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Greece

from Peter Radford

So we reach the end. Good. Let democracy and popular government prevail. The entire Euro project was conceived by a small group of elitist technocrats, then foisted on national peoples often without any ability on the part of the people to veto it.

The crisis in Europe is an echo of the crisis here in the US. America’s banks went on an unsustainable binge of greedy excess. They generated, accumulated, mixed, and then sold mortgages in an ever increasing frenzy driven by the knowledge that as long as they moved the pile fast enough they could reward themselves handsomely and not suffer the consequences of their descent into the depths of outright fraud.

And it was a fraud.

Maybe not in the narrow and legally provable sense, but in the broader and more applicable ethical sense. The banks sought to rip us off to enrich themselves. They knew how compliant our governments all were. They knew that, in the end, they would be bailed out. So there was never a brake on their acceleration over the edge. 

This we all know. All except, apparently, for those few who cling to the delusion that it was the US government’s fault for “forcing” the banks to lend to marginally creditworthy borrowers in the name of some equality program. This trope still pops up now and again. It is utter rubbish, but serves to fog up the post-crisis debate just enough that we have never sought proper compensation from the banks. They still exist, absent one or two of the real fringe players, and are bigger and more dangerous than ever.

So the sudden realization that all that highly rated paper spewing from the Wall Street spigot, was just toxic junk, overturned the world’s finances. The Euro zone immediately fell into disarray. Its banks had gathered debts with reckless abandon and needed help. That help took the form, by and large, of moving the debts from private balance sheets onto public balance sheets. Meaning the taxpayers and not shareholders were now responsible for piles of useless assets that they had no responsibility for creating.

Add in the burden of providing support to those thrown into unemployment by the inevitable recession the bank crisis gave life to and government budgets everywhere were thrown into disarray. Debt piled up.

So governments suddenly faced their own debt management crises. And true to the immutable laws of capitalism, the bankers began to decry the increasing piles of debt accumulated from their own vice. Those bankers and their friends in orthodox economics began to talk ominously of impending confidence crises wherein nations would be unable to access the credit markets and so continue to fund the recovery from the bank induced horror.

The ratio of debt to GDP, we were told, had risen to crisis levels and needed to be reduced. Instead of increasing GDP the advocated approach was to reduce debt.

Now any fool with even a modest education could have understood that reducing debt ratios by cutting spending would also cut GDP meaning that the risk was high that the ratio might never fall even with substantial cuts. Worse: the risk was higher that cuts would actually reduce GDP faster than it would allow debt to be reduced, thus the ratio would deteriorate.

But that doesn’t happen in orthodox textbooks. And it doesn’t fit the banker’s narrative.

So austerity was invented and doomed to fail from the beginning.

You and I told them so, but you and I don’t count. The voice of democracy has been stifled. Popular government has been subverted and re-tooled as government for the benefit of a few.

And they want to be repaid. Despite having started the crisis. Despite having made bad decision after bad decision. Despite being so-called “experts” at risk assessment. Despite the 25% unemployment. Despite the 25% decline in GDP. And despite the humanitarian catastrophe that their greed unleashed on perfectly innocent people.

That a whole slew of north European politicians have cast their lot with the bankers is testimony to the grip that plutocracy and economic orthodoxy have combined to exert. It is an insanity. It is a delirium from which Europe, or rather the Euro project, probably will not recover.

Deservedly so.

When you ask an orthodox economist what a market is comprised of they rarely mention people. When you ask a banker what constitutes a debtor nation they will not talk about human beings. They do not care about real lives. Or real consequences. Reality in all its manifest aspects is expunged from their respective analyses. Instead they speak in a language specifically constructed to dehumanize their thoughts. This is to protect them from the ethical responsibility for their ideas and actions.

Well no more. Maybe.

Democracy has spoken up.

Let us not rejoice just yet though. There is work to do.

The Greeks have resisted more plunder. But can they rebuild?

I hope so.

  1. Achilleas
    July 8, 2015 at 3:11 pm

    Unfortunately Democracy has not won.

    The Greek government took this loud, proud and fearless NO that the greek people shouted on Sunday and translated it on Wednesday (with the latest request to the ESM)
    into more austerity (the new proposal will be worse for greeks than the government’s proposal of June 25) and even backed down from its firm position on immediate debt relief:

    ESM request today:
    “… Greece welcomes an opportunity to explore potential measures to be taken so that its official sector related debt becomes both sustainable and viable over the long run”

    Does that sound like “democracy won”, or as “democracy was manipulated” to you?

  2. Blissex
    July 8, 2015 at 4:52 pm

    «Democracy has spoken up.»

    Dhe democratic will of the democratically elected governments of 500 million europeans who respect the popular will of their voters has been to say NO to Greece’s proposals for more plunder. Democracy has won!

    «Let us not rejoice just yet though. There is work to do. The Greeks have resisted more plunder.»

    They resisted that temptation :-) only thanks to the democratic choices of the democratic governments of 500 million europeans.

    Greece in their recent post-2001 import boom “absorbed” (sounds better than your “plundered”) over €230 billion of net imports, peaking at an amazing €35 billion per year, with €73 billion “absorbed” even in the 2009-2012 period of “austerity”:

    https://research.stlouisfed.org/fred2/series/BPBLTT01GRA636N
    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1prt

    Most of those imports were “absorbed” thanks to loans that Greece probably never meant to repay, and as the second graph above shows they account for the majority of greek GDP growth if the “boom” years.

    • Lyn Eynon
      July 8, 2015 at 8:19 pm

      No bank was obliged to lend to Greek public or private borrowers. They did it because they thought it would be profitable and when it went wrong because they had mispriced the risk they persuaded governments and institutions to bail them out and pass the bill to Greece.

      This is not a dispute between the people of different European countries. It is a conflict between policies to protect working people across the EU and policies to enhance the wealth of a few at the expense of the rest. The Greek ‘no’ is for everyone who has suffered under austerity.

      • Blissex
        July 8, 2015 at 10:50 pm

        «No bank was obliged to lend to Greek public or private borrowers.»

        And viceversa. The greek government and citizens borrowed and nobody forced them to. They just planned to default later.

        «they persuaded governments and institutions to bail them out and pass the bill to Greece.»

        That’s really ridiculous — how was the bill passed to Greece? Were the jackbooted tank bridgades of the ECB seen in Syntagma square? Were Yanis or Alexis tortured in the basement of the European Council of Ministers until they signed over all the greek euros to the “institutions”?

        What actually happens is that interest rate payments by the greek government halved over the past few years, even if they are bankrupt. How does that represent a passing of the bill?

        The “institutions” are paying a large part of the bill by subsidizing the greek bankruptcy by several dozen billion euros a year in artificially low interest rates and in default insurance, plus the EU is still donating, no-strings-attached, €5 billion a year to Greece in transfer payments, as it has done for decades.

        Does the greek government want to refuse all that and declare default? A vast majority of greeks voted to refuse all that, and the greek government are very welcome to default, and Schauble would be overjoyed by that.

        «policies to enhance the wealth of a few at the expense of the rest.»

        Indeed a small country like Greece enriched themselves with €230 billion of net imports in a few years paid for largely by loans, and then they want those loans to be paid for by the great majority of EU citizens. If the same colossal amounts had been spent infrastructure investments in Bulgaria, Romania, Hungary, the baltics etc. they would have relieved much poverty.

        «The Greek ‘no’ is for everyone who has suffered under austerity.»

        But Greece has not suffered under austerity: their total GDP in 2014 was much the same as in 2001, when Greece was considered a rich country, and their GDP per capita at PPP in 2014 was higher than in 2001. The numbers are very clear and indisputable. Countries like Holland, Denmark, Finland have a 2014 GDP much the same as that in 2001, and nobody is campaigning to have all their foreign debts forgiven. Plus during six years of “austerity” Greece still managed to net import over €70 billion of the good stuff. Only in 2013 Greece returned to the 2001 situation of a current account in substantial balance.

        Some greeks have indeed become poorer than in 2001, but since the average income has actually slightly improved in 2014, that cannot be because of austerity; it is rather because of a massive redistribution from poor greeks (with little money in swiss bank accounts) to rich greeks (with a few hundred billion euros of wealth abroad), but that’s an internal political matter for greeks to resolve. Why should germans, french, italian citizens be taxed to support the poor greeks that the rich greeks don’t care about, especially as they already donate €5 billions a year to Greece in net aid, and the EU treaties that Greece signed enthusiastically (to the point of fraud) specifically exclude that?

        Consider instead the permanent “austerity” of the Bulgarians, whose GDP per capita in euros is even today one quarter of that of the greeks. Who is worrying about them?

  3. Michael Kowalik
    July 9, 2015 at 2:53 am

    BlisSex is profiling itself as a paid troll: infiltrate “to discredit, promote distrust, dissuade, deceive, deter, or disrupt.”

    • charlie
      July 9, 2015 at 3:51 am

      thank you M. Kowalik ….

      amazing that he attributes the approval to all europe 500M people! Nice shift from real people to entire populations a typical Fox New deceptive shift of subject .. the first clue Blissex dissembles.

  4. Lyn Eynon
    July 9, 2015 at 8:16 am

    In brief reply to Blissex.

    Banks need to take responsibility for their own mistakes. Returns are justified by taking on risks and sometimes those risks materialise. There was no obligation on European citizens to bail them out. A faster and deeper haircut would have stimulated recovery.

    Denying that Greece has suffered from austerity by comparing 2014 to 2001 GDP is like denying there was a 1930s depression in the US because it had been preceded by a boom. The Greek economy has collapsed since 2009 and the policies insisted on by the troika to achieve primary surplus have accentuated this, foolishly so as growth would make it easier to repay debt.

    On the EU countries poorer than Greece. Yes, a massive public infrastructure programme funded by monetary expansion and the cheap debt that Germany and other countries could borrow would be a excellent idea. Would you – or Schauble – support that?

  5. July 9, 2015 at 8:58 am

    Blissex you are entiteled to your own opinion but not your own facts. To deny what has happened in Greece, in terms of unemployment, suicide, economic refugess etc, is completely and utterly bogus. It’s almost as if you were looking at the same set of meaningless and useless economic statitistics that are the hallmark of your typical neo-classical economists who haven’t done any real field research in the past 40 years.

    Now that being said I think by all means we ought to be looking more closely at what actually transpired in the former east bloc nations that became part of the EU. I would venture to say that the plight of your average former east bloc citizen was much worse than what has happened in Greece. However this does not change what is happening in Greece. For better or worse the EU is an economic union and any political unification is simply an afterthought, albeit one which people for some silly reason believe is what the EU is all about, even though, as this crisis has shown, there is 0 democratic legitimacy underlying the shenanigens carried out by the ECB. What is so funny about the EU is that because there is no real pretence of democratic legitimacy the details of the how the eu’s economic union actually works, the actual rules and regulations are by and large, for most europeans, soley the interest of some Brussels technocrats and not worthy of real attention.

    I for one will not tolerate the righteous indignation of many of the more prosperous lands of EU because, as in the case of Germany, the vast majority of the population doesn’t even know what debt is, they have no fuckin clue, never been in debt, don’t use credit cards and their societies haven’t privatetized every moment of social welfare like other countries have. Worse most Germans don’t even know why they just happen to be so much “smarter” than those shiftless, corruput and lazy SuedLaeinder(hint maybe because %80 of banking in Germany, which includes loans and other forms of finance, takes place in effectively public banking system which is not based on profit.) And of course they are uaware how the EU/ECB has been trying to annihilate the last vestiges of public banking preaching the sermon of free markets for commerical banks. And to think it was the Americans who designed their public banking system FTW LOL!(Marshall Plan).

    There is ample reason to be pissed off the at the machinations of the EU/ECB/IMF, completely independent of Greeece, or to bemoan the general uttter IGNORANCE of large parts of the EU towards how their economic union actually works(but then again why should anyone care, since there is nothing democratic about it one can”t do anything about it anyway ?!&). The outright exploitation of the former east bloc countries by German(austria) and France(Russia) is eerily reminsecent of pre 1914 Europe. Don’t even get me started with what the US/IMF has been doing in Ukraine and elsewhere. For some stupid reason I still believe that something good can come out of the EU, but not util there is a real democratic system of legitimacy, for in it’s current form the EU is of the bankers,by the bankers, and for the bankers, screw the people

    • July 9, 2015 at 10:02 am

      You are perfectly right about the German banking system* and at pointing out that we have to focus on institutions and not on short-term actions and PR-stunts of election-driven politicians.

      To quote from my post: “The point is whether a country is good at institution-building or not. There is a lot at stake. If you mess up your political institutions you end up in a banana republic, if you mess up your banking institutions, first and foremost the central bank, you end up in large scale bankruptcy and QE.”

      *See my post on the parallel thread
      https://rwer.wordpress.com/2015/07/02/finance-as-warfare-michael-hudsons-new-book/#comment-95338

  6. July 9, 2015 at 9:23 am

    You say: “The Greeks have resisted more plunder. But can they rebuild?” The Greeks have given Yanis Varoufakis the mandate he asked for. A very solid one. Varoufakis is an economist, more precisely a heterodox economist. Can heterodox economists rebuild Greece? Seems that they missed a big chance.

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