect in the early years and
harsh retribution when kids hit 9 or 10. We're all supposed to politely respect each other's
cultures. But some cultures are more progress-resistant than others, and a horrible tragedy
was just exacerbated by one of them. 5
These are extreme versions of a dominant media story that essentially blames the victims of
the earthquake. None of this answers the real questions. Why are the majority of Haitians so
poor? Why according to the mayor of Port-au-Prince, were 60 percent of the buildings unsafe in
normal conditions? Why is there no building regulation in a city that sits on a fault line? Why
was the Haitian state so weak and disorganized before and after the earthquake? To answer these
questions, we must delve into Haiti's history.
European slavery, revolution, and U.S. domination
The answer lies in Haiti's history of European conquest, slavery, resistance, and U.S. imperial
domination. At every step, instead of aiding the Haitian majority, the U.S. has manipulated the
country's politics and exploited its poverty in pursuit of profit, and used it as a pawn in its
competition with regional and international rivals. In doing so the U.S. has reduced Haiti to
abject poverty and incapacitated its government to manage the society and the current crisis.
This history, a second and unnatural fault line, interacted with the natural one to make the
earthquake so devastating.
Columbus set off the first tremors when he landed on the island he called Hispaniola in
1492. He proceeded to enslave the Taino natives, whose population was estimated to be more than
half a million. The combination of European disease, massacre, and brutal exploitation led to
the genocide of the native population. Spain ceded the western section of the island in 1697 to
France, which renamed it San Domingue. Spain remained in control of the eastern section of the
island, Santo Domingo, which would become the Dominican Republic. French merchants and planters
turned their colony into a vast slave plantation and slaves from Africa replaced Indians and
white indentured servants. The colony was a killing field where slaves were literally worked to
death -- half the African slaves who arrived died within a few years. But it was an enormously
profitable one. San Domingue was the richest colony in the new world; the slave plantations
produced half of the world's coffee, 40 percent of its sugar, as well as a host of other
commodities. 6
In 1791, Toussaint L'Ouverture, a literate freed slave, led the world's first successful
slave revolution. Toussaint defeated the three great empires of the age -- France, Spain, and
England -- which all attempted to defeat the great slave army. During the struggle, the French
managed to kidnap Toussaint and jail him in France, where he died. His second-in-command,
Jean-Jacques Dessalines, led the final victory and established the new nation of Haiti in
1804.
Haiti's very existence was a threat to all the empires and their colonies. They all lived
off profits from plantation slavery. So the great powers quarantined the country, attempting to
prevent the spread of slave revolution. France finally recognized Haiti in 1824, but on the
condition that it pay reparations to France for the loss of its property -- its slaves. In
today's terms this sum amounted to $21 billion. Thus France shackled Haiti with debt at its
birth that it did not finish repaying until 1947, fundamentally distorting the nation's
development. 7
Under the eagle
The U.S. was one of the last powers to recognize Haiti, finally doing so in 1862. It became
interested in Haiti not to help it, but instead to plunder it. In the late nineteenth century
the U.S. became an imperialist power, extending its talons to snatch control of the Caribbean,
Latin America, and the Pacific from potential rivals like Spain, Britain, and Germany. The U.S.
launched its imperial conquest under the guise of liberating Cuba, Puerto Rico, and the
Philippines from Spain. Puerto Rico and the Philippines became U.S. colonies -- U.S. marines
killed hundreds of thousands of Filipinos to conquer the island -- while Cuba became a colony
in all but name. The U.S. then policed the Caribbean as if it were an American lake. The number
of occupations and invasions over the following decades is too many to list.
A leader of this conquest was Major General Smedley Butler, who became one of the most
decorated marines in history. After he turned against U.S. imperialism later in life, he summed
up his experience:
I spent thirty-three years and four months in active military service as a member of this
country's most agile military force, the Marine Corps . And during that period, I spent most
of my time being a high-class muscle-man for Big Business, for Wall Street and for the
Bankers. In short, I was a racketeer, a gangster for capitalism . I helped make Mexico,
especially Tampico, safe for American oil interests in 1914. I helped make Haiti and Cuba a
decent place for the National City Bank boys to collect revenues in. I helped in the raping
of half a dozen Central American republics for the benefits of Wall Street. The record of
racketeering is long. I helped purify Nicaragua for the international banking house of Brown
Brothers in 1909–1912 . I brought light to the Dominican Republic for American sugar
interests in 1916. In China I helped to see to it that Standard Oil went its way unmolested.
During those years, I had, as the boys in the back room would say, a swell racket. Looking
back on it, I feel that I could have given Al Capone a few hints. The best he could do was to
operate his racket in three districts. I operated on three continents. 8
The U.S. saw Haiti as one of the key sites to establish client governments to protect U.S.
interests in the Caribbean. 9 In 1915 the U.S. used the pretext of political turmoil
in Haiti to invade the country and occupy it until 1934. The U.S. plundered the island, forced
it to repay its debts to the U.S., and established involuntary corvee gang labor to build
roads. United States corporations, hoping to take advantage of Haiti's cheap labor, gained
control of 266,000 acres of Haitian land, displacing thousands of Haitian peasants. Haitians
rose up against this exploitation in a mass liberation movement, the Cacos Rebellion, led by
Charlemagne Peralte. The U.S. slaughtered thousands of resistance fighters, crucifying Peralte
in Port-au-Prince.
The U.S. also established one of the most reactionary institutions in Haitian society, the
Haitian National Army. The U.S. designed that army not to fight foreign wars but to repress the
country's peasant masses.
The neoliberal "plan of death"
While the U.S. ended its occupation of Haiti -- prompted in part by a renewed wave of protests
and strikes by workers and students -- it continued to intervene in the country's politics and
economics with devastating consequences. From 1957 to 1986, the U.S. supported the father-son
dictatorship of Francois "Papa Doc" Duvalier and Jean-Claude "Baby Doc" Duvalier. The
Duvaliers' dictatorship maintained power through the army and a vast network of death squads
called the Tonton Macoutes. The U.S. backed them as a counterweight to Fidel Castro who had
aligned Cuba with Russia in the Cold War struggle for Latin America and the Caribbean. Most
observers believe that Papa Doc Duvalier's Macoutes killed tens of thousands. 10 The
Duvaliers' economic vision for Haiti -- one that has continued to motivate U.S. plans for Haiti
-- was to establish Haiti as low-tax, low-wage, non-union offshore assembly site for U.S.
corporations.
Though half of Haitians lived in dire poverty, Haiti until the mid–1980s was
self-sufficient in the production of rice, its most important staple. All this changed with the
imposition of neoliberal policies, pushed by the United States, that required Haiti to slash
tariffs, privatize state-owned industries, and cut the state's agricultural budget. Haitian
activists would come to call it a "plan of death."
President Reagan pushed this plan as part of his Caribbean Basin Initiative that aimed to
open up the area to U.S. corporations and U.S. agricultural products. Baby Doc opened up the
Haitian market to a wave of U.S. agribusiness exports like rice and wheat, which are heavily
subsidized. The Haitian peasants were simply unable to compete with these cheap, subsidized
imports, and Haiti's rural economy gradually collapsed. Hundreds of thousands of peasants
abandoned the countryside for the cities to seek some kind of employment. Deprived of their
livelihood, peasants turned to cutting down trees to make charcoal for cooking fuel, leading to
the massive deforestation of the country, and the further destruction of Haiti's already
depleted soil. 11 As a result, Port-au-Prince, which had been a small town of 50,000
in the 1950s, exploded in size to nearly 800,000 in the 1980s and well over 2 million today.
12
Reagan and Baby Doc claimed that they would absorb these dislocated peasants into an
enlarged sweatshop industry. But the various factories in the export processing zones only
created about 60,000 jobs. As a result, the masses in Port-au-Prince gathered in slums, left to
survive on remittances from relatives who had fled abroad and income scraped together in a
highly unstable informal economy.
Finally, the U.S. tried to subject Haiti to the same tourist industry that swept the rest of
the Caribbean. Baby Doc cut deals with Club Med and various hotel chains to offer the country's
beaches for tourism. Bill Clinton and Hillary Clinton first came to Haiti on their honeymoon as
part of the jet set that Baby Doc welcomed into the swank resorts on the island. It would not
be the last time the Clintons played around in Haiti.
Baby Doc took out $1.9 billion in loans from the U.S., other powers, and international
financial institutions to bankroll this neoliberal "reform" of the country. 13
Meanwhile, Haitians suffered a calamitous drop in their standard of living; during the 1980s,
absolute poverty increased by 60 percent -- from 50 to 80 percent of the population.
14 The dictator and his family joined the American and Haitian ruling class to party
and profit at the expense of Haitian peasants, workers, and the urban poor.
Killing social reform
Peasants, workers, and the urban poor rose up against Baby Doc in opposition to this social
catastrophe in a tremendous social movement called Lavalas (the Creole word for a cleansing
flood). A young Catholic priest and advocate of liberation theology, Jean-Bertrand Aristide,
became the spokesperson of the struggle. In 1986, Lavalas succeeded in driving Baby Doc from
power. The U.S. whisked him away into exile in France along with $505 million stolen from the
country. 15 Duvalier left behind a shattered country, shackled again with the odious
debt accrued by a dictator to finance the neoliberal disaster.
Under pressure from the movement -- but also to stem the tide of impoverished Haitian
refugees pouring out of the country -- the U.S. and Haitian governments finally agreed to hold
elections in 1990. The U.S. spent $36 million to try to get their candidate, a former World
Bank employee, elected. He received only 14 percent of the vote. Aristide defeated fourteen
rivals, winning two-thirds of the vote, on a platform of extensive popular social reforms. The
U.S. and the Haitian ruling class literally saw red. They thought that, in the words of a U.S.
embassy official in Port-au-Prince, a "Marxist maniac" had been elected to the Haitian
government. 16 President George Bush Sr. backed a military coup against Aristide in
1991 and tacitly backed the brutal regime that ruled Haiti from 1991 to 1994.
The military massacred thousands of Lavalas activists and drove 38,000 more out of the
country. Bush Sr. and his successor President Bill Clinton repatriated most of these refugees
and jailed others in Krome Detention Center in Florida and Guantánamo in Cuba. After an
international outcry, the U.S. opted for a face-saving intervention to restore Aristide to
power in 1994, but on the condition that he agree to the neoliberal plan of death. Aristide
signed on to the deal but resisted its full implementation during his remaining two years in
office. He did abolish the Haitian military in 1995 -- a great victory for the movement -- and
implemented some reforms, but it was far from what he had promised during the struggle against
Duvalier. "The author of a text entitled 'Capitalism is a Mortal Sin,'" wrote Paul Farmer at
the time,
now meets regularly with representatives of the World Bank, the International Monetary
Fund (IMF) and AID [U.S. Agency for International Development]. He was once the priest of the
poor; now he's president of a beleaguered nation, run into the ground by a vicious military
and business elite and by their friends abroad. Aristide finds himself most indebted to the
very people and institutions he once denounced from the pulpit. 17
Aristide's Lavalas ally and successor, René Préval, implemented much of the
U.S. neoliberal agenda during his term from 1996 to 2000. 18
Aristide would again run for and win the presidency in 2000, to the great irritation of
Clinton and then-President George W. Bush. In his second term, Aristide implemented reforms
such as raising the minimum wage and building schools. He also began to demand that France
refund the $21 billion that it forced Haiti to pay from 1824 to 1947. 19 At the same
time, however, Aristide backed new sweatshop developments in Ounaminthe and agreed to other
neoliberal measures. 20 But the U.S. was not appeased and France was outraged.
Another coup and U.S. occupation
The U.S., France, and Canada used the pretext of charges that Aristide manipulated the
parliamentary elections, something they usually tolerate with their own allies, to justify a
destabilization campaign against Aristide and yet another coup. Bush, of course, had no ground
to stand on as he himself had stolen the 2000 U.S. presidential election. Nevertheless, the
U.S., Canada, and France imposed economic sanctions, mounted a vast propaganda campaign against
Aristide, backed the ruling-class political opposition in the Group of 184, and aided the
right-wing death squads. Finally, in 2004, as the death squads swept through the country, the
U.S. kidnapped Aristide, whisked him out of the country to temporary exile in the Central
African Republic and to final exile in South Africa. Thus, on the two hundredth anniversary of
its declaration of independence, Haiti was occupied by the U.S., yet again.
Soon the U.S. delegated the occupation to the UN and its 9,000 mostly Brazilian troops, who
continue to patrol the country to this day. This UN force, MINUSTAH, protected the
U.S.-installed puppet regime headed up Gérard Latortue who they brought out of
retirement from Boca Raton, Florida. The coup regime was utterly corrupt and brutal. With its
death squad allies, the regime conducted a terror against the remnants of the social movements
and Aristide's party, Fanmi Lavalas. The combination of death squad and UN repression killed an
estimated 3,000 people. 21 The UN troops either joined the slaughter or stood aside
while repression swept the island. 22
While the U.S. and UN allowed elections in 2006, they banned Aristide's party, the most
popular party in the country. Aristide's former ally, René Préval, again won the
presidency, but by this time he had become a servant for the U.S. political and economic agenda
in Haiti. For example, Préval banned Fanmi Lavalas from running in elections and refused
to sign a bill passed in the parliament to raise the minimum wage. 23 In fact, the
real power was no longer in the hands of the Haitian government. The U.S.- backed UN occupation
rules the country in colonial style, dictating policy to the Haitian government.
The occupation has completely failed to develop the country. It has done nothing to improve
living conditions for Haitians, to rebuild the country's ravaged infrastructure, or to reforest
the countryside. Before the earthquake, two rounds of natural disasters swept Haiti and exposed
the U.S. and UN's callous neglect of the country. Hurricanes hit in 2004 and 2008, killing
thousands. 24 The pattern of impoverishment, deforestation, and degradation of the
country's infrastructure, which has accelerated in recent years, has rendered natural disasters
in Haiti far more devastating than anywhere else. In what is perhaps the worst exposure of the
result of U.S. and UN refusal to improve conditions in Haiti, the food crisis in Haiti spiraled
out of control on their watch. Even before the food crisis in 2008, the urban poor were reduced
to eating mud cakes flavored with salt as a regular meal. When capitalists speculated on the
international food market, they drove up the prices of Haiti's imported staples, especially
rice. In response Haitians rioted, only to be repressed by the UN troops. 25
Imposing a new plan of death on Haiti
During the UN occupation, the U.S. imposed the same neoliberal economic plan on Haiti in the
interests of multinational capital and the Haitian ruling class. UN Secretary-General Ban
Ki-moon appointed Bill Clinton as special envoy to Haiti in 2009 and tasked him with
revitalizing the country's economy. Clinton developed a new version of the plan of death along
with Oxford economics professor and former research director for the World Bank, Paul Collier.
Collier outlined their program in his paper, "Haiti: From natural catastrophe to economic
security." 26 It advocated investment in the tourist industry, redevelopment of the
sweatshop industry in cities, export-oriented mango plantations in the countryside, and
construction of infrastructure to service that development.
As Polly Pattullo documents in Last Resorts: The Cost of Tourism in the Caribbean ,
the tourist industry is largely controlled by U.S. multinational corporations. She quotes one
critic of the tourist industry who argues, "When a third world economy uses tourism as a
development strategy, it becomes enmeshed in a global system over which it has little control.
The international tourism industry is a product of metropolitan capitalist enterprise. The
superior entrepreneurial skills, resources and commercial power of metropolitan companies
enable them to dominate many third world tourist destinations." 27
Clinton has orchestrated a plan for turning the north of Haiti into a tourist playground, as
far away as possible from the teeming slums of Port-au-Prince. He lured Royal Caribbean Cruise
Lines into investing $55 million to build a pier along the coastline of Labadee, which it has
leased until 2050. From there, Haiti's tourist industry hopes to lead expeditions to the
mountaintop fortress Citadelle and the Palace of Sans-Souci, both built by Henri Christophe,
one of the leaders of Haiti's slave revolution. 28
For the cities, Collier promotes sweatshop development. Without a hint of shame, he notes,
"Due to its poverty and relatively unregulated labor market, Haiti has labor costs that are
fully competitive with China, which is the global benchmark. Haitian labor is not only cheap it
is of good quality. Indeed, because the garments industry used to be much larger than it is
currently, there is a substantial pool of experienced labor." 29 Given the abolition
of tariffs on many Haitian exports to the U.S., Haiti is primed, according to Collier, for a
new sweatshop boom.
But this is no sustainable development plan in the interests of Haitian workers. At best,
Collier promises 150,000 or so jobs. As anthropologist Mark Shuller argues, "subcontracted,
low-wage factory work does not contribute much to the economy besides jobs. Being exempt from
taxes, it does not contribute to the financing of Haiti's social services." 30
Moreover these jobs themselves do not even pay enough to support life -- they pay for transport
and lunch at about $1.60 a day. The U.S. will want to keep these wages low, since that is the
profitable basis for the investment.
For the peasant majority in the country, Clinton and Collier advocate the construction of
vast new mango plantations. According to them, such new plantations will both create an export
crop and aid the reforestation of the country. While it may create jobs for poor peasants, such
plantations will not rebuild the agricultural infrastructure of the country so that it can
return to the self-sufficient food system it had before the 1980s. As TransAfrica founder
Randall Robinson told Democracy Now! , "That isn't the kind of investment that Haiti
needs. It needs capital investment. It needs investment so that it can be self-sufficient. It
needs investment so that it can feed itself." 31 Such self-sufficiency runs against
the grain of U.S. policy to control the international food market with its subsidized
crops.
Collier finally argues for investment in infrastructure -- airports, seaports, and roads --
not so much to meet people's needs as to service these new investments in tourism, sweatshops,
and plantations. As a result, Collier's plan will actually increase infrastructural inequities;
businesses will get what they need to export their products, while the Haitian masses'
infrastructural needs, like navigable roads, will be left unaddressed. Even worse, Collier
advocates increased privatization of Haiti's infrastructure, especially the port and the
electrical system.
It is not incidental that Collier is also the author of The Bottom Billion ,
32 a book that calls for outside intervention by wealthy nations such as the United
States into what he calls "post-conflict" poor nations, combining targeted aid and economic
restructuring under long-term military occupation. In a modern recasting of the old colonialist
"civilizing mission," this is meant to lift these nations out of a vicious cycle of violence
and poverty.
On his whirlwind tour of the country in 2009, Bill Clinton promised investors that Haiti was
open for business with Aristide and Lavalas out of the way and the U.S. and UN in effective
control of the country. "Your political risk in Haiti" he declared at a press conference "is
lower than it has ever been in my lifetime." 33
Failing to deliver relief to victims
In the aftermath of the earthquake, the press has cooperated with the Obama administration in
giving the impression that the U.S. military has been busy delivering aid to desperate
Haitians. The facts don't bear this out. To begin with, Obama's promise of $100 million in aid
to the country is a pittance -- less than the winnings of a Kentucky couple in a recent
Powerball lottery. 34 It is a paltry amount compared to the hundreds of billions
that the U.S. shelled out to American banks and the $3 trillion the U.S. will have expended on
the Iraq War alone.
There were early warning signs that this humanitarian mission was not all it was cracked up
to be. Obama's decision to appoint former presidents George W. Bush and Bill Clinton to oversee
the collection of donations through the Clinton Bush Haiti Fund displays incredible callousness
toward the Haitian masses. Clinton imposed the plan of death on Lavalas. Bush let New Orleans
get washed out to sea and backed the 2004 coup that overthrew Aristide. Appointing Bush is like
putting Nero in charge of the fire department.
Aid was slow to arrive, and what did turn up was inadequate. Amid a crisis where the first
forty-eight hours are decisive in saving people's lives, the U.S. and UN failed to come
anywhere near addressing the needs of the 3 million people impacted by the earthquake. Every
minute that aid was delayed meant more people died from starvation, dehydration, injury, and
disease. It also meant that the hospitals and doctors desperately trying to help the victims
were left stranded without the basics to heal the injured.
As Dr. Evan Lyon of Partners in Health, speaking from Port-au-Prince's main hospital just as
heavily-armed U.S. troops were arriving, told Democracy Now! ,
In terms of supplies, in terms of surgeons, in terms of aid relief, the response has been
incredibly slow. There are teams of surgeons that have been sent to places that were, quote,
"more secure," that have ten or twenty doctors and ten patients. We have a thousand people on
this campus that are triaged and ready for surgery, but we only have four working ORs without
anesthesia and without pain medications. And we're still struggling to get ourselves up to
twenty-four-hour care. 35
In the week after the quake, Partners in Health estimated as many as 20,000 Haitians were
dying daily from lack of surgery. 36
The U.S. and UN used all sorts of technical alibis to justify the delay in meeting people's
needs. They complained that the damage done to Haiti's airport, seaport, and roads impeded
delivery of doctors, nurses, food, water, and rescue teams. Such claims are unconvincing.
Clearly the means exist to deliver aid quickly to a country only 700 miles away from Miami,
Florida, and only 156 miles from a fully functional international airport in the Dominican
Republic. Other countries had no difficulty sending planes of aid and volunteers. China, from
half way around the world, got a plane of aid to Haiti earlier than the United States. Iceland
sent a rescue team within forty-eight hours of the quake. Cuba sent dozens of doctors to join
the several hundred doctors already working the country.
This failure of the U.S. to respond produced a chorus of denunciations from relief experts.
One official from the Italian government, Guido Bertolaso, who was acclaimed for his successful
handling of the April 2009 earthquake in Italy, denounced the U.S. effort as a "pathetic
failure." He declared, "The Americans are extraordinary but when you are facing a situation in
chaos they tend to confuse military intervention with emergency aid, which cannot be entrusted
to armed forces. It's truly a powerful show of force but it's completely out of touch with
reality." 37
Guns over aid
As with Katrina, Obama prioritized the deployment of the U.S. military over provision of aid.
He sent Secretary of State Hillary Clinton to Haiti right away to get President Préval
to secure emergency powers. "The decree would give the government an enormous amount of
authority, which in practice they would delegate to us," she stated. 38 The U.S. has
taken effective control of Haiti. It has secured control of the airport and seaport and
deployed 20,000 U.S. troops to bolster the enlarged UN force of 12,500 already in the country.
Thus, for the fourth time since 1915, Haiti is under a U.S. occupation.
How did the U.S. justify the fact that six days into the relief effort only a trickle of aid
had gotten through to those who needed it? The U.S. government claimed that aid could not be
delivered properly until security was first established. When asked why the U.S. hadn't used
its C-130 transport planes to drop supplies in Port-au-Prince, Secretary of Defense Robert
Gates said, "Air drops will simply lead to riots." 39 However, precisely the
opposite is the case; people will riot because they lack food and water.
In lockstep, the corporate media's coverage shifted from its initial sympathy with victims
of the disaster to churning out scare stories. "Marauding looters emptied wrecked shops and
tens of thousands of survivors waited desperately for food and medical care," Reuters claimed.
"Hundreds of scavengers and looters swarmed over wrecked stores in downtown Port-au-Prince,
seizing goods and fighting among themselves." 40
These scare stories in turn became an excuse for not delivering aid. Writer Nelson Valdes
reported,
The United Nations and the U.S. authorities on the ground are telling those who directly
want to deliver help not to do so because they might be attacked by "hungry mobs." Two cargo
planes from Doctors Without Borders have been forced to land in the Dominican Republic
because the shipments have to be accompanied within Port-au-Prince by U.S. military escorts,
according to the U.S. command. 41
The scare stories led relief workers and military personnel to treat Haitians in a
dehumanizing fashion. Democracy Now!'s Amy Goodman reported an incident where an aid
helicopter refused to distribute food on the ground and instead dropped it on people. An
angry Haitian compared the incident to "throwing bones to dogs." 42
Many non-governmental organizations (NGOs), because of their close relation with the U.S.,
have adopted a paranoid obsession with security to the detriment of providing relief. Ecologist
and human rights activist Sasha Kramer reported on Counterpunch,
One friend showed me the map used by all of the larger NGOs where Port-au-Prince is
divided into security zones, yellow, orange, red. Red zones are restricted, in the orange
zones all of the car windows must be rolled up and they cannot be visited past certain times
of the day. Even in the yellow zone aid workers are often not permitted to walk through the
streets and spend much of their time riding through the city from one office to another in
organizational vehicles. The creation of these security zones has been like the building of a
wall, a wall reinforced by language barriers and fear rather than iron rods, a wall that,
unlike many of the buildings in Port-au-Prince, did not crumble during the earthquake. Fear,
much like violence, is self-perpetuating. When aid workers enter communities radiating fear
it is offensive, the perceived disinterest in communicating with the poor majority is
offensive, driving through impoverished communities with windows rolled up and armed security
guards is offensive . Despite the good intentions of the many aid workers swarming around the
UN base, much of the aid coming through the larger organizations is still blocked in storage,
waiting for the required UN and U.S. military escorts that are seen as essential for
distribution, meanwhile people in the camps are suffering and their tolerance is waning.
43
Yet this disastrous "beware of the Haitian people" line is simply not borne out by reports
coming from Haiti. "There are no security issues," argues Dr. Lyon:
I've been with my Haitian colleagues. I'm staying at a friend's house in Port-au-Prince.
We're working for the Ministry of Public Health for the direction of this hospital as
volunteers. But I'm living and moving with friends. We've been circulating throughout the
city until 2:00 and 3:00 in the morning every night, evacuating patients, moving materials.
There's no UN guards. There's no U.S. military presence. There's no Haitian police presence.
And there's also no violence. There is no insecurity. 44
As the real nature of the U.S. operation became clear, an array of forces criticized the
U.S. for imposing an occupation, not supplying relief. Venezuelan president Hugo Chávez
rightly declared on his weekly television show, "Marines armed as if they were going to war.
There is not a shortage of guns there, my God. Doctors, medicine, fuel, field hospitals --
that's what the United States should send. They are occupying Haiti undercover."
45
Impeding relief
The U.S. occupation actually prevented relief efforts. Once the U.S. was in charge of the
airport it prioritized military flights over relief flights. Jarry Emmanuel, the air logistics
officer for the World Food Program, complained, "There are 200 flights going in and out every
day, which is an incredible amount for a country like Haiti. But most of those flights are for
the United States military. Their priorities are to secure the country." 46
Hillary Clinton herself brought relief missions to a halt when she flew into Port-au-Prince
to seize emergency powers from Préval. The U.S. military shut the airport down for three
hours, preventing the desperately needed delivery of aid. Outraged, Alain Joyandet, the French
Cooperation Minister, called on the UN to investigate America's dominant role in the relief
effort and protested: "This is about helping Haiti, not occupying it." 47
The chorus of complaints further escalated not only from governments but also from aid
organizations. Richard Seymour reports that,
Since the arrival of the troops, however, several aid missions have been prevented from
arriving at the airport in Port-au-Prince that the U.S. has commandeered. France and the
Caribbean Community have both made their complaints public, as has Médecins Sans
Frontières [MSF] on five separate occasions. UN World Food Program flights were also
turned away on two consecutive days. Benoit Leduc, MSF's operations manager in
Port-au-Prince, complained that U.S. military flights were being prioritized over aid
flights. 48
The U.S. military has even turned back masses of health care workers who wanted to volunteer
to provide needed medical care in Haiti. The National Nurses Union organized an emergency
conference call to mobilize thousands of nurses to go to Haiti. More than 1,800 nurses called
in and they proceeded to recruit 11,000 others to the project. Initially the U.S. military said
that it would accept them, but then, inexplicably, they reversed themselves and told them that
the U.S. had plenty of military personnel to address the health care disaster in Haiti. Nothing
could be further from the truth. 49
The U.S. military, Florida's state government, and the Obama administration also colluded in
one of the worst examples of the callous treatment of Haitian victims. They refused to allow
landing of planes loaded with injured people in desperate need of medical treatment. The Obama
administration and Florida's governor were locked in a battle over who would pay for the cost
of the medical care. So for five days, the U.S. let injured people suffer in Haiti because
budget battles mattered more than people's lives. 50
Al Jazeera captured the nature of the U.S. and UN military occupation in a January
17 report:
Most Haitians here have seen little humanitarian aid so far. What they have seen is guns,
and lots of them. Armored personnel carriers cruise the streets. UN soldiers aren't here to
help pull people out of the rubble. They're here, they say, to enforce the law. This is what
much of the UN presence actually looks like on the streets of Port-au-Prince: men in uniform,
racing around in vehicles, carrying guns. At the entrance to the city's airport where most of
the aid is coming in, there is anger and frustration. Much-needed supplies of water and food
are inside, and Haitians are locked out. "These weapons they bring," [an unidentified Haitian
says], "they are instruments of death. We don't want them; we don't need them. We are a
traumatized people. What we want from the international community is technical help. Action,
not words." 51
Problems with the NGOs
Haiti has approximately 10,000 NGOs operating within its borders, one of the highest numbers
per capita in the world. The international NGOs are unaccountable to either the Haitian state
or Haitian population. So the aid funneled through them further weakens what little hold
Haitians have on their own society. These NGOs have taken deep hold in Haiti at the very same
time that the conditions in the country have gone from bad to apocalyptic.
Amid this crisis, some of the NGOs and their employees have tried valiantly to fill the
vacuum left by the U.S. and UN. But most of them did not have real forces inside the country to
respond to the disaster. The Red Cross, for example, only had 15 employees on the ground, but
has received the bulk of donated money -- more than $200 million -- from people around the
world. Add to this the reluctance of the big NGOs to act without "security," as mentioned
above.
Moreover, as the British medical journal The Lancet argues, many of the international NGOs
are engaged in a fierce battle for funds and have allowed that competition to distort their
provision of food, water, medical aid, and services amidst the crisis. After calling aid an
"industry in its own right," the Lancet noted that NGOs are
jostling for position, each claiming that they are doing the most for earthquake
survivors. Some agencies even claim that they are "spearheading" the relief effort. In fact,
as we only too clearly see, the situation in Haiti is chaotic, devastating, and anything but
coordinated. Polluted by the internal power politics and the unsavory characteristics seen in
many big corporations, large aid agencies can be obsessed with raising money through their
own appeal efforts. Media coverage as an end in itself is too often an aim of their
activities. Marketing and branding have too high a profile. Perhaps worst of all, relief
efforts in the field are sometimes competitive with little collaboration between agencies,
including smaller, grass-roots charities that may have better networks in affected countries
and so are well placed to immediately implement emergency relief. 52
Repatriating and jailing refugees
As Haitians' needs continued unmet, the U.S. occupation devolved into policing the disaster,
including preventing the flight of refugees from Haiti. It is true that activists finally
compelled Obama to grant Haitians Temporary Protected Status (TPS). Obama's decision delayed
the deportation of 30,000 Haitians and will make TPS available to 100,000 to 200,000 more.
These provisions, however, have strict limitations.
First of all, the U.S. plans to exclude victims of the earthquake, offering TPS only to
those who arrived in the U.S. without legal documents before January 12. Those who quality must
prove they are indigent and at the very same time pay $470 in application fees. 53
Those Haitians who are granted TPS will only be allowed to stay in the U.S. for eighteen months
before they must return to Haiti. If they do qualify for the program they will become known to
the authorities and thus make themselves more vulnerable to repatriation. Moreover, given the
scale of destruction in Port-au-Prince, there is no way that the city or country will be in
better condition in a year and a half. So if the U.S. enforces this eighteen-month limitation,
it will return Haitians to an ongoing disaster area.
To enforce the bar on Haitians coming to the U.S., a flotilla of military vessels has
surrounded the country. Homeland Security Secretary Janet Napolitano tried to spin this in
humanitarian terms. "At this moment of tragedy in Haiti," she lectured, "it is tempting for
people suffering in the aftermath of the earthquake to seek refuge elsewhere, but attempting to
leave Haiti now will only bring more hardship to the Haitian people and nation." 54
In a far more blunt statement of the actual policy, Coast Guard Lieutenant Commander Chris
O'Neil, in charge of Operation Vigilant Sentry declared, "The goal is to interdict them at sea
and repatriate them." 55
The U.S. made sure to broadcast this threat to Haitians. A U.S. Air Force transport plane
spends hours in the air above Haiti every day, not ferrying food and water, but broadcasting a
radio statement in Creole from Haiti's ambassador to the U.S., Raymond Joseph. "I'll be honest
with you," Joseph says, according to a transcript on the State Department's Web site. "If you
think you will reach the U.S. and all the doors will be wide open to you, that's not at all the
case. And they will intercept you right on the water, and send you back home where you came
from." 56
To prepare for the eventuality that some Haitians may get through the military cordon around
Haiti, Obama, like Bush and Clinton before him, has prepared jail space to incarcerate refugees
at Krome Detention Center in Florida and at the U.S. military base in Guantánamo, Cuba.
57
Asserting who's boss in Latin America
Days after the quake, the conservative think tank Heritage Foundation posted an article
detailing what it considered should be Washington's aims in occupying Haiti. The U.S. military
presence, they argued, in addition to preventing "any large scale movements by Haitians to take
to the sea to try to enter the U.S. illegally," also "offers opportunities to re-shape Haiti's
long-dysfunctional government and economy as well as to improve the public image of the United
States in the region." At the same time, it argues, the U.S. military presence could "interrupt
the nightly flights of cocaine to Haiti and the Dominican Republic from the Venezuelan coast
and counter the ongoing efforts of Venezuelan President Hugo Chávez to destabilize the
island of Hispaniola." There is no evidence of Venezuelan cocaine flights or efforts to
"destabilize" Haiti, but the point is clear: The U.S. sees Haiti as part of an effort to assert
more control over the region and contain "unfriendly" regimes. 58
The military response to Haiti's crisis cannot be separated from Washington's regional
interests. As Greg Gandin writes in the Nation ,
In recent years, Washington has experienced a fast erosion of its influence in South
America, driven by the rise of Brazil, the region's left turn, the growing influence of China
and Venezuela's use of oil revenue to promote a multipolar diplomacy. Broad social movements
have challenged efforts by US- and Canadian-based companies to expand extractive industries
like mining, biofuels, petroleum and logging. 59
Faced with such regional and international competition, the U.S. under Bush and now Obama is
angling to launch a counteroffensive. The U.S. tried to topple Chávez in 2002, it
succeeded in overthrowing Aristide in 2004, and last year backed the coup against President
Zelaya in Honduras. As Grandin reports, the U.S. is actively promoting the right-wing
opposition to the various reform socialist governments in the region. It is backing up this
political initiative with an expansion of its military bases in the region, particularly in
Colombia. "In late October," Grandin writes, "the United States and Colombia signed an
agreement granting the Pentagon use of seven military bases, along with an unlimited number of
as yet unspecified 'facilities and locations.' They add to Washington's already considerable
military presence in Colombia, as well as Central America and the Caribbean." 60
Haiti is thus a stepping-stone for further U.S. interventions in the region.
"Shock doctrine" for Haiti
For Haiti itself, the U.S. is preparing to impose its old neoliberal plan at gunpoint. In
The Shock Doctrine , Naomi Klein documents how the U.S. and other imperial powers take
advantage of natural and economic disasters to impose free-market plans for the benefit of the
American and native capitalists. The U.S., other powers, the IMF, and World Bank had their
shock doctrine for Haiti immediately on hand. Hillary Clinton declared, "We have a plan. It was
a legitimate plan, it was done in conjunction with other international donors, with the United
Nations." 61 This is the Collier Plan, the same old plan of sweatshops, plantations,
and tourism.
The U.S., a few other imperial powers, a few lesser countries, and the UN convened a meeting
on January 26 in Montreal to profess their concern and promises to aid Haiti. The fourteen
so-called "Friends of Haiti" made sure to include the Haitian prime minister, Jean-Max
Bellerive, to at least give the illusion of respect for the country's sovereignty. But outside
a protest organized by Haiti Action Montreal opposed the meeting with signs demanding "medical
relief not guns," "grants not loans," and "reconstruction for people not profit."
In the Guardian , Gary Younge criticized the summit for failing to produce any
solutions to the crisis in Haiti. "Even as corpses remained under the earthquake's rubble," he
wrote, "and the government operated out of a police station, the assembled 'friends' would not
commit to canceling Haiti's $1 billion debt. Instead they agreed to a 10-year plan with no
details, and a commitment to meet again -- when the bodies have been buried along with coverage
of the country -- sometime in the future." 62
By contrast, Venezuela's Hugo Chávez and his Latin American and Caribbean allies
assembled in the Bolivarian Alternative for the Americas (ALBA) announced their opposition to
America's shock doctrine. They denounced Washington's neoliberal plans, called for relief not
troops and for the cancellation of Haiti's debt. Venezuela itself immediately cancelled Haiti's
debt and began sending shiploads of relief offering over $100 million in humanitarian aid with
no strings attached. 63
No such humanitarian motives animate the U.S., its capitalist corporations, and the
international financial institutions. These vultures began circling above Haiti almost
immediately. The Street, an investment Web site, published an article misleadingly entitled,
"An opportunity to heal Haiti," that lays out how U.S. corporations can cash in on the
catastrophe. "Here are some companies," they write, "that could potentially benefit: General
Electric (GE), Caterpillar (CAT), Deere (DE), Fluor (FLR), Jacobs Engineering (JEC)."
64 The Rand Corporation's James Dobbins wrote in the New York Times, "This disaster
is an opportunity to accelerate oft-delayed reforms." 65
Over the last few years, the U.S. has been trying to give a facelift to the international
financial institution that it uses to impose its plans in Haiti. As Jim Lobe reports,
Last June, 1.2 billion dollars in Haiti's external debt, including that owed to the
Washington-based International Monetary Fund (IMF), World Bank, and Inter-American
Development Bank (IDB), was cancelled after the Préval government completed a
three-year Heavily Indebted Poor Countries (HIPC) program. Over half of that debt had been
incurred by Haiti's dictatorships, notably the Duvalier dynasty that ruled the country from
1957 to 1986. But the cancellation covered debt incurred by Haiti only through 2004. In the
last five years, the country has received new loans -- some of them to help it recover from
the floods and other hurricane damage -- totaling another 1.05 billion dollars.
66
In other words, the U.S. and the financial institutions exchanged the old debts for new
so-called "legitimate loans," trapping Haiti yet again in debt. Eric Toussaint and Sophie
Perchellet call this "a typical odious debt-laundering maneuver." 67
In the wake of the crisis, the bankers were at Haiti's door yet again, ready, incredibly, to
loan Haiti money with the usual conditions. The IMF offered Haiti a new loan of $100 million
with the usual strings attached. As the Nation 's Richard Kim writes,
The new loan was made through the IMF's extended credit facility, to which Haiti already
has $165 million in debt. Debt relief activists tell me that these loans came with
conditions, including raising prices for electricity, refusing pay increases to all public
employees except those making minimum wage, and keeping inflation low. They say that the new
loans would impose these same conditions. In other words, in the face of this latest tragedy,
the IMF is still using crisis and debt as leverage to compel neoliberal reforms.
68
Debt cancellation activists like Jubilee pushed back against the IMF and scored a victory
over it. "On Jan. 21," Lobe reports,
the World Bank announced a waiver of Haiti's pending debt payment for five years and said
it would explore ways that the remaining debt could be cancelled. The IDB [Inter-American
Development Bank] has said it is engaged in a similar effort and will present alternatives
for reducing or canceling the debt to its board of governors. On Jan. 27, the IMF, which
lacks the authority to provide outright grants, announced that it would give Haiti a 102
million-dollar loan at zero-percent interest and that would not be subject to any of the
Fund's usual performance conditions. 69
The pressure even forced the U.S. to call for all new monies extended to Haiti to be in the
form of grants, and U.S. Treasury Secretary Timothy Geithner called for debt relief in the run
up to the G-7 conference in February. 70
While activists can claim these concessions by the U.S. and the international financial
institutions as victories that open up the possibility for even more progress in demanding full
cancellation of Haiti's debt and all third world debt, no one should look at this situation
through rose-colored glasses. The U.S. is using this promise -- and it is just a promise at
this point -- to cover up its determination to implement the Collier Plan for tourism,
sweatshops, and mango plantations to exploit Haiti's desperately poor workers and peasants. In
fact, the U.S. does not need to use the leverage of debt to force Haiti to agree to the plan;
it has secured colonial rule over the country and can impose its plans directly at
gunpoint.
Resistance and solidarity
The left has a responsibility to cut through the propaganda of the Obama administration and the
mainstream media. The U.S. is not engaged in humanitarian relief, but old-fashioned imperialism
in Haiti. Humanitarianism has long been one of the means the U.S. uses to provide a cover story
for its military actions abroad. But whether it was saving the Cuban people from Spanish
brutality, sending the marines into Mogadishu in 1993 to feed starving Somalis, or overthrowing
the Taliban to "liberate women," the real aims and practical results of these interventions
diverged radically from their alleged noble intentions.
Humanitarian military intervention was heavily promoted in the 1990s during the latter part
of the first Bush administration and the Clinton administration -- in particular during the
wars in the former Yugoslavia. Its purpose was to reestablish the legitimacy of U.S. military
intervention in the wake of the U.S. defeat in Vietnam, as part of a policy intended to erase
what was known as the "Vietnam syndrome." It is being revived again in the wake of the
unpopularity of the occupations of Iraq and Afghanistan and weariness toward the "war on
terror," for similar reasons. The U.S. hopes that it can re-legitimize its military as a force
for good so that it can lay the groundwork for more U.S. interventions in the region and around
the world.
Even if the U.S. gets away with its new plans for Haiti, it will inevitably breed resistance
in the population and throughout the region where through bitter experience workers and
peasants have learned to oppose U.S. designs on their countries. In Haiti, workers and peasants
will find their way to organize in the countryside on the plantations, in the sweatshops, and
in the shantytowns.
Already Haitian organizations have come out against the U.S. agenda. A statement issued on
January 27 from the Coordinating Committee of Progressive Organizations announced:
We must declare our anger and indignation at the exploitation of the situation in Haiti to
justify a new invasion by 20,000 U.S. Marines. We condemn what threatens to become a new
military occupation by U.S. troops, the third in our history. It is clearly part of a
strategy to remilitarize the Caribbean Basin in the context of the imperialist response to
the growing rebellion of the peoples of our continent against neo-liberal globalization. And
it exists also within a framework of pre-emptive warfare designed to confront the eventual
social explosion of a people crushed by poverty and facing despair. We condemn the model
imposed by the U.S. government and the military response to a tragic humanitarian crisis. The
occupation of the Toussaint L'Ouverture international airport and other elements of the
national infrastructure have deprived the Haitian people of part of the contribution made by
Caricom, by Venezuela, and by some European countries. We condemn this conduct, and refuse
absolutely to allow our country to become another military base. 71
The Haitian left has thus already started building opposition to the U.S. occupation and the
Collier Plan. Every year since the U.S. coup in 2004, activists have marched on February 28 in
Port-au-Prince against the UN occupation and to demand the end of Aristide's exile. Workers'
organizations just last year protested in the thousands for an increase in the minimum wage
that Préval opposed. Lavalas activists had protested before the earthquake against their
exclusion from the scheduled parliamentary elections. Now amid crisis and occupation,
Préval, who has proved to be a puppet for the U.S. agenda, thus losing what little
political support he had, has cancelled those elections. No doubt Préval's behavior will
provoke political opposition from below against his government's collaboration with the United
States.
Outside Haiti, the left must build solidarity with that struggle and make several demands on
the Obama administration. First, Obama must immediately end the military occupation of Haiti,
and instead flood the country with doctors, nurses, food, water, and construction machinery.
Second, the U.S. must also stop its enforcement of Jean-Bertrand Aristide's exile and the ban
on his party, Fanmi Lavalas, from participating in elections. Haitians, not the U.S., should
have the right to determine their government.
Third, the left must demand that the U.S., other countries, and international financial
institutions cancel Haiti's debt, so that the aid money headed to Haiti will go to food and
reconstruction, not debt repayment. More than that -- France, the U.S., and Canada, the three
countries that have most interfered with Haiti's sovereignty -- should pay reparations for the
damage they have done. France can start by repaying the $21 billion dollars that it extracted
from Haiti from 1824 to 1947. Fourth, leftists must agitate for Obama to indefinitely extend
Temporary Protected Status to Haitians in the U.S. -- and open the borders to any Haitians who
flee the country. Finally, the left must direct all its funds to Haitian grass-roots
organizations to provide relief and help rebuild resistance to the U.S. plan for Haiti.
Only through agitating for these demands can we stop the U.S. from imposing at gunpoint its
shock doctrine for Haiti. In this struggle, the left must educate wider and wider layers of
people, already suspicious of U.S. motives after Hurricane Katrina, and the Iraq and
Afghanistan wars, that the U.S. state never engages in military actions for humanitarian
motives. As the great American revolutionary journalist John Reed declared, "Uncle Sam never
gives anybody something for nothing. He comes along with a sack stuffed with hay in one hand
and a whip in the other. Anyone who accepts Uncle Sam's promises at their face value will find
that they must be paid for in sweat and blood." 72
"President Obama on U.S. rescue efforts in Haiti, www.America.gov .
Bill Quigley, "Haiti: still starving 23 days later," Huffington Post, posted
February 4, 2010.
Soumitra Eachempati, Dean Lorich, and David Helfet, "Haiti: Obama's Katrina," Wall
Street Journal , January 26, 2010.
Rich Schapiro, "Rev. Pat Robertson says ancient Haitians' 'pact with the devil' caused
earthquake," New York Daily News , January 13, 2010.
David Brooks, "The underlying tragedy," New York Times , January 14, 2010.
For an overview of the French colony and the slave revolution see Ashley Smith, "The
Black Jacobins," International Socialist Review (ISR) 63, January–February
2009.
Peter Hallward, Damming the Flood: Haiti, Aristide, and the Politicsw of
Containment (New York: Verso Books, 2007), 12.
Quoted in Sidney Lens, The Forging of the American Empire (Chicago: Haymarket
Books, 2003), 270.
For an overview of the history of U.S. imperialism in Haiti see Helen Scott, "Haiti under
siege," ISR 35, May-June 2004.
Paul Farmer, The Uses of Haiti (Monroe, Maine: Common Courage Press, 1994),
108.
Alex Dupuy, Haiti in the New World Order (New York: Westview Press, 1996),
37.
For an analysis of Baby Doc's neoliberal plans see chapter 2 of Alex Dupuy, The
Prophet and the Power (New York: Rowman and Littlefield, 2007).
Eric Toussaint and Sophie Perchellet, "Debt is Haiti's real curse," Socialist
Worker , January 20, 2010.
Regan Boychuck, "The vultures circle Haiti at every opportunity, natural or man-made,"
Znet, February 3, 2010.
Dupuy, Haiti in the New World Order , 31.
Quoted in Amy Wilentz, The Rainy Season (New York: Simon and Schuster, 1989),
137.
Quoted in Ashley Smith, "The new occupation of Haiti: Aristide's rise and fall,"
ISR 35, May–June, 2004.
For an analysis of Lavalas after Aristide's restoration see chapter 5 of Robert Fatton,
Haiti's Predatory Republic (Boulder: Lynne Reiner Publishers, 2002).
For a perhaps overly generous portrait of Aristide in his second term see chapters 6 and
7 of Peter Hallward, Damming the Flood .
Clara James, "Haiti free trade zone," Dollars and Sense , November/December
2002.
"... For Germany, the idea of Europeanism has provided the country's elites with the perfect alibi to conceal their hegemonic project behind the ideological veil of 'European integration' ..."
"... "That may sound absurd given that today's Germany is a successful democracy without a trace of national-socialism – and that no one would actually associate Merkel with Nazism. But further reflection on the word 'Reich', or empire, may not be entirely out of place. The term refers to a dominion, with a central power exerting control over many different peoples. According to this definition, would it be wrong to speak of a German Reich in the economic realm?" ..."
"... More recently, an article in Politico Europe ..."
"... Even though the power exercised by Europe's 'colonial masters' is now openly acknowledged by the mainstream press, it is however commonplace to ascribe Germany's dominant position as an accident of history: according to this narrative, we are in the presence of an 'accidental empire', one that is not the result of a general plan but that emerged almost by chance – even against ..."
"... Germany (and France) have been the main beneficiaries of the sovereign bailouts of periphery countries , which essentially amounted to a covert bailout of German (and French) banks, as most of the funds were channelled back to the creditor countries' banks, which were heavily exposed to the banks (and to a lesser degree the governments) of periphery countries. German policy, Helen Thompson wrote , overwhelmingly 'served the interests of the German banks'. ..."
"... This is a telling example of how Germany's policies (and the EU's policies more in general), while nominally ordoliberal – i.e., based upon minimal government intervention and a strict rules-based regime – are in reality based on extensive state intervention on behalf of German capital, at both the domestic and European level. ..."
"... German authorities have also been more than happy to go along with – or to encourage – the European institutions' 'exercise of unrestrained executive power and the more or less complete abandonment of strict, rules-based frameworks' – Storey is here referring in particular to the ECB's use of its currency-issuing monopoly to force member states to follows its precepts – 'to maintain the profitability of German banks, German hegemony within the Eurozone, or even the survival of the Eurozone itself'. ..."
"... Germany (and France) are also the main beneficiaries of the ongoing process of 'mezzogiornification' of periphery countries – often compounded by troika -forced privatisations –, which in recent years has allowed German and French firms to take over a huge number of businesses (or stakes therewithin) in periphery countries, often at bargain prices. A well-publicised case is that of the 14 Greek regional airports taken over by the German airport operator Fraport. ..."
"... France's corporate offensive in Italy is another good example: in the last five years, French companies have engaged in 177 Italian takeovers, for a total value of $41.8 billion, six times Italy's purchases in France over the same period. This is leading to an increased 'centralisation' of European capital, characterised by a gradual concentration of capital and production in Germany and other core countries – in the logistical and distribution sectors, for example – and more in general to an increasingly imbalanced relationship between the stronger and weaker countries of the union. ..."
"... In short, the European Union should indeed be viewed a transnational capitalist project, but one that is subordinated to a clear state-centred hierarchy of power, with Germany in the dominant position. In this sense, the national elites in periphery countries that have supported Germany's hegemonic project (and continue to do so, first and foremost through their support to European integration) can thus be likened to the comprador bourgeoisie ..."
"... Exportnationalismus' ..."
"... Modell Deutschland ..."
"... Even more worryingly, Germany is not simply aiming at expanding its economic control over the European continent; it is also taking steps for greater European military 'cooperation' – under the German aegis, of course. As a recent article in Foreign Policy ..."
"... In other words, Germany already effectively controls the armies of four countries. And the initiative, Foreign Policy ..."
Originally from: Germany's dystopian plans for Europe: from fantasy to reality?By Thomas
Fazi 4 December 2017
For Germany, the idea
of Europeanism has provided the country's elites with the perfect alibi to conceal their
hegemonic project behind the ideological veil of 'European integration'
After Emmanuel Macron's election in France, many (including myself) claimed that this
signalled a revival of the Franco-German alliance and a renewed impetus for Europe's process of
top-down economic and political integration – a fact that was claimed by most
commentators and politicians, beholden as they are to the Europeanist narrative, to be an
unambiguously positive development.
Among the allegedly 'overdue' reforms that were said to be on the table was the creation of
a pseudo-'fiscal union' backed by a (meagre) 'euro budget', along with the creation of a
'European finance minister', the centre-points of Macron's plans to 're-found the EU' – a
proposal that raises a number of very worrying issues from both political and economic
standpoints,
which I have discussed at length elsewhere .
The integrationists' (unwarranted) optimism, however, was short-lived. The result of the
German elections, which saw the surge of two rabidly anti-integrationist parties, the
right-wing FDP and extreme right AfD; the recent collapse of coalition talks between Merkel's
CDU, the FDP and the Greens, which most likely means an interim government for weeks if not
months, possibly leading to new elections (which polls show would
bring roughly the same result as the September election); and the growing restlessness in
Germany towards the 13-year-long rule of Macron's partner in reform Angela Merkel, means that
any plans that Merkel and Macron may have sketched out behind the scenes to further integrate
policies at the European level are now, almost certainly, dead in the water. Thus, even the
sorry excuse for a fiscal union proposed by Macron is now off the table, according to most
commentators.
At this point, the German government's most likely course in terms of European policy
– the one that has the best chance of garnering cross-party support, regardless of the
outcome of the coalition talks (or of new elections) – is the 'minimalist' approach set
in stone by the country's infamous and now-former finance minister, Wolfgang Schäuble, in
a 'non-paper' published shortly
before his resignation.
The main pillar of Schäuble's proposal – a long-time obsession of his –
consists in giving the European Stability Mechanism (ESM), which would go on to become a
'European Monetary Fund', the power to monitor (and, ideally, enforce) compliance with the
Fiscal Compact. This echoes Schäuble's previous calls for the
creation of a European budget commissioner with the power to reject national budgets – a
supranational fiscal enforcer.
The aim is all too clear: to further erode what little sovereignty and autonomy member
states have left, particularly in the area of fiscal policy, and to facilitate the imposition
of neoliberal 'structural reforms' – flexibilisation of labour markets, reduction of
collective bargaining rights, etc. – on reluctant countries.
To this end, the German authorities even want to make the receipt of EU cohesion funds
conditional on the implementation of such reforms , tightening the existing arrangements
even further. Moreover, as noted by Simon
Wren-Lewis , the political conflict of interest of having an institution lending within the
eurozone would end up imposing severe austerity bias on the recovering country.
Until recently, these proposals failed to materialise due, among other reasons, to France's
opposition to any further overt reductions of national sovereignty in the area of
budgetary policy; Macron, however, staunchly rejects France's traditional
souverainiste stance, embracing instead what he calls 'European sovereignty', and thus
represents the perfect ally for Germany's plans.
Another proposal that goes in the same direction is the
German Council for Economic Experts' plan to curtail banks' sovereign bond holdings.
Ostensibly aimed at 'severing the link between banks and government' and 'ensuring long-term
debt sustainability', it calls for: (i) removing the exemption from risk-weighting for
sovereign exposures, which essentially means that government bonds would no longer be
considered a risk-free asset for banks (as they are now under Basel rules), but would be
'weighted' according to the 'sovereign default risk' of the country in question (as determined
by credit rating agencies); (ii) putting a cap on the overall risk-weighted sovereign exposure
of banks; and (iii) introducing an automatic 'sovereign insolvency mechanism' that would
essentially extend to sovereigns the bail-in rule introduced for banks by the banking union,
meaning that if a country requires financial assistance from the ESM, for whichever reason, it
will have to lengthen its sovereign bond maturities (reducing the market value of those bonds
and causing severe losses for all bondholders) and, if necessary, impose a nominal 'haircut' on
private creditors.
As noted by the German economist Peter Bofinger , the only member of the German Council of
Economic Experts to vote against the sovereign bail-in plan, this would almost certainly ignite
a 2012-style self-fulfilling sovereign debt crisis, as periphery countries' bond yields would
quickly rise to unsustainable levels, making it increasingly hard for governments to roll over
maturing debt at reasonable prices and eventually forcing them to turn to the ESM for help,
which would entail even heavier losses for their banks and an even heavier dose of
austerity.
It would essentially amount to a return to the pre-2012 status quo, with governments once
again subject to the supposed 'discipline' of the markets, particularly in the context of a
likely tapering of the ECB's quantitative easing (QE) program. The aim of this proposal is the
same as that of Schäuble's 'European Monetary Fund': to force member states to implement
permanent austerity.
Of course, national sovereignty in a number of areas – most notably fiscal policy
– has already been severely eroded by the complex system of new laws, rules and
agreements introduced in recent years, including but not limited to the six-pack, two-pack,
Fiscal Compact, European Semester and Macroeconomic Imbalances Procedure (MIP).
As a result of this new post-Maastricht system of European economic governance, the European
Union has effectively become a sovereign power with the authority to impose budgetary rules and
structural reforms on member states outside democratic procedures and without democratic
control.
The EU's embedded quasi-constitutionalism and inherent (structural) democratic deficit has
thus evolved into an even more anti-democratic form of 'authoritarian constitutionalism' that
is breaking away with elements of formal democracy as well, leading some observers to suggest
that the EU 'may easily become the postdemocratic prototype and even a pre-dictatorial
governance structure against national sovereignty and democracies'.
To give an example, with the launch of the European Semester, the EU's key tool for economic
policy guidance and surveillance, an area that has historically been a bastion of national
sovereignty – old-age pensions – has now fallen under the purview of supranational
monitoring as well. Countries are now expected to
(and face sanctions if they don't): (i) increase the retirement age and link it with life
expectancy; (ii) reduce early retirement schemes, improve the employability of older workers
and promote lifelong learning; (iii) support complementary private savings to enhance
retirement incomes; and (iv) avoid adopting pension-related measures that undermine the long
term sustainability and adequacy of public finances.
This has led to the introduction in various countries of several types of automatic
stabilizing mechanisms (ASMs) in pension systems, which change the policy default so that
benefits or contributions adjust automatically to adverse demographic and economic conditions
without direct intervention by politicians. Similar 'automatic correction mechanisms' in
relation to fiscal policy can be found in the Fiscal Compact.
The aim of all these 'automatic mechanisms' is clearly to put the economy on 'autopilot',
thus removing any element of democratic discussion and/or decision-making at either the
European or national level. These changes have already transformed European states into
'semi-sovereign' entities, at best. In this sense, the proposals currently under discussion
would mark the definitive transformation of European states from semi-sovereign to de
facto (and increasingly de jure ) non-sovereign entities.
Regardless of the lip service paid by national and European officials to the need for
further reductions of national sovereignty to go hand in hand with a greater 'democratisation'
of the euro area, the reforms currently on the table can, in fact, be considered the final
stage in the thirty-year-long war on democracy and national sovereignty waged by the European
elites, aimed at constraining the ability of popular-democratic powers to influence economic
policy, thus enabling the imposition of neoliberal policies that would not have otherwise been
politically feasible.
In this sense, the European economic and monetary integration process should be viewed, to a
large degree, as a class-based and inherently neoliberal project pursued by all
national capitals as well as transnational (financial) capital. However, to grasp the processes
of restructuring under way in Europe, we need to go beyond the simplistic capital/labour
dichotomy that underlies many critical analyses of the EU and eurozone, which view EU/EMU
policies as the expression of a unitary and coherent transnational (post-national) European
capitalist class.
The process underway can only be understood through the lens of the geopolitical-economic
tensions and conflicts between leading capitalist states and regional blocs, and the
conflicting interests between the different financial/industrial capital fractions located in
those states, which have always characterised the European economy. In particular, it means
looking at Germany's historic struggle for economic hegemony over the European continent.
It is no secret that Germany is today the leading economic and political power in Europe,
just as it is no secret that nothing gets done in Europe without Germany's seal of approval. In
fact, it is commonplace to come across references to Germany's 'new empire'.
A controversial Der Spiegel editorial from a few years back event went as far as
arguing that it is not out place to talk of the rise of a 'Fourth Reich':
"That may sound absurd given that today's Germany is a successful democracy without a trace
of national-socialism – and that no one would actually associate Merkel with Nazism. But
further reflection on the word 'Reich', or empire, may not be entirely out of place. The term
refers to a dominion, with a central power exerting control over many different peoples.
According to this definition, would it be wrong to speak of a German Reich in the economic
realm?"
More recently, an article in
Politico Europe – co-owned by the German media magnate Axel Springer AG
– candidly explained why 'Greece is de facto a German colony'. It noted how, despite
Tsipras' pleas for debt relief, the Greek leader 'has little choice but to heed the wishes of
his "colonial" masters', i.e., the Germans.
This is because public debt
in the eurozone is used as a political tool – a disciplining tool – to get
governments to implement socially harmful policies (and to get citizens to accept these
policies by portraying them as inevitable), which explains why Germany continues to refuse to
seriously consider any form of debt relief for Greece, despite the various commitments and
promises to that end made in recent years: debt is the chain that keeps Greece (and other
member states) from straying 'off course'.
Even though the power exercised by Europe's 'colonial masters' is now openly acknowledged by
the mainstream press, it is however commonplace to ascribe Germany's dominant position as an
accident of history: according to this narrative, we are in the presence of an 'accidental
empire', one that is not the result of a general plan but that emerged almost by chance –
even against Germany's wishes – as a result of the euro's design faults, which
have allowed Germany and its satellites to pursue a neo-mercantilist strategy and thus
accumulate huge current account surpluses.
Now, it is certainly true that the euro's design – strongly influenced by Germany
– inevitably benefits export-led economies such as Germany over more internal
demand-oriented economies, such as those of southern Europe. However, there is ample evidence
to support the argument that Germany, far from having accidently stumbled upon European
dominance, has been actively and consciously pursuing an expansionary and imperialist strategy
in – and through – the European Union for decades.
Even if we limit our analysis to Germany's post-crisis policies (though there is much that
could be said about Germany's post-reunification policies and subsequent offshoring of
production to Eastern Europe in the 1990s), it would be very naïve to view Germany's
inflexibility – on austerity, for example – as a simple case of ideological
stubbornness, considering the extent to which the policies in question have benefited Germany
(and to a lesser extent France).
Germany (and France) have been
the main beneficiaries of the sovereign bailouts of periphery countries , which essentially
amounted to a covert bailout of German (and French) banks, as most of the funds were channelled
back to the creditor countries' banks, which were heavily exposed to the banks (and to a lesser
degree the governments) of periphery countries. German policy, Helen Thompson wrote ,
overwhelmingly 'served the interests of the German banks'.
This is a telling example of how Germany's policies (and the EU's policies more in general),
while nominally ordoliberal – i.e., based upon minimal government intervention
and a strict rules-based regime – are in reality based on extensive state
intervention on behalf of German capital, at both the domestic and European level.
As Andy Storey notes, not only did the German government, throughout the crisis, show a
blatant disregard for ordoliberalism's non-interference of public institutions in the workings
of the market, by engaging in a massive Keynesian-style programme in the aftermath of the
financial crisis and pushing through bailout programmes that largely absolved German banks from
their responsibility for reckless lending to Greece and other countries; German authorities
have also been more than happy to go along with – or to encourage – the European
institutions' 'exercise of unrestrained executive power and the more or less complete
abandonment of strict, rules-based frameworks' – Storey is here referring in particular
to the ECB's use of its currency-issuing monopoly to force member states to follows its
precepts – 'to maintain the profitability of German banks, German hegemony within the
Eurozone, or even the survival of the Eurozone itself'.
Germany (and France) are also the main beneficiaries of the ongoing process of
'mezzogiornification' of periphery countries – often compounded by troika
-forced privatisations –, which in recent years has allowed German and French firms to
take over a huge number of businesses (or stakes therewithin) in periphery countries, often at
bargain prices. A well-publicised case is that of the 14 Greek regional airports taken over by
the German airport operator Fraport.
France's corporate offensive in Italy is another good example: in the last five years,
French companies have engaged in 177 Italian takeovers, for a total value of $41.8 billion, six
times Italy's purchases in France over the same period. This is leading to an increased
'centralisation' of European capital, characterised by a gradual concentration of capital and
production in Germany and other core countries – in the logistical and distribution
sectors, for example – and more in general to an increasingly imbalanced relationship
between the stronger and weaker countries of the union.
These transformations cannot simply be described as processes without a subject: while there
are undoubtedly structural reasons involved – countries with better developed economies
of scale, such as Germany and France, were bound to benefit more than others from the reduction
in tariffs and barriers associated with the introduction of the single currency – we also
have to acknowledge that there are loci of economic-politic power that are actively driving and
shaping these imperialist processes, which must be viewed through the lens of the unresolved
inter-capitalist struggle between core-based and periphery-based capital.
From this perspective, the dichotomy that is often raised in European public discourse
between nationalism and Europeanism is deeply flawed. The two, in fact, often go hand in hand.
In Germany's case, for example, Europeanism has provided the country's elites with the perfect
alibi to conceal their hegemonic project behind the ideological veil of 'European integration'.
Ironically, the European Union – allegedly created as an antidote to the vicious
nationalisms of the twentieth century – has been the tool through which Germany has been
able to achieve the 'new European order' that Nazi ideologues had theorised in the 1930s and
early 1940s.
In short, the European Union should indeed be viewed a transnational capitalist project, but
one that is subordinated to a clear state-centred hierarchy of power, with Germany in the
dominant position. In this sense, the national elites in periphery countries that have
supported Germany's hegemonic project (and continue to do so, first and foremost through their
support to European integration) can thus be likened to the comprador bourgeoisie of
the old colonial system – sections of a country's elite and middle class allied with
foreign interests in exchange for a subordinated role within the dominant hierarchy of
power.
From this point of view, the likely revival of the Franco-German bloc is a very worrying
development, since it heralds a consolidation of the German-led European imperialist bloc
– and a further 'Germanification' of the continent. This development cannot be understood
independently of the momentous shifts that are taking place in global political economy –
namely the organic crisis of neoliberal globalisation, which is leading to increased tensions
between the various fractions of international capital, most notably between the US and
Germany.
Trump's repeated criticisms of Germany's beggar-thy-neighbour mercantilist policies should
be understood in this light. The same goes for Angela Merkel's recent call – much
celebrated by the mainstream press – for a stronger Europe to counter Trump's
unilateralism. Merkel's aim is not, of course, that of making 'Europe' stronger, but rather of
strengthening Germany's dominant position vis-à-vis the other world powers (the US but
also China) through the consolidation of Germany's control of the European continental economy,
in the context of an intensification of global inter-capitalist competition.
This has now become an imperative for Germany, especially since Trump has dared to openly
challenge the self-justifying ideology which sustains Germany's mercantilism – a
particular form of economic nationalism that Hans Kundnani has
dubbed ' Exportnationalismus' , founded upon the belief that Germany's massive
trade surplus is uniquely the result of Germany's manufacturing excellence ( Modell
Deutschland ) rather than, in fact, the result of unfair trade practices.
This is why, if Germany wants to maintain its hegemonic position on the continent, it must
break with the US and tighten the bolts of the European workhouse. To this end, it needs to
seize control of the most coveted institution of them all – the ECB –, which
hitherto has never been under direct German control (though the Bundesbank exercises
considerable influence over it, as is well known). Indeed, many commentators openly acknowledge
that Merkel now has her eyes on the ECB's presidency. This would effectively put Germany
directly at the helm of European economic policy.
Even more worryingly, Germany is not simply aiming at expanding its economic control over
the European continent; it is also taking steps for greater European military 'cooperation'
– under the German aegis, of course.
As a recent article in Foreign Policy revealed , 'Germany is quietly building a
European army under its command'.
This year Germany and two of its European allies, the Czech Republic and Romania, announced
the integration of their armed forces, under the control of the Bundeswehr. In doing so, the
will follow in the footsteps of two Dutch brigades, one of which has already joined the
Bundeswehr's Rapid Response Forces Division and another that has been integrated into the
Bundeswehr's 1st Armored Division.
In other words, Germany already effectively controls the armies of four countries. And the
initiative, Foreign Policy notes, 'is likely to grow'. This is not surprising: if
Germany ('the EU') wants to become truly autonomous from the US, it needs to acquire military
sovereignty, which it currently lacks.
Europe is thus at a crossroads: the choice that left-wing and popular forces, and periphery
countries more generally, face is between (a) accepting Europe's transition to a fully
post-democratic, hyper-competitive, German-led continental system, in which member states
(except for those at the helm of the project) will be deprived of all sovereignty and autonomy,
in exchange for a formal democratic façade at the supranational level, and its workers
subject to ever-growing levels of exploitation; or (b) regaining national sovereignty and
autonomy at the national level, with all the short-term risks that such a strategy entails, as
the only way to restore democracy, popular sovereignty and socioeconomic dignity. In short, the
choice is between European post-democracy or post-European democracy.
There is no third way. Especially in view of the growing tensions between Germany, the US
and China, periphery countries should ask themselves if they want to be simple pawns in this
'New Great Game' or if they want to take their destinies into their own hands.
"... The grand history of Latin America: borrow billions of $$$ from U.S. banks, hand the money to the wealthy who immediately deposit it right back in American banks, and let the poor pay back the principal and interest. Hmmm . seems more and more the way this country is going. ..."
"... The fixed exchange rate under Kirchner was totally unsustainable. One difference between Macri's neoliberalism and his predecessors is Macri is allowing much more of a floating currency than in the pre 2001 time period (We can debate how much it is actually is floating and clearly a lot of this debt issuance is for currency stabilization that I personally don't approve of). ..."
"... Brazil's recent neoliberal turn was frustrating for a variety of reasons, but being a big, diverse economy, they've got more sovereignty than their neighbors. However, the business and political elites in Brazil decided to hammer through austerity (spending cuts and interest rate hikes) because they WANTED to, not because external forces made them do it. ..."
by lan Cibils and Mariano Arana, Political Economy Department, Universidad Nacional de
General Sarmiento, Buenos Aires, Argentina. Originally published at Triple Crisis
In Argentina's 2015 presidential run-off election, the neoliberal right-wing coalition
"Cambiemos" (literally, "lets change"), headed by Mauricio Macri, defeated the populist
Kirchnerista candidate by just two percentage points. Macri's triumph heralded a return to the
neoliberal policies of the 1990s and ended twelve years of heterodox economic policies that
prioritized income redistribution and the internal market. The ruling coalition also performed
well in the October 2017 mid-term elections and has since begun implementing a draconian set of
fiscal, labor, and social security reforms.
One of the hallmarks of the Cambiemos government so far has been a fast and furious return
to international credit markets and a very substantial increase in new public debt. Indeed,
since Macri came to power in 2015, Argentina has issued debt worth more than $100 billion. This
marks a clear contrast to the Kirchner administrations, during which the emphasis was debt
reduction.
The Kirchner Years: Debt Reduction?
Both Néstor and Cristina Kirchner pointed to desendeudamiento -- debt
reduction -- as one of the great successes of their administrations. To what extent was debt
reduced during the twelve years of Kirchnerismo?
Figure 1 shows the evolution of Argentina's public debt stock and the debt/GDP ratio between
2004-2017. One can see that there was a substantial reduction in the debt to GDP ratio between
2004-2011 -- the first two Kirchner terms -- due primarily to: a) the 2005 and 2010 debt
restructuring offers, b) a deliberate policy of desendedudamiento (debt cancellation),
and c) high growth rates. Indeed, debt/GDP dropped from 118.1% in 2004 to 38.9% in 2011. One
can also see that the actual stock of public debt fell after the 2005 debt restructuring
process, and then remained relatively stable until 2010. In 2011, it began a slow upward trend,
due to the re-appearance of the foreign exchange constraint once the commodity bubble burst and
capital flight increased.
Figure 1: Public Debt Stock (millions of dollars) and Debt/GDP ratio
Source: Ministry of Finance, Argentina.
An additional, fundamental change occurred during the first two Kirchner administrations:
the change in currency composition of Argentina's public debt. Indeed, as Figure 2 shows,
peso-denominated public debt reached 41% of total debt after the 2005 debt-restructuring
process. Between 2005 and 2012 it remained relatively stable, and then, after 2012,
dollar-denominated public debt began to grow again although never reaching pre-2005
debt-restructuring levels. The currency composition change is key, since it reduces
considerably the pressure on the external accounts.
Figure 2: Currency Composition of Argentina's Public Debt (as a % GDP)
Source: Ministry of Finance, Argentina.
Fast and Furious
Since Macri became president in December 2015, there has been a dramatic change in official
public debt strategy, radically reversing the process of debt reduction of the previous decade.
As shown in Figure 1, there was a substantial jump in the stock of public debt in 2016, and it
has continued to grow in 2017.The result to date has been a substantial increase in the stock
of Argentina's dollar-denominated public debt, as well as an increase of the debt service to
GDP ratio. New debt has been used to cover the trade deficit, pay off the vulture funds,
finance capital flight, and meet debt service payments. All of this has resulted in growing
concerns about Argentina's future economic sustainability, not to mention any possibility of
promoting economic development objectives.
Upon taking office, the Macri Administration rapidly implemented a series of policies to
liberalize financial flows and imports, and a 40% devaluation of the Argentine peso. [1] In
this context, it also went on a debt rampage, increasing dollar denominated debt considerably.
Between December 2015 and September 2017, Argentina's new debt amounts to the equivalent of
$103.59 billion. [2] This includes new
debt issued by the Treasury (80%), provincial governments (11%), and the private sector (9%).
While Argentina's debt had been increasing slowly since 2011, the jump experienced in 2016 was
unlike any other in Argentina's history.
If the increase in debt is alarming, the destination of those funds is also cause of
concern. Data from Argentina's Central Bank (Banco Central de la República Argentina or
BCRA) show that during the first eight months of 2017, net foreign asset accumulation of the
private non-banking sector totaled $13.32 million, 33% more than all of 2016, which itself was
17% more than all of 2015. This means that since December 2015, Argentina has dollarized assets
by approximately $25.29 billion.
According to the BCRA, during the same period there was a net outflow of capital due to debt
interest payments, profits and dividends of $8.231 billion. Additionally, the net outflow due
to tourism and travel is calculated at roughly $13.43 billion between December 2015 and August
2017.
In sum, the dramatic increase in dollar-denominated debt during the two first Macri years
served to finance capital flight, tourism, profit remittances, and debt service, all to the
tune of roughly $50 billion.
Where is This Headed?
Argentina's experience since the 1976 military coup until the crash of 2001 has shown how
damaging is the combination of unfavorable external conditions and the destruction of the local
productive structure. The post-crisis policies of the successive Kirchner administrations
reversed the debt-dependent and deindustrializing policies of the preceding decades. However,
since Macri took office in December 2015, Argentina has once again turned to debt-dependent
framework of the 1990s. Not only has public debt grown in absolute terms, but the weight of
dollar-denominated debt in total debt has also increased. Despite significant doubts regarding
the sustainability of the current situation, the government has expressed intentions of
continuing to issue new debt until 2020.
What are the main factors that call debt-sustainability into question? First, capital
flight, which, as we have said above, is increasing, is compensated with new dollar-denominated
public debt. Second, Argentina's trade balance turned negative in 2015 and has remained so
since, with a total accumulated trade deficit between 2015 and the second quarter of 2017 of
$6.53 billion. Import dynamics proved impervious to the 2016 recession, therefore it is
expected that the deficit will either persist as is or increase if there are no drastic
changes. Furthermore, in the 2018 national budget bill sent to Congress, Treasury Secretary
Nicolás Dujovne projects that the growth rate of imports will exceed that of exports
until at least 2021, increasing the current trade deficit by 68%.
Finally, according to the IMF's World Economic Outlook (October 2017), growth rate
projections for industrialized countries increase prospects of a US Federal Reserve interest
rate increase. This would make Argentina's new debt issues more expensive, increasing the
burden of future debt service and increasing capital flight from Argentina (in what is
generally referred to as the "flight to safety").
The factors outlined above generate credible and troublesome doubts about the sustainability
of the economic policies implemented by the Macri administration. While there are no signs of a
major crisis in the short term (that is, before the 2019 presidential elections), there are
good reasons to doubt that the current level of debt accumulation can be sustained to the end
of a potential second Macri term (2023). In other words, there are good reasons to believe that
Argentines will once again have to exercise their well-developed ability to navigate through
yet another profound debt crisis. This is not solely the authors' opinion. In early November
2017 Standard & Poor's placed Argentina in a list of the five most fragile economies.
[3] It looks like,
once again, storm clouds are on the horizon.
'What are the main factors that call debt sustainability into question? First, capital
flight.'
Capital flees Argentina whenever the opportunity arises because successive governments --
whether leftist or conservative -- refuse to control inflation and maintain a stable
currency.
Since 2001, the Argentine peso has slid from one-to-one with the US dollar to about 19 to
the dollar today. With Argentine inflation running in the low to mid twenties (according to
INDEC and Price Stats), the peso can be expected to carry on weakening against the dollar
indefinitely.
A hundred years during which the peso has lopped off thirteen (13) zeros owing to chronic
inflation shows that Argentina is politically and culturally incapable of responsibly
managing its own currency.
Argentines know this. Unfortunately, only the richer ones have assets they can move to
safety outside the country. The hand-to-mouth poor will continue being ravaged by inflation,
not to mention the large quantities of counterfeit pesos in circulation.
Letting Argentines play with fiat currency is like handing out loaded pistols to rowdy
5-year-olds. In both these sad cases, adult supervision is urgently needed.
The grand history of Latin America: borrow billions of $$$ from U.S. banks, hand the
money to the wealthy who immediately deposit it right back in American banks, and let the
poor pay back the principal and interest. Hmmm . seems more and more the way this country is
going.
The fixed exchange rate under Kirchner was totally unsustainable. One difference between
Macri's neoliberalism and his predecessors is Macri is allowing much more of a floating
currency than in the pre 2001 time period (We can debate how much it is actually is floating
and clearly a lot of this debt issuance is for currency stabilization that I personally don't
approve of).
I'm not an expert in this at all, but in Peru, you could hold bank accounts in either
national currency or dollars. The national currency accounts spared you currency exchange
fees and also had higher interest rates. Most people who could hedged their bets by putting
money in both accounts.
It seems like a happy medium between abandoning national currencies and letting savers get
ravaged? No?
While not as spectacular of a return as Bitcoin, but impressive nonetheless, the escape
route for an Argentinean @ the turn of the century was the golden rule, an ounce of all that
glitters was 300 pesos then and now around 25,000 pesos, a most excellent 'troy' horse.
So, is austerity good or is austerity bad? And in what conditions?
I'm for expansionary government expense (and direct government ownership of some
industries, such as with an NHS) balanced by taxes on high incomes.
So in my view the problem happens when the government lowers taxes on the rich, as seems
likely in this case.
On the other hand taxes on the rich are likely to cause capital flight.
So why did Macri get elected to do this? Yeah he didn't win by much, but he won.
>The hand-to-mouth poor will continue being ravaged by inflation
Which is freaking weird. Argentina has cropland. They have energy sources (and I won't
bore everybody ok, I will with the observation that the Industrial Age is generously a
300/8000 year ratio part of human history).
And doesn't the below need some unpacking?:
>only the richer ones have assets they can move to safety outside the country
What are these assets? Why are said assets mobile? How did they come to "own" them? What
percentage of the population is encompassed by "the richer ones" phrasing?
Question: why doesn't MMT thinking work for countries like Argentina?
As wikipedia notes:
"The key insight of MMT is that "monetarily sovereign government is the monopoly
supplier of its currency and can issue currency of any denomination in physical or
non-physical forms. As such the government has an unlimited capacity to pay for the things
it wishes to purchase and to fulfill promised future payments, and has an unlimited ability
to provide funds to the other sectors. Thus, insolvency and bankruptcy of this government
is not possible. It can always pay."
Is this a general flaw in MMT? Does MMT only apply to dominant nation-states like the
U.S., who can use foreign military and financial pressures to protect the currency, aka the
petrodollar? Is the petrodollar a true 'fiat currency' or is it somehow based on control of
commodities (especially oil)? Is there something peculiar about Argentina and other countries
facing currency devaluation that MMT doesn't handle well? Any ideas on this?
That wikipedia write up isn't wrong, but it could be better. Probably need to hammer home
the point that the sovereign can always pay IN THE CURRENCY THAT IT ISSUES.
Most of the MMT related conversations on this site, and the posts that are written up on
the subject are mostly about explaining how there are constraints that many people THINK
exist in the USA, but don't actually exist, at least in economic terms (political constraints
notwithstanding). A country cannot be forced to default on a currency it issues. If the USA
had significant debts in EUR or JPY, then it'd be a very different conversation.
External constraints are a big deal for most countries, especially developing countries
that depend on exports of primary commodities. Chile, for instance, is constrained by balance
of payments problems when the price of copper declines. Also, developed countries that are
relatively smaller have much more limited sovereignty. The Swiss Central Bank has to follow
what the ECB does, to a large degree.
On the other hand, there's episodes where some countries have found room for maneuver when
they give up their sovereign currency. I didn't expect that Ecuador's economy would perform
quite as well as it has in recent years. But, they've shown that you can find ways to get
creative to compensate for loss of monetary sovereignty. Of course, the fiscal constraints
are real since Ecuador can't print USD.
Brazil's recent neoliberal turn was frustrating for a variety of reasons, but being a
big, diverse economy, they've got more sovereignty than their neighbors. However, the
business and political elites in Brazil decided to hammer through austerity (spending cuts
and interest rate hikes) because they WANTED to, not because external forces made them do
it.
No doubt an MMT prescription for Argentina would advice them to lay off the $ denominated
debt and stick to pesos as much as possible. I'd imagine Stephanie Kelton or any of the UMKC
crew would advise curtailing imports or doing some import substitution in order to take
pressure off balance of payments issues. They'd also take a look at what was driving
inflation domestically and try to find ways to relieve it with a targeted approach, instead
of risking recession and unemployment. Neoliberal/Washington Consensus type economists would
say hike interest rates, cut government spending in order to curtail demand. They'd argue
that the private sector will make the best decisions about where to reign in spending to
reduce inflation.
"... Interview with Michael Hudson, a research professor of Economics at University of Missouri, Kansas City, and a research associate at the Levy Economics Institute of Bard College. His latest book is J is for Junk Economics . Cross-posted from Hudson's site . ..."
"... And Forgive them their Debts: Credit and Redemption ..."
"... And Forgive them their Debts: Credit and Redemption ..."
"... the Dems are now doing the age-old distraction of diverting the discussion to sex rather than economics. I thought just the political right does that ..."
"... I am highly skeptical of the tune Amazing Grace ..."
December 23, 2017 Interview with Michael Hudson, a research professor of Economics at
University of Missouri, Kansas City, and a research associate at the Levy Economics Institute
of Bard College. His latest book is J is
for Junk Economics . Cross-posted from
Hudson's site .
As many people turn towards their Christian and Jewish faiths this Christmas and Hanukkah in
an attempt to make sense of the year that was, at least one economist says we have been reading
the bible in an anachronistic way.
In fact he has written an entire book on the topic. In And Forgive them their Debts:
Credit and Redemption (available this spring on Amazon), Professor Michael Hudson makes
the argument that far from being about sex, the bible is actually about economics, and debt in
particular.
The Ten Commandments Were About Debt
People tend to think of the Commandment 'do not covet your neighbour's wife' in purely
sexual terms but actually, the economist says it refers specifically to creditors who would
force the wives and daughters of debtors into sex slavery as collateral for unpaid debt.
"This goes all the way back to Sumer in the third millennium," he said.
Similarly, the Commandment 'thou shalt not steal' refers to usury and exploitation by threat
for debts owing.
But the rulers of classical antiquity who cancelled their subjects' debts tended to be
overthrown with disturbing frequency – from the Greek 'tyrants' of the 7th century BC who
overthrew the aristocracies of Sparta and Corinth, to Sparta's Kings Agis and Cleomenes in the
3rd century BC who sought to cancel Spartan debts, to Roman politicians advocating debt relief
and land redistribution, Julius Caesar among them.
Jesus Died for Our Debt
Professor Hudson says Jesus Christ paid the ultimate price for his activism.
What Would Jesus Do?
To understand how to fix today's economy, Hudson says that the Bible's answers were
practical for their time.
And
Forgive them their Debts: Credit and Redemption will be available for purchase just in
time for Easter on Amazon.
Reckless lending is a valid concept and has been put into law by Judges and almost
unbelievably, lawmakers as well, in some jurisdictions.
The debt is void.
Tricking a borrower into overcommittment is worse and that is what happened in Ireland
during the 80s onwards. The Prime ministers of different parties over that time had unlimited
overdrafts with several banks, most notably the AIB. A conspiracy that meant only a very few
were fully aware of the final result: bondholders would be reimbursed, with the scam being
paid for by those who made money and also those who lost money in the asset Ponzi that was
always the end.
Emigration was also the intended end, which worked quite well.
With you right up to that last sentence. Why couldn't the simple banker theft, the 'free
lunch', have been "the intended end"? Critics of the status quo IMHO often attribute way too
much intelligence and foresight to the powers that be. There is such a thing as intelligent
self-interest (greed). Germany's Bismark and Hudson's ancient rulers understood it. The
West's ruling class apparently doesn't.
an aside: It's important to distinguish sentences of opinion from sentences of claimed
fact, imo. ;) Opinion is just that, and can't be called out for malice or falsity. Incorrect
statements of fact can be so called out. This is an important distinction in written
comments. It's important for the reputation of the publication itself, and why LTEs insist on
this distinction being made in the letters.
Uriah Heep's "umbleness" was a mask covering his scheming; a very different thing from
making a simple written distinction between opinion and fact.
> "Reckless lending is a valid concept and has been put into law by Judges and almost
unbelievably, lawmakers as well, in some jurisdictions.
The debt is void.
Tricking a borrower into overcommittment . . ."
Take your average 21 year-old today or 40 years ago! Put him in the US and . . .
1) Expose him through the MSM to relentless advertising and propaganda that he should
spend, spend, spend!
2) Don't teach him in school about personal finance and debt.
3) Give him a credit card.
What do you expect will happen? Through trickery the bankers have rigged a very profitable
system for themselves. It is not a good system where a young person has to have
way-above-knowledge-and-discipline in order to protect themselves from credit racketeers.
That's why there is the ancient wisdom of the "Debt Jubilee"
if only, all the LENDERS and the Banks (Banksters!) had followed the the cardinal rules(of
Finance) of FIDUCIARY DUTY & DUE DILIGENCE, we wouldn't have 2008 crisis.
Banksters were bailed out and the 'DEBT' became the new money, world wise!
Now we have 2008 x10 (Mother of all Bubbles!) crisis at our door step!
When Citi takes too much debt they get Jubilee, when John Q. Public does, they get
bankruptcy.
So let's not say "we should bring back Jubliee", we already have it, to the tune of tens
of trillions of dollars. Jubliee for billionaires and bankers, just not for you and me.
It's similar to the debate over "Socialism", Bernie gets trashed for even daring to
mention the word. But if "socialism" is loosely defined as direct transfers of assets from
the State, we have massive socialism in this country already. For Big Wall St, Big Pharma,
Big Oil, Big Military, Big Incarceration, Big Surveillance. But propose it for Big Citizen
and you will get shouted down and shamed as some kind of pinko.
At a major bank in the late 80s, I heard the Controller describe the ideal credit card
customer: the one with account just below the credit limit who makes the minimum monthly
payment a few days late.
I agree with all that Michael Hudson has to say -- only problem is that the bankers have
been so effective in dividing and conquering the genernal public that they can't see who the
real enemy is. We have middle class people hating those that have been set up and abused by a
corrupt banking establishment that many in this country actually blame the victims. Question
is how is this all going to end? and what can we do to stop the world take over by a corrupt
banking elite?
I have come to believe (from my reading) that the bankers have successfully used
algorithms to speed up computing in order to make a profit no matter what the markets are
doing. The AI of their machines does not have an ethical basis or empathy for those who lose
money. The financialization of the economy is part of the role that AI performs in the
profiteering of the bankers and other financial institutions. That I suppose is the first
step to using AI algorithms to achieve the goal of the banker: to always and forever make a
profit. Watch AI move into other areas for the same profitable purpose.
How is this all going to end? Well, it's going to end because of people like us. We're
questioning the current way of the world, and that's the first step in changing it.
It's best to be cautious when making any kind of assertion about "the Bible says " or
"Jesus believed ." The Hebrew bible is an amalgam of many different, often conflicting
theological and moral points of view. The Gospels reflect that diversity of thought with some
non-Semitic strains added as well.
The Ten Commandments provide a good example of this. The reason given for honoring the
Sabbath in Exodus 20:
for in six days the Lord made heaven and earth, the sea, and all that is in them, and
rested the seventh day
but in Deuteronomy (i.e. the "Second Law" in Deuteronomy 5), it's
You shall remember that you were a servant in the land of Egypt, and the Lord your God
brought you out thence with a mighty hand and an outstretched arm
.
The Exodus version's rationale is drawn completely from awe for YHWH and his creation, but
the Deuteronomist asks the Sabbath observers to think empathetically by remembering their
ancestors' (mythical) enslavement.
Another example is the Deuteronomist's amendment of the law of debt slavery. The Exodus
version did limit debt slavery to 7 years (Exodus 21:2), but D goes further:
And when you send a male slave[b] out from you a free person, you shall not send him out
empty-handed. Provide liberally out of your flock, your threshing floor, and your wine
press, thus giving to him some of the bounty with which the Lord your God has blessed you.
Remember that you were a slave in the land of Egypt, and the Lord your God redeemed you;
for this reason I lay this command upon you today.
Prophets like Micah and Amos took the D point of view even further, issuing prophecies of
condemnation for the rich and compassion for the poor, but the compiler of Proverbs, while
extolling moderation, offers a perspective respectful toward the rich and powerful as long as
they behave decently.
These differences persist into the time when the Gospels were written. Luke-Acts clearly
reflects the D/Prophetic strain. While Matthew's Sermon on the Mount (Matthew 5) contains
only blessings, Luke 6 includes curses:
But woe to you that are rich, for you have received your consolation.
25 "Woe to you that are full now, for you shall hunger.
"Woe to you that laugh now, for you shall mourn and weep.
26 "Woe to you, when all men speak well of you, for so their fathers did to the false
prophets.
Where did the historical Jesus line up in this millennia-old debate? There's not that much
firm evidence either way. Dominic Crossan, relying on gospels outside the canon, tries to
make a case for a revolutionary Jesus, but a strong argument can also be made that Jesus
didn't care much about earthly politics and socio-economic issues because he believed the end
of the world was near.
After the next recession (which I have penciled in for 2019-2020), US fiscal deficits will
rise to the $1.5 to 2 trillion level and stay there. Should Trump serve two terms, federal
debt will reach $30 trillion, and by then will constitute 130 to 150% of GDP.
At this point Amerisclerosis sets in, growth being impossible as debt service
paralyzes any former dynamism in the corrupt and petrified imperial empire.
The Washington DC regime has two ways of defaulting: outright (hard) default, or soft
default via inflating away the principal. Naturally politicians will prefer the latter, as it
may permit milking a few more years out of their hollowed-out Potemkin economy.
WWJD -- what would Jesus do? Long gold, short bitcoin ought to be a pretty good
"set and forget" trade whilst awaiting the Second Coming, though it may be a bit early
yet.
What would Jesus do? We know exactly what Jesus would do! Remember him clearing out the
money-lenders from the temple? There is your answer right there. Today he would go into the
central banks, kick a** and take names after clearing them out. The big banks would then find
themselves under the gun without federal backup which mean that they could be shrunk small
enough to drown in a bath tub.
I seem to recall in one of the mainstream Protestant churches I went to as a child, when
we recited the Lord's prayer we DID say " and forgive us our debts as we forgive our
debtors".
In another, we said, "forgive us our trespasses, as we forgive those who trespassed
against us". That might've been the Winnetka Congregational Church–oh, that property
owning legacy of our founding fathers!
Not really up on my biblical exegesis this morning (it's B.C. here: Before Coffee), but
don't we "sin" against God? As opposed to our fellow mortals, I mean.
Yes, I remember it was said that way also, not in the catholic church I went to but
Protestant ones.
I just googled it and there are versions that speak about debt.
I find this article very interesting.
Being non religious now I could get behind a Socialist religious figure
I like Hudson and agree with much of his philosophy, but I don't think his book will
change many minds because religion has nothing to do with logic.
.
If you want to make a moral or economic case for debt forgiveness, fine, but if you start
talking about what Jesus really believed then you're wading into religion and most religious
people's minds are already made up on that subject, so I don't think this tactic is a useful
approach.
.
As one of my right wing friends said in response to Hudson's article, "liberation theology
has already been debunked." Well, in my friend's mind it has been debunked so that's all that
matters.
.
In my mind all religion is bunk so I am not going to defend Hudson's theology.
.
Ditto with the recent debate over Steve Keen's "theses." Just leave religion out of
economics, OK?
We are all born in ignorance, religion is what we call earlier concatenations of human
perception and memory that sustained societies across generations. The current religion, the
one we call science, has exploded the human population to a mass the ecosphere cannot long
support. Science, for all its knowledge has failed to provide anything remotely approaching a
sustainable society or the politics that might create one. Science provides no wisdom, only
knowledge.
It's a long game: minds that are are made up; minds yet to be will form around the ideas
presented them.
An argument can be made we no longer have enough time.
Interesting points. Yet if science provides knowledge how can it be possible that it does
not lead to wisdom. Philosophy, wisdom, religion and science are all bundled or linked,
science being the latest iteration. Is it possible that there is such a clear, distinct
division between wisdom and knowledge? Wisdom must be a product of knowledge as it is hard to
imagine wisdom that does not conform to knowledge.
It is a long game but our individual lives are played out on a different time reference.
Keynes of course famously acknowledged this, regarding the useless task of economists if they
do not recognize the human time frame in their theories and calculations.
Civilization's tragic but expedient go-to-move is the ever prevalent dismissive shrug of
complicity elite consensus employs to excuse the generational destruction visited by poverty
and war because the march of history must proceed at a desultory stroll in relation to the
span of a human life.
It does appear we no longer have time and probably never have.
For some time I've wondered if life itself isn't just an exhilarating acceleration of
entropy with consciousness being a kind of waste heat.
It denies us free will, but when you look at how we treat one another at scale and the curves for population
and energy use it's hard to avoid the comparison to bacteria in a petri dish.
But I still cling to free will understanding it might be an illusion!
Who is the "we" you refer to? Religion is simply codified superstition. It is a parasitic
excrescence of stable societies, not the cause of their stability. Without the science you
deplore you would not be able to criticize science for not achieving the sustainability you
claim to value. Sustainability was not a thing until the science of ecology made it so. If
you think you can make an argument that we don't have enough time to be rational, go ahead
and make it. But "hurry up and abandon science because we only have time for superstition
before the world ends" does not sound like a promising argument to me. By the way, if you
attempt the argument I suggest you start by distinguishing science from technology and the
ability and knowledge to do something from the political decisions to do (or not do) what
science tells us is in our power. The same science that gave us the green revolution and the
ability to support a huge global population has also given us birth control and the ability
to adjust the size of our population to any value we choose. It is not science's fault if we
make poor choices.
What did you know when you were born? There are embedded assumptions about me in almost
every line you wrote.
I don't deplore science, I'm just humble about what it can achieve. It has no agency, only
people do. People made science so science can hardly be better than people, which gets us
back to the problem of how to get people to sustain the ecology necessary for the
species.
Why are you proposing to abandon science? I didn't. I simply said that it will not cause
us to change our collective agency, it can't, it only has agency through us.
Additionally, there is decent science on cognitive bias that suggests, as the reader I was
responding to did, that rational arguments don't change minds. I accept that science. Ipso
facto, as you finished "It's not science's fault we make poor choices", with which I
completely agree. It won't be science's success on the outside chance we make some good ones.
That is my point: it is a political issue not a scientific one.
The religions you call superstition, while incorporating a great deal about the material
world that science has proven (within a certain tolerance) false, also include a great deal
about human psychology integrated into time scales significantly longer than any individual
human life.
I chose a poor metaphor in "the current religion, the one we call science" that
sidetracked my intent, but science can no more solve our problems for us than god.
The religions you call superstition, while incorporating a great deal about the material
world that science has proven (within a certain tolerance) false, also include a great deal
about human psychology integrated into time scales and societies significantly larger than
any individual human life that are both true and wise.
Perhaps scientific hypothesis is codified superstition. An indefatigable and self
perfecting method for discerning the universe, here on earth employed by a cognitively
limited and imperfect biological organism.
As an atheist of sorts, the definition that religion, "is a parasitic excrescence of
stable societies" strikes me more a definition of economics, particularly the capitalist
incantation and that science operating without parameters of elements of religion and
philosophy, would be useless, impossible or possibly fatally employed, without the admittedly
meager ethical constraints applied currently.
It has for a long time seemed to me that only "true believers" could have the confidence
to throw out the entire body of something as ancient, vast and polyvalent as "religion".
Maybe socialism really truly was the best shot at an belief system for how humans should
live in the modern world.
While science is part of our knowledge of the world and it is necessary for this level of
biosphere destruction, and certainly it's technologies are part of our life, I don't think it
really informs the current VALUE system that much. I think the current value system is
informed almost entirely by brutal capitalism, the ideology of mammon and wealth makes right
period.
Science and religion are not equivalent, and I have yet to come across a scientist who
claimed it to be so.
Religion is a belief system and has been useful system of inquiry to many people in
present and past history. There may be some scientists who promote some sort of technophilia
future but they are in the company with many non-scientists.
Many people often conflate those who hype Technological fixes for all social ills with
strictly scientific enquiry. Technological fantasies and science are not equivalent.
Science is, at its basis, a method of inquiry based upon continual observations,
collection of data and the experimental method. Scientific inquiry does not rest upon
predicated truths but rather that ultimate truths are not known. Every law or theory, after
rigorous testing, becomes the basic dogma for future hypotheses and new experimental
endeavours. The scientific method is itself tested by using laws and theories to predict
future events; Newtonian physics being a case in point. When theories lose their ability to
predict future events with accuracy they are either modified or discarded. Sometimes, we just
have to live with seeming contradictory conditions as between differences in Newtonian and
quantum physics; yet Newtonian physics theories and practices are still valid at the scales
in which we Homo sapiens operate. They are not based upon belief but upon
practice.
Nor does science try and engineer social structures – such as controlling
populations. That is not the role of science or scientists. Science merely records the data
and tries to predict the consequences of changing weather patterns, farming practices or
population dynamics. However, these models are very complex. The job of scientist is to try
and convey the information but scientists, like all the rest of us, operate in a political
world.
And for those who are believers in a religion, I wish you a most happy holiday and success
in your spiritual endeavours.
"And for those who are believers in a religion " Thank you for this statement, it's
representative of true humility at work. While you do not state your religious belief system
(or if indeed you have any), you're not dismissive of beliefs that others might hold as
"codified superstition" (as one commentor does above). Deriding those who may believe that
there's some intelligent consciousness that underpins life in the universe as superstitious
is to suffer from a type of hubris. Live and let live, and this applies as well to religious
fundamentalists of all stripes who've made it their mission in life to "save" others. In
matters of faith (or lack thereof), one must always keep their own counsel in my view.
I don't know if it's going to convince anyone, but it's not just a religious question but
a historical one, only people spend their whole lives studying this stuff (how to interpret
the Bible based on the culture and language of the time etc.), so while I like Hudson I think
he may be out of his depth here.
What is the nature of Political Power? In order to rule society, public sentiment must be
controlled and directed in a certain trajectory. Political and Spiritual power are dependent
and cannot be separated. When they are, failure ensues.
The contemporary world is in the midst of a spiritual/religious crisis. The human mind and
soul need an anchor in order to deal with the chaos inherent in the universe. What is human
history other than one long chain of events illustrating humanities efforts to deal with this
predicament.
Belief in a righteous cause, rooted in actual experience of daily life is what all
religions are based on. Humanity is characterized by being builders and myth makers. When the
myths fail to provide plausible explanations for life's struggles, societal collapse or new
possibilities- new myths- must be undertaken. At the very least, a reinterpretation. Building
cannot occur without a viable supporting myth.
It seems to me that humanity needs to reexamine spirituality more than ever- not abandon
it. The world cannot be left to fools and charlatans.
I credit the Catholic church with developing my social conscience–back in the 1970s,
when most pastors were old white men. It was a message delivered clearly and repeatedly.
Despite all of the other disappointments and hypocrisies we have seen in the years since,
I do think that the church leaders I knew were sincere in this regard. In fact, I have always
viewed this as the important contrast vis a vis Protestantism.
Though I am no theologian, so probably don't know what I'm talking about
My mother attends a United Methodist church whose minister is an ex-Catholic nun, who
decided she wanted to deliver sermons rather than receive them. While not real big on
organized religion myself, I have been impressed by how much work they put into actually
helping people. They built a whole facility in their basement for homeless people to come in
a couple times a week, take a shower, shave, and get re-upped on toothpaste and whatnot. They
definitely seem to take the "whatsoever you do unto the least of these, you do to me" line
much more seriously than the congregations and leadership of other United Methodist churches
Mom's attended, so maybe there is something to your thoughts on Catholic/Protestant
differences in this area although, I have a feeling that things might be way different in,
for instance, AME churches down South.
. . . the attempt of society to cope with the fact that debts grow faster than the
ability to pay ," . . .
Debt is the ultimate self licking ice cream cone. To pay off a debt and the interest
implies that society as a whole is required to take on ever greater debt. From the ephor's
(thank you knowbuddhau) perspective a perfect system.
ISTM a SLICC is a perpetual motion machine. Creditors can turn people into them with debt
+ interest. It's like some kind of special purpose vessel you can get in, but can't
disembark, and it never gets you to the yonder shore like they promised. All you can do is
row yourself to death.
I kinda think Jesus was working on more than one level. I think he had an insight that
threatened the PTB of his time with disintermediation from between people and the divine.
The way I see it, the Gospel as I've understood it never got out. The most threatening
idea was safely encapsulated in the personage and later cult of Jesus the Superfreak. I've
always understood it to be the breaking of this taboo that made him such a threat to the
PTB.
If we're all related to divinity as offspring to parent, then we all share in divinity. No
one is any more divine than anyone else. A lot hinges on the article in a specific
phrase.
Did he say, "I am *a* son of god," or did he say "I am THE son of god?" According to Alan
Watts, the Greek article is indefinite. The whole idea of a special lineage exceptionally
favored by the cosmic PTB (and of course innocently promulgated by its beneficiaries)
obviously comes straight outta our primate past. As applied to modern human affairs, it's
absurd.
No, I think he said, we're all worthy.
Before this, the only way I thought of Jesus in relation to money was, of course,
overturning the tables in the temples. I am in all ya'll's virtual debt. ;-)
End games, potential outcomes, so many possibilities.
Questions many would like to see answered:
What do the accumulators do with all that wealth?
When they acquire more than they can possibly spend, why acquire?
How much acquisition is to seek power over others?
What has happened in the past to acquirors and other power-seekers?
Will this current phantasm end in a Jubilee?
I believe at a certain point wealth acquisition is all about power over others, if only
more people clearly saw it that way.
One wants money to meet: basic needs, then a few consumer toys and a tiny bit of security,
a little more security (get a 401k), then leisure and autonomy (win the lottery and quit your
job!). Normal non-rich people can relate to these impulses, as they are basic human drives
from survival to self-actualization. Though normal non-rich people's best collective shot at
them would be socialism where there would be more economic security, and more autonomy, and
more leisure FOR ALL.
But beyond a certain point money is ultimately about a sadistic drive for power over
others. People need to see rich people for the sadistic f's they are and their hoarding of
money proves it. They won't give it up because they have a sadistic drive to rule over
others.
Great stuff. We lapsed Baptists remember one Biblical precept–apparently not
mistranslated–from our Sunday school lessons: "money is the root of all evil." Per
Hudson it might be interesting to speculate how many other of the world's historic sins boil
down to money–slavery, racism (competition between underclass groups), antisemitism. In
A Distant Mirror Barbara Tuchman wrote that the French medieval kings would declare a
personal debt jubilee from war debts by encouraging the masses to launch a pogrom. No more
creditors meant no more debt. During the pre WW 2 Nazi period Hitler said that the Jews were
free to leave as long as they left their possessions behind.
Of course in current times autocrats no longer have to reconcile their behavior with
traditional religion since it is widely in decline. Instead they invent new religious
beliefs, based on failed economic theories.
Yes, I know. In fact that's the standard comebacker for defenders of the Prosperity Gospel
.they don't love money. Rather they, like Lucy in Peanuts, just want what's coming
to them.
I'd say the short form versus the long form is a distinction without a difference. See
Michael Hudson above.
Never much enjoyed going to church as a kid but I did have to go frequently and absorbed a
lot whether I liked it or not. Every so often we would go to a service out of town and they
would recite the lord's prayer with 'forgive us our trespasses as we forgive those who
trespass against us'. It always sounded off to me and didn't exactly roll of the tongue. Our
church used 'debt' and 'debtors' which in retrospect I'm quite grateful for.
We always used the "trespass" version, growing up, so I thought for a long time that this
was all to do with how to handle people in your front yard, or hunting on your acreage
without permission.
If the (older) European cultures confounded "debt" with some notion of "sin" as with the
German word "Schuld," then the newer American version is to confound "debt" with "real
estate."
Hudson also has plenty of insights regarding the reciprocity between banks and land
ownership.
So here's another question, the upshot of these 2 thoughts: could it be that Americans
know, subliminally, that owning land is sinful?
perhaps it is, or perhaps merely owning land more than meets one's own needs is sinful
(being a landlord – ie a rentier), but certainly humans lived most of their time on
earth without land ownership at all.
To file in the category of "the more things change ":
Last year's prez primaries were very much about the current neoliberal economic system
enriching the .01% and the growing indebtedness and despair of the 99%, imo. And now we see
the Dem estab pushing, imo, a sex hysteria as the greatest destructive force that needs to be
addressed, while ignoring the destructive force of neoliberal economics and debt and deaths
from despair. The notion of sin is again transferred from economics to sex.
> @flora "And now we see the Dem estab pushing, imo, a sex hysteria as the greatest
destructive force that needs to be addressed, while ignoring the destructive force of
neoliberal economics . . . "
Amazing the Dems are now doing the age-old distraction of diverting the discussion to sex
rather than economics. I thought just the political right does that! Ancient creditors
changed the discussion from "economic unfairness" to "sexual sins." Modern US Republicans
changed it from "economic unfairness" to social issues like abortion, and sexuality. So why
are the Dems doing the same? Yves Smith has talked about the #METOO hysteria being a rich
women's movement. The news is about movie star women being wronged. Maybe it's just a "Maslow
hierarchy" sort of thing. When you are a millionaire movie star–or an affluent
pundit–then you can worry about being sexually harassed in your past. If you're a
waitress, your economic survival is foremost in your thinking. Economic class determines
taste and worry.
I don't think the rich has any objection to debt forgiveness. They already own almost
everything anyway. Heck, once debt forgiveness happens, they'll take more debt and then ask
for another round of forgiveness. A couple of rounds like that and they'll really own
everything. Hurrah!!!
Foreclosure though for everyone will I think wipe out the rich as well since they sure
have debts up the wazoo.
BTW what is the reading in the oldest greek gospels, and for comparison if avaiable the
Syriac gospels of the Nestorian churches (Syriac was a much closer language to Aramaic than
greek)
Likewise the reading in the Hebrew language version versus the Septuigant? I maintain that
even if you belive god inspired the original texts sinful humans translated it and in the old
days copied it. So the version we have today may or may not be close to the original.
I realize that this is an excerpt from the book, but the idea that sin and debt are
equated in the Bible is off. There is no mention here of hamartia, a Greek term that was used
for sin.
To quote Wikipedia:
"Hamartia is also used in Christian theology because of its use in the Septuagint and New
Testament. The Hebrew (chatá) and its Greek equivalent
(àµaρtίa/hamartia) both mean "missing the mark" or "off the
mark".[9][10][11]"
So rather than sin as a kind of status, the Bible defines sin as not hitting standards of
good behavior. This is a long way from debt, and the word hamartia isn't uncommon in the
Bible.
Also, the article brushes up against the idea of poverty in Catholicism, which leads
inevitably to il Poverello, Saint Francis, the "Poor Guy" from Assisi. In Catholicism,
poverty doesn't ennoble. Poverty clarifies, because it removes possessions as a distraction.
There is a famous legend of the "conversion" of Saint Francis, which was a long time coming.
He took off his clothes in church and gave them away. That isn't nobility. It's a
clarification. In return for being un-distracted, Saint Francis claimed a whole enchanted /
sacred cosmos, Brother Sun, Sister Moon, the famous birds, Brother Wolf of Gubbio.
The central issue that Hudson mentions here (and likely much more so in his book) is the
deterioriation of religion in the U S of A into "American Religion," which brays about being
saved, is uncharitable, doesn't know the bible or church history, has no environmental ethic
(unlike the Franciscans), and is now being degraded further by U.S. free-market
fundamentalism. As a bad Catholic and a bad Buddhist, I am highly skeptical of the tune
Amazing Grace and its many claims on the godhead.
But are you aware that the song's author, John Newton (1725-1807), was originally a slave
ship captain, then experienced spiritual conversion and eventually renounced the trade,
finally becoming an abolitionist and an Anglican priest? Earlier, he'd been press-ganged in
the Royal Navy, during which time he received eight dozen lashes and then later was marooned
in Sierra Leone, and was himself made a slave of a slaving tribe there.
"banning absentee ownership" – this would be a great idea for intellectual property.
The creator gets protection for some set period (like patents), but it is non-transferrable.
Creators get compensated, and society benefits after the set period expires.
I've always read the Bible in economic terms too so there's stuff to chew on here. But
I've interpreted the Jesus story more narrowly. It is about the Tyrian shekel (the temple
tax). Not legal tender at the time for anything but the temple tax – so the Sadducees
basically had monopoly ownership. Distributed out to people to pay their temple tax via a
raucous appearance of showy but fake competition (the moneychangers) – but the terms
(exchange rate basically) are really controlled by the monopolists behind the curtain. And
like any Monopoly101, they presumably screw people over time (but need to know more about
prices of stuff then – were currencies being debased?). All justified/rationalized
intellectually by the Pharisees then.
The problem is – the Tyrian shekel has the image of Baal on it. When Jesus overturns
the money tables and then gets shown a coin – the coin he is actually
commenting on is the shekel (render unto Baal what is Baals and unto God what is Gods) not
the denarius (render unto Caesar what is Caesars and unto God what is Gods)
Read it that way – and he is cleverly accusing the entire establishment of serious
blasphemy and exploitation of the Jewish people and directly threatening their business
model. Easy to understand why it later gets written down as 'denarius' after the temple is
destroyed and the message is no longer in Judaea (or even within Jewish community in
diaspora) – but the real message also gets lost with that
Not true unless you discount the text and archeological facts completely, which I guess
you do. The common coinage of the time would be of the empire, which was of Rome.
I love Michael Hudson, but he is not quite correct here about Jesus, at least as far as
this article presents his argument. We know Jesus best through the writings of his followers,
mainly the four evangelists, Matthew, Mark, Luke John.
The two who give us an explanation of what we call the Lord's prayer are Matthew and Luke,
and the earliest texts are written in koine greek, not hebrew. Indeed, Matthew first uses
"debt" but follows his account of the prayer immediately with an explanation that doesn't use
that term, thusly:
" for if you forgive men the tresspasses (paraptomata) of them, your heavenly father will
also forgive you, but if you do not forgive men, neither will your father forgive your
trespasses ( paraptomata) "
My big dictionary translates the above greek word as "false step" or "falling from the
right way."
Professor Hudson has an economist's point of view, as does this forum, and that's
perfectly fine – Matthew was a tax collector after all. But Jesus was not. The term
"debt" in this instance can be likened to the use of the word "seed" in the parables. The
prayer uses a narrow focus that ought to be understood in a larger sense.
Luke's version of the prayer makes this expanded meaning very clear, and that is why I
prefer the word "trespasses". ( Also it sounds better and can be dwelled upon longer when one
prays or sings it.)
I appreciate Dr. Hudson referencing the Christian Old and New Testament about money and
debt. Christianity has become so perverted in our modern times that it now represents the
opposite of its original principles. And Dr. Hudson is in good company as an economist
alluding to the New Testament about economic issues.
In the second chapter, sixth paragraph, of Capital Vol. I , Karl Marx's very
first introduction of the concept of money is followed by a quote from the New Testament book
of Revelations.
The social action therefore of all other commodities, sets apart the particular
commodity in which they all represent their values. Thereby the bodily form of this
commodity becomes the form of the socially recognised universal equivalent. To be the
universal equivalent, becomes, by this social process, the specific function of the
commodity thus excluded by the rest. Thus it becomes –money. ―Illi unum
consilium habent et virtutem et potestatem suam bestiae tradunt. Et ne quis possit emere
aut vendere, nisi qui habet characterem aut nomen bestiae aut numerum nominis ejus.‖
[―These have one mind, and shall give their power and strength unto the beast.‖
Revelations, 17:13; And that no man might buy or sell, save he that had the mark, or the
name of the beast, or the number of his name.‖ Revelations, 13:17.](Apocalypse.)
Marx is suggesting that money is analogous to the Christian belief in Revelation's "Mark
of the Beast." Of all the criticisms of Marx, one would never believe that he would sometimes
point to the New Testament while discussing economics. This is because hardly anyone reads
Marx, or the Bible for that matter. Ironically, modern American Right-wing Christianity is
corrupted by the "Prosperity Gospel" cult and views money as the ultimate good, or at least
its possession a sign of godliness, when everything in its own dogma says something else.
Could a Christian today proclaim with conviction, "Money is the Mark of the Beast!"?
I refer to the "eye of the needle" and "rich men" quote in the Gospels."
Quoting Revelations to prove any point about Christ's teachings is specious at best. The
Revelations of St John the Device appear as the stick of the Church to be used when the
Carrot of Christ's teaching is unsuccessful.
"If you don't do what we tell you you will burn in Hell!!!"
I'd also point out that Christianity as practiced appears mostly as a peasant suppression
system:
Priest: (beholden to the local Lord) "You will get you reward after you die"
A powerful statement by Marx. He recognizes the importance of a 'money of account' to give
'value' to items but at the same time questions the validity of this value.
We have definitely gotten to the point of too much monetization and lost the social values
of collaboration and compassion.
"... The initiative described in this article reminds me of how the World Bank pushed hard for emerging economies to develop capital markets, for the greater good of America's investment bankers. ..."
"... By Burcu Kilic, an expert on legal, economic and political issues. Originally published at openDemocracy ..."
"... Today, the big tech race is for data extractivism from those yet to be 'connected' in the world – tech companies will use all their power to achieve a global regime in which small nations cannot regulate either data extraction or localisation. ..."
"... One suspects big money will be thrown at this by the leading tech giants. ..."
"... Out of idle curiosity, how could you accurately deduce my country of origin from my name? ..."
December 14, 2017 by Yves Smith Yves here. Notice that Costa
Rica is served up as an example in this article. Way back in 1997, American Express had
designated Costa Rica as one of the countries it identified as sufficiently high income so as
to be a target for a local currency card offered via a franchise agreement with a domestic
institution (often but not always a bank). 20 years later, the Switzerland of Central America
still has limited Internet connectivity, yet is precisely the sort of place that tech titans
like Google would like to dominate.
The initiative described in this article reminds me of how the World Bank pushed hard
for emerging economies to develop capital markets, for the greater good of America's investment
bankers.
By Burcu Kilic, an expert on legal, economic and political issues. Originally published
at
openDemocracy
Today, the big tech race is for data extractivism from those yet to be 'connected' in
the world – tech companies will use all their power to achieve a global regime in which
small nations cannot regulate either data extraction or localisation.
To avoid a 'failure ministerial," some countries see the solution as pushing governments to
open a mandate to start conversations that might lead to a negotiation on binding rules for
e-commerce and a declaration of the gathering as the "digital ministerial". Argentina's MC11
chair, Susana Malcorra, is actively pushing for member states to embrace e-commerce at the WTO,
claiming that it is necessary to " bridge the gap between the
haves and have-nots ".
It is not very clear what kind of gaps Malcorra is trying to bridge. It surely isn't the
"connectivity gap" or "digital divide" that is growing between developed and developing
countries, seriously impeding digital learning and knowledge in developing countries. In fact,
half of humanity is not even connected to the internet, let alone positioned to develop
competitive markets or bargain at a multilateral level. Negotiating binding e-commerce rules at
the WTO would only widen that gap.
Dangerously, the "South Vision" of digital trade in the global trade arena is being shaped
by a recent alliance of governments and well-known tech-sector lobbyists, in a group called
'Friends of E-Commerce for Development' (FED), including Argentina, Chile, Colombia, Costa
Rica, Kenya, Mexico, Nigeria, Pakistan, Sri Lanka, Uruguay, and, most recently, China. FED
claims that e-commerce is a tool to drive growth, narrow the digital divide, and generate
digital solutions for developing and least developed countries.
However, none of the countries in the group (apart from China) is leading or even remotely
ready to be in a position to negotiate and push for binding rules on digital trade that will be
favorable to them, as their economies are still far away from the technology revolution. For
instance, it is perplexing that one of the most fervent defenders of FED's position is Costa
Rica. The country's economy is based on the export of bananas, coffee, tropical
fruits, and low-tech medical instruments, and almost half of its population
is offline . Most of the countries in FED are far from being powerful enough to shift
negotiations in favor of small players.
U.S.-based tech giants and Chinese Alibaba – so-called GAFA-A – dominate, by
far, the future of the digital playing field, including issues such as identification and
digital payments, connectivity, and the next generation of logistics solutions. In fact, there
is a no-holds-barred ongoing race among these tech giants to consolidate their market share in
developing economies, from the race to grow the advertising market to the race to increase
online payments.
An e-commerce agenda that claims unprecedented development for the Global South is a Trojan
horse move. Beginning negotiations on such topics at this stage – before governments are
prepared to understand what is at stake – could lead to devastating results, accelerating
liberalization and the consolidation of the power of tech giants to the detriment of local
industries, consumers, and citizens. Aware of the increased disparities between North and
South, and the data dominance of a tiny group of GAFA-A companies, a group of African nations
issued a statement opposing the digital ambitions of the host for MC11. But the political
landscape is more complex, with China, the EU, and Russia now supporting the idea of a
"digital" mandate .
Repeating the Same Mistakes?
The relationships of most countries with tech companies are as imbalanced as their
relationships with Big Pharma, and there are many parallels to note. Not so long ago, the
countries of the Global South faced Big Pharma power in pharmaceutical markets in a similar
way. Some developing countries had the same enthusiasm when they negotiated intellectual
property rules for the protection of innovation and research and development costs. In reality,
those countries were nothing more than users and consumers of that innovation, not the owners
or creators. The lessons of negotiating trade issues that lie at the core of public interest
issues – in that case, access to medicines – were costly. Human lives and
fundamental rights of those who use online services should not be forgotten when addressing the
increasingly worrying and unequal relationships with tech power.
The threat before our eyes is similarly complex and equally harmful to the way our societies
will be shaped in the coming years. In the past, the Big Pharma race was for patent
exclusivity, to eliminate local generic production and keep drug prices high. Today, the Big
Tech race is for data extractivism from those who have yet to be connected in the world, and
tech companies will use all the power they hold to achieve a global regime in which small
nations cannot regulate either data extraction or data localization.
Big Tech is one of the most concentrated and resourceful industries of all time. The
bargaining power of developing countries is minimal. Developing countries will basically be
granting the right to cultivate small parcels of a land controlled by data lords -- under their
rules, their mandate, and their will -- with practically no public oversight. The stakes are
high. At the core of it is the race to conquer the markets of digital payments and the battle
to become the platform where data flows, splitting the territory as old empires did in the
past. As
the Economist claimed on May 6, 2017: "Conflicts over control of oil have scarred
the world for decades. No one yet worries that wars will be fought over data. But the data
economy has the same potential for confrontation."
If countries from the Global South want to prepare for data wars, they should start thinking
about how to reduce the control of Big Tech over -- how we communicate, shop, and learn the
news -- , again, over our societies. The solution lies not in making rules for data
liberalization, but in devising ways to use the law to reduce Big Tech's power and protect
consumers and citizens. Finding the balance would take some time and we are going to take that
time to find the right balance, we are not ready to lock the future yet.
One suspects big money will be thrown at this by the leading tech giants. To paraphrase
from a comment I made recently regarding a similar topic : "with markets in the developed
world pretty much sewn up by the tripartite tech overlords (google, fb and amazon), the next
3 billion users for their products/services are going to come from developing world". With
this dynamic in mind, and the "constant growth" mantra humming incessantly in the background,
it's easy to see how high stakes a game this is for the tech giants and how no resources will
be spared to stymie any efforts at establishing a regulatory oversight framework that will
protect the digital rights of citizens in the global south.
Multilateral fora like the WTO are de facto enablers for the marauding frontal attacks of
transnational corporations, and it's disheartening to see that some developing nations have
already nailed the digital futures of their citizens to the mast of the tech giants by
joining this alliance. What's more, this signing away of their liberty will be sold to the
citizenry as the best way to usher them into the brightest of all digital futures.
One suspects big money will be thrown at this by the leading tech giants.
Vast sums of money are already being thrown at bringing Africa online, for better
or worse. Thus, the R&D aimed at providing wireless Internet via giant
drones/balloons/satellites by Google, Facebook, etc.
You're African. Possibly South African by your user name, which may explain why you're a
little behind the curve, because the action is already happening, but more to the north --
and particularly in East Africa.
The big corporations -- and the tech giants are competing with the banking/credit card
giants -- have noted how mobile technology leapt over the dearth of last century's telephony
tech, land lines, and in turn enabled the highest adoption rates of cellphone banking in the
world. (Particularly in East Africa, as I say.) The payoffs for big corporations are massive
-- de facto cashless societies where the corporations control the payment systems
–and the politicians are mostly cheap.
In Nigeria, the government has launched a Mastercard-branded national ID card that's also
a payment card, in one swoop handing Mastercard more than 170 million potential customers,
and their personal and biometric data.
In Kenya, the sums transferred by mobile money operator M-Pesa are more than 25 percent of
that country's GDP.
You can see that bringing Africa online is technically a big, decade-long project. But
also that the potential payoffs are vast. Though I also suspect China may come out ahead --
they're investing far more in Africa and in some areas their technology -- drones, for
instance -- is already superior to what the Europeans and the American companies have.
Hoisted from a comment I made here recently: "Here in South Africa and through its Free
Basics programme, facebook is jumping into bed with unsuspecting ISPs (I say unsuspecting
because fb will soon be muscling in on their territory and becoming an ISP itself by
provisioning bandwidth directly from its floating satellites) and circumventing net
neutrality "
I'm also keenly aware of the developments in Kenya re: safaricom and Mpesa and how that
has led to traditional banking via bank accounts being largely leapfrogged for those moving
from being unbanked to active economic citizens requiring money transfer facilities. Given
the huge succes of Mpesa, I wouldn't be surprised if a multinational tech behemoth (chinese
or american) were to make a play for acquiring safaricom and positioning it as a triple-play
ISP, money transfer/banking services and digital content provider (harvesting data about
users habits on an unprecedented scale across multiple areas of their lives), first in Kenya
then expanded throughout east, central and west africa. I must add that your statement about
Nigeria puts Mark Zuckerberg's visit there a few months back into context somewhat, perhaps a
reconnaissance mission of sorts.
Out of idle curiosity, how could you accurately deduce my country of origin from my
name?
As you also write: "with markets in the developed world pretty much sewn up by the
tripartite tech overlords (google, fb and amazon), the next 3 billion users for their
products/services are going to come from developing world."
Absolutely true. This cannot be stressed enough. The tech giants know this and the race is
on.
Today, September 26, thousands of activists are protesting in Prague, in the Czech Republic, against the
policies and institutional structures of the International Monetary Fund (IMF) and the World Bank. These protests are the
latest action in a growing movement that is highly critical of the neoliberal economic policies being imposed on people all
over the world, including those in western countries. As Robert McChesney concisely describes it, neoliberalism "refers to
the policies and processes whereby a relative handful of private interests are permitted to control as much as possible of
social life in order to maximize their personal profit." The major beneficiaries of neoliberalism are large trans-national
corporations and wealthy investors. The implementation of neoliberal policies came into full force during the eighties
under Thatcher and Reagan. Today, the principles of neoliberalism are widely held with near-religious fervor by most major
political parties in the US and Britain and are gaining acceptance by those holding power elsewhere.
Although the proponents of neoliberalism extol the virtues of free markets, free trade, private enterprise and consumer
choice, the effects of neoliberal policies is quite the opposite. In fact, these policies typically result in very
protectionist markets dominated by a few trans-national corporations. Many sectors of the economy - ranging from food
processing and distribution to the corporate media to aviation - are oligopolies and can be characterized as highly
centralized command economies that are only a shade more competitive than the economy of the former Soviet Union. A major
theme of neoliberal policies is deregulation and the removal of government interference in the economy. Consistently, such
policies are applied in a one sided way, and always in a manner that benefits large trans-national corporations, the most
influential entities in policy making. Hence, within neoliberalism as it is actually applied, capital is allowed to roam
the world freely with very few restrictions, yet workers are to remain trapped within the borders of their countries. This
serves trans-national corporations well, though for some, not well enough. According to Jack Welsh, CEO of GE, he and GE's
shareholders would be best served if factories were on barges so that when workers demand higher wages and better working
conditions, the barges could easily be moved to a country with more compliant workers. Another component of neoliberalism
is the dismantling of the welfare state. Again, in practice, this policy is applied to the majority of the population, who
have to accept cut backs in unemployment benefits and health care, while large corporations continue to receive massive
subsidies and tax breaks.
The effects of neoliberal policies on people everywhere has been devastating. During the last two to three decades,
wealth disparity has increased many fold within countries as well as between countries. In the US, inflation adjusted
median wages are lower today than they were in 1973 (when median wages reached their peak) while the wealth of the top 1%
of society has soared. One out of every five children in the US lives in a state of poverty characterized by continual
hunger, insecurity and lack of adequate health care. This, after almost ten years of a record breaking economic boom. For
the poorest people in the world, the situation has become even more desperate. John Gershman and Alec Irwin state in "Dying
for growth":
100 countries have undergone grave economic decline over the past three decades. Per capita income in these 100
countries is now lower than it was 10, 15, 20 or in some cases even 30 years ago. In Africa, the average household
consumes 20 percent less today than it did 25 years ago. Worldwide, more than 1 billion people saw their real incomes
fall during the period 1980-1993. Meanwhile, according to the United Nations Development Program's 1998 Human
Development Report, the 15 richest people in the world enjoy combined assets that exceed the total annual gross domestic
product of sub-Saharan Africa. At the end of the 1990's, the wealth of the three richest individuals on earth surpassed
the combined annual GDP of the 48 least developed countries.
The Thistle won't waste ink on how the wealthy have fared since the mainstream corporate press does a very commendable
job in this respect.
Neoliberalism has been a disaster for the environment as well. Despite the growing awareness in the late eighties that
the rate of fossil fuel consumption at that time would cause global warming and many other forms of unpredictable and
dangerous environmental changes, energy consumption has continued to increase at an alarming rate. This has been
facilitated by neoliberal deregulation of environmental protections championed by corporate puppets such as Newt Gingrich
and Tom Delay. In their continued quest for windfall profits, for example, corporations such as Ford and GM aggressively
marketed (and continue to do so) highly polluting sports utility vehicles (SUVs) while ignoring cleaner and more efficient
technologies. This was made possible by loop holes in environmental laws allowing SUVs to be sold that do not meet the
emission standards imposed on passenger cars. Consumer Reports Magazine (Nov. pg. 54) noted in 1997, that "the growing
popularity of SUVs, has helped make the 1997 automotive model year the least fuel-efficient in the last 16 years". Due to
the subservience of government to large corporations, these loop holes are still in place. Today, the qualitative
predictions of a decade ago are starting to manifesting themselves. The average temperature of the world has risen over the
last decade and for the first time, water has been observed on the polar caps.
One industry that has benefited significantly from neoliberal policies is the biotech industry, though not without
potentially catastrophic costs for the majority of the population. While large biotech corporations such as Monsanto and
Dupont are aiming for massive profits, the environment and our food supply is irreversibly being altered in the process,
creating a situation where large portions of the population and all future generations are subjected to potentially severe
and unpredictable health risks. As a way to promote the nascent biotech industry, the Bush administration in the early
nineties adopted a policy which held that regulations should not be created in such a way as to be a burden on the
industry. The Clinton administration has continued this policy, and today approximately 60% of our food is genetically
modified. This transformation of our food supply has occurred with scant public knowledge or oversight. And although genes
from viruses, bacteria or arctic fish with anti-freeze properties are inserted into crops, the federal regulatory agencies,
with heavy industry influence, maintain that genetically modified foods are no different from crops obtained with
traditional breeding techniques and therefore do not need to be approved (unless the transported genes are known to induce
a human allergen). Studies investigating the long term health and environmental effects of genetically modified crops are
not required by any federal agency and are rarely performed. In this atmosphere of deregulation and concentrated corporate
control, it is only a matter of time before a serious biological catastrophe occurs.
What does the IMF and World Bank have to do with this?
The IMF and World Bank were both created at the end of world war II in a political climate the is very different from
that of today. Nevertheless, their roles and modalities have been suitably updated to serve the interests of those that
benefit from neoliberalism. The institutional structures of the IMF and World Bank were framed at an international
conference in Bretton Woods, New Hampshire. Initially, the primary focus of the IMF was to regulate currency exchange rates
to facilitate orderly international trade and to be a lender of last resort when a member country experiences balance of
payments difficulties and is unable to borrow money from other sources. The original purpose of the World Bank was to lend
money to Western European governments to help them rebuild their countries after the war. In later years, the World Bank
shifted its attention towards development loans to third world countries.
Immediately after world war II, most western countries, including the US, had 'New Deal' style social contracts with
sufficient welfare provisions to ensure 'stability' between labor and capital. It was understood that restrictions on
international capital flow were necessary to protect these social contracts. The postwar 'Bretton Woods' economic system
which lasted until the early seventies, was based on the right and obligation of governments to regulate capital flow and
was characterized by rapid economic growth. In the early seventies, the Nixon administration unilaterally abandoned the
Bretton Woods system by dropping the gold standard and lifting restrictions on capital flows. The ensuing period has been
marked by dramatically increased financial speculation and low growth rates.
Although seemingly neutral institutions, in practice, the IMF and World Bank end up serving powerful interests of
western countries. At both institutions, the voting power of a given country is not measured by, for example, population,
but by how much capital that country contributes to the institutions and by other political factors reflecting the power
the country wields in the world. The G7 plays a dominant role in determining policy, with the US, France, Germany, Japan
and Great Britain each having their own director on the institution's executive board while 19 other directors are elected
by the rest of the approximately 150 member countries. The president of the World Bank is traditionally an American citizen
and is chosen with US congressional involvement. The managing director of the IMF is traditionally a European. On the IMF
board of governors, comprised of treasury secretaries, the G7 have a combined voting power of 46%.
The power of the IMF becomes clear when a country gets into financial trouble and needs funds to make payments on
private loans. Before the IMF grants a loan, it imposes conditions on that country, requiring it to make structural changes
in its economy. These conditions are called 'Structural Adjustment Programs' (SAPs) and are designed to increase money flow
into the country by promoting exports so that the country can pay off its debts. Not surprisingly, in view of the dominance
of the G7 in IMF policy making, the SAPs are highly neoliberal. The effective power of the IMF is often larger than that
associated with the size of its loans because private lenders often deem a country credit-worthy based on actions of the
IMF.
The World Bank plays a qualitatively different role than the IMF, but works tightly within the stringent SAP framework
imposed by the IMF. It focuses on development loans for specific projects, such as the building of dams, roads, harbors etc
that are considered necessary for 'economic growth' in a developing country. Since it is a multilateral institution, the
World Bank is less likely than unilateral lending institutions such as the Export Import Bank of the US to offer loans for
the purpose of promoting and subsidizing particular corporations. Nevertheless, the conceptions of growth and economic well
being within the World Bank are very much molded by western corporate values and rarely take account of local cultural
concerns. This is clearly exhibited by the modalities of its projects, such as the 'Green Revolution' in agriculture,
heavily promoted in the third world by the World Bank in the sixties and seventies. The 'Green Revolution' refers to the
massive industrialization of agriculture, involving the replacement of a multitude of indigenous crops with a few
high-yielding varieties that require expensive investments of chemicals, fertilizers and machinery. In the third world, the
'Green Revolution' was often imposed on indigenous populations with reasonably sustainable and self sufficient traditions
of rural agriculture. The mechanization of food production in third world countries, which have a large surplus labor pool,
has led to the marginalization of many people, disconnecting them from the economy and exacerbating wealth disparity in
these countries. Furthermore, excessive chemical agriculture has led to soil desertification and erosion, increasing the
occurrence of famines. While the 'Green Revolution' was a catastrophe for the poor in third world countries, western
chemical corporations such as Monsanto, Dow and Dupont fared very well, cashing in high profits and increasing their
control over food production in third world countries.
Today, the World Bank is at it again. This time it is promoting the use of genetically modified seeds in the third world
and works with governments to solidify patent laws which would grant biotech corporations like Monsanto unprecedented
control over food production. The pattern is clear, whether deliberate or nor, the World Bank serves to set the stage for
large trans-national corporations to enter third world countries, extract large profits and then leave with carnage in
their wake.
While the World Bank publicly emphasizes that it aims to alleviate poverty in the world, imperialistic attitudes
occasionally emerge from its leading figures. In 1991, then chief economist Lawrence Summers (now US Secretary of the
Treasury) wrote in an internal memo that was leaked:
Just between you and me, shouldn't the World Bank be encouraging more migration of the dirty industries to the LDCs
[less developed countries]? ... The economic logic behind dumping a load of toxic waste in the lowest wage country is
impeccable, and we should face up to that ... Under-populated countries in Africa are vastly under-polluted; their air
quality is probably vastly inefficiently low compared to Los Angeles or Mexico City .... The concern over an agent that
causes a one-in-a-million chance in the odds of prostate cancer is obviously going to be much higher in a country where
people survive to get prostate cancer than in a country where under-five mortality is 200 per thousand.
And thistle thought that the World Bank tried to extend lives in developing countries, not take advantage of low life
expectancy.
How do countries get into financial troubles, the Debt Crisis.
The most devastating program imposed by the IMF and the World Bank on third world countries are the Structural
Adjustment Programs. The widespread use of SAPs started in the early eighties after a major debt crisis. The debt crisis
arose from a combination of (i) reckless lending by western commercial banks to third world countries, (ii) mismanagement
within third world countries and (iii) changes in the international economy.
During the seventies, rising oil prices generated enormous profits for petrochemical corporations. These profits ended
up in large commercial banks which then sought to reinvest the capital. Much of this capital was invested in the form of
high risk loans to third world countries, many of which were run by corrupt dictators. Instead of investing the capital in
productive projects that would benefit the general population, dictators often diverted the funds to personal Swiss bank
accounts or used the them to purchase military equipment for domestic repression. This state of affairs persisted for a
while, since commodity prices remained stable and interest rates were relatively low enabling third world countries to
adequately service their debts. In 1979, the situation changed, however, when Paul Volker, the new Federal Reserve
Chairman, raised interest rates. This dramatically increased the cost of debtor countries' loans. At the same time, the US
was heading into a recession and world commodity prices dropped, tightening cash flows necessary for debt payment. The
possibility that many third world countries would default on their debt payments threatened a major financial crisis that
would result in large commercial bank failures. To prevent this, powerful countries from the G7 stepped in and actively
used the IMF and World Bank to bail out third world countries. Yet the bail-out packages were contingent upon the third
world countries introducing major neoliberal policies (i.e. SAPs) to promote exports.
Examples of SAP prescriptions include:
- an increase in 'labor flexibility' which means caps on minimum wages, and policies to weaken trade unions and worker's
bargaining power.
- tax increases combined with cuts in social spending such as education and health care, to free up funds for debt
repayment.
- privatization of public sector enterprises, such as utility companies and public transport
- financial liberalization designed to remove restrictions on the flow of international capital in and out of the
country coupled with the removal of restrictions on what foreign corporations and banks can buy.
Despite almost two decades of Structural Adjustment Programs, many third world countries have not been able to pull
themselves out of massive debt. The SAPs have, however, served corporations superbly, offering them new opportunities to
exploit workers and natural resources.
As Prof. Chomsky often says, the debt crisis is an ideological construct. In a true capitalist society, the third
world debt would be wiped out. The Banks who made the risky loans would have to accept the losses, and the dictators and
their entourage would have to repay the money they embezzled. The power structure in society however, prevents this from
happening. In the west tax payers end up assuming the risk while the large banks run off with the high profits often
derived from high risk loans. In the third world, the people end up paying the costs while their elites retire in the
French Riviera.
It is important to realize that the IMF and World Bank are tools for powerful entities in society such as
trans-national corporations and wealthy investors. The Thistle believes that massive world poverty and environmental
destruction is the result of the appalling concentration of power in the hands of a small minority whose sights are
blinded by dollar signs and whose passions are the aggrandizement of ever more power. The Thistle holds that an
equitable and democratic world centered around cooperation and solidarity would be more able to deal with environmental
and human crises.
"... Since World War II the United States has used the Dollar Standard and its dominant role in the IMF and World Bank to steer trade and investment along lines benefiting its own economy. But now that the growth of China's mixed economy has outstripped all others while Russia finally is beginning to recover, countries have the option of borrowing from the Asian Infrastructure Investment Bank (AIIB) and other non-U.S. consortia. ..."
"... The problem with surrendering is that this Washington Consensus is extractive and lives in the short run, laying the seeds of financial dependency, debt-leveraged bubbles and subsequent debt deflation and austerity. The financial business plan is to carve out opportunities for price gouging and corporate profits. Today's U.S.-sponsored trade and investment treaties would make governments pay fines equal to the amount that environmental and price regulations, laws protecting consumers and other social policies might reduce corporate profits. "Companies would be able to demand compensation from countries whose health, financial, environmental and other public interest policies they thought to be undermining their interests, and take governments before extrajudicial tribunals. These tribunals, organised under World Bank and UN rules, would have the power to order taxpayers to pay extensive compensation over legislation seen as undermining a company's 'expected future profits.' ..."
"... At the center of today's global split are the last few centuries of Western social and democratic reform. Seeking to follow the classical Western development path by retaining a mixed public/private economy, China, Russia and other nations find it easier to create new institutions such as the AIIB than to reform the dollar standard IMF and World Bank. Their choice is between short-term gains by dependency leading to austerity, or long-term development with independence and ultimate prosperity. ..."
"... The price of resistance involves risking military or covert overthrow. Long before the Ukraine crisis, the United States has dropped the pretense of backing democracies. The die was cast in 1953 with the coup against Iran's secular government, and the 1954 coup in Guatemala to oppose land reform. Support for client oligarchies and dictatorships in Latin America in the 1960 and '70s was highlighted by the overthrow of Allende in Chile and Operation Condor's assassination program throughout the continent. Under President Barack Obama and Secretary of State Hillary Clinton, the United States has claimed that America's status as the world's "indispensible nation" entitled it back the recent coups in Honduras and Ukraine, and to sponsor the NATO attack on Libya and Syria, leaving Europe to absorb the refugees. ..."
"... The trans-Atlantic financial bubble has left a legacy of austerity since 2008. Debt-ridden economies are being told to cope with their downturns by privatizing their public domain. ..."
"... The immediate question facing Germany and the rest of Western Europe is how long they will sacrifice their trade and investment opportunities with Russia, Iran and other economies by adhering to U.S.-sponsored sanctions. American intransigence threatens to force an either/or choice in what looms as a seismic geopolitical shift over the proper role of governments: Should their public sectors provide basic services and protect populations from predatory monopolies, rent extraction and financial polarization? ..."
"... Today's global financial crisis can be traced back to World War I and its aftermath. The principle that needed to be voiced was the right of sovereign nations not to be forced to sacrifice their economic survival on the altar of inter-government and private debt demands. The concept of nationhood embodied in the 1648 Treaty of Westphalia based international law on the principle of parity of sovereign states and non-interference. Without a global alternative to letting debt dynamics polarize societies and tear economies apart, monetary imperialism by creditor nations is inevitable. ..."
"... The past century's global fracture between creditor and debtor economies has interrupted what seemed to be Europe's democratic destiny to empower governments to override financial and other rentier interests. Instead, the West is following U.S. diplomatic leadership back into the age when these interests ruled governments. This conflict between creditors and democracy, between oligarchy and economic growth (and indeed, survival) will remain the defining issue of our epoch over the next generation, and probably for the remainder of the 21 st century. ..."
"... wiki/Anglo-Persian Oil Company "In 1901 William Knox D'Arcy, a millionaire London socialite, negotiated an oil concession with Mozaffar al-Din Shah Qajar of Persia. He financed this with capital he had made from his shares in the highly profitable Mount Morgan mine in Queensland, Australia. D'Arcy assumed exclusive rights to prospect for oil for 60 years in a vast tract of territory including most of Iran. In exchange the Shah received £20,000 (£2.0 million today),[1] an equal amount in shares of D'Arcy's company, and a promise of 16% of future profits." Note the 16% = ~1/6, the rest going off-shore. ..."
"... The Greens in Aus researched the resources sector in Aus, to find that it is 83% 'owned' by off-shore entities. Note that 83% = ~5/6, which goes off-shore. Coincidence? ..."
"... Note that in Aus, the democratically elected so-called 'leaders' not only allow exactly this sort of economic rape, they actively assist it by, say, crippling the central bank and pleading for FDI = selling our, we the people's interests, out. Those traitor-leaders are reversing 'Enlightenment' provisions, privatising whatever they can and, as Michael Hudson well points out the principles, running Aus into debt and austerity. ..."
"... US banking oligarchs will expend the last drop of our blood to prevent a such a linking, just as they were willing to sacrifice our blood and treasure in WW1 and 2, as is alluded to here.: ..."
"... The past century's global fracture between creditor and debtor economies has interrupted what seemed to be Europe's democratic destiny to empower governments to override financial and other rentier interests. Instead, the West is following U.S. diplomatic leadership back into the age when these interests ruled governments. This conflict between creditors and democracy, between oligarchy and economic growth (and indeed, survival) will remain the defining issue of our epoch over the next generation, and probably for the remainder of the 21st century. ..."
"... It's important to note that such interests have ruled (owned, actually) imperial Britain for centuries and the US since its inception, and the anti-federalists knew it. ..."
"... "After World War I the U.S. Government deviated from what had been traditional European policy – forgiving military support costs among the victors. U.S. officials demanded payment for the arms shipped to its Allies in the years before America entered the Great War in 1917. The Allies turned to Germany for reparations to pay these debts." The Yank banker, the Yankee Wall Street super rich, set off a process of greed that led to Hitler. ..."
"... But they didn't invent anything. They learned from their WASP forebears in the British Empire, whose banking back to Oliver Cromwell had become inextricably entangled with Jewish money and Jewish interests to the point that Jews per capita dominated it even at the height of the British Empire, when simpleton WASPs assume that WASPs truly ran everything, and that WASP power was for the good of even the poorest WASPs. ..."
"... The Berlin Baghdad railway was an important cause for WWI. ..."
"... Bingo. Stopping it was a huge factor. There was no way the banksters of the world were going to let that go forward, nor were they going to let Germany and Russia link up in any other ways. They certainly were not about to allow any threats to the Suez Canal nor any chance to let the oil fields slip from their control either. ..."
"... This is not how the Enlightenment was supposed to evolve ..."
"... In fact, this is exactly how it was supposed to work. The wave of liberal democracies was precisely to overturn the monarchies, which were the last bulwark protecting the people from the full tyranny of the financiers, who were, by nature, one-world internationalists. ..."
"... The real problem with this is that any form of monetary arrangement involves an implied trusteeship, with obligations on, as well as benefits for, the trustee. The US is so abusing its trusteeship through the continual use of an irresponsible sanctions regime that it risks a good portion of the world economy abandoning its system for someone else's, which may be perceived to be run more responsibility. The disaster scenario would be the US having therefore in the future to access that other system to purchase oil or minerals, and having that system do to us what we previously did to them -- sanction us out. ..."
"... " Marx believed that capitalism was inherently built upon practices of usury and thus inevitably leading to the separation of society into two classes: one composed of those who produce value and the other, which feeds upon the first one. In "Theories of Surplus Value" (written 1862-1863), he states " that interest (in contrast to industrial profit) and rent (that is the form of landed property created by capitalist production itself) are superfetations (i.e., excessive accumulations) which are not essential to capitalist production and of which it can rid itself." ..."
In theory, the global financial system is supposed to help every country gain. Mainstream teaching of international finance, trade
and "foreign aid" (defined simply as any government credit) depicts an almost utopian system uplifting all countries, not stripping
their assets and imposing austerity. The reality since World War I is that the United States has taken the lead in shaping the international
financial system to promote gains for its own bankers, farm exporters, its oil and gas sector, and buyers of foreign resources –
and most of all, to collect on debts owed to it.
Each time this global system has broken down over the past century, the major destabilizing force has been American over-reach
and the drive by its bankers and bondholders for short-term gains. The dollar-centered financial system is leaving more industrial
as well as Third World countries debt-strapped. Its three institutional pillars – the International Monetary Fund (IMF), World Bank
and World Trade Organization – have imposed monetary, fiscal and financial dependency, most recently by the post-Soviet Baltics,
Greece and the rest of southern Europe. The resulting strains are now reaching the point where they are breaking apart the arrangements
put in place after World War II.
The most destructive fiction of international finance is that all debts can be paid, and indeed should be paid, even when
this tears economies apart by forcing them into austerity – to save bondholders, not labor and industry. Yet European countries,
and especially Germany, have shied from pressing for a more balanced global economy that would foster growth for all countries and
avoid the current economic slowdown and debt deflation.
Imposing austerity on Germany after World War I
After World War I the U.S. Government deviated from what had been traditional European policy – forgiving military support costs
among the victors. U.S. officials demanded payment for the arms shipped to its Allies in the years before America entered the Great
War in 1917. The Allies turned to Germany for reparations to pay these debts. Headed by John Maynard Keynes, British diplomats sought
to clean their hands of responsibility for the consequences by promising that all the money they received from Germany would simply
be forwarded to the U.S. Treasury.
The sums were so unpayably high that Germany was driven into austerity and collapse. The nation suffered hyperinflation as the
Reichsbank printed marks to throw onto the foreign exchange also were pushed into financial collapse. The debt deflation was much
like that of Third World debtors a generation ago, and today's southern European PIIGS (Portugal, Ireland, Italy, Greece and Spain).
In a pretense that the reparations and Inter-Ally debt tangle could be made solvent, a triangular flow of payments was facilitated
by a convoluted U.S. easy-money policy. American investors sought high returns by buying German local bonds; German municipalities
turned over the dollars they received to the Reichsbank for domestic currency; and the Reichsbank used this foreign exchange to pay
reparations to Britain and other Allies, enabling these countries to pay the United States what it demanded.
But solutions based on attempts to keep debts of such magnitude in place by lending debtors the money to pay can only be temporary.
The U.S. Federal Reserve sustained this triangular flow by holding down U.S. interest rates. This made it attractive for American
investors to buy German municipal bonds and other high-yielding debts. It also deterred Wall Street from drawing funds away from
Britain, which would have driven its economy deeper into austerity after the General Strike of 1926. But domestically, low U.S. interest
rates and easy credit spurred a real estate bubble, followed by a stock market bubble that burst in 1929. The triangular flow of
payments broke down in 1931, leaving a legacy of debt deflation burdening the U.S. and European economies. The Great Depression lasted
until outbreak of World War II in 1939.
Planning for the postwar period took shape as the war neared its end. U.S. diplomats had learned an important lesson. This time
there would be no arms debts or reparations. The global financial system would be stabilized – on the basis of gold, and on creditor-oriented
rules. By the end of the 1940s the United States held some 75 percent of the world's monetary gold stock. That established the U.S.
dollar as the world's reserve currency, freely convertible into gold at the 1933 parity of $35 an ounce.
It also implied that once again, as in the 1920s, European balance-of-payments deficits would have to be financed mainly by the
United States. Recycling of official government credit was to be filtered via the IMF and World Bank, in which U.S. diplomats alone
had veto power to reject policies they found not to be in their national interest. International financial "stability" thus became
a global control mechanism – to maintain creditor-oriented rules centered in the United States.
To obtain gold or dollars as backing for their own domestic monetary systems, other countries had to follow the trade and investment
rules laid down by the United States. These rules called for relinquishing control over capital movements or restrictions on foreign
takeovers of natural resources and the public domain as well as local industry and banking systems.
By 1950 the dollar-based global economic system had become increasingly untenable. Gold continued flowing to the United States,
strengthening the dollar – until the Korean War reversed matters. From 1951 through 1971 the United States ran a deepening balance-of-payments
deficit, which stemmed entirely from overseas military spending. (Private-sector trade and investment was steadily in balance.)
U.S. Treasury debt replaces the gold exchange standard
The foreign military spending that helped return American gold to Europe became a flood as the Vietnam War spread across Asia
after 1962. The Treasury kept the dollar's exchange rate stable by selling gold via the London Gold Pool at $35 an ounce. Finally,
in August 1971, President Nixon stopped the drain by closing the Gold Pool and halting gold convertibility of the dollar.
There was no plan for what would happen next. Most observers viewed cutting the dollar's link to gold as a defeat for the United
States. It certainly ended the postwar financial order as designed in 1944. But what happened next was just the reverse of a defeat.
No longer able to buy gold after 1971 (without inciting strong U.S. disapproval), central banks found only one asset in which to
hold their balance-of-payments surpluses: U.S. Treasury debt. These securities no longer were "as good as gold." The United States
issued them at will to finance soaring domestic budget deficits.
By shifting from gold to the dollars thrown off by the U.S. balance-of-payments deficit, the foundation of global monetary reserves
came to be dominated by the U.S. military spending that continued to flood foreign central banks with surplus dollars. America's
balance-of-payments deficit thus supplied the dollars that financed its domestic budget deficits and bank credit creation – via foreign
central banks recycling U.S. foreign spending back to the U.S. Treasury.
In effect, foreign countries have been taxed without representation over how their loans to the U.S. Government are employed.
European central banks were not yet prepared to create their own sovereign wealth funds to invest their dollar inflows in foreign
stocks or direct ownership of businesses. They simply used their trade and payments surpluses to finance the U.S. budget deficit.
This enabled the Treasury to cut domestic tax rates, above all on the highest income brackets.
U.S. monetary imperialism confronted European and Asian central banks with a dilemma that remains today: If they do not turn around
and buy dollar assets, their currencies will rise against the dollar. Buying U.S. Treasury securities is the only practical way to
stabilize their exchange rates – and in so doing, to prevent their exports from rising in dollar terms and being priced out of dollar-area
markets.
The system may have developed without foresight, but quickly became deliberate. My book Super Imperialism sold best in
the Washington DC area, and I was given a large contract through the Hudson Institute to explain to the Defense Department exactly
how this extractive financial system worked. I was brought to the White House to explain it, and U.S. geostrategists used my book
as a how-to-do-it manual (not my original intention).
Attention soon focused on the oil-exporting countries. After the U.S. quadrupled its grain export prices shortly after the 1971
gold suspension, the oil-exporting countries quadrupled their oil prices. I was informed at a White House meeting that U.S. diplomats
had let Saudi Arabia and other Arab countries know that they could charge as much as they wanted for their oil, but that the United
States would treat it as an act of war not to keep their oil proceeds in U.S. dollar assets.
This was the point at which the international financial system became explicitly extractive. But it took until 2009, for the first
attempt to withdraw from this system to occur. A conference was convened at Yekaterinburg, Russia, by the Shanghai Cooperation Organization
(SCO). The alliance comprised Russia, China, Kazakhstan, Tajikistan, Kirghizstan and Uzbekistan, with observer status for Iran, India,
Pakistan and Mongolia. U.S. officials asked to attend as observers, but their request was rejected.
The U.S. response has been to extend the new Cold War into the financial sector, rewriting the rules of international finance
to benefit the United States and its satellites – and to deter countries from seeking to break free from America's financial free
ride.
The IMF changes its rules to isolate Russia and China
Aiming to isolate Russia and China, the Obama Administration's confrontational diplomacy has drawn the Bretton Woods institutions
more tightly under US/NATO control. In so doing, it is disrupting the linkages put in place after World War II.
The U.S. plan was to hurt Russia's economy so much that it would be ripe for regime change ("color revolution"). But the effect
was to drive it eastward, away from Western Europe to consolidate its long-term relations with China and Central Asia. Pressing Europe
to shift its oil and gas purchases to U.S. allies, U.S. sanctions have disrupted German and other European trade and investment with
Russia and China. It also has meant lost opportunities for European farmers, other exporters and investors – and a flood of refugees
from failed post-Soviet states drawn into the NATO orbit, most recently Ukraine.
To U.S. strategists, what made changing IMF rules urgent was Ukraine's $3 billion debt falling due to Russia's National Wealth
Fund in December 2015. The IMF had long withheld credit to countries refusing to pay other governments. This policy aimed primarily
at protecting the financial claims of the U.S. Government, which usually played a lead role in consortia with other governments and
U.S. banks. But under American pressure the IMF changed its rules in January 2015. Henceforth, it announced, it would indeed be willing
to provide credit to countries in arrears other governments – implicitly headed by China (which U.S. geostrategists consider to be
their main long-term adversary), Russia and others that U.S. financial warriors might want to isolate in order to force neoliberal
privatization policies. [1] I provide the full
background in "The IMF Changes its Rules to Isolate China and Russia," December 9, 2015, available on michael-hudson.com, Naked
Capitalism , Counterpunch and Johnson's Russia List .
Article I of the IMF's 1944-45 founding charter
prohibits it from lending to a member engaged in civil war or at war with another member state, or for military purposes generally.
An obvious reason for this rule is that such a country is unlikely to earn the foreign exchange to pay its debt. Bombing Ukraine's
own Donbass region in the East after its February 2014 coup d'état destroyed its export industry, mainly to Russia.
Withholding IMF credit could have been a lever to force adherence to the Minsk peace agreements, but U.S. diplomacy rejected that
opportunity. When IMF head Christine Lagarde made a new loan to Ukraine in spring 2015, she merely expressed a verbal hope for peace.
Ukrainian President Porochenko announced the next day that he would step up his civil war against the Russian-speaking population
in eastern Ukraine. One and a half-billion dollars of the IMF loan were given to banker Ihor Kolomoiski and disappeared offshore,
while the oligarch used his domestic money to finance an anti-Donbass army. A million refugees were driven east into Russia; others
fled west via Poland as the economy and Ukraine's currency plunged.
The IMF broke four of its rules by lending to Ukraine: (1) Not to lend to a country that has no visible means to pay back the
loan (the "No More Argentinas" rule, adopted after the IMF's disastrous 2001 loan to that country). (2) Not to lend to a country
that repudiates its debt to official creditors (the rule originally intended to enforce payment to U.S.-based institutions). (3)
Not to lend to a country at war – and indeed, destroying its export capacity and hence its balance-of-payments ability to pay back
the loan. Finally (4), not to lend to a country unlikely to impose the IMF's austerity "conditionalities." Ukraine did agree to override
democratic opposition and cut back pensions, but its junta proved too unstable to impose the austerity terms on which the IMF insisted.
U.S. neoliberalism promotes privatization carve-ups of debtor countries
Since World War II the United States has used the Dollar Standard and its dominant role in the IMF and World Bank to steer
trade and investment along lines benefiting its own economy. But now that the growth of China's mixed economy has outstripped all
others while Russia finally is beginning to recover, countries have the option of borrowing from the Asian Infrastructure Investment
Bank (AIIB) and other non-U.S. consortia.
At stake is much more than just which nations will get the contracting and banking business. At issue is whether the philosophy
of development will follow the classical path based on public infrastructure investment, or whether public sectors will be privatized
and planning turned over to rent-seeking corporations.
What made the United States and Germany the leading industrial nations of the 20 th century – and more recently, China
– has been public investment in economic infrastructure. The aim was to lower the price of living and doing business by providing
basic services on a subsidized basis or freely. By contrast, U.S. privatizers have brought debt leverage to bear on Third World countries,
post-Soviet economies and most recently on southern Europe to force selloffs. Current plans to cap neoliberal policy with the Trans-Pacific
Partnership (TPP), Transatlantic Trade and Investment Partnership (TTIP) and Transatlantic Free Trade Agreement (TAFTA) go so far
as to disable government planning power to the financial and corporate sector.
American strategists evidently hoped that the threat of isolating Russia, China and other countries would bring them to heel if
they tried to denominate trade and investment in their own national currencies. Their choice would be either to suffer sanctions
like those imposed on Cuba and Iran, or to avoid exclusion by acquiescing in the dollarized financial and trade system and its drives
to financialize their economies under U.S. control.
The problem with surrendering is that this Washington Consensus is extractive and lives in the short run, laying the seeds
of financial dependency, debt-leveraged bubbles and subsequent debt deflation and austerity. The financial business plan is to carve
out opportunities for price gouging and corporate profits. Today's U.S.-sponsored trade and investment treaties would make governments
pay fines equal to the amount that environmental and price regulations, laws protecting consumers and other social policies might
reduce corporate profits. "Companies would be able to demand compensation from countries whose health, financial, environmental and
other public interest policies they thought to be undermining their interests, and take governments before extrajudicial tribunals.
These tribunals, organised under World Bank and UN rules, would have the power to order taxpayers to pay extensive compensation over
legislation seen as undermining a company's 'expected future profits.' "
This policy threat is splitting the world into pro-U.S. satellites and economies maintaining public infrastructure investment
and what used to be viewed as progressive capitalism. U.S.-sponsored neoliberalism supporting its own financial and corporate interests
has driven Russia, China and other members of the Shanghai Cooperation Organization into an alliance to protect their economic self-sufficiency
rather than becoming dependent on dollarized credit enmeshing them in foreign-currency debt.
At the center of today's global split are the last few centuries of Western social and democratic reform. Seeking to follow
the classical Western development path by retaining a mixed public/private economy, China, Russia and other nations find it easier
to create new institutions such as the AIIB than to reform the dollar standard IMF and World Bank. Their choice is between short-term
gains by dependency leading to austerity, or long-term development with independence and ultimate prosperity.
The price of resistance involves risking military or covert overthrow. Long before the Ukraine crisis, the United States has
dropped the pretense of backing democracies. The die was cast in 1953 with the coup against Iran's secular government, and the 1954
coup in Guatemala to oppose land reform. Support for client oligarchies and dictatorships in Latin America in the 1960 and '70s was
highlighted by the overthrow of Allende in Chile and Operation Condor's assassination program throughout the continent. Under President
Barack Obama and Secretary of State Hillary Clinton, the United States has claimed that America's status as the world's "indispensible
nation" entitled it back the recent coups in Honduras and Ukraine, and to sponsor the NATO attack on Libya and Syria, leaving Europe
to absorb the refugees.
Germany's choice
This is not how the Enlightenment was supposed to evolve. The industrial takeoff of Germany and other European nations involved
a long fight to free markets from the land rents and financial charges siphoned off by their landed aristocracies and bankers. That
was the essence of classical 19 th -century political economy and 20 th -century social democracy. Most economists
a century ago expected industrial capitalism to produce an economy of abundance, and democratic reforms to endorse public infrastructure
investment and regulation to hold down the cost of living and doing business. But U.S. economic diplomacy now threatens to radically
reverse this economic ideology by aiming to dismantle public regulatory power and impose a radical privatization agenda under the
TTIP and TAFTA.
Textbook trade theory depicts trade and investment as helping poorer countries catch up, compelling them to survive by becoming
more democratic to overcome their vested interests and oligarchies along the lines pioneered by European and North American industrial
economies. Instead, the world is polarizing, not converging. The trans-Atlantic financial bubble has left a legacy of austerity
since 2008. Debt-ridden economies are being told to cope with their downturns by privatizing their public domain.
The immediate question facing Germany and the rest of Western Europe is how long they will sacrifice their trade and investment
opportunities with Russia, Iran and other economies by adhering to U.S.-sponsored sanctions. American intransigence threatens to
force an either/or choice in what looms as a seismic geopolitical shift over the proper role of governments: Should their public
sectors provide basic services and protect populations from predatory monopolies, rent extraction and financial polarization?
Today's global financial crisis can be traced back to World War I and its aftermath. The principle that needed to be voiced
was the right of sovereign nations not to be forced to sacrifice their economic survival on the altar of inter-government and private
debt demands. The concept of nationhood embodied in the 1648 Treaty of Westphalia based international law on the principle of parity
of sovereign states and non-interference. Without a global alternative to letting debt dynamics polarize societies and tear economies
apart, monetary imperialism by creditor nations is inevitable.
The past century's global fracture between creditor and debtor economies has interrupted what seemed to be Europe's democratic
destiny to empower governments to override financial and other rentier interests. Instead, the West is following U.S. diplomatic
leadership back into the age when these interests ruled governments. This conflict between creditors and democracy, between oligarchy
and economic growth (and indeed, survival) will remain the defining issue of our epoch over the next generation, and probably for
the remainder of the 21 st century.
Endnotes
[1] I provide the full background in
"The IMF Changes its Rules to Isolate China and Russia," December 9, 2015, available on michael-hudson.com, Naked Capitalism
, Counterpunch and Johnson's Russia List .
"Austerity" is such a misused word these days. What the Allies did to Germany after Versailles was austerity, and everyone paid
dearly for it.
What the IMF and the Western Banking Cartel do to third world countries is akin to a pusher hopping up addicts on debt and
then taking it away while stripping them of their assets, pretty much hurting only the people of the third world country; certainly
not the WBC, and almost certainly not the criminal elite who took the deal.
The Austerity everyone complains about in the developed world these days is a joke, hardly austerity, for it has never meant
more than doing a little less deficit-spending than in prior periods, e.g. UK Labour whining about "Austerity" is a joke, as the
UK debt has done nothing but grow, which in terms understandable to simple folk like me means they are spending more than they
can afford to carry.
" The immediate question facing Germany and the rest of Western Europe is how long they will sacrifice their trade and investment
opportunities with Russia, Iran and other economies by adhering to U.S.-sponsored sanctions "
In the whole article not a word about the euro, also an instrument of imperialism, that mainly benefits Germany, the country
that has to maintain a high level of exports, in order to feed the Germans, and import raw materials for Germany's industries.
Isolating China and Russia, with the other BRICS countries, S Africa, Brazil, India, dangerous game.
This effort forced China and Russia to close cooperation, the economic expression of this is the Peking Petersburg railway, with
a hub in Khazakstan, where the containers are lifted from the Chinese to the Russian system, the width differs.
Four days for the trip.
The Berlin Baghdad railway was an important cause for WWI.
Let us hope that history does not repeat itself in the nuclear era.
Edward Mead Earle, Ph.D., 'Turkey, The Great Powers and The Bagdad Railway, A study in Imperialism', 1923, 1924, New York
The U.S. response has been to extend the new Cold War into the financial sector, rewriting the rules of international finance
to benefit the United States and its satellites – and to deter countries from seeking t o break free from America's
financial free ride .
Nah, the NY banksters wouldn't dream of doing such a thing; would they?
This is not how the Enlightenment was supposed to evolve
What I said, and beautifully put, the whole article.
World War I may well have been an important way-point, but the miserable mercantile modus operandi was well established
long before.
An interesting A/B case:
a) wiki/Anglo-Persian Oil Company
"In 1901 William Knox D'Arcy, a millionaire London socialite, negotiated an oil concession with Mozaffar al-Din Shah Qajar of
Persia. He financed this with capital he had made from his shares in the highly profitable Mount Morgan mine in Queensland, Australia.
D'Arcy assumed exclusive rights to prospect for oil for 60 years in a vast tract of territory including most of Iran. In exchange
the Shah received £20,000 (£2.0 million today),[1] an equal amount in shares of D'Arcy's company, and a promise of 16% of future
profits." Note the 16% = ~1/6, the rest going off-shore.
b) The Greens in Aus researched the resources sector in Aus, to find that it is 83% 'owned' by off-shore entities. Note
that 83% = ~5/6, which goes off-shore. Coincidence?
Then see what happened when the erstwhile APOC was nationalized; the US/UK perpetrated a coup against the democratically elected
Mossadegh, eventual blow-back resulting in the 1979 revolution, basically taking Iran out of 'the West.'
Note that in Aus, the democratically elected so-called 'leaders' not only allow exactly this sort of economic rape, they
actively assist it by, say, crippling the central bank and pleading for FDI = selling our, we the people's interests, out. Those
traitor-leaders are reversing 'Enlightenment' provisions, privatising whatever they can and, as Michael Hudson well points out
the principles, running Aus into debt and austerity.
We the people are powerless passengers, and to add insult to injury, the taxpayer-funded AusBC lies to us continually. Ho,
hum; just like the mainly US/Z MSM and the BBC do – all corrupt and venal. Bah!
Now, cue the trolls: "But Russia/China are worse!"
The immediate question facing Germany and the rest of Western Europe is how long they will sacrifice their trade and investment
opportunities with Russia, Iran and other economies by adhering to U.S.-sponsored sanctions.
US banking oligarchs will expend the last drop of our blood to prevent a such a linking, just as they were willing to sacrifice
our blood and treasure in WW1 and 2, as is alluded to here.:
Today's global financial crisis can be traced back to World War I and its aftermath.
Excellent.:
The principle that needed to be voiced was the right of sovereign nations not to be forced to sacrifice their economic survival
on the altar of inter-government and private debt demands Without a global alternative to letting debt dynamics polarize societies
and tear economies apart, monetary imperialism by creditor nations is inevitable.
This is a gem of a summary.:
The past century's global fracture between creditor and debtor economies has interrupted what seemed to be Europe's
democratic destiny to empower governments to override financial and other rentier interests. Instead, the West is following
U.S. diplomatic leadership back into the age when these interests ruled governments. This conflict between creditors and democracy,
between oligarchy and economic growth (and indeed, survival) will remain the defining issue of our epoch over the next generation,
and probably for the remainder of the 21st century.
Instead, the West is following U.S. diplomatic leadership back into the age when these interests ruled governments. It's
important to note that such interests have ruled (owned, actually) imperial Britain for centuries and the US since its inception,
and the anti-federalists knew it.
Here is a revolution as radical as that which separated us from Great Britain.
You will find all the strength of this country in the hands of your enemies [ ed comment: the money grubbers ]
Patrick Henry June 5 and 7, 1788―1788-1789 Petersburg, Virginia edition of the Debates and other Proceedings . . . Of the
Virginia Convention of 1788
The Constitution had been laid down under unacceptable auspices; its history had been that of a coup d'état.
It had been drafted, in the first place, by men representing special economic interests. Four-fifths of them were
public creditors, one-third were land speculators, and one-fifth represented interests in shipping, manufacturing, and merchandising.
Most of them were lawyers. Not one of them represented the interest of production -- Vilescit origine tali.
- Albert Jay Nock [Excerpted from chapter 5 of Albert Jay Nock's Jefferson, published in 1926]
"After World War I the U.S. Government deviated from what had been traditional European policy – forgiving military support
costs among the victors. U.S. officials demanded payment for the arms shipped to its Allies in the years before America entered
the Great War in 1917. The Allies turned to Germany for reparations to pay these debts." The Yank banker, the Yankee Wall Street
super rich, set off a process of greed that led to Hitler.
But they didn't invent anything. They learned from their
WASP forebears in the British Empire, whose banking back to Oliver Cromwell had become inextricably entangled with Jewish money
and Jewish interests to the point that Jews per capita dominated it even at the height of the British Empire, when simpleton WASPs
assume that WASPs truly ran everything, and that WASP power was for the good of even the poorest WASPs.
To Michael Hudson,
Great article. Evidence based, factually argued, enjoyably readable.
Replacements for the dollar dominated financial system are well into development. Digital dollars, credit cards, paypal, stock
and currency exchange online platforms, and perhaps most intriguing The exponential rise of Bitcoin and similar crypto-currencies.
The internet is also exponentially exposing the screwing we peasants have been getting by the psychopath, narcissistic, hedonistic,
predatory lenders and controllers. Next comes the widespread, easily usable, and inexpensive cell phone apps, social media exposures,
alternative websites (like Unz.com), and other technologies that will quickly identify every lying, evil, jerk so they can be
neutrilized / avoided
"Textbook trade theory depicts trade and investment as helping poorer countries catch up, compelling them to survive by
becoming more democratic to overcome their vested interests and oligarchies along the lines pioneered by European and North
American industrial economies."
I must be old; the economic textbooks I had did explain the benefits of freer trade among nations using Ricardo and Trade Indifference
Curves, but didn't prescribe any one political system being fostered by or even necessary for the benefits of international trade
to be reaped.
to be honest, this way of running things only need to last for 10-20 more years before automation will replace 800 million jobs.
then we will have a few trillionaire overlords unless true AI comes online. by that point nothing matters as we will become zoo
animals.
What the IMF and the Western Banking Cartel do to third world countries is akin to a pusher hopping up addicts on debt and
then taking it away while stripping them of their assets, pretty much hurting only the people of the third world country; certainly
not the WBC, and almost certainly not the criminal elite who took the deal.
That's true and the criminals do similar asset stripping to their own as well, through various means.
It's always the big criminals against the rest of us.
The Berlin Baghdad railway was an important cause for WWI.
Bingo. Stopping it was a huge factor. There was no way the banksters of the world were going to let that go forward, nor
were they going to let Germany and Russia link up in any other ways. They certainly were not about to allow any threats to the
Suez Canal nor any chance to let the oil fields slip from their control either.
The wars were also instigated to prevent either Germany or Russia having control of, and free access to warm water ports
and the wars also were an excuse to steal vast amounts of wealth from both Germany and Russia through various means.
All pious and pompous pretexts aside, economics was the motive for (the) war (s), and the issues are not settled to this day.
I.e., it's the same class of monstrously insatiable criminals who want everything for themselves who're causing the major troubles
of the day.
Unfortunately, as long as we have SoB's who're eager to sacrifice our blood and treasure for their
benfit, things will never change.
The golden rule is one thing. The paper rule is something else.
May you live in interesting times.
The golden rule is for dreamers, unfortunately. Those who control paper money rule, and your wish has been granted; we live
in times that are both interesting and fascinating, but are nevertheless the same old thing. Only the particular particulars
have changed.
Essentially, the anti-EU and anti-euro line that Professor Hudson has being pushing for years, which has now morphed into a pro-Putin
line as the anti-EU faction in the US have sought to use Putin as a "useful idiot" to destroy the EU. Since nobody in Europe reads
these articles, Ii doesn't really matter and I certainly don't see any EU leader following the advice of someone who has never
concealed his hostility to the EU's very existence: note the use of the racist slur "PIIGS" to refer to certain EU Member States.
Thus, Professor Hudson is simply pushing the "let Putin win in Ukraine" line dressed up in fine-sounding economic jargon.
Since nobody in Europe reads these articles, Ii doesn't really matter
None of it rally matters anyway, no matter how valid. To paraphrase Thucydides, the money grubbers do what they want and the
rest of us are forced to suck it up and limp along.
and I certainly don't see any EU leader following the advice
I doubt that that's Hudson's intent in writing the article. I see it as his attempt to explain the situation to those of us
who care about them even though our concern is pretty much useless.
I do thank him for taking the time to pen this stuff which I consider worthwhile and high quality.
That sounds good but social media is the weapon of choice in the EU too. Lot's of kids know and love Hudson. Any half capable
writer who empathetically explains why you're getting fucked is going to have some followers. Watering, nutrition, weeding. Before
too long you'll be on the Eurail to your destination.
said: "The Yank banker, the Yankee Wall Street super rich, set off a process of greed that led to Hitler." If true, so what?
That's a classic example of 'garbage in, garbage out'. http://www.codoh.com
This is not how the Enlightenment was supposed to evolve
In fact, this is exactly how it was supposed to work. The wave of liberal democracies was precisely to overturn the monarchies,
which were the last bulwark protecting the people from the full tyranny of the financiers, who were, by nature, one-world internationalists.
The real problem with this is that any form of monetary arrangement involves an implied trusteeship, with obligations on,
as well as benefits for, the trustee. The US is so abusing its trusteeship through the continual use of an irresponsible
sanctions regime that it risks a good portion of the world economy abandoning its system for someone else's, which may be perceived
to be run more responsibility. The disaster scenario would be the US having therefore in the future to access that other system
to purchase oil or minerals, and having that system do to us what we previously did to them -- sanction us out.
The proper
use by the US of its controlled system thus should be a defensive one -- mainly to act so fairly to all players that it, not someone
else, remains in control of the dominant worldwide exchange system. This sensible course of conduct, unfortunately, is not being
pursued by the US.
there is fuzzy, and then there is very fuzzy, and then there is the fuzziness compounded many-fold. The latter is this article.
Here from wiki: "
" Marx believed that capitalism was inherently built upon practices of usury and thus inevitably leading to the separation
of society into two classes: one composed of those who produce value and the other, which feeds upon the first one. In "Theories
of Surplus Value" (written 1862-1863), he states " that interest (in contrast to industrial profit) and rent (that is the form
of landed property created by capitalist production itself) are superfetations (i.e., excessive accumulations) which are not
essential to capitalist production and of which it can rid itself."
Wiki goes on to identify "rentier" as used by Marx, to be the same thing as "capitalists." What the above quotation says
is that capitalism CAN rid itself of genuine rent capital. First, the feudal rents that were extracted by landowners were NOT
part of a free market system. Serfdom was only one part of unfree conditions. A general condition of anarchy in rules and laws
by petty principalities characteristic of feudalism, both contained commerce and human beings. There was no freedom, political
or economic.
The conflation (collapsing) of rents and interest is a Marxist error which expands into complete nonsense when a competitive
economy has replaced feudal conditions. ON top of that, profits from a business, firm, or industrial enterprise are NOT rents.
Any marxist is a fool to pretend otherwise, and is just another ideological (False consciousness ) fanatic.
Germany loans money back to the poorer nations who buy her exports just as China loans money to the United States (they purchase
roughly a third of our Treasury bonds) so that Americans can continue to buy Chinese manufactured goods.
The role to be played by the USA in the "new world order" is that of being the farmer to the world. The meticulous Asians will
make stuff.
The problem with this is that it is based on 19th century notions of manufacturing. Technique today is vastly more complicated
than it was in the 1820′s and a nation must do everything in its power to protect and nurture its manufacturing and scientific
excellence. In the United States we have been giving this away to our competitors. We educate their children at our taxpayer's
expense and they take the knowledge gained back to their native countries where, with state subsidies, they build factories that
put Americans out of work. We fall further and further behind.
"..."We have organized crime specialized in finance. As a consequence of the discovery of the theft, the banks stopped issuing loans
for a while. There was a domino effect which hit the leu.""
July 2, 2015
Local franchise of accountancy giant Grant Thornton was working for three of the country's largest banks when $1bn was embezzled
One of the world's leading auditors has been accused of negligence and incompetence after $1bn was siphoned out of
Moldova from under its nose – a sum equivalent to 15% of the
former Soviet republic's GDP.
Grant Thornton, the UK based accountancy giant with local franchises in dozens of countries, was the auditor for three of Moldova's
largest banks through which the money was embezzled and spirited out of the country in complex financial transactions, some through
UK companies.
As a result, the authorities had to rescue the three banks with a bailout equivalent to half the annual budget. The knock-on effect
was a currency collapse and a plunge towards recession, ruining the economy almost overnight. Moldova is already Europe's poorest
country.
The theft was discovered in November 2014 at Unibank, Banca de Economii and Banca Sociala , which the Moldovan member of Grant
Thornton, a global network of independent firms, has been auditing since 2010, 2011 and 2013 respectively.
Iurie Chirinciuc, a Moldovan MP who was part of a commission set up to investigate the affair, believes Grant Thornton was negligent
and obstructive.
"All the [audit] reports give positive opinions," he said. "How can you give a positive opinion when the situation at these banks
was so grave?"
Grant Thornton said it drew the attention of the banks and relevant authorities to its concerns about the banks and that its audit
reports contained alerts about loans. But Chirinciuc said it should not have given the banks a generally clean bill of health.
He claims repeated requests for the auditors to give testimony to the inquiry were "vehemently opposed".
"I have made a formal request for analysis of Grant Thornton to the central bank," Chirinciuc said. "In the commission, I was
shocked to see that all state institutions were informed and updated as to the situation at the banks, but did not intervene. These
circumstances make me think that very high-ranking dignitaries are involved in the theft of the billion."
Chirinciuc was also aghast that after the fraud was discovered, Grant Thornton's Moldova director, Stéphane Bridé, was appointed
economy minister. Bridé told the Guardian his nomination "was made in conformity with the legislation of the Republic of Moldova,
according to which my professional qualities and experience were exclusively considered".
Multiple spurious loans were granted by Banca de Economii and Unibank on the basis of false guarantees to companies that then transferred
the money offshore. Some went to British companies controlled by entities registered in places where directors' identities are kept
secret.Two preliminary reports – one by the parliamentary commission and the other by corporate investigation firm Kroll – suggest
that fraud eventually became the main occupation of the banks.
The parliamentary report says: "The management of the banks have manifested evident lapses in professionalism and integrity …
by giving credits that were compromised from the beginning" and made transactions of "fictional and fraudulent character". The MPs
concluded the banks had knowingly endangered their "capacity to make basic operations" such as paying out pensions and public sector
salaries.
The banks consistently misrepresented cash balances by using unorthodox "overnight deposits" – zero-interest deposits from Russian
banks Interprombank, Gazprombank, Alef Bank and Metrobank – to disguise the lack of capital while continuing to give out nonperforming
loans. "In essence these operations were operations of manipulation," the parliamentary report says.
So contaminated have the banks become that the IMF and World Bank have suspended programmes with Moldova, and the EU is considering
following suit. World Bank country manager Alex Kremer said last week: "We are advising the authorities that the three banks ...
should be liquidated." He said trying to nationalise or recapitalise the banks would risk wasting more taxpayers' money.
Moldovan prosecutors have since launched an investigation that has so far put about 30 people under criminal indictment, including
bank executives. Among these is Ilan Shor, chairman of the board at Banca de Economii since April 2014, allegedly the mastermind.
Shor was released from house arrest on 23 May, having agreed to cooperate with investigators. The chief prosecutor has not returned
a request for comment. Shor denies wrongdoing. Earlier this month, he was elected mayor of the small town of Orhei.
Kroll's confidential report was published online in April
by the speaker of the Moldovan parliament, Andrian Candu. It says a group of companies under Shor's control gradually took over the
banks and in 2010 started giving never-to-be-repaid loans to themselves. When watchdogs closed in, "orders were given by management
of the banks to archive loan documentation relating to the suspicious transactions". A vehicle belonging to another Shor company
that collected the paperwork was subsequently stolen and burned.
Between 2011, when Shor's companies were allegedly beginning to sink their teeth into the banks, and October 2014 when the scam
went bust, Kroll found the number of Shor-related companies involved grew from 10 to 39. By December 2014, 90% of Unibank's loans
were to Shor group companies. Deposits recorded as being from Russian banks, which enabled Banca de Economii to make huge loans,
were not received.
"Ilan Shor and individuals associated with him played an integral role in coordinating this activity," Kroll says in its report,
claiming there was "a deliberate intention to extract as much benefit as possible for entities connected to Mr Shor and to the detriment
of the bank". A Kroll representative said the report was leaked without consent and declined to comment further.
The "missing billion" contributed to a run on the Moldovan leu in which it lost a quarter of its value against the dollar in February.
Grant Thornton had no presence in Moldova before 2010, but its ascent has been startling. Seven of the country's 14 biggest banks
became its clients in the space of four years, making it by far the biggest player in the market. International competitors such
as KPMG and Deloitte steadily lost Moldova to Grant Thornton, with neither having more than two major banks on their roster in the
country by 2013.
Representatives of the Moldovan Grant Thornton franchise deny impropriety and say that that auditors cannot be held responsible
if clients do not disclose full financial information.
"While we would like to detect all fraud, according to International Standards of Auditing, the auditors' role is not to discover
fraud, or to prosecute clients for fraud," they said in a statement. "We stand by the quality of our work – which is public record
- and believe the audit opinions were correct under the circumstances."
A spokesman for the global office said Grant Thornton member firms acted autonomously and their work was only scrutinised by head
office every three years. It did not respond to a question asking what it planned to do about its relationship with GT Moldova.
A Moldovan financial system insider who wishes to remain anonymous said: "It's clear Grant Thornton was at least negligent if
not worse. How could it not have known what was going on, especially at Unibank where the scam was almost total?"
In its response, GT Moldova said: "Various observations were mentioned annually in the letters we addressed to management and
shareholders of these banks and to the National Banks of Moldova.
"We wish to remind you that in 2013, the inquiry commission for the assets of Banca de Economii was based not only on the audit
of the court and reports of the International Monetary Fund but also mentions of Grant Thornton audit."
The effect of the financial loss has been felt by ordinary Moldovans. Ion Preașcă, a finance journalist in ther capital Chișinău,
said: "We have organised crime specialised in finance. As a consequence of the discovery of the theft, the banks stopped issuing
loans for a while. There was a domino effect which hit the leu."
Alexei, who owns a small construction business, said: "They will invent some new taxes to make up for the damage. I had an account
at Banca Sociala and have stopped using it since. I opened two new accounts in banks with foreign ownership."
Natasha, a bookkeeper, said: "The resulting price rises had bad effects. The electricity price nearly doubled from one month to
the next. The bill was 300 lei [£10] and it's now 500. Pensions and salaries haven't increased."
The criminal investigation is ongoing. Neither the Moldovan National Bank or government returned requests for information. An
estimated 50,000 Moldovans protested on 3 May in Chișinău, demanding justice and the recovery of the stolen money.
Thanks to Iurie Sanduta, editor of www.rise.md, for help researching this article.
"... although I haven't heard of private equity pushing Puerto Rican toll roads they would own ..."
"... My dear Lambert, were I a vulture capitalist (which I am not!), I would not put one plugged nickel into infrastructure in PR. Not toll roads, not resorts, not power grid, not rebuilding the pharma factories, nada. Because another Maria will just happen again and trash it all before sufficient ROI, and who's gonna insure it now? Insurance companies believe in climate change, whether they will admit it or not. ..."
"... But I would put a few $$$ into PR debt, and gamble that the US govt will bail *me*and my fellow vultures (not PR) out. Am I cynical enough? ..."
"... This is just incompetence. Load up cargo ships (which are the most enormous transportation devices on the planet) and bring an aircraft carrier or two with cargo helicopters to bring the goods inland: ..."
"... "The political class seems to have lost the ability to mobilize on behalf of its citizens.". It wasn't always this way. Read http://northernwoodlands.org/articles/article/thirty-eight-new-england-lumber-storm . ..."
"... When I read what the FDR Administration was able to accomplish amidst the devastation of New England's forests wrought by the hurricane of 1938, it brought tears to my eyes. ..."
"... "The political class seems to have lost the ability to mobilize on behalf of its citizens." ..."
"... most convenient/fast/cost effective ..."
"... If the U.S. is not an empire, Puerto Rico would not be a protectorate or whatever. If the U.S. is an empire in decline, Puerto Rico being abandoned would be a signal to the world that the U.S. dollar is in serious trouble. ..."
"... What with PR's situation and the apparent U.S. tendency to retreat from simple truths, could a collapse in preference falsification* be in progress? ..."
Somehow, I think our government's response to PR/Maria will be the new norm unless there
are a bunch of billionaire's calling the gov reps they bought to complain. And even they may
be frustrated by the current boob in the WH.
although I haven't heard of private equity pushing Puerto Rican toll roads they would
own
My dear Lambert, were I a vulture capitalist (which I am not!), I would not put one
plugged nickel into infrastructure in PR. Not toll roads, not resorts, not power grid, not
rebuilding the pharma factories, nada. Because another Maria will just happen again and trash
it all before sufficient ROI, and who's gonna insure it now? Insurance companies believe in
climate change, whether they will admit it or not.
But I would put a few $$$ into PR debt, and gamble that the US govt will bail *me*and
my fellow vultures (not PR) out. Am I cynical enough?
What about the cars? I would imagine that many cars were destroyed, heavely damaged, or
simply lost. Getting cars repaired and replaced will also be a major challenge. And this I
bet would fall on the backs of the individual owners who will already be strapped for cash
to begin with.
Pretty well, yup. Insurance companies gonna pay pennies on the dollar, assuming you actually
have insurance for stuff like this. Poor people tend to get the very minimum needed to get
their vehicle on the road, which is usually liability. If you do have bountiful; coverage for
Acts O'God, where are you going to get your car repaired or replaced anyway? This may sound
super-cynical, even for me, but looking at those washed out and blown-away roads, getting cargo
into remote places in PR is a job for sure-footed critters like mules and horses. Dirt bikes
can move people over difficult terrain. So can
bicycles , and they
have been preparing for such a thing.
The crisis in PR compared to the crises in FL and TX really opened my eyes to how dangerous
and precarious it must be to live on an island, even one ostensibly connected to a powerful
country. The logistical nightmare of getting things there is compounded so much by that sea
barrier. At least in TX, you can call in the cajun navy who can drive their boats to the location,
then launch.
So now one thing is even clearer to me: the first losers of rising sea levels and climate
change disasters will be islanders. Places like the Maldives and the Leewards will have a really
hard time in the next few decades.
??? The sea is how people got things everywhere long, long before the first steam engine
(and I'm talking those Roman toy ones) was even conceived?
This is just incompetence. Load up cargo ships (which are the most enormous transportation
devices on the planet) and bring an aircraft carrier or two with cargo helicopters to bring
the goods inland:
"The CH-53E heavylift transport helicopter can carry cargo with a maximum weight of 13.6
t internally or 14.5 t externally."
I get what both of you are saying vis a vis sea travel, Jones Act and all, but even in the
best of all possible human organizations, it's still a major factor in any relief effort. It's
just not nearly as easy to get people from point A to point B by boat. If your car breaks down,
you're stranded, if your boat breaks down, you could easily die.
Much of the sea barrier is man-made, namely the Jones Act. As a result, it is more expensive
for Puerto Rico to get supplies form the US than from non-American sources because of shipping
costs.
We do live on a global island. Soot from Chinese coal burning lands on the few remaining
glaciers in Glacier National Park and hastens their demise. Methane from melting permafrost
in the Northwest Territories acts as a blanket to increase solar heating of the ocean surface.
Increased ocean temperatures help hurricanes to explode from Category 1 to 5 almost overnight
and stall over Houston as a Biblical deluge.
Three well-placed air-burst EMP nuclear bombs can disable communication and transport over
most of the country. And a week without water and food being transported into New York would
turn it into San Juan with no rescue boats on the horizon and frozen corpses piling up in the
alleys in mid-winter.
We all live on an island -- one held together by a thin spider web of technology and resting
upon an biosphere that we are waging war against with our insatiable imperative of growth.
When I read what the FDR Administration was able to accomplish amidst the devastation
of New England's forests wrought by the hurricane of 1938, it brought tears to my eyes.
"The political class seems to have lost the ability to mobilize on behalf of its citizens."
My momma used to say, "Where there's a will, there's a way." I have observed that if there's
'no way', it's because there is no will. I think this is the case in PR, as it was in NOLA,
and as it seems to be in Houston (except for the *nice* neighbourhoods, of course). Cali fire
victims, prepare to be On Your Own(tm).
Great job, Lambert .insight and solid research into a topic overlooked by the MSM and the
politicals .
If your interest and time permits, I would love a report on what FEMA will/has provided
for LONG TERM HOUSING for PR, Northern CA, and the areas hit hard by hurricanes on the USA
mainland ..
I have not been able to locate much on this topic
Last I heard was that FEMA had Zero trailers on hand and had let out a contract to some
company(s) to build new trailers.
In the interim, there was a report that FEMA would be distributing TENTS to some people
in need of shelter. I believe this article was a report from Florida after the fist Hurricane
hit there.
A look at Puerto Rico shows that there at lots of homes without roofs ..and they are probably
not accessible for a trailer delivery up in the hills. In Santa Rosa, CA, there is very little
affordable and available housing close to Santa Rosa. The rains will arrive and then the Mud
will Turn the Sand into YUCK and MUCK.
I remember, after Katrina and her friends beat up New Orleans, a lot of folks were flown
away from New Orleans (Barbara Bush opined it was probably a good deal for a lot of 'em) and
many did not return. Others were put in FEMA trailers. (TREME on HBO covered the KATRINA aftermath
as only David Simon can!)
Anyone else, who can provide me with links or information, is most welcome to respond.
FEMA's mission is emergency/first response mobilization. It is not their job or within its
functionality or budget to provide long-term rebuilding solutions. That falls on the island's
government, with congressional financial assistance if congress allocates money for it.
The Army Corps of Engineers are one thing, the other things are the Combat Engineers, organized
perhaps as regiments and assigned to combat brigades. These are the people who do roads, airfields,
etc., and the ones you would have wanted on the spot in Puerto Rico from maybe day two.
I strongly believe the problem is the deployment to the Middle East. Bullies strongly believe
they must never, ever show weakness. So they believe that they can't pull Combat Engineers
out of Whateveristan without looking weak.
So they don't – and they bless their lucky stars that Puerto Rico isn't a state and Puerto
Ricans aren't considered Americans by most Americans. However – how many of those deployed
to the ME are from Puerto Rico, and how are they reacting? I gotta wonder.
To get a road open, you need to clear the trees and debris, repair bridges, and repair landslides.
In rugged terrain, this is a serious effort as just one break makes the road unusable for deliveries
beyond the break.
Puerto Rico has one of the highest rates of car ownership in the world, thanks to urban
sprawl and the government's failure to build public transportation that commuters might
actually use . Puerto Ricans are isolated without cars About 931,000 Puerto Ricans drive
or carpool to work out of 3.4 million total residents, according to U.S. Census data. [T]he
island has the fifth-highest number of vehicles per capita in the world.
The only thing I would like to mention is that people don't drive because there soley because
there is no public transportation, they drive because it is the most convenient/fast/cost
effective mode of travel available. You could build all the lightrail in the world, but
if it wasn't more convenient/cheaper/cost effective than driving, people wouldn't take it.
Disincentives for driving are much more powerful than incentives for transit.
How much road do they have per inhabitant there? Maybe disasters like these could be a wakeup
call for how we lay out our development and where we spend our infrastructure dollars? Unfortunately
probably not.
I haven't read the book or seen the movie, so maybe my comment is off base, but I'll proceed
anyway. This article makes me think of the post-apocalyptic drama "The Road", by Cormac McCarthy.
If the U.S. is not an empire, Puerto Rico would not be a protectorate or whatever. If
the U.S. is an empire in decline, Puerto Rico being abandoned would be a signal to the world
that the U.S. dollar is in serious trouble.
What with PR's situation and the apparent U.S. tendency to retreat from simple truths,
could a collapse in preference falsification* be in progress?
From my side of the world, the U.S. is becoming more than ever a busted flush of apparent
and unsustainable inconsistencies which might take us all down with it.
Here's hoping that there is a bounty of brilliant minds and and excellent administrators
in the U.S. military leadership who are ready to step up.
By report Puerto Rico is making a deal with a Washington (state) power company on power
line repair, the issues involved in running power lines through PR and through inland Washington
being rather similar. the last Saffir 3, 4, or 5 hurricanes ot hit the island did so in 1928
and 1932, or so I have read, so on one hand there is plenty of time to get a return on investment,
and on the other hand, there was no rationale for building power lines that could survive a
force 4 or 5 hurricane.
Puerto Rico is third world lite. They could rebuild and become a model for the third world.
There are only 3 million people on the island. They dont have to pay Fed income tax. It could
be a great retirement location for elderly whites. It just requires investment. Currently the
single largest employer is the US govt. They need leadership from within.
Here's what the IRS says about Puerto Rico and income taxes (quoted from
Wikipedia
):
In general, United States citizens and resident aliens who are bona fide residents of
Puerto Rico during the entire tax year, which for most individuals is January 1 to December
31, are only required to file a U.S. federal income tax return if they have income sources
outside of Puerto Rico or if they are employees of the U.S. government. Bona fide residents
of Puerto Rico generally do not report income received from sources within Puerto Rico on
their U.S. income tax return.
So they pay income tax, but only on income from outside Puerto Rico. Also from Wikipedia:
In 2009, Puerto Rico paid $3.742 billion into the US Treasury.[10] Residents of Puerto
Rico pay into Social Security, and are thus eligible for Social Security benefits upon retirement.
However, they are excluded from the Supplemental Security Income.
The federal taxes paid by Puerto Rico residents include import/export taxes,[11] federal
commodity taxes,[12] and others. Residents also pay federal payroll taxes, such as Social
Security[13] and Medicare taxes.[14]
If neoliberalism is the belief that the proper role of government is to enrich the rich --
in Democratic circles they call it "wealth creation" to hide the recipients; Republicans are
much more blatant -- then the " shock doctrine " is its action plan.
Click the link above for more information (or read the book ), but in essence the idea is to
use any form of disaster, whether earthquake or economic/political crisis, to remake a society
in the neoliberal image. To reconstruct the destroyed world, in other words, to the liking of
holders of great wealth -- by privatizing everything of value held by the public (think water
rights, public roads); by forcing austerity on cash-strapped governments as the price for "aid"
(think loans, not grants, repaid by unwritten social insurance checks); by putting "managers,"
or simply loan officers, in charge of democratic decision-making.
In simple, a "shock doctrine" solution always takes this form: "Yes, we'll help you, but we
now own your farm and what it produces. Also, your family must work on it for the next 50
years."
This is what happened in Chile after Pinochet and his coup murdered the democratically
elected socialist Salvador Allende and took over the government. It's what's happening to
Greece, victim of collusion between greedy international bankers and the corrupt Greek
politicians they cultivated. And it's what happened in the U.S. during the 2008 bailout of
bankers, by which government money was sent in buckets to companies like AIG so they could pay
their debts in full to companies like Goldman Sachs. While millions of mortgaged homeowners
crashed and burned to the ground.
The populist reaction to neoliberal "reform" is usually social revolt, often or usually
ineffective, since creditors are, almost by definition, people with money, and people with
money, almost by definition, control most governments. In Greece, the revolt sparked the
election of an (ineffective) "socialist" government -- plus the rise of the Greek neo-Nazi
party, Golden Dawn. In the U.S. the revolt still still sparks universal (and ineffective)
hatred of the 2008 bank bailout -- plus the rise of the failed Sanders candidacy and the
successful Trump presidency.
The form this same revolt will take in 2018 and 2020 is still to be determined.
The Shock Doctrine and Puerto Rico
The "shock doctrine" -- the stripping of wealth from the devastated by the
already-way-too-wealthy -- is now being applied to Puerto Rico. Even before the hurricanes hit
it, Puerto Rico was a second-class citizen relative to states of the U.S., even among its
non-state territories. In contrast to Puerto Rico, for example, the American Virgin Islands
were instantly much better treated when it came to relief from the Jones Act ,
a sign of already-established prejudice.
The reason should be obvious. In Puerto Rico , English is the primary
language of less than 10% of the people, while Spanish is the dominant language of the school
system and daily life. In the American Virgin
Islands , English is the dominant language, and Spanish is spoken by less than 20% of the
population. The fact that two-thirds of the population of the U.S. Virgin Islands is black
seems to be lost on most Americans, a fact that likely benefits those inhabitants greatly in
times like these.
Thus, to most Americans the citizens of Puerto Rico are conveniently (for neoliberals) easy
to paint as "them," the undeserving, which changes what atrocities can be committed in the name
of "aid" -- much like it did after Hurricane Katrina devastated "them"-inhabited New
Orleans.
Congress passed a law back in the 80's prohibiting PR from defaulting. Repudiation of PR
debt would entail getting our current congress and prez to pass legislation to repudiate it,
so in other words divine intervention ;-).
When NAFTA was passed, Congress also stripped companies of tax benefits for having
operations in Puerto Rico. In addition, the Jones Act makes shipping to and from Puerto Rico
more expensive than shipping to and from Mexico. Oddly enough, many companies moved
operations from Puerto Rico and Puerto Rico has been in recession/depression ever since.
I think Puerto Rico will be interesting to watch to see if anti neoliberal sentiment can
take hold and survive. In one sense, every individual abandoned or ensnared in debt is in the
same boat. Once put in a situation of debt servitude, the only recourse to extricate oneself
is to become self reliant and attempt to build supporting networks. The trouble is, once
those networks start to form, the traditional game plan is to bring in force and break them
up.
If strong, self-supporting communities can form in PR, it will provide inspiration for
communities on the mainland.
It will be also interesting to see if self-funded initiatives can make headway against the
banking and financial interests.
This situation in PR is important in that it can change the focus of community building
away form personal self-interest as now exists in America, and towards the common good, as it
should be. The same is happening all across the mainland in economically devastated
communities, but successfully blacked out in the media.
This truly is a long term endeavor, but tragically, climate change will increase the
opportunities for proper action. The proper long term investment is in people and life
skills. Lets roll up our sleeves.
an aside:
" Once put in a situation of debt servitude, the only recourse to extricate oneself is to
become self reliant and attempt to build supporting networks. "
US people born 1880 – 1900 were adults/young adults with families when the Great
Depression hit. Their children, sometimes referred to as The Greatest Generation, were
children or teens during the depression and saw how debt destroyed families. When those
children grew up they were debt averse. The Depression/Greatest Gen's children, the Baby
Boomers, would often joke their parents, who were Depression kids, could squeeze a nickel
until it screamed. Boomers, having no memory of systemic economic bad times, took on large
debts for school and housing on the theory their income would always increase as it had for
their parents. Now the Boomers children are facing a wholly different economy, more like the
Great Depression than the Booming 50's and 60's.
I expect today's younger generation will become debt averse. That would hurt the FIRE
sector's reliance on ever increasing debt payment rents. Reducing the FIRE sectors influence
would be good for both the Main Street economy and individuals, imo.
In turn, Puerto Rico's govt debt crisis led to the imposition of a crushing 11.5% sales
tax, making retail prices already jacked up by the Jones Act even more unaffordable.
Puerto Rico's recovery will depend almost entirely on how much of a haircut is imposed on
bondholders versus restructuring and extending in the Greek fashion, which would doom PR
forevahhhh.
It would be interesting to compare the pace of recovery in Cuba with that of Puerto Rico.
Both were hit by category 5 hurricanes within days of each other. In the case of Cuba, Havana
was every much at the center of the bulls eye as San Juan Puerto Rico if I am correct. But
I've not been able to uncover a single scrap of reporting that draws the comparison. Perhaps
it would be embarrassing to the defenders of "free market" capitalism and social
organization?
But hurricanes are last month's news. We've moved on to the startling revelations that fat
pig movie directors are pussy grabbers just like our President.
I have always believed that one of the primary aims of the Cuba travel ban was to keep us
Puerto Ricans from traveling there to see what isolation and poverty -- the constant threats
leveled at those who support PR independence -- could look like.
Thanks for posting this journalism from an Indian source. While it may be accurate, the
writing style reads like it was copied straight from the Ideologe's Bible. So I'll file it
along most commentary from outlets like the Washington Post– assume it is fraudulent
propaganda until proven otherwise.
It's very nice to talk about how to rebuild Puerto Rico but how long will it be before
Puerto Rico is hit by another major hurricane? And while we're thinking of Puerto Rico what
about Houston, and Florida? What about the North Carolina sea coast -- or New Jersey -- NYC?
I don't expect anything reasonable will be done in rebuilding any of these places or
beginning an orderly retreat to higher ground.
Some parts of these areas may remain habitable -- at least long enough to make it
worthwhile to build infrastructure but I believe it will be a mistake to simply "rebuild".
Replacement infrastructure should be built to better withstand the future storms and rising
seas. I am aware that not "rebuilding" is neither socially nor politically viable. It just
seems a shame to waste what time and resources remain.
I was fortunate enough to get to meet a number of Puerto Rican cooperators at this year's
Assoc. of Cooperative Educators Institute in Denver. Puerto Rico has a very strong
cooperative sector/movement. Co-ops in Puerto Rico don't pay tax to the gov't. Instead, each
co-op provides (iirc) 2% of net revenues to Liga
de Cooperativas de Puerto Rico , the apex co-op organization for the island. This
provides an internally funded support mechanism for co-ops and has helped create a thriving
co-op ecosystem.
So I've got some optimism that my Puerto Rican friends will be able to replace at least
some of the failed systems that have been afflicting them with cooperative, sustainable,
alternative solutions.
Puerto Rico has agreed to pay a reported $300 million for the restoration of its power
grid to a tiny utility company which is primarily financed by a private equity firm founded
and run by a man who contributed large sums of money to President Trump, an investigation
conducted by The Daily Beast has found.
Whitefish Energy Holdings, which had a reported staff of only two full-time employees
when Hurricane Maria touched down, appears ill-equipped to handle the daunting task of
restoring electricity to Puerto Rico's over 3 million residents.
As usual, donate a few thousand, reap millions.
FEC data compiled by The Daily Beast shows that Colonnetta contributed $20,000 to the
"Trump Victory" PAC during the general election, $27,000 to Trump's primary election
campaign (then the maximum amount permitted), $27,000 to Trump's general election campaign
(also the maximum), and a total of $30,700 to the Republican National Committee in 2016
alone.
Colonnetta's wife, Kimberly, is no stranger to Republican politics either; shortly after
Trump's victory she gave $33,400 to the Republican National Committee, the maximum
contribution permitted for party committees in 2016.
Bears repeating, we're not only 'ruled' by whores, we're ruled by cheap whores.
Of course I make apologies to all ladies of negotiable affection.
"... They were replaced by neoclassical supply-side theorists and the first thing they did was decide that from then on the IMF should follow a policy of structural adjustment whenever there's a crisis anywhere. ..."
"... In 1982, sure enough, there was a debt crisis in Mexico. The IMF said, "We'll save you." Actually, what they were doing was saving the New York investment banks and implementing a politics of austerity. ..."
"... The population of Mexico suffered something like a 25 percent loss of its standard of living in the four years after 1982 as a result of the structural adjustment politics of the IMF. ..."
"... What are they doing to Greece now ? It's almost a copy of what they did to Mexico back in 1982, only more savvy. This is also what happened in the United States in 2007–8. They bailed out the banks and made the people pay through a politics of austerity. ..."
BSR There have been numerous
crises since 2007. How does the history and concept of neoliberalism help us understand them?
DH There were very few crises between 1945 and 1973;
there were some serious moments but no major crises. The turn to neoliberal politics occurred
in the midst of a crisis in the
1970s , and the whole system has been a series of crises ever since. And of course crises
produce the conditions of future crises.
In 1982–85 there was a debt crisis in Mexico, Brazil, Ecuador, and basically all the
developing countries including Poland. In 1987–88 there was a big crisis in US savings
and loan institutions. There was a wide crisis in Sweden in 1990, and all the banks had to be
nationalized .
Then of course we have Indonesia and Southeast Asia in 1997–98, then the crisis moves
to Russia, then to Brazil, and it hits Argentina in 2001–2.
And there were problems in the United States in 2001 which they got through by taking money
out of the stock market and pouring it into the housing market. In 2007–8 the US housing
market imploded, so you got a crisis here.
You can look at a map of the world and watch the crisis tendencies move around. Thinking
about neoliberalism is helpful to understanding these tendencies.
One of big moves of neoliberalization was throwing out all the Keynesians from the World
Bank and the International Monetary Fund in 1982 -- a total clean-out of all the economic
advisers who held Keynesian
views .
They were replaced by neoclassical supply-side theorists and the first thing they did
was decide that from then on the IMF should follow a policy of structural adjustment
whenever there's a crisis anywhere.
In 1982, sure enough, there was a debt crisis in Mexico. The IMF said, "We'll save you."
Actually, what they were doing was saving the New York investment banks and implementing a
politics of austerity.
The population of Mexico suffered something like a 25 percent loss of its standard of
living in the four years after 1982 as a result of the structural adjustment politics of the
IMF.
Since then Mexico has had about four structural adjustments. Many other countries have had
more than one. This became standard practice.
What are they doing to
Greece now ? It's almost a copy of what they did to Mexico back in 1982, only more savvy.
This is also what happened in the United States in 2007–8. They bailed out the banks and
made the people pay through a politics of austerity.BSR Is there anything about the recent crises and
the ways in which they have been managed by the ruling classes that have made you rethink your
theory of neoliberalism? DH Well, I don't think
capitalist class solidarity today is what it was. Geopolitically, the United States is not in a
position to call the shots globally as it was in the 1970s.
I think we're seeing a regionalization of global power structures within the state system --
regional
hegemons like Germany in Europe, Brazil in Latin America, China in East Asia.
Obviously, the United States still has a global position, but times have changed. Obama can
go to the G20 and say, "We should do this," and Angela Merkel can say, "We're not doing that."
That would not have happened in the 1970s.
So the geopolitical situation has become more regionalized, there's more autonomy. I think
that's partly a result of the end of the Cold War. Countries like Germany no longer rely on the
United States for protection.
Furthermore, what has been called the "new capitalist class" of
Bill Gates , Amazon , and
Silicon
Valley has a different politics than traditional oil and energy.
As a result they tend to go their own particular ways, so there's a lot of sectional rivalry
between, say, energy and finance, and energy and the Silicon Valley crowd, and so on. There are
serious divisions that are evident on something like climate change, for example.
The other thing I think is crucial is that the neoliberal push of the 1970s didn't pass
without strong resistance. There was massive resistance from labor, from communist parties in
Europe, and so on.
But I would say that by the end of the 1980s the battle was lost. So to the degree that
resistance has disappeared, labor doesn't have the power it once had, solidarity among the
ruling class is no longer necessary for it to work.
It doesn't have to get together and do something about struggle from below because there is
no threat anymore. The ruling class is doing extremely well so it doesn't really have to change
anything.
Yet while the capitalist class is doing very well, capitalism is doing rather badly. Profit
rates have recovered but reinvestment
rates are appallingly low, so a lot of money is not circulating back into production and is
flowing into land-grabs and asset-procurement instead.
"... Interview with Vlado Plaga in the German magazine FAIRCONOMY, September 2017. ..."
"... Absentee Ownership and its Discontents ..."
"... Theories of Surplus Value ..."
"... Clue to the Economic Labyrinth ..."
"... is the author of Killing the Host (published in e-format by CounterPunch Books and in print by Islet ). His new book is J is For Junk Economics . He can be reached at [email protected] ..."
Interview with Vlado Plaga in the German magazine FAIRCONOMY, September 2017.
Originally, you didn't want to become an economist. How did it come that you changed your plans
and digged so deep into economics?
I found economics aesthetic, as beautiful as astronomy. I came to New York expecting to become
an orchestra conductor, but I met one of the leading Wall Street economists, who convinced me that
economics and finance was beautiful.
I was intrigued by the concept of compound interest. and by the autumnal drain of money from the
banking system to move the crops at harvest time. That is when most crashes occurred. The flow of
funds was the key.
I saw that there economic cycles were mainly financial: the build-up of debt and its cancellation
or wipe-out and bankruptcy occurring again and again throughout history. I wanted to study the rise
and fall of financial economies.
But when you studied at the New York University you were not taught the things that really interested
you, were you?
I got a PhD as a union card. In order to work on Wall Street, I needed a PhD. But what I found
in the textbooks was the opposite of everything that I experienced on Wall Street in the real world.
Academic textbooks describe a parallel universe. When I tried to be helpful and pointed out to my
professors that the texbooks had little to do with how the economy and Wall Street actually work,
that did not help me get good grades. I think I got a C+ in money and banking.
So I scraped by, got a PhD and lived happily ever after in the real world.
So you had to find out on your own Your first job was at the Savings Banks Trust Company, a trust
established by the 127 savings banks that still existed in New York in the 1960s. And you somehow
hit the bull's eye and were set on the right track, right from the start: you've been exploring the
relationship between money and land. You had an interesting job there. What was it?
Savings banks were much like Germany's Landesbanks. They take local deposits and lend them out
to home buyers. Savings and Loan Associations (S&Ls) did the same thing. They were restricted to
lending to real estate, not personal loans or for corporate business loans. (Today, they have all
been turned into commercial banks.)
I noticed two dynamics. One is that savings grew exponentially, almost entirely by depositors
getting dividends every 3 months. So every three months I found a sudden jump in savings. This savings
growth consisted mainly of the interest that accrued. So there was an exponential growth of savings
simply by inertia.
The second dynamic was that all this exponential growth in savings was recycled into the real
estate market. What has pushed up housing prices in the US is the availability of mortgage credit.
In charting the growth of mortgage lending and savings in New York State, I found a recycling of
savings into mortgages. That meant an exponential growth in savings to lend to buyers of real estate.
So the cause of rising real estate prices wasn't population or infrastructure. It was simply that
properties are worth whatever banks are able and willing to lend against them.
As the banks have more and more money, they have lowered their lending standards.
It's kind of automatic, it's just a mathematical law
Yes, a mathematical law that is independend of the economy. In other words, savings grow whether
or not the economy is growing. The interest paid to bondholders, savers and other creditors continues
to accrue. That turns out to be the key to understanding why today's economy is polarizing between
creditors and debtors.
You wrote in "
Killing
the Host " that your graphs looked like Hokusai's "Great Wave off Konagawa" or even more like
a cardiogram. Why?
Any rate of interest has a doubling time. One way or another any interest-bearing debt grows and
grows. It usually grows whenever interest is paid. That's why it looks like a cardiogram: Every three
months there's a jump. So it's like the Hokusai wave with a zigzag to reflect the timing of interest
payments every three months.
The exponential growth of finance capital and interest-bearing debt grows much faster then the
rest oft he economy, which tends to taper off in an S-curve. That's what causes the business cycle
to turn down. It's not really a cycle, it's more like a slow buildup like a wave and then a sudden
This has been going on for a century. Repeated financial waves build up until the economy becomes
so top-heavy with debt that it crashes. A crash used to occur every 11 years in the 19th century.
But in the United States from 1945 to 2008, the exponential upswing was kept artificially long by
creating more and more debt financing. So the crash was postponed until 2008.
Most crashes since the 19th century had a silver lining: They wiped out the bad debts. But this
time the debts were left in place, leading to a masive wave of foreclosures. We are now suffering
from debt deflation. Instead of a recovery, there's just a flat line for 99% of the economy.
The only layer of the economy that is growing is the wealthiest 5% layer – mainly the Finance,
Insurance and Real Estate (FIRE) sector. That is, creditors living of interest and economic rent:
monopoly rent, land rent and financial interest. The rest of the economy is slowly but steadily shrinking.
And the compound interest that was accumulated was issued by the banks as new mortgages. Isn't
this only logical for the banks to do?
Savings banks and S&Ls were only allowed to lend for mortgages. Commercial banks now look for
the largest parts of the economy as their customers. Despite the fact that most economic textbooks
describe industry and manufacturing as being the main part of economy, real estate actually is the
largest sector. So most bank lending is against real estate and, after that, oil, gas and mining.
That explains why the banking and financial interests have become the main lobbyists urging that
real estate, mining and oil and gas be untaxed – so that there'll be more economic rent left to pay
the banks. Most land rent and natural resource rent is paid out as interest to the banks instead
of as taxes to the government.
So instead of housing becoming cheaper and cheaper it turns out to be much less affordable in
our days than in the 1960s?
Credit creation has inflated asset prices. The resulting asset-price inflation is the distinguishing
financial feature of our time. In a race tot he bottom, banks have steadily lowered the terms on
which they make loans. This has made the eocnomy more risky.
In the 1960s, banks required a 25-30% down payment by the buyer, and limited the burden of mortgage
debt service to only 25% of the borrower's income. But interest is now federally guaranteed up to
43% of the home buyer's income. And by 2008, banks were making loans no down payment at all. Finally,
loans in the 1960s were self-amortizing over 30 years. Today we have interest-only loans that are
never paid off.
So banks loan much more of the property's market price. That is why most of the rental value of
land isn't paid to the homeowner or commercial landlord any more. It's paid to the banks as interest.
Was this the reason for the savings and loan crisis that hit the US in 1986 and that was responsible
for the failure of 1,043 out of the 3,234 savings and loan associations in the United States from
1986 to 1995?
The problem with the savings and loan crisis was mainly fraud! The large California S&L's were
run by crooks, topped by
Charles Keating. Many were prosecuted for fraud and sent to jail. By the 1980s the financial
sector as a whole had become basically a criminalized sector. My colleague Bill Black has documented
most of that. He was a prosecutor of the S&L frauds in the 1980s, and wrote a book "The best way
to rob a bank is to own one".
That's a famous quotation, I also heard that.
Fraud was the main financial problem, and remains so.
Since 2007 Americans were strangled by their mortgages in the sub-prime crisis
These were essentially junk mortgages, and once again it was fraud. Already in 2004 the FBI said
that the American economy was suffering the worst wave of bank fraud in history. Yet there was no
prosecution. Essentially in the United States today, financial fraud is de-criminalized. No banker
has been sent to jail, despite banks paying hundreds of billions of dollars of fines for financial
fraud. These fines are a small portion of what they took illegally. Such paymets are merely a cost
of doing business. The English language was expanded to recognize junk loans. Before the financial
crash the popular press was using the word "junk mortgages" and "Ninjas": "No Income, No Jobs, no
Assets". So everybody knew that there was fraud, and the bankers knew they would not go to jail,
because Wall Street had become the main campaign contributer to the leading politicians, especially
in the Democratic party. The Obama Administration came in basically as representatives of the bank
fraudsters. And the fraud continues today. The crooks have taken over the banking system. It is hard
for Europeans to realize that that this really has happened in America. The banks have turned into
gangsters, which is why already in the 1930s President Roosevelt coined the word "banksters".
I also heard the nice English sayings "Too big to fail" or "Too big to jail"
But what has become of those 10 million households that ended up losing their homes to foreclosure?
How are their economic and living conditions today? What has become of their houses? The economy
has recovered
Most of the houses that were foreclosed on have been bought out by hedge funds for all cash. In
the wake of 2008, by 2009 and 2010 hedge funds were saying "If you have $5,000,000 to invest, we're
going to buy these houses that are being sold at distress prices. We're going to buy foreclosed properties
for all cash, because we can make a larger rate of return simply by renting them out." So there has
been a transfer of property from homeowners to the financial sector. The rate of home-ownership in
America is dropping.
The economy itself has not recovered. All economic growth since 2008 has accrued only to the top
5% of the economy. 95% of the economy has been shrinking by about 3% per year and continues to shrink,
because the debts were kept in place. President Obama saved the banks and Wall Street instead of
saving the economy.
That's why we live in an "age of deception" as the sub-title of your latest book suggests, I guess?
"People have the idea that when house prices go up, somehow everybody's getting richer. And it's
true that the entry to the middle class for the last hundred years has been to be able to own your
own home "
What is deceptive is the fact that attention is distracted away from how the real world works,
and how unfair it is. Economics textbooks teach that the economy is in equilibrium and is balanced.
But every economy in the world is polarizing between creditors and debtors. Wealth is being sucked
up to the top of the economic pyramid mainly by bondholders and bankers. The textbooks act as if
the economy operates on barter. Nobel prices for Paul Samuelson and his followers treat the economy
as what they call the "real economy," which is a fictitious economy that in theory would work without
money or debt. But that isn't the real economy at all. It is a parallel universe. So the textbooks
talk about a parallel universe that might exist logically, but has very little to do with how the
real economy works in today's world.
If you had a picture you'd see me nodding all the time, because that's what I also found out:
if you look at the mathematics, it is polarizing all the time, it is de-stabilizing. Without government
interference we'd have crash after crash It is not under control anymore.
But you also suggest that there's another factor that makes housing prices go up – and that's
property tax cuts. Why?
"Taxes were shifted off the Donald Trumps of the world and onto homeowners ."
Whatever the tax collector relinquishes leaves more rental income available to be paid to the
banks. Commercial real estate investors have a motto: "Rent is for paying interest." When buyers
bid for an office building or a house, the buyer who wins is the one who is able to get the largest
bank loan. And that person is the one who pays all the rent to the bank. The reason why commercial
investors were willing to do this for so many decades is that they wanted to get the capital gain
– which really was the inflation of real estate prices as a result of easier credit. But now that
the economy is "loand up," prospects for further capital gains are gone. So the prices are not rising
much anymore. There is no reason to be borrowing. So the system is imploding.
So, how could we change the situation and make land a public utility?
There are two ways to do this. One way is to fully tax the land's rental value. Public investment
in infrastructure – roads, schools, parks, water and sewer systems – make a location more desirable.
A subway line, like the Jubilee tube line in London, increases real estate prices all along the line.
The resulting rise in rents increases prices for housing. This rental value could be taxed back by
the community to pay for this infrastructure. Roads and subways, water and sewer systems could be
financed by re-capturing the rental value of the land that this public investment creates. But that
is not done. A free lunch is left in private hands.
The alternative is direct public ownership of the land, which would be leased out to whatever
is deemed to be most socially desirable, keeping down the rental cost. In New York City, for instance,
restaurants and small businesses are being forced out. They're closing down because of the rising
rents. The character of the economy is changing. It is getting rid of the bookstores, restaurants
and low-profit enterprises. Either there should be a land tax, or public ownership of the land. Those
are the alternatives. If you tax away the land's rent, it would not be available to be paid to the
banks. You could afford to cut taxes on labor. You could cut the income tax, and you could cut taxes
on consumption. That would reduce the cost of living.
To me that's pretty close to the position of Georgists on how to handle land, isn't it?
I don't like to mention Henry George, because he didn't have a theory of land rent or of the role
of the financial sector and debt creation. The idea of land tax came originally from the
Physiocrats in France, François
Quesnay, and then from Adam Smith, John Stuart Mill, and in America from
Thorstein Veblen and
Simon Patten . All of these
economists clarified the analysis of land rent, who ended up with it, and how it should be taxed.
In order to have a theory of how much land rent there is to tax, you need a value and price theory.
Henry George's value theory was quite confused. Worst of all, he spent the last two decades of his
life fighting against socialists and labor reformers. He was an irascible journalist, not an economist.
The classical economists wrote everything you need to know about land rent and tax policy. That
was the emphasis of Adam Smith, John Stuart Mill all the classical economists. The purpose of their
value and price theory was to isolate that part of the economy's income that was unearned: economic
rent, land rent, monopoly rent, and financial interest. I think it is necessary to put the discussion
of tax policy and rent policy back in this classical economic context. Henry George was not part
of that. He was simply a right-wing journalist whom libertarians use to promote neoliberal Thatcherite
deregulation and anti-government ideology. In Germany, his followers were among the first to support
the Nazi Party already in the early 1920s, for instance, Adolf Damaschke. Anti-Semitism also marked
George's leading American followers in the 1930s and ‚40s.
So I guess I have to go back a bit further in history, to read the original Physiocrats as well
John Stuart Mill is good, Simon Patten is good, Thorstein Veblen is wonderful. Veblen was writing
about the financialization of real estate in the 1920s in his Absentee Ownership . I recently
edited a volume on him:
Absentee Ownership and its Discontents (ISLET, Dresden, 2016).
Germany's land tax reform seems to go in the wrong direction. Germany has to establish new rules
for
it's "Grundsteuer" that in fact is a mingled tax on land and the buildings standing on it, based
on outdated rateable values of 1964 (in the West) and 1935 (in the East). The current reform proposals
of the federal states will maintain this improper mingling and intend a revenue neutral reform of
this already very low tax. It brings about 11 billion Euro to the municipal authorities, but this
is only 2% of the total German tax revenue, whereas wage tax and sales tax make up for 25% each.
We need a complete tax shift, don't we?
Germany is indeed suffering from rising housing prices. I think there are a number of reasons
for this. One is that Germans have not had a real estate bubble like what occurred in the US or England.
They did lose money in the stock market, and many decided simply to put their money in their own
property. There is also a lot of foreign money coming into Germany to buy property, especially in
Berlin.
The only way to keep housing prices down is to tax awat the rise in the land value. If this is
done, speculators are not going to buy. Only homeowners or commercial users will buy for themselves.
You don't want speculators or bank credit to push up prices. If Germany lets its housing prices rise,
it is going to price its labor out of the market. It would lose its competitive advantage, because
the largest expense in every wage-earner's budget is the cost of housing. In Ricardo's era it was
food; today it is housing. So Germany should focus on how to keep its housing prices low.
I'd like to come back to the issue of interest once more. The English title of "Der Sektor" is
"
Killing the host – How Financial Parasites and Debt Bondage Destroy the Global Economy". It's
much more coming to the point. It struck me that you mention John Brown. He wrote a book called "Parasitic
wealth or Money Reform" in 1898. I came across his book some years ago and thought that he was somehow
America's Helmut Creutz
of the 19th century. He was a supporter of Henry George, but in addition John Brown analyzed and
criticized the interest money system and its redistribution of wealth. He said that labour is robbed
of 33% of its earnings by the parasitic wealth with subtle and insideous methods, so that it's not
even suspected. Why does almost nobody know this John Brown?
John Brown's book is interesting. It is somewhat like that of his contemporary
Michael Flürscheim
. Brown's book was published by Charles Kerr, a Chicago cooperative that also published Marx's
Capital . So Brown was a part of the group of American reformers who became increasingly
became Marxist in the 19 th and early 20 th century. Most of the books published
by Kerr discussed finance and the exponential growth of debt.
The economist who wrote most clearly about how debt grew by its own mathematics was Marx in Vol.
III of
Capital and his
Theories of Surplus Value . Most of these monetary writers were associated with Marxists
and focused on the tendency of debt and finance to grow exponentially by purely mathematical laws,
independently of the economy, not simply as a by-product of the economy as mainstream economics pretends.
Brown's plan of reforms included the nationalization of banks and the establishment of a bank
service charge in lieu of interest. The latter sounds remarkably up-to-date. In Germany the banks
are raising charges because of the decrease in their interest margins. How is your view on the matter
of declining interest rates?
Well, today declining interest rates are the aim of central bank Quantitative Easing. It hasn't
helped. The most important questio nto ask is: what are you going to make your loans for? Most lending
at these declining interest rates has been parasitic and predatory. There's a lot of corporate take-over
lending to companies that borrow to buy other companies. There is an enormous amount of stock market
credit that has helped bid up stock prices with low-interest credit and arbitrage. This has inflated
asset prices for stocks, bonds and real estate. If the result of low interest rates is simply to
inflate asset prices, the only way this can work is to have a heavy tax on capital gains, that is
asset price gains. But in the US, England, and other countries there are very low taxes on capital
gains, and so low interest rates simply make housing more expensive, and make stocks and buying a
flow retirement income (in the form of stocks or bonds that yield dividends and interest) much more
expensive.
I guess Brown is getting to the positive aspects of low interest also.
What Brown was talking about were the problems of finance. In the final analysis there is only
one ultimate solution: to write down the debts. Nobody really wants to talk about debt cancellation,
because they try to find a way to save the system. But it can't be fixed so that debts can keep growing
at compound rates ad infinitum . Any financial system tends to end in a crash. So the key
question is how a society is NOT going not to pay debts that go bad. Will it let creditors foreclose,
as has occurred in the US? Or are you going to write down the debts and wipe out this overgrowth
of creditor claims? That's the ultimate policy that every society has to face.
Very topical, the German Bundesbank sees the combination of low interest rates and a booming housing
market as a dangerous cocktail for the banking sector. "The traffic lights have jumped to yellow
or even to dark yellow", Andreas Dombret said, after the Bundesbank had denied the problem in the
last years by dismissing it as Germany's legitimate catch-up effects. The residential property prices
have gone up by 30% since 2010, in the major cities even by more than 60%. The share of real estate
loans in the total credit portfolio is significantly rising. The mortgage loans of the households
have increased in absolute terms as well as relative to their income. It's only due to the low interest
rates that the debt service has not increased yet. But the banks and savings companies are taking
on the risk: the mortgages with terms of more than ten years have risen to more than 40% of the residential
real estate loans. The interest-change risks lie with the banks. Don't we have to face up to the
truth that interest rates shouldn't go up again?
What should be raised are taxes on the land, natural resource rent and monopoly rent.
The aim should be to keep housing prices low instead of speculation. Land rent should serve as the
tax base, as the classical economists said it should. Adam Smith, John Stuart Mill all urged that
the basis of the tax system should be real-estate and natural resource rent, not income taxes (which
add to the cost of labor), the cost of labor and not value-added taxes (which increase consumer prices).
So tax policy and debt write-downs today are basically the key to economic survival.
Banking should be a public utility. If you leave banking in the present hands, you're leaving
it in the hands of the kind of crooks that brought about the financial crisis of 2008.
Couldn't the subprime-crisis have been prevented if the Fed had introduced negative interest rates
in the 1990s?
No. The reason there was the crash was fraud and speculation. It was junk mortgages and the financialization
of the economy. Pension funds and people's savings were turned over to the financial sector, whose
policy is short-term. It seeks gains mainly by speculation and asset price inflation. So the problem
is the financial system. I think the Boeckler foundation has annual meetings in Berlin that focus
on financialization and explain what the problem is.
Yes, that's a big topic. The financial sector is interested, as you said, in short-term gains,
but people who want to save for their retirement are interested in long-term stability – that is
contradictory. Do you know the "
Natural Economic
Order by Free Land and Free Money" by Silvio Gesell
It is not practical for today's world, it is very abstract. The solution to the financial problem
really has to be ultimately a debt write-down, and a shift to the tax system, as the classical economists
talked about.
Gesell was also advocating the taxing of land. I think he had something in mind with bidding for
the land, letting the market fix the prices.
He did not go beneath the surface to ask what kind of market do you want. Today, the
market for real estate is a financialized market. As I said, the basic principle is that most rent
is paid out as interest. The value of real estate is whatever a bank will lend against it. Unless
you have a theory of finance and the overall economy, you really don't have a theory of the market.
You are advocating a revival of classical economics. What did the classical economists understand
by a free economy?
They all defined a free economy as one that is free from land rent, free from unearned income.
Many also said that a free economy had to be free from private banking. They advocated full taxation
of economic rent. Today's idea of free market economics is the diametric opposite. In an Orwellian
doublethink language, a free market now means an economy free for rent extractors, free
for predators to make money, and essentially free for financial and corporate crime.
The Obama Administration de-criminalized fraud. This has attracted the biggest criminals – and the
wealthiest families – to the banking sector, because that's where the money is. Crooks want to rob
banks, and the best way to rob a bank is to own one. So criminals become bankers. You can look at
Iceland, at HSBC, or at Citibank and Wells-Fargo in the news today. Their repeated lawbreaking and
criminal activities have been shown tob e endemic in the US. But nobody goes to jail. You can steal
as much money as you want, and you'll never go to jail if you're a banker and pay off the political
parties with campaign contribution. It's much like drug dealers paying off crooked police forces.
So crime is pouring into the financial system.
I think this is what's going to cause a return to classical economics – the realization that you
need government banks. Of course, government banks also can be corrupted, so you need some kind of
checks and balances. What you need is an honest legal system. If you don't have a legal system that
throws crooks in jail, your economy is going to be transformed into something unpleasant. That's
what is happening today. I think that most Europeans don't want to acknowledge that that's what happened
in America (USA). There is such an admiration of America that there is a hesitancy to see that it
has been taken over by financial predators (a.k.a. "the market").
We always hear that oligarchies are in the east, in Russia, but hardly anyone is calling America
an oligarchy although alternative media says that it's just a few families that rule the country.
It is absolutely urgent that Richard Spencer and the Alt Right adopt the ideas and framework
of Michael Hudson and and Ha Joon Chang(Kicking away the ladder.)
Support Socialism!!!=violation of free market principles
It is always a joy to read Michael Hudson but he is always discreetly incomplete as he never
discusses the role of the privately owned US Federal Reserve, the other privately owned central
banks and the BIS (Bank for International Settlements), which collectively force governments to
borrow money from their central bank in order to create new money instead of these governments
unilaterally creating the money themselves as they theoretically could.
@Albertde It is always a joy to read Michael Hudson but he is always discreetly incomplete
as he never discusses the role of the privately owned US Federal Reserve, the other privately
owned central banks and the BIS (Bank for International Settlements), which collectively force
governments to borrow money from their central bank in order to create new money instead of these
governments unilaterally creating the money themselves as they theoretically could. This is a
good point.
I believe Hitler made the same point, but due to our education consisting of largely being
told what to think, rather than being taught how to think, we have had it pounded into our heads
that such ideas as monetary sovereignty only come out of the minds of truly evil men. We are repeatedly
told the only way to prevent Weimar style inflation is to run our economy as we presently do,
no improvements are possible and to even consider such is a sign of sociopathology. Our betters
for some reason want the children of the white stock that founded the country to hate themselves
and become submissive to the advancing immigrant hordes while our politicians figure out ways
to sell off large chunks of our infrastructure, like our roads for instance, so they can they
can charge us and all the new immigrants they are letting in to drive on them.
Hell, just last week they taught a group of white men a good lesson when they tried to peaceably
assemble to protest about their grievances. The media & leftist politicians (both Dem & Republican)
teamed up on an alternative story of the event and allowed a group of paid communist thugs to
come in and beat them while the media reported the white group to be the aggressor.
If I didn't know better, I would swear the United States has been taken over by a hostile globalist
elite, that cares not one bit for the natives of our country.
Exciting times are ahead in our nation, this is for sure.
As to Michael Hudson's article, it is more gibberish from a lefty economist, he dances around
facts but always in the end puts a disingenuous spin on it. The article is garbage and awfully
loose with the facts.
Mr. Hudson is interesting as usual. I almost always learn something new from one of his interviews.
I'm not sure how "taxing the land" squares with MMT, unless he is suggesting that we should
shift taxes off the middle class to free up money for circulation.
In other words, fiscal policy (taxing and spending) is part economic policy and part social
policy. It's a political economy.
Here is a primer on MMT for people who haven't looked into it yet.
All that needs to be done at present is to change the FED's charter to allow infrastructure
to be funded with some degree of monetary financing to prevent the selling off of the commons
to global finance. I suggest this form of financing should only be used for maintenance of the
commons, i.e. infrastructure.
All the rest will remain theoretical.
While not perfect the FED has all the tools and statistics to facilitate some level of monetary
financing of infrastructure. I will take an independent federal reserve with a revised charter
over selling off the commons to investors who will then charge us to use them. Funding our infrastructure
the way it is presently done through congress is a joke, we need a better system, the economists
at the FED are presently in a good position to speak to how best this might be accomplished. We
need a plan, not a patchwork of resolutions and stop gap measures as to how the nations infrastructure
will be funded.
It could be dollar matching to other funding sources, percentages, econometric models, etc. but
unemployment levels and inflationary concerns would need to be considered.
One does not have to project too far into the future to see that the future needs for "money"
to "pay" the unfunded obligations of the Federal government are going to require some serious
changes in the monetary system.
The US cannot politically survive, and therefore will not allow, a repeat of the Great Depression
where economic activity collapses to the same extent it did in 1929-30 (roughly 40%).
It seems to me likely that something on the order of MMT will be followed where the government
issues "money" directly rather than funding its creation through debt instruments.
I think it is naive, however, to believe that this will be some kind of panacea, a cure for
all our ills. In order to institute MMT, or anything like it, the government will have to have
far more power as it will have far more responsibility .
More power in the hands of fewer people – what could possibly go wrong?
While the topic is dry one for me, Hudson makes it somewhat interesting and I like that he
calls a fraud a fraud.
In fact pretty much the whole system, financial and political and all their appendages such
as schools and the media, is a huge fraud. A pox on all the SOBs.
How could anyone argue against this, for instance?
Today's idea of free market economics is the diametric opposite. In an Orwellian doublethink
language, a free market now means an economy free for rent extractors, free for predators to
make money, and essentially free for financial and corporate crime.
I've long been impressed that what we have is not a free market, but a free-for-all market
that excludes all but the richest from obtaining much by way of benefits.
I, along with many others wish we were renting an apartment instead of "owning" our house free
and clear and unsellable for 50% of what I paid for it in 1993 due to my neighborhood being targeted
by AFFH on steroids.
And set aside my abject racism to see how easy it is to understand why younger people (highly
skilled and otherwise) with absolutely nothing resembling job security would not want to own a
home when they are forced on a wholesale basis to move frequently hundreds or thousands of miles
away to find another unstable replacement job.
An interesting but (alas ) incomplete and lop-sided view of the world. A couple comments:
The sheer size of the government apparatus (over 40% gdp in the US, more in most of the rest
of the West) ensures rampant and intentional mis-allocation of capital, backed by the full police
and judicial power of those various levels of government. This is an unavoidable aspect of human
nature.
The fiscal and monetary fraud is no more than one aspect of many alluded to in the paragraph
above. We have allowed charlatans masquerading as Utopian saviors and Paradigm Changers to capture
police power to enforce laws and regulations obviously designed to shear the sheep, and reward
the wolves. Too Big To Fail? More like Too Big To be Held to Account lest me and my friends and
their children have to get real jobs instead of stealing from the rubes.
Last, it will be interesting to see how the debt is dealt with. It is a truly global issue,
with too many people having to pledged to pay more money than can possibly be paid. It is so bad
that the very accounting of the fiction has become near-impossible. Sooner or later, the accounting
will become impossible, and some sort of reset (which will include a default and repudiation of
most public and private debt instruments and their associated derivatives) will be agreed on?
Implemented? Forced upon? By whom? Using what legal structure and in what currency denomination?
Not any currency now in circulation, I think. Unclear to me, It will be fascinating to watch.
If the options for infrastructure finance (maintenance and expansion of roads in particular)
are basically:
- Soak the rich (taxes go up on the haves to pay)
- Some degree of monetary finance (money will be earned into existence rather than loaned into
existence)
- Selling off the commons (the rich buy the infrastructure and charge the masses to use it)
- Continued patchwork of debt finance and can kicking
I would say monetary finance would make everyone short of the greedy asshole that wants to
buy the highways happy.
I am fully aware that we have the appearance of a shortage of responsible enough parties to
handle this sort of proposition. If it were widely known and the left got wind of it they would
likely have brawndo water fountains on every corner. But Gary Cohn has not left the White House
yet, and he is just the sort of guy that can pull something like this off through some acronym
backed with hard facts and a near guarantee of success. We need to back away from socialism writ
large and focus on long term sustained full employment with a gradual return to free market principles
in all area of commerce.
In my economic utopia full employment and maintenance of infrastructure would be at the top
of central bank or FED area of concern.
Medical care is expensive because it is subsidized and corrupted. Let the medical care bubble
burst and let doctors compete for patients like other area of commerce. Until we figure out how
to do that there will be no affordable medicine for the masses.
Furthermore there is discussion in some circles of guaranteed minimum income. What a horrible
idea. Let me guess, the people will drive to pick up their money on some pothole filled road,
right? What a misguided notion. Can we please put off all that talk until all the roads are fixed,
every tree is trimmed, every sidewalk fixed, every park glisteningly beautiful, etc until we even
remotely consider it a possibility. The ghettos already give everyone free money and they line
up in their own filth stepping over garbage to pick up their checks. Give me a break!
Not every land owner is happy when roads or sewer systems are built close by. They may lose
in terms of historical, cultural, and environmental values they attach to their surroundings.
How are you going to compensate them? Nationalizing land does not solve this problem. One way
of making people lose their attachment to a particular surrounding is to force them move every
few years. But why do you want do that? To celebrate Bolshevist craziness? Why?
What is needed is to use a different approach when protesting. Why not call it, 'American pride
parade?" Or, "love the USA parade?", others use different naming conventions when in reality its
other objectives that they sought after. For example, the federal reserve act=taking over the
economy of the USA. Patriot act=taking your rights away, etc. So whomever is trying to even the
field in 'pride' such as the T-shirts that read: 'brown pride', 'black pride', etc. Whities should
have 'American pride', and who will fight that? So then American pride=White pride, period. That
will put an end to the rabid attacks from the fake news media, and all its dumb followers.
Nationalizing all, or even most, land-rent only makes sense if the national government will
take on the financial responsibility of funding local infrastructure, which seems like a disaster
in the making.
Socializing all, or even most, land-rent even at the local level would completely destroy the
balance sheets of millions of productive citizens. Cruel and arbitrary. As far as the response,
"torches and pitchforks" would be understatement.
The only fair solution is to grandfather current land-rents and then tax the increment. Still
discourages speculation. You could even phase-out the grandfather without destroying innocent
families so long as it's gradual over a very long term, say 50 years.
A very interesting and intelligent commentary, as always from this source.
I would like to suggest that there is, in addition to what has been described here, another
factor influencing rent, and that's demographics.
In the middle ages, Europe was essentially fully populated relative to its technology and infrastructure.
All land was owned by a handful for wealthy families, and they could charge peasants rents so
high that wages were hardly more than subsistence.
Then the Black Death came, and, unlike most plagues that quickly burned themselves out, it
held the population low for generations. Suddenly the rich could not just coast on unearned interest
from inherited land, because land was no longer a limiting factor. The rich tried reigning in
wages via statute, but it's hard to beat supply and demand, and the rich failed. This caused the
renaissance. It is little appreciated, but the physical standard of living of late medieval England
was higher than many s0-called modern third-world countries
I suggest that, not in replacement of what has been mentioned here, but in addition, that demographics
and population pressure also play a signficant role. When there is more land than people, it gets
hard to collect rent (in the ante-bellum American South, the plantation owners had to resort to
slavery. In the North, you had a lot of owner-operator farmers).
I would also think that, with a stable or slowly growing population, eventually every family
pays off their mortgage, all the roads that need to get built are built, and then the children
inherit, and debt goes away. A rapidly growing population means that big sums must constantly
be borrowed to fund new construction and infrastructure, both public and private
And finally, I would posit that anything which reduces wages – such as too-rapid population
growth – will also cause financialization, but for a different reason. I propose that in a low-wage
society, where losing a job likely means a lifetime sentence of poverty, that people become wage-slaves,
and beholden to their employers – and this includes economists and journalists etc. In this case
only the occasional saint will take a stand on principle, and most of us are not saints. On the
other hand, in a tight labor market, if an employee defies their boss (CNN, the University of
Chicago, etc.), and is fired, it's not a big issue – they can easily find comparable well-paid
work elsewhere.
@Si1ver1ock I would like to offer an observation about "taxing the land". In my home state
property taxes are among the lowest in the nation and this is a significant political issue. I
cannot offer a "correct balance," but since it is an issue that has been front and center in local
politics I think I can offer some relevant observations.
Because property taxes are low in my state "persons" (including corporate) have been able to
tie up large tracts for agricultural (including silvicultural) and mineral (including speculative)
purposes. Most of it is in pine forest which offers very low returns and then there is the occasional
mineral "jackpot" when somebody strikes oil or opens a mine (usually coal). The low tax cost means
that it is not expensive to hold land for these purposes. Other beneficiaries are family farms
where the land is actively worked, but does not yield a high rate of return.
While family farms are pretty bulletproof politically, there is strong opposition to the large
corporate interests. The main argument against these interests has been that they inhibit "growth."
Arguments "for" (besides the campaign contributions) are that we are better off with a more stable,
steadily growing agricultural (silvicultural) economy as rapid "growth" creates instability, i.e.
that "creative destruction" is not an unalloyed good, of which the rate should be maximized.
There IS a tendency towards old rich families, some of whom are degenerate, but some of whom
are "pillars of the community" who support charitable organizations that benefit "everybody" if
one thinks slower moving societies are a good thing.
My general impression is that Mr. Hudson thinks that lots of "growth" is a good thing, but
he thinks he knows a better way to achieve it (better than Trump, e.g.). Obviously, since I put
"growth" in scare quotes I am not sold on the idea no matter how it is achieved.
Outside the issue of "growth" there is the issue of how much a community benefits from having
"pillars."
You makes your choice and you takes your chance. Personally, I don't think the universe gives
a damn one way or the other – if it works, it works, if it doesn't, "batter up!"
"... It doesn't matter what the people vote for. Either you do what we say or we will smash your banking system." Tsipras's job is to say, "Yes I will do whatever you want. I want to stay in power rather than falling in election." ..."
"... Somebody's going to suffer. Should it the wealthy billionaires and the bankers, or should it be the Greek workers? Well, the Greek workers are not the IMF's constituency. It says: "We feel your pain, but we'd rather you suffer than our constituency." ..."
"... The basic principle at work is that finance is the new form of warfare. You can now destroy a country's economy not merely by invading it. You don't even have to bomb it, as you've done in the Near East. All you have to do is withdraw all credit to the banking system, isolate it economically from making payments to foreign countries so that you essentially put sanctions on it. You'll treat Greece like they've treated Iran or other countries. ..."
"... The class war is back in business – the class war of finance against labor, imposing austerity and shrinking living standards, lowering wages and cutting back social spending. It's demonstrating who's the winner in this economic warfare that's taking place. ..."
"... Then why is the Greek population still supportive of Syriza in spite of all of this? I mean, literally not only have they, as a population, been cut to no social safety net, no social security, yet the Syriza government keeps getting supported, elected in referendums, and they seem to be able to maintain power in spite of these austerity measures. Why is that happening? ..."
"... You also need a contingency plan for when the European Union wrecks the Greek banks, which basically have been the tool of the oligarchy in Greece. The government is going to have to take over these banks and socialize them, and use them for public purposes. Unfortunately, Tsipras never gave Varoufakis and his staff the go ahead. In effect, he ended up double crossing them after the referendum two years ago that said not to surrender. That lead to Varoufakis resigning from the government. ..."
"... Tsipras decided that he wanted to be reelected, and turned out to be just a politician, realizing that in order to he had to represent the invader and act as a client politician. His clientele is now the European Union, the IMF and the bondholders, not the Greeks. What that means is that if there is an election in Greece, people are not going to vote for him again. He knows that. He is trying to prevent an election. But later this month the Greek parliament is going to have to vote on whether or not to shrink the economy further and cut pensions even more. ..."
"... The Greek government has not said that no country should be obliged to disregard its democratic voting, dismantle its public sector and give up its sovereignty to bondholders. No country should be obliged to pay foreign creditors if the price of that is shrinking and self destruction of that economy. ..."
"... They haven't translated this political program of not paying into what this means in practice to cede sovereignty to the Brussels bureaucracy, meaning the European Central Bank on behalf of its bondholders. ..."
Sharmini Peries: The European Commission announced on May 2, that an agreement on Greek pension
and income tax reforms would pave the way for further discussions on debt release for Greece. The
European Commission described this as good news for Greece. The Greek government described the situation
in similar terms. However, little attention has been given as to how the wider Greek population are
experiencing the consequences of the policies of the Troika. On May Day thousands of Greeks marked
International Workers Day with anti-austerity protests. One of the protester's a 32-year-old lawyer
perhaps summed the mood, the best when he said
"The current Greek government, like all the ones before it, have implemented measures that has
only one goal, the crushing of the workers, the working class and everyone who works themselves
to the bone. We are fighting for the survival of the poorest who need help the most."
To discuss the most recent negotiations underway between Greece and the TROIKA, which is a European
Central Bank, the EU and the IMF, here's Michael Hudson. Michael is a distinguished research professor
of Economics at the University of Missouri, Kansas City. He is the author of many books including,
"Killing the Host: How Financial Parasites and Debt Bondage the Global Economy" and most recently
"J is for Junk Economics: A Survivor's Guide to Economic Vocabulary in the Age of Deception" .Michael,
let's start with what's being negotiated at the moment.
Michael Hudson: I wouldn't call it a negotiation. Greece is simply being dictated to. There
is no negotiation at all. It's been told that its economy has shrunk so far by 20%, but has to shrink
another 5% making it even worse than the depression. Its wages have fallen and must be cut by another
10%. Its pensions have to be cut back. Probably 5 to 10% of its population of working age will have
to immigrate.
The intention is to cut the domestic tax revenues (not raise them), because labor won't be paying
taxes and businesses are going out of business. So we have to assume that the deliberate intention
is to lower the government's revenues by so much that Greece will have to sell off even more of its
public domain to foreign creditors. Basically it's a smash and grab exercise, and the role of Tsipras
is not to represent the Greeks because the Troika have said, "The election doesn't matter.
It doesn't matter what the people vote for. Either you do what we say or we will smash your
banking system." Tsipras's job is to say, "Yes I will do whatever you want. I want to stay in power
rather than falling in election."
Sharmini Peries: Right. Michael you dedicated almost three chapters in your book "Killing
the Host" to how the IMF economists actually knew that Greece will not be able to pay back its foreign
debt, but yet it went ahead and made these huge loans to Greece. It's starting to sound like the
mortgage fraud scandal where banks were lending people money to buy houses when they knew they couldn't
pay it back. Is it similar?
Michael Hudson: The basic principle is indeed the same. If a creditor makes a loan to a country
or a home buyer knowing that there's no way in which the person can pay, who should bear the responsibility
for this? Should the bad lender or irresponsible bondholder have to pay, or should the Greek people
have to pay?
IMF economists said that Greece can't pay, and under the IMF rules it is not allowed to make loans
to countries that have no chance of repaying in the foreseeable future. The then-head of the IMF,
Dominique Strauss-Kahn, introduced a new rule – the "systemic problem" rule. It said that if Greece
doesn't repay, this will cause problems for the economic system – defined as the international bankers,
bondholder's and European Union budget – then the IMF can make the loan.
This poses a question on international law. If the problem is systemic, not Greek, and if it's
the system that's being rescued, why should Greek workers have to dismantle their economy? Why should
Greece, a sovereign nation, have to dismantle its economy in order to rescue a banking system that
is guaranteed to continue to cause more and more austerity, guaranteed to turn the Eurozone into
a dead zone? Why should Greece be blamed for the bad malstructured European rules? That's the moral
principle that's at stake in all this.
Sharmini Peries: Michael, The New York Times has recently published an article titled,
"IMF torn over whether to bail out Greece again." It essentially describes the IMF as being sympathetic
towards Greece in spite of the fact, as you say, they knew that Greece could not pay back this money
when it first lent it the money with the Troika. Right now, the IMF sounds rational and thoughtful
about the Greek people. Is this the case?
Michael Hudson: Well, Yanis Varoufakis, the finance minister under Syriza, said that every
time he talked to the IMF's Christine Lagarde and others two years ago, they were sympathetic. They
said, "I am terribly sorry we have to destroy your economy. I feel your pain, but we are indeed going
to destroy your economy. There is nothing we can do about it. We are only following orders." The
orders were coming from Wall Street, from the Eurozone and from investors who bought or guaranteed
Greek bonds.
Being sympathetic, feeling their pain doesn't really mean anything if the IMF says, "Oh, we know
it is a disaster. We are going to screw you anyway, because that's our job. We are the IMF, after
all. Our job is to impose austerity. Our job is to shrink economies, not help them grow. Our constituency
is the bondholders and banks."
Somebody's going to suffer. Should it the wealthy billionaires and the bankers, or should it be
the Greek workers? Well, the Greek workers are not the IMF's constituency. It says: "We feel your
pain, but we'd rather you suffer than our constituency."
So what you read is simply the usual New York Times hypocrisy, pretending that the IMF
really is feeling bad about what it's doing. If its economists felt bad, they would have done what
the IMF European staff did a few years ago after the first loan: They resigned in protest. They would
write about it and go public and say, "This system is corrupt. The IMF is working for the bankers
against the interest of its member countries." If they don't do that, they are not really sympathetic
at all. They are just hypocritical.
Sharmini Peries: Right. I know that the European Commission is holding up Greece as an
example in order to discourage other member nations in the periphery of Europe so that they won't
default on their loans. Explain to me why Greece is being held up as an example.
Michael Hudson: It's being made an example for the same reason the United States went into
Libya and bombed Syria: It's to show that we can destroy you if you don't do what we say. If Spain
or Italy or Portugal seeks not to pay its debts, it will meet the same fate. Its banking system will
be destroyed, and its currency system will be destroyed.
The basic principle at work is that finance is the new form of warfare. You can now destroy a
country's economy not merely by invading it. You don't even have to bomb it, as you've done in the
Near East. All you have to do is withdraw all credit to the banking system, isolate it economically
from making payments to foreign countries so that you essentially put sanctions on it. You'll treat
Greece like they've treated Iran or other countries.
"We have life and death power over you." The demonstration effect is not only to stop Greece,
but to stop countries from doing what Marine Le Pen is trying to do in France: withdraw from the
Eurozone.
The class war is back in business – the class war of finance against labor, imposing austerity
and shrinking living standards, lowering wages and cutting back social spending. It's demonstrating
who's the winner in this economic warfare that's taking place.
Sharmini Peries:Then why is the Greek population still supportive of Syriza in spite of
all of this? I mean, literally not only have they, as a population, been cut to no social safety
net, no social security, yet the Syriza government keeps getting supported, elected in referendums,
and they seem to be able to maintain power in spite of these austerity measures. Why is that happening?
Michael Hudson: Well, that's the great tragedy. They initially supported Syriza because
it promised not to surrender in this economic war. They said they would fight back. The plan was
not pay the debts even if this led Europe to force Greece out of the European Union.
In order to do this, however, what Yanis Varoufakis and his advisors such as James Galbraith wanted
to do was say, "If we are going not to pay the debt, we are going to be expelled from the Euro Zone.
We have to have our own currency. We have to have our own banking system." But it takes almost a
year to put in place your own physical currency, your own means of reprogramming the ATM machines
so that people can use it, and reprogramming the banking system.
You also need a contingency plan for when the European Union wrecks the Greek banks, which basically
have been the tool of the oligarchy in Greece. The government is going to have to take over these
banks and socialize them, and use them for public purposes. Unfortunately, Tsipras never gave Varoufakis
and his staff the go ahead. In effect, he ended up double crossing them after the referendum two
years ago that said not to surrender. That lead to Varoufakis resigning from the government.
Tsipras decided that he wanted to be reelected, and turned out to be just a politician, realizing
that in order to he had to represent the invader and act as a client politician. His clientele is
now the European Union, the IMF and the bondholders, not the Greeks. What that means is that if there
is an election in Greece, people are not going to vote for him again. He knows that. He is trying
to prevent an election. But later this month the Greek parliament is going to have to vote on whether
or not to shrink the economy further and cut pensions even more.
If there are defections from Tsipras's Syriza party, there will be an election and he will be
voted out of office. I won't say out of power, because he has no power except to surrender to the
Troika. But he'd be out of office. There will probably have to be a new party created if there's
going to be hope of withstanding the threats that the European Union is making to destroy Greece's
economy if it doesn't succumb to the austerity program and step up its privatization and sell off
even more assets to the bondholders.
Sharmini Peries: Finally, Michael, why did the Greek government remove the option of Grexit
from the table in order to move forward?
Michael Hudson: In order to accept the Eurozone. You're using its currency, but Greece
needs to have its own currency. The reason it agreed to stay in was that it had made no preparation
for withdrawing. Imagine if you are a state in the United States and you want to withdraw: you have
to have your own currency. You have to have your own banking system. You have to have your own constitution.
There was no attempt to put real thought behind what their political program was.
They were not prepared and still have not taken steps to prepare for what they are doing. They
haven't made any attempt to justify non-payment of the debt under International Law: the law of odious
debt, or give a reason why they are not paying.
The Greek government has not said that no country should be obliged to disregard its democratic
voting, dismantle its public sector and give up its sovereignty to bondholders. No country should
be obliged to pay foreign creditors if the price of that is shrinking and self destruction of that
economy.
They haven't translated this political program of not paying into what this means in practice
to cede sovereignty to the Brussels bureaucracy, meaning the European Central Bank on behalf of its
bondholders.
Note: Wikipedia defines Odious Debt: "In international law, odious debt, also known as illegitimate
debt, is a legal doctrine that holds that the national debt incurred by a regime for purposes that
do not serve the best interests of the nation, should not be enforceable."
"... By Ignacio Portes, formerly the economy editor of the English-speaking daily Buenos Aires Herald. He has also published at Pando Daily and NSFWcorp ..."
"... Folha de São Paulo ..."
"... "'I know your works: you are neither cold nor hot. Would that you were cold or hot! So, because you are lukewarm, and neither cold nor hot, I will spew you out of my mouth.'" ..."
"... Her response of a Greek-style, slow austerity plan during the next two years only helped her lose a large part of her harder-core electoral base. ..."
"... mierda de toro ..."
"... O Globo ..."
"... Globo ..."
"... While these economic own-goals are definitely the key, ..."
Posted on
April 25, 2017
by
Yves Smith
Yves here. I wanted to emphhsize a factor to
consider in the difficulties Latin American (and
developing) countries have had in trying to manage
their affairs, namely, the impact of advanced
central bank monetary operations on them. Our guest
writer Ignacio Portes mentions it in his post below,
but it is worth discussing at greater length.
Remember how for at least 18 months before the
2014 Bernanke "taper tantrum" that markets around
the world were following a "risk on/risk off" trade,
with reactions based largely on the latest central
bank oracle reading? And that emerging economies
were the ones most whipsawed by these trades?
None other than that card-carrying Communist,
former IMF chief economist Raghuram Rajan complained
about it when he was the head of the Central Bank of
India.
From a 2014 post
in which we first quote a Rajan
interview with Bloomberg and then add further
comments:
Rajan is blunt by the standards of official
discourse Some of his key points:
Emerging markets were hurt both by the
easy money which flowed into their economies
and made it easier to forget about the
necessary reforms, the necessary fiscal
actions that had to be taken, on top of the
fact that emerging markets tried to support
global growth by huge fiscal and monetary
stimulus across the emerging markets. This
easy money, which overlaid already strong
fiscal stimulus from these countries. The
reason emerging markets were unhappy with
this easy money is "This is going to make it
difficult for us to do the necessary
adjustment." And the industrial countries at
this point said, "What do you want us to do,
we have weak economies, we'll do whatever we
need to do. Let the money flow."
Now when they are withdrawing that money,
they are saying, "You complained when it
went in. Why should you complain when it
went out?" And we complain for the same
reason when it goes out as when it goes in:
it distorts our economies, and the money
coming in made it more difficult for us to
do the adjustment we need for the
sustainable growth and to prepare for the
money going out
International monetary cooperation has
broken down. Industrial countries have to
play a part in restoring that, and they
can't at this point wash their hands off and
say we'll do what we need to and you do the
adjustment. .Fortunately the IMF has
stopped giving this as its mantra, but you
hear from the industrial countries: We'll do
what we have to do, the markets will adjust
and you can decide what you want to do . We
need better cooperation and unfortunately
that's not been forthcoming so far.
Narrowly, Rajan is correct, but the
underlying problem is much bigger and most
orthodox economists are unwilling to confront it
because it conflicts with their free markets
religion. Carmen Reinhart and Ken Rogoff, in an
analysis that got much less attention that their
work on debt levels and growth, looked
at 800 years of history of crises
and found
a strong correlation between the level of
international capital flows and the frequency
and severity of financial crises. That's
implicit in his discussion of the impact of hot
money flowing in and out. The Reinhart/Rogoff
finding was confirmed by
a 2010 paper by Claudio Borio and Piti Disyatat
of the BIS
that argued that what drives
financial crises is not net capital flows
("global imbalances") but gross capital flows
(too much financial "elasticity" as they called
it, or what most of us would describe as too
much speculation). But Rajan may in fact be
referring to remedies like capital controls when
he says, basically, that the industrial
economies may not like the remedies that
emerging economies implement.
Back to the present post. Voters in countries in
Latin America hold their officials accountable for
economic performance. Yet the destabilizing impact
of hot money in and outflows, brought to them by the
tender ministrations of neoliberal orthodoxy, means
that the degree of control is limited.
By Ignacio Portes, formerly the
economy editor of the English-speaking daily Buenos
Aires Herald. He has also published at Pando Daily
and NSFWcorp
The world's attention over the last few months
has been focused on the rise of right-wing movements
across the first world, and the struggle of the
previously-ruling liberal establishment to
understand the nature of what hit them. Somewhat
buried below those news, however, one can also read
about what seem to be the last pangs of another
regional alliance going haywire, though with
somewhat different protagonists.
It wasn't long ago that South American
governments were seen as the biggest political
alternative in a world moving mostly to the right,
as parties backed by unemployed and landless
movements, trade unions, indigenous groups and
socialist organizations took power and pushed for
certain re-distributive policies.
Now, the continent's two biggest economies,
Argentina and Brazil, are ruled by coalitions packed
with center-right businessmen. And in Venezuela -
the country which arguably started to turn the
continental political tide to the left back in 1998
- Hugo Chávez's heir Nicolás Maduro is barely
holding to the presidency, losing by a landslide in
the last mid-term elections amid frightening levels
of social disarray.
Unpacking what went wrong for them will be key
for whoever ends up being the next leftist movement
to have a shot at power. And much of what went wrong
was about the economy.
The fact that those three collapses took place
almost simultaneously had a lot to do with the end
of the commodity price supercycle that made life so
much easier for governments across Latin America
throughout the 2000s. But it wasn't simply a stroke
of bad luck with the region's primary exports.
Wherever you looked, voters also had the growing
perception that the malaise was also explained by
local policy. And that was much harder to accept
both for officials and for their most ardent
supporters, who preferred to focus on outside
factors, be them the global economy or some kind of
internal or external political conspiracy.
Not that some degree of conspiracy couldn't be a
factor. Dilma Rousseff's ousting in Brazil was
largely an exercise in hypocrisy from a political
opposition mired in corruption scandals and with
several past episodes of embellishing the budget's
figures. Yet it accused the government of exactly
those two things, first to switch sides from
congressional allies to staunch enemies and then to
impeach Rousseff.
But none of that would have worked hadn't
Rousseff's government also been under growing
popular pressure since the country fell into a
recession in 2014. Rousseff had already lost most of
the middle class before that. Her response of a
Greek-style, slow austerity plan during the next two
years only helped her lose a large part of her
harder-core electoral base. With the recession
deepening and unemployment soaring, Rousseff's
approval ratings plunged below 20%. Her former
allies turned on her and there was no way back from
there.
Brazil's Workers' Party fell into the classic
emerging market boom and bust. The capital that had
flown into the country with the commodities at high
prices made it easy for the government and the
private sector to take on debt and finance a larger
expansion. The hype made Brazil an easy sale. In
2009, The Economist famously printed Jesus' statue
at the top of Rio de Janeiro's Corcovado mountain
taking off from the ground as if it were a rocket,
illustrating a story about the country's supposed
transformation. The government seemed to believe it
too, embarking into grandiose, costly projects to
host the 2014 football World Cup and the 2016 summer
Olympic Games announcing Brazil's arrival into the
global center stage, while also playing up the
significance of the massive (but hard to reach) oil
deposits discovered off the Brazilian coast.
But the foundations of the boom weren't really
solid. The country's currency, the real, appreciated
beyond what many local industries could resist in
the long run due to the sudden influx of foreign
capital. Protectionism and subsidies to some of
Brazil's top business owners tried to compensate for
that, but the costs of doing so started to mount.
When commodity prices stopped helping, the
underlying problems surfaced. By 2013, The Economist
ran exactly the opposite cover than in 2009, with
Jesus' statue crashing down after a failed launch.
Short-term investors panicked and moved their cash
elsewhere. Suddenly, re-financing public and private
debt became much harder. Millions of Brazilians
started struggling with defaulted loans for the
consumer goods they had recently purchased, and
repayments only got harder when the Central Bank
also raised interest rates to try cut inflation.
Subsidies to companies became hard to sustain too,
while basic services and infrastructure, which never
improved much, started suffering even more, with the
tightening budgets focused on completing the
billionaire Olympic and World Cup stadiums and
luxury hotels. Even oil failed to deliver, both due
to the plunge in international prices and the
massive corruption schemes uncovered in the
state-run Petrobras, which threw the company into
disarray.
The question, then, is why did the Workers' Party
go for policies that would end up destroying its
popularity and its grip on power?
A tentative answer, unglamorous as it might be,
is that they didn't know what else to do. Their
problem could be seen as another manifestation of a
general failing of the post Cold War left: the lack
of a trusted economic programme of its own, which
forced them to borrow from here and there as
circumstances presented themselves.
They used a bit of orthodoxy to avoid "scaring"
the markets when they first took office in 2003,
tried to take advantage of those first moves by
leveraging the credit they were given as a result,
and added some re-distributive policies when there
seemed to be room for them, all of that almost
inevitably mixed with the endemic corruption schemes
and inefficiency troubles that seem to mar all of
the region's politics (but that hardly came to the
surface during the boom times).
When the crises came, the government tried some
countercyclical moves at first, but Brazilian laws
made them less effective than normally expected, as
private and public debt could not be diluted due to
indexation clauses written into contracts, keeping
the burden high despite some stimulus. So they
resumed the international bond market appeasing as a
(failed) last-ditch effort, with political scandals
erupting in the background as capital flight and
coalition disbanding made the end increasingly
inevitable.
Brazil's elites decided for a transition behind
the backs of the electorate, backing Rousseff's
former VP Michel Temer, a man from the ideologically
flexible PMDB party, to take her place after a
largely ridiculous impeachment process where the
charges against the President were barely even
mentioned. Unconcerned about his lower-than-Dilma
popularity, the possibility of re-election or the
need to be loyal to his voting base, Temer is now
enacting a much more thorough austerity program that
has slightly turned markets around, but which has
seen unemployment continue to skyrocket, now
reaching 13% percent, up from 7% just a couple of
years ago.
Could it have gone differently? In the most
short-termist of views, it's hard to see how the
Workers Party could have held on. Falling
governments are the norm amid huge economic crises
with no seemingly end in sight, and this was
Brazil's largest recession on record. In a
European-like parliamentary system, the situation
would surely have led to a vote of no confidence,
used in similar circumstances to oust Prime
Ministers in more democratically-friendly fashion.
But as we'll see in parts II and III, the
multiple roads taken by other left-of-centre
coalitions in Latin America showed that the Workers
Party's long-term approach was just one of many
possibilities.
Actually I think the critical strategic mistake
here was made by the Brazilian right, which had the
option of just waiting until 2018 and then taking
power in a normal election. They may have been
spooked by the prospect of running against Lula
again (though they have beaten Lula in the past
several times). Or there may have been behind the
scenes US pressure for a color revolution, due to
Brazil's previous closeness to Russia.
But not just waiting until the election and then
taking power on the normal pendulum swing will blow
up in their faces.
The overall Workers' Party strategy was
appropriate for the situation they were in. My only
real criticism is political, they should have made
winning statehouses more of a priority and less so
the presidency, but you have to run a presidential
candidate, and when you have a candidate like Lula
you are going to try to capitalize.
I hope you're right that it was a mistake.
Every poll I have seen shows Lula easily winning
any election, and the Brazilian capitalist class
was well aware of this. In fact there was the
pathetic incident where
Folha de São Paulo
intentionally
obfuscated poll data
showing that 62 percent
of Brazilians want new elections and they would
have voted for Lula. The stunning speed and
extent of the destruction
wrought by Temer
(and Macri) shows that the right wing is
convinced that this may be their only shot at
power, so they need to get in and obliterate as
much of the welfare state as quickly as
possible, like vandals who know the security
guards will arrive any second.
That said, I agree that the impeachment
debacle shows that PT needs a far bigger
presence in congress and in the governorships,
otherwise it is vulnerable to another
constitutional coup. However, I disagree that
"the overall Workers' Party strategy was
appropriate": they were gravely wrong to
implement austerity in an economic downturn.
The Brazilian right had no choice. If Dilma
had been left in charge she might have chosen to
sacrifice a whole bunch of corrupt businessman
and politicians to placate the middle class.
Someone was going down. The only question was
who.
Well, I guess I will wait for parts 2 and 3. Thus
far in the story, it is hard to see how Brazil,
Argentina and Venezuela represent three cases of the
same phenomenon.
Nah, their approaches were different for
sure, I think it will become clear in far more
detail starting in the second post. Part of the
point of the series is to show that the
governments fell into different failure modes,
despite some common themes such as international
economics (commodity prices first helping a lot,
then not so much) or the fact they were all part
of a regional political alliance.
I think this represents a clear example of the
failure of 3rd way politics again. The jackals on
the right in Latin America do not and will not
respect parties of the left, no matter if they stick
with orthodoxy. They must be confronted and beaten
with deeper reforms and a well-organized base.
Ecuador's recent election shows what can be done.
Correa's party has achieved its best result ever and
still won even though the opposition was united this
election.
But Rousseff did use the stick of orthodoxy,
and she was overthrown nonetheless!
"'I know your works: you are neither cold
nor hot. Would that you were cold or hot!
So, because you are lukewarm, and neither
cold nor hot, I will spew you out of my
mouth.'"
"But Rousseff did use the stick of
orthodoxy, and she was overthrown
nonetheless!" – Exactly! The lesson for
parties of the left is not to trust the
right. They are not your friends. They will
stick the knife in your back at the first
chance!
As far as the question of "how", Yves intro and
2014 post was more insightful. Parsing relevant
facts from irrelevant facts seems always a grind,
and discerning facts from opinion seems even more
so. Context always matters, and proportionality
often seems distorted or missing, imO. I've
gravitated towards the opinion that "capital" seems
a euphemism for power, "capitalism" seems a
euphemism for a network of unaccountable, unelected
"Davos" insiders(aka tPtb) , and "capitalists" seem
to be the gatekeepers that keep the outsiders
outside the power to shape, re-shape, form, re-form,
structure, re-structure, structurally adjust and
re-adjust etc., a social order that willingly or
unwittingly serves these insiders as the highest
priority and loftiest of purposes, at the expense of
anything and everything else. Which is why I've also
gravitated towards the opinion that "capitalism" and
"democracy" are not only antithetical to each other,
but irreconcilable a neoliberal project that
facilitates a virtual-parliament, where "governance"
is done through "capital" flows, by and at the
behest of unseen, unaccountable, unelected insiders.
Anecdote: When I was in Brazil last December I
asked everyone I could why Dilma was impeached. The
near unanimous answer was "por corrupção" (the
outliers were two responders who, interestingly,
said it was because she was unpopular). While
Ignacio's excellent post does hint at this, I think
it's important to stress the battle for "hearts and
minds" currently underway in LatAm that, in the case
of Brazil, has led to Rousseff losing her base and
the far right returning to power.
Yves and Ignacio look at two important aspects,
with Yves focusing on deleterious capital flows and
Ignacio on the resulting fiscal policy. Ignacio's
point is particularly salient, and one that often
gets lost among leftist pundits prone to ideological
Manichaeism:
Her response of a Greek-style, slow
austerity plan during the next two years only
helped her lose a large part of her harder-core
electoral base.
This, IMO, is the number one reason that led to
Rousseff's overthrow: Dilma inflicted austerity on
the working class and it abandoned her, leaving her
vulnerable to a rightwing attack. But how can I say
that when it goes against the findings of my (highly
unscientific, anecdotal) survey? Let me answer that
with yet more anecdotal evidence.
Here in Latin America there is an almost
universal narrative as to why we have so much
poverty, that goes as follows: "we live in a
resource rich region, but we are plagued by
'corruption', which means politicians with their
hands in the till. We wish we could have safe roads,
sewers, transportation, hospitals but the state
always ends up bankrupt because the politicians
steal all the money". (At this point the narrative
gets taken over by political allegiances and media
memes: "what we need to do is throw these corrupt
bums out of office and bring in [enter name of
political party supported by the media]".
This narrative is, of course, total
mierda de
toro
. First the state cannot go bankrupt, so
that should be BS tell n° 1. When Rousseff's base
saw their infrastructure, pensions and jobs cut, it
was not because Rousseff is a corrupt politician
with her hand in the till, bankrupting the state.
Even in Brazil, which has a particularly corrupt
political elite, they rob millions when the economy
is a matter of hundreds of billions. Yet like so
many revolutionaries of her generation, Rousseff is
solid on socialist ideology when it comes to
politics, but when it comes to economic
understanding, not so much. So when the
international economic crisis came to Brazil, she
appointed the Finance Minister who seemed to know
something about that economics stuff: Washington
Consensus Superstar Joachim Levy. Levy sold her the
usual neoliberal BS line that "the state is broke,
TINA, we need to cut social programmes", yadda
yadda. And austerity was suddenly on the menu.
Meanwhile, the monopolist media conglomerate
O Globo
broadcasted everywhere 24/7 that Dilma
was corrupt with the usual narrative. If you're in a
favela and you see your life getting worse because
of budget cuts and you hear the non-stop
"Corrupção!" narrative from the media, in the
absence of a media and education system that tell
the truth about economics, there is no way you stick
your neck out to support Rousseff. Here the media
and its oligarchical overlords ensure that people
have a hard time differing between millions and
trillions, between microeconomy and macroeconomy.
The TV is full non-stop with caterwauling that this
or that politician might have stolen $10m and they
incorrectly associate that with the macroeconomic
situation caused by the government's bad fiscal
policy.
In sum, yes the QE/ZIRP capital flows play a
role. Yes this was used to push the PT to make bad
fiscal decisions. But there is also an ideological
battle on in Latin America, where the
oligarchic-dominated media are pushing a false
'corruption' narrative to take advantage of the
fiscal missteps of ostensibly left-wing governments.
While these economic own-goals are definitely the
key, if it were not for this false narrative, the
PT, Kirchnerism, Chavism even Lugo in Paraguay
would still be in the drivers seat.
Personally, yes, the media is rotten and
that's a tremendous problem. The plunging
economy (caused by int'l capital tidal flows +
austerity) + media narrative of scapegoating is,
of course, how the script goes to throw
left-leaning govts out of power. However, I
don't think that gets you ALL the way there.
Otherwise, how to explain Venezuela and
Ecuador? The oligarchs ran the same playbook in
all countries in LatAm. But it doesn't always
work.
1) Venezuela is arguably MORE vulnerable to
capital flows and commodity prices than in
Brazil. The government has been handicapped by
its own incompetence (especially with regard to
the currency, as Comrade Haygood will tell you
any chance he gets!). The Chavista government
has also had plenty of corruption problems, at
least somewhat linked to those bad currency
policies. Yet, somehow, the government is still
hanging in there. In fact, its popularity seems
to be on the rebound as the population gets
tired of the violent, extremist idiots that seem
to be leading the opposition. In my view,
they've kept a core of supporters, who have
stayed loyal and haven't been sold out by their
government. Those core supporters are organized
and actively pushing back against the hard-right
in the country. This seems to be enough to
endure the turbulence.
2) Ecuador's example is also telling.
Correa's party, Allianza Pais, just hauled in
its largest ever vote total. They seem less
corrupt and incompetent than the Chavista party
in Venezuela, but face the same problems of
tumultuous capital flows and rabidly hostile
media with the constant accusations of
corruption that are present in Venezuela and
Brazil. Yet, in spite of this, they continue to
increase their support and expand their base.
From where I stand the lessons seem clear for
lefty parties of Lat Am:
No compromise with the right or with
orthodoxy. They hate you and will slit your
throat if you let them. Do not abandon your base
(and they won't abandon you). Organize your base
and be prepared for crisis. These things let you
survive as a political force. If you show
competence and reduce corruption (in reality,
not according to the media narrative), then
you'll get even stronger and do even better at
the ballot box.
Thanks Johnny, likewise. With regard to
"ALL the way there", I tried to be clear
that the main reason for Rousseff's fall was
her austerity policies, with the media
playing a crucial role thereafter. With
regard to Ecuador vs. Venezuela, BOTH made
currency missteps, as Correa's biggest
failure was that he was never able to wean
Ecuador off the USD. The main difference I
see between the two countries' leftist
governments is that Correa was
somewhat more successful at diversifying the
economy
whereas Venezuela is still far
too dependent on oil rents. In all the South
American economies, the key is developing an
internal market by bringing the excluded
masses into the economy and ditching the
commodity exporter model. Nevertheless I
agree with your point about the Venezuelan
right: they are overplaying their hand and
Maduro is gaining strength (eg, yesterday's
poor turnout opposition march).
I'd also point out that the last
elections in the countries in question (Ecu
2017, Bol 2016, Arg 2015, Bra 2014, Ven
2013) were all photo finishes (with ≈2%
margins), where the slightest tweeks could
have reversed the outcome completely, so it
is hard to talk about mandates or "what the
people want".
Lastly you discuss corruption as being a
factor for the Maduro and Correa
administrations. Does that mean you disagree
with my point that "corruption!" is just a
rightwing meme that has little to do with
most people's household economies?
Sorry, squishing too many thoughts
into my comments with limited time to
write (at work).
To clarify my addition to your point
about austerity being the real Rousseff
killer, I'd say, "Yes, that's absolutely
the proximate cause. However, there are
underlying reasons that are just as
important that shouldn't be left out of
the story".
Perry Anderson's article in LRB is a
real must read on what has happened in
Brazil. He covers a wide range of
issues, including why the PT has failed
in a broader political context.
If you're interested, read the part
that starts: "Half-hidden, the roots of
this debacle lay in the soil of the PT's
model of growth itself. From the outset,
its success relied on two kinds of
nutrient: a super-cycle of commodity
prices, and a domestic consumption
boom."
Anderson goes on to discuss how the
PT failed to improve public services,
only relying on the private sector.
Finance Minister Mantega tried to
stimulate private investment and also
attempted to split off industrial
interests away from big finance. That
attempt failed spectacularly. Again,
here's Anderson's money quote: "In the
belief that this must rally
manufacturers to its side, the
government confronted the banks by
forcing interest rates down to an
unprecedented real level of 2 per cent
by the end of 2012. In São Paulo the
Employers Federation briefly expressed
its appreciation of the change, before
hanging out flags in support of the
anti-statist marchers of June 2013."
Re: Ecuador election, yes it was
close. However, I think the margin of
victory doesn't tell the full story.
Allianza Pais keeps building its vote
totals every election since 2006. Check
wikipedia on this. Correa had a big
breakthrough from 2009 to 2013, but
Moreno didn't lose votes, he got more. I
could be wrong, but that makes me thing
they're building something more lasting
than what PT did.
Just looking, Rousseff couldn't match
Lula's vote totals, neither could Maduro
match Chavez's. Somehow, Moreno beat
Correa's numbers from previous
elections. That might be a real sign, or
might not.
Lastly, regarding this, "Does that
mean you disagree with my point that
"corruption!" is just a rightwing meme
that has little to do with most people's
household economies?" - No, I think
you're right. But I do think corruption
is more of a problem in Venezuela.
Unless you've got some other explanation
for why they won't fix the screwy
currency policy that seems to magnify
problems, rather than dampen them (as a
well managed currency should do)?
I can only guess that someone fairly
important is making a lot of money in
cross-border smuggling to Colombia.
I think Ecuador seems to have done
better on corruption, the best the media
could do was drum up a scandal that
sounded ridiculous on its face. I don't
recall the details, but it seemed like
they were really desperate to latch onto
something.
Corruption is important, just not
in the way of the simplistic media
spin that you mentioned – obviously
what a President might take home is
irrelevant when compared to a
national budget or a GDP. (and
Dilma, by the way, doesn't seen to
have been personally corrupt at all;
even if there was obviously
corruption at her party, I have
never seen any hint that it might
have help line up her pockets)
A topic that I have never read
anyone write about in depth is how
left political alternatives can
finance their campaigns. Obviously,
if you are a business candidate
you'll find it easier to get donors,
but if you want to build a working
class or socialist party then it
gets tougher. And in Latin America,
this has often led to all kinds of
shady deals with the underworld,
with public works contracts and so
on. And the problem is the economic
distortions that this brings: to
keep those dirty schemes that
finance your party going, you have
to create infrastructure programmes
not where they are most needed but
where it's easier to take a cut off
without anyone noticing it (this
happened a lot in Argentina), you
have to take part in corruption
schemes with the country's oligarchs
(see Brazil), you have to make deals
with murderous criminal cartels and
so on. This can be incredibly
damaging: it weakens the economy for
starters, but it ultimately even
derails the point of the political
project completely, turning a
political party into a bureaucracy
whose main goal is just
self-perpetuation. Venezuela's
military trying to hang on to power
and to its failed economic policies
no matter how in order to keep its
power over black market deals is
part of the explanation for that
country's crisis, for sure, and
another example of this.
Example 1: Upon assuming the
presidency, the Macri
administration immediately
embarks on a plan to devalue the
peso. Four of Macri's ministers,
including
éminence grise
Marcos Peña buy dollar futures
before the devaluation and make
out like bandits when the peso
plummets.
Example 2: Upon Macri taking
office as Buenos Aires Mayor,
his cousin's construction firm,
IECSA, suddenly jumps from
virtual anonymity to being the
third largest recipient of
public works contracts.
Are these examples of
corruption the same? I would
argue no. In example 2– which is
the type you mention and which
is the type most screamed about
in the press– the damage is that
favouritism may have led to not
the best postulant winning the
bid, thus providing the public
with inferior infrastructure.
But there is a general good that
occurs: insofar as Calcaterra
hires local workers and uses
domestic materials, the economy
will grow from the multiplier
effect. (Of course insofar as
the money is not used for
construction and instead gets
parked in Miami, there is a net
loss.) While I agree
infrastructure does not get well
distributed– I burn with rage
when I see stupid multi-million
peso overpasses in Buenos Aires
while my neighbourhood doesn't
even have proper sewers– there
is no reason why both can't be
built; Argentina has plenty of
people and materials just
waiting to be employed.
Example 1 on the other hand
is the type of corruption we
should worry about. It involves
politicians making
decisions not based on the
public good, but rather to
benefit themselves and/or a
small group of powerful people.
The devaluation of the peso
immediately went to the supply
chain and inflation skyrocketed,
resulting in a 12% loss in real
wages. This less-publicised
corruption affected the
pocketbook of everyone in the
country, whereas the eternally
repeated infrastructure issue–
be it Calcaterra or Baéz or
whoever– is not even noticeable
in the average citizen's
economy. Nevertheless, when
Globo
shows the latest
accused in Lava Joto, the public
inevitably gets angry because
they think that the suspect's
alleged crime cost them money
personally; that he is the
reason why there is no money for
housing or pensions. No, the
reason why there are housing and
pension cuts is because it was a
political decision by the
Dilma/Temer governments; Lava
Joto has nothing to do with it.
______
Secondly, with regard to
campaign financing here's my two
cents: I think it is less of an
issue here then it is up north.
First because mandatory voting
makes GOTV largely unnecessary,
thus greatly reducing the amount
of money needed. Secondly,
because (for better or worse)
all the Mercosur countries have
very strong party apparatuses
that perform much of the
campaigning work. And thirdly
because of (partially) public
funded elections. In this
regard, politics here is not as
much about fundraising as it is
about lining up all the unions
and social movements. But this
system giveth and taketh. On one
hand it often involves mass
mobilisations that are largely
based on individuals' political
motivation and organising
efforts; but on the other hand
it entails party patronage
systems that often fund goons
who carry out ratf*cking
operations and small-scale
political violence (the mafias
you mentioned? eg, the AAA in
the 70s; or more recently the
thugs who stormed the Santa Cruz
Governer's House, etc.). This is
not to say that there is not a
growing trend toward expensive
marketing campaigns and black
money, but for now at least it
is more subdued. And lastly, in
the case the left needs campaign
money, I think the Sanders 2016
campaign provided an excellent,
viable model.
While these economic own-goals are
definitely the key,
Rabid G: could you expound on which own-goals
were problematic, what could or should have been
done differently? There seems to be an argument
that:
1. Rousseff mis-steps led to lack of support
among people who were, and apparently still are,
Lula supporters. Presumably the argument is that
she could have run large fiscal deficits and
targeted spending to poor? Or canceled the
Olympics?
2. This lack of support made possible soft coup.
From what I know of what happened, I am
skeptical of both claims. And seems to
completely absolve hot money of any
responsibility, which I took as the main point
of the post. But I claim no expertise.
Yes that is the argument: Rousseff
implemented two rounds of austerity,
cutting pensions and capping spending
when Brazil's economy was already
retracting. As readers here well know, these
pro-cyclical measures always have the same
result: throwing the country into deeper
recession. Each round of austerity
coincided with steep drops in Rousseff's top
approval rating
(Optimal/Good).
Meanwhile, Lula– who never cut pensions and
spending– remains the most popular
politician in the country.
And as I made clear in my post (as
Ignacio did in the OP), these factors are
just part of what led to Rousseff's
impeachment; no one is "completely absolving
hot money" which is certainly another part
of the equation. That said, given mainstream
economists' monetarist bent, there is a
tendency to see everything that happens in
Latin America through a capital
flow/commodity lens (cough *Haygood* cough).
But this only holds true to the degree that
these countries are dependent on finance and
commodities. And the whole mantra of these
leftist governments has been to supplant
finance/commodity dependency with an
internal market. So with all respect to Yves
(and I think she might agree), to the degree
to which they have been successful at
creating this internal market, the hot money
argument does not come into play.
We never get ahead of the problem. In the early
70s Nixon was advised by Sec. Treas John Conally, of
Dallas fame, that we could go off the gold standard
bec we could basically do anything we wanted to
generate growth in our own economy and that the
imbalances that would follow for other countries
"were their problem." This attitude preceded the
free-market mania that followed, thinking that the
market would balance it all out. So, starting with
Breton Woods and an incomplete monetary system which
did not address the real world, we have come to 2017
wherein candidates are running for office without a
party and sovereign states don't understand the
power of their own sovereignty. We need a "peg" – a
new rational one. Gold has always been irrational,
but the environment is as rational as you can get.
And every sovereign country has an environment. The
environment is everywhere! Whereas the nutty
obsession with gold made it valuable and it was
arbitrarily priced at some "standard" to which all
else was valued (insane, right?) we could do it the
rational way and price the environment at some value
and thereby eliminate inflation altogether (because
you can't inflate a currency that is both ubiquitous
and invaluable already) and at the same time have a
resourceful, healthy world. Everywhere. This would
get rid of all the neoliberal money hoarding and all
sorts of ills. But, I'm dreaming again.
Another great discussion set up by Yves but the
article, probably because of limited length, could
only scratch the surface of what is and was brewing
in Latin America in last decade or so and Obama's
policies of global color revolutions having a lot to
do with it.
Moreover, it is hard in English speaking media to
figure out what is going on in Latin America
especially recently in Venezuela, Ecuador, Bolivia
even Brazil or Argentina but one thing in my
opinion, is sure there is no socialism there, nor
ever was.
Instead there were more or less social-democratic
governments trying to elevate horrible poverty of
the peoples due to extreme exploitation by local
oligarchs, while in all cases leaving intact
capitalist/neo-feudal system and social structures
including reactionary religious organizations as it
was there before. Now all those governments are
under a direct attack from Global oligarchy.
It may sound harsh but the main problem is that
Maduro and other "people's" leaders in Latin America
were being heavily influenced or down right
corrupted by western money. Yes, leftist leaders
directly or due to their global policies withd USD
dominated financial system are in Wall Street
pockets already. Too many friends of Lula, Chavez
and now Maduro revolution have bank accounts in New
York to appropriately respond to this blatant
aggression we are witnessing in a revolutionary
manner, as they should if they did not betray their
people.
Those South American springs we are witnessing in
Argentina, Brazil, Venezuela, Bolivia, and Ecuador,
and soon Cuba etc., are not due to lack of
cooperation between popular South American leaders
and US.gov and Wall Street but that they cooperate
to little to win approval of Washington hegemons,
namely they do not exploit and betray their people
hard enough.
It is a world oligarch's quarrel and those who do
not heed the warnings are expelled from the cushy
country club of globalists, and that's why they are
so polite, yes polite, facing Washington economic
aggression. But there is deeper reason for it.
Former radicals, communists, worker trade
unionists or native populists and other leftist such
as Lula-Rousseff, Chavez,(Maduro), Corea, Morales
etc., after being brought to power, via peoples
popular movements spawned by catastrophe of raging
neoliberalism in previous decades , not on their own
merits as a true leftists since they later betrayed
the true left, but on the wave of global capital
instigated booms of commodity demand from China
itself stimulated to the brink of orgasm via Wall
Street money changers and now is awaiting eruption
anytime and following by a long secular economic
flaccidity which will turn this mockery of workers'
led Chinese government into openly
fascistic/regional imperial regime as it already is.
One must realize that those recent South American
leftist revolutions, including Chavez revolution,
were underwritten by Wall Street bubbles, one might
have asserted wrongly, that they were being
skillfully exploited by leftist leaders while in
truth they fell into a trap that ultimately doomed
and condemned truly leftist Marxian or even
Maoist/Leninist revolutionary political movements in
South America into political oblivion for decades to
come.
And hence sweeping counterrevolutionary wind of
Washington doing, blowing across the South American
continent.
And that seems to be the plan to discredit any
political left as a vital and even viable or
effective political force in South America, Europe
and elsewhere.
It took him eight years but Obama Mission was
Accomplished. And that's his legacy few wants to
talk about.
"Let's not dance around. Your first steps will be
breaking the power of current economic and political
elites who are not willing to convincingly join you
or at least let you rule without trying to sabotage
you.
You must do this all at once. When it happens, it
happens to everyone it is going to happen to. This
is Machiavelli's dictum, and he was right. After it
has happened, those who weren't broken know they're
safe as long as they don't get in your way."
Break up the banks and the media, have competent
administrators ready to step in, and insulate
yourself from foreign cash flows as much as you can.
Otherwise you will be sabotaged.
I am transmitting from Brazil, having witnessed
in situ the last 15 years of surreal economics.
The current 'crisis' has nothing to do with
politics, ideology, government policy, corruption,
etc.
In fact, there's no crisis at all happening in
Brazil.
From 2003-2014, Brazil went through a surreal
bubble of credit (and corresponding debt), equally
divided amongst families and corporations.
The total debt stock went from 25% to 56% of GDP,
in eleven years. That's roughly 3% of cocaine-like
GDP injected into the veins of the economy, over
quasi-eternal 11 years.
The debt bubble is now gloriously bursting. Two
years of bubble deflation already checked, my guess
is that the Brazilian economy should return to its
natural size around 4Q 2017 / 1Q 2018.
From there on, there's slow growth in the works.
We Brazilians do not know how to grow via investment
and innovation. And everyone is vaxxed against
diving into debt again.
Without digging into details of your numbers,
I don't think what you wrote is factually
incorrect. However, the tone of what you wrote
gives no agency to any person or institution.
Big debt bubbles don't just 'happpen' like bad
weather. They happen because of policy decisions
made by people, individually and as groups.
Why those decisions were made and how they
succeeded or failed is the part worth
discussing.
"... By Don Quijones, Spain & Mexico, editor at Wolf Street. Originally published at Wolf Street ..."
"... By Don Quijones . ..."
"... When it comes to debt, everything is relative, especially if you don't have a reserve-currency-denominated printing press. Read Is Mexico Facing "Liquidity Problems?" ..."
"... Greenspan's Fraud ..."
"... It would also stop phony war on drugs in Mexico ..."
"... To make matters worse, much of Mexico's new debt is in foreign-denominated currencies. Between 2015 and 2016 alone, the total amount of euro and dollar-denominated debt it issued rose by 46%. ..."
"... [u]nlike debt issued in pesos, Mexico's central bank cannot just print dollars and euros to bail out bond holders or inflate away the debt. ..."
"... Therefore shouldn't the question be the absolute external debt in dollars instead of the relative amount in pesos? ..."
"... To make matters worse, much of Mexico's new debt is in foreign-denominated currencies. ..."
Mexico's Economy Is Being Plundered Dry Posted on
April 20, 2017 by
Yves Smith Yves here. Most Americans know on some level that Mexico has become an economic and
political disaster, save for those at the very top of the food chain. This post gives vignettes that
bring home how much of a failed state it has become. And needless to say, the US had no small role
in that outcome.
By Don Quijones, Spain & Mexico, editor at Wolf Street. Originally published at
Wolf Street
The government of Mexico has a new problem on its hands: what to do with the burgeoning ranks
of state governors, current or former, that are facing prosecution for fraud or corruption. It's
a particularly sensitive problem given that most of the suspects belong to the governing political
party, the Institutional Revolutionary Party (PRI), which ruled Mexico uninterruptedly from 1929
to 2000. It returned to power in December 2012 with the election of Enrique Peña Nieto. And it clearly
hasn't changed its ways.
Some of the accused governors were so compromised they went on the run. In the last few weeks,
two of them, Tomás Yarrington, former state governor of Tamaulipas, and Javier Duarte, former governor
of Veracruz, were tracked down. Yarrington, accused of laundering proceeds from drug trafficking
as well as helping Mexico's Gulf Cartel export "large quantities" of cocaine to the United States,
was ensnared by Italian Police in the Tuscan city of Florence. He faces possible extradition
to the United States.
Yarrington's successor as governor of Tamaulipas, Eugenio Hernández, a fellow PRI member who is
also accused of close ties with narcotraficantes and money laundering,
has not been seen in public since last June .
As for Duarte, he was caught this week by police in Guatemala. Like Yarrington, he wasn't exactly
laying low. Among the accusations he faces is that of
buying fake chemotherapy
drugs , which were then unknowingly administered by state-run hospitals to children suffering
from cancer. He and his cohorts purportedly pocketed the difference. He is also alleged to have set
up 34 shell companies with the intention of diverting 35 billion pesos (roughly $2 billion) of public
funds into his and his friends' deep pockets.
In just about any jurisdiction on earth, $2 billion is a substantial amount of money, even by
today's inflated standards. But in Mexico, where neither the super rich (accounting for a very large
chunk of the country's wealth) nor the super poor (accounting for roughly half of the population)
pay direct taxes of any kind, it's a veritable fortune.
And when the country's public debt is already growing at an unprecedented pace, rampant corruption
becomes a serious problem.
In the year 2000, Mexico had a perfectly manageable debt load of roughly 20% of GDP. Today, it
is almost two and a half times that size. Last year alone the Mexican state
issued a grand total of $20.31 billion in new debt, the largest amount since 1995, the year immediately
after the Tequila Crisis when the country received an international bailout to rescue its entire
banking system from collapse and to
make whole the Wall Street investment banks that had gone all in on Mexican assets.
To make matters worse, much of Mexico's new debt is in foreign-denominated currencies. Between
2015 and 2016 alone, the total amount of euro and dollar-denominated debt it issued rose by 46%.
Unlike debt issued in pesos, Mexico's central bank cannot just print dollars and euros to bail out
bond holders or inflate away the debt. This debt must be serviced the hard way.
In recent years, Mexico's public debt has mushroomed in order to make up for lackluster growth,
a weakening peso, much lower global oil prices, and the dwindling contribution to government coffers
of the country's erstwhile sugar daddy, Pemex. The state-owned oil giant has itself been systematically
plundered dry by its burgeoning ranks of senior managers and administrators, the untouchable,
unsackable leaders of the oil workers' union, all closely aligned to PRI, and legions of Pemex contractors.
Between 2008 and 2016 Pemex's contribution to the government's tax revenues shrank from 40% to
13%. During roughly the same period (2009-2016) its debt grew
187% , to nearly
$100 billion. Its pension liabilities amount to $1.2 billion. The losses and debt keep growing in
tandem, while its production and reserves are shrinking. The company was already
bailed out once last year.
The more Pemex's financial health declines, the larger the shortfall in public finances and the
faster Mexico's public debt will grow.
The really twisted part? The more the debt grows, the more opportunities the country's corrupt
politicians will get to feather their nests. It's not like there's much deterrent. In recent years
only 17 of 42 serving or former governors suspected of corruption have been investigated, according
to a study by María Amparo Casar, executive president of the advocacy group Mexicans Against Corruption
and Impunity. Before the latest rash of detentions, only three of them ended up in prison.
"The decades of impunity have generated a level of shamelessness we've never seen before in Mexico,"
Max Kaiser, anti-corruption director for the Mexican Institute of Competitiveness (IMCO), told the
New York Times . The excesses are more public than ever and have brought Mexicans to the verge
of bankruptcy.
Mexico's debt continues to grow at a much faster pace than its economy, whose growth is forecast
to slow this year to 1.5%, compared to last year's 2.4%. In February Mexico's top auditor, the Federal
Audit Office (ASF), warned
that Mexico's debt situation was just a step away from becoming unsustainable. A number of states
are
already facing bankruptcy , including Duarte's Veracruz.
Last August, Standard & Poor's lowered the outlook for Mexico's sovereign bonds from stable to
negative and saw "an at least one-in-three possibility of a downgrade over the next 24 months." Mexico's
foreign currency sovereign credit rating, which is what matters with bonds denominated in a foreign
currency, at BBB+, is just three notches above junk. A downgrade would raise the cost of borrowing,
pushing Mexico's finances even closer to the brink. In the meantime, the plunder must go on.
By Don Quijones .
When it comes to debt, everything is relative, especially if you don't have a reserve-currency-denominated
printing press. Read
Is Mexico Facing "Liquidity Problems?"
And needless to say, the US had no small role in that outcome.
Can you elaborate on this? What responsibility do average US citizens bear for Mexico's crisis?
Given the massive wealth transfer upwards in the last decade do we not have the same corruption
issues in the US, regardless of it being under cover of law?
Maybe the stuff in this article has something to do with explaining the role "our" government
and corruptorations have had and continue to have in catalyzing an dexporting and importing immiseration
in Mexico and here "at home" too? "The Political Economy of Mexico's Drug War,"
http://isreview.org/issue/90/political-economy-mexicos-drug-war
I don't know if this is what was meant by that comment or not but, at the very least, it is
the US' appetite for drugs that has allowed the cartels to flourish into practically nation states
unto themselves.
The problem with either is that a) The Mexican drug cartels are moving toward producing more
lethal, cheaper drugs in massive quantities as the profits from selling marijuana dry up, and
b) there needs to be, in the USA, a much more rigorous process regulating (as opposed to banning)
controlled substances and of assisting addicts towards recovery. We've made periodic moves in
this direction, but none have had staying power and that needs to change.
@Loblolly: The U.S.'s role south of its borders has been predation and looting for centuries
now. I've read that between 1798 and 1994 the U.S. was responsible for 41 changes of government
south of its borders.
When the Haitians, one of the two poorest nations in the hemisphere, had the temerity to elect
Jean Bertrand Aristide, the candidate of the poor, the Clintons sent troops, and Bush 43 kidnapped
him and took him to Central Africa.
The Reagan administration famously sold arms to Iran right after it had kidnapped U.S. embassy
staff to fund a proxy war against the other poorest nation in the hemisphere, Nicaragua. Reagan
asked the Mexican president to endorse his line that Nicaragua was a threat to the U.S. The Mexican
president replied he would be happy to do that if there was any way he could say such a thing
without being laughed out of office.
More recently, then secretary of state Hillary Clinton blessed the Honduran coup, installing
a military junta to replace the democratically-elected government–a government which had the temerity
to try to raise Honduras' minimum wage from 60¢ an hour. (The nerve of those people!). Meanwhile,
30,000 unaccompanied minors made their way to Gringolandia to avoid Honduran chaos. (I heard from
WaPo's Ruben Navarette, deploring the treatment of these kids, but he uttered not a peep about
what made them choose exile over their homes.)
For Mexico's current corruption and sad-and-sorry economy, we can at least take credit for
NAFTA. Actually their president, Carlos Salinas Gotari, drank enough of the neoliberal koolaid
with his Harvard education to propose "free trade" to Bush 41 whose administration authored the
actual legislation. Clinton signed the treaty with environmental and labor provisions that just
aren't enforced.
To demonstrate what a great idea was NAFTA, almost immediately the U.S. had to come up with
a $20 billion loan to deal with the capital flight it permitted–and not incidentally to bail out
U.S. banks that bet wrong on Mexico, and to rehearse the U.S. bank bailouts for any later financial
scandal.
One might guess that shipping a bunch of subsidized Iowa corn south of the border would put
some subsistence corn farmers in Mexico out of business and it did. Sure, corn is only arguably
the most important food crop in the world, and those little farmers were keeping the diversity
of the corn genome alive, but hey! They weren't making any money for Monsanto!
In the wake of NAFTA, Mexican real incomes declined 34% (says Ravi Batra in his Greenspan's
Fraud )–really saying something in a country where half the population gets by on less than
$4 a day. One has to return to the halcyon days of the Great Depression to find a decline like
that in the U.S. economy.
Of course that U.S. decline provoked no great migration oh wait! The Okies! The only more recent
comparable economic decline (besides the Greeks) that I can think of is when Cuba lost its oil
and subsidies from the Soviets in the early '90s. In the U.S., Michael Pollan reports we get one
calorie of food by burning 10 calories of petroleum. Without that Russian oil, I've read that
the average Cuban lost 20 lbs.
So the constant attacks, political, economic and military, from the U.S. have had an effect.
All those "illegal aliens" (no, not Martians with unpaid traffic tickets actually: "undocumented
workers") came north for a reason. Ask one if he'd rather be back home, and you'll seldom hear
them say "no."
We read daily in nakedcapitalism how we're sowing the wind, but we're surely going to reap
the whirlwind for the way the U.S. has treated its southern neighbors.
It's widely known that NAFTA allowed US agriculture companies that are heavily subsidized by
the government to dump their cheap corn in Mexico putting farmers there off their land and out
of business. And yet people still wonder why so many are immigrating to the US.
Also, I'd keep an eye on that governor who is facing extradition to the US for facilitating
the export of "large quantities" of cocaine. Speculation to be sure, but something tells me you
don't do that without the knowledge and possible assistance of Uncle Sugar.
I'd say ask Gary Webb, but he's dead of course after exposing a similar scandal back in the
90s.
NAFTA is directly responsible for increased cartel power. Besides corn dumping disrupting Mexico's
rural economy and legitimate income, it generated the "maquiladora's" or Mexican factories along
the US border for assembling tariff free imported materials for export.
The large population increase the factories attracted had no increase in public infrastructure
like schools, housing etc and youth gangs proliferated. The cartels then began using the gangs
as enforcers for smuggling routes and distribution into the US and many associated criminal tasks.
A cascade of events ..
Between 2008 and 2016 Pemex's contribution to the government's tax revenues shrank from
40% to 13%.
A radio journalist friend in Guadalajara has been expecting and writing about this scenario
for at least a dozen years. Mexico is a petro-state, but production is declining in its big oilfields
and isn't being replaced. He visited South America to check out alternate bolt holes, on the theory
that when the oil runs out, it's gonna turn ugly in Mexico.
So far his worries proved to be early. We don't have enough data points, but it's worth noting
that Mexico's 1982 debt crisis occurred after a spike in US interest rates, a US recession and
an oil patch meltdown in 1981.
Similarly, the US Fed started hiking interest rates in early 1994, while the price of oil had
been sliding toward $15/bbl ever since the late 1990 spike to $40/bbl in anticipation of the Gulf
war. Here's a long term chart of crude oil:
Now J-Yel and her sidekick Stanley Mellon Fischer are once again "normalizing" interest rates,
in a process they imagine to be smooth sailing. One should doubt this proposition. Among other
things, recent extreme peso devaluation makes Mexico's dollar-denominated debt more onerous to
service.
By next year, the question on everyone's lips in Vichy DC may be " Who lost Mexico?
"
IIRC, Cantarell, the supergiant Mexican offshore field, peaked quite awhile ago. Maybe some
new discoveries have made up for some of the decline, but I hadn't heard much about that.
If US establishment would go after murderous Mexican oligarchy's Wall Street interests and
support democratic movements in Mexico based of egalitarian principles, return of land to the
people and establish social justice, we would have to build a wall to keep Mexicans in the US
not the other way around.
It would also stop phony war on drugs in Mexico, a war that is nothing but a modern form, a
sad reincarnation of popular insurrection against Mexican aristocracy happens to be at this time
funded by drug trade, as a proud Mexican tradition of noble outlaws, a country founded on "Bandits"
myth as national heroes bringers of independence from Spain.
If the US removed big Imperial foot of the throats of billions of peoples all over the world,
and that includes Mexico nobody would want to go to America enjoying living in their own countries
as everybody wants.
World immigration is an artifact of exploitative globalism and wars. Nothing natural or normal
or desired is in emigration of people. Tourism yes but emigration is a sociopolitical tools of
global oligarchy combined with chaos and violence.
If US let, as it were before in history (revolution of 1910-1930-ties, before PRI was corrupted
to the bone) for political left to takeover the Mexican government then fate of Mexican people
would have changed significantly for better.
The primary aim of official propaganda is to generate an "official narrative" that can be
mindlessly repeated by the ruling classes and those who support and identify with them. This
official narrative does not have to make sense, or to stand up to any sort of serious scrutiny.
Its factualness is not the point. The point is to draw a Maginot line, a defensive ideological
boundary, between "the truth" as defined by the ruling classes and any other "truth" that contradicts
their narrative.
Or to use your language, it's to keep in place the foot of US authority on its own people.
The damage to Mexico in the war on drugs is collateral damage – a necessary cost of keeping people
in the US disciplined. Nothing personal just bidness.
This article focuses on the oil, but where does Carlos Slim figure into this? I find it endlessly
fascinating that one of the world's richest people hails from one of its poorest countries.
Point taken, but it should be noted that in terms of per capita GDP (PPP), Mexico is 68th out
of 186 in the world, meaning it is not really one of the world's poorest countries. That said,
there is rampant poverty in Mexico that makes Slim's hoarding all the more despicable.
Per capita GDP is just an average. Median income is what you should be considering
here. There are a handful of Carlos Slims down there that bust the curve for everyone else. Oh,
by the way, did I mention that Señor Slim now owns the New York Times?
Far be it from me to defend the Peña Nieto administration, but I'm not sure from where Quijones
gets this:
To make matters worse, much of Mexico's new debt is in foreign-denominated currencies. Between
2015 and 2016 alone, the total amount of euro and dollar-denominated debt it issued rose by
46%.
The
figures I have from the Bank of México show the country ended 2015 with a gross external debt
of USD $417bn, while it ended 2016 at USD $412 bn: ie not a 46% increase but rather the first
decrease in Mexico's external debt since 2009.
What I do see is that the total external debt (in dollars) decreased but the peso lost 18%
to the USD in 2016. Since GDP only grew 7% last year, Mexico's external debt as a percentage of
GDP (denominated in pesos) would have grown by around 40%. But this goes against Quijones' correct
point that " [u]nlike debt issued in pesos, Mexico's central bank cannot just print dollars
and euros to bail out bond holders or inflate away the debt. ". Therefore shouldn't the question
be the absolute external debt in dollars instead of the relative amount in pesos?
I would guess that we want to answer the question "How much Mexican production would have to
be diverted to pay off that debt?" So we either work out the value of Mexican GDP in dollars,
or convert the value of the debt to pesos.
Therefore shouldn't the question be the absolute external debt in dollars instead of the
relative amount in pesos?
Simpler to keep the currency conversions out, and just track changes on a per currency basis.
A perennial question I always ask when it comes to trade imbalances by the US is that we send
our dollars to foreign countries for goods, and it only a subset of the US dollars come back to
the US for goods what's happening to the rest of our US dollars? In the case of Mexico, an answer
in theory could be that at least some of those US dollars are being used to pay US debt. But that
would mean the Fed Gov of Mexico would have to implement a tax that is denominated in US dollars.
Which would then fall on their exporters, as they're the ones hoovering up the US dollars. And
they don't want that.
So instead they tax the losers. And they only have pesos. So the conversion rate is an issue.
What's interesting in all this is that while Mexico's Fed Gov is taking on debt in US dollars,
their central bank owns US treasuries (that's how they manipulate their currency). But it begs
the question, is there a way that Mexico's central bank and Mexico's Fed Gov could come to a deal
to use the US treasuries that the central bank is holding to cancel out the US debt obligation
by Mexico's Fed Gov? I'm guessing no – it's the principle of the matter, lol.
To make matters worse, much of Mexico's new debt is in foreign-denominated currencies.
Why do countries do this to themselves? Seems to be the very definition of insanity.
"Why do countries do this to themselves?" They don't. They have an elite that does this to
the country because it benefits them as a class, with most people in the country excluded from
the decision-making process.
I don't get what good it can possibly do to build a wall to keep those bad hombres out when
the bad hombres are all the politicians in Mexico. This is not a cautionary tale, it's too late
for that. We need entirely new thinking here. Look how complex Brexit is – which lets us know
how detailed the union tried to be in order to protect its interests. Which is looking pretty
futile. Victor Orban was the only leader in the EU to put up a wall to keep refugees/immigrants
out and instead of sanctioning Hungary, Mutti has confessed her immigration policy was a mistake.
Why on earth didn't she say the ME war was a mistake? It's practically genocide. Three years ago
when Syrians started leaving in a panic they knew it was going to be annihilation. How did they
know they were sitting on such unlucky ground? If free trade treaties had a way of maintaining
decent wages and living standards as the prerequisite to that trade we could begin to set things
right. And that is what we should be doing instead of going to war to kickstart the free market
economy. Trump is acting like that wall is actually infrastructure. And I wonder if people are
amused by the double meaning of "the war on poverty." Everything is such a mess we can't keep
pretending that the basics we follow are right. It seems like one long and insane emergency. I'm
so burned out with political failure.
"[Pemex's] pension liabilities amount to $1.2 billion" this figure seemed a bit low in today's
world of inflated pension return expectations–wondering about the source here. I saw the following
study said Pemex's liabilities were closer to $90 billion although it is Wharton.
That is a terrible typo on my part and I hang my head in shame - it should read 1.8 trillion
pesos (roughly $90 billion at today's exchange rate), though there's some controversy around the
number since some of the liabilities were supposed to have been transferred to the government's
books last year. I don't how how the $1.2 billion crept in but I apologize with complete sincerity
to all readers (and Yves) for the cock up.
That data point you mention was taken from
an article (second paragraph down) published in EL Financiero, the third most read newspaper
in Mexico and an affiliate of Bloomberg. Will look into the disparity.
As for Mexico's GDP, it grew by 2.3% last year, not 7%. The country hasn't experienced such
buoyant growth for decades - and certainly not since joining NAFTA.
Thanks DQ: sorry I wasn't clear about the 7% figure; the Bank of Mexico data I cited refer
to nominal GDP growth in pesos. Since the peso devalued 18% to the dollar in 2016, real GDP in
dollars shrank from USD 1.3 trillion to 1.15 trillion. Might this account for why EF calculated
a 46% increase in external debt– because they are stating how many dollars Mexico borrowed but
calculated in pesos? If so, this figure is misleading and detracts from your argument: those obligations
are in foreign currencies, so their value in pesos is beside the point.
As I see it, the external debt is not (yet) a major issue in Mexico; more of a concern are
the bonds issued by the states and semi-public companies that cannot print their own currencies
and will leave the public on the hook. (Not to mention PRI whacking the public with spending cuts
and utility/gas hikes, which are another story )
Thanks for clarifying, RG. And you're probably right: external debt is not the biggest issue
here. More important are the out of control public spending at the regional level, the systemic
corruption at both the state and federal level, which Peña Nieto's government has done nothing
to address, and Pemex's worsening woes, and the risk they pose to Mexico's fiscal health.
If the peso once again begins to fall in value, the exposure of Mexico's corporate sector to
foreign denominated debt is likely to be a much more immediate threat than the government's.
Mexico has always been like this. Even prior to American meddling. Transferring all their mineral
wealth i.e. silver to China for cheap, yet profitable, ceramics, and turning the Yucatan from
growing food into the plants that were used to weave bags for storage containers in the 18th C.,
peonage and companies stores, on and on it goes.
What's happening now is just a continuation of the plundering that's been happening since the
16th C.
this sounds like the standard bezzle:
run up debts
buy things
pocket the things
burn down the store
collect insurance $ on everything that was "inside" the store (even though it had actually been
looted long ago)
As for Duarte, he was caught this week by police in Guatemala. Like Yarrington, he wasn't
exactly laying low. Among the accusations he faces is that of buying fake chemotherapy drugs,
which were then unknowingly administered by state-run hospitals to children suffering from
cancer. He and his cohorts purportedly pocketed the difference.
Shades of Harry Lime, no? The drug war has done to Mexico what it took WWII to do to Vienna.
Anecdote here, but an uncle on my husband's side who lives in Mexico City had mentioned big
problems with his pension. (he works in media, and the family refers to it as a government pension).
he said that pensions are being looted and they are paying out pennies on the dollar. so he withdrew
what he could in lump sum and bought a small apartment near a beach somewhere. the only way to
keep any of the value. they say what used to be hundreds of dollars a month to retire on is now
less than $50 per month, and that no one can live off that little.
"... That 'political pressure' turned out to be the bait and switch for a system that shifted power via debt creation. ..."
"... What we have not yet come to terms with are the implications of David Graeber's anthropological insights: how does debt affect social relationships, alter social norms, and affect relationships among individuals? ..."
"... Debt is a form of power, but by failing to factor this into their equations, the Central Bankers are missing the social, political, and cultural consequences of the profound shifts in 'credit market architecture'. In many respects, this is not about 'money'; it's about power. ..."
"... The Central Bankers' models can include all the parameters they can dream up, but until someone starts thinking more clearly about the role and function of money, and the way that 'different kinds of money' create 'different kinds of social relationships', we are all in a world of hurt. ..."
"... At this point, Central Bankers should also ask themselves what happens - socially, personally - when 'debt' (i.e., financialization) shifts from productivity to predation. That shift accelerated from the 1970s, through the 1990s, into the 2000s. ..."
"... Now, maybe it is just a coincidence, but it is hard for me not to notice that the explosion in consumer credit matches up nicely with the rise in inequality. ..."
Of the structural changes, the evolution and revolution of credit market architecture
was the single most important . In the US, credit card ownership and instalment credit spread
between the 1960s and the 2000s; the government-sponsored enterprises – Fannie Mae and Freddie
Mac – were recast in the 1970s to underwrite mortgages; interest rate ceilings were lifted
in the early 1980s; and falling IT costs transformed payment and credit screening systems in
the 1980s and 1990s. More revolutionary was the expansion of sub-prime mortgages in the 2000s,
driven by rise of private label securitisation backed by credit default obligations (CDOs)
and swaps. The 2000 Commodity Futures Modernization Act (CFMA) made derivatives enforceable
throughout the US with priority ahead of claims by others (e.g. workers) in bankruptcy. This
permitted derivative enhancements for private label mortgage-backed securities (PMBS) so that
they could be sold on as highly rated investment grade securities. A second regulatory change
was the deregulation of banks and investment banks . Similar measures to lower required capital
on investment grade PMBS increased leverage at commercial banks. These changes occurred in
the political context of pressure to extend credit to poor.
That 'political pressure' turned out to be the bait and switch for a system that shifted
power via debt creation.
What we have not yet come to terms with are the implications of David Graeber's anthropological
insights: how does debt affect social relationships, alter social norms, and affect relationships
among individuals?
Debt is a form of power, but by failing to factor this into their equations, the Central
Bankers are missing the social, political, and cultural consequences of the profound shifts in
'credit market architecture'. In many respects, this is not about 'money'; it's about power.
After Brexit, Trump, and the emerging upheaval in the EU, it's no longer enough to just 'build
better economic models'.
The Central Bankers' models can include all the parameters they can dream up, but until
someone starts thinking more clearly about the role and function of money, and the way that 'different
kinds of money' create 'different kinds of social relationships', we are all in a world of hurt.
At this point, Central Bankers should also ask themselves what happens - socially, personally
- when 'debt' (i.e., financialization) shifts from productivity to predation. That shift accelerated
from the 1970s, through the 1990s, into the 2000s.
Allowing anyone to charge interest that is usurious is the modern equivalent of turning a blind
eye to slavery.
By enabling outrageous interest, any government hands their hard working taxpayers over to
what is essentially unending servitude.
This destroys the political power of any government that engages in such blind stupidity.
Frankly, I'm astonished that it has taken so long for taxpayers to show signs of outrage and
revolt.
I think you have come up with a good insight – I very much agree its about power and not money.
Now, maybe it is just a coincidence, but it is hard for me not to notice that the explosion
in consumer credit matches up nicely with the rise in inequality.
And one other thing I would point out – it doesn't take usurious interest rates. If squillionaires
have access to unlimited, essentially cost free money in which the distributors of money are guaranteed
a profit, NO MATTER HOW MUCH THEY HAVE LOST, while the debts on non-squillionaires are collected
with fees, penalties, and to the last dime, than it doesn't matter if interest rates are essentially
zero.
Who gets bailed out is not due to logic or accounting that says that the banks' losses have
to be made whole, but not home owners – that is an ideology called economics .
While ordinary people fret about austerity and jobs, the eurozone's corridors of power have
been undergoing a remarkable transformation
The ascension of Mario Monti to the Italian prime ministership is remarkable for more
reasons than it is possible to count. By replacing the scandal-surfing Silvio Berlusconi,
Italy has dislodged the undislodgeable. By imposing rule by unelected technocrats, it has
suspended the normal rules of democracy, and maybe democracy itself. And by putting a senior
adviser at Goldman Sachs in charge of a Western nation, it has taken to new heights the
political power of an investment bank that you might have thought was prohibitively
politically toxic.
This is the most remarkable thing of all: a giant leap forward for, or perhaps even the
successful culmination of, the Goldman Sachs Project.
It is not just Mr Monti. The European Central Bank, another crucial player in the sovereign
debt drama, is under ex-Goldman management, and the investment bank's alumni hold sway in the
corridors of power in almost every European nation, as they have done in the US throughout the
financial crisis. Until Wednesday, the International Monetary Fund's European division was
also run by a Goldman man, Antonio Borges, who just resigned for personal reasons.
Even before the upheaval in Italy, there was no sign of Goldman Sachs living down its nickname
as "the Vampire Squid", and now that its tentacles reach to the top of the eurozone, sceptical
voices are raising questions over its influence. The political decisions taken in the coming
weeks will determine if the eurozone can and will pay its debts – and Goldman's interests are
intricately tied up with the answer to that question.
Simon Johnson, the former International Monetary Fund economist, in his book 13 Bankers,
argued that Goldman Sachs and the other large banks had become so close to government in the
run-up to the financial crisis that the US was effectively an oligarchy. At least European
politicians aren't "bought and paid for" by corporations, as in the US, he says. "Instead what
you have in Europe is a shared world-view among the policy elite and the bankers, a shared set
of goals and mutual reinforcement of illusions."
This is The Goldman Sachs Project. Put simply, it is to hug governments close. Every business
wants to advance its interests with the regulators that can stymie them and the politicians
who can give them a tax break, but this is no mere lobbying effort. Goldman is there to
provide advice for governments and to provide financing, to send its people into public
service and to dangle lucrative jobs in front of people coming out of government. The Project
is to create such a deep exchange of people and ideas and money that it is impossible to tell
the difference between the public interest and the Goldman Sachs interest.
Mr Monti is one of Italy's most eminent economists, and he spent most of his career in
academia and thinktankery, but it was when Mr Berlusconi appointed him to the European
Commission in 1995 that Goldman Sachs started to get interested in him. First as commissioner
for the internal market, and then especially as commissioner for competition, he has made
decisions that could make or break the takeover and merger deals that Goldman's bankers were
working on or providing the funding for. Mr Monti also later chaired the Italian Treasury's
committee on the banking and financial system, which set the country's financial policies.
With these connections, it was natural for Goldman to invite him to join its board of
international advisers. The bank's two dozen-strong international advisers act as informal
lobbyists for its interests with the politicians that regulate its work. Other advisers
include Otmar Issing who, as a board member of the German Bundesbank and then the European
Central Bank, was one of the architects of the euro.
Perhaps the most prominent ex-politician inside the bank is Peter Sutherland, Attorney General
of Ireland in the 1980s and another former EU Competition Commissioner. He is now
non-executive chairman of Goldman's UK-based broker-dealer arm, Goldman Sachs International,
and until its collapse and nationalisation he was also a non-executive director of Royal Bank
of Scotland. He has been a prominent voice within Ireland on its bailout by the EU, arguing
that the terms of emergency loans should be eased, so as not to exacerbate the country's
financial woes. The EU agreed to cut Ireland's interest rate this summer.
Picking up well-connected policymakers on their way out of government is only one half of the
Project, sending Goldman alumni into government is the other half. Like Mr Monti, Mario Draghi,
who took over as President of the ECB on 1 November, has been in and out of government and in
and out of Goldman. He was a member of the World Bank and managing director of the Italian
Treasury before spending three years as managing director of Goldman Sachs International
between 2002 and 2005 – only to return to government as president of the Italian central bank.
Mr Draghi has been dogged by controversy over the accounting tricks conducted by Italy and
other nations on the eurozone periphery as they tried to squeeze into the single currency a
decade ago. By using complex derivatives, Italy and Greece were able to slim down the apparent
size of their government debt, which euro rules mandated shouldn't be above 60 per cent of the
size of the economy. And the brains behind several of those derivatives were the men and women
of Goldman Sachs.
The bank's traders created a number of financial deals that allowed Greece to raise money to
cut its budget deficit immediately, in return for repayments over time. In one deal, Goldman
channelled $1bn of funding to the Greek government in 2002 in a transaction called a
cross-currency swap. On the other side of the deal, working in the National Bank of Greece,
was Petros Christodoulou, who had begun his career at Goldman, and who has been promoted now
to head the office managing government Greek debt. Lucas Papademos, now installed as Prime
Minister in Greece's unity government, was a technocrat running the Central Bank of Greece at
the time.
Goldman says that the debt reduction achieved by the swaps was negligible in relation to euro
rules, but it expressed some regrets over the deals. Gerald Corrigan, a Goldman partner who
came to the bank after running the New York branch of the US Federal Reserve, told a UK
parliamentary hearing last year: "It is clear with hindsight that the standards of
transparency could have been and probably should have been higher."
When the issue was raised at confirmation hearings in the European Parliament for his job at
the ECB, Mr Draghi says he wasn't involved in the swaps deals either at the Treasury or at
Goldman.
It has proved impossible to hold the line on Greece, which under the latest EU proposals is
effectively going to default on its debt by asking creditors to take a "voluntary" haircut of
50 per cent on its bonds, but the current consensus in the eurozone is that the creditors of
bigger nations like Italy and Spain must be paid in full. These creditors, of course, are the
continent's big banks, and it is their health that is the primary concern of policymakers. The
combination of austerity measures imposed by the new technocratic governments in Athens and
Rome and the leaders of other eurozone countries, such as Ireland, and rescue funds from the
IMF and the largely German-backed European Financial Stability Facility, can all be traced to
this consensus.
"My former colleagues at the IMF are running around trying to justify bailouts of
€1.5trn-€4trn, but what does that mean?" says Simon Johnson. "It means bailing out the
creditors 100 per cent. It is another bank bailout, like in 2008: The mechanism is different,
in that this is happening at the sovereign level not the bank level, but the rationale is the
same."
So certain is the financial elite that the banks will be bailed out, that some are placing
bet-the-company wagers on just such an outcome. Jon Corzine, a former chief executive of
Goldman Sachs, returned to Wall Street last year after almost a decade in politics and took
control of a historic firm called MF Global. He placed a $6bn bet with the firm's money that
Italian government bonds will not default.
When the bet was revealed last month, clients and trading partners decided it was too risky to
do business with MF Global and the firm collapsed within days. It was one of the ten biggest
bankruptcies in US history.
The grave danger is that, if Italy stops paying its debts, creditor banks could be made
insolvent. Goldman Sachs, which has written over $2trn of insurance, including an undisclosed
amount on eurozone countries' debt, would not escape unharmed, especially if some of the $2trn
of insurance it has purchased on that insurance turns out to be with a bank that has gone
under. No bank – and especially not the Vampire Squid – can easily untangle its tentacles from
the tentacles of its peers. This is the rationale for the bailouts and the austerity, the
reason we are getting more Goldman, not less. The alternative is a second financial crisis, a
second economic collapse.
Shared illusions, perhaps? Who would dare test it?
Nearly 60% (58.3%) of the population in Ukraine lives below the poverty line, according to data of
the M.V. Ptukha Institute of Demography and Social Surveys, the National Academy of Science of Ukraine.
In 2015, this indicator was half as much – 28.6%. "The poverty index has increased twofold along
with the actual cost of living," says Svetlana Polyakova , the leading research fellow at the Living
Standard Department at the Demography Institute. "In addition, within the past year, we saw a growth
of the poverty level defined by the UN criteria for estimation of internationally comparable poverty
line in Central and Eastern Europe."
The highest poverty line was registered among the families having at least one child – 38.6% and
pensioners – 23%. The situation may deteriorate this year. According to the State Service of Statistics,
savings of Ukrainians in April-June fell by 5.297billion hryvnias (more than $200 million at the
current exchange rate).
The cost of living in Ukraine in 2016 makes up 1,544 hryvnias (about $60).
Earlier, Prime Minister of Ukraine Volodymyr Groysman said the previous policy of populism and
"money printing and distribution to people" made the country weaker and the people poorer.
"... Elites can continue on the current path of pursuing integration projects and defending existing
integration, hoping to win enough popular support that their efforts are not thwarted. On the evidence
of the U.S. presidential campaign and the Brexit debate, this strategy may have run its course. ...
..."
"... I think some fellows already had this idea: "Much more promising is this idea: The promotion
of global integration can become a bottom-up rather than a top-down project" -- "Workers of the World,
Unite. You have nothing to lose but your chains!" ~Marx/Engels, 1848 ..."
"... Krugman sort of said this when he saw that apparel multinationals were shifting jobs out of
China to Bangladesh. Like $3 an hour is just way too high for workers. ..."
"... The "populists" are raging against global trade which benefits the world poor. The Very Serious
economists know what is really going on and have to interests of the poor at heart. Plus they are smarter
than the "populists" who are just dumb hippies. ..."
"... And what about neocolonialism and debt slavery ? http://historum.com/blogs/solidaire/245-debt-slavery-neo-colonialism-neoliberalism.html
..."
"... International debtors are the modern colonialists, sucking the marrow of countries; no armies
are needed anymore to keep those countries subjugated. Debt is the modern instrument of enslavement,
the international banks, corporations and hedge funds the modern colonial powers, and its enforcers
are instruments like the Global Bank, the IMF, and the corrupt, collaborationist governments (and totalitarian
regimes) of those countries, supported and propped up by these neo-colonials. ..."
"... Cover your a$$ much Larry? No mention of mass immigration? No mention of the elites' conscious,
planned attack on homogeneous societies in Western Europe, the US, and now Japan? ..."
"... The US was 88% European as of 1960. As of 1800 it was like 90% English. So yes, it was basically
a homogeneous society prior to the immigration act of 1965. Today it is extremely hard for Europeans
to get into the US -- but easier for non-Europeans. Now why would that be? Hmm .... ..."
"... The only trade that is actually free is trade not covered by laws and/or treaties. All other
trade is regulated trade. ..."
"... Here's a good rule to follow. When someone calls something the exact opposite of what it is,
in all probability they are trying to hustle your wallet. ..."
"... ISIS was invented by Wall Street who financed them. ISIS is a scam, just like Bin Laden's group,
just like "COMMUNISM!!!!" to control people. To manipulate them. ..."
"... Guys, the bourgeois state is a protection racket and always has been. It makes you feel safe,
secure and "feel like man". So we can enjoy every indulgent individual lust the world has to offer.
Then comes in dialectics of what that protection racket should do. ..."
"... To me, the bourgeois state is nothing more than a protection racket for the rich, something
you should not forget. ..."
"... I find it rather precious that Summers pretends not to understand why people hate TPP. I do
not think there is any real widespread antipathy toward global integration, though it does pose some
rather substantial systemic dangers, as we saw in the global financial collapse. What people, including
me, oppose is how that integration is structured. These agreements are about is not "free trade", but
removing all restrictions on global capital and that is a big problem. ..."
"... TPP is not free trade. It is protectionism for the rich. ..."
"... All or most modern "free trade" agreements are like that. What people oppose is agreements
which impoverish them and enrich capital. ..."
"... More free trade arrangement are not always better trade arrangements. People have seen the
results of the labor race to the bottom caused by earlier free trade agreements; and now they are guessing
we're going to get the same kind of race to the bottom with TPP when we have to put all of our environmental
laws and other domestic regulations into capitalist competition with backward countries. ..."
"... progressive states (WA, OR, CA, NV, IL, NY, MD) could simply treat union busting the same way
any OTHER major muscling or manipulation of the free market is treated: make it a felony. ..."
"... Summers: "Pie in the Sky" So trade negotiations would have to be lead by labor advocates and
environmental groups -- sounds great to me, but I can't for the life of me figure out why the goods
and service producers (i.e. capital owners) would have any incentive to promote trade under such a negotiated
trade agreement... or that trade would actually occur. You'd have to eliminate private enterprise incentives
to profit I think.. not something the U.S.'s "individualism" god can't tolerate. ..."
"... Alas, the Kaiser, the Tsar, and the Emperor did not act in accord with its tenets. Either increased
global trade is irrelevant to war and peace, or World War I didn't happen. Your pick which to believe.
..."
What's behind the revolt against global integration? : Since the end of World War II, a broad
consensus in support of global economic integration as a force for peace and prosperity has been
a pillar of the international order. ...
This broad program of global integration has been more successful than could reasonably have
been hoped. ... Yet a revolt against global integration is underway in the West. ...
One substantial part of what is behind the resistance is a lack of knowledge. ...The core of
the revolt against global integration, though, is not ignorance. It is a sense - unfortunately
not wholly unwarranted - that it is a project being carried out by elites for elites, with little
consideration for the interests of ordinary people. ...
Elites can continue on the current path of pursuing integration projects and defending
existing integration, hoping to win enough popular support that their efforts are not thwarted.
On the evidence of the U.S. presidential campaign and the Brexit debate, this strategy may have
run its course. ...
Much more promising is this idea: The promotion of global integration can become a bottom-up
rather than a top-down project. The emphasis can shift from promoting integration to managing
its consequences. This would mean a shift from international trade agreements to international
harmonization agreements, whereby issues such as labor rights and environmental protection would
be central, while issues related to empowering foreign producers would be secondary. It would
also mean devoting as much political capital to the trillions of dollars that escape taxation
or evade regulation through cross-border capital flows as we now devote to trade agreements. And
it would mean an emphasis on the challenges of middle-class parents everywhere who doubt, but
still hope desperately, that their kids can have better lives than they did.
I think some fellows already had this idea: "Much more promising is this idea: The promotion
of global integration can become a bottom-up rather than a top-down project" -- "Workers of the
World, Unite. You have nothing to lose but your chains!" ~Marx/Engels, 1848
Krugman sort of said this when he saw that apparel multinationals were shifting jobs out of
China to Bangladesh. Like $3 an hour is just way too high for workers.
A large part of the concern over free trade comes from the weak economic performances around the
globe. Summers could have addressed this. Jared Bernstein and Dean Baker - both sensible economists
- for example recently called on the US to do its own currency manipulation so as to reverse the
US$ appreciation which is lowering our net exports quite a bit.
What they left out is the fact that both China and Japan have seen currency appreciations as
well. If we raise our net exports at their expense, that lowers their economic activity. Better
would be global fiscal stimulus. I wish Larry had raised this issue here.
The "populists" are raging against global trade which benefits the world poor. The Very Serious
economists know what is really going on and have to interests of the poor at heart. Plus they
are smarter than the "populists" who are just dumb hippies.
One of the most fundamental reasons for the poverty and underdevelopment of Africa (and of
almost all "third world" countries) is neo-colonialism, which in modern history takes the shape
of external debt.
When countries are forced to pay 40,50,60% of their government budgets just to pay the interests
of their enormous debts, there is little room for actual prosperity left.
International debtors are the modern colonialists, sucking the marrow of countries; no
armies are needed anymore to keep those countries subjugated. Debt is the modern instrument of
enslavement, the international banks, corporations and hedge funds the modern colonial powers,
and its enforcers are instruments like the Global Bank, the IMF, and the corrupt, collaborationist
governments (and totalitarian regimes) of those countries, supported and propped up by these neo-colonials.
In reality, not much has changed since the fall of the great colonial empires. In paper, countries
have gained their sovereignty, but in reality they are enslaved to the international credit system.
The only thing that has changed, is that now the very colonial powers of the past, are threatened
to become debt colonies themselves. You see, global capitalism and credit system has no country,
nationality, colour; it only recognises the colour of money, earned at all cost by the very few,
on the expense of the vast, unsuspected and lulled masses.
Debt had always been a very efficient way of control, either on a personal, or state level.
And while most of us are aware of the implementations of personal debt and the risks involved,
the corridors of government debt are poorly lit, albeit this kind of debt is affecting all citizens
of a country and in ways more profound and far reaching into the future than those of private
debt.
Global capitalism was flourishing after WW2, and reached an apex somewhere in the 70's.
The lower classes in the mature capitalist countries had gained a respectable portion of the
distributed wealth, rights and privileges inconceivable several decades before. The purchasing
power of the average American for example, was very satisfactory, fully justifying the American
dream. Similar phenomena were taking place all over the "developed" world.
Cover your a$$ much Larry? No mention of mass immigration? No mention of the elites' conscious,
planned attack on homogeneous societies in Western Europe, the US, and now Japan?
There is of course no reasonable answering to prejudice, since prejudice is always unreasonable,
but should there be a question, when was the last time that, say, the United States or the territory
that the US now covers was a homogeneous society?
Before the US engulfed Spanish peoples? Before the US engulfed African peoples? Before the
US engulfed Indian peoples? When did the Irish, just to think of a random nationality, ruin "our"
homogeneity?
I could continue, but how much of a point is there in being reasonable?
The US was 88% European as of 1960. As of 1800 it was like 90% English. So yes, it was basically
a homogeneous society prior to the immigration act of 1965. Today it is extremely hard for Europeans
to get into the US -- but easier for non-Europeans. Now why would that be? Hmm ....
ISIS was invented by Wall Street who financed them. ISIS is a scam, just like Bin Laden's
group, just like "COMMUNISM!!!!" to control people. To manipulate them.
It is like using the internet to think you are "edgy". Some dudes like psuedo-science scam
artist Mike Adams are uncovering secrets to this witty viewer............then you wonder why society
is degenerating. What should happen with Mike Adams is, he should be beaten up and castrated.
My guess he would talk then. Boy would his idiot followers get a surprise and that surprise would
have results other than "poor mikey, he was robbed".
This explains why guys like Trump get delegates. Not because he uses illegal immigrants in
his old businesses, not because of some flat real wages going over 40 years, not because he is
a conman marketer.........he makes them feel safe. That is purely it. I think its pathetic, but
that is what happens in a emasculated world. Safety becomes absolute concern. "Trump makes me
feel safe".
Guys, the bourgeois state is a protection racket and always has been. It makes you feel
safe, secure and "feel like man". So we can enjoy every indulgent individual lust the world has
to offer. Then comes in dialectics of what that protection racket should do.
To me, the bourgeois state is nothing more than a protection racket for the rich, something
you should not forget.
I find it rather precious that Summers pretends not to understand why people hate TPP. I do
not think there is any real widespread antipathy toward global integration, though it does pose
some rather substantial systemic dangers, as we saw in the global financial collapse. What people,
including me, oppose is how that integration is structured. These agreements are about is not
"free trade", but removing all restrictions on global capital and that is a big problem.
Actually, this is my first actual response to the post itself, but you were too busy being and
a*****e to notice. All or most modern "free trade" agreements are like that. What people oppose
is agreements which impoverish them and enrich capital.
This has become a popular line, and it's not exactly false. But so what if it were a "free trade"
agreement? More free trade arrangement are not always better trade arrangements. People have
seen the results of the labor race to the bottom caused by earlier free trade agreements; and
now they are guessing we're going to get the same kind of race to the bottom with TPP when we
have to put all of our environmental laws and other domestic regulations into capitalist competition
with backward countries.
" The promotion of global integration can become a bottom-up rather than a top-down project. "
" ... whereby issues such as labor rights and environmental protection would be central ...
"
+1
Now if we could just adopt that policy internally in the United States first we could then
(and only then) support it externally across the world.
Easy approach: (FOR THE TEN MILLIONTH TIME!) progressive states (WA, OR, CA, NV, IL, NY,
MD) could simply treat union busting the same way any OTHER major muscling or manipulation of
the free market is treated: make it a felony. FYI (for those who are not aware) states can
add to federal labor protections, just not subtract.
A completely renewed, re-constituted democracy would be born.
Biggest obstacle to this being done in my (crackpot?) view: human males. Being instinctive
pack hunters, before they check out any idea they, first, check in with the pack (all those other
boys who are also checking in with the pack) -- almost automatically infer impossibility to overcome
what they see (correctly?) as wheels within wheels of inertia.
Self-fulfilling prophecy: nothing (not the most obvious, SHOULD BE easiest possible to get
support for actions) ever gets done.
I'm not the only one seeking a new path forward on trade.
by Jared Bernstein
April 11th, 2016 at 9:20 am
"...
Here's Larry's view of the way forward:
"The promotion of global integration can become a bottom-up rather than a top-down project.
The emphasis can shift from promoting integration to managing its consequences. This would
mean a shift from international trade agreements to international harmonization agreements,
whereby issues such as labor rights and environmental protection would be central, while issues
related to empowering foreign producers would be secondary. It would also mean devoting as
much political capital to the trillions of dollars that escape taxation or evade regulation
through cross-border capital flows as we now devote to trade agreements. And it would mean
an emphasis on the challenges of middle-class parents everywhere who doubt, but still hope
desperately, that their kids can have better lives than they did.
Good points, all. "Bottom-up" means what I've been calling a more representative, inclusive
process. But what's this about "international harmonization?""
It's a way of saying that we need to reduce the "frictions" and thus costs between trading
partners at the level of pragmatic infrastructure, not corporate power. One way to think of
this is TFAs, not FTAs. TFAs are trade facilitation agreements, which are more about integrating
ports, rail, and paperwork than patents that protect big Pharma.
It's refreshing to see mainstreamers thinking creatively about the anger that's surfaced
around globalization. Waiting for the anger to dissipate and then reverting back to the old
trade regimes may be the preferred path for elites, but that path may well be blocked. We'd
best clear a new, wider path, one that better accommodates folks from all walks of life, both
here and abroad."
Summers: "Pie in the Sky" So trade negotiations would have to be lead by labor advocates and
environmental groups -- sounds great to me, but I can't for the life of me figure out why the
goods and service producers (i.e. capital owners) would have any incentive to promote trade under
such a negotiated trade agreement... or that trade would actually occur. You'd have to eliminate
private enterprise incentives to profit I think.. not something the U.S.'s "individualism" god
can't tolerate.
Imagine a trade deal negotiated by the AFL-CIO. Labor wins a lot and capital owners lose a little.
We can all then smile and say to the latter - go get your buddies in Congress more serious about
the compensation principle. Turn the table!
"consensus in support of global economic integration as a force for peace and prosperity " --
"The Great Illusion" (
https://en.m.wikipedia.org/wiki/The_Great_Illusion
)
That increased trade is a bulwark against war rears its ugly head again. The above book which
so ironically delivered the message was published in 1910.
Alas, the Kaiser, the Tsar, and the Emperor did not act in accord with its tenets. Either
increased global trade is irrelevant to war and peace, or World War I didn't happen. Your pick
which to believe.
Our problems began back in the 1970s when we abandoned the Bretton Woods international capital
controls and then broke the unions, cut taxes on corporations and upper income groups, and deregulated
the financial system. This eventually led a stagnation of wages in the US and an increase in the
concentration of income at the top of the income distribution throughout the world:
http://www.rwEconomics.com/Ch_1.htm
When combined with tax cuts and financial deregulation it led to increasing debt relative to
income in the importing countries that caused the financial catastrophe we went through in 2008,
the economic stagnation that followed, and the social unrest we see throughout the world today.
This, in turn, created a situation in which the full utilization of our economic resources can
only be maintained through an unsustainable increase in debt relative to income:
http://www.rwEconomics.com/htm/WDCh3e.htm
This is what has to be overcome if we are to get out of the mess the world is in today, and
it's not going to be overcome by pretending that it's just going to go away if people can just
become educated about the benefits of trade. At least that's not the way it worked out in the
1930s: http://www.rwEconomics.com/LTLGAD.htm
A pretty devious scheme -- creating difficulty for the government neoliberal
wanted to depose by pushing neoliberal reforms via IMF and such. They channeling
the discontent into uprising against the legitimate government. Similar process
happened with Yanukovich in Ukraine.
Notable quotes:
"... the Syrian government put staying in power via adopting neoliberal strictures ahead of the welfare of Syrians ..."
"... it doesn't make President Assad virtuous of himself and neither does it reflect the reality that when push came to shove Assad put his position ahead of the people of Syria and kissed neoliberal butt. ..."
"... President Assad revealed his stupidity when he didn't pay attention to what happens to a leader who has previously been featured as a 'tyrant' in western media if he lets the neoliberals in: They fawn & scrape all the while developing connections to undermine him/her. If the undermining is ineffective there is no backing off. The next option is war. The instances are legion from President Noriega of Panama to President Hussein of Iraq to Colonel Ghaddaffi of Libya - that one really hurts as the Colonel was a genuinely committed and astute man. Assad is just another hack in comparison. ..."
"... Syrian leaders are politicians, they suffer the same flaws of politicians across the world. They are power seekers who inevitably come to regard the welfare of their population as a means to an end rather than an end in itself. ..."
"... No one denies that the opposition have been used and abused by FUKUSi, but that of itself does not invalidate the very real issues that persuaded them to resist an austerity imposed from above by assholes who weren't practicing what they preached. ..."
"... According to the European model of diplomacy imposed upon the globe, countries have interests not friends. ..."
"... A solution which reduces numbers of humans killed is worth attempting. ..."
"... Just because someone chooses an option that you disagree with does not make them evil or headchoppers or Islamofacist. ..."
"... On balance I would rather see Assad continue as leader of Syria but I'm not so naive as to believe he is capable of finding a long term resolution, or that there are not a good number of self interested murderous sadists in his crew. ..."
"... This war is about destroying real history, civilization, culture and replacing with fake. The war in Yemen is the same. Who in that region wants to replace real history with fake. Think about it. Most Islamic,Christian, Assyrian history is systematically being destroyed. ..."
"... you make some good points concerning Assad flirting with neoliberalism however, i don't know how you call an opposition 'moderate' when its toting firearms. ..."
"... The protests against Assad were moderate, and to his credit Assad was willing to meet them halfway. However, this situation was exploited by (((foreign powers))) ..."
"... This is not about "good or evil", this is about TOW missiles made in USA against T-55, Saudi money for mercenaries, Israeli regional ambitions and so on. Syria is another country that the US wants to destroy. Six years ago Syria was a peaceful country. ..."
"... Allegedly president Assad is a bad guy but Erdogan, Netanyhu and bin Saud are noble and good men. Who believes in such nonsense? The US has become similar to Israel and this is the reason why "Assad must go". Sick countries do sick things. ..."
"... no, because one side is so simplistically evi l(armed to the fucking teeth and resolved to violent insurrection!!!), if Assad didn't have the backing of the vast majority of his people and of his overreached army it would have ended a long time ago and Syria would be a failed state flailing away in the grip of anarchy. perhaps your Syrian 'friends' should meditate on this naked truth. ..."
"... when that shitty little country called Israel was squeezed onto the map in 1948, Syria welcomed Palestinian refugees with open arms by the hundreds of thousands. no, they didn't grant them citizenship, but prettty much all other rights. ..."
"... This whole nightmare was dreamed up from within the US Embassy in Damascus in 2006. Bashir al Assad was too popular in the country and the region for America's liking, so they plotted to get rid of him. Near all the organ eating, child killing, head chopping "moderate" opposition are from other countries, those that are Syrian, as was the case in Iraq, mostly live outside the country and are not in touch with main stream opinion, but very in touch with US, Saudi etc $$$s. ..."
"... I consider Bashar al-Assad the legitimate Syrian President and attempts to remove him by external interests as grounds for charges of crimes against humanity, crimes of war. ..."
"... As one of the bloggers rightly stated Wesley Clarke spilled the whole beans and revealed their true ilk. 7 countries in 5 years. How coincidental post 9/11. ..."
"... If you say "Assad was flirting with Neo Liberalism" then this is actually a compliment to Assad. Why? Because he wanted to win time. He wanted to prevent the same happening to Syria that has happened to Iraq. At that time there was no other protective power around. Russia was still busy recovering. ..."
"... As demeter said Posted by: Demeter @14, the flirrting with neoliberalism bought them time as neocons were slavering for a new target. It also made the inner circle a ridiculous amount of money. Drought made life terrible for many rural syrians. When the conflict started, if you read this website you'd notice people wondering what was going on and as facts unfolded. realizing that Assad was the lesser of two evils, and as the war has gone on, look like an angel in comparison to the opposition. ..."
"... Salafism is Racism. It de-egitimizes the entire anti Assad revolution. ..."
"... Wesley Clark's "seven countries in five years" transcript for anyone who has forgotten: http://genius.com/General-wesley-clark-seven-countries-in-five-years-annotated ..."
"... the armed conflict originated with scheming by foreign governments to use extremists as a weapon. ..."
"... Furthermore, Debsisdead sets up the same "binary division" that he says he opposes by tarnishing those who oppose using extremists as a weapon of state as Assad loving racists. The plot was described by Sy Hersh in 2007 in "The Redirection" . ..."
"... The fight IS "binary". You support Assad and his fighters, the true rebels, or you don't. Calling Assad a "hack" is a slander of a veritable hero. Watch his interviews. Assad presides over a multi-cultural, multi-confessional, diverse, secular state, PRECISELY what the Reptilians claim they cherish. ..."
"... "the Syrian government put staying in power via adopting neoliberal strictures ahead of the welfare of Syrians." - on that we can agree. ..."
"... It continues to annoy me that the primary trigger for the civil war in Syria has been totally censored from the press. The government deliberately ignited a population explosion, making the sale or possession of condoms or birth control pills illegal and propagandizing that it was every woman's patriotic duty to have six kids. The population doubled every 18 years, from 5 million to 10 million to 20 million and then at 22 the water ran out and things fells apart. Syria is a small country mostly arid plateau, in principle it could be developed to support even more people just not in that amount of time and with the resources that the Syrians actually had. ..."
"... It doesn't mean he's a saint that Assad is leading the very popular 'secular/multi-confessional Syria' resistance against an extremely well-funded army primarily of non-Syrians who are mainly 'headchoppers' who will stop at nothing to impose Saudi-style religious dictatorship on Syria. ..."
"... The 'moderate' opposition to Assad has largely disappeared (back into the loyal opposition that does NOT want a Saudi-style state imposed on Syria), but those who remain in armed rebellion surely must know that they are a powerless, very small portion of what is in fact mercenary army completely subservient to the needs and directives of its primary funders/enablers, the US and Saudi Arabia. So whatever their original noble intentions, they've become part of the Saudi/US imperial problem. ..."
"... All that land, all that resource...and a unifying language. Amazing. If only the Arab world could unite for the collective good of the region we might witness a rogue state in an abrupt and full decline. A sad tactic of colonial powers over the years, setting the native tribes upon each other. We've not evolved here. ..."
"... t in recent history the foreign policy of powerful nations is aimed at sponsoring social disintegration within the borders of targeted countries. ..."
"... Ethnic cleansing means destruction of culture, of historical memory, the forced disappearance of communities that were rooted in a place. ..."
"... Compare President Assad's leadership to that of the western, or Saudi, sponsors of terror; or measure his decisions against those of the hodgepodge of rebels and mercenaries, with their endless internal squabbles and infighting. Assad is so much more of a spokesman for the rights of sovereignty, and his words carry more weight and outshine the banalities that spring from the mouths of those who are paying the bills, and supplying weapons, and giving all kinds of diplomatic comfort to the enemies of the Syrian government. ..."
"... There is no need for sorting things into absolutes of good and evil. But there is a condition under which fewer, a lot fewer, humans would have died in Syria, Without foreign interference--money, weapons, and training--Assad's government would have won this war quite a while ago. ..."
"... And as for "Islamic Fundamentalism", it is this abnormal form of Islam that is purely based on racism and not the other way around. Islamic fundamentalists call everybody, and I mean everybody, who is not living according to their rule a non-believer, a Takfiri, who does not deserver to live. ..."
"... Fundamentalism is never satisfied until it can become a tyranny over the mind. Racism and fundamentalism are as American as apple pie. You have to take a close look at who is pouring oil on this fire! ..."
"... I disagree with you in that neoliberalism is seriously not difficult to define. It boils down to belief that public programs are bad/'inefficient' and that society would be better served by privatizing many things(or even everything) and opening services up to 'competition'. It's mainly just cover for parasites to come in and get rich off of the masses misery. The 'neoliberalism is just a snarl word' meme is incredibly stupid, since plenty of books and articles have been written explicitly defining it. ..."
"... American economic hegemony is inherently neoliberal, and has been for decades. The IMF is essentially an international loan shark that gives countries money on the condition that they dismantle their public spending apparatus and let the market run things. ..."
"... The situation is different now. One Syrian lady, who came to see me in April, who lives in California, told me that her father, who was a big pre-war oppositionist, now just wants to return to Syria to die. There's no question. if you want peace in Syria, Asad is the only choice. The jihadis, who dominate the opposition, don't offer an alternative. ..."
"... The lesson of Viet Nam was to keep the dead and wounded off the six o'clock news. ..."
"... The jackals are going in. Another coup. Syria was on the list. Remap the Middle East. Make it like Disney World. Israel as Mad King Ludwig's Neuschwanstein. ..."
"... I don't think anyone who comments here regularly ever assumed that Bashar al Assad was a knight in white shining armour. Most of us are aware of how he came to be President and that his father did rule the country from 1971 to 2000 with an iron fist. Some if not most also know that initially when Bashar al Assad succeeded to the Presidency, he did have a reformist agenda in mind. How well or not he succeeded in putting that across, what compromises he had to make, who or what opposed him, how he negotiated his way between and among various and opposed power structures in Syrian politics we do not know. ..."
"... Yes, I have trouble reconciling the fact that Bashar al Assad's government did allow CIA renditioning with his reformist agenda in my own head. That is something he will have to come to terms with in the future. I don't know if Assad was naive, under pressure or willing, even eager in agreeing to cooperate with the CIA, or trying to buy time to prepare for invasion once Iraq was down. Whether Assad also realises that he was duped by the IMF and World Bank in following their advice on economic "reforms" (such as privatising Syria's water) is another thing as well. ..."
"... I don't see why you call the problem "Islamic fundamentalism" when in fact it is Sunni fundamentalism. ..."
"... Manifest Destiny is fundamentalism. ..."
"... "Full Spectrum Dominance" and other US Military doctrines are fundamentalist in nature. ..."
"... I have no doubt that Assad was little more than a crude Arab strongman/dictator prince back in the 2011 when the uprising started. Since then, he has evolved into a committed, engaged defender of his country against multilateral foreign aggression, willingly leaving his balls in the vice and all. ..."
"... He could have fled the sinking ship many times so far. Instead, he decided to stay and fight the Takfiri river flowing in through the crack, and risk going down with the ship he inherited. The majority of the Syrians know this very well. ..."
"... Bashar of 2016 (not so much the one of 5 1/2 years ago) would not only win the next free elections, but destroy any opposition. The aggressors know that as a fact. ..."
"... if Syria had control over its borders with Turkey, Israel, Jordan and Iraq would the war have ended a long time ago ? Answer honestly. ..."
"... If yes, then the so-called "opposition" of the union of headchoppers does not represent a significant portion of the Syrian people. Were it otherwise Assad wouldnt be able to survive a single year, let alone 5. With or without foreign help. ..."
"... OK here is an interesting article from 2011 on Abdallah Dardari, the fellow who persuaded Bashar al Assad to adopt the disastrous neoliberal economic reforms that not only ruined Syria's economy and the country's agriculture in particular but also created an underclass who resented the reforms and who initially joined the "rebels". http://english.al-akhbar.com/node/2097 ..."
"... And where is Dardari now? He jumped ship in 2011 and went to Beirut to work for the UN's Economic and Social Commission for Western Asia (ESCWA). He seems like someone to keep a watchful eye on. https://en.wikipedia.org/wiki/Abdullah_Dardari ..."
"... of COURSE assad flirted with the west. between housing cia rendition houses and the less-than-flattering aspects of the wikileaks "syria files", assad and/or his handlers (family and/or military) have tried a little too hard to "assimilate" to western ideals (or the lack thereof). ..."
"... i seriously doubt they will make that mistake again. they saw what happened to al-qaddafi after he tried to play nice and mistook western politicians for human beings. they've learned their lesson and become more ruthless but they were always machiavellians because they have to be. not an endorsement, just an acceptance of how the region is. ..."
"... also: israel, the saudis (along with qatar and the other GCC psychopaths in supporting capacity) and the US are the main actors and throwing european "powers" into the circle of actual power does them an undue favor by ignoring their status as pathetic vassal states. "FrUkDeUSZiowhatever" isn't necessary. ..."
"... Look I know the MSM is utterly controlled - but the extent of that control still shocks at times. It is simply not possible to be "informed" by any normal definition of the word anymore without the alternative media - and for that reason this site serves a valuable purpose and I once again thank the host and contributors. ..."
"... The irony is, Assad is 10x smarter and bigger person than Debs. Yes, he made some mistakes, but if not "flirting with neoliberalism", war against Syria would have started many years earlier, when Resistance wasnt ready one bit (neither Russia, nor Iran, while on the other hand US was more powerful). ..."
"... Support for rebel groups was misguided at best at the beginning of the war. One could conceivably not appreciate the capacity of the KSA/USA/Quatar/Israel to influence and control and create these groups. Jesus it's hard for me to think of a single local opposition group that isnt drenched in fanaticism besides the Kurds. ..."
"... There's no way to a solution for the Syrian people, the population not imported that is, if these groups win. I hate to be so binary but its so naive in my eyes to think anything good will come from the long arm of the gulf countries and the USA taking control. ..."
"... As I've said repeatedly, the GOAL of the Syria crisis for the Western elites, Israel and the ME dictatorships is to take Syria OUT by any means necessary in order to get to IRAN. Nothing else matters to these people. In the same vein, nothing else matters to ninety percent of the CURRENT insurgents than to establish some Salafist state, exterminate the Shia, etc., etc. ..."
"... So, yes, right NOW the whole story is about US elites, Zionist "evil", corrupt monarchs, and scumbag fanatics, etc., etc. Until THAT is resolved, nothing about how Syria is being run is going to matter. ..."
"... Copeland @60: No, I don't think the problem is fundamentalism. It's the warring crusade method of spreading a belief's 'empire' that is the problem. This is a problem uniquely of the Saudi 'do whatever it takes' crusade to convert the entire 'Arab and Muslim world' to their worst, most misogynist form of Islam. ..."
"... Just want to mention that from the beginning there were people who took up arms against the government. This is why the situation went out of control. People ambushed groups of young soldiers. Snipers of unknown origin fired on police and civilians. ..."
"... I rather like Assad. I won't lie. But, he is not the reason for the insurrection in Syria ~ well, except for his alliances with Russia and Iran and his pipeline decisions and his support for Palestinian and Iraqi refugees. What happened in Syria is happening all over the globe because the nation with the most resources in the world, the self-declared exceptionalist state thinks this is the way to rule the world. . . . because they want to rule and they don't care how much destruction it takes to do so. And lucky for us there is no one big enough and bad enough to do it to us - except for our own government. ..."
"... There were a lot of people posting how Bashar al Assad was doing full neoliberalism. And at was true. ..."
"... So Assad was hit by a Tri-horror: global warming, dwindling cash FF resources, and IMF-type pressure, leaving out the trad. enemies, KSA, pipelines , etc. MSM prefer to cover up serious issues with 'ethnic strife' (sunni, shia, black lives matter, etc.) ..."
It is sad to see so many are so locked into their particular views that they
see any offering of an alternative as 'neoliberal' or laughable or - if it weren't
so serious - Zionist.
1/ I do not see the Syrian civil war as racist or race based, I do believe
however that the rejection of all Islamic fundamentalism as being entirely comprised
of 'headchoppers' is racist down to its core. It is that same old same old whitefella
bullshit which refuses to consider other points of view on their own terms but
considers everything through the lens of 'western' culture which it then declares
wanting and discards.
2/ Noirette comes close to identifying one of the issues that kicked
off the conflict, that the Syrian government put staying in power via adopting
neoliberal strictures ahead of the welfare of Syrians. I realize many have
quite foolishly IMO, adopted President Assad as some sort of model of virtue
- mostly because he is seen to be standing up to American imperialism. That
is a virtuous position but it doesn't make President Assad virtuous of himself
and neither does it reflect the reality that when push came to shove Assad put
his position ahead of the people of Syria and kissed neoliberal butt.
3/ President Assad revealed his stupidity when he didn't pay attention
to what happens to a leader who has previously been featured as a 'tyrant' in
western media if he lets the neoliberals in: They fawn & scrape all the while
developing connections to undermine him/her. If the undermining is ineffective
there is no backing off. The next option is war. The instances are legion from
President Noriega of Panama to President Hussein of Iraq to Colonel Ghaddaffi
of Libya - that one really hurts as the Colonel was a genuinely committed and
astute man. Assad is just another hack in comparison.
4/ These Syrian leaders are politicians, they suffer the same flaws of
politicians across the world. They are power seekers who inevitably come to
regard the welfare of their population as a means to an end rather than an end
in itself.
5/ My Syrians friends are an interesting bunch drawn from a range of people
currently living inside and outside of Syria. Some longer term readers might
recall that I'm not American, don't live in America and nowadays don't visit
much at all. The first of the 'refugee' Syrians I got to know, although refugee
is a misnomer since my friend came here on a migrant's visa because his skills
are in demand, is the grandchild of Palestinian refugees - so maybe he is a
refugee but not in the usual sense. Without going into too many specifics as
this is his story not mine, he was born and lived in a refugee camp which was
essentially just another Damascus suburb. As he puts it, although a Palestinian
at heart, he was born in Syria and when he thinks of home it is/was Damascus.
All sides in the conflict claimed to support Palestinian liberation, yet he
and his family were starved out of their homes by both Syrian government militias
and the FSA.
When he left he was initially a stateless person because even though he was
born in Syria he wasn't entitled to Syrian citizenship. He bears no particular
grudge against the government there but he told me once he does wish they were
a lot smarter.
On the other hand he also understands why the people fighting the government
are doing so. I'm not talking about the leadership of course (see above - pols
are pols) but the Syrians who just couldn't take the fading future and the petty
oppression by assholes any longer.
6/ No one denies that the opposition have been used and abused by FUKUSi,
but that of itself does not invalidate the very real issues that persuaded them
to resist an austerity imposed from above by assholes who weren't practicing
what they preached.
I really despair at the mindset which reduces everything to a binary division
- if group A are the people I support they must all be wonderful humans and
group B those who are fighting Group A are all evil assholes.
If group A claim to support Palestinian self determination (even though they
have done sweet fuck all to actually advance that cause) then everyone in Group
B must be pro-Zionist even though I don't know what they say about it (the leadership
of the various resistance groups are ME politicians and therefore most claim
to also support Palestinian independence). Yes assholes in the opposition have
done sleazy deals with Israel over Golan but the Ba'ath administration has done
similar opportunist sell outs over the 40 years when the situation demanded
it.
I fucking hate that as much as anyone else who despises the ersatz state
of Israel, but the reality is that just about every ME leader has put expedience
ahead of principle with regard to Palestine. Colonel Ghadaffi would be the only
leader I'm aware of who didn't. Why do they? That is what all pols and diplomats
do not just Arab ones. According to the European model of diplomacy imposed
upon the globe, countries have interests not friends.
As yet no alternative to that model has succeeded since any attempt to do
so has been rejected with great violence. The use of hostages offered by each
party to guarantee a treaty was once an honorable solution, the hostages were
well treated and the security they afforded reduced conflict - if Oblamblam
had to put up one of his daughters to guarantee a deal does anyone think he
would break it as easily as he currently does? Yet the very notion of hostages
is considered 'terrorism' in the west. But I digress.
The only points I wanted to make was the same as those I have already made:
A solution which reduces numbers of humans killed is worth attempting.
Just because someone chooses an option that you disagree with does
not make them evil or headchoppers or Islamofacist.
On balance I would rather see Assad continue as leader of Syria
but I'm not so naive as to believe he is capable of finding a long term
resolution, or that there are not a good number of self interested murderous
sadists in his crew. By the same token I don't believe all of those
resisting the Ba'athist administration are headchopping jihadists or foreign
mercenaries. This war is about 5 years old. If either side were so simplistically
good or evil it would have ended a long time ago.
Plus one more - it is humorous and saddening to see people throw senseless
name-calling into the mix. It is the method preferred by those who are too
stupid and ill informed to develop a logical point of view.
If you want to call me a Zionist lackey of the imperialists or whatever it
was go right ahead - it is only yourself who you tarnish, I'm secure in the
knowledge of my own work against imperialism, corporate domination and Zionism
but perhaps you, who have a need to throw aspersions are not?
Posted by b on September 12, 2016 at 03:33 AM |
Permalink
Plus one more - it is humorous and saddening to see people throw senseless
name-calling into the mix. It is the method preferred by those who are
too stupid and ill informed to develop a logical point of view.
why you think your article is different from others senseless name-calling,
i see exactly the same.
This war is about destroying real history, civilization, culture
and replacing with fake. The war in Yemen is the same. Who in that region
wants to replace real history with fake. Think about it. Most Islamic,Christian,
Assyrian history is systematically being destroyed.
you make some good points concerning Assad flirting with neoliberalism
however, i don't know how you call an opposition 'moderate' when its toting
firearms.
The protests against Assad were moderate, and to his credit Assad
was willing to meet them halfway. However, this situation was exploited
by (((foreign powers)))
If either side were so simplistically good or evil it would have ended
a long time ago.
This is not about "good or evil", this is about TOW missiles made in
USA against T-55, Saudi money for mercenaries, Israeli regional ambitions
and so on. Syria is another country that the US wants to destroy. Six years
ago Syria was a peaceful country.
Allegedly president Assad is a bad guy but Erdogan, Netanyhu and
bin Saud are noble and good men. Who believes in such nonsense? The US has
become similar to Israel and this is the reason why "Assad must go". Sick
countries do sick things.
If either side were so simplistically good or evil it would have
ended a long time ago
no, because one side is so simplistically evi l(armed to the fucking
teeth and resolved to violent insurrection!!!), if Assad didn't have the
backing of the vast majority of his people and of his overreached army it
would have ended a long time ago and Syria would be a failed state flailing
away in the grip of anarchy. perhaps your Syrian 'friends' should meditate
on this naked truth.
If group A claim to support Palestinian self determination (even
though they have done sweet fuck all to actually advance that cause)...
when that shitty little country called Israel was squeezed onto the
map in 1948, Syria welcomed Palestinian refugees with open arms by the hundreds
of thousands. no, they didn't grant them citizenship, but prettty much all
other rights.
so thanks, b, for headlining this obfuscatory drivel. thus, for posterity.
This whole nightmare was dreamed up from within the US Embassy in Damascus
in 2006. Bashir al Assad was too popular in the country and the region for
America's liking, so they plotted to get rid of him. Near all the organ
eating, child killing, head chopping "moderate" opposition are from other
countries, those that are Syrian, as was the case in Iraq, mostly live outside
the country and are not in touch with main stream opinion, but very in touch
with US, Saudi etc $$$s.
Here again is the reality of where this all started, article from 2012
(below.). And never forget Wesley Clark's Pentagon informant after 9/11
of attacking "seven countries in five years." Those in chaos through US
attacks or attempted "liberation" were on the list, a few more to go and
they are a bit behind schedule. All responsible for this Armageddon should
be answering for their actions in shackles and yellow jump suits in The
Hague.
|~b~ Thank you for putting Debsisdead's comment @ 135 prior post into readable
form. Failing eyesight made the original in its extended format difficult
to read.
Reference Debsisdead comment:
Your definition of neoliberal would be nice to have. Usually it is used
as ephemerally as a mirage, to appear in uncountable numbers of meaning.
Having determined your definition of neoliberal, are you sure it WAS
neoliberal rather than a hegemonic entity? Neoliberal seems best used as
the reactionary faux historic liberalism as applied to economic agendas
(neocon is the political twin for neoliberal, libertarian had been previously
been co-opted).
Instead of F•UK•US•i, maybe a F•UK•UZoP would suffice (France•United
Kingdom•United Zionist occupied Palestine) given the spheres of influence
involved.
Agree with your observations about the limited mentality of dualism;
manichaeism is a crutch for disabled minds unaware and blind to subtle distinctions
that comprise spectrums.
Though not paying close attention to Syrian history, it was Hafez al-Assad
who became master of the Syrian Ba'athist coup d'état and politically stabilised
Syria under Ba'athist hegemony. In the midst of the 'Arab-spring' zeitgeist,
an incident involving a child with security forces led to a genuine public
outcry being suppressed by state security forces. This incident, quickly
settled became cause célèbre for a subsequent revolt, initially by SAA dissidents
but soon thereafter by external interests having the motive of regime overthrow
of Syrian Ba'athists and their leadership. Other narratives generally make
little sense though may contain some factors involved; the waters have been
sufficiently muddied as to obscure many original factors - possibly Bashar
al-Assad's awareness of his security forces involvement in US rendition
and torture as to compromise his immediately assuming command of his security
forces in the original public protest over the child. Those things are now
well concealed under the fogs of conflict and are future historians to sort.
I consider Bashar al-Assad the legitimate Syrian President and attempts
to remove him by external interests as grounds for charges of crimes against
humanity, crimes of war.
Classic western sheeple disconnect. As one of the bloggers rightly stated
Wesley Clarke spilled the whole beans and revealed their true ilk. 7 countries
in 5 years. How coincidental post 9/11. This total disconnect with global
realities is a massive problem in the west cause the 86000 elite /oligarchs
r pushing for a war with both the bears/ Russian and Chinese along with
Iran. These countries have blatantly stated they will not be extorted by
fascism. All western countries r all living a Corporate state. Just look
all around every facet of our society is financialised. Health ,education
, public services.
Wake up cause if we dont we will be extinct Nuclear winter
I am of syrian origin, born in Beirut Lebanon.
My family lived a happy life there, but shortly after I was born, Israel
invaded Lebanon, and my family fled and emigrated to Europe, I was 1 year
old.
I call major bullshit on your piece.
If you say "Assad was flirting with Neo Liberalism" then this is actually
a compliment to Assad.
Why? Because he wanted to win time. He wanted to prevent the same happening
to Syria that has happened to Iraq. At that time there was no other protective
power around. Russia was still busy recovering.
What do you think would
have happened had Assad not pretended he would go along? Syria would have
been bombed to pieces right then. Why did Assad change his mind later and
refused to cooperate with Qatar, Saudi and US? Because the balance of power
was about to change. Iran and Russia were rising powers (mainly in the military
field).
I could say so much more. I stopped reading your post when you mentioned
that your Palestinian friend ( I know the neighbourhood in Damascus, it
is called Yarmouk and it is indeed a very nice suburb) does not have Syrian
citizenship. Do you know why Palaestinians don't get Syrian citizenship?
Because they are supposed to return to their homeland Palestine.
And they can only do that as Palestinians and not as Syrians. That is
why.
And that so many (not all!) Palestinians chose to backstab the country
that has hosted them and fed them and gave them a life for so many years,
and fought side by side with islamist terrorists and so called Free Syrian
Army traitors is a human error, is based on false promises, is lack of character
and honour and understanding of the broader context and interests. How will
some of these fools and misguided young men feel when they realise that
they have played right into the hand of their biggest enemy, the Zionists.
I would like to remind some of you who might have forgotten that famous
incident described by Robert Fisk years ago, when a Syrian Officer told
him upon the capture of some of these "freedom fighters' on Syrian soil,
one of them said: "I did not know that Palestine was so beautiful", not
realising that he was not fighting in Palestine but in Syria.
And as for "Islamic Fundamentalism", it is this abnormal form of Islam
that is purely based on racism and not the other way around. Islamic fundamentalists
call everybody, and I mean everybody, who is not living according to their
rule a non-believer, a Takfiri, who does not deserver to live.
Though reluctant to get involved in what seems to be for some a personal
spat, I would like to point out one fundemental point that renders the above
published and counter arguments difficult to comprehend which is that they
lack a time frame.
The 'Syrian opposition' or what ever you wish to call it is not now what
it was 6 years ago. Thus, for me, at least, it is not possible to discuss
the make up of the opposition unless there are some time frames applied.
An example is a Syrian who was an officer in the FSA but fled to Canada
last year. He fled the Syrian conflict over 3 years ago to Turkey -which
is how I know him - where he did not continue ties with any group. He simply
put his head down and worked slavishly living at his place of work most
of the time to escape to Canada - he feared remaining in Istanbul. He claimed
that he and others had all been taken in by promises and that the conflict
had been usurped by extremists. He was not a headchopper, he was not the
beheader of 12 year old children. He was and is a devout Muslim. He was
a citizen of Aleppo city. I know him and of him through other local Syrians
in Istanbul and believe his testimony. I mention him only to highlight that
the conflict is not what it was, not what some intended it to be ... Nor
is it what some paint it to be. There are many who fight whomever attacks
their community be they pro / anti Government. - Arabs especially have extended
village communities/ tribes and pragmatically they 'agree' to be occupied
as long as they are allowed to continue their lives in peace. If conflict
breaks out they fight whomever is necessary.
DebIsDead makes some very excellent points in his/her comments. They
deserve appraisal and respectful response. It is also clear thar he/she
is writing defensively in some parts and those detract from what is actually
being said.
The piece suffers from several errors. As demeter said Posted by: Demeter
@14, the flirrting with neoliberalism bought them time as neocons were slavering
for a new target. It also made the inner circle a ridiculous amount of money.
Drought made life terrible for many rural syrians. When the conflict started,
if you read this website you'd notice people wondering what was going on
and as facts unfolded. realizing that Assad was the lesser of two evils,
and as the war has gone on, look like an angel in comparison to the opposition.
You can't change the fact that it took less than 2 years for the opposition
to be dominated by both foreign and domestic takfiris who wanted to impose
saudi style culture on an open relatively prosperous cosmopolitan country.
They've succeeded in smashing it to pieces. Snuff your balanced account
and your bold anti racism
Debsisdead sets up a strawman - racism against Islamic fundamentalists
and validity of opposition against Assad - and uses this to sidestep
that the armed conflict originated with scheming by foreign governments
to use extremists as a weapon.
"If you want to call me a Zionist lackey of the imperialists or whatever
it was go right ahead - it is only yourself who you tarnish, I'm secure
in the knowledge of my own work against imperialism, corporate domination
and Zionism but perhaps you, who have a need to throw aspersions are not?"
Passive-aggressive much?
The fight IS "binary". You support Assad and his fighters, the true rebels,
or you don't. Calling Assad a "hack" is a slander of a veritable hero. Watch
his interviews. Assad presides over a multi-cultural, multi-confessional,
diverse, secular state, PRECISELY what the Reptilians claim they cherish.
"the Syrian government put staying in power via adopting neoliberal strictures
ahead of the welfare of Syrians." - on that we can agree.
It continues to annoy me that the primary trigger for the civil war in
Syria has been totally censored from the press. The government deliberately
ignited a population explosion, making the sale or possession of condoms
or birth control pills illegal and propagandizing that it was every woman's
patriotic duty to have six kids. The population doubled every 18 years,
from 5 million to 10 million to 20 million and then at 22 the water ran
out and things fells apart. Syria is a small country mostly arid plateau,
in principle it could be developed to support even more people just not
in that amount of time and with the resources that the Syrians actually
had.
No the issue was not 'climate change'. The aquifers in Syria had been
falling for years, even when rainfall was above normal. Don't blame the
weather.
"The more the merrier" - tell me exactly how people having more children
than they can support creates wealth? It doesn't and it never has.
Whenever governments treat their people as if they were cattle, demanding
that they breed the 'correct' number of children rather than making the
decision based on their own desires and judgement of how many they can support,
the result is always bad.
Assad treated the people of Syria as if they were cattle. Surely this
deserves mention?
Cultural "left" bullshit at its best. Cultural "leftists" don't need to
know any hostory or have any understanding of a political issue: it's sufficient
to pull out a few details from the NATO press and apply their grad school
"oppression" analysis.
Thanks to b for posting the comment of Debs is Dead. The point I would take
issue with is where he states "I realize many have quite foolishly IMO,
adopted President Assad as some sort of model of virtue. . ."
I don't believe this is a correct realization. I think the many to whom
he refers know very well that any person in leadership of a country can
be found to have flaws, major and minor, and even to have more of such than
the average mortal. The crucial counterpoint, however, which used to be
raised fairly often, is that it is the acceptance of the majority of the
people governed by such leaders that ought to be the international norm
for diplomatic relations.
I respect the knowledge DiD has gained from his Syrian friends and contacts.
But I also remember a man called Chilabi and am very leery of destabilization
attempts this country has been engaged in lo these many generations, using
such displaced persons as surrogates. And rather than properly mourn the
9/11 victims and brave firemen and rescuers of that terrible day, I find
myself mourning the larger tragedy of unnecessary wars launched as a consequence
of our collective horror at that critical moment in our history.
After making sound point about black-and-white worldview being unrealistic,
the guy goes full retard. Position towards Palestinians as the one and only
criteria to judge ME developments... C'mon, it's not even funny.
And while started from a "My Syrian friends" then he goes on reasoning on
behalf of one single ex-Palestinian ex-Syrian guy...
Looks like self-revelation of a kind. Some guy, sitting in Israel, or whatever,
waging informational warfare for the Mossad/CIA/NGO who pays his rent.
"The government deliberately ignited a population explosion, making the
sale or possession of condoms or birth control pills illegal and propagandizing
that it was every woman's patriotic duty to have six kids."
DiD: "I realize many have quite foolishly IMO, adopted President Assad as
some sort of model of virtue. . ." The big reveal is that DiD can't name
a single contributor here who has written that Assad is "some sort of model
of virtue."
It doesn't mean he's a saint that Assad is leading the very popular 'secular/multi-confessional
Syria' resistance against an extremely well-funded army primarily of non-Syrians
who are mainly 'headchoppers' who will stop at nothing to impose Saudi-style
religious dictatorship on Syria.
The 'moderate' opposition to Assad has
largely disappeared (back into the loyal opposition that does NOT want a
Saudi-style state imposed on Syria), but those who remain in armed rebellion
surely must know that they are a powerless, very small portion of what is
in fact mercenary army completely subservient to the needs and directives
of its primary funders/enablers, the US and Saudi Arabia. So whatever their
original noble intentions, they've become part of the Saudi/US imperial
problem.
Thanks for addressing the problem of angry comments by some posters who
just want to throw verbal grenades is unacceptable. I hope this site continues
to be a great source for sharing information and ideas.
Why in God's name was this pointless comment by Debs is Dead promoted this
way?!!! The only point being made, that I can see, is that the war in Syria
does have some legitimate issues at its root. WELL OF COURSE IT DOES. The
Hegemon rarely to never makes up civil unrest in countries it wants to overthrow
out of whole cloth. They take some dispute that is already there and ramp
it up; this process escalates until it turns into some form of a proxy war
or coup. In other words, the domestic political process is DISTORTED until
it is no longer remotely recognizable as a domestic process.
So sure, if the US and its allies had not stoked political factionism
in Syria into a global proxy war, we could discuss the fine details of the
Syrian domestic process very usefully. At this point, though, IT IS IRRELEVANT.
I do agree on one point: Assad joins the horrendous list of overlords
who thought they could make a deal with the Hegemon on their own terms.
Assad will pay for that mistake with his life very soon I would guess and
I think that Putin will too, though that might take a little longer. If
they had chosen to stand on principle as Chavez did, maybe they would be
dead as Chavez is (possibly done in, who knows), but they'd be remembered
with honor as Chavez is.
It is a shame no one stood up for Libya, for a surviving Gaddafi would have
emerged considerably stronger - as Assad eventually will.
Whatever genuine opposition there was has long been hijacked by opportunistic
takfiris, wahabbists and there various paymasters. And so as ruralito says
@25: "The fight IS "binary...". The fight is indeed binary, the enemy is
plural. Assad versus the many appearances of both the first and fourth kind.
Appearances to the mind are of four kinds.
Things either are what they appear to be;
or they neither are, nor appear to be;
or they are, and do not appear to be;
or they are not, and yet appear to be.
Rightly to aim in all these cases is the wise man's task. ~Epictetus
Where there is obfuscation lay the enemy, hence Russia's long game of
identification.
Does anyone remember the essay posted on this site a while back titled "The
Feckless Left?" I don't believe B posted it, but if memory serves it's posted
front and centre on the navigation bar beside this piece?
It really hammers those people like Tariq Ali, who while surely having
legitimate grievances against the Assad govt, opened the door for legitimation
of foreign sponsored war. They thought that funneling millions of dollars
worth of training, weapons and mercs would open the door for another secular
govt, but this time much 'better.' Surely.
No one thinks Assad is great. I really have trouble understanding where
that notion comes from. It's just that the alternative is surely much worse.
Lots of people didn't like Ghaddafi but jesus, I'm sure most Libyans would
wish they could turn back the clock (at the risk of putting words in their
mouths). It's not binary, no one sees this as good vs evil, its just that
its become so painfully obvious at this point that if the opposition wins
Syria will be so fucked in every which way. Those with real, tangible grievances
are never going to have their voices heard. It will become the next Libya,
except the US and it's clients will actually have a say in what's left of
the political body in the country if you could even label it that at that
point (which is quite frightenening in my eyes. Libya is already a shit
show and they don't have much of a foothold there besides airstrikes and
that little coastal base for the GNA to have their photo ops).
I find it ironic that when criticisms are levelled at Assad from the
left they usually point out things that had he done more of, and worse of,
he probably would be free of this situation and still firmly in power. If
he had bowed down to Qatar and the KSA/USA I wonder if the 'armed opposition'
would still have their problems with him? That's the ultimate irony to me.
If he had accepted the pipelines, the privatization regimes, etc. would
they still be hollering his name? It's very sad that even with the balancing
act he did his country has been destroyed. Even if the SAA is able to come
out on top at this point, the country is wholly destroyed. What's even the
point of a having a 'legitimate' or 'illegitimate' opposition when they're
essentially fighting over scraps now. I'd be surprised if they could rebuild
the country in 120 years. Libya in my eyes will never be what it once was.
It'll never have the same standards of living after being hit with a sledgehammer.
I don't mean to be ironic or pessimistic, its just a sad state of affairs
all around and everyday it seems more and more unlikely that any halfway
decent solution for the POPULATION OF SYRIA, not Assad, will come out of
this.. It's like, I'm no nationalist, but in many countries I kind of would
rather that than the alternative. Ghaddafi wasn't great but his people could've
been a lot worse of - and ARE a lot worse of now. I'm no Assad fan, but
my god look what the alternative is here. If it wasnt 95% foreign sponsored
maybe id see your point.
Read the essay posted on the left there. "Syria, the Feckless Left" IIRC.
I thought that summed up my thoughts well enough.
And guys, even if you agree with me please refrain from the name calling.
It makes those of you with a legitimate rebuttal seem silly and wrong. I've
always thought MoA was so refreshing because it was (somewhat) free of that.
At least B is generating discussion. I kind of appreciate that. It's nice
to hear ither views, even if they are a little unrealistic and pro violent
and anti democratic.
An example of an armed opposition with legitimate grievances that is
far from perfect but still very sympathetic (in my eyes) is hizbollah. They
have real problems to deal with. While they recieve foreign sponsorship
they aren't a foreign group the way the Syrian opposition is. And they will
be all but destroyed when their supply lines from Syria are cut off. I wonder
how that fits in with OPs post.
What makes Debs is Dead's turgid comment so irrational is that it endorses
Regime Change in Syria as an ongoing, but necessary and inevitable, "good".
But in doing so it tip-toes around the fact that it doesn't matter how Evil
an elected President is, or is not, it's up to the the people who elected
him to decide when they've had enough. It most certainly is NOT Neoconned
AmeriKKKa's concern.
Debs also 'forgot' to justify totally wrecking yet another of many ME
countries because of perceived and imaginary character flaws in a single
individual.
It does not compute; but then neither does "Israel's" 70 year (and counting)
hate crime, The Perpetual Palestinian Holohoax.
Whatever happened to the age old expression that one has to walk in someone
else's shoes to understand their walk in life?
In an all too obvious fashion, another arm chair expert is blessing the
world with his/her drivel.
To make it as concise as possible:
What would you have done in Assad's position? The U.S. is trying to annex
Syria since 1948 and never gave up on the plan to convert it to what the
neo-fascists turned Afghanistan, Iraq, Libya, Somalia and the Republic of
Yugoslavia - whereas Yemen is still in the making, together with Ukraine,
Turkey and Africa as a whole.
In the light of U.S. 'foreign policy', the piece reeks of the stench
of obfuscation.
Debs also 'forgot' to justify totally wrecking yet another of many ME
countries because of perceived and imaginary character flaws in a single
individual.
We shouldn't be surprised. Even a basic pragmatic approach to this conflict
has been lost by many in the one sided, over the top shower of faeces that
is the western MSM.
It does not compute; but then neither does "Israel's" 70 year (and
counting) hate crime, The Perpetual Palestinian Holohoax.
All that land, all that resource...and a unifying language. Amazing.
If only the Arab world could unite for the collective good of the region
we might witness a rogue state in an abrupt and full decline. A sad tactic of colonial powers over the years, setting the native tribes
upon each other. We've not evolved here.
It is impossible for any one of us to possess the whole picture, which is
why we pool our experience, and benefit from these discussions. The thing
I see at the root of the Syrian war is the process of ethnic cleansing.
In many cases that involve murderous prejudice, it erupts as civil war;
but in recent history the foreign policy of powerful nations is aimed at
sponsoring social disintegration within the borders of targeted countries.
Ethnic cleansing means destruction of culture, of historical memory,
the forced disappearance of communities that were rooted in a place.
The objectives of the perpetrators have nothing to do with the convictions
of the fundamentalists who do the dirty work; and the sectarian and mercenary
troops are merely the tools of those who are creating hell on earth.
I agree with what papa wrote at the top of this thread:
why you think your article is different from others senseless name-calling,[?]
i see exactly the same. This war is about destroying real history, civilization,
culture and replacing with fake. The war in Yemen is the same. Who in
that region wants to replace real history with fake. Think about it.
Most Islamic,Christian, Assyrian history is systematically being destroyed.
Compare President Assad's leadership to that of the western, or Saudi, sponsors
of terror; or measure his decisions against those of the hodgepodge of rebels
and mercenaries, with their endless internal squabbles and infighting. Assad
is so much more of a spokesman for the rights of sovereignty, and his words
carry more weight and outshine the banalities that spring from the mouths
of those who are paying the bills, and supplying weapons, and giving all
kinds of diplomatic comfort to the enemies of the Syrian government.
Debsisdead has always brought much food for thought to this watering
hole. I have always respected him, and I think he has a fine mind. Nonetheless,
despite the valuable contribution of this piece as a beginning place, in
which we might reevaluate some of our presumptions, I maintain there are
a few errors which stand out, and ought to be discussed.
I call into question these two points:
(1) Just because someone chooses an option that you disagree with does
not make them evil or headchoppers or Islamofacist.
Up thread @14, we were reminded of Robert Fisk's report about misdirected,
misinformed "freedom fighters" naively wandering around in Syria, while
thinking that they were fighting in Palestine. In this ruin of Syria, where
the well-intentioned are captured, or co-opted into evil acts against the
civilian population, --is it really incumbent upon us, --from where we sit,
to agonize over the motives of those who are committing the actual atrocities
against the defenseless? What is the point?
(2) On balance I would rather see Assad continue as leader of Syria
but I'm not so naive as to believe he is capable of finding a long term
resolution, or that there are not a good number of self interested murderous
sadists in his crew. By the same token I don't believe all of those
resisting the Ba'athist administration are headchopping jihadists or
foreign mercenaries. This war is about 5 years old. If either side were
so simplistically good or evil it would have ended a long time ago.
There is no need for sorting things into absolutes of good and evil.
But there is a condition under which fewer, a lot fewer, humans would have
died in Syria, Without foreign interference--money, weapons, and training--Assad's
government would have won this war quite a while ago.
And as for "Islamic Fundamentalism", it is this abnormal form of Islam
that is purely based on racism and not the other way around. Islamic
fundamentalists call everybody, and I mean everybody, who is not living
according to their rule a non-believer, a Takfiri, who does not deserver
to live.
Fundamentalism is never satisfied until it can become a tyranny over the
mind. Racism and fundamentalism are as American as apple pie. You have to
take a close look at who is pouring oil on this fire!
@9 I disagree with you in that neoliberalism is seriously not difficult to
define. It boils down to belief that public programs are bad/'inefficient'
and that society would be better served by privatizing many things(or even
everything) and opening services up to 'competition'. It's mainly just cover
for parasites to come in and get rich off of the masses misery. The 'neoliberalism
is just a snarl word' meme is incredibly stupid, since plenty of books and
articles have been written explicitly defining it.
"Having determined your definition of neoliberal, are you sure it WAS
neoliberal rather than a hegemonic entity?"
American economic hegemony is inherently neoliberal, and has been for
decades. The IMF is essentially an international loan shark that gives countries
money on the condition that they dismantle their public spending apparatus
and let the market run things.
I usually enjoy DiD's rants (rant in the nice sense), but in this case he
is wrong. His remarks are out of date.
No doubt he has Syrian friends in NZ, including the Syro-Palestinian
he mentions. They will have been living their past vision of Syria for some
time. Yes, back in 2011, there was a big vision of a future democratic Syria
among the intellectuals. However those who fight for the rebellion are not
middle class (who left) but rural Islamist Sunnis, who have a primitive
al-Qa'ida style view.
The Syrian civil war is quite like the Spanish civil war. It started
with noble republicans, including foreigners like Orwell, fighting against
nasty Franco, but finished with Stalin's communists fighting against Nazi-supported
fascists.
The situation is different now. One Syrian lady, who came to see me in
April, who lives in California, told me that her father, who was a big pre-war
oppositionist, now just wants to return to Syria to die. There's no question. if you want peace in Syria, Asad is the only choice.
The jihadis, who dominate the opposition, don't offer an alternative.
Noirette comes close to identifying one of the issues that kicked off
the conflict, that the Syrian government put staying in power via adopting
neoliberal strictures ahead of the welfare of Syrians.
The Ba'thist regime is a mafia of the family, not a dictatorship of Bashshar.
Evidently their own interest plays a premier role, but otherwise why not
in favour of the Syrian people? There's lot of evidence in favour of Syrian
peace.
The lesson of Viet Nam was to keep the dead and wounded off the six o'clock
news.
The jackals are going in. Another coup. Syria was on the list. Remap
the Middle East. Make it like Disney World. Israel as Mad King Ludwig's
Neuschwanstein.
Islam and its backward dictates, and Christianity with its backward dictates
and Manifest Destiny are problematic.
I may be white and I may be a fella but don't believe I'm in the fold as
described. Fundamentalists of any sort are free to believe as they will
but when they force it on others via gun, govt, societal pressures, violence
there's trouble. I've seen comparisons to the extremes from Christianity's
past with the excuse of Islam as being in its early years. No excuses. Fundies
out. But we don't see that in places like Saudi Arabia or Iran. Facts on
the ground rule. Iran had a bit more moderation but only under the tyrant
Shah. A majority may have voted for the Islamic Republic and all that entails
but what of the minority?
BTW, where are the stories (links) that show Bashar has embraced neoliberalism?
In the end, DiD reduced to pointing to two evils (with multi-facets) and
it looks like Assad is the lesser. But who can come up with a solution for
a country so divided and so infiltrated by outsiders? And here in the US,
look at the choice of future leaders that so many do not want. Where is
the one who will lead the US out of its BS? And who will vote for him/her?
Thanks to B for republishing the comment from Debsisdead. The comment raises
some issues about how people generally see the war in Syria, if they know
of it, as some sort of real-life video game substitute for bashing one side
or another.
I am not sure though that Debsisdead realises the full import of what
s/he has said and that much criticism s/he makes about comments in MoA comments
forums could apply equally to what s/he says and has said in the past.
I don't think anyone who comments here regularly ever assumed that Bashar
al Assad was a knight in white shining armour. Most of us are aware of how
he came to be President and that his father did rule the country from 1971
to 2000 with an iron fist. Some if not most also know that initially when
Bashar al Assad succeeded to the Presidency, he did have a reformist agenda
in mind. How well or not he succeeded in putting that across, what compromises
he had to make, who or what opposed him, how he negotiated his way between
and among various and opposed power structures in Syrian politics we do
not know.
Yes, I have trouble reconciling the fact that Bashar al Assad's government
did allow CIA renditioning with his reformist agenda in my own head. That
is something he will have to come to terms with in the future. I don't know
if Assad was naive, under pressure or willing, even eager in agreeing to
cooperate with the CIA, or trying to buy time to prepare for invasion once
Iraq was down. Whether Assad also realises that he was duped by the IMF
and World Bank in following their advice on economic "reforms" (such as
privatising Syria's water) is another thing as well.
But one thing that Debsisdead has overlooked is the fact that Bashar
al Assad is popular among the Syrian public, who returned him as President
in multi-candidate direct elections held in June 2014 with at least 88%
of the vote (with a turnout of 73%, better than some Western countries)
and who confirmed his popularity in parliamentary elections held in April
2016 with his Ba'ath Party-led coalition winning roughly two-thirds of seats.
The fact that Syrians themselves hold Assad in such high regard must
say something about his leadership that has endeared him to them. If as
Debsisdead suggests, Assad practises self-interested "realpolitik" like
so many other Middle Eastern politicians, even to the extent of offering
reconciliation to jihadis who lay down their weapons and surrender, how
has he managed to survive and how did Syria manage to hold off the jihadis
and US-Turkish intervention and supply before requesting Russian help?
Copeland @58: I don't see why you call the problem "Islamic fundamentalism"
when in fact it is Sunni fundamentalism. Admittedly it's tough to 'name'
the problem. I'm sure I speak for most here that the problem isn't fundamentalism
but 'warring imperialist fundamentalist and misogynist Sunni Islam' that
is the problem.
It'd be nice to have a brief and accurate way of saying
what this is: 'Saudi Arabia violently exporting its worst form of Islam'.
When people refer to Christian fundamentalism they use the broad term
as well. Nothing is otherwise wrong with denominational belief, if past
a certain point it is not fundamentalist. You say the problem is not fundamentalism,
but something else. Indeed, the problem is fundamentalism.
Manifest
Destiny is fundamentalism. There are even atheist fundamentalists. "Full
Spectrum Dominance" and other US Military doctrines are fundamentalist in
nature. We are awash in fundamentalism, consumerist fundamentalism, capitalist
fundamentalism. If we are unlucky and don't succeed in changing the path
we are on; then we will understand too late the inscription that appeared
in the Temple of Apollo: "Nothing too much".
They say that the first casualty of war is truth and from what I read in
comments such a mental state prevails among readers, they see Assad, quite
reasonably, as the only one who can end this horrible war and the only one
who is really interested in doing so while US and even seemingly Russia
seems to treat this conflict as a instrument of global geopolitical struggle
instigated by US imperial delusions.
But of course one cannot escape conclusion that although provoked by
the CIA operation Bashir Assad failed years befor 2011 exactly because,
living in London, did not see neoliberalism as an existential threat ad
his father did but a system that has its benefits and can be dealt with,
so for a short while Saddam, Gaddafi and Mubarak thought while they were
pampered by western elites.
Now Assad is the only choice I'd Syrians want to keep what would resemble
unified Syrian state since nobody else seems to care.
I have no doubt that Assad was little more than a crude Arab strongman/dictator
prince back in the 2011 when the uprising started.
Since then, he has evolved into a committed, engaged defender of his
country against multilateral foreign aggression, willingly leaving his balls
in the vice and all.
He could have fled the sinking ship many times so far. Instead, he decided
to stay and fight the Takfiri river flowing in through the crack, and risk
going down with the ship he inherited. The majority of the Syrians know
this very well.
Bashar of 2016 (not so much the one of 5 1/2 years ago) would not only
win the next free elections, but destroy any opposition. The aggressors
know that as a fact.
Which is precisely why he "must go" prior to any such elections. He would
be invincible.
"This war is about 5 years old. If either side were so simplistically
good or evil it would have ended a long time ago."
Question to you:
if Syria had control over its borders with Turkey, Israel, Jordan and
Iraq would the war have ended a long time ago ? Answer honestly.
If yes, then the so-called "opposition" of the union of headchoppers
does not represent a significant portion of the Syrian people. Were it otherwise
Assad wouldnt be able to survive a single year, let alone 5. With or without
foreign help.
And that, my friend, may be the biggest oft ignored cui bono of the entire
Syrian war.
If Assad goes:
Syria falls apart. Western Golan has no more debtor nation to be returned
to as far as the UN go. It immediately becomes fee simple property of the
occupying entity, for as long as the occupier shall exist (and, with Western
Golan included, that might be a bit longer perchance...).
Hizbullah loses both its best supply line and all the strategic depth
it might have as well as the only ally anywhere close enough to help. It
becomes a military non-entity. Who benefits?
I think this cui bono (and a double one at that!) is a $100 difficulty
level question, although it feels like a $64k one.
Best opinion post I've yet read on this site. "Binary division," also very
much affects the U.S. election. If you hate Hillary, you must just LOVE
Trump, even though many of the best reasons to hate her--her arrogance,
her incompetence, her phoniness, her lies, her and Bill's relentless acquisition
of great wealth, etc.--are also reasons to hate Trump. Assad is a bastard,
Putin is a bastard, Saddam was a bastard--but so are Obama, Netanyahu, Hollande,
etc. Is it REALLY that hard to figure out?
@ 62 john... we'll have to wait for debs to explain how all that (in your
link) adds up, so long as no one calls him any name/s.... i'd like to say
'the anticipation of debs commenting again is killing me', but regardless,
killing innocent people in faraway lands thanks usa foreign policy is ongoing..
OK here is an interesting article from 2011 on Abdallah Dardari, the fellow
who persuaded Bashar al Assad to adopt the disastrous neoliberal economic
reforms that not only ruined Syria's economy and the country's agriculture
in particular but also created an underclass who resented the reforms and
who initially joined the "rebels". http://english.al-akhbar.com/node/2097
And where is Dardari now? He jumped ship in 2011 and went to Beirut to
work for the UN's Economic and Social Commission for Western Asia (ESCWA).
He seems like someone to keep a watchful eye on.
https://en.wikipedia.org/wiki/Abdullah_Dardari
not even sure where to begin...this article is barely worthy of a random
facebook post and contains a roughly even mix of straw men and stuff most
people already know and don't need dictated to them by random internet folks.
of COURSE assad flirted with the west. between housing cia rendition
houses and the less-than-flattering aspects of the wikileaks "syria files",
assad and/or his handlers (family and/or military) have tried a little too
hard to "assimilate" to western ideals (or the lack thereof).
i seriously
doubt they will make that mistake again. they saw what happened to al-qaddafi
after he tried to play nice and mistook western politicians for human beings.
they've learned their lesson and become more ruthless but they were always
machiavellians because they have to be. not an endorsement, just an acceptance
of how the region is.
and then there's "just about every ME leader has put expedience ahead
of principle with regard to Palestine. Colonel Ghadaffi would be the only
leader I'm aware of who didn't". that might be a surprise to nasrallah and
a fair share of iran's power base. i'd also say "expedience" is an odd way
to describe the simple choice of avoiding israeli/saudi/US aggression in
the short term since the alternative would be what we're seeing in syria
and libya as we speak. again, not an endorsment of their relative cowardice.
just saying i understand the urge to avoid salfist proxy wars.
[also: israel, the saudis (along with qatar and the other GCC psychopaths
in supporting capacity) and the US are the main actors and throwing european
"powers" into the circle of actual power does them an undue favor by ignoring
their status as pathetic vassal states. "FrUkDeUSZiowhatever" isn't necessary.]
as for "calling all islamic fundamentalism" "headchopping" being "racist",
be sure not to smoke around all those straw men. never mind the inanity
of pretending that all islamic "fundamentalism" is the same. never mind
conflating religion with ethnicity. outside of typical western sites that
lean to the right and are open about it few people would say anything like
that. maybe you meant to post this on glenn beck's site?
whatever. hopefully there won't be more guest posts in the future.
I read this site regularly and give thanks to the numerous intelligent posters
who share their knowledge of the middle east and Syria in particular. Still,
I do try to read alternative views to understand opposition perspectives
no matter how biased or damaging these might they appear to the readers
of this blog. So in the wake of recent agreements, I try find out what the
mainstream media is saying about the Ahrar al-Sham refusal to recognize
the US/Russia sponsored peace plan....and type that into google.......and
crickets. All that comes up is a single Al-Masdar report.
Look I know the
MSM is utterly controlled - but the extent of that control still shocks
at times. It is simply not possible to be "informed" by any normal definition
of the word anymore without the alternative media - and for that reason
this site serves a valuable purpose and I once again thank the host and
contributors.
The irony is, Assad is 10x smarter and bigger person than Debs. Yes, he
made some mistakes, but if not "flirting with neoliberalism", war against
Syria would have started many years earlier, when Resistance wasnt ready
one bit (neither Russia, nor Iran, while on the other hand US was more powerful).
The other ironic point, Debs is guilty of many things he blames other
for, hence comments about his hypocrisy and lack of self-awareness.
The essay I refered to earlier at 45/46 from this site I'll post below.
I think it has a lot of bearing on what DiD is implying here. It's DEFINITELY
worth a read and is probably the reason why I started appreciating this
site in the first place.
Support for rebel groups was misguided at best at the beginning of the
war. One could conceivably not appreciate the capacity of the KSA/USA/Quatar/Israel
to influence and control and create these groups. Jesus it's hard for me
to think of a single local opposition group that isnt drenched in fanaticism
besides the Kurds. But now that we understand the makeup and texture of
these groups much more and to continue support, even just in the most minor
of ways, is really disheartening.
There's no way to a solution for the Syrian
people, the population not imported that is, if these groups win. I hate
to be so binary but its so naive in my eyes to think anything good will
come from the long arm of the gulf countries and the USA taking control.
WORTH A READ. ONE OF THE BEST THINGS EVER POSTED ON MoA.
Richard Steven Hack | Sep 13, 2016 3:38:32 AM |
79
The problem with this post is simple: all this might have been true back
when the insurgency STARTED. TODAY it is UTTERLY IRRELEVANT.
As I've said repeatedly, the GOAL of the Syria crisis for the Western
elites, Israel and the ME dictatorships is to take Syria OUT by any means
necessary in order to get to IRAN. Nothing else matters to these people.
In the same vein, nothing else matters to ninety percent of the CURRENT
insurgents than to establish some Salafist state, exterminate the Shia,
etc., etc.
So, yes, right NOW the whole story is about US elites, Zionist "evil",
corrupt monarchs, and scumbag fanatics, etc., etc. Until THAT is resolved,
nothing about how Syria is being run is going to matter.
I don't know and have never read ANYONE who is a serious commenter on
this issue - and by that I mean NOT the trolls that infest every comment
thread on every blog - who seriously thinks Assad is a "decent ruler". At
this point it does not matter. He personally does not matter. What matters
is that Syria is not destroyed, so that Hizballah is not destroyed, so that
Iran is not destroyed, so that Israel rules a fragmented Middle East and
eventually destroys the Palestinians and that the US gets all the oil for
free. This is what Russia is trying to defend, not Assad.
And if this leaves a certain percentage of Syrian citizens screwed over
by Assad, well, they should have figured that out as much as Assad should
have figured out that he never should have tried to get along with the US.
Frankly, this is a pointless post which is WAY out of date.
Posted by: Richard Steven Hack | Sep 13, 2016 3:38:32 AM | 79
In the same vein, nothing else matters to ninety percent of the CURRENT
insurgents than to establish some Salafist state, exterminate the Shia,
etc., etc.
"We had to be fighters," he said, "because we didn't find any other
job. If you want to stay inside you need to be a part of the FSA [Free
Syrian Army, the group that has closest relations with the West]. Everything
is very expensive. They pay us $100 a month but it is not enough.
"All this war is a lie. We had good lives before the revolution.
Anyway this is not a revolution. They lied to us in the name of religion.
"I don't want to go on fighting but I need to find a job, a house.
Everything I have is here in Muadhamiya."
...
.. who seriously thinks Assad is a "decent ruler". At this point it does
not matter. He personally does not matter.
...
Frankly, this is a pointless post which is WAY out of date.
Posted by: Richard Steven Hack | Sep 13, 2016 3:38:32 AM | 79
Well, according to RSH, who specialises in being wrong...
Assad does matter because he is the ELECTED leader chosen by the People
of Syria in MORE THAN ONE election.
Did you forget?
Did you not know?
Or doesn't any of that "democracy" stuff matter either?
Israel said its aircraft attacked a Syrian army position on Tuesday after
a stray mortar bomb struck the Israeli-controlled Golan Heights, and it
denied a Syrian statement that a warplane and drone were shot down.
The air strike was a now-routine Israeli response to the occasional spillover
from fighting in a five-year-old civil war, and across Syria a ceasefire
was holding at the start of its second day.
Syria's army command said in a statement that Israeli warplanes had attacked
an army position at 1 a.m. on Tuesday (2200 GMT, Monday) in the countryside
of Quneitra province.
The Israeli military said its aircraft attacked targets in Syria hours
after the mortar bomb from fighting among factions in Syria struck the Golan
Heights. Israel captured the plateau from Syria in a 1967 war.
The Syrian army said it had shot down an Israeli warplane and a drone
after the Israeli attack.
Denying any of its aircraft had been lost, the Israeli military said
in a statement: "Overnight two surface-to-air missiles were launched from
Syria after the mission to target Syrian artillery positions. At no point
was the safety of (Israeli) aircraft compromised."
The seven-day truce in Syria, brokered by Russia and the United States,
is their second attempt this year by to halt the bloodshed.
Copeland @60: No, I don't think the problem is fundamentalism. It's the
warring crusade method of spreading a belief's 'empire' that is the problem.
This is a problem uniquely of the Saudi 'do whatever it takes' crusade to
convert the entire 'Arab and Muslim world' to their worst, most misogynist
form of Islam. T
here are of course many fundamentalists (the Amish and some
Mennonites are examples from Christianity) that are not evangelical, or
put severe (no violence, no manipulation, no kidnapping, stop pushing if
the person says 'no') limits on their evangelism.
Only the Saudis, or pushers
of their version of Islam, seem to put no limits at all on their sect's
crusade.
Just want to mention that from the beginning there were people who took
up arms against the government. This is why the situation went out of control.
People ambushed groups of young soldiers. Snipers of unknown origin fired
on police and civilians.
There are plenty of people in the United States right now who are just
as oppressed - I would wager more so - than anyone in Syria. Immigrants
from the south are treated horribly here. There are still black enclaves
in large cities where young men are shot by the police on a daily basis
for suspicious behavior and minor driving infractions. And then there are
the disenfranchised white folks in the Teaparty who belong to the NRA and
insist on 'open carry' of their weapons on the street and train in the back
woods for a coming war. Tell me what would happen if there were a guarantor
these people found believable who promised them that if they took up arms
against the government (and anyone else in the country they felt threatened
by) they would be guaranteed to win and become the government of a 'New
America'. What if that foreign guarantor were to pay them and improve their
armaments while providing political cover.
I rather like Assad. I won't lie. But, he is not the reason for the insurrection
in Syria ~ well, except for his alliances with Russia and Iran and his pipeline
decisions and his support for Palestinian and Iraqi refugees. What happened
in Syria is happening all over the globe because the nation with the most
resources in the world, the self-declared exceptionalist state thinks this
is the way to rule the world. . . . because they want to rule and they don't
care how much destruction it takes to do so. And lucky for us there is no
one big enough and bad enough to do it to us - except for our own government.
"All of the petrodollars Saudi Arabia spends to advance this claim of
leadership and the monopolistic use of Islam's greatest holy sites to manufacture
a claim of entitlement to Muslim leadership were shattered by this collective
revolt from leading Sunni Muslim scholars and institutions who refused to
allow extremism, takfir, and terror ideology to be legitimized in their
name by a fringe they decided that it is even not part of their community.
This is the beginning of a new era of Muslim awakening the Wahhabis spared
no efforts and no precious resources to ensure it will never arrive."
Assad (=> group in power), whose stated aim was to pass from a 'socialist'
to a 'market' economy. Notes.
*decreased public sector employment.* -- was about 30%, went far
lower (1) - was a staple: one 'smart' graduate in the family guaranteed
a good Gvmt job, could support many.
*cut subsidies* (energy, water, housing, food, etc.) drought (2005>)
plus these moves threw millions into cities with no jobs.. pre-drought
about 20% agri empl. cuts to agri subsidies created the most disruption.
…imho was spurred by the sharply declining oil revenues (peak oil..)
which accounted for ?, 15% GDP in 2002 for ex to a few slim points edging
to nil in 2012, consequences:
> a. unemployment rose 'n rose (to 35-40% youth? xyz overall?), and social
stability was affected by family/extended f/ district etc. organisation
being smashed. education health care in poor regions suffered (2)
> b. small biz of various types went under becos loss of subs, competition
from outsiders (free market policy), lack of bank loans it is said by some
but idk, and loss of clients as these became impoverished. Syria does not
have a national (afaik) unemployment scheme. Assad to his credit
set up a cash-transfer thingie to poor families, but that is not a subsitute
for 'growing employment..'
*opened up the country's banking system* (can't treat the details..)
So Assad was hit by a Tri-horror: global warming, dwindling cash
FF resources, and IMF-type pressure, leaving out the trad. enemies, KSA,
pipelines , etc. MSM prefer to cover up serious issues with 'ethnic strife'
(sunni, shia, black lives matter, etc.)
1. all nos off the top of my head.
2. Acceptance of a massive refugee pop. (Pals in the past, Kurds, but
numerically important now, Iraqis) plus the high birth rate
2011> 10 year plan syria in arabic (which i can't read) but look at images
and 'supporters' etc.
"... Last week we reported on the DC Leaks hack of what was over 2,500 documents detailing how George Soros and his NGOs influence world leaders, drive foreign policy, and help to create unrest in sovereign nations, that many times leads to chaos and civil war. ..."
Last week we reported on the
DC Leaks hack of what was over 2,500 documents detailing how George Soros and his NGOs influence
world leaders, drive foreign policy, and help to create unrest in sovereign nations, that many times
leads to chaos and civil war.
One country of particular focus for George Soros and his NGOs is Ukraine. It is now
accepted fact that Soros was deeply involved in the Maiden protests in 2014 and the violent coup,
that saw a democratically elected government overthrown in the name of "EU values". What is even
more troubling, as revealed by the DC Leaks hack, is how Soros and his network of "non-profit organisations"
worked to lobby EU member states into not only buying his Ukraine "Maidan" narrative, but to also
disavow any ties and support for Russia.
Leaked documents show that George Soros was active in mapping out the Greek media landscape with
generous grants, so as to further his Ukraine project, while also using his deep pockets to get Greek
media to turn against the Russian Federation…in what can only be described as a well-funded and orchestrated
smear campaign.
In one document entitled: "Open Society Initiative For Europe (OSIFE). Mapping the Ukrainian
debate in Greece" (Ukraine and Europe-greece-tor ukraine debate mapping greece.docx), Soros
offers a consultant a remuneration of $6,500 (gross) for "at least 15 full working
days in carrying out this task" plus all expenses paid.
The aim of this task:
The consultant is expected to chart the main players in the Greek debate on Ukraine, outline
the key arguments and their evolution in the past 18 months. Specifically, the report will take
stock of any existing polling evidence provide a 'who is who?' with information about
at least
– 6 newspapers,
– 10 audiovisual outlets (TV and radio),
– 6 internet sites,
– About 50 opinion leaders and trends in social networks[1].
Categorize the main strains of discussion and eventually identify different sides / camps of
the discussion.
Provide a brief account of how Russia has tried to influence the Greek debate on Ukraine
through domestic actors and outlets
Include a section with recommendations on
– What are the spaces OSF should engage and would most likely to have impact?
– What are the voices (of reason or doubt) that should be amplified?
Open Society Initiative For Europe (OSIFE) selected Iannis Carras for the Greek media mapping
grant. The justification why he was chosen…
All contracts were for the same amount. We needed to find highly specialized researchers to
map the debate on Ukraine in Europe, therefore we identified a shortlist of candidates in consultation
with colleagues in the Think Tank Fund, OSEPI and in consultation with members of the OSIFE board
and chose the most qualified who could produce the report in the time allowed. I n the
case of Greece we agreed that Iannis Carras, an economic and social historian of Balkan and Russian
relations with expert knowledge of Greece's NGOs and social movements, was the best suited to
the task.
What is even more interesting is not the grant from OSIFE, but a letter from grant winner Carras
to a person named Mathew (another Greek speaker???), outlining his plan in detail for pushing Soros'
Ukraine agenda in Greece.
Of significance is how Carras tells Mathew about Greek society's overall suspicion of The Open
Society after the roll in played in seeding unrest in Yugoslavia. Carras even tells Mathew
to not mention The Open Society in Greece.
"Do you want your name to appear alongside mine on the paper? Do make comments on all of the
below.
In general, and at your discretion, do not say you are doing this for Open Society
because it is likely to close down doors. There's a lot of suspicion about Open Society in Greece,
mainly because of its positions vis-à-vis the former Yugoslavia. As I am simultaneously
writing an article for Aspen Review Eastern Europe that can be used as the organisation for which
research like this is taking place."
Carras then goes on to outline his approach in manipulating Greek society, covering topics such
as:
1. Media.
2. Political parties and think tanks
3. Opinion polls.
4. Business relations.
5. Religious and cultural ties.
6. Migration and diaspora.
7. Greece and Ukraine in the context of Greece's economic crisis.
8. Greece, Ukraine and the Cyprus issue.
9. Names and brief description of significant actors: a 'who is who?' with information on at least
50 opinion leaders
Carras notes how Russia has much goodwill in Greece, exercising "significant soft power".
Carras notes that Greece is, at this moment, a weak player in the Ukraine debate and the
Greek Foreign Minister Kotzias realises this.
Summary: I am working on the hypotheses largely born out by the interviews
carried out so far that Russia has significant soft power in Greece though this does not
easily convert into hard power (e.g. vetoing EU sanctions). Greeks are basically
not very interested in Ukraine and the crisis there. They reflect and understand that
conflict through their own economic crisis and their relations with Europe (nowadays primarily
Europe and not US). To the extent that relations with Europe remain the focus and do not go off
the rails, Greece will bark but will not bite. If they improve, Greece might
not even bark (as can be seen with Greece's policy on Israel, Kotzias can be very much a realist).
Carras does warn that should Greece's economic situation deteriorate further, than Greece may
very well look to Russia for support, and this has implications on the Ukraine plan.
If they deteriorate however, Greece will be looking to Russia for increased support
and will alter its Ukraine policies accordingly. Do you agree with these hypotheses?
Can you find confirmation for or against them in the media outlets examined?
Carras places extra emphasis on influencing the media in Greece, citing various large news outlets
that the Soros NGO can target, including approaching left wing and right wing blogs.
This is the bulk of the work (we have to think about how to divide the work up). We have to
provide a 'who is who?' with information about at least 6 newspapers, 10 audio-visual outlets
(TV and radio) and 6 internet sites. Some of these will be obvious, but, even in these cases,
change over time (at least eighteen months) is an important consideration. Here are some suggestions
for newspapers: Kathimerini, Avgi, Ta Nea, Vima, Efymerida Syntakton, Eleutherotypia,
Proto Thema, Rizospastis? etc. What else? Protagon? Athens Review of Books? (info on
Kotzias). As for TV, we'll just do the main ones. What about left wing blogs? What about commercial
radio stations? I think we should cover Aristera sta FM. Sky. What else? Anything from
the nationalist and far right? My choice would be Ardin (already looking at this) which
at least tries to be serious. Patria is even more unsavoury. I'll deal with the religious web
sites in the culture and religion appendix. I think we should interview Kostas Nisenko (
http://www.kathimerini.gr/757296/article/epikairothta/kosmos/viaih-epi8e... ) and Kostas Geropoulos
of New Europe to get into the issues involved… not at all sure though that it's advisable
to talk to the Russia correspondents Thanasis Avgerinos, Dimitris Liatsos, Achileas Patsoukas
etc. (I know all of them). Also if we come across articles with interesting information
on any one of the topics, we should mail them to one another.
Attention is placed on influencing political parties. Carras sees this as a more difficult task,
as parties in Greece would not be warm towards turning their back on Russia.
Who if anyone deals with Russia / Ukraine within each of the political parties? How important
are political parties in formulating policies? (my hunch is totally unimportant). I must
admit I have little idea of how to proceed with this one, but I have written to the academic
Vassilis Petsinis and I hope I'll get to skype with him soon. Think-tanks are easier,
and, I think, more important. I have already interviewed Thanos Dokos (director Greek foreign
policy institute, ELIAMEP) in person.
Carras notes how he has approached various religious leaders, academics and actors, to gauge a
sense of how deep Russia's influence and "soft power" runs in Greek society and culture.
So far I have interviewed by telephone Metropolitan John of Pergamum (one of the top figures
in the inner circle of the Istanbul based Ecumenical Patriarchate). I have read Metropolitan Nektarios
of the Argolid's recent book (2014), "Two bullets for Donetsk". I have tried but so far not succeeded
in contacting Metropolitan Nektarios himself, and have started work on two of the main religious
news websites romfea.gr and amen.gr .
With respect to culture I intend to contact Georgos Livathinos, leading director of Russian
and other plays and Lydia Koniordou, actress. Also the management of the Onassis Centre, particularly
Afroditi Panagiotakou, the executive vice-director who is quite knowledgeable in this field having
travelled to both Ukraine and Russia.
In 2016 Greece and Russia will be hosting each other as the focus of cultural events in the
two respective countries. I will be looking to understand the extent to which Russia's
unparalleled cultural soft-power might translate into Greek policy making.
Greek military is the final point of influence, with Carras interviewing Ambassadors and policy
decision makers.
Foreign policy and the Greek military. So far I have interviewed in person Ambassador Elias
Klis (formerly ambassador of Greece to Moscow, advisor to the current Foreign Minister, advisor
to the Greek Union of Industrialists. He is perhaps the single most important person for understanding
Greek-Russian diplomatic relations at present). Ambassador Alexandros Philon (formerly ambassador
of Greece to Washington, to whom I am related). Captain Panos Stamou (submarines, extensive contacts
in Crimea, also secretary and leading light of the Greek-Russian historical association) who emphasised
the non-political tradition of the Greek armed forces. Tempted to talk to Themos Stoforopoulos
for a nationalist left wing view. I have also read foreign minister Kotzias' latest book. All
of this has provided me with useful insights for appendices 7 and 8, and particularly for the
connection to the Cyprus issue (which at the moment Greece is very keen to downplay).
Carras places an emphasis on Cyprus, perhaps recognising the islands affinity to support Russia
and its large Russian diaspora community.
The recommendations will be for the medium and the short term, cited here based on interviews
carried out so far. Medium term recommendations will include a cultural event (to be specified
later) and a one-day conference on Ukraine and international law, citing precedents for dealing
with the situation in Ukraine (particularly Cyprus). Recommendations may include capacity building
for local Ukrainian migrant spokesperson(s). Short term recommendations will include an action
pack on what Greece has at stake in Ukraine, and ways to narrate parallels in interactions between
nation and empire vis-à-vis Greece / Ukraine. Think about whether these work / what else we might
recommend?
"... Brazil is corrupt to the core - from the comprador elites down to a great deal of the crass "new" elites, which include the PT. The greed and incompetence displayed by an array of PT stalwarts is appalling - a reflection of the lack of quality cadres. Corruption and traffic of influence involving Petrobras, construction companies and politicians is undeniable, even if it pales compared to Goldman Sachs shenanigans or Big Oil and/or Koch Brothers/Sheldon Adelson-style buying/bribing of US politicians. ..."
"... The Central Bank still keeps its benchmark interest rate at a whopping 14.25%. A disastrous Rousseff neoliberal "fiscal adjustment" actually increased the economic crisis. Today Rousseff "governs" - that's a figure of speech - for the banking cartel and the rentiers of Brazilian public debt. Over $120 billion of the government's budget evaporates to pay interest on the public debt. ..."
"... It's no coincidence that three major BRICS nations are simultaneously under attack - on myriad levels: Russia, China and Brazil. The concerted strategy by the Masters of the Universe who dictate the rules in the Wall Street/Beltway axis is to undermine by all means the BRICS's collective effort to produce a viable alternative to the global economic/financial system, which for the moment is subjected to casino capitalism. It's unlikely Lula, by himself, will be able to stop them. ..."
"... These oligarchs,.. GOOD. Those oligarchs.... BAD. ..."
"... The Oligarchs of the BRICS have been duped and co-opted by TPTB in the US. Their foot-dragging and lack or decisive and timely action means that their Window Of Opportunity is probably gone. The various Trans-Oceanic Trade Deals that the US has cooking is front-running their indecisiveness and lack of action. ..."
"... They are 'toast', because these Trade Deals have the USD baked into them, and the combined GDPs of each Pact is far bigger than that of the BRICS. ..."
Imagine one of the most admired global political leaders in modern
history taken from his apartment at 6 am by armed Brazilian Federal Police
agents and forced into an unmarked car to the Sao Paulo airport to be interrogated
for almost four hours in connection with a billion dollar corruption scandal
involving the giant state oil company Petrobras.
This is the stuff Hollywood is made of. And that was exactly
the logic behind the elaborate production.
The public prosecutors of the two-year-old Car Wash investigation maintain there
are "
elements of proof " implicating Lula in receiving funds - at least 1.1 million
euros - from the dodgy kickback scheme involving major Brazilian construction
companies connected to Petrobras. Lula might - and the operative word is "might"
- have personally profited from it mostly in the form of a ranch (which he does
not own), a relatively modest seaside apartment, speaking fees in the global
lecture circuit, and donations to his charity.
Lula is the ultimate political animal - on a Bill Clinton level. He had already
telegraphed he was waiting for such a gambit, as the Car Wash machine had already
arrested dozens of people suspected of embezzling contracts between their companies
and Petrobras - to the tune of over $2 billion - to pay for politicians of the
Workers' Party (PT), of which Lula was leader.
Lula's name surfaced via the proverbial rascal turned informer, eager to
strike a plea bargain. The working hypothesis - there is no smoking gun - is
that Lula, when he led Brazil between 2003 and 2010, personally benefited from
the corruption scheme with Petrobras at the center, obtaining favors for himself,
the PT and the government. Meanwhile, inefficient President Dilma Rousseff is
herself under attack engineered via a plea bargain by the former government
leader in the Senate.
Lula was questioned in connection to money laundering, corruption and suspected
dissimulation of assets. The Hollywood blitz was cleared by federal judge Sergio
Moro - who always insists he's been inspired by the Italian judge Antonio di
Pietro and the notorious 1990s
Mani Pulite
("Clean Hands") investigation.
And here, inevitably, the plot thickens.
Round up the usual media suspects
Moro and the Car Wash prosecutors justified the Hollywood blitz insisting
Lula refused to be interrogated. Lula and the PT vehemently insist otherwise.
And yet Car Wash investigators had consistently leaked to mainstream media
words to the effect, "We can't just bite Lula. When we get to him, we will swallow
him." This would imply, at a minimum, a politicization of justice, the Federal
Police and the Public Ministry. And would also imply that the Hollywood blitz
may have been supported by a smoking gun. As perception is reality in the frenetic
non-stop news cycle, the "news" - instantly global - was that Lula was arrested
because he's corrupt.
Yet it gets curioser and curioser when we learn that judge Moro wrote an
article in an obscure magazine way back in 2004 (in Portuguese only, titled
Considerations about Mani Pulite , CEJ magazine, issue number 26, July/September
2004), where he clearly extols "authoritarian subversion of juridical order
to reach specific targets " and using the media to intoxicate the political
atmosphere.
All of this serving a very specific agenda, of course. In Italy, right-wingers
saw the whole Mani Pulite saga as a nasty judicial over-reach; the left, on
the other hand, was ecstatic. The Italian Communist Party (PCI) emerged with
clean hands. In Brazil, the target is the left - while the right, at least for
the moment, seems to be composed of hymn-singing angels.
The pampered, cocaine-snorting loser candidate of the 2014 Brazilian presidential
election, Aecio Neves, for instance, was singled out for corruption by three
different accusers - and it all went nowhere, without further investigation.
Same with another dodgy scheme involving former president Fernando Henrique
Cardoso - the notoriously vainglorious former developmentalist turned neoliberal
enforcer.
What Car Wash has already forcefully imprinted across Brazil is the
perception that corruption only pays when the accused is a progressive nationalist.
As for Washington consensus vassals, they are always
angels - mercifully immune from prosecution.
That's happening because Moro and his team are masterfully playing to the
hilt Moro's self-described use of the media to intoxicate the political atmosphere
- with public opinion serially manipulated even before someone is formally charged
with any crime. And yet Moro and his prosecutors' sources are largely farcical,
artful dodgers cum serial liars. Why trust their word? Because there are no
smoking guns, something even Moro admits.
And that leads us towards the nasty scenario of a made in Brazil media-judicial-police
complex possibly hijacking one of the healthiest democracies in the world. And
that is supported by a stark fact: the right-wing Brazilian opposition's entire
"project" boils down to ruining the economy of the 7 th largest global
economic power to justify the destruction of Lula as a presidential candidate
in 2018.
Elite Plundering Rules
None of the above can be understood by a global audience without some acquaintance
with classic Braziliana. Local legend rules that Brazil is not for beginners.
Indeed; this is an astonishingly complex society - which essentially descended
from a Garden of Eden (before the Portuguese "discovered" it in 1500) to slavery
(which still permeates all social relations) to a crucial event in 1808: the
arrival of
Dom John VI of Portugal (and Emperor of Brazil for life), fleeing Napoleon's
invasion, and carrying with him 20,000 people who masterminded the "modern"
Brazilian state. "Modern" is an euphemism; history shows the descendants of
these 20,000 actually have been raping the country blind for the past 208 years.
And few have ever been held accountable.
Traditional Brazilian elites compose one of the most noxious arrogant-ignorant-prejudiced
mixes on the planet. "Justice" - and police enforcement - are only used as a
weapon when the polls do not favor their agenda.
Brazilian mainstream media owners are an intrinsic part of these elites.
Much like the US concentration model, only four families control the media landscape,
foremost among them the Marinho family's Globo media empire. I have experienced,
from the inside, in detail, how they operate.
Brazil is corrupt to the core - from the comprador elites down to a great
deal of the crass "new" elites, which include the PT. The greed and incompetence
displayed by an array of PT stalwarts is appalling - a reflection of the lack
of quality cadres. Corruption and traffic of influence involving Petrobras,
construction companies and politicians is undeniable, even if it pales compared
to Goldman Sachs shenanigans or Big Oil and/or Koch Brothers/Sheldon Adelson-style
buying/bribing of US politicians.
If this was a no-holds-barred
crusade against corruption - which the Car Wash prosecutors insist it is
- the right-wing opposition/vassals of the old elites should have been equally
exposed in mainstream media. But then the elite-controlled media would simply
ignore the prosecutors. And there would be nothing remotely on the scale of
the Hollywood blitz, with Lula - pictured as a lowly delinquent - humiliated
in front of the whole planet.
Car Wash prosecutors are right; perception is reality. But what if it backfires?
No consumption, no investment, no credit
Brazil couldn't be in a gloomier situation. GDP was down 3.8% last year;
probably will be down 3.5% this year. The industrial sector was down 6.2% last
year, and the mining sector down 6.6% in the last quarter. The nation is on
the way to its worst recession since…1901.
There was no Plan B by the - incompetent - Rousseff administration for the
Chinese slowdown in buying Brazil's mineral/agricultural wealth and the overall
global slump in commodity prices.
The Central Bank still keeps its benchmark interest rate at a whopping
14.25%. A disastrous Rousseff neoliberal "fiscal adjustment" actually increased
the economic crisis. Today Rousseff "governs" - that's a figure of speech -
for the banking cartel and the rentiers of Brazilian public debt. Over $120
billion of the government's budget evaporates to pay interest on the public
debt.
Inflation is up - now in double-digit territory. Unemployment is at 7.6%
- still not bad as many a player across the EU - but rising.
The usual suspects of course are gloating, spinning non-stop how Brazil has
become "toxic" for global investors.
Yes, it's bleak. There's no consumption. No investment. No credit. The only
way out would be to unlock the political crisis. Maggots in the opposition racket
though have a one-track obsession; the impeachment of President Rousseff. Shades
of good ol' regime change; for these Wall Street/Empire of Chaos vassals, an
economic crisis, fueled by a political crisis, must by all means bring down
the elected government of a key BRICS player.
And then, suddenly, out of left field, surges…Lula. The move against him
by the Car Wash investigation may yet backfire - badly. He's already on campaign
mode for 2018 - although he's not an official candidate, yet. Never underestimate
a political animal of his stature.
Brazil is not on the ropes. If reelected, and assuming he could purge the
PT from a legion of crooks, Lula could push for a new dynamic. Before the crisis,
Brazilian capital was going global - via Petrobras, Embraer, the BNDES (the
bank model that inspired the BRICS bank), the construction companies. At the
same time, there might be benefits in breaking, at least partially, this oligarchic
cartel that control all infrastructure construction in Brazil; think of Chinese
companies building the high-speed rail, dams and ports the country badly lacks.
Judge Moro himself has theorized that corruption festers because the Brazilian
economy is too closed to the outside world, as India's was until recently. But
there's a stark difference between opening up some sectors of the Brazilian
economy and let foreign interests tied to the comprador elites plunder the nation's
wealth.
So once again, we must go back to the recurrent theme in all major global
conflicts.
It's the oil, stupid
For the Empire of Chaos, Brazil has been a major headache since Lula was
first elected, in 2002 (for an appraisal of complex US-Brazil relations, check
the indispensable work of Moniz Bandeira).
A top priority of the Empire of Chaos is to prevent the emergence of regional
powers fueled by abundant natural resources, from oil to strategic minerals.
Brazil amply fits the bill. Washington of course feels entitled to "defend"
these resources. Thus the need to quash not only regional integration associations
such as Mercosur and Unasur but most of all the global reach of the BRICS.
Petrobras used to be a very efficient state company that then doubled as
the single operator of the largest oil reserves discovered in the 21 st
century so far; the pre-salt deposits. Before it became the target of
a massive speculative, judicial and media attack, Petrobras used to account
for 10% of investment and 18% of Brazilian GDP.
Petrobras found the pre-salt deposits based on its own research
and technological innovation applied to exploring oil in deep waters - with
no foreign input whatsoever. The beauty is there's no risk; if you drill in
this pre-salt layer, you're bound to find oil. No company on the planet would
hand this over to the competition.
And yet a notorious right-wing opposition maggot promised Chevron in 2014
to hand over the exploitation of pre-salt mostly to Big Oil. The right-wing
opposition is busy altering the juridical regime of pre-salt; it's already been
approved in the Senate. And Rousseff is meekly going for it. Couple it to the
fact that Rousseff's government did absolutely nothing to buy back Petrobras
stock - whose vertiginous fall was deftly engineered by the usual suspects.
The meticulous dismantling of Petrobras, Big Oil eventually profiting from
the pre-salt deposits, keeping in check Brazil's global power projection, all
this plays beautifully to the interests of the Empire of Chaos. Geopolitically,
this goes way beyond the Hollywood blitz and the Car Wash investigation.
It's no coincidence that three major BRICS nations are simultaneously
under attack - on myriad levels: Russia, China and Brazil. The concerted strategy
by the Masters of the Universe who dictate the rules in the Wall Street/Beltway
axis is to undermine by all means the BRICS's collective effort to produce a
viable alternative to the global economic/financial system, which for the moment
is subjected to casino capitalism. It's unlikely Lula, by himself, will be able
to stop them.
The Oligarchs of the BRICS have been duped and co-opted by TPTB in
the US. Their foot-dragging and lack or decisive and timely action means
that their Window Of Opportunity is probably gone. The various Trans-Oceanic
Trade Deals that the US has cooking is front-running their indecisiveness
and lack of action.
They are 'toast', because these Trade Deals have the USD baked into
them, and the combined GDPs of each Pact is far bigger than that of the
BRICS.
Math + Action beats Hope + Hype every time, kiddies. (Those of you who
can't handle the Truth or the Cognitive Dissonance, had best go to their
"Safe Space".)
"... The USA used to complain about Japan Inc. Of course now it's USA as Neolibraconia Inc. and
it's business is war along all lines : military, economic, environmental, social ... ..."
After 9-11, the United States focused its most aggressive foreign policy on the Middle East –
from Afghanistan to North Africa. But the deal recently worked out with Iran, the current back-door
negotiations over Syria between U.S. Secretary of State John Kerry, and Russia Foreign Minister Sergei
Lavrov, and the decision to subsidize, and now export, U.S. shale oil and gas production in a direct
reversal of U.S. past policy toward Saudi Arabia – together signal a relative shift of U.S. policy
away from the Middle East.
With a Middle East consolidation phase underway, U.S. policy has been shifting since 2013-14 to
the more traditional focus that it had for decades: first, to check and contain China; second, to
prevent Russia from economically integrating more deeply with Europe; and, third, to reassert more
direct U.S. influence once again, as in previous decades, over the economies and governments in Latin
America.
... ... ...
Argentina & Brazil: Harbinger of Neoliberal Things to Come
Should the new pro-U.S., pro-Business Venezuela National Assembly ever prevail over the Maduro
government, the outcome economically would something like that now unfolding with the Mauricio Macri
government in Argentina. Argentina's Macri has already, within days of assuming the presidency, slashed
taxes for big farmers and manufacturers, lifted currency controls and devalued the peso by 30 percent,
allowed inflation to rise overnight by 25 percent, provided US$2 billion in dollar denominated bonds
for Argentine exporters and speculators, re-opened discussions with U.S. hedge funds as a prelude
to paying them excess interest the de Kirchner government previously denied, put thousands of government
workers on notice of imminent layoffs, declared the new government's intent to stack the supreme
court in order to rubber stamp its new Neoliberal programs, and took steps to reverse Argentine's
recent media law. And that's just the beginning.
Politically, the neoliberal vision will mean an overturning and restructuring of the current Supreme
Court, possible changes to the existing Constitution, and attempts to remove the duly-elected president
from office before his term by various means. Apart from plans to stack the judiciary, as in Argentina,
Venezuela's new business controlled National Assembly will likely follow their reactionary class
compatriots in Brazil, and move to impeach Venezuela president, Maduro, and dismantle his popular
government – just as they are attempting the same in Brazil with that country's also recently re-elected
president, Rousseff.
What happens in Venezuela, Argentina, and Brazil in the weeks ahead, in 2016, is a harbinger of
the intense economic and political class war in South America that is about to escalate to a higher
stage in 2016.
I'm still unconvinced that 1,000 rapists ran rampant in Cologne on New Years Eve. Where's Penelope
and her fraud analysis when it seems most needed?
2016 will be the year when all this comes to a head. Perhaps Russia and the BRICS should preemptively
repudiate their dollar denominated debts? It all seems to be
going south at this particular
point in time anyway.
Trying to follow nmb's link @1 without actually being shortened and sold myself led me to
Pepe Escobar of 29 Dec
The lame duck Obama administration – whatever rhetorical and/or legalistic contortions –
still sticks to the Cold War 2.0 script on Russia, duly prescribed by Obama mentor Dr. Zbigniew
"Grand Chessboard" Brzezinski.
The key front though is the Russian economy; sooner or later there's got to be a purge of
the Russian Central Bank and the Finance Ministry, but Putin will only act when he has surefire
internal support, and that's far from given.
The fight to the death in Moscow's inner circles is really between the Eurasianists and
the so-called Atlantic integrationists, a.k.a. the Western fifth column. The crux of the battle
is arguably the Russian Central Bank and the Finance Ministry – where some key liberalcon monetarist
players are remote-controlled by the usual suspects, the Masters of the Universe.
The same mechanism applies, geopolitically, to any side, in any latitude, which has linked
its own fiat money to Western central banks. The Masters of the Universe always seek to exercise
hegemony by manipulating usury and fiat money control.
So why President Putin does not fire the head of the Russian Central Bank, Elvira Nabiulina,
and a great deal of his financial team - as they keep buying U.S. bonds and propping up the
U.S. dollar instead of the ruble? What's really being aggressed here if not Russian interests?
The book tries to do two things. One is to cover the history of American foreign policy, from around
1900 to the present, tracing the gradual construction of a global empire. This first really came
into view as a prospect during the Second World War and is today a reality across all five continents,
as a glance at the skein of its military bases makes clear. The Cold War was a central episode within
this trajectory, but the book doesn't treat just the U.S. record vis-á-vis the USSR or China. It
tries to deal equally with American relations with the Europe and Japan, and also with the
Third World, treated not as a homogenous entity but as four or five zones that required different
policy combinations.
The second part of the book is a survey of American grand strategy-that is,
the different ways leading counselors of state interpret the current position of the United States
on the world stage and their recommendations for what Washington should do about it.
The "big think" set, in other words-Kissinger, of course, Brzezinski, Walter Russell Mead,
Robert Kagan. And then people such as Francis Fukuyama, whom I consider a ridiculous figure but whose
thinking you judged worth some scrutiny. How did you choose these?
From the range of in-and-outers-thinkers moving between government and the academy or think-tanks-who
have sought to guide U.S. foreign policy since 2000, with some intellectual originality. Kissinger
isn't among these. His ideas belong to a previous epoch, his later offerings are boilerplate. Fukuyama,
who sensed what the effects of office on thought could be, and got out of state service quite early,
is a mind of a different order. The figures selected cover the span of options within what has always
been a bipartisan establishment.
You make a distinction between American exceptionalism, which is much in the air, and
American universalism, which few of us understand as a separate matter. The first holds America to
be singular (exceptional), and the second that the world is destined to follow us, that the trails
we've blazed are the future of humanity. You call this a "potentially unstable compound." Could you
elaborate on this distinction, and explain why you think it's unstable?
It's unstable because the first can exist without the second. There is, of course, a famous ideological
linkage between the two in the religious idea, specific to the United States, of Providence-that
is, divine Providence. In your own book "Time No Longer" you cite an astounding expression of this
notion: "However one comes to the debate, there can be little question that the hand of Providence
has been on a nation which finds a Washington, a Lincoln, or a Roosevelt when it needs him." That
pronouncement was delivered in the mid-1990s-not by some television preacher, but by Seymour Martin
Lipset: chairs at Harvard and Stanford, president of both the American Sociological and the American
Political Science Associations, a one-time social democrat.
What is the force of this idea? A belief that God has singled out America as a chosen nation for
exceptional blessings, a notion which then easily becomes a conviction of its mission to bring the
benefits of the Lord to the world. President after president, from Truman through to Kennedy, the
younger Bush to Obama, reiterate the same tropes: "God has given us this, God has given us that,"
and with the unique freedom and prosperity he has conferred on us comes a universal calling to spread
these benefits to the rest of the world. What is the title of the most ambitious contemporary account
of the underlying structures of American foreign policy? "Special Providence," by Walter Russell
Mead. Year of publication: 2001.
But while a messianic universalism follows easily from providential exceptionalism, it is not
an ineluctable consequence of it. You mount a powerful attack on the idea of exceptionalism in "Time
No Longer," but-we may differ on this-if we ask what is the more dangerous element in the unstable
compound of the nation's image of itself, I would say exceptionalism is the less dangerous. That
may seem paradoxical. But historically the idea of exceptionalism allowed for an alternative, more
modest deduction: that the country was different from all others, and so should not be meddling with
them-the argument of Washington's Farewell Address [in 1796].
A century later, this position became known as isolationism, and as the American empire took shape,
it was all but invariably castigated as narrow-minded, short-sighted and selfish. But it could often
be connected with a sense that the republic was in danger at home, with domestic ills that needed
to be addressed, which vast ambitions abroad would only compound. Mead terms this strand in American
sensibility Jeffersonian, which isn't an accurate description of Jefferson's own empire-building
outlook, but he otherwise captures it quite well.
We don't ordinarily apply the term "exceptionalist" in the same breath to America and
to Japan, though if there is any nation that claims to be completely unique, it is Japan. But the
claim produced a drastic isolationism as a national impulse, both in the Tokugawa period [1603-1868,
a period of severely enforced seclusion] and after the war. Does that support the point you're making?
Exactly. Historically, exceptionalism could generate a self-limiting, self-enclosing logic as
well as the gigantic expansionist vanities of the Co-Prosperity Sphere and the "Free World" [narrative].
In the American case, the two strands of exceptionalism and universalism remained distinct, respectively
as isolationist and interventionist impulses, sometimes converging but often diverging, down to the
Second World War. Then they fused. The thinker who wrote best about this was Franz Schurmann, whose
" Logic of World Power" came out during the Vietnam War. He argued that each had a distinct political-regional
base: the social constituency for isolationism was small business and farming communities in the
Midwest, for interventionism it was the banking and manufacturing elites of the East Coast, with
often sharp conflicts between the two up through the end of thirties. But in the course of the Second
World War they came together in a synthesis he attributed-somewhat prematurely-to FDR, and they have
remained essentially interwoven ever since. The emblematic figure of this change was [Arthur H.]
Vandenberg, the Republican Senator from Michigan [1928-51], who remained an isolationist critic of
interventionism even for a time after Pearl Harbor, but by the end of the war had become a pillar
of the new imperial consensus.
Mainstream debate today seems to have constructed two very stark alternatives: There is
either engagement or isolation. In this construction, engagement means military engagement; if we
are not going to be militarily engaged we are isolationists. I find that absolutely wrong. There
are multiple ways of being engaged with the world that have nothing to do with military assertion.
True, but engagement in that usage doesn't mean just military engagement,
but power projection more generally. One of the thinkers I discuss toward the end of my book is Robert
Art, a lucid theorist of military power and its political importance to America, who argues for what
he calls selective-expressly, not universal-engagement. What is unusual about him is that in seeking
to discriminate among engagements the U.S. should and should not select, he starts considering in
a serious, non-dismissive way what would typically be construed as isolationist alternatives, even
if ending with a fairly conventional position.
How far do you view the contemporary American crisis-if you accept that we are living
through one-as, at least in part, one of consciousness? As an American, I tend to think that no significant
departure from where find ourselves today can be achieved until we alter our deepest notions of ourselves
and our place among others. I pose this question with some trepidation, since a change in consciousness
is a generational project, if not more. Our leadership is not remotely close even to thinking about
this. I'm suggesting a psychological dimension to our predicament, and you may think I put too much
weight on that.
You ask at the outset whether I accept that Americans are living through a crisis. My reply would
be: not anything like the order of crisis that would bring about the sort of change in consciousness
for which you might hope. You describe that as a generational project, and there, yes, one can say
that among the youngest cohorts of the U.S. population, the ideologies of the status quo are less
deeply embedded, and in certain layers even greatly weakened. That is an important change, but it's
generational, rather than society-wide, and it's not irreversible.
At the level of the great majority, including, naturally, the upper middle class, the image you
use to describe the purpose of your last book applies: you write that it aims "to sound the tense
strings wound between the pegs of myth and history during the hundred years and a few that I take
to be the American century. It is this high, piercing tone that Americans now have a chance to render,
hear, and recognize all at once. We have neither sounded nor heard it yet." That's all too true,
unfortunately. The most one can say is that, among a newer generation, the strings are fraying a
bit.
I tend to distinguish between strong nations and the merely powerful, the former being
supple and responsive to events, the later being brittle and unstable. Is this a useful way to judge
America in the early 21st century-monumentally powerful but of dubious strength? If so, doesn't it
imply some change in the American cast of mind, as the difference between the two sinks in?
That depends on the degree of instability you sense in the country. In general, a major change
in consciousness occurs when there is a major alteration in material conditions of life. For example,
if a deep economic depression or dire ecological disaster strikes a society, all bets are off. Then,
suddenly, thoughts and actions that were previously inconceivable become possible and natural. That
isn't the situation so far in America.
Can you discuss the new accord with Iran in this context? I don't see any question it's
other than a breakthrough, a new direction. What do you think were the forces propelling the Obama
administration to pursue this pact? And let's set aside the desire for a "legacy" every president
cultivates late in his time.
The agreement with Iran is an American victory but not a departure in U.S. foreign policy. Economic
pressure on Iran dates back to Carter's time, when the U.S. froze the country's overseas assets after
the ousting of the Shah, and the full range of ongoing U.S. sanctions was imposed by the Clinton
administration in 1996. The Bush administration escalated the pressure by securing U.N. generalization
of sanctions in 2006, and the Obama administration has harvested the effect.
Over the past decade, the objective has always been the same: to protect Israel's nuclear monopoly
in the region without risking an Israeli blitz on Iran to preserve it-that might set off too great
a wave of popular anger in the Middle East. It was always likely, as I point out in "American Policy
and its Thinkers," that the clerical regime in Tehran would buckle under a sustained blockade, if
that was the price of its survival. The agreement includes a time-out clause to save its face, but
the reality is an Iranian surrender.
You can see how little it means any alteration in imperial operations in the region by looking
at what the Obama administration is doing in Yemen, assisting Saudi Arabia's wholesale destruction
of civilian life there in the interest of thwarting imaginary Iranian schemes.
This next question vexes many people, me included. On the one hand, the drives underlying
the American imperium are material: the expansion of capital and the projection of power by its political
representatives. The American mythologies are shrouds around these. On the other hand, the issue
of security has a long history among Americans. It is authentically an obsession independent of capital-American
paranoia dates back at least to the 18th century. I don't take these two accountings to be mutually
exclusive, but I'd be interested to know how you reconcile these different threads in American foreign
policy.
Yes, there has been a longstanding-you could say aboriginal-obsession with security in the United
States. This can be traced as an independent strand running through the history of American dealings
with the outside world. What happened, of course, from the Cold War through to the "war on terror"
was a ruthless instrumentalization of this anxiety for purposes of expansion rather than defense.
At the start of the Cold War you had the National Security Act and the creation of the National Security
Council, and today we have the National Security Agency. Security became a euphemistic cloak for
aggrandizement.
The United States occupies the better part of a continent separated by two immense oceans, which
nobody in modern history has had any serious chance of invading, unlike any other major state in
the world, all of which have contiguous land-borders with rival powers, or are separated from them
only by narrow seas. The U.S. is protected by a unique geographical privilege. But if its expansion
overseas cannot be attributed to imperatives of security, what has driven it?
A gifted and important group of historians, the Wisconsin school [which included the late William
Appleman Williams, among others], has argued that the secret of American expansion has from the beginning
lain in the quest by native capital for continuously larger markets, which first produced pressure
on the internal frontier and the march across the continent to the Pacific, and when the West Coast
was reached, a drive beyond into Asia and Latin America, and ultimately the rest of the world, under
the ideology of the Open Door.
A couple of good scholars, Melvyn Leffler and Wilson Miscamble, one a liberal and the other a
conservative, have identified my position with this tradition, taxing me with a belief that American
foreign policy is essentially just an outgrowth of American business. This is a mistake. My argument
is rather that because of the enormous size and self-sufficiency of the American economy, the material
power at the disposal of the American state exceeded anything that American capital could directly
make use of or require.
If you look at the First World War, you can see this very clearly. East Coast bankers and munitions
manufacturers did well out of supplying the Entente powers, but there was no meaningful economic
rationale for American entry into the war itself. The U.S. could tip the scales in favor of the British
and French variants of imperialism against the German and Austrian variants without much cost to
itself, but also much to gain.
The same gap between the reach of American business and the power of the American state explains
the later hegemony of the United States within the advanced capitalist world after the Second World
War. Standard histories wax lyrical in admiration of the disinterested U.S. generosity that revived
Germany and Japan with the Marshall and Dodge Plans [reconstruction programs after 1945], and it
is indeed the case that policies crafted at the State and Defense Departments did not coincide with
the desiderata of the Commerce Department. The key requirement was to rebuild these former enemies
as stable capitalist bulwarks against communism, even if this meant there could be no simple Open
Door into them for U.S. capital.
For strategic political reasons, the Japanese were allowed to re-create a highly protected economy,
and American capital was by and large barred entry. The priority was to defend the general integrity
of capitalism as a global system against the threat of socialism, not particular returns to U.S.
business. The importance of those were never, of course, ignored. But they had to bide their time.
Today's Trans-Pacific Partnership will finally pry open Japanese financial, retail and other markets
that have remained closed for so long.
I'd like to turn to the origins of the Cold War, since I believe we
are never going to get anywhere until these are honestly confronted. You give a forceful account
of Stalin's reasons for avoiding confrontation after 1945 and Washington's reasons for not doing
so. But should we attribute the outbreak of the Cold War to the U.S. without too much in the way
of qualification?
We can look at the onset of the Cold War on two levels. One is that of punctual events. There,
you are certainly right to pick out the ideological starting gun as Truman's speech on Greece
in 1947, designed the "scare hell" out of voters to win acceptance for military aid to the Greek
monarchy. In policy terms, however, the critical act that set the stage for confrontation with
Moscow was the flat American refusal to allow any serious reparations for the staggering level
of destruction Russia suffered from the German attack on it. The most developed third of the country
was laid waste, its industry and its cities wrecked, while Americans suffered not a fly on the
wrist at home-basking, on the contrary, in a massive economic boom. There was no issue Stalin
spoke more insistently about than reparations in negotiations among the Allies. But once the fighting
was over, the U.S. reneged on wartime promises and vetoed reparations from the larger part of
Germany-far the richest and most developed, and occupied by the West - because it did not want
to strengthen the Soviet Union and did want to rebuild the Ruhr as an industrial base under Western
control, with a view to creating what would subsequently become the Federal Republic.
Agreed. I also think he helpfully callobrates the loss of European independence…
[Speaking of
the era of De Gaulle, Adenauer and Eden] "Since then, there has been nobody like this. If we ask
why, I think the answer is that all these people were formed before the First and Second World
Wars broke out, in a period in which major European states had as much weight as the United States
on the international checkerboard, if not more. They were not brought up in a world where American
hegemony was taken for granted. All of them were involved in the two World Wars, and in the Second
De Gaulle had good reason to be distrustful of the U.S., since Roosevelt was long pro-Vichy and
wanted to oust him as leader of the Free French.
We could add, incidentally, a couple of later politicians, who fought in the second conflict.
One was the English Tory prime minister, Edward Heath, the only postwar ruler of Britain who never
made the trip to simper on the White House lawn, receiving an audience and paying tribute, that
would become a virtual ceremony of investiture for any new ruler around the world. The other was
Helmut Schmidt, a veteran of Operation Barbarossa [the Nazi invasion of the Soviet Union in June
1941] who scarcely concealed his disdain for Carter. These were latecomers from the past. Their
successors have grown up under U.S. paramountcy and take it for granted. This is America's world.
It is second nature for them to defer to it."
He also exposes that the crop that followed made a show of independence but toed the line:
"During the countdown to the war in Iraq, there were large street demonstrations in not a few
countries, which Dominique Strauss-Kahn - no less - described as a European Declaration of Independence.
Schröder [Gerhard, the German chancellor from 1998-2005] announced that Germany could not accept
the war, and Chirac [Jacques, the French president, 1995-2007] blocked a U.N. resolution endorsing
it. Were these bold acts of independence? Far from it. The French envoy in Washington told Bush
in advance: You already have one U.N. resolution saying Saddam must comply with inspections, which
is suitably vague. Don't embarrass us by trying to get another resolution that is more specific,
which we'll have to oppose. Just use that one and go in. No sooner, indeed, was the attack launched
than Chirac opened French skies to U.S. operations against Iraq. Can you imagine De Gaulle meekly
helping a war he had said he opposed? As for Schröder, it was soon revealed that German intelligence
agents in Baghdad had signaled ground targets for "Shock and Awe." These were politicians who
knew the war was very unpopular in domestic opinion, and so made a show of opposing it while actually
collaborating. Their independence was a comedy."
"... the inept idiots in Kiev borrowed from whomever they wanted, including a
group that helped push Argentina into near bankruptcy. ..."
"... "If Aurelius also refuses to take part, the bonds it holds will remain in default, potentially
allowing the hedge fund to chase Ukraine in courts in London and elsewhere. "That bond will remain
out there like some of the Argentine debt. Ukraine will remain in default," Nomura strategist Tim
Ash said, although he noted that Ukraine had fewer assets than Argentina for hedge funds to seize."
..."
"... the judges in the US ruled in favor of the hedge fund over Argentina, so there's clear
precedent ..."
Time for Financial News. As a result of the Gas/Oil Wars, Russia pulled ahead, because Putin used
the money intended for recapitalization of the gas/oil industry, to recapitalize the gas/oil industry.
Some in the West are shocked at that, firmly believing that he was supposed to steal the money. Ah
yes, the power of believing in your own propaganda.
"If Aurelius also refuses to take part, the bonds it holds will remain in default, potentially
allowing the hedge fund to chase Ukraine in courts in London and elsewhere. "That bond will remain
out there like some of the Argentine debt. Ukraine will remain in default," Nomura strategist Tim
Ash said, although he noted that Ukraine had fewer assets than Argentina for hedge funds to seize."
Oh yeah, the judges in the US ruled in favor of the hedge fund over Argentina, so there's clear
precedent. Whoopsie. The reason this looks really bad, is that there are no good solutions out of
this. If Ukraine defaults, it'll be stuck permanently on the teat of the US/EU, as I predicted in
June: https://ucgsblog.wordpress.com/2014/06/09/the-box-not-seen/
If the judges flip flop, Argentina will have a clear cut case against the hedge funds, pushing
Obama into a battle with the hedge funds, when they have the Republicans on their side. If Obama
pays this hedge fund, Franklin-Templeton will demand the same exact treatment, adding to Obama's
sentiment as the Debt King of the United States. Not to mention that Congress wouldn't authorize
that big a sum. There are no good options of out this, for either Poroshenko or Obama. To quote Gordon:
"da, cheburashke ne vezet"
"... The
Argentine government managed to restructure about 93% of that debt through heavily discounted
bond exchanges in 2005 and 2010. But a small group of investors refused to tender their defaulted
bonds for new securities, and they have hounded Argentina in courts across the globe for close
to a decade seeking full repayment. ..."
The
Argentine government managed to restructure about 93% of that debt through heavily discounted
bond exchanges in 2005 and 2010. But a small group of investors refused to tender their defaulted
bonds for new securities, and they have hounded Argentina in courts across the globe for close
to a decade seeking full repayment.
As part of the restructuring process, Argentina drafted agreements in which repayments would
be handled through a New York corporation and governed by United States law. The holdout bondholders
found themselves unable to seize Argentine sovereign assets in settlement, but realized that
Argentina had omitted to provide for holdout situations and had instead deemed all bonds repayable
on pari passu (equal) terms that prevented preferential treatment among bondholders. The holdout
bondholders therefore sought, and won, an injunction in 2014 that prohibited Argentina from
repaying the 93% of bonds that had been renegotiated, unless they simultaneously paid the 7%
holdouts their full amount due as well. Together with the agreement's Rights Upon Future Offers
("RUFO") clause, this created a deadlock in which the 93% of renegotiated bondholders could
not be paid without paying the 7% holdouts, but any payment to the holdouts would potentially
(according to Argentina) trigger the 93% being due repayment at full value too; a sum of around
$100 billion which Argentina could not afford.[6] The courts ruled that as Argentina had itself
drafted the agreement, and chosen the terms it wished to propose, it could not now claim the
terms were unreasonable or unfair, and that this could not be worked around by asserting sovereign
status since the injunction did not affect sovereign assets, but simply ruled that Argentina
must not give preferential treatment of any group of bondholders over any other group when
making repayments.
…NML Capital Limited, a Cayman Islands-based offshore unit of Paul Singer's Elliott Management
Corporation, purchased many holdings in 2008, paying an estimated USD49 million for one series
of bonds whose face value was over USD220 million;[22] with the subsequent boom in Argentine
bond values, this face value grew to USD832 million by 2014.[26] They in turn established the
American Task Force Argentina lobbying group against Argentine bond restructuring efforts,[19]
and sued to enjoin Argentina's ongoing payments to the bondholders who had participated in
the earlier restructurings.[2]
####
Nothing can stop red blooded capitalists! I suspect that death is but a minor inconvenience.
And this is what awaits Ukraine. Welcome to Capitalism Kiev, please read the small font.
Oh, you don't read? Wonderful! We shall have a good time doing business together! How much for
Dnepropetrovsk?
Warren, September 26, 2015 at 2:24 pm
These hold-out creditors aren't called fondo buitre for nothing!!!!!
"... The $3.5 trillion of QE, six years of 0% interest rates for Wall Street (why are credit card
interest rates still 13%?), and $8 trillion of deficit spending by the Federal government have provided
the outward appearance of economic recovery, as the standard of living for most Americans has declined
significantly. ..."
The housing market peaked in 2005 and proceeded to crash over the next five years, with existing
home sales falling 50%, new home sales falling 75%, and national home prices falling 30%. A funny
thing happened after the peak. Wall Street banks accelerated the issuance of subprime mortgages to
hyper-speed. The executives of these banks knew housing had peaked, but insatiable greed consumed
them as they purposely doled out billions in no-doc liar loans as a necessary ingredient in their
CDOs of mass destruction.
The millions in upfront fees, along with their lack of conscience in
bribing Moody's and S&P to get AAA ratings on toxic waste, while selling the derivatives to clients
and shorting them at the same time, in order to enrich executives with multi-million dollar compensation
packages, overrode any thoughts of risk management, consequences, or the impact on homeowners,
investors, or taxpayers. The housing boom began as a natural reaction to the Federal Reserve suppressing
interest rates to, at the time, ridiculously low levels from 2001 through 2004 (child's play compared
to the last six years).
... ... ...
Greenspan created the atmosphere for the greatest mal-investment in world history. As he
raised rates from 2004 through 2006, the titans of finance on Wall Street should have scaled back
their risk taking and prepared for the inevitable bursting of the bubble. Instead, they were blinded
by unadulterated greed, as the legitimate home buyer pool dried up, and they purposely peddled "exotic"
mortgages to dupes who weren't capable of making the first payment. This is what happens at the end
of Fed induced bubbles. Irrationality, insanity, recklessness, delusion, and willful disregard for
reason, common sense, historical data and truth lead to tremendous pain, suffering, and financial
losses.
Once the Wall Street machine runs out of people with the financial means to purchase a home
or buy a new vehicle, they turn their sights on peddling their debt products to financially illiterate
dupes. There is a good reason people with credit scores below 620 are classified as sub-prime.
Scores this low result from missing multiple payments on credit cards and loans, having multiple
collection items or judgments and potentially having a very recent bankruptcy or foreclosure. They
have low paying jobs or no job at all. They do not have the financial means to repay a large loan.
Giving them a loan to purchase a $250,000 home or a $30,000 automobile will not improve their lives.
They are being set up for a fall by the crooked bankers making these loans. Heads they win, tails
the dupe gets kicked out of that nice house onto the street and has those nice wheels repossessed
in the middle of the night.
The subprime debacle that blew up the world in 2008 was created by the Federal Reserve, working
on behalf of their Wall Street owners. When interest rates are set by central planners well below
levels which would be set by the free market, based on risk and return, it creates bubbles, mal-investment,
and ultimately financial system disaster. Did the Fed, Wall Street, politicians, and people learn
their lesson? No. Because we bailed them out with our tax dollars and have silently stood by
while they have issued $10 trillion of additional debt to solve a debt problem. The deformation of
our financial system accelerates by the day.
The $3.5 trillion of QE, six years of 0% interest rates for Wall Street (why are credit card
interest rates still 13%?), and $8 trillion of deficit spending by the Federal government have provided
the outward appearance of economic recovery, as the standard of living for most Americans has declined
significantly.With real median household income still 6.5% BELOW 2007 levels, 7.3% BELOW
2000 levels, and about equal to 1989 levels, the only way the ruling class could manufacture a fake
recovery is by ramping up the printing presses and reigniting a housing bubble and an auto bubble.
They even threw in a student loan bubble for good measure.
... ... ...
The entire engineered "housing recovery" has had a suspicious smell to it all along. The true
bottom occurred in 2009 with an annual rate of 4 million existing home sales. An artificial bottom
of 3.5 million occurred in 2010 after the expiration of the Keynesian first time home buyer credit
that lured more dupes into the market. The current rate of 5.31 million is at 2007 crash levels and
on par with 2001 recession levels. With mortgage rates at record low levels for five years, this
is all we got?
What really smells is the number of actual mortgage originations that have supposedly driven this
35% increase in existing home sales. If existing home sales are at 2007 levels, how could mortgage
purchase applications be 55% below 2007 levels? If existing home sales are up 35% from the 2009/2010
lows, how could mortgage purchase applications be flat since 2010?
New home sales are up 80% from the 2010 lows, but before you get as excited as a CNBC bimbo over
the "surging" new home sales, understand that new home sales are still 60% BELOW the 2005 high and
25% below the 1990 through 2000 average. So, in total, there are 1.5 million more annual home sales
today than at the bottom in 2010. But mortgage originations haven't budged. That's quite a conundrum.
As you can also see, the median price for a new home far exceeds the bubble highs of 2005. A critical
thinking individual might wonder how new home sales could be down 60% from 2005, while home prices
are 15% higher than they were in 2005. Don't the laws of supply and demand work anymore? The identical
trend can be seen in the existing homes sales market. The median price for existing home sales of
$228,700 is an all-time high, exceeding the 2005 bubble levels. Again, sales are down 30% since 2005.
I wonder who is responsible for this warped chain of events?
AlaricBalth
This FRED chart I have posted, which corresponds with the effective Fed Funds Rate chart in
the article, will show exactly what a daunting problem the the US and the Federal Reserve is being
forced to deal with. I have overlaid the Labor Force Participation Rate with M2 Velocity of Money,
each beginning in 1960. M2 velocity refers to how fast money passes from one holder to the next.
The labor force participation rate is a measure of the share of Americans at least 16 years old
who are either employed or actively looking for work. If money demand is high, it could be a sign
of a robust economy, with the usual corresponding inflationary pressure.
As you can see, each peaked around 1997-98 and have been in slow decline ever since. Unless
the Fed has a plan to increase the LFPR, people are not going to be spending money they just do
not have.
Demographically, this is not going to happen. Baby boomers will still be retiring at a rate
of 10,000 per day and manufacturing is never coming back to the US until we are a third world
country with a cheap labor force.
This is not an issue that can be fixed by political promises. So no matter which political
party is in control, this will not be repaired with platitudes. This is a structural macro-economic
phenomenon which is caused by demographics and poor long term fiscal planning.
Elizabeth Warren Video, Late Night with Steven Colbert, 23 Sept 2015.
Defends Dodd-Frank and gave stats to prove the value of CFPB formed, like 650,000 complaints
handled, and many changes forced on corporations.
Edit: Looks like CBS didn't release the segment of Elizabeth Warren only, so you have to go
through whole show or just the 2:00 minute segment that only shows her saying she is not running
for President.
Apparently I don't have the computer configured to play it anyway.
FreedomGuy
I do not think Wall Street and your local bankers or mortgage brokers are the bad guys here.
Frankly, they look at the rules and try to make a living in the mortgage business. They are not
angels but neither are they demons and I do not think they purposely write bad business.
I think the Wizard of Evil behind the curtain is first and last the government including a
GSE like the Fed. They set this stuff up. You know you can load up Freddie and Fannie with smelly
stuff and off-load risk. They hold rates near historic lows so people can buy more.
This drives prices and all the flipping crap and related stuff I hate.
I am in the middle of this. Being an avid reader of ZH I have become a proper pessimist. I
did a cash-out refi and am paying off virtually all other loans...or more properly moving them
to the tax deductible home loan. I was going to rent and move north because of work but after
lots of research, breathtaking price increases and a few other cautions I decided to sit it out.
I am going to see what the economic terrain looks like in 6 months or more.
The thing is you have to play the game as it is, today, not as you think it should be.
marts321
Don't hate the player, hate the game.
TeethVillage88s
Check out the growth of Holding companies.
Financial Business; Credit Market Instruments; Liability, Level 2015:Q1: 14,104.57 Billions of Dollars (+ see more) Quarterly, End of Period, Not Seasonally Adjusted, TCMDODFS,
Holding Companies; Credit Market Instruments; Liability, Level 2015:Q1: 1,380.52 Billions of Dollars (+ see more) Quarterly, End of Period, Not Seasonally Adjusted, CBBHCTCMDODFS, https://research.stlouisfed.org/fred2/series/CBBHCTCMDODFS
U.S.-Chartered Depository Institutions; Credit Market Instruments; Liability, Level 2015:Q1: 669.90 Billions of Dollars (+ see more) Quarterly, End of Period, Not Seasonally Adjusted, CBTCMDODFS,
Now, we know that in 2007 the Biggest Wall Street banks wanted access to Deposits in the USA.
So maybe I don't have the date, could have been planned from Lehman Request date to become a Deposit
Bank while an Investment Bank.
So today we have Holding Companies that are allowed to have Deposits while doing commercial
and investment work and proprietary trading... and now are 30% Bigger after all the Bailouts and
transfer of Taxpayer and Retirement Funds to them.
Holding Companies have Doubled Liability since 3QTR 2007
Wow
TeethVillage88s
Too Bad we don't have Honest Brokers in DOJ, FBI, SEC, FINRA, FTC, GAO, CBO, FED, Treasury,
OCC, FSOC, BCFP, CFTC, FDIC, FHFA, SIPC
I'm not sure how you can isolate or focus your condemnation or fault.
- Private & Public Pensions, Retirement Funds, Deposit Insurance, The Fact that our Wall Street
Banks are Borg connecting to AI Technology,... and Complexity is increasing at an Exponential
Rate meaning Risk is Exponential as well
- Big Concern -- pay outs for Pension Benefit Guaranty Corporation (federal Trust Fund), 1999
= $1.23 Billion, 2000 = $1.35 Billion, 2001 =$1.37 Billion. Okay, but today 2010 = $5.59 B, 2011
= $5.89 B, 2012 = $5.86 B, 2013 = $5.89 B. There is a continual need to supplement Pensions. 2010
PBGC's deficit increased 4.5 percent to $23 billion (Liabilities beyond assets)
- Federal direct student loan program 1999 = $52 Billion, INCREASED to 2013 = $675 Billion.
(Risky)
- 2013 Total FDIC Trust Fund in Treasuries = $36.9 Billion + $18 billion in the DIF (Risky)
- 2013 Total National Credit Union Trust in Treasuries = $11.2 Billion
Edit: This applies, $8.16 Trillion in US Deposits
Total Savings Deposits at all Depository Institutions 2015-09-07: 8,164.3 Billions of Dollars (+ see more) Weekly, Ending Monday, Not Seasonally Adjusted, WSAVNS, https://research.stlouisfed.org/fred2/series/WSAVNS
To all hysterical critics of the FED, what do you suggest they do instead? The rich can do
nothing, sit it out, the poor meanwhile will starve and die (and probably riot before they die).
The poor need jobs. Now almost at any cost, because those jobs are few and far in between as
we are competing with China. So they do ZIRP, NIRP whatever, something, anything to at least marginally
force the rich to spend. For, if people do not spend there will be even less jobs…and less tax
revenue collected for the government to run and distribute around… and it all starts going downhill.
The FED is just trying to keep the system at the higher spending point. It does not seem to
work very well, but the next option is a direct confiscation and redistribution of assets (to
keep those poor jobless souls content). Nobody gives a f* about inequality until it becomes a
riot-provoking problem itself. Ugly as it is there is actually logic in what the FED is doing.
Batman11
The globalists rush to take the profits in the good times but run and hide in the bad.
Where is the profit in sorting out the bad times? In the bad times national institutions, Governments and Central Banks, get left to sort out
the mess loading the costs onto national tax payers.
When things go wrong nationalism rises as each nation is left to fend for itself. We should know how it works by now, this isn't the first time.
1920s/2000s - high inequality, high banker pay, low regulation, low taxes for the wealthy,
robber barons (CEOs), reckless bankers, globalisation phase
1929/2008 - Wall Street crash
1930s/2010s - Global recession, currency wars, rising nationalism and extremism
1940s/? - Global war
We are nearly there with the Middle East on fire and the two nuclear super-powers at each other's
throats.
Maybe next time we will know better, third time lucky.
mianne
Cherry picker, I agree with you : " All our government up here has to do is get out of
NATO, disband our version of the CIA, divorce Homeland Security, duty and tax all imports to
the hilt, keep our water, electricity and natural resources to ourselves and manufacture our
own products... Then you can have all the wars you want in the middle east and we will watch
it on television without worrying about whether to be part of the murder brigade or not."
But as for ourselves, as governed by the totalitarian EU whose representatives are non elected
by people, but were chosen by the international finance tycoons ( our elected presidents
deprived of any power by the supranational non elected entity, US- OTAN driven European
Union), we are just powerless slaves .
However we won the referendum ( 52 % ) against the content of the Maastricht-Lisbon
European Constitution, but they do not take it into account, submitting us to the ignominious
treaty . Democracy ?
"... That is brilliant - so Turing Pharmaceuticals is a classical - wait for it - parasitic infection! ..."
"... The point is we should be trying
to make our regulation more intelligent (making it encourage not discourage innovation - cheaper
and easier to police - less subject to regulatory capture etc.). ..."
Item: The former president of a peanut company has been
sentenced to 28 years in prison for knowingly shipping tainted products that later killed
nine people and sickened 700.
Item: Rights to a drug used to treat parasitic infections were acquired by
Turing Pharmaceuticals, which specializes not in developing new drugs but in buying existing
drugs and jacking up their prices. In this case, the price went from $13.50 a tablet to $750.
...
There are, it turns out, people in the corporate world who will do whatever it takes, including
fraud that kills people, in order to make a buck. And we need effective regulation to police that
kind of bad behavior... But we knew that, right?
Well, we used to know it... But ... an important part of America's political class has declared
war on even the most obviously necessary regulations. ...
A case in point: This week Jeb Bush, who has an uncanny talent for bad timing, chose to publish
an op-ed article in The Wall Street Journal denouncing the Obama administration for issuing
"a flood of creativity-crushing and job-killing rules." Never mind his
misuse of cherry-picked statistics, or the fact that private-sector employment
has grown much faster under President Obama's "job killing" policies than it did under Mr.
Bush's brother's administration. ...
The thing is, Mr. Bush isn't wrong to suggest that there has been a move back toward more regulation
under Mr. Obama, a move that will probably continue if a Democrat wins next year. After all, Hillary
Clinton released a plan to limit drug prices at the same time Mr. Bush was unleashing his anti-regulation
diatribe.
But the regulatory rebound is taking place for a reason. Maybe we had too much regulation in
the 1970s, but we've now spent 35 years trusting business to do the right thing with minimal oversight
- and it hasn't worked.
So what has been happening lately is an attempt to redress that imbalance, to replace knee-jerk
opposition to regulation with the judicious use of regulation where there is good reason to believe
that businesses might act in destructive ways. Will we see this effort continue? Next year's election
will tell.
reason
"Item: Rights to a drug used to treat parasitic infections were acquired by Turing Pharmaceuticals,
which specializes not in developing new drugs but in buying existing drugs and jacking up their
prices. In this case, the price went from $13.50 a tablet to $750. ..."
That is brilliant - so Turing Pharmaceuticals is a classical - wait for it - parasitic infection!
reason
"So what has been happening lately is an attempt to redress that imbalance, to replace knee-jerk
opposition to regulation with the judicious use of regulation where there is good reason to believe
that businesses might act in destructive ways. Will we see this effort continue? Next year's election
will tell."
Personally, I don't think this is really addressing the key point. You can't actually avoid regulation
(the alternative to public regulation - as pushed by say Milton Friedman - ends up being private
regulation - which is just as subject to regulatory capture). The point is we should be trying
to make our regulation more intelligent (making it encourage not discourage innovation - cheaper
and easier to police - less subject to regulatory capture etc.). The policy discussions about
this a difficult enough with good faith - but bad faith politics makes this impossible. We need
to throw the Gingrich revolution in the dustbin as soon as possible.
The point is we should be trying to make our regulation more intelligent (making it encourage
not discourage innovation - cheaper and easier to police - less subject to regulatory capture etc.
"... So what has been happening lately is an attempt to redress that imbalance, to replace knee-jerk
opposition to regulation with the judicious use of regulation where there is good reason to believe
that businesses might act in destructive ways. Will we see this effort continue? Next year's election
will tell. ..."
"... That is brilliant - so Turing Pharmaceuticals is a classical - wait for it - parasitic infection! ..."
"... The point is we should be trying
to make our regulation more intelligent (making it encourage not discourage innovation - cheaper
and easier to police - less subject to regulatory capture etc.). ..."
"... The reality is that, in the absence of
effective regulation with substantial penalties, all of the incentives are to lie, cheat, and
steal. In consequence, it really is the norm, if only in more minor ways than the ones that
make the headlines. Wage theft, fraud, knowingly selling defective merchandise, and many other
abuses are clearly rampant. This is exactly why markets cannot exist in the absence of
effective government regulation to provide trust. ..."
"... Economic idealists have popularized the notion that the world can work without much
regulations because their models tell them so. Unless they are behavioral economists, they
often fail to include fraud, scams & information asymmetry into their models. This produces
garbage like efficient markets that only exist in an idealistic dream world. The real world
markets are filled with fraud, scams and disreputable agents. Failure to account for bad
behavior is the bane of many a model. ..."
"... But I love Obama because he has created a wonderland of money for lawyers and consultants,
a river of chocolate and honey to make Willy Wonka jealous. Go Barry go! ..."
Item: The former president of a peanut company has been
sentenced to 28 years in prison for knowingly shipping tainted products that later killed
nine people and sickened 700.
Item: Rights to a drug used to treat parasitic infections were acquired by
Turing Pharmaceuticals, which specializes not in developing new drugs but in buying existing
drugs and jacking up their prices. In this case, the price went from $13.50 a tablet to $750.
...
There are, it turns out, people in the corporate world who will do whatever it takes, including
fraud that kills people, in order to make a buck. And we need effective regulation to police that
kind of bad behavior... But we knew that, right?
Well, we used to know it... But ... an important part of America's political class has declared
war on even the most obviously necessary regulations. ...
A case in point: This week Jeb Bush, who has an uncanny talent for bad timing, chose to publish
an op-ed article in The Wall Street Journal denouncing the Obama administration for issuing
"a flood of creativity-crushing and job-killing rules." Never mind his
misuse of cherry-picked statistics, or the fact that private-sector employment
has grown much faster under President Obama's "job killing" policies than it did under Mr.
Bush's brother's administration. ...
The thing is, Mr. Bush isn't wrong to suggest that there has been a move back toward more regulation
under Mr. Obama, a move that will probably continue if a Democrat wins next year. After all, Hillary
Clinton released a plan to limit drug prices at the same time Mr. Bush was unleashing his anti-regulation
diatribe.
But the regulatory rebound is taking place for a reason. Maybe we had too much regulation in
the 1970s, but we've now spent 35 years trusting business to do the right thing with minimal oversight
- and it hasn't worked.
So what has been happening lately is an attempt to redress that imbalance, to replace knee-jerk
opposition to regulation with the judicious use of regulation where there is good reason to believe
that businesses might act in destructive ways. Will we see this effort continue? Next year's election
will tell.
reason
"Item: Rights to a drug used to treat parasitic infections were acquired by Turing Pharmaceuticals,
which specializes not in developing new drugs but in buying existing drugs and jacking up their
prices. In this case, the price went from $13.50 a tablet to $750. ..."
That is brilliant - so Turing Pharmaceuticals is a classical - wait for it - parasitic infection!
reason
"So what has been happening lately is an attempt to redress that imbalance, to replace knee-jerk
opposition to regulation with the judicious use of regulation where there is good reason to believe
that businesses might act in destructive ways. Will we see this effort continue? Next year's election
will tell."
Personally, I don't think this is really addressing the key point. You can't actually avoid regulation
(the alternative to public regulation - as pushed by say Milton Friedman - ends up being private
regulation - which is just as subject to regulatory capture). The point is we should be trying
to make our regulation more intelligent (making it encourage not discourage innovation - cheaper
and easier to police - less subject to regulatory capture etc.). The policy discussions about
this a difficult enough with good faith - but bad faith politics makes this impossible. We need
to throw the Gingrich revolution in the dustbin as soon as possible.
RC AKA Darryl, Ron said in reply to reason...
YEP!
What politicians can get away with is an artifact of the limited toolset that the electorate
has to express its informed will. We need a well educated democracy and the democratic part of
that requires Constitutional electoral reforms (e.g., gerrymandering, campaign finance). A bit
of the educational aspect of a voting actually democratic republic would naturally work itself
out with a more engaged and empowered electorate participating ACTIVELY.
With the system as it is then it takes a shock wave through the electorate for them to throw
the bums out, but there is no follow through. There is a failsafe reaction function, but no
more than that except on specific social issues that get overwhelming support where
politicians can move with the electoral majority at zero cost while reactionary politicians
can triangulate and pander some votes from the minority opinion of those too old or set in
their ways to participate in the social sea change.
ilsm said in reply to RC AKA Darryl, Ron...
The threat is "faith voters", dogma developed by billionaires' propaganda to plunder the
world.
DrDick said in reply to reason...
Krugman is far too kind to the businessmen. The reality is that, in the absence of
effective regulation with substantial penalties, all of the incentives are to lie, cheat, and
steal. In consequence, it really is the norm, if only in more minor ways than the ones that
make the headlines. Wage theft, fraud, knowingly selling defective merchandise, and many other
abuses are clearly rampant. This is exactly why markets cannot exist in the absence of
effective government regulation to provide trust.
DeDude said in reply to reason...
Exactly; what we need is a detailed debate on each specific regulation. What it intends to
accomplish, whether that could be accomplished in a less burdensome way, and whether the
accomplishment is sufficient to justify the burden. However, that is not something that can
happen in the 15 second soundbite that appears to be the attention span of the average voter.
Lee A. Arnold said in reply to Second Best...
Second Best: "Markets work if allowed to self regulate."
No. Never happened, except in local instances. For self-regulation you need proper prices,
and for proper prices you need proper supply and demand.
For proper supply you need perfect competition, so there must be numerous competitors entering
the same market, and this requires, among other things, almost no intellectual protection.
For proper demand, you need perfectly informed consumers, and this is not only impossible, but
it is getting far far worse, because the complexity of the world is increasing.
The problem with state regulation is that it also falls prey to the same objections, although
at a slower rate. We use votes not prices, but the same imperfection of information and lack
of flexibility causes problems with the voting system.
When you combine this problem with the increase in inequality (which was masked temporarily by
World War II and the subsequent spurt of blue-collar jobs productivity), we are headed into an
accelerated amelioration of the market system by greater public ownership.
RC AKA Darryl, Ron said in reply to Lee A. Arnold...
"Peanut butter does not kill people, people kill people."
[If you can read a opening sentence like that and not recognize it as satirical parody, then
you might want to look around to find the sense of humor that you lost. When the will of the
people is no more than a euphemism for dollar democracy then parody, satire, sarcasm, and a
healthy dose of cynicism are called for.]
JF said in reply to RC AKA Darryl, Ron..
Lee A Arnold - Think Jonathan Swift and his piece about the way to reduce subsidies for the
orphaned poor infants, it is to reduce their number so we feel good about the fact that we
help the few poor infants left alive.
I reacted a few times to Second Best's comments before I recognized the satire.
But I also have used his comments as a way to bring out the more logical, real-world of facts
and rationality - so commentary helps either way. I suppose that serves 2nd Best's interests
too.
JF said in reply to JF...
I believe the Jonathan Swift recommendations are the preferred republican-party approach to
Social Security too. Really need fewer claimants, that will solve the accounting problems.
RC AKA Darryl, Ron said in reply to Second Best...
"Peanut butter does not kill people, people kill people. Car emissions do not kill people
... high drug prices do not kill people ... people do."
[This is an economics blog. You cannot be that "subtle (???)" and expect people to recognize
your satire. Maybe there is a humorous math equation that economists can understand. I guess
economics graduate school is so boring that most people lose all sense of humor. I am glad
that Krugman has kept his.]
Richard H. Serlin said...
"Then there's for-profit education, an industry wracked by fraud - because it's very hard
for students to assess what they're getting - that leaves all too many young Americans with
heavy debt burdens and no real prospect of better jobs. But Mr. Bush denounces attempts at a
cleanup."
And worse, wasting their incredibly valuable and rare young years, quite possibly their only
chance before age and children make it extremely hard, not getting an education. Such a big
thing. You don't do it when you're young, with the power and freedom and lack of dependents of
youth, the opportunity may easily be gone forever. Such a brutal cost these predators and
their Republican allies extract.
RC AKA Darryl, Ron said in reply to Richard H. Serlin...
One cause of increased tuition is the reduction of state and federal appropriations to state
colleges, causing the institutions to shift the cost over to students in the form of higher
tuition. State support for public colleges and universities has fallen by about 26 percent per
full-time student since the early 1990s.[10] In 2011, for the first time, American public
universities took in more revenue from tuition than state funding.[9][11] Critics say the
shift from state support to tuition represents an effective privatization of public higher
education.[11][12] About 80 percent of American college students attend public institutions...
bakho said...
Economics Professors of the "free market" bent for years have indoctrinated youth with the
misguided notion that "regulations are bad" and market methods, no matter how RubeGoldberg,
are always better. " You don't need to regulate pollution, just put a tax on it," as an
example. Even cap and trade would not work without stiff emissions regulations.
Economic idealists have popularized the notion that the world can work without much
regulations because their models tell them so. Unless they are behavioral economists, they
often fail to include fraud, scams & information asymmetry into their models. This produces
garbage like efficient markets that only exist in an idealistic dream world. The real world
markets are filled with fraud, scams and disreputable agents. Failure to account for bad
behavior is the bane of many a model.
ilsm said in reply to bakho...
Sanctity of the "market"......
I got a jar of this snake oil here too!
The market they sell is the one that runs in Honduras
Tom aka Rusty said...
A couple of random observations:
Last time I looked about 150 Dodd-Frank regs had not been written yet, some of the key ACA
regs are three years late.
Obama-ites have written some of the most complex, convoluted regs of the past 40 years, the
health EMR regs have practically guaranteed a windfall for IT companies and a failure for EMR/EHR.
No mention of the Obama-Holder "too big to prosecute doctrine."
The new overtime regs will likely be in the "driving thumb tacks with a sledge hammer" mode.
But I love Obama because he has created a wonderland of money for lawyers and consultants,
a river of chocolate and honey to make Willy Wonka jealous. Go Barry go!
pgl said in reply to kthomas...
Rusty wants us to believe he is the only one who understands health care so he is a
persistent critic of ObamaCare. But now he wants to pretend he's the expert on financial
markets too? Seriously? Dodd-Frank is complicated only because the Jamie Dimons of the world
milk every opportunity to game financial markets. If Rusty thinks letting Jamie Dimon evade
any financial market regulation is a good idea - he is the most clue person ever.
DrDick said in reply to pgl...
He was just trying to do us a favor and demonstrate exactly what is meant by "knee-jerk
opposition to regulation ."
JF said in reply to Tom aka Rusty...
Have you ever looked at the multi-party derived hedging instruments in play now - they can
hardly get more complex, and indeed most didn't understand them when they were made, and these
are still complex now.
So I have to say, that the 'marketplace' makes Krugman's point about complexity. It comes from
humans cunningly doing stuff that serves their interests at the time as they see it. Not
always wisdom at work here.
But it is complex, and so regulation of such complexity, if the generally applicable rules
seek some fairness (classes of people are usually affected differently) and stands a test of
due process too - the regulations will also need to be complex. The complexity came first, the
regulations come afterwards (after society learns of the stupidity the hard way).
Railing about this is a form of misleading sophistry, a rhetorical device to reverse the
causality.
We can think with more foresight and regulate before the stupid complexity arises, but it does
take a rational policy making environment for this exploration, discussion and policy-making
to occur with good foresight - I am waiting for the new Congress in 2017.
If the Warren-Sanders people have any influence then, we may see a whole lot less complex
financial system (it's a riot when you think how the Efficient Market Hypothesis, a
theoretical justification for the marketplace's range of instruments in fact led to more
complexity, less real efficiency and effectiveness, and ossification of the system when it
needed to be resilient but stable as a well-behaved system can be).
We will probably be better off after the 2017 debates. After all, this community of actors are
only intermediaries on behalf of real productive outcomes truly needed by society - right,
they are just intermediaries? How much inter-mediation does the economy need?
david s said...
The Obama Administration has been friendlier to corporate America than W's was.
While it was Ronald Reagan and his Republican Party that called for deregulation not much
was done until Alan Greenspan, then Chairman of the Federal Reserve, gave federal deregulation
his blessing in speeches from NY to Aspen to California in which he said "the market" will
reign in excesses and regulate itself b/c of competition acting egregiously would create.
Oopsie, Old Alan got it ALL WRONG again!
I thought a little history would help in this thread.
likbez said...
My impression is that regulation always reflects the needs of who is in power today. One
the key ingredients of political power is the ability to push the laws that benefit particular
constituent. And to block laws that don't.
If we assume that financial oligarchy is in power today, then it is clear that there can be no
effective regulation of financial services and by extension regulation of derivatives. And if
on the wave of public indignation such regulation is adopted, it will be gradually watered
down and then eliminated down the road.
And you can always hire people who will justify your point of view.
In this sense neither Milton Friedman nor Greenspan were independent players. They sold
themselves for money and were promoted into positions they have for specific purpose. I am not
sure the either of them believed the crap they speak or wrote.
It is under state capitalism that TBTF can't exists. Under neoliberalism they rule the country,
so the question about cutting their political power of dismantling them is simply naive. Nobody give
political power without a fight.
"... Today, with governments which are nothing but literally the junior partners (of Big Business)
in government-by-crime-syndicate, these laws might as well no longer exist, as they are practically
never enforced. Indeed, an entity must be a political/economic pariah, or simply lacking "connections"
if it is unable to sneak some merger or take-over past our totally compliant governments, and their
fast-asleep "regulators". ..."
"... There could never be an economic system, or economic argument where "too big to fail" could
ever be a rational/legitimate policy. Put another way, no level of short-term economic harm or
shock could possibly equal the long-term harm (and insanity) of institutionalized blackmail
– which is all that "too big to fail" ever was/is. You must protect us, no matter what we do,
no matter what the cost. Utter insanity. Utter criminality. ..."
"... An oligopoly is where a small group of companies dominate/control an entire market or sector.
Here it is important to understand that oligopolies are every bit as "evil" as monopolies (in
every way), but the oligopoly puts a happy-face on this evil. Oligopolies represent pretend
competition. ..."
"... But such corporate extortion via oligopolies/monopolies is certainly not confined to the banking
sector. The Oligarchs engage in such extortion (against corrupt governments which require absolutely
no arm-twisting) in virtually every sector of our economies, but generally in not quite as extreme
a form as what is perpetrated by the Big Banks. ..."
"... Read Schumpeter beginning to end. He recognized the evolution of increasingly
larger-scale, boom-and-bust "capitalism" from free-enterprise, entrepreneurial capitalism to
industrial capitalism and eventually to various forms of state-capitalism, corporate-statism,
or quasi-fascism we have today, or what I refer to as militarist-imperialist, rentier-socialist,
or Anglo-American corporate-state. ..."
Today, with governments which are nothing but literally the junior partners (of Big Business)
in government-by-crime-syndicate, these laws might as well no longer exist, as they are practically
never enforced. Indeed, an entity must be a political/economic pariah, or simply lacking "connections"
if it is unable to sneak some merger or take-over past our totally compliant governments, and their
fast-asleep "regulators".
Today we have corporate monoliths which are literally orders of magnitude larger than any
remotely "optimal" size, with the ultimate and most-obvious examples being those hideously bloated
financial behemoths which we now know as "the Big Banks". How ridiculously too-big have the Big Banks
gotten?
Even the most-ardent admirer of the Big Banks in the entire media world, Bloomberg, couldn't stop
itself from openly salivating about how much "profit" could be had, just by beginning to chop-down
the financial fraud-factory which we know as JPMorgan Chase & Co.:
JPMorgan Chase & Co, the biggest U.S. bank by assets, would be worth 30 percent more if broken
into its four business segments, an unlikely scenario, an analyst at Stifel Financial Corp.'s KBW
unit said.
Note that there is not one word in the article indicating that there couldn't be a lot more
profit to be made, by then smashing those pieces into much smaller pieces still. This article
simply pointed to the instant profit of 30% which would be available just by beginning to
chop-down this obscenely large behemoth, and in the simplest manner possible.
Why would "smaller" be much more valuable, in our forward-looking markets, in the case of smashing
JPMorgan down-to-size (or at least beginning that process)? Obviously a major portion of that profit
quotient would have to be derived from greater efficiency. Smaller is better.
However, pointing out that even the greatest admirer/biggest cheerleader of the Big Banks has
observed how we would all be better off if the Big Banks were smaller is only a start. We
then come to the heinous propaganda which the cheerleaders (including Bloomberg) have dubbed "too
big to fail".
This is a very simple subject. "Too big to fail" is a pseudo-concept which is entirely antithetical
to any economic system which even pretends to adhere to the principles of "free markets".
Free markets demand that insolvent entities fail, it is the only way for such free markets to heal,
when weakened by the misallocation of assets (such as in the case of insolvent enterprises). No business,
or group of businesses could ever be "too big to fail".
There could never be an economic system, or economic argument where "too big to fail" could
ever be a rational/legitimate policy. Put another way, no level of short-term economic harm or
shock could possibly equal the long-term harm (and insanity) of institutionalized blackmail
– which is all that "too big to fail" ever was/is. You must protect us, no matter what we do,
no matter what the cost. Utter insanity. Utter criminality.
Understand that our own, corrupt governments embarked upon this criminal insanity long after the
equally criminalized government of Japan already proved that too-big-to-fail was a failed policy.
Not only could there never be an argument in favor of this criminality, our governments knew it
would fail before they ever rubber-stamped this systemic corruption.
But all of these arguments against the insanity of perverting and skewing our economies in favor
of Big Business, and against Small Business pale into insignificance compared to the principal condemnation
of too-Big Business: the economic "cannibals" known as monopolies and oligopolies.
For readers unfamiliar with these terms because the Corporate media and charlatan economists try
to pretend that these words don't exist, a brief refresher is in order. As most readers know, a monopoly
is where a single enterprise effectively controls an entire market or sector. While a "monopoly"
may be desirable when playing a board-game, in the real world these parasitic entities do nothing
but blood-suck, from any/every economy they are able to "corner".
However, the majority of people, even today, are at least partially familiar with the evils of
monopolies, thus the ultra-wealthy Oligarchs rarely attempt to perpetrate their systemic theft via
these corporate fronts. Instead, they perpetrate most of their organized crime via oligopolies.
An oligopoly is where a small group of companies dominate/control an entire market or sector.
Here it is important to understand that oligopolies are every bit as "evil" as monopolies (in
every way), but the oligopoly puts a happy-face on this evil. Oligopolies represent pretend
competition.
These corporate fronts cooperate as closely as possible in systemically plundering economies.
How do monopolies/oligopolies rob from us? The "old-fashioned" way for these blood-suckers to do
so was via simple price-gouging. When you have complete control over a sector/market, you can
charge any price you want.
However, not surprisingly, the Little People tend to notice when the Oligarchs use their corporate
fronts to engage in simple price-gouging. They actually begin to notice the general evil which oligopolies/monopolies
represent, and that is "bad for business" (i.e. crime).
Instead, the Oligarch Thieves of the 21st century engage in their robbery-by-corporation in a
different, more sophisticated/less-visible manner: via corporate welfare. What other crime can monopolies
and oligopolies perpetrate, with overwhelming success? Naked extortion.
As previously explained; "too-big-to-fail" (and now even "too big to jail") is nothing but the
most-obvious and most-despicable form of corporate extortion (or simply economic terrorism): give
us all the money we want, or we'll blow up the financial sector. Small banks could never perpetrate
such a crime (terrorism).
But such corporate extortion via oligopolies/monopolies is certainly not confined to the banking
sector. The Oligarchs engage in such extortion (against corrupt governments which require absolutely
no arm-twisting) in virtually every sector of our economies, but generally in not quite as extreme
a form as what is perpetrated by the Big Banks.
Typically, the extortion which precedes even more Corporate welfare, occurs in this form: give
us everything we want, or we will close our factory/business, and you will (temporarily)
lose those jobs. Here we don't need to imagine this in the hypothetical, as we have a particularly
blatant example of such Corporate extortion/welfare, courtesy of U.S. Steel:
U.S. Steel Canada Inc. is threatening to cease operations in Canada by the end of the year
if an Ontario Superior Court judge rejects its request to stop paying municipal taxes, halt payments into pension funds, and
cut off health care and other benefits to 20,000 retirees
and their dependents. [emphasis mine]
... ... ...
kanoli
Like most of Jeff Nielson's rants, this one is nonsensical. If small business hires more
people to produce the same product or service as a big business, they cannot do so at the same
or lower price unless they are paying a lower wage.
The problem with big business isn't that it is big - it is their tendency to lobby government
for regulations that stifle small business competitors.
If politicians were not for sale, it wouldn't matter whether a business is big or small.
Neither would have undue influence on the law.
The problem is regulatory democracy where all laws are constantly subject to fiddling by an
elected legislature.
Element
In practice a balanced mix of all sized businesses are necessary in a planetary
civilization that trades products globally. Getting the mix 'right' and not having big
business get away with preventing competition, or of govt throttling to skim and micro-control
is most of the deleterious effect on business, and on human beings in general.
Unfortunately humans have been trained to like Logos, and to buy 'wants' accordingly.
iDroned on a bit,
2c
newnormaleconomics
Read Schumpeter beginning to end. He recognized the evolution of increasingly
larger-scale, boom-and-bust "capitalism" from free-enterprise, entrepreneurial capitalism to
industrial capitalism and eventually to various forms of state-capitalism, corporate-statism,
or quasi-fascism we have today, or what I refer to as militarist-imperialist, rentier-socialist,
or Anglo-American corporate-state.
The current state of the evolution of "capitalism" is its advanced, late-stage,
financialized, globalized phase.
With Peak Oil, population overshoot, unprecedented debt to wages and GDP, Limits to Growth,
climate change, a record low for labor share, decelerating productivity, OBSCENE wealth and
income inequality, and increasing geopolitical tensions, growth of real GDP per capita is
done, which means that growth of profits, investment, and capital formation/accumulation is
done, which in turn means "capitalism" is done.
Paul Marshall, chairman of London-based hedge fund Marshall Wace, in the FT:
Central banks have made the rich richer: Labour's new shadow chancellor has got at least one
thing right. ... Quantitative easing ... has bailed out bonus-happy banks and made the rich richer.
...
It is no surprise that the left is angry about this, nor that they are looking for other
versions of QE that do not so directly benefit bankers and the rich. Instead of increasing the
money supply by buying sovereign bonds from banks, central banks could spread the love evenly
by depositing extra money in every person's bank account..., it might have been fairer.
Mr McDonnell and Jeremy Corbyn, the new Labour leader, advocate a second approach: targeting
QE at infrastructure projects. The central bank would buy bonds direct from the Treasury on the
understanding that the funds would be used to improve housing and transport infrastructure. ...
QE had clear wealth effects, which could have been offset by fiscal measures. All political
parties should acknowledge this. So should those of us who want free markets to retain their legitimacy.
The ongoing oligarch theft labeled an "economic recovery" by pundits, politicians and mainstream
media alike, is one of the largest frauds I've witnessed in my life. The reality of the situation
is finally starting to hit home, and the proof is now undeniable.
Families' savings not where they should be: That's one part of the problem. But Mills sees
something else in the recovery that's more disturbing. The number of households tapping alternative
financial services are on the rise, meaning that Americans are turning to non-bank lenders for
credit: payday loans, refund-anticipation loans, pawnshops, and rent-to-own services.
According to the Urban Institute report, the number of households that used alternative
credit products increased 7 percent between 2011 and 2013. And the kind of household seeking alternative
financing is changing, too.
It's not the case that every one of these middle- and upper-class households turned to pawnshops
and payday lenders because they got whomped by an unexpected bill from a mechanic or a dentist.
"People who are in these [non-bank] situations are not using these forms of credit to simply overcome
an emergency, but are using them for basic living experiences," Mills says.
Of course, it's not just "alternative financial services." Increasingly desperate American citizens
are also tapping whatever retirement savings they may have, including taking the 10% tax penalty
for the privilege of doing so. In fact, 30 million Americans have done just that in the past year
alone, in the midst of what is supposed to be a "recovery."
With the effects of the financial crisis still lingering, 30 million Americans in the last
12 months tapped retirement savings to pay for an unexpected expense, new research shows.
This undercuts financial security and underscores the need for every household to maintain an
emergency fund.
Boomers were most likely to take a premature withdrawal as well as incur a
tax
penalty, according to a
survey from Bankrate.com. Some 26% of those ages 50-64 say their financial situation has
deteriorated, and 17% used their 401(k) plan and other retirement savings to pay for an emergency
expense.
Two-thirds of Americans agree that the effects of the financial crisis are still being felt
in the way they live, work, save and spend, according to a
report from Allianz Life Insurance Co. One in five can be called a post-crash skeptic-a person
that experienced at least six different kinds of financial setback during the recession, like
a job loss or loss of home value, and feel their financial future is in peril.
So now we know what has kept meager spending afloat during this pitiful "recovery." A combination
of "alternative loans" and a bleeding of retirement accounts. The transformation of the public
into a horde of broke debt serfs is almost complete.
Don't forget to send your thank you card to you know who:
This week, Eric has an in depth conversation with economist Michael Hudson, author of the new
book
Killing
the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy. Eric and Prof.
Hudson discuss the evolution of finance capital from its humble parasitical beginnings to the comprehensive
global network of economic tapeworms and barnacles that it is today. They examine neoliberal terrorism,
how debt is used as a weapon, and the disastrous effects of the financialization of the real economy.
Hudson outlines the relationship between the parasites and their bloodsucking policies of austerity,
providing insight using the example of Latvia, where he witnessed first hand the smash-and-grab nature
of such prescriptions. Plus, Eric and Michael touch on Obama as Wall Street errand boy, the importance
of left economic organizing, and much much more.
Musical interlude from the exciting new band
GospelbeacH, and intro
and outtro from David Vest.
I was fascinated that Bear Stearns was the first to go
as Bear was the only large company that failed to respond
to the Fed's calls when LTCM almost brough down the house
in 1998.
the greatest control fraud in history, the 2008 seizure of the u.s. government's financial/regulatory
apparatus by wall street's banks and trading houses to recapitalize themselves and avoid prosecution
for their enormous crimes, is tremendously evil. it will never be prosecuted or its errors
corrected until the psychopaths at the head of our society are neutralized.
only 9-11 can do this. it is the crime that is clear-cut, unambiguously wrong, provable,
without a statute of limitations (treason/murder/kidnapping), sufficiently inflammatory (very
important) and really comprehensive in its list of perps, especially after the fact (the editors
of the new york times don't actually have to go to jail; just most people have to think they should).
"If a counterparty liquidates, net exposure becomes gross [emphasis added
by me], and suddenly everyone starts wondering where all those "physical" commodities are."
For those who may not quite grasp this, it means all your "hedging" against falling prices
is null and void and you are left with full-in-the-face long exposure PLUS entities dealing in
the physical commodity can suddenly be looking down a long tunnel of "failure to timely deliver"
on contracts they've signed.
But, then again, 2016 is the last year for a lame duck president... traditionally a very good
year to "clean house" and get the government to bail you out.
"...Draitser examines some of the volatile conflicts on the continent, attempting to trace
how they relate to the US-NATO regional and global hegemonic agenda. From there, he provides his
analysis of Syria and the US role in the rise of ISIS/ISIL, as well as Washington's militarization
of Latin America in order to stifle its independence and growing alliances with the non-western
world."
He describes in detail what the US and its neocolonial NATO allies are doing in Africa,
with close attention to the grand strategy of militarily checking the economic influence of
China. Draitser examines some of the volatile conflicts on the continent, attempting to trace
how they relate to the US-NATO regional and global hegemonic agenda. From there, he provides his
analysis of Syria and the US role in the rise of ISIS/ISIL, as well as Washington's
militarization of Latin America in order to stifle its independence and growing alliances with
the non-western world. Finally, Draitser touches on the current situation in Haiti and the
grand strategy of containing China through the Asia Pivot and the Trans-Pacific Partnership. All
this and much much more in this wide-ranging interview.
I am not sure that what EU wants is recovery. I think that idea is a fire sell of key Greek assets
to Germany for pennies of a dollar. Distressed sales, you know. Welcome to modern debt slavery. . "..."Dutch economist Maarten Verwey has unprecedented powers as his taskforce oversees the implementation
of Greece's cash-for-reforms rescue package...Whoever ends up moving into Maximos Mansion, the official
Athens residence of Greece's prime ministers, after Sunday's election, they will not, in any meaningful
sense, be running the country. . That honour might be said to go instead to a besuited Dutch economist in Brussels with the imposing
title of director-general in the secretariat-general of the European commission in charge of the Structural
Reform Support Service. . Maarten Verwey, a senior civil servant at the Dutch finance ministry who joined the commission in
2011 and led its Cyprus assistance programme, heads what amounts to an EU taskforce for Greece,
Greek media have said. "
They sucked up to their politicians, whilst they ignored the obligations of their society.
Any collective responsibility was surrendered for personal gain.
As usual... The Politicos grabbed the loot, and did a quick exit.
What remains, is your problem!
====
Do you see it?... That debt necklace that continues to engulf you?
The moral catastrophe this EU promoted...
We have to respond - but do reflect when you vote when Cameron decides.
rberger -> Sehome 19 Sep 2015 21:47
While there might be some economic sense to your idea, the politics make it unlikely to happen.
The Southern Europe countries wanted the stable currency and low interest rates associated with
the Bundesbank. If you asked Spain whether they wanted to go into a union with people like Greece,
it wouldn't make any sense to them - they would prefer to stick to their own currency.
Xenkar -> Mackname 19 Sep 2015 21:42
We have to keep pretences about Democracy in Europe is all. As for the renaissance I can't
see Greece waiting 3 centuries as a debt colony, unless you are referring to the word literally,
or to the sociological results of the renaissance after its end which was the return of Democracy
in a revolutionary fashion.
rberger -> Pannie321 19 Sep 2015 21:40
Of all the privatizations that have been done since the crisis started, not a single one has
gone to a German company. (The airport operations one may go to a joint venture with Fraport but
it hasn't been finalized yet.) The winners of the privatizations have been from countries like
China, Hungary, Azerbaijan, etc (i.e., usually not EZ countries). I don't think there are any
German companies involved in any of the upcoming privatizations either.
Mackname 19 Sep 2015 21:27
I don't understand the logical that keeps those people voting for something that they have
no power to do a damned thing about it.
Those people need a renaissance.
slipangle -> Shizam13 19 Sep 2015 21:25
"German jackboot" that really is disgraceful, Germany would be far happier if Greece had run
proper balanced budgets. The Greeks were the architects of their own disaster,Germans should be
thanked for bailing the fools out rather then insulted.
randomguydeaustralie -> Sehome 19 Sep 2015 21:19
What, like an Austro-Hungarian Empire you mean?? That ended pretty badly as I recall
Pannie321 -> rberger 19 Sep 2015 21:14
Merkel has never been supportive of Greece, she along with Schauble are entirely responsible
for impoverishing Greece for the benefit of German Banks. Just check out which Country's businesses
are buying up Greek assets cheaply, check out the Nationality of the Business that hasn't paid
any V.A.T. revenues or social security(N.I.) contributions for the past 20 years. That business
has now conveniently sold their interests.
Why have elections when thanks to Tsipras treacherous deal it makes absolutely no difference
who's elected. Greece your new PM is Maarten Vervwey:
"Dutch economist Maarten Verwey has unprecedented powers as his taskforce oversees the implementation
of Greece's cash-for-reforms rescue package...Whoever ends up moving into Maximos Mansion, the
official Athens residence of Greece's prime ministers, after Sunday's election, they will not,
in any meaningful sense, be running the country.
That honour might be said to go instead to a besuited Dutch economist in Brussels with the
imposing title of director-general in the secretariat-general of the European commission in charge
of the Structural Reform Support Service.
I have watched economic problems from Portugal to Greece for a few years now, seemingly insoluble
without German/Brussells dictates, and I have a Propossal:
All Southern Europe, with its own level of economic strength, languages and cuisine and weather,
should withdraw from EU and be its own Union, with its own currency. All of wealthy, arrogant
Northern Europe including Scandinavia would be Europe North, but with no power to order anything
at all in Europe South.
This would leave Czech Rep, Slovakia, Poland, the Balts and the poor small countries of Yugoslavia,
either to form a Middle Europe, or break to join the North or South.
Three Europes, I think, makes more sense when one considers language, culture, values, and economics.
OXIOXI20 -> TheRuthlessTruth 19 Sep 2015 20:22
You ever hear of bank bailouts, 2008, 2010, 2012 ??
Scrotalyser 19 Sep 2015 19:46
I hate to have to tell them, but the Greeks sold their country for Euros. So they can't do
anything, because they gave their power away to a cabal of faceless fraudsters.
Captain_Tibbets 19 Sep 2015 19:41
Tell the EU to shove their debts.
Iceland is doing fine now. You don't need the Euro. It's a curse not a blessing. We did tell
you that.
This German mercantilist farce needs to stop. Do it now whilst they're in a blind panic about
their disasterous asylum plans which are on the brink of causing war between Hungary and Slovenia.
Kick the Germans when they are down - it's the best way, they're not so good fighting on two fronts
historically...
Mmm hmmmm, large amount of cash found in vehicle, check. Weapon and ammunition found in vehicle,
check. What…no air tickets to Moscow? Where's the flippin' air tickets, you incompetent cretins??
There always have to be air tickets, Christ, do I have to run a fucking seminar or something?
I'd be willing to bet his real crime was getting in someone's way in the Porky/Yatsie machine,
simply because it has happened over and over since they took power – as predictable as darkness
at the end of daylight. Official commissioned to root out corruption, official finds wrong kind
of corruption, official announces the finding of corruption, official accused of corruption, found
with large amount of cash, sometimes weapons although that's not of much consequence in a country
full of them, and who uses a rifle downtown to extort money?…and air tickets, signifying an intent
to flee. Always remember the air tickets, it's important.
I wouldn't go so far as to say he has done nothing wrong, but he is likely no more corrupt
than the rest of the organization, including a president who is still raking in the dough from
private enterprise and owns his own media channel. Perhaps that's what endears him so to the west,
who see him taking his first tottering steps toward a society utterly dominated by corporatism
and business to the exclusion of all other concerns, beyond paying them pious lip service at election
time. American policymakers probably envy him his open graft and lawbreaking, and wish they, too
were allowed to merely promise to sell their corporate interests if elected and then forget about
it, whereupon everyone else would just ignore it and figure there is nothing untoward about a
political figure making a little brass. After all, that pathetic Ukrainian in the man-on-the-street
interview in the run-up to elections said he was voting for Poroshenko because he was already
rich, so hopefully he would not steal as much.
Mosiychuk is
stripped of his Parliamentary immunity and arrested. A video allegedly shows him soliciting
and accepting bribes. Lyashko is stunned. This is apparently unprecedented. His own party is said
to have voted for it, believing Mosiychuk would then be given the floor and would refute the allegations.
But, in what is beginning to typify the last-of-the-wild-frontier politics in Kiev, they went
straight to arrest. The masked police are a nice touch, and in my humble opinion, a great way
to display European values. Keep it up, Ukraine – you're almost NATO material!!
"..."Equally, Lavrov lifted the veil a little bit to let the Americans know
that the Russian military intelligence has not only been monitoring the operations of the American military
aircraft in Iraq but have scientifically analyzed the US aircraft's flight plans and so on. In sum,
Russians seem to have intelligence dope to substantiate something that the Iranians have been all along
maintaining, namely, that the American aircraft are regularly airdropping supplies for the IS." "
The presidents of Russia, Armenia, Belarus, Kazakhstan, Kyrgyzstan and Tajikistan met in narrow format
and then continued their talks with their delegations present.
The summit's main focus was on effective
response to the biggest current military and political challenges, including an upsurge in activity
by terrorist and extremist groups and destabilisation of the situation on the CSTO countries' borders.
The meeting ended with a package of documents being signed, including a statement by the CSTO
Collective Security Council's member states. In particular, documents were signed concerning cooperation
in the transit of military formations and military products; readiness inspections for carrying out
the Collective Rapid Reaction Forces' objectives, their composition and deployment, as well as the
CSTO's budget.
* * *
Speech at CSTO Collective Security Council session
President of Russia Vladimir Putin: Thank you, Mr Rahmon!
First of all, I would like to express my gratitude for the opportunity to work in Tajikistan today.
I would like to note that Tajikistan is our strategic partner and ally. We see that here in Tajikistan,
you also face problems with certain forays and attempts to destabilise the situation. I would like
to say straight away that we are assessing these threats adequately and you can always count on our
help and support, although we see that your law enforcement agencies and armed forces are handling
the problems that come up effectively.
Just now, in the restricted format, we had a detailed discussion on the CSTO's zone of responsibility,
as well as urgent regional and international problems, and outlined steps to further strengthen our
organisation. We noted the increase in threats faced by CSTO member states in various areas.
We are concerned by the state of affairs in Afghanistan. International security forces have been
in that nation a long time, carrying out certain work, including positive work; however, it still
has not brought qualitative, definitive and decisive improvements to the situation. Unfortunately,
the situation in that country is deteriorating following the withdrawal of most foreign military
forces.
There is an increase in the real danger of terrorist and extremist groups entering nations that
neighbour Afghanistan, and the threat is made worse by the fact that in addition to the well-known
organisations, the influence of the so-called Islamic State has also spread to Afghanistan. The scope
of the organisation's work has reached far beyond the borders of Iraq and Syria. Terrorists are carrying
out mass executions, plunging entire nations into chaos and poverty and destroying cultural monuments
and religious shrines.
The outcomes of the fight by international security forces against the production of narcotics
is no less dispiriting. We know how this threat is growing from year to year; unfortunately, it is
not decreasing.
I mentioned the situation in Syria and Iraq; they are the same as the situation in Afghanistan,
in that they worry all of us. Please allow me to say a few words on the situation in this region,
the situation around Syria.
The state of affairs there is very serious. The so-called Islamic State controls significant stretches
of territory in Iraq and Syria. Terrorists are already publicly stating that they have targets set
on Mecca, Medina and Jerusalem. Their plans include expanding activities to Europe, Russia, Central
and Southeast Asia.
We are concerned by this, especially since militants undergoing ideological indoctrinations and
military training by ISIS come from many nations around the world – including, unfortunately, European
nations, the Russian Federation, and many former Soviet republics. And, of course, we are concerned
by their possible return to our territories.
Basic common sense and a sense of responsibility for global and regional security require the
international community to join forces against this threat. We need to set aside geopolitical ambitions,
leave behind so-called double standards and the policy of direct or indirect use of individual terrorist
groups to achieve one's own opportunistic goals, including changes in undesirable governments and
regimes.
As you know, Russia has proposed rapidly forming a broad coalition to counteract the extremists.
It must unite everyone who is prepared to make, or is already making, an input into fighting terrorism,
just as Iraq and Syria's armed forces are doing today. We support the Syrian government – I want
to say this – in countering terrorist aggression. We provide and will continue to provide the necessary
military technology assistance and urge other nations to join in.
Clearly, without active participation by the Syrian authorities and military, without participation
by the Syrian army, as the soldiers fighting with the Islamic State say, you cannot expel terrorists
from this nation, as well as the region overall, it is impossible to protect the multi-ethnic and
multi-faith people of Syria from elimination, enslavement and barbarism.
Of course, it is imperative to think about the political changes in Syria. And we know that President
Assad is ready to involve the moderate segment of the opposition, the healthy opposition forces in
these processes, in managing the state. But the need to join forces in the fight against terrorism
is certainly at the forefront today. Without this, it is impossible to resolve the other urgent and
growing problems, including the problem of refugees we are seeing now.
Incidentally, we are seeing something else: we are currently seeing attempts to practically put
the blame on Russia for this problem, for its occurrence. As if the refugee problem grew because
Russia supports the legitimate government in Syria.
First of all, I would like to note that the people of Syria are, first and foremost, fleeing the
fighting, which is mostly due to external factors as a result of supplies of arms and other specialized
equipment. People are feeling the atrocities of the terrorists. We know that they are committing
atrocities there, that they are sacrificing people, destroying cultural monuments as I already mentioned,
and so on. They are fleeing the radicals, first and foremost. And if Russia had not supported Syria,
the situation in that nation would have been even worse than in Libya, and the flow of refugees would
be even greater.
Second, the support of the legitimate government in Syria is not in any way related to the flow
of refugees from nations like Libya, which I already mentioned, Iraq, Yemen, Afghanistan, and many
others. We were not the ones that destabilised the situation in those nations, in whole regions of
the world. We did not destroy government institutions there, creating power vacuums that were immediately
filled by terrorists. So nobody can say that we were the cause of this problem.
But right now, as I said, we need to focus on joining forces between the Syrian government, the
Kurdish militia, the so-called moderate opposition, and nations in the region to fight the threat
against Syria's very statehood and the fight against terrorism – so that together, with our efforts
combined, we can solve this problem.
I already spoke about the other issues that currently concern us, which we discussed today. In
this respect, I would like to note that we plan to continue strengthening cooperation between our
armed forces. We plan a whole set of activities in this area. I would like to also stress that our
cooperation within the CSTO framework is certainly not directed against anybody. We are open to constructive
cooperation, and that is precisely the approach that is reinforced in the final statement that will
be signed today.
I am certain that we must resume concrete discussions on creating Euro-Atlantic systems for equitable
and indivisible security; we need to carry out a full inventory of existing problems and disagreements.
This analysis can be used to achieve a discussion of the principles of sustainable political development.
The OSCE and other international organisations can be used to agree on legally binding guarantees
concerning the indivisibility of security for all nations, achieve observance of important fundamental
principles of international law (respecting the sovereignty of states, not meddling in their domestic
affairs), and strengthen regulations on the inadmissibility of appeasing anti-state, anti-constitutional
coups and the promotion of radical and extremist forces.
I would like to thank Mr Rahmon for his work as chairman of the CSTO, as well as my other colleagues,
and to wish our Armenian partners and friends success in chairing the organisation. Thank you very
much for your attention.
Martin from S.E.B. on September 16, 2015 · at 12:51 am UTC
Putin speaks out all the related Truth now, finally!
Also rightfully he points out, that US-ISIS could spread to Europe and Russia like a wildfire
during storm, if it cannot be extinguished very soon.
"""""But right now, as I said, we need to focus on joining forces between the Syrian government,
the Kurdish militia, the so-called moderate opposition, and nations in the region to fight the
threat against Syria's very statehood and the fight against terrorism – so that together, with
our efforts combined, we can solve this problem."""""
I don't need a religion for this: I PRAY and wish all the Best!!!
Anonymous on September 16, 2015 · at 1:09 am UTC
re: Syria and the latest BBC article. At least they did not do a blatant hack job ( maybe the
sarcastic article in RI today about how to write mindless attacks on Russia hit a nerve) And ,
my, my they have a defense analyzer who actually makes sense:
Analysis: Jonathan Marcus, BBC defence correspondent
"Russia's backing for Mr Assad should be seen not as a vote of confidence in Syria's embattled
president but as an investment in a country where Russia believes it can play out its foreign-policy
role.
Indeed Mr Putin's military deployments signal that he will not let the Assad regime fall. This
does not mean Mr Assad will be there forever.
Russian diplomacy is working in tandem with its military policy, exploring all avenues for reaching
some sort of interim deal in which Mr Assad might stay on, at least for the time being.
But Russia's horizons in Syria probably extend well beyond Mr Assad's active presence – a reflection
of Russia's concerns about militant Islam and wider trends in the region, and also its belief
that Western remedies in the Middle East have been an unmitigated disaster. "
Meanwhile the US administration of criminals and liars pretends to be puzzled by Russia's support
for Syria, what a load of tripe in the New York Times. The Americans are not worth talking to,
they don't know how to tell the truth or hear it, it is something that sticks in their craw, there
has to be some propaganda angle in play in everything they say, and behind that is a party line
that is right out of the propaganda the west used to spout about Stalin. Beware, whoever dares
to question the world according the New York Times: the truth is too important to be left out
in the open and must be hidden behind a curtain of lies.
It would be good someday to have access to a network of reporters committed to giving accurate
information from every country, for example in the current crisis area from the capitals of Turkey,
Syria, Iraq, Iran, Saudi, Qatar, Israel, Jordan, the western capitals, etc. so that each viewpoint
can be assessed and a judgment formed.
Reading between lines and deciphering cryptic word bites really sucks, and I am sick of it.
I don't know about anybody else but I have just about had it even with the internet. I get a better
picture of the world from just daydreaming about it. Earth people can be so stupid!
Red Ryder on September 16, 2015 · at 3:15 am UTC
When you find a story on one source, spend a few minutes using a browser like DuckDuckGo or
Yandex or Baidu and look for the essence, like the same headline facts.
If you don't find anything, it's generally not much more than wishful thinking.
If the topic is really compelling, try searching for the next day or two. If you find only the
original source repeated or not at all addressed, it was fantasy.
Voltaire is cotton candy. Makes your feel good as the sugar rushes through your brain and bloodstream.
David George on September 16, 2015 · at 6:10 am UTC
I'm beginning to think you are right about Voltaire-net, but they have been good for some information
I think.
Nevertheless the footnotes to many of the articles in Voltairenet are a treasure trove and they
remain available in full, also a rarity in my experience.
The Soviet Union entered Afghanistan in late December, 1979. This is what happened in the first
part of 1979, as told in "From the Shadows" by former CIA director and Secretary of Defense Robert
Gates and reprinted at stormcloudsgathering.com.
"The Carter administration began looking at the possibility of covert assistance to the insurgents
opposing the pro-Soviet, Marxist government of President Taraki at the beginning of 1979. . .
"On March 30, 1979, Aaron chaired a historic "mini-SCC" … Walt Slocombe, representing Defense,
asked if there was value in keeping the Afghan insurgency going, "sucking the Soviets into a Vietnamese
quagmire?". . .
Peter on September 16, 2015 · at 5:39 am UTC
USSR's Afghanistan. US's Vietnam.
Putin/Russia is not the USSR.
US is still the US.
Erebus on September 16, 2015 · at 4:15 am UTC
I'm looking for an even more pointed statement when Putin addresses the UN at the end of this
month. The gloves are coming off. The Kremlin has been on a diplomatic blitzkrieg for a few months
now, and they must think they have enough support to take the USA's strategy head-on.
By inviting the USA to join their coalition, Moscow has put Washington into Zugzwang.
The choice is: publicly support regime change in Syria over the destruction of ISIS, or join the
Russian initiative to destroy the terror networks. Either way, American Exceptionalism, to say
nothing of Indispensability, gets knocked cross-eyed.
Talk about getting out-maneuvered. Ouch.
Ann on September 16, 2015 · at 5:00 am UTC
sadly, when he said that Russia stands behind and will support any problems arising in Tajikistan
I immediately … knee jerk … thought of when he said about the same thing in Donbass…that was very
difficult to understand…I think the 5th column prevented Putin from entering Donbass right at
the beginning of the war. Putin is not like a person that makes empty promises, and during that
time, the beginning of the Donbass fiasco when he was making that promise, he was sitting on the
edge of his seat I remember…as though it had already been talked about in the government and he
thought he could make a tentative promise…but I guess he was overruled.
Grieved on September 16, 2015 · at 5:08 am UTC
I consistently admire the way in which Russia speaks only the truth required for the concerns
of the day, but even so never hesitates to speak the necessary truth, and never speaks anything
other than the truth when she does speak. Russia is formally a friend of Israel, and yet will
speak of "joining forces between the Syrian government, the Kurdish militia, the so-called moderate
opposition, and nations in the region to fight the threat against Syria's very statehood and the
fight against terrorism…"
No mention of Israel or Turkey as belligerents acting against such a coalition. And perhaps as
it comes together, these nations will reverse their positions and bow to the inevitable. Russia
is quite elegant, I think, in allowing all parties in situations the maximum room to change and
adapt, leaving it until the vital last moment for any potential opposition to gather its energy
into a strike – at which time Russia will engage with that very energy to throw down the opponent.
I know it's irresistible to use these judo analogies with everything that Russia and Putin do
– but how can we see it otherwise? The entire military doctrine and diplomatic activities of Russia
display this every day. There's a rigorous adherence to the factual truth, combined with a severe
reluctance to spend words or effort until the moment is right – combined yet again with zero hesitation
to expend massive energy for actions deemed necessary, such as military drills.
It's clear I'm a fan of Russia, but only because of what i see.
Demeter on September 17, 2015 · at 5:26 pm UTC
"Russia is quite elegant, I think, in allowing all parties in situations the maximum room to
change and adapt, leaving it until the vital last moment for any potential opposition to gather
its energy into a strike – at which time Russia will engage with that very energy to throw down
the opponent."
Thank you for saying that Grieved. I think this is quite true. I felt frustrated when I read that
again Putin would not mention with one word the true culprits. But then again, as you said, he
is giving them one more and another and yet another chance to change their mind and come to their
senses. Lie one warning after another but wrapped as an invitation to join forces.
Should they (US, Israel, Turkey, Saudi etc) decide to continue to follow on the path of destruction
of a sovereign nation Russia will hit back with full might.
Mulga Mumblebrain on September 17, 2015 · at 10:56 pm UTC
Israel will not change its position vis-a-vis the destruction of Syria. That's not how they
operate. They demand 100% gratification of their desires, being above dealing with mere goyim
as if they were their equals.
The Israeli elite want Syria broken up into four or so mutually antagonistic fragments, the
better for Israel to dominate them, prior to the eventual annexation of those lands that they
covet as Eretz Yisrael.
And, of course, Zionazi intransigence and ambition, while growing more explicit over the years
as the hard Right took over in Israel, and the Jewish Fifth Columns took over Western polities,
the USA in particular, has been there awaiting realisation, since the days of Herzl and Ben-Gurion.
Israel does not, and I believe can not, do compromise because the essence of their cult is the
ineradicable belief in their superiority over the goyim, and the pre-eminence of Judaic Law over
International Law, which they believe, must not be applied to those acting directly according
to Divine Will.
Jabotinsky's 'Iron Wall' of total intransigence and absolute refusal to compromise, negotiate
in good faith or keep agreements with others, unless they definitively favour the Jews, is 'non-negotiable'.
It is, of course, a psychology that has gotten them into strife, over and over again, throughout
history, with hideous consequences, for the Jews and their victims as well, but today, with an
increasingly deranged elite, inside Israel and in the Diaspora, armed with hundreds of nukes,
it's positively apocalyptic.
Unfortunately there are lots of lunatics actively looking forward to such an outcome, particularly
the loathsome Christian Zionists.
Stan K on September 18, 2015 · at 5:31 am UTC
This article explains what you are referring to. "The Promised Land",
David George on September 16, 2015 · at 6:12 am UTC
I hope and pray that such a force will be created that it will destroy the psycho takfiris,
their enablers and handlers, their psycho mullahs and preachers, ideologues, strategists, tacticians,
lying political apologists, western criminal bankrollers, the whole evil society, and that a plague
like this will never again be allowed to exist on the face of the Earth; and that the US and its
minions will be presented with the whole bill for repairing the destruction they have caused and
making the victims whole again.
Erebus on September 16, 2015 · at 9:39 am UTC
David,
Be careful what you wish for. If the forces unleashed were truly enough to destroy all your target
parties, I doubt there'd be enough of the USA left to present any sort of bill to, or anyone left
inclined to present it.
Though Mr. Whitney hyperventilates a bit, the scenario he paints is both believable and ominous.
I think one should hope that the clash consists of a short, sharp lesson. Say, the first few NATO/USAF
planes entering Syrian airspace falling out of the sky would be absolutely devastating to Western
pre-eminence. In a word, it would be over.
CSTO's bandwagon would break an axle under the crush of new partners, and the "psycho takfiris"
could then be systematically destroyed.
David George on September 16, 2015 · at 1:12 pm UTC
I grew tired of Mike Whitney a long time ago, he is one of a long list of glib analysts who
never manage to put their finger on the essential evil of the people they analyze, or who somehow
manage to make it sound "everyday". There is nothing "everyday" about the criminals in Washington
and Jerusalem, Ankara, Riyadh, and the other cesspools of global power like Las Vegas, Los Angeles,
New York, and the various lily pads where they seek peace from their own consciences. They need
to be destroyed. I remember when Turkey's foreign policy was "zero problems", then over one weekend
it switched. Who promised what? Not only a few downed jets, but a few radiating airbases and a
generation's worth of repentance might be the answer to today's slick sickness. If it were not
for zombies like Brzezhinski and Kissinger and their banker sponsors, a young girl in Afghanistan
or elsewhere might have a prospect of a reasonable future instead of the prospect of being married
to a bearded psycho four times her age. Enough is enough.
Erebus on September 17, 2015 · at 12:00 am UTC
Your rage is not misplaced, but it is futile. The "evil" you speak of is just a point on the
spectrum of human behaviors. Eradicating it? Maybe, over generations. In one cathartic event?
Sure, but the collateral damage will be the rest of the spectrum, and even the planet.
I think the strategy being pursued by Russia & China is the only viable one. Box that "evil" in
so it can't continue to destroy nations and lives on an international scale. Expose it, challenge
it, drive it into its domestic corner(s) where, disconnected from its international wealth pumps
it can be constrained by the local population.
Mulga Mumblebrain on September 17, 2015 · at 11:17 pm UTC
Erebus, that would be like trying to cage a cancer. If you do not then excise the cancer, you
will suffer metabolic injury so great that you will perish, as the cancer pumps out various toxins,
like 'Free Market Fundamentalism', 'Western moral values' or 'Exceptionalism'. Cut the tumour
out, plus the chemotherapy of somehow rescuing the non-malignant members of the cancer societies
from the inhuman habits inculcated in them from birth (ie gross materialism, unbridled greed,
cultural and racial superiority, addiction to crass 'tittietainment' etc) and even a few escaping
cancer cells can cause metastasis elsewhere. What is really needed is a miracle, a 'spontaneous
remission' where the individual cells in the Western cancer suddenly transform themselves into
non-malignant, human, organisms again. There might be some good signs, such as the rise of Corbyn
in the UK, the eclipse of Harper, the character of Pope Francis, but there is a Hell of a way
to go, and not much hope of success.
Outlaw Historian on September 16, 2015 · at 11:11 pm UTC
Russian intel watch very very closely the movements of Outlaw Empire airplanes over Syria &
Iraq, not just the supposed airstrikes but air drops of supplies too. Excerpted from Lavrov's
latest speech:
"Equally, Lavrov lifted the veil a little bit to let the Americans know that the Russian military
intelligence has not only been monitoring the operations of the American military aircraft in
Iraq but have scientifically analyzed the US aircraft's flight plans and so on. In sum, Russians
seem to have intelligence dope to substantiate something that the Iranians have been all along
maintaining, namely, that the American aircraft are regularly airdropping supplies for the IS."
"...We all know that neoliberal economics is the driver of grotesque mal-distribution of wealth
as a privileged nomenclature gorges on resources it has commandeered through insider dealing. The predations
of this ideology over recent years mimic the violent reaction of Europe's other great Union – the Soviet
Union – to any challenge to the privileges of the nomenclature."
.
"...As this story demonstrates yet again, the Troika never meant to negotiate in good faith with
the Greek government, but simply imposed its own destructive austerity and privatization program on
it. It's also clear that the EU per se has very little independent existence, being mainly administrative
scaffolding for the German government to pursue its own essentially predatory policies directed at the
subjugation of the rest of Europe."
.
"...Mr. Varoufakis also ignores the role that clientelism has played in making a bad situation even
worse. He also ignores Greece's excessive debt and runaway fiscal spending. This has been going on since
1980. "
.
"...The divergence between Germany, on the one hand, and France and Italy, on the other, has been
hinted at in various analyses. The existing Euro system does represent the rule of bankers, enforced
by central bank control of the currency and pliable elected officials. As I observed over a long career
representing debtors and creditors in big cases, it is useless to expect a realistic evaluation of the
debtor's ability to repay, and a rational restructuring of debt, until the personnel responsible for
making the ill-advised loans are no longer the decision-makers (i.e. fired, retired or escaped to greener
pastures). The European banks, knowing that the Greeks could not repay, pressured their governments
to bail them out in stages starting in 2010, and they have succeeded in getting out. The politicians
who effected this bailout don't want to now tell the voters that they sold them out for the benefit
of the banks; rather they excoriate the Greeks as deadbeats, and refuse to deal with anyone who speaks
reality. So Greece, a small country, which can't repay the amount of debt outstanding, must wait for
a new cast of European politicians before sound economic arrangements can be implemented. The current
deal just kicks the can down the road pending such political change; it has no chance of success. Comme
ca change, comme c'est la meme chose."
.
"...You are wrong. The bankers knew well that Greece's loans were unsustainable and yet, they kept
lending, knowing that Merkel would cover the losses. However, what happened has happened. many were
at fault. Countries cause wars and ethic cleansing and are not punished. Germany is a prime example.
Why is Greece being held to a different standard? What happened to solidarity. Merkel is showing more
solidarity to the migrants, inviting all of the Middle East to come to Europe. She should fly them directly
to Germany. Why let them go through Greece first. Germany has a black eye, after her treatment of Greece
and now wants to show her "softer side" Let her suffer the consequences then"
.
"...His arguments about how irrational the eurozone has been in not transforming its economic framework
to a form more convenient to Greece, which represents only about 2% of the eurozone's GDP, is not compelling.
It's like the argument of millions of illegal aliens from failed societies given citizenship who then
turn around and agitate for changing the host society so that it better resembles the failed societies.
The eurozone's economic framework is hardly "undemocratic" if its most vocal critics number so few among
the whole."
.
"...Greece's rich and powerful, like the elites everywhere, "crushed Greece", because as countless
man/woman in the street quotes in this paper indicate Greek business owners and professionals not on
salary cheat and do not pay owed taxes. This criminal elite role modeling then infects the rest of the
society as well. Obviously when not enough money goes into government treasuries this also causes deficits!
But the rich and powerful, and their bought and paid for media, skillfully distract us from this reality
by arranging the public discussion to just be about cuts to sympathetic government programs, cuts that
are most often offered by the same criminal elites as the only solution to reducing deficits. Which
means the same dysfunctional status quo is continued and so yet more and more loans and bailouts and
debt forgiveness and screaming and yelling about being "victims" of it all go on - probably forever.
"
Since the beginning of Greece's financial crisis in 2010, two prime ministers have been swept
from office after they were forced to adopt an unfeasible package of austerity measures in exchange
for a bailout from the troika, as the eurozone authorities - the European Commission, the European
Central Bank and the International Monetary Fund - are known. It pains me to watch the same fate
befall a third prime minister, my friend and comrade Alexis Tsipras.
In July, when Mr. Tspiras was forced to capitulate to the troika's latest "program," it spelled
the end of our government. It also caused a split in our party, Syriza, between those who reluctantly
agreed to implement the program and the rest of us (approximately 40 Syriza members of Parliament,
out of a total of 149) who did not. The general election set for Sept. 20 is a result of this crisis.
For my part, having resigned as finance minister over the troika's ruthless, humiliating imposition,
I plan to sit this one out. I will not contest my parliamentary seat in a sad election that will
not produce a Parliament capable of endorsing a realistic reform agenda for Greece.
Nor can I support the adoption of a troika program that everyone knows is destined to fail. There
was a clear consensus, shared not only by myself and Mr. Tsipras, but also by Germany's finance minister,
Wolfgang Schäuble, and officials at the International Monetary Fund, that the new bailout deal was
not viable.
I will not, however, join those who think that exiting the eurozone, to bring about a major devaluation
with a reintroduced drachma, is in itself a program for Greece's recovery.
The cause of this continuing trouble for Greece lies in the eurozone's existential crisis. The
pioneers of the single currency, of whom Mr. Schäuble is the last active member, were undecided whether
the euro should be modeled on the international gold standard of the interwar period or on a sovereign
currency, like the dollar.
The gold standard relied on strict rules that were unenforceable during a crisis. In a severe
downturn, these imposed the greatest burden on the worst-hit economies and thus made exit the only
alternative to a humanitarian crisis. This is the reason that President Franklin D. Roosevelt took
the United States off the gold standard in 1933, expanded the money supply and helped pull America
out of the Depression.
A sovereign currency, or state money, demands a different, more flexible set of responses based
on political union, as the French government and others have recently proposed. The great questions
that Europe must answer are: What kind of political union do we want? And are we prepared to act
quickly enough to prevent the fragmentation of the eurozone?
Europe's indecision is a result of a deep rift between Berlin and Paris. Berlin has traditionally
backed a rules-based eurozone in which every member state is responsible for its own finances, including
bank bailouts, with political union limited to a fiscal overlord's possessing veto power over national
budgets that violate the rules. Paris and Rome, cognizant that their deficit position would condemn
them to a slow-burning recession under such a rules-based political union, see things differently.
It was in the context of this standoff that Mr. Schäuble felt that accepting an alternative plan
for Greece's recovery, in place of the troika's program, would weaken Germany's hand vis-à-vis the
French. Thus little Greece was crushed while the elephants tussled.
We had such a plan. In March, I undertook the task of compiling an alternative program for Greece's
recovery, with advice from the economist Jeffrey Sachs and input from a host of experts, including
the former American Treasury Secretary Larry Summers, and the former British chancellor of the Exchequer
Norman Lamont.
Our proposals began with a strategy for debt swaps to reduce the public debt's burden on state
finances. This measure would allow for sustainable budget surpluses (net of debt and interest repayments)
from 2018 onward. We set a target for those surpluses of no more than 2 percent of national income
(the troika program's target is 3.5 percent). With less pressure on the government to depress demand
in the economy by cutting public spending, the Greek economy would attract investors of productive
capital.
As well as making this possible, the debt swaps would also render Greek sovereign debt eligible
for the European Central Bank's quantitative easing program. This in turn would speed up Greece's
return to the money markets, reducing its reliance on loans from European institutions.
To generate homegrown investment, we proposed a development bank to take over public assets from
the state, collateralize them and so create an income stream for reinvestment. We also planned to
set up a "bad bank" that would use financial engineering techniques to clear the Greek commercial
banks' mountain of nonperforming loans. A series of other reforms, including a new, independent I.R.S.-like
tax authority, rounded out our proposals.
The document was ready on May 11. Although I presented it to key European finance ministers, including
Mr. Schäuble, as the Greek Finance Ministry's official plan, it never received the endorsement of
our own prime minister. The reason? Because the troika made it abundantly clear to Mr. Tsipras that
any such document would be seen as a hostile attempt to backtrack from the conditions of the troika's
existing program. That program, of course, had made no provision for debt restructuring and therefore
demanded cripplingly high budget surpluses.
The fact that few people ever got to hear about the Greek plan is a testament to the eurozone's
deep failures of governance. If the "Athens Spring" - when the Greek people courageously rejected
the catastrophic austerity conditions of the previous bailouts - has one lesson to teach, it is that
Greece will recover only when the European Union makes the transition from "We the states" to "We
the European people."
Across the Continent, people are fed up with a monetary union that is inefficient because it is
so profoundly undemocratic. This is why the battle for rescuing Greece has now turned into a battle
for Europe's integrity, soul, rationality and democracy. I plan to concentrate on helping set up
a Pan-European political movement, inspired by the Athens Spring, that will work toward Europe's
democratization.
Naturally, this will take years to bear fruit - years that Greece cannot afford. In the meantime,
I shall continue to promote our plan for Greece's recovery as a true, viable alternative to the troika's
impossible program.
Yanis Varoufakis, a former finance minister of Greece, is an outgoing member of Parliament
for Syriza and a professor of economics at the University of Athens.
DaveG, Manhattan
Greece lied about its financial situation when it joined the Euro zone (with Goldman-Sachs'
help.)
Beyond that, with no true political union in Europe, the Euro was a bad idea from the start.
(Good for Germany, because it gets to sell its goods abroad more cheaply than if it still used
the Mark, but bad for monetary and fiscal policy in less developed countries.)
Now with Greek insolvency, the EU has presented an aid plan, which Greece can never pay back.
Austerity with a 25% unemployment rate is no solution. (In 1933, the US had a 25% unemployment
rate because of Republican laissez-faire austerity policies. "New Deal" spending would reduce
the rate to 15% by at least 1940; unfortunately, WWII did the rest.)
Though the Germans got a "haircut" in 1953 on their accumulated debt (as they had in the 20's/30's),
they were not interested in any similar haircut for Greece. (Marshall Plan money the Germans got
after the war, and the lack of reparations they were required to pay to countries like Greece
under the terms of the 1953 haircut are additional benefits they received then.)
The Greeks and the Germans are no angels in any of this. Europe has just made an economic mess
of itself.
Grouch, Toronto
As this story demonstrates yet again, the Troika never meant to negotiate in good faith
with the Greek government, but simply imposed its own destructive austerity and privatization
program on it.
It's also clear that the EU per se has very little independent existence, being mainly administrative
scaffolding for the German government to pursue its own essentially predatory policies directed
at the subjugation of the rest of Europe.
Yoda, DC
Dr. Varoufakis makes the same argument in his book "THe Global Minotaur". And he is correct
about the very important role that capital flows and crushing debt have played on peripheral nations
of which Greece is a member. However, there are other very important factors he ignores (in both
this article and the book). He ignores the role and importance of institutions for example. Greece
is the only nation in Europe not to have a land registry. Greece's institutions reek of corruption,
cronyism and "roufeti" (Greek for you scratch my back, I scratch yours - a subtle form of corruption).
This very important fact goes unsaid.
Mr. Varoufakis also ignores the role that clientelism has played in making a bad situation
even worse. He also ignores Greece's excessive debt and runaway fiscal spending. This has been
going on since 1980.
Robert Jennings, Lithuania/Ireland
A remarkable article.
I am one of the Old believers in the European ideal of Economic and Social cohesion; I have
worked in support of the Accession process for over twenty years and watched in dismay as an alien
ideology of neoliberalism (Corporatist Capitalism) has reduced the European Ideal to "fumbling
in a greasy till", W. B. Yeats on Ireland.
I have also watched in dismay as the same ideology pre-empted Political decision-making in
Ireland to force the Irish people to pay the private debts of headstrong and bankrupt Banks.
We all know that neoliberal economics is the driver of grotesque mal-distribution of wealth
as a privileged nomenclature gorges on resources it has commandeered through insider dealing.
The predations of this ideology over recent years mimic the violent reaction of Europe's other
great Union – the Soviet Union – to any challenge to the privileges of the nomenclature.
The Greek people can be proud of their rejection (by referendum) of the European Union nomenclature
–their action resonates with the Prague Spring rejection of the Soviet Union nomenclature way
back in 1968. The Prague Spring was crushed by Soviet Tanks, the Greek Spring is being throttled
by a combination of self-serving International Institutions designed to protect the Neoliberal
ideology and the Corporate Capitalist nomenclature it serves.
I hope that people like Yanis Varoufakis can remain a dominant influence in the resistance
to the takeover of the European Union.
serban, is a trusted commenter Miller Place
Varoufakis proposals were perfectly reasonably, never mind all the spleen toward Greece displayed
by many commenters. None are seem to realize that much of the bloated Greek bureaucracy has in
fact been reduced, from where do they think the 25% unemployment comes from? His problem was political
weakness, not lack of economic wisdom. Greece did and does not have the muscle to stand up to
whatever conditions Germany wanted to impose. Mr. Schauble may honestly believe that Greece needs
hard medicine but his approach was to impose a plan that will keep Greece down for many more years.
Eventually much of the debt will have to be written of, the longer this goes on the bigger the
amount that will not be repaid.
Bill, Boston 8 hours ago
The divergence between Germany, on the one hand, and France and Italy, on the other, has
been hinted at in various analyses. The existing Euro system does represent the rule of bankers,
enforced by central bank control of the currency and pliable elected officials. As I observed
over a long career representing debtors and creditors in big cases, it is useless to expect a
realistic evaluation of the debtor's ability to repay, and a rational restructuring of debt, until
the personnel responsible for making the ill-advised loans are no longer the decision-makers (i.e.
fired, retired or escaped to greener pastures). The European banks, knowing that the Greeks could
not repay, pressured their governments to bail them out in stages starting in 2010, and they have
succeeded in getting out. The politicians who effected this bailout don't want to now tell the
voters that they sold them out for the benefit of the banks; rather they excoriate the Greeks
as deadbeats, and refuse to deal with anyone who speaks reality. So Greece, a small country, which
can't repay the amount of debt outstanding, must wait for a new cast of European politicians before
sound economic arrangements can be implemented. The current deal just kicks the can down the road
pending such political change; it has no chance of success. Comme ca change, comme c'est la meme
chose.
Uzi Nogueira, Florianopolis, SC 5 hours ago
Mr. Varoufakis: How Europe Crushed Greece. Really?
Greece's eurozone membership was the high point achieved by the political leadership. A tourism-based
economy was sharing a common currency along with advanced-wealthy Germany, France, Italy and Netherlands.
Everything was fine except for one small detail, the state of a backward economy.
The ruling political elite continued to run the country as business as usual. Namely, an over
generous welfare system, a corrupt public patronage system and a backward third world-like economy.
The end result, an unsustainable public debt brought about by the 2009 financial crisis.
Mr. Varoufakis -- and fellow politicians -- may still think (erroneously) eurozone membership
is an inherited right fore being an European country. He misses, however, a fundamental point
about economic integration.
Membership of a rich man's club does not entitle Greece to benefit from other country's wealth
and prosperity for free. Greeks have to earn it. This is the ultimate lesson from the current
debt crisis.
Richard Luettgen, New Jersey
Mr. Varoufakis needs to re-examine his history. FDR didn't end the Great Depression in the
U.S. by abandoning the gold standard. The Great Depression persisted despite all his efforts until
the demands of WWII put everyone to work either producing or fighting.
His arguments about how irrational the eurozone has been in not transforming its economic
framework to a form more convenient to Greece, which represents only about 2% of the eurozone's
GDP, is not compelling. It's like the argument of millions of illegal aliens from failed societies
given citizenship who then turn around and agitate for changing the host society so that it better
resembles the failed societies. The eurozone's economic framework is hardly "undemocratic" if
its most vocal critics number so few among the whole.
Some of the plans Mr. Varoufakis extols have merit, such as his "development bank". But it's
Syriza that's been least open to reforming excessively protective labor practices, reforming tax
collection and a still-overwhelming public sector. The truth is that they don't really want to
change and want the debt to simply go away. The only way it can is by exit, repudiation for a
period of debt service and a starting over on a basis that is strategically sustainable.
And Mr. Varoufakis's desire for European "democratization" is merely self-interested rationalization
for leveling ALL of Europe to avoid the consequences to peoples of excessive debt voluntarily
and knowingly amassed.
Winthrop Staples, is a trusted commenter Newbury Park, CA 6 hours ago
Greece's rich and powerful, like the elites everywhere, "crushed Greece", because as countless
man/woman in the street quotes in this paper indicate Greek business owners and professionals
not on salary cheat and do not pay owed taxes. This criminal elite role modeling then infects
the rest of the society as well. Obviously when not enough money goes into government treasuries
this also causes deficits! But the rich and powerful, and their bought and paid for media, skillfully
distract us from this reality by arranging the public discussion to just be about cuts to sympathetic
government programs, cuts that are most often offered by the same criminal elites as the only
solution to reducing deficits. Which means the same dysfunctional status quo is continued and
so yet more and more loans and bailouts and debt forgiveness and screaming and yelling about being
"victims" of it all go on - probably forever.
bob karp, new Jersey 5 hours ago
You are wrong. The bankers knew well that Greece's loans were unsustainable and yet, they
kept lending, knowing that Merkel would cover the losses. However, what happened has happened.
many were at fault. Countries cause wars and ethic cleansing and are not punished. Germany is
a prime example. Why is Greece being held to a different standard? What happened to solidarity.
Merkel is showing more solidarity to the migrants, inviting all of the Middle East to come to
Europe. She should fly them directly to Germany. Why let them go through Greece first. Germany
has a black eye, after her treatment of Greece and now wants to show her "softer side" Let her
suffer the consequences then
Prof.Jai Prakash Sharma, is a trusted commenter Jaipur, India.
For now the Greek bailout deal with all its stringent austerity conditions attached to it might
be okay as a one shot emergency move reluctantly accepted by the Greeks, but the lasting solution
to the recurring crises in the Eurozone could only be an establishment of pan-European political
union to sustain the existing monetary union with a broad common framework of fiscal policies
applicable to the entire Union area, as rightly argued by the author.
Michael Boyajian, Fishkill
Thank you for your profound insight into the ham fisted idiocy of the so called troika.
Dr. MB, Irvine, CA
This gentleman seems to be oblivious of fundamental issue -- the duties one has when one talks
of his/her rights! Where were the follow-ups on Greece's duties when she took all these debts?
Were they (the Greeks) expecting these debts to be forgiven when the income from these "loans/debts"
were crucial for the livelihoods of people in member countries of the EU? Simply stated, Greece,
like any other party too often only talking of "rights" must realize that rights and duties are
two sides of the same coin -- one does --or cannot exist without the other. Sooner Greece begins
walking the walk, the better it is!
mr. mxyzptlk, Woolwich South Jersey 8 hours ago
Debt swaps? Selling off the commons to the "private sector" seems to me like a bad idea. Default
on the debts to the private banksters, tell them you're writing down your debt at ten cents on
the dollar and restart your own currency. Let the people of Greece run their own country and take
it back from the banksters.
LG Phillips, California 5 hours ago
Not all of Greece's problems originate from EU membership, but the treatments imposed by the
EU to remedy these ills are bizarre, irrational, and dangerous. For ex. while EU administrators
insist Greece institute reforms to eliminate corruption and tax avoidance, they imposed govt spending
constraints hindering Greek government's ability to implement the government programs/structures
necessary to accomplish these reforms. While EU administrators insist Greece "deregulates" its
mom and pop bakeries and other such markets, the truly labyrinthine thicket of boards, councils,
ministries and agencies dictating Greece's nat'l government and economy is dizzying! There's the
EU, the European Commission, the European Council, the European Central Bank, the European Stability
Mechanism, & the IMF, which taken together lock-in and maximize inflexibility plus damagingly
procyclical response when dealing with economic crises.
And the euro itself is a ridiculously designed and constrained currency. To paraphrase a metaphor
given by Warren Mosler, the self-imposed constraints the EU's instituted on its own currency are
as nonsensical as putting a big bag over your head to race in the 100m. What US conservatives
who think Greece's problems are a harbinger for the US don't get is that Greece status in the
EU has reduced to a status akin to PA or OH but WORSE, with no sovereignty of its currency plus
(unlike PA or OH) Greece is compelled to fund guarantees of its own private banking system!
We've now spent three weeks watching American politicians argue needlessly over the Iran nuclear
deal. For or against, they all miss this one salient point: It is the US that needed to end this
standoff with Iran – not the other way around.
For years we have been hearing that US sanctions "were biting" and had "teeth." Sanctions, it
was said, would "change Iranian behaviors," whether in regards to the Islamic Republic's "support
of terrorism," its "calculations" over its nuclear program, or by turning popular Iranian sentiment
against its government.
Here is US President Obama spinning the fairytale at full volume:
"We put in place an unprecedented regime of sanctions that has crippled Iran's economy…And it
is precisely because of the international sanctions and the coalition that we were able to build
internationally that the Iranian people responded by saying, we need a new direction in how we
interact with the international community and how we deal with this sanctions regime. And that's
what brought President Rouhani to power."
There is, of course, scant evidence that any of this is true.
If anything, on the economic front,
the net effect of sanctions has been to rally Iranians behind domestic production and thrift – establishing
both the discipline and policy focus necessary to sustain the country indefinitely. A 2013 Congressional
Research Service (CRS)
report
explains this unintended consequence of sanctions:
"There is a growing body of opinion and Iranian assertions that indicates that Iran, through actions
of the government and the private sector, is mitigating the economic effect of sanctions. Some
argue that Iran might even benefit from sanctions over the long term by being compelled to diversify
its economy and reduce dependence on oil revenues. Iran's 2013-2014 budget relies far less on
oil exports than have previous budgets, and its exports of minerals, cement, urea fertilizer,
and other agricultural and basic industrial goods are increasing substantially."
Sanctions didn't succeed on the political front either. By in large, Iranians did not hold their
leadership responsible for sanctions-related economic duress, nor did they seek rapprochement with
the West as a way out. The US continues to flog the narrative that Iranians elected President Hassan
Rouhani in a bid to "moderate" foreign policy stances, but a survey conducted by US pollster Zogby
Research Services in the immediate aftermath of Rouhani's election turns that premise on its head:
Ninety-six percent of Iranians surveyed agreed with the statement that "maintaining the right
to advance a nuclear program is worth the price being paid in economic sanctions and international
isolation." Of those polled, a mere five percent of Iranians felt that improved relations with the
US and the West were their top priority.
No, sanctions have not worked in any of the ways they were intended.
So if the Iranians were not 'dragged' to the negotiating table, then what was the sudden incentive
behind a multilateral effort to forge a deal in 2015 - 36 years after the first US non-nuclear sanctions
were levied against the Islamic Republic, and nine years after the UN Security Council first issued
nuclear-related sanctions?
Keep in mind that both the Iranians and the permanent members of the UNSC have offered up proposals
to end the nuclear deadlock since 2003. So why, this deal, now?
Could it be that the Americans had simply blinked first?
And the world turned
It must be understood that much of this nuclear brouhaha has nothing to do with Iran actually
possessing or aspiring to possess nuclear weapons. The Islamic Republic neither has nuclear weapons,
nor does it profess to want them.
US intelligence agencies, over the years, have conceded that Iran has not even made the "decision"
to pursue weaponization, and the IAEA has repeatedly stated in 52 periodic assessment reports that
there has been "no diversion"of nuclear materials to a weapons program.
In short, all the fuss has really only ever been about containing, isolating and taming a developing
nation with aspirations that challenge Empire's hegemony.
Iran was never going to be able to change the rules of the game single-handedly. That is, until the
game itself shifted hands and direction.
In 2012, cracks in the global economic and political power structures started to shift dramatically.
We started to see the emergence of the BRICS, in particular Russia and China, as influential movers
of global events. Whether it was a shift in trading currencies from the conventional dollar/euro
to the rupee/yuan/ruble, or the emergence of new global economic/defense institutions initiated by
BRICS member states, the world's middle powers began to assert themselves and project power on the
international stage.
But it was in the vast and complicated Middle East arena that old power and new power came to
clash most ferociously.
In November 2011, the year of the Arab uprisings, the BRICS
announced their first collective foreign policy statement, urging the rejection of foreign intervention
in Syria's internal affairs.
By 2012, it started becoming clear that the crisis in Syria was being heavily fomented by external
players, including the three UNSC Western permanent members, the US, UK and France and their regional
allies, Saudi Arabia, Qatar and NATO-member Turkey.
In 2012, it also became clear that Al-Qaeda and other militant Islamist fighters were dominating
the opposition inside the Syrian military theater and that these elements were being
backed
by the United States and its allies.
The American calculus, at this point, was to allow and even encourage the proliferation of fighters
prepared to unseat the government of Syrian President Bashar Assad, anticipating that at some future
date they could then reverse the gains of radicals.
Assad did not fall, but
extremism – fueled by funding, arming and training from US allies – entrenched itself further
in Syria.
This did not go unnoticed in Washington, which has always struggled to make a coherent case for
its Syria strategies. The rise of ISIS (IS, formerly ISIS/ISIL) and the flood of jihadists into the
Syrian theater began to change the American calculations. The US began to work on hedging its bets…and
that is when Iran began to factor significantly in America's Plan B.
That Plan B began in mid-2012, just as Saudi Arabia's incoming intelligence chief Bandar bin Sultan
was preparing for a violent escalation in Syria, one that would exacerbate the Islamist militancy
in the Levant exponentially.
That July, secret backchannel talks between the United States and Iran were established in Oman,
kicked off, according to the Wall Street Journal, by "a pattern of inducements offered by Washington
to coax Tehran to the table."
Take note that the Americans initiated this process, not the allegedly "sanctions-fatigued" Iranians,
and that this outreach began when Iranian President Mahmoud Ahmadinejad was at the helm, not his
successor Rouhani.
Iran – or bust
Iran's elite Quds Force Commander Qassem Soleimani said a few months ago: "Today, there is nobody
in confrontation with [IS] except the Islamic Republic of Iran, as well as nations who are next to
Iran or supported by Iran."
If you look at the array of ground forces amassed against Islamist radicals from Lebanon to Iraq,
they consist almost entirely of elements allied with the Islamic Republic, or are recipients of weapons
and sometimes training provided by the Iranians.
There are no combat forces from Western states and none from their Arab or Turkish allies within
the region.
'Boots on the ground' are essential in asymmetrical warfare, but the US military will continue
to oppose inserting its troops into direct combat situations in Syria and Iraq.
In a Telegraph op-ed on the eve of the Vienna nuclear agreement, Britain's influential former
ambassador to Washington Christopher Meyer
wrote:
"Whether we like it or not, we are in de facto alliance against ISIL with Assad of Syria and with
Iran, the implacable foe of our long-standing ally, Sunni Saudi Arabia…. if ISIL is able to expand
further in the Middle East, won't this unavoidably lead to the conclusion that our strategic ally
in the region for the 21st century must be Iran?"
This is the conundrum Washington began facing in 2012. And so it set in motion a face-saving strategy
to enable itself to "deal" with Iran directly.
The Vienna Agreement
Here's what the Iran nuclear deal does – besides the obvious: it takes the old American-Iranian
"baggage" off the table for the US administration, allowing it the freedom to pursue more pressing
shared political objectives with Iran.
The Iranians understood full well in Vienna that they were operating from a strong regional position
and that the US needed this deal more urgently. The Americans tried several times to get Iran to
expand discussions to address regional issues on a parallel track, but the Iranians refused point-blank.
They were not prepared to allow the US to gain any leverage in various regional battlefields in order
to weaken Iran's position within broader talks.
Although the Iranians are careful to point out that the Vienna agreement is only as good as the
"intentions" of their partners, this deal is essentially a satisfactory one for Tehran. It ensures
rigorous verification that Iran is not pursuing a nuclear weapons program, which is great for a country
that doesn't seek one.
It also provides Iran with protections against 'over-inspection' and baseless accusations, dismisses
all UNSC resolutions against the Islamic Republic, recognizes the country's enrichment program, provides
extensive international sanctions relief, binds all UN member-states to this agreement (yes, Israel
too) and nails down an end-date for this whole nuclear saga.
The deal also frees up Iran to pursue its regional plans with less inhibitions.
"What the president (Obama) and his aides do not talk about these days - for fear of further antagonizing
lawmakers on Capitol Hill who have cast Iran as the ultimate enemy of the United States - are their
grander ambitions for a deal they hope could open up relations with Tehran and be part of a transformation
in the Middle East," reads a post-Vienna article in the New York Times.
US Secretary of State John Kerry, commenting after the deal, said: "I know that a Middle East
that is on fire is going to be more manageable with this deal and opens more potential for us to
be able to deal with those fires, whether it is Houthi in Yemen or ISIL in Syria and Iraq than no
deal and the potential of another confrontation with Iran at the same time."
"The Iran agreement is a disaster for ISIS," blares the headline from a post-agreement
op-ed by EU foreign affairs chief Frederica Mogherini. She explains:
"ISIS is spreading its vicious and apocalyptic ideology in the Middle East and beyond…An alliance
of civilizations can be our most powerful weapon in the fight against terror…We need to restart
political processes to end wars. We need to get all regional powers back to the negotiating table
and stop the carnage. Cooperation between Iran, its neighbors and the whole international community
could open unprecedented possibilities of peace for the region, starting from Syria, Yemen and
Iraq."
Clearly, for Western leaders Iran is an essential component in any fight against ISIS and other like-minded
terror groups. Just as clearly, they have realized that excluding Iran from the resolution of various
regional conflicts is a non-starter.
That is some significant back-tracking from earlier Western positions explicitly excluding Iran from
a seat at the table on Mideast matters.
And stay tuned for further policy revisions - once this
train gets underway, it will indeed be "transformative."
As for the Iran nuclear deal…except for some hotheads in Congress and the US media, most of the
rest of the world has already moved on. As chief US negotiator and undersecretary for political affairs,
Wendy Sherman said recently: "If we walk away, quite frankly we walk away alone."
The balance of power has shifted decisively in the Middle East. Washington wants out of the mess
it helped create, and it can't exit the region without Iran's help. The agreement in Vienna was reached
to facilitate this possibility. Iran is not inclined to reward the US for bad behavior, but will
also likely not resist efforts to broker regional political settlements that make sense.
It was not a weak Iran that came to the final negotiations in Vienna and it was not a crippled
Iran that left that table.
As New York Times columnist Thomas Friedman (for once) aptly
observed:
"It is stunning to me how well the Iranians, sitting alone on their side of the table, have played
a weak hand against the United States, Russia, China, France, Germany and Britain on their side
of the table. When the time comes, I'm hiring (Iran's Supreme Leader) Ali Khamenei to sell my
house."
Iran just exited UNSC Chapter 7 sanctions via diplomacy rather than war, and it's now focusing its
skill-sets on unwinding conflict in the Middle East. If you're planning to challenge Empire anytime
soon, make sure to get a copy of Iran's playbook. Nobody plays the long game better - and with more
patience.
There are two ways to win, at any game: One is by improving one's own performance. The other is
by weakening the performances by all of one's competitors. The United States is now relying almost
entirely upon the latter type of strategy.
Loathing for Russians is cultivated and encouraged in Estonia by western
governments and media; disparaging remarks about Russians are given wide
and approving coverage, and if there are any of a more reasonable tone
they are unreported. The same throughout the Baltics, really. For some
reason, Washington regards them as a highly-important strategic area,
probably because it is the most likely trigger for a NATO Article-5
intervention. But, as usual, they only do half the planning, and it is
all on the military side. Let's build lots of bases and seed the ground
with lots of stored military equipment to fight the Russian bear – but
let's do fuck-all to stimulate the economy or compensate the region
for loss of a major trading partner. Note the two headlines in the
sidebar; "EPP: EU Should Tell Russia, We Are Ready to go to War", and
"Latvian PM: If Russia Attacks NATO, the Treaty Will be Enforced".
Reorientation of trade flows in the region
will further hurt the economies of the Baltics, as well as Black Sea
ports.
The effect, then, of Washington's endless meddling in the region
will lead to a further and increasing exodus from the region of its
population, fed up with the constant scare tactics coupled with economic
contraction or stagnation caused by political maneuvering. And you know
what? Washington doesn't care. It is gambling everything on
being able to grow a regional war and bring Russia to battle while there
is still a chance there might be something to save for American trade
later.
" I suspect that the simple scale of the dollar value of trading of financial claims on things
– trading in which London and New York are dominant – contributes more to the maintenance of the
dollar reserve system than you are proposing."
I think so too. One of the necessary conditions
for a country to be imperialistic is for it to have ample amounts of financial capital at its
disposal. Because I have red commie tendencies, I will point out that Hilferding and Lenin wrote
extensively on this subject and even if their works are now outdated, they still give interesting
insights on how financial capital is crucial for a country with imperialist tendencies. If anybody
is interested Lenin's writings on imperialism, they are available here:
This is the reason I find it funny when people speak of "Russian imperialism". In order to
be an imperialist power, Russia should, at least, have a very powerful financial sector. And it
does not, at least not one that can be compared to the magnitude of the US financial sector. When
you look at the list of world's biggest banks, you can see that Russian banks are actually pretty
small when compared to their US counterparts.
Americans believe that Russia is a corrupt country where everyone from the president to regional
governors to government officials are flourishing on bribes. Russia has developed corruption into
a "fine art," says a book titled "Putin's Kleptocracy: Who Owns Russia?" written by the University
of Miami professor Karen Dawisha.
U.S. fares far better than Russia on Corruption Perceptions Index
In the absence of an efficient federal system, regional governors in Russia rule like mobsters.
Moscow is also allegedly involved in the
massive
FIFA scandal. Americans and Europeans believe corruption in Russia is so widespread that when
they imposed sanctions
against Moscow following the
annexation
of Crimea, they also targeted "friends of Vladimir Putin" and rich oligarchs.
John McCain has said in the past that Vladimir Putin rules by "corruption, repression, and violence."
If you take a look at the
Corruption Perceptions
Index, the United States in ranked 17th while Russia comes at a distant 136th spot. Does that
really mean the U.S. is far less corrupt than Russia? Probably not, says Jerome Israel, a former
senior executive at NSA and the FBI.
Jerome said in a column published in
The Baltimore Sun that the legislation and behavior of the U.S. political class would open your
eyes that the claims against Russia are hypocritical. For instance, last year's Cromnibus bill allows
banks to undertake extremely risky investments. And if the banks suffer a huge loss, the American
taxpayer gets the bill. Jerome says Congress has sold out the little guy to favor the K-Street lobbyists.
Contrary to Russia, U.S. specializes in 'soft bribes'
Another example is the trade pact currently under consideration by Congress.
Details of the legislation are classified, and Americans don't know what's in it. Even a large
number of lawmakers in Congress haven't read it. This is Soviet-style of lawmaking, says Jerome Israel.
Recently, CNN
reported
that at least 78 members of Congress have their family members as federally registered lobbyists.
According to congressional watchdog Legistrom, these lobbyists have lobbied contracts worth over
$2 billion. While corruption and bribery are prevalent in Russia, the U.S. specializes in "soft bribes."
It's like you take care of the lawmakers' families and they will take good care of you. These "pay-to-play"
schemes make it hard to understand how American politicians are better than their Russian counterparts.
Article does great service cutting thru the 'noise'.
I don't know why half billion 'clawback' and hefty penalties from GS isn't demanded for
structuring fraudulent accounting in Greece's entry to EU.
Also unaddressed, the 12-14 billion olympic boondoggle that undoubtedly was wildly profitable
for a few, leaving the Greek population with abondoned facilities and the bill.
Rose is correct. But the EU was doomed from the start. Now the Europeans are deliberating
about having formed a political (as in purely political) union, without a viable economic model.
We put it just the opposite but the result is the same. The thing that gets me, whether it is
Germany or the US, is how holier-than-thou creditors are when the game is up. They seem to have
only one religion: IBGYBG. When they are not repaid they pontificate about how irresponsible the
debtors are, nevermind a worldwide depression. The main reason the EU was doomed from the start
was that it was founded on a growth model that didn't really have legs. It was just a convenient
magic show. They shouldn't pretend they didn't see this coming. Already their talk has shifted to
saving the Core. Merkel, and probably Hollande, has decided to cut her losses, I'd bet. Save the
Core instead of lose the whole unsalvageable mess. In so doing they should write off the debts of
the periphery to zero.
"This has been a conflict between a small European nation, led by a leftist
government, attempting to reassert its autonomy under crushing German
predominance. That may sound simplistic, but there is not much more to it."
well, if you lived in germany like I do, you'll make the experience of an
everyday propaganda in the mass media including the state owned ones
repeating the narrative of the lazy greek.
In what way that is a proof of "a small European nation, led by a
leftist government, attempting to reassert its autonomy under crushing
German predominance"?
well, I think it's not wrong to say the Germany is projecting its
power on the other nations in the eurozone and that greece loss of
sovereignity is a result of such power projection
"The wealthy Greeks seek to conserve their wealth as much as the
wealthy Germans. To devolve this down to nationalistic stereotypes
is to play the game of the wealthy. Divide and rule. This article
buys into that, big time."
Well of course, there is more to it. 'Germany' is part of a
transnational neoliberal power elite, even if 'the German people
aren't, and it is a central component. Its participation in what
has happened to Greece may not have been sufficient, but it was
certainly necessary.
If Merkel and Schauble and co had been
sensible out loud from January and actually listened to and
dealt fairly with Varoufakis, even if the IMF and ECB were
hardline, would we be where we are?
And whatever influence the
US or her own finance-capilitalists wield over her, ultimately
Merkel is voted in or out by constituents. Win them over to a
sounder view and she either listens or plans her retirement.
Democratic sovereignty may be virtually dead in Greece,
thanks in part to the efforts of Merkel and co, but it is still
breathing in powerful nations like Germany.
'To devolve this down to nationalistic stereotypes is to play
the game of the wealthy'
That's true. The real issue is the elite, whatever canton
they happen to hail from.
To that end you might be interested in a reply I just
appended to a comment of yours from a couple of weeks ago, in a
discussion on whether Tsipras will do a Blair and end up on the
yachts of his erstwhile enemies. You said:
'Which does not mean that he, and Syriza, will not fall into
the clientelist trap (some, like Guy Verhofstadt, say they have
already started)'
I said 'Well,
Guy Verhofstadt certainly knows of which he speaks.
Follow the money. Their money, that is. Not ours.'
That's the enemy of both Germans and Greeks, good or bad,
lazy or industrious.
Who is responsible for Greeks not able to buy cheaper generic pharma
drugs? The Greeks, and there are no two ways about it.
Your claim that German mass media depict the Greeks as lazy "on a
daily basis" is nothing but propaganda, and obviously easy to do if you
conveniently forget to include (or read, or watch) all examples to the
contrary. Discussions in Sueddeutsche were often very good, you ever took
the time to read them? This programm is publicly financed:
https://www.youtube.com/watch?v=_QimxVuicZU
There are many things in this article I would disagree with.
Yes, Greece was made to suffer by the French and German banks during the
bailout; however, if Greece had really buckled down and changed it probably
could have got through this and moved forward.
It is not German's fault that the Greeks have not improved their tax
collection. Nope German assistance was kicked out of the country. It was not
the Germans who failed to go after past Greek elites. No it was the Greeks. It
was not the Germans who constructed an enormous counter productive government
bureaucracy in Greece and refused to reform it. It was the Greeks. It was not
the Germans who put in an unsustainable pension system and refused to reform
it, it was the Greeks. It was not the Germans who have failed to put in place
an up to date property system so that the owners (mainly Greek elites) of the
property pay their property taxes, and still refused to do this, it was the
Greeks.
I saw some report that said approximately $50 billion a year of taxes from
Greek elites goes uncollected each year. The problem is Germany and the rest of
the EU expected Greece to reform itself when it hit the wall. It has refused to
do so. I keep saying, why does the Greek population keep wanting to stay on the
Euro. It distrusts its own govt more than the EU.
Yes, Greece was made to suffer by the French and German banks during
the bailout; however, if Greece had really buckled down and changed it
probably could have got through this and moved forward.
Actually they did. Greece was in a primary surplus at the beginning of
this year.
What changed was a new government was elected whom the European powers
disapproved of. In league with the ECB, these powers - pincipally Germany -
deliberately engineered a bank run in Greece so as to topple theis elected
government or bring it into line. There is no other explanation.
This is not the Europe most europeans ever signed up for. It is the end
of the EU as a political project as far as I, what some other assorted
cranks, but now an alarmingly new number of ordinary commentators have
concluded.
The elites and assorted Quis across the continent will continue to laud
and implement the new German and neoliberal coup. But don't expect the
general population to be pleased about it.
The bank run was underway before Syriza came into office. It's fair to
say that the ECB took measures to make it worse (giving only minimal ELA
increases) but it's not accurate to depict them as its sole cause. It's
more akin to fanning flames.
The creditor conduct has been terrible. There's no need to overegg the
pudding. It only hurts the credibility of critics.
It doesn't matter much at this point whose fault it is…the obstinance in
dealing with the problem will ensure that the Euro system fails
catastrophically.
It would be hard to make an argument that the Greeks were responsible for
that outcome. Any system that can be brought down by it's weakest member is
a very poor system indeed.
Wasn't it the Greek elites who had the agency to make these changes, but
chose to protect their own interests instead? Like what is happening in the
USA?
In each case what is needed is to create genuinely democratic power
structures. Maybe the broader populace needed to see things really fall
apart, before taking up the mantle of taking responsibility to create
something new that is capable of moving things forward in a constructive way
for the people at large.
The elites (and this includes many ex-junta members) have controlled
the govt since late 70's. The people have gone along with this because
crumbs have been handed out to the people while the elites were stealing
the country blind. One of the big backers of Syrzia is govt workers. They
and the elites do not want govt reforms. Change will not come until it is
forced upon them.
My first reaction to the new deal (my wife is Greek and I am around
lots of Greeks) is basically that Germany was annexing the country but
later as I thought about it I decided maybe that is a good thing. The
Greek people have not been able to have a functioning country for 30
years. It is ranked as the most corrupt place in Europe and also one of
the hardest countries in Europe to open a business.
One can be sure that "the Greeks," like the Czechs maybe, ought to
cheer the victory of their new masters. In the New Libertarian vein,
you only got what you ( or the Government-Like Organization you as a
weak little individual and serf-able mope must perforce become
attached to) can Take and then Hold against the other Galtian
Enterprises.
So it's the case, then, that Friedmania has flattened the earth so
completely that the armies of Bidness can send the tanks and JU-87s
and F-16s in a clean, bloody sweep over the Lowlands… Interesting that
backward tribespeople in places like Afghanistan (our name for that
collection) have resisted the actual tanks, preserving their
identities as, e.g., Pashto, while happily soaking up the bribes and
floods of corruption, pallets of $100 bills and Viagra and stuff…
The blame is circular. Germany knew Greece restructured its debt to enter
the zone.
As for the generous pensions, I keep on scratching my head wondering how
many would consider 10k generous if they were receiving it. Money value is
not the only measure of the size of a pension. One must look at what it
buys. And frankly, they seem to consume way less resources than we do here
in Canada.
I was one of those people who, in my youth, welcomed the EEC, then EC, then
EU, from the shores of Old Blighty, hoping and believing it would tie us in to
a balancing power against the US and USSR (giving my age away). I bought into
that "preventing war" schtick.
Now I realise that they didn't want to prevent war because of its effects
upon the populations who fought and suffered it. Now, watching Greece (and my
own government), I can see that the reason they wanted to prevent war is
because war destroys wealth. It is wealth, above all else, that all governments
of the world, now seek to conserve.
The wealthy Greeks seek to conserve their wealth as much as the wealthy
Germans. To devolve this down to nationalistic stereotypes is to play the game
of the wealthy. Divide and rule. This article buys into that, big time.
It is unfair to cast aspersions on the intentions of a dead generation on
the grounds of the behaviour of their grandchildrens' generation. Monnet and
Schumann were active 60 to 70 years ago.
Although British myself, I had French relations (now dead) who were
passionate about uniting Europe precisely on the grounds that they wanted no
repetition of the slaughter and rapine which traumatised their lives. There
are no grounds for supposing that they were insincere and motivated by
concern for their (often trivial) personal possessions.
I am not casting aspersions on the people. I am saying that maybe we,
the people have been duped? Or maybe, good causes get hijacked as a
vehicle of convenience by others with different intentions?
It often happens that cause and effect are set in incorrect order. The
creation of the EC in this form was simply possible due to a peaceful
period experienced during that time but has little real effect on peace
itself what its main objective is supposed to be.
On another level I do not like the above article at all. It is exactly
the worst way that nationalism is used to divert attention from the
failure of the power hungry elite to the seemingly inappropriate conduct
of people of another nation. It is a dangerous development and shows that
the unsustainable policies of individual governments may be in trouble.
On the aspect of racism we have to differentiate. It is normal that
one feels more comfortable with persons of the same
background/culture/language etc. and therefore favors those in his
personal choices which is part of the individual's freedom. The line is
to be drawn when someone ACTS against another race/person of different
background or culture where the word racism is appropriate. To now use
the German's sentiment towards Greece as prove of being racist is
completely inappropriate except when the believe that someone can
endlessly live above his own means is completely ingrained in the mind
set. We all have sentiments in that we mostly believe our culture/way of
life etc. is somehow a bid superior to others' culture for defining one's
identity and we generally do not appreciate that our "negative" character
attributes are blown out of proportion.
As many of the remarks in this thread concerning the shortcoming of various
European populations demonstrate, Europe lacks any sense of common identity.
Europe is not a community and Europeans are not a people. A unified Europe
might be ruled by force as a multicultural empire like the Ottoman Empire but
the notion of a United States of Europe is utter fantasy.
Thank You… I've spent a bunch of time in Europe, and all the above
generalizations are more true than not.
However, Greek and Italian government is so corrupt, so sleazy, and so
unlike the German system, that it's been pretty well accepted that tax
evasion is a way of life there. Germany has its bad apples, but not anywhere
near the kind of corruption you see in the PIIGS…. and yes, that's probably
a sly acronym.
BUT – however colorful and memorable my stays in Italy [north or south],
Greece, or even Spain – I would rather have Swiss, Belgian, German or even
French neighbors. Sorry… there IS a difference in these peoples, if only in
the overall flavor of their respective countries.
The Swiss are niggardly so and so's… and every time I'm there I curse
their petty, judgmental, xenophobic ways…. but Switzerland will be a better
place to live and prosper for it.
There is something to be said about grumpy old white people…. they make
the neighborhood better. And safer.
sorry… but these conversations are going to have to be had as the world
is awash in migratory peoples… some who are overwhelming their environments
are not who we want moving in…. sorry… Hamilton's Rule
why oh why can't we have the necessary discussion about over population,
migratory populations… and who and how many can play?
It's coming to all of you… and I don't care how lofty the rhetoric, there
IS a difference between cultures. I would rather have Swiss neighbors than
Hmong.
In general, a Swiss would rather have Swiss neighbors, a Hmong Hmong
neighbors, a Martian Martian neighbors.
But as you say, not everyone is the same.
Take, for example, Bilbo Baggins.
He likes to venture out and hang around stranger creatures, like men,
elves, wizards, etc.
Generally speaking, pardon the generalization, but people usually
don't like to migrate to strange new places, unless their homes have been
destroyed (or captured as slaves/indentured laborers)…not even to make
more money. They rather their home nation grow more prosperous, so they
can make more money at home…generally speaking.
Not to even mention foreigners there is little love lost between
German, French and Italian Swiss. Xenophobia is a basic Swiss
principle just as it is for say the Japanese.
Mr. Rose's contribution creates a relaxed ambiente in which a
wide garden variety of small and large racism thrives. What about
facts about xenophobic Switzerland ? Here a few: "With more than
20% of the population resident aliens, Switzerland has one of the
highest ratios of non-naturalized inhabitants in Europe (comparable
to the Netherlands; roughly twice the ratio of Germany). In 2003,
35,424 residents were naturalized, a number exceeding net
population growth. Over the 25-year period of 1983 to 2007, 479,264
resident foreigners were naturalized, yearly numbers rising
gradually from below 10,000 (0.1%) in the 1980s to above 40,000
(0.6%) in the 2000s.[16] Compare the figure of 0.2% (140,795) in
the United Kingdom (2004).["
Thanks to put the matter in proper perspective. It is not a
matter of being xenophobic but rather a matter of volume, size
and sustainability. Switzerland has a strong tradition to
welcome real refugees and to ignore the mentioned circumstances
by people who may belong to a nation whose government may be
responsible for many bad policies implemented worldwide that
contributed to a large degree to the present disorder is a
faulty logic. But again, the blame game between nationalities
and nations is exactly the wrong way to go but is the preferred
choice by governments and the elite to divert the attention from
their failures.
Boy do you have that wrong! You don´t mean "neighbors" at all. You
mean "prosperity" and that you would rather live in a prosperous place
than a poor one. I can only pity you. You have simply swallowed the
kool-aid that capitalism preaches about "happiness". Both the Germans (I
live in Berlin) and the Swiss are the unhappiest people I´ve ever been
around. And the happiest? I´d have to say the Cubans! They know how to
ENJOY LIFE.
What's with the persistent, insistent, often inconsistent turn to
personification/reification/hypostatization in what purports to be
"sophisticated and informed analysis" of complex intersections and interactions
and interrelations? Is "Greece" a useful category, or "Germany," or "The US,"
when it comes to trying to keep the species alive? Or is that latter notion not
really part of the goal at all?
One might need to differentiate between the interest of the people and
the interest of the governments. The government's interest might in many
cases not be what serves the people best but what ensures and enhances their
own power.
These historical episodes always remind me of Terence McKenna's dictum that
'Culture is not your friend'. These 'Germans/Greeks/English are
mean/kind/clueless/uncivilized…' are all notions generated by cultural baggage
that all peoples carry. There are a lot of issues coming to a head in the Greek econonomic debacle.
It's a real shame that the EU institutions can't seem to find a way to
ameliorate conditions for the common people in Greece and maybe inflict a
little suffering on the knaves and fools of various nationalities who brought
Greece to this pass. But supranational institutions these days are all tailored
to cater to the comfort of an internationalist elite that transcends ethnicity.
They have their own culture and it involves laughing at you while peeing off a
cliff on your head.
First, I'm astonished at the speed with which the cultural stereotypes
have returned in public discourse. "Good German, Lazy Greek, Arrogant
German, Junker, etc"
Thus I fear war. Dehumanizing others with labels is the start of a series
of excuses to start killing.
Second, War has become so profitable (for some), and the epithet 'War
Profiteer," whihc if issued when I was young was about the worst epithet
which could be slung at another, has lost its power to shame, and now
appears as a medal of achievement aka: Defense Industry CEO.
What you are bringing to the discussion are generalizations, and
instead of the Greeks being badmouthed, you are badmouthing Germans.
Same exact thing.
imo, war between any of the eu states seems inconceivable in the next
decade. of course, the political landscapes can change quickly, but
europeans have always held stereotypes of each other. a case in point is
the joke about european heaven and hell from years back: european heaven:
the french are the cooks, the germans the mechanics, the british the
police, the italians the lovers, and it's all organised by the swiss.
european hell: the british are the cooks, the french the mechanics, the
swiss the lovers, the germans the police and it's all organised by the
italians.
European (and world) war is already in full swing, it's financial.
So much easier to pursue without all those messy flag-draped coffins
to hide at the airport, the Pulitzer shots of crying babies, or the
CNN live feeds of missile strikes destroying buildings. It's a casino,
and we are the chips.
Financial wars are less messy or not as gory, but can be more
lethal.
Non-violence* kills.
*We think of physical violence as the only kind of violence. So,
when I say non-violence, it could mean mental violence (which is
not physical violence).
The article is true. The Eurozone is a dead man walking. The fault line
between the Western and Greek Orthodox cultures is real. The article is wrong
in sense that like almost all working journalists he is a handmaiden to the
Davos Elite. The oligarchs are the ones pushing debt. They then suck the
debtors dry till dead. Exploiting ethnic hatreds furthers their crimes.
Class Warfare is very 19th century. Today we have plunder capitalism.
Plutocrats and their servants robbing everyone else. This is oblivious to
corporate media.
Germany is back to its good old self. The atonement period is over, folks.
As the French say: chassez le naturel, il revient au galop. And the more
repressed it was, the more virulent the come back.
Emmanuel Todd gives some clues as to what the new Reich might look like:
It's not very different to what Doktor Schaeubble is supposed to have
planned according to an article in the links some time ago. In addition, Doktor
Schaeubble wants Slovakia too. An old ally from Barbarossa must not be
forgotten.
Emmanuel Todd thinks the UK is in the process of escaping by leaving the EU
altogether (I think there's a referendum on that). He has put France in gray
denoting "voluntary servitude". I'm sure the French elite wants to be
collaborators, like in the old times (Sartre said that was the reason the
French army collapsed so rapidly). The French people probably want out and join
the Club Med.
I wouldn't mind a euro north and a euro south. There's nothing to visit up
north but if the currency becomes cheaper, it would make visiting France, Italy
and Spain very attractive.
Deutschland raus! This ought to be the marching slogan of every truly
democratically minded citizen in Europe, no matter how strange the ideological
alliances. It has been remarked by many economists over the years, most
recently by that former IMF guy, that having Germany leave the Euro and return
to the DM would be the cleanest, least disruptive and fairest way to resolve
the Euro-crisis.
Excellent comments about implicit racism, nationalism, ismism. Not
necessarily mutually exclusive.
What is the degree of homogeneity in a culture? Is it in the DNA, like
lactose intolerance? Is it a product of circumstance, sea-farers in antithesis
to mountain dwellers? Does it scale with size?
In smaller groups with a survival mentality, non-compliance may be
ruthlessly selected out, with compliance being actions we might consider
superstitious or abhorrent. Urban living requires a skill set which starts to
look like a global culture, as long as the three billion people cooking on
three-stone fires are peripheralized.
Here's what I know. When I hear or read about what America is doing in the
world, I remember that a quarter of a million people were in a single protest
march against the wars in 2003 and it didn't mean shit. That our government
routinely does actions that over 2/3 of the population does not support. That
corporations are both not people and 'not people'.
There is a difference between homogeneity and agency. When those with agency
in Germany attempted to create a master race, they created a cultural identity
that those looking at Germans can never forget.
A little FDI would solve the whole problem. Where is it?
Wasn't it supposed to have been here by now? This is like JEB Stuart at
Gettysburg. Where is he? (Sorry for the Civil War allusion, it's too abstract,
since he did show up. Evidently he liked to roam around the countryside.).
Where is FDI? Where is it roaming? Where is it? It must be sitting in a pile
somewhere, like baseballs, or tennis balls. Is it at the ECB? Is it in Germany?
Where the hell is it? it must be a big pile by now. Can't somebody see it
protruding above a horizon like the Matterhorn? Oh! maybe it's in Switzerland!
maybe it's in a Swiss Bank! No. There's too much of it. It wouldn't fit. It has
to be somewhere - or maybe it's spread out all over the place. Maybe it's so
spread out it's lost it "congealiality". Oh man. That's a property of FDI. It
doesn't work if it's only a euro or two. It has to congeal. Evidently it can't
be too spred out or all in one place. If it's all in one place, it's a big pile
and it's useless, since it congeals and hardens like glue. If it's too spread
out, it loses all congealiality. This sounds like a chemistry problem. It may
be.
Where the hell is it? I've not seen one macroeconomics article on the
interet that says where the FDI is. Not one. (Although maybe I haven't looked
hard enough. That's certainly a possibility).
Very interesting article. I would like more background on the campaign of
condemnation of Gutmenschen - on what basis were they condemned?
"Impracticality"? Failure to get on board with various Eurozone proposals? EU
skepticism? General lack of sociopathy?
I believe Rose is referring to a controversy about the possible origin of
the expression "Gutmenschen" in Nazi lingo. It became popular in the late
90s after the publication of a "Dictionary of the Gutmenschen", by satirist
Klaus Bittermann, which mocked many instances of self-righteousness in
Germany's public life. With time, however, it came to target the Left and
"Political Correctness" in particular; thus, a "Gutmensch" would be a
do-gooder who supported all kinds of progressive causes, from feminism to
environmentalism, but had no knowledge of the hard facts of life (that is,
the business world). Eventually, a journalism association traced the
expression back to a few Nazi leaflets; it was hardly conclusive evidence,
but enough to blow things out of proportion and start another culture
battle. At its most erudite, it was related to the Weberian opposition
between the Gutmensch's ethics of conviction and the ethics of
responsibility; at its most tribal, the "Gutmensch" became an umbrella term
for everything inimical to the methods and the aims of the Right. Hence, one
can have "Gutmenschen issues", "Gutmenschen arguments", "Gutmenschen
politics". When used by the Right, it is a strongly derogatory expression,
very hostile and openly dismissive.
I don't understand what the problem is about: saying Germans are
racists would be a generalization if the sentence means each individual german
is a racist, but I think it points to a structural fact, that the mainstream
public discourse in germany, and certainly in many other countries, is driven
by the need to constitute a collective identity where the german is
somewhat superior to the other. You just need to live here in Germany
and listen to the everyday discourse, most people are not explicit racists, but
they tend to assign positive attributes to themselves in constituting that
collective identity while at the same time assigning the opposite negative
attribute to another collective identity, we are diligent,
trustworthy, thrifty and so on because some other, i.e. the Greek, are exactly
the opposite, lazy, untrustworthy, profligate. The people who constitute
themselves this way don't think as themselves as racists, because being racist
is a negative trait in the public discourse. It is simply a fact that the
mainstream public discourse in Germany is full of such stereotypes, positive
for themselves and negative for the other (not only in tabloids like
bild but in the so-called Qualitätspresse, even in the fee-financed state
media.) This process is amplified by the fact that Germany has become the
hegemonic power in Europe. Projecting one's power needs an ideological
discourse which legitimates the unavoidable violence linked to this process, so
if the Greeks are impoverished, disenfranchised in the process of power
projection, then this has to be morally justified, usually by ascribing
inferiority.
I think my issue with this is that someone who is not German is heavily
insinuating that the German nation is "reverting to type". Phrases like " a
primordial fear" suggest there is a fixed reference in the very nature of
those who speak German that is incapable of change or challenge. I would
dispute that.
But then the very existence of the nation state is defined by those
cultural commons that others do not share – language, religion, governance
etc – and who is ever going to define themselves as inferior to anyone else?
Much of the early EU history was built on predicating the subsidiarity of
the nation state to the continental whole. It has morphed, in my view, into
a tool for the trans/multi-national globalist wealthy and the result is the
playing off of nation states against each other, in both economic and
cultural terms. I think this article is complicit in that.
During my university studies in Sociology, I was always amazed at the
endless pressure to refrain from judging culture-only record it, dissect it (in
a non judgmental way, of course), and teach the fragments left over to the next
crop of undergrads. A museum of culture, poorly displayed and heavily redacted. Judgement is required, or it's all useless. There are such things as sick cultures, and it's not very difficult to find
reasonable criteria to identify them. One cannot, for the purposes of solving problems of the sort that we debate
here, ignore this fact. Tax theft as a cultural norm is a reality in Greece, and it cannot be the basis
of an accusation of racism to point this out. Greek culture, no matter how rich in history, literature and art, contains
elements that make it non-viable in even the medium run, and the national sport
of tax theft is only one of many of them. It is equally clear, now, that the same is true of the "European Union".
It is interesting to me that Mr. Rose wanted the comments open. He lives in
Berlin, and has been described as an investigative journalist (http://www.spiegel.de/kultur/gesellschaft/mathew-d-rose-der-investigator-von-berlin-a-321596.html).
I don't see much investigative journalism in the above piece. In his books,
Rose's career consists of mainly criticizing the country that he chose as his
residence. Yet some commenters claim that there is no "freedom" in Germany – go
figure. Would be interesting to know if he collected money from the state that
he loathes. Lving in Berlin, there is ample possibility to talk to Polish people and other
Eastern Europeans. Not done in above article, and this should be easy, living
there. There are so many yuppy-like people who used illegal Polish laborers to
fix up their Prenzlauer Berg/ Kreuzberg properties – this comes to mind.
Not sure what Mr. Rose's agenda is – sounds as if he wants to elicit
emotional responses from foreigners, about the awfulness of Germans as such.
Sorry you have to live amongst them.
This is not merely Germany vs. Greece, but rather the Western Banking Cabal
asserting heightened control over the economies of the world, particularly
those nations which depend on the dollar and the euro for trade. The reason for
the austerity policy, aside from unbridled greed (class war), is the fact of
Peak Resources which means increasing scarcity into the future - energy, raw
materials, food, water. The oligarchs are also preparing for Climate Chaos
which they anticipate will be infinitely costly. They expect
record-breaking losses and repair costs from storm damage, drought, wildfires,
floods and sea level rise, crop losses, fishery collapses, and health care
costs resulting from Fukushima's poisons that have been spreading through
oceans and the air during the last four + years. The cost of disposing of all
the dead human remains will also be a challenge, as the Great Extinction event
proceeds.
I love "great inflation" discussions. Outside 1968-early 82 period when inflation was decelerating
from high levels, inflation has been fairly steady from the modern FED system in 1951 to 2015.
It was like a shot in the dark.
I always go by some Keynesian theories that excessive growth caused by fighting proxy wars
during the cold war in Korea and Vietnam caused excessive national growth that lead to eventually
shortages in capital and excessive wage growth so business raised prices to slow down the economy.
ilsm said in reply to The Rage...
The US debt is fully $10T less than the $28T cold war tab.
You get the negative impact of wars, but miss the point.
Guns and butter. You cannot have both. The pentagon trough [plus much of the other 5% of GDP for
federal welfare to 'capitalists' like Elon Musk] is too heavy to tote.
Inflation from LBJ through Reagan was a band aid to get some butter while the pentagon troughers
gobbled up resources to airily blow things up pillaging coca cola and blue jeans from the butter
'side'.
Cold war [war on Saudi/Sunni fostered terrists is continued cold war troughing] has depleted the
US common since 1947, less a few years when Clinton actually paid off some of the war debt.
Matt Young said...
While we are on the subject, lets ask. What is the likelihood that Simon even advances the theory
of information by one bit? We know the experts, the count is about ten to twenty, many of them having
their stuff posted on this blog. Does anyone believe that Simon discovered a new secret?
ilsm said in reply to Matt Young...
Ask the wrong questions you get the wrong answer you seek.
likbez said...
"Ask the wrong questions you get the wrong answer you seek."
That reminds me neoliberal discourse about corruption and all those dances about "governance" (aka
organizing political and economic life along market mechanisms) that neoliberal are pushing.
It's simply amazing how neoliberals managed to brainwash public using pseudo-science, mathiness and
obscure terminology. Using bottom feeders like Friedman, Feldstein, Mishkin, John Taylor, Greg Mankiw
etc.
Those stooges of financial oligarchy even managed to explain corruption as the rent-seeking behavior
of individual public servants not as a key, immanent feature of neoliberal accumulation of capital.
"...these policy debates are really about ideology and power." . "...special interests, in and out of the country, are using the troika to get what they
could not have obtained by more democratic processes." . "...The battle, however, is not just about Greece. It's not even just about the money,
although special interests in the rest of Europe and some within Greece itself have taken advantage
of the troika to push their own interests at the expense of ordinary Greek citizens and the
country's overall economy. This is something I saw repeatedly firsthand when I was at the World
Bank, most noticeably in Indonesia. When a country is down, there is all manner of mischief that can
be done." . "...One underlying problem in Greece, in both its economy and its politics, is the role of a
group of wealthy people who control key sectors, including banks and the media,
collectively referred to as the Greek oligarchs." . "...More likely than
not, though, the troika will do what it has done for the last five years: Blame the
victim."
As I read the details, I had a sense of déjà vu. As chief economist of the World Bank in
the late 1990s, I saw firsthand in East Asia the devastating effects of the programs
imposed on the countries that had turned to the I.M.F. for help. This resulted not just
from austerity but also from so-called structural reforms, where too often the I.M.F.
was duped into imposing demands that favored one special interest relative to others.
There were hundreds of conditions, some little, some big, many irrelevant, some good,
some outright wrong, and most missing the big changes that were really required.
Back in 1998 in Indonesia, I saw how the I.M.F. ruined that country's banking system. I
recall the picture of Michel Camdessus, the managing director of the I.M.F. at the time,
standing over President Suharto as Indonesia surrendered its economic sovereignty. At a
meeting in Kuala Lumpur in December 1997, I warned that there would be bloodshed in the
streets within six months; the riots broke out five months later in Jakarta and
elsewhere in Indonesia. Both before and after the crisis in East Asia, and those in
Africa and in Latin America (most recently, in Argentina), these programs failed,
turning downturns into recessions, recessions into depressions. I had thought that the
lesson from these failures had been well learned, so it came as a surprise that Europe,
beginning a half-decade ago, would impose this same stiff and ineffective program on one
of its own.
Whether or not the program is well implemented, it will lead to unsustainable levels of
debt, just as a similar approach did in Argentina: The macro-policies demanded by the
troika will lead to a deeper Greek depression. That's why the I.M.F.'s current managing
director, Christine Lagarde, said that there needs to be what is euphemistically called
"debt restructuring" - that is, in one way or another, a write-off of a significant
portion of the debt. The troika program is thus incoherent: The Germans say there is to
be no debt write-off and that the I.M.F. must be part of the program. But the I.M.F.
cannot participate in a program in which debt levels are unsustainable, and Greece's
debts are unsustainable.
Austerity is largely to blame for Greece's current depression - a decline of gross
domestic product of 25 percent since 2008, an unemployment rate of 25 percent and a
youth unemployment rate twice that. But this new program ratchets the pressure up still
further: a target of 3.5 percent primary budget surplus by 2018 (up from around 1
percent this year). Now, if the targets are not met, as they almost surely won't be
because of the design of the program itself, additional doses of austerity become
automatic. It's a built-in destabilizer. The high unemployment rate will drive down
wages, but the troika does not seem satisfied by the pace of the lowering of Greeks'
standard of living. The third memorandum also demands the "modernization" of collective
bargaining, which means weakening unions by replacing industry-level bargaining.
None of this makes sense even from the perspective of the creditors. It's like a
19th-century debtors' prison. Just as imprisoned debtors could not make the income to
repay, the deepening depression in Greece will make it less and less able to repay.
Structural reforms are needed, just as they were in Indonesia, but too many that are
being demanded have little to do with attacking the real problems Greece faces. The
rationale behind many of the key structural reforms has not been explained well, either
to the Greek public or to economists trying to understand them. In the absence of such
an explanation, there is a widespread belief here in Greece that special interests, in
and out of the country, are using the troika to get what they could not have obtained by
more democratic processes.
Consider the case of milk. Greeks enjoy their fresh milk, produced locally and delivered
quickly. But Dutch and other European milk producers would like to increase sales by
having their milk, transported over long distances and far less fresh, appear to be just
as fresh as the local product. In 2014 the troika forced Greece to drop the label
"fresh" on its truly fresh milk and extend allowable shelf life. Now it is demanding the
removal of the five-day shelf-life rule for pasteurized milk altogether. Under these
conditions, large-scale producers believe they can trounce Greece's small-scale
producers.
In theory, Greek consumers would benefit from the lower prices, even if they suffered
from lower quality. In practice, the new retail market is far from competitive, and
early indications are that the lower prices were largely not passed on to consumers. My
own research has long focused on the importance of information and how firms often try
to take advantage of the lack of information. This is just another instance.
One underlying problem in Greece, in both its economy and its politics, is the role of a
group of wealthy people who control key sectors, including banks and the media,
collectively referred to as the Greek oligarchs. They are the ones who resisted the
changes that George Papandreou, the former prime minister, tried to introduce to
increase transparency and to force greater compliance with a more progressive tax
structure. The important reforms that would curb the Greek oligarchs are largely left
off the agenda - not a surprise since the troika has at times in the past seemed to have
been on their side.
As it became clear early on in the crisis that the Greek banks would have to be
recapitalized, it made sense to demand voting shares for the Greek government. This was
necessary to ensure that politically influenced lending, including to the oligarchic
media, be stopped. When such connected lending resumed - even to media companies that on
strictly commercial terms should not have gotten loans - the troika turned a blind eye.
It has also been quiescent as proposals were put forward to roll back the important
initiatives of the Papandreou government on transparency and e-government, which
dramatically lowered drug prices and put a damper on nepotism.
Normally, the I.M.F. warns of the dangers of high taxation. Yet in Greece, the troika
has insisted on high effective tax rates even at very low income levels. All recent
Greek governments have recognized the importance of increasing tax revenues, but
mistaken tax policy can help destroy an economy. In an economy where the financial
system is not functioning well, where small- and medium-size enterprises can't get
access to credit, the troika is demanding that Greek firms, including mom and pop
stores, pay all of their taxes ahead of time, at the beginning of the year, before they
have earned it, before they even know what their income is going to be. The requirement
is intended to reduce tax evasion, but in the circumstances in which Greece finds
itself, it destroys small business and increases resentment of both the government and
the troika.
This requirement seems at odds, too, with another of the demands with which Greece has
been confronted: that it eliminate its cross-border withholding tax, which is the
withholding tax on money sent from Greece to foreign investors. Such withholding taxes
are a feature of good tax systems in countries like Canada and are a critical part of
tax collection. Evidently, it is less important to ensure that foreigners pay their
taxes than that Greeks do.
There are many other strange features of the troika bailout packages, in part because
each member of the troika has its favorite medicine. As doctors warn, there can be
dangerous interactions. The battle, however, is not just about Greece. It's not even
just about the money, although special interests in the rest of Europe and some within
Greece itself have taken advantage of the troika to push their own interests at the
expense of ordinary Greek citizens and the country's overall economy. This is something
I saw repeatedly firsthand when I was at the World Bank, most noticeably in Indonesia.
When a country is down, there is all manner of mischief that can be done.
But these policy debates are really about ideology and power. We all know that. And we
understand that this is not just an academic debate between the left and the right. Some
on the right focus on the political battle: the harsh conditions imposed on the
left-wing Syriza government should be a warning to any in Europe about what might happen
to them should they push back. Some focus on the economic battle: the opportunity to
impose on Greece an economic framework that could not have been adopted any other way.
I believe strongly that the policies being imposed will not work, that they will result
in depression without end, unacceptable levels of unemployment and ever growing
inequality. But I also believe strongly in democratic processes - that the way to
achieve whatever framework one thinks is good for the economy is through persuasion, not
compulsion. The force of ideas is so much against what is being inflicted on and
demanded of Greece. Austerity is contractionary; inclusive capitalism -
the antithesis of what the troika is creating - is the only way to create shared and
sustainable prosperity.
For now, the Greek government has capitulated. Perhaps, as the lost half decade becomes
the lost decade, as the politics get uglier, as the evidence mounts that these policies
have failed, the troika will come to its senses. Greece needs debt restructuring, better
structural reforms and more reasonable primary budget surplus targets. More likely than
not, though, the troika will do what it has done for the last five years: Blame the
victim.
Joseph E. Stiglitz is a Nobel laureate in economics, a professor at Columbia
and the author, most recently, of "The Great Divide: Unequal Societies and What We
Can Do About Them."
'One underlying problem in Greece, in both its economy and its politics,
is the role of a group of wealthy people who control key sectors, including
banks and the media, collectively referred to as the Greek oligarchs.'
Thank you - as it was the Oligarchic system which ruined Greece and perhaps it
could have been mentioned in this article - how much money these Oligarchs moved
out of the country into foreign bank accounts - and if you have been in Athens you
probably had Greeks telling you, that with this money in Greece there would be no
need for another bailout.
And for sure the debt - which is more or less the main 'incentive' for Greece to
reform - should be forgiven - and the other European nations will agree to another
'haircut' AFTER the reforms are implemented - and you might be able to trust such
a prediction - as all our predictions about the Greece Crisis -(documented by the
published comments in the NYT) have come true.
And it is a very welcome change of the narrative by progressive US economists -
that at least the distructive role of the Greek Oligarchs is recognized.
It comes up late in the article and the suggestion - the troika seemed to be at
times on their side is probably as unfair as the idea that progressive US
economists have been on the Oligrachs side.
As from the beginning of the crisis
it was rarely mentioned by US economists. They built a narrative all about
'austerity' insted of 'money for reforms' or a working taxation system for Greece!
"... "Privatisation in Greece right now means a fire sale," political economist Jens Bastian
said." . "...The Guardian is not the paper you think it is... or would like it to be.
Even if its support for the previous Coalition government wasn't clear enough, the nature of its coverage
of Russia, Greece, and lately the Corbyn candidacy, very obviously reveals its true loyalties." . "... Privatization will make the Greek economy look like Russia. Mafia State 2.0. The cost of everything
will rise as the profiteers stripmine any assets left after the sellout of the Greek people. Those assets
deemed unprofitable will be dumped onto the bankrupt state government. Your last paragraph is neocon
boilerplate and simply doesn't apply in a situation where pirates move in to clean the bones of their
victims. "
Greece needs to sell off €50bn worth of state assets such as airports and marinas quickly as part
of its third bailout deal. But is such a plan realistic?
In the early days of the Greek debt crisis, two German politicians came up with a radical solution:
Greece should sell off some of its uninhabited islands and property to pay back its creditors. "Sell
your islands you bankrupt Greeks! And sell the Acropolis too!" was how the German tabloid Bild summed
up their idea.
While selling off ancient monuments was never a serious idea, the privatisation of state assets
has always been an integral feature of Greece's international bailouts. Over the past five years,
Greece has faltered on promises to sell vital parts of its infrastructure – ports, airports, marinas
and waterworks – in exchange for billions of euros in loans.
Privatisation remains a vital element of Greece's latest bailout deal. Under threat of being forced
out of the eurozone, Athens agreed to transfer "valuable assets" to an independent fund, with the
aim of raising €50bn (£35bn). Half the proceeds will be used to shore up capital reserves at Greek
banks; a quarter will be used to repay Greece's creditors, and the remainder will be spent on unspecified
investments.
The privatisation fund was the issue that almost forced a Grexit
at the
marathon 17-hour, all-night summit of European leaders in Brussels earlier this month. "It was
the only thing discussed at the summit," recalls one diplomat.
At 6am, as Greece teetered on the brink of leaving the euro, the Greek prime minister, Alexis
Tsipras, was still haggling over privatisation details with his counterparts, Angela Merkel and François
Hollande.
The idea of the privatisation fund first emerged in a leaked German government paper which argued
Greece should leave the eurozone if it did not agree to put €50bn in a Luxembourg fund as collateral
for its debts. Although drafted in Berlin, the plan soon found support among Greece's hardline creditors
in central Europe and the Baltics.
Tsipras wrung two concessions: the fund would be run from Athens, not Luxembourg, and a tranche
of the cash would be earmarked for investments in Greece.
The privatisation fund is likely to remain one of the most contentious issues as Greece and its
creditors strive to conclude bailout talks by mid-August.
From the creditors' perspective, Greek privatisation has been failure heaped upon failure. In
2011, international creditors decreed that Athens would raise €50bn by the end of 2015 from selling
state assets. By early 2015, only €3.2bn had been raised; none of the most sensitive aspects – airports,
ports, railways – had been sold. Neither officials at the European commission nor the International
Monetary Fund are taking the €50bn target remotely seriously.
In a
devastating analysis of Greece's debt burden published in July, the IMF said it was realistic
to assume asset sales would be worth no more than €500m a year – meaning it could take 100 years
to raise €50bn.
Gabriel Sterne at Oxford Economics argues that the IMF has failed to learn from its recent history
that "less is more" when it comes to setting numerical targets. "It is economics versus faith – 'Somehow
we will make this work even if it doesn't add up' – but the economics really doesn't add up."
When Syriza swept to power in January, one of its first actions was to sack the people in charge
of Greece's privatisation agency and cancel plans to sell Greece's electricity transmission operator
(ADMIE). The sale of other assets – most notably regional airports and the port of Piraeus – had
almost been completed, but was thrown into doubt. The government is expected to put up little resistance
to the sales now being concluded. Venues purpose-built for the 2004 Athens Olympic games, which have
sat derelict and rotting for the past decade, will also be among the assets moved to the fund, alongside
state utilities, including the water board and ADMIE.
Both Russia and China have expressed interest in snapping up the state-run railway network, one
of the biggest encumbrances on public finances before the debt crisis erupted in late 2009. The Greek
state is also rich in buildings bequeathed by individuals to municipalities and the Orthodox Church
– properties that are also expected to be included in the fund. Contrary to popular perception, the
public sector owns very few islands. The sale last week to Hollywood star Johnny Depp of the Aegean
islet of Stroggilo, for a reputed €4.2m, was conducted privately.
While Tsipras has been forced into a humiliating climbdown over the sale of state assets, he has
repeatedly branded the entire bailout plan as a bad deal that he doesn't believe in.
Unions with ties to the governing party have already vowed to "wage war" to stop the sale of docks
in Piraeus, where the Chinese conglomerate, Cosco, currently manages three piers. With the debt-stricken
country on its knees, officials have stressed that the prime minister will fight to ensure the denationalisations
are not seen as a fire sale.
However, independent observers fear just that. "Privatisation in Greece right now means a
fire sale," political economist Jens Bastian said.
Bastian was one of the officials responsible for privatisation under the European commission's
Taskforce for Greece, a body of experts distinct from the troika. He thinks it was a "political mistake"
to set a target to raise €50bn from asset sales, in the absence of support from Greek politicians
across the political spectrum, from the centre-right New Democracy party, to Pasok on the centre-left
and Syriza on the left.
"We have never had a political majority to embrace the idea of privatisation. How are you going
to create the political momentum that has been absent in the past years under more difficult conditions
today?" he asks.
Greece's creditors share such scepticism. Their answer is tighter controls. The privatisation
fund will be managed by Greeks under the close watch of creditors.
The privatisation fund has few precedents, although it has been compared to the Treuhandanstalt,
the German agency created in the dying days of the GDR to privatise East German assets shortly before
reunification. Greece's former finance minister, Yanis Varoufakis, was one of the first to draw the
parallel, although others offer the comparison unprompted. Peter Doyle, a former IMF economist, says
the Treuhand offers the closest parallels: the agency had full control over government ministries
to sell assets quickly. "The principal task was to sell these things to somebody for cash."
Greek government officials and opposition politicians said it was too early to know how the Greek
fund would operate.
"We've got a long way to go before we have a clear picture of what this fund and the privatisation
scheme will entail," Anna Asimakopoulou, shadow finance minister with the main opposition New Democracy
party, told the Guardian. "But the entire privatisation process will feature large in negotiations
because Tsipras is so opposed to them and creditors see them as a good way to raise revenues."
Greece has an urgent need for cash: although the eurozone bailout is meant to be worth up to €86bn,
only €50bn is on the table, via the eurozone's bailout fund, the European Stability Mechanism.
Doyle thinks Greece's bailout is underfunded. "The Europeans just don't have enough cash ...
and a major way to fill that gap is through privatisation." Officials at the Greek privatisation
agency are "going to find their arms very strongly twisted to provide needed cash", he says.
"The privatisation agency is facing a trade off between doing something that is fair and open
and following judicial procedures, or something that is going to deliver needed cash."
He fears Greece could be heading down the path taken by Russia in the 1990s, when valuable state
assets were sold at knockdown prices to raise urgently-needed cash, creating a new oligarch class
in the process.
"The very thing we all think that Greece needs – to get rid of its oligarchy – will in fact be
entrenched by privatisation done this way," argues Doyle, who worked on privatisations in the Czech
Republic, Slovakia and Poland in the 1990s. The difference between those countries and Greece, he
thinks, is that the population and political class in central Europe accepted the idea of privatisation,
despite the short-term hardships.
He is convinced the current privatisation plan for Greece is doomed to fail. "The programme was
set up to encourage Greece to leave the euro and that plan didn't work, so now we are stuck with
the privatisation arrangement that nobody, not even the original creditors, ever intended to happen."
Up for sale
Helliniko Olympic complex
Ports of Piraeus and Thessaloniki
14 regional airports
PPC power company, including ADMIE, the electricity transmission operator
DEPA natural gas company
Hellenic Petroleum
Hellenic Post
Athens Water Supply and Sewerage Company
Xenia Hotels in Rhodes
Marinas of Chios, Pylos and other locations
Source: Hellenic Republic Asset Development Fund
MrShigemitsu -> Byron73 26 Jul 2015 15:49
surely a newspaper like the Guardian
Woah, back up now.... you see, there's your problem right there.
The Guardian is not the paper you think it is... or would like it to be.
Even if its support for the previous Coalition government wasn't clear enough, the nature of its
coverage of Russia, Greece, and lately the Corbyn candidacy, very obviously reveals its true loyalties.
It supports the neoliberal status quo - don't kid yourself otherwise.
JaneThomas 25 Jul 2015 22:07
"It's neither more moral nor a matter of just desserts to call for that internal devaluation,
that austerity, than it is to call for the currency devaluation. Indeed, I would argue entirely
the other way: the currency devaluation will cause a lot less human pain so that's the way the
problem should be solved. Thus Greece must leave the euro because that's the way to solve the
problem with the least pain."
How many Greeks really want Eurozone at any cost can only be seen through a referendum.
Remember that prior to the last referendum of 61-39, the same opinion poll companies were predicting
a 50-50 result.
Are they more trustworthy on the Eurozone question?
Capital's motivation is to accumulate financial assets i.e. supplying the least possible service/product
for the greatest possible return.
delaxo kimdriver 25 Jul 2015 16:32
"the Greek political establishment was held to account by its electorate":
Excuse me but his sounds like a joke, when 61% of the electorate expressed a will that was summarily
rejected by the true rulers of the colony.
Alfie Silva kimdriver 25 Jul 2015 16:11
Al well and good in principle and I agree with most of what you say.
However, privatisations are not always the nirvana you make them out to be.
You see it everywhere across Europe; the privatisation of EDP, PT, REN for example in Portugal;
customer service is now appalling in these former nationalized industries.
I experienced it first hand in the UK; NORWEB and North West Water becoming United Utilities;
service to the public again is appalling.
In the rush to privatise, the need for an ombudsman and guaranteed standards by statute is as
necessary as making a return to shareholders.
Moniq Vervoort 25 Jul 2015 12:43
The list of Oligarch Greeks that don t pay tax in Greece should be plastered all over the internet
, newspapers , tv , etc
Out of the 100 richest people on Earth right now 8 are Greek , one lady and 7 gents that ought
to get a BBC camera and a competent interviewer asking their take on the situation ' back Home'!
That would make more sense that simply flogging the place off to Tom Dick and Harry (IMO)
Ryleigh RedCoat4Ever 25 Jul 2015 09:48
Except they are a nation state, not a household or a company. The ability of one country to
intervene in another and seize assets smells of imperialism and colonialism.
deskandchair -> Winhoering 25 Jul 2015 09:20
Another corporatist fantasist:
"Spain and Ireland are reporting good growth rates"
AND soaring poverty and unemployment and mass emigration, really great EZ success stories there
NOT.
deskandchair -> whitewolfe 25 Jul 2015 09:17
"Smaller the state less corruption"
More corporatist lies, small state = large corporate power and in which fairy-tale lala land do
you imagine there's no corruption in private companies? Indeed, corruption is even MORE COVERT
in private companies you dunce.
LibertineUSA 25 Jul 2015 09:06
Making Greece poorer one step at a time. What a triumph of neoliberal economics...for at least
the beneficiaries of neoliberal economics. Who just happen to be the same people who own everything
and don't want to pay their taxes.
FourtyTwo Drosophilasrule 25 Jul 2015 09:01
Germany already owns fully the Greek telecom company (Deutsche Telekom) and is preparing to
secure the purchase of all Greek regional airports (Fraport AG). There are also rumours that Sofina,
based in Brussels is after Thessaloniki's water company EYATH (ΕΥΑΘ). Interestingly enough Guy
Verhofstadt sits on this company's board. So I grant you it is not just "Germany" but Germany's
sphere of influence out to buy Greece. ;)
But even if some Greek oligarchs manage to get a piece of that cake, do you really think that
would be anything to be proud of? I hear that Greece's "national contractor" George Bobolas is
collaborating with Sofina to get a piece of EYATH. What do you have to say about that?
Everybody knows that the non-paper regarding the Greece Treuhand (let's call a spade a spade,
shall we?) was circulated by Schaeuble even before the beginning of the summit meeting and that
originally the fund would be based in Luxembourg, be run by non-Greeks and all the money from
the privatisations would go to creditors to service the debt. The summit almost collapsed because
of this aggressive move as Tsipras abandoned the negotiations in dismay and several more moderate
people had to intervene to get him back to the negotiation table. Later we found that the non-paper
was known and endorsed by both Merkel and the SPD. So yes, pretty much all of "Germany" was behind
that caper.
Joint control of assets (Greek state and private companies) has already been proposed by the Greek
government, namely Varoufakis himself, but that was deemed unsatisfactory. And even a neoliberal
has to agree that selling off assets at a time of a big depression and uncertainty will effect
in their being sold for peanuts with a great loss to the seller and a humongous gain for the buyer.
Especially if the assets are monopolies of basic commodities like water which means they are totally
risk-free, or related to the country's basic means of revenue, tourism.
Kompe75 hungrycocky 25 Jul 2015 07:59
We knew that Germans and reason coincide....but now with Schaueble everything is possible...they
have tradition in electing paranoid leaders
MacNara -> whitewolfe 25 Jul 2015 06:31
You are clearly an ultra-capitalist, while I am not, so it's difficult to talk with you. But
like many with a religious belief in capitalism, you don't seem to have much idea how it works.
Let's take your point 1:
Selling them contributes to the government, cash. Cash that the country desperately needs.
No: all this money is going abroad; the Greek government won't see any of it. From the point of
view of the Greek government, the sale alone (assuming nothing else happened) would be purely
an accounting change with no effect in the real world. So, from their point of view, if they were
capitalists it would be best to carry on as is, or declare bankruptcy and have a pre-arranged
buyer for the bankrupt company (i.e. themselves).
As long as trains run and electricity is deliver[ed] who cares who owns it?
Well, shareholders seem to, otherwise why would there be stockmarkets? And the reverse is true
from the customers' point of view. That is to say, if the company became profitable and the profits
went to the Greek state rather than others, then it would make a big difference to the citizens.
And so on for your other three points, which I had also already answered in my original post.
John Bennetts -> whitewolfe 25 Jul 2015 06:02
Total BS, Whitewolf. I expect that putting others down makes you feel bigger.
Name examples of "smaller state less corruption". Where has this worked?
The foreign banks made bad deals, lost the gamble and then pressured their governments, led by
Germany, to extract penalties far i n excess of the supposed crime. The whole nation is being
pauperised.
But that doesn't matter... they're only olive-sucking Greeks, after all. Not German or French
banks. So that's OK.
MacNara 25 Jul 2015 00:02
I don't understand why the idea of management contracts for Greek state-owned industries has
not been given an airing.
For example, Deutsche Bahn (German government) could be given a ten or twenty year contract to
make the railways profitable, and EDF (French government) could do the same for the power system.
And this could be done without privatisation (after all, the German and French equivalents are
state-owned).
This would surely have several benefits:
1. When the companies were profitable, they could contribute to Greek government finances.
2. Alternatively, once profit-making, they could be sold off, but not at fire-sale prices as looks
likely at the moment.
3. This would be a clear example of the German and French (and other governments') desire to help
Greece improve, and not to asset-strip, so it would be a PR win, and a plus for all sides (especially
if these contracts were 'at cost' and non-profit).
4. Making these businesses profitable will probably initially involve job losses, wage cuts, and
price rises. Keeping them in state ownership would mean that the benefits of these sacrifices
by Greeks would be kept in-house (i.e. go to the government and not foreign capitalists or Greek
oligarchs) and therefore make it more likely that they would get social acceptance.
Has such a plan really never been discussed? Or is my logic faulty?
deskandchair 24 Jul 2015 23:52
". It is a necessary component of a healthy economy because it ensures private sector efficiency
and productivity"
Straight from the '90's handbook and absolute RUBBISH. Look at for example public transport
systems privatised in Australia. They're now less efficient (schedules are a joke) rolling stock
is older and shoddy and private companies STILL DEPEND on state governments for injections of
hundreds of millions of dollars to maintain infrastructure.
Then there's electricity supplies in Aus states that have privatised, over-investment in infrastructure
(so they can pump the cost of electricity so while households are using less power, costs far
exceed inflation). The same with water, gas etc.
I have yet to see ONE example of privatisation of public assets in Aus that resulted in better
service, efficiencies etc etc etc. Privatisation of assets is simply a cash-cow for certain companies
to bleed the public dry and am happy to consider any REAL example where this is not so.
Alto Cumulus 24 Jul 2015 22:56
Multinational corporations hire battalions of lawyers precisely to AVOID paying taxes. And
foreign governments collude, allowing multinationals and Greek oligarchs to park their money in
the Luxemburg, Netherlands, or other tax havens.
So selling of Greece's water utilities or ports does NOT mean the corporate buyers will be compelled
to pay taxes in Greece. The burden of tax payment will continue to fall to Greek small businesses
and Greek families.
The little taxes the new corporate overlords may pay will be immediately sucked up by Greece's
creditors.
Marty Wolf -> psygone 24 Jul 2015 15:30
Privatization will make the Greek economy look like Russia. Mafia State 2.0. The cost of everything
will rise as the profiteers stripmine any assets left after the sellout of the Greek people. Those
assets deemed unprofitable will be dumped onto the bankrupt state government. Your last paragraph
is neocon boilerplate and simply doesn't apply in a situation where pirates move in to clean the
bones of their victims.
Olastakarvouna 24 Jul 2015 15:12
Helliniko Olympic complex, and 14 regional airports have already been sold (with only bureaucratic
hurdles remaining). So has DEPA the natural gas company, but its sale is being held up by EU regulators.
The PPC power company will NEVER be sold (unless you believe that Britain will sell its NHS).
The Athens Water Supply and Sewerage Company will also NEVER be sold, as its sale (and that of
Thessaloniki water supply co) was deemed unconstitutional a year ago by Greece's highest court.
Helena Smith, please try refining your reporting a little bit more.
By Mathew D. Rose, a freelance journalist in Berlin
Five months ago I attempted to explain why the conflict between Germany
and Greece was destined culminate as it has:
Following the recent elections in Greece, Germany and its EU
compradors are making it clear who is in charge. The Germans are
currently not offering any compromise, but iterate the same blunt
demand: Greece has to accept what is being dictated; in other words,
capitulate or be annihilated. This time it will not be the Wehrmacht
und Luftwaffe that are to force the Greek nation into submission, but
a weapon just as lethal: national bankruptcy.
This conflict has nothing to do with Greek debt or finances. Syriza's
strategy was based upon the rational assumption that the nation's debt
and recovery are being stifled by austerity. As we know from most any
respected economist, Greece's debt can never and will never be repaid. On
the continent that prides itself as the cradle of the enlightenment,
there should have been an amicable, lasting solution to Greece's
untenable financial situation. Greece has had to learn the hard way, that
the EU is no longer a European project for peace, democracy and
prosperity, but a German tool for hegemony.
This has been a conflict between a small European nation, led by a
leftist government, attempting to reassert its autonomy under crushing
German predominance. That may sound simplistic, but there is not much
more to it.
In past postings I have also attempted to explain the German mindset
leading to this – and there is no other word for it – disaster. The
negotiations have been surprisingly linear. Syriza's main goal was debt
relief. They always saw Chancellor Merkel as the lone decision maker in
the negotiations. Ms Merkel on the other hand has unremittingly demanded
unconditional capitulation. The rest has been spectacle. There is a
saying: "Clowns entertain in the intervals between the acts. The circus
director runs the show". Dijsselbloem, Juncker and the rest may have had
a lot to say to the media, but little to say in negotiations. Finland,
Slovakia and Slovenia are irrelevant. The only other player of any
importance besides Merkel was ECB president Mario Draghi, who assisted
Germany's financial blitzkrieg by questionably terminating the ECB's
support of Greek banks. Schäuble was Merkel's executioner.
The intervention of France's President Francois Hollande was uncannily
reminiscent of Neville Chamberlain. The only thing lacking was his
arrival at Charles de Gaulle Airport brandishing a letter from Chancellor
Merkel. The conclusion of "negotiations" was reminiscent of the Munich
Dictate. Greece has been "saved", much as Czechoslovakia 77 years ago.
The humanitarian disaster had reached dimensions that defy any
definition of a "United Europe". With the media's obsession with the
pseudo negotiations the fact that this was an existential decision for
millions of Greeks was forgotten, many of whom stood at the edge of an
abyss. This became clear as affected Greeks were asking how they were to
pay for their insulin and if it would soon become unavailable due to the
financial embargo that was being created. This was the terrorism that
Yanis Varoufakis denounced.
The reaction of what I would term "enlightened Germans" to
Varoufakis's claim was what one expects. For them, they were being
compared to ISIS. Even though the fear emanating from much of Greece's
population was palpable, there was little reflection by many of those
Germans capable of doing so, with regard to the aggression conducted in
the name of Germany. In the phase immediately before Syriza's
capitulation there was an increasing awareness among some Germans that
something was going terribly wrong, but it was too little and too late.
This brings me to the first main point of this posting. The history of
the "good Germans" has always been one of ineffectuality. In the course
of history there have been many Germans who believed in the
enlightenment, be it Martin Luther, Immanuel Kant or Wolfgang Goethe.
These however never questioned the authoritative role of the state
against the will of the people. The class of "enlightened" Germans always
regret what their nation is doing, but more often than not, in the end
participate in the very actions they deplore. As A.J.P. Taylor wrote:
"There were, and I daresay are, many millions of well-meaning kindly
Germans; but what have they added up to politically?" In the case of
Greece, this has occurred still again.
Not that the ethical Germans have had an easy time of it lately. A few
years ago there was a massive campaign in commentaries and politics
condemning so called Gutmenschen (literally translated: good people), who
were defined by their critics as persons following their moral conscience
– regardless of being leftist, moderate or conservative. In a nation that
is responsible for the holocaust, this is a very worrying development.
Thus the transition of Germany's hegemonic role in Europe, among many
internal transitions such as the unjust redistribution of wealth, has
been thoroughly ideologically prepared.
It is worth mentioning a sort of landmark book written by the German
historian Heinrich August Winkler, "The Long Journey to the West", which
appeared in the year 2000. It traces the purported progress of Germany
becoming a responsible member of Western Europe's democratic tradition
and intellectual enlightenment. Winkler may have been too quick with his
conclusion. Under German hegemony we are seeing heads of state removed by
financial pressure (Italy and Greece), nations forced to take over debts
from reckless private banks (Ireland and Spain) and Greece being pounded
into submission and having its autonomy reduced to passing legislation
dictated by Berlin. The Germany of today has little to do with Western
European democracy, resembling more traditional German anti-democratic
authoritarianism.
The second point I wash to make is that the real losers with regard to
the disaster in Greece are not even aware of their plight: the Eastern
Europeans. What the Germans have done to Greece has its basis in racism,
but the Germans have a primordial fear and hate of eastern Europeans,
resulting in a commensurate brutality. When the opportunity arrives to
subjugate these peoples, the process will not be as gentle as in Greece.
Ukraine could already be the first example of this.
The only exception might be Poland, which throughout history has been
invaded and occupied by the Germans. Not only have the Germans always
considered Poland a colony, but after the Second World War German
territory was added to Poland. This is something that Germans resent to
this day. Willy Brandt falling to his knees in Warsaw was an important
gesture, but in Germany these days Willy Brandt numbers among the
derogated "Gutmenschen". The Poles are fortunately highly distrustful of
the Germans – with good reason – and are still not members of the
eurozone . They surely have been following the developments in Greece and
hopefully comprehended the writing on the wall.
Lastly, no one seems to have really thought through what the "reforms"
forced upon Greece will mean in practice. Up to now Greeks apparently
were reluctant to pay taxes because hardly any one, especially the
oligarchs, did so. To alter a nation's attitude to taxation is a
herculean task for a government at the best of times, a process that
Yanis Varoufakis interestingly had initiated very early on. The
imposition of a ridiculously high value added tax increase by Germany is
nothing more than taxation without representation. Not paying ones taxes
in Greece will become a patriotic act of resistance against the Germans
and the troika. There can be no crdible political discourse from a
politically disgraced Syriza, leaving coercion as the only alternative (Varoufakis
knew why he resigned as finance minister and has voted against the German
dictate). The Greek people clearly rejected the dictate that has been
foisted upon them. They will not be supporting the so called "reforms",
especially as they simply cannot afford to do so.
The crisis in Greece and in Europe is not over, it is only just
beginning.
John Jones, July 25, 2015 at 2:36 am
Yeah and Greeks and eastern Europeans and other minorities etc also live the experience of
been on the end of the racism by Germans, English and other northern Europeans. And it is not
'some people' in their experience.
And it is always satire and funny when you are not the one on the other end of the joke.
The wealthy Greeks seek to conserve their wealth as much as the wealthy Germans. To
devolve this down to nationalistic stereotypes is to play the game of the wealthy. Divide
and rule. This article buys into that, big time.
Stereotypes which most of the German population has had no problem believing and spouting
off towards Greeks. Preconceived notions that not only the Germans have but England and
northern Europe.
Skippy, July 24, 2015 at 11:45 am
The strange thing is the Germans were late to the colonization party, tho at that time
there was some funky stuff happening in German philosophy and spiritualism.
Skippy…. and at the end of the day all the other anglophone nations history is white washed
and Germany was left holding the bag as the bad guy.
vidimi, July 24, 2015 at 12:05 pm
yup. i would say the english probably qualify as history's greatest all-time villains…or
should i say "some english people".
flora, July 24, 2015 at 12:49 pm
Yes. " A few years ago there was a massive campaign in commentaries and politics condemning
so called Gutmenschen (literally translated: good people), who were defined by their critics
as persons following their moral conscience – regardless of being leftist, moderate or
conservative."
This remark makes me wonder if Hegel is still the guiding philosophy in Germany.
"Since the state is mind objectified, it is only as one of its members that the individual has
objectivity, genuine individuality, and an ethical life…" Hegel
Hegel gives the state the primacy, not the family or community or individual conscience.
dk, July 24, 2015 at 11:47 am
The reality is that oligarchs use proxies of many kinds, from nations to individuals. They
gain resources and profit from the products and byproducts of elaborately manufactured
scenarios, pitting groups against each other to produce illusions of demand, debt, etc.
Germany and Greece are no more than proxies in this gambit.
Beware the kayfabe.
DJG, July 24, 2015 at 11:06 am
The Anglo-German media have steeped in racism. Are you forgetting the acronym PIIGS? Do you
think that is referring to hams on the hoof in Finland?
I'll write it again: The DJG rule. The Anglophone world (and the Germans and Dutch) prefer
their Romans and Greeks dead. The current ones are too "excitable."
MyLessThanPrimeBeef, July 24, 2015 at 12:15 pm
Brown people, little people, poor people, desert people don't do too well either in that
world.
hemeantwell, July 24, 2015 at 11:35 am
To add: the more I think about this, the more off target this post is. Precisely at a time
when it is necessary to consider features of the current crisis like, in no particular order,
falling German productivity, the dwindling of Chinese demand that fueled Germany's economy,
growing difficulties in finding investment options for surplus capital >>> bubble investment,
how a NATO that is dominated by the US is fostering a crisis in the Ukraine, Rose focuses on
the diffuse sentimental templates that can regressively steer a crisis response, especially
when elites want to play the nationalism card. Rose does next to nothing to draw our attention
back to crisis drivers, he just forecasts how it can be misinterpreted.
German native speaker, July 25, 2015 at 5:43 pm
For years, after starting an illegal war in Iraq, after the US caused the banking/
derivatives crisis, and after the truth about NSA/Snowdon, whenever someone in Germany talked
bad about the "Amis" (short for Americans) because of the way the US behave, I have reminded
them that not all Americans are 'behind' and supportive of the 'system'.
I guess I can now follow your reasoning and encourage all Germans to pile it on about how bad
Americans are, and unless all of them are called ruthless imperialists, the US won't change
(according to your logic).
OpenThePodBayDoorsHAL, July 24, 2015 at 4:56 pm
The "most successful" in recent memory gets to dictate the narrative because their view is
seen as "right". Germany gets to crow about their "economic miracle", founded on running
surpluses, exchange rate suppression that would never have been possible under the
deutschemark, and the inconvenient truth of the massive debt forgiveness and restructuring
they were afforded in 1953. America benefits similarly from their long-in-the-tooth supremacy
after WW II, a victory of excellent river systems, large protective oceans, bounteous
agricultural acres, and skillful realpolitik at Bretton Woods. Of course there's no possible
chance that a 23% VAT on tourism will remedy Greece's predicament, but the ultimate failure of
the program will be whitewashed because the "right" countries in the dominant narrative du
jour did their best. We used to have a few politicians who understood at least a tiny bit
about history and economics, but that era is long gone indeed, they're either ignorant
(Reagan, Bush, Trump) or utterly corrupt (Clinton, Obama, Clinton).
Jim, July 24, 2015 at 7:19 pm
"excellent river systems, large protective oceans, bounteous agricultural acres" – these
are all things that Brazil or for that matter the Congo Republic has. Going by natural
resources and geographical advantages the Congo Republic should be vastly richer than remote
mountainous Japan with it's earthquakes, almost total lack of natural resources and with only
3% of it's surface area suitable for agriculture.Japan has only one thing going for it – the
Japanese people. But that makes all the difference in comparison with that treasure house of
natural resources – the Congo.
Tinky, July 25, 2015 at 6:16 am
Did you really not understand that HAL was referring to aggregate advantages, and that
isolating one in comparison is not at all useful?
Or should we also list the countless island nations that enjoy "large protective oceans", yet
somehow fail to threaten the economic dominance of the U.S.?
mesfern, July 25, 2015 at 7:25 am
Believe it or not, the relative amount of agricultural land is the same in Japan and the
Congo (~12%; the US have 45%). It may not be the first impression one has from the Congo, but
its terrain is rather mountainous and rocky; as one nears the eastern provinces, one might
even be tempted to say they are the African Himalaya. Add in the rainforests, and it becomes
obvious why it is so difficult to build and maintain the necessary infrastructures.
praedor, July 24, 2015 at 2:21 pm
Clear political correctness corrupting your vision. The German people (by and large, the
majority, the bulk, the CULTURE) label the Greeks as lazy and deserving of what they are
getting. They label the GREEKS as LAZY and deserving of their plight. They don't deserve aid,
succor, etc, because they're Greeks and Greeks are…Greek (lazy leeches). That is an objective
fact of the coverage and the overall conceit of the German people en bank. It is racist. I
don't give a flying crap if you can find one or two coffee shop teenager Germans who disagree,
they aren't the ones running the show, propping up the show, supporting the show, creating the
show, kowtowing to the show (though they too are kowtowing). The German machine as a whole, in
focus, by design, by preference, is racist and hegemonic. The Troika IS the German
establishment, the German heart, the German soul as it is run and supported, directly and
indirectly, actively and passively, by Germans. Virtually all of them.
FedUpPleb, July 24, 2015 at 12:19 pm
Shill harder Jesper. What was done to Greece cannot be explained by any rational political
policy. It has its roots in emotion, domination, nationalism and yes, racism. You can call the
latter "cultural differences" if you like, but it only puts a euphemism on the shocking
behaviour seen over the last two months.
Europe has been cast back into the 1950s by this euro crisis. A large portion of the blame now
lies with German intransigence in the face of the reality of both bank and soverign
bankruptcies. This German intransigence is, at its heart, motivated by national interest,
which by casting us back into the 1950s, makes many nervous.
I have been watching commentary and coverage from across the world closely since the end of
May on these issues. I can assure anyone still in doubt that the opinions in this post are
representative of a very wide and indeed deep shift in mood following what was done to Greece.
Europe has lost the cafe-latte front and one must understand the points being made in this
post to realise it.
Or one can remain in terminal denial and wait for the market to come along and make things
better. In any case, please have the graces not to simply stand around shilling.
salvo, July 24, 2015 at 1:50 pm
well, I live in Germany and am formally German myself and I can assure you the main
narrative repeated in German mainstream discourse by the mass media is that the Greeks are
somewhat inferior, lazy, profligate, untrustworthy and so on, something most people tend to
believe. Indeed most of them feel that the German politics is way too soft towards them. I
could start linking to a few articles by German mainstream media to underwrite my point
Gabriel, July 24, 2015 at 10:59 am
One of the few bright spots for me in how the Greece has played out is that in Poland
people seem indeed to have picked up that joining the Euro might be something besides a badge
of honor of being "Western" and European.
My partner Polish and is currently stuck there for preposterous reasons, and she's
confirmed that "sensible," cosmopolitan, Warsaw, pro-EU people are taking a hard look at what
actually adopting the Euro might expose them to.
I was gloomy about the chance of this happening, because the pattern I remember from
Argentina in the 90s is that the lackeys who aren't being punished by the hegemon think
they'll score points by sounding even more punitive than the hegemon (Slovakia seems to have
played that role in this crisis), and far too many intelligent people don't understand that
adopting a currency cannot be considered in purely symbolic terms. Perhaps Poles' not
altogether delightful history with German-run international systems has made them more alert
about this kind of thing.
PS. Apropos well-meaning Germans, I linked to a couple of vids by some of their contemporary
equivalents
here.
susan the other, July 24, 2015 at 11:19 am
I was surprised by the Fortruss post because there is so much censorship here we don't get
any idea about the manipulations of our State Department until they fail or succeed. It made
me think that we and Germany/France are truly on opposite sides when it comes to the future of
Europe. Without "Old Europe" on our side to manipulate eastern Europe it is doubtful we will
succeed in drawing them in (and keeping them) into the neoliberal model we seem so determined
to export. Hopefully the crisis in neoliberalism has just begun.
Jim Haygood, July 24, 2015 at 11:03 am
Change one word; here's how it reads:
'The class of "enlightened" Americans always regret what their nation is doing, but more
often than not, in the end participate in the very actions they deplore.'
nobody, July 24, 2015 at 11:26 am
Mark Ames:
I really started with the idea that in every age, there is some awful oppression that is not
yet recognized and therefore doesn't exist, but later seems horribly obvious. This became
clear to me working in Moscow in the '90s. No one in the "liberal" Western press corps,
academia, world financial aid organizations or Clinton Administration had a shred of sympathy
for the millions of Russians suffering from so-called "privatization" programs that we rammed
down their throats.
Literally millions of Russians went to their graves early in the '90s, yet many respectable
Westerners openly said that the old generation would "have to die off" before the proper
mindset set in to allow full Westernization in Russia. Those millions of deaths are still not
seen as part of something larger and evil.
Excellent quote. Thanks for posting it. And today's crop of "respectable Westerners" wonder
why Putin seems to have Svengali-high approval ratings when facing down the full disapproval
of DC and the EU.
Our Western elite really has gone one-up on the Bourbons. Latter remembered everything and
learned nothing; ours does away with the remembering bit.
Eric Patton, July 24, 2015 at 11:27 am
Germany has money, industry, resources, brains, and will. They think strategically, and
they plan well. You have to admire it.
Inverness, July 24, 2015 at 4:10 pm
Germany has benefited tremendously from both debt forgiveness and cheap Turkish labour.
Jim, July 24, 2015 at 7:30 pm
Oh get real! Germany has been devastated numerous times in history. Almost totally
destroyed by the Thirty Years War, again almost totally destroyed, occupied and divided at the
end of WWII, devastated both by the Napoleonic Wars as well as WWI. It always recovers to
become the strongest state in Western Europe.
YankeeFrank, July 25, 2015 at 4:04 pm
And you say that as if its a good thing. The 20th century would beg to differ. I'd "admire"
Germany a bit more perhaps if they managed to build a strong nation without it always seeming
to be built on a sneering arrogance and racist hatred of those not "German", meaning
specifically Prussian or Bavarian, and it not always winding up with the total domination and
ruin of other nations. I guess its easy for them to get up and engineer every day when
motivated by an overweening pride.
To me they have a singular inability to do anything other than engineer other peoples' ideas
and start wars that make the world cringe in horror at their monstrous deeds. Some cultural
things never change I guess.
And no, I'm not letting the US off the hook for its misdeeds, but there is something
fundamentally vicious and yes, I'll say it, evil, about the German culture that not only
justifies the suffering of "others" at their hands but actually revels in it, as the OP and
some commenters who are actually German have made clear here.
MyLessThanPrimeBeef, July 24, 2015 at 12:25 pm
It's interesting how often we exclude ourselves in our analyses of events abroad, or
fail to include the international dimension of our domestic policies.
It's the hegemonic-power projection cartographic map you mentioned a few days ago.
By Nathan Tankus, a writer from New York City. Follow him on Twitter at @NathanTankus
Last week
Mario Draghi held a press conference following the decision to raise ELA a paltry 900 million
dollars for Greek banks. In that press conference he said many things but I'd like to focus on
one passage that has gotten no attention:
There is an article in the Treaty that says that basically the
ECB has the responsibility to promote the smooth functioning of the payment system. But this has
to do with the functioning of TARGET2, the distribution of notes, coins. So not with the provision
of liquidity, which actually is regulated by a different provision, in Article 18.1 in the ECB
Statute: "In order to achieve the objectives of the ESCB, the ECB and the national central banks
may conduct credit operations with credit institutions and other market participants, with lending
based on adequate collateral." This is the Treaty provision. But our operations were not monetary
policy operations, but ELA operations, and so they are regulated by a separate agreement, which
makes explicit reference to the necessity to have sufficient collateral. So, all in all, liquidity
provision has never been unconditional and unlimited.
This is a truly shocking statement. To understand why, we need to go back to
the basics
of central banking. Banks have accounts at the central bank (I'm going to call the balances
in these accounts "settlement balances" in line with non U.S. Conventions) which are primarily
used to settle payments with other banks. When you use a debit card issued by one bank to pay
someone with a bank account in another bank, your bank has to in turn send a payment using settlement
balances to make that payment.
As should be obvious from that description, in order to make that payment your bank has to
have sufficient settlement balances in its account at the central bank or the central bank must
provide an overdraft. Thus, if the smooth functioning of the payments system is defined as the
ability of depository institutions to clear payments, the central bank must ensure that settlement
balances are available at some price.
The Federal Reserve explicitly recognizes this in its
"Policy on Payment System Risk" by stating that "the Board recognizes that the Federal Reserve
has an important role in providing intraday balances and credit to foster the smooth operation
of the payment system". Draghi is arguing that the ECB's mandate to "promote the smooth functioning
of the payments system" is defined differently than the Federal Reserve's mandate and (as far
as I can tell) every other Central Bank's payment system mandate around the world. I can't over-emphasize
how radical a departure Draghi's position is from the norms of central banking. Whatever else
we may want to criticize the Federal Reserve's and the government's response to the financial
crisis, they did preserve the the smooth functioning of the payments system
with their alphabet soup of lending facilities and ultimately
an FDIC guarantee on interbank lending. The problem was that they didn't put Too Big To Fail
banks in a form of receivership and didn't prosecute bank executives, not that they made sure
payments continued to take place.
As disturbing as the European Central Bank position already is, it becomes more frightening
when we analyze why the Greek banking system has been cut off in detail. First, remember that
the ECB's official position has been that the Greek banking system is solvent as long as Greek
government bonds preserve a certain value. Second, the ECB judges the value of those government
bonds not be their market price but by their view of the Greek government's "compliance" with
the dictates of the EU and the IMF. As Vice President Constâncio said during the press conference:
when a country has a rating which is below the investment grade
which is the minimum, then to access monetary policy operations, it has to have a waiver. And
the waiver is granted if there are two conditions. The first condition is that the country must
be under a programme with the EU and IMF; and second, we have to assess that there is credible
compliance with such a programme.
The bigger picture here is that under this interpretation of the ECB's operating mandates the
European Central Bank can, at any time choose to exclude a particular country's bonds from its
monetary policy operations, watch its credit rating fall and eventually, force the country to
choose between an IMF program and having a frozen banking system and no ability to borrow. Not
only must that country enter an IMF program but it must be judged to be in "credible compliance"
by the ECB at all times.
Being in credible compliance is a necessary not sufficient condition for borrowing. Recall
that the statute Draghi quoted said that it "may", not must, "conduct credit operations". This
is how they've justified keeping the Greek banking system on such a tight leash despite claiming
that the Greek Government was in "credible compliance" up until recently and how they can justify
not extending ELA by enough to restore normal operations in the current situation. The ECB is
like an abusive spouse who believes marriage means they can beat their significant other for any
reason and that previous beatings justify beatings in the future.
Even worse, if the Greek banking system is insolvent because of defaults from the private sector
in Greece (very
likely), the Troika has made the reduction in value of deposits (a bail-in) the preferred
tool (along with privatization) to return solvency to the banking system. In other words, there
is not only no guarantee of orderly clearing of payments but also no guarantee that depositors
will eventually be made whole. It is official policy that at any time the value of a deposit in
one bank does not equal the value of a deposit in another bank.
Cyprus was not a fluke. It would be foolish for depositors in other countries to feel safe,
except perhaps those in Germany and France. Their political leaders would likely suddenly discover
the need for depositors to be fully protected in the Eurozone if they were ever forced to recognize
insolvency.
Putting all this together, Europe now has a system where liquidity and insolvency problems
can occur and can be deliberately generated (at least in part) by the central bank. Then the Troika
can force that country into an "IMF program" if it wants to continue having a functioning banking
system. Alternatively, the central bank can choose to simply "suspend convertibility" to the unit
of account and force the write down of deposits until the banks are solvent again. During this
drawn out period payments grind to a halt and mass business disruptions and failures can and will
be generated. In other words Europe has created a system where you either comply with the dictates
of unelected bureaucrats or you accept a more disorderly version of the United States banking
system before the Civil War. The bottom line is that if you feel inclined to visit Europe remember
that the payments system can fail you at any time. Plan accordingly.
Alexis Tsipras had a choice. As the leader of the fledgling Syriza government in Greece, he
could have told the European Union to stuff its austerity plan. He could have taken the risk that
the EU would offer a better deal to keep Greece in the Eurozone. Or, failing that, he could have
navigated his country into the uncharted waters of economic independence.
But he chose to "follow the rules" by accepting the EU plan. Greece is getting its financial
bailout, Greeks are tightening their belts, and the Eurozone will survive more-or-less intact.
Tsipras learned what happens when you challenge the rules of an elite club. Once in a while, the
club changes the rules. Most of the time, the club issues an ultimatum: suck it up or move on.
Hassan Rouhani had a choice. As the leader of a new reformist government in Iran, he could have
told the international community to keep its nose out of his country's business. He could have
kept adding to Iran's civilian nuclear program, arguing all the time that it was not in violation
of any international agreements. He could have tried to chip away at the international sanctions
regime by concluding economic agreements with willing countries.
But he chose to negotiate with the permanent five members of the UN Security Council - plus
Germany - and bring Iran into full compliance with International Atomic Energy Agency
requirements. By "following the rules" in this way, Rouhani is hoping that the windfall that
comes from the lifting of sanctions will provide enough capital to turn around the Iranian
economy and boost the prospects of his political cohort.
In Hollywood movies and on TV, the rule breakers usually triumph. I can't begin to count how many
films and shows feature CIA operatives, FBI agents, and police officers that must defy the chain
of command in order to do the right thing and collar the bad guys.
But in the real world, breaking the rules usually comes with big penalties. Of course, it all
depends on who sets the rules and who dares to defy them. Sometimes the outlaws face a lifetime
behind bars. And sometimes they not only break the rules with impunity but win the proverbial
jackpot as well.
... ... ...
Iran, a larger country that plays a strategic role in the Middle East, has considerably more
room for maneuver than does Greece. But it too cannot unilaterally remake the rules of the game.
It can only negotiate the best deal it can. In the end, it must open itself up to the kind of
inspection regime that more powerful countries would never tolerate. It is, of course, the height
of hypocrisy for Israel, which refuses to disclose whether it has a nuclear program at all - much
less permit access to its secret sites - to insist that Iran open up virtually every corner of
the country to a highly intrusive verification regime.
But the rules of the game are changing. The model of "international community" that we've been
driving is more than 65 years old, and its engine is starting to conk out.
All the major rule-setting institutions reflect the balance of power that reigned in the
immediate aftermath of World War II. The World Bank was founded in 1944, the IMF and United
Nations in 1945, and the European Coal and Steel Community (which served as the cornerstone of
the future European Union) in 1951. But what will happen as Germany and France exert less control
within the EU, as China builds new international financial institutions, as the UN finally
tackles the problem of reforming the Security Council? What will happen as U.S. relative power in
the world continues to decline?
New rule-makers mean new rules. Get ready: A new world is not only possible, it's just around the
corner.
John Feffer is the the editor of LobeLog and the director of Foreign Policy In Focus at the
Institute for Policy Studies. He is also the author, most recently, of Crusade 2.0. He is a
former Open Society fellow, PanTech fellow, and Scoville fellow, and his articles have appeared
in The New York Times, Washington Post, Los Angeles Review of Books, Salon, and many other
publications.
The powers are not stupid but they are incredibly naive and misinformed. The idea of the
Eurozone was to subsume nationalist fever into a multicultural Eurozone. The Germans in their
Nationalist Pride have made this a failure of Greece instead of the failure of the Eurozone.
The rhetoric is one of nationalism, not one of unity. The economics is Nationalist, not
Post-Nationalist.
DrDick said in reply to bakho...
The German economic policy is, and long has been, deutschland über alles.
pgl
Is Merkel related to Jeb! I was looking for what the term Club Med nations really means -
and it seems to be a put down for nations like Italy and Greece. But check this out. Merkel's
"solution" is for the Italians and Greeks to work more:
Of course they want to work more but the stupid fiscal austerity that Merkel is cramming down
their throats is leading to massive unemployment. And guess what? Jeb! wants to impose
annually balanced budgets for the US through spending cuts. Wow - the US may indeed become the
next Greece if Jeb! becomes President.
Kathleen McNamara actually believes the cover story for why elites pushed the Euro zone.
Yes a great peace keeping mission this has been :<)
Economic elites in Europe have used the Euro to roll back democratic socialism and increase
the global reach of European based multi-national corporations. The Euro is about the Davos
economic elite and their goals. The Davos economic elite did not want fiscal union, they
wanted fiscal disintegration of the welfare state. They have institutionalized fuss budgetry
and inflationphobia for 19 of the 28 EU states.
Eclectic Obsvr
Gee, I don't think any of the critiquing economists doubt that the Euro was created as a
political matter in the EU. It's just that they thought it economically unwise and to that
extent economics matters to politics. It is the same thing about preaching austerity with the
idea that exports will make up for lost domestic demand. At some point it's not logical to
believe that all Eurozone countries have have a current account surplus. Appears to me that
this is something coming out of a perhaps arrogance of foreign policy "experts".
Kenneth Thomas said in reply to Eclectic Obsvr...
Yes, although I believe France actually got the idea after its policy about-face in 1984.
They dreamed of a multinationally controlled ECB replacing the Bundesbank, but let austerity
and deficit mania get written into the ECB's mandate.
Michael Derry
Sometimes people overlook the easiest of things. The problem in Europe is the same as the
U. S. faced under the Articles of Confederation. The Constitutional Convention was originally
called to address the economic problems of the Confederation by strengthening the then
existing Congress. The solution involved a fiscal union and it still took a few years to get
the monetary and trade imbalances settled. You would figure a political scientist would know
this.
Barkley Rosser said...
At the end here we have some people talking about the realities of the politics of this in
the 80s, particularly regarding France. It also occurs to me that most of the commentators
here are Americans, where all the people now getting their backs patted (Feldstein, Krugman,
Friedman, etc.) while now able to crow about the current problems were all massively dead
wrong back in the 90s and after when pretty much all of them declared loudly that the
Europeans would not even be able to get the euro established at all. All along they totally
under rated the political push behind this, which was arguably seriously flawed and well
beyond plots by Davos elites, although that crowd clearly has done well under this at the
expense of others. In that regard, this article serves a useful purpose.
The political strength of the euro in face of its now obvious and glaring economic problems is
seen both by the fact that we have recently seen more countries joining, the Baltic nations,
clearly for political/security reasons (join Europe! Get away from Russia!), but the fact that
after all this stuff this spring, here is Greece accepting this horrible deal because their
leaders recognize that the overwhelming majority of Greeks want to stay in the euro. Greece
should probably never have joined, and it looks to me that they would probably be better off
to obey the desires of the horrible Wolfgang Schauble, but there they are, hanging on in
there.
Let us also keep in mind that these current problems have arisen due to the depths of the
Great Recession, which basically none of us foresaw how bad it would be. Indeed, it has been a
tough test, and the critics have been able to see their forecasts of problems be fulfilled.
Economically all three Baltic nations now are basket
case. Latvia is probably in worst condition.
They lost most of the trade with Russia and nobody
else wants what they can produce. Emigration is
rampant. Especially among young people, who see no
perspectives in their home country.
They also destroyed most of their manufacturing base
(the same is true for Poland).
While partially inevitable with the independence,
Baltic's version of Russophobia has its economic and
political costs.
Jesse said...
Her central hypothesis seems to be that money is power, and that the deployment of the euro
is an exercise in the centralization of power over a heterogeneous collection of nations and
economies. And that the US dollar is similar.
How fitting that she teaches at Carroll Quigley's old university.
She *could* be correct. And if so, then we are in for interesting times.
It is the German's wet dream. Their economic policies have long focused on artificially
suppressing the prices of their manufactures to keep their exports competitive. Now everyone's
currency is pegged to their economy and they control the system.
This article described well what damage Syriza might have done to the neoliberal paradigm
which seems to be entrenched everywhere these days . Very interesting comparison in there between EU government and the Chinese Communist Party which
I hadn't heard before. "It should shamelessly flirt with Russia and China, playing with the idea of
giving an island to Russia as its Mediterranean military base, just to scare the shit out of Nato strategists.
To paraphrase Dostoyevsky, now that the EU God has failed, everything is permitted." And while he does
mention Golden Dawn and other euro- right wing parties he isn't especially critical of them. Not all
that familiar with Zizek's overarching philosophy but one wonders if he shouldn't be careful what he
wishes for in terms of allies in the struggle against neoliberalism. Anyway, other than that lots to
chew on here. . "...However, statements like those from IMF demonstrate that the true problem lies elsewhere:
does EU really believe in their own bailout plan?Does it really believe that the brutally
imposed measures will set in motion economic growth and thus enable the payment of debts? Or is it that
the ultimate motivation for the brutal extortionist pressure on Greece is not purely economic (since
it is obviously irrational in economic terms) but politico-ideological – or, as
Paul Krugman put it in the
New York Times, "substantive surrender isn't enough for Germany, which wants regime change and total
humiliation - and there's a substantial faction that just wants to push Greece out, and would more or
less welcome a failed state as a caution for the rest." One should always bear in mind what a horror
Syriza is for the European establishment – a Conservative Polish member of the European parliament even
directly appealed to the Greek army to make a coup d'etat in order to save the country." . "...At a deeper level, however, one cannot avoid a suspicion that the true goal is not to give
Greece a chance but to change it into an economically colonised semi-state kept in permanent poverty
and dependency, as a warning to others. But at an even deeper level, there is again a failure – not
of Greece, but of Europe itself, of the emancipatory core of European legacy." . "...Sounds familiar? Yes, to anyone who knows how Chinese power functions today, after Deng Xiaoping
set in action a unique dual system: the state apparatus and legal system are redoubled by the Party
institutions which are literally illegal - or, as He Weifang, a law professor from Beijing, put it succinctly:
"As an organisation, the Party sits outside, and above the law. It should have a legal identity, in
other words, a person to sue, but it is not even registered as an organization. The Party exists outside
the legal system altogether." (Richard McGregor,
The Party, London: Allen Lane
2010, p. 22) It is as if, in McGregor's words, the state-founding violence remain present, embodied
in an organisation with an unclear legal status:" . "...And it is crucial to note how the obverse of this non-transparency of power is false humanitarianism:
after the Greek defeat, there is, of course, time for humanitarian concerns. Jean-Claude Juncker immediately
stated in an interview that he was so glad about the bailout deal because it would immediately ease
the suffering of the Greek people which worried him very much. Classic scenario: after a political crack-down,
humanitarian concern and help… even postponing debt payments." . "...In the guise of Syriza "contradictions", the EU establishment is merely getting back its
own message in its true form. And this is what Syriza should be doing now. With a ruthless pragmatism
and cold calculation, it should exploit the tiniest cracks in the opponent's armour. It should use all
those who resist the predominant EU politics, from British conservatives to Ukip in the UK. It should
shamelessly flirt with Russia and China, playing with the idea of giving an island to Russia as its
Mediterranean military base, just to scare the shit out of Nato strategists. To paraphrase Dostoyevsky,
now that the EU God has failed, everything is permitted." . "...The ultimate problem is a much more basic one. The recurrent story of the contemporary Left
is that of a leader or party elected with universal enthusiasm, promising a "new world" (Mandela, Lula)
– but, then, sooner or later, usually after a couple of years, they stumble upon the key dilemma: does
one dare to touch the capitalist mechanisms, or does one decide to "play the game"? If one disturbs
the mechanisms, one is very swiftly "punished" by market perturbations, economic chaos and the rest."
Greece is not being asked to swallow many bitter pills in exchange for a realistic plan
of economic revival, they are asked to suffer so that others in the European Union can go on dreaming
their dream undisturbed.
The Italian philosopher Giorgio Agamben said in an interview that "thought is the courage of hopelessness"
- an insight which is especially pertinent for our historical moment when even the most pessimist
diagnostics as a rule finishes with an uplifting hint at some version of the proverbial light at
the end of the tunnel. The true courage is not to imagine an alternative, but to accept the consequences
of the fact that there is no clearly discernible alternative: the dream of an alternative is a sign
of theoretical cowardice, it functions as a fetish which prevents us thinking to the end the deadlock
of our predicament. In short, the true courage is to admit that the light at the end of the tunnel
is most likely the headlight of another train approaching us from the opposite direction. There is
no better example of the need for such courage than Greece today.
The double U-turn that took the
Greek crisis in July 2015 cannot but appear as a step not just from tragedy to comedy but, as
Stathis
Kouvelakis noted in Jacobin magazine, from tragedy full of comic reversals directly
into a theatre of the absurd – is there any other way to characterize the extraordinary reversal
of one extreme into its opposite that would bedazzle even the most speculative Hegelian philosopher?
Tired of the endless negotiations with the EU executives in which one humiliation followed another,
Syriza called for a referendum on Sunday July 5 asking the Greek people if they support or reject
the EU proposal of new austerity measures. Although the government itself clearly stated that it
supported No, the result was a surprise: the overwhelming majority of more than 61 per cent voted
No to European blackmail. Rumors began to circulate that the result – victory for the government
– was a bad surprise for Alexis Tsipras himself who secretly hope that the government would lose,
so that a defeat will allow him to save face in surrendering to the EU demands ("we have to respect
the voters' voice"). However, literally the morning after, Tsipras announced that Greece was ready
to resume the negotiations, and days later Greece negotiated a EU proposal which is basically the
same as what the voters rejected (in some details even harsher) – in short, he acted as if the government
has lost, not won, the referendum. As
Kouvelakis wrote:
"How is it possible for a devastating 'no' to memorandum austerity policies to be interpreted
as a green light for a new memorandum? … The sense of the absurd is not just a product of this
unexpected reversal. It stems above all from the fact that all of this is unfolding before our
eyes as if nothing has happened, as if the referendum were something like a collective hallucination
that suddenly ends, leaving us to continue freely what we were doing before. But because we have
not all become lotus-eaters, let us at least give a brief résumé of what has taken place over
the past few days. … From Monday morning, before the victory cries in the country's public squares
had even fully died away, the theater of the absurd began. …
The public, still in the joyful haze of Sunday, watches as the representative of the 62
percent subordinated to the 38 percent in the immediate aftermath of a resounding victory for
democracy and popular sovereignty. … But the referendum happened. It wasn't a hallucination from
which everyone has now recovered. On the contrary, the hallucination is the attempt to downgrade
it to a temporary 'letting off of steam,' prior to resuming the downhill course towards a third
memorandum."
And things went on in this direction. On the night of July 10, the Greek Parliament gave Alexis
Tsipras the authority to negotiate a new bailout by 250 votes to 32, but 17 government MPs didn't
back the plan, which means he got more support from the opposition parties than from his own. Days
later, the Syriza Political Secretariat dominated by the left wing of the party concluded that EU's
latest proposals are "absurd" and "exceed the limits of Greek society's endurance" – Leftist extremism?
But IMF itself (in this case a voice of minimally rational capitalism) made exactly the same point:
an IMF study published a day earlier showed that Greece needs far more debt relief than European
governments have been willing to contemplate so far - European countries would have to give Greece
a 30-year grace period on servicing all its European debt, including new loans, and a dramatic maturity
extension…
No wonder that Tsipras himself publicly stated his doubt about the bailout plan: "We don't believe
in the measures that were imposed upon us," he said during a TV interview, making it clear that he
supports it out of pure despair, to avoid a total economic and financial collapse. The eurocrats
use such confessions with breathtaking perfidity: now that the Greek government accepted their the
tough conditions, they doubt the sincerity and seriousness of their commitment. How can Tsipras really
fight for a program he doesn't believe in? How can the Greek government be really committed to the
agreement when it opposes the referendum result?
However, statements like those from IMF demonstrate that the true problem lies elsewhere:
does EU really believe in their own bailout plan?Does it really believe that the brutally
imposed measures will set in motion economic growth and thus enable the payment of debts? Or is it
that the ultimate motivation for the brutal extortionist pressure on Greece is not purely economic
(since it is obviously irrational in economic terms) but politico-ideological – or, as
Paul Krugman put it in
the New York Times, "substantive surrender isn't enough for Germany, which wants regime
change and total humiliation - and there's a substantial faction that just wants to push Greece out,
and would more or less welcome a failed state as a caution for the rest." One should always bear
in mind what a horror Syriza is for the European establishment – a Conservative Polish member of
the European parliament even directly appealed to the Greek army to make a coup d'etat in
order to save the country.
Why this horror? Greeks are now asked to pay the high price, but not for a realist perspective
of growth. The price they are asked to pay is for the continuation of the "extend and pretend" fantasy.
They are asked to ascend to their actual suffering in order to sustain another's (eurocrats') dream.
Gilles Deleuze said decades ago: Si vous etez pris dans le reve de l'autre, vous etez foutus.
("if you are caught into another's dream, you are fucked"), and this is the situation in which Greece
finds itself now. Greeks are not asked to swallow many bitter pills for a realistic plan of economic
revival, they are asked to suffer so that others can go on dreaming their dream undisturbed.
The one who now needs awakening is not Greece but Europe. Everyone who is not caught in this
dream knows what awaits us if the bailout plan is enacted: another 90 or so billions will be thrown
into the Greek basket, raising the Greek debt to 400 or so billion euros (and most of them will quickly
return back to Western Europe - the true bailout is the bailout of German and French banks, not of
Greece), and we can expect the same crisis to explode in a couple of years.
But is such an outcome really a failure? At an immediate level, if one compares the plan with
its actual outcome, obviously yes. At a deeper level, however, one cannot avoid a suspicion that
the true goal is not to give Greece a chance but to change it into an economically colonised semi-state
kept in permanent poverty and dependency, as a warning to others. But at an even deeper level, there
is again a failure – not of Greece, but of Europe itself, of the emancipatory core of European legacy.
The No of the referendum was undoubtedly a great ethico-political act: against a well-coordinated
enemy propaganda spreading fears and lies, with no clear prospect of what lies ahead, against all
pragmatic and "realist" odds, the Greek people heroically rejected the brutal pressure of the EU.
The Greek No was an authentic gesture of freedom and autonomy, but the big question is, of course,
what happens the day after, when we have to return from the ecstatic negation to the everyday dirty
business – and here, another unity emerged, the unity of the "pragmatic" forces (Syriza and the big
opposition parties) against the Syriza Left and Golden Dawn. But does this mean that the long struggle
of Syriza was in vain, that the No of the referendum was just a sentimental empty gesture destined
to make the capitulation more palpable?
The really catastrophic thing about the Greek crisis is that the moment the choice appeared as
the choice between Grexit and the capitulation to Brussels, the battle was already lost. Both terms
of this choice move within the predominant eurocratic vision (remember that the German anti-Greek
hardliners like Wolfgang Schauble also prefer Grexit!). The Syriza government was not fighting just
for a greater debt relief and for more new money within the same overall coordinates, but for the
awakening of Europe from its dogmatic slumber.
Therein resides the authentic greatness of Syriza: insofar as the icon of the popular unrest in
Greece were the protests on the Syntagma (Constitution) Square, Syriza engaged in a Herculean labor
of enacting the shift from syntagm to paradigm, in the long and patient work of translating the energy
of rebellion into concrete measures that would change everyday life of the people. We have to be
very precise here: the No of the Greek referendum was not a No to "austerity" in the sense of necessary
sacrifices and hard work, but a No to the the EU dream of just going on with the business as usual.
The country's former finance minister, Yanis Varoufakis, repeatedly made this point clear: no
more borrowing but an overall rehaul needed to give the Greek economy a chance to rebound. The first
step in this direction should be an increase in the democratic transparency of our power mechanisms.
Our democratically elected state apparatuses are thus more and more redoubled by a thick network
of "agreements" and non-elected "expert" bodies which yield the real economic (and military) power.
Here is Varoufakis's report on an extraordinary moment in his dealings with EU negotiator Jeroen
Dijsselbloem:
"There was a moment when the President of the Eurogroup decided to move against us and
effectively shut us out, and made it known that Greece was essentially on its way out of the Eurozone.
/…/ There is a convention that communiqués must be unanimous, and the President can't just convene
a meeting of the Eurozone and exclude a member state. And he said, 'Oh I'm sure I can do that.'
So I asked for a legal opinion. It created a bit of a kerfuffle.
For about 5-10 minutes the meeting stopped, clerks, officials were talking to one another,
on their phone, and eventually some official, some legal expert addressed me, and said the following
words: 'Well, the Eurogroup does not exist in law, there is no treaty which has convened this
group.' So what we have is a non-existent group that has the greatest power to determine the lives
of Europeans. It's not answerable to anyone, given it doesn't exist in law; no minutes are kept;
and it's confidential. So no citizen ever knows what is said within… These are decisions of almost
life and death, and no member has to answer to anybody."
Sounds familiar? Yes, to anyone who knows how Chinese power functions today, after Deng Xiaoping
set in action a unique dual system: the state apparatus and legal system are redoubled by the Party
institutions which are literally illegal - or, as He Weifang, a law professor from Beijing, put it
succinctly: "As an organisation, the Party sits outside, and above the law. It should have a legal
identity, in other words, a person to sue, but it is not even registered as an organization. The
Party exists outside the legal system altogether." (Richard McGregor,
The Party, London:
Allen Lane 2010, p. 22) It is as if, in McGregor's words, the state-founding violence remain
present, embodied in an organisation with an unclear legal status:
"It would seem difficult to hide an organization as large as the Chinese Communist Party,
but it cultivates its backstage role with care. The big party departments controlling personnel
and the media keep a purposely low public profile. The party committees (known as 'leading small
groups') which guide and dictate policy to ministries, which in turn have the job of executing
them, work out of sight. The make-up of all these committees, and in many cases even their existence,
is rarely referred to in the state-controlled media, let alone any discussion of how they arrive
at decisions."
No wonder that exactly the same thing happened to Varoufakis as to a Chinese dissident who, some
years ago, formally brought to court and charged the Chinese Communist Party for being guilty of
the Tienanmien massacre. After a couple of months, he got a reply from the ministry of justice: they
cannot pursue his charge since there is no organization called "Chinese Communist Party" officially
registered in China.
And it is crucial to note how the obverse of this non-transparency of power is false humanitarianism:
after the Greek defeat, there is, of course, time for humanitarian concerns. Jean-Claude Juncker
immediately stated in an interview that he was so glad about the bailout deal because it would immediately
ease the suffering of the Greek people which worried him very much. Classic scenario: after a political
crack-down, humanitarian concern and help… even postponing debt payments.
What should one do in such a hopeless situation? One should especially resist the temptation of
Grexit as a great heroic act of rejecting further humiliations and stepping outside - into what?
What new positive order are we stepping into? The Grexit option appears as the "real-impossible",
as something that would lead to an immediate social disintegration. Krugman writes: "Tsipras apparently
allowed himself to be convinced, some time ago, that euro exit was completely impossible. It appears
that Syriza didn't even do any contingency planning for a parallel currency (I hope to find out that
this is wrong). This left him in a hopeless bargaining position."
Krugman's point is that Grexit is also an "impossible-real"
which can happen with unpredictable consequences and which, as such, can be risked.
"All the wise heads saying that Grexit is impossible, that it would lead to a complete implosion,
don't know what they are talking about. When I say that, I don't mean that they're necessarily
wrong - I believe they are, but anyone who is confident about anything here is deluding himself.
What I mean instead is that nobody has any experience with what we're looking at."
While in principle this is true, there are nonetheless too many indications that a sudden Grexit
now would lead to utter economic and social catastrophe. Syriza economic strategists are well aware
that such a gesture would cause an immediate further fall of the standard of living for an additional
(minimum) 30 per cent, bringing misery to a new unbearable level, with the threat of popular unrest
and even military dictatorship. The prospect of such heroic acts is thus a temptation to be resisted.
Then there are calls for Syriza to return to its roots: Syriza should not become just another
governing parliamentary party, the true change can only come from grassroots, from the people themselves,
from their self-organization, not from the state apparatuses… another case of empty posturing, since
it avoids the crucial problem which is how to deal with the international pressure concerning debt,
or, more generally, how to exert power and run a state. Grassroots self-organization cannot replace
the state, and the question is how to reorganize the state apparatus to make it function differently.
It's nonetheless not enough to say that Syriza put a heroic fight, testing what is possible -
the fight goes on, it has just began. Instead of dwelling on the "contradictions" of Syriza policy
(after a triumphant No one accepts the very program that was rejected by the people), and of getting
caught in mutual recriminations about who is guilty (did the Syriza majority commit an opportunistic
"treason", or was the Left irresponsible in its preference for Grexit), one should rather focus on
what the enemy is doing: the "contradictions" of Syriza are a mirror image of the "contradictions"
of the EU establishment gradually undermining the very foundations of united Europe.
In the guise of Syriza "contradictions", the EU establishment is merely getting back its own
message in its true form. And this is what Syriza should be doing now. With a ruthless pragmatism
and cold calculation, it should exploit the tiniest cracks in the opponent's armour. It should use
all those who resist the predominant EU politics, from British conservatives to Ukip in the UK. It
should shamelessly flirt with Russia and China, playing with the idea of giving an island to Russia
as its Mediterranean military base, just to scare the shit out of Nato strategists. To paraphrase
Dostoyevsky, now that the EU God has failed, everything is permitted.
When one hears the complaints that the EU administration brutally ignores the plight of the Greek
people in their blind obsession with humiliating and disciplining the Greeks, that even Southern-European
countries like Italy or Spain didn't show any solidarity with Greece, our reaction should be: but
is there any surprise in all this? What did the critics expect? That the EU administration will magically
understand the Syriza argumentation and act in compliance with it? The EU administration is simply
doing what it was always doing. Then there is the reproach that Greece is looking for help in Russia
and China – as if Europe itself is not pushing Greece in that direction with its humiliating pressure.
Then there is the claim that phenomena like Syriza demonstrate how the traditional Left/Right
dichotomy is outlived. Syriza in Greece is called extreme Left, and Marine le Pen in France extreme
Right, but these two parties have effectively a lot in common: they both fight for state sovereignty,
against multinational corporations. It is therefore quite logical that in Greece itself, Syriza is
in coalition with a small Rightist pro-sovereignty party. On April 22, 2015, Francois Hollande said
on TV that Marine le Pen today sounds like George Marchais (a French Communist leader) in 1970s –
the same patriotic advocacy of the plight of ordinary French people exploited by international capital
– no wonder Marine le Pen supports Syriza . . . a weird claim which doesn't say a lot more than the
old Liberal wisdom than Fascism is also a kind of Socialism. The moment we bring into the picture
the topic of immigrant workers, this whole parallel falls apart.
The ultimate problem is a much more basic one. The recurrent story of the contemporary Left
is that of a leader or party elected with universal enthusiasm, promising a "new world" (Mandela,
Lula) – but, then, sooner or later, usually after a couple of years, they stumble upon the key dilemma:
does one dare to touch the capitalist mechanisms, or does one decide to "play the game"? If one disturbs
the mechanisms, one is very swiftly "punished" by market perturbations, economic chaos and the rest.
The heroism of Syriza was that, after winning the democratic political battle, they risked a step
further into disturbing the smooth run of the Capital. The lesson of the Greek crisis is that Capital,
though ultimately a symbolic fiction, is our Real. That is to say, today's protests and revolts are
sustained by the combination (overlapping) of different levels, and this combination accounts for
their strength: they fight for ("normal" parliamentary) democracy against authoritarian regimes;
against racism and sexism, especially the hatred directed at immigrants and refugees; for welfare-state
against neoliberalism; against corruption in politics and economy (companies polluting environment,
etc.); for new forms of democracy that reach beyond multi-party rituals (participation, etc.); and,
finally, questioning the global capitalist system as such and trying to keep alive the idea of a
non-capitalist society. Both traps are to be avoided here: the false radicalism ("what really matters
is the abolition of liberal-parliamentary capitalism, all other fights are secondary"), as well as
the false gradualism ("now we fight against military dictatorship and for simple democracy, forget
your Socialist dreams, this comes later – maybe…").
When we have to deal with a specific struggle, the key question is: how will our engagement in
it or disengagement from it affect other struggles? The general rule is that, when a revolt begins
against an oppressive half-democratic regime, as was the case in the Middle East in 2011, it is easy
to mobilize large crowds with slogans which one cannot but characterise as crowd pleasers – for democracy,
against corruption, etc. But then we gradually approach more difficult choices: when our revolt succeeds
in its direct goal, we come to realize that what really bothered us (our un-freedom, humiliation,
social corruption, lack of prospect of a decent life) goes on in a new guise. In Egypt, protesters
succeeded in getting rid of the oppressive Mubarak regime, but corruption remained, and the prospect
of a decent life moved even further away. After the overthrow of an authoritarian regime, the last
vestiges of patriarchal care for the poor can fall away, so that the newly gained freedom is de facto
reduced to the freedom to choose the preferred form of one's misery – the majority not only remains
poor, but, to add insult to injury, it is being told that, since they are now free, poverty is their
own responsibility. In such a predicament, we have to admit that there was flaw in our goal itself,
that this goal was not specific enough - say, that standard political democracy can also serve as
the very form of un-freedom: political freedom can easily provide the legal frame for economic slavery,
with the underprivileged "freely" selling themselves into servitude. We are thus brought to demand
more than just political democracy – democratization also of social and economic life. In short,
we have to admit that what we first took as the failure to fully realize a noble principle (of democratic
freedom) is a failure inherent to this principle itself – to learn this move from the distortion
of a notion, its incomplete realization, to the distortion immanent to this notion is the big step
of political pedagogy.
The ruling ideology mobilises here its entire arsenal to prevent us from reaching this radical
conclusion. They start to tell us that democratic freedom brings its own responsibility, that it
comes at a price, that we are not yet mature if we expect too much from democracy. In this way, they
blame us for our failure: in a free society, so we are told, we are all capitalist investing in our
lives, deciding to put more into our education than into having fun if we want to succeed, etc. At
a more directly political level, the US foreign policy elaborated a detailed strategy of how to exert
damage control by way of re-channeling a popular uprising into acceptable parliamentary-capitalist
constraints – as was done successfully in South Africa after the fall of apartheid regime, in Philippines
after the fall of Marcos, in Indonesia after the fall of Suharto, etc. At this precise conjuncture,
radical emancipatory politics faces its greatest challenge: how to push things further after the
first enthusiastic stage is over, how to make the next step without succumbing to the catastrophe
of the "totalitarian" temptation – in short, how to move further from Mandela without becoming Mugabe.
The courage of hopelessness is crucial at this point.
"...Well, they found out how hard it is when you have no leverage to put up a strong fight.
" . "...The whole premise that the EU would crumble if Greece left the EU was pushed by Yanis
V....and he was 2 years to late to the party... the markets had priced in the Grexit over the last 3
years and it showed in the lack of volatility during the leadup to the Vote."
Curious3, here is the direct quote from the July 12th Proposal (downloaded from BBC)
"to develop a significantly scaled up privatisation programme with improved governance;
valuable Greek assets will be transferred to an independent fund that will monetize the assets
through privatisations and other means. The monetization of the assets will be one source to
make the scheduled repayment of the new loan of ESM and generate over the life of the new loan
a targeted total of EUR 50bn of which EUR 25bn will be used for the repayment of
recapitalization of banks and other assets and 50 % of every remaining euro (i.e. 50% of EUR
25bn) will be used for decreasing the debt to GDP ratio and the remaining 50 % will be used
for investments."
thecatspyjamas2 -> picar52 21 Jul 2015 10:21
As Paul Krugman said yesterday " I find it hard to believe they didn't have a plan B"
...That was the worst thing they did...not just the stupid promises they made..but the fact
they had no leverage AND they did not have the common sense to even try to create some fake
leverage during the negotiations. Syriza must have thought the previous Greeks in charge just
did not put up any fight against the Austerity.
Well, they found out how hard it is when you have no leverage to put up a strong fight.
The whole premise that the EU would crumble if Greece left the EU was pushed by Yanis
V....and he was 2 years to late to the party... the markets had priced in the Grexit over the
last 3 years and it showed in the lack of volatility during the leadup to the Vote.
KateShade -> curious3 21 Jul 2015 09:41
Dear curious, according to July 12 summit proposal 50% of money is to go on recapitalizing
banks, 25% on bringing down debt to GDP ratio and 25% on investment.
So the answer to the question how much of money raised is to go on interest is "none".
Does that clarify things?
picar52 -> TokyoJones 21 Jul 2015 06:55
I appreciate your comments and will reply in as few words as possible. My dismay is not
solely with the present government but with the whole political establishment that has ever
since the beginning of the crisis, in 2009, consistently avoided doing their bit with regard
to each and every agreement they signed with the troika, etc. As a result they all lost
international credibility, as the only game they ever knew how to play was that of populist
rhetoric vis-a-vis the local electorate. In fact George Papandreou, who was in power for three
years (2009-11), did absolutely nothing in terms of reforms. The opposition parties,
conservative New Democracy and left Syriza attacked the PASOK government in every possible
way. Meanwhile, in other southern European countries, the opposition parties took a more
responsible approach and thus measures were introduced that ensured that their crises quickly
ended. In Greece however, things took a different turn. And the end result is there for all to
see.
I shall give you another example of populist misleading rhetoric. Andreas Papandreou, who
first gained power in 1981, got elected on slogans such as
EEC and NATO, the same syndicate! (EOK kai NATO to idio syndikato!)
or
Out with the (US military) bases of death! (Exo oi vaseis tou thanatou!)
Papandreou had promised (in 1981) to hold a referendum for Greeks to decide to on membership
of the EEC. When elected, he never held it. He promised to close down the US military bases.
He never did - instead the US stopped operating them because they no longer served their
purpose.
So please understand, Greek politicians are a special breed. Their cynical streak as regards
the implementation of measures required to gain power is probably unmatched in any other
European democracy.
Europeans who have not experienced this at close hand cannot appreciate the level of lying and
hypocrisy we have had to put up with.
bally38 -> areianos 21 Jul 2015 06:43
1. Please Stop shouting.
2. Credit Default Swaps were triggered.
Here's the story in Reuters (march 2012)
3. "WHY ARE YOU PEOPLE SUCH MEDIA MUPPETS" As they say, when you point the finger, three
fingers are pointing back at you.
areianos Grishnakh 21 Jul 2015 06:21
This is the last of it, after 2015 debt is highly manageable.
http://graphics.wsj.com/greece-debt-timeline/
Varoufakis is an intelligent and honourable man and fought for the people very well
Tsipras had to make the most difficult executive decision of his life.
By January 2016 the Greek crisis will be over.
I don't blame Germany for protecting its own unregulated and gambling interests I just find it
somewhat unique that Americans have more concern about the Greeks in Greece than Germans.
Which sounds better, to "die for your government", or "give your life for your country"? The
first could be interpreted, after a mountain of bodies pile up, as a mistake. As something
that would seem to require scrutiny, admissions of having been wrong, of blame to be placed.
Dying for a government, or more precisely, dying for a select group of political figures at a certain
moment in time for very specific reasons, doesn't hide behind a fluttering flag quite as well as
"dying for country". Which is why we never hear it. War, in the mind of the Middle America
that still thinks on it, is shrouded in a sepia-toned composite of images and sounds, stories of
soldiers, duty to country, service, songs, movies, and myth that give politicians far more leverage
than they would otherwise have, when executing another war. No, "service to country" is the
emotional and moral narcotic we administer to ourselves, almost automatically, at the inception of
a new war. War is all wrapped up in our American Mythos so tight that it seems astonishing
that we haven't descended utterly into a pure American-style fascism. Maybe a few more 9/11-style
attacks and the transformation would be complete. 9/11 was an unparalleled opportunity for
the explosion of government growth, and as much as "war is the health of the State", so are foreign
attacks on the home State, attacks that can be perfectly molded so as to stoke the maximum amount
of nationalist rage from the citizens. Those attacks were a godsend for a government that had
been starved of an actual threat for far too long. And they took full advantage of the opportunity.
Fourteen years later, the Warfare State is petering out from the evaporating fumes of 9/11, and their
looking for a new fix.
But what of those who lied the country into igniting a regional dumpster fire after 9/11?
Once the war hysteria evaporates, where are What would it really take to hold any one politician
for a military disaster halfway around the world? It is blindingly obvious that there will
never be a reckoning for those who hustled us into the Iraq war. What about Libya? Syria?
How bad does it have to get for there to be something resembling accountability? War atrocities
seem to have become less of a chance for justice and lessons learned than as a new precedent that
the progenitors of the next war can point to when their war goes bad. And creators of war did
learn a few things from Iraq and Afghanistan. They learned that flag-draped coffins do focus
the attention of the citizenry. And drone strikes don't, really.
That hazy collage of feel-good nationalism is trotted out every election year, and every candidate
engages in it to one degree or another. Peace is a hard sell next to the belligerent effusions
of a Donald Trump. His crazed rantings against immigrants, his bizarre fantasies as to how
he would handle world leaders via telephone call, as well as his boorishness in general, has thousands
flocking to hear him speak. But what they're cheering is an avatar of a blood-soaked ideology,
one that cloaks itself in the native symbols and culture, breeding hate and intolerance, until the
bilious nationalism reaches just the right temperature and then boils over into lawless fascism.
As Jeffrey Tucker
points out,
Trump is nothing new. The graveyard of twentieth century tyrannies is a testament to just how
much death and destruction can be induced by a charismatic parasite bellowing the tenets of a flag-wrapped
tyranny. Most of what we hear coming from leaders today is fascism to a greater or lesser extent.
If what we mean by fascism to be a Religion of the State, a militant nationalism taken to its logical
conclusion, then every leader engages in it, because it ignites something primitive and sinister
in the minds of voters.
We understand war theoretically, and distantly, but what of those who are forced to carry out
the fever dreams of politicians? Blindly thanking veterans for their service, we feel a sense
of duty discharged, and never think to look more deeply into their traumas, or the scheme they were
tricked into executing. Military recruiters, the unscrupulous peddlers of military slavery,
are treated as a benign influence on young people today. Their pushy, overindulgent attitude
toward our 18-year olds should piss us off more than it does, since what they are conning the young
into is becoming the expendable plaything for the whims of the current Administration.
War is the pith of total government. The source of all its power, war and the threat of
war provide the excuse for every injustice, every outrage, every restriction of liberty or further
bilking of the citizen-hosts. As the Warfare State trots out the familiar sermons of threats
from abroad, potential greatness at home, and wars to be fought, one would do well to reflect that
war enriches the State at the expense of the rest of us. It consumes our lives, our liberty,
our wallets, and the future of our children and grandchildren. The current crop of candidates
who peddle military greatness are the enemy of peace and prosperity, and when they so openly declaim
their lust for war, we should frankly believe what they say. And after hearing them, we should
recognize the would-be tyrant in our midst, hawking hyper-militarism under the guise of national
greatness, and treat them like the vermin they clearly are.
Shane Smith lives in Norman, Oklahoma and writes for
Red Dirt Report.
"...Germany is a loanshark with a gang of Northern countries and they just kneecapped Greece
to get the word out in the neighborhood, aka Eurozone. This isn't about moral hazard, it's Germany saying
to the periphery if you don't submit we will pound you into the ground." . "...Since Prof. Varoufakis is an expert in Game Theory, I'm surprised that he didn't realize that
BEFORE he started negotiations. If the Eurozone hardliners gave in to Greece, they would have
to give the same deal to everyone who asked for it.
I wonder if he's going to use this experience in his classes." . "..."Ireland, Spain and Portugal endured the pain associated with their bailouts and emerged economically
stronger." Lies. Europe is sinking into economic weakness because of Germany's insane ideas about economics." . "...The euro is essentially the successor to the Deutsche mark, whatever other Europeans might
think of it. Germany's currency had far more global weight than those of the other members before
the monetary union was created, and Germany's exit would destroy the euro immediately." . "...I do not hate Germans, my family are of German descent and I have German friends. What I hate are
destructive neoliberal policies like those imposed by the German government. Let us be clear, from all
reports the people who refuse to negotiate here are the Germans. The French, Italians, and others have
shown some flexibility, but the Germans have not, and as the dominant economy in the ECU, they pretty
much get their way." . "...Germany and the UK have been fighting for decades (really since Bismark) over who should politically
run Europe. That is why the so called UK "exit" from the EU is a real joke. More like hurt feelings
of being the loser. " . "...Let's not waste time with wishful thoughts about the foresight of the German elites. As they so often
say, "We Germans reject Keynesian economics." Indeed. They reject not only deficit spending in a
liquidity trap but, more fundamentally, the paradox of thrift, and not just as the paradox applies
to households but also as it applies to sovereign nations. . So the German elites announce, over and over again, their dictum for the rest of Europe. "Imitate
Germany! Be more competitive!" That is to say, always run a large current-account surplus.
" . "...
"We Germans reject Keynesian economics." Should we call this MerkelNomics? Sort of like
Herbert Hoover economics. Or Cameron-Osborne economics. The kind of stupidity that JohnH apparently
hearts. Of course this is also the economics of the modern Republican Party. We are ruled by morons.
" . "...The historic way a weaker economy became more competitive was to have a weaker currency and to
protect its developing industry with various protections against imports. That route is not available
to the periphery nations." . "...Stripped of ambitions for a political and economic union, the bloc changes into a utilitarian project . A few things that many of us took for granted, and that some of us believed in, ended in a single
weekend. By forcing Alexis Tsipras into a humiliating defeat, Greece's creditors have done a lot more
than bring about regime change in Greece or endanger its relations with the eurozone. They have destroyed
the eurozone as we know it and demolished the idea of a monetary union as a step towards a democratic
political union. . In doing so they reverted to the nationalist European power struggles of the 19th and early 20th
century. They demoted the eurozone into a toxic fixed exchange-rate system, with a shared single currency,
run in the interests of Germany, held together by the threat of absolute destitution for those who challenge
the prevailing order. The best thing that can be said of the weekend is the brutal honesty of those
perpetrating this regime change."
Germany is a loanshark with a gang of Northern countries and they just kneecapped Greece
to get the word out in the neighborhood, aka Eurozone. This isn't about moral hazard, it's Germany
saying to the periphery if you don't submit we will pound you into the ground.
What a great democratic experiment. And what a model of solidarity and social cohesion. What
a joke.
Government debt and balance of trade as shares of Gross Domestic Product for France, 2000-2012
(Percent)
[ President Hollande has been shockingly conservative or a staunch conservative wearing socialist
clothes. ]
DrDick -> anne...
It has been pretty obviously the latter from the outset. He is a socialist in name only, much
like the British Labour Party these days.
MacAuley -> Peter K....
Since Prof. Varoufakis is an expert in Game Theory, I'm surprised that he didn't realize that
BEFORE he started negotiations. If the Eurozone hardliners gave in to Greece, they would have
to give the same deal to everyone who asked for it.
I wonder if he's going to use this experience in his classes.
pgl
"be willing to act unilaterally, be willing to default unilaterally, have a plan for achieving
primary surplus if you haven't already achieved it, have a hard default and euro exit (now possible,
thanks to the Germans) option in your back pocket, and be willing to use it at the first sign
of hassle from the ECB."
YES! Only edit to this comes from the fact that Greece already has a large primary surplus.
Exit the Euro Zone and say the heck with the Germans.
Fred C. Dobbs
(Many hold that Germany should have given
in to Greece, not the other way around.
That was not to be. Go figure.)
The Greek Deal Is a Disaster for Greece, and Maybe
for Europe http://nyti.ms/1UUXCHl via @UpshotNYT
NYT - Neil Irwin - July 13
For years, Greece's negotiations with its European creditors have featured moments in which
all parties stare into the abyss, fear what they see, and step back to reach a deal.
On Monday, there was yet another deal. But this time it is one that pushes Greece into the
abyss, even if financial markets don't acknowledge it just yet and even if what happens next is
deeply uncertain.
Greece already has 26 percent unemployment, a tourism industry that is suffering as would-be
visitors stay away, and banks and a stock market that have been closed going on three weeks. Just
a week ago, its voters overwhelmingly rejected a bailout offer that was less punitive than the
one its leaders just accepted.
Yet the deal that Greek leaders and their creditors reached Monday morning after a brutal series
of overnight talks promise to deepen political and economic strains in a country already in depression.
It was a momentous weekend for Europe, and not in a good way. The deal will keep Greece in
the eurozone at least a while longer, at great cost, and with little certainty about the future
of either Greece or Europe in the not too distant future.
In exchange for a cash lifeline, the country has agreed to much greater concessions than those
that were under discussion a few weeks ago. Among them: higher taxes, cuts to government pensions
and a sell-off of $55 billion worth of state assets in order to recapitalize banks and make debt
payments. That last strategy is a little like a family selling off its furniture to make its mortgage
payment; you can do it, but it does not exactly amount to a long-term solution.
A week ago, thousands of Greeks crowded Syntagma Square, in front of the nation's parliament,
celebrating their country's emphatic "No" vote on a proposed financial rescue. Right and left,
old and young, the Greek people were united: They would not accept the further austerity that
Germany and other European countries were demanding as a condition of further bailout money. ...
(The new harsh scheme can only work if Greece corrects
a lot of 'systemic problems', and - unfortunately -
maybe not even then.)
Monday, July 13, 2015 at 12:24 PM
Fred C. Dobbs -> Fred C. Dobbs...
The Eurozone's Damaging Deal for Greece http://nyti.ms/1JeyJgO
NYT - editorial - July 13
In the end, after trying every possible tactic, Prime Minister Alexis Tsipras of Greece threw
in the towel and accepted the toughest demands yet made by creditors to extend life support for
Greece and keep it in the eurozone. That may avert an immediate catastrophe, but there is little
to celebrate since it will do little to address, much less repair, the slow-moving disaster of
the Greek economy.
The Greek Parliament has to approve the main portions of the package by Wednesday just to start
negotiations on a new three-year bailout of up to 86 billion euros ($96 billion). Despite pleas
from the Greeks for debt relief, the creditors gave only vague indications that they might consider
easing terms on Greece's total debt of more than 300 billion euros, which it cannot possibly repay.
Mr. Tsipras certainly didn't help his cause with the European leaders by calling for a confusing
last-minute referendum, in which Greek voters rejected an earlier bailout deal. And now his capitulation
has enraged members of his left-wing Syriza party, raising the possibility of another national
election, with the attendant unknowns, or at least a thorough reshuffling of the government.
The guiding notion behind the creation of the European Union was to resolve problems like this
through consensus and cooperation. Instead, the final 17-hour negotiating session was marked by
acrimony not only between Greece and the European leaders, but also between Germany and France;
between the German finance minister and the head of the European Central Bank; between north and
south, east and west.
So the tragedy is not only that the Greek debt crisis has no end in sight, but that instead
of the one-for-all-and-all-for-one ethic that was supposed to govern Europe, the rancorous talks
showed a roomful of national leaders with sharply differing conceptions of what to do about a
bankrupt fellow member.
The Greek Parliament is likely to accept the deal, if only because there is no choice. Austerity
will remain firmly in place, and the increased taxes and reduced pension payments imposed in the
package will only further erode the demand that the Greek economy needs to avoid a deepening depression.
The deal also requires that a fund be created to sell off public assets worth 50 billion euros
to repay debts and recapitalize banks, a condition hard for a socialist government to swallow,
and continued monitoring of Greece's adherence to bailout terms by the International Monetary
Fund. ...
Monday, July 13, 2015 at 05:16 PM
Eric
there is only one problem with this plan, there is no popular support for it.
Some of you probably think that if the economy in some countries continues to stagnate, this attitude
will change. But popular support for the euro in those countries is not about macro-economics,
but because they don't trust their own politicians to handle their own currencies properly.
I think there is a higher chance that the Northern countries exit the eurozone than the troubled
countries, even when it would be wise from a macro economic perspective.
David -> Eric...
Actually there are lot of problems with it as others have posted.
Odd note. when did the Finns become jerks? I have known a few who were super cool. I get there's
a politics thing but I expected this out of Germany, not the Finns.
Peter K. -> Eric...
"but because they don't trust their own politicians to handle their own currencies properly."
You have no evidence of this and just are making things up out of thin air.
pgl -> Peter K....
Eric does not even know the difference between the overall surplus/deficit versus the primary
surplus. Dumb? Dishonest? Either way - he is a troll.
am -> pgl...
I thought also that the ps had disappeared since the start of the year.
But the mystery in all of the crisis has been the wish to retain the euro by the Greek people.
It may be some sense of belonging to the euro group that they desire. But it is more like knowing
the history of the drachma. His point that Peter copied in is not all unreasonable.
They don't
want the drachma because monetary and fiscal policy may revert to drachma like figures of the
past, including devaluation.
I posted up a link before on the recent history of the drachma. From
ww2 to the collapse of the Bretton Wood institutions it was good: called the golden period. From
1972 or thereabouts until the attempt at convergence to join the euro it was very poor. During
the convergence period it was good. I think the people can remember the bad period with devaluations.
It was one of the reasons they wanted to join the euro.
Eric
''Want the Euro? Be More Like the Germans''
...
The euro is essentially the successor to the Deutsche mark, whatever other Europeans might
think of it. Germany's currency had far more global weight than those of the other members before
the monetary union was created, and Germany's exit would destroy the euro immediately. By contrast,
the common currency could feasibly survive the exit of any other member, probably even France.
If you want to use an essentially German currency, you have to be a little German. That means
low or nonexistent budget deficits, extreme tax discipline (tax dodging in Germany is not just
a crime -- it causes genuine moral outrage), and a rule-based approach to government and economic
life.
Europeans like the euro, and most of them make an honest attempt at German-ness. Ireland, Spain
and Portugal endured the pain associated with their bailouts and emerged economically stronger.
Their political landscape also became more German: The center left and the center right, increasingly
indistinguishable from one another, alternate in power or even share it, and the extreme right
and extreme left have been marginalized. In Greece, the extreme left won. That was extremely un-German.
The result is politically -- and probably economically -- disastrous for Greece.
The message for other euro countries is that if they want to enjoy the trade, convenience and
interest-rate benefits of the common currency, they cannot afford to elect the far left and far
right. The German-led currency union will fight back and make it painful. If Podemos wins in Spain,
or if the Finns Party triumphs in Finland, they will need to take their countries out of the euro
area to escape Greece's fate.
...
How rule based were the Germans after WW2 when their debt was forgiven and they were gifted
the Marshall plan after they started the worst war in human history, genocide etc. This was the
greatest crime foriveness in human history.
DrDick -> David ...
Also after WW I, when they defaulted on their debts.
Peter K. -> Eric...
Wow what a horrible piece. Not surprising coming from Eric.
"Ireland, Spain and Portugal endured the pain associated with their bailouts and emerged economically
stronger."
Lies. Europe is sinking into economic weakness because of Germany's insane ideas about economics.
Peter K. -> Eric...
"Leonid Bershidsky is a Bloomberg View columnist. He is a Berlin-based writer, author of three
novels and two nonfiction books."
The Germans are reverting to form.
Just saw Brad Pitt's movie Fury. Good movie. Pitt kills a lot of Nazis as the Americans invade
Germany.
Feckless as Syriza? What other choice did they have?
One. Default and exit. But the Greeks don't want to do that, so why have a backup plan? I don't
really go along with these criticisms of Tsipras and Syriza. Nobody could have done better. Being
"nice" to the Germans wouldn't have mattered at all. The Greeks were nice for 5 years and just gave
them a broken economy.
The Greeks recognized it wasn't working and elected Syriza to get a better deal. They couldn't.
They held a referendum and the Greeks voted No to the austerity deal. But they don't want to leave
the Eurozone so they have to accept the bailout terms. They're in a no win situaion.
I agree with Krugman and Dean Baker that default and getting your own monetary policy is the way
to go, but the Greeks don't want to leave Europe.
John Cummings -> Eric...
I suspect there is a bunch of pro-anglo sentiment in secret. Basically progressives and Margie Thatcher
are crying together at the diminished anglo role....
pgl -> Eric...
We don't hate Germans. We hate horrific economic policies. We also don't like trolls - like you.
Eric -> Eric...
actually it was Germany that proposed a possible better way out for Greece this weekend: a time out
from the euro zone for at least five years, debt restructuring, humanitarian aid and growth enhancing
measures:
This German plan was ridiculed and dismissed by other eurozone countries, in particular France. I
wonder why.
John Cummings -> Eric...
That was only by "select" Germans and only if Greece didn't capitulate. It may still happen if Greece
doesn't follow their edict.
DrDick -> Eric...
I do not hate Germans, my family are of German descent and I have German friends. What I hate are
destructive neoliberal policies like those imposed by the German government. Let us be clear, from all
reports the people who refuse to negotiate here are the Germans. The French, Italians, and others have
shown some flexibility, but the Germans have not, and as the dominant economy in the ECU, they pretty
much get their way.
Peter K. -> Eric...
My family is of German descent. My father's father had German parents, one of whom came over on a
boat. My grandfather fought the Japanese in World War II while some of his cousins were drafted by the
Nazis late in the war and sent to the Eastern Front never to be heard from again.
Your lack of concern over the well-being of the Greeks is shameful. You're a stupid troll.
John Cummings
Germany and the UK have been fighting for decades (really since Bismark) over who should politically
run Europe. That is why the so called UK "exit" from the EU is a real joke. More like hurt feelings
of being the loser.
btg -> John Cummings...
The Brits kept out of Europe and have never seen themselves as being fully part of Europe - the
EU was always a French/German thing.
Britain/England is an island and as such it never needed a large standing army and instead became
a maritime power with an empire larger than its European neighbors.
Britian sees the defeat of Germany as a highpoint but even then it was largely overtaken by the
US since then as the US forced it to dismember the empire.
Did Monetary Policy Really Offset Fiscal Austerity in Canada?
by David Beckworth
The blogosphere is once again talking about Canada's successful fiscal austerity in the mid-to-late
1990s. Paul Krugman rekindled the conversation with this statement:
"[L]ook at everyone's favorite example of successful austerity, Canada in the 1990s. Canada came
in with gross debt of roughly 100 percent of GDP, roughly comparable to Greece on the eve of the
financial crisis. It then proceeded to do a pretty big fiscal adjustment -- 6 percent of GDP according
to the IMF's measure of the structural balance, which is about a third of what Greece has done but
comparable to other European debtors. But unemployment fell steadily. What was Canada's secret?"
Ramesh Ponnuru and I have argued numerous times that Canada's secret was a monetary policy offset.
That is, monetary policy eased to offset the drag of fiscal tightening. Paul Krugman agrees in the
above post. The evidence that we and others have pointed to in support of this view is the Bank of
Canada cutting its target interest rate more than 500 basis points between 1995 and 1997.
Some of our conservative and libertarian friends, however, are not convinced by this evidence.
David Henderson and Robert Murphy, in particular, have pushed back against this view. They contend
there was no monetary offset. Henderson questions how much influence the Bank of Canada actually
has over interests rates. Murphy goes further and provides a list of data points that he claims show
the Canadian success story did not rely on loose money. So are Henderson and Murphy's skepticism
of the monetary offset warranted?
The answer is no.....
....
Note that nominal GDP follows its trend path rather closely during the period of fiscal austerity.
The Bank of Canada, in other words, did what was necessary to keep aggregate demand on a stable growth
path during this time. Given the evidence shown above, the Bank of Canada offset the fiscal tightening
via lower interest rates and a permanently higher monetary base path. This story is completely missed
by Murphy's cursory look at nominal GDP growth rates over a few years. So yes, monetary policy did
offset fiscal austerity in Canada in the mid-to-late 1990s.
The policy implications from this experience are clear. Economies undertaking fiscal austerity
are best served by expansionary monetary policy. It provides a viable path to obtaining a more sustainable
debt level. The ECB, however, tightened monetary policy twice during the Eurozone crisis. Given the
one-size-fits-all approach problems, this tightening proved excessive for the periphery countries
and helped spawn the soveriegn debt crisis. Just imagine how different the Eurozone would be today
had the ECB began its QE program back in 2008.
------------------
Obviously JohnH and other critics of monetary policy and QE don't agree. The banks had enough
liquidity and QE wouldn't help. How wrong they are. They're just like conservatives.
Debt expanded due to the corporate debt bubble(that financed Y2K overhaul) of the 1990's which
gave the illusions that "austerity" worked. "Monetary" Policy became looser as would expect during
that time of disinflation (which was the point). Glibers don't want to give the BoC any credit, but
that is their way. In the end the BoC didn't really offset anything. The debt market is the debt
market.
pgl -> John Cummings...
What a bunch of irrelevant babble. Read what Krugman wrote and learn. Duh!
John Cummings -> pgl...
Krugman ignored the debt expansion of corporate balance sheets in the mid-late 90's. That was
the key driver. Overrating central banks is a classic sign of neo-classical/new keynesian garble.
A debt expansion is a debt expansion. It will drive growth. Always have. Since the 1600's.
pgl -> John Cummings...
Are you talking about US corporate balance sheets in 1995. How the F is this relevant to the current
Greek crisis? Krugman has noted Greece's debt before the crisis. So pardon my French but what the
FUCK are you babbling about now?
Bert Schlitz -> John Cummings...
"Some of our conservative and libertarian friends, however, are not convinced by this evidence.
David Henderson and Robert Murphy, in particular, have pushed back against this view. They contend
there was no monetary offset. Henderson questions how much influence the Bank of Canada actually
has over interests rates. Murphy goes further and provides a list of data points that he claims show
the Canadian success story did not rely on loose money. So are Henderson and Murphy's skepticism
of the monetary offset warranted?"
1.Libertarian/Austrian types don't believe in the nation state. Any function, even if run privately
by a monopoly is considered bad when connected to the nation state. Their ideal is more of a Wealth/Propertarian
run global syndicate that handles wealth tranfers via what true conservatives would call a degenerated
imperial state of capitalists/merchants. Very non-democratic.
2.They believe capitalism can survive without debt expansion. This silly notion is what separates
them from neo-liberals who quite understandably, know this is not true. Debt is what makes capitalism
go. Without it, it is not sustainable. That is why the economic contraction from a libertarian regime
would eventually drive them from power and enable conservatives and socialists to unite, much like
it did in the late 19th century during what was the closest to the last libertarian period.
pgl -> Peter K....
"Some of our conservative and libertarian friends, however, are not convinced by this evidence."
These conservatives and libertarians may be his friends but they know nothing about economics.
Just check out the devaluation of the C$ and you'll see what Krugman was talking about.
It's really amazing to see how quickly the notion that contractionary fiscal policy is actually
expansionary is spreading. As I noted yesterday, * the Panglossian view has now become official doctrine
at the European Central Bank.
So what does this view rest on? Partly on vague ideas about credibility and confidence; but largely
on the supposed lessons of experience, of countries that saw economic expansion after major austerity
programs.
Yet if you look at these cases, every one turns out to involve key elements that make it useless
as a precedent for our current situation.
Here's a list of fiscal turnarounds, ** which are supposed to serve as role models. What can we
say about them?
Canada 1994-1998: Fiscal contraction took place as a strong recovery was already underway, as
exports were booming, and as the Bank of Canada was cutting interest rates. As Stephen Gordon explains,
*** all of this means that the experience offers few lessons for policy when the whole world is depressed
and interest rates are already as low as they can go.
Denmark 1982-86: Yes, private spending rose - mainly thanks to a 10-percentage-point drop in long-term
interest rates, hard to manage when rates in major economies are currently 2-3 percent.
Finland 1992-2000: Yes, you can have sharp fiscal contraction with an expanding economy if you
also see a swing toward current account surplus of more than 12 percent of GDP. So if everyone in
the world can move into massive trade surplus, we'll all be fine.
Ireland, 1987-89: Been there, done that. **** Let's all devalue! Also, an interest rate story
something like Denmark's.
Sweden, 1992-2000: Again, a large swing toward trade surplus.
So every one of these stories says that you can have fiscal contraction without depressing the
economy IF the depressing effects are offset by huge moves into trade surplus and/or sharp declines
in interest rates. Since the world as a whole can't move into surplus, and since major economies
already have very low interest rates, none of this is relevant to our current situation.
Yet these cases are being cited as reasons not to worry as austerity becomes the rule.
Policy Lessons From the Eurodebacle
By Paul Krugman
[Graph]
It's now clear, or should be clear, that the Greek program was doomed to failure without major
debt relief; no matter how hard the Greeks tried, austerity would shrink GDP faster than it reduced
debt relative to the baseline, so that the debt situation was bound to worsen even as the attempt
to balance the budget imposed vast suffering.
And there was no good, or even non-terrible, answer given Greece's membership in the euro.
But there's a broader lesson from Greece that is relevant to all of us - and it's not the usual
one about mending our free-spending ways lest we become Greece, Greece I tell you. What we learn,
instead, is that fiscal austerity plus hard money is a deeply toxic mix. The fiscal austerity depresses
the economy, and pushes it toward deflation; if it's accompanied by hard money (in Greece's case
the euro, but a fixed exchange rate, a gold standard, or any kind of obsessive fear of inflation
would do the trick), the result is not just a depression and deflation, but quite likely a failure
even to reduce the debt ratio.
For comparison, look at everyone's favorite example of successful austerity, Canada in the 1990s.
Canada came in with gross debt of roughly 100 percent of GDP, roughly comparable to Greece on the
eve of the financial crisis. It then proceeded to do a pretty big fiscal adjustment - 6 percent of
GDP according to the International Monetary Fund's measure of the structural balance, which is about
a third of what Greece has done but comparable to other European debtors. But unemployment fell steadily.
What was Canada's secret?
The answer was, easy money and a large currency depreciation. * These offset the drag from austerity,
allowing growth to continue.
So, how does this play into U.S. policy debates? Well, Republicans love to warn that America might
turn into Greece any day now. ** But look at the policy mix that is now de facto GOP orthodoxy: sharp
cuts in government spending (maybe offset by tax cuts for the rich, but these won't provide much
stimulus), combined with a monetary policy obsessed with fears of dollar "debasement". That is, the
conservative side of the US political spectrum, while holding up Greece as a cautionary tale, is
actually demanding that we emulate the policy mix that turned Greek debt into a complete disaster.
The value of the Canadian dollar fell by 27% against the American dollar through the 1990s. The interest
rate on 10-year Canadian government bonds fell 33% during the 1990s.
pgl -> anne...
Yep - very big drop in interest rates and large devaluation of the C$. So fiscal austerity was offset
by more investment demand and higher net exports.
The poster should have noted that no other government is in the Greece position. The Podemos leader,
likely to be the next Spanish PM, said there was a big difference between Greece and Spain and in
debt numbers that is very true.
Central government debt as a share of Gross Domestic Product for Ireland, Portugal, Spain, Italy
and Greece, 2007-2012
[ Central government debt as a share of GDP was above 120% for Ireland, Portugal, Italy and Greece
by 2012. Spain alone had a reasonably low debt ratio at 65%. ]
Spain maintained a relatively and reasonably low debt ratio in the wake of the recession at the expense
of a searing loss of employment, with the employment-population ratio for men and women 25-54 falling
from 77.2 to 65.6 between 2007 and 2013:
By contrast, when the Spanish employment-population ratio for men and women 25-54 was 65.6 in
2013, the German employment-population ratio was 83.5 for a shocking difference:
Let's not waste time with wishful thoughts about the foresight of the German elites. As they so often
say, "We Germans reject Keynesian economics." Indeed. They reject not only deficit spending in a
liquidity trap but, more fundamentally, the paradox of thrift, and not just as the paradox applies
to households but also as it applies to sovereign nations.
So the German elites announce, over and over again, their dictum for the rest of Europe. "Imitate
Germany! Be more competitive!" That is to say, always run a large current-account surplus.
Of course, this dictum would first impoverish laggard European nations, including the UK, then
Latin American nations, then Russia and the USA.
Therefore, a German-dominated Europe would in the future find itself surrounded by mortal enemies,
which would have no choice but to destroy it again.
Should we call this MerkelNomics? Sort of like Herbert Hoover economics. Or Cameron-Osborne economics.
The kind of stupidity that JohnH apparently hearts. Of course this is also the economics of the modern
Republican Party. We are ruled by morons.
Eric -> Jan...
Hoe does becoming more competitive impoverish your country?
RGC -> Eric...
The historic way a weaker economy became more competitive was to have a weaker currency and to
protect its developing industry with various protections against imports. That route is not available
to the periphery nations.
The Germans would be wise to recognize that it is in their long-term interest to help those nations
become more competitive and thereby create a balanced, stable trading zone where everyone can succeed.
The best way to do that is via some sort of development fund that is targeted at the most urgent
projects wherever they may be. To do that the Germans are going to have to be magnanimous ala the
Marshall Plan, although it is also in their self-interest. The current situation may also require
some purely cash transfers to bridge a ramp-up period.
The Germans need to think like true Europeans, ditch the "lazy Greeks" talk and think of the periphery
nations somewhat like East Germany. Either that or forget about united Europe and go back to the
dangers of nationalism.
Eric -> RGC ...
Thanks. But don't you think the Germans want convergence, that is help the weaker nations become
more competitive? They do understand that there is no future for the eurozone without convergence.
There are and have been loads of subsidies in the EU. If you travel through poorer parts of Europe,
you see the EU signs that projects have been paid with EU money. Infrastructure is pretty good in
countries like Spain, Portugal and Greece, partly thanks to EU funds, now the same is happening to
Eastern Europe. But this has not made a country like Greece more competitive.
The Germans don't believe it's (just) about the money, they believe in reforms.
The thing is that reforms have been ridiculed by the likes of Krugman, it's all about fiscal stimulus
in their world, something the Germans are skeptical about.
Eastern Europe is actually a good example, but the problem is they could run this program at home,
but can't in a country like Greece. In the end only the Greek can help themselves.
Eric -> Eric...
I meant East Germany is a good example
RGC -> Eric...
IIRC, some from the West said similar things about their East brothers before reunification.
I've read a lot of Varoufakis' papers and I think he was on the right track. He has been very
critical of Greece's corruption and lack of administrative competence. His economics is socialist/Keynesian.
He proposed a solution similar to my prior post:
Of course there are plutocrats, self-serving politicians, banksters and dummkopfs in all countries.
I think all the larger economies, except maybe China, suffer right now from neo-liberal or just incompetent
governments.
Bert Schlitz -> Eric...
All capitalism is unsustainable eventually. I always viewed the "horrible" East Germany not so
horrible indeed when visiting their and exploring its inner bowels. They had a better work ethic
and weren't so concerned about materialistic obsession.
Having the Russians completely leaving them alone by the 1990's without unification would have
been interesting. There was indeed quite a bit of leftover national socialism embedded over there.
Western Germany on the other hand was binging on debt expansion like all other OCD countries in
the 1980's and its economic situation "appeared" to improve rapidly. Like all capitalist music boxes,
that story has to end. Once debt expansion ends and the state can't hold up the carcass anymore,
the situation in 1980's East Germany would seem like a paradise.
pgl -> Eric...
East Germany is a good example of how NOT to do this. Do you know anything? It appears not.
pgl -> Eric...
It depends on how one does the more competitive part. The right way to do this is to devalue the
currency but Greece can't do this as long as they are this Euro and the Germans don't help. Have
you read ANY part of this discussion? Seriously - you are like the 3 year old who just fell off the
turnip truck.
Peter K. -> Eric...
Wolfgang Munchau:
"We will soon be asking ourselves whether this new eurozone, in which the strong push around the
weak, can be sustainable. "
Eric likes it when the strong push around the weak. He identifies with the bully.
Jan -> Eric...
"Competitive" does mean productive. It means a regular current account surplus.
Germany achieved
a regular surplus not by upgrading labor or capital but by thrift (shifting income from consumption
to production)-- repressing wages/benefits and acquiring a quasi-pegged currency.
A regular surplus benefits the nation which runs it at the expense of other nations. Latin American
economists have been saying in recent years that the German surplus has been "hollowing out" their economies
and at least one prominent German economist has agreed with them.
The EU is a huge economy. If it were to run a surplus as large as Germany now runs, the USA and Russia
would soon become friends again.
am
The Euro group negotiators are reported to be pleased with the package on offer. It would seem
probable that the Greek government or parliament will not approve the deal. This will mean grexit.
The Euro group negotiators are reported to be pleased with the package on offer.
cogitoman
What is wrong to being made to stick to the rules?
RGC -> cogitoman...
Rules are necessary and good. The next question is "do we have the right rules?". IMO the Eurozone
has unworkable rules.
Tsipras faces clash with Syriza radicals opposed to eurozone bailout for Greece
After marathon talks to secure third bailout, Greek prime minister prepares for showdown with MPs
opposed to deal described as harsher than Versailles treaty
By Phillip Inman and Jennifer Rankin - Guardian
Brussels
[ So a Greek legislator would have to be a "radical" to vote against a "deal described as harsher
than Versailles treaty." ]
gordon
I have a suspicion that many Greeks fear that leaving the Eurozone would mean they would no longer
be able to leave Greece to work in Eurozone countries and send remittances home. The bulk of remittances
to Greece appear to come from Germany: http://www.pewsocialtrends.org/2014/02/20/remittance-map/
anne -> gordon...
I have a suspicion that many Greeks fear that leaving the Eurozone would mean they would no longer
be able to leave Greece to work in Eurozone countries and send remittances home....
[ Would there be migration limits if Greece simply remained in the European Union? ]
David
There is a modern meme I hate, the idea that everything has to be a "brand".
But if the Eurozone falls apart it will be the German brand that suffers. No one likes a bully.
Greece's brutal creditors have demolished the eurozone project
by Wolfgang Munchau
Stripped of ambitions for a political and economic union, the bloc changes into a utilitarian project
A few things that many of us took for granted, and that some of us believed in, ended in a single
weekend. By forcing Alexis Tsipras into a humiliating defeat, Greece's creditors have done a lot more
than bring about regime change in Greece or endanger its relations with the eurozone. They have destroyed
the eurozone as we know it and demolished the idea of a monetary union as a step towards a democratic
political union.
In doing so they reverted to the nationalist European power struggles of the 19th and early 20th
century. They demoted the eurozone into a toxic fixed exchange-rate system, with a shared single currency,
run in the interests of Germany, held together by the threat of absolute destitution for those who challenge
the prevailing order. The best thing that can be said of the weekend is the brutal honesty of those
perpetrating this regime change.
[clipped]
nor even the total capitulation of Greece. The material shift is that Germany has formally proposed
an exit mechanism. On Saturday, Wolfgang Schäuble, finance minister, insisted on a time-limited exit
- a "timeout" as he called it.
I have heard quite a few crazy proposals in my time, and this one is right up there. A member state
pushed for the expulsion of another. This was the real coup over the weekend: not only regime change
in Greece, but also regime change in the eurozone.
The fact that a formal Grexit may have been avoided for the moment is immaterial. Grexit will be
back on the table when you have the slightest political accident - and there are still many things that
could go wrong, both in Greece and in other eurozone parliaments. Any other country that in future might
challenge German economic orthodoxy will face similar problems.
This brings us back to a more toxic version of the old exchange-rate mechanism of the 1990s that
left countries trapped in a system run primarily for the benefit of Germany, which led to the exit of
the British pound and the temporary departure of the Italian lira. What was left was a coalition of
countries willing to adjust their economies to Germany's. Britain had to leave because it was not.
What should the Greeks do now? Forget for a moment the economic debate of the past few months, over
issues such as the impact of austerity or economic reforms on growth. Instead ask yourself this simple
question: do you really think that an economic reform programme, for which a government has no political
mandate, which has been explicitly rejected in a referendum, that has been forced through by sheer political
blackmail, can conceivably work?
The implications for the rest of the eurozone are at least as troubling. We will soon be asking ourselves
whether this new eurozone, in which the strong push around the weak, can be sustainable. Previously,
the strongest argument against any forecasts of break-up has been the strong political commitment of
all its members. If you ask Italians why they are in the eurozone, few have ever pointed to the economic
benefits. They wanted to be part of the most ambitious project of European integration undertaken so
far. We will soon be asking ourselves whether this new eurozone, in which the strong push around the weak,
can be sustainable
But if you take away the political aspiration, you may end up with a different judgment. From a pure
economic point of view, we know that the euro has worked well for Germany. It worked moderately well
for The Netherlands and Austria, although it produced quite a degree of financial instability in both.
But for Italy, it has been an unmitigated economic disaster. The country has seen virtually no productivity
growth since the start of the euro in 1999. If you want to blame the lack of structural reforms, then
you have to explain how Italy managed decent growth rates before then. Can we be sure that a majority
of Italians will support the single currency in three years' time?
The euro has not worked out for Finland either. While the country is considered the world champion
of structural reforms, its economy has slumped ever since Nokia lost the plot as the world's erstwhile
premier mobile phone maker. Whether the euro is sustainable for Spain and Portugal is not clear. France
has performed relatively well during the euro's early years, but it, too, is now running persistent
current account deficits. It is not only Greece where the euro is not optimal. Once you strip the eurozone of any ambitions for a political and economic union, it changes into a utilitarian
project in which member states will coldly weigh the benefits and costs, just as Britain is currently
assessing the relative advantages or disadvantages of EU membership. In such a system, someone, somewhere,
will want to leave sometime. And the strong political commitment to save it will no longer be there
Greece was not ready to join the Eurozone in 1999 and it was pretty clear by 2011 that Greece
would be better off outside the Eurozone.
By 2013 it was obvious that the only reason to delay Grexit (and to continue Greek austerity) was
to prepare for the inevitable. The Eurozone is now prepared for Grexit, and it's time. In five years
the Greeks will be grateful.
"...The "Eurosystem", the network of national central banks governed by the European Central
Bank, gives central bankers unprecedented ability to squeeze and manipulate national governments in
a coordinated way. It is as if every government in the Eurozone ALREADY has a colonial entity watching
it like the Troika's agents are supposed to watch Syriza in Athens. And, since the ECB Governing Council
(like other EU institutions) tries to operate by a non-transparent "consensus" (i.e. the votes are not
revealed), the degree to which national central bank heads are representing the ECB in their countries,
rather than the other way around, is often not clear."
.
"...IMO these 'lessons' miss the biggest one for the left: the loss of independent media. What good
is protesting neolib control via banks if no one is listening?
.
Governments easily manipulate corporate controlled media via access journalism. Thus we get factual
truths intermixed with propaganda spin that is relentlessly pro-business, pro-establishment.
.
Greece is a case in point. As described in
Greek Government Insider Lifts the Lid on Five Months of 'Humiliation' and 'Blackmail', the
Troika was gradually increasing pressure on Greece to do what the Troika demanded. They withheld billions
of euro to Greece and cut off liquidity to the Greek government. Then they waited as the financial pressure
on Greece grew. But along with those measures was a caustic media that painted Syriza as incompetent,
then undemocratic (because most greeks wanted to remain in the euro), then irresponsible (for
calling a referendum), etc."
.
"... Following, a link to a German documentary about the various mechanisms of the EU [Troika, Eurogroup,
European Commission, Council, etc] which are being used as devastating tools to beat down and extract
wealth, vampire style, from Greece [and Cyprus], in order to revive comatose banks and line the pockets
of investors, through privatization of public property.
.
This documentary does a good job of demonstrating just how the power of technocratic branches of the
EU is being rolled out to pillage Greek, Portuguese, Cyprus economies, plunging the respective populations
into ever greater misery.
. The Trail of the Troika [1:29:22]
Before the crisis no one even knew that national central banks still existed - I certainly didn't.
But now it's clear that the creditors' unchallenged control of this commanding high ground was
decisive to the outcome in Greece. Next time an elected government challenges the EU authorities,
their first order of business must be getting control or cooperation of their national central
bank.
The quote says "control or cooperation," but I can guarantee the latter is never going to happen.
It is nearly impossible to exaggerate the degree to which the campaign for central bank "independence"
has made them the enemies within for any left governments.
The central bankers waged a 50-60 year political war to wrest back the monetary flexibility that
the break down of Bretton Woods gave to national governments. Having won that war across most of
the developed world in the 70s and 80s, they extended the battlefield to the emerging markets in
'90s and '00s.
The autonomy of central banks (meaning the political allegiance to Wall Street/London City/Frankfurt
etc.) was maybe the biggest neoliberal victory of all. If rightwing political victories (Reagan,
Thatcher et. al.) were the beachheads of the Great Counterattack on social democracy then "independent"
central banks became the citadels of the occupation forces: Neoliberalism's "Republican Guard."
Ironically, the ECB was originally conceived - or at least was sold to the European left - as
a way for governments to regain monetary flexibility at a higher level. As a way to a) escape US
dollar hegemony and to b) outflank the Bundesbank by formalizing the joint political control of European
monetary policy. I do not know if the hack establishment Social Democrats who sold that vision ever
believed it, but if so, more fool them. Because what the European Monetary Union became, obvious
now, was a way to turn the vision on its head: formalize joint MONETARY control of Europe's politics.
The "Eurosystem", the network of national central banks governed by the European Central Bank,
gives central bankers unprecedented ability to squeeze and manipulate national governments in a coordinated
way. It is as if every government in the Eurozone ALREADY has a colonial entity watching it like
the Troika's agents are supposed to watch Syriza in Athens. And, since the ECB Governing Council
(like other EU institutions) tries to operate by a non-transparent "consensus" (i.e. the votes are
not revealed), the degree to which national central bank heads are representing the ECB in their
countries, rather than the other way around, is often not clear.
As long as the cozy comprador system tied peripheral governments to the core (i.e. Berlin), the
role of the ECB and the Eurosystem could be obscured. Peripheral governments appointed "made guys"
(i.e. banksters and/or their technicians) to national central bank boards and pretended to govern.
Core politicians and their local comprador politicians let the Eurosystem technicians in Frankfurt
tell them what "structural reforms" they should push to make the EMU "work."
But the moment an outsider government like Syriza came to power, the role of the Eurosystem and
the national central banks in it could no longer be hidden. The fact that the Greek National Bank
was an instrument of the ECB in Frankfurt, not of the Greek government in Athens, became obvious
to everybody. The ECB's role as the muscle behind the Eurogroup's (Berlin's) diktats put the Greek
National Bank in the position of helping to choke its own banks and terrorize its own citizens. And
under the rules of EMU the Greek government was completely powerless to do anything about it. A defining
moment.
The inescapable conclusion is that the allegedly "independent" Eurosystem now operates not as
a network of central banks but as a parallel government.
The role of the Eurosystem within the half-hidden political order of the eurozone really is comparable
to the Soviet or Chinese Communist Party. Like the Communist Party, the Eurosystem is now the "leading
organ" of the neoliberal order, operating at all levels of the EU structure and providing "guidance"
to elected political structures which are not formally under its legal control, but in reality are
dominated by it. And behind the administrative apparatus of the party (Eurosystem) is the Central
Committee (Eurogroup) and the Politburo (the key creditor government officials). And behind THEM
is the real locus of the party's centralized power: the General Secretary (Germany/Merkel).
So J.W. Mason is quite right: it is impossible for any left government to attack the dictatorship
of finance unless it controls its national central bank. But while control of the national central
bank is necessary, it is hardly sufficient. As long as the EMU exit is off the table, verboten, so
to speak, control of the national central banks only eliminates the "near enemy."
Ultimately it comes down to political will, which in parliamentary democracies, comes down to
public support. As long as the majority (of all voters or of propertied influentials, depending on
the system) is more loyal to the Euro than to national sovereignty an effective challenge to the
dictatorship of finance is impossible - no matter how many national central banks the left controls.
You know this 'independent' central bank as tool of the neolibraconian consensus is the most
salient point drummed home about Russia : the central bank as 5th column.
And the Russian central bank preceded the ECB, didn't it? When the boys from Harvard went to
Russia to 'straighten' things out they conducted an experiment ... and discovered it worked just
great : rinse and repeat. Russia was the archetype of the gelded European nation to come.
So the next time says Russia is not a part of Europe I'll say ... not only of Europe, but the
first European nation subverted by the gnomes of neolibraconia.
The Europeans who still have a pulse ought to note now just who their real enemy is : hint,
the one that's occupying Europe. And who is their fellow European victim. And ban together to
defeat their common enemy ... well run him out of town on a rail, at any rate.
One of the key reasons that Wall St/City/Frankfurt want universal "austerity" is not just that
they want people to be frightened, impoverished and insecure; but in particular, because it has
the desirable effect of suppressing the political participation of people who must continuously
walk the edge, just to get by - and by now this is about half the population -and who might otherwise
participate in the political process with decisive effect.
Rise like lions after slumber
In unfathomable number
Shake your chains to earth like dew
That in sleep have fallen on you
Ye are many, they are few.
H.L. Mencken is also very good on this subject - the need of the self-appointed elite to distract
and render impotent the average person, and how greatly the big shots hate and fear the "mob".
why would a small country like Greece need to be the second biggest spender in nato after the
USA. ...
According to an editorial published by the Greek conservative newspaperKathimerini, after the
removal of the right-wing military junta in 1974, Greek governments wanted to bring disenfranchised
left-leaning portions of the population into the economic mainstream[28] and so ran large deficits
to finance enormous military expenditure, public sector jobs, pensions and other social benefits.
Greece is, as a percentage of GDP, the second-biggest defense spender[29] in NATO, the highest
being the United States, according to NATO statistics.
The US is the major supplier of Greek arms, with the Americans supplying 42 per cent of its
arms, Germany supplying 22.7 per cent, and France 12.5 per cent of Greece's arms purchases.[30]
Everybody and I mean everybody is king fu fighting
those bankers are as fast as lightning
Posted by: ab initio | Jul 16, 2015 10:32:40 AM |
12
It should be obvious with how the ECB structure was formed that any country that uses the euro
as its currency is dependent on the ECB for liquidity if there is deposit flight from the banks
in that country.
There is only two ways for a country to retain full sovereignty. One have a national currency
with a national monetary authority that controls it and second a government that if it runs a
deficit has the ability to borrow in private markets and maintains a currency board (e.g: Ecuador
which uses the US dollar).
Ecuador is a good example where its government debt became untenable. It defaulted on the debt
and so was for all intents shut out from private debt markets, so the government could not run
a deficit. It continued to use the US dollar as its currency.
Greece had to make a choice. Continue in the eurosystem and accept the hegemony of the eurogroup
or exit. It's parliament accepted the former. One can blame Schauble and Merkel all you want but
the bottom line is that the Greek government and parliament acquiesced to its loss of sovereignty.
The Greek people have the power to change it if they want. They just have to decide to exit the
eurosystem and elect a government that does that.
In France, Marine Le Pen is clear. She will take France out of the eurosystem if elected. Of
course we'll have to see if she honors her campaign promise but at least she is categorical about
it. Syriza got elected promising they'll be able to get a better deal compared to the center-right
party before them. In this case the Left in Greece delivered an even worse result for the average
Greek citizen.
IMO these 'lessons' miss the biggest one for the left: the loss of independent media. What
good is protesting neolib control via banks if no one is listening?
Governments easily manipulate corporate controlled media via access journalism. Thus we get
factual truths intermixed with propaganda spin that is relentlessly pro-business, pro-establishment.
Greece is a case in point. As described in
Greek Government Insider Lifts the Lid on Five Months of 'Humiliation' and 'Blackmail',
the Troika was gradually increasing pressure on Greece to do what the Troika demanded. They withheld
billions of euro to Greece and cut off liquidity to the Greek government. Then they waited as
the financial pressure on Greece grew. But along with those measures was a caustic media that
painted Syriza as incompetent, then undemocratic (because most greeks wanted to remain in the
euro), then irresponsible (for calling a referendum), etc.
Too often we give the media a pass when it has been well documented that business and
government tries to control MSM (and increasingly other media as well) via access journalism,
advertising revenue (a few industries dominate) writing stories that cite in-the-tank 'experts'
from establishment-friendly think-tanks and controlled opposition.
Even within Greece, Syriza had trouble getting their message out because oligarchs own virtually
all of the media! And many blogs also fell for the spin - even those that have been critical
of the media in the past like Yves Smith at nakedcapitalism.com - despite the fact that the
delay in Greece putting forth a proposal before the April 30th deadline could be logically attributed
to the 2-step process that the Troika had forced (describing how they would service the debt
would severely undermine Greece's position in future debt restructuring talks).
A Left that is not in touch with the people - and whose message is undermined by establishment-friendly
media - is a disaster far greater than the loss of control of the financial system. The Left's
greatest strength should be its connection with the people that it fights for. Yet, instead
the Left has allowed itself to be marginalized by a corporate media that has strengthened the
centrist 'faux Left' at the expense of the progressive Left. So much so that many people today
identify THE LEFT with the identity politics that forms 'the base' for the fauxLeft. In short,
people of the 'Left' are viewed as selfishly wanting something for themselves at the expense
of others. (It should come as no surprise that reporting about Greece often fell in line with
this line of thinking.)
For activists that are outside the centrist political establishment - anti-war, climate change,
the environment (fracking, nuclear energy, etc.), inequality, constitutional and civil rights,
etc. - it is very difficult to reach a wide audience. All 'change' is channeled into the pro-business,
pro-establishment centrist political system. Anyone who is not a centrist is suspect.
Greece's coherent arguments quickly fell off media radar as sniping about their incompetence
and their oh-so-strange Finance Minister took center stage. This put even more pressure on the
Greeks and deterred potential allies. And the spinning continues. The understanding of most people
still does not go much beyond this: the Greeks don't want to pay their bills and Syriza are incompetent
radicals that made the problems worse and can't be trusted. In the face of this onslaught by the
Troika and Troika-friendly media, Syriza's resistance is all but ignored in favor of trumpeting
Greece's defeat (a warning to others?).
=
Is there any hope? Maybe.
1) Syriza formed a government with nationalists (ANEL). Why the Left is depicted as unpatriotic
is beyond me, but the left may be getting its patriotic mojo back as WAR and trade deals are increasingly
understood as benefiting an international elite. I could see similar political alliances forming
in other countries. (In the US, I think the establishment had feared a potential Tea Party
- Occupy alliance.)
2) Media reform (or the threat of it). The Greek government has begun investigations into media
bias during the referendum (there was very little coverage of government rallies and government
positions, etc.). If the Syriza-led government falls, any media reforms are probably less
likely.
Ron Paul's "audit the Fed" movement got some traction which caused the Fed to take notice.
"Truth in media" efforts should probably be re-doubled.
3) Education. We need to retain humanities education. Higher education is turning into vocational
training. For example, IMO it's difficult to appreciate the myriad issues and import of the neolib
consumer-oriented approach to government vs. the democratic citizen-oriented approach, without
a humanities education.
Also, people don't usually react until it is too late - partly because few have enough learning
to understand the impact that new policies will have. They try to make up for their lack of understanding
by relying on trusted representatives like Obama. TTIP is a case in point. Look for demonstrations
about Obamatrade in a few years when it is too late.
Following, a link to a German documentary about the various mechanisms of the EU [Troika, Eurogroup,
European Commission, Council, etc] which are being used as devastating tools to beat down and
extract wealth, vampire style, from Greece [and Cyprus], in order to revive comatose banks and
line the pockets of investors, through privatization of public property.
This documentary does a good job of demonstrating just how the power of technocratic branches
of the EU is being rolled out to pillage Greek, Portuguese, Cyprus economies, plunging the respective
populations into ever greater misery.
james, If you read the Shock Doctrine by Naomi Kline you can follow the same financial rape
of South American countries in the 70's that the financial mafia are doing now to the middle east.
The world needs to have a discussion about the world of private finance that exists now and
what could be if all finance were sovereign.
The role of the European Central Bank and their buttler, Stournaras, at the Greek Central Bank
in this fiasco needs this kind of discussion, and more, since it lies at the heart of German blackmail
and coup attempt of the Greek government. Thank you b for this post.
@5
One reason that there have been inordinate arms purchase by Greece is that the Greek elite
-- media, oligarchy, politicians (especially the latter) are up to their armpits in corruption,
and one of the vehicles for corruption is arms deals.
The all powerful "socialist" minister of defence under Papandreou and minister of development
under Simitis is now in jail, almost prime minister, now serving 20 years in the hoosgow, for
being bribed by German arms dealers (Siemens, among others). It is widely believed that the previous
governments went after this easy and obvious target to cut off investigations of others, a lot
of others.
The nationalist minister of defence under the Tsipras government, Panos Kammenos is sending
document after document to prosecutors involving a bewildering array of bribery, thievery, fraud,
and so on in the Greek armed forces. Submarines that lean, helicopters that can't fly, because
of onerous service after purchase contracts. The list is huge.
One reason why both German and Greek corruptos hate him so much, and tried to bring down the
Tsipras government. It remains to be seen if he keeps his post, after Tsipras's deal with the
Germans.
The other, of course, is the Turkey threat, also used to justify military procurement.
The discussions with Greece are thus a formal process designed to politically defeat Greece's
left forces, burying any prospects of meaningful political change across the continent. This
is the only explanation for the creditors' inflexibility despite Tsipras crossing all Syriza's
red lines in terms of pensions reforms, tax policy, privatizations, and market liberalization.
This punitive stance was made crystal clear by late June, when the ECB actively incited
a bank run, warning of an "uncontrollable crisis," and abruptly capped its emergency loans
to the banking sector, triggering bank holidays and capital controls.
Also in the site, an informative behind the scenes interview with Left Platform Syriza MP,
Stathis Kouvelakis.
The Troika was willing to 'punch' Syriza's ticket ("Welcome to the Club"!) with minor
concessions. But Tspiras/Varoufakis did not simply accept what the Troika demanded.
As bad as the deal is, Greece managed to get the debt restructuring that the Troika had refused
to talk about. They had even refused to put their promises of a future debt restructuring in writing.
Many are saying that Greece should've prepared for GRexit; critizing Syriza/Tspiras as too
establishment and too europhile to contemplate that path. But they have bought time to prepare
for the next round. And in the next round, it may be that a GERexit is on the table as well.
Euro QE is not a magic elixir; just more extend and pretend. It'll exacerbate core vs. periphery
problems as much as it exacerbates inequality (as it has in the USA). And political and fiscal
integration is hard to do when people feel that they are not treated fairly.
This $50 billion Greek asset theft fund that was willingly handed over by Syriza traitors,
as well as other politicians responsible, Is exactly the collateral needed for a independent Greek
central bank to create, let's say for eg, a fractional reserve base of 10% to create $500 billion.
With that now $500 billion, the Greek government could pay off all the debt, including the
criminally induced ones, and it's based on those $50 billion worth of assets.
And That's only if you agree to the idea of paying off all your criminally in deuced debts.
An independent and sovereignly principled government or parliament would do exactly that.
And there's more fractional reserves using National assets that can be used to grow the economy
and serve the people.
Syriza knows this, but since they are unprincipled, Ideologically weak, cowardly towards their
aggressors and more interested in power than public service, means you're never get that from
these freaks.
Obvious from day one. Judge them on their actions, not on their whingeing on how they've been
mistreated and violated.
How the fuck is it accepted, that private banks can print as much national currencies as they
like, but the owners of the those national currencies - the people and the government - cannot
do with fractional reserves and money printing, like what the private banks do.
jackrabbit@17, I would like to point out that the Greek populace ignored the media when they
voted in the referendum, so I think the importance of such propagandistic power is overblown.
Once you lose faith in that source of information, it's gone; it doesn't come back. Russia under
the Soviets is a case in point, and currently also there is an erosion in US confidence that what
they see and hear is trustworthy. What happened after the referendum confused the public, and
that was a huge mistake.
Back a ways, in support of Tsipras, I wanted him to do as Putin has done and shore up that
public confidence because then you can make decisions in the moment and the support will grow.
Immense popularity is a powerful weapon. Varoufakis was correct in seeing that as an important
pivotal moment, when the people supported the 'no' vote that Tsipras had also supported. The course
he chose confused his supporters. Paramount should have been the dictum that the people could
not bear further austerity and that was that - the austerity they would face at that point would
be the prideful kind that can see a brave future beyond.
Tsipras had embraced the New Deal outlook, but he forgot Roosevelt's famous saying, 'You have
nothing to fear but fear itself.' Varoufakis welcomed, FDR style, the banksters' hatred. It's
too bad Tsipras could not do the same. Long lines of grateful poor people stood by the tracks
as FDR's funeral train passed. Will that happen for Tsipras? There's a Greek saying that one should
count no man happy until after his death. Roosevelt, loved by his people and by history, was a
happy man. I hope there's time for Tsipras to become one as well.
Furthermore, we have about 50% of the world's wealth but only 6.3% of its population. This
disparity is particularly great as between ourselves and the peoples of Asia. In this situation,
we cannot fail to be the object of envy and resentment. Our real task in the coming period
is to devise a pattern of relationships which will permit us to maintain this position of disparity
without positive detriment to our national security. To do so, we will have to dispense with
all sentimentality and day-dreaming; and our attention will have to be concentrated everywhere
on our immediate national objectives. We need not deceive ourselves that we can afford today
the luxury of altruism and world-benefaction.
For these reasons, we must observe great restraint in our attitude toward the Far Eastern
areas. The peoples of Asia and of the Pacific area are going to go ahead, whatever we do, with
the development of their political forms and mutual interrelationships in their own way. This
process cannot be a liberal or peaceful one. The greatest of the Asiatic peoples-the Chinese
and the Indians-have not yet even made a beginning at the solution of the basic demographic
problem involved in the relationship between their food supply and their birth rate. Until
they find some solution to this problem, further hunger, distress, and violence are inevitable.
All of the Asiatic peoples are faced with the necessity for evolving new forms of life to conform
to the impact of modern technology. This process of adaptation will also be long and violent.
It is not only possible, but probable, that in the course of this process many peoples will
fall, for varying periods, under the influence of Moscow, whose ideology has a greater lure
for such peoples, and probably greater reality, than anything we could oppose to it. All this,
too, is probably unavoidable; and we could not hope to combat it without the diversion of a
far greater portion of our national effort than our people would ever willingly concede to
such a purpose.
As Chancellor Merkel and other German leaders would frequently remind the rest of Europe and
the world, with 7% of the world population, 25% of global GDP and 50% of world social spending,
Europe's economic system was unsustainable and uncompetitive in a globalized economy. Germany's
vision for Europe was aimed at introducing "rules to force Europe's economies to become more
competitive." But competitiveness was defined by Germany, and thus, "the rest of Europe needs
to become more like Germany."
I nearly choked when I read Timothy Geithner quoted at the beginning of dana's link ... but it
makes perfect sense. None of this is about 'economics' - that chimerical, dismal 'science' - all
of it is about politics, and power politics, and imperial politics.
The Germans - like everyone else - can see the US has had its run and is headed for its fall.
But they also know that Germany by itself is not of a size to pick up where the US leaves off,
when the US leaves off. So Germany needs to take over Europe.
I think I've heard this before.
Between 2008 and 2013, the Greek government cut 40% of its budget, healthcare costs soared,
tens of thousands of doctors, nurses and other healthcare workers were fired, drug costs rose,
as did drug use with HIV infections doubling and a malaria outbreak was reported for the first
time since the 1970s, while suicide rates increased by 60%. ... Unemployment has grown to 26%
(and over 50% for youth), wages dropped by 33%, pensions were cut by 45%, and 40% of retired
Greeks now live below the poverty line.
Cleanliness is next to Godliness. The Germans are cleaning up Greece, and Europe.
The IMF's latest move - fake debt reduction for Greece, the kind of stuff that flows out of
Geither's pie-hole in dana's link above - seems to be overt recognition of this fact, bringing
it into play.
So they new dynamic will be the US on one side and Russia on the other, containing Germany's
New Europe?
Makes sense, really. (None of this makes any sense ... only to the zero-summers playing games
with our world). China surely has its eyes on all that Lebensraum in eastern Russia. The US and
Russia can team up to defeat the NAZIs who have 'stolen' the Ukrainian revolution (to contain
both Europe and China). (And then the US can double-cross Russia when the time is ripe).
Hey, looks like it's 'working' with our new, soon to be 'best friends' in Iran.
Arghhhh. Makes me want to stop reading the news, stop watching the movie. Or do something to
help change it.
... just substitute the US for NATO. Germany has certainly knocked the scales from some eyes.
I can't imagine Russia will be drawn in.
Greed and geopolitics do make strange bedfellows though. Nations don't have friends they have
interests. And it's hard to see any of these 'nation' that have identified its citizens' interests
with its own. Of the big ones ... maybe Russia under Putin? All he has is the support of the Russian
people.
Syriza has shown, I suppose, that gaining access to power isn't enough. The party has to be
involved with its members and those they hope to make members. Helping people get access to food,
medicine, security, and anything else the state is refusing to help with. The left cannot just
win elections, it must be threatening to those in power. It must be prepared to take control of
those things the people demand they control (and it must be willing to relax when the people demand
this). People must look to the organization in Latin America, that is all I can say. There, under
the harshest repression, democracy is thriving.
The story of Greece I suppose is a lesson for the rest of the left parties though, who of them
has a chance outside of Podemos - and what of Podemos anyway. They don't seem particularly able
sadly.
The world- but especially the west - in the last 30 years, has changed so fundamentally that
democracy is nowhere to be found. Nor democratic forms of social organization are even gone for
the most part. And now they are turning the screws on whatever remains. Even the middle classes
live under turn-key totalitarianism, as it was said by someone, (as opposed to before, where it
was just the lower classes) and everyone knows this. And it is proved more and more with each
passing event it seems. The people are thoroughly boxed in and controlled, but unlike juliania
I think the media has so much to do with it. The massive media conglomeration is a keystone of
the changes over the last 30 years, as well as the emergence of the internet - brought to a great
many people by those media conglomerates.
The oligarchs of the west are determined to return to their royal status and complete political
power they had before WW1. This is really a hopeless feeling attached to this, their seemingly
complete victory over democracy. And I imagine that is much of the point...
Stefania Vitali, James B. Glattfelder, and Stefano Battiston
Abstract
The structure of the control network of transnational corporations affects global market competition
and financial stability. So far, only small national samples were studied and there was no appropriate
methodology to assess control globally. We present the first investigation of the architecture
of the international ownership network, along with the computation of the control held by each
global player. We find that transnational corporations form a giant bow-tie structure and that
a large portion of control flows to a small tightly-knit core of financial institutions.
This core can be seen as an economic "super-entity" that raises new important issues both for
researchers and policy makers.
Yes, Tsipras seems to have been ambivalent. The referendum was a bold move that actually worked
in his favor but then turned cautious. Maybe he worried that if he threatened GRexit Schauble
and the Troika would call his bluff?
In an earlier thread, I likened Tsipras to Chamberlain, who had the best intentions but is
remembered as an appeaser. This may seem like a dramatic comparison but Michael Hudson has made
the point that economics is now war by other means.
Chamberlain satisfied the public's overwhelming desire for peace just as Tspiras satisfied
his public's desire to stay in the Euro. Each one had misgivings about the deal that they signed.
Chamberlain began to rearm - especially building up British air power. Tsipras may also prepare
for a future confrontation with the Troika.
The role of the Eurosystem within the half-hidden political order of the eurozone really
is comparable to the Soviet or Chinese Communist Party.
No, it's not. Billmon doesn't understand the structure. He's not seeing it clearly, and is not
getting to the root of the problem.
The individual EU countries that use the Euro cannot create their own currency. They GAVE UP
their sovereign currency for a foreign one, the euro, when they agreed to make themselves subservient
to the Maastricht Treaty.
The Maastricht Treaty did/does not allow for a 'federal government of Europe'. It ONLY concerned
itself with a monetary union, and it set down strict rules for entry (for instance, a nation's
deficits could be no more than 3%--an insanity). It allowed for the creation of a central bank,
the European Central Bank (ECB), whose operating rules were dictated by the Maastricht Treaty
(and subsequent revisions).
But crucial to understand is this: a central bank CAN ONLY SET MONETARY POLICY. You need a
'federal government' to SET FISCAL POLICY. The EU doesn't have that. Sure, it has the EU parliament,
and it has a bunch of unelected officials running the ECB. But it has no overlord, no elected
oversight, that can rule in conditions like Greece is going through to ease sectoral pain, and
stop the bleeding of ordinary citizens. That requires fiscal policy. The only way that fiscal
policy can be changed in the EU is by a change to the treaties. Or the blessing of Angela Merkel,
because Germany has captured the ECB.
Let me try to put this in perspective. The US has a federal government AND a central bank.
Despite what all the Federal Reserve haters and the 'get rid of the IRS' people claim (inaccurately),
the US central bank is a creature of Congress and must answer, by law, to the federal government
twice a year. It is the US Treasury's banker, and must, again by law, return all profits each
year to the US Treasury.
The US federal government creates fiscal policy. This is the direction for the country that
the central must follow and support trhough monetary polices. Fiscal policy is Congress' job although
they haven't done it properly for 30 years. For example, if one of the 50 states is in trouble-let's
be hyperbolic: devastating earthquake, massive drought, asteroid hits--Congress can authorize
("appropriate") funds--creating them 'out of thin air'-to help the state. With no debt
to children or grandchildren.
Why? Because the US federal government issues the currency, the 50 states only use them. The
50 states cannot create their own currency, just like the countries that use the euro. But the
50 states have the protection of the US federal government.
The formerly sovereign countries in the EU that use the Euro are like the 50 US states now.
They cannot create their own currency, which would give them the policy space to pay their
own citizens and denominate all the debts incurred in their own currency. They are dependent on
the ECB, a goddam central bank that has no fiscal authority, to help them. EVEN THOUGH, in Europe,
the ECB issues the Euro 'out of thin air'. The ECB is a collection of central banks. And right
now Germany's central bank is dominant because it has climbed to the top-Germany was deeply in
debt before the euro took over-on the backs of the other nations.
You will not begin to understand what is going on until you realize that the euro was designed
by the famous French economist, François Perroux, in 1942 in anticipation of Hitler winning WWII,
which was expected then. The plan was that they (the Nazi Pétain government wanted to be aligned
with the German hegemon) would introduce a pan-Eurpoean currency and force adoption by the southern
and eastern European countries to control and impoverish them. Mitterand, aligned with the Nazi/fascist
Cagoulard in the late 1930 and 40s, was a Pétain enthusiast; this only came out in 1990. It was
Mitterand who pushed through the euro, if you will check history. Perroux's monetary replacement
was the blueprint for the Maastricht Treaty and the subsequent treaties.
How the fuck is it accepted, that private banks can print as much national currencies as they
like, but the owners of the those national currencies - the people and the government - cannot
do with fractional reserves and money printing, like what the private banks do.
1. Private banks cannot "print as much national currencies as they like."
2. Fractional reserve banking does not exist. It died 80 years ago in most modern economies.
I think only Hong Kong and Bulgaria (I think) use it now. The US doesn't' use it. Neither does
any single country in the EU or Europe. Fractional reserve banking can only exist in countries
that have a gold standard.
3. The only entity that prints the euro is the ECB, although the national central banks do
it for the ECB under contract. BUT. BUT. BUT. These national central banks do it by keystroke.
They don't control the physical printing presses. Besides, physical currency is such a small part
of the currency.
4.
but the owners of the those national currencies - the people and the government
any country using the euro is not using a "national" currency. They are using a foreign currency.
@19/20 psychohistorian.. i like where you are coming from, but people are slow to change and
always looking for leadership.. many think that because someone is rich or has a type of power
that comes with money, that they will be good enough to lead.. that is a mixed bag to me personally..
there are just as many losers with money as not..
@28 Laguerre.. thanks.. you've given a specific example to my more generalized observations
already posted.. indeed - visa and mastercard are a part of the same ponzi scheme run by the same
kleptomaniacs under the guise of whatever they want to pass themselves off as.. playing with the
bank of international settlements is only a step away..
@35 guest77 quote.. "The world- but especially the west - in the last 30 years, has changed
so fundamentally that democracy is nowhere to be found." i think that is very true..
@39 mrw.. good post, but you are not addressing the issue directly either.. making a comparison
to what was a country like greece to one of the states in the usa, cheapens the idea of what a
country is.. the euro has done this too.. doesn't mean we have to go along with it, but in terms
of drawing a parallel, it isn't a bad one to make. and of course the big difference here is now
that greece has given up it's control of monetary policy, as have all the other countries gobbled
up in this insane idea of an european community - greece is an opportunity for everyone within
the stupid structure to see it for what it is - a complete rip off of any shred of democracy that
might have remained...
mrw - we've had these conversations before.. you appear to think the fed reserve is some sort
of good two shoes neutral structure that follows a mandate and is not beholden to malevolent interests..
i see it as just the opposite.. the euro was another way to diversify the ponzi scheme by duping
a lot of ignorant people into something they would have been better knowing more about.. i would
be curious to hear a response from you that provides an answer as to the solution here.. mine
would be greece to say fuck you to the euro currency and go back on it's own...
@jackrabbit.....you said that us "lower class" folk rely on the "upper class" folk to keep
the world running
In the 66 years of my life I have seen untold potential waiting/begging for opportunity
and I think your neck might break watching the momentary vacuum be filled getting rid of the
top 50K social parasites and their attendant sociopaths. It is a myth that us poor 99% can't
make it without the 1%. It is a myth that has been around for centuries and never has been
true. The 1% are and have been an impediment to that advancement of humanity for quite some
time. In most major ways we stopped evolving during the Enlightenment period when faith didn't
become deprecated but instead became one of the tenets of the Western form of social organization,
others being private property/finance, inheritance and "rule of law".
If all that were to change by neutering inheritance and ongoing ownership of private property
(yeah, neuter public policy influence of religions too)
With Capital being returned to the global Commons, public education regains its priority and
is a right for all but at the higher levels; and private education disappears. With those of
faith no longer being in control of public policy, population control can be discussed, managed
and alternatives like birth control researched/provided. We have answers for many of our pressing
social problems, but we do not have the will to break out of the anthropological mold we are
in.
Would the 99% agree to develop and use a technology that burdened the next thousand generations
of humans to manange the potentially extinction causing effluent (i.e. Fukushima)? We live
according to a very sick, no longer defensible and currently committing war crimes against
humanity form of social organization, who's administrators we used to prosecute at the Hague
70 years ago. American empire is now the tool of the global plutocrats and the odds of the
99% wresting control away and changing the course of our species and world look slim.......but
creating textual white noise on the intertubes is cathartic.
Regarding events of past 6 months between Greece and the EU
(and Greek membership of the euro).
Following the recent Greek capitulation,it is clear to almost everyone now that the fuse has
been lit beneath the euro.(and possibly even the entire European project.
Eurosceptism is starting to break out (and its only just starting) throughout the entire
EU.
We can now all see politicians such as Marine Le Pen getting elected in next French Presidential
Election on a purely "leave the euro now" ticket.
PS the entire Europe project was always predicated on a "lets destroy individual National
Sovereignty" premise (a sort of EUSSR).
I never did understand why when Communism officially died around 1990
that it seemed to make an almost simultaneous and miraculous rebirth, but then Europe is the
land of Dracula
and various other 19th century horror stories.
Syriza has shown, I suppose, that gaining access to power isn't enough. The party
has to be involved with its members and those they hope to make members. guest77 at
35.
I agree, also pretty much with the rest of the post. What happened is that there was a power
vacuum in Greece (when PASOK threw in the towel and the old structure crumbled) and the only
ones willing to enter the breach were Syriza. One might also say that in Greece the political
power structure does not match the real power structures in a good or efficient way. This democratic
hoopla is all peachy cool when it is Swiss burghers discussin' and votin' on the color of the
trams, or property tax, while being faithful to their 'radical' or 'socialist' -whatever- roots.
In Greece, in its present form, it does not work. See for ex. the fantastical abyss between
the OXI vote and the acceptance by the elected representatives of even harsher austerity.
Ideally, in a hypothetical genuine, true? democratic system, after the OXI vote a
unitary or even technocatic Gvmt should have been formed (ironically, Tsipras did just that
in a way ..) behind the OXI vote, to collectively resist and bargain (doubt any positive result
would have been forthcoming but who knows), but naturally that was not possible.
One argument is that the 'Left' must be 'more in touch', 'must reform', must be 'more grass
roots' etc. (Sounds a bit like what they say about the EU, heh? And in Greece that argument
is made, plenty) - true, but imho it won't be enough. No way.
So some other avenues have to be explored, sought, implemented.. One imperative (under
the present cirucumstances) is national sovereignity, see in Greece, New Democracy being say
'for austerity', 'for the euro' and so on because they are tied up in comprador not to say
Mafia circles linked to the EU, big capital, banks, instituted corrupt structures, tax evasions,
etc.
Anyway this debacle has shown that parliamentary democracy is not to be afforded to small
powerless countries that have been taken for a ride. I think ppl are seeing that now, that
facade is cracking.
Overall the EU is in deep sh*t. It won't survive for very long in its present shape.
This article fails to note the 'eurosclerosis' that plagued Europe in the 70's and 80's.
Uncompetitive economies with large social obligations and clientist political systems that
still exist in some areas.
The 'evil genious' moniker doesn't really fit. I doubt he is the only economist that would've
offered such a solution. And he is certainly not the only guy that found European labor laws
of the time to be a costly headace. I think he just got there first. And his demeanor is grandfatherly
not menacing.
And he is not unmindful of how his work can be misused. When I took his advanced economics
class in the early 90's I argued against the excesses of supply-side economics while others
in the class seemed to be eager to show their support of what they assumed Mundell believed
in. I got an A-.
=
There are problems with the Euro - the disparate economies, the lack of political and fiscal
union, the uneven benefits, etc. - but blaming it on the academics seems like scape-goating,
and nearly as bad as blaming it on the victims. Should we blame Marx for the fall of the Soviet
Union?
How do you reconcile the contradiction between your points 1 and 2.
If Private banks "cannot" print as much money as they like ( point 1 ), then how can fractional
reserve banking Not exist in most of the world ? ( point 2 ) . If fractional reserves do not
exist then they free to print as much as they like.
Of course whem I say they can "print as much as they like" , that is not a children's imagination
interpretation where the private banks are free to print infinitelt, that's of course the private
banks have been unlinked from previously acceptable amount of printing/keyboard strokes, to
create money.
And your 3rd doesn't make any sense at all. How does a gold standard have any restrictions
on having a 10% fractional reserve, 1000%, or 1,000,000% of gold holdings ? Gold doesn't make
decisions, regulations and enforcement are the decision-makers. Whether it's gold or fiat.
And your point 4 is right. It is my argument to why no country should join a single currency
like the euro, and nations should always have their own sovreign national currencies
Sorry to be late on here. The Chamberlain comparison is an interesting one, and Tsipras'
tragic flaw may be his devotion to the Eurozone - I think it is his, not really any perceived
mandate, because surely he knows a good leader makes choices as events change - to go back
to my example, that's what FDR did, and very risky choices they were. Some of FDR's didn't
work, so he did other things. He was making it up as he went along, and I think that's very
similar to what would be needed in exiting the eurozone. You would have to bring the people
along with you, with the confidence and trust that something needed to happen, charting a new
course. Tsipras doesn't seem to have been willing to do that, and consequently he runs the
risk of being just one more in the line of leaders who have caved under pressure.
I think it has a lot to do with lack of faith in the people themselves on the part of such
leadership. Obama showed this when he didn't take public financing but already was turning
to the banksters. He didn't need to do that, and he probably would have even had a bigger vote
tally if he'd stayed with the people. I wonder why this new leadership seems so divorced from
sympathy with those who elect them and whom they presumably serve? I don't think Tsipras is
as two-faced as Obama, but he's starting to wear the same shoes. The tragedy is the Greek people
so much need him to step up - the way a tennis player steps up if he's really a champion. I
think there's still time but it's getting late. If he keeps on with this deal, history will
take note. That's a huge price to pay.
Tsipras ... he messed up. If 'his' deal goes through Greece suffers the full catastrophe.
The thing to do is to prevent that happening. Tsipras is a lame duck. It makes little difference
why he messed up ... character flaw, bribery, incompetence, all the usual failings of the political
class.
The point is he has set Greece up for more lethal loans and so his 'program' must be repudiated.
The only way I can imagine that happening is via the direct participation of the Greek people
in their government. If there is a majority NO! on the new' program, good. Make a counter offer
... when (if, I suppose, to be inclusive) it's rejected, exit the euro - there's life at the
end of the tunnel. If not ... well, they're done for, aren't they?
Debt-slaves of the German-dominated EU : deprived of their remaining assets and their own
government.
Why this capitulation? Why have we come to this after all the enthusiasm of six months ago?
After the surge of grassroots support in this country and in Europe? The answer is clear
to me. And it has to do with the wrong strategy, that was good enough to win elections,
but proved disastrous in government. What is this wrong strategy? It's very simple, expressed
openly time and time again. We will achieve radical change in Greece, radical change in
Europe, and we will do it within the Eurozone. That was the strategy. Well, that's not possible,
period.
As far as I'm concerned, the Greek left has found its leader. Lapavitsas says it all, clearly
and brilliantly: Grexit and nationalize the banks.
You can't advance if you do not understand that Syriza has failed, if you keep making excuses
for their failure, or try to pretend it was anything but failure. Greece must leave the euro.
This has been obvious for several years, but unreasoning, 'no matter what' Eurozone love, especially
prevalent within Syriza and generally among the middle-class European left and pseudo-left
(Podemos, I'm looking at you!), MUST be abandoned. The euro doesn't love you; it's time to
stop loving it back.
The MAIN task for the European left, if it wants to be left rather than neoliberal, is to
abandon the euro. It's easy: listen and be persuaded by Lapavitsas.
More from Lapavitsas:
Finally, the deal is quite clearly neocolonial. The government of the left has signed up Greece
to a neocolonial agreement.
And it is--it is neocolonial for many reasons. I will mention three. First, the deal proposes
the establishment of a privatization fund of 50 billion Euros which will basically sell public
property under foreign management. 25 billion of that, the first 25 billion, will go to the
banks by the agreement. If there's anything left, and there won't be anything left because
they'll never make 50 billion, it might go to repaying the debt and possibly to investment.
Essentially, then, this fund will sell what it can of public property to recapitalize the banks.
We've just agreed the deal that sells the family silver to recapitalize the failed Greek banks.
~~~
The real winner of this deal is obvious. It's staring you in the face. The real winner is the
Greek oligarchy expressed in the mass media. That's why the mass media are thriving and celebrating
[a win].
~~~
Because the monetary union in which, to which Greece belongs, is not ideological. I mean, it
is, but it isn't just ideology. And it isn't just a balance of forces. It is an institutional
mechanism. The sooner the Greeks understand this, the better for all of us. It is an institutional
mechanism, it is a monetary union that's, it's a hierarchical body that works in the interests
of big business and in the interests of a few countries within it. That's what the EMU is.
~~~
Now, what do we do, then? What we need to do is to withdraw our consent to this agreement.
To withdraw our consent to this agreement. And to redesign a radical program that is consistent
with our values, our aims, and what we've told to the Greek people all this time, all these
years. And that radical program is impossible without Euro exit. The only thing that we really
need to do is focus on developing a plan for Euro exit that will allow us to implement our
program. It is so obvious I'm amazed that people still don't see it after five months of failed
negotiations.
http://www.bbc.com/news/world-europe-33578778
The former Greek finance minster has said his country's economic reforms are "going to fail",
just as formal talks on a huge bailout are set to begin.
In a BBC interview, Yanis Varoufakis said Greece was subject to a programme that will "go
down in history as the greatest disaster of macroeconomic management ever".
~~~
I may disagree with [PM Tsipras] and I declared that by resigning my post
~~~
The bailout could total €86bn (£60bn) in exchange for austerity measures.
In a damning assessment, Mr Varoufakis said: "This programme is going to fail whoever undertakes
its implementation."
Asked how long that would take, he replied: "It has failed already."
Varoufakis is just whining. He doesn't provide a solution to the immediate and staggeringly
important problem, imposition of worse austerity on Greece's people. He sounds not dissimilar
to Tsipras, who also says he's unhappy/pessimistic yada yada. They're like old men complaining
about the weather. Whining and whinging, Tsipras has signed up to carry out the police state
repression that's the only way his new legislation can be carried out.
Even though the solution/escape is clear, as Lapavitsas points out. It's almost as if the
Syriza apologists are incapable of saying/thinking the word 'Grexit'. Who is holding their
tongues?
parking weapons like f-16 and submarines in countries is a good idea...they are maintained
and serviced and kept ready for active service...this all under the cover of arms deals etc
etc.
there is only one flaw..the government of that country must be trusted....they cannot change
sides...greece is in a unique position.opposite north africa,on the med, so it is well positioned
for launching of attacks,on countries like libya or tunisia or even egypt.
"Varoufakis is just whining. He doesn't provide a solution…"
Exactly. There is no solution that doesn't include leaving the Euro and reclaiming monetary
sovereignty (although that alone won't do it…they need astute, competent leadership too). A
solution that presumes changing the fundamental Euro structure to include a fiscal component
is never going to happen, the big guns (Germany) would leave before that would happen.
Playing long shots works in the movies, in real life not so much.
Most of the billions of words that have been written on this subject have been little more
than wailing and gnashing of teeth. Denial.
There are several stages to go before there is any viable solution that citizens will sign
on to, that won't be co-opted by TPTB.
I'm not saying Syriza made all of the right mover, but neither do I think they can be
considered "the Greek People's enemy". Not at all. They appear to be being honest.
Posted by: guest77 | Jul 17, 2015 7:52:02 PM | 64
What a load of utter nonsense.
Honest?
They demanded the right to seek a mandate from the people before proceeding. They then got
exactly the mandate they claimed to have sought . . . . . .
. . . And then, promptly ignored it entirely.
=======
There's nothing "honest" in that. Cynical? Absolutely. Manipulative? Certainly
And you guys are just endlessly whining about the whiners ... the political class has chosen
its preferred 'solution'. They're all done. If there is to be a real solution it has got to
come from the Greek people.
@37
That's quite an article. I cut and pasted the picture of the 'bow-tie' graph and made the
table of the 50 top controllers from page 33 sortable below it.
I'll try to summarize the significance of the bow-tie graph and its abbreviated labels tomorrow,
for those who don't want to read the
full article
themselves.
Twenty-four of the top 50 controllers are nominally American.
As MRW writes, at 40, there is no resemblance between EU financial and pol. structures those
of the Soviet, Chinese Communist Parties.
MRW maybe you are hyping the Nazi past? Mitterand and Thatcher particularly were against
the re-unification of Germany. Mitterand wanted to lock Germany down in the Euro in an 'alliance'
(or because he was a bankster's man, in fact laws prohibiting speculation were lifted in France
well before Billy C's annulment of Glass-Steagall, the US played catch-up) and Germany made
the trade, with difficulty (attachment to the mark, independence, etc.) Controlling countries
through their currency and banking system is not an original or particularly Nazi idea. For
ex it works right now in parts of Africa with the CFA and nobody talks about it. The French
didn't borrow that idea from the Nazis.
Jackrabbit at 38, juliania at 66, jfl & fairleft >67
Like many, I've been waiting for the longest running drama on the Athens stage to finally
get to the last act before attempting to make sense of the staging, plot and characters.
I still don't think we're quite there yet; probably a little more political fall-out still,
but not much, see e.g.,
a majority of the Syriza Central Committee opposed the austerity deal.
Having set aside the mandate of the Greek electorate, the Syriza government has willfully
ignored last week's landslide "No" vote and secretly agreed a raft of repressive, impoverishing
measures....
The leaders of Syriza are revolutionaries of a kind – but their revolution
is the perverse, familiar appropriation of social democratic and parliamentary movements
by liberals groomed to comply with neo-liberal drivel and a social engineering whose authentic
face is that of Wolfgang Schauble, Germany's finance minister, an imperial thug. Like the
Labour Party in Britain and its equivalents among former social democratic parties such
as the Labor Party in Australia, still describing themselves as "liberal" or even "left",
Syriza is the product of an affluent, highly privileged, educated middle class, "schooled
in postmodernism", as Alex Lantier wrote. [I could not immediately find whatever Pilger
is quoting, he is affiliated with the "wsws"
website; such sad sloppiness at a major
site in these days of html coding...]
For them, class is the unmentionable, let alone an enduring struggle, regardless of the
reality of the lives of most human beings. Syriza's luminaries are well-groomed; they lead
not the resistance that ordinary people crave, as the Greek electorate has so bravely demonstrated,
but "better terms" of a venal status quo that corrals and punishes the poor. When merged
with "identity politics" and its insidious distractions, the consequence is not resistance,
but subservience. "Mainstream" political life in Britain exemplifies this.
This is not inevitable, a done deal, if we wake up from the long, postmodern coma and
reject the myths and deceptions of those who claim to represent us, and fight.
How then do democratic movements ensure that their leaders views and priorities accord with
their own, and can be held responsible and be replaced? What sort of leadership is needed for
industrial as well as political democracy?
ps to 77 -- Amongst the parties affected by the Munich Agreement, I think Edvard Beneš,
the Czechoslovakian President, is a better fit for poor Tsipras.
"the political class has chosen its preferred 'solution'. They're all done. If there is
to be a real solution it has got to come from the Greek people."
No kidding?
I don't know what's worse, repeating the obvious ad nauseam or whining.
Having set aside the mandate of the Greek electorate, the Syriza government has willfully
ignored last week's landslide "No" vote and secretly agreed a raft of repressive, impoverishing
measures…. a quote by rufus at 77
NO. Syriza was elected on a platform of 'staying in the EU-Euro' and at the same time 'reducing
/abolishing austerity.'
This mandate might be considered contradictory or ridiculous, illusory, doomed to fail,
etc. (Yes I agree.)
Also Syriza has a slim voter support and thus had to form a coalition Gvmt.
Well in function of that contradictory mandate they managed (at terrible cost and perhaps
misguidely) half of it. Staying in the Euro.
What is surprising? Nothing.
Why they chose the one above the other is abundantly clear.
I enjoy good discussion and criticism but this carping and sniping about Syriza from the
US Left says more about writers such as JP and the weaklings of the Left, that have attained
a new level of meaninglessness, and has allowed someone like Bernie Sanders to claim to be
a Socialist without any real blowback, is trying.
paulmeli at @63 has got it exactly right. In all modern economies on a fiat currency, loans
create deposits.
Bankers, as a result, create 'credit money', NOT new interest-free money. (Credit money
also means that one person's asset is another person's liability. At the commercial banking
level within the real economy that includes collateral, timed repayment schedule, and interest
owed, which is income to the issuing bank. Everything nets to zero at this level across the
macroeconomy.)
The US federal government, on the other hand, adds new money into the economy. Only
entity that can. Only the US federal government can introduce new, interest-free money
into the economy, and it does it via congressional spending based on the needs of its citizens,
and where it wants the economy to grow (giving 40% of it to the financial institutions is NOT
GROWTH). Which the mo-fos we've elected do not understand.
One small quibble, Paul. The amount of physical currency, physical cash and coin, is around
11.5% to12% of the available money. The rest are treasury securities. Don't forget that countries
like Ecuador are pegged to the USD and need US cash for their citizens. Ecuador's central bank
orders them from the US Treasury (Bureau of Printing and Engraving) and puts up 100% of the
demanded amount in assets (treasury securities) to pay for them.
Sorry for the delay. I'm traveling. Good questions, btw.
First, let's clear up what fractional reserve banking is. This is a lousy simplistic
example, but it will work. And let's imagine a small western town with one bank, which I will
call Bank Buckeroo. Introducing a second bank in the town mean I would have to explain how
interbank reserves work, and it doesn't matter in this explanation. [BTW, US banks DO NOT LEND
their reserves; reserves serve another purpose in the US banking system; namely to help the
Federal Reserve retain the overnight interest rate target that banks charge each other. Canada,
for example, doesn't even have a reserve requirement for their commercial banks.]
Fractional reserve banking explained
OK. Johnny Schwartzburger sidles into his Bank Buckeroo and deposits 100 bucks in cash in
his savings account.
Now Bank Buckeroo has got $100 more than it had yesterday.
Because the reserve requirement is, say, 10%-the FRACTION of the loan that the bank must
retain under "fractional reserve banking"--Bank Buckeroo holds onto $10 and can loan out $90.
Sally Sweetpea needs $90 for her beauty shop and she borrows $90 from Bank Buckeroo, and
deposits that in her checking account.
Now Bank Buckeroo holds onto $9 (10% of $90) and can loan out $81.
Old Ray Saddleback needs $81 to buy supplies for the only café in town, so he hits up Bank
Buckeroo for an $81 loan.
Bank Buckeroo holds onto $8.10 (10% of $81) and can loan out $72.90.
Paddy O'Gilligan needs $72.90 to top off his supply of whiskey at the only bar in town (and
this banker likes his whiskey), so he borrows $72.90 from Bank Buckeroo.
Bank Buckeroo holds onto $7.29 (10% of $72.90) and can loan out $65.61
You see where I'm going with this. Eventually, Bank Buckeroo will have reserved all $100,
but will have extended credit against that $100 to customers that he knows are good to pay
back their loans. Under the gold standard system before 1933, each dollar had a statement on
it that you could exchange 20 of the one-dollar bills for one ounce of gold (not exactly the
statement but that's what it meant). It was a "fixed exchange rate." The value of a dollar
(US) was fixed to the value of gold. So Bank Buckeroo has Johnny Schwartzburger's original
$100 in cash that guarantees it can trade-in the cash for $100 in gold anytime it wants. It's
protected against that loss. The only thing the banker has to worry about is whether his customers
can pay back the new loans, and he knows their creditworthiness intimately.
That all changed in 1933-no more gold standard in the US
We went off the gold standard. The value of the USD was no longer pegged to the value
of gold, the supply of which the US federal government could not control globally except
for certain US mines. Each new goldmine find globally affected the value of the dollar before
1913 and led to extraordinary panics and busts in the last half of the 1800s. More gold available
meant the value of the dollar dropped, and that affected international trade, and whether people
exchanged their dollars for gold stateside and hoarded it, further diminishing the amount of
money available in the real economy. It was the National Gold Something-or-Other Act in 1900
that pegged the USD at $20/ounce.
Interestingly enough, it was Marriner Eccles, whom FDR made the first chairman of the Federal
Reserve three years later, a Republican Mormon banker from Provo UT who appeared before the
Senate and House of Representatives in 1932/33 to make the case for dropping the gold standard
(he wasn't the only one however). Eccles became more popular than Miley Cyrus. Eccles had seen
the devastation that the banking system was doing to his municipal and rural customers. Eccles
was 22 when he made his first million after his father died and he had to take over the family
businesses, which included a bank. He was a financial genius who could speak plain English
to commoners about banking and esoteric financial concepts. His ideas predated John Maynard
Keynes by three years. (BTW, Keynes was never taught in American universities, so anyone
sneeringly invoking Keynes doesn't know what they are talking about. The first Nobel Laureate
in Economics, Paul Samuelson, is supposed to be the explainer and keeper of Keynes ideas, but
Samuelson admitted in 1989 in a video interview that he never read more than half the book,
and that he never understood Keynes' ideas to begin with.)
[to be contd]
Correction: Each new goldmine find globally affected the value of the dollar before 1913
Should read: Each new goldmine find globally affected the value of the dollar before
1900
If Private banks "cannot" print as much money as they like ( point 1 ), then how can fractional
reserve banking Not exist in most of the world ? ( point 2 ) . If fractional reserves do
not exist then they free to print as much as they like.
[…]
And your 3rd doesn't make any sense at all. How does a gold standard have any restrictions
on having a 10% fractional reserve, 1000%, or 1,000,000% of gold holdings ? Gold doesn't
make decisions, regulations and enforcement are the decision-makers. Whether it's gold or
fiat.
Loans create deposits. Yes, 'out of thin air'. Bankers can say 'Yay' or 'Nay' based on the
cut of your jib, or the color of your skin, although they are not allowed to.
Banks don't print money. They issue credit, i.e. 'credit money'. They mark up the customer's
bank account with computer keystrokes in the amount of the loan. Banks issue credit money based
on two things: (1) customer creditworthiness, (2) customer income. They also require collateral.
Banks have to maintain reserves in their banks accounts at the Federal Reserve
on all the loans they make.It is a percentage of the loan, and banks cannot loan out
this money. If the bank doesn't have enough reserves in their Fed account, they have to borrow
from other banks at the Fed Funds Rate, or overnight interest rate, set by the Fed. (The Fed
uses this overnight interest rate to promote or demote bank lending in the economy, among other
things.)
If the bank has been making bad loans or is overextended-this goes to your Point 1 about banks
being free to issue as much credit money as they like-and other banks know that, the other
banks might not loan it any reserves.
In that case, the solvency-suspect bank has to slink to the Fed's Discount Window where they
can borrow the required reserves, but the interest rate is punitive, and it usually alerts
bank examiners that there's a problem at the bank. So having to go to the Discount Window is
not something a bank wants to broadcast.
By law, the Federal Reserve must supply reserves to banks within the federally chartered banking
system, or declare the overextended bank insolvent.
A 'check and balance' on a bank loaning out as "as much as they like" is meeting its reserves
requirement.
About gold. When you have a gold standard, you're on a fixed exchange rate: X amount of
currency for each ounce of gold. That's when fractional reserve banking makes sense because
the bank only wants to loan out X amount of money based on the amount of gold in the kitty.
It's up to the banker to make intelligent and safe decisions about who he loans to by doing
his due diligence.
On a gold standard, he who owns the gold, owns the country. When we got rid of the gold
standard, goldminers and gold owners stopped owning this country, including Mr. Rothschild.
We fucked him up the ass. Our money is based on the 'full faith and credit of the US federal
government' and we issue our own currency. To boot, we are the reserve currency worldwide.
The thread didn't take my formatting in @88. Here is the first half presented in a clearer
format:
----------------------------------------------
In response to Tom's @61
Loans create deposits. Yes, 'out of thin air'. Bankers can say 'Yay' or 'Nay' based
on the cut of your jib, or the color of your skin, although they are not allowed to.
Banks don't print money. They issue credit, i.e. 'credit money'. They mark up the customer's
bank account with computer keystrokes in the amount of the loan. Banks issue credit money
based on two things: (1) customer creditworthiness, (2) customer income. They also require
collateral.
Banks have to maintain reserves in their banks accounts at the Federal
Reserve on all the loans they make.It is a percentage of the loan, and banks cannot
loan out this money. If the bank doesn't have enough reserves in their Fed account, they
have to borrow from other banks at the Fed Funds Rate, or overnight interest rate, set by
the Fed. (The Fed uses this overnight interest rate to promote or demote bank lending in
the economy, among other things.)
If the bank has been making bad loans or is overextended-this goes to your Point 1 about
banks being free to issue as much credit money as they like-and other banks know that, the
other banks might not loan it any reserves.
In that case, the solvency-suspect bank has to slink to the Fed's Discount Window where
they can borrow the required reserves, but the interest rate is punitive, and it usually
alerts bank examiners that there's a problem at the bank. So having to go to the Discount
Window is not something a bank wants to broadcast.
By law, the Federal Reserve must supply reserves to banks within the federally chartered
banking system, or declare the overextended bank insolvent.
A 'check and balance' on a bank loaning out as "as much as they like" is meeting its
reserves requirement.
Disaster In Europe:
...all the wise heads saying that Grexit is impossible, that it would lead to a complete implosion,
don't know what they are talking about. When I say that, I don't mean that they're necessarily
wrong - I believe they are, but anyone who is confident about anything here is deluding himself.
What I mean instead is that nobody has any experience with what we're looking at. It's striking
that the conventional wisdom here completely misreads the closest parallel, Argentina 2002. The
usual narrative is
completely
wrong: de-dollarization did *not* cause economic collapse, but rather followed it, and recovery
began quite soon.
There are only terrible alternatives at this point, thanks to the fecklessness
of the Greek government and, far more important, the utterly irresponsible campaign of financial
intimidation waged by Germany and its allies. And I guess I have to say it: unless Merkel miraculously
finds a way to offer a much less destructive plan than anything we're hearing, Grexit, terrifying
as it is, would be better.
A divided Germany rose from the ashes of the Nazi defeat in World War II, weathering the Cold
War to transform into one of the good guys. Modern Germany quickly molded itself into the
standard-bearer of global pacifism, a hotbed of youth culture and the tree-hugging Lorax of
nations in the fight against climate change.
But, just like that, the image of the "cruel German" is back.
Germany - more specifically, its chancellor, Angela Merkel - has faced years of derision for
driving a hard bargain with financially broken Greece, which has received billions in bailouts
since 2010. But for both Germany and Merkel, the concessions extracted this week from Athens
appear to have struck a global nerve. By insisting on years more of tough cuts and making other
demands that critics have billed as humiliating, Berlin is wiping out decades of hard-won
goodwill.
In the aftermath of the deal with Greece, the hashtag #Boycottgermany - calling on users not
to buy German products - has started trending on Twitter. Evoking Hannibal Lecter, the cannibal
from "The Silence of the Lambs," some are sharing caricatures depicting Merkel as an E.U.-eating
"Angela Lecter." A cartoon portraying Wolfgang Schäuble - Merkel's even-harder-line finance
minister - as a knife-wielding killer from the Islamic State militant group has gone viral.
Germany was one of more than a dozen nations that insisted on a tough deal with Greece. But
Britain's Daily Mail singled out Germany, saying Greece had surrendered to austerity "with a
German gun at his head."
In the United States, New York Times columnist Paul Krugman this week noted the hate mail he
had received from Germany for repeatedly criticizing its tough line on fiscal reforms. The
Germans, he wrote, had suggested that as a Jew, he should know "the dangers of demonizing a
people." To that, Krugman responded with sarcasm: "Because criticizing a nation's economic
ideology is just like declaring its people subhuman."
In Greece, those actively supporting the austerity deal are being heckled by their countrymen
as "Nazi collaborators." Another image making the rounds on social media shows a doctored version
of the European Union flag, its circle of gold stars against a blue background reshaped into a
swastika.
French daily Le Figaro declared that "conditions were imposed on a small member state that would
have previously required arms." In a commentary that sneered at Merkel's "half smile" after the
deal was reached, Britain's Guardian newspaper argued that rather than being cruel to be kind,
the terms of the bailout were simply "cruel to be cruel."
In its online edition, even Germany's own Der Spiegel magazine decried the Berlin-led demands as
"the catalogue of cruelties."
In a country that can be highly sensitive about its brutal past, some Germans are beside
themselves. On Friday, the German parliament is set to vote on whether to green-light rescue
talks under the onerous new terms. It is expected to vote yes. In any case, some argue, the
damage to Germany's image has been done.
"Merkel, Schäuble and [Vice Chancellor Sigmar] Gabriel in two and a half days burned the
trust that had been built over 25 years," Reinhard Bütikofer, a German politician from the
progressive Green Party, declared during an emotional outburst on local television. "The
heartless, dictatorial and ugly Germany again has a face, and that is Schäuble."
He finished by saying, "I am upset, as you can see, very upset."
"...The "Eurosystem", the network of national central banks governed by the European Central
Bank, gives central bankers unprecedented ability to squeeze and manipulate national governments in
a coordinated way. It is as if every government in the Eurozone ALREADY has a colonial entity watching
it like the Troika's agents are supposed to watch Syriza in Athens. And, since the ECB Governing Council
(like other EU institutions) tries to operate by a non-transparent "consensus" (i.e. the votes are not
revealed), the degree to which national central bank heads are representing the ECB in their countries,
rather than the other way around, is often not clear."
"...IMO these 'lessons' miss the biggest one for the left: the loss of independent media. What
good is protesting neolib control via banks if no one is listening?
Governments easily manipulate corporate controlled media via access journalism. Thus we get factual
truths intermixed with propaganda spin that is relentlessly pro-business, pro-establishment.
Greece is a case in point. As described in
Greek Government Insider Lifts the Lid on Five Months of 'Humiliation' and 'Blackmail', the
Troika was gradually increasing pressure on Greece to do what the Troika demanded. They withheld billions
of euro to Greece and cut off liquidity to the Greek government. Then they waited as the financial pressure
on Greece grew. But along with those measures was a caustic media that painted Syriza as incompetent,
then undemocratic (because most greeks wanted to remain in the euro), then irresponsible (for
calling a referendum), etc."
"... Following, a link to a German documentary about the various mechanisms of the EU [Troika, Eurogroup,
European Commission, Council, etc] which are being used as devastating tools to beat down and extract
wealth, vampire style, from Greece [and Cyprus], in order to revive comatose banks and line the pockets
of investors, through privatization of public property.
This documentary does a good job of demonstrating just how the power of technocratic branches of
the EU is being rolled out to pillage Greek, Portuguese, Cyprus economies, plunging the respective populations
into ever greater misery.
"...None of this is about 'economics' - that chimerical, dismal 'science' - all
of it is about politics, and power politics, and imperial politics."
Before the crisis no one even knew that national central banks still existed - I certainly didn't.
But now it's clear that the creditors' unchallenged control of this commanding high ground was
decisive to the outcome in Greece. Next time an elected government challenges the EU authorities,
their first order of business must be getting control or cooperation of their national central
bank.
The quote says "control or cooperation," but I can guarantee the latter is never going to happen.
It is nearly impossible to exaggerate the degree to which the campaign for central bank "independence"
has made them the enemies within for any left governments.
The central bankers waged a 50-60 year political war to wrest back the monetary flexibility that
the break down of Bretton Woods gave to national governments. Having won that war across most of
the developed world in the 70s and 80s, they extended the battlefield to the emerging markets in
'90s and '00s.
The autonomy of central banks (meaning the political allegiance to Wall Street/London City/Frankfurt
etc.) was maybe the biggest neoliberal victory of all. If rightwing political victories (Reagan,
Thatcher et. al.) were the beachheads of the Great Counterattack on social democracy then "independent"
central banks became the citadels of the occupation forces: Neoliberalism's "Republican Guard."
Ironically, the ECB was originally conceived - or at least was sold to the European left - as
a way for governments to regain monetary flexibility at a higher level. As a way to a) escape US
dollar hegemony and to b) outflank the Bundesbank by formalizing the joint political control of European
monetary policy. I do not know if the hack establishment Social Democrats who sold that vision ever
believed it, but if so, more fool them. Because what the European Monetary Union became, obvious
now, was a way to turn the vision on its head: formalize joint MONETARY control of Europe's politics.
The "Eurosystem", the network of national central banks governed by the European Central Bank,
gives central bankers unprecedented ability to squeeze and manipulate national governments in a coordinated
way. It is as if every government in the Eurozone ALREADY has a colonial entity watching it like
the Troika's agents are supposed to watch Syriza in Athens. And, since the ECB Governing Council
(like other EU institutions) tries to operate by a non-transparent "consensus" (i.e. the votes are
not revealed), the degree to which national central bank heads are representing the ECB in their
countries, rather than the other way around, is often not clear.
As long as the cozy comprador system tied peripheral governments to the core (i.e. Berlin), the
role of the ECB and the Eurosystem could be obscured. Peripheral governments appointed "made guys"
(i.e. banksters and/or their technicians) to national central bank boards and pretended to govern.
Core politicians and their local comprador politicians let the Eurosystem technicians in Frankfurt
tell them what "structural reforms" they should push to make the EMU "work."
But the moment an outsider government like Syriza came to power, the role of the Eurosystem and
the national central banks in it could no longer be hidden. The fact that the Greek National Bank
was an instrument of the ECB in Frankfurt, not of the Greek government in Athens, became obvious
to everybody. The ECB's role as the muscle behind the Eurogroup's (Berlin's) diktats put the Greek
National Bank in the position of helping to choke its own banks and terrorize its own citizens. And
under the rules of EMU the Greek government was completely powerless to do anything about it. A defining
moment.
The inescapable conclusion is that the allegedly "independent" Eurosystem now operates not as
a network of central banks but as a parallel government.
The role of the Eurosystem within the half-hidden political order of the eurozone really is comparable
to the Soviet or Chinese Communist Party. Like the Communist Party, the Eurosystem is now the "leading
organ" of the neoliberal order, operating at all levels of the EU structure and providing "guidance"
to elected political structures which are not formally under its legal control, but in reality are
dominated by it. And behind the administrative apparatus of the party (Eurosystem) is the Central
Committee (Eurogroup) and the Politburo (the key creditor government officials). And behind THEM
is the real locus of the party's centralized power: the General Secretary (Germany/Merkel).
So J.W. Mason is quite right: it is impossible for any left government to attack the dictatorship
of finance unless it controls its national central bank. But while control of the national central
bank is necessary, it is hardly sufficient. As long as the EMU exit is off the table, verboten, so
to speak, control of the national central banks only eliminates the "near enemy."
Ultimately it comes down to political will, which in parliamentary democracies, comes down to
public support. As long as the majority (of all voters or of propertied influentials, depending on
the system) is more loyal to the Euro than to national sovereignty an effective challenge to the
dictatorship of finance is impossible - no matter how many national central banks the left controls.
You know this 'independent' central bank as tool of the neolibraconian consensus is the most
salient point drummed home about Russia : the central bank as 5th column.
And the Russian central bank preceded the ECB, didn't it? When the boys from Harvard went to
Russia to 'straighten' things out they conducted an experiment ... and discovered it worked just
great : rinse and repeat. Russia was the archetype of the gelded European nation to come.
So the next time says Russia is not a part of Europe I'll say ... not only of Europe, but
the
first European nation subverted by the gnomes of neolibraconia.
The Europeans who still have a pulse ought to note now just who their real enemy is : hint,
the one that's occupying Europe. And who is their fellow European victim. And ban together to
defeat their common enemy ... well run him out of town on a rail, at any rate.
One of the key reasons that Wall St/City/Frankfurt want universal "austerity" is not just that
they want people to be frightened, impoverished and insecure; but in particular, because it has
the desirable effect of suppressing the political participation of people who must continuously
walk the edge, just to get by - and by now this is about half the population -and who might otherwise
participate in the political process with decisive effect.
Rise like lions after slumber In unfathomable number Shake your chains to earth like dew That in sleep have fallen on you Ye are many, they are few.
H.L. Mencken is also very good on this subject - the need of the self-appointed elite to distract
and render impotent the average person, and how greatly the big shots hate and fear the "mob".
why would a small country like Greece need to be the second biggest spender in nato after the
USA. ...
According to an editorial published by the Greek conservative newspaper Kathimerini, after the
removal of the right-wing military junta in 1974, Greek governments wanted to bring disenfranchised
left-leaning portions of the population into the economic mainstream[28] and so ran large deficits
to finance enormous military expenditure, public sector jobs, pensions and other social benefits.
Greece is, as a percentage of GDP, the second-biggest defense spender[29] in NATO, the highest
being the United States, according to NATO statistics.
The US is the major supplier of Greek arms, with the Americans supplying 42 per cent of its
arms, Germany supplying 22.7 per cent, and France 12.5 per cent of Greece's arms purchases.[30]
Everybody and I mean everybody is king fu fighting. And
those bankers are as fast as lightning
It should be obvious with how the ECB structure was formed that any country that uses the euro
as its currency is dependent on the ECB for liquidity if there is deposit flight from the banks
in that country.
There is only two ways for a country to retain full sovereignty. One have a national currency
with a national monetary authority that controls it and second a government that if it runs a
deficit has the ability to borrow in private markets and maintains a currency board (e.g: Ecuador
which uses the US dollar).
Ecuador is a good example where its government debt became untenable. It defaulted on the debt
and so was for all intents shut out from private debt markets, so the government could not run
a deficit. It continued to use the US dollar as its currency.
Greece had to make a choice. Continue in the eurosystem and accept the hegemony of the eurogroup
or exit. It's parliament accepted the former. One can blame Schauble and Merkel all you want but
the bottom line is that the Greek government and parliament acquiesced to its loss of sovereignty.
The Greek people have the power to change it if they want. They just have to decide to exit the
eurosystem and elect a government that does that.
In France, Marine Le Pen is clear. She will take France out of the eurosystem if elected. Of
course we'll have to see if she honors her campaign promise but at least she is categorical about
it. Syriza got elected promising they'll be able to get a better deal compared to the center-right
party before them. In this case the Left in Greece delivered an even worse result for the average
Greek citizen.
IMO these 'lessons' miss the biggest one for the left: the loss of independent media. What
good is protesting neolib control via banks if no one is listening?
Governments easily manipulate corporate controlled media via access journalism. Thus we get
factual truths intermixed with propaganda spin that is relentlessly pro-business, pro-establishment.
Greece is a case in point. As described in Greek Government Insider Lifts the Lid on Five Months of 'Humiliation' and 'Blackmail',
the Troika was gradually increasing pressure on Greece to do what the Troika demanded. They withheld
billions of euro to Greece and cut off liquidity to the Greek government. Then they waited as
the financial pressure on Greece grew. But along with those measures was a caustic media that
painted Syriza as incompetent, then undemocratic (because most greeks wanted to remain in the
euro), then irresponsible (for calling a referendum), etc.
Too often we give the media a pass when it has been well documented that business and
government tries to control MSM (and increasingly other media as well) via access journalism,
advertising revenue (a few industries dominate) writing stories that cite in-the-tank 'experts'
from establishment-friendly think-tanks and controlled opposition.
Even within Greece, Syriza had trouble getting their message out because oligarchs own virtually
all of the media! And many blogs also fell for the spin - even those that have been critical
of the media in the past like Yves Smith at nakedcapitalism.com - despite the fact that the
delay in Greece putting forth a proposal before the April 30th deadline could be logically attributed
to the 2-step process that the Troika had forced (describing how they would service the debt
would severely undermine Greece's position in future debt restructuring talks).
A Left that is not in touch with the people - and whose message is undermined by establishment-friendly
media - is a disaster far greater than the loss of control of the financial system. The Left's
greatest strength should be its connection with the people that it fights for. Yet, instead
the Left has allowed itself to be marginalized by a corporate media that has strengthened the
centrist 'faux Left' at the expense of the progressive Left. So much so that many people today
identify THE LEFT with the identity politics that forms 'the base' for the fauxLeft. In short,
people of the 'Left' are viewed as selfishly wanting something for themselves at the expense
of others. (It should come as no surprise that reporting about Greece often fell in line with
this line of thinking.)
For activists that are outside the centrist political establishment - anti-war, climate change,
the environment (fracking, nuclear energy, etc.), inequality, constitutional and civil rights,
etc. - it is very difficult to reach a wide audience. All 'change' is channeled into the pro-business,
pro-establishment centrist political system. Anyone who is not a centrist is suspect.
Greece's coherent arguments quickly fell off media radar as sniping about their incompetence
and their oh-so-strange Finance Minister took center stage. This put even more pressure on the
Greeks and deterred potential allies. And the spinning continues. The understanding of most people
still does not go much beyond this: the Greeks don't want to pay their bills and Syriza are incompetent
radicals that made the problems worse and can't be trusted. In the face of this onslaught by the
Troika and Troika-friendly media, Syriza's resistance is all but ignored in favor of trumpeting
Greece's defeat (a warning to others?).
=
Is there any hope? Maybe.
1) Syriza formed a government with nationalists (ANEL). Why the Left is depicted as unpatriotic
is beyond me, but the left may be getting its patriotic mojo back as WAR and trade deals are increasingly
understood as benefiting an international elite. I could see similar political alliances forming
in other countries. (In the US, I think the establishment had feared a potential Tea Party
- Occupy alliance.)
2) Media reform (or the threat of it). The Greek government has begun investigations into media
bias during the referendum (there was very little coverage of government rallies and government
positions, etc.). If the Syriza-led government falls, any media reforms are probably less
likely.
Ron Paul's "audit the Fed" movement got some traction which caused the Fed to take notice.
"Truth in media" efforts should probably be re-doubled.
3) Education. We need to retain humanities education. Higher education is turning into vocational
training. For example, IMO it's difficult to appreciate the myriad issues and import of the neolib
consumer-oriented approach to government vs. the democratic citizen-oriented approach, without
a humanities education.
Also, people don't usually react until it is too late - partly because few have enough learning
to understand the impact that new policies will have. They try to make up for their lack of understanding
by relying on trusted representatives like Obama. TTIP is a case in point. Look for demonstrations
about Obamatrade in a few years when it is too late.
Following, a link to a German documentary about the various mechanisms of the EU [Troika, Eurogroup,
European Commission, Council, etc] which are being used as devastating tools to beat down and
extract wealth, vampire style, from Greece [and Cyprus], in order to revive comatose banks and
line the pockets of investors, through privatization of public property.
This documentary does a good job of demonstrating just how the power of technocratic branches
of the EU is being rolled out to pillage Greek, Portuguese, Cyprus economies, plunging the respective
populations into ever greater misery.
james, If you read the Shock Doctrine by Naomi Kline you can follow the same financial rape
of South American countries in the 70's that the financial mafia are doing now to the middle east.
The world needs to have a discussion about the world of private finance that exists now and
what could be if all finance were sovereign.
The role of the European Central Bank and their buttler, Stournaras, at the Greek Central Bank
in this fiasco needs this kind of discussion, and more, since it lies at the heart of German blackmail
and coup attempt of the Greek government. Thank you b for this post.
@5
One reason that there have been inordinate arms purchase by Greece is that the Greek elite
-- media, oligarchy, politicians (especially the latter) are up to their armpits in corruption,
and one of the vehicles for corruption is arms deals.
The all powerful "socialist" minister of defence under Papandreou and minister of development
under Simitis is now in jail, almost prime minister, now serving 20 years in the hoosgow, for
being bribed by German arms dealers (Siemens, among others). It is widely believed that the previous
governments went after this easy and obvious target to cut off investigations of others, a lot
of others.
The nationalist minister of defence under the Tsipras government, Panos Kammenos is sending
document after document to prosecutors involving a bewildering array of bribery, thievery, fraud,
and so on in the Greek armed forces. Submarines that leak, helicopters that can't fly, because
of onerous service after purchase contracts. The list is huge.
One reason why both German and Greek corruptos hate him so much, and tried to bring down the
Tsipras government. It remains to be seen if he keeps his post, after Tsipras's deal with the
Germans.
The other, of course, is the Turkey threat, also used to justify military procurement.
The discussions with Greece are thus a formal process designed to politically defeat Greece's
left forces, burying any prospects of meaningful political change across the continent. This
is the only explanation for the creditors' inflexibility despite Tsipras crossing all Syriza's
red lines in terms of pensions reforms, tax policy, privatizations, and market liberalization.
This punitive stance was made crystal clear by late June, when the ECB actively incited
a bank run, warning of an "uncontrollable crisis," and abruptly capped its emergency loans
to the banking sector, triggering bank holidays and capital controls.
Also in the site, an informative behind the scenes interview with Left Platform Syriza MP,
Stathis Kouvelakis.
The Troika was willing to 'punch' Syriza's ticket ("Welcome to the Club"!) with minor
concessions. But Tspiras/Varoufakis did not simply accept what the Troika demanded.
As bad as the deal is, Greece managed to get the debt restructuring that the Troika had refused
to talk about. They had even refused to put their promises of a future debt restructuring in writing.
Many are saying that Greece should've prepared for GRexit; critizing Syriza/Tspiras as too
establishment and too europhile to contemplate that path. But they have bought time to prepare
for the next round. And in the next round, it may be that a GERexit is on the table as well.
Euro QE is not a magic elixir; just more extend and pretend. It'll exacerbate core vs. periphery
problems as much as it exacerbates inequality (as it has in the USA). And political and fiscal
integration is hard to do when people feel that they are not treated fairly.
This $50 billion Greek asset theft fund that was willingly handed over by Syriza traitors,
as well as other politicians responsible, Is exactly the collateral needed for a independent Greek
central bank to create, let's say for eg, a fractional reserve base of 10% to create $500 billion.
With that now $500 billion, the Greek government could pay off all the debt, including the
criminally induced ones, and it's based on those $50 billion worth of assets. And That's only if you agree to the idea of paying off all your criminally in deuced debts.
An independent and sovereignly principled government or parliament would do exactly that.
And there's more fractional reserves using National assets that can be used to grow the economy
and serve the people.
Syriza knows this, but since they are unprincipled, Ideologically weak, cowardly towards their
aggressors and more interested in power than public service, means you're never get that from
these freaks. Obvious from day one. Judge them on their actions, not on their whingeing on how they've been
mistreated and violated.
How the fuck is it accepted, that private banks can print as much national currencies as they
like, but the owners of the those national currencies - the people and the government - cannot
do with fractional reserves and money printing, like what the private banks do.
jackrabbit@17, I would like to point out that the Greek populace ignored the media when they
voted in the referendum, so I think the importance of such propagandistic power is overblown.
Once you lose faith in that source of information, it's gone; it doesn't come back. Russia under
the Soviets is a case in point, and currently also there is an erosion in US confidence that what
they see and hear is trustworthy. What happened after the referendum confused the public, and
that was a huge mistake.
Back a ways, in support of Tsipras, I wanted him to do as Putin has done and shore up that
public confidence because then you can make decisions in the moment and the support will grow.
Immense popularity is a powerful weapon. Varoufakis was correct in seeing that as an important
pivotal moment, when the people supported the 'no' vote that Tsipras had also supported. The course
he chose confused his supporters. Paramount should have been the dictum that the people could
not bear further austerity and that was that - the austerity they would face at that point would
be the prideful kind that can see a brave future beyond.
Tsipras had embraced the New Deal outlook, but he forgot Roosevelt's famous saying, 'You have
nothing to fear but fear itself.' Varoufakis welcomed, FDR style, the banksters' hatred. It's
too bad Tsipras could not do the same. Long lines of grateful poor people stood by the tracks
as FDR's funeral train passed. Will that happen for Tsipras? There's a Greek saying that one should
count no man happy until after his death. Roosevelt, loved by his people and by history, was a
happy man. I hope there's time for Tsipras to become one as well.
Furthermore, we have about 50% of the world's wealth but only 6.3% of its population. This
disparity is particularly great as between ourselves and the peoples of Asia. In this situation,
we cannot fail to be the object of envy and resentment. Our real task in the coming period
is to devise a pattern of relationships which will permit us to maintain this position of disparity
without positive detriment to our national security. To do so, we will have to dispense with
all sentimentality and day-dreaming; and our attention will have to be concentrated everywhere
on our immediate national objectives. We need not deceive ourselves that we can afford today
the luxury of altruism and world-benefaction.
For these reasons, we must observe great restraint in our attitude toward the Far Eastern
areas. The peoples of Asia and of the Pacific area are going to go ahead, whatever we do, with
the development of their political forms and mutual interrelationships in their own way. This
process cannot be a liberal or peaceful one. The greatest of the Asiatic peoples-the Chinese
and the Indians-have not yet even made a beginning at the solution of the basic demographic
problem involved in the relationship between their food supply and their birth rate. Until
they find some solution to this problem, further hunger, distress, and violence are inevitable.
All of the Asiatic peoples are faced with the necessity for evolving new forms of life to conform
to the impact of modern technology. This process of adaptation will also be long and violent.
It is not only possible, but probable, that in the course of this process many peoples will
fall, for varying periods, under the influence of Moscow, whose ideology has a greater lure
for such peoples, and probably greater reality, than anything we could oppose to it. All this,
too, is probably unavoidable; and we could not hope to combat it without the diversion of a
far greater portion of our national effort than our people would ever willingly concede to
such a purpose.
As Chancellor Merkel and other German leaders would frequently remind the rest of Europe and
the world, with 7% of the world population, 25% of global GDP and 50% of world social spending,
Europe's economic system was unsustainable and uncompetitive in a globalized economy. Germany's
vision for Europe was aimed at introducing "rules to force Europe's economies to become more
competitive." But competitiveness was defined by Germany, and thus, "the rest of Europe needs
to become more like Germany."
I nearly choked when I read Timothy Geithner quoted at the beginning of dana's link ... but it
makes perfect sense. None of this is about 'economics' - that chimerical, dismal 'science' - all
of it is about politics, and power politics, and imperial politics.
The Germans - like everyone else - can see the US has had its run and is headed for its fall.
But they also know that Germany by itself is not of a size to pick up where the US leaves off,
when the US leaves off. So Germany needs to take over Europe.
I think I've heard this before.
Between 2008 and 2013, the Greek government cut 40% of its budget, healthcare costs soared,
tens of thousands of doctors, nurses and other healthcare workers were fired, drug costs rose,
as did drug use with HIV infections doubling and a malaria outbreak was reported for the first
time since the 1970s, while suicide rates increased by 60%. ... Unemployment has grown to 26%
(and over 50% for youth), wages dropped by 33%, pensions were cut by 45%, and 40% of retired
Greeks now live below the poverty line.
Cleanliness is next to Godliness. The Germans are cleaning up Greece, and Europe.
The IMF's latest move - fake debt reduction for Greece, the kind of stuff that flows out of
Geither's pie-hole in dana's link above - seems to be overt recognition of this fact, bringing
it into play.
So they new dynamic will be the US on one side and Russia on the other, containing Germany's
New Europe?
Makes sense, really. (None of this makes any sense ... only to the zero-summers playing games
with our world). China surely has its eyes on all that Lebensraum in eastern Russia. The US and
Russia can team up to defeat the NAZIs who have 'stolen' the Ukrainian revolution (to contain
both Europe and China). (And then the US can double-cross Russia when the time is ripe).
Hey, looks like it's 'working' with our new, soon to be 'best friends' in Iran.
Arghhhh. Makes me want to stop reading the news, stop watching the movie. Or do something to
help change it.
... just substitute the US for NATO. Germany has certainly knocked the scales from some eyes.
I can't imagine Russia will be drawn in.
Greed and geopolitics do make strange bedfellows though. Nations don't have friends they have
interests. And it's hard to see any of these 'nation' that have identified its citizens' interests
with its own. Of the big ones ... maybe Russia under Putin? All he has is the support of the Russian
people.
Syriza has shown, I suppose, that gaining access to power isn't enough. The party has to be
involved with its members and those they hope to make members. Helping people get access to food,
medicine, security, and anything else the state is refusing to help with. The left cannot just
win elections, it must be threatening to those in power. It must be prepared to take control of
those things the people demand they control (and it must be willing to relax when the people demand
this). People must look to the organization in Latin America, that is all I can say. There, under
the harshest repression, democracy is thriving.
The story of Greece I suppose is a lesson for the rest of the left parties though, who of them
has a chance outside of Podemos - and what of Podemos anyway. They don't seem particularly able
sadly.
The world- but especially the west - in the last 30 years, has changed so fundamentally that
democracy is nowhere to be found. Nor democratic forms of social organization are even gone for
the most part. And now they are turning the screws on whatever remains. Even the middle classes
live under turn-key totalitarianism, as it was said by someone, (as opposed to before, where it
was just the lower classes) and everyone knows this. And it is proved more and more with each
passing event it seems. The people are thoroughly boxed in and controlled, but unlike juliania
I think the media has so much to do with it. The massive media conglomeration is a keystone of
the changes over the last 30 years, as well as the emergence of the internet - brought to a great
many people by those media conglomerates.
The oligarchs of the west are determined to return to their royal status and complete political
power they had before WW1. This is really a hopeless feeling attached to this, their seemingly
complete victory over democracy. And I imagine that is much of the point...
Stefania Vitali, James B. Glattfelder, and Stefano Battiston
Abstract The structure of the control network of transnational corporations affects global market competition
and financial stability. So far, only small national samples were studied and there was no appropriate
methodology to assess control globally. We present the first investigation of the architecture
of the international ownership network, along with the computation of the control held by each
global player. We find that transnational corporations form a giant bow-tie structure and that
a large portion of control flows to a small tightly-knit core of financial institutions.
This core can be seen as an economic "super-entity" that raises new important issues both for
researchers and policy makers.
Yes, Tsipras seems to have been ambivalent. The referendum was a bold move that actually worked
in his favor but then turned cautious. Maybe he worried that if he threatened GRexit Schauble
and the Troika would call his bluff?
In an earlier thread, I likened Tsipras to Chamberlain, who had the best intentions but is
remembered as an appeaser. This may seem like a dramatic comparison but Michael Hudson has made
the point that economics is now war by other means.
Chamberlain satisfied the public's overwhelming desire for peace just as Tspiras satisfied
his public's desire to stay in the Euro. Each one had misgivings about the deal that they signed.
Chamberlain began to rearm - especially building up British air power. Tsipras may also prepare
for a future confrontation with the Troika.
The role of the Eurosystem within the half-hidden political order of the eurozone really
is comparable to the Soviet or Chinese Communist Party.
No, it's not. Billmon doesn't understand the structure. He's not seeing it clearly, and is not
getting to the root of the problem.
The individual EU countries that use the Euro cannot create their own currency. They GAVE UP
their sovereign currency for a foreign one, the euro, when they agreed to make themselves subservient
to the Maastricht Treaty.
The Maastricht Treaty did/does not allow for a 'federal government of Europe'. It ONLY concerned
itself with a monetary union, and it set down strict rules for entry (for instance, a nation's
deficits could be no more than 3%--an insanity). It allowed for the creation of a central bank,
the European Central Bank (ECB), whose operating rules were dictated by the Maastricht Treaty
(and subsequent revisions).
But crucial to understand is this: a central bank CAN ONLY SET MONETARY POLICY. You need a
'federal government' to SET FISCAL POLICY. The EU doesn't have that. Sure, it has the EU parliament,
and it has a bunch of unelected officials running the ECB. But it has no overlord, no elected
oversight, that can rule in conditions like Greece is going through to ease sectoral pain, and
stop the bleeding of ordinary citizens. That requires fiscal policy. The only way that fiscal
policy can be changed in the EU is by a change to the treaties. Or the blessing of Angela Merkel,
because Germany has captured the ECB.
Let me try to put this in perspective. The US has a federal government AND a central bank.
Despite what all the Federal Reserve haters and the 'get rid of the IRS' people claim (inaccurately),
the US central bank is a creature of Congress and must answer, by law, to the federal government
twice a year. It is the US Treasury's banker, and must, again by law, return all profits each
year to the US Treasury.
The US federal government creates fiscal policy. This is the direction for the country that
the central must follow and support trhough monetary polices. Fiscal policy is Congress' job although
they haven't done it properly for 30 years. For example, if one of the 50 states is in trouble-let's
be hyperbolic: devastating earthquake, massive drought, asteroid hits--Congress can authorize
("appropriate") funds--creating them 'out of thin air'-to help the state. With no debt
to children or grandchildren.
Why? Because the US federal government issues the currency, the 50 states only use them. The
50 states cannot create their own currency, just like the countries that use the euro. But the
50 states have the protection of the US federal government.
The formerly sovereign countries in the EU that use the Euro are like the 50 US states now.
They cannot create their own currency, which would give them the policy space to pay their
own citizens and denominate all the debts incurred in their own currency. They are dependent on
the ECB, a goddam central bank that has no fiscal authority, to help them. EVEN THOUGH, in Europe,
the ECB issues the Euro 'out of thin air'. The ECB is a collection of central banks. And right
now Germany's central bank is dominant because it has climbed to the top-Germany was deeply in
debt before the euro took over-on the backs of the other nations.
You will not begin to understand what is going on until you realize that the euro was designed
by the famous French economist, François Perroux, in 1942 in anticipation of Hitler winning WWII,
which was expected then. The plan was that they (the Nazi Pétain government wanted to be aligned
with the German hegemon) would introduce a pan-Eurpoean currency and force adoption by the southern
and eastern European countries to control and impoverish them. Mitterand, aligned with the Nazi/fascist
Cagoulard in the late 1930 and 40s, was a Pétain enthusiast; this only came out in 1990. It was
Mitterand who pushed through the euro, if you will check history. Perroux's monetary replacement
was the blueprint for the Maastricht Treaty and the subsequent treaties.
How the fuck is it accepted, that private banks can print as much national currencies as they
like, but the owners of the those national currencies - the people and the government - cannot
do with fractional reserves and money printing, like what the private banks do.
1. Private banks cannot "print as much national currencies as they like."
2. Fractional reserve banking does not exist. It died 80 years ago in most modern economies.
I think only Hong Kong and Bulgaria (I think) use it now. The US doesn't' use it. Neither does
any single country in the EU or Europe. Fractional reserve banking can only exist in countries
that have a gold standard.
3. The only entity that prints the euro is the ECB, although the national central banks do
it for the ECB under contract. BUT. BUT. BUT. These national central banks do it by keystroke.
They don't control the physical printing presses. Besides, physical currency is such a small part
of the currency.
4.
but the owners of the those national currencies - the people and the government
any country using the euro is not using a "national" currency. They are using a foreign currency.
@19/20 psychohistorian.. i like where you are coming from, but people are slow to change and
always looking for leadership.. many think that because someone is rich or has a type of power
that comes with money, that they will be good enough to lead.. that is a mixed bag to me personally..
there are just as many losers with money as not..
@28 Laguerre.. thanks.. you've given a specific example to my more generalized observations
already posted.. indeed - visa and mastercard are a part of the same ponzi scheme run by the same
kleptomaniacs under the guise of whatever they want to pass themselves off as.. playing with the
bank of international settlements is only a step away..
@35 guest77 quote.. "The world- but especially the west - in the last 30 years, has changed
so fundamentally that democracy is nowhere to be found." i think that is very true..
@39 mrw.. good post, but you are not addressing the issue directly either.. making a comparison
to what was a country like greece to one of the states in the usa, cheapens the idea of what a
country is.. the euro has done this too.. doesn't mean we have to go along with it, but in terms
of drawing a parallel, it isn't a bad one to make. and of course the big difference here is now
that greece has given up it's control of monetary policy, as have all the other countries gobbled
up in this insane idea of an european community - greece is an opportunity for everyone within
the stupid structure to see it for what it is - a complete rip off of any shred of democracy that
might have remained...
mrw - we've had these conversations before.. you appear to think the fed reserve is some sort
of good two shoes neutral structure that follows a mandate and is not beholden to malevolent interests..
i see it as just the opposite.. the euro was another way to diversify the ponzi scheme by duping
a lot of ignorant people into something they would have been better knowing more about.. i would
be curious to hear a response from you that provides an answer as to the solution here.. mine
would be greece to say fuck you to the euro currency and go back on it's own...
@jackrabbit.....you said that us "lower class" folk rely on the "upper class" folk to keep
the world running
In the 66 years of my life I have seen untold potential waiting/begging for opportunity
and I think your neck might break watching the momentary vacuum be filled getting rid of the
top 50K social parasites and their attendant sociopaths. It is a myth that us poor 99% can't
make it without the 1%. It is a myth that has been around for centuries and never has been
true. The 1% are and have been an impediment to that advancement of humanity for quite some
time. In most major ways we stopped evolving during the Enlightenment period when faith didn't
become deprecated but instead became one of the tenets of the Western form of social organization,
others being private property/finance, inheritance and "rule of law".
If all that were to change by neutering inheritance and ongoing ownership of private property
(yeah, neuter public policy influence of religions too) With Capital being returned to the global Commons, public education regains its priority and
is a right for all but at the higher levels; and private education disappears. With those of
faith no longer being in control of public policy, population control can be discussed, managed
and alternatives like birth control researched/provided. We have answers for many of our pressing
social problems, but we do not have the will to break out of the anthropological mold we are
in.
Would the 99% agree to develop and use a technology that burdened the next thousand generations
of humans to manange the potentially extinction causing effluent (i.e. Fukushima)? We live
according to a very sick, no longer defensible and currently committing war crimes against
humanity form of social organization, who's administrators we used to prosecute at the Hague
70 years ago. American empire is now the tool of the global plutocrats and the odds of the
99% wresting control away and changing the course of our species and world look slim.......but
creating textual white noise on the intertubes is cathartic.
Regarding events of past 6 months between Greece and the EU (and Greek membership of the euro).
Following the recent Greek capitulation,it is clear to almost everyone now that the fuse has
been lit beneath the euro.(and possibly even the entire European project.
Eurosceptism is starting to break out (and its only just starting) throughout the entire
EU. We can now all see politicians such as Marine Le Pen getting elected in next French Presidential
Election on a purely "leave the euro now" ticket.
PS the entire Europe project was always predicated on a "lets destroy individual National
Sovereignty" premise (a sort of EUSSR).
I never did understand why when Communism officially died around 1990 that it seemed to make an almost simultaneous and miraculous rebirth, but then Europe is the
land of Dracula and various other 19th century horror stories.
Syriza has shown, I suppose, that gaining access to power isn't enough. The party
has to be involved with its members and those they hope to make members. guest77 at
35.
I agree, also pretty much with the rest of the post. What happened is that there was a power
vacuum in Greece (when PASOK threw in the towel and the old structure crumbled) and the only
ones willing to enter the breach were Syriza. One might also say that in Greece the political
power structure does not match the real power structures in a good or efficient way. This democratic
hoopla is all peachy cool when it is Swiss burghers discussin' and votin' on the color of the
trams, or property tax, while being faithful to their 'radical' or 'socialist' -whatever- roots.
In Greece, in its present form, it does not work. See for ex. the fantastical abyss between
the OXI vote and the acceptance by the elected representatives of even harsher austerity.
Ideally, in a hypothetical genuine, true? democratic system, after the OXI vote a
unitary or even technocatic Gvmt should have been formed (ironically, Tsipras did just that
in a way ..) behind the OXI vote, to collectively resist and bargain (doubt any positive result
would have been forthcoming but who knows), but naturally that was not possible.
One argument is that the 'Left' must be 'more in touch', 'must reform', must be 'more grass
roots' etc. (Sounds a bit like what they say about the EU, heh? And in Greece that argument
is made, plenty) - true, but imho it won't be enough. No way.
So some other avenues have to be explored, sought, implemented.. One imperative (under
the present cirucumstances) is national sovereignity, see in Greece, New Democracy being say
'for austerity', 'for the euro' and so on because they are tied up in comprador not to say
Mafia circles linked to the EU, big capital, banks, instituted corrupt structures, tax evasions,
etc.
Anyway this debacle has shown that parliamentary democracy is not to be afforded to small
powerless countries that have been taken for a ride. I think ppl are seeing that now, that
facade is cracking.
Overall the EU is in deep sh*t. It won't survive for very long in its present shape.
This article fails to note the 'eurosclerosis' that plagued Europe in the 70's and 80's.
Uncompetitive economies with large social obligations and clientist political systems that
still exist in some areas.
The 'evil genious' moniker doesn't really fit. I doubt he is the only economist that would've
offered such a solution. And he is certainly not the only guy that found European labor laws
of the time to be a costly headace. I think he just got there first. And his demeanor is grandfatherly
not menacing.
And he is not unmindful of how his work can be misused. When I took his advanced economics
class in the early 90's I argued against the excesses of supply-side economics while others
in the class seemed to be eager to show their support of what they assumed Mundell believed
in. I got an A-.
=
There are problems with the Euro - the disparate economies, the lack of political and fiscal
union, the uneven benefits, etc. - but blaming it on the academics seems like scape-goating,
and nearly as bad as blaming it on the victims. Should we blame Marx for the fall of the Soviet
Union?
How do you reconcile the contradiction between your points 1 and 2.
If Private banks "cannot" print as much money as they like ( point 1 ), then how can fractional
reserve banking Not exist in most of the world ? ( point 2 ) . If fractional reserves do not
exist then they free to print as much as they like.
Of course whem I say they can "print as much as they like" , that is not a children's imagination
interpretation where the private banks are free to print infinitelt, that's of course the private
banks have been unlinked from previously acceptable amount of printing/keyboard strokes, to
create money.
And your 3rd doesn't make any sense at all. How does a gold standard have any restrictions
on having a 10% fractional reserve, 1000%, or 1,000,000% of gold holdings ? Gold doesn't make
decisions, regulations and enforcement are the decision-makers. Whether it's gold or fiat.
And your point 4 is right. It is my argument to why no country should join a single currency
like the euro, and nations should always have their own sovreign national currencies
Sorry to be late on here. The Chamberlain comparison is an interesting one, and Tsipras'
tragic flaw may be his devotion to the Eurozone - I think it is his, not really any perceived
mandate, because surely he knows a good leader makes choices as events change - to go back
to my example, that's what FDR did, and very risky choices they were. Some of FDR's didn't
work, so he did other things. He was making it up as he went along, and I think that's very
similar to what would be needed in exiting the eurozone. You would have to bring the people
along with you, with the confidence and trust that something needed to happen, charting a new
course. Tsipras doesn't seem to have been willing to do that, and consequently he runs the
risk of being just one more in the line of leaders who have caved under pressure.
I think it has a lot to do with lack of faith in the people themselves on the part of such
leadership. Obama showed this when he didn't take public financing but already was turning
to the banksters. He didn't need to do that, and he probably would have even had a bigger vote
tally if he'd stayed with the people. I wonder why this new leadership seems so divorced from
sympathy with those who elect them and whom they presumably serve? I don't think Tsipras is
as two-faced as Obama, but he's starting to wear the same shoes. The tragedy is the Greek people
so much need him to step up - the way a tennis player steps up if he's really a champion. I
think there's still time but it's getting late. If he keeps on with this deal, history will
take note. That's a huge price to pay.
Tsipras ... he messed up. If 'his' deal goes through Greece suffers the full catastrophe.
The thing to do is to prevent that happening. Tsipras is a lame duck. It makes little difference
why he messed up ... character flaw, bribery, incompetence, all the usual failings of the political
class.
The point is he has set Greece up for more lethal loans and so his 'program' must be repudiated.
The only way I can imagine that happening is via the direct participation of the Greek people
in their government. If there is a majority NO! on the new' program, good. Make a counter offer
... when (if, I suppose, to be inclusive) it's rejected, exit the euro - there's life at the
end of the tunnel. If not ... well, they're done for, aren't they?
Debt-slaves of the German-dominated EU : deprived of their remaining assets and their own
government.
Why this capitulation? Why have we come to this after all the enthusiasm of six months ago?
After the surge of grassroots support in this country and in Europe? The answer is clear
to me. And it has to do with the wrong strategy, that was good enough to win elections,
but proved disastrous in government. What is this wrong strategy? It's very simple, expressed
openly time and time again. We will achieve radical change in Greece, radical change in
Europe, and we will do it within the Eurozone. That was the strategy. Well, that's not possible,
period.
As far as I'm concerned, the Greek left has found its leader. Lapavitsas says it all, clearly
and brilliantly: Grexit and nationalize the banks.
You can't advance if you do not understand that Syriza has failed, if you keep making excuses
for their failure, or try to pretend it was anything but failure. Greece must leave the euro.
This has been obvious for several years, but unreasoning, 'no matter what' Eurozone love, especially
prevalent within Syriza and generally among the middle-class European left and pseudo-left
(Podemos, I'm looking at you!), MUST be abandoned. The euro doesn't love you; it's time to
stop loving it back.
The MAIN task for the European left, if it wants to be left rather than neoliberal, is to
abandon the euro. It's easy: listen and be persuaded by Lapavitsas.
More from Lapavitsas: Finally, the deal is quite clearly neocolonial. The government of the left has signed up Greece
to a neocolonial agreement.
And it is--it is neocolonial for many reasons. I will mention three. First, the deal proposes
the establishment of a privatization fund of 50 billion Euros which will basically sell public
property under foreign management. 25 billion of that, the first 25 billion, will go to the
banks by the agreement. If there's anything left, and there won't be anything left because
they'll never make 50 billion, it might go to repaying the debt and possibly to investment.
Essentially, then, this fund will sell what it can of public property to recapitalize the banks.
We've just agreed the deal that sells the family silver to recapitalize the failed Greek banks. ~~~ The real winner of this deal is obvious. It's staring you in the face. The real winner is the
Greek oligarchy expressed in the mass media. That's why the mass media are thriving and celebrating
[a win]. ~~~ Because the monetary union in which, to which Greece belongs, is not ideological. I mean, it
is, but it isn't just ideology. And it isn't just a balance of forces. It is an institutional
mechanism. The sooner the Greeks understand this, the better for all of us. It is an institutional
mechanism, it is a monetary union that's, it's a hierarchical body that works in the interests
of big business and in the interests of a few countries within it. That's what the EMU is. ~~~ Now, what do we do, then? What we need to do is to withdraw our consent to this agreement.
To withdraw our consent to this agreement. And to redesign a radical program that is consistent
with our values, our aims, and what we've told to the Greek people all this time, all these
years. And that radical program is impossible without Euro exit. The only thing that we really
need to do is focus on developing a plan for Euro exit that will allow us to implement our
program. It is so obvious I'm amazed that people still don't see it after five months of failed
negotiations.
http://www.bbc.com/news/world-europe-33578778 The former Greek finance minster has said his country's economic reforms are "going to fail",
just as formal talks on a huge bailout are set to begin.
In a BBC interview, Yanis Varoufakis said Greece was subject to a programme that will "go
down in history as the greatest disaster of macroeconomic management ever". ~~~ I may disagree with [PM Tsipras] and I declared that by resigning my post ~~~ The bailout could total €86bn (£60bn) in exchange for austerity measures.
In a damning assessment, Mr Varoufakis said: "This programme is going to fail whoever undertakes
its implementation."
Asked how long that would take, he replied: "It has failed already."
Varoufakis is just whining. He doesn't provide a solution to the immediate and staggeringly
important problem, imposition of worse austerity on Greece's people. He sounds not dissimilar
to Tsipras, who also says he's unhappy/pessimistic yada yada. They're like old men complaining
about the weather. Whining and whinging, Tsipras has signed up to carry out the police state
repression that's the only way his new legislation can be carried out.
Even though the solution/escape is clear, as Lapavitsas points out. It's almost as if the
Syriza apologists are incapable of saying/thinking the word 'Grexit'. Who is holding their
tongues?
parking weapons like f-16 and submarines in countries is a good idea...they are maintained
and serviced and kept ready for active service...this all under the cover of arms deals etc
etc.
there is only one flaw..the government of that country must be trusted....they cannot change
sides...greece is in a unique position.opposite north africa,on the med, so it is well positioned
for launching of attacks,on countries like libya or tunisia or even egypt.
"Varoufakis is just whining. He doesn't provide a solution…"
Exactly. There is no solution that doesn't include leaving the Euro and reclaiming monetary
sovereignty (although that alone won't do it…they need astute, competent leadership too). A
solution that presumes changing the fundamental Euro structure to include a fiscal component
is never going to happen, the big guns (Germany) would leave before that would happen.
Playing long shots works in the movies, in real life not so much.
Most of the billions of words that have been written on this subject have been little more
than wailing and gnashing of teeth. Denial.
There are several stages to go before there is any viable solution that citizens will sign
on to, that won't be co-opted by TPTB.
I'm not saying Syriza made all of the right mover, but neither do I think they can be
considered "the Greek People's enemy". Not at all. They appear to be being honest.
guest77 | Jul 17, 2015 7:52:02 PM | 64
What a load of utter nonsense.
Honest?
They demanded the right to seek a mandate from the people before proceeding. They then got
exactly the mandate they claimed to have sought . . . . . .
. . . And then, promptly ignored it entirely.
=======
There's nothing "honest" in that. Cynical? Absolutely. Manipulative? Certainly
And you guys are just endlessly whining about the whiners ... the political class has chosen
its preferred 'solution'. They're all done. If there is to be a real solution it has got to
come from the Greek people.
@37
That's quite an article. I cut and pasted the picture of the 'bow-tie' graph and made the
table of the 50 top controllers from page 33 sortable below it.
I'll try to summarize the significance of the bow-tie graph and its abbreviated labels tomorrow,
for those who don't want to read the
full article
themselves.
Twenty-four of the top 50 controllers are nominally American.
As MRW writes, at 40, there is no resemblance between EU financial and pol. structures those
of the Soviet, Chinese Communist Parties.
MRW maybe you are hyping the Nazi past? Mitterand and Thatcher particularly were against
the re-unification of Germany. Mitterand wanted to lock Germany down in the Euro in an 'alliance'
(or because he was a bankster's man, in fact laws prohibiting speculation were lifted in France
well before Billy C's annulment of Glass-Steagall, the US played catch-up) and Germany made
the trade, with difficulty (attachment to the mark, independence, etc.) Controlling countries
through their currency and banking system is not an original or particularly Nazi idea. For
ex it works right now in parts of Africa with the CFA and nobody talks about it. The French
didn't borrow that idea from the Nazis.
Jackrabbit at 38, juliania at 66, jfl & fairleft >67
Like many, I've been waiting for the longest running drama on the Athens stage to finally
get to the last act before attempting to make sense of the staging, plot and characters.
I still don't think we're quite there yet; probably a little more political fall-out still,
but not much, see e.g.,
a majority of the Syriza Central Committee opposed the austerity deal.
Having set aside the mandate of the Greek electorate, the Syriza government has willfully
ignored last week's landslide "No" vote and secretly agreed a raft of repressive, impoverishing
measures....
The leaders of Syriza are revolutionaries of a kind – but their revolution
is the perverse, familiar appropriation of social democratic and parliamentary movements
by liberals groomed to comply with neo-liberal drivel and a social engineering whose authentic
face is that of Wolfgang Schauble, Germany's finance minister, an imperial thug. Like the
Labour Party in Britain and its equivalents among former social democratic parties such
as the Labor Party in Australia, still describing themselves as "liberal" or even "left",
Syriza is the product of an affluent, highly privileged, educated middle class, "schooled
in postmodernism", as Alex Lantier wrote. [I could not immediately find whatever Pilger
is quoting, he is affiliated with the "wsws"
website; such sad sloppiness at a major
site in these days of html coding...]
For them, class is the unmentionable, let alone an enduring struggle, regardless of the
reality of the lives of most human beings. Syriza's luminaries are well-groomed; they lead
not the resistance that ordinary people crave, as the Greek electorate has so bravely demonstrated,
but "better terms" of a venal status quo that corrals and punishes the poor. When merged
with "identity politics" and its insidious distractions, the consequence is not resistance,
but subservience. "Mainstream" political life in Britain exemplifies this.
This is not inevitable, a done deal, if we wake up from the long, postmodern coma and
reject the myths and deceptions of those who claim to represent us, and fight.
How then do democratic movements ensure that their leaders views and priorities accord with
their own, and can be held responsible and be replaced? What sort of leadership is needed for
industrial as well as political democracy?
ps to 77 -- Amongst the parties affected by the Munich Agreement, I think Edvard Beneš,
the Czechoslovakian President, is a better fit for poor Tsipras.
"the political class has chosen its preferred 'solution'. They're all done. If there is
to be a real solution it has got to come from the Greek people."
No kidding?
I don't know what's worse, repeating the obvious ad nauseam or whining.
Having set aside the mandate of the Greek electorate, the Syriza government has willfully
ignored last week's landslide "No" vote and secretly agreed a raft of repressive, impoverishing
measures…. a quote by rufus at 77
NO. Syriza was elected on a platform of 'staying in the EU-Euro' and at the same time 'reducing
/abolishing austerity.'
This mandate might be considered contradictory or ridiculous, illusory, doomed to fail,
etc. (Yes I agree.)
Also Syriza has a slim voter support and thus had to form a coalition Gvmt.
Well in function of that contradictory mandate they managed (at terrible cost and perhaps
misguidely) half of it. Staying in the Euro.
What is surprising? Nothing.
Why they chose the one above the other is abundantly clear.
I enjoy good discussion and criticism but this carping and sniping about Syriza from the
US Left says more about writers such as JP and the weaklings of the Left, that have attained
a new level of meaninglessness, and has allowed someone like Bernie Sanders to claim to be
a Socialist without any real blowback, is trying.
paulmeli at @63 has got it exactly right. In all modern economies on a fiat currency, loans
create deposits.
Bankers, as a result, create 'credit money', NOT new interest-free money. (Credit money
also means that one person's asset is another person's liability. At the commercial banking
level within the real economy that includes collateral, timed repayment schedule, and interest
owed, which is income to the issuing bank. Everything nets to zero at this level across the
macroeconomy.)
The US federal government, on the other hand, adds new money into the economy. Only
entity that can. Only the US federal government can introduce new, interest-free money
into the economy, and it does it via congressional spending based on the needs of its citizens,
and where it wants the economy to grow (giving 40% of it to the financial institutions is NOT
GROWTH). Which the mo-fos we've elected do not understand.
One small quibble, Paul. The amount of physical currency, physical cash and coin, is around
11.5% to12% of the available money. The rest are treasury securities. Don't forget that countries
like Ecuador are pegged to the USD and need US cash for their citizens. Ecuador's central bank
orders them from the US Treasury (Bureau of Printing and Engraving) and puts up 100% of the
demanded amount in assets (treasury securities) to pay for them.
Sorry for the delay. I'm traveling. Good questions, btw.
First, let's clear up what fractional reserve banking is. This is a lousy simplistic
example, but it will work. And let's imagine a small western town with one bank, which I will
call Bank Buckeroo. Introducing a second bank in the town mean I would have to explain how
interbank reserves work, and it doesn't matter in this explanation. [BTW, US banks DO NOT LEND
their reserves; reserves serve another purpose in the US banking system; namely to help the
Federal Reserve retain the overnight interest rate target that banks charge each other. Canada,
for example, doesn't even have a reserve requirement for their commercial banks.]
Fractional reserve banking explained
OK. Johnny Schwartzburger sidles into his Bank Buckeroo and deposits 100 bucks in cash in
his savings account.
Now Bank Buckeroo has got $100 more than it had yesterday.
Because the reserve requirement is, say, 10%-the FRACTION of the loan that the bank must
retain under "fractional reserve banking"--Bank Buckeroo holds onto $10 and can loan out $90.
Sally Sweetpea needs $90 for her beauty shop and she borrows $90 from Bank Buckeroo, and
deposits that in her checking account.
Now Bank Buckeroo holds onto $9 (10% of $90) and can loan out $81.
Old Ray Saddleback needs $81 to buy supplies for the only café in town, so he hits up Bank
Buckeroo for an $81 loan.
Bank Buckeroo holds onto $8.10 (10% of $81) and can loan out $72.90.
Paddy O'Gilligan needs $72.90 to top off his supply of whiskey at the only bar in town (and
this banker likes his whiskey), so he borrows $72.90 from Bank Buckeroo.
Bank Buckeroo holds onto $7.29 (10% of $72.90) and can loan out $65.61
You see where I'm going with this. Eventually, Bank Buckeroo will have reserved all $100,
but will have extended credit against that $100 to customers that he knows are good to pay
back their loans. Under the gold standard system before 1933, each dollar had a statement on
it that you could exchange 20 of the one-dollar bills for one ounce of gold (not exactly the
statement but that's what it meant). It was a "fixed exchange rate." The value of a dollar
(US) was fixed to the value of gold. So Bank Buckeroo has Johnny Schwartzburger's original
$100 in cash that guarantees it can trade-in the cash for $100 in gold anytime it wants. It's
protected against that loss. The only thing the banker has to worry about is whether his customers
can pay back the new loans, and he knows their creditworthiness intimately.
That all changed in 1933-no more gold standard in the US
We went off the gold standard. The value of the USD was no longer pegged to the value
of gold, the supply of which the US federal government could not control globally except
for certain US mines. Each new goldmine find globally affected the value of the dollar before
1913 and led to extraordinary panics and busts in the last half of the 1800s. More gold available
meant the value of the dollar dropped, and that affected international trade, and whether people
exchanged their dollars for gold stateside and hoarded it, further diminishing the amount of
money available in the real economy. It was the National Gold Something-or-Other Act in 1900
that pegged the USD at $20/ounce.
Interestingly enough, it was Marriner Eccles, whom FDR made the first chairman of the Federal
Reserve three years later, a Republican Mormon banker from Provo UT who appeared before the
Senate and House of Representatives in 1932/33 to make the case for dropping the gold standard
(he wasn't the only one however). Eccles became more popular than Miley Cyrus. Eccles had seen
the devastation that the banking system was doing to his municipal and rural customers. Eccles
was 22 when he made his first million after his father died and he had to take over the family
businesses, which included a bank. He was a financial genius who could speak plain English
to commoners about banking and esoteric financial concepts. His ideas predated John Maynard
Keynes by three years. (BTW, Keynes was never taught in American universities, so anyone
sneeringly invoking Keynes doesn't know what they are talking about. The first Nobel Laureate
in Economics, Paul Samuelson, is supposed to be the explainer and keeper of Keynes ideas, but
Samuelson admitted in 1989 in a video interview that he never read more than half the book,
and that he never understood Keynes' ideas to begin with.)
[to be contd]
Correction: Each new goldmine find globally affected the value of the dollar before 1913
Should read: Each new goldmine find globally affected the value of the dollar before
1900
If Private banks "cannot" print as much money as they like ( point 1 ), then how can fractional
reserve banking Not exist in most of the world ? ( point 2 ) . If fractional reserves do
not exist then they free to print as much as they like.
[…]
And your 3rd doesn't make any sense at all. How does a gold standard have any restrictions
on having a 10% fractional reserve, 1000%, or 1,000,000% of gold holdings ? Gold doesn't
make decisions, regulations and enforcement are the decision-makers. Whether it's gold or
fiat.
Loans create deposits. Yes, 'out of thin air'. Bankers can say 'Yay' or 'Nay' based on the
cut of your jib, or the color of your skin, although they are not allowed to. Banks don't print money. They issue credit, i.e. 'credit money'. They mark up the customer's
bank account with computer keystrokes in the amount of the loan. Banks issue credit money based
on two things: (1) customer creditworthiness, (2) customer income. They also require collateral. Banks have to maintain reserves in
their banks accounts at the Federal Reserve
on all the loans they make.It is a percentage of the loan, and banks cannot loan out
this money. If the bank doesn't have enough reserves in their Fed account, they have to borrow
from other banks at the Fed Funds Rate, or overnight interest rate, set by the Fed. (The Fed
uses this overnight interest rate to promote or demote bank lending in the economy, among other
things.) If the bank has been making bad loans or is overextended-this goes to your Point 1 about banks
being free to issue as much credit money as they like-and other banks know that, the other
banks might not loan it any reserves. In that case, the solvency-suspect bank has to slink to the Fed's Discount Window where they
can borrow the required reserves, but the interest rate is punitive, and it usually alerts
bank examiners that there's a problem at the bank. So having to go to the Discount Window is
not something a bank wants to broadcast. By law, the Federal Reserve must supply reserves to banks within the federally chartered banking
system, or declare the overextended bank insolvent. A 'check and balance' on a bank loaning out as "as much as they like" is meeting its reserves
requirement.
About gold. When you have a gold standard, you're on a fixed exchange rate: X amount of
currency for each ounce of gold. That's when fractional reserve banking makes sense because
the bank only wants to loan out X amount of money based on the amount of gold in the kitty.
It's up to the banker to make intelligent and safe decisions about who he loans to by doing
his due diligence.
On a gold standard, he who owns the gold, owns the country. When we got rid of the gold
standard, goldminers and gold owners stopped owning this country, including Mr. Rothschild.
We fucked him up the ass. Our money is based on the 'full faith and credit of the US federal
government' and we issue our own currency. To boot, we are the reserve currency worldwide.
The thread didn't take my formatting in @88. Here is the first half presented in a clearer
format: ----------------------------------------------
In response to Tom's @61
Loans create deposits. Yes, 'out of thin air'. Bankers can say 'Yay' or 'Nay' based
on the cut of your jib, or the color of your skin, although they are not allowed to.
Banks don't print money. They issue credit, i.e. 'credit money'. They mark up the customer's
bank account with computer keystrokes in the amount of the loan. Banks issue credit money
based on two things: (1) customer creditworthiness, (2) customer income. They also require
collateral.
Banks have to maintain reserves in their banks accounts at the Federal
Reserve on all the loans they make.It is a percentage of the loan, and banks cannot
loan out this money. If the bank doesn't have enough reserves in their Fed account, they
have to borrow from other banks at the Fed Funds Rate, or overnight interest rate, set by
the Fed. (The Fed uses this overnight interest rate to promote or demote bank lending in
the economy, among other things.)
If the bank has been making bad loans or is overextended-this goes to your Point 1 about
banks being free to issue as much credit money as they like-and other banks know that, the
other banks might not loan it any reserves.
In that case, the solvency-suspect bank has to slink to the Fed's Discount Window where
they can borrow the required reserves, but the interest rate is punitive, and it usually
alerts bank examiners that there's a problem at the bank. So having to go to the Discount
Window is not something a bank wants to broadcast.
By law, the Federal Reserve must supply reserves to banks within the federally chartered
banking system, or declare the overextended bank insolvent.
A 'check and balance' on a bank loaning out as "as much as they like" is meeting its
reserves requirement.
Communism definition: A political theory derived from Karl Marx, advocating class war and leading
to a society in which all property is publicly owned and each person works and is paid according
to their abilities and needs.
Central banksters are not advocating communism. Indeed, the totalitarian fascist financial
criminals advocate no publically owned property. They are buying public lands for pennies on the
dollar as they enslave the population via representative debt.
The banksters are plundering criminals that want all that is valuable and to hell with the
population, there are too many people anyway, let them starve. The criminal fascist central banksters
hate any public support of the people. That is not a communist or a socialist and certainly not
a democratic concept; it is a totalitarian criminal bankster cartel fascist concept.
Benito Mussolini in his book titled "The Doctrine of Fascism" defined fascist form of government
as the merger of corporate monopoly with government. The bankster modern fascist should be branded
as fascist, and no other, to distinguish them from representative democracy (government of, for
and by the People.
windcatcher
The European Union before the Eurozone, was designed and implemented by the bankster financed
and controlled Council on Foreign Relations and the Trilateral Commission. Goldman Sachs is but
one tentacle of the criminal bankster world financial octopus of the New World Order Empire.
Our American Constitution has not been destroyed (same for Greece Constitution); it has been
overthrown by bankster fascist (government of, for and by multinational corporate monopoly). The
American Constitution and our Bill of Rights, as authored primarily by James Madison and explained
in the Federalist Papers, are still intact today.
Our Founding Fathers had to deal with the same problems we are facing today: domination by
corporate monopoly over the American economy and obeying foreign laws.
We fought the American Revolution to be free from the corporate monopoly and domination of
the American economy by the British Empire.
After we won the war, our Founding Fathers along with economist Adam Smith's "Free Enterprise"
economy, the American Constitution was written to guarantee the American People that the government
function was for and by the People--- not government of, for and by the criminal corporate monopoly.
The Age of Enlightenment of constitutional democratic republics began.
To paraphrase Thomas Jefferson, the Constitution, if not vigilantly guarded against criminal
corporate monopoly corruption, the people will have to refreash our Constitution with revolution.
Indeed, our nation was founded on revolution in rejection of corporate monopoly and domination
by totalitarian criminal banksters.
Enough is enough! Nationalize the banks and requisition them to serve the People to restart
our American Free Enterprise economy, throw the fascist totalitarian bankster criminals in prison!
If the criminal banksters were prosecuted for American mortgage fraud back in 2000 the criminals
would have been in prison instead of destroying the economies of the world with their fascist
totalitarian New World Order Empire.
Radical Marijuana
I did not previously know those historical details presented in the article above, however,
those do not surprise me! The European Union and its Euro were projects of the international bankers,
within which context almost all of the successful national politicians were the banksters' puppets,
voted for by enough of the people who have become the banksters' muppets, while the European politicians,
and those that voted for them, became mostly even more so...
The EU and Euro were stepping stones.
Tragedy and Hope by Carroll Quigley:
"powers of financial capitalism
had another far-reaching goal,
nothing less than to create a
world system of financial
control in private hands
able to dominate the
political system of
each country and
the economy of
the world as
a whole ..."
"...The lesson Schäuble learned – and which is likely to influence his decision-making now –
is that if you act the pure-hearted neoliberal you can still get away with decisions that don't make
perfect economic sense."
.
"...But Schäuble should have learned from history that the Treuhand gamble had catastrophic psychological
consequences. Even though the agency was run by Germans, who spoke German, still it was seen by many
in the east as an occupying force."
.
"...Schäuble's idea of foreign countries controlling Greek assets and moving them abroad is an even
more humiliating concept for any country. Schäuble comes across as a tough and sober accountant. In
fact he is just an ordinary politician repeating old mistakes. "
.
"...The assault on his life, who forced him to a wheel-chair, made Schaeuble, who always was an
arrogant, egocentric, right-wing conservative, a vengeful and bitter arrogant egocentric conservative,
who hates everything even remotely socialist."
.
"...And the whole Greece thing just shows how idiotic neoliberalism actually is..."
.
"...This talk of nation vs nation is a distraction. It's better to follow the money. It quickly
becomes clear that those who have profited from Greece joining the Euro are keeping their money and
the rest are having to suffer the consequences. Goldman Sacks have made billions as have investors in
Europe. Meanwhile the people of Greece, Germany or the broader EU are being told they have been reckless
and will have to suffer the consequences."
.
"...It's enough to be in the wider neoliberal EU to go under. Being in the eurozone just adds extra
pain, waterboarding and rectal feeding. As EU apparatchiks admitted themselves. Maybe the US can now
shut down Gitmo by sending the inmates to Greece, where conditions are just as harsh."
.
"...Whilst national governments are printing money in gay abandon to bail out their banker backers...
Simultaneously fleecing their taxpayers under the the moral pretence of 'Austerity', we have witnessed
an unelected cartel eviscerate a sovereign nation. The Greek Balance Sheet of Misery is deep in the
red! Apparently, people no longer matter - Politicians and Bankers have a free rein.Greece
fell for the EU dream... It was a political sucker to be exploited for the benefit of the Project. Post
2008, it has been treated like dirt. Its neighbours should take note - this Union is a nasty creature."
.
"...Many many people these on both sides of the former border are living in a way where 1990 GDR
living standards would just about be an upgrade."
.
"...The nepotism and clientelism of the ruling class has been a problem since independence from
Turkey and successive Greek governments have promised and failed to rectify it but that doesn't excuse
humiliating an entire nation and pushing it to the point of economic and civil collapse because 'they
deserve to reap what they sow' regardless of the consequences for the entire region with IS just a few
hundred kilometres away. This is the worst case of being unable to see the wood for the trees that we
have seen since the 'allies' invaded Iraq on the pretext of saving the West from nuclear weapons that
did not exist.
The vindictive behaviour towards Greece marshalled by Germany last weekend has lost it a lot of friends
and reminded us where its mindset comes from and where it leads to if more civilised nations do not
step in to reel it in. Habermas in particular is particularly cognisant of this."
Every drama needs a great baddie, and in the latest act of the Greek crisis
Wolfgang Schäuble, the 72-year-old German finance minister, has emerged as the standout villain:
critics see him as a ruthless technocrat who strong-armed an entire country and now plans to strip
it of its assets. One part of the bailout deal in particular has scandalised many Europeans: the
proposed creation of a fund designated to cherrypick €50bn (£35bn) worth of Greek public assets and
privatise them to pay the country's debts. But the key to understanding Germany's strategy is
that for Schäuble there is nothing new about any of this.
It was 25 years ago, during the summer
of 1990, that Schäuble led the West German delegation negotiating the terms of the unification with
formerly communist East Germany.
A doctor of law, he was West Germany's interior minister and one of Chancellor Helmut Kohl's closest
advisers, the go-to guy whenever things got tricky.
The situation in the former GDR was not too dissimilar from that in
Greece when Syriza swept to
power: East Germans had just held their first free elections in history, only months after the Berlin
Wall fell, and some of the delegates from East Berlin dreamed of a new political system, a "third
way" between the west's market economy and the east's socialist system – while also having no idea
how to pay the bills anymore.
The West Germans, on the other side of the table, had the momentum, the money and a plan: everything
the state of East Germany owned was to be absorbed by the West German system and then quickly sold
to private investors to recoup some of the money East Germany would need in the coming years. In
other words: Schäuble and his team wanted collateral.
At that time almost every former communist company, shop or petrol station was owned by the
Treuhand, or trust agency – an institution originally thought up by a handful of East German
dissidents to stop state-run firms from being sold to West German banks and companies by corrupt
communist cadres. The Treuhand's mission: to turn all the big conglomerates, companies and tiny shops
into private firms, so they could be part of a market economy.
Schäuble and his team didn't care that the dissidents had planned to hand out shares of companies
to the East Germans, issued by the Treuhand – a concept that incidentally led to the rise of the
oligarchs in Russia. But they liked the idea of a trust fund because it operated outside the government:
while technically overseen by the finance ministry, it was publicly perceived as an independent agency.
Even before Germany merged into a single state in October 1990, the Treuhand was firmly in West German
hands.
Their aim was to privatise as many companies as possible, as soon as possible – and if you were
to ask most Germans about the Treuhand today they would say it achieved that objective. It didn't
do so in a way that was popular with the people of East Germany, where the Treuhand quickly became
known as the ugly face of capitalism. It did a horrible job in explaining the transformation to shellshocked
East Germans who felt overpowered by this strange new agency. To make matters worse, the Treuhand
became a hotbed of corruption.
The agency took all the blame for the bleak situation in East Germany. Kohl and Schäuble's party,
the conservative CDU, was re-elected for years to come, while others paid the price: one of the Treuhand's
presidents, Detlev Karsten Rohwedder, was
shot and killed
by leftwing terrorists. (Schäuble too became the victim of an
attack that left him permanently in a wheelchair, only days after German reunification – but
his paranoid attacker's motives were unrelated to the political events)
But the reality of what the Treuhand did is different from the popular perception – and that should
be a warning for both Schäuble and the rest of
Europe. Selling East Germany's
assets for maximum profit turned out to be more difficult than imagined. Almost all assets of real
value – the banks, the energy sector – had already been snapped up by West German companies. Within
days of the introduction of the West German mark, the economy in the east completely broke down.
Like Greece, it required a massive bailout programme organised by Schäuble's government, but in secret:
they set aside 100bn marks (£35bn) to keep the old East German economy afloat, a figure that became
public only years later.
With prices for labour and supplies going through the roof, the already stressed East Germany
economy went into freefall and the Treuhand had no chance to sell many of its businesses. After a
couple of months it started to close down entire companies, firing thousands of workers. In the end
the Treuhand didn't make any money for the German government at all: it took in a mere €34bn for
all the companies in the east combined, losing €105bn.
What the Treuhand did should be a warning for Schäuble and Europe: the economy in East Germany
completely broke down
In reality, the Treuhand became not just a tool for privatisation but a quasi-socialist holding
company. It lost billions of marks because it went on paying the wages of many workers in the east
and kept some unviable factories alive – a positive aspect usually drowned out in the vilifications
of the agency. Because Kohl and, during the summer of 1990, Schäuble weren't
Chicago economists keen on radical experiments but politicians who wanted to be re-elected, they
pumped millions into a failing economy. This is where parallels with Greece end: there were political
limits to the austerity a government could impose on its own people.
The lesson Schäuble learned – and which is likely to influence his decision-making now – is
that if you act the pure-hearted neoliberal you can still get away with decisions that don't make
perfect economic sense. If Schäuble is acting tough with Greece right now, it is because his
electorate wants him to act that way; it's not just that he doesn't care about the Greek people,
he wants people to believe he doesn't care, because he sees the political advantage in it.
But Schäuble should have learned from history that the Treuhand gamble had catastrophic psychological
consequences. Even though the agency was run by Germans, who spoke German, still it was seen by many
in the east as an occupying force.
Schäuble's idea of foreign countries controlling Greek assets and moving them abroad is an
even more humiliating concept for any country. Schäuble comes across as a tough and sober accountant.
In fact he is just an ordinary politician repeating old mistakes.
If Schäuble is acting tough with Greece right now, it is because his electorate wants him
to act that way;
Yes, after they were programmed to feel that way by the well-orchestrated media campaign that's
gone on for 5 years now.
Zabka 18 Jul 2015 07:42
Schäuble is a nasty sociopath and Europe is paying for the fourth time Germany's folly and
Imperial ambitions
sacco ThinkingAustralian 18 Jul 2015 07:41
How could the Greek MPs have voted against the package ? The unelected euro institutions
deliberately crippled their banking system just prior to the referendum. The unelected euro
institutions have had an ongoing police of regime change in Greece. For that alone they need
to be abolished.
You appear to be confusing several things. The governance of the Eurozone is largely in the
hands of the so-called Eurogroup of EZ finance ministers, and what you describe as the "unelected
euro institutions" are, for the most part, as mortified by the situation as you or I but do not
have a role in which they can exercise significant control.
Their influence is (one might even say "unfortunately" in the light of events) rather limited.
In particular, as regards the ferocious arguments over the release of €7.2bn which have dominated
the headlines for the last six months with its endless arbitrary deadlines, the European Commission
team of civil servants who provide the secretariat which performs technical work and assessments
for the Eurogroup concluded that Greece had satisfied the conditions set for release of the funds,
and this outcome was communicated by the "unelected" Commissioner for Economic and Financial Affairs
-Pierre Moscovici- at their meeting last December!
The Eurogroup ministers decided, however, (possibly together with the influence of the IMF)
that they had other reasons not to release the funds. Why? Many observers concluded that they
did so mainly in order to retain a powerful political lever to prevent any incoming Greek government
after the elections from taking any decisions of which they, the Eurogroup, might not approve.
it's worth remembering, though, that the weighting of Germany's vote alone is sufficient to
impose a blocking veto, and that this is also the group with most political power over the European
Central Bank. Although the ECB has some nominal independence, in practice the current conditions
are far beyond what can be dealt with using the instruments and policies that it has been given,
so it is constantly beholden to its political masters for permission to take necessary action:
in these urgent circumstances, a veto is almost as effective as absolute control, as the only
actions that can be proposed are those which won't be vetoed.
Fstephens56 Fstephens56 18 Jul 2015 07:28
In the end Treuhand sold out 95% of the Eastern German economy to Westerners, who in turn didn't
even have to present a feasible plan (or money to back the investment). It's easy to suppose that
anybody who handed over a few bills to the right hands was able to snatch up a bit of value. Usually
the Eastern companies "sold" for 1 Mark.
However, Western German "investors" were not really interested in another automobile manufacturer
in the East, or another innovative company that produces household goods. They saw these companies
a competition and their only interest was in seeing them closed down or reduced to a minor subsidiary.
If you have any doubts about it, just look up the "Foron" scandal. It is a perfect example on
how the Eastern German economy was systematically and deliberately ruined by competitors, who
wouldn't even shy away from threats and illegal activities to ensure their position.
Only 5% of former GDR companies were sold to Eastern German investors, interested in carrying
on. However, since Treuhand favored Western German buyers over Eastern German investors, these
5% were more or less either "left-overs", that nobody else wanted, or rare examples of factories,
where the workers managed to buy out their own company and run it themselves after other investors
failed to present themselves.
So in short Treuhand failed in all but 1 thing: filling the pockets of their associates. They
stole from the poor and used it to bolster the profits of the rich.
But back to Schaeuble! He was Kohl's favored minister by the time and it's save to assume that
he was more or less involved in (or at least aware of) the proceedings. Schaeuble is a neo-liberal,
law-and-order, right-wing nationalist, who thinks of political office not as a service to the
nation, but as a business meant to make money for the one who runs it. (Just listen to some of
his former speeches if you have any doubts about that)
The assault on his life, who forced him to a wheel-chair, made Schaeuble, who always was
an arrogant, egocentric, right-wing conservative, a vengeful and bitter arrogant egocentric conservative,
who hates everything even remotely socialist.
Over the years his speeches as minister for inner affairs grew more and more disturbing. Making
it evident, that Schaeuble thought of common people as nothing more than a violent, incompetent
mob, that had to be educated and controlled by a superior political cast. (Just listen to one
of his later speeches as minister for inner affairs in Merkel's government concerning his thoughts
about public opposition against his political ideas.)
Schaeuble was then by believed by many Germans (including some media) to be an overly bitter
and possibly dangerous "lunatic", unfit for political office. Upon Merkel's reelection, Schaeuble
was then removed from office and instituted as finance minister. Possibly a step to "ship him
off" to a position where he could do less harm.
That said: the second thing to know is that the crisis in Greece is nothing by another crisis
of the financial sector. Private investors invested money into Greece, that Greece is unable to
pay back. Unfortunate - but such are the risks of the stock market, right?
Not quite! Because what actually happened was that Germany (and other European) countries used
tax-payer's money to bail-out European banks a second time, by backing up the already defaulted
Greek loans with public money.
So the money "given" to Greece is not really helping the Greek people. It is meant to use public
money to support private investors and European banks.
And as always: where big money is moving through many hands, those who would like to hold a
sum of it, aren't far removed.
As an example, it is said that Schaeuble talked about an "investment plan" that would see a substantial
sum put in an institution run by one of his relatives.
A "mere coincidence" of course, but one that explains more precisely what is going on than
the article above. It's all about clever ways to turn public money into private money, while keeping
public eyes and public discussion fixed on "hard but necessary" austerity measures. Measures that
were never meant to help Greece, let alone end the crisis! All of this maneuvering is just meant
to help the private investors and keep them from losing money.
Investors, that were never interested in a strong Greek economy. But only in an opportunity to
snatch up some valuable pieces of Greek property for a bargain and either gut and sell them for
a short-term profit, or to rid themselves of possible competition.
So in the end, the only relevance the historical context has at this point is one that we have
already known and is true for ANY historical context: people are doing gruesome thing for personal
gain and few ever care about the consequences their actions impose unto other people.
Fstephens56 18 Jul 2015 07:27
The article couldn't be any more dead wrong, if it told us that Schaeuble did it because he
was a reptilian overlord from another dimension.
First thing to know about him: he was close friends with former chancellor Kohl and his minister
for inner affairs. Now Kohl is a man as corrupt as they come. Kohl had close ties to the media
via his dear friend Leo Kirch (a media-mogul) and various companies. And if you doubt that Kohl
ran his office like a business: the GDR secret service had surveillance tapes of Kohl accepting
bribes. I say "had" because Kohl used the power of his office to see them destroyed.
After which he made it a habit of using his money and influence to sue people who dared to
openly oppose his version of the truth. A habit that he hasn't given up until today: he recently
sued a ghost-writer, that he fired over "differences of opinion" for publishing some of the less
favorable things he had learned during his interviews with the former chancellor.
Schaeuble and Kohl were then involved in the "Leuna" affair. Where several French officials,
Kohl as the then-chancellor of Germany and probably some of his ministers where allegedly taking
bribes for one of the most obvious heists ever! The most grotesque scandal yet in German history.
"Leuna" was the name of a former GDR chemistry empire worth billions and billions of pounds
and the beating heart of the Eastern German economy. High-quality plastics, artificial fabrics
and pharmaceutical products were amongst the key export products and fed a whole region bigger
than Wales.
Kohl used the power of his office to personally take control over the "Leuna" asset, snatching
it away from under the nose of Treuhand. And gifted it to French company Total for the symbolic
price of 1 Mark (about a quarter of a British Pound).
With this "deal" French "Total" took sole control of ALL gas-stations throughout Eastern Germany,
THE ONLY petrol refinery in Eastern German able to produce gasoline, a long-running fixed-price
deal with Russia for deliverance of finest Siberian oil reserves paid in Ruble at a bargain price,
control over SEVERAL PIPELINES was included for free, and ALL of the chemistry production of Eastern
Germany combined in an industrial complex the size of the City of London complete with its own
railroad system, able to produce plastics and high-quality pharmaceutical products 24/7.
And like this wasn't enough, the Kohl-Schaeuble-duo than "gifted" Millions of German tax-payers
money to the company. Because it was quite obvious that Total got more out of that heist than
they could possibly chew.
This "Leuna" heist affected roughly 500.000 workers in Eastern Germany. It cost the job of
tens of thousands of people. The result of which were angry protests against Kohl and people throwing
eggs and foul vegetables at the man, as he later visited the region.
However, this is not even the end of it. The article states that the banks had already been
sold before the Treuhand came to be, but fails to mention "how" exactly that happened. It was
Kohl himself who oversaw the process and gave them away on a bargain due to a little "accounting
error" that "miscalculated" the value of these banks much to the advantage of the buyers. With
this deal Kohl effectively gifting billions to Western German banks, circumventing any public
control of what is happening.
Meanwhile the Treuhand had some shady dealings of its own. The article mentions that one of
the heads of "Treuhand" was assassinated. What the article fails to mention however is, that the
man killed was believed to be the first (and only) ever not to be part of a government-friendly
group of individual and he was killed right BEFORE he to get a good look at the books. He was
quickly replaced by another, more agreeable individual.
In other words: the reunification was a mess and a huge scandal, where most people involved
were doing their very best to siphon as much money and personal gain out of the process as possible,
before proper order could be established.
The price for this corruption was paid by those, unable to fight back:
- pensioners were denied money from their private pension plans (a result of the bank-deal)
- millions of people lost their jobs
- nearly all small businesses went bankrupt, breaking the back of what remained of Eastern
German economy
- highly educated and young people fled the country in hundreds of thousands, leaving behind
ghost cities (some cities like Halle-Neustadt lost up to half of their population)
- real-estate values plummeted, leaving people with nothing
ItsAnOutrage2 cpp4ever 18 Jul 2015 07:02
...the creditors should have done their due diligence better and never lent to Greece in the
first place, and at some point they will have to accept some lose.
They have already accepted a loss of over €100billion. The argument over further lending to
Greece is, in essence, about paying Greece not to devalue the Euro and damage the political and
economic structure of the EU. Some people think it's worth the hit, and others think we should
let Greece go. I am in the latter camp; I've nothing against the Greeks, but their government
is only interested in getting re-elected. Greece is toast in either event, so let them start rebuilding
sooner rather than later.
'Other peoples money?!' The crisis was manfactured from 2008 by banks and institutions. This
video is the confession of an economic hitman. It shows how financial crisis are manufactured.
It was his job.
The bankers don't just have a lot to answer for, they have it ALL to answer for. This is ALL
their mess. Their corruption,and their greed. They should be the ones to pay, not the innocent
citizens of Greece who, on top of suffering the high unemployment and hardships imposed on them
by austerity, are also having to put up with the unfair accusations, insults and vilification,
that the wrongly informed general public from the rest of the EU is directing at them.
AndrewDavidBoyle 18 Jul 2015 06:36
The Investment For Greece Fund
KFW is led by a six-member Managing Board headed by Ulrich Schröder, which in turn reports
to a 37-member Supervisory Board. The chair of the Supervisory Board changes annually between
the German Federal Ministers of Finance and Economic Affairs; the chairman for 2015 is Wolfgang
Schäuble.
The KfW will contribute financially to the fund and provide it with technical assistance. Whatever
that means.
The Investment For Greece fund was a bilateral agreement between KMF and the Greek government.
Interesting that Tsipras was keen to avoid this fund and instead create another one!
Up to €50bn (£35bn) worth of Greek assets will be transferred to a new fund, which will contribute
to the recapitalisation of the country's banks. The fund will be based in Athens, not Luxembourg
as Germany had originally demanded.
The location of the fund was a key sticking point in the marathon overnight talks. Transferring
the assets out of Greece would have meant "liquidity asphyxiation", Tsipras said.
We will see what happens here...
johnbig SenseCir 18 Jul 2015 06:29
Very interesting article giving information not generally known, at least by me.
However the lesson I take from this is that the reunification of Germany on a 1 D mark for
1 Ost mark basis was a political decision of the highest order probably made by Kohl himself.
The economics then had just to follow as best possible without negating or modifying the main
decision. Schauble was obliged to follow Kohl's policy decision
In Greece it seems to be the economics leads all other considerations and the political aim
of helping back to its feet a small economy and thus keeping a healthy European Union takes a
back seat. Unless the political decision being applied is to do anti-Keynes economics for all
always. Markel is obliged to follow Schauble"s policy.
EcoNasty huzar30 18 Jul 2015 05:26
If they were stupid and greedy enough to throw money at me if I'm a high risk then they shouldnt
be surprised when I don't pay them back...
After all, we wouldn't have had the crash would we if it hadn't been for stupid greedy moneymen
making crap decisions ??
And the whole Greece thing just shows how idiotic neoliberalism actually is...
I mean, I actually think Tsipras is playing a blinder. He knows that Greece may have been pushed
into a corner I'm the short term, but in the long game Greece has Merkel et al over a barrel ..they
can't (despite the tub thumping last week) allow Greece to leave because the disastrous impact
this would have on the EZ and wider global economy and they'd have to write down hundreds of billions
- yet their austerity measures will make it far less likely that Greece can meet its next payment
deadline meaning they'll be back here again in a few months ...
...of course there's no more room for more restructuring or austerity after this bailout so
they're stuffed essentially...either they let Greece leave with the huge risks that poses or they
have to lose face and write down Greece's debts.
Tsipras ..the man who broke neoliberalism. He'll get statues erected ;
Peter Gentoo 18 Jul 2015 05:25
Why the British Empire ruined the world part II:
Scramble of Africa:
During the final twenty years of the nineenth century, Britain occupied or annexed territories
which accounted for more than thirty-two percent of Africa's population, making the British the
most dominant Europeans on the continent.By 1965, Britain had lost its stranglehold on the continent-but
the consequences of imperialism were immense. Firstly, the settler states of Kenya, Rhodesia,
and South Africa saw many episodes of violence before African nationalists could forge a return
to stability, after the departure of the colonial governments. Corrupt African "strongmen," or
dictators, often gained power-despite ignoring the social needs of the people. Economic dependence
on the West, coupled with political corruption, crippled attempts to diversify.Even today, Africa
is the least developed region in the world, with poverty and malnutrition running rampant. The
idea that Europeans wanted to "civilize" Africa was an utter lie, and a means to justify the exploitation
of the continent.
Palestine:
After defeating the Ottoman Empire in World War One, Great Britain did not liberate their Arab
allies but instead colonized them. The British received Palestine, Jordan, and Iraq. After centuries
of anti-Semitism, many Jews began migrating to their original homeland of Palestine (ancient Judaea),
and after the War, these migrations greatly increased. Many British officials, some of whom were
also anti-Semitic, wanted to establish a Jewish homeland in the Middle East in order to kick the
Jews out of Europe altogether.The British announced in 1947 their intention to withdraw from Palestine
in 1948. On November 1947 the United Nations General Assembly passed a plan to partition Palestine
into two separate states-one Arab, and one Jewish. The Jews accepted, but the Arabs rejected the
partition. The British officially left on May 14, 1948, without providing a resolution to the
situation; that same day the Jews proclaimed the state of Israel. Arab countries immediately attacked
the new Jewish state, but the Israelis drove off the invaders and conquered more territory. Roughly
nine hundred thousand Arab refugees fled-or were expelled from-old Palestine.This war left an
enormous legacy of Arab bitterness towards Israel and its political allies, Great Britain and
the United States. The Arab-Palestinian conflict has provided a deep divide between East and West,
and between Christianity and Judaism on the one hand and Islam on the other hand. The modern "War
on Terror" stems from the American and Western support of Israel. In addition, Israel has been
accused of atrocities ranging from bulldozing Palestinian homes, to acts of terror committed by
Mossad, the Israeli CIA
Partition of India:
After two centuries of colonialism in India, the British Labour government agreed to a speedy
independence of India after 1945. But conflict between Hindu and Muslim nationalists led to murderous
clashes between the two communities in 1946. When it became clear that the Muslim League would
accept nothing less than an independent Pakistan, India's last viceroy, Lord Louis Mountbatten,
proposed partition. Both sides accepted, and at the "stroke of midnight" on August 14, 1947, one
fifth of humanity gained political independence.Yet independence through partition brought tragedy.
In the weeks afterwards, communal strife exploded into an orgy of massacres and mass expulsions.
Hundreds of thousands of Hindus and Muslims were slaughtered, and an estimated five million made
refugees. Indian Congress Party leaders were completely powerless to stop the violence. "What
is there to celebrate?" exclaimed Gandhi in reference to the much-sought independence; "I see
nothing but rivers of blood." In January 1948, Gandhi himself was gunned down by a Hindu fanatic
who believed that he was too lenient on Muslims.After the ordeal of independence, relations between
India and Pakistan remain tense to this day. Fighting over the disputed area of Kashmir continued
until 1949, and broke out again in 1965-1966, 1971, and 1999. What makes the Indo-Pakistani conflict
even more dangerous is that both sides contain nuclear weapons. With the possibility that Pakistan
might become a failed state, there is a good chance of a major genocide erupting in the twenty-first
century.
Peter Gentoo 18 Jul 2015 05:23
Why the British Empire ruined the world:
Apartheid:
Apartheid was a system of racial segregation enforced through legislation by the National Party
governments, the ruling party in South Africa from 1948 to 1994. The rights of the nation's black
majority were curtailed, and white supremacy and Afrikaner-minority rule was maintained. After
one hundred years of wars, and having gained complete political control, the British made a decision
that doomed many South Africans. They gave Boer republics the green light to disenfranchise all
non-whites. The apartheid system was entrenched in the Union constitution, which was drawn and
approved by the British government. In 1913, the Native Land Act was brought into force; it pushed
black people off the land on which they were either owners or tenants, and relocated them to shantytowns
in the cities.
Irish Potato Famine:
During the summer of 1845, a "blight of unusual character" devastated Ireland's potato crop-the
staple of the Irish diet. A few days after potatoes were dug up from the ground, they began to
rot. Over the next ten years more than 750,000 Irish died from the ensuing famine, and another
two million left their homeland for Great Britain, Canada and the United States. Within five years,
the Irish population was reduced by a quarter.
Invention of the machine gun:
In 1879, the Gardner Machine Gun was demonstrated for the first time. It could fire ten thousand
rounds in twenty-seven minutes, and its accuracy was superior to that of the Gatling gun. This
impressed military leaders from Britain, and the following year the British Army purchased the
gun.In 1881, the American inventor Hiram Maxim visited the Paris Electrical Exhibition. While
he was at the exhibition a man he met told him "if you wanted to make a lot of money, invent something
that will enable the Europeans to cut each other's throats with greater facility." Maxim decided
to move to London, and began working on a more effective machine-gun. The British Army adopted
the Maxim Machine Gun in 1889. The following year, Austria, Germany, Italy, and Russia also purchased
the gun, causing an arms race on the European continent. The machine gun would haunt the British
during the Battle of the Somme, when the British suffered 60,000 casualties on the first day.
Since its introduction, the machine gun has caused countless fatalities across the world, and
has allowed for more people to be killed within a shorter time span.
Atlantic slave trade:
The British did not start the slave trade or even import the most slaves (both of these dubious
distinctions belong to the Portuguese). In the beginning, British traders merely supplied slaves
for the Spanish and the Portuguese colonies; but eventually, British slave traders began supplying
slaves to the new English colonies in North America. The first record of enslaved Africans landing
in British North America occurred in 1619, in the colony of Virginia.In the 1660s, the number
of slaves taken from Africa in British ships averaged 6,700 per year. By the 1760s, Britain was
the foremost European country engaged in the slave trade, owning more than fifty percent of the
Africans transported from Africa to the Americas. The British involvement in the slave trade lasted
from 1562 to until the abolishment of slavery in 180-a period of 245 years. History Professor
David Richardson has calculated that British ships carried more than 3.4 million enslaved Africans
to the Americas during this time. In addition to being a major player in the slave trade, the
British supported the pro-slavery Confederates during the Civil War. The British needed cotton
to fuel their machines; this caused the demand for cotton to skyrocket, which in turn demanded
slave labor. If the Confederates had won at the battle of Antietam, the British would have given
full support to the rebels, and may even have tipped the Civil War in favor of the Confederates.
And although Great Britain was one of the first nations to abolish slavery, they quickly made
up for the loss of human labor by extracting Africa's raw materials and resources.
DeeDee99 18 Jul 2015 05:18
"Look at what he inflicted on his own country."
Yes. HIS OWN COUNTRY.
Now he's doing it to another country: and both he, the President of the other country, the
IMF and the ECB all know it isn't going to work.
So he is destroying another country for what ........... ? So the EU can continue to build
an anti-democratic and increasingly dictatorial United States of Europe where national democracies
are irrelevant (unless they happen to be Germany).
ZankFrappa 18 Jul 2015 05:12
This talk of nation vs nation is a distraction. It's better to follow the money. It quickly
becomes clear that those who have profited from Greece joining the Euro are keeping their money
and the rest are having to suffer the consequences. Goldman Sacks have made billions as have investors
in Europe. Meanwhile the people of Greece, Germany or the broader EU are being told they have
been reckless and will have to suffer the consequences.
anita66 18 Jul 2015 05:05
Maybe worth noting, that Schäuble's readon to make Greece fail is also related to the vast
oil resources in the Aegean sea. And his generally corrupt manner. In the past he accepted bribes
and bribed for weapon deals and other operations. and thats who most deals in Greece were agreed.
bloomday Budanevey 18 Jul 2015 05:03
Greece's economic performance from the mid-90's to the beginning of 2010 was better than the
EU average (3.9% vs 2.4%). Once the European financial crisis began to make itself felt in Greece,
in 2010, they followed the Troika's austerity instructions to the letter, slashing expenditures
and increasing taxes. A 25% decline in GDP and 25% unemployment, with youth unemployment twice
that was the result. This economic downturn happened because they followed and implemented creditor
demands for austerity, measures that are now seen not to work for Greece. What is more, It is
a fiction that all the bailout money loaned to Greece is at it's disposal to use as it pleases,
most has been recycled back to the creditors in loan repayments - Joseph Stiglitz estimates that
90% of the money loaned Greece has been paid straight back to the Creditors, leaving Greece with
insufficient sums to invest to create growth. Austerity is an anti-growth economic policy and
the sooner the leadership of the German CDU wake up to the fact the better it will be for the
Eurozone.
lundberg 18 Jul 2015 04:53
The link between the early 1990's and now (2008 till forever?) is that Germany and Schäuble
caused all-European recessions. The 1990's recession was very bad in for example Sweden and Finland.
One reason for this German behaviour is a myth that inflation (as of 1923) is the only thing to
be avoided. Others have noted that other bad things have happened in Germany even after 1923.
Tight Money, high interest rates is the perpetual formula, though exactly that brought Hitler
into power.
The reunification was performed in a stupid way (1 West Mark= 1 East Mark, overnight, when
market value was 7:1 or so). This stupidity was repeated, and worse, with the Maastrich treaty
in 1992. All Europe had to pay for it, which led to a first wave of rightwing populism rather
than European unity. We are now living through the second wave.
Germany was eventually essentially reunited, though it took much longer time and inflicted
a lot more pain than was necessary, in Germany and abroad.
Europe remains broken, because you cannot have a single currency without a single government.
This has been known all along, though the smart-alecs in Brussels, Berlin and Paris thought that
they would solve that problem by stepwise federalization. Not likely.
bootayjam grumpyoldman 18 Jul 2015 04:34
Well said. I find it amazing that the Guardian is only now waking up to the fact that maybe,
just maybe, the EU is bought and paid for and part of the global corporate banking system that
has a stranglehold on us all.
Look at the IMF, which acts as a member of the Troika.
But it has has no elected position, and cannot be removed from power.
The second unelected member is Mario Draghi of the ECB. The same Mario Draghi who worked for Goldman
Sachs and helped Greece hide it's true debt in order to join the Euro. How do you get rid of him?
And more importantly, how did he get the job?
And finally, the head of Europe, Juncker, is also unelected by the people. And he was responsible
for introducing corporate tax dodging in Luxembourg when he was PM there.
The entire government design is totally un-Democratic and therein lies the crisis, but not
just in the EU, but across the world. Can you vote out the IMF or World Bank?
But in terms of the EU, not a single member of the Troika ever needs to worry about polls since
they do not have to worry about elections.
This is authoritarian government if we have ever seen one, and Tony Benn's 5 awkward questions
to ask those in power seem more relevant every day.
laSaya TomHalpin 18 Jul 2015 04:32
Reparations and exploitation
Further information: German reparations for World War II
Contrary to common myth, the US did in fact take "reparations"; parts of it by John Gimbel called
"plunder and exploitation", directly from Germany. The US for instance took an 8.9% share of dismantled
Western German industry.
The Allies also confiscated large amounts of German intellectual property (patents and copyrights,
but also trademarks). Beginning immediately after the German surrender and continuing for the
next two years the US pursued a vigorous program to harvest all technological and scientific know-how
as well as all patents in Germany. John Gimbel comes to the conclusion, in his book "Science Technology
and Reparations: Exploitation and Plunder in Postwar Germany", that the "intellectual reparations"
taken by the US (and the UK) amounted to close to $10 billion. The US competitors of German firms
were encouraged by the occupation authorities to access all records and facilities. l Law No.
25) for fear of the research directly profiting their competitors.
The patents, drawings and physical equipment taken in Germany included such items (or drawings
for) as electron microscopes, cosmetics, textile machinery, tape recorders, insecticides, ...
and other technologies - almost all of which were either new to American industry or 'far superior'
to anything in use in the United States."
The British took commercial secrets too, by abducting German scientists and technicians, or simply
by interning German businessmen if they refused to reveal trade secrets.
Konrad Adenauer stated: "According to a statement made by an American expert, the patents formerly
belonging to IG Farben have given the American chemical industry a lead of at least 10 years.
In JCS 1067 there were provisions allowing German scientists be detained for intelligence purposes
as required. Although the original focus on the exploitation was towards military means, much
of the information collected by FIAT was quickly adapted commercially to the degree that the office
of the Assistant Secretary of State for Occupied Areas requested that the peace treaty with Germany
be redacted to protect US industry from lawsuits.
The US made no attempt to evaluate the value of what was taken from Germany, and in the contracts
that led to sovereignty for West Germany in 1955 the West Germans had to formally renounce all
claims to possible compensation for all types of assets taken, including scientific and technical
know-how.
The property taken in Germany was without regard to the rules of the Hague Convention, which prohibits
the seizure of enemy private property "unless it is susceptible of direct military use",
German reparations for World War II
Division of Germany as of the Potsdam Conference.
After World War II, both West Germany and East Germany were obliged to pay war reparations
to the Allied governments, according to the Potsdam Conference. Other Axis nations were obliged
to pay war reparations according to the Paris Peace Treaties of 1947.
Contents
1 Early propositions
2 Recipients
2.1 Greece
2.2 Israel
2.3 The Netherlands
2.4 Poland
2.5 Yugoslavia
2.6 Soviet Union
3 Other forms of payment
3.1 Annexation of territories
3.2 Dismantling of industries
3.3 Intellectual property
3.4 Forced labour
4 See also
5 References
Other forms of payment
According to the Yalta Conference, no reparations to Allied countries would be paid in money.
Instead, much of this value consisted of German industrial assets, as well as forced labour.
Annexation of territories
Poland and the Soviet Union annexed the German territories east of the Oder-Neisse, leading to
the expulsion of 12 million Germans. These territories were incorporated into Poland and the Soviet
Union respectively and resettled with citizens of these countries.
France controlled the Saar protectorate from 1947 to 1956, with the intention of using its coal
deposits and possibly annexing the region to France permanently. The same mines had been under
French control from the end of the First World War until 1935. Following the results of a plebiscite,
France had to relinquish its control of the Saar region on January 1, 1957, however it continued
to extract coal from the area's mines until 1981.
Dismantling of industries
Further information: Allied plans for German industry after World War II
At the beginning of the occupation, the Allies started dismantling the remnants of German industries.
Later abandoned this plan in favour to the Marshall Plan.
Intellectual property
The Allies confiscated significant values of German patents, copyrights and trademarks.
Forced labour
See German prisoners of war in the Soviet Union, Forced labour of Germans in the Soviet Union
and Forced labour of Germans after World War II.
-------------
For some ignorance is bliss.
Never led the facts get into the way of prejudice.
Prejudice is what fool use for reason.
Voltaire.
romantotale17 ID0958318 18 Jul 2015 04:28
With a Gini coefficient of 0.78, Germany has a high degree of wealth inequality compared
to other countries and there is still a wide gap between western and eastern Germany, almost
25 years after unification. In 2012, the average net worth of eastern Germans was less than
half that of western Germans.
Sounds like the country is well run, then. According to current definitions of a successful
society: ie benefiting the wealthy, ability of the wealthy to conceal their gains, increasing
inequality...
wilk 18 Jul 2015 04:20
Before reunification West Germany had a growth rate of aboaut 3.6%. and East Germany full employment
. After - Schauble Germany managed to reach 2.2% the other year - the highest since reunification;
eastern Germany has an double the unemployment rate of the west - over 10%. Workers rights in
Germany have been decimated with most of those in work on zero- hour contracts or temporary work
and the rich states are refusing to put more money into the failing eastern ones.
Like most of us the German people like to have a "Greece" so that we can feel well off and that
our governments and big business are working for us - so the Merkels' and Schaubles' keep in power
phil49 -> probitase 18 Jul 2015 04:13
Rather simplistic. North America achieved its independence well before most Latin American
countries and before rapacious 19th century capitalism had developed. By the time the Latin American
countries achieved independence, European (mainly British) companies were ready to step in and
siphon off vast amounts of the wealth generated, unlike in the United States, where most of the
wealth was home-owned and reinvested, before the US was ready to take over from the European imperialists
and do as they had done.
someoneionceknew -> Mister_T 18 Jul 2015 04:12
Cool story, bro. But completely untrue. Germany is being run for the benefit of its corporations
and its banks i.e. neoliberal fundamentalism.
It's 'success' is arguable. Its future looks bleak.
When people bang on about what W. Germany got in Marshall plan aid after WWII they never look
at the facts.
Read on.
The largest recipient of Marshall Plan money was the United Kingdom (receiving about 26%
of the total), followed by France (18%) and West Germany (11%). Some 18 European countries received
Plan benefits.
Criticism of the Marshall Plan became prominent among historians of the revisionist school,
such as Walter LaFeber, during the 1960s and 1970s. They argued that the plan was American economic
imperialism, and that it was an attempt to gain control over Western Europe just as the Soviets
controlled Eastern Europe.
Henry Hazlitt criticized the Marshall Plan in his 1947 book Will Dollars Save the World?, arguing
that economic recovery comes through savings, capital accumulation and private enterprise, and
not through large cash subsidies. Ludwig von Mises criticized the Marshall Plan in 1951, believing
that "the American subsidies make it possible for [Europe's] governments to conceal partially
the disastrous effects of the various socialist measures they have adopted"
Hard luck story
We all know the easy British explanation for our cumulative export defeat in world markets
from the 1950s onwards, especially at the hands of the Germans. This story tells us that lucky
West Germany had all her industries and infrastructure bombed flat or removed as reparations,
and then was able to re-equip herself from scratch with Marshall Aid dollars. Meanwhile, so this
hard-luck story goes on, poor old Britain had to struggle on with worn-out and old-fashioned kit.
Britain actually received more than a third more Marshall Aid than West Germany ...
This is utter myth. Britain actually received more than a third more Marshall Aid than West
Germany - $2.7 billion as against $1.7 billion. She in fact pocketed the largest share of any
European nation. The truth is that the post-war Labour Government, advised by its resident economic
pundits, freely chose not to make industrial modernisation the central theme in her use of Marshall
Aid.
Successive governments squandered billions of Marshall Plan Aid to support British world power
pretensions, and so jeopardised the economic future of Britain.
The sad irony is that it had been in vain that the Labour Government had sacrificed the modernisation
of Britain as an industrial country for the sake of using Marshall Aid to support a world power
role - strategic and financial.
What a monumental waste of a great and unrepeatable opportunity.
Germany, which up until the 1953 Debt agreement had to work on the assumption that all the
Marshall plan aid was to be repaid, spent its funds very carefully. Payment for Marshall plan
goods, "counterpart funds", were administered by the Reconstruction Credit Institute, which used
the funds for loans inside Germany. In the 1953 Debt agreement the amount of Marshall plan aid
that Germany was to repay was reduced to less than 1 billion USD.[85] This made the proportion
of loans versus grants to Germany similar to that of France and the UK.[84] The final German
loan repayment was made in 1971.
---------------------- Arguing that economic recovery comes through savings, capital accumulation and private enterprise,
and not through large cash subsidies.
Greece please take note of this advice from Henry Hazlitt .
For those that claim that the 193 debt agreement was so instrumental in German economic recovery
because it was " generous " read the above and think again.
Further lets look at what the aid was intended to be used for. The Marshall Plan aid was mostly used for the purchase of goods from the United States.
Oh, such generosity.
NickFletcher19 18 Jul 2015 03:35
Can people please do referring to him and his ilk as "technocrats". These people aren't experts
in economics, business, management, if anything other than politics.
diotima1 18 Jul 2015 03:33
It's nauseating that such proposals, disguised as "rational" are taken seriously by EU and
set the agenda for finding a solution to the Greek tragedy. In this the Greek goverment is also
to blame. Advised by flamboyant Varoufakis , who failed to table any serious proposal for the
past five months, it wasted all credibility and played into the hands of Shauble and US think
tanks ready to experiment with demise of euro at the expense of Greek people.
They may have an Onassis or two, but that certainly doesn't make them prosper that much. Had
they built those ships you might have a point. We are talking heavy industry here and since tourism
is hardly the high point of any really successful economy, your reply is just a lot of useless
left-wing hot air. The idea that the whole economy even the size of the small Greek economy was
somehow reduced to its present malaise by a few tax dodges is another simplistic answer to the
troubles affecting Greece. Your answer is in effect a few scattered breadcrumbs which had no other
effect than to make you look completely silly and irrelevant.
angiefay 18 Jul 2015 00:38
Schäuble and Merkel have split Europe. They are trying to force their ORDER on everyone.
Against them we have France, who, however naïvely, believes more in JUSTICE. Nothing about
the New German Order is just, only about profit and control. The situation in Greece has exposed
how much they are trying to take control of Europe though the banks.
Instead of trying to help Greece set up systems such as a Land Registry, local Tax Offices
free from corruption etc, which would provide a more just tax system, they want to sell off/buy
up any remaining assets the country has.
hfakos Ben McCarty 17 Jul 2015 20:00
So what are you proposing, exterminating the native cultures in Europe to create a new coherent
one? I didn't say the U.S. reaching its current stage was a rosy process, but it's a fact they
now have a coherent enough culture mostly speaking the same language. We cannot reach this stage
in Europe, because civilization has advanced enough not to tolerate the forced engineering of
a new culture from already thriving and existing ones. So, there always be very serious constraints
on the cohesion of Europe. You just have to live with that.
seaspan Steve Sage 17 Jul 2015 19:42
The social/private structure of Greece is typically European, that isnt the problem. The problem
started with euro integration, and the negative balance of trade in the private economy unable
to devalue local currency, stimulate Exports, investment in local industry, etc. Imports vastly
exceeded Exports, so the Govt floated bonds to buy back the difference (ballooning deficits),
But also Pools of euro money in foreign banks recycled back to Greece as easy loans, which increased
Imports accentuating the difference to Exports -- a downward spiral, and ever increasing govt
debt. This structural flaw hasnt been addressed at all...
eastofthewall BeatonTheDonis 17 Jul 2015 19:35
That was the biggest surprise in this saga. That even the yanks had more sense than to pathologically
stick to austerity. They had a stimulus program. When the U.S. is less cruel than you, it's
time for self-reflection.
Have you been to America lately? Visit Baltimore for me, will you! After the dotcom bubble
burst the U.S. had a stimulus program which helped building up the even bigger housing bubble.
That is why we now live in the age of "The Second Great Depression". Do you really think another
stimulus bubble will help you out of this mess?
be_kul 17 Jul 2015 19:25
Sorry, the parallels go far beyond that:
(1) Schäuble wants the new "Greek Treuhand" to be a part of the ESM. In the ESM – in case the
author forgot about that – every person MUST and CAN NOT be put on juridical trial for his/her
deeds. The same was true for the Treuhand in East Germany.
(2) Schäuble wants the new "Greek Treuhand" to be managed 'inside' the ESM by a little German
bank which is part of the German governmental KfW – which is headed by Schäuble (and his minions).
(3) But the best is yet to come: While the new Greek Treuhand will be modelled after the East
German Treuhand, the latter itself was modelled after another "Treuhand" in German history: That
one which was established to plunder the "Generalgouvernement" i.e.: the occupied Poland under
Hitler. It had the same legal structure as the East German Treuhand … and even the name was the
same.
So, there you have it: Schäuble does not even try to hide that his plans for Greece are those
of an occupier – he can just simply count on (the vast majority of) people who don't know history.
By the way: Did anyone mention that Greece in 1953 joined the creditors of Germany when they
were cutting down Germany's depth from WW II by 60% and re-structured the rest so that Germany
could come out of its own hell with the "Wirtschaftswunder" (economic wonder – which was not a
wonder at all!)? And did anyone mention the credit Hitler's Germany stole from Greece during WW
II and never paid back (except a very small part of it)?
If anyone now thinks that I would "pull a godwin" now … sorry, I won't.
Because I guess anyone can draw his/her own historical parallels and consequences in viewing
Schäuble correctly.
Phil Porter Dritan Nikolla 17 Jul 2015 18:54
I'm just trying to change myself and become the heartless, soulless and cultureless husk the
EU and it's citizens seemingly now aspire to.
The Euro symbol will become the new crucifix!
hfakos 17 Jul 2015 18:34
It's enough to be in the wider neoliberal EU to go under. Being in the eurozone just adds
extra pain, waterboarding and rectal feeding. As EU apparatchiks admitted themselves. Maybe the
US can now shut down Gitmo by sending the inmates to Greece, where conditions are just as harsh.
someoneionceknew 17 Jul 2015 18:28
If Schäuble is acting tough with Greece right now, it is because his electorate wants him to
act that way; it's not just that he doesn't care about the Greek people, he wants people to believe
he doesn't care, because he sees the political advantage in it.
That's possibly the most disturbing aspect of the analysis.
monzer7 17 Jul 2015 18:19
Whilst national governments are printing money in gay abandon to bail out their banker
backers... Simultaneously fleecing their taxpayers under the the moral pretence of 'Austerity',
we have witnessed an unelected cartel eviscerate a sovereign nation.
The Greek Balance Sheet of Misery is deep in the red!
Apparently, people no longer matter - Politicians and Bankers have a free rein.
Greece fell for the EU dream... It was a political sucker to be exploited for the benefit
of the Project.
Post 2008, it has been treated like dirt. Its neighbours should take note - this Union is a
nasty creature.
girlmostlikely sailorjeff 17 Jul 2015 18:15
It's also why German's are skeptical of transfer unions. They were promised by Kohl and Schäuble
and Waigel, that Eastern Germany would just bloom and it would magically catch up to Western living
standards on it's own merits. Those were Germans after all. None of that happened, the catching
up has been the other way round. Many many people these on both sides of the former border
are living in a way where 1990 GDR living standards would just about be an upgrade.
erpiu 17 Jul 2015 18:15
schäuble and his bunch of rightwing political hacks who pass as eurozone finance ministers
are know-nothing frauds or if you prefer, fantasists --as p.krugman calls them.
schäuble himself is an opportunist par excellence, a now-aparatchick/political hack formerly
a small-time lawyer with several one-week courses in "economics explained to homemakers" and a
dissertation on "public accountants" as special qualifications for his current position as "supreme
social-dumping master of western europe"('s rentier-subjugated economies) with distant adolfian
resonances.
https://en.wikipedia.org/wiki/Wolfgang_Sch%C3%A4uble
======
Schäuble studied law and economics at the University of Freiburg and the University of Hamburg,
which he completed in 1966 and 1970 by passing the First and Second State Examinations respectively,
becoming a fully qualified lawyer.
In 1971 Schäuble obtained his doctorate in law, with a dissertation called "The public accountant's
professional legal situation within accountancy firms".
====== https://en.wikipedia.org/wiki/Wolfgang_Sch%C3%A4uble
kcfussball -> DT48 17 Jul 2015 18:13
Agreed, it seems to be part of the neo - con agenda to create divides amongst ordinary people.
I wonder what they are scared of.
hfakos -> Phil Porter 17 Jul 2015 17:53
It's the liberal "intellectuals" we. They know better what's good for you. In Eastern Europe
they were called Bolsheviks.
Pharaoh9 MartinLunnon 17 Jul 2015 17:46
In the German mind the problem is always with you, never with the bank.
monzer7 17 Jul 2015 17:44
I admire Germany for the way in which it has rebuilt its country. Their products demonstrate
an envious capability. Every German I have ever met has been easy going, and friendly - nice people.
Their politicians stink!
This rape of Greece was unnecessary... It portrays an unassailable bully humiliating a people.
The image has been tarnished. My admiration diluted.
monzer7 17 Jul 2015 17:44
I admire Germany for the way in which it has rebuilt its country. Their products demonstrate
an envious capability. Every German I have ever met has been easy going, and friendly - nice people.
Their politicians stink!
This rape of Greece was unnecessary... It portrays an unassailable bully humiliating a people.
The image has been tarnished. My admiration diluted.
MartinLunnon RationalPlan 17 Jul 2015 17:34
This is clearly a relevant point. Perhaps it's been made by many previous BTL commentators,
but I'm surprised that it wasn't brought out in the article.
The parallels with the situation in Greece are many: both East Germany then and Greece now are
experiencing the pains of a fixed exchange rate with the strong (West) German economy. In both
cases the fixed exchange rate (and thus strong currency while the fix holds) favours savers over
borrowers - I suspect that many Germans instinctively believe this to be necessary ever since
the inflation if the 1920s and 30s.
In Greece now the borrower is the government. In Germany shortly after reunification the burden
fell on Treuhand-owned companies which had liabilities to pay wages in DM coverted from OstMarks
at 1:1: "With prices for labour and supplies going through the roof, the already stressed East
Germany economy went into freefall"
"When you owe the bank £1000 you have a problem: when you owe the bank £1,000 million the bank
has a problem". In the CDU's image of the German mind the problem is always with you, never with
the bank.
hfakos linesanddots 17 Jul 2015 17:33
These are all Cold War dinosaurs. Merkel included. With them at the helm a different, livable
Europe has no chance.
paulc156 Christian Abel 17 Jul 2015 17:25
Frankly, though the IMF have been culpable in previous instances of crisis management both
with Greece and others they have exhibited some capacity to learn from past mistakes. As for the
EU and especially the German dominated ECB they have pushed half of Europe to the precipice based
on an imbecilic policy prescription that hasn't been tried since the UK tried to stay on the gold
standard after WW1. You seem to have sided with the cranks!
Lafcadio1944 Cerebral_Football 17 Jul 2015 17:24
I recommend you read Naomi Kline's well documented book Shock Doctrine which makes the case
for what I said far better than I can.
As to your apparent view that the appropriate social behavior is to always and under all circumstances
take every possible advantage available to enrich ourselves. I suggest you investigate that period
in history known as the Enlightenment.
LiberteEgalite1 trickster5 17 Jul 2015 17:14
trickster, you are incorrect! At least 400 million people in India live in abject poverty in
suffering as a direct result of England's plundering of India over 200 years, this is not counting
the millions that it killed in the name of keeping order because the Indians dared to raise their
heads against the British tyranny.
You need to read real history and not the blinkered one that you read in the glossy magazines
glorifying the inhuman British empire.
hfakos probitase 17 Jul 2015 16:59
But there are many mini-jobs. Which is practically unemployment if that's the only thing you
have. Statistics are easy to manipulate.
hfakos KrissCross 17 Jul 2015 16:56
What a success story, climbing all the way up to being the EU's poorest nation with an EUR300
monthly salary and loosing a million people who emigrated to the West, and it keeps counting.
You have also become a much more sovereign nation, that's why you cancelled South Stream a nanosecond
after McCain showed up in Sofia. I mean EUR300 is more than enough, let's not be greedy and try
get more revenue in the EU's poorest country. Thanks but no thanks, I wouldn't like to emulate
Bulgaria's "success".
FactsForFood Mevagissey 17 Jul 2015 16:55
Hmmm, in comparison the US killed at least 129,000 civilians in a few seconds when it dropped
two nuclear bombs on Japan. And many more civilians were long-term disabled afterwards.
So you are saying that we should remember this terrible crime by the US and hold them accountable
for it as well.
Cerebral_Football Fani Papas 17 Jul 2015 16:48
Here's a brilliant quote from yesterday's Atlantic:
By 2010 one of those countries-Greece-could no longer pay its bills. Over the prior decade
Greece had built up massive debt, a result of too many people buying too many things, too few
Greeks paying too few taxes, and too many promises made by too many corrupt politicians, all
wrapped in questionable accounting. Yet despite clear problems, bankers had been eagerly lending
to Greece all along.
Greece is made up of Greeks, you can't disassociate them. The Greek people borrowed that money
when they were levering up and buying homes, not paying taxes, doling out public sector pensions
and benefits like they had discovered the cure for cancer.
Greece owes money to Spain, Italy, Slovenia, Portugal and every other country in the Eurozone.
But first and foremost, before all of that, they owed the money to the banks. Yes and the banks
needed to be paid back.
If you think that's unfair, try telling your credit card/bank company that you won't pay them
back.
Mevagissey Susan Dechancey 17 Jul 2015 16:47
The nepotism and clientelism of the ruling class has been a problem since independence
from Turkey and successive Greek governments have promised and failed to rectify it but that doesn't
excuse humiliating an entire nation and pushing it to the point of economic and civil collapse
because 'they deserve to reap what they sow' regardless of the consequences for the entire region
with IS just a few hundred kilometres away. This is the worst case of being unable to see the
wood for the trees that we have seen since the 'allies' invaded Iraq on the pretext of saving
the West from nuclear weapons that did not exist.
The vindictive behaviour towards Greece marshalled by Germany last weekend has lost it a lot
of friends and reminded us where its mindset comes from and where it leads to if more civilised
nations do not step in to reel it in. Habermas in particular is particularly cognisant of this.
hfakos -> jozef77 17 Jul 2015 16:46
Don't worry, you will see many other cents extracted from the periphery by German corporations.
You know, such when I pay international rates calling my Deutsche Telekom customer parents in
Hungary from my Deutsche Telekom line in Germany. Borderless Europe, ain't it great?
probitase -> DT48 17 Jul 2015 16:41
One of the rules of the Eurozone is that a country is not allowed to default on its debts.
The EU is indeed designed to pull countries in until they find they cannot or do not have the
power to extricate themselves.
hfakos -> angryboy 17 Jul 2015 16:38
Yes, the Greeks are like stupid kids. What a worn-out cliche. The only countries that matter
here are Germany and maybe France. Lol, do you really believe that whatshisname FinMin of mighty
Slovakia has any say in this crises? Germany is using the clowns of these midget EZ countries
to deflect some blame. I have never seen that many Mickey Mouse politicians suffering from delusions
of grandeur than during the Greek torture sessions. As if whatshername from the Baltic grand duchies
has any weight behind her proclamations.
TomorrowsWorld Barry1858 17 Jul 2015 16:35
It's a hard battle getting people to realise just how much so-called wealth is predicated on
the money market casino rather than goods and services. Perhaps because it makes all the effort
of putting in your relatively honest 9 to 5 fairly irrelevant, most people would rather talk about
lazy Greeks than face the fact that they're the living fuel for a casino lifestyle they will only
get close to if they happen to buy a winning lottery ticket.
Susan Dechancey 17 Jul 2015 16:33
where are the insights into how Greece got here ? a contra to this :
In just the past decade the wage bill of the Greek public sector has doubled, in real terms-and
that number doesn't take into account the bribes collected by public officials. The average
government job pays almost three times the average private-sector job. The national railroad
has annual revenues of 100 million euros against an annual wage bill of 400 million, plus 300
million euros in other expenses. The average state railroad employee earns 65,000 euros a year.
Twenty years ago a successful businessman turned minister of finance named Stefanos Manos pointed
out that it would be cheaper to put all Greece's rail passengers into taxicabs: it's still
true. "We have a railroad company which is bankrupt beyond comprehension," Manos put it to
me. "And yet there isn't a single private company in Greece with that kind of average pay."
So lets look a t Greece .. it like watching a magician ....
BeastNeedsMoreTorque papalibre 17 Jul 2015 16:32
But that argument doesn't put the banks lending the money in the clear does it? Even if we
accept your argument about the stupid borrowers it doesn't exonerate the banks does it?
It's called fraud.
If I sell you a car that I know is unsafe but you're too stupid to check before I hand over the
cash, its still fraud on my part.
Here's a quote that might persuade you:
Financial fraud can be broadly defined as an intentional act of deception involving financial
transactions for purpose of personal gain. Fraud is a crime, and is also a civil law violation.
Many fraud cases involve complicated financial transactions conducted by 'white collar criminals'
such as business professionals with specialized knowledge and criminal intent.
"..."It is like a dysfunctional family where narcissistic parents believe a fantasy of their
own perfection and scapegoat one of the children as the cause and epitome of all that is wrong."
Nice analogy. This is the world that propaganda created. A completely parallel universe. But it's
not exactly a new development. Look at the US, they are at their n-th invasion, and everybody still
pretends that they are slaughtering people for 'humanitarian' reasons. Or the IMF, which has ruined
the economies of pretty much every single state in the Third World and everybody pretends that 'we are
helping them to escape poverty'." . "...It all started with the 2008 global financial meltdown caused by private banker greed. Since
the rich cannot be paid for their mistakes--i.e. nationalize the banks--then the rest of us, the state,
take over the debt." . "...Yes, what's happening to Greece is happening (or will happen) to us all. I will continue
to vote however I've seen what happens to a fine government representing to the best of their ability
the people & country - they got knocked around & overruled. What I thought was non-negotiable turns
out some Hayek adoration readers in powerful positions decide now is time to dismantle social security
provision, employment protections & public infrastructure is made over to privateers. Scary times. " . "...Warren Buffet said we are in a class warfare and we (the rich) are winning. Strong words
since Americans don't believe in class or Marxism."
The last act of the classical Greek tragedy ends with two outcomes: disaster and catharsis. In
the current Greek debt drama, however, there has been no catharsis. The purification has failed to
materialise.
It would have meant that both sides had seen the error of their ways and come to their senses.
Instead, the madness continues:
Greece will take on €86bn of debt in addition to the existing €317bn (not including the emergency
loans from the ECB). From Angela Merkel through François Hollande to Alexis Tsipras, all eurozone
government leaders assert that Greece will emerge from over-indebtedness more quickly this way and
will be economically healed in three years.
Europe pretends that the bailout will help. And Greece acts as if everything is fine now.
The Brussels summit was not a disaster, though.
Greece does not fall into chaos
and the euro remains stable. Maybe Walter Benjamin, who once said: "The real disaster is if everything
stays as it is," was right. When it comes to classical drama, it seems we have not reached the final
act after all. The fourth act, the "retardation", continues. The action is slowing down, with suspensory
moments: the troika returns to Athens and monitors the situation, while the Greek authorities delay
and tinker about again. Until the action moves into a phase of extreme tension towards the finale.
When will that be? Merkel hopes it will be after the next parliamentary elections.
The troika is not operating as a trustee, but representing highly selfish interests
For the Greeks, there is more at stake in this drama than there is for the Germans. The Germans
will lose a lot of money at the most. The Greeks, however, have long since come under the tutelage
of the donors. What Tsipras signed on Monday is the permanent abandonment of Greek sovereignty. Athens
will be told what budget surplus it must achieve and what taxes it should raise. Fiscal sovereignty
is broken. The constitution will be interfered with to impose pension cuts. The administration and
judiciary must be rebuilt according to the standards of the northerners. It is not about a bailout
loan, but it is avowedly about nation building, as if Greece were a failed state. Even
the IMF has condemned the deal as unworkable and said the levels of debt are unsustainable.
Greek culture is being encroached upon in every way. The Sunday opening of shops is being enforced,
whether the still strongly religious population likes it or not. Consumption is more important than
orthodox religion – that is the credo of the north. In international law the internal affairs of
a nation are largely taboo; in the euro protectorate there are no taboos.
citizenJA -> Neil59 17 Jul 2015 08:58
If Greece was a corporation, would we be concerned about this "takeover"? What is happening
now is no different than an administrator stepping in, only it is happening to a government.
Wrong. Greece is a sovereign nation, sovereign people, not a business full of employees. Greece's
government is functional & democratically accountable. A nation isn't a corporation. A country
isn't a business. I can't tell you how horrifying your post is to me.
citizenJA Johanes 17 Jul 2015 08:08
Tecup, I really hope it is opening a few eyes to the real state of affairs.
We are all Greece, and sadly, this is not a statement of solidarity. It is a metaphor for
what our rulers are turning us into. And we vote for them ...
Yes, what's happening to Greece is happening (or will happen) to us all. I will continue
to vote however I've seen what happens to a fine government representing to the best of their
ability the people & country - they got knocked around & overruled. What I thought was non-negotiable
turns out some Hayek adoration readers in powerful positions decide now is time to dismantle social
security provision, employment protections & public infrastructure is made over to privateers.
Scary times.
HauptmannGurski CjCanada 16 Jul 2015 20:49
The elephant in the room is NATO. They wanted to keep Greece in at all costs, and now they
have all costs.
luella zarf CjCanada 16 Jul 2015 19:05
It is like a dysfunctional family where narcissistic parents believe a fantasy of their
own perfection and scapegoat one of the children as the cause and epitome of all that is wrong.
Nice analogy. This is the world that propaganda created. A completely parallel universe.
But it's not exactly a new development. Look at the US, they are at their n-th invasion, and everybody
still pretends that they are slaughtering people for 'humanitarian' reasons. Or the IMF, which
has ruined the economies of pretty much every single state in the Third World and everybody pretends
that 'we are helping them to escape poverty'.
The problem is that once the sociopaths have completed the capture of the developing world, they
have nothing left to plunder but the developed world. No surprise there, capitalism is a Ponzi
scheme, but imagine the shock of the Western middle classes when they finally realize that this
is their future too.
luella zarf competentcrew 16 Jul 2015 18:47
The market structure has not changed from 100 years ago and is archaic, more Oriental
than European. Something has to change.
The 'burden of the white man' reloaded. With this attitude, Germans will end up being again
the most hated people in Europe, and rightly so. Nobody asked them to 'zivilise' us.
luella zarf DieSacheUndOderIch 16 Jul 2015 18:40
That is the point! Germany only subscribed to the Euro under its conditions, that included
a stable currency.
In 10 years the European Union will either break up or we will have war again. People are not
going to put up with enforced austerity and German colonialism forever. You can hide your head
in sand or you can try to understand the macroeconomics of EU, which are a bit complicated but
not beyond what the average intelligence can grasp.
But Germans, to quote the economist Heiner Flassbeck, suffers from 'a collective denial of the
truth', when it comes to the 'failure of German economic and financial policies and their devastating
consequences'.
Yeah, although I'm with John Gray and his post-Marxist analyses of the cyclical nature of human
civilization, and would if pushed say the outlook is bleak with a few rays of sunshine here and
there. The UK is likely to move further to the right when things worsen - that's not a definite,
but it's likely if the post-Thatcherite years are to be viewed as a legitimate litmus test.
competentcrew -> luella zarf 16 Jul 2015 12:27
53 small businesses go bankrupt every day in Greece. 1.5 million former private sector employees
are unemployed. There's no time to romanticise about beauty and variety. We are talking about
people scavenging bins for food. The market structure has not changed from 100 years ago and is
archaic, more Oriental than European. Something has to change.
competentcrew -> kay_dee 16 Jul 2015 12:21
Excuse me? 200.000 skilled professionals emigrated from Greece (in the last 2 years and this
is a low estimate) not because they were bored, but because the way the Greeks want to run their
country left them with no jobs and no hope. The country is ruined and desperately needs growth,
so Sunday trading might just help a fraction. Living in a time warp doesn't.
wheresrobinhood 16 Jul 2015 01:57
It all started with the 2008 global financial meltdown caused by private banker greed.
Since the rich cannot be paid for their mistakes--i.e. nationalize the banks--then the rest of
us, the state, take over the debt.
The author is projecting a finality when the state cannot take on the debts of the rich any longer.
Warren Buffet said we are in a class warfare and we (the rich) are winning. Strong words since
Americans don't believe in class or Marxism.
"...Spot on. Greece's debts have now been made effectively unrepayable in order to send the
deafening warning to the Spaniards, Portuguese, Italians, etc., not to dare elect anti-austerity governments.
It's pretty desperate stuff."
.
"...if Greece was free to decide would they be in this spot. no.. they are being dictated. period.
the people understand that and are protesting, but the politicians can only do what the banks tell them
so they will do exactly what they are told and then have elections - the people will then elect new
government which will negotiate so minor changes to the payment plans or some other irrelevant term
which the new government will tout as a victory which of course the media will lap up like a dog in
heat and everything will be as it should according to the control exerted by these financial oligarchs
who dont give a crap about the people and only care to own own own. "
.
"...Just as Sven Linqvist shows in The History of Bombing that World War Two was essentially the
result of Germany importing practices into Europe which were formerly common and universally accepted
(even applauded) in the West's administration of its colonies (mass murder, genocide, gun boat diplomacy),
so Europe's next breakdown will be able to trace its roots back to this importing of economic practices
formerly reserved by Western institutions for the developing world into the heart of the developed world.
This is the beginning of the end for Europe, and it certainly marks the end of my--and many others'--dreams
of a powerful, unified Europe underpinned by the acquis communautaire."
.
"...The EU is a tool of banks and corporations to squeeze the poor."
.
"...This article points out what has been obvious for some time. The neo liberalist European elites
cannot tolerate Syriza or any other far left political movement. There is to be no credible alternative
to austerity and anyone who says otherwise will be crushed. "
.
"...I have just read the Hans-Ulrich Goerges column in yesterday's Stern magazine. It points out
how much untaxed money rich Greeks, including the families of Greek government ministers, have parked
in Switzerland over the last few years and particularly in the last few months and weeks. The amount
of money involved dwarfs other sums under discussion here. And nobody does anything about it! What sort
of a society is mainland western Europe, that everybody involved knows exactly what is going on, but
all turn a blind eye?"
.
"...You do realise that the biggest tax evading entities in Greece are of German interests? You
do realise that the fund where undervalued Greek assets will be going into is directed by none other
than Dr Schauble (the German finance minister) himself. Greece won't be reformed because of many interests
and mostly external. The rest is a charade."
.
"...To quote the great economist - J K Galbraith - 'In economics, the majority is always wrong' and
that is certainly the case with the euro. For twenty years The Guardian has been mocking those of us
who foresaw that the euro would impoverish southern Europe. We were also ridiculed for pointing out
that the EU was undemocratic - run by unelected and unaccountable bureaucrats. Well, now the penny appears
to have dropped - which is great - but I don't expect any apology to us eurosceptics! "
.
"...Thank you for the better analysis I've read. As a Portuguese, from a country that is going through
a very similar situation, I feel that we are not living anymore in a democracy: only a formal one, under
the economical-financial diktat of the UE bureaucracy, Germany, IFM and North-American geopolitical
interests. If you have a good memory, as a people we have freed ourselves from a 48 years dictatorship
in April 1974, and now we are falling under another one, like the Greeks, who suffered also in the flesh
the Dictatorship of the Colonels. What is waiting us? A long agony, in a humiliating, almost colonial
situation. The "Evil Empire" is now formed by a nebulous cloud of hidden interests, speculators and
corporations. I also had an internationalist dream, I dreamed with a democratic United Europe where
the richness of its several cultures and its cross pollination could have given birth to o New Renaissance
and an enlarged Atlantic-Mediterrean Pax. Not any more. After the abject humilitiation of Greece I feel
ashamed of even be classified as an European. In the now quickly decaying corpse of a dream all the
extremims will found, as worms, the fertile ground of a graveyard. No, thank you. Keep your money and,
when needed, try to eat it."
.
"...For me this is a wake up call. The European project has been stripped of its social pretensions
and bare naked it's ugly. A project which was originally intended to maintain the social and economic
balance in a Europe which would otherwise inevitably be dominated by Germany's disproportionate mass
and scale has become a means of achieving and maintaining German financial and economic supremacy over
the rest of Europe."
.
"...In a speech from Goebbells to Czech Intellectuals and journalists, Berlin 1940.
You gentlemen have now seen something of the Reich, and I made a point of allowing you to make this
journey before I addressed you. You have seen the Reich in Wartime, and you will have formed some idea
of what it can be in peace. Out great nation with its large population, together with Italy, will in
practice take over the leadership of Europe. There are no two ways about that. What it means for you
is that you are already members of a great Reich which is preparing to reorganize Europe, tearing down
the barriers that still separate the European peoples and making it easier for them to come together.
Germany intends to put an end to a situation which quite clearly cannot satisfy mankind for long. We
are performing here a work of reform which I am convinced will one day be recorded in large letters
in the book of European history. Can you imagine what the Reich will actually be like after the war?
(…)"
.
"...What preparations did the Euro-zone make for a Greek default? They moved the private debt to the
Euro-zone tax payers. 2009 - 2014 - reduction in private creditors exposure: France - 50 billion, Germany
- 20 billion ..... etc ......."
.
"...... Wake up call for Mr.Milne: The European Project was never meant to be of benefit for the
people, only for business (and politicians). You better focus on TTIP, the coming super USA/EU, where
we will all be Greece. And we don't get a referendum... This is why the UK no longer needs to be in
the EU, TTIP will take care of that. All a matter of "look over here!", so you don't see what's happening
over there.... "
.
"...The fact that war is inconceivable between the members of the EU is the often forgotten achievement.
You do not have to look very far back from its foundation to realise what has been achieved. The tragedy
in my view is that the vision of Europe has been hijacked by the federalists and euro (the currency)-philes.
Enforcing a single currency made this crisis only a matter of time, as we have all known since it started.
Spare a thought for German tax-payers who are doing the lion's share of the funding while hearing Germany
abused on all sides."
.
"...I agree with Seamus' analysis and find it moves to the core of what's wrong with the financial Management
of Greece by the Interests of World, European Capital. "Greed is good for Greece" is what it's democratic
and financial institutions are being told by wealthy power Brokers. "If you don't shape up to our expectations
of ever more atavistic desire for exponential Profit margins....you will be punished. So shape up and
take your medicine. Corporate Fascism. This greed for Profit at exponential expectation is commodifying
the very space between human communities and is philosophically. morally and spiritually bankrupt. I
fear the the reptilian brain has taken over the asylum! See Chomsky's "Profit Before People"..."
.
"...We're always talking about the loans, but the loans are not the problem, nor was the Greek economy
the problem: between 2001 and 2008, the Greek economy grew faster than the German economy. If you do
not believe this, don't quarrel, look it up.
.
The fundamental problem of the euro zone has nothing to do with Greece, it has to do with Germany and
with the macroeconomic architecture of the euro: it can't work. Since 2001, and against agreements,
Germany put enormous pressure on wages: wages did not increase in sinc with productivity, but remained
far below it. The consequence of this was that, by 2010, the Germans will able to produce a product
and sell it in the EU for 15 % cheaper than an basically identical product made in France. With Greece,
the difference was 25 %. This is how Germany exported its unemployment across the union, how it created
unemployment everywhere else, how, year after year, it accumulates record trade surpluses that end up
in German banks that borrow it to us so we can buy more cheap German products."
.
"...You have not addressed the most horrible fact which was that the German officials conspired for
years to use Grexit to manipulate other EU states into giving up their sovereignty, which is black on
white in Geithner's memoirs. Yet you go on with the same moralistic crap: that nobody forced Greece
to do this or that. Which tells me that you do not have an ethical bone in your body, because that is
Dark Vader shit. "
.
"...Central Europe is painting Greece as the naughty boy, while Spain and Portugal are the good little
boys who did what they were told and imposed painful austerity on their peoples. This is the colonial
tactic of divide and rule. The truth is that the euro enriches Central Europe and impoverishes the periphery.
All the PIIGS faced painful choices after the 2008 crash as a result. The Spanish wrote off the chances
of their young people. The Greeks tried to blag, bluster and fight their way out. Central Europe want
everybody to think about how terrible the Spanish and the Greeks are for making these different bad
choices. Actually, Central Europe are the villains (not only Germany but also Benelux and Finland).
They used to say that you should not have monetary union without political union. We should now say:
Monetary union without political union is perfect, if you want a mechanism for central imperial domination
of their peripheral colonies."
.
"...Greek elites, also wedded to the same system, long ago placed their country in this unpleasant
position. While I acknowledge that Greece must reform, many think the reforms the Troika wishes for
are not the best ones to achieve results, lacking fairness and justice, and again penalising the poorest
sections of Greek society. Both Germany and Greece, pushed by the EU to be the stars of this drama,
are engaged in an impossible stand off."
.
"...in 2014 Timothy Geithner, US Secretary of the Treasury 2009-2013 published his Memoirs, where he
details how he met Schauble in 2012. Well well, and Mr Schauble told him that kicking the Greeks out
of the eurozone was a desirable strategy because "a Grexit would be traumatic enough that it would help
scare the rest of Europe into giving up more sovereignty to a stronger banking and fiscal union".
http://www.nytimes.com/2015/06/30/business/dealbook/the-hard-line-on-greece.html
Translation: Since 2012, the Germans have attempted to throw Greece under the bus in order to manipulate
other states to give up their sovereignty to the bankers! You can't make this up if you tried it! Disgusting."
.
"...No taxpayers lent money to Greece : that was private banks. This only became a problem for European
taxpayers when the troika decided in 2010 to take over responsibility for the debts, thereby transferring
liability from bankers to taxpayers. They then imposed macroeconomic policies which gutted the Greek
economy making it unlikely European taxpayers would ever get much of their money back . The newspapers
really have got you hating the oppressed and loving your oppressors, haven`t they ?"
.
"...Yes, I was thinking the right wing voters are most hypocritical, even in their condemnation
of the EU, because they vote for the same neoliberal ideology that got Greece into this mess, for their
own nations!"
.
"...I was raised to have a horror of clubs and organizations with memberships. Do not see why a country
would want to be a member of a club, especially when the economic disparities are so great. The EU can
never operate like the USA, because every one of the countries in it as a long and different history,
different language and culture. To run efficiently it will have to imitate the former USSR and develop
a dictatorial central administration. Seems that Merkel has grasped that fact. Arbeit macht Frei
will be the watchword and goodbye to La dolce vita."
.
"...Did it occur to you that the EU has changed in recent years. It is now run by right wing governments
who promote a failed austerity and a failed banking system. A decade ago, it was full of socialist governments
who went on a spending spree. The Banks were the winners in both cases, but now the poorest pay with
unemployment, rights taken, and assets stripped, while those who benefitted most still enjoy their riches
and stack money away in tax havens."
This attempt to turn Athens into a debt colony will fail – and open the way to the breakup of
the eurozone
"That's been a familiar pattern in the developing world for decades, in the guise of IMF and
World Bank structural adjustment programmes. But the eurozone has now given it permanent institutional
form."
afurada crystaltips2 17 Jul 2015 18:31
It means what it says - that over 90% of the demands made by the Troika were carried out by
successive governments. I'm listing some of them here (in order of occurrence from 2010): a freeze
in the salaries of all government employees; a 10% cut in bonuses and overtime for govt workers;
a freeze on pensions; an increase in VAT from 19% to 21%; rises in taxes on fuel, cigarettes,
and alcohol; rises in taxes on luxury goods; cuts in public sector pay; pension reform including
increasing retirement age from 60 to 65 for women; cap on monthly wages and introduction of 10%
cuts on salaries above €1,800; new taxes and new cuts of workers' wages; property tax collected
through the electricity bill; public pension cuts to 15%; increase of the retirement age from
65 to 67; additional wage cuts for civil servants up to 20%; public salary wage cuts up to 30%;
Public Broadcasting Service shut down; thousands of layoffs and wage cuts for civil service workers.
They could have done more, and harmed the economy even further. As it turns out, it is a good
thing that they didn't.
Graham Jones 17 Jul 2015 18:25
Indeed, the bullying of Greece and the introduction of secretive treaties like TTIP and TISA
which threaten all our public services, making a mockery of having a parliamentary democracy,
have convinced me to vote no in a referendum. The EU is a tool of banks and corporations to
squeeze the poor. It seems our MEPs are as blissfully unaware of the broad tide of disaffection
with the EU as they are with the real effects of the secret treaties. I bet Cameron is kicking
himself about offering a referendum on EU membership, naively thinking that the leftish, greenish
and liberal voters would weigh against the Tory euroscepts and kippers. He really needs the SNP
on this one!
eamono MaroonMango 17 Jul 2015 17:50
Absolute crap as the Finance Minister was defeated 4-2 in a ministerial vote prior to his resignation.
What were his policies and decisions? They were to take control of the Greek National Bank before
the ECB acting unlawfully, stopped the funding. Why aren't you questioning the political actions
of a bank that is deemed to be economic not political? Who in Europe ordered the ECB to act like
this? The Germans? It wasn't the French. Do some research!!! Dr. Eamon
ukchange68 iOpenerLo114Lat51 17 Jul 2015 17:33
'real money' investors have been cheated, and stolen from, just like the rest of us, I'm afraid
Euvosto Taivas gooner40 17 Jul 2015 16:39
Regrettable, the political egos in Brussels, Paris and Berlin could never stand the Union's
dissolution without tragedy.
bolshevik96 17 Jul 2015 15:55
This article points out what has been obvious for some time. The neo liberalist European
elites cannot tolerate Syriza or any other far left political movement. There is to be no credible
alternative to austerity and anyone who says otherwise will be crushed. The fact that the
democratically elected government of a free and sovereign nation can be bullied into accepting
harsh, economic strictures despite their election on an anti austerity ticket shines a revealing
light on the bureaucratic reality of the European Union. The Greek people made their voices heard
in the referendum and the message was loud and clear - NO. Democracy in the Union now only exists
on the sufferance of the financial elites and if you think that this has no implications for the
UK you couldn`t be more wrong. The writing is on the wall for the smaller, newer members (and
some of the older ones) : elect governments acceptable to the new neo liberalist orthodoxy or
face the consequences.... For years the right wing press has been banging on about European interference
in British domestic affairs and the left has been dismissing it as xenophobic scare mongering
but maybe they have actually been calling it right.... if that`s the case the left had better
start re-thinking their position and start putting British interests first, last and always........
tnbskts icarus32fly 17 Jul 2015 15:21
Because when a country gets into deep financial trouble, what's the alternative? And the problem
is, the deep financial trouble isn't always self-inflicted; sometimes governments are destabilised
from without in order to bring about this very situation, sometimes the problems are part of a
more widespread financial or other crisis (which is at least part of the problem in this case,
even though I know the Tories like to claim that the 2008 financial crisis was totally down to
the Labour government).
And then the vultures circle and pick the bones clean. Austerity for the masses, public holdings
transferred to private ownership at fire-sale prices, laws passed to favour foreign investors
and trade at the expense of local businesses and individuals, and a society and economy wrecked
for decades to come.
mjlynley 17 Jul 2015 12:50
While I have lots of sympathy with the Greek (I used to live there), and I agree that the terms
are onerous, those who are vociferously criticizing the Europeans and blaming especially the Germans
must ask themselves 1) what about Greece's responsibility (and trustworthiness) and 2) what is
the alternative.
With regard the first, the Greeks and their sympathizers talk all the time about the democratic
will of the people. But democracy also means collective responsibility for what the governments
you elect do in your name. Let us not forget, Greece was actually starting to recover at the end
of last year before Syriza started its disastrous and ill-conceived theatrics. Also, you can't
put the blame for the debt on the creditors - the Greeks LIED and CHEATED about their true level
of indebtedness, and they failed to keep their promises. The Greeks are adults and must take responsibility
for their decisions. If they are not considered adults able to make sensible decisions, then they
don't deserve to rule.
Another important point, frequently mentioned, but not stressed enough, is that the Greeks
themselves don't want to pay for their country. Tax evasion is rampant. I was there a couple of
months ago and was surprised by the number of petrol stations that were cash only, no receipt.
If the Greeks aren't at least prepared to meet the world half-way, why should taxpayers in northern
Europe be forced to subsidize them ad infinitum. The reforms are designed to get Greece to a primary
budget surplus (i.e. before interest). Surely that is not unreasonable?!
What is the alternative to the current deal? Everyone knows there will be some form of debt
relief, even if it's only making a large chunk virtually interest-free, and stretched out far
into the future. If there is a write-off, someone has to pay. The money doesn't come out of thin
air. And that will be borne by taxpayers whose countries kept the rules!
Sadly, it's a mess with no winners, only losers.
dr8765 17 Jul 2015 08:50
Near perfect closing paragraph Seumas.
On the assumption that The Guardian will allow a "free vote" amongst its journalists, I hope
that you will lead the "out" faction in the run-up to the referendum. Although, judging by some
of the things written by others this past week, you may have some competition.
At last the left in this country seems to have woken up to what is happening, although that
doesn't extend to the politicians. But then, when was the last time the Labour party really represented
the views of the disenfranchised?
Liam DC Nisbet LiberteEgalite1 17 Jul 2015 08:34
Do your research. Greeks are well aware of the endemic corruption and tax evasion, and this
has certainly contributed towards their economic woes, but it's not the whole picture.
Greece was lent a lot of money, by Germany, when Germany knew it couldn't pay it back. That's
called irresponsible lending and it would land your average high street bank in deep water, but
the Troika are not your average high street banks.
This article is not baseless at all, in fact it's right on the money.
It's your kind of poorly informed rhetoric that stokes nationalist resentment. Keep your childish
opinions to yourself in future because you're not helping anyone.
LiberteEgalite1 17 Jul 2015 08:14
Countries poorer than Greece in the EU such as Latvia, Slovakia, and Lithuania have made the
reforms and adjustments required to reign in borrowing in order to be competitive and are starting
to succeed. Their aspire to be like Netherlands and Germany and are working hard to attain this
goal. Greece on the other hand wants to send a begging bowl around the EU so that it can hand
generous welfare to its citizens using other people's money. This article is baseless and not
helpful in helping Greeks understand the real source of their plight, which is their endemic corruption
and tax evasion of its elite.
MaxDrei 17 Jul 2015 07:30
I have just read the Hans-Ulrich Goerges column in yesterday's Stern magazine. It points
out how much untaxed money rich Greeks, including the families of Greek government ministers,
have parked in Switzerland over the last few years and particularly in the last few months and
weeks. The amount of money involved dwarfs other sums under discussion here. And nobody does anything
about it! What sort of a society is mainland western Europe, that everybody involved knows exactly
what is going on, but all turn a blind eye?
NickLS -> nicholass 17 Jul 2015 07:25
Greece does not have an export oriented economy, this is a fact. It would be great if it did,
but to develop one would take time and - surprise! - development; yes, the opposite of austerity!
Given this factual situation of negligible exports, cutting pensions and wages effectively
means killing the internal market and shrinking the economy because - surprise! - people will
have less money to buy stuff from the companies that sell them. Thus, the remaining companies'
sales will fall more and they will have to close shop.
As for the characterisation of SYRIZA, I do not know what you justify it on and what your experience
with them is, but I think it should be more than clear that your opinion does not necessarily
reflect the truth.
Actually they checked their books, however Eurostat rules said that derivative positions did't
have to be on the books. Many complained about this rule, but Greece with the help of Goldman
Sachs completely abused it by turning what looks like a loan from GS (ie GS give Greece a load
of money, Greece pay small 'interest charges', Greece repays a load of money) into something structured
as a derivative position that didn't have to show up.
estremoz -> NickLS 17 Jul 2015 05:57
It won't be NATO, it will be Eurogendfor, militarily equipped, rapid reaction force entirely
at the operational control of the Commission, not the Council of Ministers.
Already formed, already fully operational.
Anti EU protests, which will increase, will be termed domestic terrorism.
NickLS -> cpp4ever 17 Jul 2015 05:49
Greece is not going to exit the Eurozone for the simple reason that Greek assets have been
and will keep being sold off at ridiculously low prices to foreign interests. This includes infrastructure,
utilities, telecommunications, banks, road tolls, ports, airports, minerals, oil rights, land,
tourist businesses, etc. For example, Fraport (a German company) will be gaining ownership of
14 airports throughout Greece soon and Deutsche Telecom already owns the biggest telecommunication
company in Greece. Canadian companies and funds own the Athens airport and the gold reserves in
the north of the country.
Can you imagine what long term profits these are going to make for foreign companies and for
lender countries who bought it all for 1/100th of their real value through the bailout terms?
A return to the drachma would mean the end of the profits and their feast, so it won't happen.
And even if a revolt happens one day, you will start hearing in the media how Greek "extremists"
are out of control and need to be suppressed by NATO or Juncker's army, if he has it by then.
icarus32fly 17 Jul 2015 05:48
Crucifixion: what an apt image! And the sheer weight of the voices behind the plethora of links
you provide in this piece is ample evidence that most people of good sense are hating what's happening.
Wonder if a shotgun wedding -the very rushed formation of the EU-can possibly end in an amicable
and civilised divorce?
tnbskts 17 Jul 2015 05:45
Naomi Klein pointed out in The Shock Doctrine in 2007 that banker-imposed austerity was incompatible
with democracy, and that the financial sector along with its bought-and-paid-for governments would
do whatever it took to make sure that its interests prevailed, so this outcome was pretty much
inevitable. Not exactly surprising that Greece has been added to the parade of countries that
have already been impoverished so that the few at the top can become even richer.
icarus32fly MaxDrei 17 Jul 2015 05:44
No, not heart breaking at all; heartbreak involves losing something worthwhile and precious,
the whole EU Project was never anything like this but a cock-eyed, ill-conceived, misguided shotgun
monetary wedding...to continue your marriage metaphor...I'm still trying to figure out who was
pregnant and had to get married.
orsat1 17 Jul 2015 05:42
I have had many happy experiences in the past 47 years whilst visiting Greece. I would like
to go again but, I fear a backlash from all Greeks who do not profit from tourism. Tourism is
a major part of the Greek economy and many Germans holidayed there: they will now stay away thus
exacerbating the problem. Likewise many other EU citizens will feel as I do and stay away.
The IMF and now the ECB have said that the debt is unsustainable, only the EU [mainly Germany]
believes that they can get blood out of a stone. PLEASE LEAVE THE EU if only temporarily, and
bring back the drachma. Tourists will flock to your shores.
cpp4ever 17 Jul 2015 05:38
Have to agree with you, Seumas Milne, Greece will eventually have to exit the Eurozone and
default on many of its debts if the EU Troika continues with policies that have singularly failed
in the past and I reckon will no doubt fail again. The current course for Greece makes a mockery
of any Democracy requirements of the Eurozone when it can apparently be effectively over ruled
so easily. If anyone thinks otherwise, then consider this, Greek businesses going bankrupt is
about the most successful business there at the moment and that is going to do nowt for their
GDP, or make the profits required to service any debts, let alone pay them off. But that is what
Troika policy has achieved and can hardly be called a success!
johnc2tinit 17 Jul 2015 05:31
Perhaps now is the time to point out the obvious: On the scale of Europe Greece is a tiny country.
The Greek population is a mere 5% that of France, Germany and Britain combined. It is similar
to that Lombardy and just double that of Ireland. With a third of the population is in the city
or metropolitan area of Athens there is neither the workforce nor the infrastructure to rebuild
a viable economy, capable of sustaining the payback expected.
Even with a florid economy Greece would have struggled to pay back the "investments" that other
European countries poured in as bail-out. The error was as much on the part of the "rescuers"
as on the government then in power for accepting such disproportionate sums.
Any private investor will find in small print at the foot of a prospectus the warning: past
performance is no guarantee of future returns. In Greece's case, following years of corrupt government,
this codicil should have made the EU all that much more careful to help Greece to become solvent
again – innovating industry and creating jobs – rather than encouraging her to dig a deeper hole
to be finally swallowed in.
Until those now crying for their money back realise that their money as lost and start supporting
all the smaller members of the union in order to rebuild a single economic entity the future is
bleak. For all of us, even for the larger and more wealthy members.
John Crawford, Bergamo, Italy
NickLS Mark Hatton 17 Jul 2015 05:30
It is misleading to say there is a Greek situation. There is a situation for almost everyone
in Europe; some are feeling the effects now, some felt it earlier and some will feel it later.
However, you are right to say the the EU is a very opaque bureaucratic hegemony, on that is empowered
by the de facto diversity, inequality and the lack of effective bottom-up organisation throughout
the continent.
AgeingAlbion 17 Jul 2015 05:30
Over 40 years ago Tony Benn and Enoch Powell joined forces and argued that the EU was undemocratic;
that you could not have a single government without a single minister of finance; and that the
EU (Eec for pedants) was an ever expanding monster that was a one way street to a superstate.
The dishonest Ted Heath pretended he disagreed. The more honest on the left agreed but thought
it was a good thing, since for them more government is always better government.
So well done for waking up Seamus to what was predicted by intelligent people from opposite
ends of the spectrum before you were even born.
Christopher Deans 17 Jul 2015 05:28
There was not one member country that did not fudge entry conditions to the common currency
of the euro and Greece was aided by other members. The only way the euro could have worked was
within the confines of a Federal Europe, and a common currency was the lure. This was Germany's
third attempt to dominate Europe in the last 100 years and it has failed. The Greeks will leave
the Euro and they will be followed by the Mediterranean Nations whose economy is being stifled
by debts greater than 100% of GDP; they need to devalue their currency to survive. German goods
and services will become increasingly expensive, and equitable trade balances will eventually
be restored. The process of restoration will cause some considerable hardships, which are inevitable.
but who wants to use currency and a fiscal system in which trade deficit will see German bailiffs
at the door demanding possession of national assets.
Mark Hatton 17 Jul 2015 05:23
The European Union is not a democratic institution, neither was it created to be. It's basis
is ideological federalism, or bureaucratic hegemony, if you prefer.
The EU project was always a method for Germany and/or France to attempt to dominate the mainland.
There was long an unspoken agreement between these two senior nations to this end, whilst each
plotted to usurp the other, 'France by other means', 'ever closer union'. The disparate identities
of the European members are being gently sanded to match the homogeneous banality of the bureaucratic
elite themselves. Peace in our time intending to be achieved by grim uniformity.
That the Greek situation is political as well as financial is self evident. But it is not as
black and white, good vs evil as some commentators would have you believe. The Greek establishment
are as responsible for their predicament as the EU is. As a nation it has lived beyond it's means,
and saw Euro membership as it's ticket to do this. It is naive to imagine the EU, IMF and German
banks would be given pause by a pointless referendum and empty bluster. For all Tsipras' guts
and political mandate, its was always a matter of time before he had to capitulate, or leave the
Euro. Everyone round that table knew it.
imp44791 oak101 17 Jul 2015 05:23
For once a decent comment in CiF that doesn't go on about either "banksters" or "lazy Greeks".
There are no good guys in this affair.
1. Not those European politicians who are risking to wreck (and possibly have already wrecked)
decades' worth of effort to build a system to keep the nationalist beast quiet over a point of
philosophy ("moral hazard") and protocol ("why did you lot call a referendum while we were still
negotiating"?).
2. Not the supposed left-wingers in Greece who have repeatedly lied to their own voters for
years on end (latest one: "vote No, and we will force a good agreement in 48 hours"), and who
once elected immediately proved themselves to be the usual force of conservatism that the Greek
"left" has always been: the protectors of guild privileges, the sacrificers of workers in the
private sector to protect the cushy positions of their clients in the civil service, the persistent
deniers of any modernising reform.
3. Not the voting public in Greece who cannot rid itself of the ridiculous sense of exceptionalism,
entitlement (on the achievements of some chaps who lived 2500 years ago), and myth-making ("the
Russians will save us")
4. Not the voting public in Europe, who has fallen hook, line and sinker for all the inane
stereotypes of feckless Southerners who will retire at 30 to sit out in the sun, and buy luxuries
with the hard earned money of Berlin bakers.
5. And certainly not the commenters of CiF, who ride their own personal ideological hobby-horses
(be that "banksters" or "morally bankrupt socialists") over an affair that has little to do with
any of that.
I am a Greek expat of some 25 years, after despairing of points 2 and 3 above. Because Syriza's
BS is not just BS. It's also old-hat BS: all a silly mish-mash of old Pasok clientelism and anti-modernising
reflexes, seasoned by the illiterate ramblings of the extra-parliamentary far left. But the last
five years have also led me to despair of the supposedly better Europeans. Perhaps it's time to
up sticks again and try a less ideologically bankrupt continent. Is New Zealand far enough? How
about Tuvalu?
NickLS rCharel 17 Jul 2015 05:23
You do realise that the biggest tax evading entities in Greece are of German interests?
You do realise that the fund where undervalued Greek assets will be going into is directed by
none other than Dr Schauble (the German finance minister) himself. Greece won't be reformed because
of many interests and mostly external. The rest is a charade.
bill9651 17 Jul 2015 05:11
To quote the great economist - J K Galbraith - 'In economics, the majority is always wrong'
and that is certainly the case with the euro.
For twenty years The Guardian has been mocking those of us who foresaw that the euro would
impoverish southern Europe. We were also ridiculed for pointing out that the EU was undemocratic
- run by unelected and unaccountable bureaucrats.
Well, now the penny appears to have dropped - which is great - but I don't expect any apology
to us eurosceptics!
ThinBanker justonetom 17 Jul 2015 05:06
With respect, I think you miss a crucial angle on Syriza. Tsipras and Varoufakis are very intelligent
men, so is it realistic to suggest that they were naively offering the undeliverable and crossing
their fingers? No, the point of their strategy was fear: take a bold, brazen stance and evoke
the clear understanding that they will not back down and all the time leverage fear of the repurcussions
for the eurozone as a whole if they are kicked out. Such a strategy requries a poker face, a brazen
bluff til the end.
When it came to showing hands, Germany won .... but if you think about it, this was the only
viable strategy if Greece was to try and remove its straitjacket.
ManuelGiraldes 17 Jul 2015 04:58
Thank you for the better analysis I've read. As a Portuguese, from a country that is going
through a very similar situation, I feel that we are not living anymore in a democracy: only a
formal one, under the economical-financial diktat of the UE bureaucracy, Germany, IFM and North-American
geopolitical interests. If you have a good memory, as a people we have freed ourselves from a
48 years dictatorship in April 1974, and now we are falling under another one, like the Greeks,
who suffered also in the flesh the Dictatorship of the Colonels. What is waiting us? A long agony,
in a humiliating, almost colonial situation. The "Evil Empire" is now formed by a nebulous cloud
of hidden interests, speculators and corporations. I also had an internationalist dream, I dreamed
with a democratic United Europe where the richness of its several cultures and its cross pollination
could have given birth to o New Renaissance and an enlarged Atlantic-Mediterrean Pax. Not any
more. After the abject humilitiation of Greece I feel ashamed of even be classified as an European.
In the now quickly decaying corpse of a dream all the extremims will found, as worms, the fertile
ground of a graveyard. No, thank you. Keep your money and, when needed, try to eat it.
JackBz 17 Jul 2015 04:53
For me this is a wake up call. The European project has been stripped of its social pretensions
and bare naked it's ugly. A project which was originally intended to maintain the social and economic
balance in a Europe which would otherwise inevitably be dominated by Germany's disproportionate
mass and scale has become a means of achieving and maintaining German financial and economic supremacy
over the rest of Europe.
Right now Greece can go hang, but the message is - actually - you can all go hang, if it doesn't
work for Germany it's not going to happen.
Shipyardwelder 17 Jul 2015 04:11
Greece has been made a sort of sacrificial lamb for the Euro project. On the altar of the European
dream, a nation has been reduced to penury. Yes, they were stupid to borrow money in the way that
they did. But, more stupid is a E.U., that allowed a situation like this to develop in the first
place. -- May the fine Greek people find resurrection that comes after crucifixion.
estremoz 17 Jul 2015 03:39
In a speech from Goebbells to Czech Intellectuals and journalists, Berlin 1940.
You gentlemen have now seen something of the Reich, and I made a point of allowing you to make
this journey before I addressed you. You have seen the Reich in Wartime, and you will have formed
some idea of what it can be in peace. Out great nation with its large population, together with
Italy, will in practice take over the leadership of Europe. There are no two ways about that.
What it means for you is that you are already members of a great Reich which is preparing to reorganize
Europe, tearing down the barriers that still separate the European peoples and making it easier
for them to come together. Germany intends to put an end to a situation which quite clearly cannot
satisfy mankind for long. We are performing here a work of reform which I am convinced will one
day be recorded in large letters in the book of European history. Can you imagine what the Reich
will actually be like after the war? (…)
mitchellkiwi 17 Jul 2015 03:30
Well, Merkel, Schauble, Juncker, congratulations! You'll be able to buy the Piraeus, already
you own plenty of properties there. You'll be able to buy energy, water and other public services.
But more and more of the British public now know they no longer want to be a part of such an abusive
organisation. The UK will be leaving after their referendum. We don't want to know you any longer.
Euvosto Taivas FrankMartin 17 Jul 2015 03:30
At least very many Finns would like to resign the euro. They have begun collecting names, in
order to give the opportunity to a referendum. The eurozone represents the dictatorship of the
international banksters. The whole European Union is hated every day more and more. Names against
it are collected, too. As we know, Eu does not allow referendums regarding its decisions or very
existence.
soundofthesuburbs David Parris 17 Jul 2015 03:21
What preparations did the Euro-zone make for a Greek default? They moved the private debt to
the Euro-zone tax payers.
2009 - 2014 - reduction in private creditors exposure: France - 50 billion, Germany - 20 billion
..... etc .......
The taxpayers have been loaded up with the bankers bad loans.
Who do you think funded people like Jean Monnet? The campaign for European Union was in Britain
until Britain made it clear it was not going to commit, then it shifted to France.
Yes, it is a US project - some European politicians may have been anti-American, but surely
it is obvious by now that the US is politically pragmatic and would consider that a small price
to pay for the desired geopolitical outcomes.
Enoch Powell 17 Jul 2015 02:57
The crucifixion of Greece is killing the European project
The European project is dead. Dead as a dodo !! The free trade concept looked good on paper
but the EU has transformed into something quite different than what was originally intended.
If the British people knew that political union was on the agenda and that millions of poor
East Europeans would have free access to British jobs, public services and social housing they
would have comprehensively rejected EU membership at conception. The fact is the British and Greek
people have been lied to time and time again by the political establishment. The chickens have
come home to roost and it's game over for this failed and corrupt European project. Get over it
!!
taxmillionaires admonfr 17 Jul 2015 02:55
You conveniently forget that of the 'bail outs' allegedly given to Greece, more than a 90%
went straight to the banks, therefore, they should not be called bail outs for Greece. They were
at all effects bailouts for the effing failing banks.
Greece couldn't pay its debt and that debt shouldn't been payed. When you walk into a casino
and you gamble, you may win or loose. If you loose, you don't have the European taxpayers covering
for your loses. The same should be applied to banks and investors. You invest at your own peril.
You may win a fortune in profits and interest but you may lose if the borrower cannot pay back.
However, the way it is in Europe now, the banks and creditors gamble and profit from the interests
while the taxpayers foot the bill for the loses. If there is not enough taxpayers' money to cover
the astronomical loses of those banks, then bleed the taxpayers dry by imposing an artificial
austerity destined to suck up to the last cent of EU states to give to banks. What a cosy arrangement,
no?
I will only believe that it was Greece's fault if up to the last cent of those 300 bn or so
in 'bail outs' had remained in Greece's economy. As it is, for me, it was, it is and it will continue
to be the fault of the banks and the apologists for those banks. As we stand, the eurocrats have
catastrophically failed not only to Greece, to the rest of the eurozone countries, but to every
country in the EU because they have tramped democracy and put in the open what the EU project
is all about. Nobody apart from Greece's democratically elected government should have a say in
how the country is run.
What those eurocrats have done in Greece is at all effects a coup and history will make them
pay dearly for it.
muezzin maricaangela 17 Jul 2015 02:49
Well, as you know, ties between Germany and Croatia are deep :) We'll see if Germans will help
if Croats implode.
As for the commercial loans - this is how the Chinese and Americans operate. Standard MO. Only,
the Germans, Swiss and Italians did it a bit more ineptly, crashing many a East/Southern European
family with unfavorable loans. Note however, that this does not apply to Greece, where interests
rates were slashed a few years ago.
FenlandBuddha Thorlar1 17 Jul 2015 02:49
"The "European project" was largely designed by the US in the aftermath of WWII specifically
to resist Soviet Russian expansion."
Absolute bollocks. The drivers behind the European project were all European (sometimes anti-American).
It was all about no more European wars and at its core how can France and Germany live together
after 3 destructive wars in one lifetime. That's what drive men like Jean Monnet. If the USSR
hasn't existed they would have acted in exactly the same way. The Americans couldn't wait to get
out of Europe after the war.
Utter anti-American " twist rhe facts to make the US the villain" drivel
hertsman GMPierce 17 Jul 2015 02:46
The money went to the German and French banking system and was added to Greece's bill.
The Greeks didn't see a nickle of that money.
Wrong. They got 9% or around 25 Bn - that's a lot of nickels. Please make your contributions
more accurate.
the ordinary Greek people don't profit from that corruption.
Really ? Where do you think the money came from to allow public servants to retire at 55 with
80% pension ? A Guardian article on Greek pensions featured a clerk who had retired at 55 and
received E 940/month pension. This must be the most generous pension system in the world.
David Parris 17 Jul 2015 02:35
Germany wants influence in proportion to its size, and its size is huge; this has led to dangerous
hegemonism leaving smaller states (except Luxembourg) counting for little. Essentially, European
democratic structures exist only on paper; in practice, France and Germany collude to stitch up
major decisions in advance, to the detriment of smaller Member States. The mechanism of so-called
"bail-outs" should be noted; they consist of loans at better interest rates than the bank gives
me, and are used to pay off German bond holders. So in effect, Germans are the main beneficiaries
of bail-outs, and although they tie up capital, they provide a decent return to the lender.
jorjo stui2000 17 Jul 2015 02:30
Some consequences of the mess imposed by Germany and their vassals
- in a few months Germany has lost a lot of the political capital and reputation it had
acquired post WWII
- Euroscepticism growing all over Europe, not only within rightwing populists but amongst
liberal and progressive part of society
- Probability of UK exiting EU as a result of the referendum increasing materially
- Possibility of Scotland leaving UK as a result of it
What a shamble, and I have not even mentioned the consequences in Greece!
soundofthesuburbs admonfr 17 Jul 2015 02:26
It is interesting to contrast how Greece is being treated for its debt of 300 – 400 billion
to how the bankers were treated when they lost 6 trillion.
James Rickards in Currency Wars gives this figure (before anyone asks):
Losses from sub-prime - less than $300 billion
With derivative amplification - over $6 trillion
Thorlar1 17 Jul 2015 02:21
The "European project" was largely designed by the US in the aftermath of WWII specifically
to resist Soviet Russian expansion. Consequently there has never been any place for left wing
politics, let alone economics, at the high tables of European economic policy.
Germany, the greatest recipient of post war reconstruction funds (bail outs) at the end of
the war, is dutifully toeing an economic line drawn by America, via the IMF, World Bank and now
the ECB. Europe is not a unifying project, it is a neoliberal test bed for economic Darwinism
and magic pudding thinking where survival of the fittest is the first and only rule.
Ironically it took the US, an outsider, to dictate the terms of Breton Woods and the new global
world order to Europeans, especially France, who wanted to do another Versailles treaty on Germany
all over again.
But as always America's motives were far from pure, it created a powerful anti-communist bulwark
in central Europe, and new 'trading partners' for its exports and has retained economic supremacy
ever since, essentially on the back of arms manufacture and associated industries that has accounted
for up to a third of the the US's GDP. For a while it not only survived at the expense of its
'competitors' it thrived.
But all good things come to an end and the end for the US economic dominance was the signaled
by rejection of Keynesianism in the late 70s and 1980's debt-fueled consumption. This and other
magic pudding ideas became a global exports along with structural adjustment, aka austerity.
After a brief fling with communism Greece avidly imported all this economic nonsense, peddled
by dealers like Goldman Sachs et al, little realising that unlike America with its huge economy
and global fiat currency, they could not money-print their way out of living beyond their means.
When it came time to pay the piper the down side of debt-fueled consumption was made very clear
by Germany, a principal lender, who has no problem doing to Greece what the US stopped France
from doing to Germany all those years ago.
The only answer for Greece now is to forget tourism and convert its entire economy to arms
manufacturing, this will not only enable it to repay all its loans, but be in surplus in no time.
They could get some advice on this from another small European arms manufacturing country: Sweden!
Scrotalyser Euvosto Taivas 17 Jul 2015 02:18
The EU always was a Banking Project. We must thank the Greeks for showing us the true nature
of the beasts. And apologies to all those whose warnings were brushed off as conspiracy theories.
Gjenganger Charliezulu 17 Jul 2015 02:14
I beg to differ. Postwar Germany must have been a place of crushing austerity. They had had
their system rewritten by outsiders, they had taken on board the new way of doing things and decided
to make a success of it no matter what. Then the outside world decided to stop demanding the impossible
and thereby cause unnecessary ruin (and, yes, that kind of foresight is in short supply today).
We should not push the parallel too far - Greece is 'guilty' of economic mismanagement, not
of world war and genocide. But some of the same spirit of accepting reality and dealing with your
problems would go a long way to make debt relief easier. Germany did not hold a referendum to
decide that they were having their pre-war living standard back, the occupying troops out, and
their country unified, and the US and USSR would kindly move out of the way and provide the money
to finance the project.
Gayreekslayer 17 Jul 2015 02:13
Greece has a per capita GDP that is lower than that of West Virginia (both before and after
the meltdown), one of America's poorest states. West Virginia doesn't have subway stations with
marble. It couldn't afford it even if it wanted to have them.
Bottom line is when you have an economy that is worse than West Virginia, you can't live like
you're in The Netherlands or in Germany.
GMPierce 17 Jul 2015 02:03
Guess what guys -- The old man crying in front of the Bank ATM was not one of the people who
collected the cash from the previous bail-outs.
The money went to the German and French banking system and was added to Greece's bill. The
Greeks didn't see a nickle of that money.
The Greek government is obviously corrupt, but again, the ordinary Greek people don't profit
from that corruption. The Greeks banks are broke because all of the money is in the hands of the
EU bureaucrats and a dozen other varieties of thieves.
You can call them socialists or you can call them free-enterprisers, but whatever label they
use is just a justification for why they are entitled to rob the ordinary people blin.
mrmikeeu 17 Jul 2015 01:59
The crucifixion of Greece is killing the European project
... Wake up call for Mr.Milne: The European Project was never meant to be of benefit for
the people, only for business (and politicians). You better focus on TTIP, the coming super USA/EU,
where we will all be Greece. And we don't get a referendum... This is why the UK no longer needs
to be in the EU, TTIP will take care of that. All a matter of "look over here!", so you don't
see what's happening over there....
Healthymongrel 17 Jul 2015 01:55
The fact that war is inconceivable between the members of the EU is the often forgotten
achievement. You do not have to look very far back from its foundation to realise what has been
achieved. The tragedy in my view is that the vision of Europe has been hijacked by the federalists
and euro (the currency)-philes. Enforcing a single currency made this crisis only a matter of
time, as we have all known since it started. Spare a thought for German tax-payers who are doing
the lion's share of the funding while hearing Germany abused on all sides.
The real blame lies with the people who will never be called to account: the fantasists for
a federal Europe who pulled countries into the Euro knowing perfectly well that their economies,
their whole ways of looking at the world, were incompatible.
That was a criminal act.
Meanwhile, in the UK the advantages of Europe are being masked by this disaster, the will of
the Greek (and I suspect the German) people is being driven over, public opinion in France is
moving against all things European.
ID3090731 17 Jul 2015 01:55
I agree with Seamus'analysis and find it moves to the core of what's wrong with the financial
Management of Greece by the Interests of World, European Capital.
"Greed is good for Greece" is what it's democratic and financial insitutions are being told
by wealthy power Brokers.
"If you don't shape up to our expectations of ever more atavistic desire for exponential Profit
margins....you will be punsished. So shape up and take your medicin.
Corporate Facism. This greed for Profit at exponential expectation is commodifying the very
space between human communities and is philosophivally. morally and spiritually bankrupt. I fear
the the reptilian brain has taken over the asylum! See Chomsky's "Profit Before People"
trp981 17 Jul 2015 01:25
"The ex-finance minister Yanis Varoufakis compared the 'deal' to the Versailles treaty."
The post WW1 Versailles treaty and the post WW2 Marshall Plan can be profitably compared to
everyone's favorite US Constitution amendments: 18th and 21st. The former instituted the prohibition
on alcoholic beverages, while the latter repealed the former. The zeal of austerity-mongers in
torturing Greece in the guise of a morality play, while much of the bailout money is being transferred
in the background to the coffers of the creditors - who hold more than at least as much responsibility
in making risky loans in pursuit of higher gains - could possibly lead to a system-wide collapse
beyond Greece. After a prolonged period of avoidable suffering, something like a Marshall Plan/21st
Amendment will be required to repeal a stupid "pre-Keynesian balanced-budget economics" and wash
away the damage wrought by the banks and the financial sector in general. An unnecessary lessons-not-learned
repetition of historical events and/or the return of the repressed.
"That's been a familiar pattern in the developing world for decades, in the guise of
IMF and World Bank structural adjustment programmes. But the eurozone has now given it permanent
institutional form."
The Troika's algorithmic cruelty towards the Greeks has thrown into relief – yet again - the
consequences of "structural adjustment programmes", which effectively redefine the economic concept
of GDP as generalized debt peonage. The only novelty in the Greek situation, and by extension
"southern Europe", is that the GDP has now contracted from faraway places to the outskirts of
the civilized continent.
"The idea that this crisis has simply pitted one democratic mandate – that of Greece
– against the hard-pressed taxpayers of 18 other eurozone members is nonsense."
The good news for those into the dark arts of manufacturing consent is that a politically
sufficient number of people can be fooled a politically sufficient number of times. Especially
effective is the national-economy-is-like-household-economy ruse, which always succeeds in corralling
the economic illiterate. Which leaves us with the wise words of Cheech and Chong: "I know exactly
where we are."
CroppyNotDown 17 Jul 2015 01:13
The ECB happy to illegally egg on then stand and watch a bank run destroy an entire country,
for whom it is the central bank; all at the behest of its most powerful shareholder.
This is surely a world first in the history of central banking.
Now the ECB will loosen the noose, ever so slightly, just to allow a few short breadths.
Europe knows its destruction techniques well. It has a long and bloody history learning them.
The humiliation of Greece cries out for vengence, and that is probably what it will get.
apacheman 16 Jul 2015 20:28
You might call this the opening stages of The War of the 1%.
Truly it is a war of sociopaths against humanity, and it will be very, very ugly before it
is through.
It has happened repeatedly in human history, and it always ends in the same way: the extermination
of the current 1% and and their families after the slaughter of millions of innocents.
I wish they would learn to accept limits, but their natures demand complete and utter control...they
enjoy watching the suffering, and always think they can get off scot-free, right up to the moment
they are on the steps of the guillotine, or facing the firing squads.
Sadly, it is beginning again.
ID9173573 16 Jul 2015 20:14
We're always talking about the loans, but the loans are not the problem, nor was the Greek
economy the problem: between 2001 and 2008, the Greek economy grew faster than the German economy.
If you do not believe this, don't quarrel, look it up.
The fundamental problem of the euro zone has nothing to do with Greece, it has to do with Germany
and with the macroeconomic architecture of the euro: it can't work. Since 2001, and against agreements,
Germany put enormous pressure on wages: wages did not increase in sinc with productivity, but
remained far below it. The consequence of this was that, by 2010, the Germans will able to produce
a product and sell it in the EU for 15 % cheaper than an basically identical product made in France.
With Greece, the difference was 25 %. This is how Germany exported its unemployment across the
union, how it created unemployment everywhere else, how, year after year, it accumulates record
trade surpluses that end up in German banks that borrow it to us so we can buy more cheap German
products.
France did never did anything 'wrong,' it followed the wage rule, it was not over it and it
was not under it. Now France is bleeding. Greece went over: wages increased faster than rises
in productivity, but it was, all by all, not that much and it should not have been important.
Now you can say, what's wrong with it, isn't that competition? Isn't that the name of the game,
trying to sell your products cheaper than your competitors. No, it is not. It's mere mercantalism,
it is as stupid as it gets. The German policies destroyed demand everywhere in Europe, up to the
point that there is deflation everywhere. It is called Japanese disease: deflation, high and persistent
unemployment and a low rate of investment. There is only one way out of this and that is to let
wages rise. But no one understands that, although there is a clear historical precedent: in the
1920s the golden standard created basically the same imbalances as we have now but politicians
from whatever stripe or colour continue to swear by it - we know where it ended. The euro will
go down the same road if no changes will be made. In the meantime, let just suck the living daylight
out of the Greeks and turn the place into a protectorate. But it won't help. It is not a new problem,
it is an old problem. Wages have to rise, social welfare allowances and pensions have to rise,
the ridiculous and idiotic obsession with decreasing the government deficit as a priority has
to be left behind, instead priority has to be given to bringing the aggregate private debt down
and up to the day that this happens there will be no growth anywhere - for those who believe that
the conservatives are doing a great job: look at manufacturing output, look at productivity growth
(ridiculous), look at the investment rate (still way below 2008) - these factors and pretty much
nothing else determine growth, not financialisation, not the insane inflation of real estate.
Either we change or we'll become developing countries. For the truth is that if Greece is bankrupt,
no one else is far off.
luella zarf Cigars 16 Jul 2015 20:07
You have not addressed the most horrible fact which was that the German officials conspired
for years to use Grexit to manipulate other EU states into giving up their sovereignty, which
is black on white in Geithner's memoirs. Yet you go on with the same moralistic crap: that nobody
forced Greece to do this or that. Which tells me that you do not have an ethical bone in your
body, because that is Dark Vader shit.
But I'm not going to bother to deconstruct all your ideological nonsense, it's not worth my
time and energy, I'll just copypaste again Mark Blyth's ending from his article in Foreign Affairs:
''To fix the problem, someone in core Europe is going to have to own up to all of the
above and admit that their money wasn't given to lazy Greeks but to already-bailed bankers
who, despite a face-value haircut, ended up making a profit on the deal.''
No surprise there, like in any casino, the house never loses.
Central Europe is painting Greece as the naughty boy, while Spain and Portugal are the good
little boys who did what they were told and imposed painful austerity on their peoples. This is
the colonial tactic of divide and rule.
The truth is that the euro enriches Central Europe and impoverishes the periphery. All the
PIIGS faced painful choices after the 2008 crash as a result. The Spanish wrote off the chances
of their young people. The Greeks tried to blag, bluster and fight their way out. Central Europe
want everybody to think about how terrible the Spanish and the Greeks are for making these different
bad choices. Actually, Central Europe are the villains (not only Germany but also Benelux and
Finland).
They used to say that you should not have monetary union without political union. We should
now say: Monetary union without political union is perfect, if you want a mechanism for central
imperial domination of their peripheral colonies.
maricaangela CarolusB 16 Jul 2015 19:38
Thanks for your polite reply, Charles. I too know many people from those areas and have lived
in Serbia and Croatia, as well as Germany.
Yes, the poor will suffer most, but rather than blame Syriza entirely, I think two irreconcilable
ideologies came up against each other, and there was no room for manouevre at all, to move to
a logical and helpful conclusion.
This is a terrible deal for Greece - it doesn't even avert disaster, just makes it more long-winded
and painful - and a terrible deal for the tax payers footing the bill. So who should we blame?
As the saying goes, 'The fish rots from the head'. The EUs weak leadership has meant they have
co-opted German politicians, who are unfortunately equally wedded to failed economics and have
too much 'inat' to change course, and possibly too much to lose politically?
Greek elites, also wedded to the same system, long ago placed their country in this unpleasant
position. While I acknowledge that Greece must reform, many think the reforms the Troika wishes
for are not the best ones to achieve results, lacking fairness and justice, and again penalising
the poorest sections of Greek society. Both Germany and Greece, pushed by the EU to be the stars
of this drama, are engaged in an impossible stand off.
Why do you only blame Syriza? Why not the lack of oversight of the EU, the corrupt behaviour
of the previous Greek governments, and the fact that within the EU, since 2008, the Banks have
not been regulated or checked but continually bailed out and the recipients of enormous funds
from QE? Why has Germany made the taxpayers of Europe fund the Bank's bailouts?
This is a catastrophic situation and exposes democracy in peril. I am sure in Germany, opinion
is also split, and can understand that all those carrying the load are equally fed up, but I do
think people should think more clearly about how we got here.I do not see apportioning blame appropriate
any more but I see no contrition from the EU, nor any desire to change the trajectory of policy,
however unpopular it increasingly becomes, and when even the IMF says it will no longer work.
The EU should have made sure Greece was solvent before membership, and they have thrown good
money after bad. Do you think they are competent decision makers, and why do they carry on protecting
the Banks at the expense of taxpayers? In fact, Varafoukis wanted a Grexit, he couldn't find the
means to do it, and in a way, he and Schauble obviously separately thought that was the better
option, and it would have been in accord with the results of the referendum that was held in Greece.
I'm sorry, but you do not offer explanations of these anomalies, while only blaming Syriza,
a government in power for only 6 months, and constantly negotiating in that time to stave off
disaster, when this crisis has been dragging on for years.
Austerity has been proven not to work, and yet the medicine is still administered, even though
it kills the patient (and in the end, the nurse(!), no doubt). Obama rejected it, Osborne is no
longer following it in reality, numerous economists reject it's value. Yet here we are with more
austerity for Greece, none for the Banks, Financial Institutions and elites who have taken the
money out of Greece, and placed it in foreign banks and tax havens.
I am very sorry for the taxpayers who are footing the bill, and the Greek people. I am not
sorry for those who will not take any responsibility for their mistakes, and I will vote to go
out of the EU. I cannot, on principle, vote to stay in such a misguided institution which holds
in contempt the citizens of Europe, and upholds elitism and corruption.
I do not think the Greek governments are innocent, but I find it very hard to find any innocents
among the leaders here. As usual, the people who had no say in these events will pay the highest
price, whether Germans, Greeks, Finns, Slovenians - let's hope they remember when next they vote
in elections.
I wish you well, in the hope we might have light at the end of the tunnel eventually!
Santiago Barreiro Jim Jetson 16 Jul 2015 19:36
Half of my family live in Spain, and they´re pretty honest taxpayers, well-meaning townsfolk.
Since the EU showed up and the EURO replaced the peseta, the quality of life there has decreased.
The issue in the eurozone isn´t honest vs. dishonest countries, but rich vs. poor countries. France
is noticeably corrupt, improductive and with a bloated, inefficient bureaucracy and they haven´t
suffered. Simply because they´re rich enough so an overvalued currency doesn´t affect them.
luella zarf -> Cigars 16 Jul 2015 19:33
Mark Blyth, a noted economist, has a recent article in Foreign Affairs, subtitled Why Greece
Isn't to Blame for the Crisis: ''According the Bank of International Settlements, by 2010 when
the crisis hit, French banks held the equivalent of nearly 465 billion euros in so-called impaired
periphery assets, while German banks had 493 billion on their books.''
The article explains the mechanisms through which the banks were bailed out and even made a
profit despite the alleged haircut which ends up like this: "To fix the problem, someone in core
Europe is going to have to own up and admit that their money wasn't given to lazy Greeks but to
already-bailed bankers who, despite a face-value haircut, ended up making a profit on the deal.''
https://www.foreignaffairs.com/articles/greece/2015-07-07/pain-athens
HoolyK maricaangela 16 Jul 2015 19:17
Look, ... there are a ton of countries and peoples around the world who would love to be like
Germany and the Germans ... a disciplined, cultured, technologically advanced people with a successful
economy. Like China and Russia for example, their leaders are basically aping the Germans, trying
to turn their countries into bigger versions of Germany. Greece has an opportunity for direct
German rule that can turn it into a mini-Germany, but with sun and beaches. Why not take this
offer? Because the Greeks, ever since independence from the Ottoman Empire has not shown itself
very worthy of self rule. Why shy away? After all, Greece once had a German prince upon its thrown,
and Greece's very flag is based upon the colors of Bavaria. The alternative is wallowing in Balkan
mediocrity and Mediterranean sloth.
duke_widin 16 Jul 2015 18:53
This week has made a mockery of monetary union as a path to a united democratic Europe and
opened the way for the eurozone's breakup.
Greece is important for the EU that's why every aspect is analysed and discussed but, still
small fry... Greece needs the the 3rd time bailed out in 5 years,this makes it hard to understand
how the program works . I read columns and articles here in the Guardian from economy professors
who don't seem to understand how solid the Euro zone is set up in contrast to the USDollar who
still got a private central bank the FED something even the UK gave up more as 75 years ago ....
However,the euro has the highest combined value of banknotes and coins in circulation in the
entire world and in only 15 years(the US Dollar took ca.150 years) it has become the second reserve
currency after the USDollar without any other competitor in sight....
The EU with over 500 million inhabitants in this short time has became the world most potent
and biggest consumer market..
And now the EU will find a even greater stability in more political integration...
darkwhy ShiresofEngland 16 Jul 2015 18:36
And the blatant absence of due diligence. When a loan shark lends money there is no due diligence,
just fear and the breaking of bones.
Lack of due diligence was the major driver behind the sub-prime mortgage crime-all the way to
the top. They [the bankers] got of with it Scot -free and kept on awarding themselves £$billions
while their victims suffer without end[the poor in the Uk for one
luella zarf -> Cigars 16 Jul 2015 18:30
The lenders were more than willing to help if economic reforms were implement.
This a shameless lie, that reform were not implemented (why are you doing this? didn't your
mummy teach you basic morality?). If you search the website OECD Going for growth 2015, you will
find a chart called OECD Going for growth reform responsiveness, average 2007-1014 showing that
Greece leads the OECD reform ranking.
The problem is that austerity is a ruinous idiotic policy and the reforms have thrown Greece
into a 1933-style depression. Unemployment in Greece is over 25 percent now, higher than the United
States during the Great Depression.
The lenders were not considering Grexit.
Unfortunately for all of you the trolling trolls who promote this propagandistic bullshit,
in 2014 Timothy Geithner, US Secretary of the Treasury 2009-2013 published his Memoirs, where
he details how he met Schauble in 2012. Well well, and Mr Schauble told him that kicking the Greeks
out of the eurozone was a desirable strategy because "a Grexit would be traumatic enough that
it would help scare the rest of Europe into giving up more sovereignty to a stronger banking and
fiscal union". http://www.nytimes.com/2015/06/30/business/dealbook/the-hard-line-on-greece.html
Translation: Since 2012, the Germans have attempted to throw Greece under the bus in order
to manipulate other states to give up their sovereignty to the bankers! You can't make this up
if you tried it! Disgusting.
8911steven Jim Jetson 16 Jul 2015 18:21
No taxpayers lent money to Greece : that was private banks. This only became a problem
for European taxpayers when the troika decided in 2010 to take over responsibility for the debts,
thereby transferring liability from bankers to taxpayers. They then imposed macroeconomic policies
which gutted the Greek economy making it unlikely European taxpayers would ever get much of their
money back . The newspapers really have got you hating the oppressed and loving your oppressors,
haven`t they ?
HolyInsurgent 16 Jul 2015 18:05
Seumas Milne: A eurozone nakedly dominated by one state, Germany, enforcing destructive
austerity on its vassals with such brutality, can have no enduring legitimacy.
Ironically including for Germany when it enters an inevitable recession in the boom-and-bust
cycle. Then watch German politicans and economists howl when their surrounding markets have all
been crippled by Germany's "success." What goes around comes around. And Germany will learn this
hard lesson too late.
What kind of a union of partners treats one of its members like a recalcitrant colony,
destroys its economy if it steps out of line, and dismisses its democracy as an impudent affront?
In fact it's one that has always ducked democratic accountability, embedded deregulation and
privatisation in treaties, and preferred to fix policy – including the race-to-the-bottom Transatlantic
Trade Investment Partnership – with corporate interests in secret.
Agreed. The neoliberal policies of the Troika are the culprit and require re-evaluation
before there are intra-European boycotts...or worse.
maricaangela CarolusB 16 Jul 2015 17:51
The mindset of the Balkans is not easily understood by Western Europe. Cut off from their cultural
Christian roots by the Ottomans for centuries, deeply divided and distrustful, forced to fight
for freedom from their occupiers, and centuries of begging for any favour, job, or entitlement,have
left them with a deep distrust of the State (hence the endemic non-payment of taxes even now they
have self rule) yet eager to be part of the Europe they were separated and distanced from for
so long. Same goes for other countries, e.g. Bulgaria, Romania, and Hungary and the former Jugoslav
states, on similar lines, often uniting to fight the Ottomans, but otherwise quarreling over borders,
land and ethnic divisions, and divided in WWs by forces beyond their control. This is not foremost
in the national mindsets now, but is deeply subconscious, rather like our sabres are rattled at
Germany/Prussia in an almost visceral way, and despite the jokes about us and the French, we look
to them to show a united front against any German encroachment of our powers. Unfortunately, German
actions have ignited that subconscious fear, of being cast out, isolated and alone. So they grab
at straws for now.
I guess this historical sense of being forced apart from the rest of the continent, yet fighting
two WWs alongside the allies (with Serbia) makes them feel they are safer in than out, even though
that position may be very tenuous. People in continental Europe are eager for peace and tolerant
of their neighbours only to a certain degree, and in the Balkans this is exacerbated by a deep
inferiority complex of being pawns in the games of the bigger powers, and deeply misunderstood.
In a similar sense, Serbs have a lot of contempt for Milosevic, yet feel outraged that Britain,
a former ally bombed them. This burns them deeper than their own politicians, who they expect
to be venal and corrupt and do nothing good for them. Thus Greece is behind Syriza because they
are the best they've had for a long time, they are willing to include the people who were denied
a voice for so long, yet have ultimately ended up with a terrible deal. These countries feel martyred
by all sides, like victims of their own and others, so they make, for us, strange decisions, it's
true.
inmateN7 16 Jul 2015 17:48
Any of us in the UK who have been at the sharp end of our incumbent governments' austerity
programme can only feel sympathy for the people of Greece, who have been well and truly shafted
by this 'fix'. However, this does not justify a knee-jerk, one-size-fits-all assumption that both
we and Greece, would be better out of the EC.
For Greece, a forced exit may be the only outcome, but they have their reasons for wanting to
stay in the EC, they are not masochists. While we in the UK have always been cynical of the 'provisions'
of EC membership, I don't think we're half as cynical as those on the continent, many of whom
underwent near stratospheric inflation when they swapped their currencies. Membership is not a
dictatorship, it's always up for negotiation, and what we need are the leaders and representatives
to navigate this negotiation in a mature and truly democratic way. Sure TTIP gives me the fear,
and there's a lot to argue against, but I still feel more secure about the nations of Europe being
united in a common purpose, and not fracturing under different ideologies, returning to eyeing
each other with jingoistic suspicion...
Alarmcall 16 Jul 2015 17:30
All Europe should be questioning whether this European Union has lost its way, has strayed
too far from the enlightened founding principles of the Treaty of Rome, has forgotten their
purpose to prevent history repeating the fateful folly of letting bankers exploit workers,
keeping working conditions harsh, spreading impoverishment, fanning nationalism and seeding
revolt and warfare.
The European Union, not just the Euro Zone, is now at risk of being destroyed by stupidity,
bruised egos, weak visionless collective leadership and no clear chain of command. The so called
leaders need to wake up to the lack of Unity at the heart of both the Eurozone and the wider EU.
Too many countries are preoccupied with self interest, not sharing, and not uniting under the
EU flag; this includes the shameful United Kingdom government.
Market makers do not plan for or buy long term security, they simply exploit opportunity for profit.
Markets will let a population starve, they will let a nation go bankrupt regardless of the suffering,
they will let a nation be defenceless, they will pollute and disrupt the biosphere for as long
as governments let them, unless they are paid not to.
Markets corrupt governments to put GDP growth above responsibility for people or life on Earth.
Anything that gets in the way of greed driven corporations making more profits is ignored, denied
or if needs be fought by mercenary intermediaries paid to misinform, to make political donations
and provide other reward channels to lure away opposition. Above all they rely on selfishness
dominating community.
Markets are in conflict with the needed good governance of this planet now that humans are
changing the conditions that have enabled us to flourish.
As the last three decades have shown, markets push government towards ever more deregulation,
and lower taxes to increase debt driven unconstrained growth of consumption, regardless of financial
risk to individuals, or countries, and without heeding the clear scientific evidence that pollution
of the atmosphere with greenhouse gasses is causing a speed of global warming that will in a lifetime
radically change the climate system with catastrophic consequences for the stability of civilisation
around the planet.
The citizens of all the member states of the European Union need to come to their senses
and reflect on these matters. The European Union has not responded well to the internal economic
problems of the Euro Zone nor the wider EU, nor major international problems, because the member
states retain the real power and they act like slaves to blindly further this out of control
corporate machine, that is taking their countries on a suicidal route to savage resource wars
in a hungry climate ravaged world.
For too long Europe has relied upon leadership from the United States, but the US Congress
has been neutered by the misuse of the power and wealth of Corporations.
We can see the result in the staggeringly huge government debts in America and across the EU
including Britain. These are primarily down to rescuing commercial banks that were going bust
and governments taxing far too little at the expense of a bleak future for the young.
The loans to Greece were designed to rescue European banks, transfer the debt to taxpayers, and
through harsh terms provide more opportunities for buying up Greek distressed assets by commercial
vultures.
This dangerous global banking system needs putting back in its box. Global problems can
only be solved by responsible governance.
The three decades of cut taxes, de-regulate, "small government is best", started in the 1980's
has corrupted and crippled the West with runaway greed, destroyed global economic stability through
debt, deepened inequality and through damage to the biosphere is undermining the stability of
the climate, the habitable zones, and the food and water resources that have made modern large
scale civilisation possible.
Europe should say no to TTIP, no to ISDS and concentrate on making Europe united and self sufficient.
This highly dangerous century is no time for Europe to revert to small disagreeable countries
led by blinkered narrow minded leaders. Europe must find leaders with the courage and the vision
to stand up for the high principles of the Treaty of Rome and put a real Union into the heart
of Europe.
It is time for a new Europe to emerge under new leadership with a proper Federal Democratic
Structure. There is no way back to pre 2007. There will be no good way forward to manage this
isolated rock in space for mutual benefit without a real United States of Europe influencing
the fast approaching global choice between war and peace.
Socialism and Keynesianism for the rich.
Austerity for the rest of us.
Garry Coll 16 Jul 2015 17:28
The recent, and ongoing, Greek episode of the Eurozone soap opera borders on the absurd.
Notwithstanding the excellent article above by Mr Milne, it seems that there is more to this
than a conflict between Greece and its Eurozone partners.
When the threat of default loomed several weeks ago, the Greek government said in plain language,
we can't pay this.
To which they were told, pay up, because if you go into default we will have to take serious
action like kick you out of the Euro and possibly the EU also.
So Greece went into default by not paying a tranche of it agreement with the IMF.
To which they were told, alright now that you're in default you must accept this bailout or
we'll kick you out of the Euro and possibly the EU also.
Grand said Greece, we'll put your bailout proposal to the people in a referendum. And the Greek
people in a democratic plebiscite voted against the bailout proposal.
After which Greece defaulted again on an IMF payment.
To which they were told, here are our final bailout
Kenny6501 16 Jul 2015 17:25
The 50B was the amount of holdings the government was supposed to privatize from the last package.
In the last rescue package, the implication is that the european and germans agree to trust that
the Greeks will manage these sales themselves to pay for the loans that the other countries have
put in (primarily Germany and France, but even the poorer baltics chipped in). So selling these
assets from the previous rescue was a "we trust the greeks to do what is right" - the equivalent
of a call from our bank reminding you to sell your 3rd or 4th condo to pay for the 5th one to
reduce your debt to the bank.
The 50B is now a forced sale because the last one didn't happen and only 7B of asset sale was
in place, of which Syriza tried to reverse at least one (the port in Piraeus), the structure of
explicitly saying 50B has to be sold is just one step below the equivalent of the Germans sending
Guido in with a process server to repossess your nice furniture. It's what happens when your lender
no longer trusts you.
YouHaveComment 16 Jul 2015 17:25
Plan to save Europe
1 - Direct elections for the EU Commission - we have to be able to vote them out.
2 - None of this TTIP / BIT nonsense of negotiating away the democratic will of the people behind
closed doors.
3 - Direct elections for the EU Commission - we have to be able to vote them out.
4 - Euro to be reformed so that no country ever again gets to be in Greece's or Germany's position.
5 - Direct elections for the EU Commission - we have to be able to vote them out.
6 - There is no point 6.
7 - Direct elections for the EU Commission - we have to be able to vote them out.
(with apols to Monty Python)
luella zarf AnotherBerliner 16 Jul 2015 17:20
The principle is called "No taxation without representation" (that is, European taxpayers
have the right to decide how their tax money is spent, including if on loans to Greece).
Actually, when the Troika coerced Greece to accept the bailout in 2011, Papandreou didn't want
to sign without a public mandate and tried to organize a referendum, but the Eurocrats immediately
ousted him and buried the referendum and now Greeks are saddled with this huge unpayable debt
for which they have never voted. What democracy, what representation?!
People have no idea of what the sociopaths at the top did in order to save the gambling German,
French, British and American banks, and now are screaming for blood, but the Greeks were not allowed
to vote either.
umweltAT2100 16 Jul 2015 17:19
Everything Mr. Milne has written is factually correct - it is a horror scenario!
A real shocker and an alarming eye-opener was the letter in the Guardian by Elmar Brok* supposedly
addressed to Mr Tsipras but clearly aimed at making known that the German CDU/CSU avowed intention
was to rid the Greeks of this terrible Syriza government that they had democratically elected
and re-endorsed in the subsequent referendum. It was also to prepare the ground for Schäubles'
secret master-plan** (that wasn't shared or agreed to by the other Euro countries) Grexit for
5 years, at the end of which Greece probably would not qualify to re-enter the Euro.
A lot of anti-bailout rabble-rousing seems to have been beaten up by the German Bild newspaper
– and national hostility was so high, that the SPD party leader Gabriel joined his CDU/CSU coalition
partners against any debt relieve or restructuring of the repayment terms. (So even without Murdoch
the media can be a deadly instrument – or is he running the Bild!)
The way the Troika mismanaged this whole catastrophic, short-sighted/visionless and merciless
episode has done irreparable damage to the EU, and its nations states see quite plainly that it
is not Greek that cannot be trusted, but that strong nationalistic and right-wing governments
are all speaking with different voices, and like the Tower of Babel, the whole thing is in danger
of imploding. The EU has also goofed up badly on issues like Ukraine and Mediterranean migrants
over the last two years.
The Greeks have suffered irreparable damage – chaos, confusion, not knowing whether they could
still get a few Euro out of the bank to buy essentials, anger at being humiliated, terrified of
what the next day's disasters would hold in store for them, the country crippled and grinding
to a halt right at the beginning of the tourist season which is one of the main sources of income.
At the same time, like Italy, Greece is handling a steady flow of Mediterranean migrants, over
68,000 this year alone. And now they are force to sell their port of Piraeus, so any profits will
go to its new owners, probably China.
Killing the European Project by Paul Krugman
http://krugman.blogs.nytimes.com/2015/07/12/killing-the-european-project/?smid=tw-NytimesKrugman&seid=auto&_r=1
Mr Tsipras, we need to rebuild trust before we can talk | Elmar Brok | Comment is free | The
Guardian
http://www.theguardian.com/commentisfree/2015/jul/06/tsipras-restore-trust-greece-eu
*Profile: Elmar Brok is a German MEP, CDU* member, and chairman of the European parliament committee
on foreign affairs
Great article, and why I put the Guardian above all other UK media sources for unbiased reporting.
Predatory Lending is illegal, and the EU and ECB and the German banks reasonably knew that
the last bailouts were beyond Greece ability to repay.
So now money created out of thin air [loaned into existence], is now franked and made solid and
legit, and Greece's hard assets are nailed down as collateral for the lenders to rob Greece of
its few real assets.
The banks have taken over, and democracy and votes are just symbols with no real value.
This is our future. Elected Governments being dictated to by Corporations and Banks, and Nations
swindled in clear day light out in the open.
Just my opinion.
goudar30 maricaangela 16 Jul 2015 17:15
Yes an evident consequence , my comment was not meant to be offensive , but sarcastic towards
this absurd situation & the huge gap between cold technocracy and the hardship of the weakest
, I think it is and will become more & more a serious matter for every single european Citizen,
Those kind of outrageous policies are bound to bring suffering.to people and not only in Greece
, more and more weakened people are suffering from those ideologies. in many Eu countries.
and these days , many -& more then politicians may wish- feel & are greek .
No they damned well are not. In many cases private European banks made reckless loans to private
entities in Greece, and now they demand 100 cents plus on the Euro in bailout. In any loan situation,
part of the responsibility is on the lender. To have it any other way you'll ultimately blow the
system up; lenders would do whatever they could get away with and it would take capitalism itself
down. But that now seems to be the mentality of the German finance ministry, and most of the rest
of the EU is bending down for it.
This changes everything for 2017 in the UK. Everything. Whose situation do you prefer, Iceland,
or Greece? I think the answer to that is easy, the one with the glaciers and the herring. And
for the EU to survive, and Britain to survive in it, the choice CANNOT be limited to those two
options. Yet limiting to those two is precisely what the German approach does.
maricaangela Alfie Silva 16 Jul 2015 17:10
In Croatia, the same has happened. For short term profit for their broke economy, the politicians
loaned them to the Chinese who stuck high tolls on them, far too expensive for locals to use and
which even Swiss and Austrian tourists try to avoid. Thus the old, and bad roads, are blocked
in summer, and busy in winter, with these new highways empty.
I heard in Spain the same problem exists. No sense at all.
FOARP Charliezulu 16 Jul 2015 17:05
Greece already received debt-relief in 2012 to the tune of more than 100 billion Euros, in
the form of a 50% hari cut on private loans (those evil "banksters" everyone keeps blaming for
this crisis received 50 cents back for every euro they originally lent Greece). Why should she
receive more such largesse?
sacco TeutonClown 16 Jul 2015 16:29
I would love to see what would happen if Germany had that big a problem.
I am pretty sure Germany would not have received a single bail-out, let alone three.
Germany, together with France, already had just this kind of problem in 2009–10 and on to 2012,
when they vetoed any proposal to restructure massive debts that were clearly unpayable after the
global banking crash in order to protect the exposure of their own banks.
While other countries were forced to bear the major costs of re-capitalising their own banking
systems, German banks had vast tranches of their bad debts bought out at above the market rate
by programmes such as SMP; those that remained in the private sector were marked down to less
than 47% in 2012 (and even that was more than they were worth). Ironically, given your comment,
it is precisely the bill for their portion of these debts that is currently being used to keep
Greece under the heel.
The unfathomable sums that have to be raised according to en endless series of deadlines that
have rendered normal political responsibility impossible in Greece -the Troika has thus far seen
off three governments, five Prime Ministers, and eight ministers of Finance- serve nothing more
than to make scheduled repayments on these even though they were officially declared unpayable
in 2010 - if they weren't unpayable losses, then why were the Eurozone rules violated by bailing
out the banks with programmes such as SMP? No Greek government can hope to make any impression
on this cause of permanent tribute as, without control over their own policy priorities and with
the Eurozone & ECB policies acting to maximise uncertainty over their future trajectory -the very
opposite of the support that should be offered to build the confidence required to promote investment-
the numbers are simply too big in relation to the diminished Greek economy.
Yet they are forced to continue with the endless irrelevance of this coercive and corrosive
mill of debt recycling, because otherwise the the political masters will force the ECB (contrary
to its mandate) to shut down Greek banks, just as we have seen.
To sum up: Germany has already had its bail-out through its banks. They have proved sufficiently
powerful -and ill-advised- to saddle the full bill on the Greeks, the least able to pay. The longer-term
results will be to stall and even reverse progress on many aspects of the European project that
has served German prosperity so well, and to promote the rise of far-right populist nationalism
in both Greece and Germany (and likely in France and elsewhere too).
maricaangela Nanome 16 Jul 2015 16:28
Yes, I was thinking the right wing voters are most hypocritical, even in their condemnation
of the EU, because they vote for the same neoliberal ideology that got Greece into this mess,
for their own nations!
The Left is hypocritical until now, because ideology blurred their vision and their judgement,
but at least they don't vote for it at home.
Ideology and dogma is dangerous. Right and left are now vague concepts with little solid principle
involved. The main principle with Greece is that democracy itself is threatened when Corporations
and Banks make the rules, and politicians from all sides are their puppets.
Greece isn't blameless and who can fault Eurozone taxpayers for not wanting to keep funnelling
cash to them?
Do you mean that EZ taxpayers should expect those debts in 2010 to stay as bank debts, and
Article 125 of the Treaty of Lisbon to be upheld which if the EU/ECB/IMF had played with a straight
bat then it would have been a default in 2010.
Didn't happen did it? Those who ask themselves why leaves a bitter taste in the mouth if they
are europhiles.
JensBa mp66 16 Jul 2015 16:08
There was a secret plan, that 4-5 people had worked out. But their was no decision to implement
it from the leadership of Syriza, which would have been necessary. For details see the interview
of Varoufakis with New Statesman.
ShiresofEngland 16 Jul 2015 16:06
What kind of a union of partners treats one of its members like a recalcitrant colony, destroys
its economy if it steps out of line, and dismisses its democracy as an impudent affront? In
fact it's one that has always ducked democratic accountability, embedded deregulation and privatisation
in treaties, and preferred to fix policy – including the race-to-the-bottom Transatlantic Trade
Investment Partnership – with corporate interests in secret.
The EUSSR
OMG not that tired old cliche, and I put it in bold! You can spot me walking the streets as
I am the handsome chap wearing a "Told You So" T shirt. [Smugness mode off]
There is always one big drawback of being a eurosceptic, and it isn't the irritant of being
called racists, loonies and fruitcakes. The real problem is when we are right it always come at
a heavy price, and today the Greek people are paying that price. Euroloon zealots will test
to destruction their beliefs which always comes at the expense of the 'little people'. Those poor
buggers like all of us just trying to get by and do what is right for ourselves and families.
This deal for Greece is vicious stupidity of the highest order. It is unworkable, and nobody
wants it other than the banksters and the euroloons. The silver lining is many europhiles are
having second thoughts as the EU's mask has slipped. It is always hard to make a U turn, but I
did as once one myself (yep honestly!). I commend those who have changed their position and offer
a welcome to the darkside.
inLondon10 16 Jul 2015 16:05
Costas Lapivitsas from the left platform of Syriza, Larry Elliot from the Guardian, Ambrose
Evans Pritchard from the Telegraph are not necessarily political soul mates but all make convincing
arguments that,with the current terms on offer, Greece would be better out of the Euro. Surely
the most constructive way forward is for Tsipras and the EU to organise a way out of the Euro
with as little damage as possible.
vicepopeeric Wolfgang Amadeus 16 Jul 2015 16:02
Lets see, we gave the banks almost a quadrillion dollars for f***ing up the economy by gambling
with other peoples money.
Greece has had about 370 billion dollars (works out at about 3.7% of what we gave the banks).
Of that 370 billion dollars, only about 10% actually went to the Greeks, the rest went to banks
to pay other banks.
No its NOT the economy stupid it's PEOPLE that count.
Drewv PolydentateBrigand 16 Jul 2015 16:01
Immolation, crucifixion, waterboarding... stop this emotive hyperbole.
These are accurate descriptions. Your "generous loan" will be used almost entirely to pay the
interest on a debt that will never be repaid, to German and French banks.
The country isn't bankrupt, that is the entire fucking point. Bankrupt countries get major
debt relief.
candy44maker JohnG4 16 Jul 2015 15:59
There are but a few German banks affected!
Some interesting Infographics:
The Greeks will need to hire 180 truck drivers to transport the money.
Who Loaned Greece the Money?
Greece owes a lot of money to a lot of people, and it's not at all that German or French banks
are affected. Check out who loaned the money.
Information Date: 2012 February. Source: EBA (European Banking Authority)
Greece meanwhile owes to their lenders 0.5 trillion Euro. They claim that only 10% was spent
on the Greek people, and 90% of the money lent was going back to foreign banks. This is simply
not true. Approx. 30% of the money was used for the annual budget in Greece, about 35% was spent
to make loan payments and approx. 35% of the money left Greece and was transferred to offshore
bank accounts.
I was raised to have a horror of clubs and organizations with memberships. Do not see why a
country would want to be a member of a club, especially when the economic disparities are so great.
The EU can never operate like the USA, because every one of the countries in it as a long and
different history, different language and culture. To run efficiently it will have to imitate
the former USSR and develop a dictatorial central administration. Seems that Merkel has grasped
that fact. Arbeit macht Frei will be the watchword and goodbye to La dolce vita.
Drewv -> SimpleOldSailor 16 Jul 2015 15:46
So the Eurozone breaks up, in that case the winners will be the big banks and the other
leeches that live off the blood stream of international finance.
Will theybe? Their short-term losses would be enormous, with vast amounts of public and private
debt being written off as the dominoes start falling. International finance as a whole would take
a pounding worse than in 2007/2008.
DomesticExtremist hood 16 Jul 2015 15:36
That is to expect neo-liberal high priests in Brussels to dismantle their own temple.
It's not going to happen.
maricaangela wondrinfree 16 Jul 2015 15:32
Did it occur to you that the EU has changed in recent years. It is now run by right wing
governments who promote a failed austerity and a failed banking system. A decade ago, it was full
of socialist governments who went on a spending spree. The Banks were the winners in both cases,
but now the poorest pay with unemployment, rights taken, and assets stripped, while those who
benefitted most still enjoy their riches and stack money away in tax havens.
Mistakes have been made, but those who should be paying are still at the party, while those
who had no hand in all this have been kicked into the gutter.
Oligarchy is winning, with the support and help of political elites.
Seppo Janhonen feliciafarrel 16 Jul 2015 15:28
Good comment. I share your view of the idea of truth and honour as well as most - as I believe
- of us Finns. The Greek catastrophy is right now shaking our trust to the honesty, reliability
and endurance of the European project. It´s interesting how the views of single Europian citizens
are being shaped in these days. Many of us are asking why on earth we are paying the debts of
a state that is not willing (and obviously not able either) to manage its own businesses. Mr.
Tsipras is not much respected in Finland right now.
Also the EU membership will without doubt enjoy less support in future; The Guardian itself
encourages this development by stating the simple truth that a small country like Finland has
no influence in decision making in EU. That´s what we have seen right now although our leaders
have maintained it´s important to sit at the table where the decisions are made. Well, the results
can be seen... Why stay in an immoral society like (euro group) or even EU? Therefore it is probable
that there will start processes to quit euro or even EU in my country.
Who knows whether one day the EU countries Greece, Finland and Britain on extreme sides of
our continent share one more thing in common? That´s quitting EU.
AngrySkeptic WitNit 16 Jul 2015 15:26
It's all very well to talk in objective terms such as "public finance". The problem is
what the people of the country will be forced to live through and have been living through foe
a while. Is it absolutely necessary that they should? Probably not. Is this what a united Europe
means? Probably. Is this what a united Europe should be? I think not.
oxleydan CarolusB 16 Jul 2015 15:05
Well the 18 EZ governments can send their CCJs or whatever to the muppets that took out the
loans in the first place, rather than sacrificing the entire civilian population.
And can you see any possible issues with medicine that kills the patient? If the terms of the
bailout further reduce demand in the Greek economy, thereby actually reducing the prospects of
economic growth necessary for paying back the loans, then you have to question the motivation
behind the terms of the bailout. Is it motivated by a punitive desire to make an example of Greece,
to deter Spain, Italy and Portugal? In other words, it's political rather than economic.
Alfie Silva -> feliciafarrel 16 Jul 2015 15:04
Your propaganda goes against all that is decent and correct.
You may accuse me of propaganda, but I have no axe to grind nor vested interest to protect.
In Portugal, every graduate who graduates, is another graduate who leaves Portugal. Or they
stay and find work in McDonalds. If they can get it.
The Euro may have benefited a small number of Portuguese, but the majority are fed up. They
may not be as vocal as the Greeks, but the next macro-economic shock to hit Europe will change
that.
cascade14 16 Jul 2015 15:04
The "crucifixion" of Greece is only an outward manifestation of the true intentions of the
EU, which are most often hidden within the myriad of Directives, Regulations and Decisions that
are produced with Teutonic efficiency and, which are designed to control, subliminally, every
aspect of the lives of all of those who have been mesmerised by the lure of a European Utopia.
The cruelty inflicted upon the Greek population is a PR aberration and error by the EU, brought
about by the unexpected temerity of the Greeks to dare to express their wishes, nay despair, through
a democratic process of a Referendum which stands in stark opposition to the ideals of Empire
building and subjugation of the masses; which is essential to the expansion of the EU.
The side effect of which is to try to keep in line those other "none- believers" who might
wish to put their heads above the parapet and say "Boo" to Merkel and Schauble.
LanceLee Wolfgang Amadeus 16 Jul 2015 15:04
It has long ceased to be about money.
Even on the level of money, the current 'deal' is an absurdity: it amounts to loaning more
money to Greece which cannot pay back the money it already owes. This goes on, bizarrely, because
among other realities the Euro zone institutions make money from these loans, a sum currently
standing at 1.9 billion Euros. It pays to devastate Greece. We could all be in total agreement
that Greece pay everything back- and be faced with the conundrum an impoverished society that
cannot meet its own needs can hardly meet outside debtors' without incurring more debt. What is
needed, if money is what we're talking about, is a plan that provides for growth to provide the
money to repay debt. It's really very simple.
Well, let them 'Grexit' and default... Really? Repay none of the 240 billion and climbing Euro
debt? Another great idea.
The problem is that if the solution really isn't very hard to imagine, sparking a reasoned
growth with reform, allowing for debt repayment and national functioning, there is a political
investment primarily on Germany's part in a policy called 'austerity' that has no intellectual
or economic justification that in effect says: 'in hard time, raise taxes and cut spending'. We
could as well call this the rebirth of the economic policies of Herbert Hoover. But values like
'thrift' 'responsibility' 'integrity' have been high-jacked by this theory, so that advising a
modern Keynesian policy as has been carried out in the United States with such radically different,
and better results, compared to the Euro zone, is tantamount to these misguided politicos to 'profligacy'.
Worse, having invested their political capital in this approach, predominantly German inspired,
the Euro zone leaders have denied themselves the possibility of a rational settlement.
So I find myself in the very odd position of agreeing with Seumas Milne, who is a bright person
but whose views I usually find exaggerated to the point of absurdity. How odd to think Mrs. Merkel
has so bungled things that she has made Milne right.
Lafcadio1944 16 Jul 2015 14:46
The European project has long sense been dead. Apparently commentators and just now figuring
this out and far far to late. Europe through the maneuvering of Germany especially under Merkel
has taken over Europe and now acts as its overseer. Through German writing of the "rules" to its
own advantage and then being the enforcer of the rules essentially has turned the once proud nations
of Europe into German bantustans. No country or even group of countries can now leave the EZ without
serious and prolonged economic suffering, and staying in they have only the opportunity of offering
the equivalent of -0- hour feudal work for a pittance, insuring their perpetual poverty.
These are the present conditions and it remains to be seen whether or not the people of Europe
are going to do anything about it but history shows that people are obedient to power to the point
of digging their own graves as the Greeks have done.
Democracy may be wonderful and might some day offer benefits to the general population, but
for now the democratic process elects people who say they are left and govern from the far right.
This happens over and over from the "hope" Obama exploited to win election to the leftest slogans
Syriza used to win election. Once in power suddenly they discover the great virtue of Neoliberal/Ordoliberal
(I write the rules you obey) ideologies of oligarch worship and oppression.
Germany wrote the rules for the EU and they advantage Germany exclusively. Germany is now running
a trade surplus in excess of 7% - people don't seem to understand or care that this is a deliberate
violation of EU regulation and rules and so no commentators mention it. The German trade surplus
especially sense it is so very high acts as a tool to dominate the rest of Europe, disadvantage
them seriously and insure that if they left the EU there economies would collapse. Thus, Germany
has a very big hammer which it shows to Hollande each time he makes some feeble attempt to disagree
with Merkel.
The EU has been converted by Germany/Merkel to a mechanism for transferring wealth from the
middle and lower classes of Europe to oligarchs. Even German workers have not escaped and will
only find their living standards continue to deteriorate.
Think of life in Bangladesh, that is Neoliberal heaven.
ilove2shop -> ID7524597 16 Jul 2015 14:34
You really should use Google to see the state of the countries you mentioned. Ireland has had
a mass exodus of it's population, like the Great Potato Famine exodus,Spain has double digit unemployment
(and it had a surplus before the crash),as do Portugal and Italy with people leaving for former
Portugese and Spanish colonial economies.Why do you think Podemos is on the rise?
Italy, Ireland and Portugal, all had democratic mandates that were reversed by the eurozone.
Their economies are mired in a deflationary near-recession. Italy's GDP peaked at $31,764 in
inflation-adjusted U.S. dollar per capita in 2008; by 2014, it had fallen to $28,376. On the same
basis, Ireland's GDP per capita has fallen from $51.002 in 2008 to $45,119 today. And Spain's
GDP per capita is now $24,573, vs. $26,927 in 2008.
At the same time, inflation in the eurozone has fallen to -0.5% in March 2015 from 5% in December,
2007. Low inflation and low growth means low demand for money, and that means lower interest rates
- despite these countries' staggering debt.
Another reason for the low rates: The European Central Bank is buying long-term bonds in a
bid to keep rates low and give a boost the economy. It's a page out of the Federal Reserve's playbook.
At the same time, however, the ECB is demanding austerity programs from its weakest members, often
involving drastic cuts in government spending. It's a bit like bleeding a patient at the same
time as giving a transfusion - which is why the Eurozone is facing a long recovery.
It is clear that the banks can get away with just about anything. They are corrupt, venal,
rapacious and largely incompetent and irresponisble yet everything is done to save them and make
sure that they never pay for their mistakes, indeed they are rewarded. Meanwhile ordinary people
like the ordinary people of Greece are made to pay for the banks mistakes, see their pensions
and savings eroded and squandered by these vultures. So sad and angry at what is being done to
Greece, crucifixion is an apt description of what is being done to the country and its people.
JohnG4 ID7524597 16 Jul 2015 14:04
You are completely ignorant of the concept of bank lending and bank money. Greece borrowed
from banks brand new money (not pre-existing money) at interest. It did not borrow from your bank
account! It did not borrow from your government! So how is it that Greece lived at your expense?
On the contrary: Germany benefited immensely from the monetary expansion (the lush bank lending)
since the expansion financed the trade surplus of Germany. It was a monetary expansion for the
German economy, only the latter did not have to pay interest or seignorage tax.
None of this writes off the responsibilities of successive Greek governments. But, the banking
system that financed this expansion concealed the true credit risk even from the Greek electorate.
JosephH79 JohnG4 16 Jul 2015 14:04
Because that narrative helps impose technocratic, plutocratic, neo-liberal, hegemonic, ...
... idiocy upon European people.
michalakis 16 Jul 2015 14:02
I find nothing to disagree with in this article; no hyperbole of any sort.
Just as Sven Linqvist shows in The History of Bombing that World War Two was essentially
the result of Germany importing practices into Europe which were formerly common and universally
accepted (even applauded) in the West's administration of its colonies (mass murder, genocide,
gun boat diplomacy), so Europe's next breakdown will be able to trace its roots back to this importing
of economic practices formerly reserved by Western institutions for the developing world into
the heart of the developed world. This is the beginning of the end for Europe, and it certainly
marks the end of my--and many others'--dreams of a powerful, unified Europe underpinned by the
acquis communautaire.
justonetom citizenJA 16 Jul 2015 13:36
Syriza did not destroy the economy. The Greek economy was a basket-case long before they came
to power. However, the economy has sharply worsened on their watch. The figures are all in the
public domain; stating that is not contentious.
Look, Greece could choose to default. To say, sorry, can't pay these loans and never will.
Formally default. So why don't they? Because they know that without further loans their country
is bankrupt.
Beyond Seamus's banner-waving, it's not complicated. Country that can't pay its debts seeks
more loans. People willing to advance loans demand a better quality of proof that this time loans
will be repaid (ie. reforms). Greece can choose to accept or decline.
What Tsipras offered was a total chimera. Merkel knew it, we all knew it. "No cuts! No reforms!
But more loans to us! And staying within the EZ!". This was demagogy. He was never going to be
able to deliver that, and lo and behold...
Seamus wants, desperately, this to be a story about "evil neoliberal bankers". And there
is some truth in a narrative that includes bad lending. But ultimately Tsipras was a poor
negotiator, insulting the very people whose help he required, acting in bad faith with 'stunts'
like springing a referendum without giving notice to his partners... Syriza has proved incompetent.
A classic "opposition" party that crashes and burns as soon as it has real-world work to do from
a position of real power.
Had the Greeks seen through him/it, and voted for a party that could do business with the troika,
they might have ended up with better terms from more sympathetic partners in the EZ.
Weefox 16 Jul 2015 13:24
Greece had a choice. For some reason it decided that it was better to stay in the EU, which
it hates and slags it at every turn. Why? The neoliberal economy of Europe is something which
Syriza and the hard left reject, but they still expects it to cover their debts.
I am beginning to smell a whiff of hypocrisy.
welcomeparty lawbag 16 Jul 2015 13:14
Well you should talk to the leadership of the EU who had the gal in 2012 to take the debt held
by privat banks who had just had a "haircut" of 43% of their holding but what does the EU do they
purchase the debt, not at the 57% value but pays it at a full 100% of price (this makes good the
loss the bankers made - why?), so now we the tax payer "own" the debt. It was a Privat debt but
the EU leadership made it a public debt.
You tell me is that the fault of the Greek people or is it the Crew of bankers that hold office
in the EU and who have favoured the German and French bank's with the deposit of 90% of the Billions
Greece was lend. Greece only ever saw 10% flowing into their banks.
It is bordering on criminal what they have been doing and is doing to the Greek nation, who
needs enemies when you have friends like these.
If you are worried about Greece not paying the money they have borrowed, ask the EU why they
will not talk about debt restructure (Pay in full over time) or rather why they have not allowed
Greece to access this function that the IMF has spouted about.
Why has the EU promised if Greece swallow the bitter and accessive austerity imposed on them
The banks will be allowed Greece to access the QE program of 1 TRILLON EURO allocated to banks,
should Greece need it they will be able to access this fund they can from 2018. But guess what
the QE program finishes in 2018.
What kind of negotiation is that- they have emasculated Greece and they believe that these
sort of thing are allowed - which they are not...
You maybe rushing to get into the full Union of the EU, me I would rather be poor but outside
the EU - why, well if they will do what they are doing to the Greek people in public, I feel I
would be scared silly wondering what they would do behind closed doors and I was in trouble.
Making people scared is easy and is extreme, fear is a new God the propaganda machine of the
EU are using , the 3rd world war has arrived without a shot being fired, not becourse you and
I have issues, but becourse they can....
Steven Savage 16 Jul 2015 13:14
"What kind of a union of partners treats one of its members like a recalcitrant colony,
destroys its economy if it steps out of line, and dismisses its democracy as an impudent affront?
"
The same kind of union that allowed Greece to enter when it no doubt had very good reason to
suspect that Greece was cooking its books to show its deficit was far lower than it actually was,
and that allowed Goldman to create derivatives to further shore up its sovereign balance sheet.
No one ever really seems to take the European currency union to task over this. The Greek entrance
into the Euro should have been "annulled," for lack of a better word, years and years ago, perhaps
as early as 2003. That annulment would have allowed the EU to remove Greece by legitimately claiming
fraud, and as such, would have been a way out of the Euro that no one else would have been privy
to. It would have kept the currency union together for the rest of the members, and would have
hopefully stopped the worst of the bad debt way before it grew to such unmanageable, toxic levels.
The EU had its chance to dismiss Greece but chose not to. We all know EU vanity and arrogance
were heavily involved in retaining Greece. Greece is wrong for its economic deceptions and culture
of tax avoidance, but the EU darn well knew it was letting Greece get away with, and it knew it
about a dozen years ago.
waterme888 objectinspace 16 Jul 2015 13:14
the imf does austerities to countries for a reason.. to think that they are enforcing these
rules on greece just for the benefit of greeks is laughable.. greece is a small small economy
with little impact on world economics.. so why is not a single media asking the hard questions
why now.. why is this happening now and why is the economic union of europe going to be effected
by such an insignificant economy collapsing.
in the 1988-1989 this very same thing was done to poland --- few remember as todays society
does not study history and relies on being told what to think by the corrupt and reprehensible
media.
now i dont have enough room to explain the totality of keynesian economic reforms pushed forth
by these huge financial oligarchs but if you think even for one moment that these banks have the
best interests of the greeks in mind your off your rocker.
OneCommentator 16 Jul 2015 13:13
This week has made a mockery of monetary union as a path to a united democratic Europe
and opened the way for the eurozone's breakup.
So true! Hence the problem is not neo-liberalism or German intransigence but the monetary union
of disjunct and completely different economic and even political systems. Greece's politics not
only their economic performance are completely different from Germany's. Why should they be in
the EZ together? Free trade? Sure, it makes sense. But that's about it. There is no need of a
United Europe. It is naive and meaningless dream.
GordonGecko real tic 16 Jul 2015 13:13
'Proof? or is this more tendentious opinion conjuring fairy facts as it goes along? '
and note the phrase 'money wasn't given to lazy Greeks but to already-bailed bankers who, despite
a face-value haircut, ended up making a profit on the deal."
'It's hardly surprising that hostility to the EU, which shows no signs of being open to deep-seated
reform, is growing across the continent.'
Hostility is perhaps too strong, but nonetheless there is now a tendency to question whether
the European Institutions are there to protect us from neoliberalism or have already sold out.
Personally I have been a europhile for over 40 years but I am now wondering if this is the sort
of Europe I really want.
Lastwordsusie viscount_jellicoe 16 Jul 2015 13:04
It's desperately frightening.
The government of pretty much all of the globe with a few exceptions is run by rightwing corporate
ideologues.
Neoliberalism has - at least for now - triumphed and those on the left are feeling pretty bewildered
and rudderless.
Greece's pain is not just that of CRUSHING austerity without end, but also of ritual humiliation.
That's a recipe not for meek compliance - but ultimately, seething anger, division and civil unrest.That
will no doubt be crushed also but the troika has successfully set the left against itself once
more.
I don't doubt that what the troika seeks is the restoration of ruthless and corrupt rightist
government - (maybe they'd like another Junta to deal with.)
I'm not sure there ever can be a bloodless revolution unless there's a way of overcoming the
power of capital and those that wield it without some miraculous change in human behaviour and
some genetic evolution that ceases to regard the earths resources as belonging to the few with
the many in hock to their whims or largesse.
Uncertain times?
No! Much, much more than that.
What will the right do when population drifts of the desperate, fleeing war and hunger, along
with ecological resource imperatives -become insuperable, as the world's ability to withstand
the rapacious greed of its exploiters start forcing its hand?
658176529539572 16 Jul 2015 12:55
Centuries ago, Thomas Jefferson gave the American people this warning:
"If the American people ever allow private banks to control the issue of their currency,
first by inflation, then by deflation, the banks and corporations that will grow up around
them will deprive the people of all property until their children wake up homeless on the continent
their Fathers conquered."
-- Central banks (all over the world), are apparently using this method of conquest…
roola 16 Jul 2015 12:54
Thank God one journalist sees the political truths behind the EU's policies for Greece. Weimar
Republic, anyone?
And, no, the EU has never been a solely economic union. How can it be while it implements undemocratic
procedures that can dictate, as in Greece, a country's economic future? Whatever happens, Greece,
with a now greater accumulation of swinging debts and with the EU's intent to break its left-wing
government, eventually will be forced to leave Europe. When that happens, EU 'unity' will be seen
for the sham it is.
I was one of those who voted 'yes' in the original UK referendum for joining Europe, though
with misgivings about the undemocratic set-up. Not now. The misgivings have proven themselves
to be the reality and my vote would be a 'no' vote.
michalakis greatapedescendant 16 Jul 2015 12:51
Yes, seriously.
The fallout could not have been more if the Germans had just send the Luftwaffe in to bomb
the place. I'm 47, a formerly middle class, middle income, self-employed professional. I've been
working abroad for the last 4 years, as has almost every other 'dad' I know. My former life is
destroyed: the infrastructure I worked in, the people I worked with, have gone. My clients, my
colleagues, my connections are all gone. I cannot return to Greece to work. I cannot watch my
daughter grow up. Seriously.
rightwinggit 16 Jul 2015 12:50
The idea that this crisis has simply pitted one democratic mandate – that of Greece – against
the hard-pressed taxpayers of 18 other eurozone members is nonsense.
It is, of course completely true.
Very little of Greek government debt is now held by private institutions. By far the biggest
creditor is the German government (read taxpayer) followed by the French taxpayer followed by
the Italian taxpayer followed by the Spanish taxpayer.
The only countries where significant amounts of Greek debt are held in private hands are in
the US and the UK and the US favours debt relief.
In terms of percentage of GDP Malta is in deep shit - its exposure to Greece is 5% of its GDP.
Personally I think Greece should leave the EZ and return permanently to the Drachma but don't
pretend that there will be no cost to EZ taxpayers.
Germany is owed €90bn. If half of it is written off, that would cost each German €550. When
you look at it like that it doesn't sound like very much. All you have to do is persuade the German
voter that it is a price worth paying....
Silas Walter Adams (1958). The legalized crime of banking and a constitutional remedy. Boston:
Meador. pp. 13,30,58,90,246. OCLC 3906807
AXWE08 lawbag 16 Jul 2015 12:46
I think we have heard this Neoliberal prescription before. It is ironic that such avowed loyalty
to the EU's machinations comes from the very sector that would see the UK leave the EU. The truth
is simple enough: A debt that can't be paid, won't. No matter how much squeezing is applied to
Greece the outcome will be the same, namely debt write down at some time in the near future. Austerity
was seen to be a failure long before Syriza and Tisparas took office and this was the reason why
they were voted in.
Jantar 16 Jul 2015 12:45
I totally agree that this deal/putsch is a disgrace - but let's not fall in that simplistic
Hollywood trap that suggests that because one side acted disgracefully the other side must be
the side of the angels.
Greece has been a thoroughly corrupt state since the Colonels were forced out. Their democracy
was always fake, hijacked from the start by economic & political cabals. So let's not pretend
this is a story about some virtuous/democratic David being crushed by wicked Goliath. The referendum
was a farce: the choices badly chosen & put, with a government playing to the gallery, promising
things not even covered by the actual referendum . Still, and as always, the true and self-appointed
leaders of the EU fear elections and hate referendums and have never accepted any of the latter.
The government of the day lied about the economic situation when they joined the Euro but that
was something the Eurocrats knew, of course but they had their own self-glorious reasons to publicly
pretend Greece was ready to join.
So, yes, this is a mess - but there really are no 'white hats' here. Black and dark grey are
the only colour options in this movie.
As always, as throughout the whole of human history, it's the common people (who can be venal,
yes, and short-sighted, and plain dumb - and often are; not many white hats there either) who
get screwed. Nothing new under the sun indeed.
viscount_jellicoe 16 Jul 2015 12:40
Spot on. Greece's debts have now been made effectively unrepayable in order to send the
deafening warning to the Spaniards, Portuguese, Italians, etc., not to dare elect anti-austerity
governments. It's pretty desperate stuff.
waterme888 -> objectinspace 16 Jul 2015 12:39
if Greece was free to decide would they be in this spot. no.. they are being dictated.
period. the people understand that and are protesting, but the politicians can only do what the
banks tell them so they will do exactly what they are told and then have elections - the people
will then elect new government which will negotiate so minor changes to the payment plans or some
other irrelevant term which the new government will tout as a victory which of course the media
will lap up like a dog in heat and everything will be as it should according to the control exerted
by these financial oligarchs who dont give a crap about the people and only care to own own own.
this happens in every country - its called Keynesian economics and even your country is under
the influence.. or perhaps your buying power has gone up over the past 20 years..
this whole system is a illusion and education into finance is the only cure.
viewcode 16 Jul 2015 12:37
Dear Guardian
Speaking seriously at the moment, don't you think this article is over the top? It's a rant,
and quite an intense one at that. You should step back, take a deep breath, and try to regain
a sense of proportion. Germany is not the Wehrmacht, Greece has not been immolated and - as even
the Eurosceptics have realised (http://blogs.spectator.co.uk/coffeehouse/2015/07/a-beginners-guide-to-euroscepticism/
) - this is driven more by hysteria than by rationality. "Brutal authoritarianism"? Seriously?
658176529539572 16 Jul 2015 12:37
"Banking was conceived in iniquity and was born in sin. The Bankers own the Earth. Take
it away from them, but leave them the power to create deposits, and with the flick of a pen
they will create enough deposits to buy it back again. However, take it away from them, and
all the fortunes like mine will disappear, and they ought to disappear, for this world would
be a happier and better world to live in. But if you wish to remain slaves of the Bankers and
pay for the cost of your own slavery, let them continue to create deposits."
-- Sir Josiah Stamp, President of the Bank of England in the 1920s, the second richest man
in Britain
FourtyTwo 16 Jul 2015 12:35
What helped win the election became a fatal handicap in office, as Tsipras resisted pressure
even to make contingency plans for Grexit. That would have strengthened his negotiating hand,
as well as giving Greece the option of escaping indefinite economic depression.
According to both Tsipras and Varoufakis there was a contingency plan being made by a small
group of 5 people. Varoufakis stated in an interview that he knew since March that Schaeuble wanted
a grexit and of course he wanted to prepare for such an outcome as best as he could. The plan
did not turn up well and was abandoned because it showed that Greece didn't have enough financial
power left to prop up a new currency, which would immediately devaluate out of control.
The reason for the clandestineness of this plan was that if the media found out about it they
would blow the whistle and accuse Syriza of actively planning a grexit, something that terrified
Greeks at that time.
Goias Goias -> lawbag 16 Jul 2015 12:34
"Why should the French, the Germans et al, give more money to the Greeks to enable them
to do silly left wing populist things?"
This is an interesting statement, it ignores completely the silly little right-wing things
like the global financial crisis in 2008 and the ripple effect it had over the banking system
first and the countries having to sustain that system later. I guess our lenience towards these
silly little right-wing things makes us accomplices of the destruction they bring.
If only the Greek officials wore ties. Don't they now how important that is?
bally38 16 Jul 2015 12:31
As that well-known negotiating guru Yannis Varoufakis put it:
If you are not willing to even contemplate the prospect of a breakdown, then you're not
negotiating
He wasn't joking. He didn't just contemplate it. He planned for it. The referendum was planned,
just as the two sides had nearly clinched a deal. He had prepared for enforced capital controls,
and admitted in the New Statesman interview what his advice to Tsipras was. Take over the Bank
of Greece and pay salaries for another few months with the last reserves, while issuing IOUs.
ie: Unilateral Grexit. For which Syriza has no mandate.
Tsipras, to his credit, refused to implement the plan, instead asked for Varoufakis' resignation.
Any crucifixion of Tsipras was on a cross that Yannis Varoufakis nailed him to. But he's an
adult. As he said in his TV address two nights back. He's responsible, because he's the Premier.
waterme888 Renato Timotheus 16 Jul 2015 12:31
the unemployment was a gift of these same banks who use influence and covet means to enforce
their will upon those countries they need to capitulate into a deep control algorithm.
look up keynesian economic theory and then study what happened to the countries of south america
in through the 1950-1970's and understand that is exactly what is happening to greece..
the media does not report these facts for they are owned or influenced by the same banks perpetrating
the control.
do you smell extinction.
liberalexpat 16 Jul 2015 12:28
The bias of many of the articles on Greece in the British media has gone completely OTT - it's
patently obvious that there are glaring faults on both sides - and the misuse of the word democracy
is flagrant.
Certainly, the eurozone countries have acted harshly. But the Greek crisis stems from decades
of tax cheating, clientelism and other ills, many of them stemming from the uncontrollable behaviour
of the Greek mega-rich. Liberal British commentators normally lambast the mega-rich, tax evaders
and the widening rich-poor divide - why let the Greeks off the hook?
A major problem is that so many British europhobic commentators are projecting their views
onto the Greeks: look how furious with them Henry the Eighth Farage is. They hate the EU, and
tell us other Europeans do, too: they are in denial of the fact that poll after poll has shown
the Greek majority in favour of staying in both the euro and the EU since they can't and won't
understand it.
Democracy. Is Greece the only eurozone country to have it - and should it be allowed to impose
its view on 18 other member countries? (Note to commentators: the EU and the eurozone are not
the same.) And if the Greek referendum was the touchstone of European democracy, why not have
one in the other 18 countries?
Secondly, the workings of Greek democracy à la Tsipras. He calls a snap referendum on a non-existent
deal, says its conclusive 'no' vote will strengthen his hand in fighting austerity - then trashes
the people's vote and has to rely on the opposition to get the austerity bailout vote through.
Hmmm.
waterme888 wondrinfree 16 Jul 2015 12:26
they want to remain in it because you only read what the news reports and assume that what
they are telling you is what the people want... if the people want this so badly then why did
they just announce they may have elections in the fall. now consider that when have elections
changed anything.. in the long run nothing changes and everything remains the same.. history is
so very clear..
distract the masses with rhetoric as people in groups are easily swayed into false beliefs.
societal engineering done in the name of control.
parttimer 16 Jul 2015 12:26
Greece would be turned into an economic "protectorate", one purred, where all key decisions
would be taken by foreign governments and unelected EU bureaucrats.
Wow. If only someone had told you in advance that EU membership resulted in all key decisions
being taken by foreign governments and unelected EU bureaucrats.
sjxt 16 Jul 2015 12:24
An unusually good article for Seumus - the only point I would take issue with is the comparison
with the IMF's third world debt programs and bank handling of sovereign defaults.
The only reason the IMF is involved in this case at all is DSK's EU/French politicking - the
IMF's lending here should have prevented it lending to a palpably bust sovereign.
And if we were looking at private bank loans negotiations on debt relief would have started
months ago - such loans would be written down in the bank's books under GAAP already.
The real culprits here are the northern governments who have pretended for years this is a
liquidity rather than a solvency problem to their electorates and on that basis crucified Greece
in the earlier bailouts to bail out their own banks, and now refuse to face their electorates
with the unpalatable truth most of their money ain't coming back.
But with the IMF and now the ECB calling for debt relief - probably disguised as massive maturity
extensions, plus other EU governments like France and Italy, 2 and a half of the Troika are now
lining up against the Germans their allies......
MartinAMiss worldsworstposter 16 Jul 2015 12:23
France was the first country to break the 3% rule. Germany has broken Eurozone rules. This
isn't just about Greece, but Germany & France shielding their banks from bad debts they shouldn't
have made.
Other rule breaks, the ECB cutting ELA fundding to Greek banks. Under the rules that govern
it, ECB's job is to keep banks opne, not close them like an enforcer for a loan shark.
If you are in doubt about that fact it is the banks that are being bailed out, perhaps the
former head of Bundesbank & board member of IMF will convince you.
Greece is being crushed to remind the Spanish and Italians of the price of disobedience
zappa2007 16 Jul 2015 12:08
The Greeks had no option to accept this awful deal because not to have done so would have left
them with no banking system, hunger, poverty and riots. The new Government came to power thinking
they could have a rational conversation with the EU on he basis of reform and explaining to the
EU about the logic of their rational position. The Germans and other rightists have imposed a
political settlement in the face of the economics of the situation that even the IMF recognises.
Yes, just like the Treaty of Versailles. Look how well that turned out.
A cruel trick has been played on the Greeks and the rest of us too. It is the banks that have
swallowed all the cash in vast bailouts but the public who have to pay it back. Profits have been
privatised and losses socialised. Meanwhile we voluntarily give up our rights and living standards.
What fools we all are.
itin78 16 Jul 2015 12:06
The 'European project',has brought Greece a ticket to the third world.
The Common market was sold to us as,a Free Trade Area.
The currency union,which was meant to be the precursor of a European Superstate,was dreamt
up by empire building politicians,without consulting the citizens of Europe.
The project is undemocratic.
It is not long ago that a lady on the BBC was telling us that we must join the Euro.
Thank goodness that we actually kept out.
It was a rare piece of good fortune for the UK.
In the meantime,there will be no end to the amount of our taxes that disappear into the bottomless
pit of the Greek 'economy.'
midnightschild10 16 Jul 2015 12:02
When I was young I went to Europe on vacation, before it became the EU. It may only be remembering
as a child how happy and welcoming the Greeks were to visitors. The singing and dancing on the
Palatka was a fond memory. I have visited the EU three times since, and saw how Europe had changed,
particularly under the austerity programs. The concept of the EU might have sounded good in theory,
but in practice, the strong countries got richer while the weaker countries got the shaft. You
can't build a country by keeping the people on their knees. What happened to Greece is tragic.
It showed the punitive measures taken against those who voice their choices in a democratic way.
The world watched, and saw how the EU had changed from a financial trade cooperation became nothing
more than a political class attack by the rich against the poor.
Julius Marklovitz 16 Jul 2015 11:59
This situation is absolutely ridiculous. Tsipras is a genius I will admit. He has essentially
made himself and his country look like poor victims of a bully. Only one problem. This bailout
is 100% voluntary. Nothing dictates that Greece has to ask or receive a bailout. Oh and not to
mention that this is bailout number 3! When all is said an done your talking about half a TRILLION
dollars for a country of 11 million. $50,000 per Greek. That is OBSCENE. But their rampant government
corruption, rampant tax evasion, and the cultural belief that it is ok to steal and kickbacks
are an everyday part of life warrants no responsibility. I'm a democrat and this makes me sick.
This isn't some child being bullied. This is a country who by choice has done everything in its
power to squander it's resources and then guilt trips the world into buying its victim stance.
It's manipulative. And get this through your head. Countries who are fiscally responsible are
not responsible for those who plunge their countries into recessions . I'm not a fan of Germany
in terms of how they use Greece to devalue their currency. But this it's Germany's fault is just
garbage.
Jmbowsher mittelfeld 16 Jul 2015 11:53
Well Varoufakis and co (who, if you remember, have only been in power less than 6 months) were
committed to reform, particularly where the fat cats were concerned. But as Varoufakis states,
they were told they couldn't make reforms because to do so would be to act unilaterally. In other
words, any perceived impotence is largely down to the troika...
shalone 16 Jul 2015 11:43
And the misery of greek people has aroused so much sympathy in many countries. If anything,
Schauble and Merkel are being accused of being ruthless. So it is not only greeks that hate the
two leaders.
Perhaps the Greeks made a mistake, and relied too much on rationality, on a belief in a Eurozone
in which good sense and reason would prevail. As it was, the Germans were willing to
ruthlessly crush the Greek banking system, while the ECB and IMF stood idly by, fomenting a financial
panic and humanitarian disaster in order to displace a sovereign government and put an entire nation
'in its place.' We certainly have seen this kind of example made before.
This was an exercise in raw power. It was a financial blitzkrieg, an act of economic warfare
and reckless destruction on a people that ought to be condemned by the free world. But this
kind of ruthless abuse of financial systems seems to be the accepted thing now amongst the developed
economies. And we might view Greece as a sort of an experiment in a new form of warfare and
ruthlessness, as were Guernica, Warsaw, and Lidice.
It is a shame if the Greeks have not prepared
for Grexit, although there are still clearly options despite the naysayers who see only difficulties
in everything. Freedom is rarely the easier way.
The lesson that the countries of the Eurozone cannot trust Germany to act with wisdom and goodwill
was known, but now we also see that restraint is also not in their repetoire. If one can read
between the lines, it would be a pity if the rest of the European countries do not start planning
now for their own active exit from such an failed concept as the European Monetary Union.
And it would be a tragedy if the rest of the world does not now see plainly where a single currency
for the world would also take them, where it is already taking them. Modern theories
about its benign utility to do only good aside, money is raw power. And one must be exceptionally
careful of granting that power to create and distribute and manage money into the hands of vain and
corruptible people without stringent transparency, checks and balances, and provisions for
justice and individual freedom.
Are the lights going out all over Europe? Not yet, but there is a darkness casting
its shadow over the earth. I fear that Greece is only the beginning of a new phase in
the degradation of the human condition by the power of insatiable greed, and spiritual wickedness
in high places.
"The earth, entire peoples and individual persons are being brutally punished. And behind all
this pain, death and destruction there is the stench of what Basil of Caesarea called 'the dung
of the devil'. An unfettered pursuit of money rules. The service of the common good
is left behind.
Once capital becomes an idol and guides people's decisions, once greed for money presides over
the entire socioeconomic system, it ruins society, it condemns and enslaves men and women, it
destroys human fraternity, it sets people against one another and, as we clearly see, it even
puts at risk our common home."
"..." The destruction of Greece, like the destruction of America, by the big banks and financial
firms is not, as the bankers claim, about austerity or imposing rational expenditures or
balanced budgets. It is not about responsible or good government. It is a vicious form of
class warfare. It is profoundly anti-democratic. It is about forming nations of
impoverished, disempowered serfs and a rapacious elite of all-powerful corporate oligarchs,
backed by the most sophisticated security and surveillance apparatus in human history and a
militarized police that shoots unarmed citizens with reckless abandon. The laws and rules it
imposes on the poor are, as Barbara Ehrenreich has written, little more than "organized
sadism."" . "... Merkel and her finance minister have accomplished what the eurosceptics could not do
themselves -- brought the entire EU project into question." . "...This deal is neither good for the ordinary Germans nor the Greeks. It's plain stupidity,
or cynical manipulation by Merkel and Schauble so that someone else in the future will have to
suffer the consequences of their actions. The Greeks can never repay the German taxpayer a mounting
amount of debt, with a shrinking economy. Greece, after another round of misery and economic
contraction, plus some asset stripping for opportunistic buyers (cronies of D'bloem, Merkel, and
Schauble's backers), will find itself in a deeper hole very soon."
I actually think that Schauble speaks a lot of economic sense. As finance minister, it's
his responsibility to table the economically viable options that are politically feasible
within his own country.... And that's where it all breaks down.
Merkel is a weak leader. The Euro was meant to be a catalyst of European Federalisation, not
the tool for economic imperialism that it currently is. It is up to Merkel, the LEADER of the
German people, to explain the features of the Euro that strengthen Germany at the periphery's
expense. Take the Euro away, and Germany will enter a recessionary period. At the very least,
its growth will slow to a halt. It is up to Merkel, the leader of the German people, to
explain to the German population the responsibility that Germany has to ensuring sustainable
growth in periphery until European integration is complete. It is up to Merkel to lead a
change in public perception and find the political backing for debt reduction, because, for as
much as she barks on about the rules and regulations of the EMU, capitalist economics has some
ground rules, some fundamental laws, which she is more than happy to use to Germany's
advantage at the expense of the periphery.
Yes, politicians are representatives of the people, and ultimately they must listen to the
people, but they are also leaders of the people, and unless Merkel takes this part of her job
seriously, as opposed to simply pandering to German public opinion, then she is misleading her
own electorate, much in the same way that she accuses Tsipras of having mislead his.
Unless the Euro changes quickly, unless there is a commitment towards fiscal (and by
necessity) political integration, Germans had better get used to being viewed negatively by
the rest of Europe, because it's only going to get worse. The government of Germany may not
trust that of Tsipras, but the governments of the periphery are starting to lose trust that
fiscal consolidation will ever happen, and then they will seek to break free from the shackles
of the Euro. Then. once German products become more expensive to the outside world, and the
oversized German export economy starts to shrink (i would call it an economic correction), the
bubble will deflate, people will become redundant, and the German dream will turn into the
German nightmare.
Cynndara HoSimpson 14 Jul 2015 19:03
Well, frankly, the EU has given Germany the dominance over the European market that Kaiser
Wilhelm and Hitler were both striving for. What the Germans don't understand is that they have
sucked their neighbors dry with their export-geared economy. It's understandable that the
average German worker doesn't understand this, since they have suffered from deliberately
depressed wages used to make their products competitive and increase the profits of business
owners. It isn't the WORKERS who have benefited from the arrangement, anywhere on Earth. Of
course, encouraging the serfs to hate each other over trivial differences while pocketing the
profits is an old, old elite strategem.
Cynndara 14 Jul 2015 18:55
". . . only 18% of Germans said they trusted Greece to implement the reforms it
signed up to, with 78% saying they had no trust in the government of Alexis Tsipras."
Nor should they. "An oath made under duress is not binding" is one of the most ancient
precepts of Germanic law. The Greeks are fully justified in doing anything they can to renege
on terms that were dictated to them with a bazooka pointed at their entire economy via the
banks.
Since the terms are unsustainable and odious, they will not be sustained, and eventually the
Greeks will be forced to leave the EU. What Germany has done makes it far more likely that
when they do, there will be no EU left.
WWIII anyone? When will they ever learn?
tf2333 WonderWorld 14 Jul 2015 17:36
I always have the facts in mind. Comparing median household incomes (more accurate than
mean) worldwide Germany was #12 in 2011 and Greece was #27. In 2013 Germany was #16 and Greece
nowhere in the top 30... It is miraculous what two years of financial aid can accomplish.
These are the comprehensive facts from the 2013 US census, I am open to your own sources.
Katime Monasteria 14 Jul 2015 17:35
It's only the wealthy who dodged taxes. Actually under the austerity program of the
preceding administration, taxes for the wealthy were cut down while taxes for the poor were
raised (like in the UK and the US, among other countries)
Of course wealthy Greeks have gotten their money out of Greece and parked a lot of it in the
Cayman Islands along with the money siphoned out of other economies including that of the US.
Working class folks always paid their taxes. In Greece like elsewhere taxes are deducted from
paychecks.
I hope for your sake that you are one of the 88 individuals who own half of all the earth's
wealth. If you are a working stiff like the rest of us, you're being a patsy.
Nigelpwsmith 14 Jul 2015 17:23
The Germans are taking particular delight in their cruelty to use Greece as a whipping boy
to get all the other Euro countries into line. They even had the temerity to suggest that if
Greece didn't accept the deal, they wouldn't just be out of the Eurozone, but out of the EU as
well - something that is impossible without the consent of the Greek people.
Merkel and Schäuble have taken it one step further. The bully boys are now threatening to
demand funds from the United Kingdom. Even though Cameron obtained an opt out from bailing out
the Eurozone, Jean-Claude Juncker, European Commission president, has discarded any notion
that this was written into any treaty and may revive the European Financial Stabilisation
Mechanism. Using the EU funds as collateral, the EU would loan even more money to Eurozone
basket cases and then when these debts are not repaid, contributors like the UK would get
stung with the bill.
If anything is likely to persuade the British public to leave the EU in 2017, this would be
it!
brianboru1014 14 Jul 2015 17:14
Angela Merkel and her finance minister, Wolfgang Schäuble, actually have managed to divide
the continent.
Germany is not trusted any more as an innocent post World War 2 European nation. Many now see
it as the most destructive force in Europe just as it was in the beginning of the 20th
century.
WonderWorld Aris Tsihlis 14 Jul 2015 17:03
Just so you know: according to the most recent poll in Germany, 75% of the Supporters of
the Green party and 52% of the Linke party are supportive of Merkel's way of dealing with the
Greek blackmailing of Europe. You should get used that democracy is not the personal right of
communist Greek demagoges, but is practiced in every single country in the EU. And a majority
of the people there are fed up with Greece stealing their tax money.
MartinAMiss RedCoat4Ever 14 Jul 2015 16:54
It's economically unworkable. As has been demonstrated by the fact bedt to GDP ratio has
gone from 130% to 177% and predcited to rise to 200%.
The IMF has always been clear about sustainability. Having two French chiefs who have
presidential ambitions, when so much of the Greek liability belongs to French banks, has
hindered a sensible solution being found.
tf2333 14 Jul 2015 16:35
Throwing my own interpretation in the pool of opinions... It is only natural that measures
and assurances are needed whenever someone is asking for money. But in modern societies, fine
lines are drawn to what these assurances should be. Regardless of the final concessions from
both sides, the original demands of 1) 50bn worth of assets to be gradually sold by the
creditors and controlled from Luxembourg (!) 2) involvement of the creditors in Greek
legislation from now on and 3) re-iteration of all legislation taken by the current elected
government without the consent of the Eurogroup are far-fetched in a legal sense, to say the
least. It is worth mentioning that the Eurogroup is a non-legal entity that keeps NO written
log during its meetings and is under no one's jurisdiction... Last but not least, I am simply
sad to see the European ideal broken and nationalism grown on all sides. Taking the US as the
nearest example of a monetary union, many of the southern states are literally bankrupt and
the northern states are simply paying for their debt to maintain the stability of the union.
The same situation within Europe is translated into "why should Finnish / Germans etc pay for
the debt of the Greeks?". Well, this is how unions work, to everyone's sudden dismay, not as a
club only for the privileged.
eurotrash 14 Jul 2015 15:16
" The destruction of Greece, like the destruction of America, by the big banks and financial
firms is not, as the bankers claim, about austerity or imposing rational expenditures or
balanced budgets. It is not about responsible or good government. It is a vicious form of
class warfare. It is profoundly anti-democratic. It is about forming nations of
impoverished, disempowered serfs and a rapacious elite of all-powerful corporate oligarchs,
backed by the most sophisticated security and surveillance apparatus in human history and a
militarized police that shoots unarmed citizens with reckless abandon. The laws and rules it
imposes on the poor are, as Barbara Ehrenreich has written, little more than "organized
sadism."
Corporate profit is God. It does not matter who suffers. In Greece 40 percent of children
live in poverty, there is a 25 percent unemployment rate and the unemployment figure for
those between the ages of 15 and 24 is nearly 50 percent. And it will only get worse.
We will not return to a rational economy or restore democracy until these global speculators
are stripped of power. This will happen only if the streets of major cities in Europe and
the United States are convulsed with mass protests. The tyranny of these financial elites
knows no limits. They will impose ever greater suffering and repression until we submit or
revolt. I prefer the latter. But we don't have much time.
daitwice Optimist13 14 Jul 2015 14:27
You are an optimist. Businesses are about margins. That's why any substantial boycott can
be harmful.
What will save Germany is inertia, the failure of most to act on their feelings of disgust.
It's easier to rip off a comment here or on social media than think through how to avoid
buying German products. We shall see how long people remember, before they switch to some
other outrage project.
But I think you're wrong about fringe parties. People who have always been pro-EU are turning
sharply against THIS Europe. Certainly Britons, with their innate sense of what representative
government is, do not like bullying decisions taken behind closed doors by unaccountable
committees that refuse to take minutes of their meetings.
The German S-Ds are more corporatist in their approach. They've been complicit in driving
down German wages so that there's now a wave of anger and a level of poverty for 3 million
Germans that can be be usefully turned outwards against southern Europeans (not that I'm
saying the Greeks haven't made mistakes).
Alexandra Michaels Kostas Nikolaidis 14 Jul 2015 14:18
Corruption in Greek governments? Absolutely! I know it. I saw it. Why do you think so many
back Tsipras who is not from the old money ruling class that live in Ekali and sail around the
world on yachts?
Tax evasion? Yes, mostly the upper middle and upper classes...not the ones who are paying
the piper--the civil servants and some of the more honest and smaller independent business
people.
Don't put all the blame on Greece. What do the yiayiades and papoudes need to suffer in
their old age when they lived honorable lives? Your people are suffering because of the rich
and the corrupt and the monolith banks.
Read the prophecies of the Elder, Saint Paisios who predicted all of this back in 1983 when
it seemed like science fiction to the people who he said it to and who documented his words.
See what the big bank monolith minotaur really is...if you believe in God.
RedCoat4Ever Alexandra Michaels 14 Jul 2015 14:07
When Varoufakis was backward inducing the various levels of "the game", he miscalculated
the probabilities AND payoffs. He believed the dominant strategy was to claim "the EZ needs us
more than we need them". He was wrong. Dead wrong. Tsipras played and now has to take the
payout. He chose an inferior strategy, which is remarkable given that the payouts and
probabilities were known to the world. There is not a question of blame. This was Tsipras'
choice. He must now accept the payout.
AKAJOE 14 Jul 2015 14:04
It is probably true that Germany has/is been too harsh - although the total online hate
campaign is way way over the top. With every idiot jumping on the band wagon...but what I
don't understand is why is no one mad at the Greeks? The Greek elite (political and business)
completely failed their own country by exploiting the system and people and sucking the whole
place dry for the last 4 decades.(and longer)..this is 10x worse than what Germany is
doing...where is the social shit storm against them??! how about #BoycottShippingTycoons or #GetTheCroniesOutofHere..anyway
can't think of anything more witty....
crystaltips2 Alexandra Michaels 14 Jul 2015 14:00
It may be a generalisation but when most sources agree that Greece's shadow economy is
around 25% of GDP then it's a pretty fair one. Public spending is 50% of GDP, so that means
fully half of private sector transactions are made 'off the books'. You don't need to speak
Greek or live there to find this out.
germany15 DieSubversiv 14 Jul 2015 13:49
The devil-contract-thing is right, I agree -- But when Banks use their power to do crime,
like manipulating Libor, eulibor, ... and in this case manipulating the Greeks balances and so
on (like golmansachs did), they are the origin of the Greek disaster. If I would sign a
manipulated contract, the crime is not the signing, but the manipulation !!!
I would agree to you, that the signers where very naive, but the thing is: Now we know, that
they were cheating and even, if we can prove this, the banks will not be judged (to big to
judge or so) -- In my opinion that's a language of a non-democratic state -- Sad but true !
And I have to add, that of course the whole political system in that case failed too!
But the sickest thing is:
Now, as we know of the crime, the goldmansachs bank did in that case, the result is, that a
goldmansachs banker is running the ECB System ?!
Alexandra Michaels 14 Jul 2015 13:48
All along Tsipras realized that the debt was unsustainable and that austerity did not work.
The world's global economists agree with that.
All along he stated that he wished to negotiate for better and less humiliating (to the
poor and middle class) terms for the bail out.
Unlike the German leaders who are beholden to the monolith bank god of greed, as well as
previous elitist politicians who ran the Greek government, he cared about the lesser rather
than only the rich.
The humiliating austerity (threatened to be stricter and worse before the mandate) terms he
was forced to agree to after being (in the words of other ministers present) "mentally
waterboarded", "crucified", etc., are a sad day for all the world.
That a woman could exert such pressure on another is beyond me, but desperation and greed
can do funny things to a person...
Today, not Germany and not Greece are winners...the evil banksters who are ruling the
world, the anti-christ, if you will, are the winners.
retsdon damiendd 14 Jul 2015 13:47
I actually voted in the referendum back in 78 or whenever it was to stay in the old Common
Market. And I'd probably do so again today. But over the subsequent 30 odd years the project
has been hijacked by Empire builders in Brussels. If I had a vote in the next referendum on
staying in the current EU - which I don't - I'd vote out probably. It's an unhealthy
organization.
Alexandra Michaels Sal2011 14 Jul 2015 13:40
Sal, that was an amazing post and assessment. So many think that this is all simplistic and
like to compare it to them going to the bank for a car loan (atleast in the U.S.)
Sadly, these opportunistic corporations, the new oligarchy of the once democratic United
States, are also salivating Ukraine.
One cannot help wonder who is behind these global events.
These corporations and banksters are nothing short of pure evil. The media is often biased
and cannot be trusted.
Thank God for erudite posters like you. I wish I could copy your post and share it
elsewhere, but alas there is no 'cut and paste' ability here.
While I congratulate you, I also tremble in fear at this evil which has taken control of
the world and which has killed democracy.
Algirdas Davidavičius Maarten Van Wijk 14 Jul 2015 13:34
It is beyond me how all the responsibility for expert, technocrat failures made in favour
of the banks against the sovereign national democracies is constantly shifted towards citizens
in a manner that sets them one national democracy against the other. Now suddenly the
lithuanians and dutch are "paying for the lousy greeks", when it is private investor and their
client polititian failures that created the crisis. Is it not, dear Mr. Vam Wijk, that the
"Greece against all the rest of EU democracies" is absolutely a scandalous lie and absolutely
disorienting illusion?
jackayarcher 14 Jul 2015 11:05
Below all the shouting, accusations, recriminations, ad hominem attacks on all sides, there
is the fundamental economic fact that the austerity measures imposed on the Greeks by the
Germans were/are a huge mistake. Even the IMF now admits (and why did it not do so sooner?)
that Greek debt, just like German debt in the not-so-distant past, was too high to ever be
re-paid, that trying to do so under the conditions Germany insists on means that Greece is
condemned to perpetual penury.
This is the worst act on Germany's part -- acting irrationally while assuming an almost
religious sense of economic and moral superiority. Unattractive, to say the least, however
popular such behavior may be among Germans. It isn't to the rest of us. Merkel and her finance
minister have accomplished what the eurosceptics could not do themselves -- brought the entire
EU project into question. As for the eurozone, we now see how appallingly bad an idea it is,
and one that will bring all Europe to grief.
prefec2 Skallior 14 Jul 2015 10:58
As a German, I have to concur with your assessment. Merkel and Schäuble ruined the EU.
However, they are not the only ones who supported this stupid path which will not lead to a
recovery of Greece, but to the destruction of the euro zone and the EU. The EU is already a
fragile thing, as more and more countries have become egoistic, for example the UK or Finland,
a union where everyone is only looking after his personal benefit will not work. Nor will it
work based on a neo-liberal agenda of Merkel.
prefec2 JMFulton 14 Jul 2015 10:54
The EU handed them a brick not a life line. the only thing that would help is a debt
restructuring or a haircut combined with a massive reform of the state bureaucracy. Cuts to
pensions, however, are not necessary. The same goes for privatization of infrastructure.
Greece is so deep in debt, because of the corrupt elites (which are presently not in
government). It is also in debt, because Goldman Sachs helped them to trick the EU and the EU
and especially Schröder looked the other way when they cheated themselves into the Euro.
However, most of their debt accumulated after becoming part of the Euro zone.
Sal2011 14 Jul 2015 10:30
This deal is neither good for the ordinary Germans nor the Greeks. It's plain
stupidity, or cynical manipulation by Merkel and Schauble so that someone else in the future
will have to suffer the consequences of their actions. The Greeks can never repay the German
taxpayer a mounting amount of debt, with a shrinking economy. Greece, after another round of
misery and economic contraction, plus some asset stripping for opportunistic buyers (cronies
of D'bloem, Merkel, and Schauble's backers), will find itself in a deeper hole very soon.
How do countries like Greece find themselves in such a debt jam? Here's an example of a
typical process. A German company wants to do a project in Greece. It approaches the Greek
government, with its lobbyists and debt from a German bank to finance the deal. Since it is
coming in with the capital, it overprices the project. Greece gets an overpriced asset and
debt - sometimes the asset is indeed worthless for example military white elephants that will
never be used. The German company gets the windfall. The German banker is happy at placing
more debt, they get paid by the amount of debt they sell. The German and Greek taxpayers
ultimately pick up the bill for the overpriced asset. While the overpriced asset doesn't
contribute as it should to the Greek economy (if indeed anything, e.g. in he case of a
military white elephant), the Greek taxpayer - ironically the middle earners and poor, who
don't have offshore tax accounts - is expected to pay for it. Public opinion is whpped up
against the Greek pensioner, middle earning worker as if they somehow manipulated the system
and pocketed the money, not a crony corporation of the German politicians.
When the Greek taxpayer obviously finds himself going bust trying to pay for an overpriced
asset, Germany passes the bad debt to its own taxpayers, i.e. the Greeks now owe German
taxpayers. They obviously can't pay this either. So now they are forced to sell assets - let's
look at what assets are being proposed. These assets are monopolies like the electricity
transmission grid and airports which the Greek taxpayer has to use and pay for in any case. In
other words, compulsory taxpayer payments. Who will these assets go to? Foreign companies,
cronies of the Troika's decision makers (where they will find jobs, advisory roles after
public sector retirement). Will it help Greece grow again? No. Will it help Greek payments to
the German taxpayer? Unlikely. But it does help certain opportunists make a lot of money in
the short run, while others are left to suffer the consequences in the future.
Shannon Ribbons 14 Jul 2015 10:07
The banks WILL have their money. Only a juicy war could have distracted them from their
slavering over Greece.
"...The leaders of Syriza are revolutionaries of a kind – but their revolution is the perverse, familiar
appropriation of social democratic and parliamentary movements by liberals groomed to comply with
neo-liberal drivel and a social engineering whose authentic face is that of Wolfgang Schauble,
Germany's finance minister, an imperial thug. " . "...The global financial class is pleased that any pain to be visited from the bad behavior of,
wait for it, the global financial class including some of the usual and almost omnipresent suspects,
will be presumably visited upon the Greek public alone. . And there will be a feast of sorts for the vulture class. . This is the continuation of a financial strategy being pursued by the Western developed economies
for some years now. It is not 'ordoliberal', which is a nice historical diversion, so
much as neo-liberal, a fashion of political management that has swept the West thanks in great part
to the economic and political influence of the US and the UK." . "...'In the [1967] coup d'état the choice of weapon used in order to bring down democracy then was
the tanks. Well, this time it was the banks. The banks were used by foreign powers
to take over the government. The difference is that this time they're taking over all public
property.'" . "...We are seeing the same thing being done on a much more local scale in the UK and the US surely,
with certain locales being turned into virtual protectorates after being caught up in a web of corruption,
financial fraud, and unpayable debts by officially sanctioned Banks. Consider this not an anomaly, but an experiment in progress, with more to follow."
"Find out just what people will submit to, and you have found out the exact amount of injustice
and wrong which will be imposed upon them; and these will continue until they are resisted with
either words or blows or both. The limits of tyrants are prescribed by the endurance of those
whom they oppress."
Frederick Douglass
Greek Prime Minister Alexis Tsipras seems to have folded precipitously, after apparently having
taken all other options off the table including a Grexit, a movement toward the burgeoning China
Development Bank, an impasse.
His strategy seemed a bit out of joint. I have heard that Victoria Nuland made him an offer
he could not refuse, and he did not wish or did not have the option to offer a 'principled resignation'
as did Varoufakis.
It could be that he was then taken aback and surprised by the sheer ferocity of the European
(German) proposal, which was to essentially make Greek into a protectorate, and to visit a looting
of national assets, given that the loans being granted are completely unpayable and the collateral
will be forfeit.
He certainly is not the first Western leader to have capitulated when a 'gun' has been held
to their head. There is a certain rhyme, and a sense of déjà vu in all this. We must
do these things, because of the imperative of (pick one: destiny, our blood,
they have given us no choice, it is in their nature to be ruled, to safeguard our freedom, and/or
the logic of the market)
There was intraday commentary along these lines here.
There is certainly room for criticizing Syriza in this. I admit I was supportive of their efforts,
and still am. I will try not to judge their efforts too harshly until all the facts are revealed.
Since I am not eager to be a martyr, I rarely find it appropriate to insist on that path for anyone
else. But I did think this characterization from John Pilger bears some merit.
The leaders of Syriza are revolutionaries of a kind – but their revolution is the perverse, familiar
appropriation of social democratic and parliamentary movements by liberals groomed to comply with
neo-liberal drivel and a social engineering whose authentic face is that of Wolfgang Schauble,
Germany's finance minister, an imperial thug.
Like the Labour Party in Britain and its equivalents among former social democratic parties
such as the Labor Party in Australia, still describing themselves as 'liberal' or even 'left',
Syriza is the product of an affluent, highly privileged, educated middle class, "schooled in postmodernism",
as Alex Lantier wrote.
For them, class is the unmentionable, let alone an enduring struggle, regardless of the reality
of the lives of most human beings. Syriza's luminaries are well-groomed; they lead not the resistance
that ordinary people crave, as the Greek electorate has so bravely demonstrated, but "better terms"
of a venal status quo that corrals and punishes the poor. When merged with "identity politics"
and its insidious distractions, the consequence is not resistance, but subservience. "Mainstream"
political life in Britain exemplifies this.
I wonder how much of Anglo-American political realities that Pilger is projecting on the Greeks.
It is hard to me to judge.
But this is mere speculation and second guessing, and we have to focus on what is next. Certainly
the Greek people will be foolish to accept the terms to which their Prime Minister has agreed. But
what they will do about it, if anything, is another matter. One hopes that they will make a
stand, if only to break the momentum of what James Galbraith has called 'the neoliberal project'
in which the US in involved despite all its dissembling about it.
Those who complain about the abuse of power and financial repression in their own cases, as
those in the precious metals are sometimes known to do, are foolish if they think that what is happening
in Greece means nothing for them. The cause of freedom makes all free people brothers
and sisters, and those who see themselves as standing proudly alone will fall, miserably and alone.
The global financial class is pleased that any pain to be visited from the bad behavior of,
wait for it, the global financial class including some of the usual and almost omnipresent suspects,
will be presumably visited upon the Greek public alone.
And there will be a feast of sorts for the vulture class.
This is the continuation of a financial strategy being pursued by the Western developed economies
for some years now. It is not 'ordoliberal', which is a nice historical diversion, so
much as neo-liberal, a fashion of political management that has swept the West thanks in great part
to the economic and political influence of the US and the UK.
What makes it different in this case of Greece is that it is being done, not to a Third World
country, but to a long established Western nation and a member of the European community.
If there is any good to come out of this, at least the neo-liberal financial class has been revealed
for who and what they truly are. And so we can no longer claim any illusions, no plausible
excuse in our believing them once again.
'In the [1967] coup d'état the choice of weapon used in order to bring down democracy then was
the tanks. Well, this time it was the banks. The banks were used by foreign powers
to take over the government. The difference is that this time they're taking over all public
property.'
Yanis Varoufakis
And so we see Hillary the populist railing about wages and Wall Street today, while riding
on a tidal wave of big money, insider dealings, and soft payoffs from the moneyed interests.
But it is all in the patter, the words, the quality of the performance, the identity politics, don't
ya know. This is a spectacle, a play on the national stage, and an act of political fiction.
And so facts don't matter, just the entertainment factor. How else could one account for at
least half of the Republican candidates?
We are seeing the same thing being done on a much more local scale in the UK and the US surely,
with certain locales being turned into virtual protectorates after being caught up in a web of corruption,
financial fraud, and unpayable debts by officially sanctioned Banks.
Consider this not an anomaly, but an experiment in progress, with more to follow.
Aid agencies at Addis Ababa development finance summit claim UK and others have obstructed talks
aimed at enabling poor countries to influence UN tax policy.
Aid agencies on Monday accused the world's richest countries, including the UK, of blocking plans
to allow poor countries a greater say on UN tax policies.
The upgrade of the UN tax committee to an intergovernmental body was widely seen as a way for
less wealthy nations that have struggled to build effective tax systems to influence policy decisions
at the UN.
The UK joined the US and several other wealthy countries at the UN financing for development conference
in Addis Ababa in a manoeuvre to limit discussions on tax policy at the UN, arguing that the Organisation
for Economic Cooperation and Development (OECD) was taking the lead on tax issues.
But a proposal presented to the conference by the OECD, known as a thinktank for the world's 34
richest nations, was also criticised for treating developing countries as an afterthought.
The OECD and the UN Development Programme launched a project entitled tax inspectors without borders
to help poorer countries bolster domestic revenues by strengthening the ability of tax authorities
to limit tax avoidance by multinationals.
The initiative, which involves providing tax audit experts to work alongside local officials dealing
with the affairs of multinationals, has had encouraging results across pilot projects in Albania,
Ghana and Senegal. Evidence from Colombia, meanwhile, indicated an improvement in tax revenue from
$3.3m (£2.1m) in 2011 to $33.2m in 2014, "thanks to tax audit advice and guidance".
Aid charities believe developing countries should build robust tax systems to prevent them from
borrowing heavily and getting into debt, as highlighted in a recent report by the Jubilee debt campaign.
The World Bank has come under heavy fire in the past for encouraging poor countries to cut corporate
taxes to boost foreign direct investment. Ethiopia, Mongolia, El Salvador and Puerto Rico are among
38 countries in the report that are slipping dangerously into debt after borrowing on the international
money markets to bridge the gap left by large tax shortfalls.
The Addis Ababa conference was expected to produce a series of high-level deals to promote sustainable,
self-sufficient development. But the charities fear the UN and the World Bank will promote private
finance initiatives that involved either privatisation or greater borrowing to finance investment,
improve infrastructure and public services.
Speaking at the conference, a spokeswoman for ActionAid said: "The UK government has positioned
itself as a global leader on many aspects of sustainable development, aid and in global efforts to
tackle tax avoidance and evasion. It is therefore disappointing that the UK appears to be one of
the few governments blocking progress on the important issue of a tax body."
Failure to tackle this question in Addis will not make the urgent need for international tax reform
go away. It will simply intensify the challenges ahead for the international community. There is
growing recognition that the OECD alone cannot ensure global rules work for all countries, especially
the poorest. Blocking agreement on an obvious solution in Addis simply delays the inevitable while
putting other critical processes at risk.
Save the Children said the world was "sleepwalking towards failure" at the global finance summit,
adding that the UN should create an international body to oversee global tax matters.
A spokesman said: "Tax has never been more under the spotlight as the source of finance for development,
but decisions affecting the poorest countries and their ability to recoup money owed to them are
taken in an elite club of the most powerful nations. This 20th-century way of doing business is no
longer appropriate for the era of sustainable development goals."
"...Sherr is the archetypal think tank expert. The most interesting part in that biographical sketch
– was reading that he was born in New York and holds dual US-UK citizenship. " . "...The self-delusion, hypocrisy and deceit of Western leaders, policy makers and analysts has
no limits. This panel exemplifies this.
" . "...Whenever I see his name, though, I'm reminded of a piece he wrote on Ukraine years ago, long
before Maidan. ... it's called "Realism About Ukraine Part I – Internal Conditions. James Sherr, Conflict Studies
Research Centre, UK Defence Academy". Read it over carefully; this dates from June 2005, and
I found his assessment of the competitors for power to be frank and realistic, especially that
on Tymoshenko. " . "...I have no idea who this guy actually is but, just from that statement I would say
he's an empty vessel in moral terms."
I think Russia and the west are quits for good as far as any hope of alliances is concerned, because
the west is just too untrustworthy. However, it is my personal opinion that much of the demonization
of Putin is intended to make him respond in kind with bellicose rhetoric which will allow him
to be cast as an unstable, ranting dictator. Moreover, he seems to see the trap or for whatever
reason is avoiding it, choosing instead to keep his criticism mild, measured and slightly mocking.
So if that is the strategy, it's failing pretty badly, and it is the western media which looks
unhinged.
Published on 15 Jun 2015
What You Need To Know:
✓ Russia needs to win a conclusive victory fairly quickly because this conflict is not economically
sustainable for them;
✓ Since the post-Cold War order was established Russia has wanted to discuss the new world
order with the West;
✓ Some in the West now understand that this is long term struggle, but it is unclear how much
longer some EU members states will support the sanctions;
✓ It is unlikely that Russia will target Georgia next, rather, the next two countries will
be Moldova and Belarus because they are more vulnerable;
✓ Things are being achieved in Ukraine primarily because of the civil society which is increasingly
strong and self-confident.
"The appearance of a stalemate is deceptive. If the West's sanctions
remain in place and the oil price remains low it will be very difficult for the Russian state
to function in the way it does now," James Sherr, associate fellow of the Russia and Eurasia
programme at Chatham House told Hromadske. The current occupation regime in Donbas is not sustainable
economically and Russia no interest in subsidizing it, said Sherr, the situation, therefore,
will not remain frozen forever.
"They [Russia] need to win a conclusive victory fairly quickly or time starts to work against
them. This creates a dangerous situation because they are under pressure to do something more
here," said Sherr. "It might not mean they will take Mariupol but it might mean the kind of
military offensive that produced Minsk 1 and 2".
Since the post-Cold War order was established Russia has wanted to discuss the new world
order with the West, said Sherr. Russia does not see this as conflict with Ukraine, it views
as a conflict in Ukraine but with the West. According to Sherr, the solution from Russia's
perspective is to have that conversation with the West, not only about Ukraine but about elsewhere
in the former Soviet space, central and eastern Europe.
Some in the West now understand that this is long term struggle, said Sherr. In 2015, the
West has been more realistic about what it is facing compared to 2014, when many were talking
about the 'Ukraine Crisis' – as if it was something short term. However, the West is also more
tired now than it was last year, explained Sherr. Several EU states who imposed sanctions on
Russia at the cost of their own economies thought that they would have an effect within a few
months. It might take a couple of years and thus it is questionable whether or not they will
continue to support the policy, Sherr told Hromadske.
In terms of developments in the rest of the region, according to Sherr, it is unlikely that
Russia will target Georgia next. Firstly, the Georgians are very astute and secondly, NATO
has a much higher profile there so there is more certainty that they will respond. The next
two countries will be Moldova and Belarus because they are more vulnerable. Nobody wants to
see Putin defeated more than Alexander Lukashenko because he knows if he is not defeated in
Ukraine, he will be next, said Sherr.If Moldova is attacked it is far from certain if the EU
or NATO will respond. Romania would respond but it is unclear how. At the moment Russia is
doing everything to make Moldova dysfunctional, said Sherr. In the Baltic region, furthered
Sherr, one of the dangers is miscalculated accident. It is unclear what could happen if a Russian
military plane collided with an SAS Boeing, for instance.
Sherr also discussed the question of Ukraine's energy dependence. According to him, steps
have been taken towards making Ukraine more energy efficient. Ukraine is now surviving with
a very low level of imports from Russia compared to what it was. However, there is still work
to be done improving investor confidence.
One of the worst realities for Ukraine, according to Sherr, is that the system and the culture
of power has survived 2 revolutions and is now surviving a war. Things are being achieved in
Ukraine primarily because of the civil society which is increasingly strong and self-confident.
The state, however, is still a major problem for people "so far much more talk about change
than real change.
Hromadske International's Nataliya Gumenyuk spoke with James Sherr on May 28, 2015.
Published on 21 Apr 2015
Lecture by James Sherr about Russia's Challenge to the West' organized by Center for Security
and Strategic Research, March 4, 2015.
James Sherr is one of top experts on Russia in the United Kingdom. He is an associate fellow
and former head of the Russia and Eurasia programme at the Royal Institute of International
Affairs "Chatham House".
He was a fellow of the Conflict Studies Research Centre of the UK Ministry
of Defense from 1995 to 2008. He has published extensively on Soviet and Russian military,
security and foreign policy. He has spent last weeks in Kiev.
Sherr is the archetypal think tank expert. The most interesting part in that biographical sketch
– was reading that he was born in New York and holds dual US-UK citizenship.
Sherr and Lucas are the most erudite and loquacious Russophobes in the Anglosphere.
Whenever I see his name, though, I'm reminded of a piece he wrote on Ukraine years ago, long
before Maidan. I never had any success linking it because it was an odd document, and the link
always led to the wrong story, about an air show in Lvov. Let me see if I can find it again.
Yeah; it's still a weird one, it opens in a new window, so you'll have to google it yourself;
it's called "Realism About Ukraine Part I – Internal Conditions. James Sherr, Conflict Studies
Research Centre, UK Defence Academy". Read it over carefully; this dates from June 2005, and
I found his assessment of the competitors for power to be frank and realistic, especially that
on Tymoshenko.
He describes her as "an electoral ally [of Yushchenko] but a personal
rival, is not averse to confrontation and seems determined to exercise authority without limit.
If Yushchenko has confused leadership with inspiration, she has confused it with control and,
to the astonishment of many in Ukraine's business sector, these controls are taking the form
of Soviet style 'administrative measures' which extend to the micro economy.". Later he
opines (unclear whether this was Tymoshenko's decision or Yushchenko's, but I believe the former),
"But this defence cannot be stretched to justify price controls on meat or subsidies on
electricity, and the decision to increase public sector salaries by almost 57 per cent flies
in the face of economic reality". You go, James.
Might return but only got as far as 4:49 where his nibs suggested that ALL the EU wants is
a "borderlands" – oh, the irony – that is, what was it?… "quiet, stable and prosperous" while
the inscrutable Russians positively YEARN for a humanitarian disaster on its, you know, ACTUAL
border.
I have no idea who this guy actually is but, just from that statement I would say
he's an empty vessel in moral terms.
Give it a few years at this rate, and you'll be able to get gobbled by your boyfriend on the
sidewalk and people will surround you and applaud while the police do a burlesque pantomime
beside you in their rainbow vinyl uniforms. I am curious in an academic sort of way to see
how far the pendulum will swing as the western democracies vie with one another to see who
can be the most gay and hedonistic. This has all happened before, for anyone who never studied
history – it was called the Roman Empire. And it will end in tears; you'll see.
The acceptance of homosexuality is the most potent example of a civilisation that is decadent.
Tolerating and indulging in such degeneracy and perversion, demonstrate that such a civilisation
no longer cares for its future and no longer has any morals.
I am absolutely fine with the acceptance of it, because it is not a "problem" for society like
alcoholism or chainsaw juggling or diabetes. Healthy homosexuals pay taxes and consume products
and laugh and drink and have fun like all the rest of us.
Although I am liberal in my politics
I am a social conservative in that I do not care for overt sexual displays in a public setting
unless it is a strip club, where presumably you knew what you were getting into when you came
in and that's your choice. I do not want to know how you and your partner do it, and I don't
want to be forced into thinking about it by having to run down an endless rainbow tunnel surrounded
by prancing boys in pink jockstraps.
Just keep it to yourself and confine your lust to significant
glances exchanged with one another, and we'll be just fine. Being forced to play gooseberry
to overt gay displays is embarrassing and uncomfortable for me, and just when we were beginning
to internalize the lesson that thinking about your fellow citizens' feelings was important,
the tolerance train pulled into the station and the rule book was thrown away in favour of
celebrating homosexuality.
I don't have anything against it – I'm just not interesting in being
dragged into a neverending boogie of celebration of it. I'm even less interested in it just
so my country can thumb its nose at other countries and say "Beat that, you anti-gay
brute!"
"...Even in a Social democratic Europe the problems of the Euro would remain. The difference in
economies and outlook, the needs are too different. Neo-Liberalism has accelerated the exposing
of the contradictions though." . "...Yes, although Syriza are basically mopping up what earlier, usually right-wing, governments
screwed up." . "...Seems to me that Europe is being ruled by Germany. Germany is the main beneficiary of the
Euro of course, and it was the Euro which got the country's economy moving forward powerfully again
after its stagnation of the nineties. " . "...Having said all this, I have a lingering suspicision that my local airport on Syros is going
to be sold off for a bargain basement price to some asset stripping International Bank. That shouldn't
happen. Greece's financial woes shouldn't be an excuse to asset strip the whole of Greece." . "...And if you had any idea about 'facts', you'd know that even the very identification of a
'fact' is subjective and therefore not 'neutral', which was your choice of word. And the process of
identifying 'facts' comes before the act of reporting them, another process that is subjective and thus
not neutral. But you feel free to kid yourself that German newspapers contain 'neutral' reporting while
accusing others of stupidity. Must be great belonging to a superior nation, nein?" . "...Do me a favour, the Greek nation isn't a naughty child that has to be humiliated into "behaving".
If the French and German bankers had "behaved" there would have been a fraction debt owed in the first
place. " . "...There is no " agreement". There is an ultimatum." . "...Therefore: yes, we Germans have indeed access to neutral reporting. It is part of our media
landscape. Amazing. Any English-speaking student of the philosophy of history will tell you that
'neutral' or 'objective' history does not and cannot exist. And what happened yesterday, indeed just
now, is 'history'. However, according to you, it seems that Germans have overcome the problems
of identifying a 'fact' and presenting 'facts' in a manner which in no way reflects the author's prejudices.
Which means (i) you Germans really are robots devoid of human emotion, or (ii) you be talking rubbish.
Personally I reckon it's the latter but feel free to correct me." . "..."They crucified Tsipras in there," a senior eurozone official who had attended the summit remarked.
"Crucified." http://t.co/Ue9ENl3tIz "
Although couched in fairly careful language, subject to votes in
the Greek parliament and with the proposed privatisation fund to be based in the country rather than
– as originally suggested – abroad, the
agreement reached deprives Greece of an enormous amount of its sovereignty. It may stop short
of the "coup" mentioned at times overnight, but – unless the Greek parliament balks in coming days
– Greece is no longer master of its own destiny.
... ... ...
The southern countries face the refugee crisis from across the Mediterranean;
France has made a partial return to Africa, as a byproduct of the chaos in Libya. The countries to
the north, and especially the east, are newly apprehensive about Russia, following events in Ukraine,
but their fears are not entirely shared by the "new" Europeans further south, who are more concerned
about their economic losses from anti-Russian sanctions.
The EU countries are suddenly looking outward in many different and divisive ways. Until now, though,
the Franco-German alliance has remained constant, and the union, including the common currency, remains
intact. Last night it was possible, if only fleetingly, to sense the perils that await if that centre
cannot hold.
mattus 13 Jul 2015 19:02
You can take money off a country, but you have to do it on the sly! So that the country does
not notice.
Troika does not equal lifeboats, they are destroyers!
mattus 13 Jul 2015 18:57
Grexit has not been avoided, just as the Versaille treaty did not avoid the eventual non-compliance
by the Germans. Greeks 2015 and Germans 1918 were both humiliated. They have to produce for foreign
powers under severe oversight and a treaty that is not perceived to be fair.
That will not work.
What will work, however is a Grexit which allows Greece to keep Euro as its currency. Is that
possible? Of course Montenegro does so:
Amusing that you quote what was seen as the worst decision by a British Foreign Office in recent
history. It gave away the moral authority and high-grund the UK has in 1955 (against the wishes
of Mr Churchill), it allowed the original 6 to go on to be hugely more successful than the UK
in the next 30 years and within 10 years a British government was begging to be let in, finally
being allowed once de Gaulle had lost power.
By the time the UK entered we were bankrupt, had tried to spend and devalue our way out of repeated
crises (and failed) at the cost of the value of the pound and the destruction of most big industries.
We then entered to an EEC which was almost entirely crafted to support a French-style agricultural
sector and ensure that the Berlin-Paris axis would rule the roost. In subsequent years of course
we have acted as the cuckoo-in-the-nest, constantly bitching, moaning and belittling and finally,
with the John Major widen-don't-deepen approach to undermining may get the way of the Tory Europhobe.
TimTimpson HolgerHallmann 13 Jul 2015 16:09
But Germany IS doing it again; assuming she knows what's best for other countries, imposing
her Will on other Peoples, seeking to dominate Europe and doing it by abusing her power.
Rather than showing the generosity and humanity of the Greeks and others after WWII, when the
vast debt owed by Germany was written off, she seeks to humiliate and dictate to another nation
in order to expropriate their treasures.
retsdon -> Eddiel899 13 Jul 2015 15:26
I don't think it was a deliberate scam. The problem was the cash from massive German trade
surpluses looking for a higher return outside domestic Germany meeting massive demand from peripheral
Europe to jig their lifestyles, competitiveness, infrastructure, whatever up to northern standards.
As there was nothing to within the combined Eurozone to stop northern banks lending or peripheral
Europeans borrowing ( at negative real rates at times), it's hardly surprising that the result
was an enormous credit bubble which was sooner or later bound to burst in tears.
The real problem is that the losses from the burst were not equitably assigned - far too much
of the cost landing on the shoulders of peripheral Europe's workers and middle-class savers already
mired in the inevitable recession.
Danny Sheahan -> Marendins 13 Jul 2015 14:17
Even in a Social democratic Europe the problems of the Euro would remain. The difference
in economies and outlook, the needs are too different.
Neo-Liberalism has accelerated the exposing of the contradictions though.
TimTimpson -> Vincent Veal 13 Jul 2015 13:38
Are you serious? you want to remain in the organisation that has just behaved in that manner
towards a member requiring support. You must have shares in JP Morgan or something.
jackheron -> CaptainGrey 13 Jul 2015 13:26
Yes, although Syriza are basically mopping up what earlier, usually right-wing, governments
screwed up. If you do a little, you know, reading about the subject, you'll find that since
democracy was introduced in Greece (I tend to go for 1952, when women finally got the vote), Greeks
have in fact been cautious, conservative voters, cleaving to the right in times of crisis.
Although frankly why I'm bothering to explain this to someone who identifies with one of the weedier
characters in Captain Scarlet and the Mysterons is, I will confess, baffling. Everyone knows that
Captain Black was the ne'er-do-well hipster, and with that five o'clock shadow that makes Greek
men so irresistible.
Coolhandluke77 13 Jul 2015 12:46
That is what the Euro or shared currency means - loss of sovereignty.
The new deal seems to a new take on fraudulent loans: assets are seized and loans given even though
there is no credible way they can be paid back.
If this is "a coup" then the coup leaders are easy to identify. They are The Great Left Hope -
Syriza. Many on the left were spell bound by Syriza, and now they turn on the anti-German chauvinism
rather than see their illusions punctured.
It's all about maintaining the Euro - a political and vanity project - at any cost.
BritCol Tracey Savage 13 Jul 2015 12:20
Try reading some economists other than Milton Friedman. Maybe start with Heilbroner, or Galbraith
or even Schumpeter. There are other options besides the Chicago school of trickle down pennies.
Danny Sheahan whitecross 13 Jul 2015 12:13
Also that anyone who challenges Germany's economic needs will be slammed down hard.
A currency union where the needs and protection of one trumps the needs of all others is doomed
to fail in acrimony.
afortiorama misterlunch 13 Jul 2015 11:46
It's exactly the same, they had debts and they didn't have the money to repay them. Iceland
defaulted and recovered, Argentina defaulted and didn't recover (wait for Kirchner to step down
and then you'll see the vultures that are already circling it will tead Argentina apart); Greece
has a EU anchor. Tsipras tried to bluff his way out - I don't blame him - and lost.
whitworthflange Eddiel899 13 Jul 2015 11:34
Seems to me that Europe is being ruled by Germany. Germany is the main beneficiary of the
Euro of course, and it was the Euro which got the country's economy moving forward powerfully
again after its stagnation of the nineties.
Germany lent the money to its neighbours to buy German goods in its new European wide home market,
and in the process most of those neighbours lost the majority of their manufacturing capability
as Germany out competed and drove it out of business.
So - how's the privatised power industry working out for everyone in the UK?
david119 13 Jul 2015 11:24
"The agreement reached deprives Greece of an enormous amount of its sovereignty"
If a country joins the Euro it does loose some national sovereignty, that has been obvious from
the start.
But it was not necessary to deprive Greeks of dignity and hope.
There is nothing in the rules of the Euro that says that European taxpayers have to bail out banks
that engage in reckless and irresponsible lending. Those banks should have been allowed to go
bust as Northern Rock was allowed to go bust when it engaged in irresponsible and reckless lending
to individuals.
There are two sides to this.
Greece needs hope. It will never realistically be able to pay back it's mountain of debt, much
of its debt needs to be cancelled.
But on the other hand anyone who has lived in Greece knows that the creaking, bureaucratic Greek
State will never reform itself and if Greeks want to continue to use the Euro this reform urgently
needs to happen.
So the EU needs to combine basic humanity with toughness over the reform of the Greek State. If
Greeks want to carry on as usual then they have to exit the Common Currency. All the Greeks that
I know accept this.
Having said all this, I have a lingering suspicision that my local airport on Syros is going
to be sold off for a bargain basement price to some asset stripping International Bank. That shouldn't
happen. Greece's financial woes shouldn't be an excuse to asset strip the whole of Greece.
MrGadgie HolgerHallmann 13 Jul 2015 11:10
And if you had any idea about 'facts', you'd know that even the very identification of
a 'fact' is subjective and therefore not 'neutral', which was your choice of word. And the process
of identifying 'facts' comes before the act of reporting them, another process that is subjective
and thus not neutral.
But you feel free to kid yourself that German newspapers contain 'neutral' reporting while accusing
others of stupidity. Must be great belonging to a superior nation, nein?
letsbeavinya MerlinUK 13 Jul 2015 11:06
The end of sovereignty? Possibly. The start of responsibility?
Do me a favour, the Greek nation isn't a naughty child that has to be humiliated into "behaving".
If the French and German bankers had "behaved" there would have been a fraction debt owed in the
first place.
cessle 13 Jul 2015 10:59
There is no " agreement". There is an ultimatum.
If Greece has any sense at all it will reject this ultimatum and default. It will receive more
humanitarian aid from the EU that will actually get to the people who need it most than if it
capitulates to the EU, EC, ECB and IMF and re-capitalises it banks from more unrepayable bail-outs
designed to keep the failed European project afloat.
Germany, quite unfairly, will be blamed for forcing out the Greeks and for setting in motion the
end of the EU and its bastard progeny the Euro. Its relationship with France will deteriorate
markedly.
France, Spain and Italy will be looking nervously over their shoulders as they watch speculators
bet on who will be next out of the failed currency.
Will a Brexit be necessary? Could be academic.
Eddiel899 13 Jul 2015 10:55
The predictable outcome has been arrived at.
The bankers are again happy and the losers are again going to be Germany and Greece. For this
is a charade to rob Germany of whatever wealth it has left with the pretence of keeping Europe
and Greece on the right path. And we don't have to look far to see who is pulling the strings
....... the oligarchs who now rule Europe through what is euphemistically called the Troika.
MrGadgie HolgerHallmann 13 Jul 2015 10:51
Therefore: yes, we Germans have indeed access to neutral reporting. It is part of our
media landscape.
Amazing. Any English-speaking student of the philosophy of history will tell you that 'neutral'
or 'objective' history does not and cannot exist. And what happened yesterday, indeed just now,
is 'history'.
However, according to you, it seems that Germans have overcome the problems of identifying
a 'fact' and presenting 'facts' in a manner which in no way reflects the author's prejudices.
Which means (i) you Germans really are robots devoid of human emotion, or (ii) you be talking
rubbish. Personally I reckon it's the latter but feel free to correct me.
reddan 13 Jul 2015 10:33
This from the Financial Times
"They crucified Tsipras in there," a senior eurozone official who had attended the summit
remarked. "Crucified." http://t.co/Ue9ENl3tIz
Interesting debate below between Syrizia central committee member Stathis Kouvelakis and Proffessor
Alex Callinicos on 11th July at Marxism in London.
What a fudge, what a deliberate attempt to downplay the significance of what has been occurring.
How perfidious.
letsbeavinya taketheatrain 13 Jul 2015 10:24
Although the deal is imposed from outside it is a good deal. It offers the opportunity for
Greece to start to rebuild its finances and governance. In my view this is a better option than
Grexit, a return to the Drachma, a world of hurt and a probable return to business as usual.
What a load of guff.
This is the end of sovereignty for the Greek parliament.
"The independent economics-writer, Charles Hugh Smith - who was one of
only 29 economists worldwide who predicted the 2008 crash in advance and who explained accurately
how and why it was going to occur - has provided a more honest description of the sources of Greece's
depression:
1. Goldman Sachs conspired with [actually: were hired by] Greece's corrupt kleptocracy to conjure
up an illusion of solvency and fiscal prudence so Greece could join the Eurozone [despite Greek
aristocrats' massive tax-evasion, which created the original problem].
2. Vested interests and insiders gorged on the credit being offered by German and French [and
other] banks, enriching themselves to the tune of tens of billions of euros, which were transferred
to private accounts in Switzerland at the first whiff of trouble. When informed of this, Greek
authorities took no action; after all, why track down your cronies and force them to pay taxes
when tax evasion is the status quo for financial elites?
3. If Greece had defaulted in 2010 when its debt was around 110 billion euros, the losses would
have fallen on the banks that had foolishly lent the money without proper due diligence or risk
management. This is what should have happened in a market economy: those who foolishly lent extraordinary
sums to poor credit risks take the resulting (and entirely predictable) losses."
Here's
a very interesting article by recently-departed Greek Finance Minister Yanis Varoufakis. He contends
that Germany is the driving force behind it, and that Germany is attempting to force Greece out of
the common currency union as a lesson to France, to put the fear of God into them. In such circumstances,
Tsipras's erratic behaviour and overall spinelessness just gets in the way.
This fits well with
the image of Germany as the emerging leader of a new Europe, but not so well with the concept of
a Germany that is more a friend to Moscow and less a tool of Washington.
In fact, it sounds like
a country rent with internal struggle which is trending toward a boil itself.
Greece remain a debt slave.... The condition in which it was put by previous neoliberal goverments...
.
"...All of it is nasty. It revolts me. Rich scumbags win and the small people pay"
.
"...Greece will now be governed in the way that all countries will be governed in the future. Neoliberal
institutions will have the world in their grip and dictate all policy so they can squeeze every last
drop out of the people justifying this because money is owed. Conquest by indebting nations this is
the perfect instrument to destroy all self determination."
.
"...Its not the germans. They are just the convenient target. We all know its the banks behind the governments."
All of it is nasty. It revolts me. Rich scumbags win and the small people pay
The majority of leading politicians, business owners and bankers need to take a long look in the
mirror and ask themselves what divides them from Norman Bates, to me they all seem to be psychopaths
rogerfranklin 13 Jul 2015 10:01
Well, I never thought I'd say this, but well done to French socialist Hollande and Italian
banker Draghi for doing just enough to (hopefully) prevent armageddon. Of course this deal won't
work and we'll all be back here in a year or so but at least the eurozone hasn't been turned into
the ERM with Italy and Spain the next targets.
Branko Dodig -> inconvenient_truth 13 Jul 2015 10:00
They don't want to waste their people's money? They have already done so when Greece was technically
in default in 2012; they bought off the bank-held bad debt (which happened due to irresponsible
lending of banks wishing for higher returns since Germany etc could not absorb the capital and
had very unattractive interest rates).
Realistically, bubbles form and deficit soars when there is an inflow of cheap capital, as
it was to the periphery of Europe in the 2000s. It's not just a "periphery of Europe thing", a
mentality or cultural problem, because the same thing happened in the USA in various periods,
and in Germany as well (the famous French "indemnity" which caused a crisis in Germany afterwards).
If we treat the symptoms and not the causes in the way the EU and specifically the Eurozone
is set up, we're just going to have recurring problems of this sort.
RichardDargan 13 Jul 2015 09:58
Perhaps this is the end of democracy, in that the will of the people in a country however misguided
it might be in what it wants, has been subjugated to the money machine.
The Greeks voted against austerity at least twice. The first time was when they elected Syriza
and the second time was when they voted 'No' in the referendum a week ago. The ratcheting up of
the terms of what the Greeks have to do to get their money means they now have worse terms than
those they started with. Vindictiveness or what, on the part of the ECB and others calling the
shots? Is the vindictiveness aimed as a warning to other countries (?Italy and Spain?) who might
find themselves, in the future, in a similar position?
I have the nagging feeling that the 'result' of these negotiations has more to do with the
internal politics of Germany and Finland and other countries pushing for harder terms than with
the situation in Greece.
It will be the 'ordinary' Greeks who will have to pay for the fecklessness of the political
and wealthy classes who probably have got their money out and safe in some offshore location.
It all leaves something of a dirty taste in the mouth the way this has been handled. So much for
democracy when the unelected money-men and women start dealing with the affairs of countries.
nursinggardener 13 Jul 2015 09:53
Greece will now be governed in the way that all countries will be governed in the future.
Neoliberal institutions will have the world in their grip and dictate all policy so they can squeeze
every last drop out of the people justifying this because money is owed. Conquest by indebting
nations this is the perfect instrument to destroy all self determination.
lsjogren -> AdelJ 13 Jul 2015 09:52
Greece is not in debtor's prison. They are free to reneg on their debts and abandon the Euro.
And that is what they should do because;
1). In the long run it will be in their best interest
2). It will expose the Eurofarce and force the other countries of Europe to stop basing their
economies on the false premise that failed economies are capable of paying off their debts over
time.
trobriander 13 Jul 2015 09:50
A word of truth must be said here. Tspiras deserves an applause. The man was voted in to help
a nation on the brink. He was fighting hard to save those dearest to him while trying to talk
some sense into creditors who make the merchant of Venice look like a gentleman.
He called for a tough referendum to exercise transparency with the Greeks for the initial bail
out. Conversely, Merkel (who earned herself a solid F [0/100] for the Greek course) called it
a bluff and threatened if outcome were NO then it was immediate Euro exit – she even refused to
talk until after the referendum, which was further damaging.
With a big OXI mandate, the man went back to Brussel to negotiate better proposal – carrying
with him even a bigger load, in return, the EZ have further entrenched – as if every leader held
a bat, waiting turn to get a swing at the ball
Once a wise man said: good finance brings about good friends…
Dear Tspiras, There are hardly any good friends left within the EZ!
thinkoutloud 13 Jul 2015 10:07
I have always supported our membership of the EU and have seen as a force for good and particularly
as a way Europe can be big enough to manage rather than be controlled by finance.
Well, this has given me real cause for concern and i am now far less worried about the prospect
of our leaving the EU. Indeed I may vote for it (100% reversal of previous views).
The Eu has turned on its people, putting finance and the markets first. if you ever had any
doubts, you now know what loss of national sovereignty really means.
Almost the only time we hear of Nations nowadays is in their role as supporters of the finance
industry, to bear their risk and to have their ordinary people bear the consequences of financial
system (greed and ) failure. Beyond that, Nations as cultural and political entities no longer
exist, they are just 'economies' - they serve the markets.
I had thought financiers and bankers got high salaries because they took huge risks, but it
appears it is we the ordinary people who take the risks while they take the profits with the help
of our politicians.
Thank you for your wishes, but I think that Tsipras will soon be a political zombie. This was
the plan of the gang in Brussels and Berlin, and I cannot understand why he failed to do something
to avoid the traps. The agreement is not viable. We will have a discussion about this subject
again, very soon. Unfortunately, now the only alternative in the Greek political system is Golden
Dawn. A racist and nationalist party. The Greeks will vote to support this party, not because
they are racists and nationalists. (You can see almost all Greeks offering food and cloths to
the thousands of illegal immigrants and refugees. A problem that has its roots to the irresponsibility
of the northern countries.) But they will support Golden Dawn because they want a way to express
their opposition to all politicians which act as betrayers, like Tsipras.
jonathanpt 13 Jul 2015 10:06
This is not the deal they rejected last week, that was a short term extension of the second
bail-out for 8 billion.This is a new 3 year 3rd bail-out for 80 billion.
However as a long term europhile and strong supporter of Britains membership of the EU ,the
way Greece has been treated leaves me wondering,for the first time, about our continuing membership
and there will be more like me, unintended consequences.... Brixit???
lsjogren crumlinbob 13 Jul 2015 09:48
crum: Greece has taken a stand, "we hate the neo-liberal superstate, and we want to remain
part of the neo-liberal superstate".
Sorry, they can't have it both ways.
amrit radnor 13 Jul 2015 09:48
These previous Greek leaders were hovering in Brussel like birds looking for dead animal's
body.
Regime change game is yet to end.
Present government could get defeated and new elections could take place.
illywacker Gulfstream5 13 Jul 2015 09:46
1) It is the private banks that ran out of our money with which to gamble.
2) Socialism is precisely about using richer people's money to help those who have little.
Thatcher does not acknowledge such generosity as a factor in human relations ("no such thing as
society", etc. etc.), which tells you everything you need to know.
lsjogren crumlinbob 13 Jul 2015 09:44
crum: You just don't get it. National sovereignty and a common currency with other nations
are incompatible. Greece can either have the Euro or national sovereignty, not both.
soundofthesuburbs 13 Jul 2015 09:43
"Athens has also agreed to sell off state assets worth €50bn, with the proceeds earmarked for
a trust fund supervised by its creditors. Half the fund will be used to recapitalise Greek banks,
while the remaining €25bn will pay down Greek debts."
Banks are institutions where the profits remain in private hands and the losses are socialised.
Can anyone explain?
brnost 13 Jul 2015 09:42
When unelected bodies force an elected government to surrender its financial sovereignty, the
word "coup" is the only one that can be used. No one emerges with credit from this, but Germany
and Merkel come out looking very ugly indeed. It should never have come to this. It was Syriza's
predecessors who got into the mess, but the troika were complicit, and their humiliation of Greece
to cover their own culpability has exposed the moral bankruptcy of the whole Euro project.
mgtuzairodtiiasn PeregrineSlim 13 Jul 2015 09:42
It is true. The first loans were given to Greece when the state was born after the Ottoman
occupation. So, all subsequent loans were given just for the payment of the previous loans. But,
although the nominal amounts were very large, only small parts of them were received by the Greeks.
The rest of the money was considered in all cases as warranties, commission etc. The Greek state
in fact was forced to get this loans with the threat of favoring the "enemies". Except of a small
period before 1893, when some money was spent to improve the infrastructure, in all other periods
the money was spent for military equipment, mainly warships which were sold by the lenders.
crumlinbob 13 Jul 2015 09:35
Disgraceful treatment of a soverign country. The EU has become a nasty shambles. The austerity
measure being forced on the Greeks will not help that country one bit. Things will get worse as
most economists (without a right wing blinkered view) have stated. Hell even the IMF have said
they got their figures wrong. So what is being foistered on Greece wont work. So whay is it being
forced on them? To teach the people that democracy is in no way equal to corporate finance and
how dare they vote a left wing government to cause such upset to the neo liberal superstate. The
EU is a disgrace.
AdelJ 13 Jul 2015 09:31
The result of the agreement will probably not be known until six months hence but if more damage
is done to the Greek economy will this be considered a success? I hope it works but on the face
of it it looks both a political and economic disaster for Greece. Did Greece stuff up in the way
they borrowed and spent - most certainly, but surely the end result has to be both reform and
the chance of a thriving economy in the future. I fear this agreement will not deliver. The Greeks
have basically been put in debtors prison. When Schauble asked the Greek negotiators how much
to leave the eurozone the best answer might have been to give him a figure.
ukchange68 jahiz123 13 Jul 2015 09:31
slave states - ALL to do with finance, nothing to do with countries
pedro15 Doug_Niedermeyer 13 Jul 2015 09:29
Russia would have defeated the Axis on its own ,just taken a bit longer.
You came into the War in '17 when the Europeans had lost millions over 4 years ,Germany was
using 16 year olds and on its last legs with rampant starvation. Bit like you stand back ,watch
3 guys batter a fourth into the ground then when the fourth is unconscious you join in helping
the kicking .Just enough time in ww1 to get enough experience for your 'we saved the world movies.
You didn't declare War on Germany until Hitler ,down to some weird sense of loyalty to Japan
declared war on USA after Pearl Harbour, and after Germany had in effect lost the Russian campaign
befor Moscow. I believe for the aid of a few destroyers you took a chunk of the Caribbean off
us.
If you are so great please explain why you have not won a single War, up to and including Iraq,
since ww2.
In fact the Finnish economy faces huge problems. It is even in a worse situation than the Greek
one. The Greek problems are in some degree artificial, due e.g. to the actions of Schauble, but
the Finnish problems are all substantial. Finland has lost two of its main sectors, the Forest
industry, and telecommunications. Also, there is a huge housing bubble, as in Sweden too. I expect
that while we are talking about Greece, another country (Finland? Belgium? ) will soon explode.
Notice that while the Greek public debt is very high, the total debt is much lower than that of
other countries. E.g. the mean household of Greece owes 109% of its income, while the Dutch one
owes 317%. So, there are many countries much more indebted, and all this noise about Greece helps
politicians to hide the problems there are existent in their countries.
david wright 13 Jul 2015 09:26
Angela Merkel said: "I never make historical comparisons."
Of course not. She daren't. In 1953, Germany was essentially let of the hook for huge amounts
in return for bveing a good ally and helping ounter the Soviet union (which indeed needed countering).
Then in Reunification, the former West germany accepted East german currency at par with the Deutschmark,
a huge giveaway - 25% would have been generous. Finally, EuroReichsKanzlor Merkel daren't think
of the possible blowback from her imposition of a 'worse than Versailles' solution on Greece.
Hear and see no evil. If only she could have made the hat trick, and done none. The underlying
situation is utterly unchanged. The same go-round will begin in between a couple of months, and
three years. It ain't over til it's over, and it ain't over yet, baby.
soundofthesuburbs 13 Jul 2015 09:23
Greece is a banker gamble that didn't pay off.
Bankers worked on the assumption that Germany would pick up all debts, if there were problems.
This lead to bond yields across the Euro-zone being exceptionally low.
Following this assumption, lending to anyone was like lending to Germany, but there was a slightly
higher margin in lending to Greece which made it more profitable.
When it became apparent Germany was not going to pick up the tab, bond yields soared in countries
like Greece and sustainable debt became unsustainable.
The EU moved the banker's bad debts to the taxpayers of Europe and the bankers gamble has been
left to run its course, with them being saved from any losses.
bensdad 13 Jul 2015 09:23
And there we have it. The EU may be dead in the water, but at least we now have a IVth Reich.
TimTimpson EloiCasali 13 Jul 2015 09:20
Greece's hidden economy is about 25% of GDP.
Germany's 15%
Britain's around 10%
USA 7%
Germans should let the British and Americans run their economy, the tax dodgers!
I concur. One of my reasons for wanting to be in the EU, apart from peace etc, was that it
gave us a level of protection from the right wing Neo-Liberal drift in the UK. The recent treatment
of Greece in these negotiations and the coup yesterday has left me scratching my head, particularly
as we also have right wing group of fanatics in charge here as well.
ukchange68 drdirk 13 Jul 2015 09:19
very, very well said.
Its not the germans. They are just the convenient target. We all know its the banks behind the
governments.
This greek capitualtion will go down in history as one of those moments that was missed/wasted.
the orcs are on the march........
It is important that the Greek people not be alone in this struggle. In the United States
and other countries, we should connect our struggles against austerity at home to solidarity
with the Greek people, their social movements and with left political parties who share this
politics and practice. The struggle in Greece for an alternative to austerity is so important
not only for the Greek people but for all people who want to live in a world where human needs
are put at the center of our politics and economics.
drdirk 13 Jul 2015 09:14
People, please stop bashing the Germans in general. As a German, I feel very ashamed what the
Merkel administration and its allies did to Greece in these "negociations". We should all concentrate
on the matter, that democracy has been hijacked by a neoliberal elite of politicians and banks.
All over Europe, led by the northern states. They are trying to establish a new form of governing
all over Europe. There is no difference whether you live in England, Germany or elsewhere. They
want it all and they want it now. Believe me, I know many fellow Germans who strongly feel disgusted
by this government, maybe not enough ( the German media has been rediculously supportive of the
German finance minister ) . The social democrats are dead. They should just join the Conservatives.
If progressive left wing and liberal people don't come up with a new political way for Europe,
things will go dark. The orks are already waiting to come out of their holes...
LouisianaAlba 13 Jul 2015 09:10
Bad deals are cemented in history and this one looks ready to be cemented. Krugman labels the
process leading to it, vindictive. We all want to hope for the best and trust in the abilities
of those managing the bad end of this deal in Greece, but I think all their abilities will be
tested too much. I put in an earlier comment that magically disappeared from these columns who
and what I thought was the beginning of all this. The magic word Versailles has now been brought
elsewhere. Read the Varoufakis New Statesman interview..there is no doubt who was in charge of
all this.
A typical case of "damned if you do, damned if you don't" , especially for Germany. I remember
well the times when everybody (including the UK incidentally) was criticizing Germany for lack
of leadership. Now Merkel leads and gets criticized for being heavy-handed, Versailles-jackboot-Panzer
analogies included. I am not a fan of hers and I don't delude myself that this deal is going to
solve Greece's problems for the next decades. However, considering the alternatives, namely a
messy Grexit with a humanitarian crisis of biblical proportions, it doesn't warrant all that name
calling. Don't forget that Merkel has to sell this deal in Germany as well. Considering public
opinion there is staunchly anti-bailout. that's not going to be a lot of fun either. Perhaps we
should all pipe down a notch and wait how this plays out before declaring the end of the EU.
W61212 Alexander2015 13 Jul 2015 09:06
No, capital debts remain. If Greece left EZ it would at least not be locked into another larger
bailout that would like the prior, is impossible to repay. Grexit now and not increase the debt,
or stay in EZ, get another bailout and the debt would be unpayable sometime down the line. Bailouts
for Greece are carousel, get bailout, can't repay, get another bailout, can't pay - and can't
pay because of imposed austerity. Which is why this must stop.
Isanybodyouthere 13 Jul 2015 09:05
Interesting, the fledgling Finnish govt which is a coalition of right wing and right of centre
groups would have fallen if they had voted to give Greece more concessions. So it's not just Tsipras
and Syriza living dangerously. I also have a feeling Finland's EU membership will be severely
tested if this coalition is to hold.
psygone 13 Jul 2015 08:56
After Greece defaulted on its sovereign debt in 1893, the UK, France, the Austria-Hungarian
Empire, the German Empire, the Russian Empire and several Italian independent states created the
"International Financial Commission of Control".
The institution headquartered in Athens with more than 5,000 mostly foreign employes, supervised
the public finances of Greece which was imposed by European powers, who had bailed out Greece
in autumn of 1897 when the country bankrupted four years earlier.
The Commission supervised the collection ot taxable incomes from salt, olive oil, matches,
playing cards, cigarette papers and Naxos emery, tobacco, stamp duties and the Piraeus customs
office's duties.
The goal was the payment of the country's debts to its creditors.
However, the institution's official last act was an emergency evacuation on 6 April 1941 as
Nazi German and Italian troops entered Athens.
The "International Financial Commission of Control" did return to Athens in 1945 but with only
12 employees and continued to operate in Greece until 1978 when the 1893 debt was finally "written
off" -- 81 years total.
Lawrie Griffith Casablancaboy 13 Jul 2015 08:54
Poland is being shored up as a bastion of containment against Russia.
If Greece was strategically important in this new cold war with Russia it be awash with money
and its debts wiped.
CroppyNotDown W61212 13 Jul 2015 08:53
Tsipras is too young to know the full extent of German vindictiveness. He is not to be faulted
for assuming that he was negotiating with democrats.
Greece should have sent Manolis Glezos. He has a better gut feel for what he is up against. He
has seen it before.
Γιώργος Πρίμπας Phil Gollin 13 Jul 2015 08:51
And the truth is that Greece is occupied by Germans conservatives politicians (who will borrow
money with 0,0something % rate and will lend the Greeks with at least 2,5% rate) who promise to
eat the money from Greeks.
Thank you for yours help!
Of course if the German government will want to cut money from social heath it will say: the
Greeks! :-)
so idiots are those who will believe it!
AnOwl 13 Jul 2015 08:50
I'll tell you what the demands look like. They look like the demands that Austria-Hungary made
of Serbia in July 1914. IN that case, the Austro-Hungarians thought that Serbia would never accept
the terms and expected a war. Serbia, of course, did accept them (even though they were widely
regarded in European diplomatic circles as a humiliation) and we all ended up going to war anyway.
Whilst there is little militarism in today's Europe, I can't help but note the similarities
in the degree of belligerence. And I agree with Varoufakis that the end result of this will be
as significant for th elong-term future of Europe as Westphalia, Versailles or the Treat of Rome.
Silvertown DJT1Million 13 Jul 2015 08:50
The EU has behaved totally dishonourably preferring to destroy the economy of a fellow member
of the EU to protect the bankers who foolishly had loaned the Greek state billions.
The Greek people are suffering so the bankers of Frankfurt, Paris Milan, Madrid etc do not
have sleepless nights waiting for the 'people's governments' to require the Banks to take a haircut
rather than pauperise their citizens.
They just love fighting with guns and the thrill of shooting to kill. The front is boring right now,
shooting artillery into cities does not have the same gratification. The only way for Ukraine to
purge itself of Right Sector is to kill them all. So long as any are left alive they will cling to
their guns – which nobody seems to be able to make them give up – and foment armed insurrection.
The Ukrainian state is disintegrating and Washington smiles beatifically, having created another
Libya, this time on Russia's doorstep.
karl1haushofer , July 12, 2015 at 5:27 am
"Yarosh hates Avakov even more than he hates the Russians."
Aren't they both Russians themselves? Yarosh does not even speak Ukrainian and Avakov is a Russian
name.
Pavlo Svolochenko, July 12, 2015 at 5:37 am
Yarosh, yes. Avakov (Avakian?) is an Armenian from Baku.
…"If you want to talk about a nation that could pose an existential threat to the United States,
I'd have to point to Russia," Dunford said. "And if you look at their behavior, it's nothing short
of alarming."
U.S. State Department spokesman Mark Toner said Kerry did not share the assessment, even though
Russia's actions in Ukraine posed regional security challenges.
"The secretary doesn't agree with the assessment that Russia is an existential threat to the United
States, nor China, quite frankly," Toner told a regular news briefing when asked about Dunford's
remarks.
"You know, these are major powers with whom we engage and cooperate on a number of issues,
despite any disagreements we may have with them," he said. "Certainly we have disagreements with
Russia and its activities within the region, but we don't view it as an existential threat."…
####
The problem with ignorant blowhards like Dunford is that if their words are to be taken seriously,
then seriously needs to be funded with cold, hard dollars. Resources daarlings. The USA has pinned
its flag to the Asia Swivel (aka fk China!) as its fundamental future military posture.
That is an expensive proposition.
To then start bivolating (sp?) about Russia means some cash going to contain China would have
to go instead to containing Russia, which so far, the USA has been doing on the very cheap by using
Ukrainians as willing (or not so) canonfodder and the Europeans paying the economic consequences.
To mix a metaphor or three, the US Gorilla shits in an European chinashop and still expects fawning
applause for the performance*. Instead, by amping up the rhetoric via NATO and bigging up the
Russia threat, the USA is trying to get Europe to pay (new UK budget promises 2% GDP on weapons)
for the US' own mess and aggressive anti-Russia policy, squaring the military budget circle if you
will. Except, it is not working. Europe as a whole will still not pick up the military tab
US wants it to. This is the de facto recognition by Europe that the Russia threat is total bullshit,
in total contradiction of all the mass propaganda to the opposite by the pork pie news networks.
* "It's like a jungle some times it makes me wonder how I keep from going under" – Rapper's Delight
Warren, July 12, 2015 at 7:50 am
The Europeans need to free themselves from American yoke, the Americans must have serious leverage
on European leaders to explain their servility to the US.
* "It's like a jungle some times it makes me wonder how I keep from going under"
That line comes from Grandmaster Flash and the Furious Five – The Message
marknesop, July 12, 2015 at 11:06 am
All that notwithstanding, Kerry is out of favour and the State Department has the bit in its teeth.
It likes the cut of Dunford's jib and his willingness to help imprint brand "Russian Aggression".
Kerry's demurrals are not going to mean anything in the great scheme of things, and it is much too
late for him to assuage his conscience now for all the lies he told and partisan bullshit he spread.
He deserves to ride his doomed state down nearly as much as the rest of his government.
Jeremn, July 12, 2015 at 5:06 am
Just looking at who funds the ECFR.
http://www.ecfr.eu/about/donors
George Soros is the primary funder, and the European Commission also supplies money. Then there's
a whole slew of banks, oil firms and foundations. Interesting reading.
marknesop, July 12, 2015 at 11:20 am
It would of course be a generalization, but just about everywhere you find a western agency fomenting
revolution and stirring up unrest in the names of freedom and democracy, you will find George Soros's
money. It's a wonder Obama has not awarded him the Presidential Gong of Freedom.
Do they, or don't they?
Some people say, that Right Sektor is withdrawing all their battalions from
Donbass and moving them West, back towards Kiev.
Right Sektor denies this, and says, no, all their guys are still in place at
the ATO, valiantly fighting the Colorados.
Basurin reports that the Right Sektor guys truly are leaving, thus
providing some blessed relief to the people of Donetsk. Resulting in fewer
incidents of shelling, etc.
yalensis, July 13, 2015 at 3:54 am
Ukry starting to get worried about Trans-Carpthian separatism:
Rada Deputy Boris Filatov, who belongs to Igor Kolomoisky's party, was outraged when he read some
blogposts written by Trans-Carpathians. Who claimed that Trans-Carpathia was unjustly taken away
from Slovaks and Hungarians in the 1950's.
Some of the Rusyns there say they are not Ukrainians, and never have been.
Filatov was outraged at some of this loose talk on blogs. He retorted on his own blog with the
following proposed remedy to these separatist inclinations:
"Можете почитать, что публично пишут в своих бложиках некоторые местные деятели. Врачи! Жечь
падаль каленым железом. Сажать и лишать имущества", - написал Филатов на своей странице в соцсети.
"You cannot even imagine what some of these local activists are scribbling in their blogs. I
would brand these scum with a heated up iron. I would throw them in jail and confiscate their
property."
yalensis:
Recall that Filatov made similar threats against Crimeans.
Which just scared them even further into escaping from the tender embraces of Ukrainian nazis.
I am betting most Rusyns also wish they could opt out of this Ukrainian "prison of nations"
and become part of Slovakia or Hungary. Unfortunately, they don't have that option, so they are
stuck in this abusive relationship.
yalensis, July 13, 2015 at 4:13 am
And what's the plan, once the Right Sektor battalions reach Kiev?
According to this piece, Right Sektor is organizing a massive meeting on the Maidan this
coming Sunday, July 19.
Right Sektor spokesperson Dmitry Pavlichenko announced the following:
-He urges everybody to swarm to Kiev on Sunday. The meeting ("veche") will start promptly at
noon.
-The purpose is to form "organs of power" to replace the current government.
-A priority will be also to form a "people's court".
Right Sektor has issued ultimatum to Ukrainian government: They want Avakov's head on a
platter.
There is constant picket of around 100 persons around President Poroshenko's office building.
The picketers wear insigna for parties such as "OUN", "Freedom or Death", and "Right Sektor". The
building is protected by around 30 National Guards troops, and there has been a stand-off up
until this point.
"..."The demonization of Putin is not a policy. It's an alibi for not having a policy."" . "...I understood some time ago that USA presidents are very fickle animals, nobody can trust
them and nobody is safe of them, they could turn from being a friend to be your enemy overnight"
Last week I had the honor of interviewing Stephen F. Cohen, Professor Emeritus of Russian Studies
and Politics at NYU and Princeton University, where for many years he was director of its Russian
Studies program. Professor Cohen, a long-time friend of Mikhail Gorbachev, is one of the most important
Russia scholars in the world and a member of the founding board of directors of the
American Committee for East-West Accord,
a pro-detente organization that seeks rethinking and public discussion of U.S. policy toward Russia.
Despite his impressive credentials and intimate knowledge of Russia and its history, you will
rarely hear Cohen's voice in the mainstream press. And it is not for a lack of trying; his views,
and those of others like him, are simply shut out of the media, which, along with almost every U.S.
politician, has decided to vilify Russian and Putin, irrationally equating Putin with such tyrants
as Adolf Hitler. As Cohen explains:
Even Henry Kissinger -- I think it was in March 2014 in the Washington Post -- wrote
this line: "The demonization of Putin is not a policy. It's an alibi for not having a policy."
And then I wrote in reply to that: That's right, but it's much worse than that, because it's also
that the demonization of Putin is an obstacle to thinking rationally, having a rational discourse
or debate about American national security. And it's not just this catastrophe in Ukraine and
the new Cold War; it's from there to Syria to Afghanistan, to the proliferation of nuclear weapons,
to fighting global terrorism. The demonization of Putin excludes a partner in the Kremlin that
the U.S. needs, no matter who sits there.
And Cohen reminds us that, quite contrary to the common, manufactured perception in this country,
we have a very willing and capable potential partner in Moscow right now. As Cohen explains, "Bill
Clinton said this not too long ago: To the extent that he knew and dealt with Putin directly, he
never knew him to say anything that he, Putin, didn't mean, or ever to go back on his word or break
a promise he made to Clinton."
What's more, as Cohen reminds us, when the 9/11 attacks happened, Putin was the very first international
leader to offer help to President Bush:
Putin called George Bush after 9/11 and said, "George, we're with you, whatever we can do,"
and in fact did more to help the Americans fight a land war in Afghanistan to oust the Taliban
from Kabul. ... Russia still had a lot of assets in Afghanistan, including a fighting force called
the Northern Alliance. It had probably better intelligence in and about Afghanistan than any country,
and it had air-route transport for American forces to fight in Afghanistan. He gave all this --
Putin gave all this -- to the Bush administration. Putin's Kremlin, not a member of NATO, did
more to help the American land war and save American lives, therefore, in Afghanistan, than any
NATO country.
However, as Cohen explains, Bush strangely repaid Putin by (1) unilaterally withdrawing from the
anti-ballistic (ABM) treaty, the "bedrock" of Russia's national security, and (2) launching the second
wave of NATO expansion toward Russia.
And, as Cohen points out, this was not the only case in which the U.S. quite brazenly betrayed
Russia in recent decades. Thus he notes that Presidents Clinton, Bush and Obama have all violated
the very clear agreement that, in return for Gorbachev's allowing the reunification of Germany, the
U.S. would not move NATO one inch further east. In addition, the U.S. undermined then-President Medvedev
(who we claim to prefer to Putin) by unseating Gaddafi in Libya -- with disastrous consequences --
despite our promise to Russia that we would do no such thing if Russia agreed to the Security Council
resolution approving the no-fly zone over Libya.
All of this history must be considered when we view the current crisis in Ukraine, which, Cohen
warns, is quickly leading to a hot war with Russia. As Cohen relates:
If you took even the short time frame of the Ukrainian crisis and you began it in November
2013, when the then-elected president of Ukraine, Yanukovych, didn't actually refuse to sign the
European Union's offer of a partnership with Europe. He asked for time to think about it. That
brought the protesters in the streets. That led to the illegal overthrow of Yanukovych, which,
by the way, Poroshenko, the current president, strangely now admits was illegal. ...
Then comes Putin's annexation or reunification of Crimea, as Russians call it. Then already
evolving now in Eastern Ukraine are protests against what's happening in Kiev, because Eastern
Ukraine was the electoral base of Yanukovych. Yanukovych was its president in a fundamental way.
Then comes the proxy war, with Russia helping the rebel fighters in Eastern Ukraine and the United
States and NATO helping the military forces of Kiev. ...
And so it went, on and on. Now, if you back up and ask who began the aggression, it's my argument
-- for which I'm called a "Putin apologist," which I am not -- ... but the reality is that Putin
has been mostly reactive. Let me say that again: reactive. If we had the time, I could explain
to you why the reportedly benign European Union offer to Kiev in 2013 was not benign at all. No
Ukrainian who wanted to survive could have accepted that. And by the way, it had clauses buried
below that would've obliged Kiev to adhere to NATO military security policy. ...
Ukraine had been on Washington's agenda for a very, very long time; it is a matter of public
record. It was to that that Putin reacted. It was to the fear that the new government in Kiev,
which overthrew the elected government, had NATO backing and its next move would be toward Crimea
and the Russian naval base there. ... But he was reacting, and as Kiev began an all-out war against
the East, calling it the "anti-terrorist operation," with Washington's blessing. ...
This was clearly meant to be a war of destruction. ... Meanwhile, NATO began escalating its
military presence. In each of these stages, a very close examination will show, as I'm sure historians
will when they look back, that Putin has been primarily reactive. Now maybe his reactions have
been wrong-headed. Maybe they've been too aggressive. That's something that could be discussed.
...
But this notion that this is all Putin's aggression, or Russia's aggression, is, if not 100-percent
false, let us say, for the sake of being balanced and ecumenical, it's 50-percent false. And if
Washington would admit that its narrative is 50-percent false, which means Russia's narrative
is 50-percent correct, that's where negotiations begin and succeed.
I can only hope that the policy makers in this country will hear the voices of people like Professor
Cohen and enter into rational negotiations with Russia in order that we may be spared what is shaping
up to be a disastrous war in Europe.
Joseph Skibinsky · Top Commenter · Las Vegas, Nevada
I understood some time ago that USA presidents are very fickle animals, nobody can trust
them and nobody is safe of them, they could turn from being a friend to be your enemy overnight,
starting from Bush - father, and those who followed him. For those who don't believe me about
Bush-father, I suggest to read Autobiography of Colin Powell who was a member of Bush's staff.
And what Pr Cohen tells us about Bush-son confirms what I stated about our Presidents/politicians.
Those who want to comment on my statement, please, stick to facts. I don't take easily personal
attacks and let me assure you, I will respond in kind.
Samuel Ramani · Contributor at The Huffington Post
I think that Professor Stephen Cohen is raising a valuable and vital point, that Russia's annexation
of Crimea and Ukraine was not just naked aggression. Russia acted impulsively due to a variety
of factors: the fear that it would lose great power status if NATO encroached onto its sphere
too much, the fear that the Maidan protests could be an inspiration for unrest in Russia, and
the concern that a Westward tilt for Ukraine would weaken his Eurasian Union project. Our perceptions
of what is rational differ markedly from Russia's as our regimes are different and climate in
which decision-making is made is different. Neoliberal_rationality/ is always contextual and the same should
apply to Russia.
To prevent this conflict, an incremental approach would have been best- we should have very clearly
delineated that EU association agreement would be strictly economic and not a gateway to immediate
NATO membership for Ukraine. Preserving Ukrainian neutrality in security matters, while revitalizing
its economy and broken political institutions was the optimal approach. I'm not excusing Russia's
conduct by any means or claiming that Russia was right in annexing Crimea, and violating the sovereignty
of Ukraine, but at the same time, we have to realize that Russia views this conflict from a very
different lens than the West. Russia views NATO expansion in the CIS with the same alarm as we
would if Russian missiles and equipment started appearing in Latin American countries with uncomfortable
proximity to America. Russia views sovereignty not as the inviolable rights of individual countries
but the inviolable integrity of the Russian sphere of influence (the CIS), as a zone that the
West cannot enter and intervene.
Donald Schellberg · Top Commenter · Universidad Tecnológica de Panamá
It seems like you are leaving the Ukrainian people out of this. I don't think it is between
the US and Russia. It is for them to decide. They should allow a referendum in Donbas, free an
open with international monitors. The same with Crimea. If the majority of the permanent residents
want to remain in Russia, that is fine, if not let them choose. If Crimea does formally become
part of Russia under this referendum than Russia should reimburse the Ukrainian government for
the businesses, bases and state institutions that were taken over. And Ukraine would guarantee
access via Maripol until they finish the bridge. Just my opinion.
John-Albert Eadie · Top Commenter · Stanford University
This is late. If you look in adjacent media you will see folks like Stephen Cohen and others
are not ignored, but looked to as being experts. WHAT YOU MUST DO IS LOOK TO ALTERNATIVE MEDIA.
BECAUSE Time, WSJ, and all else cannot be trusted. Then you would have first seen Stephen Cohen's
stuff, and many serious others. Try Facebook first, flimsy as it seems.
Like any neoliberal country Greece is a divided country with 20% of population representing "fifth
column of globalization" and benefiting from it and 80% suffering from it. . "...Well that is the rub. Western banks effectively control the cost of credit globally. You either
fall into line or you're perpetually behind the curve until you sell all your goods of any value." . "...Are you even aware that this is not actually loans that the Greek people got? If I loan
money to your corrupt banker and than ask YOU to return it, will you be less offensive?
" . "...The 2010 bailout was the one that allowed private French, Dutch and German banks to transfer
their liabilities to the Greek public sector, and indirectly to the entire eurozone's public sector.
There was no debt restructuring in that deal." . "...The loans were made by a cabal of high-financiers in Europe to a cabal of corrupt finianciers
in Greece. The game of lending rules are: you bet that the party you lend money to will pay back the
loan with interest. Which is what the German banks did, making a profit on the interest for quite some
time. But now the high-financiers in Europe have lost the game, i.e. Greece/the-old-displaced-guard-in-Greece
can no longer pay them back. That's the financiers problem: not the problem of Greece's normal citizens
nor other EU taxpayers! Is that so difficult to understand? Class war for beginners... privatize the
profit, socialize the loss." . "...The banksters, multi-national corporations and their political lackeys, have engaged in
an extend and pretend fantasy which is passing their private debt onto taxpayers across Europe. Once
the shoulders of the Greek taxpayer have been broken, it will pass onto the shoulders of the taxpayers
from the rest of Europe. God, I want to shake the anti Greek/pro EU lobby to wake them up. Greece, please,
please, please vote NO, so we can begin the long process of getting control of Europe out of the hands
of these maniacs." . "...Without risking depositors' cash, governments had the ability to sit back ready to nationalise
any banks whose lending to Greece was so irresponsible that they were unsustainable. This would have
wiped out the shareholders and sent a clear message that lending as well as borrowing has to be responsible
and that shareholders need to earn their fat returns by exerting oversight.
" . "...Yanis Varoufakis has a point. The proposals put by the EU would cause the Greek economy to contract
further, this effectively would increase the debt ratio to GDP. Nowhere have I heard any talk on how
to build up the Greek economy, it has all been about collecting taxes.
I have also read commentators on here talk about how Greece lied to get into MU, this has a great deal
of truth in it, but one must remember the EU knew what a basket case Greece was financially, therefore
they are equally complicit in this debacle.
The question has to be why the EU is doing this to Greece, they know their actions will do nothing other
than cause more misery in the country. The reason this is happening is to protect German banks. Greece
is the domino that could bring the whole system down." . "...No, the original package lent to Greece was to bailout Greek and EU banks. The subsequent
bailout (to pay for the bailout) is 60% owned/facilitated by EFSF. It raised it through selling bonds,
no doubt to financial institutions. So now we're in the bizarre situation of banks befitting from the
bailout of banks with the Greek people carrying the can and Europeans (who are liable to honour EFSF
bonds+intererst) blaming Greece and defending the banks! "
Yes it should have been, by letting the banks go under as per Iceland. Or were too many people
(living in vacuums ?) unprepared to deal with the short term pain ? Now it seems the world of
people must suffer to service the Banks' bad debt.....what good slaves we are! The Emperor has
no clothes!
Duncan Frame -> Brasil13 4 Jul 2015 11:10
Well that is the rub. Western banks effectively control the cost of credit globally. You either
fall into line or you're perpetually behind the curve until you sell all your goods of any value.
W61212 -> Brasil13 4 Jul 2015 11:08
Careful what you wish for. From the EC
'In 2013 the EU recorded a trade surplus in goods (more than double the surplus registered in
2012). The EU also has a surplus in commercial services trade.
The EU is the biggest foreign investor in Brazil with investments in many sectors of the Brazilian
economy. Around 50% of the FDI flows received by Brazil during the last 5 years originated in
the EU.'
This debacle with Greece demonstrates the EU can't run itself and yet it has huge holdings with
Brazil and has recently reversed to a trade surplus in to Brazil, a nation with huge natural,
industrial and human resources of its own. Brazil exports mainly agricultural and mining products
to the EU and imports manufactured products. See the imbalance? Brazil exports primary products
and imports finished products made elsewhere and those jobs are elsewhere. See the problem?
There's only one letter difference but choice for the Greeks is to become either the new Ireland
(and suffer self-inflicted austerity for decades to come) or the new Iceland (by tearing up the
rule book and starting again).
Germans (for the most part) are not Nazis or terrorists, and should not have to take the blame
for this crisis. They are, however, dupes, like people living under capitalism everywhere. They
are willing to let the international banksters and their political cronies in the European parliament
run their lives and create whatever mischief they believe is in their interest.
ToddPalant -> Scaff1 4 Jul 2015 11:06
Tell us suckers then, about how Ukraine, a run down country that was just made worse by
regime change. From bad Yanukovich to much worse American puppet and idiot Poroshenko plus a catastrophic
war. Tell us about Lybia and bad Qaddafi, who in his life time killed 3-4000 people and the much
worse UK-France that caused at least a 100000 dead with their pet invasion at the behest of our
friends from across the Atlantic.
May be you need to dust your mirror.
Duncan Frame -> Laurelei 4 Jul 2015 11:05
Terrorists primary aim is to promote fear rather than harm. That's far more effective in getting
their way. You close the banks you show the public what you're capable of.
Saaywar Montana -> thisisafix 4 Jul 2015 11:04
Their economies are naff. Spain and Italy are the two countries most likely to join Greece
in a new union. Portugal and Ireland are too far gone but Ireland has been rebelling. Once people
see a progressive union to compete with the rubbish EU then these countries will gain support
for joining a new southern European union.
These countries are not out of the water and won't get out of it either. Austerity will do what
it does and the people will rise up. It's inevitable. The EU doesn't have a monopoly on unions
lol.
Greece, as did every other country, got left with the bill of the private banking sector.
Yes, it was their fault for running a deficit but a significant proportion of the debt owed by
the Greek gov is bank bailouts.
It's the same here. The UK paid £700bn to private banks to make sure they didn't fail. The
deficit has nothing to do with that. so around 50% of the debt is a mixture or deficit spending
and capital investments made by the government.
Robape Laurelei 4 Jul 2015 10:57
Financial terrorists, just interested in the bottom line, not countries.
elcomm W61212 4 Jul 2015 10:56
When fascist governments get in trouble at home they start wars to distract people. It's not
that far out.
Duncan Frame Laurelei 4 Jul 2015 10:56
Yes everything's exceptional. 2008 was the biggest economic collapse since the great depression.
And Greece was the most exposed country. No difference.
Alfie Silva karlmiltonkeynes 4 Jul 2015 10:55
My mistake, I thought you were intelligent.
It is common knowledge that only around 10% of bailout monies went to the real economy.
You are correct indeed in that creditors got a haircut, mainly hedgefunds and most foreign banks
by 2015 had reduced their exposure to Greece. The issue today is sovereign debt. Do you realise
that sovereign debt is the senior collatoral for Eurozone banks?
So we are back to banks again Mr Banker.
Duncan Frame ID13579 4 Jul 2015 10:53
I don't have to excuse giving voice to the victims of those in power to you or anyone else.
And it seems to me Tsipras is taking the same line. You confuse the Greek people with the people
who actually profited from that debt. Why should they be forced to starve on the back of decisions
over which they had influence?
usufruct -> HoorayHenrietta 4 Jul 2015 10:44
Like Americans and most other people around the globe, the German people have allowed the international
banks to pull the wool over their eyes. There is no reason for taxpayers to bail out the banks
as we are still doing here in the U.S. For the past six years my wife and I have been paying down
mortgages on real estate hoping to reestablish equity in properties whose value was gutted by
cavalier banksters on Wall Steet. A few clicks to gamble away the hard work of millions! These
people should be arrested and tried for their crimes. In a fair court they would be sent away
for life.
Chris Hindle 4 Jul 2015 10:42
'Yanis Varoufakis accuses creditors of terrorism.'
So what is wrong with that? Financial terrorism is a much more protracted and painful process
to the victims than sudden violence, but the end result is the same.
The Vermin Who Would Be Kings have discovered they no longer need the fuss and expense of maintaining
a standing army of occupation, far simpler to get countries/continents/ the world in deep debt
(via bent politicians making private bankster debt into sovereign debt - just like they did in
Greece ) and exert control through that.
BTW the UK has some £9 trillion in foreign debt (much of which is the bad debts of the
City - and the highest of any stand-alone country on earth) So now you know what next months austerity
drive is all about
InjunJoe -> degardiyen 4 Jul 2015 10:24
The "slovakian tax payer" will not be paying to maintain the Greek standard of living,
but to shore up the ECB, the IMF and the private lenders to Greek banks, as 90% of the "bail-out"
goes to serving interest. Haven't you been reading the news?
Duncan Frame -> karlmiltonkeynes 4 Jul 2015 10:20
That's weird because at the same time the banks collapsed in 2008 the deficit went up from
57% to 82%, lots of people lost their jobs or had to take pay cuts. I'm sure it was just a coincidence.
LeftToWrite -> ID6487190 4 Jul 2015 10:17
Yeah the EU has shown itself to want a compromise. All those nice compromised offers it made.
Yep we all remember those.
Compromise means both sides giving ground, not one side accepting everything the other demands.
Use a dictionary next time.
For once a nation is standing up to EU bullying and we have ignorant fools like you turning it
the other way in an attempt to change the narrative.
LeftToWrite 4 Jul 2015 10:11
How can the Troika have fucked up this badly? It seems they forgot that Greece is actually
a construct that represents the people who live there, and you can't just impose misery after
misery on a people without expecting them to finally have enough. Even if they vote yes, all it
does is postpone that that time when they will have had enough.
Honestly, this has shown the true greed at the hearts of Merkel et al, and by extension the people
they represent. Save the French and German banks, fuck over the Greek people. If people think
anti German rhetoric in Greece is extreme now, decades of resentment is about to follow.
שוקי גלילי Steve Collins 4 Jul 2015 10:09
You probably meant to say "when you ask for it back from someone ELSE, who didn't actually
get your money". Are you even aware that this is not actually loans that the Greek people
got? If I loan money to your corrupt banker and than ask YOU to return it, will you be less offensive?
email from Green Party Brussels office. TTIP and ISDS - Call to action by Keith Taylor MEP!
Breaking news! We've just been informed that the postponed vote on the European Parliament
resolution on TTIP has been put on the agenda for Wednesday 8th July.
MEPs will be voting on the resolution as a whole, but also on a whole array of amendments
to the text. Among these is a compromise amendment on the investor-state dispute mechanism, or ISDS.
The compromise amendment suggests replacing ISDS courts with some kind of 'new' system,
but there is no further explanation or details. As long as there is any system in place
for investors to sue governments, as the compromise calls for, it is still ISDS. The
fact that the Parliament's President is trying to spin this as something different by
giving it a new name does not change anything.
The compromise amendment has been agreed by the largest
groups in the European Parliament: the centre-left Socialists & Democrats (which includes
the UK's Labour MEPs), the centre-right European People's Party, and the European Conservatives
and Reformists group (which includes the UK's Conservative MEPs) and the Alliance of
Liberals and Democrats (which includes the UK's Liberal Democrat MEP).
On Wednesday, all MEPs will get a chance to vote on this amendment and the resolution
as a whole.
The Greens are calling on citizens, trade unions, NGOs,
towns and regions and businesses to speak out and contact their elected representatives
and hold them to account on this attempt to privatise justice and infringe democratic
rights.
How you can help This is our last chance to make sure that damaging ISDS provisions are not given the
green light by the European Parliament. MEPs need to know the full force of public opinion
on this threat to our national laws and our democratic rights. Contact your other MEPs before Wednesday asking them to oppose TTIP and the Investor
State Dispute Settlement (ISDS). - use Write To Them to email your MEPs directly with your own concerns - use the 38 Degrees campaign to send a quick template email - call your MEPs in Brussels to let them the reasons you're opposed - spread the word! Share your concerns on social media, tweet your MEPs, encourage your
friends and family to contact their MEPs, use Greens/EFA resources to campaign. Message from Keith
"I've been extremely heartened to receive so many emails from constituents voicing
their opposition to ISDS and the TTIP proposals in the last few weeks. It's clear that
there's a powerful and growing democratic movement to protect our laws, our public services
and our regulatory standards from potential devastation.
The decision to postpone the vote on TTIP earlier in
the month stinks of political parties running scared of the huge public opposition to
TTIP.
TTIP represents a monumental power grab by corporations and it must be stopped in its
tracks.
The sudden re-scheduling of this vote means we are now short on time to make our voices
heard. The Greens need all the help we can get to spread the word and put pressure on
other MEPs to do the right thing and represent the views and interests of their constituents." You can keep up-to-date with the Greens/EFA campaign and what the Greens are doing in
the European Parliament via their TTIP campaign website and their twitter feed.
Thank you for your support. Best wishes,
LeftToWrite ID105467 4 Jul 2015 10:14
To bail out German banks, get your facts straight before posting nonsense.
Kalandar 4 Jul 2015 10:14
Propoganda galore from the mainstream media but its fooling no one, except perhaps themselves.
ID345543 4 Jul 2015 10:04
This Is Why The Euro Is Finished
The 2010 bailout was the one that allowed private French, Dutch and German banks to
transfer their liabilities to the Greek public sector, and indirectly to the entire eurozone's
public sector. There was no debt restructuring in that deal.
The loans were made by a cabal of high-financiers in Europe to a cabal of corrupt finianciers
in Greece. The game of lending rules are: you bet that the party you lend money to will pay back
the loan with interest. Which is what the German banks did, making a profit on the interest for
quite some time. But now the high-financiers in Europe have lost the game, i.e. Greece/the-old-displaced-guard-in-Greece
can no longer pay them back. That's the financiers problem: not the problem of Greece's normal
citizens nor other EU taxpayers! Is that so difficult to understand? Class war for beginners...
privatize the profit, socialize the loss.
NeverNotHereTV gsxsure 4 Jul 2015 09:59
Syriza does not want "free money". They want a fraction put toward economic growth, and then
payments as a meaningful fraction of that growth. It is simple enough.
Alfie Silva 4 Jul 2015 09:50
Please can anyone explain to me why we are letting the bankster cabal turn European against
European?
The banksters, multi-national corporations and their political lackeys, have engaged in an
extend and pretend fantasy which is passing their private debt onto taxpayers across Europe. Once
the shoulders of the Greek taxpayer have been broken, it will pass onto the shoulders of the taxpayers
from the rest of Europe. God, I want to shake the anti Greek/pro EU lobby to wake them up. Greece,
please, please, please vote NO, so we can begin the long process of getting control of Europe
out of the hands of these maniacs.
Finnbolt 4 Jul 2015 09:49
"Debt relief was "politically highly toxic for many eurozone member states"."
Here you have the problem. The creditor state governments are responsible to their voters and
many have said that their taxpayers will not finance the Greeks and money lent will be paid back
in full.
Syriza says they have a mandate from the Greek people to force other euro countries to continue
financing them and take a haircut. In other words, lose most of the money lent to Greece.
EU is a collection of nation states with pretensions of a federation. One of the pretensions about
to be busted is a transfer union, meaning taxpayers in richer countries tranferring part of their
wealth to poorer countries.
APSAPS 4 Jul 2015 09:49
A $22.6 billion International Monetary Fund and World Bank financial package was approved on
13 July 1998 to support reforms and stabilize the Russian market. Despite the bailout, July 1998
monthly interest payments on Russia's debt rose to a figure 40 percent higher than its monthly
tax collections. Additionally, on 15 July 1998, the State Duma dominated by left-wing parties
refused to adopt most of the government anti-crisis plan so that the government was forced to
rely on presidential decrees. On 17 August 1998, the Russian government devalued the ruble, defaulted
on domestic debt, and declared a moratorium on payment to foreign creditors. It was later revealed
that about $5 billion of the international loans provided by the World Bank and International
Monetary Fund were stolen upon the funds' arrival in Russia on the eve of the meltdown.
Sounds very similar.
Oh, wait, maybe some referendum could have helped?
Insomnijazz hertsman 4 Jul 2015 09:48
Nah - these are just lies for the gullible to swallow.
Without risking depositors' cash, governments had the ability to sit back ready to nationalise
any banks whose lending to Greece was so irresponsible that they were unsustainable. This would
have wiped out the shareholders and sent a clear message that lending as well as borrowing has
to be responsible and that shareholders need to earn their fat returns by exerting oversight.
Instead they chose the worst option: bailing out the bank shareholders by assuming responsibility
for their risky lending, but refusing to then pay the price for their political cowardice and
shifting the blame onto a largely guiltless Greek population which has already suffered hugely
from the economic devastation.
Brent1023 4 Jul 2015 09:46
Debt relief not on the table.
It comes down to the Greek people or the banksters. Who needs a bailout more?
The EU has sided with the banksters.
Not just in Greece but in Ireland, Spain, Portugal.
Only Iceland was able to force banksters to swallow their losses.
Everywhere else bankster fraud was rewarded with a 100% bailout.
Should be renamed the European Bankster Union.
Surprising that the UK does not want it - it also bailed out its banksters.
NWObserver sunnytimes 4 Jul 2015 09:39
The creditors are not looking to get their money back. Debt is the leverage being used to destroy
the social and public infrastructure in the country.
So their worst nightmare is Greeks voting 'No', staying in default and surviving or prospering
while remaining in the Eurozone. Then they will not be able to use the same fear tactics against
another EZ country. They are psychopaths out to destroy, not creditors looking to get their money.
So if Greeks vote 'No' , they will spare no effort to destroy Greece, beginning with the continuation
of the liquidity freeze. However, there are some simple steps that Greece can take to end the
liquidity freeze and I think they have already taken them.
Albrecht Ritschl: During the past century alone, though, at least three times. After the first
default during the 1930s, the US gave Germany a "haircut" in 1953, reducing its debt problem to
practically nothing. Germany has been in a very good position ever since, even as other Europeans
were forced to endure the burdens of World War II and the consequences of the German occupation.
Germany even had a period of non-payment in 1990....but we were also extremely reckless -- and
our export industry has thrived on orders. The anti-Greek sentiment that is widespread in many
German media outlets is highly dangerous. And we are sitting in a glass house: Germany's resurgence
has only been possible through waiving extensive debt payments and stopping reparations to its
World War II victims.'
Don't worry. The nappy business is doing well in Brussels...
EU sources: possible extra Eurogroup on Monday and EU leaders Summit on Wednesday #Greferendum
via GR media http://www.dimokratiki.gr/04-07-2015/pithano-ektakto-eurogroup-ti-deftera-ke-sinodos-korifis-tin-tetarti/
…
They are pissing in their pants the lot of them...
rafela Bogoas81 4 Jul 2015 09:00
Austerity didnt work. In the last five years the economy shrinked by 19%. Unemployment rose
to 27%. Tsipras wanted more debt relief. The IMF report sustain that an improvement is impossible
without debt relief.
sunnytimes 4 Jul 2015 08:58
German people are industrious and inventive. They play by the rules. Unfortunately they are
also rather naive and believe generally what the state tells them. In history the role of such
people has always been to pay the bills.
GuillotinesRUs 4 Jul 2015 08:45
Yanis Varoufakis has a point. The proposals put by the EU would cause the Greek economy to
contract further, this effectively would increase the debt ratio to GDP. Nowhere have I heard
any talk on how to build up the Greek economy, it has all been about collecting taxes.
I have also read commentators on here talk about how Greece lied to get into MU, this has a great
deal of truth in it, but one must remember the EU knew what a basket case Greece was financially,
therefore they are equally complicit in this debacle.
The question has to be why the EU is doing this to Greece, they know their actions will do nothing
other than cause more misery in the country. The reason this is happening is to protect German
banks. Greece is the domino that could bring the whole system down.
U77777 -> CassiusClay 4 Jul 2015 08:40
Austerity isn't the answer - but when you have put yourself into the situation that the Greeks
have, it is part of the solution. A small part and nothing like the media like to portray, but
something has got to give.
As for electing Tsipras and varoufakis......Seriously, stop drinking. They're a bunch of cowboys
with some well intended principles and a load of rather deluded ideas. Worse still, neither of
them have actually come up with anything like a constructive plan how to stimulate the economy
and help Greece stand on its own 2 feet again
Dimitris Chloupis -> sylvester 4 Jul 2015 08:39
Any sensible Greek realizes without deep reforms no economy is going forward. This is not even
debatable in my country. We already reduced public sector by 500.000 employes thats a juicy 50%.
High pensions of the past are long gone. The result is that now it costs 6 billion to pay for
wages in public sector and another 5 billion to pay for pension, total 10 billion. But we need
another 10 billion for paying back loans each year. This year alone we paid back 25 billion !!!
Tax evasion should be our next focus, its not reasonable for an economy that makes 200 billions
per year to need loans . There is a will to fix all that, because the alternative is far worse.
Of course the same can be said about Germany , why a country that make 3.1 trillion euros per
year has a 80% debt ? Tax evasion of course ;) Time to open those swish bank accounts , but does
Germany want that ? How many vested Greek interest are connected with German vested interest ?
Denying corruption is to deny the foundation of modern economies.
W61212 -> RussBrown 4 Jul 2015 08:39
I made a point earlier about the birth of a new Brussels based dictatorship which controls
all EZ 'national governments', which are national governments by name only, ergo Syriza has to
go for straying from the script. Brussels has already proven it would rather deal with corrupt
Greek politicians by doing so in the past
Continent Renato -> Timotheus 4 Jul 2015 08:37
Inequality of opportunity in the Eurozone is now so great -- young people in Greece have
an unemployment level of 60% and the rate is 33% in the austerity "success story" of Portugal
The systems are different. Northern countries have the dual education system, i.e. only about
10 p.c. of the youth go to college/university, and 90 p.c. go through a 3 or 4 year education
"learning by doing".
In addition, the "dirty work" in Greece (farming/harvest/construction) is done by temporary migrants
from Macedonia, Albania, Romania, Bulgaria because the Greek parents wanted their children to
have a better life and sent them to universities without an employment market for so many acdemics.
Many of them land in a job with in the bloated govt.
sunnytimes 4 Jul 2015 08:36
The true parasites are the bond markets of London and New York. The create nothing. All they
do is swap pieces of paper with ech other all day long, skimming every transaction. The UK and
US have run trade deficits or decades, that is by definition they produce less than they consume.
Time to tear down this edifice of debt and get back to a capital-based economy.
LeftOrRightSameShite FOARP 4 Jul 2015 08:35
Greece already has been bailed out
No, the original package lent to Greece was to bailout Greek and EU banks. The subsequent
bailout (to pay for the bailout) is 60% owned/facilitated by EFSF. It raised it through selling
bonds, no doubt to financial institutions. So now we're in the bizarre situation of banks befitting
from the bailout of banks with the Greek people carrying the can and Europeans (who are liable
to honour EFSF bonds+intererst) blaming Greece and defending the banks!
Bit thick really innit!
RussBrown 4 Jul 2015 08:35
Myth 1 - Greece do nothing to solve the problem (they have had years of austerity)
Myth 2 - Germany is bailing out the Greeks. The money that goes to Greece goes straight back into
the German Banks. But by making it impossible for business to run in Greece the businesses move
their resources to Germany and pay taxes their in a massive transfer of wealth from a poor EU
country to the richest. This is a capitalist scam and all of lot on here shouting their propaganda
should be ashamed of yourselves. The rich bankers are using you to justify the destruction of
the poor!
Or to put it a bit differently, it's reasonable to fear the consequences of a "no" vote, because
nobody knows what would come next. But you should be even more afraid of the consequences of a
"yes," because in that case we do know what comes next - more austerity, more disasters and eventually
a crisis much worse than anything we've seen so far.
The usual narrative of the Greek economic tragedy is that the country is paying for its past
profligacy, but there is deeper back story of political repression fueled by major powers intervening
in Greece and contributing to a dysfunctional political system.
By William R. Polk
Focusing exclusively on the monetary aspects of the Greek crisis the media misses much of what
disturbs the Greeks and also what might make a solution possible.
For over half a century, Greeks have lived in perilous times. In the 1930s, they lived under
a brutal dictatorship that modeled itself on Nazi Germany, employing Gestapo-like secret police
and sending critics off to an island concentration camp. Then a curious thing happened: Benito
Mussolini invaded the country.
Challenged to protect their self-respect and their country, Greeks put aside their hatred of
the Metaxis dictatorship and rallied to fight the foreign invaders. The Greeks did such a good
job of defending their country that Adolf Hitler had to put off his invasion of Russia to rescue
the Italians. That move probably saved Josef Stalin since the delay forced the Wehrmacht to fight
in Russia's mud, snow and ice for which they had not prepared. But, ironically, it also saved
the Metaxis dictatorship and the monarchy. The king and all the senior Greek officials fled to
British-occupied Egypt and, as new allies, they were declared part of the "Free World."
Meanwhile, in Greece, the Germans looted much of the industry, shipping and food stuffs. The
Greeks began to starve. As Mussolini remarked, "the Germans have taken from the Greeks even their
shoelaces…"
Then, the Greeks began to fight back. In October 1942, they set up a resistance movement that
within two years became the largest in Europe. When France could claim less than 20,000 partisans,
the Greek resistance movement had enrolled about 2 million and was holding down at least two divisions
of German soldiers. And they did it without outside help.
As the war's outcome became apparent, British Prime Minister Winston Churchill was determined
to return Greece to the prewar rule of the monarchy and the old regime. He was motivated by fear
of Communist influence within the resistance movement.
Churchill tried to get the Anglo-American army that was getting ready to invade Italy to attack
Greece instead. Indeed, he tried so hard to change the war plan that he almost broke up the Allied
military alliance; when he failed, he threw all the soldiers he still controlled into Greece and
precipitated a civil war that tore the country apart. The Underground leaders were outsmarted
and their movement was smashed. The bureaucracy, police and programs of the prewar dictatorship
resumed control.
After the war, with Britain out of money and no longer able to sustain its policy, London turned
Greece over to the Americans who announced the "Truman Doctrine" and poured in money to prevent
a leftist victory. American money temporarily won the day, but the heavy hand of the former regime
created a new generation of would-be democrats who challenged the dictatorship.
This is the theme beautifully evoked in Costa Gavras' film "Z," starring Yves Montagne. As
the film shows, the liberal movement of the early 1960s was overwhelmed by a new military dictatorship,
"the rule of the colonels."
When the military junta was overthrown in 1974, Greece enjoyed a brief period of "normality,"
but none of the deep fissures in the society had been healed. Regardless of what political party
chose the ministers, the self-perpetuating bureaucracy was still in control. Corruption was rife.
And, most important of all, Greece had become a political system that Aristotle would have called
an oligarchy.
The very rich used their money to create for themselves a virtual state within the state. They
extended their power into every niche of the economy and so arranged the banking system that it
became essentially extra-territorialized. Piraeus harbor was filled with mega-yachts owned by
people who paid no taxes and London was partly owned by people who fattened off the Greek economy.
The "smart money" of Greece was stashed abroad.
The Current Crisis
This state of affairs might have lasted many more years, but when Greece joined the European
Union in 1981, European (mainly German) bankers saw an opportunity: they flocked into Greece to
offer loans. Even those Greeks who had insufficient income to justify loans grabbed them. Then,
the lenders began to demand repayment. Shocked, businesses began to cut back. Unemployment increased.
Opportunities vanished.
There is really no chance that the loans will be repaid. They should never have been offered
and never should have been accepted. To stay afloat, the government has cut back on public services
(except for the military) and the people have suffered. In the 2004 elections, the Greeks had
not yet suffered enough to vote for the radical coalition led by the "Unity" (SYRIZA) party. Only
3.3 percent of the voters did.
Then, after the 2008 financial crash came years of worsening hardship, disapproval of all politicians
and anger. It was popular anger, feeling misled by the bankers and by their own foolishness. There
was also hopelessness as Greeks realized that they had no way out and began to turn to SYRIZA.
After a series of failed attempts to secure a mandate, SYRIZA won the 2015 election with 36.3
percent of the vote and 249 out of 300 members of Parliament.
Today, the conditions that impelled that vote are even more urgent: the national income of
Greece is down about 25 percent and unemployment among younger workers is over 50 percent. So
where does that leave the negotiators?
Faced with German and EU demands for more austerity, the Greeks are angry. They have deep memories
of hatred against the Germans (this time, not soldiers but bankers). They have been, time after
time, traduced by their own politicians. Prime Minister Alexis Tsipras must know that if he is
charged with a "sell-out," his career is finished.
And the bail-out package offered by the International Monetary Fund and the European Central
Bank is heavily weighted against Greece. Greeks also see their option of exiting the Euro as similar
to stances taken by Britain and Sweden in not joining in the first place – although a painful
adjustment for the Greek economy would be expected if Greece undertakes an unprecedented departure
from the European currency.
However, unless the IMF and ECB offer a real chance for a better life for Greeks by forgiving
most of the debts, I believe that the Greeks might well vote on Sunday to reject the austerity
demands and leave the Euro.
William R. Polk is a professor who taught Middle Eastern studies at Harvard. President John
F. Kennedy appointed Polk to the State Department's Policy Planning Council.
Congress Weighs in on Holding IMF Accountable for Damage Caused by Failed Policies in Greece
By Mark Weisbrot
The battle over the future of Greece will not end on Sunday, no matter how the vote goes or
-- if the Greek people vote "no" -- how the European authorities respond to their choice. This
is a fight over the future of Europe, and the people who are currently strangling the Greek economy
in a transparent attempt to intimidate the Greek electorate understand this very well. That is
why they are being especially aggressive and ruthless at this moment: trying to convince Greeks
that a "no" vote means leaving the euro, claiming that such a decision would have calamitous consequences,
and giving them a taste of the financial crisis and economic disruption that they will suffer
through if they refuse to do as they are told.
Last Sunday, the European Central Bank (ECB) made a deliberate decision to limit Emergency
Liquidity Assistance to the Greek banking system. The limit was set low enough to force -- for
the first time in the six years of depression that the ECB has deepened and prolonged -- the closure
of Greek banks.
It is not surprising that the very idea of a referendum would provoke the ire of the eurozone
authorities. Unlike the European Union, which has a different history, the eurozone project has
become a fundamentally anti-democratic project. It has to be; the people currently running it
want to reverse, as much as possible, decades of social progress on issues that are vital to Europeans.
But you don't have to take my word for it: there is a paper trail of thousands of pages that spell
out their political agenda. The International Monetary Fund conducts regular consultations with
member governments under Article IV of its charter, and these result in papers which contain policy
recommendations. There were 67 such consultations for EU countries during the four years of 2008
to 2011, and the pattern was striking: budget tightening was recommended in all 27 countries,
with spending cuts generally favored over tax increases. Cutting health care and pension spending,
reducing eligibility for disability and unemployment compensation, raising retirement ages and
increasing labor supply were also overwhelmingly common recommendations.
The European authorities took advantage of the crisis and post-crisis years to impose parts
of this agenda on the weaker eurozone economies: Spain, Italy, Portugal, Ireland and most brutally
of all, Greece. More than 20 governments fell as a result, until finally, in Greece on January
25, a government was elected that said no. The goal of the European authorities, therefore, is
to topple this government. This has been apparent since the ECB cut off itsmain line of credit
to Greece on February 4.
Now comes a group of U.S. members of Congress warning the IMF that it could -- perhaps for
the first time in decades -- be held accountable for the economic destruction that it's helping
to implement. The letter objects to the IMF "taking a hard line with respect to demands that Greece
implement further reforms" and notes:
Greece has already reduced its national public sector work force by 19 percent and carried
out many of the reforms demanded by the IMF and its creditors. It has gone through an enormous
fiscal adjustment, achieving the largest cyclically adjusted primary budget surplus in the euro
area last year; and a very large current account adjustment (with a 36 percent reduction in imports).
At the same time, as even the IMF has acknowledged in its own research, the austerity imposed
by Greece's creditors over the past five years turned out to be far more devastating to the economy
than they had predicted.
Senator Bernie Sanders, who joined House members in signing the letter, issued his own blistering
statement yesterday. "At a time of grotesque wealth inequality, the pensions of the people in
Greece should not be cut even further to pay back some of the largest banks and wealthiest financiers
in the world," said Sanders. Among the House signers were the co-chairs of the Congressional Progressive
Caucus, Representatives Keith Ellison and Raul Grijalva, and the Dean of the House and Ranking
Member of the Judiciary Committee, Rep. John Conyers.
Unlike many letters from Congress that are ignored by the executive branch, this one might
be taken more seriously by the IMF and the U.S. Treasury department -- which is the IMF's most
powerful overseer. One reason is that the IMF has been trying for five years to enact reforms
in its governance structure that are very important to the Fund and Treasury -- reforms that can't
be enacted unless they are approved by Congress. These reforms would make some small changes in
voting representation. They wouldn't shift the balance of power at the Fund, with the U.S. and
its allies still likely to maintain a comfortable majority. But the U.S. government and the Fund
have lost a lot of credibility in recent years by unilaterally holding up even these largely symbolic
changes. They see this hold-up as encouraging developing countries to opt for creating new institutions
such as the BRICS Development Bank and Currency Reserve Arrangement. More recently, the Obama
administration suffered an embarrassing setback after the U.K., Germany and France ignored their
pleas and became founding members of China's new $100 billion initiative to create an Asian Infrastructure
Investment Bank.
From the congressional letter:
"As members of the U.S. Congress, we must also note the unprecedented difficulty that the IMF's
proposed quota and governance reform has faced in the U.S. Congress since 2010. As you know, this
also has global implications, as some governments in developing countries have begun to lose confidence
in this effort to make the IMF's voting structure more representative of its member countries
in the twenty-first century and are seeking institutional alternatives. It will be difficult to
get a majority of the U.S. Congress on board for these important reforms if the IMF is seen as
responsible for further damage to the Greek economy, as well as the currently unforeseeable consequences
of any financial collapse."
The IMF will need all the votes it can get for this legislation to pass through Congress. It
can choose to ignore this warning at its own institutional risk.
"...The Greek comprador class supported the Nazis in the Second World War, fought against the United
Front in the civil war, made the neo-fascist 1970s regime, and today they support EU/NATO integration
and austerity. They are an integral part of the European ruling class that is holding the working and
middle classes of across the whole continent by the balls. The ruling class which has divided Europe,
once again as they did in the 1930s, into "Germans" and "Greeks" instead of the reality - of workers
and rulers. So, there is not one "more dangerous" than the other. They are the same."
"...Initially, the IMF predicated their support on Ukraine reaching a deal with its private
creditors to restructure its debt to reduce its payments by $15 billion over four years. This has not
proven easy, however, and the IMF now says it may release funds to Kiev even if it defaults on its private
creditors. "
"..."This is a very dark moment for Europe. They have closed our banks for the sole purpose
of blackmailing what? Getting a 'Yes' vote on a non-sustainable solution that would be ad for Europe.""
"...I have to say that I totally didn't get that point so far. Of course they're going nuts about
a short-noticed referendum, because usually in these cases the public gets brainwashed for months in
advance. Can't believe I didn't notice that right away. It's the essence of western democracy: let people
vote, but only the things you want them to choose from. Nice move by Syriza btw! Now that I think about
it, it's obvious that they planfully came up with the referendum as suprise! Kudos!"
"...After the hell of World War II, the Federal Republic of Germany – commonly known as West
Germany – got massive help with its debt from former foes. Among its creditors then? Greece. The 1953
agreement, in which Greece and about 20 other countries effectively wrote off a large chunk of Germany's
loans and restructured the rest, is a landmark case that shows how effective debt relief can be. It
helped spark what became known as the German economic miracle."
"...We are witnessing a black swan event. The Greek banks have run out of cash. Either the EU seizes
Greece or a failed state in Europe has been born with Ukraine soon to follow. All of the Greek debts
are void and trillions in derivative payments will be due. This is 2008 all over again with the collapse
of the western financial system possible. This is why everyone is so desperate. Yet, for pennies on
the total cost of the default, Greece could be saved. Magnanimity may yet win out but it would mean
the end of the current rule of extinction capitalism in the West."
The Greeks have to make their decision as to what they are going to do. This is not a vote
about staying in the EU. If the Greeks are kicked out, there is no one to blame for that decision
except the EU masters. The Greeks are making only one decision - wether or not to agree to the
terms of the EU for the repayment of the debt - and thereby wether the debt was incurred legally.
All those who claim that this is a referendum on the EU are liars who are not being honest
with the Greek people. Those who are trotting out the endless stream of confusion as to what this
referendum is about - like the BBC, the New York Times, and even Greek parties like Potomi, etc
- are clearly no friends of the Greek people. Because to be a friend is to speak honestly.
"Your mention of compradors is important because the internal enemies of the Greek people
may be more dangerous than the external Troika."
The internal and external enemies of the Greek people are one in the same. The Greeks are paying
the Troika who gives the money to prop up Greek banking oligarchs. There is no difference between
a banker in Athens, a banker in Frankfurt, or a hedge fund vulture in New York City holding Greek
debt. All are ghouls who are profiting from the destruction of Greece.
The Greek comprador
class supported the Nazis in the Second World War, fought against the United Front in the civil
war, made the neo-fascist 1970s regime, and today they support EU/NATO integration and austerity.
They are an integral part of the European ruling class that is holding the working and middle
classes of across the whole continent by the balls. The ruling class which has divided Europe,
once again as they did in the 1930s, into "Germans" and "Greeks" instead of the reality - of workers
and rulers. So, there is not one "more dangerous" than the other. They are the same.
To add to the anti-Syriza noise machine, wether from a reactionary stance or a "ultra-leftist"
stance, is to do the people of Europe a disservice. Syriza is the only left-wing, anti-austerity
party with power inside the EU. It is unique. It fought the Golden Dawn on the streets of Athens.
It engaged the Greek people and asked for their vote, and it is living up to their mandate without
- and this is key - claiming more of one than they earned.
The referendum vote will be their true mandate. The Greek people have had a chance to see Syriza
in action, the referendum will be the Greek people's chance to show or deny their trust in Syriza
before embarking on a long struggle for independence, or maintaining the constant drain of austerity.The
stakes are clear: Syriza's success means a stake in the heart of the EU debt vampires who are
feeding off of not just Greece, but on all of those nations deemed "the periphery". Success for
Syriza is success for the very idea of democracy in the 21st Century. It is that cut-and-dried.
If Syriza fails, then the last good hope for European democracy vanishes until, perhaps, the
next escalation of crisis, whenever that might be a year or two years down the road. Or perhaps
for the foreseeable future. Because this is the simplest question of the referendum: do a people
have the right to say "no" to those whom wish them ill, to say "no" to those who, by whatever
"legal" power, are seeking to oppress them? As Martin Luther King, Jr stated: "One has a moral
responsibility to disobey unjust laws." And clearly this debt - and the refusal of those who imposed
it to make any compromise, even for the sickest and the poorest - is unjust. So which is worse
- to face the morse losses for ones shattered economy, or the loss of ones national will and democracy?
Because after Syriza, there is the abyss. There is no one offering to speak for the Greek people
if Syriza falls.
If Syriza succeeds, though, then all over Europe, we could see these sham technocratic, ruling
class regimes fall. These regimes whose only reason for staying in power is naked fear. This is
a good time to recall the words of Franklin Roosevelt, when the US found itself crushed between
a failed economy on one side, and a nest of powerful oligarchs on the other who refused to offer
any support to the citizens of the country:
This is preeminently the time to speak the truth, the whole truth, frankly and boldly. Nor
need we shrink from honestly facing conditions in our country today. This great Nation will
endure as it has endured, will revive and will prosper. So, first of all, let me assert my
firm belief that the only
thing we have to fear is fear itself-nameless, unreasoning, unjustified terror which
paralyzes needed efforts to convert retreat into advance. In every dark hour of our national
life a leadership of frankness and vigor has met with that understanding and support of the
people themselves which is essential to victory. I am convinced that you will again give that
support to leadership in these critical days.
The Greeks are facing a moment of truth as stark and as clear as any in human history. As stark
as any 20th Century war for independence. They can choose to continue down their current path,
only to have to face the same choice in a year or two years from now with conditions far, far
worse (there is no one arguing that there is any hope for their recovery - no one). So it is either
continued depression under the "guiding hand" of those who seek only one thing from Greece: the
transfer of its wealth. Or they can say "No" and take their destiny, again, into their own hands.
Only once they have made their collective will known will Europe decide what course of action
to take: compromise, or split Europe. And if it is a split, then the only party responsible
will be the masters of the EU.
You know, the whole name-calling thing, Comrade X, escapes me. Why people feel like it enhances
their persona I don't know. To repeat: the troika has already won this contest because Syriza
capitulated. You quote me incorrectly.
I think failure for the troika is if they get the Yes vote they want and then refuse to offer
concessions, which will push Tsipras and Varoufakis to resign. Without a deal shortly the ECB
will have to step in and expand emergency liquidity assistance to make sure all those retirees
who don't use debit cards have enough cash to buy food.
xxx
As this isn't a vote about EU membership, then the Greek people should have no fear. They should
vote as their conscience dictates.
Who knows what form the EU Masters want the Union to take? The Greek people won't have a say
in this and they should recognize that. The Greeks should recognize their limits - they do not
have the power to vote to stay or leave the EU, they have only the power to vote on to wether
or not to pay this odious debt. Europe will do with them, after that, as it will. So they should
be clear that they are voting only on the debt, and ignore all those who are trying to cloud the
issue.
The real danger, as always, is that we know the USA is busy manipulating every European political
system. And we know that US geopolitics will insist on Greece remaining in the EU and in NATO
no matter what it means for the Greeks. So the Greek people must be extremely wary of all those
going onto the streets, EuroMaidan-style, for "Pro-EU" rallies... they're dishonest at best, and
more likely they are pawns of the only power even less interested in the welfare of the Greek
people than even the EU - Washington Imperialsim.
A, Yes vote would mean that the Syriza government must resign since the implication is that the
Greek people have voted a motion of no confidence.
A, No vote would mean the ball is in the
Troika court. They can a) choose not to fund the Greek banks anymore which would imply that the
banks would collapse immediately and no more pension payments under the current Euro system; b)
Choose to give Greece an ultimatum of accept or reject whatever their offer will be. Non acceptance
would mean once again they can cause Greek banks to collapse.
The Greek people are caught between a rock & a hard place. Risk the collapse of their banks
and a new unknown future in a non-Euro currency system or accept whatever terms the Troika is
willing to provide to keep their banks afloat. There is a decent probability that there is a "civil
war" in Greece between those that would prefer to be in the Euro currency bloc under whatever
terms the Troika offers and those wanting out of the Euro currency system.
The real danger, as always, is that we know the USA is busy manipulating every European political
system. And we know that US geopolitics will insist on Greece remaining in the EU and in NATO
no matter what it means for the Greeks. So the Greek people must be extremely wary of all those
going onto the streets, EuroMaidan-style, for "Pro-EU" rallies... they're dishonest at best, and
more likely they are pawns of the only power even less interested in the welfare of the Greek
people than even the EU - Washington Imperialsim.
Very emphatic and stirring, guest77 @26. This is another moment of truth for non-Greek capitalist
slaves as well. They are discouraged from seeing the Greek whip as their own.
In every dark hour of our national life a leadership of frankness and vigor has met with that
understanding and support of the people themselves which is essential to victory.
Oh. Pray I may ask, President Roosevelt, "Why do we not need a leadership of frankness and vigor
in good hour?" Perhaps this is why we don't get one in the dark ones?
"Those who claim that
this is a referendum on the EU" are propagandists and sowers of confusion and discord. All vigorous
capitalist systems need them, good times and bad.
Compradors are distinguished by their divided loyalties and false allegiances. Oligarchs cannot
be mistaken for compradors. Compradors are an integral part of capitalist political economy and
their false allegiance is more dangerous because it disarms. We could speak as well of German
compradors, those who would vote to continue the immiseration of Greece though the bankers and
brokers fraudulently saddled German and European taxpayer with their losses. Compradors don the
hypocritical morality their oligarchs so affordably produce. They love playing the fools, because
it so well pays.
Do the ultra-leftists who critique Syriza do only disservice? I doubt it. Even if "Syriza is
the only left-wing, anti-austerity party with power inside the EU", that is not enough. Even Syriza
would confirm that they and their pragmatism is not enough to achieve their ends. I agree that
"ultra-left" critics risk being confused with dissemblers, but they should not silence themselves
for that reason. KKE asks of Greeks, instead of yah or nay, to demand:
* NO TO THE PROPOSAL OF THE EU-IMF-ECB
* NO TO THE PROPOSAL OF THE GOVERNMENT
* DISENGAGEMENT FROM THE EU, WITH THE PEOPLE IN POWER
Is it not clear what Syriza should do with these "votes"? I have seen a Syriza supporter dissemble
on KKE's position; that's bigotry.
Can Syriza mobilize the electorate against their oppressors? Have they propagandized enough?
This referendum is not on whether "people have the right to say "no" to those whom wish them ill",
i.e. a vote for their own oppression, but whether they have mobilized the Greeks, beyond Syriza's
election, for the coming fracas.
Syriza cannot bring "these sham technocratic, ruling class regimes" to fall. We must fight
on, whether they fail or no.
Yves Smith et al may not be as loony as you think. Check out this piece by William Engdahl,
in which he has identified Varifoukas as a modern version of a Trojan horse, but in this instance,
acting in the interest of the Greek oligarchs. It is this particular segment of the Greek population
which has in large part been shielded from public view, most because of all the focus on the evil
troika. Engdahl quite rightly put much of the blame for the current Greek crisis on a long established
practice by the corrupt Greek political class, that has not only plundered and looted the country
for the past 70 years (he actually sees that this is a centuries old practice), but has willfully
subjected their fellow country folk to never-ending debt enslavement.
An interesting point, and this is on reason that NC could be cut some slack, is that Tsiprias
and Varifoukas played nothing other than a game of brinkmanship that was a sure loser. Given that
they had no plan-B to fall back on, and that they refused Putin's offer of assistance, it is hard
to argue against Engdahls' conclusion that this was a rigged game all the way - one rigged by
the Greek oligarchs, with Tsiprias and Varifoukas acting as their proxies.
I was always suspicious of the smile that never ceases to leave Varifoukas' face.
RT IMF and Ukraine agree on terms for release of $1.7 bn in bailout funds
The International
Monetary Fund and Kiev's representatives have agreed on a set of measures to be taken by Ukraine
in order to receive $1.7 billion in bailout money, according to the IMF press service. The much
needed 2nd tranche of a promised $17.5 billion support package will be released when the IMF's
Ukrainian mission determines that the requirements of the agreement have been met, though the
press release did not specify what those conditions might be. The IMF's management and board will
also have to approve the final release of funds.
Initially, the IMF predicated their support on Ukraine reaching a deal with its private
creditors to restructure its debt to reduce its payments by $15 billion over four years. This
has not proven easy, however, and the IMF now says it may release funds to Kiev even if it defaults
on its private creditors.
Presuming the referendum occurs, the range of outcomes can be distilled thus:
A> Greece votes "Yes": Tsipras resigns (as Energy Minister Panagiotis Lafazanis has already
hinted), EU rejoices but unless a technocratic government can be rustled up in Parliament, the
ensuing election campaign will waste valuable weeks and add to uncertainty and instability. Any
subsequent negotiations will see Greece economically immolated by its unrepentant lenders.
B> Greece votes No:
Technically referenda are considered consultative and need a 40 percent turnout to be deemed
relevant.
With Greece in default on its IMF loans, the concept that a strong 'no' vote strengthens its
hand in negotiations is a dubious assertion verging on folly. There is no negotiation, thus no
strengthened position. Egos may be soothed but that won't feed Greek pensioners.
~~~
Neither vote enables a simple resolution. No delivers a poisoned chalice. A petulant EU, rattled
by Greece's refusal to be supplicant to the superpower of delusion, won't receive Alexis Tsipras
back into the fold prodigal son-style.
2) Greece maintains the euro: Syriza's apparent (self-defeating) choice. Athens must release
the currency pressure valve to rebalance Greece, enabling future export and tourist growth fuelled
by a cheaper New Drachma.
(Incidentally, this default is Greece's sixth since 1826).
~~~
4) Greece introduces parallel currency to pay bills. Thus a New Drachma will emerge and Greece
will de facto exit the eurozone. By this stage the EU will be too preoccupied with its own credibility
gap to hold Greece within the eurozone's structures.
~~~
6) Third party motivated regime change cannot be discounted: Some angry creditors are likely pushing
for Syriza to be ousted. However a No vote gives Syriza a mandate to govern, albeit against a
very volatile, probably quite chaotic, background.
8) Greece abandons the euro and adopts bitcoin - a lovely idea which would at least guarantee
citizens could no longer be subject to summary devaluation at the knee. Alas only slightly more
plausible than lenders accepting a No vote is a basis for debt relief.
And what of the eurozone?
The EU has egg on its face and a sickly currency whose sanctity is being undermined. Economically,
Greek GDP is barely 1.8 percent of the 335 million citizen eurozone. However contagion risks will
be a huge worry. Europe has delayed vital structural reforms and will pay a greater price than
the 'mere' high unemployment relative stagnation of recent years where Asia rose and Europe froze.
Investors will be spooked to realize the euro is not merely perishable, it is in mortal danger.
Greece is a small but debt-laden Mediterranean nation, behind the narcissistic political hubris,
the EU remains an, albeit fading, giant of global influence.
Sure, they played this lose lose, that is the part
that really worries me. You cannot trust politicians who enter that type of game. And this is
all the EU.
"smart people now benefit in contraction", sure, as
the fire sales concentrate ownership to the very few. This model has been tested and proven politically
unsustainable before, it leads to war, where "smart
people" are bound to benefit, too.
bjmaclac | Jul 3, 2015 2:43:06 AM | 63
Engdahl certainly is right in that Syriza is made an example of to disencourage (Southern)
European national politicians from challenging the system. The result, however, is very much the
end of Europe, as there is no way now to sell European initiatives to the - very diverse - national
publics. The discussion in Germany has been framed in a way that makes it virtually impossible
to transfer any more billions to creditors or agree to a debt cut meaning the billions granted
before on saving German and international banks have to be written off.
European politicians got themselves in such a quandary that they depend on the IMF to solve
the crisis whilst making the solution more and more expensive themselves. By defaulting on the
IMF Greece presumably has taken that option from the table. The BRICS will not pay for the "European
problem".
The earlier declaration from the Monarchs of the European voting commission was telling. They
demanded a two week delay to allow their minions to browbeat and propagandize the poor Greeks
before a 'fair', read controlled, referendum could take place. Wayoutwest | Jul 2, 2015 1:51:47
PM | 7
I have to say that I totally didn't get that point so far. Of course they're going nuts about
a short-noticed referendum, because usually in these cases the public gets brainwashed for months
in advance. Can't believe I didn't notice that right away.
It's the essence of western democracy: let people vote, but only the things you want them to
choose from. Nice move by Syriza btw! Now that I think about it, it's obvious that they planfully
came up with the referendum as suprise! Kudos!
China may help Greece directly through its new financial instruments, director of the Quantitative
Finance Department at China's Institute of Quantitative and Technical Economics told Sputnik
China.
"The Greek crisis has an undoubtedly seriously influence on China's trade with Greece
and investment into the country. But I think that European countries together with China can
help Greece overcome the problems that arose," Fan Mingtao said.
"I believe there are two ways to give Greece Chinese aid. First, within the framework of
the international aid through EU countries. Second, China could aid Greece directly. Especially
considering the Silk Road Economic Belt and the Asian Infrastructure Investment Bank. China
has this ability," Fan added
A 'YES' vote is capitulation. A 'NO' vote means negotiation backed by the possibility of GRexit.
GRexit has not been an option so far because Syriza had no democratic authority to contemplate
such a move. Allowing for the possibility of GRexit gives the Greek side a much stronger hand.
Both sides are playing games. You can't take what they say at face value. The Greeks are pro-Europe
until the are not. Tsipras says that a 'NO' vote is not a vote for GRexit. But a 'NO' allows for
GRexit if negotiations fail.
If a GRexit occurs, the Greek side will blame the Troika, pointing to how determined Syriza
has been to stay in Europe. This political blame game is meant to raise the stakes.
I think Greece would issue a parallel currency like Tax Anticipation Notes (TANs) during a
transition period (maybe starting right after a 'NO' vote). If Greece exits, they will likely
get support (loans, trade deals) from BRICS. Russia has an incentive to see that Greece does not
fail, while the Troika has an incentive to see that Greece does fail.
=
I think there will be a 'NO' vote and, armed with the recently released IMF report on the sustainability
of Greek debt, Greece will get a favorable agreement. The BIG question in my mind is whether the
Troika will insist on Greece to agree to support tighter EU integration. That would then also
be asked of other PIGS that seek debt relief.
So this Greek crisis could represent the beginning of the end for the EZ or an significant
advance for those that want to see a "United States of Europe".
A new poll by the Anti-Defamation League found that the majority of Greeks continue to hold
anti-Semitic views about Jewish control over finance and the global economy, despite a recent
drop in anti-Jewish attitudes in other parts of Europe.
They are desperate! The Greeks are NAZIs! Wow! It is amusing to see them going insane, breaking
down right on stage before the audience ... roaring with laughter? I know I am. If you lose your
money, good god don't you lose your mind!
Come on Greeks! You've got 'em on the run! As that
great stateswoman Nancy Reagan once said with regard to drug dealers - "Just say NO!"
German Finance Minister Wolfgang Schäuble has a clear negotiating strategy, aimed at getting
Greece to agree to leave the eurozone. Unfortunately for him, Greece does not want to exit,
and it cannot be forced to do so under the treaties governing the European Union. What Greece
wants is to remain in the eurozone, with a lower debt burden – a position that is both economically
astute and protected by treaty.
... ... ...
There are plenty of precedents for such a course. Sovereign debts have been restructured
hundreds, perhaps thousands, of times – including for Germany. In fact, hardline demands by
the country's US government creditors after World War I contributed to deep financial instability
in Germany and other parts of Europe, and indirectly to the rise of Adolf Hitler in 1933. After
World War II, however, Germany was the recipient of vastly wiser concessions by the US government,
culminating in consensual debt relief in 1953, an action that greatly benefitted Germany and
the world. Yet Germany has failed to learn the lessons of its own history.
I propose a four-step path out of the Greek crisis. First, I recommend that the Greek people
give a resounding "No" to the creditors in the referendum on their demands this weekend.
Second, Greece should continue to withhold service on its external debts to official creditors
in advance of a consensual debt restructuring later this year. Given its great depression,
Greece should use its savings to pay pensioners, provide food relief, make crucial infrastructure
repairs, and direct liquidity toward the banking system.
Third, Prime Minister Alexis Tsipras must use his persuasive powers to convince the public,
in the style of US President Franklin D. Roosevelt, that the only thing they have to fear is
fear itself. Specifically, the government should make clear to all Greeks that their euro deposits
are safe; that the country will remain within the eurozone (despite the false claims by some
members of the Eurogroup that a no vote means a Greek exit); and that its banks will reopen
immediately after the referendum.
Finally, Greece and Germany need to come to a rapprochement soon after the referendum and
agree to a package of economic reforms and debt relief. No country – including Greece – should
expect to be offered debt relief on a silver platter; relief must be earned and justified by
real reforms that restore growth, to the benefit of both debtor and creditor. And yet, a corpse
cannot carry out reforms. That is why debt relief and reforms must be offered together, not
reforms "first" with some vague promises that debt relief will come in some unspecified amount
at some unspecified time in the future (as some in Europe have said to Greece).
Greece is sliding into a full-blown national crisis as the final cash reserves of the banking
system evaporate by the hour and swathes of industry start to shut down, precipitating the
near disintegration of the ruling coalition. Business leaders have been locked in talks with
the Bank of Greece, pleading for the immediate release of emergency liquidity funds (ELA) to
cover food imports and pharmaceutical goods before the tourist sector hits a brick wall. Officials
say the central bank will release the funds as soon as Friday, but this is a stop-gap measure
at best. "We are on a war footing in this country," said Yanis Varoufakis, the Greek finance
minister. The daily allowance of cash from many ATM machines has already dropped from €60 to
€50, purportedly because €20 notes are running out.
Large numbers are empty. The financial contagion is spreading fast as petrol stations and
small businesses stop accepting credit cards. Constantine Michalos, head of the Hellenic Chambers
of Commerce, said lenders are simply running out of money. "We are reliably informed that the
cash reserves of the banks are down to €500m. Anybody who thinks they are going to open again
on Tuesday is day-dreaming. The cash would not last an hour," he said. "We are in an extremely
dangerous situation. Greek companies have been excluded from the electronic transfers of Europe's
Target2 system. The entire Greek business community is unable to import anything, and without
raw materials they can't produce anything," he said.
Troika Maneuvering to Rig Greek Referendum (Martin Armstrong)
In a TV interview, Mr. Varoufakis said very clearly,
"This is a very dark moment for Europe. They have closed our banks for the sole purpose
of blackmailing what? Getting a 'Yes' vote on a non-sustainable solution that would be bad
for Europe."
I must admit, most politicians do not come even close to the truth, but Varoufakis seems to
be the ONLY finance minister who understands the demands of the Troika are not plausible for any
nation. Merkel has tried to skirt any responsibility by saying this is a Troika decision. One
must seriously ask, are those in the Troika just totally brain-dead? Their blackmail and economic
war against Greece will be evidence to ensure that Britain leaves the EU. The ONLY thing that
saved Britain was Maggie Thatcher's effort to keep Britain out of the euro for she knew far too
well where it would lead.
The view in Poland is also now anti-euro. Any Brit who now does not vote to get out of the
EU and the grips of the Troika is ignorant of world events and the political power play going
on. The EU leaders will not travel to Athens until after the referendum. Suddenly they realize
that their powers are so off the wall that they dare not expose their own schemes. Hollande of
France wants a resolution for he fears a Frexit is gaining momentum. Obama wants a resolution,
fearing Greece will be forced into the arms of Russia, breaking down NATO. Yet through all of
this, there is no hope because those in power are clueless. The Troika refuses to solve the euro
crisis because they only see their own self-interest and assume they can force their will upon
all the people.
The Troika is doing everything in their power to rig the Greek referendum to make it appear
that the Greek people want Brussels. The Troika deliberately closed the banks to punish the people
of Greece, and to show them what exiting the euro means. This appears to be their only way of
diverting the crisis with orchestrating a fake "YES" vote to economic suicide. The Troika will
attempt to rig the referendum as they did with the Scottish elections. So expect biased vote
counting in favor of a "YES" vote to stay in the euro. As Stalin said, "Those who vote decide
nothing. Those who count the vote decide everything." http://www.armstrongeconomics.com/archives/34268
So, do you think the large banks in the US have any loans still in their vaults or did they sell
them all to the FED when it was buying 85 BILLION per month? I mean, most of the real estate loans
are FHA, so never show up anyway. And the banks received dollar for dollar value on the exchange
of bad and marginal loans and even, why not, good loans?
After
the hell of World War II, the Federal Republic of Germany – commonly known as West Germany – got
massive help with its debt from former foes. Among its creditors then? Greece. The 1953 agreement,
in which Greece and about 20 other countries effectively wrote off a large chunk of Germany's
loans and restructured the rest, is a landmark case that shows how effective debt relief can be.
It helped spark what became known as the German economic miracle.
So it's perhaps ironic that Germany is now among the countries resisting Greece's requests
for debt relief. Greek Finance Minister Yanis Varoufakis claims debt relief is the key issue that
held up a deal with creditors last week and says he'd rather cut off his arm than sign a deal
that does not tackle the country's borrowings. The IMF backed the call to make Greece's debt manageable
with a wide-ranging report on Thursday that also blames the Greek government for being slow with
reforms. Despite years of budget cuts, Greece's debt burden is higher than when its bailout began
in 2010 – more than €300 billion, or 180% of annual GDP – because the economy has shrunk by a
quarter.
The social fabric in Greece is likely to unravel completely providing the fascist
New Dawn an even larger opening. Those that want to accept whatever terms the EU/IMF offer to
insure their banks get the emergency funding to stay open and will vote Yes in the referendum
are neck and neck with the No vote group.
Syriza knows that at the end of the day they have a Hobbesian choice. The majority of Greeks
want to be in the Euro. If Syriza want their banks open under the Euro system they have to agree
to whatever the EU offers, otherwise they'll have to go against the wishes of the majority of
Greeks and move to another currency. They have no other choice.
jfl @73, have ADL acknowledged Israel's reassurances from Ukranian NAZI's?
ADL condemns Greeks
for thinking Jews exercise inordinate control over finance and the global economy (implying their
resistance arises out of antisemitism). Israel supports fascists where they commit to "oppose
all [racist] phenomena, especially anti-Semitism, with all legitimate means." If ADL does not
request such commitment from Syriza (which is obviously unnecessary), is that because they don't
want it? Do they not want it because the Greeks are right?
Re somebody @74: Sachs, ever this schmuck-comprador, concludes "No country – including Greece
– should expect to be offered debt relief on a silver platter; relief must be earned and justified
by real reforms that restore growth, to the benefit of both debtor and creditor." Why does he
neglect the issue of odious debt, you may ask:
[SNOWDEN] do you see 'odious debt' as a workable concept?
[SACHS] That's a tough question.
I am sympathetic to the idea but I have taken a
somewhat different view. I of course agree with Michael Kremer that cer-
tain debts need to be forgiven, and his view is that certain debts ought not
to be enforceable at all. There are two aspects that concern me with his
approach. First, even non-odious debt should be forgiven in many circum-
stances. So I don't think that the answer to sub-Saharan Africa's debt prob-
lem depends so much on where the debt came from, as opposed to what
the current implications are of the accumulated debt. Some countries get
themselves into a mess through bad luck or bad governance and in my
view these countries need help. Societies should not be trapped by debt
when it is a life and death issue. Second, I am not sure that we know, or can
define what 'odious' means in a clear-cut, unambiguous way. Tastes vary a
lot about what is or what is not good governance. I worry that rich and pow-
erful countries are likely to manipulate decisions on which debts are to be
defined as odious. I would not want to see the Pentagon deciding whose debts
are odious and whose are not. So the applicability of the concept worries
me. However, there is something particularly troubling about a brutal dic-
tatorship that takes on debt by mortgaging national assets and then the cit-
izens of that country, for decades to come, having to pay for that debt. After
all, in most countries private citizens are not responsible for the repayment
of debt incurred in their name by fraudsters. So I sympathise with the
idea, but have a problem seeing how the idea can be put into operation.
Forgive me, I cannot waste any more time deconstructing that obvious bullshit. SACHS is a legendary
good cop. The "NO" possibility must be bracketed and so his "approval" is unsurprising.
To okie farmer @76; Armstrong is hysterical: e.g. "One must seriously ask, are those in the
Troika just totally brain-dead?" and "there is no hope because those in power are clueless."
Blimey, 'e sounds like a fooking war correspondent. 'E must like war.
:-)) Chomsky should have known better. The information
in the approval is that there is a transatlantic economist establishment party supporting the
"no",
apart from Syriza, Beppe Grillo, Podemos - and British media. Looks like the regime change plot
is a German one.
PM Tsipras said that Euro members will never allow Greece to exit, because it would be too
expensive. But what is, really, the cost of Grexit?
We estimate the minimum direct cost of Grexit at around €239bn or 2.4% of Eurozone GDP.
Is
Greece too big to fail for the Eurozone, as Tsipras argues? No. Grexit costs are manageable
for creditors. Yet, Grexit is twice more expensive than keeping Greece within the Eurozone
(even with debt relief). Making Greek debt sustainable again by restructuring it and bringing
close to 100% of GDP, would cost roughly half that (€140bn, or 1.4% of Eurozone GDP). The real
issue, of course, would be moral hazard for other countries, which may be incentivised to ask
for debt relief as well. This issue may be avoided with a conditional form of debt restructuring...
... ... ... According to the RBS analysis, it makes financial sense for the Troika to help Greece
instead of risk GRexit. Its only that other countries might seek debt relief that prevents them
from doing so (plus their dislike of the Tsipras government).
And, we now know that the IMF
agrees: Greek debt should be restructured.
Tusk refused to get drawn out on what this alternative solution might look like. "If you imagine
too much, you get self-fulfilling prophesies," he said, adding that it was above all necessary
to "avoid this dramatic scenario: the breakup of the eurozone."
He added that the stakes in Greece go well beyond the debt or future of the euro, and are
at heart geopolitical: "Greece and the Balkans are the traditional soft underbelly of Europe,"
and the EU needs to move "very, very cautiously."
Let Greece go bankrupt within the Euro. ECB control capital
flows. Foreign banks to take over bankrupt Greek national banks. Personal hardship to be softened
by humanitarian EU programme.
Mr. Tsipras's unexpected decision to call the referendum was the equivalent
of a frustrated chess player trying to break open a match with a daring last-minute move that
his opponent considered to be against the rules.
We are witnessing a black swan event. The Greek banks have run out of cash. Either the EU
seizes Greece or a failed state in Europe has been born with Ukraine soon to follow. All of the
Greek debts are void and trillions in derivative payments will be due. This is 2008 all over again
with the collapse of the western financial system possible. This is why everyone is so desperate.
Yet, for pennies on the total cost of the default, Greece could be saved. Magnanimity may yet
win out but it would mean the end of the current rule of extinction capitalism in the West.
"...Neoliberal politicians are well-paid traitors to their own countries and peoples - how much
empathy can be expected of them for anyone else?"
"...When I see expressions like "hard-working" and "sustainable", I stop reading. It is as Orwell
said: ready made plastic expressions rushing in to smother all possibility of an original individual
thought. All this dolt needed to include were "inclusive", "sensitive", "globalised", "aspirational",
"stakeholders", and he would be done."
"...You are quite right about Golden Dawn but I don't think the Troika actually care about
that so much. Its beyond obvious that the Troika care nothing for the Greek population and I think they
would be content with a fascist dictatorship as long as it signs up to austerity."
"...That would not be a bad thing, but I don't think the Euro is seen as an error or a mistake
at all. As Germany has discovered, it is an extremely useful tool in assuring the triumph of greed:
keeping populations poor, unemployed and fearful, so they are more willing to accept the lash of the
markets and agree to bank bailouts, low wages, a diminished social safety-net, trade treaties, etc.,
etc."
The possibility of a Greek exit from the eurozone has never been more likely. We shouldn't be
under any illusions – this would be a catastrophe for Greece's eurozone creditors, the Greek state
and the European Union.
Like it or not, we are all in this together. If we continue on our current trajectory, everyone
stands to lose from what now resembles a reckless, self-destructive standoff. The Greek economy is
on the verge of complete collapse. This would not only be devastating for the people of Greece, it
will guarantee that creditors never see their money again. We must remember that Germany has lent
approximately €80bn. This is an astonishing figure, close to a quarter of Greece's budget for 2016.
Yet the sad irony is, the longer the current impasse continues, the greater pressure Angela Merkel
will face within her own party to reject any solution that is accepted by the Greek government.
But much more is at stake than euros. The world will consider a "Grexit" as a devastating blow
for EU monetary cooperation and the European project. A destabilising Grexit will only be welcomed
by the likes of China, Russia and those who are most threatened by a strong, united European Union.
If Greece is to stay within the eurozone, we need to secure a massive de-escalation of the tensions,
rhetoric and threats from both sides – and fast. It is time for Greece's finance minister Yanis Varoufakis
and the political leaders of the eurozone to come to their senses and bring this crisis back from
the brink.
Prodisestab -> HolyInsurgent 3 Jul 2015 18:26
Neoliberal politicians are well-paid traitors to their own countries and peoples - how
much empathy can be expected of them for anyone else?
Agreed to a good extent. However, when the discussions broke off Friday night, the two sides
were very close regarding the measures that were needed. I believe that they were off by 60 million
euros only. Their differences were mostly about the types of measures to be taken with the Greek
government wanting more taxes on businesses and the creditors wanting more to be paid by ordinary
people. The problem that I have and that a lot of observers have with that is the fact that the
Greek government did compromize quite a lot while the creditors refused to budge from their inflexible
position despite the fact that implementation of their policies during the last five years has
put the country into a depression. A basic premise of "negotiation" is that both sides make compromises
in order to arrive at a mutually beneficial solution. In this case the creditors demonstrated
total lack of flexibility, which clearly indicates alterior motives at least on the part of some
of the creditors. In Germany they have fed their people with all the hate against "lazy Greeks"
etc that clearly shows up in these messages and in that sense they have themselves created a very
negative environment. I believe that about 90% or so of all the loans that have been given to
Greece went back to the creditors. Greece is not looking for handouts here. This must be understood.
This is a debt crisis that has been mishandled and that has span out of control as a result.
Economic terrorism is not justified under any conditions and particularly within the EZ.
LiveitOut 3 Jul 2015 21:45
When I see expressions like "hard-working" and "sustainable", I stop reading.
It is as Orwell said: ready made plastic expressions rushing in to smother all possibility of
an original individual thought.
All this dolt needed to include were "inclusive", "sensitive", "globalised", "aspirational", "stakeholders",
and he would be done.
How odd all this stuff about hardworking families when we are all being screwed to kingdom come
by hard whoring banking gangsters who have never done a second of useful work in their effing
lives --
The Greek economy is on the verge of complete collapse. This would not only be devastating
for the people of Greece, it will guarantee that creditors never see their money again.
The debt has been known to be unpayable for a long time. It has nothing to do with current events
in Greece. It should have been written off.
No one believes anything Alexis Tsipras says anymore, and this is why a yes vote on Sunday
is crucial. But it's also clear eurozone leaders have made mistakes with Greece.
But despite their nonsenses the latter group somehow, mysteriously, retain credibility. It was
not the antics of Tsiparis that brought about this mess but the behaviour of his 'credible' opponents.
Greece and its creditors agree a three-month window to develop a long-term reform programme
combined with an investment package to turn Greece's ailing economy around.
Now you are getting close to the Syriza position.
Let us use this crisis to deliver real, sustainable change by drawing up a settlement in
the next three months in which the Greek state, its government and its administration are paying
back the debts, instead of forcing hard-working citizens to pay the bill.
Is that before or after the twenty-year moratorium on debt implied by the IMF?
From the burning embers of two world wars, we have created a single market with free movement
of people, goods, services and capital.
And the freedom to avoid taxes.
PaleMan -> jonbryce 3 Jul 2015 12:59
You are quite right about Golden Dawn but I don't think the Troika actually care about
that so much.
Its beyond obvious that the Troika care nothing for the Greek population and I think they would
be content with a fascist dictatorship as long as it signs up to austerity.
Danny Sheahan 3 Jul 2015 12:59
No one believes the ECB or the EU leadership anymore.
If they were serious about the Euro as a strong functional currency this mess would not be
so big.
They would not have had to flush out private German and French bad debt in the 2nd bailout
by putting it on the tax payer, or those countries would have had to step in to hep their banks
and political careers would have been over.
The ECB has become a political football and it cannot maintain stability in its currency region.
It is a failed central bank.
Vilos_Cohaagen 3 Jul 2015 12:58
"The Greek economy is on the verge of complete collapse. This would not only be devastating
for the people of Greece, it will guarantee that creditors never see their money again."
The problem is that there's no scenario where the creditors do get paid back. So, why (for
a start) "lend" them 60 billion more Euros? Wiping the debt completely out just means that the
Greeks can start accumulating new "debt" they'll have no intention to re-pay and will be defaulting
on a few years down the line.
BusinessWriter 3 Jul 2015 12:52
it will guarantee that creditors never see their money again.
Crazy - this Guy actually thinks the creditors have any chance of seeing their money again
- what planet is he on.
As for his idea that the Greek state (or any state for that matter that doesn't control its own
currency) can pay of its debt independent of the taxpaying public - it's deluded nonsense.
Where is the Greek state supposed to get the billions of euro from? The only source of revenue
it has is taxes or selling assets that it holds on behalf of the citizens of Greece.
Equally, the idea that the clientelist state is somehow a separate thing to the majority of
the Greek people is nonsense. So many of them are either employed by the state or in professions
protected from competition by the state or in companies that only serve the state. Identifying
anyone who doesn't benefit in some way from the current clientelist state would be like looking
for an ATM in Athens with cash in it on Monday morning.
This Guy is just another symptom of the problem - he offers no sustainable solution - and what
he does offer is incoherent and too late.
fullgrill -> elliot2511 3 Jul 2015 12:51
That would not be a bad thing, but I don't think the Euro is seen as an error or a mistake
at all. As Germany has discovered, it is an extremely useful tool in assuring the triumph of greed:
keeping populations poor, unemployed and fearful, so they are more willing to accept the lash
of the markets and agree to bank bailouts, low wages, a diminished social safety-net, trade treaties,
etc., etc.
whichone 3 Jul 2015 12:50
"Syriza's game is up. No one believes anything Alexis Tsipras says anymore"
well 1) it looks like 50% of the Greeks believe him
2) The IMF (and Merkel in leaked notes) have acknowledged that the debt is unsustainable even
if Greece accept all conditions imposed by the Troika.
Varoufakis has been saying this since the start. So lets no longer pretend that this is all
about getting the money back or that Greece wants to avoid its responsibility to its creditors
: again will say Varoufakis has said the Greek government does not want to do this. The point
is he and many other knowledgeable people (not politicians) know that it can not be paid back
, but with the conditions in place to allow the economy to start to grow then Greece has a chance
to pay some of it back. This is about bringing a Government to heel. I wish the Guardian , having
continually reported on this crisis and knows what has been said allows a contributor to use the
paper as propaganda.
And I hope that all those people who purposely said that a 'NO' vote means a no to Greece in
the Euro and EU after a 'NO' result and surprise surprise Greece is still in the Euro, get thrown
to the Wolves.
The same is goes with the comments about Varoufakis playing Game theory. He denied this basically
saying that those who say this obviously don't know the first thing about Game Theory.
badluc TheSighingDutchman 3 Jul 2015 12:48
Genuine question: correct me if I'm wrong, but haven't the electorates of Germany, Netherlands,
Finland etc been consistently fed by most of their politicians (and newspapers) a completely mistaken
"morality tale" about what the root causes of the problems are, blaming inefficient and corrupt
governments who borrowed too much, without mentioning either the reckless lenders (mainly German,
French, Dutch etc banks), were silent about the shifting of the burden of bad lending from the
banks to the EU taxpayers (did they ever acknowledge that clearly?!?), describing the solution
as a punitive austerity which would somehow bring moribund economies back from the abyss, etc?
Politicians have a duty to be frank and sincere with their electorate, sharing with them all the
relevant data they have on a given problem. If they have been feeding them misguided rhetoric,
they have only themselves to blame if the chickens now come home to roost. In other words, if
the electorate would now revolt against the inevitable, don't the politicians of those countries
who have most strongly supported and advocated austerity have only themselves to blame?
SouthSeas 3 Jul 2015 12:48
Germany has lent 80bn to Greece to pay back loans from German banks
RudolphS 3 Jul 2015 12:47
While Verhofstadt calls for a cooling-off period he at the same time claims 'Syriza's game
is up' and is urging the Greek people to vote 'yes' next sunday. With the latter he shows his
true colours as just another Brussels eurocrat, and is only fuelling debate instead of cooling-off.
Dear Mr. Verhofstadt, why the hell do you think the Greek voted en masse for a party like Syriza?
Because they are sick and tired of people like you.
And yes, there much more at stake than a debt. Putin must be watching this whole spectacle
with total bewilderment how the EU is crippling itself from the inside.
Rainborough 3 Jul 2015 12:47
Anyone who is in danger of being impressed by conservative politician Guy Verhofstadt's perspective
on Greek problems might like to bear in mknd that among his numerous other highly lucrative financial
interests is his position on the board of the multi-billion Belgian investment company Sofina,
whose interests include a stake in the highly controversial planned privatization of the Thessaloniki
water utility.
hatewarmongers OscarD 3 Jul 2015 12:46
The neoliberal elite don't
SHappens 3 Jul 2015 12:17
In a democracy people can chose their fate by voting or through referendum. That's the way
it goes but not in Europe where referendum are seen as a danger to the establishment. Tsipras,
as soon as he came to power through a democratic vote was seen as a danger. He was ostracized
and considered a pariah, Greece became a pariah state and they can as well die from hunger.
The EU, and institutions have behaved like the little bullies they are, just like they did
with Switzerland after the vote on immigration, they threat, blackmail everyone who dare think
different.
For the sake of democracy, the Greeks have to vote no, there is no other decent alternatives
especially after all the bashing and disrespect they have been under. Nobody in EU and US (since
they have their say in european affairs) want to see Greece walking away, nor Russia or China
for that matter. But Tsipras had the opportunity to see where his real allies stand, and it is
not within Europe. He might not forget this in the future.
mfederighi 3 Jul 2015 12:09
You are entirely right in suggesting that the only sustainable solution is a far-reaching reform
programme for the Greek state and the reek economy. However, when you say that:
Greece's people must be at the centre of such a settlement. They did not cause this crisis
and remain the victims of successive Greek governments, who have protected vested interests
and the Greek clientelist system at their expense.
You seem to think that vested interest and the reek clientelist system are distinct from the
Greek people. There is, I am afraid, a substantial overlap - that is, quite a few people benefit
from clientelism and are part of vested interests. Not recognising this is disingenuous.
After all, corrupt and inefficient governments have been elected again and again - by whom?
jimmywalter 3 Jul 2015 12:06
The Banks solution is no solution - it means poverty and no taxes to pay to repay. The Banks
want a Treaty of Versailles. We all know of a certain Austrian that rose up to end the German
economic collapse. We all know how that ended. I don't want that again. People revolt over economics.
Spain, Italy, and Greece have huge numbers of unemployeed who did nothing to create this crisis.
The Banks did. Who should pay? Anyway, leave the Euro, stay in the EU!
Here are my thoughts on options for handling Greece's debt.
Let me begin with the following question: if someone makes a new loan to the Greek government,
are they ever going to get paid back? Let's start by being clear about what we mean by "paid back."
There's nothing fundamentally unsound about the consols that the British government sometimes used
historically to borrow. These bonds were intended to pay interest forever but never repay the principal.
In practical terms it's not really that different from a 30-year bond, nor for that matter from a
one-year bond that creditors always roll over. As long as the interest payments always get made,
the buyer can consider himself fully "paid back" in the present-value sense for the consol he purchased,
even if the principal itself is never repaid.
But the question is, where will the Greek government get the funds with which to make future interest
payments? If they always just borrow new sums with which to make interest payments as they come due,
it's obviously not a good deal for the creditors. The debt just grows over time, and creditors are
only being paid back with their own money. If you followed the cash flow over time, you'd find it's
always a one-way street from creditors to borrowers, and amounts to an outright gift from creditors,
not a loan that is ever paid back in any sense.
One way to keep track of this is by looking at the government's primary budget surplus, which
is calculated by taking the usual budget surplus and adding to it the government's annual interest
payments. If the interest payments are large, the normally calculated budget might be in deficit
(defined here as a negative surplus). But when you add interest payments to that negative number,
it could come out to be a positive number.
If the normal budget is in deficit but the primary budget is in surplus, it means that the debt
is going to grow over time, but at least some of the interest payments are being made with real funds
instead of with new borrowing. If you work through the math, it turns out that as long as the primary
budget surplus is equal to annual interest expense, creditors are being fully repaid in present-value
sense, even though the debt itself is never retired.
But if the primary surplus is less than the annual interest expense, the debt will be growing,
and repaying in present value requires continual revenue increases or budget cuts. The question anyone
lending new sums to Greece must contemplate is whether that's a plausible scenario.
What are the numbers for Greece's primary surplus? It turns out it's harder to find a straight
answer to that question than it should be. The graph below plots the figures from the
IMF World Economic
Outlook database. These claim that after years of big deficits, Greece finally ran a primary
surplus of 1.2% of GDP in 2013.
But the ECB claims instead that
Greece ran a primary deficit of 8.3% of GDP rather than a surplus in 2013. What's the controversy?
Based on
this report from the Wall Street Journal, it appears that the IMF must be excluding one-time
expenditures in support of the Greek banking system, which amounted to 10.8% of GDP. In terms of
the calculus of whether external creditors on net were getting repaid anything in 2013, the ECB concept
appears to be the correct one– Greece was still running a big primary deficit in 2013 in the sense
that any interest payments they made that year, along with much of their spending, were paid for
with newly borrowed money.
For 2015 the IMF is anticipating a primary surplus of 3% of GDP. But
Daniel Gros attributes the
surplus so far in 2015 to factors such as the government not having made cash payments yet for goods
and services already ordered or provided– otherwise known as new government borrowing not recorded
in the official measures of government debt.
This is why creditors are asking for more progress from Greece on the primary surplus before extending
additional funds. But here's the response of Greek finance minister
Yanis Varoufakis:
Greece's drama is often misunderstood in northern climes because past profligacy has overshadowed
the exceptional adjustment of the past five years. Since 2009 the Greek state's deficit has been
reduced, in cyclically adjusted terms, by a whopping 20 per cent, turning a large deficit into
a large structural primary surplus. Wages contracted by 37 per cent, pensions by up to 48 per
cent, state employment by 30 per cent, consumer spending by 33 per cent and even the current account
deficit by 16 per cent.
Alas, the adjustment was so drastic that economic activity was choked, total income fell by
27 per cent, unemployment skyrocketed to 27 per cent, undeclared labour scaled 34 per cent, public
debt rose to 180 per cent of the nation's rapidly dwindling GDP, investment and credit evaporated
and young Greeks, just as their Irish counterparts, left for distant shores, taking with them
huge quantities of human capital that the Greek state had invested in them.
What Greece needs now is not more cutbacks that push an impoverished populace into greater
indignity, or higher tax rates and charges that crush what is left of economic activity. These
"parametric" measures, as the institutions call them, have been excessive, the result now being
a nation on its knees.
No, what Greece now needs desperately is serious, proper reforms. We need a new tax system
that helps defeat evasion and curtail political or corporate interference, a corruption-free procurement
system, business-friendly licensing procedures, judicial reforms, elimination of scandalous early
retirement practices, proper regulation of the media and of political party finances, etc.
Suppose we granted the claim that further tax increases or spending cuts would be crippling and
self-defeating. If true, doesn't that make a pretty good case that Greece does not have the capability
to make real interest payments on any new debt? And if it is as simple as implementing a few reasonable
reforms, why were these not instituted earlier, and how effective can they be expected to be? Why
wouldn't they also depress demand in an already depressed economy?
By now it should be clear to all that the only reason why Germany has been so steadfast in its
negotiating stance with Greece is because it knows very well that if it concedes to a public debt
reduction (as opposed to haircut on debt held mostly by private entities such as hedge funds which
already happened in 2012), then the rest of the PIIGS will come pouring in: first Italy, then Spain,
then Portugal, then Ireland.
The problem is that while it took Europe some 5 years to transfer a little over €200 billion in
Greek private debt exposure to the public balance sheet (by way of the ECB, EFSF, ESM and countless
other ad hoc acronyms) at a cost of countless summits and endless negotiations, which may or may
not result with the first casualty of the common currency which may prove to be reversible
as soon as next week, nobody in Europe harbors any doubt that the same exercise can be repeated
with Italy, or Spain, or even Portugal. They are just too big (and their nonperforming loans are
in the hundreds of billions).
And yet, today, in a stunning display of the schism within the Troika, it was the IMF itself which
explicitly stated that Greece is no longer viable unless there is both additional funding
provided to the country, which can only happen if there is another massive debt haircut.
Even with concessional financing through 2018, debt would remain very high for decades
and highly vulnerable to shocks. Assuming official (concessional) financing through end–2018,
the debt-to-GDP ratio is projected at about 150 percent in 2020, and close to 140 percent in 2022
(see Figure 4ii). Using the thresholds agreed in November 2012, a haircut that yields
a reduction in debt of over 30 percent of GDP would be required to meet the November 2012 debt
targets. With debt remaining very high, any further deterioration in growth rates or
in the mediumterm primary surplus relative to the revised baseline scenario discussed here would
result in significant increases in debt and gross financing needs (see robustness tests in the
next section below). This points to the high vulnerability of the debt dynamics.
And the kicker:
"these new financing needs render the debt dynamics unsustainable."
Bingo, because that is, in a nutshell, precisely what Tsipras and Varoufakis have been claiming
since day one. As expected, a Greek government spokesman promptly said that the IMF report
is in line with the Greek government's view on debt.
What makes the IMF report even more odd, is not so much its content and position which have been
largely known for quite some time now, but its timing: just three days before the Sunday referendum,
Tsipras now has prima facie evidence to wave in front of the Greek people and say "see,
we were right all along."
It is exactly the case that only a "No" vote at this point would allow
Greece to continue a negotiation which has already seen one of the three Troika members side with
the Greek position. Should Greece vote "Yes", it will make any future negotiation with the Troika
impossible, and while the country will get a few months respite the resultant bank run after the
bank reopen with the ECB's blessing will mean that all Greece will do is buy itself a few months
time. Only this time all the debt will still be due.
And, should hey vote "Yes", this time the Greeks will only have themselves to blame for all the
future pain, pain which will continue
well after the mid-point of this century.
But ignoring Greece for a minute, what the IMF's "debt
sustainability analysis" has just done is open the door for every single other comparably
insolvent peripheral European nation to knock on Christine Lagarde's door and politely ask:
"Mme Lagarde, if Greece is unsustainable, then why aren't we?"
Because as the chart below shows, the debt situations of all the other peripheral European nations
is just as "unsustainable."
In this way, while the outcome of the Greek situation is currently unknown, it has also become
moot, because at this very moment, politicians from Spain's Podemos to Italy's Five Star
movement are drafting memos demanding that the IMF evaluate their own debt sustainability.
Or rather unsustainability.
Perhaps more importantly, these same politicians will now dangle the prospect of an IMF admission
that they, too, deserve a haircut as the catalyst to be elected into power. After all who can refuse
that their life would be made so much better if only the country was permitted to selectively "default"
on €50, €100, €200 billion or more in debt? Just elect this politician, or that, and watch your living
standard soar...
And since the IMF has no choice but to agree that just like Greece all these nations are accordingly
drowning in debt, Syriza's sacrifice (assuming Tsipras fails to outnegotiate Merkel) will not have
been in vain. In fact, it may very well end up that today the IMF opened up the Pandora's box, one
which, more than a Grexit, will destroy Merkel's "united Europe" legacy.
Looks like US is using IMF to mess around a bit with German (and russian) ambitions.
i_call_you_my_base
Was thinking the same. The US is trying to foul things up for Europe here.
Pool Shark
Just like the 'Dread Pirate Roberts,' Central Banksters must leave no survivors. Otherwise
word gets out that they've gone soft, and then it's nothing but 'work, work, work...'
disabledvet
Smith and Wesson sure looks good here.
"You can keep the Ouzo." And the "Ginsu 2" apparently.
The IMF is just a repository for US dollar funding. If the entire Continent of Europe cannot
cough up a single US dollar to pay for "Greece" then that is the ECB's problem...not the IMF's
problem.
Those dollar sure look pretty expensive right now...on that I would agree.
Tall Tom
Can I draft a memo to the IMF requesting if the United States can pay its debts?
Do you think that I'd be taken seriously?
Our arrears are worse than Greece's ever were. The Debt is unpayable.
This is laughable.
weburke
I predict 3 countries out of the eu, and the greek guy gets big billing with the pope talking
us into the nwo.
greenskeeper carl's picture
Hahaha I fucking called this shit this morning as soon as I saw that first article. We don't
need no water let the motherfucker burn... The house of cards is getting flimsy.
One of these is...
+1 for the firewater burn reference.
boogerbently
Contagion from NOT throwing Greece under the bus. The rest want THEIR "write downs" now.
Haus-Targaryen
Interesting.
This pits the IMF against Rainbowland. Their actions here imply they want the system to blow
up (free shit for Greece (which is affordable) also means free shit for Italy and Spain (which
isn't affordable)) however, Greece is now in formal default, and ClG could write her letter and
deliver it tomorrow, blowing up Greece beyond recognition tomorrow.
The EU is pretty steadfast in what they desire -- Greece to bend over and keep the system going.
Greece is pretty obviously willing to play kamikaze economics.
What I don't get is the IMF. Some of their actions imply they want the system to explode, while
their other actions imply they don't. Given Greece and the EU kinda off-set each other right now
-- the player at this point to watch is the IMF. ECB can wreck havoc with their collateral requirements,
but apart from that this pig is stuffed until 6 PM CST on Sunday.
Crtrvlt
1) the IMF (US) realizes Greece can't fail for strategic geographic reasons
2) they are trying to save face for Merkel
Bankster Kibble
1) the IMF (US) realizes Greece can't fail for strategic geographic reasons
1.1) Greece must stay inside the EU because it is easier to block Russian gas lines that way,
and the EU is too divided to decide how to pay for a gas line through Greece by itself
disabledvet
Greek "euro-debt" WAS paying 18% just last week.
"Ruble MONEY" pays about 14%...give or take.
Brazilian REALES look like the best deal on actual MONEY right now would appear...there just
aren't many of those either though.
two hoots
This debt juggernaut is the planet's most serious threat. World leaders must get a grip on
all lending institutions that can place irresponsible/shortsighted/corrupt countries in Greece
situations.
We know the cause, symptoms and prognosis but fail to find a cure other than continuous talk,
talk and more talk and more debt and we even know why we do this.
The US, G7, G20, UN someone, somewhere must take lead and cure the world of this bankers disease.
The bankers caused it; keep them away from the patient.
I totally get the naivity of my comment, but this fixing it with what caused it is ...well.
James_Cole
Greece is now in formal default. Are they though? What I don't get is the IMF. Some of their
actions imply they want the system to explode, while their other actions imply they don't.
Considering Germany and France have competing interests to the US this would make sense.
All I know is watching this has been a lot more interesting than last seasons game of thrones.
i_call_you_my_base
I agree with you again. I'll throw this out there: if the US rattles Europe here, and then
even pushes China's markets over, the US would have effectively kneecapped every major economy
(inc Russia), all of northern Africa, and the ME in a decade and a half.
Captain Debtcrash
But nothing on Japan. It's amazing how they can look at one, Greece and say it is unsustainable,
but just because Japan, who is in much worse shape, can print money they don't see a problem.
A solvency crisis can not be solved with money printing, and most developed nations are insolvent.
When the collective world realizes a printing press makes no difference there will be fireworks,
and that realization will happen in the blink of an eye.
itstippy
Japan does not owe the Troika any money. Japan is not part of the European Union. Madames LeGarde
and Merkel don't give a shit about Japan. I agree Japan is hopelessly insolvent, and the fact
that JGBs (denominated in Yen) are seen as a "safe haven" in times of global turmoil is insane.
Someday soon they are going to melt down into a pool of toxic crap.
F0ster
Exactly, if you "fuck the EU" and make them so poor they buy less energy products, you inadvertently
kill one of Russia's preferred revenue streams. So the US is using the IMF to fuck the EU in its
war with Russia.
falak pema
Hahaha, the "jack in the box flavour of truth"... the IMF now caught in its own cross hairs.
DSK made that statement a few days ago that the chief economist of the IMF has now set in stone
like a potential time bomb.
And Lady LAgarde, the scheming Milady of Status Quo, (she said no debt restructuring UNTIL
they implement full austerity in Greece and kill all those pensioners), is now made to look like
what she truly is : A creature of Pax Americana power cabal. The woman who said to Sarkozy; another
Neo-con fellow traveller; fais ce que tu voudrais de moi Nicolas...back in 2007 when he got elected
to President. And he did!
Now the IMF has turned the tables; probably to follow suit in echoing the declarations of its
ex and humbled CEO; DSK. Is this the work of Olivier Blanchard who leaves the IMF or is it the
work of his successor? In any case this is a psychological time bomb as the IMF mask comes off!
Rainman
Pretty clever ...this is where Lew gets a demand for a declaration of unlimited credit to the
IMF; then the cycle of destruction moves to the next phase.
overqualified
Meet the new Mutually Assured Destruction
N57Mike
"Pandora was a woman who lived with her husband in a paradise and was given a beautiful box
for safekeeping with the caution that she ought not to ever, ever open it. For a time she remembered
and kept her promise to not open the box but eventually succumbed to the temptation and decided
to have a peek. The lid flew open as soon as she raised it and a swarm of imprisoned evils flew
up and out into the world inflicting pain, greed, envy and manner of suffering on all they found.
Pandora and her husband Epimetheus were also the victims of all these ills, knew they were
responsible for the suffering and were grieving their part in it while sitting near the box. In
the midst of their lamenting, they heard a small voice crying out from the box, "Open, open, and
I will heal your wounds! Please let me out!" and while at first they were afraid to open it and
possibly release even more troubles, they eventually decided to see who the plaintive voice came
from.
They fearfully opened the box and found a small bright-winged beautiful creature. It was well
for Pandora that she opened the box a second thim, for the gods, with a sudden impulse of compassion,
had concealed among the evil spirits one kindly creature, Hope, whose mission was to heal the
wounds inflicted by her fellow prisoners"
Can't someone just print a $1 trillion Euro bill and hand it to the Greek government to pay
everything off and start anew.
NotApplicable
I think you mean SDR.
Long story short, the choices left are but two. Endure the pain of a global collapse, or enslave
the planet with all of this unpayable debt rolled up into the next global monetary system.
With a few wars along the way to grease the skids.
Cyring "Uncle!" yet?
Lea
The IMF is backtracking because the new Chinese-led bank has opened. It is not the only option
anymore.
The Chinese could step in any minute, and that would mean the end for the IMF's plundering
tactics - worldwide. So, letting go of some of its demented demands on Greece is only cautious.
"Germany is king when it comes to debt. Calculated based on the amount of losses compared to
economic performance, Germany was the biggest debt transgressor of the 20th century."
How many haircuts?
"That depends on how you do the math. During the past century alone, though, at least three
times. After the first default during the 1930s, the US gave Germany a "haircut" in 1953, reducing
its debt problem to practically nothing. Germany has been in a very good position ever since,
even as other Europeans were forced to endure the burdens of World War II and the consequences
of the German occupation. Germany even had a period of non-payment in 1990."
More:
Ritschl: That's what it looks like, but we were also extremely reckless --
and our export industry has thrived on orders. The anti-Greek sentiment that is
widespread in many German media outlets is highly dangerous. And we are sitting in a glass
house: Germany's resurgence has only been possible through waiving extensive debt payments and
stopping reparations to its World War II victims.
SPIEGEL ONLINE: You're saying that Germany should back down?
Ritschl: In the 20th century, Germany started two world wars, the second of
which was conducted as a war of annihilation and extermination, and subsequently its enemies waived
its reparations payments completely or to a considerable extent. No one in Greece has forgotten
that Germany owes its economic prosperity to the grace of other nations.
tom a taxpayer
The Greek referendum is a revolutionary action. It will spread like wildfire across Europe
and around the world whereever debt slaves yearn to be free. Over the coming days and weeks it
will drag the IMF, ECB and other world-class bankstas to their days of reckoning.
Hopefully, the Greek government will follow the referendum with the arrest and trial of Goldman
Sachs and other international bankstas. Justice cries out for a mass trial in the style of the
Maxiprocesso (Maxi Trials) of the Mafia in Sicily during the 1980s that resulted in hundreds of
defendants convicted.
Wouldn't it just be easier to drone all the Rothschilds and their central banks out of existence,
could be done in 24 hours.
Never_Put_Down
Hardly, they own the drones and the drone operators.
Jack Burton
I don't claim any great knowledge of high finance, though I have some basic understanding,
but, many here on ZH and ZH in general has been miles ahead of all the Media Mouthpieces, all
the IMF spokesmen, all the finance ministers of Europe combined.
" "these new financing needs render the debt dynamics unsustainable."
Who in the fuck did not know 3 years ago that the above was true?
And, Greece is the little boy with his finger in the dike. If the default hole begins to leak,
the supporting structures will be eaten away very fast, and the leak will become a flood. Allowing
haircuts and reducing austerity in one place will call forth the floods of demands for similar
treatment.
An Estonian finance minster summed it up. "We have not had years of austerity, cuts in
wages, health, retirements, education for years, ONLY in order for Greece to keep their benefits!
Play this same thought pattern out across the big problem children SPAIN, ITALY and IRELAND. Spain
for example is totally too big to be bailed out, and is too big to fail, Should IT fail, the EU
project melts away.
Over in Russia, a nation with NATO massing on it's borders, claiming to be defending against
a Russian invasion threat. A Russia under strict sanctions in finance, banking, energy and import
export trade. Russia is doing just what they should do. Take all the threats, the lies, the propaganda
and accusations from the West, stay mostly silent, stay behind their protected borders and wait.
As the EU mounts attack after attack, threat after threat, sanction after sanction, for no good
reaon other than Washington wants it, Russia is waiting. They may look to be outnumbered and out
gunned by the military and financial powers under Washington's direct control. But holding the
line and waiting is their best bet. They have surpluses of well over 300 billion, minimal debts,
a fast modernizing military, tens of billions in new gold holdings added to the already large
supply. They have energy independence totally. Sanctions have allowed Russian domestic agriculture
and manufacturing to instantly be competitive again, with imports being shut down.
The EU and Washington are right now at the very peak of their power to bully and threaten.
They look invincible! But a tiny nation like Greece, shows just how rotten the foundations are.
Washington, the giant power that also seems totally invincible, is really more rotten than Greece,
if you look at the scale of debts and obligations. To top it all off, Washington has declared
open war on China, the world's largest economy, and richest nation in terms of Real Money. \
The rot has set in, how fast it spreads is not something I can know, but I do know it will
spread!
"...Make no mistake: Sunday's referendum will mark a defining moment in Greece's modern history
and a decisive turn for Europe's neoliberal project."
Those who accuse the Greeks of "recklessness" are mistaken: the creditors' utter contempt
for democracy left them with no other choice but a rupture.
The announcement struck like
a bombshell.
Tsipras' spectacular decision late on Friday to fly back to Athens and put the Eurogroup's final
bailout offer to a referendum - with the government advising voters to reject the deal - has stunned
friends and foes alike.
Now, with depositors lining up at ATMs to withdraw cash, the Eurogroup refusing to extend the
current bailout program, the ECB capping its emergency liquidity assistance for Greek banks, and
Greece set to miss a €1.5 billion IMF payment on Tuesday, the long-awaited endgame is finally upon
us. After five long and exhausting years, the euro crisis has exploded into its dramatic climax.
Those who now lambast the Greek government for its supposed "recklessness" in calling the referendum
are profoundly mistaken. Yes, as I have argued many times before, Tsipras' and Varoufakis' belief
that they could somehow extract an "honorable compromise" from the creditors was always extremely
naive. But in the end it was the creditors' utter contempt for democracy that pushed Tsipras with
his back against the wall, forcing him to sign up to an agreement that they knew would split
his ruling party and government.
Deliberately tabling one outrageous proposal after another, the creditors' intention was clear
from the very start: they were never even remotely interested in any positive "deal"; the only thing
they would settle for was Syriza's complete and total surrender - ideally followed by technocratic
regime change inside Greece. Paul Krugman was therefore entirely right when
he referred to the creditors' ultimatum as "an act of monstrous folly."
Backed into a corner by the virulent moves of the Eurogroup and the IMF, Tsipras responded in
the only sensible way: he rejected the absurd proposal that the creditors had put on the table, took
the decision to his people, and advised them to vote against the creditors' disastrous ultimatum.
What is surprising is not that he made this move per se - but that it took him so long to
do it.
For five months, the creditors suffocated Greece, depriving it of all liquidity in a brazen attempt
to force Tsipras to sign up to humiliating concessions that would have condemned the Greeks to years
- if not decades - of extreme austerity. For five months, they doubled down on their cynicism and
steadfastly refused to make even the most minimal concessions. For five months, they publicly belittled
and degraded the democratically-elected representatives of millions of Greeks who had already suffered
untold hardship.
If Tsipras had signed up to this unacceptable deal, it would not only have meant political suicide
for him and his party; it would also have spelt an unmitigated disaster for the Greek people - not
to mention the lasting damage it would have inflicted upon the political prospects of the European
Left more generally. If there's anything reckless about Tsipras' approach, it's that he even let
the creditors get this far to begin with.
It was high time for the Big No - the resounding OXI!
For five years, European leaders and Greek elites sacrificed this beautiful country and
its exceptional people at the altar of the financial markets to save a handful of reckless speculators
inside the European banks and to convince international investors that the monetary union was irreversible.
For five years, they punished the Greeks for a deep-rooted structural crisis they had no
part in creating. For five years, they kicked the can down the road, hoping that the fundamental
contradictions of financialized capitalism and the European monetary union would somehow magically
disappear if only the inevitable moment of reckoning could be indefinitely pushed into the future.
This approach has now been exposed as a catastrophic but utterly predictable failure. Doubling
down on their extreme positions with the malicious intent of forcing the Greeks into a self-defeating
deal or disorderly exit, it was the creditors themselves who brought the Eurozone to the brink. Of
course they will boast that Greece has long since been "ring-fenced" and that the fallout of a Greek
default can now be contained, but investors will draw their own conclusions when they see a full-fledged
member of the Eurozone descending into chaos. It is no surprise that the euro is already tanking
in the Asian markets.
The gravest irony is that, all this time, there was a very straightforward and socially acceptable
way out of the deadlock. The sensible solution would have been to write off a significant chunk of
Greece's debt. But, as even the IMF has since
officially admitted, this option was politically unpalatable to Greece's "partners" from the
very start. In the early years, the Europeans feared that a debt write-down would lead to the collapse
of some of their biggest private banks. Now that Greece's debt has effectively been socialized, these
same European leaders fear an electoral backlash from their Euroskeptical taxpayers, who now stand
to bear the brunt of the impending Greek default.
In other words, it was the very intransigence of the creditors, the utter unwillingness to tell
their own voters the truth about the Greek bailout and their stubborn refusal to even contemplate
a sustainable and socially just resolution of the crisis, that led us to this dramatic apotheosis.
Greece and Europe now find themselves on the eve of a rancorous rupture. At the start of a week
that will undoubtedly go down in history as a make-it-or-break-it moment for Europe's ill-fated neoliberal
project, the skies over Greece are already darkening. A full-fledged bank run over the weekend forced
the government to keep the banks closed on Monday and to impose an ATM withdrawal limit of 60 euros
per day. The knock-on effects on the economy and society will make it very difficult for the Greeks
to vote in peace.
In this respect, the creditors' intentions are once again crystal clear: shocked and outraged
by Tsipras' unexpected move, they will do everything within their power to obstruct the democratic
process and influence the outcome of the vote. Their goal won't even be to keep Greece inside the
Eurozone anymore; their number one priority right now is simply to prevent Syriza from being able
to publicly claim a victory - for that would risk emboldening other anti-austerity forces across
the continent, most significantly Podemos in Spain. They would rather see Greece go down in flames
than cut Syriza some slack.
This is why the Eurogroup refused to extend Greece's current bailout program, not even for a few
days: they knew the ECB would not be able to maintain its emergency support of the Greek
banks without such a program, and they knew that without this support the Greek banks would
not be able to open on Monday. This, in turn, would force the Greeks to vote under conditions of
extreme financial uncertainty, emboldening the terror-campaign of the neoliberal opposition and possibly
skewing the vote in favor of a fear-induced yes.
Meanwhile, the unelected wing of the Troika technocracy has taken the trolling to a whole new
level. IMF chief Christine Lagarde argued that, since the creditor offer expires on Tuesday, Tsipras
is technically asking his people to vote on a deal that no longer exists anyway. European Commission
chief Jean-Claude Juncker added on to this by releasing a new proposal that was supposedly
in the works before the Greeks "unilaterally" walked out of the negotiations. Both moves are clear
attempts to destabilize popular expectations ahead of the vote and confuse the electorate about the
clarity, legality and historic significance of the choice that now lies ahead of them.
Make no mistake: Sunday's referendum will mark a defining moment in Greece's modern history and
a decisive turn for Europe's neoliberal project. The choice is very clear. Five years after the people
of Greece first rose up against the anti-democratic imposition of the Troika's austerity measures,
they have finally been given the chance to decide upon their own destiny: either they will vote yes
to a lifetime of austerity within the eurozone, or they will roar back at the creditors' inhumane
demands with a proud and resounding "NO!" - thereby opening the way for a thousand yeses to a new,
democratic and socially just Europe, freed from the shackles of debt servitude, the noose of a deflationary
single currency, and the tyranny of an unaccountable financial technocracy.
"...But it has nothing to do with morality and everything to do with a dysfunctional currency
union, a destructive neoliberal economic model enforced by treaty and an austerity regime maintained
to ensure a return to profitability on corporate terms."
.
"...No, I think Berlin and Brussels are behaving abominably, not so much in terms of what is decided,
but, as Pope Francis implied (there you are) without any consideration for the dignity of the Greek
people. Shaming, blaming, demonizing, threatening, giving the cold shoulder, to a small marginal country
who is supposedly part of your union."
.
"...I am against Syriza mate, but many commentors ignore the socioeconomic impact on the Greek population
and simplify or generalize things. Syriza is in power the past 3 or 5 months. The previous gov were
in power since 1974. Two parties, two families. Nepotism in politics is strong. "
.
"...Seamus is correct in his analysis. What is happening in Greece is akin to Democratic asphyxiation
by financial means. And those of us that believe in basic Democracy should be standing with Syriza and
the Greek people at this time. Neo-liberal dogma was always ugly. It's practical application is even
uglier. This will have serious implications for the Left in Europe as a whole but more imminently for
the British referendum vote due pretty soon."
.
"...After all, based on a leak of series of emails , Greek government was strictly following the instructions
of Troika during the past 5 years. "
.
"...we wouldn't be having this conversation if the private companies that lent money to Greece had
been made to eat their own losses.
But then neoliberalism isn't capitalism, not in the traditional sense. As has been proven beyond
reasonable doubt, neoliberals magically turn into socialists at the drop of a hat. Gains privatised,
losses socialised. In other words, they use the power of the state to collect economic rents. To call
this sure thing investing or risk-taking is pure propaganda.
"
.
"...I agree the EU élites are out to topple Syriza. The invective against Tsipras and ruthless shut
down of bank support to strike fear in the population show that clearly enough. Syriza is a mortal threat
to the noe-liberal order. I don't agree that Syriza is innocent in this drama, though. Its crisis management
has been abysmal. They know, or should, what is coming. when they threaten the EU élites."
.
"...This is a clash of ideologies. It's obvious if you listen to the spokepersons of Syriza and
the Left compared with the clapped out so-called politicians of ND and the Right. The Greeks and the
Spanish are the only countries where there's a popular moblisation against the robber barons who created
the crisis and are continuing to profit from the consequences. The left have been emasculated throughout
Europe "
.
"...My fear is that Syriza has lost the momentum, they have been unable to make the subject what
it should be, Neoliberal ideological economics. The fear mongering and the bank run neatly engineered
by Draghi and now the threat of shutting down the entire banking system - I'd be scared too. That's
hardball politics - but the main thing is people obey authority and the EU has authority as far as the
Greek people are concerned and they will back them into their very own graves."
.
"...Don't forget they are beyond the Great Depression now in terms of the economic catastrophe.
Population has been sliding since 2010."
.
"...Greeks elected Syriza out of desperation. The rest is just the usual anti-left cliches, not that
there's anything wrong with anti-left, however your understanding of the situation would be greatly
enhanced if you spent a minute Googling origins of this crisis. Perhaps EU/EZ is a bit complex for you."
.
"...The reason why the Troika objected to increases in certain taxes as part of Greece's economic
plans is twofold: (i) due to this historical lack of tax collection, increased revenue projections based
on increased taxes would be almost entirely illusory, and (ii) they targeted weak industries that Greece
needs to prosper and grow, and risked making Greece's economic situation worse. Many of the larger and
stronger of these multinational industries also had the capability of simply leaving Greece. Tsipras
refused to discuss sources of real and easy tax revenue, like tourism on the Greek islands. "
.
"...This is another round of banking bailouts using public money, cynically misnamed as bailing
out Greece. The troika need to launder the money through Greece to give to the banks. Greece get to
keep a very small percent for their troubles and taking more blame than they should."
.
"..."Europe is not under obligation to Greece" is nonsense. If Greece is a member state then EU
is indeed under obligation to support it, and it should do this effectively. It should not carry out
a policy that undermines its economy. Even if EU officials do not do this out of principles, they should
to do it to avoid loosing the support of the EU project."
.
"...The preliminary report of the Greek debt investigation (yes, there is one) will be out shortly.
From what I've read, much of the debt went to Greek banks and their foreign partners that indulged in
an aggressive loaning orgy and created a debt bubble inside the Greek economy. The banks were recapitalised
during the bailout with €80bn of state money that ended up as sovereign debt."
.
"...I had thought that Angie, Wolfie and Christine were perhaps just inept, but now I'm afraid they
may be executing a well laid plan. Perhaps they want to form a new entity: The People's Neo-liberal
Puppy Republic Of Greece. The steps: Blame all others; extort impossible amounts of invented "debts";people
who oppose you are labeled as traitors; prioritize German and French banks so they can be saved from
their own shitstorm and nationalize (i.e. charge the ordinary punter) all the fantasy cash that no-one's
ever seen; call a national emergency and impose martial law. Next is destroy all opposition and hand
everything over to private industry. A week ago, this would be very far-fetched, but now??"
It's now clear that Germany and Europe's powers that be don't just want the Greek government to
bend the knee. They want regime change. Not by military force, of course – this operation is being
directed from Berlin and Brussels, rather than Washington.
But that the German chancellor Angela Merkel and the troika of Greece's European and International
Monetary Fund creditors are out to remove the elected government in Athens
now seems beyond serious doubt. . Everything they have done in recent weeks in relation to the
leftist Syriza administraton, elected to turn the tide of austerity, appears designed to divide or
discredit Alexis Tsipras's government.
They were at it again today, when Tsipras offered what looked like almost complete acceptance
of the austerity package he had called a referendum on this Sunday. There could be no talks, Merkel
responded, until the ballot had taken place.
There's no suggestion of genuine compromise. The aim is apparently to humiliate Tsipras and his
government in preparation for its early replacement with a more pliable administration. We know from
the IMF documents prepared for last week's "final proposals" and
reported in the Guardian that the creditors were fully aware they meant unsustainable levels
of debt and self-defeating austerity for Greece until at least 2030, even on the most fancifully
optimistic scenario.
That's because, just as the
bailouts went to the banks not the country, and troika-imposed austerity has brought penury and
a debt explosion, these demands are really about power, not money. If they are successful in forcing
Tsipras out of office, a slightly less destructive package could then be offered to a more house-trained
Greek leader who replaced him.
Hence the European Central Bank's decision to switch off emergency funding of Greece's banks after
Tsipras called the referendum on an austerity scheme he had described as blackmail. That was what
triggered the bank closures and capital controls, which have taken Greece's crisis to a new level
this week as it became the first developed country to default on an IMF loan.
The EU authorities have a deep aversion to referendums, and countries are routinely persuaded
to hold them again if they give the wrong answer. The vote planned in Greece is no exception. A barrage
of threats and scaremongering was unleashed as soon as it was called.
One European leader after another warned Greeks to ignore their government and vote yes – or be
forced out of the eurozone, with dire consequences. Already the class nature of the divide between
the the
wealthier yes and more working-class no camps is stark. The troika's hope seems to be that if
Tsipras is defeated by fear of chaos, Syriza will split or be forced from office in short order.
The euro elite insists it is representing the interests of Portuguese or Irish taxpayers who have
to pick up the bill for bailing out the feckless Greeks – or will be enraged by any debt forgiveness
when they have been forced to swallow similar medicine. The reality is the other way round.
But Syriza insiders say there is little preparation for what anyway may be forced on them. The
relentless pressure of the EU bureaucracy demands a strong and clear-headed response. Right now,
for example, that means the Athens government immediately taking control of its banks, currently
shutting down all transactions.
The worst outcome of this crisis would be for Syriza to implement the austerity it was elected
to end. A yes vote in
next weekend's referendum, , if it goes ahead, would probably lead to the government's fall,
and almost certainly new elections.
Papistpal rredge 1 Jul 2015 21:21
"Implicit in your argument"
Always a ploy of course, when you find implicit, tacit, implied arguments in someone else's
thought, and then argue with it. No, I am not saying anything about the money. No, I think Berlin and Brussels are behaving abominably, not so much in terms of what is decided,
but, as Pope Francis implied (there you are) without any consideration for the dignity of the
Greek people. Shaming, blaming, demonizing, threatening, giving the cold shoulder, to a small
marginal country who is supposedly part of your union. There is NO excuse for your behavior
Ritoras Tijger 1 Jul 2015 20:57
I am against Syriza mate, but many commentors ignore the socioeconomic impact on the Greek
population and simplify or generalize things. Syriza is in power the past 3 or 5 months. The previous
gov were in power since 1974. Two parties, two families. Nepotism in politics is strong.
As said, because none answers your question that doesn't mean no is the answer.
Be open minded and less emotional. Few of the questions you ask you can google them and share
the findings with us. That will be more convincing!
peekaboo -> summicron 1 Jul 2015 20:54
The public in the 18 countries have not been consulted. Critical decisions affecting all other
members need direct approval. In fact referendums have almost never been held for EU membership
in candidate countries.
ineluctable2u -> tsimshatsui 1 Jul 2015 20:50
That's naive. Merkel is only making the Greek people suffer now in the hope that they will
lose their will and vote yes. This is ruthless politics by the troika and Merkel in particular.
martyc73 -> Gearóid Ó Loingsigh 1 Jul 2015 20:49
The North is a diversion - it cant raise taxes and relies on subvention from the British State
etc and you know this so don't be using that as an argument. The bank guarantee was also sold
in a totally different way to what was rolled out subsequently. And you know this too. Hums and
Haws???
Seamus is correct in his analysis. What is happening in Greece is akin to Democratic asphyxiation
by financial means. And those of us that believe in basic Democracy should be standing with Syriza
and the Greek people at this time. Neo-liberal dogma was always ugly. It's practical application
is even uglier. This will have serious implications for the Left in Europe as a whole but more
imminently for the British referendum vote due pretty soon.
Ritoras Tijger 1 Jul 2015 20:46
Bud, first of all you repeat you you you, it is very instructional, chill. Bravo to you as
well for making so focussed comments. I mean it even though you put all the fault on the Greek
gov.. Don't see you challenging yourself enough? Are the rest of stakeholders here perfect?
But, how do you know what Greece has done and what not?
Why the Troika have not reacted the same and with the same persistence as it does now during
the last 5 years to correct the direction of travel? You're 100% right about the Lagarde list.
The ministers who did not do nothing are in trials now.. However, I was in fact hoping that the
Troika could play a more active role in this and exercise influence to clear corruption. After
all, based on a leak of series of emails , Greek government was strictly following the instructions
of Troika during the past 5 years.
About the military expenses. I like defense and the military in fact. But! In a recession,
the Troika should have first said, save money there to invest in sectors like healthcare, education
etc. After all, Greece is very well equipped and supposedly is backed up by NATO allies.
calsation miceonparade 1 Jul 2015 20:43
I must say I enjoyed your takedown of oldships immensely. It seems he doesn't realise we
wouldn't be having this conversation if the private companies that lent money to Greece had been
made to eat their own losses.
But then neoliberalism isn't capitalism, not in the traditional sense. As has been proven beyond
reasonable doubt, neoliberals magically turn into socialists at the drop of a hat. Gains privatised,
losses socialised. In other words, they use the power of the state to collect economic rents.
To call this sure thing investing or risk-taking is pure propaganda.
Papistpal 1 Jul 2015 20:40
Never thought I'd agree with you, but I have to say, from this American capitalist perspective,
Berlin and Brussels have no sense of fair play and no respect for democracy. How can the EU call
itself a democracy if Germany has a veto because it has the big bucks. The US, I admit, would
like to do something similar, but we are constrained by maintaining at least some vestige of democratic
practice and sensibility. What is with the moralism, anyway. "Greece is wrong, so we get to do
whatever we want to them." Moralistic platitudes are not policy statements. Damn Merkel to hell
I agree the EU élites are out to topple Syriza. The invective against Tsipras and ruthless
shut down of bank support to strike fear in the population show that clearly enough. Syriza is
a mortal threat to the noe-liberal order.
I don't agree that Syriza is innocent in this drama, though. Its crisis management has been
abysmal. They know, or should, what is coming. when they threaten the EU élites. Why for
instance did they not impose capital controls the very first weekend after coming to power?? The
the country could have put up its defenses at a time of its own choosing, husbanded its resources
while negotiating - paid the IMF, keep banks open during this crucial referendum week. You don't
negotiate with 17 adversaries who all want to crush you, with one hand tied behind your back and
€ billions flowing out weekly. In three months you are on the floor.
castalla 1 Jul 2015 20:17
This is a clash of ideologies. It's obvious if you listen to the spokepersons of Syriza
and the Left compared with the clapped out so-called politicians of ND and the Right. The Greeks
and the Spanish are the only countries where there's a popular moblisation against the robber
barons who created the crisis and are continuing to profit from the consequences. The left have
been emasculated throughout Europe ... let's hope the OXI vote wins the day and Syriza gets
a mandate to argue for a restructure of the debt programme.
someoneionceknew -> FactPatrol 1 Jul 2015 20:10
The – European Social Model – is built on the fundamental principles built into Treaty establishing
the European Community (TEC):
… promotion of employment, improved living and working conditions … proper social protection,
dialogue between management and labour, the development of human resources with a view to lasting
high employment and the combating of exclusion.
It combines with the EU Charter of Fundamental Rights to define an "underlying principle is
one of solidarity and cohesion: that economic growth must serve to boost overall social wellbeing,
and not take place at the expense of any section of society".
The ILO book says that while "there is no official definition of the European Social Model"
there is a long history of practice and dialogue that allows one to map out the main characteristics.
The ILO define "six main pillars":
1. "Increased Minimum Rights on Working Conditions".
2. "Universal and Sustainable Social Protection Systems".
3. "Inclusive Labour Markets".
4. "Strong and Well-Functioning Social Dialogue".
5. "Public Services and Services of General Interest".
6. "Social Inclusion and Social Cohesion".
miceonparade -> Exodus20 1 Jul 2015 20:08
Remember what Greece were like before joining the euro, in the 1990's?
Greece in the 1990s did not have 30% unemployment or 60% youth unemployment or a depression.
Things can only begin to get better after exiting the euro and reclaiming fiscal sovereignty which
can be used to put Greek people back to work.
while the European Social Model may have been called into question here and there before
the crisis, the list of changes in most elements and pillars of the European Social Model since
the crisis is formidable. While there are a few exceptions … all other trends show a general
withdrawal of the state from social policy, first through massive cuts in social expenditure
and reduced funding of education, health care and other public services, and second through
radical reforms in a number of areas, such as social dialogue, social protection, pensions,
labour market and social cohesion in general …
the changes are particularly severe in those countries that implemented an austerity package
under the direct influence of the Troika …
Hill0fBeans sjorsnotmine 1 Jul 2015 20:05
There are no poor Greeks in Greece any more...
You're a disgrace. Instead of trolling, read some facts every now and then.
- like the 4 out of 10 Greek children living beneath the poverty line
- or 44.8% of pensioners living on less than 665 euros/month
- or the 27% unemployed
Go crawl back underneath your bridge. This is not a place for trolls.
camerashy 1 Jul 2015 19:56
The closet fascists are all out in force to get rid of a democratically elected government!
Rule by corporations and banks is what you deserve and is what you are going to get in next 5
years ... so enjoy it.
deskandchair -> Danny Sheahan 1 Jul 2015 19:56
It can't go any other way, fiscal control means political control. The tragedy is that the
EZ was formed in the first place.
Lafcadio1944 1 Jul 2015 19:52
My fear is that Syriza has lost the momentum, they have been unable to make the subject
what it should be, Neoliberal ideological economics. The fear mongering and the bank run neatly
engineered by Draghi and now the threat of shutting down the entire banking system - I'd be scared
too. That's hardball politics - but the main thing is people obey authority and the EU has authority
as far as the Greek people are concerned and they will back them into their very own graves.
xsyfer John Smith 1 Jul 2015 19:51
It has that already. Don't forget they are beyond the Great Depression now in terms of
the economic catastrophe. Population has been sliding since 2010. There will be friends.
I reckon UK, us and Sweden might do something bilateral after the mess to keep Greece away from
Russia.
Might be too late then though
deskandchair Markdoug1 1 Jul 2015 19:51
You don't live in EZ or EU (although superficial thinking isn't exclusive to those outside
EZ) however you're correct, Greeks elected Syriza out of desperation. The rest is just the
usual anti-left cliches, not that there's anything wrong with anti-left, however your understanding
of the situation would be greatly enhanced if you spent a minute Googling origins of this crisis.
Perhaps EU/EZ is a bit complex for you.
Eleutheros 1 Jul 2015 19:46
But it has nothing to do with morality and everything to do with a dysfunctional currency
union, a destructive neoliberal economic model enforced by treaty and an austerity regime maintained
to ensure a return to profitability on corporate terms.
And that's the essence of the current situation, not just in the EU, but most "western" societies,
including Australia, where I live; our present government follows the policies of Thatcher and
Reagan and is trying to bring austerity to a rich and prosperous country.
Excellent article Seumas Milne, thank you.
Oscarinho 1 Jul 2015 19:43
Yes, there is a potential danger of a right-wing, if not neo-nazi, turn in Greece (and maybe,
only maybe in other places, too). But just tell me why does the author doesn't mention that without
the support of the right-wingers and neo-nazis called Anel and Golden Dawn Syriza would not have
a majority in their own country??? Syriza does not represent a European leftist alternative (ask
Renzi) but mere 2 million Greek voters supported by the far right that are taking their own society
hostage playing the nationalistic card.
Yes, we need another haircut and, yes, this radical austerity policies needs to be changed.
It's just not sustainable as we learned the hard way- But Syriza is looking for a system change
by any means with any partners (Golden Dawn, Putin's Russia, and even Erdogan). No thanks.
Forthestate ID5590609 1 Jul 2015 19:40
you and others believe that Greeks are now somehow inherently entitled to this new and vastly
improved standard of living...
Just more bollocks! How do you square "this new and vastly improved standard of living" with
the reality since the crisis hit? Most analysts agree that the decline has seen Greece lose everything
that it acquired during the years you refer to, and more, and I repeat, it is a decline probably
unparalleled in peacetime. Where is the recognition of the catastrophe that has hit the Greek
people in your ridiculous assertion that they are enjoying a new and vastly improved standard
of living?
John Smith 1 Jul 2015 19:32
Looking at the headline photo of Merkel, the caption: Who will rid me of this troublesome Greek
popped into my head.
Then I read the article above.
Nothing would please the Euromeddlers more than a military coup, or a revolt by the coalition
partners.
Because what this crisis is exposing is how after five fruitless years, the geniuses at the
heart of the EU, couldn't grasp that among their many errors of judgement, it's no good loaning
a bankrupt money to pay off debt, the Euro has actually worked against the economic expansion
of the Eurozone both before and after the crash, and by failing to spot the dishonesty of previous
Greek administrations or act, it has shown the world that their system is weak, cannot tackle
a crisis, and despite years of rhetoric will have to do the one thing it said would never ever
happen, expel a member state and write off tens of billions of wasted euros.
In my earlier analysis I have already explained why the Euro was a currency launched half cocked,
and that without taking into account the needs of individual nations, it is doomed in the long
term, to fall to pieces.
I fear that whatever happens now, Greece is going to find itself with few friends, and at least
five years of pain and emigration of its youth.
ID5590609 Forthestate 1 Jul 2015 19:26
The level of Greek tax collection from all sectors and classes in Greek society is abysmal.
Tspiras and Varoufakis do not deny this is a problem, and other than pride or foolishness, I question
why you do. Some economists suggests that as much as 39% of the Greek economy is effectively underground.
The other purported statistics are simply red herrings to confuse this simple fact (and also avoid
dealing with the rampant other corruption and incompetence inherent in the Greek economy).
The reason why the Troika objected to increases in certain taxes as part of Greece's economic
plans is twofold: (i) due to this historical lack of tax collection, increased revenue projections
based on increased taxes would be almost entirely illusory, and (ii) they targeted weak industries
that Greece needs to prosper and grow, and risked making Greece's economic situation worse. Many
of the larger and stronger of these multinational industries also had the capability of simply
leaving Greece. Tsipras refused to discuss sources of real and easy tax revenue, like tourism
on the Greek islands.
The fact that Greece's economy has contracted over 25% is also not particularly relevant. The
larger GDP since joining the Euro represented a tremendously bloated bubble based on irresponsible
public and private debt. The current GPD still has ample room to decrease before it accurately
reflects the true size, scope and productivity of the Greek economy (and even reflects Greece's
pre-Euro GDP). Also noteworthy is the fact that Greek incomes nearly tripled since it joined the
Euro Apparently, you and others believe that Greeks are now somehow inherently entitled to this
new and vastly improved standard of living (more impressive than some other Eurozone members who
are poorer and helped fund Greece's bailout) despite the fact that it was entirely unearned and
based on fraud and the largesse of the taxpayers of other nations.
Exodus20 Tijger 1 Jul 2015 19:26
This is another round of banking bailouts using public money, cynically misnamed as bailing
out Greece. The troika need to launder the money through Greece to give to the banks. Greece get
to keep a very small percent for their troubles and taking more blame than they should.
JordiLlull neilmack 1 Jul 2015 19:24
Who are "Most people"? I dont think there are polls, but few people in Europe believe that
the fault lies exclusively on a government who has been there for 6 months, and is trying to prevent
the policies that have led to a 25% loss of GDP. Particularly since the troika has made it damn
clear that it does not plan to accept ANY plan. Sure, some have bought Daily Mirror arguments
that the Greeks spent the bailouts on Ouzo, but informed people know that the vast majority was
used to pay back interests, and that Greek retirement pensions are around 300 euro/month. I would
rather argue that "most people" in Europe who have traditionally supported EU are starting to
raise questions about what EU's role in this crisis.
"Europe is not under obligation to Greece" is nonsense. If Greece is a member state then
EU is indeed under obligation to support it, and it should do this effectively. It should not
carry out a policy that undermines its economy. Even if EU officials do not do this out of principles,
they should to do it to avoid loosing the support of the EU project.
deskandchair truecomrade 1 Jul 2015 19:22
Fiscal control = political control, it can be no other way.
FourtyTwo sjorsnotmine 1 Jul 2015 19:21
More than 30% of the population are officially below the poverty line.
The preliminary report of the Greek debt investigation (yes, there is one) will be out
shortly. From what I've read, much of the debt went to Greek banks and their foreign partners
that indulged in an aggressive loaning orgy and created a debt bubble inside the Greek economy.
The banks were recapitalised during the bailout with €80bn of state money that ended up as sovereign
debt.
MTSK87 privateindustry44 1 Jul 2015 19:13
You are an ignorant piece of work aren't you Sir? Look at the facts before spreading lies.
The Greeks work (the ones still in employment that is) work more hours than any other EU citizen
( http://www.bbc.co.uk/news/magazine-17155304
), the rich and powerful did not pay taxes no, but your average 20-30 something year old with
a wage of 400 euros a month that has to go back to living with his/her parents can barely afford
coffee never mind pay taxes. And free money? Please the "creditors" have NEVER given anyone "free"
money. Germany never gave away anything for free (see treaties imposed on Greece to buy old German
weapons). Greece was manipulated and suffered for that "free money".
emordnilap Mark Riggle 1 Jul 2015 19:10
I had thought that Angie, Wolfie and Christine were perhaps just inept, but now I'm afraid
they may be executing a well laid plan. Perhaps they want to form a new entity: The People's Neo-liberal
Puppy Republic Of Greece. The steps: Blame all others; extort impossible amounts of invented "debts";people
who oppose you are labeled as traitors; prioritize German and French banks so they can be saved
from their own shitstorm and nationalize (i.e. charge the ordinary punter) all the fantasy cash
that no-one's ever seen; call a national emergency and impose martial law. Next is destroy all
opposition and hand everything over to private industry. A week ago, this would be very far-fetched,
but now??
How many austerity plans do the Greek people have to suffer through? How much unemployment? Half
the young population? Is the plan to to cut living standards in half?
And for what? To repay a debt that the Greek people had nothing do with! To reimburse usurious
interest rates that cut the economy in a trap by the banks!
What a bunch of predators!
djb said in reply to Ellis...
i like how the advocates of austerity get all pissed off at the greek people as if they are
just being obstinate
its like someone is trying to punch someone else in the face and they
are getting all pissed off at the other guy because he keeps lifting his hands to block the
punches
"come cut it out, just let me get good shots in at you , whats a matter with you"
And Greece will not go to the drachma - Greeks are now demanding paper Euro notes, and everyone
outside Greece shipping into Greece is demanding paper Euro notes up front. Greeks are now not
able to get food and medicine and fuel if they don't have Euro currency.
But let's be clear - the Greeks are to blame because they refuse to pay Greeks to work by buying
only Greek production, or by trading Greek produced goods for imported goods.
Charles Carlstrom said...
Strikes at first glance don't seem rational. But they occur. Somestimes you swerve too late to
avoid ruin.
But even now it appears Greece is starting to swerve.
DrDick said in reply to Charles Carlstrom...
Only if you are a member of management. For the workers they are the only logical recourse. When
management will not provide safe/decent working conditions or pay you what you are worth, your
best recourse is to withhold your labor.
Tsipras Accepts Most Creditor Terms as Merkel Insists on Referendum
By Yves Smith
Post-bailout expiration dynamics are likely to produce even worse outcomes for Greece than
it had on offer from the creditors last month. It isn't just that the bailout funds of €7.2 billion
are gone; it's that Greece has gone over an event horizon with stringent capital controls on and
the European Central Bank ready and able to push the Greek banking system over the brink.
Greece's weak negotiating position is even weaker now. Even with a boost via a "no" vote on
the referendum this Sunday, if the Greek government were to take a firmer stance, the creditors
have the means and the incentives to keep crushing the economy via financial strangulation. The
ruling coalition would not be able to hold on to power for more than a month or two as the economy
continued to decay at an accelerating rate.
This is a ruthless, brutal power play in progress. Too many key actors are driven by their
own narrow imperatives, most important of all, their domestic politics, as well as institutional
rigidities. Those constraints work against taking a broader view and recognizing that the immolation
of Greece will blow back and damage the European project and their own economies. But that would
require much bolder, visionary thinking and action. The current crop of leaders has instead become
habituated to incremental patches even though it is widely recognized that the architecture of
the Eurozone is incomplete and wobbly. But no one is willing to move to a higher level of integration,
in large measure because, particularly for Germany, that entails the loss of power and privilege
at the national level.
Tsipras has recognized the weakness of his position too late. Yesterday, he tried making a
desperate, last-minute deal to ward off an IMF default and secure the bailout funds before the
program expired. But that clearly could never happen. It would require approval from all of the
other 18 states in the Eurozone, including parliamentary approval in Germany. There was no way
that would occur without German legislators having had Greece pass legislation before they voted
on the release of funds; the Greek government had been told that that was a requirement and that
needed to be done by the end of last weekend, June 28. *
Moreover, Germany wasn't even the most hardline country; Portugal, Spain, and Latvia are more
hostile to cutting Greece any slack since their leaders had their citizens wear the austerity
hairshirt. Given that it was obviously impossible at that late juncture for the other Eurogroup
members to release the bailout funds before they went poof (at a bare minimum, there was no way
the Germany MPs would approve it), the Tsipras appeal was a sign of utter desperation or delusion.
And that in turn was an admission of tremendous weakness. Less than two days of capital controls
and a bank holiday, and the ruling coalition was folding....
* Some pundits have depicted these deadlines as artificial. They weren't. There are many areas
where the lenders' conduct can correctly be called unreasonable, but the hard deadlines were the
result of past agreements and Eurozone procedures make them extremely difficult to change. This
is one reason for the current creditor hostility. Greece consumed an enormous amount of time,
running up against deadlines in what the other side saw as brinksmanship, which was a bizarre
strategy given that Greece had a weak bargaining position. But the lenders felt compelled to accommodate
Greece on that front as much as possible because the optics would be terrible if they didn't,
particularly if the situation were to devolve into a Grexit. Compounding that problem, an lawyer
with considerable knowledge of European practice pointed out by e-mail: "Europeans have a very
hidebound and literal view about their EU rules and documents. Americans see a contract as a basis
for negotiation."
Fred C. Dobbs said in reply to anne...
'Germany wasn't even the most hardline country; Portugal, Spain, and Latvia are more hostile to
cutting Greece any slack since their leaders had their citizens wear the austerity hairshirt.'
Every country in the EU is angry with Greece.
In Greece's bailout talks, why it's 18 eurozone countries versus one
http://on.wsj.com/1B7hOIy via @WSJ
... Some eurozone governments-Ireland, Portugal, Spain and the Baltic states-see themselves
as having swallowed tough, politically costly but ultimately successful medicine and see no reason
why Greece should be spared such rigor. Some, like Slovakia and the Baltic states, are poorer
than Greece and pay their workers a lower minimum wage.
Another element is that further debt relief for Greece in whatever form means losses for governments-Athens
owes other eurozone governments €195 billion ($212 billion)-and therefore for eurozone taxpayers.
Germany is owed the largest sum-more than €60 billion-followed by France and Italy. But, as a
percentage of their gross domestic product, other countries have more on the line than Germany.
According to a Bloomberg Brief analysis, Greece's debts to Slovenia exceed 3% of Slovenian GDP,
compared with 2.4% for Germany. ...
DeDude said in reply to Fred C. Dobbs...
"see no reason why Greece should be spared such rigor"
Yes their rulers have convinced them
that the depression they threw Greece into is no big deal compared to what they themselves have
suffered. As long as your corporate media hide the facts from people, you can convince them of
all kinds of stuff.
"debt relief for Greece in whatever form means losses for governments"
Yes - and the real story there is that almost all the debt that was held by private banks and
plutocrats back when this problem surfaced (and the debt should have been written down) is now
owned by governments. But that is not the debate in the corporate media - instead it is about
how terribly irresponsible the Greek government is (I guess you can fool the fools every time).
Nathanael said in reply to anne...
Yves has been mis-analyzing the Greek crisis from beginning to end. It's seriously lowered my
opinion of her, and I think she's a complete idiot at this point.
Syriza has played this out
exactly right, whether intentionally or not.
Given that the Troika will never, ever make a functional offer of major fiscal stransfers to
Greece, and has as much as said so, default was inevitable.
Greece doesn't have to leave the euro, of course; Greece could unilaterally print euros (in
violation of the Troika's insane deflationary policies) and wait for Germany to leave the euro.
But it has the same effect.
GIVEN that default is inevitable, Syriza needs to be seen as:
(1) Trying as hard as it can to offer a deal
(2) Not knuckling under to the foreign powers
They've done this.
The referendum will either go "yes" or "no".
If it's "yes", then Syriza will resign. The new government of Greece will implement stupid
policies forced by the Troika which will make their situation even WORSE; they will be blamed
for it and will be thrown out. Syriza survives.
If it's "no", Syriza can exit and allow the economy to recover through devaluation.
The worst case scenario for Syriza was that the Troika accepted one of Syriza's overly generous
offers of surrender; the economy continued to get worse; Syriza was blamed for this and thrown
out of office; and Golden Dawn was elected.
Golden Dawn would, of course, immediately leave the euro and revive the economy. By pressganging,
if necessary. :-P Having a glowing example of successful fascist economic management in Europe
is the LAST thing the world needs. Thank goodness we seem to be avoiding that.
anne said in reply to anne...
Yves Smith has from my perspective been remarkably sensitive to the needs of the Greek people,
thorough in reporting and analysis, and evidently, however sadly, all too correct in analysis
compared with other Greek-sympathetic economists.
I am aware that the analysis of Smith has
been criticized, but I am also aware and impressed that even leaders of liberal Podemos in Spain
have shared in criticisms of Syriza.
paine said in reply to anne...
Just a side comment
The private greek banks can go to hell in a chariot for all I care
The greek government should worry about small dipositors only
paine said in reply to paine...
Eichenberry seems poorly briefed
On the negotiations here
Eichengreen seems poorly briefed
On the negotiations here
Syriza has not acted incompetently
The troika is out for regime change
[ Understood as to what the European leadership is after, but Syriza has puzzled me. ]
ilsm said in reply to paine...
ecb the usa of the europa.
troika deals like nukes.
widespread drone strikes without deflation.....
Chris Herbert said...
I have a problem with the exit=disaster scenario. As a monetary sovereign and with a central bank,
both recapitalization and devaluation can be accomplished without the armageddon stuff. China's
currency, for example, is not traded on Forex. China's central bank pegs its value by fixing what
it will pay in its currency for another currency--and its currency is the only one that can be
used in China. Once Greece goes back to the drachma and once they've got a central banker and
a currency that is exclusive to domestic commerce (no Forex speculative trading) I think a good
central banker can do a lot to help Greece maintain its balance. Even better, said recapitalization
can be debt free. I'm not saying it won't cost anything, I'm just saying a monetary sovereign
need not issue debt. Greece could put people to work doing infrastructure improvements, which
build assets not liabilities. Without issuing debt. Greece has to learn how to collect taxes,
obviously. And some reforms to government size is probably in order. But the 'end of days' scare
is just that, a scare.
pgl said in reply to Chris Herbert...
I have a similar problem with the criticism is Grexit. Let's roll the tape back to 1967 when Prime
Minister Harold Wilson decided to devalue the UK pound:
The UK did not suffer a financial crisis. It did manage to raise its net exports. So why can't
the Greeks do the same?
am said in reply to pgl...
Fine, so why do the Greek people want to keep the euro as the official currency. Professor Krugman
mentioned as a reason that people like to have a strong currency. They have had the drachma before
and it was never very good and neither was the economy. I suggest the reason they want to keep
the euro is it is strong in the sense of a stable currency and inflation is kept low in Greece
as most of their imports are in euros. With a weak drachma they just get inflation on imports.
With the euro they get steady prices. Add in to that payment of salaries and pensions in euros
and then you have the advantage of earning in the currency of import purchases. Hohum, I'm probably
wrong.
Leaving the euro is not cost free. The dollar/drachma after Grexit is set by the central bank.
Maybe Greece needs to become more efficient in their use of energy. Maybe Russia will sell oil
to them at advantageous prices. A central bank can price the drachma advantageously between different
suppliers. And don't forget the Greeks have a primary surplus right now and Grexit will eject
its creditors, which is what I think Greece needs to to. The collapse scenarios are scare stories
aimed at the Greeks. They should reject them and become independent. Only by being a monetary
sovereign can Greece regain control of its economy. Right now they are in debtors prison.
Peter K. said in reply to am...
with the Euro they get humanitarian disaster. You know the economic stats, don't you?
am said in reply to Peter K....
Yes but why do they want to keep the euro, as is reported. They may suddenly change that in the
referendum vote but it is reported that the euro is what they want.
foofootos said in reply to am...
easy, the depositors want to keep the euro because they don't have a lender of last resort. They
will loose their deposits. That's all, that and scare tactics.
Paine said in reply to foofootos...
Yes that's a good part of it
But I'd like to know the value of euros held on deposit now
by the bottom three quarters of the population
I don't think it's really entirely economic. They view the euro symbolically as a special European
club membership, and don't want to be excluded from that club.
The Washington Post ran a map * showing which countries in Europe use the euro and which use
other currencies. The map is wrong. It shows Montenegro and Kosovo as using currencies other than
the euro. This is not accurate, both countries do use the euro as their official currency although
they are not have been accepted into the euro zone.
This is important in the context of the discussions on Greece because it illustrates the point
that Greece cannot be forced off the euro. The European Commission and the European Central Bank
can impose incredibly onerous conditions on Greece, but they cannot prevent the country from using
the euro if it so chooses. The decision to leave the euro could only be made by the Greek government,
not its creditors.
I never saw the "big" Greece problem before the Euro. The problem is the credit bubble starting
in 73 creating a redic surge in consumer products that really took hold in the 80's/90's for the
US and spread after that. It created the "look" of growing personal wealth via personal assets,
but it was a bubble. Without this borrowing, the US economy probably would have struggled to grow
much in the 80's as inflation fighters went on a rampage(which is what partially triggered the
bubble to grow faster). They still maintain much of the growth from the bubble, only thanks to
the market being scared to live without it. About the only thing it did, was force Russia away
from the Stalin era Soviet fast, but now, they are stepping back while no one is watching. This
is late capitalism.
The 80's and 90's would have been a lot more Escape from New York rather than Morning in America.
Nathanael said in reply to Anonymous...
Argentina's main problems were US-backed military coups and fascism. Argentina has quite impressively
managed to get itself out from under both of those problems -- seemingly permanently.
foofootos said in reply to Anonymous...
Greece only got to comparable trouble after the Balkan wars (they defaulted), during the second
world war, and then during civil war. Hardly a counter-example of "drachma troubles". Many a time
I see Greece described as a serial defaulter. And then I read the History of the Greek state after
it's independence from the Ottoman empire, and I see a war happening every 15-20 years or so.
It seems this way of looking the Greek economy just goes with the Greek stereotype.
ilsm said in reply to foofootos...
Greece seems to spend about 150% of the NATO standard war spending for GDP. While the rest of
the EU spends <75% of NATO standard.
Still only 3% compared to US' 5 to 7% according to how
you count.
US spends more in VA than total of Russia, China and UK for their military.
Darrell in Phoenix said in reply to anne...
Pegging to the Euro will not counter trade imbalances, which is the real source of Greece's troubles.
They need a currency that floats. They need to decrease imports and increase exports (or more
likely tourism) to eliminate their trade imbalance, which is the root cause of their debt.
pgl said in reply to Darrell in Phoenix...
Exactly!
foofootos said in reply to Darrell in Phoenix...
Greece currently has a balanced current account.
pgl said in reply to foofootos...
Link? Evidence? Even if this is true, it is mainly because of the imposed austerity and weak economy.
pgl said in reply to foofootos...
Darrell in Phoenix notes:
"Check the CIA world factbook for Greece.
Exports $35B. Imports $62B.
Trade imbalance of $27B compared to GDP of $290B = 9.5%!"
Your source?
am said in reply to anne...
In Simbabwe which has no currency of its own apart from small coins for change shop goods are
priced in US dollars. So consumers can buy a basket of goods and then pay the value of the us
dollars in us dollars, south African rand, Botswanan pula, euro or pound. These are all calculated
up by a routine in the software system operating at the checkout. The tax which is vat is then
sent up to the government. The government staff are paid in us dollars. But the government can't
do stimulus because they can't print any of these currencies and they don't have one of their
own. But for an interim solution it is workable.
Darrell in Phoenix said in reply to am...
And the dollars flow out of the country, and them when there are no dollars left, the economy
collapses.
What you need is exactly what Ben Franklin argued for nearly 300 years ago. A government
issued script currency that can be used to pay your taxes, and taxes high enough to create sufficient
demand for the script to give it value. You then let the value of that government issued script
currency to float on the international exchange markets to balance trade.
OH, and NEVER take on debt denominated in a foreign currency.
Nathanael said in reply to Darrell in Phoenix...
That's even a good rule for households, frankly. I never take debt denominated in a currency I
can't print. :-)
Peter K. said in reply to Chris Herbert...
What the critics of the Greek fail to mention is that before the Troika began bringing the hammer
down on Syriza and refused to negotiate with them, the Greeks were running a primary surplus.
Krugman pointed to this. That is, they were in the black without interest payments. With default
and saying no to the bailout packages they are free of the interest payments and free of the onerous
austerity measures which killed their economy.
What the critics of defaults say is that the defaulters will never be able to borrow again,
but in the real world that hasn't been the case. They're just blowing smoke to bully the Greeks
into more, fruitless austerity measures.
Agreed. There will always be attractive economic opportunities in Greece. Even if Greece defaults,
there will be new investors willing to gamble that they wont default again.
pgl said...
"Instead, the creditors first calculated the size of the primary budget surpluses that Greece
would have to run in order to hypothetically repay its debt. They then required the government
to raise taxes and cut spending sufficiently to produce those surpluses.They ignored the fact
that, in so doing, they consigned the country to an even deeper depression. By privileging their
own balance sheets, they got the Greek government and the outcome they deserved."
This is precisely
the problem Keynes warned about after WWI when the French demanded too much from the Germans.
Of course the Germans never really did pay all of those cursed repatriations. Modern day European
leaders have forgotten everything Keynes tried to teach us.
Darrell in Phoenix said in reply to pgl...
The austerity proponents are following the typical NeoCon mind-set of ignoring macroeconomic principles.
"Keynesian hokum" is their preferred name for macroeconomics I believe.
DrDick said in reply to pgl...
This is exactly why Eichengreen's piece is pure garbage. Greece made lots of compromises, too
many in fact. It was the creditors who refused to compromise. Every bank that had made irresponsible
loans (and their were huge numbers of these) in Greece should have been forced to eat all their
losses. After all, they had charged a risk premium to cover this already. Instead the Troika has
decided that they should be fully indemnified and only the Greeks should suffer.
Peter K. said in reply to DrDick...
Yeah it's almost as if he criticizes the Greeks so he can criticize the Troika even more.
"Still,
this incompetence pales in comparison with that of the European Commission, the ECB and the IMF."
Nonetheless I agree with you and disagree with Yves Smith and the like. Syriza and the Greeks
did the best they could under impossible circumstances.
The Troika's plan didn't work and they refused to negotiate. The problem is Greeks want to
stay in the Eurozone nonetheless. Sunday we'll find out if they still do no matter what.
pgl said in reply to DrDick...
This is why I prefer what Krugman wrote.
DrDick said in reply to pgl...
Likewise, and the same for Stiglitz, who is quite good on this.
Paine said in reply to pgl...
Running these nakedly in humane pub sec pruning exercises was the entire project
The debt
A pretext
Let that be a lesson to you long run fiscal space fuss budgets
Paine said in reply to Paine ...
A yes on Sunday simply means
Go back and get the best deal you can
Darrell in Phoenix said...
Exchange rates fluctuate to counter trade imbalances. The concept of a common currency, without
controls to ensure no trade imbalances exist, is fundamentally flawed.
Money flows out of Greece.
THE ONLY way money can get back into Greece is debt.
Trade imbalances cannot be persisted indefinitely. They result in the buildup of debt on the
side with the deficit, and interest on the debt just widens the trade imbalance until the debt
collapses.
Either Europe needs to take MAJOR steps to reverse existing trade imbalances, or the Euro is
ultimately doomed to collapse under unrepayable debt.
RGC said in reply to Darrell in Phoenix...
"Either Europe needs to take MAJOR steps to reverse existing trade imbalances, or the Euro is
ultimately doomed to collapse under unrepayable debt."
Yep. Varoufakis had a "Modest Proposal"
to fix this:
4. THE MODEST PROPOSAL – Four crises, four policies
The Modest Proposal introduces no new EU institutions and violates no existing treaty. Instead,
we propose that existing institutions be used in ways that remain within the letter of European
legislation but allow for new functions and policies.
These institutions are:
· The European Central Bank – ECB
· The European Investment Bank – EIB
· The European Investment Fund – EIF
· The European Stability Mechanism – ESM
Here are the four policies that will re-deploy the above institutions in a manner that deals
a decisive blow at, respectively, (1) the banking crisis, (2) the public debt crisis, (3) the
under-investment and internal imbalances crisis, and (4) the social emergency crisis afflicting
countries were absolute poverty is becoming a major issue...
Chris Herbert said in reply to Darrell in Phoenix...
Darell writes "Money flows out of Greece. THE ONLY way money can get back into Greece is debt."
Not so with a monetary sovereign. Euros are worth what the Greek central banks says they are worth,
in drachmas. And only drachmas can be used in domestic commerce. You have squirreled away euros
in Swiss bank accounts? Fine. Spend them anywhere but in Greece. If you have cheated on taxes,
and for sure you have if you are Greek and rich, then face extradition for crimes in Greece. A
monetary sovereign does not have to issue debt. It can recapitalize without debt. Look at China,
which has used this banking system successfully for more than two decades! China understand the
difference between liabilities and assets. It's not the debt that matters it's what you build
that matters.
Darrell in Phoenix said in reply to Chris Herbert...
Chris, I was saying now... With Greece on the Euro and unable to print their own currency.
Yes,
if they return to drachma, they can issue money. Until then, the only way they have been able
to make their economy liquid in the face of large trade deficit is with debt.
Darrell in Phoenix said...
Check the CIA world factbook for Greece.
Exports $35B. Imports $62B.
Trade imbalance of $27B compared to GDP of $290B = 9.5%!
Of, Germany LOVED loaning Greece money so they could buy German products.... but the problem is
that the debt can't possibly be repaid unless the trade imbalance is reversed. Germans have the
money that Greece needs to repay the debt!
This echos the problems in the USA. The poor go into debt, creating money that they spend, which
then flows through into the economy into the hands of billionaires. It is mathematically impossible
for the poor to repay the debt unless the rich first spend the money! Oh, we say it is a legal,
moral and social obligation to repay the debt, but suggest it is a moral and social obligation
(and should be a legal obligation through a steeply progressive income tax code with deductions
for most spending and capital investments) and OH HOW THE RICH SCREAM!
I struggle to understand the path forward from the referendum. Putting aside the obvious question
of "what exactly are they voting on", there are some serious logistical challenges.
It will
likely take a day or two (or three) for the votes to be counted and the result certified. Assuming
a best case scenario of a YES vote, Tsipras will likely resign, a snap election will be called,
and a new government will have to form. How long will this take? What if Syriza is re-elected?
What if there is no clear winner and we're back to having to form a coalition government, which
may or may not happen?
Time is one thing this situation does not have. There are significant upcoming dates:
-July 10 €2B Rollover of treasury bills
-July 13 €452M IMF
-July 14 €73M in Japanese Samurai bonds due
-July 17 €1B Rollover of treasury bills
-July 20 €2.1B ECB
-July 20 €1.4B National central banks
-July 20 €25M European Investment Bank
I can't imagine any scenario under which the ECB can avoid having to yank the ELA if the July
20 payments are missed. But there are plenty of opportunities for an accident before then. It
is assumed that the treasury bill rollovers will not be an issue since they are almost entirely
held by Greek banks. Is it really safe to assume that? I might be thinking about a switch into
safer, more liquid assets if I were a Greek banker. Or are they just going to avoid an auction
altogether and deem the bills rolled over by fiat? The Samurai bonds are tiny, but they are still
a commercial obligation, will require money the Greek government likely will not have, and a default
will not be able to be brushed aside as easily as the missed IMF payment. Speaking of which, the
IMF will be unable to assist in any way throughout this period, unless the arrears are cleared.
But wait, there's more. With the previous programme having expired, there will need to be a
new MoU, a vote by the Greek Parliament, a vote by other European parliaments, including Germany.
This is no longer something Finance Ministers can decide at a late night meeting.
Yet, the official position is no more talks until after the referendum.
I think the Germans think that if things get bad enough in Greece, they'll kick out Tsipras
and elect a government more willing to deal.
A vote of NO to the "Should we accept these terms?" means the Greek people support Tsipras's
hardline demand for write downs. This puts the Germans in the position of having to accept his
terms or face Greece leaving.
In short, the referendum may take the "well just wait until the Greeks replace you, then deal
with the new guy" threat off the table.
My point is that regardless of which way the vote goes on Sunday, by the time the results are
in there simply may not be enough time left to avoid a default. Note well that default does not
automatically imply Grexit, but it certainly ratchets things up a notch.
It's all up to the ECB and Troika. The money involved is small to them. It's all political. Looks
like they want a regime change in Greece. Either that will happen or there will be Grexit.
Syriza
caved on austerity but wanted more taxes and less spending cuts. The Troika said no. And the Troika
spins it like the Greeks left the negotiation table. The Troika said no and then the ECB refused
to back Greek banks as the "deadline" passed causing the bank holiday.
Oh, I think default is inevitable. All the referendum does is clarify the options AFTER that.
If it fails, and the Greeks vote that they want to accept the Eurozone offer, then there will
be a change in Greek government, a new round of austerity, and a delay of another year before
the crisis explodes again.
If it passes with a resounding vote of "NO, we're not paying" then Eurozone will have to take
major cuts in the debt or accept Greece leaving the Eurozone.
Nathanael said in reply to Darrell in Phoenix...
Darrell has the analysis correct.
The political key here is that SOME party is going to either
leave the euro. (Or massively and permanently default and start printing euros. If they simply
ignore all the ECB rules entirely, they may be able to stay in the euro. Same thing; in this case,
Germany is the one who leaves the euro.)
If it's Syriza and they do it with public support, there are good things in the future.
If it's Golden Dawn and they do it with public support, there are bad things in the future.
If Syriza does it without public support, Golden Dawn benefits, and there are bad things
in the future.
If Golden Dawn does it without public support, they'll just cancel elections to avoid losing
power, so they'll again benefit and there will be bad things in the future.
In a sense, the democratic parties are handcuffed in their options relative to the fascist
parties, so it's harder for Syriza to succeed than for Golden Dawn.
And it's really REALLY bad if Golden Dawn becomes a big economic success by defaulting or leaving
the euro!!!
The results of the "standard run" (or "base case") scenario of "The Limits to Growth" 1972 study.
Could it be that the ongoing Greek collapse is a symptom of the more general collapse that the model
generates for the first two decades of the 21st century?
So, we have arrived to an interesting point, to be intended in the Chinese sense of a curse. It is
the point where the people of Greece are being asked to choose between starvation and slavery and
this is supposed to be a triumph of democracy
As the tragedy unfolds, people take sides, aiming their impotent rage at this or that target; the
Euro, the bureaucrats of Brussels, the Greek government, Mr. Tsipras, some international conspiracy,
and even Mr. Putin, the usual bugaboo of everything.
But, could it be that all the financial circus that we are seeing dancing in and around Greece is
just the effect of much deeper causes? The effect of something that gnaws at the very foundations
not only of Greece, but of the whole Western World?
Let's take a step back, and take a look at the 1972 study titled "The Limits to Growth" (LTG). Look
at the "base case" scenario, the one which used as input the data that seemed to be the most reliable
at the time. Here it is, in the 2004 version of the study, with updated data in input.
I can only imagine the intensity of "consultations" between Washington and Berlin now... . "...The present circumstances in Greece were inherited by the current government from the previous
right-wing government, which managed to bring them out by faithfully following the austerity prescriptions
of the Troika. However both left and right-wing governments of the past, who created and hid the enormous
debt, are also to blame." . "...The documents show that the IMF's baseline estimate – the most likely outcome – is that
Greece's debt would still be 118% of GDP in 2030, even if it signs up to the package of tax and spending
reforms demanded. " . "...This is nothing more than a large-scale payday loan scam. Greece will never get past the
loan sharks and will constantly have to borrow just to pay off the interest. I'd rather default and
eat beans for a year while starting fresh than eat beans for 20 years paying off old debt. You can call
them lazy, you can call them thieves but - if they play their cards right - you can also call them "debt
free"." . "...The public debt of Greece existed BEFORE the recent election. The cruel conditions inflicted
upon Greece by its "partners" existed BEFORE the recent election. The crisis existed BEFORE the recent
election." . "...Lending more billions to Greece so they can repay the interest on previous billions loand and
those new loans repayed by cuts to pensions and more privatisation of public assets...blatant transference
of cash from those who can't afford it to those who don't need it. Hopefully the Greek people
give a resounding middle finger to the EU/IMF. And if I hear another muppet crack on about 'the Greeks
ought to pay their taxes' I'll bloody lose my temper. D some reading for gawds sake. It really isn't
that hard." . "...I would have thought that a "senior german conservative politician" telling the Times that
whatever happens Tsipras must be forced from office is an historic blow to the EU. Now, at least, people
know what it is and who it is for." . "...If they actually wanted payment, they'd be reasonable. But payment isn't their priority, these
organisations want power over Greece."
The Greek banks and former conservative governments, you mean.
You and plenty of other brainwashed idiots around here seem to think that individual, working
class Greeks had something to do with this. Of course, as always, the banks and politicians who
actually caused this got off scott free, with taxpayer money, to cause the next big financial
crisis.
HaroldP -> Nottodaymate 30 Jun 2015 21:29
Banksters, what did you expect, honesty, morality, humanity, financial expertise? Bailouts
from citizens, that's what you expected? The poor darlings can't even run a bank when they can
print money. Incompetant scum. Regards, Harry.
Jazzfunk23 -> workingclass2 30 Jun 2015 21:28
In recent years most of this mess was presided over by liberal conservatives...
Germania offers a regime of permanent debt servitude to pay for its failed banks:
The documents, drawn up by the so-called troika of lenders, support Greece's argument that
it needs substantial debt relief for a lasting economic recovery.
The documents show that the IMF's baseline estimate – the most likely outcome – is that
Greece's debt would still be 118% of GDP in 2030, even if it signs up to the package of tax
and spending reforms demanded.
clematlee Danny Sheahan 30 Jun 2015 21:25
What you have in the USA is TENS of millions of people who don't have any US dollars while
in Manhattan flats sell for millions.
AlamoSexual 30 Jun 2015 21:20
This is nothing more than a large-scale payday loan scam. Greece will never get past the
loan sharks and will constantly have to borrow just to pay off the interest. I'd rather default
and eat beans for a year while starting fresh than eat beans for 20 years paying off old debt.
You can call them lazy, you can call them thieves but - if they play their cards right - you can
also call them "debt free".
UnevenSurface Danny Sheahan 30 Jun 2015 21:12
Greece will still be here. There will of course be enormous poverty (in various forms) in the
short term - but even the FT says that the GDP will bounce up 6% quite quickly. After that, they'll
be the cheapest holiday destination in Europe, exporting the cheapest wine and olive oil. The
GDP could expand by 25%, up to pre-austerity levels. Excluding macro economic factors out of our
control, I would be truly surprised if they aren't better off - overall - within five years.
HaroldP -> owl905 30 Jun 2015 21:12
The public debt of Greece existed BEFORE the recent election. The cruel conditions inflicted
upon Greece by its "partners" existed BEFORE the recent election. The crisis existed BEFORE the
recent election. Obviously Tsipras did not "wreck his country." His fellow citizens elected
his party to fix an existing crisis. He won the election with a proposal of how to do that. He
has deviated only slightly from his promises. I find him to be a "hero" in that he could teach
the political class of Europe the importance of keeping the agreement between the state and the
citizens. It is heroic indeed to be the honest politician of Europe. He has my respect. Regards,
Harry.
Paul Collins 30 Jun 2015 21:12
Lending more billions to Greece so they can repay the interest on previous billions loand
and those new loans repayed by cuts to pensions and more privatisation of public assets...blatant
transference of cash from those who can't afford it to those who don't need it. Hopefully
the Greek people give a resounding middle finger to the EU/IMF.
And if I hear another muppet crack on about 'the Greeks ought to pay their taxes' I'll bloody
lose my temper. D some reading for gawds sake. It really isn't that hard.
malenkylitso -> owl905 30 Jun 2015 21:08
Greece was forced into a corner, then took a bailout which less than 10% went to the Greeks. The
rest went to the banks.
Sounds like a protection racket.
SystemD 30 Jun 2015 21:07
This is not just about Greece; the impact of a Greek default go much wider. The IMF (and the
Troika) has to be seen to be taking a hard line. If they don't, then their credibility with the
rest of the world diminishes, particularly in Africa. The Germans are worried about the Euro as
a currency; the Deutchmark was given up on the promise of stability, and the 1920's are still
- just - within living memory. There is a lot of fear behind their stance. Stock markets generally
are worried about the instability the situation is causing. They don't want Greece crushed - they
just want a stable situation with predictable outcomes. Volatility is not in their interest. And
Greece needs money and help to try to cure the cancer of corruption in its economy.
Greece cannot pay back its debt. Unless the creditors agree to a very long term of repayment (at
least 50 years) at reasonable rates, the only real options are for Greece to leave the Euro zone
and go back to the drachma, or the debt must be written off, with the proviso that there will
be no new loans, and Greece will have to rebuild and finance its economy from its own resources.
Stanley Wallings 30 Jun 2015 21:06
I feel sorry for the Greek people - they've had 5 hard years and for nothing. Grexit will be
horrible for those who have to stay in Greece. The 'haves' have already moved their money and
can just hop on a flight out. I hope Tsipras isn't driving the bus over a cliff for no reason
other than to piss off the Troika. I hope he has a plan C
medicynic RobWilson73 30 Jun 2015 21:06
What a great idea! Let's get rid of pensions worldwide, then no one has any cause for complaint.
I'm pleased to see that you are one of those who, when pensions in the UK increase say: "No thanks.
I don't need it and don't deserve it. It only makes me fat anyway".
In my experience in British industry, workforces are rife with 'tax-dodging, CSA dodging, mendacious,
lazy wankers', a lot of who deserve a cut in wages never mind a pension.
Monkeybus 30 Jun 2015 21:06
SQUEEZE THE GREEKS, WRING THEM OUT, RINSE THEM. Other xenophobic pronouncements are available.
SHIFTLESS, LAZY, FECKLESS. Can't they print their own money like more advanced nations?
We are all in this together, err, hang on.
Imagine if Gordon Brown had taken us into the Euro after all?
clematlee FakeyWilson 30 Jun 2015 21:06
and the west arms heart eating loonies in North Africa and invades and kills millions of people
in the process, Vietnam, Iraq, Libya, Grenada, Korea, Panama, Syria and the list goes on. Watch
the EX USA secetary of state on youtube saying the starvation of 500,000 children was a price
worth paying, by the west imposed on Iraq. It was starvation to death. Her name was Madalin Allbrite.
Don't worry about losing some so called freedoms to stop Allbite and her ilk.
Tappert Heintz 30 Jun 2015 21:03
"Greek failure to make IMF payment deals historic blow to eurozone"
Sounds like the Daily Mail. Nonsense.
owl905 Iheartbill 30 Jun 2015 21:02
They're not barred from international trade, but it's really scewed to cash and barter. There
simply isn't the mechanism to manage the exchange rates. No one outside the country will want
rapidly devaluating and 'only-good-in-Greece' drachmas. Greeks don't realize what's coming after
15 years of Euro stability.
One big surprise from them is that pipeline deal with Russia. That needs a lot of capital -
Russia is walking into even more problems if it starts forwarding debt financing to Greece to
get the pipeline built.
The tourist industry won't be hit by it (except for foreign import items that are part of the
industry) - it will be hit by the drachma, that has the profit from the industry shrink to nothing.
Danny Sheahan Justitiadroit 30 Jun 2015 21:01
Look at the Eurozone growth rates for the last 5 years, its a basket case.
The Greeks have messed up over the years but the Euroland is no case study in growth.
rberger ArundelXVI 30 Jun 2015 21:00
Actually there is very little debt servicing involved. The 29 billion actually includes debt
repayments (principal, not interest). Greece is not paying any interest for most of its bailout
money until after 2020, but of course needs to pay interest on the bonds that it has issued itself.
ScanDiscNow Danny Sheahan 30 Jun 2015 21:00
Pre Euro Greek total production increased by some 600% between 1960 and 2001 while German total
production increased by a mere 255%. However, throw in the Euro and the subsequent 15 years has
German total production up 20% while Greece total production is down 26%
ZeroHedge.
Anthony Apergis owl905 30 Jun 2015 20:57
And herein lies the issue my friend! The strictly monetary considerations that underpin your
rationale betray the disintegration of what started in Rome as a visionary peace project for the
peoples of Europe to an economic, neoliberal construct whose only concern is %s and profits. Surely,
you must be able to see this. I would strongly advise you to read the preamble to the Treaty of
Rome (1957).
MonsieurBoombastic FilthyRichBanker 30 Jun 2015 20:54
The capital controls in Greece apply to cash withdrawals and overseas transfers so this won't
affect things like internet banking where cash is transferred within the system. The things you
mention are probably still going on in most cases.
moderatextremist 30 Jun 2015 20:51
When Greece joined the EU, the corrupt government went on a spending spree of EU money, and
used Goldman Sachs to cover it up. It is those politicians and Goldman Sachs, the vampire squid
on the face of the world, that should be put on trial. I fear this development will be hurtful
to an awful lot of good people, while the arseholes that created the mess will get away with it......
yet again.
sefertzi7 30 Jun 2015 20:48
The worst possible outcome. Now the crooks who caused the debt mountain in the first place
(Papandreou x2, Simitis, Karamanlis, Samaras et al) will come back to power, reluctantly do what
they are told with the quid pro quo of a blind eye turned while they carry on in their corrupt
old ways.
Call that a revolution? More like crash and burn to me.
raymundlully -> Kaiama 30 Jun 2015 20:45
If the debt is forgiven and goes away.
Greece has in arrears to private pharma companies ,I doubt they'll extend credit orwant paying
in toy Drachmas.
Cash-strapped Greece has racked up mounting debts with international drugmakers and now owes the
industry more than 1.1 billion euros ($1.2 billion), a leading industry official said on Wednesday.
The rising unpaid bill reflects the growing struggle by the nearly bankrupt country to muster
cash, and creates a dilemma for companies under moral pressure not to cut off supplies of life-saving
medicines.
Richard Bergstrom, director general of the European Federation of Pharmaceutical Industries and
Associations, told Reuters his members had not been paid by Greece since December 2014. They are
owed money by both hospitals and state-run health insurer EOPYY.
MalleusSacerdotum 30 Jun 2015 20:45
If Greece were a private or public company and continued to 're-finance' in the manner proposed
by the IMF, its directors would be charged with insolvent trading.
They are getting a lot of stick for admitting that they are effectively bankrupt.
It is at least an honest admission of the state of play.
Omniscience Jazzfunk23 30 Jun 2015 20:42
They turned a primary deficit into a surplus within the last 5 years
Right wing conservative neo-libs corrupt elitists. The Troika is refusing to allow Greece to
tax the wealthy corrupt tax avoider thieves, while forcing more of the workers into poverty.
Vee1984 30 Jun 2015 20:40
It is a well known fact that many Greeks like to avoid paying taxes just as there are many
other European countries who avoid paying tax whether on an individual or on a company basis.
The European Union has created this problem over a long period of time by allowing countries
to borrow more than required and funds being used to build eg airports in Spain which are unused
and unnecessary due ro their geographical location and many speculative projects undertaken throughout
the EU. The reason for lending such sums, with a total disregard as to how interest payments can
be repaid, never mind repaying the loans, has been done to enrich the lenders who, as we all know,
love to gamble on how much money can be made. A risk game, played out every day, and, I suspect,
some bets even being placed on the odds of Greece defaulting in some hedge fund offices somewhere
in Europe. It should be noted that Spain and Italy have loaned money to Greece. How can this be
when both countries have loans via the EU etc? Again, investors after interest on the loans with
a total disregard as to their own countries finances. Greece is a democracy and should not give
in to the rhetoric coming from the IMF or ECB. Why not? Neither can afford to and neither can
Germany. Interesting days ahead. I truly hope that in the name of Democracy, the Greek people
will vote NO in the referendum no matter the increasing hardship this will bring. The EU really
need to be extremely mindful of the fact that abject poverty and the continuation of austerity
gives rise to discontent and a surge in popularity to right-wing extremist views.
Anthony Apergis Justitiadroit 30 Jun 2015 20:39
Indeed, the EU has mutated from a union of the peoples of Europe, into a market-driven transnational
institution governed by bankers and solely concerned with GDP growth rates (and I mean this in
a strictly non-communist/leftist way).
Dannybald DavidRees 30 Jun 2015 20:36
As a German voter I would never vote for the right wing neo-lib corporatist Fascist scum in
government. The hypocrisy of this regime is turning millions of Europeans against Germany and
rightly so. The London conference of 1953 halved German debt owed for destroying Europe. Greek
debt was 100% of GDP in 2008 and that had nothing to do with Tspiras.
Euro zone countries have already extended the maturities of their loans to Greece from 15 to 30
years and reduced the interest rates on some to just 0.5 basis points above their borrowing cost.
They also granted Greece a 10-year moratorium on interest payments on the second bailout loan
from the euro zone rescue fund.
FlashRat 30 Jun 2015 20:35
I would have thought that a "senior german conservative politician" telling the Times that
whatever happens Tsipras must be forced from office is an historic blow to the EU. Now, at least,
people know what it is and who it is for.
PennyForYourComment DavidRees 30 Jun 2015 20:35
Which is why the Eurozone concept is fundamentally broken.
Imagine if every time one US went into a bad recession, all the other states had to vote on whether
to send them money, with all the governors having to agree... and then trying to post their own
conditions on how that States economy be run before the money were delivered. It would be an unworkable
mess, especially given acrimony and resentment between states and regions (North vs. Deep south
vs. midwest, vs. west coast, etc)... The country would sooner or later fall apart as States started
rebelling and quitting. It would be absurd.
But somehow Europe is supposed to run on exactly this system. If you are going to have a single
currency, then you need common fiscal mechanism binding the areas together, because these act
as automatic financial stabilizers when there's a regional crash. If Florida's economy crashes,
money automatically pours in from everywhere else to cover unemployment insurance, etc, via the
Federal government. No similar thing happens with Greece in Europe.
BunyipBluegum theoldgreyfox 30 Jun 2015 20:34
The default you are referring to is a recent one (2014) - I was referring to the previous default
in 2001, which was followed by a significant period of economic growth and recovery. I am not
suggesting that a default is always the best solution in such circumstances, nor that the immediate
fallout won't be problematic. However in any case the example of Iceland clearly demonstrates
that a default can be the best option economically in some circumstances.
It's the same principle as bankruptcy: if your debts reach a level that can never be paid back,
it's better to wipe the slate clean and start again, even though the cost of doing this may be
to slide back down the snake to the bottom of the board.
Anthony Apergis 30 Jun 2015 20:33
To sum up:
Roughly €170b initial Greek debt +
Roughly €150b financial aid to Greece aimed at repaying initial creditors (NOT the restructuring
of the Greek economy) + austerity measures while doubling an already unsustainable debt = EU solidarity
to a member- state.
And the above does not even take into account whose economy did the initial debt prop up. I cannot
believe that the people of Europe cannot see what the REAL problem is.
The EU - and by extension Europe - is truly in trouble.
raymundlully Franco87 30 Jun 2015 20:32
UK had third world inflation in the 1970s it took the IMF medicine broke the unions in the
80s and created a home fit for bankers.
What about economic slums like Portugal and Italy.
They are much worse off now than Greece was at the start of its crisis. It will not take much
to have Italy in crisis.
Portugal is heading for an abandoned state after its crisis so its not much of a threat now, how
it will pay its debt in the future is anyone's guess. Though it is safe to presume that a country
in such decline will have less people paying tax.
They'll want more than billion.
RGBargie 30 Jun 2015 20:31
It looks like Greece might soon be sailing into uncharted waters.
I can just imagine what the consequences will be for the EZ if Greece goes alone, and then
makes a success of their new found freedom. I imagine there might well be others ready to abandon
ship if that happens.
Westmorlandia BunyipBluegum 30 Jun 2015 20:31
Point taken, but whatever the Greeks don't pay back to the EFSF will have to be paid by other
Eurozone countries, as that's how the EFSF guarantees work. So it isn't just about whether it's
fair for Greeks to pay for what their government borrowed, but whether it's more fair for Greeks
to pay or for everyone else in the Eurozone to pay for what elected Greek governments borrowed.
Reality has said for some time that Greece can't pay, and therefore some of it should have
been written off. But that's more about pragmatism than fairness.
FilthyRichBanker Wily Ways 30 Jun 2015 20:30
He could do what the rest of Europe does and make paying taxes compulsory rather than voluntary
for a start.
Cut the bloated Public sector and halve the defence budget in line with the rest of Europe - and
sell off the $50bn of assets they previously agreed to.
Bardamux Michael Richard Allen 30 Jun 2015 20:29
Ignorant it is then. So i'll explain it to you step by step.
1) If you deposit money in a bank, you are loaning the bank your money. And in many countries
you will get a small interest rate for it.
2) it is considered a short term loan, because you can withdraw it at (almost) any time.
3) Remember Icesave in the UK ? That bank did not pay its depositors
4) Other banks received hundreds of billions of euro's / pounds / dollars
5) Banks could loan money at almost 0% even with terrible collateral to help them survive
6) Greece will pay its debt if they receive half or even less help than the Dutch and UK banks
did.
Get it now or do you need more steps to help you out ?
Euro zone countries have already extended the maturities of their loans to Greece from 15 to 30
years and reduced the interest rates on some to just 0.5 basis points above their borrowing cost.
They also granted Greece a 10-year moratorium on interest payments on the second bailout loan
from the euro zone rescue fund.
Omniscience 30 Jun 2015 20:27
To be fair, they have only been lying about reform since joining the Euro.
2005 : Greece faces up to taxing times
Greece plans to offset a projected shortfall this year in tax revenues with a €2bn securitisation
deal, in spite of European Commission strictures against the use of one-off measures to reduce
the budget deficit. George Alogoskoufis, finance minister, said in an interview with the Financial
Times that the transaction would enable Greece to achieve this year's budget deficit target. He
also stressed securitisation was "a temporary measure that will give us time to bring about permanent
structural corrections".
Joaquin Almunia, the European Union's budget commissioner, signalled acceptance of this year's
planned transaction during a visit to Athens last week but urged Greece to accelerate structural
reforms next year.
The problems of Greece haven't happened since "a radical populist party" was elected. On the
contrary, the present government was elected because of the problems.
Danny Sheahan outsiderwithinsight 30 Jun 2015 20:23
Not at all, it means that Italy and Portugal are next.
If Greece leaves and its hard to see how they will not at this stage then the Euro has become
a non-permanent currency arrangement that the EU or ECB will not defend its integrity.
That marks it out as different from every other currency in the world. Only currencies that have
allowed that in the past went on to be all failed entities.
CambridgeAfterDark 30 Jun 2015 20:25
Splendid, send a message to all banker gangsters everywhere.
Best way to deal with a bully, is hit them back.
Guess the right-wing trolls on here look pretty silly now, all saying last week the FTSE would
rally upwards upon a Grexit!
BunyipBluegum robbyevans 30 Jun 2015 20:20
The present circumstances in Greece were inherited by the current government from the previous
right-wing government, which managed to bring them out by faithfully following the austerity prescriptions
of the Troika.
However both left and right-wing governments of the past, who created and hid the enormous debt,
are also to blame.
coxinutant 30 Jun 2015 20:16
A continued austerity programme makes it unlikely that Greece will be able to grow economically.
Continued economic pain-> lower ability to repay debt. So all those people who get on their hig
horse and demand that Greece repay its debts should keep in mind that debt cannot be repaid when
you have 25% unemployment, when wages plummet and people cannot spend to make the economy grow.
If austerity had been the miracle cure, it would have worked years ago. So stop bandying about
terms like 'communist' and 'marxist' and all that BS. The current government in Greece did not
create the crisis, the austerity, the 25% unemployment. The crisis was created by an irresponsible
banking sector, which was then bailed out by your money (yeah ordinary Joe, looking at you). Austerity
was hatched by The IMF, against the advice of sensible economists...
And it hasn't worked. And I am sure the 'marxist' policies of Syriza did not create the enormous
unemployment that Greece faces. Last time that occured in Europe, fascist governments came to
power, aided by pro-fascist symptahies in France and the UK...
BunyipBluegum -> peter nelson 30 Jun 2015 20:14
It was the Greek governments of the mid 2000s, who were corrupt and nepotistic. If it was them
and their wealthy friends who were going to carry the can for this, then I'd say well deserved.
But the whole reason why Syriza is against the austerity program is that it doesn't greatly affect
these people, but it DOES greatly affect ordinary Greeks, especially the working class, elderly
and vulnerable.
Also it hasn't worked. If you were prescribed a foul medicine by your doctor that made you feel
sick and weak, and then failed to cure your problem, would you be inclined to go back for another
dose?
AtomsNest -> echoniner 30 Jun 2015 20:14
If they actually wanted payment, they'd be reasonable. But payment isn't their priority, these
organisations want power over Greece.
World
Oil Energy Consumption by Sector, 1973-2010Oil can be put to a variety of uses,
with transportation accounting for a growing share of the oil consumed. While the transport sector
consumed 42% of the oil in in 1973 this share climbed to 61.5% in 2010. The growing level of global
motorization is a core component behind this relative growth, particularly the growth of international
trade. Non-energy uses mostly relate to the petrochemical industry where petroleum is used to manufacture
products such as plastics or fertilizers. Other sectors concern agriculture (powering farm equipment),
commercial and public services (power generation) and residential (heating oil).
"...Alexis Tsipras must be stopped: the underlying message of Europe's leaders. Germany's vice-chancellor
has become the first senior EU politician to voice the private views of many - that the Greek PM is
a threat to the European order
By Ian Traynor - Guardian" . "...Tsipras is only a symbol of what must be stopped. What must be stopped is democratic interference
in the affairs of finance capital. What do "the people" know about such important matters? Besides,
they might favor their own interests over those of the system (meaning those of the oligarchs)." . "...For finance capital, the stakes in Greece are high. They must make the Greeks pay a very high
price for defiance. If not, Spain, Portugal, etc. will try the same thing.
What good is the "will of the people" and democracy when it goes up against the banks?"
. "...Finance capital now MUST take untenable speculative risks. The state now MUST bail out finance
capital when their bubbles burst. The international institutions now MUST enforce draconian austerity
to pay for the bailouts. ...because otherwise there wouldn't be enough value produced for the finance
sector to appropriate and accumulate. This is the END GAME a perpetual smash-and-grab operation by the
plutocrats. "
Joseph Stiglitz
to Greece's Creditors: Abandon Austerity Or Face Global Fallout: ... "They have criminal responsibility,"
he says of the so-called troika of financial institutions that bailed out the Greek economy in
2010, namely the International Monetary Fund, the European Commission and the European Central
Bank. "It's a kind of criminal responsibility for causing a major recession," Stiglitz tells TIME
in a phone interview.
Along with a
growing number of the world's most influential economists, Stiglitz has begun to urge the
troika to forgive Greece's debt – estimated to be worth close to $300 billion in bailouts – and
to offer the stimulus money that two successive Greek governments have been requesting.
Failure to do so, Stiglitz argues, would not only worsen the recession in Greece – already deeper
and more prolonged than the Great Depression in the U.S. – it would also wreck the credibility
of Europe's common currency, the euro, and put the global economy at risk of contagion. ...
"Of course, the economics behind the program that the "troika" (the European Commission, the
European Central Bank, and the International Monetary Fund) foisted on Greece five years ago has
been abysmal, resulting in a 25% decline in the country's GDP. I can think of no depression, ever,
that has been so deliberate and had such catastrophic consequences: Greece's rate of youth unemployment,
for example, now exceeds 60%."
The troika economics he is condemning was the refusal of the ECB to do QE earlier. Troika's
bad economics is exactly what you have been advocating for the US for a long time. Just in case
you missed this.
And yet economists have been extremely slow to react to this massive economic derailment with
anything close to the kinds of bold emergency recovery plans they would be ginning up if the same
disaster was taking place in their own countries.
Why aren't the kinds of figures Stiglitz just cited the headlines here? Why has the Great Greek
Depression been treated by the media, and most economists, as though it is fundamentally just
a disagreement between Greece and its creditors?
What is the plan for putting the 20% of the Greek over-15 population that is not working, but
should be working, back to work?
Maybe people think that millions and millions of Greek people without jobs is just Greece being
Greece? That profound economic dysfunction and failure is a case of "well, what do you expect
from those people?"
Economists seem to have been so zombified by the inscrutable bureaucratic rhetoric and psychopathic
insanity of the Eurocrats, and the bumbling incoherence of the Greek government, that most of
them aren't able to think clearly. The Euros have convinced them all that any outside-the-narrow-box
thinking will cause chaos, panic, unraveling, The Unthinkable, the Complete End of Europe as We
Know It and the Return of the Satanic Hordes. So they sit on sidelines hoping that someone will
make some deal that allows Greece to keep paying forever, grindingly, in a way that isn't too,
too, too, too painful.
Part of the problem maybe is that mainstream economists have too many buddies in the Eurocracy.
They can't believe that all those nice people they went to graduate school with have gone so bonkers.
The situation with the Eurocrats reminds me a little bit of Alec Guinness in The Bridge on
the River Kwai. A noble project (in this case, the Europe project) evolves over time into a demented
and fanatical religion whose ultimate purpose is forgotten by its architects, who lose the capacity
to adapt to evolving circumstances with common sense.
It's not surprising. European governments own most of the debt now and want to get paid; and
they don't want any special deals that weren't available to them.
And the Greeks themselves are in denial. They haven't yet come to grips with what it's going
to take to rebuild their collapsed economy.
His column today on crippling austerity is pretty good though. The problem, as he says, is
the grip of the notion that leaving the Euro is "unthinkable".
A lot of Europeans have gotten too tied to the idea that one country leaving the Euro is some
kind of continental catastrophe. To read some of the hysteria - such as a recent Guardian piece
- Greeks first leave the euro and then its back to Bolsheviks, Nazis, trench warfare slaughter
or Mongol invasions or something.
But the euro isn't the UN Charter or the Magna Carta or the Treaty of Versailles. It's just
money. The unity of Europe does not stand or fall on whether a country decides to use a particular
form of money. There are several EU members, in perfectly good standing, who do not use the euro.
Big deal.
I understand that most of the Greeks themselves cannot wrap their heads around this idea. But
economists can easily.
Anyway, Greece and the rest of the world have gotten themselve so tangled up in the obsessive
attention to the secondary matter of the Greek "debt crisis" that they don't seem to have time
to think about the primary crisis - the Nobody has a Job and Our National Output is in the Toilet
Crisis.
QE? Oh nonsense. The Euro banks knew Goldman had washed Greece's books, and that Greece was
not a suitable candidate for the initial loans, much less the subsequent ones. This is onerous
debt, and is simply uncollectible. Banks must relearn to live and die by their ability to make
good loans. And if the elites get burned in the process? Maybe they'll learn to stop staffing
their banks with assclowns.
JohnH said in reply to pgl...
The Troika won't allow Greece to use Aegean gas as collateral precisely because Greece is supposed
to hand over its wealth without much if any compensation...
pgl said in reply to JohnH...
I despise this Troika. Whether they are evil or whether they are dumbass liquidionists like
you are - it does not matter. They are being very destructive. OK, you are not evil but you are
stupid with your fear of using aggregate demand stimulus. Same horrific results.
"Europe is at a crossroads. The institutions of the Troika are not only trying to destroy Greece;
they are trying to destroy us all. Now is the time to raise our voices against this blackmail
by the European elites.
"Next Sunday the Greek people will be able to vote to reject the blackmail that is austerity
and vote for dignity – with hope for another Europe. This historic moment requires everyone in
Europe to speak up and take a stand.
"We all say NO to austerity, pension cuts, and VAT increases; We all say NO to poverty and
privileges; We all say NO to blackmailing and to the dismantling of social rights; We all say
NO to fear and the destruction of democracy.
"We all say YES to dignity, sovereignty, democracy, and solidarity with the citizens of Greece.
"This is not a conflict between Greece and Europe. It is about two antagonist visions of Europe:
our Europe of solidarity and democracy, created from below and without closed borders; and their
vision, which denies social justice, dismantles democracy, opposes the protection of the weakest
and the taxation of the wealthy."
He certainly nailed this one. The Troika are demanding that the Greek people protect the plutocrats
(mostly foreign) for paying any price for their reckless and feckless action and democracy (and
the "little people" be damned.
If the Greek economy collapses without the euro, "you have on the edge of Europe a failed state,"
Stiglitz says. "That's when the geopolitics become very ugly."
By providing financial aid, Russia and China would then be able to undermine Greece's allegiance
to the E.U. and its foreign policy decisions, creating what Stiglitz calls "an enemy within."
[ This is xenophobic rubbish, showing a mean-spirited and wrong-headed disdain for China and
Russia. ]
Alexis Tsipras must be stopped: the underlying message of Europe's leaders. Germany's vice-chancellor
has become the first senior EU politician to voice the private views of many - that the Greek
PM is a threat to the European order
By Ian Traynor - Guardian
Except that Tsipras is only a symbol of what must be stopped. What must be stopped is democratic
interference in the affairs of finance capital. What do "the people" know about such important
matters? Besides, they might favor their own interests over those of the system (meaning those
of the oligarchs).
You are saying "yes, the Greece and Puerto Rico can drain my retirement savings because Stiglitz
says its democratic"?
I speak as someone who had lots of savings in BofA which bought the bank that bought my local
bank listening to people calling for BofA to be liquidated and all the debt it held written off.
Jeffrey Stewart said...
It never ceases to amaze the number of human lives must be destroyed through unemployment and
poverty due to "austerity" so that financial capitalists are repaid in full.
JohnH said in reply to Jeffrey Stewart...
It's how they keep the rest of the world under their thumbs...
Ellis said...
For finance capital, the stakes in Greece are high. They must make the Greeks pay a very
high price for defiance. If not, Spain, Portugal, etc. will try the same thing.
What good is the "will of the people" and democracy when it goes up against the banks?
"For finance capital, the stakes in Greece are high."
Yes, the stakes are high for finance capital. The choice is between euthanasia of the rentier
and suicide-bomber-style financial terrorism. Finance capital opts for the latter.
We should all be clear on what the choices are and why finance capital chooses the reckless
strategy it does. Finance capital CANNOT win this fight to the death. There is no win-win compromise
that will enable the continuation of business-as-usual to be sustainable.
'Tis the final conflict. Greece is only an episode but there will be episode after episode
based on the same scenario. The "wages-rut system" no longer has the "beautiful" capacity of ensuring
the continued accumulation of capital merely through an imbalance in the economic power of labor
and capital.
Finance capital now MUST take untenable speculative risks. The state now MUST bail out finance
capital when their bubbles burst. The international institutions now MUST enforce draconian austerity
to pay for the bailouts.
...because otherwise there wouldn't be enough value produced for the finance sector to appropriate
and accumulate.
This is the END GAME a perpetual smash-and-grab operation by the plutocrats.
Glen said in reply to Ellis...
It's well understood in modern economics that when banks and ultra rich speculators make horrible
investments that wreck the world economy, then the innocent must pay. That whole capitalism risk/reward
thing is so passe.
Ellis said in reply to Glen...
What's behind the debt? In 2004, the government paid through the nose to host the Summer Olympics.
The Greek military sucks up 3 or 4 per cent of GDP buying expensive weapons and ammo from the
U.S. Germany and France. When Greece entered the EU, it employed the services of Goldman Sachs
to hide their debt -- paying a pretty penny for their services. And when the crisis hit in 2008,
the fear that Greece might default boosted interest rates for the Greek government to usurious
levels. In other words, it's pillage pure and simple.
And now, the IMF figures that the best way forward is to starve the population even more.
"...Actually 90% of the money went off to pay the private creditors (French and German banks
who had invested in Greece). Only 10% amount of the loan ever went into the Greek economy but that
was more than balanced by the the damage that austerity politics did to the country." . "...So the IMF and the Eurozone have in effect been playing debt collectors for French and
German banks, and have attempted to bestow the costs on Greece. Is there any way that could possibly
ever have worked?" . "... Lagarde, is getting smacked and rightly so; she, Merkel et al, all thought they could
dictate to and bully Greece, and Greece would roll over, well it hasn't." . "...Only because the banks were too big to fail and therefore letting them crash would have
crashed the entire economy. If you ignore that, in theory holding the banks responsible for the
crisis they created and making them insolvent instead of using QE to bail them out could
theoretically have been something that held the right people to blame, and didn't punish ordinary
people with austerity.
It's pretty smart of the banks as they got themselves into a position where, when they screw up,
other people have to pay the price." . "...Tsipras called them "criminals". I guess it is more close to the truth." . "...Greece cannot pay, but no one can say that as it undermines the whole financial system,
which is based on confidence. We can't 'write off Greek debt' (as Jeremy Corbyn helpfully suggests)
as no indebted countries would feel the need to pay off debts again - they'd just wait for the
'Greece' solution."
The big problem right now in Greece is lack of liquidity to operate the economy. There
simply is not enough money in circulation.
If newly issued Greek euros are not traded on international markets and they are legal
tender in Greece and the Greek government accepts them as tax payments, there is no market
value. You have an assigned value, like in other controlled systems. So you can have a high
velocity of circulation as people spend them quickly, but no problem of devaluation - unless
the Greek government would issue Greek euros to total excess.
Suppose you are a shopkeeper in Greece and your pensioner customers pay you in Greek euros.
And suppose, the Greek law says you can pay your suppliers in Greek euros and the supplier can
pay his taxes in Greek euros. In that case, the Greek government will need capital controls to
ration the supplier's euros to buy imports. But that's likely to stimulate local production
and be a plus for the Greek economy.
Local fiat currencies do work.
It is a rather different and probably not very acceptable example, but the Cuban 'CUC', is
not backed at 1:1 against the US dollar in an open market. Its value is the fiat of the Cuban
government. No open market trading means no devaluation by market forces.
Trumbledon 30 Jun 2015 10:03
We never had an advanced economy actually asking for that kind of thing, delayed
payment
They still haven't - Greece is no more an advanced economy than a person who buys a
houseful of luxury items using credit cards is a wealthy person.
Greece has virtually no industry worth mentioning and virtually no agriculture; the Greek
economy is almost entirely reliant on tourism.
Greece has a smaller GDP than Thailand or Argentina, Greece's economy is roughly half the size
of Vietnam's. How on earth can Greece be considered an 'Advanced economy'? That's claptrap.
mikeyk1 Omniscience 30 Jun 2015 10:03
Actually 90% of the money went off to pay the private creditors (French and German
banks who had invested in Greece). Only 10% amount of the loan ever went into the Greek
economy but that was more than balanced by the the damage that austerity politics did to the
country.
Adam Fo 30 Jun 2015 09:57
It's probably worth adding here that Argentina did pay off it's IMF loans in full as well
as the modest amount of interest charged. One of the reasons they could do that is they are a
more resource based economy than Greece. Increasing commodity prices during that period helped
them.
Like Greece holders of Governments bonds saw massive haircuts. 50% (100 billion euro) in the
case of Greece in 2012.
Thalia01 ThinBanker 30 Jun 2015 09:55
Only because the banks were too big to fail and therefore letting them crash would have
crashed the entire economy.
If you ignore that, in theory holding the banks responsible for the crisis they created and
making them insolvent instead of using QE to bail them out could theoretically have been
something that held the right people to blame, and didn't punish ordinary people with
austerity.
It's pretty smart of the banks as they got themselves into a position where, when they screw
up, other people have to pay the price.
Hottentot 30 Jun 2015 09:40
Sorry, but the Guardian can't compare Argentina, Zimbabwe, Somalia and Sudan, to Greece, as
none of them were / are in the Euro. Lagarde, is getting smacked and rightly so; she,
Merkel et al, all thought they could dictate to and bully Greece, and Greece would roll over,
well it hasn't. It's about time others started telling the IMF (interesting that it's
referred to as the Washington-based organisation) and the EU who are all about 'protecting'
their interests, to sod off.
So the IMF and the Eurozone have in effect been playing debt collectors for French and
German banks, and have attempted to bestow the costs on Greece. Is there any way that could
possibly ever have worked?
bonkthebonk -> Adam Fo 30 Jun 2015 09:50
True, but how many of them are in a flawed currency union that actively contributed to
their demise, saw their mainly foreign reckless, speculative lenders' liabilities socialised
and how many of these poorer countries have been lent ever more money just to service the
their debts and nothing more?
CaptainGrey -> colin2d 30 Jun 2015 09:26
Calling it a Greek Euro as opposed to a new Drachma won't make any difference. It will
crash overnight. Greece has no reserves to prop it up.
optimist99 30 Jun 2015 09:24
The Greeks need to look hard at Argentina - once one of the richest countries in the
world....
"By 1908 it had surpassed Denmark, Canada and The Netherlands to reach 7th place-behind
Switzerland, New Zealand, Australia, the United States, the United Kingdom and Belgium.
Argentina's per capita income was 70% higher than Italy's, 90% higher than Spain's, 180%
higher than Japan's and 400% higher than Brazil's". (Bolt & Van Zanden 2013)
Now it is number 55....
(At the moment Greece is at 44 - similar to Portugal).
CaptainGrey -> EricthePenguin 30 Jun 2015 09:24
Mexico didn't default, it devalued. Completely different. As I note above/below (depending
on your settings)
Argentina was shut out for a decade, but was able to get through it thanks to it's
vast natural reserves of mining, farming and forestry, plus strict financial discipline.
Greece has none of those things.
Default could be a disaster for a generation of more.
Actually, nobody knows for certain how bad a default will be. But it will not be a walk in
the park
ThinBanker -> Gelion 30 Jun 2015 09:24
"But of course that's not debt, that's just a way of lowering currency values to keep your
exports competitive and put your citizens into Austerity"
Huh? Without QE, 'austerity' would have been all the greater ...
PeterHG 30 Jun 2015 08:50
It seems inconceivable to me that Greece will leave the Euro. The loss of face to the
Brussels European Union bureaucracy would be too great for them to bear . Such a happening is
beyond their imagination so they will find some means to keep Greece in. The Greek politicians
sense this and that knowledge dictates their actions.
ApfelD -> Johanes 30 Jun 2015 09:13
Tsipras called them "criminals". I guess it is more close to the truth.
optimist99 -> sandywinder 30 Jun 2015 09:15
"is that borrowing and spending too much will always get you in the end. In case
people have forgotten, the UK has a £1.5 trillion national debt."
But the folk who lend money to the UK are perfectly happy to continue to do this... So it's
not "borrowing and spending too much" in the UK... (HMG can borrow money over 30 years at less
than 3% interest...).
kentspur 30 Jun 2015 08:36
It's a default.
This semantic dancing on a pinhead just shows the absurdity of the situation. Greece
cannot pay, but no one can say that as it undermines the whole financial system, which is
based on confidence. We can't 'write off Greek debt' (as Jeremy Corbyn helpfully suggests) as
no indebted countries would feel the need to pay off debts again - they'd just wait for the
'Greece' solution.
"...From a macroeconomic viewpoint, the Greek saga is one of austere budget polices imposed
on the Greek government by the "troika" of the International Monetary Fund, the European Commission
and the European Central Bank in an attempt to collect payment on the government's debt. "
.
"...The debt/GDP level, which was supposed to fall to about 155% by 2013, actually rose to 170% because
of the severity of the contraction in output. The
IMF subsequently
published a report criticizing its participation in the 2010 program, including overly optimistic
macroeconomic assumptions."
.
"...Moreover, government pensions are important to a wide number of people. The
old-age dependency ratio is around 30%,
one of the highest in Europe. The contraction in the Greek economy means that
the pension is sometimes the sole income payment received by a family. It is hardly surprising,
therefore, that the pension system is seen as a "red line" which can not be crossed any further in Greece."
.
"...... if the European governments insist that Greece must also pay back all its outstanding debt,
then there is only one possible ending for this saga, and it will not be a happy one."
No matter what new twist the Greek debt crisis takes, there can be no question that it has been
a catastrophe for that country and for the entire Eurozone. The
Greek economy contracted by over a quarter during the period of 2007 to 2013, the largest decline
of any advanced economy since 1950.
The Greek unemployment rate last year was 26.5%, and its youth unemployment rate of 52.4% was
matched only by Spain's. But who is responsible for these conditions depends very much on which perspective
you take.
From a macroeconomic viewpoint, the Greek saga is one of austere budget polices imposed on
the Greek government by the "troika" of the International Monetary Fund, the European Commission
and the European Central Bank in an attempt to collect payment on the government's debt. The
first program, enacted in 2010 in response to Greece's escalating budget deficits, called for fiscal
consolidation to be achieved through cuts in government spending and higher taxes. The improvement
in the primary budget position (which excludes interest payments) between 2010-11 was 8% of GDP,
above its target. But real GDP, which was expected to drop between 2009 and 2012 by 5.5%, actually
declined by 17%. The debt/GDP level, which was supposed to fall to about 155% by 2013, actually
rose to 170% because of the severity of the contraction in output. The
IMF subsequently
published a report criticizing its participation in the 2010 program, including overly optimistic
macroeconomic assumptions.
To address the continuing rise in the debt ratio,
a new
adjustment program was inaugurated in 2012, which included a writedown of Greek debt by 75%.
Further cuts in public spending were to be made, as well as improvements in tax collection. But economic
conditions continued to deteriorate, which hindered the country's ability to meet the fiscal goals.
The Greek economy began to expand in 2014, and registered growth for the year of 0.8%. The public's
disenchantment with the country's economic and political status, however, turned it against the usual
ruling parties. The left-wing Syriza party took the lead position in the parliamentary elections
held this past January, and the new Prime Minister, Alexis Tsipras, pledged to undo the policies
of the troika. He and Finance Minister Yanis Varoufakis have been negotiating with the IMF, the ECB
and the other member governments of the Eurozone in an attempt to obtain more debt reduction in return
for implementing new adjustment measures.
The macroeconomic record, therefore, seems to support the position of those who view the Greek
situation as one of imposed austerity to force payment of debt incurred in the past. But because
of the continuing declines in GDP, the improvement in the debt/GDP ratio has remained an elusive
(if not unattainable) goal. (For detailed comments on the impact of the macroeconomic policies
undertaken in the 2010 and 2012 programs see
Krugman
here and Wren-Lewis
here.) Another perspective, however, brings an additional dimension to the analysis. From a public
finance point of view, the successive Greek governments have been unable and/or unwilling to deal
with budget positions-and in particular expenditures through the pension system-that are unsustainable.
Pension expenditures as a proportion of GDP have been relatively high when compared to other
European countries, and under the pre-2010 system were
projected to reach almost 25% of GDP by 2050. Workers were able to receive full benefits after
35 years of contributions, rather than 40 as in most other countries. Those in "strenuous occupations,"
which were broadly defined, could retire after 25 years with full benefits. The amount that a retiree
received was based on the last year of salary rather than career earnings, and there were extra monthly
payments at Christmas and Easter. The administration of the system, split among over 100 agencies,
was a bureaucratic nightmare.
Much of this has been changed. The minimum retirement age has been raised, the number of years
needed for full benefits is now 40, and the calculation of benefits changed so as to be less generous.
But some fear that the changes have not been sufficient, particularly if
older workers are "sheltered" from the changes.
Moreover, government pensions are important to a wide number of people. The
old-age dependency ratio is around 30%,
one of the highest in Europe. The contraction in the Greek economy means that
the pension is sometimes the sole income payment received by a family. It is hardly surprising,
therefore, that the pension system is seen as a "red line" which can not be crossed any further in
Greece.
The challenge, therefore, is for the government to establish its finances on a sound footing without
further damaging the fragile economy. This will call for some compromises on both sides.
... if the European governments insist that Greece must also pay back all its outstanding debt,
then there is only one possible ending for this saga, and it will not be a happy one.
With the VIX soaring and the US equity markets seeing their first 2% correction in many moons,
the capping on the precious metals was determined and obvious.
So much for 'Greek capitulation.'
I think Syriza realized they were being presented an untenable solution, the 'generous offer' of
extend and pretend by Merkel and the Eurocrats, with the IMF playing heavy. This bailing out of
private creditors while extracting a pound of flesh from the Greek people, facilitated by
corporate friendly governments, was exactly how Greece came into this situation in the first
place.
I thought forcing of a bank closure on Greece by the EU was a bit tough, and probably senseless.
Showing them the lash to get them to fall to heel and all that.
Most economic commentators in the US are completely clueless about money these days, and global
economics as well.
More surprises will therefore be coming I am sure.
US equity markets had about a two percent correction, with the SP 500 testing its 200 DMA.
Forget the domestic economic news, it was all geopoliticals and mostly about Greece.
The markets do not like the uncertainty of what will happen in Greece, as well as Puerto Rico
and the Ukraine, not to mention the wavering financial assets bubble in China.
I am treading slowly through the commentary and news about Greece. The least helpful are those
who are mostly projecting their egos or some ideology.
This is primarily a political problem. Greece has a left wing government that the Western
powers find unattractive compared to the puppet governments which have facilitated the bailing
out of Greek's private creditors while sustaining an unsustainable economic situation.
I am puzzled by Jeffrey Sachs who suggest that Greek default on their debt, but remain in the
Eurozone. I am not quite sure how they might do that, and while Jeff says their is no mechanism
to actually kick them out it does seem a bit too cute. The EU does not have a mechanism for
forgiving one member's debts ...
The neo-liberals running Europe have too much to lose by giving the Greeks a break -- especially
the 'socialists' who have acquiesced in the suffering of their traditional supporters since the economic
crisis began in 2007. . "...Austerity is precisely the opposite of policies required to revitalize a depressed economy.
But it is exactly what a predatory financial cabal uses to squeeze the lifeblood out of victims it manages
to snare with its promises of money now, pay later." . "...Sharpies in expensive suits take three-martini lunches at the expense of millions of people
ensnared in their delightful little game and suffering to fund their luxuries for them. Debt is such
a wonderful product. The gift that keeps on giving. You can even blame your victims by waging a moralistic
finger at them: "You never should have borrowed the money in the first place!" What a rotten, selfish,
greedy, antisocial game." . "...The theory seems to be that competing with Third World workers requires the 99% to accept
Third World salaries and conditions... how else can the 0.1% keep their multi-billion dollar lifestyles?"
European bankers can't stand the idea of a democratic vote on economic problems that impact
millions of people. Neo-liberalism is a zombie economic policy, alive long after it should be
dead. How much more suffering must the Greek people endure before anti-austerity policies are
accepted as the only way out of the crisis?
Todge, seattle 36 minutes ago
When Merkel and Juncker say "compromise", it means " do what we tell you" . Tsipras recognizes
that the creditor nations have a double standard and is calling it.
The EU leaders are not happy. Unclear why. It's only Greek pensioners who'll have to eke out
a misery on $250 a month.
Far too little attention has been paid to the darkest cloud on the horizon, the rise of right-wing
extremism in Europe. As a result of austerity measures forced on Greek workers, such as reducing
the standard minimum wage of $750 by 22 percent, people are increasingly, and quite rightly, bitter
and angry. Punishing the working class and ignoring its 25 percent unemployment rate energizes
destructive political forces in Greece such as the Golden Dawn party, which channels working class
rage into rage against the "other", such as minority citizens and immigrants. This is a particularly
bad time for anti-immigrant sentiment to take hold. It is worrisome to watch European leaders
in this debt crisis fueling such nationalist and racist extremism.
Tommy, yoopee, michigan
It's unfortunate that the European Union will dissolve simply because European oligarchs refuse
to pay higher taxes. This type of sickness that has occurred in the U.S. has apparently spread
overseas.
Sad to say, but even the rich are so blind to know that they won't have a pot to urinate in if
the earth is burning up and the people are in revolt. Austerity worked in this country, meaning
it worked to keep America in a prolonged depression after they first tried it in 1937. Will we
ever learn? If history is a guide, the quick answer is 'no'.
george, coastline
Last week the Troika insisted that Greece further cut pension benefits and not raise taxes,
If Syriza had agreed to that, they would have been discredited by their own electorate. One wonders
if that wasn't the real goal of Europe's leaders- to send a message to the Spanish who vote in
November and can express their opinion of austerity by giving power to Podemos.
Now they're shocked and petrified that the Greeks will vote on their own destiny and say they
are willing to compromise. But in the end, the neo-liberals running Europe have too much to lose
by giving the Greeks a break -- especially the 'socialists' who have acquiesced in the suffering
of their traditional supporters since the economic crisis began in 2007.
condo, France
I'm afraid today's slump in the markets has cost much much more than the money expected from
Greece. Ideology has overcome economics in this instance, but pointing the finger at Ms. Merkel
is not fair: the worst seem to be the visionless technocrats of the Eurogroup, not mentioning
the IMF
Jason, DC 6 minutes ago
""Europe cannot give permanent financial aid with no conditions," he said."
But, they aren't asking for that. They are asking for a specific amount of aid with different
conditions than what you want.
condo, France
I'm afraid today's slump in the markets has cost much much more than the money expected from
Greece. Ideology has overcome economics in this instance, but pointing the finger at Ms. Merkel
is not fair: the worst seem to be the visionless technocrats of the Eurogroup, not mentioning
the IMF
Jason, DC
""Europe cannot give permanent financial aid with no conditions," he said."
But, they aren't asking for that. They are asking for a specific amount of aid with different
conditions than what you want.
Bill Appledorf, is a trusted commenter British Columbia
Austerity is precisely the opposite of policies required to revitalize a depressed economy.
But it is exactly what a predatory financial cabal uses to squeeze the lifeblood out of victims
it manages to snare with its promises of money now, pay later.
American homeowners suckered with teasers to purchase balloon mortgages that cost them their
homes; college students roped into lifelong indebtedness with student loans issued by financial
institutions that never in a million years would pay their fair share of taxes to fund free public
education; third world countries driven to financial ruin by the tried-and-true strategy being
employed in Greece: transnational PayDay loans on which interest payments are only made possible
by rolling them over in perpetuity and loaning just enough to pay that interest every time another
tranche is issued.
Sharpies in expensive suits take three-martini lunches at the expense of millions of people
ensnared in their delightful little game and suffering to fund their luxuries for them. Debt is
such a wonderful product. The gift that keeps on giving. You can even blame your victims by waging
a moralistic finger at them: "You never should have borrowed the money in the first place!"
What a rotten, selfish, greedy, antisocial game.
dolly patterson, silicon valley
I really don't understand what the big deal is about keeping Greece in the Eurozone...their
economy only makes up 2%. They can still stay in the EU along with 9 other countries who don't
trade the euro dollar.
If the EZ gives in to Greece, it set a precedence for others like Italy and Spain, etc., to not
have to pay their dues.
Jason, DC
"If the EZ gives in to Greece..."
Exactly...all those countries should be conquered, not treated like they were part of an equal
union.
Matthew, Auckland
At least Merkel gets that berating/telling the Greek people what to vote in their own referendum
proooobably won't help. The rich, angry technocrats doing the berating? Er, not so much.
tony silver, Kopenhagen
The Capitalist West lent billions of Dollars, for Greece to realize its Olympic Games, knowing
that it was a risk, as Greece is one of the poorest country in EU.
Now they demand their money back? Seems unrealistic.
If Greece has no more money to pay its obligations, then someone should have transferred it to
foreign banks. Money cannot evaporate like smoke.
Billions of Dollars were driven by European and American money-men and invested in their banks.
David, Sacramento
Money can evaporate. Recall the Great Depression where stock prices plummeted between 1930
and 1932. That's when people jumped out of high-rise buildings, not 1929-1930.
change, new york, ny 39 minutes ago
Are we that careless and gullible? Greece does not have the money to pay today or at the
end of the year. Kicking the can down the road is only for political reasons. Economically nothing
will change.
The Europeans are looking for something to stem the fallout, something they themselves created.
The best for the Eurozone is for Greece to quietly exit from the group. The fallout will be less
damaging for all if the Europeans are willing to make a simple but hard choice.
That Greece will exit, should not be seen as a failure on the part of the Group. That is exactly
what they are making this crisis to be.
anon,
Heather, a civil war would add MORE problems! Who wants more problems?
I'm surprised no one has in-depth investigated a population of 11M people has over 350B euro
debt in its euro lifespan. I believe savvier crooks have left them with their debts also.
If Cyprus was offshore Asset banking, Greece appears to be offshore Debt banking. Not fair for
11M people to live like they abused the EMU by the decisions of a few. What is the history of
Greek financials? Were they solvent before entering the Euro?
What if crooks got Greece into the Euro, performed numerous financial crimes, used Greece,
robbed Greece, deposited the money into Cyprus and crooked banks of Greece and Cyprus. In recent
years Europe has confiscated illegal money and closed illegal banks. Greek bankers and businessmen
look crooked also. So they play the part, while others ran off with over 300B euros.
If you were to balance the funds, where did the 350B euros go? Each Greek should be a rich
on the average. Only the average citizen suffers. THIS is a recurring pattern.
KeithNJ, NJ
Greek banks did not 'overlend'. The excessive lending to the Greek government was by non-Greek
banks (perhaps the Greek banks knew better?).
The Greek government used the money to double state worker's salaries over less than ten years
and greatly expand the headcount. Some money was left over for benefits to the public.
The Greek people, not surprisingly, apparently see their State as hopelessly corrupt and avoid
funding it if at all possible. Now, other Europeans have come to the same conclusion.
So the question was, and remains, what will the Greek people do about their State? That question
does not go away regardless of whether they stick with the Euro or devalue with the Drachma. Either
way the State cannot fund itself and has run our of people willing to plug the gap, whether Greek
or non-Greek.
su, ny
As of today, If Greece leaves Eurozone, Greece some part of population will leave Greece permanently
too. so Meanwhile EU incompetent bureaucrats couldn't even figure out how to deal with Mediterranean
immigrants, now in their hand there is a legitimate prospective millions immigrant Greek people.
EU is showing it's inner workings and that say only one thing :INCOMPETENT.
su, ny
No body in the world can say that 500 billion USD credit is given with under normal banking
and financial procedures to 10,815.000 population country.
That is not right.
EU cannot wash its hands, this is entirely Greek's problem, EU and it's lenders are in this game
and they did this to Greece knowingly and intentionally and now they are trying to capitulate
a nation in pretext of World War one time Europe mentality.
This is a very nasty game and power play, nothing else.
German's bankers and Greek politicians collaborative work nothing else.
P.S: some credit in this scheme also goes to Goldman Sachs.
Carlos, Long Island, NY
Tsipras responded to their 'take it or else' ultimatum with a referendum; what's wrong with
it? What are the EU leaders afraid off? I would said that after 5 years of austerity that only
shrunk their economy, Greek people have a good reason to say no more.
They will go into a very bad couple of years but even that is better than eternal austerity
with no economic growth. After the economy stabilizes, they will start growing and will do better.
Just look what happened in Argentina.
Simon, Tampa
The Greeks need to call it a day and reject the Trioka's blackmail.
Jon Davis, NM
The Greeks need to exit the euro, align themselves economically with Russia, and lead NATO
but remain neutral. Let the rest of Europe worry about Ukraine, ISIS and the flood of immigrants
into southern Europe via Spain and Italy.
NYCLAW, Flushing, New York
Tsipras just called Merkel's bluff. By closing the Greek banks and stock exchange, Tsipras
is signaling that he is willing to take great risk to get a deal that he and his voters can live
with. Merkel, on the other hand, maybe was assuming that the Greeks would never risk an EU membership
and accept further cuts.
Caveat to Merkel: the Chinese have a old saying: "Those wear shoes are better off not stepping
on the barefooted ones." Watch out, Ms. Merkel, the Greeks may have been pushed to a point that
they have nothing to lose.
Peter Czipott, is a trusted commenter San Diego
It seems that Krugman, in his op-ed today, must be right: it's not about analysis but about
power. Analysis of the problem would yield a solution that, while not ideal, minimizes losses
for all parties involved -- or, equivalently, maximizes the ultimate payout to creditors over
time. That alternative dictates setting up a situation facilitating the eventual regrowth of the
Greek economy, to the point where it can (a) provide for its own citizens' well-being, and (b)
repay as much as possible of its outside debts.
Instead, Merkel and company, ostensibly representing the interests of their citizens, lay down
terms that, as Krugman says, lead to endless Greek austerity and a depression of unforeseeable
duration, which also harms the interests of the very citizens Merkel is presuming to protect.
And all for what? To assert the moral upper hand? It's counterproductive to the point of craziness;
and Merkel, as a physicist and problem-solver, used to dealing with quantitative data, should
know better: perhaps better than some of her economic advisers.
Michael Collins, Oakland
Greece will never be able to pay it's debt with an unemployment rate of 25%. Young Greeks are
leaving in droves to find opportunity elsewhere. While it's true that Greek still needs to implement
some economic reforms, like cutting down on tax evasion and cutting back on pensions, it's also
clear that purpose of austerity is punishment without regard to viability.
Austerity will be the end of the Greek Economy, so why not exit?
If the Europeans are serious about keeping Greece (and Spain, and Portugal) in the EU, they need
to temper Austerity with a serious plan to raise employment and give the younger generation a
reason to stay in their home country.
John M, is a trusted commenter Oakland, CA
Indeed - Greece has suffered through a full-on depression for 5 years, and all the Troika said
in response was "more of the same." To my mind, the whole purpose of this exercise is to force
massive social safety net cuts and privatization not only upon Greece, but upon all of Europe
- including Germany.
This is not merely a European perspective - look at the way pensioners were treated in Detroit,
and how the Governor of Illinois proposes to treat Chicago city workers' pensions: bankruptcy,
and then massive pension cuts. The theory seems to be that competing with Third World workers
requires the 99% to accept Third World salaries and conditions... how else can the 0.1% keep their
multi-billion dollar lifestyles?
Bob Dobbs, Santa Cruz, CA
In following a politically expedient course that utterly ruins a country considered "expendable,"
the European Community sowed the wind. And as you suggest, it may reap the whirlwind.
Europe's leaders are apparently no wiser or better than they were in 1919, when they imposed the
same sort of austerity on -- Germany. Whose leaders also seem curiously blank on the matter.
The commission reiterated on Monday that the door remained open to a deal.
Jean-Claude Juncker, the European commission president, was expected on Monday to appeal to Greece
to return to the negotiating table, but would not make any fresh proposals.
On Sunday, the commission took the unusual step of releasing the draft bailout agreement that
creditors had been negotiating with Greece before talks broke down.
"We are some centimetres away from an agreement," tweeted Pierre Moscovici, France's European
commissioner, adding that there was an open door to further talks. "We must find a compromise. I
want a reformed Greece to stay in the eurozone without austerity."
A bank manager explains the situation to pensioners waiting outside a branch of the National Bank
of Greece hoping to get their pensions.
A bank manager explains the situation to pensioners waiting outside a branch of the National Bank
of Greece hoping to get their pensions. Photograph: Yannis Behrakis/Reuters
Meanwhile, Angela Merkel will hold emergency talks with senior German politicians on Monday afternoon.
The German chancellor spoke to the US president, Barack Obama, on Sunday, with the two leaders
agreeing it was "critically important to make every effort to return to a path that will allow Greece
to resume reforms and growth within the eurozone", according to a White House statement.
The US Treasury secretary, Jack Lew, spoke to his counterparts in Germany and France, as well
as Tsipras and the head of the IMF, Christine Lagarde. The US is urging all sides to resolve the
crisis: it has called for Greece's creditors to discuss debt relief ahead of Sunday's referendum,
but is also counselling Athens to adopt "difficult measures to reach a pragmatic compromise".
In a brief, televised address to the nation on Sunday night, Tsipras blamed the eurozone leaders.
He did not say how long the banks would remain shut, nor did he give details of how much individuals
and companies would be allowed to withdraw once they reopened.
In the early hours of Monday morning, Tsipras published a decree in the official government gazette
setting out the capital controls to be imposed. The decree – entitled "Bank Holiday break" – was
signed by Tsipras and the Greek president, Prokopis Pavlopoulos.
It said all banks would be kept shut until after the referendum on 5 July and that withdrawals
from cash machines would be limited to €60 – about £40. Cash machines were not expected to reopen
until later on Monday.
Foreign transfers out of Greece are prohibited, although online transactions between Greek bank
accounts are to continue as normal. Tsipras insisted that pensions and wages would be unaffected
by the controls.
Greece's finance ministry later announced that the strict ATM withdrawal limits would not apply
to holders of credit or debit cards issued in foreign countries. This was viewed as a necessary move
as tourists were spotted joining locals in front of ATMs on Sunday. Any similar restriction would
hurt tourism, Greece's sole thriving industry, which accounts for at least a fifth of economic activity.
Tsipras said Saturday's move by the eurozone's finance chiefs to halt Greece's bailout programme
was unprecedented. He called it "a denial of the Greek public's right to reach a democratic decision".
The commission said on Monday that Greece's capital controls were "necessary and proportionate",
but free movement of capital would need to be be reinstated "as soon as possible in the interests
of the Greek economy, the eurozone and the European Union's single market as a whole".
Tsipras added that the finance ministers' initiative had prompted the ECB to curb its assistance,
forcing the government's hand. The Greek prime minister, who has always insisted the crisis can only
be solved at the highest political levels, said he had once again appealed for an extension of the
bailout until after the referendum, sending his proposal to the president of the European council,
Donald Tusk, the leaders of the other 18 member states of the single currency, the commission and
the ECB.
Markets suffered across Asia on Monday as Greece shut down its banks for a week ahead of an increasingly
likely debt default.
Oil prices declined and the euro edged down against the dollar, while Tokyo's Nikkei 225 index
fell 2% to 20,283.98 points. The Shanghai Composite Index was off 0.4% at 4,178.56 despite China's
surprise weekend interest rate cut.
Hong Kong's Hang Seng lost 1.7% to 29,192.67. Seoul's Kospi shed 1.6% to 2,057.52 and Sydney's
S&P/ASX 200 was off 1.8% to 5,447.80. Market benchmarks in Taiwan, Singapore and New Zealand also
fell sharply.
Turmoil in Asia had been widely expected after the failure of 11th-hour talks in Europe over the
weekend raised the possibility of a Greek exit from the eurozone.
More than $35bn was wiped off the Australian stock market in the first hour of trading on Monday
as investors braced for what could become a torrid week.
Earlier the euro dropped more than 3% to 133.80 yen, its lowest level for five weeks. The common
currency fell as much as 1.9% to $1.0955, its lowest level in almost a month.
More on this topicGreek debt crisis: the key points of Athens bank controls
The US Treasury secretary, Jack Lew, stressed the need for Greece "to take necessary steps to
maintain financial stability" ahead of the referendum.
He told the Greek prime minister, Alexis Tsipras, on Sunday that Athens and its creditors needed
to continue working toward a resolution ahead of a Greek referendum on 5 July on the creditors' demands
for austerity.
US stock futures dived 1.8%, hitting a three-month low, while US Treasuries futures price gained
almost two points.
A cash-strapped Greece looks certain to miss its debt repayment on Tuesday as Greece's European
partners shut the door on extending a credit lifeline after Greece's surprise move to hold a referendum
on bailout terms.
robtal 29 Jun 2015 08:43
We can print all the money we want all over the world to save every banker, financial wizard,
and insurance company . But one little country like Greece is the scape goat these financial criminals
use to bring fear and control to the rest of the world. These are evil less than human monsters
that run these world banks.
Paul Hawkins 29 Jun 2015 08:31
The World is being run by a group of financial gangsters such as the Rothschilds and 30 to
40 of the richest people in the world: Karen Hudes is a graduate of Yale Law School and she worked
in the legal department of the World Bank for more than 20 years. In fact, when she was fired
for blowing the whistle on corruption inside the World Bank, she held the position of Senior Counsel.
She was in a unique position to see exactly how the global elite rules the world, and the information
that she is now revealing to the public is absolutely stunning. According to Hudes, the elite
uses a very tight core of financial institutions and mega-corporations to dominate the planet.
Austerity is a lie as Countries use the Fiat monetary system and can produce money when they
want, such as quantitative easing. It is the greed of the banks, that had to be bailed out across
the world, that is causing the problem.
The sooner these greedy selfish power hungry bankers are brought to book the sooner the financial
markets would recover.
Mark Foster Kenneth Stephen Besig 29 Jun 2015 08:17
A large part of Syriza wanted out of the Euro because they were sure the Troika would not compromise
on it's insane 'reforms' which had already destroyed most of the economy. Debtors prison's were
abolished years ago in the UK, primarily because creditors realized it meant they would never
get any compensation for losses while debtors were in gaol. Yet by insisting on repayments on
an odious debt, we effectively put the whole of Greece into a debtors prison, and insisted on
all the wrong IMF/ECB reforms that have always failed to resurrect economies in the past. We are
still caught up in the idiotic Washington consensus/Jeffrey Sachs/ Hernando de Sotos models of
development.
In truth Greece should have left the failed euro project years ago. Iceland had the sense to
get out of the Banks clutches, file bankruptcy and impose capital controls and start again. For
the most part that as worked very well for them. Some will say Greece isn't Iceland, or nonsense
like the Greeks are lazy (they work longer hours than the Germans), Greece has deep problems for
sure and i'm not saying I'm confident Syriza have the program to fix them. But I'm 100% confident
the demands of the Troika would only cripple them further.
Myrtle7 29 Jun 2015 08:14
Save Greece! A Kind Request to the EU Leaders and Creditors (Myrtle 7)
I am writing this because today we are hours before a bitter end, perhaps, for Greece and the
beginning of problems for the EU.
A lot has been said about the Greeks living above their income for a long time or partying for
a long time and these may have been true in many cases but the Greeks should not be punished now
as they followed the example and attitude of some of their leaders. And, moreover, now, it is
the poorer people, those with lower income, that are suffering, those that did not have the right
"connections."
The referendum arranged by the government seems like a democratic move but in fact it will
be a desperate choice as the Greek people are asked to choose between suicide by drowning and
suicide by hanging.
If Greece goes into default it will be a catastrophe for the country; there is no currency
to devalue. They have to re-create the drachma (it will take perhaps a year or more) which will
be immediately devalued. How would these people, who are suffering already, cope? And if Greece
defaults, I am not sure whether the Creditors will get their money within the next 50 years, anyway.
Most seriously, the tense situation in the defaulted country, the low morale and possible disorder,
would invite & unleash unforeseen dangers for Greece first, for other European countries later
and the EU eventually; as we all know such situations can spread to the detriment of the people.
Historic recurrence is here: the specifics and the actors change, but the result is similar. Moreover,
it is common knowledge that there are forces, (they have their own agenda) which, wish, discuss
in conferences, and even envision, the break up of the European Union, even as 'we speak'. If
I am aware of this, I am sure the European leaders are aware too, for, as wise leaders, are conscious
(or should be) of emerging situations long before they get out of hand. With around 6 million
Muslims outside its northern borders, (excluding Turkish territories), Greece, will be an open,
unprotected theatre for anyone who wants an easy passage to the west.
The Creditors are part of the leadership or the Hegemony of European Union as they form the
powerful financial aspect of it; usually, leaders who push think they facilitate progress; in
fact they are blocking it. Yet, there are certain characteristics that wise leaders have and magnanimity
is the most important one. They do not expect a poor, proud nation to fall on their knees. They
would always offer opportunities for relief and growth. Lawrence Summers, US Treasury Secretary,
suggested something which sounds as a good solution: the Creditors can write off a small amount
of the debt now and perhaps ask for something that Greece, could, comfortably, add to their plan
that would help growth; e. g. taxing certain accounts many Greeks keep in Swiss banks. Such a
move by the Creditors would be wise, intelligent and humane.
With this magnanimous act the Greeks would feel uplifted and stronger to face the odds. In
my view, the most important attitude of the Leader is to make people feel they mean something
within the group, but I may be wrong.
John Kakkos DazzlingKarina 29 Jun 2015 07:04
Lazy Greeks is a very racisti thing to say, espesially since Greeks work-hours exceed that
of oher EU countries (including Germany). War reparations agreement was not accepted. Since in
1942, the Greek Central Bank was forced by the occupying Nazi regime to loan 476 million Reichsmarks
at 0% interest to Nazi Germany. In 1960, Greece accepted 115 million Marks as compensation for
Nazi crimes. Nevertheless, past Greek governments have insisted that this was only a down-payment,
not complete reparations. The 300 bn were not given to Greeks but to banks. 30% of Greeks are
iving below the povery line. Unemployment is 26% (60% to young) and 16% cant even provide daily
food needs. EU is not to blame, nor it is Greece. This financial system is just not working.
Aboutface 29 Jun 2015 06:47
There are "invisible hands" weaving the thread of EU-Euro through the IMF needle in this Greek
tradegy. One of the comment here by Steven Tracy on the Rothschilds and Rockerfeller seems about
right...a force majeure / fire sale of prime assets and not to dismiss, there are very wealthy
Greeks with offshore accounts, like vultures over a soon to be cadaver. Next move, the "Alexis
Tsipras surprise" call option.
pauline7883 29 Jun 2015 06:40
the greek people have the right to this referendum they have to decide if the deal is acceptable
whether they can cope with the continuing austerity. the financial institutions of europe have
acted disgracefully
the greek government should begin an audit of the books looking at the loans/debts owed by greece
to see if there was any illegality and prosecutions should follow
SEADADDY 29 Jun 2015 06:35
So, as Greece slips into the financial abyss, it's the common man/woman that gets the pain, the
punishment and the price tag of bankers ineptitude, greed and Houdini escapism. The bankers, corporate
investors and politicians get away with grand gambling and larceny of incredible scale, without
so much as a slap on the wrist. It wasn't the small man in Greece that caused the crisis. It was
the Niarchos's and the Onassis's & etc that caused the downfall, with getting away with not paying
their fair taxes, flags of convenience, double dealing and tax havens world wide. It's high time
that some government agency woke up and
NorthernFella,29 Jun 2015 06:00
They weren't ready to join the EU...
I would say, weren't ready to join the euro. Interesting that you don't mention anything about
the role of Goldman Sachs in this big scam.
"Humiliation" - what idiocy.
If accusing all the Greek of the ongoing (bank)crisis, using austerity (cuts directed to the
disadvantaged groups mostly) as a medicine and calling them lazy is not humiliating I don't know
what is.
And the idea that they were being 'starved by austerity' is ridiculous. They were starved
by their corrupt practices.
Let's take measures of that how much the neoliberalist austerity policy has affected those
in the most vulnerable position and let's compare it to the times before austerity. Sure the situation
has been bad for a long time before the crisis but austerity brought real hell.
Luckyspin marcus_rm 29 Jun 2015 05:34
The Greeks accuse the IMF of colluding in an EMU-imposed austerity regime that breaches the
Fund's own rules and is in open contradiction with five years of analysis by its own excellent
research department and chief economist, Olivier Blanchard.
Objectively, it is acting as an imperialist lackey. The IMF enforced brute liquidation without
compensating stimulus or relief. It claimed that its policies would lead to a 2.6 % contraction
of GDP in 2010 followed by brisk recovery.
What in fact happened was six years of depression, a deflationary spiral, a 26 % fall in GDP,
60 % youth unemployment, mass exodus of the young and the brightest, chronic hysteretic that will
blight Greece's prospects for decades to come, and to cap it all the debt ratio exploded because
of the mathematical – and predictable – denominator effect of shrinking nominal GDP.
George Vasilakakos deskandchair 29 Jun 2015 05:27
very poorly served Greece is by its media
That's the key point. You see the Greek media groups are run by the same oligarchs who've been
buying our politicians. They owe hundreds of millions to the Greek banks, along with the political
parties, between them it must be around a billion. The banks were unwilling to collect on those
debts, got bailed out and we are footing the bill...
Well, that's why I'm writing about "near-racism". Greece is schizophrenically seemed as the cradle
of democracy and the Western culture but as Gerold reveals the opinion of many by the comment:
Nonsense. The Greek nation and people have failed to grow into a modern responsible state.
They are still living like an Ottoman Province, trying to short-change the Sultan.
Many are still romanticizing the ancient times and are disappointed as they see the times have
changed. Many are wondering (bitterly) how the modern day Greek are so different from the ancient
times. In one book (a Finnish version of Traveler's history of Greece, I think) it was written
(in introduction) something like this: "are those hot-tempered noisy people really descended from
the ancient Greek?".
When adding to it Gerold's views on Greece as a nation that is still living like "an Ottoman
Province" it's easy to extend near-racist stereotypes even further. Now we're talking about "lazy
Greek who just lie down under the palm trees, waiting for the next bailout". Of course there are
stereotypes related to each nation but they get always stronger when we are going to the south
and they are told by "harder-working northerners" ...
I'm looking forward to the Greek people correcting their previous election error
Should the Greek vote only for "rationalist", pro-euro, business-oriented right-wing parties
who are ready to starve their own people to death? It sounds travesty of democracy and would prove
that economy has replaced democracy.
Theo Krom 29 Jun 2015 05:14
The markets. already have lost much more money than if they were agree to restructure, not
necessarily write-off, the Greek debt. If we count the profits the markets would gain after such
deal would have been announced then it seems that whatever is happening is a clear and utter irrational
thinking orchestrated by the allegedly proponents of rational economic thinking...
Policy for the contemporary markets, seems to be much more important than free markets. Free
market is an illusion, an excuse for the banks to suffocate democracy, using pseudo-politicians
as their most valuable gatekeepers....Well, the actual neo-liberalism has been implemented in
a very distorted manner, exactly as happened with socialism... Actually, both lead to utter misery!!!
This is what the private FMI corporation owned by the private federal reserve corporation of USA
has planned for ALL our countries. I's the Rothschields, the Rockfellers etc... The 1% that are
behind all this.
Can't you see USA is deep in debt and nearly bankrupt, just like most of the western countries
and Africa. They lend us money, put us deeper in debt, and we pay them back only the interest
of the debt ???
This has all been carefully planned since the creation of the private federal reserve corporation
in 1913 to rob our assets and control us.
This is why the BRIC countries have come together to ditch the US dollar.
Better than Eduard Snowden on the NSA.
GRJones Mark Foster 29 Jun 2015 04:51
Iceland is often held up on these pages as a shining example of the wealth and riches that
flow to you if you reject austerity. It shouldn't be. Iceland suffered enormous economic contraction
after its rejection of bailout conditions, and while the economy is growing, GDP is at about the
level it was in 2004, unemployment is still well above pre-crash levels, and prices are 50% higher
than they were before the crash. The steep devaluation of the currency by 50% meant that everyone
in Iceland took an enormous hit in terms of real wages, and because most Icelandic mortgages are
linked to the Euro theses have effectively doubled, while their homes have halved in value, leaving
much of the population in negative equity. They have enacted massive austerity, more than any
country in Europe bar Greece, slashing their deficit from 15% to less than 1%. The fall in living
standards has been severe enough that the Icelandic people voted the parties that came into power
after the rejection of bailout terms out of office, and reelected the party that was in power
before the crash. The lesson to be learned from Iceland is that economic collapse means pain,
no matter what you do.
someoneionceknew ID5590609 29 Jun 2015 04:50
Do you realize that the European rules prevent the ECB from funding member countries, as
well as prohibiting national bailouts
Sure. But why aren't you Germans subject to the rules too?
The rules don't work. They can be changed fairly easily. Why not if it stops people starving
and otherwise being persecuted through no fault of their own?
ID5590609 mjmizera 29 Jun 2015 04:38
Creditors already took a 50% haircut on Greece debt, and the conditions of Greece's bailout
loans were extremely generous, with very low interest rates and exceptionally long payment terms.
The terms and conditions were better than what was offered to Spain, Portugal and Ireland, and
those countries actually implemented the demanded austerity reforms and are now experiencing growth.
Greeks don't need their debt forgiven. Greeks need to start paying taxes and reforming and
managing their economy like a respectable first world nation, not some banana republic. Why should
Europeans and others show solidarity with Greeks when Greeks fail to show solidarity with their
own people and their democratically elected government?
Overdog81 29 Jun 2015 04:36
The past Greek politicians are responsible for bringing this debt to current levels. There's
no doubt about this.
However, the current government found itself at the edge of a cliff. 6 months of negotiations
and the issue of restructuring or writing off a non viable debt never came on the table by Greece's
creditors. Basically Greece is begging for money that only go towards paying this huge debt and
never into the real economy. Austerity measures are applied just to pay the debt's interest which
has become huge (twice the size of Ireland's and Portugal's combined) .
What Syriza is doing now is the only option it has in order to make the debt viable and end
austerity for its people. The timing of the referendum on friday night and capital controls on
Sunday night (banks closed for a week and stock market closed on Monday) point towards this way.
Its a huge gamble in order to reach an agreement but possibly the only hand Greece could play
in order to shake off the markets and thus its creditors.
I truly hope an agreement is reached before the referendum so that everyone walks out happy
especially Varoufakis and the Greek people who would get the best deal they could ever dream of.
On the other side, a debt relief decision seems the only road for the imf and eu partners. Its
a debt that could never be paid anyway so why risk?
Arthur Buse 29 Jun 2015 04:36
I had thought it was only Samuri that chose harakiri. But Alexis has done the EU a great kindness
by throwing the Greek people to the dogs of famine. He has helped the cause of breaking up the
Euro and even, dare we hope, the EU. Ever closer union was always a grave danger. It never went
well for the USSR and it ended in tragedy. The EU will eventually go the same way. The USA is
quite different. They adopted a common language before trying for a common currency and common
Federal taxes. The EU will not manage the former and has not got the will to manage the latter.
The Euro was therefore always doomed and now the EU needs to return to individual currencies and
the EEC.
Germany is the largest net contributor to the EU. They will bear the brunt of any aid extended
to Greece.
If Germans bear any loss then it is their own foolishness for trusting their politicians. Why
are Germans on the hook for bailing out their own banks?
Greece has been an economic failure for their entire modern history, including well before
they joined the Euro. They want to be live and be treated like a rich first world economy,
yet run their country like banana republic. It's readily apparent that other Europeans will
no longer fund or subsidize a lifestyle that Greeks cannot independently afford. Greece essentially
partied on northern European largesse, but the bill is now due.
That's just cut and paste racist cant. Germans should know better given their history.
Your feelings about capitalism
Oh, you still don't understand what mercantilism means? Good lord.
but what do you think is going to happen when Greece is "independent" and has to reintroduce
the Drachma.
Depends on many factors I'd say. But what are you offering?
ID5590609 someoneionceknew 29 Jun 2015 04:23
Germany is the largest net contributor to the EU. They will bear the brunt of any aid extended
to Greece. That is why the opinion of the Germans is so important when considering any action
on Greece.
Greece has been an economic failure for their entire modern history, including well before
they joined the Euro. They want to be live and be treated like a rich first world economy, yet
run their country like banana republic. It's readily apparent that other Europeans will no longer
fund or subsidize a lifestyle that Greeks cannot independently afford. Greece essentially partied
on northern European largesse, but the bill is now due.
Your feelings about capitalism notwithstanding, things must drastically change in Greece. You
claim to oppose the Eurogroup's and IMF's purportedly cruel demand for austerity and reform. That's
fine, but what do you think is going to happen when Greece is "independent" and has to reintroduce
the Drachma. Socialist solidarity is not going to fund imports of food, fuel, medicine and other
essentials. There will be austerity in Greece, either organized with their European partners,
or resulting from the chaos of financial incompetence. Greece is going to have to continue to
painfully adjust to a lifestyle commiserate with their true GDP, earnings and economic value.
The good old days are gone.
They are not asking for Herr Schauble's (or his ilks')
money or aid.
major economic reforms
More counterproductive austerity. More poverty, more privation, more labour bashing, more
suicides.
"mercantilism" (which I assume is meant as a juvenile reference to capitalism)
So I'm dealing with an idiot.
Germany has generally learned the political and economic lessons from their own unfortunate
history, everyone from WW1 reparations and the risks of inflation, the horrors of WWII,
Clearly it has not. Quite the opposite.
Carlo47 29 Jun 2015 04:03
Only the American Treasure understood the gravity of the situation, but it's odd that they
don't give appropriate instructions to the IMF and namely to the chauvinist Ms Lagrande, who continues
in its absurd hard line more on measures that on the debt.
On the other end Mr Schäuble and Mr Dijsselbloem must be happy that investors flee.
They have only have a bit of patience, until the contagion will arrive in Germany and Holland.
Anyhow, if they are honest, both should resign for clear inability to do their job and to understand
the heavy drawbacks of their dummy hard line, as supposed and false financial experts.
The German Government and the EU heads should slap the door in their face and send them away.
CanadaChuck ID9492736 29 Jun 2015 03:53
I had thought that Greece was unimportant overall in the EU. What will happen when Italy and
Spain collapse? I guess the UK won't have to bother leaving the EU.
Ian Crowther slingsby1000 29 Jun 2015 03:49
Agreed Slingsby, so a lot depends on the post management of crisis as we see in Argentina and
Turkey, its not plain sailing, far from it. But being enslaved is worse, and paying on the never
never, feeding German and French income is not the way to go Fault lies on both sides, nobody
comes out of this smelling of roses.
The EU construct was a nonsense form the very start, a union of unequals, instabilities and
too many externalities to manage that technocrats have little idea on how to manage in complex
situations.
Lanceowenmorgan Kompe75 29 Jun 2015 03:42
Ya the Forth Reich is coming and it seems Putin is the only one smart enough to see it
ID9492736 29 Jun 2015 03:40
Barely half an hour after opening, the German Stock Exchange index (DAX) is down almost 5%,
which is dangerously close to a system meltdown. The German moneymasters are trying to intervene
by pumping money into the exchange, but it's like putting a band-aid on the collapsing levee.
The German nuclear reactor is overheating uncontrollably.
Xenkar Stivell 29 Jun 2015 03:34
True, ordinary people in Europe need to stand up and support the people of Greece, but sadly
as spiceof so eloquently put it
"These little conformists, the lowly prison guards of the elites, are the lowest form
of humanity. Spiteful and small minded, they always want to "punish" those who dare raise their
heads and complain."
MrEurope Lupick 29 Jun 2015 03:31
You do realize that what you wrote is beyond ignorance...? While I agree that the way market-news
is brought is excessively dramatic, markets ARE for a large part a reflection of human productive
activity, and productive activity tends to be... you know... the stuff that makes people money.
Jobs. Earnings... roof over your head, and so forth... these things quite obviously matter.
The problem is that humans absolutely suck at understanding the long term consequences and
impact of small, tiny little (negative, but also positive) changes that accumulate over time.
You know the famous example that if Jesus would have put one dollar in his bank account, he
would (assuming 3% per annum interest) by the year 1000 he would have 7,080,467,438,104.71 dollars.
(and more money than ever has or will exist in the history of Earth by 2015...) 3% does not sound
like much... but all these small little additions do add up. And so if you're living in a world
where every week or two there is a minor crisis here or there.... eventually it starts to matter.
A lot. People put off investing. They spend less. There are less jobs... (which in turn compounds
the problems...) and on it goes.
Bottom line is - you and I know fuck all about advanced economics, just like the vast majority
of posters here.
Stivell 29 Jun 2015 03:28
Lagarde and the European leaders have forced Greece into this corner and really should expect
nothing more than the Greeks turning and baring their teeth. Ordinary people in Europe need to
stand up and support the people of Greece against these relentless scaremongering money-obsessed
bastards. Go Greece, bite that hand!
Kompe75 29 Jun 2015 03:25
If the Schaueble , Merkel and Jean Claude don't resign after the upcoming fiasco , then the
investors will fire them.Remember my prediction.They will have a bitter end than DSK.
D9492736 royaldocks 29 Jun 2015 03:16
If you really, seriously believe that EU economy is so competitive that it can turn on the
dime and adjust to the coming global economic meldown to its advantage and do so in the current
political and economic timespace , I have a BIG surprise for you: you are dangerously delusional.
First of all, the prices of ALL commodities, raw and unprocessed material EU economy needs
to keep going are going to get sky-high because EUR will be hemorrhaging value until cows come
home. And even if Mario Draghi and the idiots from Eurogroup come back to their senses tomorrow,
it will have been too late: they already committed an act of economic suicide, and it is really
too late to stop the head exit wound from bleeding to death now. Secondly, with the investors
quitting the stock bubble like crazy, the amount of discretionary spending and funded demand is
going to go down like a rock: Europe will be hit with AT LEAST a quadruple -whammy: (a) rigid
and dogmatic austerity and money-supply strangulation (b) supply chain disruption (c) extremely
weak demand and massively negative growth and (d) catastrophic consumer confidence index. Add
to this list of nightmares a never-ending flow of migrants and refugees, ever-increasing pressure
on social services, cost of funding of wars and military operations in Iraq, Syria, Libya, Aghanistan
and elsewhere, the massive losses caused by the American-imposed sanctions against Russia (by
most accounts, somewhere between $100 and $150 billion), the cost of containing the situation
in Ukraine and bankrolling the bankrupt Ukrainian government and - on top of it all - servicing
the sovereign debt, and you get a much clearer picture. There is absolutely no way - not even
a hypothetical chance - that European economy can weather out this tsunami unaffected and unharmed.
EU should consider itself lucky if they do not lose 20-30% of its entire economy in the next month
or so.
If I were a German retiree, I would be queuing up at the local ATMs as we speak. Because, yes,
it's the end of the Eurozone as we know it.
spiceof 29 Jun 2015 03:12
Amazing how the Greek subject matter brings forth the establishment sadists out en masse, demanding
that punishment, penury and the bubonic plague be visited upon that rebellious country.
These little conformists, the lowly prison guards of the elites, are the lowest form of humanity.
Spiteful and small minded, they always want to "punish" those who dare raise their heads and complain.
iruka Lupick 29 Jun 2015 02:56
Important point.
Of course it's worth bearing in mind that people like StrategicVoice213 aren't really concerned
with contrasting good people and bad people, lazy people and hard-working people, etc..
Take a closer look, and 99 times out of 100 it's amply clear that their only real interest
is in defending the authority and legitimacy of the institutions that they see being threatened
or insulted by those they're calumnying.
The actual behaviour or character of this person or that nation is of no real consequence to
213's . Any old lie, projection or blinkered misconstruction will do.
It's the need to preserve sanctified hierarchies of power that engages them.
Or more accurately (since they're clearly all sad little creatures of no importance whatsoever,
and no capacity to preserve anything, for whom an identification with power provides them with
something clearly lacking in their actual lives) it's the need to glorify power, and all its ways
and entitlements.
Lanceowenmorgan slingsby1000 29 Jun 2015 02:55
Who the fuck was the dumb ass(es) who would lend Greece all that money?
€386,000,000,000 to a country with a population of what 6-10 million? That's mathematics son you
can argue with me but you can't argue with figures. Apologies to Foghorn Leghorn. But I think
all comes down to greed.
truthbetold13 borninthe80s 29 Jun 2015 02:50
Such a pathetic cliche, a real twatcherite/conmoron lie. By bloated public sector you just
mean that more things are run by the government instead of by big business. Nobody here being
ripped off by utilities/ rail/private landlords etc thinks this is a better arrangement. What
you have is higher prices, worse service, less equal pay within those sectors, systemic tax evasion
by business and its bosses. Give me a state controlled service any day.
JohnnyMorales 29 Jun 2015 02:45
This should be the quote of the day:
Mitsuo Shimizu, deputy general manager at Japan Asia Securities Group in Tokyo, told Bloomberg
News: "In the face of pressure from the eurozone to accept austerity measures, the Greeks answered
that it's hard to live just on water."
The Japanese have never been considered softies. If they are describing the EU demands as too
much, then they are definitely too much.
FactualEvidence 29 Jun 2015 02:45
The EU needs Britain to stay in the EU for one reason only and its financial.
The EU have ploughed in billions and billions of tax payers money into several different countries
bailouts not just Greece, including Portugal, Spain, Cyprus, Ireland, Hungary, Latvia and Romania.
A total amount of 487.75 BILLION Euros has been given to these countries and that's since just
2008.
So rather than the EU getting stronger as united nation's it is getting worse.
The EU Commission, MEP's, LIBLABCON parties and BBC don't tell you that information. You have
to research it yourselves on Wikipedia.
So my three questions to all those Europhiles are.
If being in the EU is so great how come so many countries have to rely on hand out?
If so many countries need billions to even provide essential services to survive. Where is
this great trading economy?
Why is it not working for so many millions of people?
Go to Wikipedia and see how the monetary crisis is getting worse for all the countries not
better.
Google : European Debt Crisis, and check out the chart around the middle of a very long page.
Were would the EU be without the billions we put in to it and on top of that all the VAT tax
they get from us, YES VAT. Did you know that it was through EU ruling you pay VAT on your utility
bills?
Good thing Europe is ring-fenced to the risk of contagion....
The ECB will have to buy more Spanish and Italian bonds this week than the entire Greek debt,
and then bailout these countries so they can buy back the bonds (Greek style). Oh well, if they
say they've got it covered, it's fine I suppose... (shakes head in haughty derision).
The only markets still in the black are the markets that haven't opened yet. When DAX and FTSE
open, the shit tsunami is REALLY going to hit the austerity fans.
JohnnyMorales 29 Jun 2015 02:29
The loss of value across the world even if most of it is just temporary is many many times
more than Greece's entire debt.
Yet because the EU troika wanted to win a moral battle and teach a wayward Greece a moral lesson
and make impossible demands and accept the humiliation entailed in caving they opted to create
those losses.
Greece only asked for some extra help. They did not make outrageous demands like the troika.
If anything good comes out of this may it be the end of the careers of those who think the
financial world is the proper place to stage morality plays devoid of any financial purpose which
cost far more than the alternative.
Ian Crowther 29 Jun 2015 02:28
This is the end game, and has been Greece's plan from the new Government taking power. The
left want Grexit, and they will get what they wish for now, independence from a failing political
and financial EU construct.
This may work well for Greece in the mid term, sure, its going to be tough on the people, but
at least the Government will not be debt slaves now, reset the currency, devalue the economy so
it can compete again, lower taxation to bring in big business, and begin to build a new economy
based on what the Greek people want, rather than 85% of the money Greece leant eventually being
paid back to the rentiers from which the cash came. Now zero will be repaid, and EU banks will
have to suffer the losses, a drop in recapitalisation, and a hit to the recovery.
Lanceowenmorgan ID9492736 29 Jun 2015 02:24
I agree. FUCK ALL YOU NEOLIBERAL & NEOCON mother fuckers
LeonardPynchon borninthe80s 29 Jun 2015 02:24
Some perspective in the below piece - might help you:
The Financial Times' leading commentator Martin Wolf recently argued that "the vast bulk of
the official loans to Greece were not made for its benefit at all, but for that of its feckless
private creditors", that is, primarily, European banks and financial institutions. After exposing
the futility of austerity, ex-IMF economic advisor Jeffrey Sachs recently declared: "Europe's
leaders are hiding behind a mountain of pious, nonsensical rhetoric" risking an economic and social
disaster "in order to insist on collecting some crumbs from the country's pensioners".
Describing the treatment of Greece as "the Iraq War of finance", Daily Telegraph's Ambrose
Evans-Pritchard wrote: "rarely in modern times have we witnessed such a display of petulance and
bad judgement by those supposed to be in charge of global financial stability."
dzogchen 29 Jun 2015 02:23
Five lost years for the Greeks it seems. From the market's perspective those years have been
all about maneuvering the banks from out of risk. Now that work is done as the losses are laid
squarely in the public lap. The markets of course don't give half a toss about Greek people, empathy
isn't part of their nature, so might as well do what should have been done five years ago. All
the best to the people who will pay the price for all this shenanigans. Kali tihi!
BeamEcho Tim Roberts 29 Jun 2015 02:21
This is not new for the IMF, their mandate includes providing policy advice to their members.
They review the economic policies of their members. When they lend money they require economic
policy changes...
Ian Crowther IndependentScott 29 Jun 2015 02:18
Greece will not have to repay the debt, they will walk away, default and never repay. It is
the banking system and rehypothecated debt that will suffer, and the banks that have leant the
money to France and Germany. European banks have only just been recapitalised, and losing another
€300-400bn will hit the Euro recovery hard at a time when QE is being rolled out. The answer will
be print more money.
Normin 29 Jun 2015 02:17
The banksters are just waiting for a scapegoat to pin their non sustainable economic system
failure on. Meanwhile the elite will profit as the masses bleed. It can't go on like this forever
it's just a matter of when.
Kompe75 29 Jun 2015 02:14
Juncker announces a campaign to support "YES" at the greek referendum..
Another sign these people consist the out-of-touch neoliberal elite..
Does he really believe Greeks , who have suffered enormously , will sign a appalling deal that's
going to define the misery of generations for the next decades ? Just because he wants to remain
President in the dictatorship of Brussels ? I live for the moment Juncker comes in Athens...the
whole place will go up in flames.
john4108 29 Jun 2015 02:09
yes all going acording to plan the sacred " markets" are indulging in the usual lemmng like
behaviour while the banksrs try to convince everyone that,the have the medicine that we all need
. Casino capitalism writ large. Eventually, unless we want endlessly repeated crises and utter
destruction on this plant, mankind will have to come up,with a more resilient economic system.
Islam is waiting in the wings and usory is a crime in the Koran. Of course Jesus threw the
money lenders out of the temple....but Judeo-christianity has conveniently forgotten that.
"...The troika clearly did a reverse Corleone - they made Tsipras an offer he can't accept,
and presumably did this knowingly. So the ultimatum was, in effect, a move to replace the Greek government.
And even if you don't like Syriza, that has to be disturbing for anyone who believes in European ideals...." . "...This is nothing more than a neo-liberal play. They just don't want to strip their pensions,
but infrastructure as well. They should be making the requirements of the loan for deep pension cuts
and money for investments which would help build up Greece's economy and the end for these bailouts.
The fact they aren't doing that, but trying to confiscate it instead, which is the real issue. " . "..."IMF and Germany Are Hell-Bent on Finishing Off Even a Moderate Left in Greece" "Indeed,
the leftist Greek government failed to see that what Europe's neoliberal elite was after, especially
after being fully aware of the fact that Athens had no alternative plan, was not merely a humiliating
Greek deal for the Syriza-led government but finishing them off completely to send a message to all
potential "troublemakers" in the euro area of the fate awaiting them if they dared challenge the neoliberal,
austerity-based orthodoxy of the new Rome." " . "...Panicky depositors spent the weekend pulling an estimated one billion euros from the banking
system, stashing the cash in their houses or exchanging them for bulging bags of gold coins." . "...There are not as many hedge funds in Greece as there were a year ago, when it is estimated
that around 100 foreign funds were sitting on big investment stakes. Their bet was that the previous
Greek government would be able to complete the arduous process of economic reform in Greece that started
five years ago." . "...Most of the hedge fund money in Greece is invested in about 30 billion euros of freshly
minted Greek government debt securities that emerged from the 2012 restructuring of private sector bonds." . "...Among the most dubious of these, was a 10 percent equity stake, then worth about $137 million,
that Mr. Paulson's hedge fund took last year in the Athens water monopoly. The company had little debt
and was slated to be privatized, making it an attractive prospect at the time."
ATHENS - For investors around the world looking at Greece, there was but one question Sunday:
What is going to happen when the markets open on Monday?
That question is particularly acute for the hedge fund investors - including luminaries like
David Einhorn and John Paulson - who have collectively poured more than 10 billion euros into
Greek government bonds, bank stocks and a slew of other investments.
This weekend, Nicholas L. Papapolitis, a corporate lawyer here, was working around the clock
comforting and cajoling his frantic hedge fund clients.
"People are freaking out," said the 32-year-old Mr. Papapolitis, his eyes red and his voice
hoarse. "They have made some really big bets on Greece.
But there is no getting around the truth of the matter, he said. Without a deal with its European
creditors, the country will default and Greek stocks and bonds will tank when the markets open.
On the ground here, the surprise decision of the Greek prime minister, Alexis Tsipras, to hold
a referendum has turned what was a bank jog into more of a sprint with most Greeks now fearing
that the country's depleted banks will be closed on Monday.
Panicky depositors spent the weekend pulling an estimated one billion euros from the banking
system, stashing the cash in their houses or exchanging them for bulging bags of gold coins.
The yields on Greek government bonds, now around 12 percent are expected to soar as investors
rush to unload their positions in a market that of late has become extremely hard to trade.
Bank stocks, if the stock market, in fact, opens, will also be hit with a selling wave, as
they cannot survive if the European Central Bank withdraws its emergency lending program.
There are not as many hedge funds in Greece as there were a year ago, when it is estimated
that around 100 foreign funds were sitting on big investment stakes. Their bet was that the previous
Greek government would be able to complete the arduous process of economic reform in Greece that
started five years ago.
When it became clear that a radical Syriza government under Mr. Tsipras would come to power,
many investors quickly turned heel, dumping their Greek government bonds and bank stocks in large
numbers before and after the election.
But a brave, hardy few stayed put - around 40 to 50, local brokers estimate - taking the view
that while the new left-wing government could hardly be described as investor friendly, it would
ultimately agree to a deal with Europe. It would be a bumpy ride for sure, but for those taking
the long view that Greece would remain in the eurozone, holding onto their investments as opposed
to selling them in a panic seemed the better course of action.
For now, at least, that seems to be a terrible misjudgment, especially if Greece defaults and
leaves the euro.
Most of the hedge fund money in Greece is invested in about 30 billion euros of freshly
minted Greek government debt securities that emerged from the 2012 restructuring of private sector
bonds.
The largest investors include Japonica Partners in Rhode Island, the French investment funds
H20 and Carmignac and an assortment of other hedge funds like, Farallon, Fortress, York Capital,
Baupost, Knighthead and Greylock Capital.
A number of hedge funds have also made big bets on Greek banks, despite their thin levels of
capital and nonperforming loans of around 50 percent of assets.
They include Mr. Einhorn at Greenlight Capital and Mr. Paulson, both of whom have invested
and lost considerable sums in Piraeus Bank. Fairfax Financial Holdings and the distressed investor
Wilbur Ross own a large stake in Eurobank, one Greece's four main banks.
Big positions have also been taken in some of Greece's largest companies. Fortress Capital
bought $100 million in discounted debt belonging to Attica Holdings, Greece's largest ferry boat
holder. York Capital has taken a 10 percent stake in GEK Terna, a prominent Greek construction
and energy firm.
In 2014, Blackstone's credit arm bought a 10 percent chunk of the Greek real estate developer
Lamda Development. And Third Point, one of the earliest, most successful investors in Greek government
bonds, has set up a $750 million Greek equity fund.
Many of these forays were made during the heady days of 2013 and early 2014 when the view was
that, in a rock bottom global interest rate environment, risky Greek assets looked attractive,
especially if the reform process continued.
Among the most dubious of these, was a 10 percent equity stake, then worth about $137 million,
that Mr. Paulson's hedge fund took last year in the Athens water monopoly. The company had little
debt and was slated to be privatized, making it an attractive prospect at the time.
But the privatization process is now frozen and the monopoly is struggling to collect payment
on its bills from near broke government entities, making it unlikely that Mr. Paulson will get
much of his money back.
To be sure, many of these hedge funds are enormous and their Greek investments represent a
fairly small slice of their overall portfolio.
Mr. Papapolitis, who used to work at Skadden Arps law firm in New York structuring exotic real
estate deals, moved back to Greece in 2008 and has led some of the biggest hedge fund deals in
the market.
Of the same age and generation as many of his clients, he feels their pain.
"These guys are my friends," he said. "They invested in Greece when the economy was improving.
And now this happens - I feel obliged to be there for them."
He is not the only point man for hedge funds coming to Greece.
Last week, a group of about 12 of the largest remaining hedge funds arrived in Athens to attend
a seminar organized by George Linatsas, a founding partner of Axia Ventures, an investment bank
that specializes in Greece, Cyprus, Portugal and Italy, as well as shipping.
With all the large investment banks and law firms having largely given up on Greece, Mr. Linatsas
and his team of analysts became the main port of call for hedge funds that started buying Greek
government bonds in 2012.
Then, the bonds were trading at 12 cents on the euro and they soon shot up to 60 cents, making
billions of dollars for those early investors.
"People made their careers on that trade," Mr. Linatsas said. "The problem now is politics
and whether there is a government that can take this country to the next stage."
The outlook seems grim.
Indeed, in recent months these investors have spent little time breaking down balance sheets
or discounting cash flows. Instead, they have spent every effort trying to figure out what the
Syriza government is up to.
Some have tried to get an edge by listening to Greek radio. Others have hired outside firms
to study video clips of Mr. Tsipras and his finance minister, Yanis Varoufakis, to try and discern
from body movement and voice tone whether they are telling the truth. And an increasing number
have resorted to begging journalists for inside scuttlebutt.
Because few Syriza officials will meet with the investors, a large number of them have banded
together, an unusual occurrence in an industry that puts the highest of premiums on secrecy. They
exchange tips and theories via emails when they are apart and over wine-soaked dinners in Athens
during their frequent trips here.
At times the swankiest hotel in town, the Hotel Grande Bretagne (or G.B. as it is commonly
known) is so chock full of hedge fund executives (mostly in their 30s) that some have called it
the G.G.B. - the acronym for Greek government bonds.
In recent days, as it has become clear that the Syriza government was not going to accept the
latest proposal from its creditors, stress and anxiety has, in some cases, turned to outright
anger.
"I just can't believe these guys are willing to torch their own country," one investor with
a large holding of Greek bonds lamented in an email. "They thought this was a game. Now, when
the supermarkets run out of food, gas stations run out of gas, hospitals have no medicine, tourists
flee, salaries don't get paid because banks shut - what are they going to do?"
Peter K. -> Peter K....
""I just can't believe these guys are willing to torch their own country," one investor with
a large holding of Greek bonds lamented in an email."
How ideological do you have to be to not understand that the Troika already torched the
country and that the Greeks voted in Syriza becasue 5 years on there was no light at the end of
the tunnel.
I hope there's a Grexit even if the Troika forces it because the referendum took place after
Monday's deadline. Syriza should really study all of the past defaults of other countries.
Paine -> Peter K....
This Sarris gent suggest the Syriza team should have proposed " bold reforms " early on
List em mr S... List em
He however seems to understands the original sin was
The elites decision to bail the private northern banks out
Of course the people of Greece must pay for that sin.
RGC:
"IMF and Germany Are Hell-Bent on Finishing Off Even a Moderate Left in Greece"
"Indeed, the leftist Greek government failed to see that what Europe's neoliberal elite
was after, especially after being fully aware of the fact that Athens had no alternative plan,
was not merely a humiliating Greek deal for the Syriza-led government but finishing them off completely
to send a message to all potential "troublemakers" in the euro area of the fate awaiting them
if they dared challenge the neoliberal, austerity-based orthodoxy of the new Rome."
The crash has brought this done to where it was in 2000. Why did they join the Euro system
in the first place? Why would anyone listen to the finance minister of this nation?
Paine -> pgl...
Precisely put
Only a corporate lackey corrupted stooge or stool pigeon
Peter K. -> Peter K....
Greece's own central banker, Yannis Stournaras said in a statement after the European Central
Bank decision on Sunday that the Greek central bank would "take all measures necessary to ensure
financial stability for Greek citizens in these difficult circumstances."
Before negotiations broke off on Saturday between Athens and its creditors, the Tsipras government
had been hoping to reach terms that would free up a €7.2 billion allotment of bailout money that
the country needs to meet its short-term debt obligations.
Because European officials said on Saturday that Greece's €240 billion bailout program would
not be extended, the big question had been whether the central bank's president, Mario Draghi,
would continue financing the country's depleted banks.
Guidelines of the European Central Bank dictate that it can keep supporting troubled banks
as long as there is a possibility that the country in question will come to terms with its creditors
on a bailout - as was the case with Cyprus.
If Athens and its creditors do not resume talks before Tuesday, the promise of European support
for Greece may no longer be on the table. But the European Commission, the executive arm of the
European Union and a key broker in the debt talks, seemed on Sunday to reach out to the Greek
people, unexpectedly publishing the offer made to Greece before Prime Minister Alexis Tsipras
ended the negotiations and announced a national referendum.
The publication was designed to show the lengths to which the creditors, including the I.M.F.
and the European Central Bank, had gone to satisfy Athens's demands for a deal that avoided hurting
ordinary Greeks, said one European Union official with direct knowledge of the decision to publish
the offer. The official spoke on condition of anonymity because the institutions had not ruled
out a resumption of talks with Mr. Tsipras on the sensitive issue of extending the bailout.
"This is a last bridge we are building for them," said the official. The goal of publishing
the document was also to pressure "Mr. Tsipras to change course and choose to mount a 'yes' campaign"
in the upcoming referendum, the official said.
The official acknowledged there was a slim chance that Mr. Tsipras would accede to the terms
so soon after abandoning the negotiations. But if Mr. Tsipras did change course, that could lead
to a meeting of leaders of the eurozone member states on Monday night to try one more time to
reach a deal before the expiration of the bailout.
On Saturday, amid intense discussions between Greece and its creditors, officials representing
the I.M.F., to which Greece owes €1.6 billion on Tuesday, were trying to persuade European leaders
and Mr. Draghi to keep the bank emergency assistance flowing. And on Sunday, the head of the I.M.F.,
Christine Lagarde, waved an olive branch toward Greece.
In a statement, Ms. Lagarde expressed her "disappointment'' in the "inconclusive outcome of
recent discussions on Greece in Brussels.''
"I shared my disappointment and underscored our commitment to continue to engage with the Greek
authorities," she said, adding that the I.M.F. would ''continue to carefully monitor developments
in Greece and other countries in the vicinity and stands ready to provide assistance as needed.''
Early Sunday, the Greek Parliament approved Mr. Tsipras's request for a public referendum on
the proposal offer by Greece's creditors, with the vote to be held next Sunday. Mr. Tsipras and
other Greek officials had asked European officials and Mr. Draghi to keep the central bank assistance
in place until the vote.
The European Central Bank's decision on Sunday to cap the emergency loan program, as opposed
to canceling it, "allows the Greek banks to remain in a sort of coma – not functioning but not
dead," said Karl Whelan, an economics professor at University College in Dublin. That way, he
said, the Greek financial system might be revived if at some later point if Greece secures a deal
with its creditors.
Raoul Ruparel, an economist and co-director of Open Europe, a London-based research group,
said the rupture between Greece and its creditors on Saturday was unlikely to mean a definitive
end to negotiations, instead becoming "merely a prelude" to yet more talks in a week or so after
Greece holds its referendum.
"I think we are just getting started on this merry-go-round," Mr. Ruparel said, predicting
that Greek voters would probably vote to endorse proposals put forward by creditors and rejected
by the Tsipras government. "We would then be back where we started, only in a worse situation,"
he added. Because the current program will have expired by then, Greece and its creditors would
need to negotiate a new bailout - most likely a short-term deal - in an atmosphere poisoned by
even deeper distrust than before.
"The whole thing is absolute nightmare,'' Mr. Ruparel said. ''I have been following this saga
for five years, and it is depressingly tedious."
leoFromChicago:
Guy is totally business-as-usual.
I'm hardly an expert on Greece but if you were about to make a difficult decision -- say, exit
the Euro -- you might want a dramatic display of public backing say, in the form of a referendum.
The Warnings from the Bank of International Settlements Have Been Ignored Because They Have Been
Wrong
by Dean Baker
Published: 28 June 2015
The Wall Street Journal passed along warnings from the Bank of International Settlements (BIS)
that central banks should start to curtail monetary expansion and that governments need to reduce
their debt levels. The piece tells readers:
"The BIS has issued similar warnings in recent years concerning an overreliance on monetary policy,
but its advice has gone largely unheeded."
It is worth noting that the BIS has been consistently wrong in prior years, warning as early as
2011 about the prospects of higher inflation due to expansionary monetary policy:
"But despite the obvious near-term price pressures, break-even inflation expectations at distant
horizons remained relatively stable, suggesting that central banks' long-term credibility was
intact, at least for the time being.
"But controlling inflation in the long term will require policy tightening. And with short-term
inflation up, that means a quicker normalisation of policy
rates."
Since that date, the major central banks of the world have been struggling with lower than
desired inflation and doing whatever they could to raise the rate of inflation. It would have
been helpful to readers to point out that the BIS has been hugely wrong in its past warnings,
so people in policy positions appear to have been right to ignore them. This is likely still the
case.
OK, this is real: Greek banks closed, capital controls imposed. Grexit isn't a hard stretch from
here - the much feared mother of all bank runs has already happened, which means that the cost-benefit
analysis starting from here is much more favorable to euro exit than it ever was before.
Clearly, though, some decisions now have to wait on the referendum.
I would vote no, for two reasons. First, much as the prospect of euro exit frightens everyone
- me included - the troika is now effectively demanding that the policy regime of the past five
years be continued indefinitely. Where is the hope in that? Maybe, just maybe, the willingness
to leave will inspire a rethink, although probably not. But even so, devaluation couldn't create
that much more chaos than already exists, and would pave the way for eventual recovery, just as
it has in many other times and places. Greece is not that different.
Second, the political implications of a yes vote would be deeply troubling. The troika clearly
did a reverse Corleone - they made Tsipras an offer he can't accept, and presumably did this knowingly.
So the ultimatum was, in effect, a move to replace the Greek government. And even if you don't
like Syriza, that has to be disturbing for anyone who believes in European ideals.
A strange logistical note: I'm on semi-vacation this week, doing a bicycle trip in an undisclosed
location. It's only a semi-vacation because I didn't negotiate any days off the column; I'll be
in tomorrow's paper (hmm, I wonder what the subject is) and have worked the logistics so as to
make Friday's column doable too. I was planning to do little if any blogging, and will in any
case do less than I might have otherwise given the events.
Clearly, though, some decisions now have to wait on the referendum.
I would vote no, for two reasons. First, much as the prospect of euro exit frightens everyone
- me included - the troika * is now effectively demanding that the policy regime of the past five
years be continued indefinitely. Where is the hope in that? Maybe, just maybe, the willingness
to leave will inspire a rethink, although probably not. But even so, devaluation couldn't create
that much more chaos than already exists, and would pave the way for eventual recovery, just as
it has in many other times and places. Greece is not that different.
Second, the political implications of a yes vote would be deeply troubling. The troika
clearly did a reverse Corleone - they made Tsipras an offer he can't accept, and presumably did
this knowingly. So the ultimatum was, in effect, a move to replace the Greek government. And even
if you don't like Syriza, that has to be disturbing for anyone who believes in European ideals....
* European Union Commission, EuropeanCentral Bank, and International Monetary Fund
Paine -> anne...
Pk has really shown a leadership side here
Not contrarian
Progressive leadership
Vote no !
Praise be to PK
Ben Groves:
This is nothing more than a neo-liberal play. They just don't want to strip their pensions,
but infrastructure as well. They should be making the requirements of the loan for deep pension
cuts and money for investments which would hel build up Greece's economy and the end for these
bailouts. The fact they aren't doing that, but trying to confiscate it instead, which is the real
issue. If Greece wants their fat pension system, that is their choice.
I don't see anything different than post WWI Germany. This is what Libertarianism will bring to
the West if implemented. They would dismantle the current power structure and replace it with
a privately controlled syndicate dictating wealth much like today. This is not new, it has been
going on since the rise of Abrahamic religions in the west.
... to understand the deeper causes of what's been going on since Tsipras' government swept
to power in January, you really need to set the finance and economics aside and focus on the politics.
Greece has been drawing dead this whole time, and the future outlook appears bleak for one simple
reason - nobody else in Europe who holds power has any interest in making things anything other
than painful for Greece.
1) Giving Greece a better deal would be a political disaster
Tsipras' fundamental miscalculation has been that he thought that by cloaking his specific
requests for more lenient terms in the larger cause of anti-austerity politics, he could build
a coalition of political support throughout Europe for his position. The reality was just the
opposite. While politicians in Europe's creditor nations were naturally reluctant to grant Greece
a better deal, politicians in Europe's debtor nations were even more opposed.
After all, if electing a bunch of far-left types to parliament so they can demand a better
deal actually worked, then voters in Portugal and Spain and Italy and Ireland would take note
of that fact. And the last thing the current crop of elected officials in Lisbon and Madrid and
Rome and Dublin want is to all be turned out in favor of a bunch of far-left types.
2) Letting Greece default gracefully would be a disaster
Even if Greece's European partners weren't inclined to give Greece a better financial deal,
they could have at least smoothed the path to default. A Greece that doesn't pay what it owes
would be instantly cut off from credit markets and forced to run a very austere fiscal policy.
It's in Europe's interest to make things as hard as possible for Greece
Things could have been left at that. Instead, throughout the year, the European Central Bank
has been saying that it will cut the Greek banking system off from emergency funding if Greece
doesn't keep paying its debts. That means default will lead to the collapse of Greek banks, and
the end of Greek membership in the euro.
That's a political decision the ECB isn't legally required to make. But politically it's the
only possible decision. After all, if a default works out non-disastrously for Greece then other
countries could be tempted to default. And international investors might worry that other countries
could be tempted to default, raising interest rates and slowing the European economy. Only making
default as painful as possible can safeguard the interests of other countries.
3) Letting Greece leave the Eurozone gracefully would be a disaster
Here's where the news gets really bad for Greece. Leaving the Eurozone could, in theory, go
better or worse. But Europe needs it to go as badly as possible. After all, if Greece leaving
goes pretty well, then other countries might be tempted to leave. And that raises the prospect
of debt defaults, higher interest rates, and slowing European growth.
Once again, it's in Europe's interest to make things as hard as possible for Greece.
4) This is the time to fold 'em
The tragic irony, if you are Tsipras, is that his plan very well might have worked back in
2010 when his predecessors originally agreed to the terms of a bailout. Back then, the whole situation
was considerably more fluid. Greece could have threatened to default and essentially commit a
murder/suicide on the entire European economy unless it got better terms. That would have been
a very risky strategy and you can see why the Greek government didn't pursue it. But it might
have worked.
Yet as the song says, you need to know when to hold 'em and know when to fold 'em. ...
(Alternatively, persuade various major German
corps to re-locate to Greece, for tax-breaks,
warm weather, great beaches, warm weather,
'right-to-work' labor policies, tax breaks,
warm weather & great beaches, and - voilà - problem solved!)
Fred C. Dobbs:
The Next Few Days Have the Potential to Transform
Greece and Europe http://nyti.ms/1Nr7fbd
via @UpshotNYT
NYT - Neil Irwin - June 28
As it turns out, the Greek crisis ends not with a bang, but with a referendum.
It has been easy to ignore the doings in Greece for the last few years, with the perpetual
series of summits in Brussels that never seem to resolve anything. But it's time to pay attention.
These next few days are shaping up to become a transformational moment in the 60-year project
of building a unified Europe. We just don't yet know what sort of transformation it will be.
The immediate headlines that got us to this point are these: After an intractable series of
negotiations over a bailout extension with Greece's creditors, the nation's left-wing government
left the table Friday and said it would hold a referendum on July 5. Greek leaders think the offer
on the table from European governments and the International Monetary Fund is lousy, requiring
still more pension cuts and tax increases in a depressed economy, and intend to throw to voters
the question of whether to accept it.
Whatever the exact phrasing of the question (and assuming the referendum goes forward as planned),
it really boils down to this simple choice:
A "Yes" vote means that Greece will continue the grinding era of austerity that has caused
so much pain to its citizens over the last five years, in exchange for keeping the euro currency
and the monetary stability it provides.
A "No" vote almost certainly means that the country will walk away from the euro and create
its own currency (which will surely devalue sharply), bringing financial chaos in the near
term, but creating the possibility of a rebound in the medium term as the country becomes more
competitive with its devalued currency.
The Greek government, led by Alexis Tsipras, disputes this framing, and argues that Greece
could in fact reject the creditors' offer to extend the bailout program while sticking with the
euro. Events over the weekend show how untenable that is. Thousands of Greeks lined up to withdraw
euros from money machines, and the European Central Bank said it would not increase the size of
the emergency lending program that Greek banks have been using to secure euros.
Ergo, the Greek banks are, or will soon be, out of money, and the E.C.B. will be disinclined
to open the floodgates again in the absence of a bailout deal. That's why the Greek government
has effectively frozen its financial system, closing banks and the stock market on Monday. ...
ATHENS - Greece will keep its banks closed on Monday and place restrictions on the withdrawal
and transfer of money, Prime Minister Alexis Tsipras said in a televised address on Sunday
night, as Athens tries to avert a financial collapse.
The government's decision to close banks temporarily and impose other so-called capital
controls - and to keep the stock market closed on Monday - came hours after the European Central
Bank said it would not expand an emergency loan program that has been propping up Greek banks
in recent weeks while the government was trying to reach a new debt deal with international
creditors. ...
Nothing was posted here so far on the Greece tragedy. I did not touch the issue as there was
excellent coverage elsewhere
and what the whole issue produced so far was more absurd theater than serious economic policy. But
one act of the drama is now coming to a preliminary end and the tragedy may now unfold into something
new with potential serious geopolitical consequences.
Greece took up a lot of debt when banks were giving away money without caring for the ability
of the debtor to pay back. When that game ran out, some six years ago, Greece could not no longer
take up new credit to pay back its old debts. That is the point where it should have defaulted.
But the Greece government was pressed on to pay back the debt to the commercial banks even when
it had no money and not enough income to ever do so. Bank lobbyists pressed other EU governments
to raid their taxpayers to indirectly cover the banks' losses. These other governments then pushed
Greece to take on "emergency loans" from their states to pay the foreign commercial banks.
Nothing of that money ever reached the people in need in Greece. Here is
a gif
that explains what happened to all those foreign taxpayer loans treats "given to the Greek".
To get these new loans Greece had to agree to lunatic economic measures, an austerity program
and neoliberal "reforms", to fix its balance of payments. But austerity has never worked, does not
work and will never work. It crashes economies, lowers tax incomes and thereby further hinders a
government to pay back it debts. It creates a vicious cycle that ends in an economic catastrophe.
After six years of austerity nonsense the Greece voted for a new party that promised to end the
cycle and stop the austerity measures. But the new Syriza government misjudge the situation and the
nastiness and criminal energy of the other governments and organizations it was negotiating with.
It early on said it would not default and thereby took away its own best negotiation argument. The
negotiations failed. The creditors still demand more and more austerity. Now it will have to default
but under circumstances that will make it much more difficult for Greece to get back on its feet.
Yesterday the Syriza prime minister Tsirpas, in
a speech to his people, called for an end of the blackmail and for a referendum to decide on
the way forward:
Fellow Greeks, to the blackmailing of the ultimatum that asks us to accept a severe and degrading
austerity without end and without any prospect for a social and economic recovery, I ask you to
respond in a sovereign and proud way, as the history of the Greek people commands.
To authoritarianism and harsh austerity, we will respond with democracy, calmly and decisively.
Greece, the birthplace of democracy will send a resounding democratic response to Europe and
the world.
Paul Maison of Channel 4 news
sees this as a positive and likely successful step. The people will vote no to austerity and
the IMF, European Central Bank and various country governments will still keep giving fresh money
to Greece. Yves Smith at Naked Capitalism does not believe that this will happen. She calls the referendum
a sham. Greece will default and the only thing the referendum will do is to keep Syriza in the
political business. She blames Tsirpas for having misjudged the situation and for being unprepared
of what is likely to come:
Greek defiance of its creditors will make it more, not less dependent on them in the next year.
How badly things turn out for Greece will depend in significant degree on how much they do to
ameliorate the impact of the implosion of the banking system, whether they take extreme measures
to keep Greece in the Eurozone, and if Greece tumbles out, how much they provide in humanitarian
aid and targeted trade financing (most important, for petroleum imports).
Greece should have defaulted six years ago. Tsirpas should have prepared for default immediately
after he became premier. He should have used it as a threat during the negotiations. Greece will
now have to default in the worst possible situation and with little thought given to the consequences
of the default.
But the consequences will not be limited to Greece.There will be consequences for the EU, for
NATO and for the political balance in the Mediterranean. Greece may now decide to leave the "western"
realm and thereby set an example others could follow.
The German and other European governments promised their taxpayers that Greece will not default
and that the austerity program pushed onto it will succeed. They will now rightfully lose some of
their political and economic credibility. The Greece default will be a somewhat harsh and expensive
lesson for the voters in those countries too. Let's hope that they will draw the right conclusions.
While there is nothing easy about the path forward I think finance minister Varoufakis has played
things pretty well dragging it out letting the people get all those euros out of the banks to
help contribute to rebuilding but most of all blocking the ability of the Banksters to "Cyprusize"
Greece. The referendum obviously comes from the study of Iceland and anybody that studies Argentina
can only come away thinking Syriza is doing the right thing.
"...Brussels has blocked any agreement that would help Greece's recovery; debt repayments are
maximum priority"
. "...Alexis Tsipras, prime minister, is practically "hands tied", he can't implement an alternative
economic policy, this situation is contrary to his intentions, therefore it slowly diminishes the trust
citizens have put into Syriza, his political party."
. "...Greece has 10 days to liquidate the four monthly maturities of debt to the IMF (1.5 billion
euros) and to open a new financing plan for 5.2 billion euros. By next July, Athens will have to pay
3.5 billion euros to the European Central Bank (ECB), 465 million euros to the IMF and 2 billion euros
to additional creditors."
. "...There is no doubt that if Tsipras decides abandoning the Euro, the consequences will be
dramatic for Greece's economy and so for the rest of economies in the region [6],
including of course, Germany and France. Berlin fears a massive spread. If Greece collapses, speculators
will bet against the most fragile economies: Finland, Spain, Italy, Netherlands, Portugal, etc."
. "...Panic would boost interest rates, severely shrinking the financial liquidity between countries."
. "...Nevertheless, the Troika seems decisive on backlashing the left's economic program. Syriza
have inaugurated the electoral failure of neoliberalism in Europe and due to that, it has become the
lender's favorite prey, who are ready to impose their will at any price. However, the Greeks should
trust themselves, establish partnership beyond its continental borders and aim for utopia."
the Central Bank of Greece surprised everyone with the publication of their monetary politics
for 2014-2015. Besides revealing the consequences of the economic suffocation imposed by Brussels,
it concluded that in case of not getting to a prompt deal with its European partners, a crisis of
great proportions will be detonated.
"A crisis with a manageable debt as we are currently facing with the help of our partners will
transform into an uncontrollable crisis, with great risk for the banking system and for the financial
stability", it quoted [1].
It was the first time this institution seriously contemplated Greece's separation from the Eurozone.
The most influencing media immediately began to stress that the majority of Greek's population
is against abandoning the Monetary Union. Approximately a 70% according to a recent poll published
by the GOP. For keeping the "common currency" the norms in the Maastricht Treaty have to be complied,
therefore the occidental media concludes that the Greek citizens are willing to accept the European
authorities conditions: Austerity is the price for a membership in the Eurozone.
However, media emporiums omit mentioning that same majority opposes to measures that the Troika
(formed by the International Monetary Fund, the European Central Bank and the European Commission)
pretends to impose. That same majority is currently convinced that the original 245 billion euros
rescue program has only brought economic affliction. The increase of inequality and poverty, lock
of housing, mental illness and suicides, are evidence of the "humanitarian crisis" Greeks are daily
suffering [2].
A change regarding to economic matters in urgent. In that sense, the Greek government has insisted
in solving the more immediate needs (taxes on investment, creation of employment, a better distribution
of income, etc.) and less in questioning terms of the debt. Despite this, Brussels has blocked
any agreement that would help Greece's recovery; debt repayments are maximum priority [3].
Alexis Tsipras, prime minister, is practically "hands tied", he can't implement an alternative
economic policy, this situation is contrary to his intentions, therefore it slowly diminishes the
trust citizens have put into Syriza, his political party.
Disqualifications between the Greek government and the Troika were quite prompt on dates near
the meeting with the Eurogroup. Tsipras addressed that the International Monetary Fund (IMF) had
"criminal responsibility" for the crisis. He also repeated that his government wouldn't falter before
the pressure imposed by the Troika. The objective of this proposal is to "humiliate Greece" and there
he committed to reject the adjustment plans at every moment [4].
The finance minister, Yanis Varoufakis, has delivered the same message by declining on presenting
proposals that would finally include a list of "credible" commitments for the creditors: raising
the primary surplus, additional tax raises, dismantling the pension system, etc [5].
As consequence, the negotiations stalled once again [on July 18th, 2015, Editor's note] The Troika
remains intransigent in applying its "structural reforms" no matter what, while Tsipras declines
on betraying the Greeks. Therefore this dispute is ones more to be adjourned.
Greece has 10 days to liquidate the four monthly maturities of debt to the IMF (1.5 billion
euros) and to open a new financing plan for 5.2 billion euros. By next July, Athens will have to
pay 3.5 billion euros to the European Central Bank (ECB), 465 million euros to the IMF and 2 billion
euros to additional creditors.
Debt and more austerity, in the end impose more debts, this situation puts Greece in a "depressive
spiral" that seems not to have an end. How will the resources for complying with these commitments
de delivered?
There is no doubt that if Tsipras decides abandoning the Euro, the consequences will be dramatic
for Greece's economy and so for the rest of economies in the region [6],
including of course, Germany and France. Berlin fears a massive spread. If Greece collapses, speculators
will bet against the most fragile economies: Finland, Spain, Italy, Netherlands, Portugal, etc.
Considerably affected by the weak economic growth and the deflation (price breakdown), the Eurozone
would loose even more confidence from international investors. The crescent 'aversion to risk' due
to Greece's exit would provoke an increase in the performance of sovereign bonds (currently at minimum
levels). Panic would boost interest rates, severely shrinking the financial liquidity between countries.
Uncertainty will increase and the capital flows would be victim of a 'butterfly effect': slight
increase of volatility in sovereign bond markets, light drops in stock exchanges and any change in
the monetary policy, would be enough to detonate huge turbulences in credit circuits.
Nevertheless, the Troika seems decisive on backlashing the left's economic program. Syriza have
inaugurated the electoral failure of neoliberalism in Europe and due to that, it has become the lender's
favorite prey, who are ready to impose their will at any price. However, the Greeks should trust
themselves, establish partnership beyond its continental borders and aim for utopia.
Democracy was born in the ancient Greece and there is where the foundations of a new Europe, free
from the 'dictatorship of the creditors' should be built, if there is any alternative…
Keynes was there to check OLIGARCHY neo-feudalism. This crisis is about Oligarchy neofeudalism.
We need a balance between state and private enterprise. Right now we have "inverted totalitarianism" :an alliance between state and private Oligarchs
where, unlike Mussolini model; its private enterprise that RUNS THE WORLD; the 1%.
The state is their slave; even FED belongs to its paymasters : the TBTF aka JP Morgan and now
GS. Since Glass Steagall revoke; engineered by the GS squid cabal allowing Investment banks to
rule the roost to MAXIMISE shareholder returns, the whole shooting match of supply side deregulated
Reaganomics; all based on asset hiking based on short term quarterly reports; has morphed capitalism
beyond recognition.
The world of capital changed in 1981...the day all that mattered was shareholder value based
on short term steroid pumping that the 1971 "our money your problem" had initiated based on petrodollar
hegemony fueled on perpetual DEBT.
The cumulative effect of 1971/1981/1991 outsourcing NWO mantra post Iraq 1 and SU default was
what we have spawned today: a three step process where petrodollar debt + FIRE economy oligarchy
enrichment+ NWO outsourcing based on cheap oil and cheap labour have built this
casino capitalism model now compounded by derivative financialisation toxic shenanigans.
Now tell me WHAT has KEYNES got to do with this monetarist construct based on Friedman's 1971
mantra?
You guys deny the time line of facts and its irrefutable logic all based on petrodollar hegemony,
and arms bazar supremacy.
With intra-Europe relations hitting a new all-time low; and, having already been busted spying
on Merkel, Obama got caught with his hand in Hollande's cookie jar this week, the following exultation
from one of Germany's top politicians will hardly help Washington-Brussells relations.
As Russia Insider notes, Oskar Lafontaine is a major force in German politics so it caught people's
attention when he excoriated Ash Carter and Victoria Nuland on his Facebook page yesterday...
"Nuland says 'F*ck the EU'. We need need an EU foreign policy that stops warmongering
US imperialism... F*ck US imperialism!"
Here is the Facebook post (in German):
Lafontaine has been an outsized figure in German politics since the mid-70s.
He was chairman of the SPD (one of Germany's two main parties) for four years, the SPD's candidate
for chancellor in 1990, minister of finance for two years, and then chairman of the Left party in
the 2000s. He is married to Sarah Wagenknecht, political heavyweight, who is currently co-chairman
of Left party.
Lafontaine's outburst came a day after his wife, Sarah Wagenknecht, blasted Merkel's Russia
policy in an interview on RT.
Here is the full translation of the post:
"The US 'Defense' secretary, i.e., war minister is in Berlin. He called on Europe
to counter Russian 'aggression'. But in fact, it is US aggression which Europeans should
be opposing.
"The Grandmaster of US diplomacy, George Kennan described the eastward expansion of NATO as
the biggest US foreign policy mistake since WW2, because it will lead to a new cold war.
"The US diplomat Victoria Nuland said we have spent $5 billion to destabilize the Ukraine.
They stoke the flames ever higher, and Europe pays for it with lower trade and lost jobs.
"Nuland says 'F*ck the EU'. We need need an EU foreign policy that stops warmongering
US imperialism.
"F*ck US imperialism!"
* * *
When he comes out swinging this way, you know something is changing.
* * *
America - making friends and influencing people for 238 years...
remain calm
I see the CIA creating a little muslim terrorism in Europe to teach them the meaning of respect.
To date, the USSA adventurism in the Ukraine has hurt Germany financially and politically,
with more losses to follow.
Instead of integrating more closely with Russia, and becoming a key part of the New Silk Road,
Germany is blocked by the USSA, against her better interests. The USSA is creating a new berlin
style wall of lies and propaganda between Russia and Germany claiming that Russia plans to invade
the baltics, poland, moldova, blah, blah, blah.
Fortunately, most Germans are not anti intellectuals, and see through the lies, unlike the
average american shlub (30% of whom cannot name the current VP but know all of the names of the
Kardashians). Eventually, Merkel will get the boot, and be replaced by a more businesslike leader.
Not Too Important
30% is pretty generous, don't you think? More like 3%.
Even an aborigine in the middle of Africa with a cell phone knows more about the world than
97% of Americans.
Tall Tom
Fuck American Imperialism?
Actually it is GERMAN Imperialism over the nation states of Europe, using the European Union
as a subterfuge, is that which needs be quashed.
Fuck GERMAN Imperialism and the European Union as it serves as a tool for the advancement of
Germany's Imperialistic ambitions..
saveandsound
Oscar Lafontaine is member of the party "The Left". He used to be member of the "Social Democratic
Party of Germany".
Both parties are of rather marginal significance, since Merkel's CDU rules them all. ;-)
Anyway, "the Left" has been opposing US Imperialism ever since, so there is not much new to
see here.
that won't help and no more false flags will help either. The latest poll showed that only
19% of Germans would fight Russians in case Russia attacked any NATO country. I repeat: if Russia
attacked first. You can wonder, what would be the percentage of them willing to fight Russia just
for the sake of Ukraine. Close to zero, I think. The USA overstepped all boundaries, when it began
pushing EU countries into a military conflict with Russia. Continental Europeans are not Anglo-Saxons,
they think differently. They will bow down to any USA pressure, except for a military conflict
with Russia! Thats a big no no. Many of them still remember (especially Germans), what it was
like to fight wild-spirited Russians, who never surrender no matter what. These constant talks
about "Russian agression" by the USA politicians make Germans feel like a cornered animal with
nothing to loose. Such animal cannot be subdued anymore, when your existence and life is so directly
threatened, you bite. Or another example: try to force your slave to step on a rattlesnake. He
may be forced to do many things, but this time he will turn against you. I already said it before:
no war against Russia and Europe is possible, because even if the USA somehow forces us to any
such war, huge amounts of people will be so angry that they will flee to the side of Russia. We
are already discussing this openly. This is already happening in Ukraine. Already 10 000 Ukranian
soldiers defected to the other side (to fight Kiev), plus one Ukrainian general, some members
of the Ukranian intelligence service and about one and half million Ukrainians fled to Russia
to avoid draft. I saw a video where three entire units of soldiers sent from Kiev to Donetsk (with
tanks) changed side, threw out Ukrainian flags and put on Russian flags on their tanks under loud
cheers from the brave people of Donbass. There are certain very natural limits to what you
can force people to do, which bankers do not seem to understand. Yes, you can send many people
to war, but they simply will not fight, unless you give them something to fight for. For example
Hitler gave people something to fight for. But all bankers give us is chaos, no strong leader,
no ideology strong enough....I think they hoped that Putin would invade Ukraine and that would
be the reason for war (they provoked Hitler in a similar way). However, Putin is no Hitler, he
is way too intelligent to play these silly games. And it is impossible to repeat exactly what
was once so successful, because times change, people are different....you cant win with using
old outdated strategies over and over. That is why all empires fall in the end. They get stuck
in using the same tricks over and over, until they stop working. Even the old color revolutions
are not as efficient now as they were in the past and the same goes for those silly false flags.
cherry picker
He is absolutely correct. US is surrounded by two oceans and the North and South neighbor have
no intentions of invading the USA, so can anyone explain this war time nuclear, wmd, too many
carriers and so forth military and paranoia.
Can't uncle Sam keep his huge nose out of everyone's business?
Can't America just enjoy what is theirs and leave others alone?
Who needs a CIA except for Nazi types.
Fuck Nuland is a good start.
Albertarocks
And the neighbors to the north and south are non-too-pleased with the USA either. We know WTF
the USA is doing, although more and more are waking up to the fact that the USA is only being
used as the war branch of the banking mafia. Because of this we hold nothing against American
people.
In fact, up north we now probably feel more kinship with "the people" of the USA more than
ever before. Because we are learning how all this works. It is the global banking monsters and
the fascist corporations, the military industrial complex that is in bed with the fucking bankers.
It is those assholes who are causing every damned war in the world... not "the USA" as such. Putin
is a saint by comparison... not to mention the only sane leader of a superpower left on earth.
He is admirable, even from this side of the pond.
Mexicans might present a problem, I don't know. Mexicans never bother Canadians so we just
don't seem to have an opinion. Canadians are pretty calm, but fuck when we get mad there can be
one hell of a bar fight. I don't know how all this works out but it isn't going in the right direction.
I think 98% of Canadians would agree with Mr. Lafontaine. US Imperialism has got to come to an
end. Or the world will. And by "US", I mean "banker".
We need need an EU foreign policy that stops warmongering US imperialism... F*ck US imperialism!"
You know what the problem is?
It's not particularly the US, though they are the biggest players at the moment. It's the result
of the end of the Cold War.
Ever since WW2 the power blocs both had a big military and supporting intelligence service.
When the Berlin Wall came down, the Russians collapsed theirs. The West did not. And ever since
then it has been looking for a job. That's the reason we have had so much disruption. When your
major arm of government is a multi-trillion dollar armed forces, every problem looks like an excuse
for a war.
It is the imperialism of the Anglo-Zionist cabal which has hijacked the American treasury and
military.
Neocons, Interventionist "realists" and other assorted militarist scum.
Their control of the MSM is sound {they even acquired VICE News as that got too popular, and
Orwellized it, beginning with the Zionist sent to fake stories out of Ukraine}...
but not the internet. As younger people grow up, post comments and articles, this cleft between
the pre-internet and internet informed grows more and more obvious.
I'm sure I'm not the only one that expects aggressive moves against intent content.
We've seen some attacks on free speech already in the Fast Track bill - but it will take time
to really see how bad the TPP itself is in practice.
But it does seem clear that .gov is hoping to make an end run around various Constitutional
niceties by "treaty."
and no - treaties do not and can not over-ride the Constitution. Only amendment, not treaty,
can change the constitution.
... and while the US forces the other NATO members to apply more sanctions to Russia, US hypocrisy
rears its ugly head by 'allowing' products from sanctioned Russia that would benefit them ...
check this out
As someone who actually lives in Germany i can tell you that Lafontaine is an absolute has-been
and he plays no role in German politics, nor has he for years. His influence came to an end when
Schroeder kicked him out of his government over 15 years ago. To claim he is a heavyweight is
simply dead wrong.
Wagenknecht does play a certain role, but the Left is a pure protest party full of fundamentalist
hardline social democrats and former East German communists. The Left has no say on federal government
matters such as foreign policy. This post is pure alarmism.
Wild E Coyote
Actually US and Soviet Union both went bankrupt by Cold War.
Soviet Union accepted their fate.
USA still refuse to accept theirs.
Renfield
Upvoted, but I think technically it was Vietnam that bankrupted the US.
Then again, you could argue that it was the First World War, or the 1929 market crash -- although
its bankruptcy wasn't admitted until 1933.
"...Europe's neoliberal elite was after, especially after being fully aware of the fact that
Athens had no alternative plan, was not merely a humiliating Greek deal for the Syriza-led government
but finishing them off completely to send a message to all potential "troublemakers" in the euro area
of the fate awaiting them if they dared challenge the neoliberal, austerity-based orthodoxy of the new
Rome." . "...Mr. Tsipras and his one-night "superstar" finance minister tied up with a dog chain and
paraded in front of the European political stage for all to see - utterly defeated and humiliated, with
their political futures up in the air, whether they accept or reject a humiliating Greek deal." . "...as it usually happens in situations of negotiations between ordinates and subordinates,
master and slave, rich and poor, strong and weak, the more compromises the latter makes, the more compromises
the former demands.""
IMF and Germany Are Hell-Bent on Finishing Off Even a Moderate Left in Greece
...Reflecting a political organization/party that had invited and accepted under the same roof
extremely diverse political and ideological groups, the Syriza-led government not only failed to
set out a clear strategic vision for getting the country out of its current crisis but walked straight
into the trap that the euromasters and the "criminal IMF" were setting up for them throughout the
course of the negotiations.
Indeed, the leftist Greek government failed to see that what Europe's neoliberal elite was after,
especially after being fully aware of the fact that Athens had no alternative plan, was not merely
a humiliating Greek deal for the Syriza-led government but finishing them off completely to send
a message to all potential "troublemakers" in the euro area of the fate awaiting them if they dared
challenge the neoliberal, austerity-based orthodoxy of the new Rome.
Working in collaboration with the IMF (whom Mr. Tsipras has charged with "criminal responsibility"
for the economic and social catastrophe of Greece), Germany's plan (a nation that has failed to pay
its debts repeatedly in modern times and had the bigger part of its foreign debt wiped off in 1953,
yet has the audacity now to try to teach moral lessons to Greece) is to have Mr. Tsipras and
his one-night "superstar" finance minister tied up with a dog chain and paraded in front of the European
political stage for all to see - utterly defeated and humiliated, with their political futures up
in the air, whether they accept or reject a humiliating Greek deal.
... ... ...
The members of the Greek government negotiation team had submitted a list of proposals for
the June 22 Euro summit that were fully in line with the logic of the EU/IMF bailout program for
Greece: more austerity and additional structural adjustments. All in all, the proposals they made
amounted to over 8 billion euro in additional cuts between 2015 and 2016! The leftist Greek government
even proposed a tax increase to incomes above 30,000 euro, thus suggesting that individuals in that
income bracket rank among the wealthy! Basic food items and services were to carry a 23 percent VAT.
The special VAT rate on Greek islands, which is so crucial for the tourist sector of the economy,
was to be removed. The early retirement age was to be increased as of the start of 2016, and a benefit
for low-income pensioners was to be gradually substituted, beginning from 2018.
The obvious capitulation on the part of the Syriza-led government to the euromasters and the IMF
thugs, which was not the first one, was made just to get a deal done as time was running out for
Greece (it has a huge payment to make to the IMF at the end of June in the tune of 1.6 billion euro)
and thus to remove the dark clouds of a Grexit that had begun to spread dangerously over Greece,
as it had finally become clear that Germany and the IMF were calling Syriza's bluff and were ready
for the unthinkable, i.e., the possibility of a Grexit.
But as it usually happens in situations of negotiations between ordinates and subordinates, master
and slave, rich and poor, strong and weak, the more compromises the latter makes, the more compromises
the former demands.
Thus, the Greek proposals were found to be inadequate, and there were demands for more blood and
tears. Germany and the IMF wanted to force the Syriza-led government to cross its last and final
"red line," which was over additional antisocial measures in the nation's social security and pension
system. Among other things, the Lagarde/Schäuble duo wants the benefit for low-income pensioners
to be completed eliminated by 2017. This would mean that a person who receives today a monthly
pension for the amount of 500 euro (close to 50 percent of Greek pensioners receive pensions below
the official poverty line) would be deprived of about 200 euro, which come as a welfare payment of
sorts.
... ... ...
Footnotes:
1. The political babel of Syriza consists of right-wing and ultra-nationalist
camps (ie., the Independent Greeks party, Syriza's coalition partner in government) to defunct social
democrats and outdated Keynesians who saw primarily the crisis in Greece as a threat to capitalism
itself and were suggesting, accordingly, all sort of interventionist schemes to keep Greece in the
euro area and the emergence of an alternative socio-economic system at bay, including recycling unemployment
schemes with the minimum wage so as not to upset the exploitation rate in the private sector (!)
and IOUs, and from remnants of euro-communism and the old communist left to post-leftism, postmodernist
tendencies devoid of any true understanding of contemporary political realities and without structured
support at the popular, working-class level. Indicative of its political nature, not even one large,
mass protest or demonstration has ever been organized or successfully carried out by Syriza. Its
official organ Avgi still sells thousands of copies less on a daily and a weekly basis than the official
organ of the Greek Communist Party, which in the elections of January 2015 barely got over 5 percent
of the popular vote.
2. Syriza had been converted long ago into an utterly
confusing, "non-left" left political organization, and the restructuring of the Greek economy and
its moribund political culture, the abandonment of outworn, antediluvian modes of political thinking
and behaviors, and the transformation of capitalism and its transition to a socialist economy had
been completely removed from its political radar. For an argument along those lines,
see C. J. Polychroniou, "To Change Greece Requires Changing the Political Culture - and This
Could Be a Tall Order, Especially for the Left." Truthout (September 1, 2013).
... ... ...
C.J. Polychroniou is a research associate and policy fellow at the Levy Economics Institute
of Bard College and a former columnist for a Greek major national newspaper. His main research interests
are in European economic integration, globalization, the political economy of the United States and
the deconstruction of neoliberalism's politico-economic project. He has taught for many years at
universities in the United States and Europe and is a regular contributor to Truthout as well as
a member of Truthout's Public Intellectual Project. He has published several books and his articles
have appeared in a variety of journals, magazines, newspapers and popular news websites. Many of
his publications have been translated into several foreign languages, including Croatian, French,
Greek, Italian, Portuguese, Spanish and Turkish.
"...The troika had two goals from the start. First to give the banksters and plutocrats enough
time to exit the country they had plundered (with help from local plutocrats). There was a large amount
of privately held debt that could not be unloaded during a crisis, so they needed a pretend bailout
such that most of that private risk could be transferred onto public organizations. Second they needed
to keep the public in the other European countries from understanding that the fault was with their
own banksters and plutocrats, not the people of Greece; and that the bailout plan (rather than immediate
debt restructuring) actually was a plan to move the inevitable cost away from the banksters and onto
the taxpayers."
It's the Politics, Stupid!: I have been silent on Greece, because scores of excellent economists
from all sides commented at length...
But last week has transformed in certainty what had been a fear since the beginning. The troika,
backed by the quasi totality of EU governments, were not interested in finding a solution that
would allow Greece to recover while embarking in a fiscally sustainable path. No, they were interested
in a complete and public defeat of the
"radical" Greek government. ...
What happened...? Well, contrary to what is heard in European circles, most of the concessions
came from the Greek government. On retirement age, on the size of budget surplus (yes, the Greek
government gave up its intention to stop austerity, and just obtained to soften it), on VAT, on
privatizations, we are today much closer to the Troika initial positions than to the initial Greek
position. Much closer.
The point that the Greek government made repeatedly is that some reforms, like improving the tax
collection capacity, actually demanded an increase of resources, and hence of public spending.
Reforms need to be disconnected from austerity, to maximize their chance to work. Syriza, precisely
like the Papandreou government in 2010 asked for time and possibly money. It got neither.
Tsipras had only two red lines it would and it could not cross: Trying to increase taxes on the
rich (most notably large coroporations), and not agreeing to further cuts to low pensions. if
he crossed those lines, he would become virtually indistinguishable from Samaras and from the
policies that led Greece to be a broken State.
What the past week made clear is that this, and only this was the objective of the creditors.
This has been since the beginning about politics. Creditors cannot afford that an alternative
to policies followed since 2010 in Greece and in the rest of the Eurozone materializes.
Austerity and structural reforms need to be the only way to go. Otherwise people could start asking
questions; a risk you don't want to run a few months before Spanish elections. Syriza needed to
be made an example. You cannot survive in Europe, if you don't embrace the Brussels-Berlin Consensus.
Tsipras, like Papandreou, was left with the only option too ask for the Greek people's opinion,
because there has been no negotiation, just a huge smoke screen. Those of us who were discussing
pros and cons of the different options on the table, well, we were wasting our time.
And if Greece needs to go down to prove it, so be it. If we transform the euro in a club in which
countries come and go, so be it.
The darkest moment for the EU.
RGC said...
by MICHAEL HUDSON
Many readers of the European and American press must be confused about what actually is happening
in the negotiations between Greece (Alexis Tsipras and Yannis Varoufakis). The European Troika
(the IMF, European Central Bank and European Council now object to the name and want to be called
simply "the Institutions") have stepped up their demands on Syriza. What is called "negotiation"
is in reality a demand for total surrender. The Troika's demand is to force Syriza to go back
on the campaign promises that it made to voters who replaced the old right-wing Pasok ("socialist")
and Conservative New Democracy coalition, or else simply apply the austerity program to which
that coalition had agreed:cutbacks in pensions, deeper austerity, more privatization selloffs,
and a tax shift off business onto labor. In short, economic suicide.
Last weekend a group of us met in Delphi to discuss and draft the following Declaration of
Support for Greece against the neoliberal Institutions. It is now clear that finance is the new
mode of warfare. The creditors' objective is the same as military conquest: they want the land,
the natural resource rights and monopolies, and they want tribute (in this case, debt service).
And they don't want sovereign Greece to tax the economic rent from these assets. In short, the
negotiation between The Institutions and Greece is a bold exercise in rent extraction.
I agree with what Saraceno wrote. "The troika, backed by the quasi totality of EU governments,
were not interested in finding a solution that would allow Greece to recover while embarking in
a fiscally sustainable path."
The austerity program they forced Greece to follow was a failure and the troika doesn't care
what Syriza was elected to do. It can overrule democracy.
As good as the IMF research department has been regarding Keynesian policies lately, the IMF
is coming off really bad here, just going along with insane policy.
If Greece doesn't pay by the 30th do they get kicked out? If they kicked out will they hold
the July 5th referendum anyway?
Maybe the troika don't kick them out immediately and the referendum votes no on the bailout
package. Then Greece defaults but possibly stays in the EU on the drachma with capital controls.
Possibly Greece can rejoin the EU later on.
anne said in reply to anne...
What still puzzles me is whether and by what authority Greece can be forced to leave the European
Union, even if Greece has to abandon the Euro.
As for the leadership of the European Union, no matter the title of the various governing parties,
there has been an increasingly conservative political-economic bent to the leadership in domestic,
Europe-wide and international affairs.
DeDude said in reply to anne...
They can not be forced to leave the European (political) Union. The may have to abandon the
Euro currency, but a number of other EU countries have their own currency (enjoying the free trade
and political advantages of being an EU country). They would likely be forced to either back out
of the Euro or face a complete collapse of their banks and economy (without banks no business)
if the ECB close their banks access to funds. But there is no way that they could be kicked out
of the Euro if they refused to leave.
James Stewart has a piece * in the New York Times telling readers that if Greece were to leave
the euro it would face a disaster. The headline warns readers, "imagine Argentina, but much worse."
The article includes several assertions that are misleading or false.
First, it is difficult to describe the default in Argentina as a disaster. The economy had
been plummeting prior to the default, which occurred at the end of the year in 2001. The country's
GDP had actually fallen more before the default than it did after the default. (This is not entirely
clear on the graph, since the data is annual. At the point where the default took place in December
of 2001, Argentina's GDP was already well below the year-round average.) While the economy did
fall more sharply after the default, it soon rebounded and by the end of 2003 it had regained
all the ground lost following the default.
[Graph]
Argentina's economy continued to grow rapidly for several more years, rising above pre-recession
levels in 2004. Given the fuller picture, it is difficult to see the default as an especially
disastrous event even if it did lead to several months of uncertainty for the people of Argentina.
In this respect, it is worth noting that Paul Volcker is widely praised in policy circles for
bringing down the inflation rate. To accomplish this goal he induced a recession that pushed the
unemployment rate to almost 11 percent. So the idea that short-term pain might be a price worth
paying for a longer term benefit is widely accepted in policy circles.
At one point the piece refers to the views of Yanis Varoufakis, Greece's finance minister,
on the difficulties of leaving the euro. It relies on what it describes as a "recent blogpost."
Actually the post * is from 2012.
To support the argument that Greece has little prospect for increasing its exports it quotes
Daniel Gros, director of the Center for European Policy Studies in Brussels, on the impact of
devaluation on tourism:
"But they've already cut prices and tourism has gone up. But it hasn't really helped because
total revenue hasn't gone up."
Actually tourism revenue has risen. It rose by 8.0 percent from 2011 to 2013 (the most recent
data available) measured in euros and by roughly 20 percent measured in dollars. In arguing that
Greece can't increase revenue from fishing the piece tells readers:
"The European Union has strict quotas to prevent overfishing."
However the piece also tells readers that leaving the euro would cause Greece to be thrown
out of the European Union. If that's true, the EU limits on fishing would be irrelevant.
The piece also make a big point of the fact that Greece does not at present have a currency
other than the euro. There are plenty of countries, including many which are poorer than Greece,
who have managed to switch over to a new currency in a relatively short period of time. While
this process will never be painless, it must be compared to the pain associated with an indefinite
period of unemployment in excess of 20.0 percent which is almost certainly the path associated
with remaining in the euro on the Troika's terms.
In making comparisons between Greece and Argentina, it is also worth noting that almost all
economists projected disaster at the time Argentina defaulted in 2001. Perhaps they have learned
more about economics in the last 14 years, but this is not obviously true.
Tsipras had only two red lines it would and it could not cross: Trying to increase taxes on
the rich (most notably large corporations), and not agreeing to further cuts to low pensions.
if he crossed those lines, he would become virtually indistinguishable from Samaras and from the
policies that led Greece to be a broken State.
-- Francesco Saraceno
[ I believe that this passage is wrong. Prime Minister Tsipras, to my understanding, was willing
and had offered to increase taxes on the rich or "large corporations."
I will try to find a reference, but I am fairly sure I read this in regard to the offer by
Tsipras. I recall the insistence on preserving low pension levels came with an express proposal
to increase taxes on those with relatively high incomes. ]
DeDude said...
The troika had two goals from the start. First to give the banksters and plutocrats enough
time to exit the country they had plundered (with help from local plutocrats). There was a large
amount of privately held debt that could not be unloaded during a crisis, so they needed a pretend
bailout such that most of that private risk could be transferred onto public organizations. Second
they needed to keep the public in the other European countries from understanding that the fault
was with their own banksters and plutocrats, not the people of Greece; and that the bailout plan
(rather than immediate debt restructuring) actually was a plan to move the inevitable cost away from
the banksters and onto the taxpayers.
Unfortunately, European tribalistic politics (further inflamed by the second goal) forced such
austerity upon the people of Greece that they rebelled and elected a socialist government. Now there
is a third goal for the troika (as dictated by their plutocrat masters); to punish the people of
Greece (and scare voters in other countries) for electing socialist leaders. Be ready for an all
out war of sabotaging any and all Greek economic recovery. They are desperate to set the example
and scare away any thought of rebellion against economic tyranny in countries like Portugal, Spain,
Ireland (Italy, France). They are not even trying to hide their sabotage of the Syriza government
– just compare what they demand to what Syriza is offering. The objectives are for the same goals,
it is just that Syriza has a plan that can reach those goals without sinking the Greek economy into
an even deeper hole.
Fred C. Dobbs said...
If you owe your bank a million euros
and can't pay, YOU have a problem.
If it's a billion euros, THEY have a problem.
If it's a trillion, *you* are back
to having a problem, as it turns out.
Who knew?
RGC said...
IMF policy re Greece and Ukraine:
Greece: IMF Warns No Leeway on Payment as Merkel Urges Greece to Bow
Businesses Worry About Shouldering Burden of Greek Debt
By LANDON THOMAS Jr.
THESSALONIKI, Greece - From the beginning, officials at the International Monetary Fund, one
of the country's creditors, have criticized the proposal's reliance on raising corporate tax,
arguing that such increases will only hurt the country's already fragile economy....
[ This is the IMF; sacrifice ordinary already damaged Greek people for the sake of corporate
or relatively rich Greeks. ]
Having read the Dominique Strauss Kahn memo carefully again, I am not sure just what is being
argued other than a little more generous debt forgiveness a little earlier.
"Jeroen Dijsselbloem, president of the eurogroup of finance ministers, said before the meeting
he was 'disappointed' by the surprise plans to stage a popular vote on debt financing proposals.
"'It's a very sad decision for Greece because it's closed the door to further talks, a door
that was still open in my mind,' he said."
I think of my dad's friend Phil in these cases of indebtedness. Phil was a successful businessman
who functioned as a lender of last resort for a number of his acquaintances. Phil wanted his money
first and foremost. When a borrower could not pay on time, Phil gave a brief grace period. If
the borrower still could not pay, Phil would counsel the guy to get an honest job if he didn't
already have one or get a second job if he had one and only one. If the guy already had two jobs
or was ineligible for honest work, he was advised to consult a pawnbroker. If necessary, stealing
and fencing outside of Phil's network might be a last resort. If the borrower still could not
pay, Phil was not above resorting to strong collection methods that might persuade the borrower
to come up with some cash courtesy of friends and family. Like legal collection methods Phil's
cost money so was only resorted to in unusual cases. If the borrower still could not come up with
the money, Phil had to face the loss. Needless to say, no further credit would be forthcoming.
It may be impossible for Greece to pay its debts because its prospects for growth are inadequate
given the nature of its politics, the size of the debt, and relatively small size of its economy.
If its lenders have concluded that that is the case, Greece would have to default and take the
consequences. Its lenders will have to take the consequences as well. Phil would not have felt
obliged to continue to make loans to a customer who had demonstrated an inability to repay his
loan after the usual forbearance.
Chris Herbert said...
Greece doesn't need any loans. Greece doesn't need any debt. Once you are a monetary sovereign
you call the shots. Just ask the United States, or China, or Japan. Or Iceland. The central bank
can recapitalize the economy with a new drachma, the only currency that can be used domestically.
It can fund infrastructure projects that invigorate the Greek economy without issuing debt because
it is producing assets, not liabilities. It can do so by avoiding what Keynes describe as 'a bookkeepers
nightmare.' Keynes:
"The divorce between ownership and the real responsibility of management is serious within
a country when, as a result of joint-stock enterprise, ownership is broken up between innumerable
individuals who buy their interest today and sell it tomorrow and lack altogether both knowledge
and responsibility towards what they momentarily own. But when the same principle is applied
internationally, it is, in times of stress, intolerable - I am irresponsible towards what I
own and those who operate what I own are irresponsible towards me. There may be some financial
calculation which shows it to be advantageous that my savings should be invested in whatever
quarter of the habitable globe shows the greatest marginal efficiency of capital or the highest
rate of interest. But experience is accumulating that remoteness between ownership and operation
is an evil in the relations between men, likely or certain in the long run to set up strains
and enmities which will bring to nought the financial calculation....
National self-sufficiency, in short, though it costs something, may be becoming a luxury
which we can afford if we happen to want it. Are there sufficient good reasons why we may happen
to want it? The decadent international but individualistic capitalism, in the hands of which
we found ourselves after the War, is not a success. It is not intelligent, it is not beautiful,
it is not just, it is not virtuous - and it doesn't deliver the goods. In short, we dislike
it and we are beginning to despise it. But when we wonder what to put in its place, we are
extremely perplexed."
Until now, every warning about an imminent breakup of the euro has proved wrong. Governments,
whatever they said during the election, give in to the demands of the troika; meanwhile, the ECB
steps in to calm the markets. This process has held the currency together, but it has also perpetuated
deeply destructive austerity - don't let a few quarters of modest growth in some debtors obscure
the immense cost of five years of mass unemployment.
As a political matter, the big losers from this process have been the parties of the center-left,
whose acquiescence in harsh austerity - and hence abandonment of whatever they supposedly stood
for - does them far more damage than similar policies do to the center-right.
It seems to me that the troika - I think it's time to stop the pretense that anything changed,
and go back to the old name - expected, or at least hoped, that Greece would be a repeat of this
story. Either Tsipras would do the usual thing, abandoning much of his coalition and probably
being forced into alliance with the center-right, or the Syriza government would fall. And it
might yet happen.
But at least as of right now Tsipras seems unwilling to fall on his sword. Instead, faced with
a troika ultimatum, he has scheduled a referendum on whether to accept. This is leading to much
hand-wringing and declarations that he's being irresponsible, but he is, in fact, doing the right
thing, for two reasons.
First, if it wins the referendum, the Greek government will be empowered by democratic
legitimacy, which still, I think, matters in Europe. (And if it doesn't, we need to know that,
too.)
Second, until now Syriza has been in an awkward place politically, with voters both furious
at ever-greater demands for austerity and unwilling to leave the euro. It has always been hard
to see how these desires could be reconciled; it's even harder now. The referendum will, in
effect, ask voters to choose their priority, and give Tsipras a mandate to do what he must
if the troika pushes it all the way.
If you ask me, it has been an act of monstrous folly on the part of the creditor governments
and institutions to push it to this point. But they have, and I can't at all blame Tsipras for
turning to the voters, instead of turning on them.
RGC said in reply to anne...
"If you ask me, it has been an act of monstrous folly on the part of the creditor governments
and institutions to push it to this point."
The US banks promoted loans that obviously could not be repaid. They committed massive fraud.
They caused a horrendous debt deflation and concomitant great recession. Yet they were bailed
out by Obama. Why shouldn't the European banks expect the same of their politicians?
Breaking Greece: I've been staying
fairly quiet on Greece... But given reports from the negotiations in Brussels, something must be said...
This ought to be a negotiation about targets for the primary surplus, and then about debt relief that heads off endless future
crises. And the Greek government has agreed to what are actually fairly high surplus targets, especially given the fact that the
budget would be in huge
primary surplus if the economy weren't so depressed. But the creditors keep rejecting Greek proposals on the grounds that
they rely too much on taxes and not enough on spending cuts. So we're still in the business of dictating domestic policy.
The supposed reason for the rejection of a tax-based response is that it will hurt growth. The obvious response is, are you kidding
us? The people who utterly failed to see the damage austerity would do - see the chart, which compares the projections in the
2010 standby agreement with reality - are
now lecturing others on growth? Furthermore, the growth concerns are all supply-side, in an economy surely operating at least
20 percent below capacity. ...
At this point it's time to stop talking about "Graccident"; if Grexit happens it will be because the creditors, or at least the
IMF, wanted it to happen.
Sandwichman said...
The class nature of the IMF position is evident to anyone who chooses to see. Olivier Blanchard is the IMF's chief economist.
Professor Krugman politely omits mentioning that salient fact. Professional courtesy, I presume.
anne said in reply to Sandwichman...
Olivier Blanchard is the IMF's chief economist.
[ Meaning what exactly? ]
Sandwichman said in reply to anne...
Meaning if "unserious" Olivier (see below) was serious about his unseriousness maybe he would publicly repudiate the economics
of the policy of the organization that he is presumably chief economist for.
Sandwichman said in reply to anne...
"The IMF's 'Tough Choices' on Greece," Jamie Galbraith
"Blanchard should know better than to persist with this fiasco. Once the link between "reform" and growth is broken – as it
has been in Greece – his argument collapses. With no path to growth, the creditors' demand for an eventual 3.5%-of-GDP primary
surplus is actually a call for more contraction, beginning with another deep slump this year.
"But, rather than recognizing this reality and adjusting accordingly, Blanchard doubles down on pensions. He writes:
"'Why insist on pensions? Pensions and wages account for about 75% of primary spending; the other 25% have already been cut
to the bone. Pension expenditures account for over 16% of GDP, and transfers from the budget to the pension system are close to
10% of GDP. We believe a reduction of pension expenditures of 1% of GDP (out of 16%) is needed, and that it can be done while
protecting the poorest pensioners.'
"Note first the damning admission: apart from pensions and wages, spending has already been "cut to the bone." And remember:
the effect of this approach on growth was negative. So, in defiance of overwhelming evidence, the IMF now wants to target the
remaining sector, pensions, where massive cuts – more than 40% in many cases – have already been made. The new cuts being demanded
would hit the poor very hard."
anne said in reply to Sandwichman...
Understood completely, darn.
Sandwichman said in reply to Sandwichman...
So Galbraith and Krugman basically agree on the stupidity of the policy. Galbraith names the name. Krugman hesitates. Basic
social psychology.
"Blanchard insists that now is the time for "tough choices, and tough commitments to be made on both sides." Indeed it is.
But the Greeks have already made tough choices. Now it is the IMF's turn, beginning with the decision to admit that the policies
it has imposed for five long years created a disaster. For the other creditors, the toughest choice is to admit – as the IMF
knows – that their Greek debts must be restructured. New loans for failed policies – the current joint creditor proposal
– is, for them, no adjustment at all."
Final two paragraphs of Krugman's:
"Talk to IMF people and they will go on about the impossibility of dealing with Syriza, their annoyance at the grandstanding,
and so on. But we're not in high school here. And right now it's the creditors, much more than the Greeks, who keep moving
the goalposts. So what is happening? Is the goal to break Syriza? Is it to force Greece into a presumably disastrous default,
to encourage the others?
"At this point it's time to stop talking about "Graccident"; if Grexit happens it will be because the creditors, or at least
the IMF, wanted it to happen."
This is sounding a lot like our Federal government. Nondefense purchasing is not that high even though we need a lot more infrastructure.
Republicans have bitched about Social Security retirement benefits for decades. Cut taxes to hell and then demand a balanced budget
even during weak aggregate demand. OK, Greece's problems are enormous but listen to Paul Ryan enough and we will become a banana
republic.
"...not just greece. the collusion between the ECB and the French and German governments/banks, along with the IMF sends a clear
message to all the European "junior" states."
.
"...He stated that default would be "catastrophic" and that he saw his job as "attempting to save capitalism from itself." In short
exactly the role that FDR played in the U.S. "
.
"...Surely you can't believe Syriza is going to come out of that stronger? The banking system has basically collapsed, deal or no
deal. Plus. the Troika proposal also contains the poison pill of VAT increases for the islands, which would drive a wedge between Syriza
and it's nationalist allies. "
.
"...The combination of political cravenness combined with short-sightedness and a recklessness built on arrogance displayed by the
Troika should be truly sobering and is the real story, regardless of what now happens in Greece."
Greece doesn't need any loans. Greece doesn't need any debt. Once you are a monetary sovereign you call the shots. Just ask the
United States, or China, or Japan. Or Iceland. The central bank can recapitalize the economy with a new drachma, the only currency
that can be used domestically. It can fund infrastructure projects that invigorate the Greek economy without issuing debt because
it is producing assets, not liabilities. It can do so by avoiding what Keynes describe as 'a bookkeepers nightmare.' Keynes: "The
divorce between ownership and the real responsibility of management is serious within a country when, as a result of joint-stock
enterprise, ownership is broken up between innumerable individuals who buy their interest today and sell it tomorrow and lack altogether
both knowledge and responsibility towards what they momentarily own. But when the same principle is applied internationally, it is,
in times of stress, intolerable - I am irresponsible towards what I own and those who operate what I own are irresponsible towards
me. There may be some financial calculation which shows it to be advantageous that my savings should be invested in whatever quarter
of the habitable globe shows the greatest marginal efficiency of capital or the highest rate of interest. But experience is accumulating
that remoteness between ownership and operation is an evil in the relations between men, likely or certain in the long run to set
up strains and enmities which will bring to nought the financial calculation....
National self-sufficiency, in short, though it costs something, may be becoming a luxury which we can afford if we happen to want
it. Are there sufficient good reasons why we may happen to want it? The decadent international but individualistic capitalism, in
the hands of which we found ourselves after the War, is not a success. It is not intelligent, it is not beautiful, it is not just,
it is not virtuous - and it doesn't deliver the goods. In short, we dislike it and we are beginning to despise it. But when we wonder
what to put in its place, we are extremely perplexed."
While Tsipras, Syriza & Co. certainly are not the team that would win the Super bowl, far from it, they are nevertheless not
worse than the Troika in terms of incompetence, internal inconsistencies, having made populistic and crazy promises to voters
on false pretenses, etc. Greece is the unruly teenager and the Troika are supposed to be the enlightened and responsible parents,
even if it means being harsh. What we have instead is one entirely dysfunctional family.
My point is that even a 24 karat Greek Government would have an impossible task in negociating with the Ayatollahs of the Troika.
This game is therefore (unfortunately) not about acting rationally. Doing the right and responsible thing will not make you
win or at least lose less.
Therefore I think that Tsipras move to launch a referendum is not bad. If the ECB shuts off the ELA – a couple of days before
the citizens of Greece get to vote on the situation – then the ECB will (again) be confirmed at the Institution that kills democracy.
The Greek referendum has in my view been an option for the Greeks all the time. By doing it now "Ach mein Gott, way too late",
the Greeks show that the creditors, and their parliaments, do not own the agenda (and hence cannot use it as pressure point).
What we are witnessing is clearly not a negotiation. It is political warfare with one pygmy state against a totally overwhelming
force. I do not expect Greece to win this, in the end, but I hope that they will lose with dignity while the creditors win in
infamy. This is not irrelevant since the next generation of Greeks will need to know that their parents refused to surrender to
the, objectively, suicidal demands of the creditors....
Swedish Lex, June 27, 2015 at 7:33 am
I also believe that a Greek default would blow a big hole in the ECB's balance sheet, meaning that the euro states would have
to inject tens of billions of new equity. Real money. TBC.
Freddo, June 27, 2015 at 7:52 am
I wonder how Merkel is feeling right now. I would interpret telling Tspiras to "shut up" as a sign she sees her legacy disappearing
down a drain. Powerful leaders holding all the cards don't talk like that. Maybe she has suddenly realized she doesn't hold all
the cards.
ennui, June 27, 2015 at 10:06 am
not just greece. the collusion between the ECB and the French and German governments/banks, along with the IMF sends a
clear message to all the European "junior" states. the fact that the ECB has conducted a slow bank run in Greece destroys
any trust national political leaders might have in a European banking system. you can't have a central bank which is willing to
destroy the banking system of a member state to advance the political aims of other member states….
steviefinn, June 27, 2015 at 7:56 am
Swedish Lex
Agreed – & what is the difference in the end result between bowing & scraping & at least putting up some sort of fight ? Strikes
me that it would eventually end up in much the same place anyway. Maybe morals don't count in this counting house world anymore,
but however it ends, I personally am grateful to Syriza for allowing us more insight into the dealings of the EU Junta – which
hopefully others will learn from, leading to a way of destoying this hydra.
Lambert Strether, June 27, 2015 at 1:23 pm
Not sure what mechanism you have in mind. From the post:
[Syriza's] assumption appears to have been that the national governments
would find it too politically toxic to recognize losses on the debt they had extended to Greece through the EFSF and the Greek
Bailout Fund. But maturities on these facilities have been extended and payments deferred. And the national governments do not
have to mark to market. They will recognize losses only if and when Greece fails to make payments, which is years down the road.
And even then, the pain is spread out over decades. That means Greece's supposed nuclear weapon turns out to be a pop gun.
Granted, these are country losses (after they were left holding the bag for German banks) but you do't explain how the ECB
would lose. Would you, please?
Cugel, June 27, 2015 at 7:42 pm
Varoufakis last year explained everything before Syriza even took power. He stated that default would be "catastrophic"
and that he saw his job as "attempting to save capitalism from itself." In short exactly the role that FDR played in the U.S.
The difference of course is that the U.S. had a sovereign currency and could run deficits and FDR didn't have to answer to
the Troika. So, Syriza tried to get the creditors to see reason and see that it was in their long-term best interests to grant
debt-relief. They failed because of EU arrogance, blind adherence to dogma, and short-term thinking. But, they certainly didn't
have any other choice.
Yves has criticized them severely for not negotiating better. It is impossible to prove she's wrong that Syriza missed opportunities
for finding a workable compromise, but I've never seen it as remotely plausible that the creditors would agree to anything Greece
could accept.
The attempt at a referendum is obvious political theater and will be rejected by the Troika. It wouldn't work anyway. It
is just another political ploy by Tsipras to cast the blame on the Troika by making them look bad, but they are long past the
point of caring and just want Greece out of the EU.
Ben Johannson, June 27, 2015 at 3:35 pm
I can see no evidence that eurozone CB's must be in positive territory regarding its balance sheet or that member states must
make any "hole" whole. They may demand it anyway given the leaders of the eurogang are likely as stupid as they look but it isn't
an inevitability given the ECB does not require balance sheet solvency to conduct its operations.
ennui, June 27, 2015 at 1:15 pm
As Varoufakis notes in his recent statement, an agreement now would leave Syriza with a Greek economy in a deep depression,
a banking system that has been strangled by the ECB with no commitment to confidence building, a requirement to create a fiscal
surplus and monthly reviews by the IMF culminating in a repeat performance of this whole charade in November.
Surely you can't believe Syriza is going to come out of that stronger? The banking system has basically collapsed, deal
or no deal. Plus. the Troika proposal also contains the poison pill of VAT increases for the islands, which would drive a wedge
between Syriza and it's nationalist allies.
Whether it was intentional or not, Syriza's dogged commitment to this "negotiation" has illustrated just the degree to which
the Troika are acting in bad faith. There were just two outcomes that were possible from this process: Syriza signing a deal which
would be politically suicidal or Greek exit, and this was by design by the powers of Europe.
The combination of political cravenness combined with short-sightedness and a recklessness built on arrogance displayed
by the Troika should be truly sobering and is the real story, regardless of what now happens in Greece.
"...HUDSON: First of all, the terms on which the IMF make loans require more austerity and a withdrawal of all the public subsidies.
The Ukrainian population already is economically devastated. The conditions that the IMF's program is laying down for making loans to
Ukraine is that it must repay the debts. But it doesn't have the ability to pay. So there's only one way to do it, and that's the way
that the IMF has told Greece and other countries to do: It has to begin selling off whatever the nation has left of its public domain;
or, to have your leading oligarchs take on partnerships with American or European investors, so that they can buy out into the monopolies
in the Ukraine and indulge in rent-extraction."
"...This idea that foreign debts can be paid by squeezing out domestic tax revenues was controverted by Keynes in the 1920s
in his discussion of German reparations. (I devote a chapter to reviewing the controversy in my Trade, Development and Foreign Debt.)
There is no excuse for making this error -- except that the error is deliberate, and is intended to lead to failure, so that the IMF
can then say that to everyone's surprise and nobody's blame, their "stabilization program" destabilized rather than stabilized the economy."
"...The penalty for following this junk economics must be paid by the victim, not by the victimizer. This is part of the IMF's "blame
the victim" strategy."
"...The IMF also insists that debtor countries dismantle public regulations against foreign investment, as well as consumer protection
and environmental protection regulations. This means that what is in store for Ukraine is a neoliberal policy that's guaranteed to actually
make the situation even worse."
Yves here. Ukraine is going into an IMF program in even worse condition that Greece with its various loans from the Troika in
2010, and we can see how well borrowing more when you were already overindebted worked out for Greece. In addition, this interview
with Michael Hudson makes clear that the loan to Ukraine is wildly out of line with IMF rules, making it painfully obvious that this
"rescue" is all about propping up the government so it can continue to wage war rather than economic development.
SHARMINI PERIES, EXEC. PRODUCER, TRNN: Welcome to the Michael Hudson report on The Real News Network. I'm Sharmini Peries, coming
to you from Baltimore.
A ceasefire in Eastern Ukraine has been agreed to, following a marathon all-night, 17-hour negotiation between Russian President
Vladimir Putin and Ukraine President Petro Poroshenko. They were flanked by other European leaders keeping vigil. Russia and Ukraine
may have many differences, but what they have in common is a looming economic crisis, with oil prices taking a dive on the Russian
side and a very expensive war they were not counting on on the Ukrainian side.
Joining us now to talk about all of this is Michael Hudson. He is a distinguished research professor of economics at the University
of Missouri-Kansas City. His upcoming book is titled Killing the Host: How Financial Parasites and Debt Bondage Destroyed the Global
Economy.
Michael, thank you, as always, for joining us.
MICHAEL HUDSON, ECONOMICS PROF., UNIV. OF MISSOURI, KANSAS CITY: Good to be here.
PERIES: So, Michael, in a recent interview published in The National Interest magazine, you said that most media covers Russia
as if it is the greatest threat to Ukraine. History suggests the IMF may be far moredangerous. What did you mean by that?
HUDSON: First of all, the terms on which the IMF make loans require more austerity and a withdrawal of all the public subsidies.
The Ukrainian population already is economically devastated. The conditions that the IMF's program is laying down for making loans
to Ukraine is that it must repay the debts. But it doesn't have the ability to pay. So there's only one way to do it, and that's
the way that the IMF has told Greece and other countries to do: It has to begin selling off whatever the nation has left of its public
domain; or, to have your leading oligarchs take on partnerships with American or European investors, so that they can buy out into
the monopolies in the Ukraine and indulge in rent-extraction.
This is the IMF's one-two punch. Punch number one is: here's the loan -- to pay your bondholders, so that you now owe us, the
IMF, to whom you can't write down debts. The terms of this loan is to believe our Guiding Fiction: that you can pay foreign debt
by running a domestic budgetary surplus, by cutting back public spending and causing an even deeper depression.
This idea that foreign debts can be paid by squeezing out domestic tax revenues was controverted by Keynes in the 1920s in
his discussion of German reparations. (I devote a chapter to reviewing the controversy in my Trade, Development and Foreign Debt.)
There is no excuse for making this error -- except that the error is deliberate, and is intended to lead to failure, so that the
IMF can then say that to everyone's surprise and nobody's blame, their "stabilization program" destabilized rather than stabilized
the economy.
The penalty for following this junk economics must be paid by the victim, not by the victimizer. This is part of the IMF's "blame
the victim" strategy.
The IMF then throws its Number Two punch. It says, "Oh, you can't pay us? I'm sorry that our projections were so wrong. But you've
got to find some way to pay -- by forfeiting whatever assets your economy may still have in domestic hands.
The IMF has been wrong on Ukraine year after year, almost as much as it's been wrong on Ireland and on Greece. Its prescriptions
are the same as those that devastated Third World economies from the 1970s onward.
So now the problem becomes one of just what Ukraine is going to have to sell off to pay the foreign debts -- run up increasingly
for waging the war that's devastated its economy.
One asset that foreign investors want is Ukrainian farmland. Monsanto has been buying into Ukraine -- or rather, leasing its land,
because Ukraine has a law against alienating its farmland and agricultural land to foreigners. And a matter of fact, its law is very
much the same as what the Financial Times reports Australia is wanting to do to block Chinese and American purchase of farmland.[1]
The IMF also insists that debtor countries dismantle public regulations against foreign investment, as well as consumer protection
and environmental protection regulations. This means that what is in store for Ukraine is a neoliberal policy that's guaranteed to
actually make the situation even worse.
In that sense, finance is war. Finance is the new kind of warfare, using finance and forced sell-offs in a new kind of battlefield.
This will not help Ukraine. It promises to lead to yet another crisis down the road very, very quickly.
PERIES: Michael, let's unpack the debt in this crisis. The war has led Ukraine into a deeper crisis. Talk about the devastation
that has caused and what they have to manage in addition to what the IMF is trying to impose on it.
HUDSON: When Kiev went to war against Eastern Ukraine, it fought primarily the coal mining region and theexport region. Thirty-eight
percent of Ukraine's exports are to Russia. Yet much of this export capacity has been bombed out of existence. Also, the electric
companies that fuel the electricity to the coal mines been bombed out. So Ukraine can't even supply itself with coal.
What is so striking about all this is that just a few weeks ago, on January 28, Christine Lagarde, the head of the IMF, said that
the IMF does not make loans to countries that are engaged in war. That would befunding one side or another. Yet Ukraine is involved
in a civil war. The great question is thus when the IMF will even begin to release the loan it has been discussing.
Also, the IMF articles of agreement say that it cannot make loans to an insolvent country. So how on earth can it be part of a
loan bailout for the Ukraine if, number one, it's at war (which has to stop totally), and number two, it's insolvent?
The only solution is that Ukraine will scale back its debts to private investors. And that means a lot of contrarian hedge funds
investors. The Financial Times today has an article showing that one American investor alone, Michael Hasenstab, has $7 billion of
Ukraine debts and wants to speculate in it, along with Templeton Global Bond Fund.[2] How is Ukraine going to treat the speculators?
And then, finally, how is the IMF going to treat the fact that Russia's sovereign fund lent 3 billion euros to the Ukraine on harsh
terms through the London agreement terms that can't be written down? Is the IMF going to insist that Russia take the same haircut
that it's imposing on the hedge funds? All of this is going to be the kind of conflict that's going to take much more effort than
even the solutions that we've seen over the last few days have taken on the military battlefront.
PERIES: And so how could Ukraine imagine getting out of this crisis?
HUDSON: It probably imagines a dream world in which it'll get out of the crisis by the West giving it $50 billion and saying,
here's all the money you need, spend it as you want. That's the extent of its imagination. It is fantasy, of course. It's living
in a dream world -- except that a few weeks ago, George Soros came out in The New York Review of Books and urged Congress and "the
West" to give Ukraine $50 billion and look at it as a down payment on military or with Russia. Well, immediately Kiev said, yes,
we will only spend them on defensive arms. We will defend Ukraine all the way up toSiberia as we wipe out the Russians.
Bit today a Financial Times editorial said, yes, give Ukraine the $50 billion that George Soros asked for.[3] We've got to enable
it to have enough money to fight America's New Cold War against Russia. But the continental Europeans are saying, "Wait a minute.
At the end of this, there'll be no more Ukrainians to fight. The war might even spread into Poland and into elsewhere, because if
the money that's given to Ukraine is really for what the Obama administration and Hillary and Soros are all pressing for -- to go
to war with Russia -- then Russia's going to say, 'Okay, if we're being attacked by foreign troops, we're going to have to not only
bomb the troops, but the airports they are coming in through, and the railway stations they're coming in through. We're going to
extend our own defense towards Europe.'"
Apparently there are reports that Putin told Europe, look, you have two choices before you. Choice one: Europe, Germany and Russia
can be a very prosperous area. With Russia's raw materials and European technology, we can be one of the most prosperous areas in
the world. Or, Choice two: You can go to war with us and you can be wiped out. Take your choice.
PERIES: Michael, complex and interesting times in Ukraine, as well as at the IMF. Thank you so much for joining us.
HUDSON: It's good to be here, Sharmini.
PERIES: And thank you for joining us on The Real News Network.
Of course, it's hard to argue with his perspective: the war state impoverishes everyone except the war profiteers, which now
includes the western financial system in full flower.
Maybe my 401K has an emerging market fund so I can profit from Slavic misery?
That's about the extent of our democratic participation in this fiasco.
Disgusting.
participant-observer-observed, February 15, 2015 at 3:39 pm
Hudson's voice needs echoing, since the reality here is much worse than 401k investments gone evil
As FL Rep A Grayson pointed out in January (Fake Trade
TPP), with 14 yeas of half-trillion trade deficits, USA has nothing left to export than death and destruction, and since no
one wants to buy it, it can only be peddled through force or swindling.
That's one reason Hudson did not fail to mention Monsanto, which has found no one is interested in their sterile seeds. This
is like dumping nuclear wastes in developing countries.
James Levy, February 15, 2015 at 6:41 am
Every army needs motivated and competent trigger-pullers. What this and other policies of Washington, Berlin, and Kiev are
doing is making almost all potential Ukrainian trigger-pullers (except for the fanatical right-wing nationalist kind) disgruntled,
demoralized, or already in flight from service. The more desperate measures the West and Kiev take to "win" this war the worse
things get and the less likely they are to come out with even a respectable draw. The Donbas rebels and their Russian backers
would be wise to just apply moderate pressure over time and let the Kiev government implode.
Procopius., February 15, 2015 at 7:39 am
This is why I've thought there was a Great Divide within the IMF.
After reading Prof. Hudson's comments here I'm thinking there isn't really a divide - the so-called research part of the
IMF is actually a public relations exercise.
They come out and say, "Oh, our new research shows that we actually greatly underestimated the multiplier effect of austerity.
So sorry, we won't make that mistake again."
Then the knuckledraggers* who actually implement IMF policy go out and demand exactly the same terms the next time. From what
I've read the IMF research people are actually pretty good, and lots of stenographers and right-leaning economists praise them
to the skies as creating good policy, but they don't actually affect policy at all.
*knuckledraggers - originally the operations division in the CIA, the guys who were actually out there conducting coups and
killing people, so called in contrast to the analysts. I don't know what the operations people called the analysts, but I'll bet
it's not fit for a family oriented publication.
Pearl, February 15, 2015 at 8:39 am
I hate that I'm always the one here at N.C. who has to have things "dumbed down" for me.
But I have learned that when Michael Hudson speaks -- I want to be in the front row and listening intently to what he has to
say -- because, where Professor Hudson leads, I ultimately always seem to follow. So, may I stop and regurgitate what I think
Professor Hudson is saying -- and then let you smart people correct me and, hopefully (and helpfully) enable me to make sure that
I have, at least, a rudimentary grasp on that which he has said? (And to correct me and to further elaborate, if anyone has the
time or patience for it.)
Okay. So, if my pea-sized brain were asked to explain (in housewife-ese) what Professor Hudson is saying, would I be on the
right track in asking the following questions and making the following assumptions?
1) Is Professor Hudson suggesting that Putin is suggesting one of two options -- that Russia, Germany, and Europe will either
be allowed to play nice together (in the sandbox that we call the European Continent), making up a happy, well-balanced, partnership/playgroup,
OR…… the U.S. will help fund the defense of Ukraine so that Ukraine will go to war defending itself against Russia (which Ukraine
would, obviously and ultimately lose without U.S. boots on the ground)?
2) And is Professor Hudson suggesting that Putin is saying that if the latter scenario is chosen, and that once a military
operation involving the U.S. is underway, Russia would just go ahead and undertake a more hostility-induced "insertion of itself"
into said German/European sandbox?
3) Although not addressed directly in Professor's Hudson's commentary above, does Professor Hudson think that this is Putin's
Russia trying to re-assert Russia's domination over the European continent or is this just Russia wanting to be taken as a serious
and trustworthy playmate in the EU sandbox? (Is Russia having a little temper tantrum that is worth giving in to, or is this Russia
being, ya know -- just a re-branded USSR?)
*******
Because the latter seems like a pretty significant threat, doesn't it?
And if (we think) that Putin's end-goal is "total bully-driven European sandbox domination," that sort of seems like not a
very good situation for Europe or for the U.S. (I would think?)
And, furthermore, if "total bully-driven European sandbox domination," is what Putin has in mind, I think I could see my way
clear to allowing a few of our militaristic capabilities a bit closer-in and a bit more "visible" to Putin at this point in time.
(I mean -- we gotta park our fleet of battleships somewhere, anyway.)
I don't want a war with Putin's Russia, but I think that I so much don't want a war that I would tend to want for Putin to
get the message that he'll be given very little latitude in his behavior -- until we're absolutely certain that his intention
is only to be allowed to make new friends and to flourish in the EU sandbox; not total sandbox domination.
(And, btw, he can start by leaving his shirt on and leaving his tiger at home. I mean -- we need to see that he is capable
of confining himself to a few very basic social norms, right?) :-)
Nevertheless, I'm still not sure that I have understood the true underlying issues as Professor Hudson has tried to convey
them -- and I have always looked to Professor Hudson as always being an authoritative commentator on "underlying issues."
So -- I would greatly appreciate any feedback, insight or clarification that anyone has to offer me. Thanks.
sleepy, February 15, 2015 at 9:01 am
Really? No need to dress up your Putin hate in rhetorical cuteness.
Pearl, February 15, 2015 at 12:22 pm
@ Sleepy.
May I call you "Grumpy," instead? :-)
I'm sorry if I prompted you to distill down my words into some organic form of "Putin-hatred."
On the other hand, thank you for referring to my rhetoric as "cute." (I must admit -- I'm quite flattered. Ya know -- I'm at
that awkward age of 51 -- anything about me that may once have been considered "cute" is now sagging or drooping or expanding
or wrinkling. And any promise of being "cute," as in the Justice Ruth Bader Ginsburg sense of the word, the "lovable Bubbe" sort
of "cute" -- is still quite a few years off.) So I sorta feel like Rudolph the Red-Nosed Reindeer in the 1960s Rankin Bass classic
of the same name when Clarice refers to Rudolf as "cute." Indeed -- all day long there's gonna be an extra little bounce in my
step as I think to myself, "Sleepy" at Naked Capitalism thinks my rhetoric is CUTE!!!
I did not mean for my questions and/or comments to come off as sounding as though I hated Mr. Putin. Indeed, I have never met
the man, and I do not know if I would like him or not. But my bar for hatred is a very high bar -- like Adolf Hitler high. So
I doubt very much that I would hate Mr. Putin.
Perhaps, if I were a better writer, my view of Mr. Putin would have struck you as nothing more than a healthy respect for a
well-armed and powerful leader of a large country that is largely run by a handful of powerful business oligarchs in whom I have
no trust.
I made reference to the shirtless thing and the tiger thing (which, in retrospect, I probably shouldn't have done) only because
my brain often frames world issues in terms of how I, a former preschool teacher, would deal with a playground of preschoolers.
Putin's behavior in seemingly insignificant forums (i.e. shirtless, tiger-hugging photo-ops) is something that I refuse to
disregard as "quirkiness." Indeed, I personally regard such behavior as a "red flag" that this is a person who operates outside
of social norms, and is, therefore less predictable, and is therefore, more worthy of keeping a closer eye on.
That's all.
Furthermore, as a preschool teacher -- I would be keeping my eyes on my whole class. Putin? I would probably recommend a one-on-one
aide for his initial mainstreaming. (It would benefit him in that it might help him to not fail, and it would benefit the other
children who might be harmed by any of the many ways in which he might fail.)
And, if Putin had been one of my preschoolers -- I most-certainly wouldn't have hated him; I've never hated a preschooler.
I've never even disliked a preschooler.
The IMF? I view them as administrators of the preschool who have never had any hands-on preschool teaching experience, and
therefore, usually walk a precarious tightrope of being either useless or harmful. (Some of whom are UNintentionally clueless,
some of whom are idiots, and some of whom are decent -- yet exist in a bubble without realizing it. Which makes most of them ill-suited
for their jobs.)
I don't exactly parade around N.C. as some sort of policy wonk. I am authentically what I claim to be. I'm literally just a
housewife. And it just so happens that I used to teach preschool. And I am the first to admit that my "C.V." does not measure
up to the C.V. of practically any of the other folks who occasionally comment here.
I cannot convey to you the extent to which I wish that I could bring to this forum the background and experience of one who
was expert in international diplomacy or geo-politics or even basic economics and finance. But I realized a long time ago that
Yves allows me to come to this forum with the only experience and background that I have -- which is, admittedly, no more than
and no less than that of an average housewife. (And, truth be told -- I'm really not even any good at being a housewife.)
So, I'm grateful to have a forum such as Naked Capitalism to read and to sometimes even feel welcome enough to chime in, despite
my lowly status. Indeed, I always look forward to having my questions answered and I look forward to gleaning insightful feedback
to my occasional comments.
But now I know I can come here for compliments on my rhetorical style, too!
Now. How about you go pour yourself a cup of coffee, "Sleepy," and we'll call you "Happy," instead of "Sleepy" or "Grumpy?"
(Did I mention that I used to teach preschool?)
Left in Wisconsin, February 15, 2015 at 1:29 pm
Complements on your sense of humor and good-natured-ness also.
Ned Ludd, February 15, 2015 at 2:59 pm
Examples of Pearl's sense of humor and good-natured-ness:
"Is Russia having a little temper tantrum that is worth giving in to, or is this Russia being, ya know -- just a re-branded
USSR?… Because the latter seems like a pretty significant threat, doesn't it?"
"And, furthermore, if 'total bully-driven European sandbox domination,' is what Putin has in mind, I think I could see
my way clear to allowing a few of our militaristic capabilities a bit closer-in and a bit more 'visible' to Putin at this point
in time. (I mean -- we gotta park our fleet of battleships somewhere, anyway.)"
A "fleet of battleships" is an instrument of war and death. Rhetorical cuteness should not mask the implied threat of violence,
when moving "a few of our militaristic capabilities a bit closer-in and a bit more 'visible' to Putin".
From Raúl Ilargi Meijer:
[O]ur media told us Putin is the bogeyman. And 'we' never asked for any proof. […]
But here we are: no proof and layer upon layer of sanctions. And nary a voice is raised in the west. If one is, it's to
denounce the Russians as bloodthirsty barbarians. Even though there is no proof they did anything other than protecting what
they see as their own people. Something we all would do too, no questions asked.
Ukraine defines 2014 as the year western propaganda came into its own. Not just fictional stories about an economic recovery
anymore, no, we had our politico-media establishment ram an entire new cold war down our throats. And we swallowed it whole.
I guess it's not surprising the Obots will be out in support of the New Cold War -- if they even plan on keeping it only a
Cold War.
No Drama Obama???? Puleeze. Besides -- I like seeing Putin having to pander to Russian voters. (all the macho leader stuff). Makes him seem like less of
a "Mad Dictator".
Pearl, February 15, 2015 at 6:16 pm
@Ned Ludd
Perhaps I wasn't clear, or perhaps my original comment was not put in the context of Michael Hudson's interview.
Or perhaps most everyone on this thread had a really crappy Valentine's Day yesterday and they're taking out their frustrations
on me today. I don't know.
But I know this.
I am the daughter of a Nazi Holocaust Camp Liberator. Here is a video clip of the day my father, an 18 year old Private from
Sioux City Iowa, along with allied forces, liberated the Nazi camp at Ludwigslust.
I was born into, raised in, and am a product of a family that is as about as "war-avoidant" as one could imagine. Nevertheless,
I also understand and appreciate that there are times when it's nice to have a military force so that you can do stuff like helping
to stop the extermination of entire race of humans.
I also appreciate that Russians were our allies in that effort, and I grieve for the (literally) millions of Russians who died
as a result of that war.
So please do not misunderstand or mis-characterize any of my statements as being that of some sort of war monger.
Here is the part of Michael Hudson's interview to which I was referring and then asking for clarification about:
"[Bit] today a Financial Times editorial said, yes, give Ukraine the $50 billion that George Soros asked for.[3] We've
got to enable it to have enough money to fight America's New Cold War against Russia. But the continental Europeans are saying,
"Wait a minute. At the end of this, there'll be no more Ukrainians to fight. The war might even spread into Poland and into
elsewhere, because if the money that's given to Ukraine is really for what the Obama administration and Hillary and Soros are
all pressing for -- to go to war with Russia -- then Russia's going to say, 'Okay, if we're being attacked by foreign troops,
we're going to have to not only bomb the troops, but the airports they are coming in through, and the railway stations they're
coming in through. We're going to extend our own defense towards Europe.'"
Apparently there are reports that Putin told Europe, look, you have two choices before you. Choice one: Europe, Germany
and Russia can be a very prosperous area. With Russia's raw materials and European technology, we can be one of the most prosperous
areas in the world. Or, Choice two: You can go to war with us and you can be wiped out. Take your choice."
So, my question/observation was just (if the question is should we arm Ukraine against the Russians) is that, no we shouldn't
-- because there would (in all likelihood) be a greater loss of life if we did that. And, in alternate, I was asking -- couldn't
we, instead, just park a few of our ships over there and hope that everyone will play nice (as nice as possible under the circumstances.)
I'm not saying that the parking of a few battleships over there is a good idea -- In fact, I'll gladly concede that it's quite
possibly an entirely sucky idea. I was simply trying to come up with an alternative option to arming Ukraine with $50 billion
of weaponry.
We have a bloated military industrial complex; I hate that we do, and I wish that it weren't the case.
I was just wondering if -- being that we already have this bloated military industrial complex -- couldn't we at least try
to use it for something more innocuous -- like just some plumage-showing as opposed to arming a country that would lead ultimately
to lot of death and destruction -- when, in the alternate, maybe just plumage-showing would do the trick.
So I know this thread has out-lived its time -- but I just couldn't leave it inferred and dangling out there an insinuation
that I am some sort of war-monger.
OIFVet, February 15, 2015 at 6:50 pm
"Plumage-showing" should be reserved for mating rituals. In matters of war and peace, it leads to escalations.
Perhaps you missed this past year's attempts by the US to goad Russia into a war, and the Euro poodles willingness
to submit to the US "leadership" even though that's ultimately not in their own best interests. That's what Putin would have been
referring to when it came to the Euro's choices. This past week also saw the Euro's realization that the US is not interested
in de-escalaton, and that any further escalation is only going to hurt Europe more. That's why Merkel and Hollande went to Moscow.
They know that cornering Russia can only lead to Russia lashing out, Russia will never back out as it is not their way, and besides
they have no place left to back out to, what with NATO's eastward march. . So please explain, if you can, how will "plumage showing"
lead to de-escalation and enhanced Euro poodle security?
juliania, February 15, 2015 at 1:50 pm
I believe sleepy's comment was justified. No need to pile on. You gave two alternative negative assessments of Putin's motives.
How about this one? A ceasefire in Ukraine, commencing now on an important Russian feast day and the 70th anniversary of the
dreadful allied firebombing of Dresden, has components to it that are hugely humanitarian and devoutly to be wished for. You seem
to be ignoring that fact in your rush to judgment.
I will leave it at that.
Pearl, February 15, 2015 at 6:40 pm
@Juliania
Who gave two alternative negative assessments of Putin's motives?
I did?
(I can't tell for sure if your comment was directed at me or not.)
Just in case it was aimed at me, please let me draw attention to the fact that I was quoting Michael Hudson when he said:
Apparently there are reports that Putin told Europe, look, you have two choices before you. Choice one: Europe, Germany
and Russia can be a very prosperous area. With Russia's raw materials and European technology, we can be one of the most prosperous
areas in the world. Or, Choice two: You can go to war with us and you can be wiped out. Take your choice.
So those were NOT my assessments, and I don't even know that those were Michael Hudson's assessments. In fact I was trying
to gain clarity on that point.
And of course I want a ceasefire. I'm always in the "let's stop shooting at each other" camp.
Hope that clears it up.
Geesh. Rough crowd today.
(You have a pretty name, btw. I was gonna name my son Juliana -- had he not been, you know -- a son. I like Juliania even
more.) :-)
OIFVet, February 15, 2015 at 2:29 pm
Whose "mainstream" are you referring to? American? If so, that's rather blatant exceptionalism and "indispensable nation"-mongering.
Which is the US political way of going shirtless on a horse while pledging to spread "freedum and democracy" everywhere there's
oil and/or other strategic interests.
craazyboy, February 15, 2015 at 9:08 am
The Pentagon has already revealed the Weird and Shocking Truth -- Putin is one of the Lizard People!
He has plans to subvert the IMF using alien mind control techniques and have the IMF loan Mexico 50 billion dollars so that
Mexico may purchase arms (the defensive kind -- like the US DEFENSE DEPT has!) and defend itself from US and NATO Adventurism.
But Inquiring minds ask, "Will It Stop There?! Will Mexico roll across our borders?". Of course they will. Central America basically
sucks, so no reason to go that direction.
Clearly, the West must act preemptively towards this real threat and defend whatever allies we install -- anywhere in our free
world!
NotTimothyGeithner, February 15, 2015 at 9:13 am
From Putin's perspective, NATO has been rapidly growing, the U.S. is a drunk child on the world stage, Russian peace keepers
have already been attacked by an adviser to Poroshenko*, has faced economic sanctions (an act of war by most standards), sees
old time Bandarists running Kiev, is compared in public to ISIS and Ebola by the U.S. President, was accused of downing a civilian
airliner**, and even has American officials publishing fake evidence of Russian troops in the Ukraine.
War has been declared, and if the 500 million people in the EU can't handle a population of 150 million recovering from the
Yeltsin years and predatory Western finance (Putin kicked them out; his real sin), it would probably be for the best if Russian
troops returned to Berlin.
*Georgia hasn't come up in the propaganda for a reason.
**Obama and crew haven't brought it up, and the official dutch report mentions a plane crash.
Also, Putin likely means Western Europe can stop being a U.S. vassal or be frozen out of the Shangai Cooperative which includes
Russia, China, India, Iran, Pakistan, and non-EU members of the USSR. The U.S. isn't going to fuel Europe any time soon, and most
of Europe's governments are weak with major employment problems.
As for Crimea, the old Ukraine ceased to exist after the coup, and every sane person in the world recognized that Russian defense
depends on Crimea. They will never risk losing it.
Santi, February 15, 2015 at 9:48 am
The next blog entry (Itargi's) is about being
trapped in narrative.
After reading it you might feel less so…
Regarding narratives, I am very much remembered of
Cuban missile crisis and subsequent naval blockade
by the USA.
I guess US people should not feel strange if Putin warns aggressively when they get too close to Russia. Negotiations between
the IMF and Russia should ensue, I think Poroshenko, Merkel and Hollande are not really useful in the talks. (Tongue in cheek)
OIFVet, February 15, 2015 at 2:16 pm
" I think I could see my way clear to allowing a few of our militaristic capabilities a bit closer-in and a bit more "visible"
to Putin at this point in time." So you would? I just want to ask, who will pick up the tab and the responsibility for the consequences
of your cock-swinging contest with Putin? These policies do not do anything to undermine Putin but they do a lot to destabilize
US colonies, or as we colloquially refer to them, "allies". I wrote about the latest such case
a few days ago.
Chaos only benefits American imperial elites, thus chaos is our main export these days. So why in the world would you want
to support such non-sense? I doubt that's where Michael Hudson will ever take you but you can bet your bottom dollar that's where
the warmongers in DC want to take us.
participant-observer-observed, February 15, 2015 at 3:56 pm
Did you watch the video or just read the transcript? Because my viewing didn't lead me to hear Michael's thesis to be about
Putin and Russia at all.
Rather, Hudson is pointing out that once past military interventions, rape, pillage etc. of the brutish, arm-to-arm combat
sort, we will still have the spectacle to observe of the economic rape & pillage to contend with. I.e., that the "solutions" on
offer (Oligarchic tunnel vision as usual), from all directions, are just more of the same problem-creating dynamic.
He is essentially elaborating on German Chancellor's point of there being no military solution, and following it to the natural
conclusion, which consequence remaining is absurdity showing economic solutions on offer are just a slower and more painful death
and suffering than the brutish variety. (It is a logical argument form going back millennia "reduction to the absurd")
You point out an important issue: Hudson's message is quite subtle, and therefore may be hard for many people to grasp (let
alone try like yourself), which is actually quite sad, because somewhere in Ukraine right now some babies are being born to parents
who want their kid to live a life not dictated by death and destruction, of the slower or coarser varieties!
Doug Terpstra, February 15, 2015 at 3:56 pm
False humility and self-deprecation hardly mask your russophobia. And to your purported honest inquiry with a clever twist
of Hudson's arguments: yep, you've got it exactly bass-ackwards (but points scored for creativity in regurgitating all the standard
agit-prop behind a mask of feigned curiosity).
One more time, the Ukrainian coup was US sponsored; the evidence, including recordings, is beyond dispute; all of the evidence
of Russian aggression (including the now disappeared flight MH17) that you blithely presume has been demonstrably, repeatedly
discredited; there is no evidence of Russian aggression, not in Crimea (peacefully re-admitted) nor anywhere else in Europe. And
Hudson's representation of Putin's choice was not an ultimatum for one of two forms of domination as you disingenuisly paraphrased
it, but one of mutually beneficial peace or war at only at their unilateral insistence.
If your inqiry is genuinely honest, start your preschool education at another of today's posts by Ilargi, and if you want to
get to the beginning, visit his site.
Vatch. February 15, 2015 at 4:39 pm
One more time, the Ukrainian uprising was not U.S. sponsored. The Ukrainian people were sick and tired of a succession of corrupt
governments, and they wanted a change. Coups d'état are not characterized by massive crowds numbering in tens or hundreds of thousands.
Coups d'état are carried out by small groups, often with the assistance of a country's military. What the U.S. sponsored were
some of (or many of) the members of the post-uprising temporary government. This is what was recorded by eavesdropping.
The seizure of Crimea was mostly peaceful, but it was a military event, nonetheless. In February, 2014, Russian soldiers stationed
in Crimean bases illegally left those bases and seized Ukrainian government installations. Of course, the Russians have plausible
deniability, because the Russian soldiers were not wearing any insignia that might identify them as Russians; hence their nickname
"the Little Green Men". The referendum in March, 2014, was a farce worthy of North Korea: more than 96% in favor of unification
with Russia. An honest election would probably still have approved the referendum, but 96%? Give me a break!
Is Russia still paying for the use of the naval base in Crimea? They're obligated to do so under an
international treaty with Ukraine, but of course Russia
unilaterally abrogated that treaty:
The Agreement between Ukraine and Russia on the Black Sea Fleet in Ukraine, widely referred to as the Kharkiv Pact (Ukrainian:
Харківський пакт)[1][2] or Kharkiv Accords (Russian: Харьковские соглашения),[3][4][5] was a treaty between Ukraine and Russia
whereby the Russian lease on naval facilities in Crimea was extended beyond 2017 until 2042, with an additional five year renewal
option in exchange for a multiyear discounted contract to provide Ukraine with Russian natural gas.[6] The agreement, signed
on 21 April 2010 in Kharkiv, Ukraine, by Ukrainian President Viktor Yanukovych and Russian President Dimitry Medvedev and ratified
by the parliaments of the two countries on 27 April 2010, aroused much controversy in Ukraine. The treaty was a continuation
of a treaty signed in 1997 between the two nations. Shortly after the (disputed) March 2014 accession of Crimea to the Russian
Federation,[7] Russia unilateral [sic] terminated the treaty on 31 March 2014.
OIFVet. February 15, 2015 at 4:59 pm
"Coups d'état are not characterized by massive crowds numbering in tens or hundreds of thousands." They were used as a cover.
It's called "legitimizing the junta", giving it the appearance of "popular" support. Yes, the people were sick and tired of corruption.
What they got was another set of corrupt flunkies, this time loyal to the US, who hijacked the Maidan. Your recurring desperate
attempts to legitimize the junta by invoking the Maidan only delegitimizes the latter.
"What the U.S. sponsored were some of (or many of) the members of the post-uprising temporary government." LOL, funny how the
US sponsorees and US citizens ended up taking the reigns, and not temporarily either. They must be exceedingly honest and democratic
lovers of freedum.
"Is Russia still paying for the use of the naval base in Crimea?" Inanity, thy name is Vatch. I will play though, so tell me
how much is the US paying Cuba for Guantanamo?
Vatch. February 15, 2015 at 5:08 pm
Crowds in coups d'état might be used as cover while the overthrow is occurring, or after it has already happened. They do not
occur months before the overthrow, which is exactly what happened in Ukraine starting in November, 2013.
I have no argument with you about the people who have joined the government since the uprising. Obviously the U.S. retains
a huge influence.
I think the U.S. does pay a trivial amount to Cuba for the Guantanamo naval Base under the terms of the treaty. This amount
should be renegotiated. Even better, the U.S. should shut it down.
OIFVet. February 15, 2015 at 5:21 pm
"They do not occur months before the overthrow…" I know your reading comprehension couldn't possibly be this bad, even if you
are a Chicago public school product. The US saw a great opportunity to throw a little coup d'etat and claim that it was the will
of the crowds. Hence, my use of the term 'cover'. It really is not that hard to comprehend for anyone with an ounce of objectivity.
And since you brought up the Nuland recording, is she some clairvoyant latter day Nostradamus that she foresaw that Yats will
be the PM several weeks prior to the coup?
"I think the U.S. does pay a trivial amount to Cuba for the Guantanamo naval Base under the terms of the treaty." No, it doesn't.
Cuba, unlike Ukraine, has a modicum of self-respect and refuses to accept the generous lease payment of $4,000. Also, since when
is Russia supposed to pay a lease for anything located on its sovereign territory?
Ned Ludd. February 15, 2015 at 6:10 pm
They do not occur months before the overthrow, which is exactly what happened in Ukraine starting in November, 2013.
Earlier this year, we broke the story about USAID co-investing with Omidyar Network in Ukraine NGOs that organized and led
the Maidan revolution in Kiev, resulting in the overthrow of President Viktor Yanukovych. […]
The truth is, USAID's role in a covert ops and subversion should be common knowledge-it's not like the record is that hard
to find. Either USAID has developed those Men In Black memory-zappers, or else-maybe we don't want to remember. […]
After populist left-wing candidate Jean-Bertrand Aristide won the first democratic elections in Haiti in 1990, USAID and
the National Endowment for Democracy began pouring funds into opposition groups opposed to Aristide. Noam Chomsky writes:
"Aid for 'democracy promotion' sharply increased, directed to antigovernment, probusiness groups, mainly through the US
Agency for International Development (USAID), also the National Endowment for Democracy and AIFLD (the AFL-CIO affiliate with
a notorious antilabor record throughout the Third World). One of the closest observers of Haiti, Amy Wilentz, wrote that USAID's
huge 'Democracy Enhancement' project was 'specifically designed to fund those sectors of the Haitian political spectrum where
opposition to the Aristide government could be encouraged.'"
A few months later, in 1991, Aristide was overthrown in a coup.
Doug Terpstra. February 15, 2015 at 8:07 pm
Not one but TWO Gallup polls tend to support the legitimacy of the election results in Crimea and there is little evidence
of fraud or coercion… at the level suggested by your cogent "gimme a break" innuendo that Crimea is equivalent to North Korea..
This is further corroborated by the manifest peacefulness of the process itself and the year since - little or no unnrest or discontent.
This was the overwhelming will of a people in the aftermath of an illegitimate coup, who had for generations prior always been
Russian.
And yes, one more time, what don't you get about "f**k the EU" and "our man Yats", and. "five billion dollars" and the neo-Nazis
militantscCain and Pyatt pal around with.
Steve H.. February 15, 2015 at 9:17 am
Russia has far too much investment in corrupt European politicians to want a war with Europe (see Gerhard Schröder). The taking
of Crimea at U.S. expense (see Nuland) was a strategic opportunity that would have been foolish to disregard. Russia is placing
itself in the middleman position for the transport of commodities, the link between Asia and Europe, and has made the point in
the past (during the Georgia uprising) that the infrastructure for European needs is tremendously vulnerable.
Russia without Putin would likely still pursue these goals. The steppes are like the huge big brother at their back, such that
there is no existential threat to the existence of Russia. He is making the point that Europe has far more to lose, if necessary
Russia can cut them off and turn to Asia.
I am only a few paragraphs into your link, but it is providing the background and texture for which I wanted and needed to
overlay the information in the Michael Hudson interview.
(I didn't want you to have wait an hour or two for me to thank you -- so I'm going to get back to reading that which you sent.
Thanks again, so much.)
Pearl. February 15, 2015 at 1:57 pm
Wow. That website to which you linked is amazingly thought-provoking. (Dare I say….addictive!) :-0 I'm hooked. The comments
are really interesting, as well.
It's fascinating to me that we have these two great powers, Russia and the United States; one currently being led by a President
who has been been nicknamed "No Drama Obama," and the other country being led by a seemingly 180-degree opposite personality --
an "all drama," or if you will, a "Tooten' Putin."
Indeed, this in itself would tend to set the stage for some very interesting and very complex geo-politics.
Have you read much about the (subset?) of Nash Equilibrium/Game Theory that is referred to as "Drama Theory?" I wonder how
"Drama Theory" would fit into this conflict. It's older work, but interesting:
http://www.gametheory.net/News/Items/092.html ("Don't
Get Even, Get Mad: When it looks like you just can't win, what's the most rational thing to do? Try going completely crazy," suggests
Robert Matthews.)
Anyway, thanks again for the link.
OIFVet. February 15, 2015 at 2:06 pm
"Russia has far too much investment in corrupt European politicians…" Not nearly as much as the US. See all "liberul" Euro
politicians both in the East and in the West, eagerly selling their countries' interests for a few silver dollars.
lolcar. February 15, 2015 at 9:18 am
Russia's military budget is exceeded by France and the UK alone, let alone the EU as a whole, let alone the entire NATO alliance.
Not sure how you get to Russia being in any position to "bully" Europe. Parking a fleet of battleships in Russia's backyard or,
more useful in this day and age, a fleet of ballistic missiles on Russia's border would of course in no way be "bullying" because
we in the West are such special snowflakes who only engage in violence reluctantly and for the highest of moral purposes.
NotTimothyGeithner. February 15, 2015 at 10:07 am
How much goes to the military and how much goes to hookers and blow is a huge deal. The U.S. has captive markets and can force
F-35 contracts. The Russian planes need to work to be sold, and they don't have oceans protecting them.
NATO trained and equipped soldiers haven't been fairing too well without overwhelming air power. See Iraq and Georgia.
In the case of Georgia, the ex-President currently hiding out from trial in the now NATO ally here in the U.S. started the hostilities.
lolcar. February 15, 2015 at 11:17 am
Actually meant as a reply to Pearl's interpretation of
"Putin told Europe, look, you have two choices before you. Choice one: Europe, Germany and Russia can be a very prosperous
area. With Russia's raw materials and European technology, we can be one of the most prosperous areas in the world. Or, Choice
two: You can go to war with us and you can be wiped out"
as some kind of Russian threat of complete domination of Europe. But of course, you're right -- the actual fighting power per
dollar spent may well be a lot lower in the NATO alliance.
bob. February 15, 2015 at 2:23 pm
"Georgia, the ex-President currently hiding out from trial in the now NATO ally here in the U.S. started the hostilities."
"Not sure how you get to Russia being in any position to "bully" Europe."
I'm not sure that they are -- I guess I just assumed it was possible because of Russia's nuclear capability and because of
Russia's sheer size? I dunno.
But I really was just trying to have clarified if that is how the two choices given by Putin (per Michael Hudson) were intended
to be taken. I really wasn't sure -- and that's why I was asking.
Btw, and thank you for bringing to my attention, the following information -- which I did not know:
"Russia's military budget is exceeded by France and the UK alone, let alone the EU as a whole, let alone the entire NATO
alliance."
I really didn't realize that.
And, btw, I agree that the U.S. is not a special snowflake that does not ever provoke war. Ironically (predictably) the Bush/Cheney/Rumsfeld
misguided invasion of Iraq just made the United States more "hated," less respected, and less trusted. So in a way, it just seems
like we have to be more "on guard" now because we're more hated/disrespected/distrusted (understandably) than we were before we
(ever-so-thoughtfully) invaded a country that had nothing to do with 9/11 and helped to further destabilize an entire region of
the world. It was the gift that keeps on giving, no?
Anyway, I appreciate your insight. It's difficult to keep up with geo-politics, and I was actually caught fairly off guard
as to the Ukraine situation when it all exploded, and I'm trying to catch up in getting a grasp on it.
(Although, now I'm thinking of giving up on ever being able to grasp it, as my brain seems ready to explode just in scratching
the surface here!) :-)
The EU is waging war on Russia for parts of eastern Europe that historically were Russian and have Russians living in them.
And who cares about bits of the Ukraine, when the EU will starve to death the Ukrainians with the help of the IMF just as they
did in Greece.
At least with Russia, Ukraine people would eat.
As Gandhi observed, People's Politics Are Their Daily Bread.
The UK has no EU debt, but starves its poor to such an extent that after the general election in May that the poor will not
bother to come out and vote and leave a hung parliament of twiddledee and twiddledum parties, the UN will return to continue its
investigation into early deaths and suicides caused by UK's welfare reform.
There is a way to get rid of the big neo-liberal parties altogether in this UK general election.
I belong to no political member. I am a voter suffering our political class stuck 1000 years into the past, educated in an
ancient feudal mindset of past aristocracy in public schools (elite private schools) and Oxford and Cambridge universities.
MartyH. February 15, 2015 at 11:00 am
Michael Hudson graced us at the last NY NC Meet-Up. He's as blunt and brilliant in person. While I am sure his analysis on
this is as accurate as is usual for him, I just wonder how the IMF expects to plunder what has already been strip-mined by the
oligarchs and the other vultures for the past decade or more. I guess their specialty is extracting blood from stones.
susan the other. February 15, 2015 at 11:42 am
I think the objective is political control. It has worked quite well for decades. An impoverished country that is forced to
privatize its most valuable resources is being reduced to a political non-entity. It's the sovereignty question all over again.
cassandra. February 15, 2015 at 1:13 pm
Au contraire, in some ways, a broken country is ideal for extraction. Privatised assets can be had on the cheap, and with declining
living standards, labor costs plunge as well. True, birth rates fall and suicides rise, but managed correctly, the resulting social
malaise ensures political docility, and drives those with the intelligence and energy to resist, to emigrate instead. What's not
to like? And in Ukraine, there's even more to like. We have farmland (coveted by Cargill et al.), well-known iron ore
and coal deposits, and less-frequently discussed strategic metals (guess who's been the worldwide exporter of titanium sponge?).
One report on such connections can be found at
https://consortiumnews.com/2014/03/16/corporate-interests-behind-ukraine-putsch/,
but a targeted internet search uncovers a lot more roaches hiding under these stones. Imposing such an austerity package is, after
all, what the IMF is for.
cassandra. February 15, 2015 at 2:01 pm
Au contraire, in some ways, a broken country is ideal for extraction. Privatised assets can be had on the cheap, and with declining
living standards, labor costs plunge as well. True, birth rates fall and suicides rise, but managed correctly, the resulting social
malaise ensures political docility, and drives those with the intelligence and energy to resist, to emigrate instead. What's not
to like? And, in Ukraine specifically, there's even more to like: farmland (coveted by Cargill et al.), well-known iron
ore and coal deposits, and less-frequently discussed strategic metals (guess who's been the worldwide exporter of titanium sponge?).
Previously-resisted fracking becomes possible; check out Burisma Holdings, where Joe Biden's son Hunter plays footsie with Igor
Kolomoisky. An excellent report can be found at
Corporate Interests
Behind Ukraine Putsch . IMF job creation in action.
bob. February 15, 2015 at 5:24 pm
That's also probably what pissed Putin off the most, re cargill. They were probably buying food from Ukraine with Roubles,
not anymore? I haven't been able to find any numbers that I trust on either russian imports of food, or Ukrainian exports. Even
less on the denomination of the trades.
It's been some time since I looked. Maybe worth another look now.
Food can really screw with the balance of payments. In this case, russia may now have to cough up dollars for food it might
have been buying with roubles. Effectively, a double hit.
Big deal.
susan the other. February 15, 2015 at 11:31 am
Back when Rummy was dismissing the EU as "Old Europe" and pushing all of eastern Europe to join NATO -- that was 2001 -- we
were overwhelmed with news from Afghanistan and Iraq. Now that Middle East oil has been secured everything is fine. Oh wait. I
must have missed something. As Bremmer cryptically informed us, Ukraine is part of the larger plan. Rummy wanted to call it a
crusade -- since those guys fought each other for centuries. But it was tactless so he settled on "Odyssey Dawn." How poetic.
Good thing he didn't call it the Siege of Troy. Because the Achilles heel of NATO is -- ta da! -- oil. It is all about oil and
NATO doesn't have any. We shouldn't be distracted with idiotic news reports about ISIL. That is until ISIL decides to take the
Caspian. Then we will start to see what is really going on. In the meantime we will worm and weasel our way into a position in
Ukraine to attack from the north. Maybe.
NotTimothyGeithner. February 15, 2015 at 12:00 pm
The goal was never to attack Ukraine or Russia. The goal was to isolate Russia from both China and the EU and the International
arms/tech market.
The U.S. shale and natural gas industry wants to export to Europe, but they aren't close to ready. If Russia develops, they
will export, and between Russia and green energy, there goes that plan.
As far as arms, would a country rather have a pos F-22/35 or a much cheaper S-400. F-35s aren't needed to put down local thugs.
They are a tool of shock and awe. Countries not interested in invasion don't need them when cheaper alternatives to air defense
exist. The U.S. controls it's hemisphere. We don't invest in air defense, just supremacy. It's a market we just don't compete
in.
Jack. February 15, 2015 at 7:02 pm
The F-22 isn't a POS. It does exactly what it was designed to do. The problem is that what it was designed to do is largely
superfluous, and it's too expensive. We aren't exporting it anyway, and since its chief selling point, the stealth, is almost
certainly utterly worthless, potential buyers would be better off buying any of a number of other planes even if we were exporting
it. Of course the constant slashing of military budgets as part of austerity means that most of Europe can't even afford their
own natively developed alternative, the Eurofighter Typhoon. You're correct though that cheap and effective AA systems mean any
air war isn't likely to last long. And Russia would be playing defensive in any conflict. They'd just sit back and snipe the skies
clear.
skippy. February 15, 2015 at 7:54 pm
Starwars all over again…
susan the other. February 15, 2015 at 11:52 am
Hudson's new book sounds great. "Killing the Host: How Financial Parasites and Debt Bondage Destroyed the Global Economy."
Excerpts please, lots of them.
susan the other. February 15, 2015 at 11:57 am
I hope there is a long chapter in it about the mind-boggling expenses of today's modern military.
Chief Bromden. February 15, 2015 at 12:55 pm
"Shock Doctrine" is alive and well… and I thought for sure Ukraine was another U.S. humanitarian exercise.
"By encouraging reforms such as the deregulation of seed and fertiliser markets, the country's agricultural sector is being
forced open to foreign corporations such as Dupont and Monsanto.
The Bank's activities and its loan and reform programmes in Ukraine seem to be working toward the expansion of large industrial
holdings in Ukrainian agriculture owned by foreign entities."
Time limitations may have precluded Michael Hudson from mentioning Ukraine's devaluation of the hyrvnia. WSJ, Aug. 2014:
'[In late April] the IMF said Ukraine might need to inject the equivalent of 5% of the country's gross domestic product,
roughly $6 billion, into its banks to stabilize the financial sector if the exchange rate rose above 12.5 hryvnia to the dollar.'
'Ukraine's foreign-debt costs ballooned after the central bank let the hryvnia depreciate by 31 percent on Feb. 5 to
bring the exchange rate closer to black-market levels [of around 24 hryvnia per dollar], a move backed by the IMF.'
Classically, IMF programs urged devaluation to boost export competitiveness. Last April the IMF said a hryvnia exchange rate
below 12.5 would weaken the banks; now it's about 26.3 hryvnia per dollar.
Ukraine FinMin Natalie Jaresko seems to be 'letting the hryvnia slide' to get in the IMF's good graces for the next tranche,
even as the prospects for defaulting on foreign currency debt rise. This suggests a modified version of Michael Hudson's IMF
modus operandi:
'Don't pay your bondholders, so that you're now in selective default to them and owing us, the IMF, to whom you can't
write down debts. '
gordon. February 15, 2015 at 7:53 pm
There is a very simple solution to the problems of the Ukraine, one that should be familiar to any European statesperson: partition.
I'm thinking a 3-way division between Russia, Germany and the US (which would act as the representative of Monsanto, Cargill
and the other agribusiness giants). I'm sure the OSCE could form the basis for a Partition Commission which could meet (maybe
in Vienna, for historical reasons) to supervise the negotiations over boundaries and set up an agreed framework for investment
in the ex-Ukrainian territories and the marketing of their products. A continuing Commission of the Partitioning Powers might
be required to oversee and if necessary adjust the operation of such arrangements. Obviously, no Ukrainian representatives would
be required for this work. I think the partition should be complete, ie. there should be no remaining independent "Ukrainian"
territory, because this would only be a platform for tiresome and destabilising Ukrainian irredentism.
Such a solution along good old 18th Century lines would leave only the problem of outstanding Ukrainian debts. Perhaps the
best solution here would be the formation of an international Sinking Fund to which workers in ex-Ukrainian territories would
be required to contribute a proportion of their earnings. Setting up such a Fund could be another part of the work of the continuing
Commission.
I'm sure there's much more to be said about partition arrangements once people get their heads around the basic idea and realise
that moving Back To The Future in this way offers the best hope for a peaceful solution to the Ukrainian problem. After all, the
problem is not new; it is a problem that has confronted European powers many times in the past and has often been solved in this
way. Ask any Pole.
This is from Joseph P. Joyce, the author of
The IMF and Global Financial Crises;
Phoenix Rising?, which was published last year by Cambridge University Press. The book examines the evolution of the policies
and programs of the IMF with respect to the global financial markets and crises in these markets:
Among the many surprising features of the global financial crisis of 2008-09 was the emergence of the International Monetary Fund
(IMF) as a leading player in the response to what has become known as the "Great Recession." The news that the IMF was "back in
business" was remarkable in view of the deterioration of the IMF's reputation after the crises of the late 1990s and the decline
in its lending activities in the succeeding decade. The IMF had been widely blamed for indirectly contributing to the earlier
crises by advocating the premature removal of controls on capital flows, and then imposing harsh and inappropriate measures on
the countries that were forced by capital outflows to borrow from it. Moreover, the IMF initially had no direct role in dealing
with the crisis. The IMF was relegated to the sidelines as government officials in the advanced economies coordinated their responses
to the crisis.
All this changed in the fall of 2008, however, when the collapse of the financial system led to an economic contraction that spread
outside the original group of crisis countries. World trade fell and capital flows slowed and in some cases reversed, as nervous
banks, firms and investors sought to reallocate their money to safer venues. In response, the IMF provided loans to a range of
countries, including the Ukraine, Hungary, Iceland, and Pakistan. In addition, the IMF restructured its lending programs, cutting
back on the policy conditions attached to its loans and increasing the amount of credit a country could obtain. The Fund also
introduced a new credit line without conditions for countries with records of stable policies and strong macroeconomic performance.
Moreover, the IMF pledged to work with national governments and other international organizations after the crisis receded to
continue the economic recovery and improve the regulation of global financial markets. Consequently, many commentators hailed
the rejuvenated IMF as a "phoenix".
The IMF's response to the Great Recession marked a significant break from its policies during previous global financial crises.
These had taken place during an era when the IMF's membership was stratified by income and whether or not a country borrowed from
the Fund. In addition, the IMF had actively encouraged the deepening and widening of global finance. The IMF's previous responses
to financial crises, therefore, reflected the dominance of its upper-income members as well as an ideological consensus in favor
of financial flows.
The crisis hastened the end of those conditions. The shock to global financial markets and economies originated in the upper-income
countries, and the recovery of many of these nations has been relatively sluggish. The emerging economies, on the other hand,
rebounded from the global economic contraction more quickly, which in turn contributed to the recovery of the developing nations.
Moreover, the crisis demonstrated that financial instability can be a systemic condition, confirming the need for prudent oversight
and the regulation of financial markets and capital flows.
But while the Great Recession provided the IMF with an opportunity to demonstrate that it has learned the lessons of its past
mistakes, there are fundamental economic and political transformations underway which will affect the ability of the IMF to counter
future financial instability. The replacement of the dominance of the G7/8 by the G20 should lead to a more equitable governance
structure within the IMF, but inertia has slowed the pace of reform. Moreover, the European debt crises pose new challenges to
the IMF. The Fund is caught in the crossfire among Eurozone governments and their citizenries over how to deal with insolvent
sovereign members. New fiscal challenges will arise in other advanced economies with aging populations and mounting health care
and public pension costs, and the IMF's response will be scrutinized by its emerging market members who are concerned about the
scale of its lending.
Peter K. said in reply to Min...
The IMF has gotten better, especially compared to the East Asian financial crisis. But, if they were a force for good they
would have advised Greece to go the Argentine route (pace double D Dan Davies.)
Instead they enabled the devastation of Europe's periphery.
Reply Tuesday, June 25, 2013 at 01:17 PM
Lafayette said...
A TINY SPARK
{The replacement of the dominance of the G7/8 by the G20 should lead to a more equitable governance structure within the IMF,
but inertia has slowed the pace of reform. Moreover, the European debt crises pose new challenges to the IMF. The Fund is caught
in the crossfire among Eurozone governments and their citizenries over how to deal with insolvent sovereign members.}
There is no evident reason to believe that the G20 will bring any better governance to the IMF; after all, it is the "bank
of last resort" – so to speak.
The fund is indeed in the crossfire, but it should not be thus. The problem of sovereign insolvency is of a political and not
an economic or financial nature. Politicians were borrowing to maintain the debt, thus building a debt-mountain – for which Tax
Revenues provided easily the means to maintain it. That debt-mountain is still there and still a drag on government revenues precluding
any real Stimulus Spending.
An entire political class (in the EU) did not think for one moment that a Great Recession could happen until it happened. Now
they do, but the lesson has been costly. They should have known better.
{New fiscal challenges will arise in other advanced economies with aging populations and mounting health care and public pension
costs, and the IMF's response will be scrutinized by its emerging market members who are concerned about the scale of its lending.}
Frankly, I do not see the IMF coming to the rescue except in the most dire circumstances. There are many troublesome spots
on the horizon that could blow into major proportions. Brazil is one and I think Russia is another. Most important, though few
believe it, is China.
China should look at Brazil for a lesson. Brazil has known some very heady growth, but the recent violent demonstrations show
evidently that not all have benefitted from it and especially the poorest. I suggest that China is in exactly the same condition;
all it needs is a tiny spark to get it going. And the result will be very bloody indeed.
POST SCRIPTUM
Just think of it ... WalMart might be obliged to Buy American! ;^)
Markets are not stable, efficient, or self-correcting
Economies are not self-correcting.
More than deleveraging, more than a balance sheet crisis: the need for structural transformation
But even as the economy deleverages, there is every reason to believe that it will not return to full employment.
But the fact that things have often gone badly in the aftermath of a financial crisis doesn't mean they must go badly.
reforms undertaken so far have only tinkered at the edges.
the crisis has brought home the importance of financial regulation for macroeconomic stability.
But a focus on the provision of credit has neither been at the center of policy discourse nor of the standard macro-models. We
have to shift our focus from money to credit.
Distribution matters as well-distribution among individuals, between households and firms, among households, and among firms.
Traditionally, macroeconomics focused on certain aggregates, such as the average ratio of leverage to GDP. But that and other verage
numbers often don't give a picture of the vulnerability of the economy. In the case of the financial crisis, such numbers didn't
give us warning signs. Yet it was the fact that a large number of people at the bottom couldn't make their debt payments that should
have tipped us off that something was wrong. Across the board, our models need to incorporate a greater understanding of heterogeneity
and its implications for economic stability.
Should monetary policy focus just on short term interest rates? No!
There has to be coordination across all the issues and among all the instruments that are at our disposal. There needs to be close
coordination between monetary and fiscal policy.
And as daunting as the economic problems we now face are, acknowledging this will allow us to take advantage of the one big opportunity
this period of economic trauma has afforded: namely, the chance to revolutionize our flawed models, and perhaps even exit from an
interminable cycle of crises.
The UK has a strategic nightmare: it has a strong comparative advantage in the world's most irresponsible industry. So now, in
the wake of the biggest financial crisis since the 1930s, the UK must ask itself a painful question: how should the country manage
the cuckoo sitting in its nest?
The question is inescapable. London is one of the world's two most important centres of global finance.
Its regulators have, as a result, an influence on the world economy out of proportion to the country's size. In the years leading
up to the crisis, that influence was surely malign: the "light touch" approach led the way in a regulatory race to the bottom.
The fiscal costs of this crisis will be comparable to those of a big war. Thursday's threatened downgrade by Standard & Poor's
is a reminder of those costs. Loss of jobs and incomes will also scar the lives of hundreds of millions of people around the world.
All this occurred, in part, because institutions replete with highly qualified and highly rewarded people were unable or unwilling
to manage risk responsibly. The UK, as a country, the City of London and the broader financial industry bear much responsibility
for this calamity. This is a time for self-examination.
A recent report on the future
of UK international financial services, produced by a group co-chaired by Sir Win Bischoff, former chairman of Citigroup, and
Alistair Darling, chancellor of the exchequer, fails to provide such self-examination. This is partly because the committee consisted
of the industry's "great and good". It is far more because Mr Darling had already decided that "financial services are critical to
the UK's future". Thus, the report's remit was "to examine the competitiveness of financial services globally and to develop a framework
on which to base policy and initiatives to keep UK financial services competitive".
If you ask the wrong question, you will get the wrong answer. The right question is, instead, this:
what framework is needed to ensure that the operation of the financial sector is compatible with the long-run health of the UK and
world economies?
Quite simply, the sector imposes massive negative externalities (or costs) on bystanders. Thus, the recommendation "that the financial
sector be allowed to recalibrate its activities according to the sentiments and demands of the market" is wrong. A market works well
if, and only if, decision-makers confront the consequences of their decisions. This is not – and probably cannot be – the case in
finance: certainly, people now sit on fortunes earned in activities that have led to unprecedented rescues and the worst recession
since the 1930s. Given this, the industry has become too big. If implicit and explicit guarantees and externalities, including volatility,
were fully charged, the sector would surely shrink.
So how should one manage a sector that produces such "bads"? The answer is: in the same way as any polluting activity. One taxes
it. At this point, the authors of the report will surely ask: "How can you suggest taxing a sector so vital to the UK economy?" The
answer is: easily. Financial services generate only 8 per cent of gross domestic product. They are more important for taxation and
the balance of payments. But this tax revenue turns out to be perilously volatile. True, in 2007, the last year before the crisis,
the UK ran a trade surplus of £37bn in financial services, partially offsetting an £89bn deficit in goods. But smaller net earnings
from financial services would have generated a lower real exchange rate and more earnings elsewhere. Given the costs imposed by the
financial sector, a more diversified economy would have been healthier. Such sacrilegious ideas are, of course, not to be found in
the Bischoff report.
How then should the UK approach policy towards the sector? I would suggest the following guiding ideas.
First, the UK needs to make global regulation work. It should discourage regulatory arbitrage even
if it expects to gain in the short run.
Second, it must, in particular, help ensure that owners and managers of financial institutions internalise most of the costs of
their actions.
Third, it must reject egregious special pleading from the industry.
The sector argues that moving derivatives
trading on to exchanges might damage innovation. So what? Maximising innovation is a crazy objective.
As in pharmaceuticals, a trade-off exists between innovation and safety. If institutions threaten to take trading
activities offshore, banking licences should be revoked.
Fourth, while trying to create a stable and favourable environment for business activities, the UK should try to diversify the
economy away from finance, not reinforce its overly strong comparative advantage within it.
Fifth, UK authorities need to ensure that the risks run by institutions they guarantee fall within the financial and regulatory
capacity of the British state. They should not let the country be exposed to the risks created by inadequately supported and under-regulated
foreign institutions. At the very least, they should not undermine other governments' efforts to regulate their own institutions.
The "old normal" was simply unsustainable. The "new normal" must be very different. It is far from clear that the industry and
government recognise this grim truth.
: I want to finish up by broadening the discussion beyond
the regulation of hedge funds to the more general topic of how attitudes toward regulation have changed in recent years, how that
helped to set the stage for the crisis we are in, and what we need to do to prevent it from happening again. In the process, I also
want to take on Houman's point that regulators fell down on the job and let this crisis happen, so we cannot trust them in the future.
As I described in my
first post, after decades and decades of instability in the 1800s and early 1900s, followed by the massive bank failures of the
early 1930s, regulations were imposed to stabilize the banking system. The result was sixty years of calm in the financial sector.
That's hardly a failure of regulation. It wasn't until the shadow banking system began growing outside of the regulatory umbrella
that problems began to reemerge. A central theme of the posts this week has been that bringing about another decades long period
of relative stability will require the regulatory umbrella to be extended to cover all firms within both the traditional and non-traditional
(or shadow) banking system, hedge funds included.
I believe we made two regulatory mistakes that contributed to the present financial crisis. First, there was a push for deregulation
beginning in the 1970s based upon the belief that markets are self-regulating - even to the extent of self-repairing market failures
- and that caused us to go too far toward deregulation. Even the regulation that was left in place was, in many cases, not enforced
vigorously, and there was little chance of new, substantial regulatory changes being put in place to match the changes in the financial
marketplace brought about by rapid financial innovation. In some cases, deregulation was needed, but in many other cases the deregulation
went much too far.
Second, we didn't focus enough on macroeconomic stability. I think we came to believe that a large crash of the economy was extremely
unlikely, particularly one driven by problems in the financial sector. Several factors were responsible for this. The transformative
financial innovation of recent decades - particularly the slicing and dicing (securitization) of mortgages and other assets into
many complex financial products - was supposed to distribute risk broadly and prevent collapse. We had the "Great Moderation" after
the mid 1980s when the variability of output fell significantly and inflation stabilized at low levels, and this was widely attributed
to the skill of policymakers and the deregulation of the economy. Because policy had improved, and because we believed the economy
was more stable due to deregulation, we let our guard down. We continued to recognize that garden variety fluctuations in output
were still possible, though we thought the Fed could mostly handle those, but big crashes were a thing of the past. Or so we thought.
Hopefully, we have been adequately reminded that large recessions can still happen, and that will motivate us to take the regulatory
steps needed to bring more stability to the financial system. Some people
argue that any new regulation
needs to wait until the financial sector has re-stabilized to avoid creating another source of uncertainty, a view that has merit.
But the will and hence our ability to impose new regulation tends to diminish when the economy recovers, and if we wait too long
to get started, the opposition to any new regulation may carry the day and we'll fail to get the measures we need put into place.
The time to start is now.
But what of the charge that regulators blew it and caused this crisis, and therefore we are foolish to rely upon them for stability
in the future? First, as I've said, I don't think decades of stability is a failure by any definition, and the recent failure was
driven by an ideological belief that markets are self-regulating and hence best left alone. Most markets can be left alone, but as
Alan Greenspan has recently acknowledged,
financial markets are not among them. Second, I believe the recent failure did not happen because regulators were incapable of doing
better than they did, it was their belief in the self-healing power of markets - their belief that what just happened was next to
impossible - that stopped them from intervening as needed. With different beliefs and a different framework for approaching the problem,
the outcome is much different.
So I am not ready to throw up my hands and say this is too hard, either the private sector finds a way to take care of itself,
or it doesn't get done at all. We have the capacity to learn from our mistakes, to drop ideologies and theoretical constructs that
led us astray, and I have faith we will do just that (Alan Greenspan's conversion is a prime example). With comprehensive regulation
to prevent the excesses that caused the problems we are having, with the flexibility for regulations to evolve as new innovations
come to the financial marketplace, and with regulators who have learned the lessons of the past, we can look forward to another decades
long period of stability. But if we fail to take the steps that are needed and rely too much on private markets to regulate themselves,
we are setting ourselves up for this to happen again.
Houman's response is
here (it's partly in response to the
previous post).
I fear, nonetheless, that it overlooks a key factor at the cause of the Great Subprime Mess of 2008. That is, human failure.
The Subprime Mess was a Perfect Storm of many confluent factors, but underlying them all was human
inadequacy. Whether our deficiency was a matter of laxity or vanity or cupidity, doesn't solve the central issue,
which is failure on such as scale as to cause great economic deprivation.
To think that changing Wall Street's infrastructure (as Shadab does) will change human behaviour is seriously naive. (Though the
notion that finance boutiques will have better risk management because one's own wealth is committed, is an enticing argument.) We
humans are clever beings, which is why we dominate this planet.
Should we not look at regulating behaviour more than markets? Perhaps we need more/better (regulatory) stop-signs on the road,
but surely we need better-behaved drivers (risk managers) at the wheel.
I maintain, as I have for some time, that only confiscatory taxation, beyond a "reasonable level"
of total compensation, will change human behaviour. We must take the motivation out of unacceptable human behaviour,
regardless of its endeavor.
Let us not forget that grabbing for the Golden Ring was perfectly legal. Commercial lenders and Investment Bankers, responsible
for the excesses, were not only taking advantage of regulatory laxity but pushing the envelope of Risk Management into uncharted
waters. Why? Because success would bring them pecuniary rewards beyond the wildest imagination.
If we do not change such practices, by both more forceful punishment of contra-regulatory activity and higher marginal rates
of taxation, then the cunning creatures on Wall Street will simply devise new ways to beat conventional wisdom in the race to
the treasure at the end of the rainbow.
This will not happen next year or within the next decade, but neither will it take another 75 years (which the Subprime Mess needed
to repeat the Great Depression). It will come not within three or four generations either, but perhaps only two, because such convulsive
evolutions may have accelerated enormously due to the amplitude effects of globalization.
Meaning within the lifetimes or our children.
Oupoot says...
IMHO, the starting point would be to relook at the economic theory underlying regulation. The theory of self-regulation was promoted
almost exclusively in most grad schools. The theory I learned in micro-economics in grad school was that market agents (firms/individuals)
will discount any adverse future event in the n'th iteration of an iterative game process to the present, which will guide their
decisions in the 1st iteration. The assumption was of omnipresent market agents knowing the outcome of future events.
The reality that market agents cheat, lie and/or tell half-truths in order to get ahead of the competition
and make a profit were conveniently excluded. Neither did the theory adequatly take account of the time value of adverse
outcomes, i.e. there maybe incentive to market agents to delay the adverse event from taking place, or for other market agents to
know about the adverse event at an earlier date.
The are merits in self-regulation, but as the events over the past year has shown, the assumptions about market agents must be
reviewed. Regulation is by design to the benefit of the overall market, but to the detriment of individual market agents who may
have benefitted from cheating the market. The "light" regulation of the past decade is not the answer, but neither is "draconian"
regulation.
Further, the balance between too much and too little regulation is constantly moving in this everchanging world. But given the
severity of the existing crisis, erring on the side of caution is the better option, at least for the medium term.
Posted by: Oupoot |
Link to comment | April 20, 2009 at 04:23 AM
save_the_rustbelt says...
We still have thousands of pages of civil regulations and it did not work.
Solution? A certainty that Wall Street fraud will be prosecuted.
Obama just offered immunity from prosecution for 50,000+ tax evaders who used UBS Switzerland accounts, and then Obama waived
part of the normal penalties. What is up with that?
Posted by: save_the_rustbelt |
Link to comment | April 20, 2009 at 04:37 AM
Lafayette says...
Firstist with the mostest
OuP: The theory I learned in micro-economics in grad school was that market agents (firms/individuals) will discount any adverse
future event in the n'th iteration of an iterative game process to the present, which will guide their decisions in the 1st iteration.
I was taught that theory as well. Imagine my surprise when I went to work in industry, where I learned that survival was that
of the fittest. That managers could not give a damn about n-iterations, because, by the n-th time, they
may have lost their jobs for lack of having met objectives (that were entirely extraneous to economic theory).
I learned that it was not the rules of economics that prevailed but, literally, the rules of war.
I was reminded of the Confederate general who, when asked why he won a certain battle, reputedly answered, "Because I got there firstist
with the mostest" (and by all means practicable, he forgot to add).
Economics is not well served by a high-minded theory about how "market agents" make decisions. They make them chaotically, randomly.
Why search to give them any rational that is not, in fact, pertinent to the situation? Because it suits our need to be rational?
Supply and Demand curves determining optimal pricing are an intellectual abstraction of what is happening on the ground. They
make very good common sense, but they are not pertinent to evidenced market activity. An industrial giant, with sufficient market
share, can increase Supply AND increase Price. How does that well-known fact jibe with your course in EC101?
Well, your economics professor will tell you that such is not indicative of the economy as a whole. Oh, really?
We have, for almost a century, opted to organize industry as vertically integrated in a quest to create National and International
Industrial Champions by seeking the Holy Grail of economies-of-scale. Now, we've chopped the base of the pyramid off and sent it
to China (because that enhances even further our cost economies-of-scale and thereby profits).
But corporate captains strive to maintain the pyramid's largeness. The larger the pyramids and the less numerous, we think, the
better. We need (supposedly) just enough pyramids, in any given industrial sector, to maintain a modicum of competitiveness.
We should have serious doubts about that conclusion. I doubt competitiveness is all that functional. I doubt that economies-of-scale
trickle down to consumers, but I am sure that the average salaries of Top Management are higher. So, what indeed was the point of
the integration-exercise, pray tell, except to create a class of well-paid executive managers?
(NB: If you are looking for an example of the above, consider the automotive industry, which has just begun to implode. And should
we apply that analogy to Finance, the result is the Great Subprime Mess of 2008.)
I am left to conclude that many smaller pyramids all competing for far smaller market shares, meaning more atomization of industry,
perhaps provides a higher economic utility (meaning more employment in more durable jobs). I would be pleased to see seven General
Electrics in the US, not the conglomerate of one GE as it stands today. (And I used to work for GE when it was nothing like it is
today.)
I also doubt that manufacturing in the US is all that absolute a necessity, except where essential to meet specific customer needs.
I see our companies becoming service entities (with engineering, sales and administration) but manufacturing done where cheapest
at a guaranteed level of quality.
"I also doubt that manufacturing in the US is all that absolute a necessity, except where essential to meet specific customer
needs. I see our companies becoming service entities (with engineering, sales and administration) but manufacturing done where cheapest
at a guaranteed level of quality."
Ah, this is not working out so well so far. Except for wealthy white guys.
robertdfeinman says...
I think there was a hidden force behind the ideology. It is true that in the academic world in the US and UK a "free market" ideology
was taught and talked up, but why didn't this happen elsewhere?
Western Europe and Japan resisted the wholesale abandonment of the social compact and strengthened the services expected of government.
As a consequence they had decent growth, good social services, better wealth equality and less militarism
and foreign adventurism.
They also don't have an increasingly multi-generational oligarchy which uses its wealth to promote the "free market" ideology.
When one looks under the covers those who fund this type of outlook never subscribe to it themselves. The oligarchs (Koch, Scaife,
Walton, Olin, etc) insist on lots of regulations, it is just that they are slanted to favor them.
For example, tilting the tax laws away from inheritance and capital gains befits the personally wealthy. Similarly cutting the
corporate tax rate, creating accelerated depreciation and other financial gimmicks favors large firms over smaller ones. The refusal
to enforce anti-trust laws also performs the same function.
The ideologues like Greenspan and the crew at Chicago are the useful idiots who created a seemingly
logical intellectual structure that allowed the plutocrats to continue their plunder of the commons.
This is a standard tactic of plutocrats throughout history: "do what I say, not what I do". There is no free market, libertarian
movement elsewhere because there are no super wealthy keeping the ideology on life support.
If money could buy power and influence to the extent that existing regulations were trashed or ignored what mechanism is being
proposed to prevent this from happening again? Money votes not people.
Sorry to sound like a "socialist", but the only cure is to have a truly functioning democracy which means that money has to be
removed from the electoral process. This means not only during the campaigns, but the institutionalized lobbying, bribery, fund-raising,
revolving door cycle that is now the norm for legislators.
Without an implementation plan talk of lofty goals is just that, talk.
anne says...
What was done methodically done as conservatives gained in political influence was to break down regulatory economic safeguards
and peddle a philosophy about the need to break down such safeguards that prevailed even through economic crisis on crisis. The process
simply quickened with the Presidency of George Bush and a Republican Congress and increasingly Republican court system. The result
was not only the legal breaking down of regulations but the ignoring of regulations that lasted and the astonishing economic abuses
we are now trying deal with.
Beyond this, conservatism as beauty must be a joy forever only not nearly so much.
roger says...
The fallacy of the narrative fallacy is obviously that it has to find a narrative - something with a beginning and end - to be
fallacious about. But of course finding a beginning and an end is a narrative fallacy. It is rather like criticizing the science
of unicorns for saying they all have one horn when, really, we don't know whether they have one horn or two. If one is going to set
up shop as a radical skeptic, best not to start out lukewarm.
But getting beyond these issues - the fallacy of de-regulating the shadow financial sector was in the often repeated statement
that, given that only the wealthy invest in hedge funds, the government needn't worry about them. The government, see, only exists
to protect the "poor". As if the shadow system wasn't so linked and connected to the rest of the system
that it could be segregated out. The Guv'mint, and Greenspan in particular, knew, at least
since the time of the 98 crisis with LTCM, that their rhetoric about how only the rich would be effected by failures in the shadow
financial system was total bs. They bullied and harried the woman at the head of the CFTC (and it is very much to
the point that it was a woman, given that one of the bulliers, Larry Summers, seems to have, shall we say, an issue here), Brooksley
Born, who actually had two eyes in her head and saw what was going on.
And of course, Born is right, Summers is wrong, and - in a move applauded by the plutocracy-sodden establishment - Summers is
the one calling the shots on the economy in D.C.
kthomas says...
Hear hear, Prof. Thoma. Come out swinging: first jab, then vicious right-hook! This is a great way for me to start my week!
I'm not sure I agree with you on Mr Greenspan's conversion. He's a true believer, and they NEVER change thier minds.
pebird says...
The problem is not too aggressive regulation nor a lack of regulation. It is the appearance of regulation where there was little
or none. The actual amount of regulation was out of balance with what market participants thought there was.
This led to trust arbitrage - where if I knew where the system was gamed and you didn't ...
The purpose of any regulatory regime is to provide the market a floor of trust level - this is what we know and this is what we
don't. With no regulation, the regulatory agency becomes Sargent Schultz "I know nothing". But it keeps its mouth shut.
Self-regulation is an oxymoron. The idea that market participants would freely disclosure information in a spirit of transparency
without being forced to is naive at best and more likely disingenuous.
The idea that they would do so due to the threat of potential government intervention requires that someone in the government
monitor the market and compare it against some criteria of disclosure. This is the only way to have a credible threat of intervention.
In other words, in order to have self-regulated markets you need regulated markets.
Houman's response is a laundry list of why we need regulation:
1. Small is beautiful - how do you maintain smallness without regulation?
2. Over dependence breeds disaster - lets have non-traditional players enter the financial arena "So long as they are properly
regulated".
3. Derivatives do work - "encourage participants to increase transparency". Again, how can you measure transparency unless you
compare the released information to its truth content, which requires a high-degree of intervention - e.g., regulation.
Why oh why are otherwise intelligent people dancing around the necessity of doing what is painful but obvious?
Posted by: pebird |
Link to comment | April 20, 2009 at 09:38 AM
Lafayette says...
s-t-r: Except for wealthy white guys
Can't imagine what that means? Top Management?
Sorry, but when I put my forecasting glasses on, Manufacturing does not come up roses. Heavy manufacturing has the highest probability
of staying put. (By heavy, I mean cars as well.)
But light electronics and plastics ... bye, bye -- unless we want to invest in heavy automation. And, if we don't, the Chinese
will and they will dominate the market for both low-end (knock-off electronics) and high-end (semiconductor fab plants).
It's a New Global World out there, beyond the subprime mess. The subprime mess will be history one day, but global competition
will only get worse. And we need absolutely a strategy to counter the Chinese.
One that will reduce three statistics: (1) import volumes, (2) our resulting chronic trade deficit with them and (3) their sovereign
fund US T-note holdings.
Thickheaded says...
First off, regulatory practices were found to featherbed industries, stifle innovation, and disincent investment. Minsky Conference
regular Jamie Galbraith will attest that the turn toward deregulation and monetarism resulted from the deadend Keynsianism ran into
in the late 1970's with stagflation. Anything was seen as worth a shot.
Second off, twinning deregulation with abandonment of any notion of anti-trust meant that eventually M&A would create a new oligopoly
without redress. Excess profits would allow co-opting the academic shills and political hacks into favorable featherbedding. Easy
money would cover up the gaps.
The failure of preserving intellectual capital in patents, copyright, and trademarks - the West's only real assets of value after
they sold of manufacturing plants - meant that the only solution was rapid innovation and increased financial engineering to facilitate
short-term profit maximixing. The so-called moderation was a measure of short-term effect as dislocations in labor were absorbed
into lower paying service sector jobs. Easy immigration kept this from boiling over into labor discontent.
The operating environment became a crap shoot and dependent only on making it cheaper, the finance with high returns and "lower"
risk looked like a good move. CFO's suddenly became profit centers rather than the disciplinarians they once had been. Collective
ethical failures abounded as temptations increased, and the unaccountable Board rooms lined their pockets with the shareholder's
money.
The idea that high taxes somehow magically restores virtues ignores the very real organizational realities and the way people
work... and the consequent result will surely be that off-shoring accelerates. Regulation as the only answer is also simply a ticket
for continued enrichment of the legal community at the expense of the rest. Politicians would love the PAC contributions this engenders...
but it is detrimental to real reform of the economy. The notion that anything of enduring value can be accomplished without some
reform of the way government itself works and accountability to its people seems a chimera. Ditto for making capitalism work for
the shareholders rather than allowing their agents to abscond with their funds.
Present observation suggests that the only discipline democracies respond to tends to come from the outside. One suspects that
as Ying follows Yang, that the once suppliant China begins to roar a little more, the West may come to its senses and respond more
seriously. Maybe it takes the same outside threat to force accountability also in the Board Room - and if regulation manages this
(which it's more timid sort hasn't in 50 years at least), then maybe it is the better of two evils.
Lafayette says...
Dammit
pebird: Small is beautiful - how do you maintain smallness without regulation?
This is an attractive argument because it goes to the core of what went wrong -- HiFi nerds betting millions of someone else's
money, breaking the bank, then crowing that they were TBTF.
Still, the incentive to maximize income will be there (at today's present rates of marginal income taxation). Whether there are
a big six / seven banks or fifty small banks, the market volumes are for the taking. And the markets will go to those who arbitrage
best. These winners will initially not pocket profits, roll onwards their profits by gaming them. When once again large enough, then
the will try to sell out to a larger bank, cash in, and buy a megabuck ranch-style house in Palm Beach.
So, they'll be back in business soon, but on a smaller scale. Which does not automatically make them less dangerous. They
are still playing the same arbitrage game with their probability models.
These people are so dull as to be perfectly predictable. But they are also perfectly focused on an objective -- the nirvana of
megabuck earnings for each one of them.
Dammit if the plan doesn't work ...
anne says...
"By the early 80s, most of the baby boomers were already in the workforce, and if anything, women were leaving the workforce
to be stay at home mothers, since they were in their peak childbearing years."
Women if anything were continually entering the workforce through the 1980s and 1990s, the employment-population ratio for women
continually increasing from the 1960s and only leveling off during the Bush years as job creation faltered.
Even these last years however women have gained and held employment relatively better than men, which has been especially important
in terms of family support through this recession. *
* http://www.bls.gov/webapps/legacy/cpsatab1.htm
anne says...
"By the early 80s, most of the baby boomers were already in the workforce, and if anything, women were leaving the workforce to
be stay at home mothers, since they were in their peak childbearing years."
Women if anything were continually entering the workforce through the 1980s and 1990s, the employment-population ratio for women
continually increasing from the 1960s and only leveling off during the Bush years as job creation faltered. Even these last years
however women have gained and held employment relatively better than men, which has been especially important in terms of family
support through this recession. *
* http://www.bls.gov/webapps/legacy/cpsatab1.htm
Posted by: anne |
Link to comment | April 20, 2009 at 12:24 PM
rps says...
"....after decades and decades of instability in the 1800s and early 1900s, followed by the massive bank failures of the early
1930s, regulations were imposed to stabilize the banking system. The result was sixty years of calm in the financial sector. That's
hardly a failure of regulation."
Sixty years of calm?, Tsk, tsk, tsk here's an F- on your paper. What does one call 1,043 savigs and loans failures? Or how about
the insolvency of the FSLIC? How about the Depository Institutions Deregulation and Monetary Control Act (DIDMCA) of 1980 and the
Garn-St. Germain Depository Institutions Act of 1982?
How soon one forgets the Savings and Loan Scandal of the 1980's into the 90's. In fact, I would state that the S&L scandal
was the primer for today's lack of regulation, incestuous relationships between Congress and the financial industry.
Wiki: "Policies combined with an overall decline in regulatory oversight (known as forbearance), would later be cited as factors
in the later collapse of the thrift industry. From 1986 to 1989, FSLIC closed or otherwise resolved 296 institutions with total
assets of $125 billion. An even more traumatic period followed, with the creation of the Resolution Trust Corporation in 1989
and that agency's resolution by mid-1995 of an additional 747 thrifts. [8]
A Federal Reserve Bank panel stated the resulting taxpayer bailout ended up being even larger than it would have been because
moral hazard and adverse selection incentives that compounded the system's losses. [9]
There also were state-chartered S&Ls that failed. Some state insurance funds failed, requiring state taxpayer bailouts."
Sound Familiar?
Due to Congresses contempuous refusal to throw their own under the bus, and instead invoked the Ethics Committee slap on McCain's
wrist has led us again down the yellow belly brickroad to today's intentional fraud and once again our millionare Congressmen indulge
their BFF's club of greedy, fraudulent, tax evading investment and insurances houses with bailouts onto the backs of the taxpayers.
IF Congress had down their job and thrown McCain and the other 4 senators under the bus, would we be here today? Public humiliation
and Orange jumpsuits are a great deterrent for our elected officials.
William Black, Federal Banking Regulator 1984-1994 at keatingeconomics.com speaks candidly about the S&L scandal.
Mattyoung says...
Sometimes it appears we live in an imaginary world.
There is one super monopoly in our economy, Congress, who ultimately control 23% of the economy. This group cannot operate without
a big shadow banking system with the job of arbitrating the short term fluctuations that the long term policies of Congress generate.
What happens when Congress screws up, when they get the cash flow for some programs out of whack and cannot fix things in time?
The big banks step in with short term hedges and bond purchases to smooth out things out.
Anne would like us to remove Congress from the laws of economics, pretend they can be some sort of referee, but they are big players,
the biggest, and the volatility they cause will be with us sooner or later.
roger says...
Women, of course, did not leave the economy (that is, as economists define the economy, where work is what you are paid for) to
go home (where work isn't paid for, and thus isn't work) in the 80s. I don't know where that idea came from. Here's a nice little
Bureau of Labor chart to illustrate that fact: http://www.bls.gov/opub/mlr/2003/10/ressum3.pdf
Without women entering (sic) the work force (instead of lazing around all day, raising children, cleaning, cooking, managing household
finances, dealing with medical crises, and in general not working) the median American household would have been forced down several
percentiles. And it would have occured to the constituency that has supported Reagonomics, white males, that really, they were being
cheated.
Not Mark T says...
RE: the Sgt. Schultz as regulator model, an issue that we may be hearing more about is the prevalence of "side letters" used in
credit default swaps. In essence these were hidden agreements indicating that issuers such as AIG never intended to pay, and counterparties
never intended to collect, on CDS contracts only intended to spruce up a public traded company's balance sheet (see: http://us1.institutionalriskanalytics.com/pub/IRAstory.asp?tag=351).
According to a lawyer friend in the insurance industry, state insurance regulators have long been aware of this practice but looked
the other way ... until now. All this to say that unless the only objective is to give the patina of legitimacy, rules on paper have
to be enforced.
kthomas says...
@ roger "...And it would have occured to the constituency that has supported Reagonomics, white males, that really, they were
being cheated." VERY funny. Who's the greater fool, the fool or his poor overworked wife?
Can someone cite just 1 example of a market that has functioned soundly with only self-regulation? C'mon, ye true believers....tell
us.
btg says...
anne: Women if anything were continually entering the workforce through the 1980s and 1990s, the employment-population ratio for
women continually increasing from the 1960s and only leveling off during the Bush years as job creation faltered. Even these last
years however women have gained and held employment relatively better than men, which has been especially important in terms of family
support through this recession. *
During the early 1990's, there was no growth in women's labor force participation rates; since 1994 however, the rate has edged
upward, with mothers accounting for most of the rise
From March 1975 to March 1996, the labor force participation rate of women rose from 46 percent to nearly 59 percent (table 1).
Although it rose without interruption through 1990, the increase did not proceed at a steady pace; rather the rate of increase slowed
gradually over time. Between 1975 and 1980, women's labor force participation rate increased an average of 1 percentage point per
year, from 1980 to 1985, the average annual gain fell to 0.7 percentage point. During the next 5 years--1985 to 1990--the gain was
slower still, averaging 0.5 percentage point per year.
anne says...
The unemployment rate for women maintaining families, declined from 10% in 1992 to 5.9% in 2000 and is currently 10.8%. During
the Reagan years, the unemployment rate did not fall below 10% till 1985 and below 9% till 1988. The rate was lowered however to
5.9% under Clinton, only to rise from there.
Posted by: anne |
Link to comment | April 20, 2009 at 05:47 PM
the buggy professor says...
1) Lafayette and Rustbelt (among others) have lamented the decline of US manufacturing industry. Has manufacturing industry actually
declined?
Yes and no. It depends on the measure used.
2) If jobs are the measure, then yes --- the percentage of the US workforce in manufacturing declined from about 35% in the early
1970s to around 12% in 2004. But note: the same trend has been at work in all the other large advanced industrial countries: the
UK, France, Germany, and Japan. Click
here for a
publication put out by the Council of Economic Advisers (2004) that captures the trends in the US along with these other four countries,
then go to diagram 7. Note that the US had a smaller sector compared to these other countries even in the late 1960s. Note also that
the fall has been sharper for the UK and France, with Germany and Japan not falling so fast until the early 1990s.
3) If the percentage of manufacturing in US GDP is the measure, then again a roughly similar picture emerges. It has declined to
around 12-13.
4) If the measure, though, is the dollar value of manufacturing output, it was at an all-time peak in 2006-07 at over $1.6 trillion
. . . almost double the output a decade ago. According to Business Week yesterday,
"As Stephen Manning of the Associated Press acknowledged in a rare "just the facts" story in mid-February, the U.S. "by far
remains the world's leading manufacturer," producing goods valued at a record $1.6 trillion in 2007 - nearly double the $811 billion
produced a decade earlier. Indeed, the AP writer noted, "For every $1 of value produced in China's factories [in 2007], America generated
$2.50." Not bad for a country that doesn't produce anything anymore."
Please note carefully: American manufacturing --- including multinational implants here from abroad --- produce 250% more in dollar-calculated
output than China does (with a much greater role for foreign implants). A surprise to many of us, no?
Then, too, contrary to largely uninformed opinion, US manufacturing output is larger than that of China's, Japan's, or Germany's
as a percentage of total world mfg. output. 21% in 2006.
5) If the measure is investment levels, note the astonishing pace in 2007 for US manufacturing (same Business Week source) "Not only is the U.S. still the world's leading manufacturer, but there are many good reasons that companies will continue to manufacture
here and invest in new plants and equipment. According to the Census Bureau's 2007 Annual Capital Expenditures Survey, released on
Jan. 22 of this year, U.S. nonfarm businesses invested $1.36 trillion in new and used structures and equipment in 2007, a 3.9 percent
increase over 2006. More than $484 billion was spent on new structures alone."
6) Enter manufacturing exports.
And US export-manufactures were at an all-time peak in total value in 2007 as well. Note that they are heavily concentrated in
capital goods, which in turn depend markedly on R&D, innovation (process or radical product), good marketing, and highly skilled
labor . . . not to mention constant investment.. There is no reason to assume that such capital goods production will be easily transferred
abroad, the way more standardized consumer-products have been.
7) If the measure is the wage (plus benefits) of workers in manufacturing industry, it was almost double in inflation-adjusted terms
last year compared to the early 1970s, when the industrial work force was three times larger as a percentage of total employment:
about $66,000 vs. $37,000.
………………………………….
8) All of which leads to a question of importance: what has caused the decline in manufacturing jobs and output as a percentage
of total US employment and GDP?
As usual, the causes are multiple:
* Extraordinary leaps forward in manufacturing productivity in the 1980s and 1990s into this decade. Click here again (the Council
of Economic Advisers' study), then go to diagram 5. As the commentary notes, between 1950 and 2000, average nonfarm productivity
grew at 2.0% a year; the equivalent stat for manufacturing was 2.8% --- almost double. Note though how both measures soared from
1995 on to 2003 (the last year analyzed in the study), with manufacturing productivity's growth rate rising over 70% and the service
sectors' by even more from its point at the end of 1994.
*The globalizing influences working everywhere in the world, not least in the industrial leading countries of the 1950s – 1970s,
with the growing shift of fairly low-or middle-level skills or at least standardized production to developing countries like Mexico,
Brazil, and Pacific Asia. The major driving force here has been multinational manufacturers, taking advantage of disciplined workers
who have the skills to work effectively with modern technologies.
Note that there have been no significant work by economists --- or even business school professors (since some pathbreaking work
out by Raymond Vernon and others at the Harvard Business School in the 1960s and 1970s) --- on the overall causes and repercussions
of such "multi-level" production chains globally. Even Krugman's original work on geography and trade doesn't deal with it in depth.
*The trade effects that ensued from the rapid growth of standardized manufacturing in Pacific Asia and parts of Latin America.
Compounded, obviously, by the use of neo-mercantile efforts by China --- and earlier, until the late 1980s by Japan and others in
East Asia --- to keep their currencies from appreciating against the $US and later the Euro. To note this is not to deny that there
has been a lot of controversy on this topic, including the growing dependence of the US economy on capital inflows from abroad .
. . along with a cost/benefit analysis of the outcomes.
*And finally, connected with these, the growing importance in the US economy of high-tech service industries, not least financial.
Along with the shift of standardized manufacturing to developing countries --- including the use of China's disciplined, moderately
skilled work force for assembly production and exports --- the US pioneer role in creating a knowledge-based economy has, for good
or bad, shifted our comparative advantage toward both high-tech services and capital-goods manufactures.
----- A little tantalizing evidence follows here. According to a good study put out last year by Robert Gordon of Northwestern
and a British colleague on the slowdown in the EU's productivity growth after 1995 compared to the US's --- but, oppositely, a better
performance by the EU in creating jobs ---,
"We find that the revival of European employment growth can help explain why European productivity slowed. But we do not explain
why European productivity growth did not accelerate as occurred in the US. US productivity took off after 1995, growing at 0.7 percent
faster per year, but in Europe a literal reading of the productivity growth data leads to doubt that the internet revolution ever
occurred in Europe.
"Some of Europe's poor recent performance can be explained by reforms that will enhance growth in the long run, but not all of
it. Our findings should lead EU policymakers to think about the two-edged effects of policy reforms on employment and productivity,
but they should also worry about how to encourage innovation and the adoption of new technologies.1" Source: Click
here.
Posted by: anne |
Link to comment | April 20, 2009 at 05:13 PM
anne says...
Periods in which the increase of the employment-population ratio for women whether over 16 or 20 years of age slowed, were periods
of recession and slow job creation following recession as notably in the early 1990s. Job creation during the Bush Presidency from
1989 to 1993 was 53,000 monthly, while during the Clinton Presidency job creation was 240,300 monthly. Women worked when there were
jobs, and women worked even more when employers accomodated women. *
* http://www.bls.gov/webapps/legacy/cesbtab1.htm
Posted by: anne |
Link to comment | April 20, 2009 at 05:21 PM
"During the early 1990's, there was no growth in women's labor force participation rates; since 1994 however, the rate has edged
upward, with mothers accounting for most of the rise."
Duh. During the early 1990s, Bush years, there was minimal job creation. Job creation through the Clinton years that was almost
5 times higher, and more emphasis on work opportunities for women, led to women continually entering the workforce and continually
narrowing the employment-population ratio gap with men. The gap is still narrowing, but the Bush years from 2001 were marked by an
astonishing 27,000 jobs created monthly.
Posted by: anne |
Link to comment | April 20, 2009 at 05:30 PM
anne says...
We went then from 53,000 jobs created monthly during the years of Bush, to 240,300 jobs created monthly under Clinton to 27,000
jobs created monthly during the recent Bush Presidency. Women entered the workforce according to opportunity. We are now at the lowest
employment-population ratios for men whether over age 16, or 20, or 25, since 1948 when data was initially recorded.
When looking to employment-population ratios, we need to look to women and men separately, and understand how relatively severe
a time this is for men.
Posted by: anne |
Link to comment | April 20, 2009 at 05:39 PM
anne says...
The unemployment rate for women maintaining families, declined from 10% in 1992 to 5.9% in 2000 and is currently 10.8%. During
the Reagan years, the unemployment rate did not fall below 10% till 1985 and below 9% till 1988. The rate was lowered however to
5.9% under Clinton, only to rise from there.
Posted by: anne |
Link to comment | April 20, 2009 at 05:47 PM
the buggy professor says...
1) Lafayette and Rustbelt (among others) have lamented the decline of US manufacturing industry. Has manufacturing industry actually
declined?
Yes and no. It depends on the measure used.
2) If jobs are the measure, then yes --- the percentage of the US workforce in manufacturing declined from about 35% in the early
1970s to around 12% in 2004. But note: the same trend has been at work in all the other large advanced industrial countries: the
UK, France, Germany, and Japan. Click
here for a
publication put out by the Council of Economic Advisers (2004) that captures the trends in the US along with these other four countries,
then go to diagram 7. Note that the US had a smaller sector compared to these other countries even in the late 1960s. Note also that
the fall has been sharper for the UK and France, with Germany and Japan not falling so fast until the early 1990s.
3) If the percentage of manufacturing in US GDP is the measure, then again a roughly similar picture emerges. It has declined to
around 12-13.
4) If the measure, though, is the dollar value of manufacturing output, it was at an all-time peak in 2006-07 at over $1.6 trillion
. . . almost double the output a decade ago. According to Business Week yesterday,
"As Stephen Manning of the Associated Press acknowledged in a rare "just the facts" story in mid-February, the U.S. "by far
remains the world's leading manufacturer," producing goods valued at a record $1.6 trillion in 2007 - nearly double the $811 billion
produced a decade earlier. Indeed, the AP writer noted, "For every $1 of value produced in China's factories [in 2007], America generated
$2.50." Not bad for a country that doesn't produce anything anymore."
Please note carefully: American manufacturing --- including multinational implants here from abroad --- produce 250% more in dollar-calculated
output than China does (with a much greater role for foreign implants). A surprise to many of us, no?
Then, too, contrary to largely uninformed opinion, US manufacturing output is larger than that of China's, Japan's, or Germany's
as a percentage of total world mfg. output. 21% in 2006.
5) If the measure is investment levels, note the astonishing pace in 2007 for US manufacturing (same Business Week source) "Not only is the U.S. still the world's leading manufacturer, but there are many good reasons that companies will continue to manufacture
here and invest in new plants and equipment. According to the Census Bureau's 2007 Annual Capital Expenditures Survey, released on
Jan. 22 of this year, U.S. nonfarm businesses invested $1.36 trillion in new and used structures and equipment in 2007, a 3.9 percent
increase over 2006. More than $484 billion was spent on new structures alone."
6) Enter manufacturing exports.
And US export-manufactures were at an all-time peak in total value in 2007 as well. Note that they are heavily concentrated in
capital goods, which in turn depend markedly on R&D, innovation (process or radical product), good marketing, and highly skilled
labor . . . not to mention constant investment.. There is no reason to assume that such capital goods production will be easily transferred
abroad, the way more standardized consumer-products have been.
7) If the measure is the wage (plus benefits) of workers in manufacturing industry, it was almost double in inflation-adjusted terms
last year compared to the early 1970s, when the industrial work force was three times larger as a percentage of total employment:
about $66,000 vs. $37,000.
………………………………….
8) All of which leads to a question of importance: what has caused the decline in manufacturing jobs and output as a percentage
of total US employment and GDP?
As usual, the causes are multiple:
* Extraordinary leaps forward in manufacturing productivity in the 1980s and 1990s into this decade. Click here again (the Council
of Economic Advisers' study), then go to diagram 5. As the commentary notes, between 1950 and 2000, average nonfarm productivity
grew at 2.0% a year; the equivalent stat for manufacturing was 2.8% --- almost double. Note though how both measures soared from
1995 on to 2003 (the last year analyzed in the study), with manufacturing productivity's growth rate rising over 70% and the service
sectors' by even more from its point at the end of 1994.
*The globalizing influences working everywhere in the world, not least in the industrial leading countries of the 1950s – 1970s,
with the growing shift of fairly low-or middle-level skills or at least standardized production to developing countries like Mexico,
Brazil, and Pacific Asia. The major driving force here has been multinational manufacturers, taking advantage of disciplined workers
who have the skills to work effectively with modern technologies.
Note that there have been no significant work by economists --- or even business school professors (since some pathbreaking work
out by Raymond Vernon and others at the Harvard Business School in the 1960s and 1970s) --- on the overall causes and repercussions
of such "multi-level" production chains globally. Even Krugman's original work on geography and trade doesn't deal with it in depth.
*The trade effects that ensued from the rapid growth of standardized manufacturing in Pacific Asia and parts of Latin America.
Compounded, obviously, by the use of neo-mercantile efforts by China --- and earlier, until the late 1980s by Japan and others in
East Asia --- to keep their currencies from appreciating against the $US and later the Euro. To note this is not to deny that there
has been a lot of controversy on this topic, including the growing dependence of the US economy on capital inflows from abroad .
. . along with a cost/benefit analysis of the outcomes.
*And finally, connected with these, the growing importance in the US economy of high-tech service industries, not least financial.
Along with the shift of standardized manufacturing to developing countries --- including the use of China's disciplined, moderately
skilled work force for assembly production and exports --- the US pioneer role in creating a knowledge-based economy has, for good
or bad, shifted our comparative advantage toward both high-tech services and capital-goods manufactures.
----- A little tantalizing evidence follows here. According to a good study put out last year by Robert Gordon of Northwestern
and a British colleague on the slowdown in the EU's productivity growth after 1995 compared to the US's --- but, oppositely, a better
performance by the EU in creating jobs ---,
"We find that the revival of European employment growth can help explain why European productivity slowed. But we do not explain
why European productivity growth did not accelerate as occurred in the US. US productivity took off after 1995, growing at 0.7 percent
faster per year, but in Europe a literal reading of the productivity growth data leads to doubt that the internet revolution ever
occurred in Europe.
"Some of Europe's poor recent performance can be explained by reforms that will enhance growth in the long run, but not all of
it. Our findings should lead EU policymakers to think about the two-edged effects of policy reforms on employment and productivity,
but they should also worry about how to encourage innovation and the adoption of new technologies.1" Source: Click
here.
According to libertarians, we don't need regulation of things like food safety. Industries will self-regulate. And they will still
preach this even during well-publicized recalls of food contaminated by Salmonella, that was sold knowing it was contaminated. Totally
idiotic.
Even if your $66k/37k is correct, I don't believe that it is, this leaves only ~ $23kper, down a bit from your $37, to the work
force.
There's a real question about what should constitutes GDP. If production of goods is only some 12-13%, what the hell is that we're
producing? And, who's getting paid for it?
Tell us more about this $1.6 trillion worth of manufactured; like the worth part and who bought. Double a decade earlier, you
say. What was it that we were manufacturing in 1997 that was so different from what we were manufacturing in 2007?
Driving down Wycliff or East 14th, all one sees is deserted, bombed out hulls of factories, even those we automated in the 80s
are gone, so where is this manufacturing taking place. Genentech makes cancer drugs that cost $6k a month; this what you have in
mind? The Immunex for arthritis which cost $1.3k a month? Those who held stock options who work there or had stock options did well.
Hard to afford these on $23k per. And, it makes insurance and Medicare very expensive.
You real sure about all this investment in plant and equipment in 2007? News to me. And, a few examples please of the capital
goods that can't be manufactured overseas?
Posted by: ken melvin |
Link to comment | April 20, 2009 at 09:39 PM
Lafayette says...
Internet shminternet
bp: Has manufacturing industry actually declined? Yes and no. It depends on the measure used.
Yes, I used GDP accounts that show, in the US, that Services account for nearly 70% of economic activity.
Do you know a better method? Pray, show us the way ...
So you think that exports are our salvation? No way, José. Exports are typically less than 10% of GDP.
US productivity took off after 1995, growing at 0.7 percent faster per year, but in Europe a literal reading of the productivity
growth data leads to doubt that the internet revolution ever occurred in Europe.
Internet shminternet. It happened here and typically in a better way than stateside. I know no one in France still on dial-up,
whereas in the US their numbers are so large that Obama is focusing stimulation money on the problem. (I have friends in central
Massachusetts, thirty minutes from Boston's "Silicon Valley" along (old) Route 128 still on dial-up.)
Besides, productivity is, I maintain, intrinsically a matter of hours worked, not Internet penetration. The French were particularly
idiotic in forcing the 35-hour week on French industry, and is now paying the consequences of that Socialist stupidity. Everywhere,
EU leadership is trying desperately to convince national populations that the "good times" are over and they must get back to work.
But, that is difficult in countries that have become inured to working too hard. See
here. Look at the tail-end of countries
to the left of that graphic -- all EU ...
It's Europe's version of: "We have met the enemy and he is us."(Pogo
by Walt Kelly)
hari: From what I am reading, it seems IMF will not *advise* any more but *manage* global economy from now on....
Oh, come on, "manage" the Global Economy? With what tools? This will happen when pigs sprout wings.
The above sounds like a pompous announcement from Strauss-Kahn, its pompous French Director, who as Minister of Finance in France
did f***-all to redress the French economy. And, now he is moving on to manage the global economy? Everybody take cover ... --
Strauss-Kahn is preparing himself for a return to France (according to the buzz at the IMF) as a presidential candidate in 2011.
It's written on everything he does.
Frankly, I hope he does run. He ran two years ago ... and came in third as Socialist candidate behind Segolen Royal whom Sarkozy
defeated.
But, I cannot abide the notion that Strauss-Kahn, or the IMF, should be managing the Global Economy. The IMF's track record in
the matter has been abysmal and the global economy does not need a statist at its helm.
The make-up of a political class often affects remarkably the destiny of a country. Of course, if one likes, it is perhaps an
"exogenous variable". I doubt that any democracy elects its leaders solely based upon professional background. There are too many
other important variables that enter into an election, not the least of which is how we part our hair. (;^)
France is perhaps an exception to that rule, however. As I've opined here before, France must confront the fact its political
class is dominated by people who graduated from one university, the Ecole Nationale d'Administration (ENA). They are known as ENArques
and have established a crony corporation within French politics. If interested, read
here.
John Kenneth Galbraith was fascinated enough to study the school and how it trained France's top Civil Servants. It is indeed
impressive. The selection is stringent and, in fact, these people all come from the same social class (and a finite number of French
secondary schools). They are by no means, therefore, representative of the French society as a whole.
Unfortunately, under socialist rule, far too many went from the Civil Service to state owned companies, such as Airbus -- where
a number of them have had disastrous careers as industrial managers.
It is a popular (mis)conception in France that to become President, one must be either an ENArque or a Freemason and preferably
both. An example of how it works: Jacques Chirac, an ENArque promoted another ENArque as his last Prime Minister -- though the man
never had been elected to any political office in his life. It was a desperate attempt to block the ascent of Sarkozy, in view of
upcoming presidential elections, since both Chirac and Sarkozy have little common friendship though they are both on the Right. (Such
is typical of politics around the world, but particularly an attribute of French politics. Methinks.)
Sarkozy (current President of France) was a lawyer by training but Strauss-Kahn is indeed an ENArque. The ENArques can screw-up
a free lunch and still find time to blame someone else. By then, however, they are well-ensconced in another job somewhere in the
administrative hierarchy.
To wit, I would not want this gentleman "managing the Global Economy" as a promotional run-up to his candidacy as French president.
Despite the fact that he is, otherwise, an intelligent person, I doubt that any present-day Socialist could find the exit from within
a wet paper-bag, as regards the economy. They have not yet understood a fundamental principle of Political Economy: For the wealth
of a nation (or nations) to be shared equitably, it must first be generated. Therein lies the challenge as "Tax and spend" is
the easy part.
That simple rule somehow amazingly escapes the Leftist-species of politician and not only in France.
My point: The make-up of a political class often defines the destiny of a country. Their educational backgrounds are indeed important,
I find. With this in mind, have a look here to understand our own political class in the US.
It should surprise no one that the largest contingent is lawyers. Perhaps they are instinctively drawn to politics? Still, it
is impressive to see that about 8% are economists!
The substance of what I posted did not get into to clever head - for some good reason methinks - because DSK is not your *type*
of leader required by IMF
However I'd like to admonish(!) you and the likes of you to consider that G20 Summit decided to inject +$1T into IMF coffers for a good reason. China and Brazil are funding it - besides G7.
IMF is going to *manage* global financial regulatory platform along with (BIS) Stability Board created by G20. This will be decided
during the weekend session of G7 and then G20.
France is a great civilization - notwithstanding your rant about DSK and the rest of the political class.
Posted by: hari |
Link to comment | April 21, 2009 at 03:04 AM
save_the_rustbelt says...
buggy:
I am aware of all of that.
The lost manufacturing jobs were supposed to be replaced with "high value service jobs." Oops.
Apparently those service jobs consisted largely of originating subprime mortgages and working at Wal-mart.
And much of the construction industry has been turned over to undocumented workers (avoids all that messy stuff like taxes, OSHA,
workers comp, etc.).
Blue collar America bleeds so professors and investment bankers can be comfortable.
"... Because policy had improved, and because we believed the economy was more stable due to deregulation, we let our guard down."
How about that a tsunami of cash to lobby congresspersons to the tune of the $5,000,000,000, the largest percentage of it from
the finance sector, combined with collusion in high places PAID to let your guard down.
Sounds more like payoffs to me albeit legal payoffs.
Posted by: LeeAnne |
Link to comment | April 21, 2009 at 06:45 AM
Patricia Shannon says...
Lafayette, This is 2009. Why should we need to work more hours than hunter-gatherers? Where is that productivity people keep talking about going?
You may be content to be a piece of machinery to enable the top 1/2 of 1% to live in extreme luxury and decadence, but not all of
us are. Some of us actually have our own lives and interests.
This whole blog war thread is entirely unsatisfying. You guys talk in sweeping generalities that you know will never happen, but
on instnaces where you get specific, you are just nibbling at the edges. I get the feeling you want everything to continue the same,
but without the problems.
Is it possible the system as a whole is the problem?
The financial system is set up to serve itself, and hence, siphons away wealth from its clients.
You disagree? Then why does the industry spend gobs of money to prevent legislation to disclose the details of fees associated
with 401k's? That is just one small example.
The banks wanted deregulation because they said they could manage risk better than anyone. It turns out they are self-serving
liars suffering from habitual greed.
Google "Citi Fined", and tell me that Citi is not a major criminal organization. The most crime-infested place on the planet is
Wall Street. That's just a fact.
Harry Markopolos spent 7 years pounding on the fortress gates of the SEC to let him in so he could warn about fraud, but they
kept telling him to go away.
With that kind of attitude, I am now of the opinion that those on Wall Street who commit crime should pay the ultimate price.
Nothing else works, and they are literally doing more damage to this country than all the terrorist acts you could dream up would
do.
The system will change. How many bullets will be needed is up to the industry.
Posted by: K Ackermann |
Link to comment | April 21, 2009 at 09:16 AM
YerMawm says...
More regs...you mean like SOx? That sure did the trick. Laws ONLY keep the honest people honest. Financials among the most regulated
industries. Most of this current mess would be solved by growing balls, and prosecute under existing fraud laws.
In fact, as long as there is a Federal Reserve Board, a private banking cartel engaged in the price fixing of money, and theft
via inflation targets, there is regulation.
Suggest more concrete examples from history rather than generalizing the 1800's and 1900's as the financial wild west. Some periods
during the 1800's were indeed our most prosperous, stable, and productive. We haven't even begun to see instability yet. During TGD
many people still lived on farms, and grew their own food. A lesson we need to relearn...NOW.
Posted by: YerMawm |
Link to comment | April 21, 2009 at 09:25 AM
Lafayette says...
hari: However I'd like to admonish(!) you and the likes of you to consider that G20 Summit decided to inject +$1T ...
Admonish away! ;^) Sticks and stones ... etc., etc., etc.
1 trillion dollars is to managing world trade as my pissing in the ocean is to desalinating it. The key word is manage, meaning
being responsible for exchange rate variations and international transactions (of all sorts).
That can only be done with a UN-type Federated Reserve System and signatories to a Treaty that allows that agency to employ its
own reserve currency. It just ain't gonna happen. That sort of treaty will never, ever get passed in the US Senate.
We've been down this road before and I insist on the following: There is meaningful regulation on the national level because banks
are regulated by national legislation. There is NO international law (meaning a binding treaty) in the matter of regulating international
finance and there never will be. As such, there is no way to "regulate" it.
All that the IMF can do is blow a whistle. Given the scare the Great SubPrime Mess of 2008 has created, that alone may be sufficient
to focus attention and get action. Which is goodness.
And about Basel; I think (quite personally) that it is a fine idea. It is an established agreement, but without the force of a
treaty. (As I recall, we exchanged on that idea some months ago.) BaselII needs to be tightened down because it proposes using bank-developed
business models to regulate financial banking. That just ain't gonna work either.
If Basel2 is to be taken seriously, it must be truly independent in all ways and means from the market agents it is supervising.
But, coming up with new models is not Mission Impossible.
What you don't seem to understand is while G20 was Brown's forum to reform Bretton Woods institutions, IMF actually came out stronger
because the Chinese felt they were prepared to sleep with the devil they knew...(you know the rest).
That's how G20 decided to inject seed capital to reform IMF itself. [DSK will be a transition man until these changes, in fact,
take place].
The other aspect is international trade finance facility - a separate matter altogether.
The q' is if you are going to reform the (existing) structure of IMF, what will become of the hitherto role of US Treasury (the
paymaster since WWII) in framework of IMF policy decision-making.
IMO the OECD block, and G7, have made the compelling decision to liberate IMF from their voting majority and to forego IMF Chair
by EU to emerging markets.
Who will lead the new IMF set up? Most likley Indians seem to have inside track to management seat because of their professional
and other qualifications.
China will more likely takeover WB and its operations.
In sum, we're at a turning point in managing global financial system in a period of globalization.
Posted by: hari |
Link to comment | April 21, 2009 at 11:58 AM
Lafayette says...
A matter of values
PS: You may be content to be a piece of machinery to enable the top 1/2 of 1% to live in extreme luxury and decadence, but
not all of us are. Some of us actually have our own lives and interests.
I don't decry the French for their way of life. I do for their way of work. And it is the latter that makes for the former.
If I thought the standard of living was better in the US, I'd be a fool to remain in France. So, call me a fool, but I do believe
the standard of living in a great many ways is better in France.
That said, I have worked both in the US and in France. We work harder in the US. Tis a pity perhaps that we don't enjoy life better.
But, then, who am I to judge? Maybe Americans enjoy life by working hard. No joke. It could be very true. Cultural diversity is
a matter of values. If Americans value work over leisure, they are simply exercising their freedom of choice.
"So, call me a fool, but I do believe the standard of living in a great many ways is better in France."
The world is waiting for you to improve this methodology. Nepal would literally take your words as policy if accurate. Psychologically
and physiologically any policy that gets people in wealthy developed countries their first $10000 in income is a winner and there
are no doubt more of these policies in France than in America. I know first-hand America is hostile to foreigners as of 2004. I'm
sure I could visit France no problem.
Posted by: Phillip Huggan |
Link to comment | April 21, 2009 at 12:38 PM
the buggy professor says...
1) US Exports, by percentage for 2003 --- the latest data, strangely, at the CIA WorldFactBook (imports the same year too)
2) All these industries --- including US agriculture --- are high-tech ones, depending for their productivity growth on large levels
of R&D, well-educated engineers, technicians, and other workers, and continued high levels of investment. In pharmaceuticals, as
I remember from a Congresional study I looked at about four years ago, the US has 80-85% of the world market.
Some of the standardized processes --- such as assembling cell-phones --- have been transferred to countries like China.
That's common for virtually all Chinese exported manufacturing goods: about 60-65% of the content
used, including built-in technology, belong to the multinational firms implanted there. (The technical term for this
is "pass-through" value. Again, when dealing with Chinese official data, these are estimates by specialists . . . a problem compounded
by proprietary data of the firms.)
....
An example, to stay with cell phones.
The key technologies are patented to Qualcomm and Broadcomm, with Qualcomm suing just about every cell-phone producer in the world
for violating its patents. It sued Nokia, which was already paying a fee to Qualcomm, for patent-violations in 2007 . . . only for
the case to be sent to arbitration, and an eventual agreement last year in which Nokia agreed to pay $1 billion in past patent violations
. . . as well as to work cordially in a new licensing agreement with Qualcomm.
That was the case with Ericsson in Sweden earlier in the decade (before it merged with Sony), and with Japanese producers.
On the other hand, Broadcomm won a suit against Qualcomm, though I forget who was suing who.
....
As for airplane (civilian) production, Japan tried for two decades starting in the 1980s to build a competitive industry, and
failed. Eurobus, a consortium, has done much better . . . with benefits to flying passengers world-wide. It has, though, stuck itself
with a huge white-elephant in its new giant transport that can carry up to 700 or more passengers; is very fuel inefficient; and
way behind schedule . . . with the partner governments bickering over how to handle the financial losses to date, and cut jobs.
Just noticed. There are two versions of the CIA Worldfactbook, and the figures above are from the text version . . . which groups
exports by percentages slightly more coherently than the other version. Can't say why.
Paul Krugman and Dean Baker both point out that there's been a lot of phoniness in the America's productivity numbers, mainly
due to all the phoniness in our financials. So if this is true, it can be safely (and sadly) said that over the past several decades
or so Americans have been spinning their wheels big time while keeping their noses firmly to the grindstone.
Posted by: Cynthia |
Link to comment | April 21, 2009 at 01:58 PM
ken melvin says...
Buggy 4/22: My point being that in this the time of Cherry Blossom Festivals there was some cherry picking going on: E.g.: 2) If jobs are the measure, then yes --- the percentage of the US workforce in manufacturing declined from about 35% in the early
1970s to around 12% in 2004. ----The per cent decline is: 23/35 = 66%, the number of jobs some .23 x 140million ~ 32million jobs. 4) If the measure, though, is the dollar value of manufacturing output, it was at an all-time peak in 2006-07 at over $1.6 trillion
. . . almost double the output a decade ago. According to Business Week yesterday, ----St. Louis Fed: http://research.stlouisfed.org/fred2/series/IPMAN shows a bit story - tremendous increase from 1990 to 2000, 2001
dip and an increase from 2001 to 2007 albeit at a much rate than from 1990 to 2000. I can find no evidence of the 'doubling' over
the decade; in fact, the Chicago Fed: http://www.chicagofed.org/economic_research_and_data/cfmmi_data_series.cfm shows a -97 index
of 99.0 and a 2007 index of 106.7 (presently: it's about 83.8%).
5) If the measure is investment levels, note the astonishing pace in 2007 for US manufacturing (same Business Week source) "Not only is the U.S. still the world's leading manufacturer, but there are many good reasons that companies will continue to manufacture
here and invest in new plants and equipment. According to the Census Bureau's 2007 Annual Capital Expenditures Survey, released on
Jan. 22 of this year, U.S. nonfarm businesses invested $1.36 trillion in new and used structures and equipment in 2007, a 3.9 percent
increase over 2006. More than $484 billion was spent on new structures alone." ---My read: Before 2000, manufacturing investment lead finance by ~ 2 to 1, by 2007, the ratio was almost 1 to 1, equipment to structure
is trending from 2 to 1 to ~ 8/5, and, it was 2005 before investment got back to 2000 level.
6) Enter manufacturing exports. And US export-manufactures were at an all-time peak in total value in 2007 as well. Note that they are heavily concentrated in capital
goods, which in turn depend markedly on R&D, innovation (process or radical product), good marketing, and highly skilled labor .
. . not to mention constant investment.. There is no reason to assume that such capital goods production will be easily transferred
abroad, the way more standardized consumer-products have been. ---Everything's up to all nations, I'm guessing dollar: http://tse.export.gov/MapFrameset.aspx?MapPage=NTDMapDisplay.aspx&UniqueURL=ng1wed45cg0p2jfwi3xqo055-2009-4-22-8-2-13
7) If the measure is the wage (plus benefits) of workers in manufacturing industry, it was almost double in inflation-adjusted
terms last year compared to the early 1970s, when the industrial work force was three times larger as a percentage of total employment:
about $66,000 vs. $37,000. ---If? No indication that there is any basis for this assertion that I can find or have heard of.
Jeff Sachs says the government will need to find new sources of tax revenue:
The Costs of Expanding the Government's
Economic Role [Extended version], by Jeffrey D. Sachs, Scientific American: The 10-year budget framework that President Barack
Obama released ... is as much a philosophy of government as a fiscal action plan. Gone is the Ronald Reagan view that "government
is not a solution to our problem; government is the problem." Obama rightly sees an expanded role for government in allocating
society's resources as vital to meeting the 21st century challenge of sustainable development.
The scientific discipline known as public economics describes why government is needed alongside markets to allocate resources.
These reasons include: the protection of the poor through a social safety net; the correction of externalities...; the provision
of "merit goods" such as health care and education that society deems to be essential for all of its members; and the financing
of scientific and technological research that cannot be efficiently captured by private investors. In all these circumstances,
the free-market system tends to underprovide the resource in question...
Obama's budget plan properly focuses on areas that public economics identifies as priorities and where the U.S. discernibly
lags behind many parts of Europe: health..., education..., public infrastructure... and research and development... The emphasis
is on public-private partnerships (PPP), combining public financing and private sector delivery. ...
Obama's vision of an expanded federal role is on-target and transformative, but the financing will be tricky. This year's deficit
will reach an astounding $1.75 trillion, or 12 percent of GDP...
Obama's budget plan aims to reduce the deficit to 3 percent of GNP by 2013, and to level off till 2019..., but ... that target
will be very difficult to achieve and sustain as planned. ...[T]he plan is to cut the deficit mainly through higher taxes on the
rich, reduced military outlays for Iraq and Afghanistan, new revenues from auctioning carbon-emission permits and, finally, a
squeeze on non-defense discretionary spending... Such a squeeze on non-defense spending seems unlikely-and indeed undesirable-at
a time when government is launching several much-needed programs in education, health, energy and infrastructure.
The truth is that the U.S. ... will probably have to raise new revenues ... to carry out its vital roles in protecting the
poor, promoting health and education and building a modern infrastructure with ... sustainable technology. Ending the Bush-era
tax cuts on the rich certainly is merited, but further taxing the rich much beyond that will come up against political and practical
limits. Within a few years, we'll probably see the need for new broader-based taxes, perhaps a national sales or value-added tax
such as those widely used in other high-income countries. If we continue to assume that we can have the expanded government that
we need but without the tax revenues to pay for it, the unacceptable build-up of public debt will threaten the well-being of our
children and our children's children. ...
I doubt will see any major changes in the tax structure anytime soon, but if we do, value added taxes are regressive, but in countries
where they are used, they're an important source of revenue for highly progressive tax-and-transfer systems (but not without
problems). So the characteristic
of these taxes overall depends upon their implementation, i.e. how the extra revenue from the tax is used.
In this context,... the professionals are not being held accountable. As Viral V. Acharya and Rangarajan Sundaram point out:
"The US recapitalization scheme ... is ... generous to the banks in that it imposes little direct discipline in the form of replacement
of top management or curbs on executive pay, and secures no voting rights for the government".
We seem to forget one of the successful lessons from the late 1980s savings and loan crisis in structuring positive and negative
incentives: holding accountable the directors and officers, lawyers, accountants of the banks, investment banks and the rating
agencies. ... The Office of Thrift Supervision, which regulates the US's thrifts, and its sister agency, the Resolution Trust
Corp which was in charge of disposing of the assets of failed S&Ls, embarked on a deliberate deterrence strategy targeting lawyers,
accountants, directors and officers of failed thrifts that aided and abetted the excesses leading to the S&L crisis. The intent
was to discourage futures abuses and recover some of the lost taxpayer funds. ...
In the US, we are told that there are no culprits in the crisis. The attitude of the policy makers, regulators, bankers and
traders involved in the crisis is virtually fatalistic, treating the crisis as an inevitable "force majeure". All of them were
observers and "no one saw it coming". In short, the crisis is a Lemony Snicket's "Series of Unfortunate Events".
In reality the regulators that should have kept a close eye on the rapid growth of the shadow banking system were complacent,
and the boards did not have the background in the industry and didn't understand the risks. It is clear that the policy makers
and regulators lack the moral authority to lead us out of the crisis. ...
The US Treasury plans to rely on the same firms and people that were involved in leading to the crisis to get us out of it.
... Clearly, nothing learned, nothing gained from the S&L crisis or the Swedish experience. Maybe this will change.
Saying it's not your fault you crashed the ship into the rock because the rock was underwater and hidden - nobody could have seen
it coming - loses its force when you are navigating in waters that are known to be rocky. Even if you have the latest sonar based
upon fancy, innovative math that is supposed to detect the rock before you hit it, and even if regulators were supposed to clearly
map and mark all danger, if you hit it anyway, there's a reason why captains are expected to go down with - or at best be the last
ones off - the ship. It ensures they'll do all they can to avoid hitting it in the first place.
A Crisis of Ethic Proportions, by John Bogle,
Commentary, WSJ: I recently received a letter from a Vanguard shareholder who described the global financial crisis as "a
crisis of ethic proportions." Substituting "ethic" for "epic" is a fine turn of phrase, and it accurately places a heavy responsibility
for the meltdown on a broad deterioration in traditional ethical standards. ... Relying on [the] "invisible hand," through which
our self-interest advances the interests of society, we have depended on the marketplace and competition to create prosperity
and well-being.
But self-interest got out of hand. ... Dollars became the coin of the new realm. Unchecked market forces overwhelmed traditional
standards of professional conduct, developed over centuries. ... We've moved from a society in which "there are some things that
one simply does not do" to one in which "if everyone else is doing it, I can too." Business ethics and professional standards
were lost in the shuffle. ... The old notion of trusting and being trusted ... came to be seen as a quaint relic of an era long
gone.
The proximate causes of the crisis are usually said to be easy credit, bankers' cavalier attitudes toward risk, "securitization"...,
the extraordinary leverage built into the financial system by complex derivatives, and the failure of our regulators to do their
job.
But the larger cause was our failure to recognize the sea change in the nature of capitalism that was occurring right before
our eyes. That change was the growth of giant business corporations and giant financial institutions controlled not by their owners
in the "ownership society" of yore, but by agents of the owners, which created an "agency society."
The managers of our public corporations came to place their interests ahead of the interests of their company's owners. ...
The malfeasance and misjudgments by our corporate, financial and government leaders, declining ethical standards, and the failure
of our new agency society reflect a failure of capitalism. ...
What's to be done? We must work to establish a "fiduciary society," where manager/agents entrusted with managing other people's
money are required -- by federal statute -- to place front and center the interests of the owners they are duty-bound to serve.
The focus needs to be on long-term investment (rather than short-term speculation), appropriate due diligence in security selection,
and ensuring that corporations are run in the interest of their owners. ... Making that happen will be no easy task.
Rules will never cover everything, so ethics is part of the problem. But the solution to the agency problem has to come in large
part from changing incentives so that the self-interest of the managers coincides with the interests of the people they represent.
[Kahneman also talks about agency problems in a section
I left out of the next post.]
Irrational everything, by Guy Rolnik, Haaretz:
Prof. Daniel Kahneman has dozens, perhaps hundreds, of stories about people's irrational behavior when it comes to making economic
decisions. ... But the story Kahneman recalls when asked about the economic models at the root of the current financial crisis
is actually taken from history, not an experiment. It concerns a group of Swiss soldiers who set out on a long navigation exercise
in the Alps. The weather was severe and they got lost. After several days, with their desperation mounting, one of the men suddenly
realized he had a map of the region.
They followed the map and managed to reach a town. When they returned to base and their commanding officer asked how they had
made their way back, they replied, "We suddenly found a map." The officer looked at the map and said, "You found a map, all right,
but it's not of the Alps, it's of the Pyrenees."
According to Kahneman, the moral of the story is that some of our economic models, perhaps those of the investment world, are
worthless. But individual investors need security - maps of the Pyrenees - even if they are, in effect, worthless. ...
"In the last half year, the models simply didn't work. So the question arises: Why do people use models? I liken what is happening
now to a system that forecasts the weather, and does so very well. People know when to take an umbrella when they leave the house,
or when it will snow. Except what? The system can't predict hurricanes. Do we use the system anyway, or throw it out? It turns
out they'll use it."
Okay, so they use it. But why don't they buy hurricane insurance?
"The question is, how much will the hurricane insurance cost? Since you can't predict these events, you would have to take out
insurance against many things. If they had listened to all the warnings and tried to prevent these things, the economy would look
a lot different than it does now. So an interesting question arises: After this crisis, will we arrive at something like that?
It's hard for me to believe."
The financial world's models are built on the assumption that investors are rational. You have shown that not only are they
not rational, they even deviate from what is rational or statistical, in predictable, systematic ways. Can we say that whoever
recognized and accepted these deviations could have seen this crisis coming?
"It was possible to foresee, and some people did. ... I have a colleague at Princeton who says there were exactly five people
who foresaw this crisis, and this does not include ... Ben Bernanke. One of them is Prof. Robert Shiller, who also predicted the
previous bubble. The problem is there were other economists who predicted this crisis, like Nouriel Roubini, but he also predicted
some crises that never came to be."
He was one of those who predicted 10 crises out of three.
"Ten out of three is a pretty good record, relatively. But I conclude from the fact that only five people predicted the current
crisis that it was impossible to predict it. In hindsight, it all seems obvious: Everyone seemed to be blind, only these five
appeared to be smart. But there were a lot of smart people who looked at the situation and knew all the facts, and they did not
predict the crisis." ...
The interesting psychological problem is why economists believe in their theory, but this is the problem with the theory, any
theory. It leads to a certain blindness. It's difficult to see anything that deviates from it."
We only look for information that supports the theory and ignore the rest. "Correct..." ...
Let's end with your story of the Swiss soldiers and the map of the Pyrenees. I know why the map helped the soldiers: it gave them
confidence. But why didn't they use a map of the Alps? Why don't we use the right economic models, ones that are relevant to extreme
cases as well?
"Look, it's possible that there simply is no map of the Alps, that there is nothing that can predict hurricanes."
What Baseball Can Teach Policymakers, by Robert Stavins: ...Uncertainty is an absolutely fundamental aspect of environmental
problems and the policies that are employed to address those problems. Any analysis that fails to recognize this runs the risk
not only of being incomplete, but misleading as well. ...
To estimate proposed regulations' benefits and costs, analysts frequently rely on inputs that are uncertain – sometimes substantially
so. Such uncertainties in underlying inputs are propagated through analyses, leading to uncertainty in ultimate benefit and cost
estimates...
Despite this uncertainty, the most prominently displayed results ... are typically single, apparently precise point estimates
of benefits, costs, and net benefits (benefits minus costs), masking uncertainties inherent in their calculation and possibly
obscuring tradeoffs among competing policy options. Historically, efforts to address uncertainty ... have been very limited...
Over the years, formal quantitative uncertainty assessments - known as Monte Carlo analyses - have become common in a variety
of fields, including engineering, finance, and a number of scientific disciplines...
The first step in a Monte Carlo analysis involves the development of probability distributions of uncertain inputs to an analysis.
These probability distributions reflect the implications of uncertainty regarding an input for the range of its possible values
and the likelihood that each value is the true value. Once probability distributions of inputs to a benefit‑cost analysis are
established, a Monte Carlo analysis is used to simulate the probability distribution of the regulation's net benefits by carrying
out the calculation of benefits and costs thousands, or even millions, of times. With each iteration of the calculations, new
values are randomly drawn from each input's probability distribution and used in the benefit and/or cost calculations. ... Importantly,
any correlations among individual items in the benefit and cost calculations are taken into account. The resulting set of net
benefit estimates characterizes the complete probability distribution of net benefits.
Uncertainty is inevitable in estimates of environmental regulations' economic impacts, and assessments of the extent and nature
of such uncertainty provides important information for policymakers evaluating proposed regulations. Such information offers a
context for interpreting benefit and cost estimates, and can lead to point estimates of regulations= benefits and costs that differ
from what would be produced by purely deterministic analyses (that ignore uncertainty). In addition, these assessments can help
establish priorities for research.
Due to the complexity of interactions among uncertainties in inputs..., an accurate assessment of uncertainty can be gained
only through the use of formal quantitative methods, such as Monte Carlo analysis. Although these methods can offer significant
insights, they require only limited additional effort... Much of the data required for these analyses are already obtained...;
and widely available software allows the execution of Monte Carlo analysis in common spreadsheet programs on a desktop computer.
...
Formal quantitative assessments of uncertainty can mark a truly significant step forward in enhancing regulatory analysis...
They have the potential to improve substantially our understanding of the impact of environmental regulations, and thereby to
lead to more informed policymaking.
Macroeconomic policy uses the same type of framework for looking at uncertainty, but with additional twists, the addition of model
uncertainty, and the addition of parameter uncertainty within a given model. The steps above are carried out over a variety of different
policies, models, and a distribution of parameter values, and the goal is to find the most likely outcomes as well as the distribution
of outcomes for each policy. The monetary and fiscal authorities then choose policies that, for example, avoid the chance that the
policies will backfire and cause severe problems. But if the true model (or a close approximation to it) is not well represented
by the models used in the uncertainty analysis, big policy errors are still possible. That's something we tend to forget when we
do these types of analyses characterizing the degree of uncertainty that we face.
Robert Solow reviews Richard Posner's A Failure of Capitalism: The Crisis of '08 and the Descent into Depression:
How to Understand the Disaster, by Robert M. Solow, NY Review
of Books: ...Judge Posner ... has an extraordinarily sharp mind... But I also have to say that, in some respects, his grasp
of economic ideas is precarious. ...Posner has taught at the University of Chicago. Much of his thought exhibits an affinity to
Chicago school economics: libertarian, monetarist, sensitive to even small matters of economic efficiency, dismissive of large
matters of equity, and therefore protective of property rights even at the expense of larger and softer "human" rights.
But not this time, at least not at one central point, the main point of this book. ... The underlying argument-it is not novel
but it is sound-goes something like this. A modern ... economy ... can probably adapt to minor shocks ... with just a little help
from monetary policy and ... automatic fiscal stabilizers... It is easy to be lulled into the comfortable belief that the system
can take care of itself if only do-gooders will leave it alone. But that same financial system has intrinsic characteristics that
can make it self-destructively unstable when it meets a large shock. ...
In that kind of world, imagine a period of low interest rates. Once a set of profit opportunities is found, big operators will
be tempted to borrow so that they can play with much more than their own capital, and thus make very large profits. This has come
to be called "leverage." ...
In the past, 10-to-1 leverage would have been about par for a bank. More recently,... many large financial institutions ...
reached for 30-to-1 leverage, sometimes even more. ... [I]t is leverage that turns large banks and financial institutions into
ninepins that cannot fall without knocking down others that cannot fall without knocking down still others. That seems to be the
key to the potential instability of an unregulated financial system. It happens without any of the private actors violating the
canons of self-interested rationality. ...
It is a noteworthy intellectual event that Posner has come to this understanding and expressed it forcefully and fearlessly.
This same understanding must ... be the key to designing regulations that can reduce the frequency of financial crises like the
current one...
There are ... weaknesses in Posner's remarks... For example, more than once he says that the various antirecessionary measures-like
fiscal stimulus, bailouts-are very "costly" and "may do long-term damage to the economy." He does not explain what these costs
and damages are. Sometimes he seems to have budgetary costs in mind. But bailouts are mostly transfers from one group in society
to another... They are certainly not ethically satisfying transfers, but it is not clear how they do long-term damage to the economy.
The components of a fiscal stimulus package are costs to the federal budget; but to the extent that they put otherwise unemployed
labor and idle industrial capacity to work, they do not impoverish the economy; in fact, they enrich it. ...
There is an even odder chapter called "A Silver Lining?" In it Posner flirts with the idea that a recession, even a depression,
has a good side. It weeds out inefficient firms and practices. This is a little like saying that a plague is not all bad: it cleans
up the gene pool. No doubt there is some truth to this idea of a purifying effect. But the notion that it could possibly compensate
for years of lost output and lost jobs seems wholly implausible. There is certainly no calculation of economic costs and benefits
behind the thought of a "silver lining." I think it is another example of overemphasis on minor gains in efficiency and neglect
of first-order facts.
Posner's chapter on "The Way Forward" is all of sixteen pages long, and fairly disorganized... This means he does not seriously
try to imagine ... an effective regulatory regime... It seems to me that effective limits on leverage ... are basic to controlling
the potential instability of the financial system. ...
The financial system does have a useful social function to perform, and that is to make the real economy operate more efficiently.
Some human institution has to collect a nation's savings and put them at the disposal of those who have productive ways to use
them. Risks arise in the everyday business of economic life, and some human institution has to transfer them to those who are
most willing to bear them. When it goes much beyond that, the financial system is likely to cause more trouble than it averts.
I find it hard to believe ... that our overgrown, largely unregulated financial sector was actually fully engaged in improving
the allocation of real economic resources. It was using modern financial technology to create fresh risks, to borrow more money,
and to gamble it away....
Greed and foolhardiness were not invented just recently. The problem is rather that Panglossian ideas about "free markets"
encouraged, on one hand, lax regulation, or no regulation, of a potentially unstable financial apparatus and, on the other, the
elaboration of compensation mechanisms that positively encouraged risk-taking and short-term opportunism. When the environment
was right, as it eventually would be, the disaster hit.
Posted by Mark Thoma on Monday, April 20, 2009 at 05:22 PM in
Economics,
Regulation
"Words are the nodal points of numerous ideas, and are therefore predestined to ambiguity." -Sigmund Freud, The Interpretation of Dreams
"Poets are the unacknowledged legislators of the world" -Percy Bysshe Shelly
The technical argument for why firms that leverage beta using the taxpayer's balance sheet are looters is clear to anyone who
remotely understands global finance and central banking. I suspect it's also clear, at some level of mind and intellect, to the some
of the people doing the looting. To many of the shallower and more reptilian minds involved - which constitute no doubt a dissapointingly
large percentage - it admittedly is probably not. Power and profits, to them, are the only moral justifications needed. As both are
no doubt, at some level of inarticulated but instinctively accepted reasoning, deserved.
Financial looting is not now constrained by law, by regulation, or at the individual level, by a sufficiently powerful moral
conscience. The easy justification for it is that it is somehow socially necessary to "save" the system. And that the skills
involved are "worth" the price paid by society - which includes near-zero interest rates for savers and widespread fiscal and monetary
disorder that innervates democracy and sickens spirit of the people.
Yet society, in fact, is probably lucky that folks with skills such as these can "come to the rescue" and "reboot the economy"
for the benefit of all. So states a certain "wisdom", no doubt.
"Looting" is a reasonably violent word that conveys with some degree of accuracy what these men and women are doing. But it's
a word that implies an anonymity of both perpetrator and victim in the context of this usage, with an inneffectual abstraction that
lacks semiotic power. It flies through the cinema of the mind like an invisible gust of wind, unarrested and un-stilled by any imagery
that is sufficiently shocking and provocative of moral reasoning.
The language of political and social change needs a more muscular power and an imagery that arrests and convinces at an unconcious
level - this is a prerequisite for a broader social turn of collective consicousness. Certainly the banksters and their lobbyists
rely on this aspect of language in their own dealings with politicians and academics, and the political and economic establishments
are complicit in the acceptance of a veritable thesaurus of synonyms that defang "looting" into "providing liquidity to markets",
"intermediating capital flows", "compensating talent", "creating efficiencies".
A more effective phrase that describes the legally permitted looting of the taxpayer is "financial rape". The imagery is stark
and unambiguous, the metaphor is truthful at a structural level, and the notion of a personalized victim and a heinous and brutal
action is uncomfortably and effectively conveyed.
The wife who sees her wealthy bankster husband as a "rapist" is likely to be pitched headlong on an uncomfortable path of self-reflection.
The man who wonders in some corner of his mind if he really is a "rapist" may be more amenable to contemplation and enlightened regulation.
A society that defines privatized gains and socialized losses as a form of "rape" may be more willing to demand the political and
regulatory changes needed.
The word is not so hysterical as to immediately lose it's descriptive legitimacy, as are the frequent description of political
enemies as "Nazis".
No, rape is a good and accurate word. And when firms counterfeit credit, inflate profits falsely, blow themselves up, get bailed
out by taxpayers, pay bonuses with taxpayer monies and laugh in your face - they are raping you and they are "rapists" at an elemental
level.
And so the good men and women, the MBAs, CFAs, the gentle yoga class going, bottled water drinking, organic food eating, marathon
running and symphony going worker bees in the brutal corners and principal trading desks of the financial industrial complex - Yes,
you are "rapists". And you, central bankers, academics, bailout lobbyists and regulator enablers. You are aiding and abetting financial
rape.
You don't like that word, do you? It makes you get angry and squirm a bit.
Yeah, that's the point.
Now think about it. And imagine what if feels like for the person underneath you, while you're doing it to them.
The Last but not LeastTechnology is dominated by
two types of people: those who understand what they do not manage and those who manage what they do not understand ~Archibald Putt.
Ph.D
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