Galbraith on Greece

[vt]

Re: Galbraith on Greece

gnk,

Prayers and hope that the Greek people are able to somehow recover someday. It's a shame it had to come to this, but the government was given the opportunity to reform.

We really appreciate your posts on the reality the people are living through.

[Southernguy]

Re: Galbraith on Greece

+1
Maybe they trusted too much in the ECB always backstopping the banks?

This is something I can't understand. It was obvious many months ago that something bad could happen with Greek bank accounts, similar to what happened in Cyprus. Was having one's money in the Greek banking system so much more advantageous than having one's money in a foreign bank? Was it particularly difficult to move all of one's funds into a foreign bank or into gold or stocks? From my view here in the U.S., the dumb money was really, really dumb.

If something like what's happening in Greece were to happen here in the U.S., I would be quite pleased to get as much warning as the Greek people did.

[GRG55]

Re: Galbraith on Greece

I thought the Rhode Island move around that time was funnier than the California IOU thing. Call it a "furlough." But force the employees to come to work anyways. Then just don't pay them. Problem solved.

Sounds like something from the USSR - "we pretend to work and you pretend to pay us"

[GRG55]

Re: Galbraith on Greece

Watch for California style IOUs

As I recall these IOUs were legitimized by the government allowing them to be used to pay taxes.

Do you think that'll work in Greece?

What's in a name? That which we call a Euro (or a New Drachma?) by any other name would smell as sweet.

[touchring]

Re: Galbraith on Greece

The large numbers of "no" voters have proved what I had suspected. MSM and NGOs have been trying to influence the polling outcome with pro austerity articles and manipulated pre-polls that showed more people will vote yes even though the reality is completely the opposite.

+1

Greece has delivered a dramatic, unexpected and sensational rejection of the terms demanded by its creditors in return for aid, putting itself closer to leaving the euro.

With more than three quarters of votes counted, around 62% of Greeks have voted No, or Oxi – stunning the eurozone, and opening up another chapter in this long crisis.

[shiny!]

Re: Galbraith on Greece

This is something I can't understand. It was obvious many months ago that something bad could happen with Greek bank accounts, similar to what happened in Cyprus. Was having one's money in the Greek banking system so much more advantageous than having one's money in a foreign bank? Was it particularly difficult to move all of one's funds into a foreign bank or into gold or stocks? From my view here in the U.S., the dumb money was really, really dumb.

If something like what's happening in Greece were to happen here in the U.S., I would be quite pleased to get as much warning as the Greek people did.

You obviously pay attention to events like Cyprus and Greece. You're on alert for signs that it could happen here. But how many people don't pay attention, or do pay attention but think it can't possibly happen to us? None of my friends know what happened in Cyprus; they're not paying attention to Greece, either. Just like none of them saw the last bubble and none of them will see the next one. Maybe after Greece the lesson will sink in, but for most people "things just happen with no warning."

How many millions have died in totalitarian police states because they didn't leave while they still had some freedom? Why didn't they leave when they had the chance?

Normalcy bias. They were afraid of appearing foolish to their friends who thought they were worryworts. Or the thought of leaving their comfort zone was too frightening, the logistics of pulling up stakes was too daunting... So they told themselves that things weren't so bad, that the awful things that happened in other countries would never happen in theirs, or that the next election would bring a return to sanity, or that it wouldn't happen for a long time and there would be plenty of warning...

I know I'm guilty of this. Right now you and I are living under more governmental surveillance than the USSR or Fascist Germany could have imagined in their wildest fantasies. But the electricity is on, the food is plentiful, gas is cheap and TV has more mind-numbing channels than ever so it doesn't seem so bad, does it?

But you can't fly without showing your papers and being willing to submit to a body cavity search. You can't leave the country if they say you owe taxes. The government can already seize your bank account, your property, and lock you up for years with no due process. Hell, they can arrest you for even complaining about it. That they're not doing this in a widespread fashion doesn't mean they can't or won't.

No government in history has ever appropriated powers for itself that it didn't eventually use. I'm well and truly frightened of my government now because of the power it has ammassed. If I had enough courage I would leave. But I'm too afraid to do it alone and I don't know where to go that would be any safer, because there is no country in the world that the evil of these times cannot penetrate.

By 1938 the Jews in Germany were prisoners in their own country, wishing they had gotten out in 1933. But in 1933 they never imagined the future would be so bad. By the time they realized the danger they were in it was too late to do anything about it. They were not stupid. They were simply so decent and law-abiding, they couldn't believe that their civilized country would ever turn on its own citizens the way it did.

History doesn't repeat but it rhymes. Things go in cycles. Is it 1933 again? Will you know if it is?

[Fiat Currency]

Re: Galbraith on Greece

As I recall these IOUs were legitimized by the government allowing them to be used to pay taxes.

Do you think that'll work in Greece?

What's in a name? That which we call a Euro (or a New Drachma?) by any other name would smell as sweet.

It will be IOUs first ... then the NGD (New Greek Drachma). IOUs work ... Just Another Fiat Currency. They should go for the currency symbol OXI at this point

They key will be whatever political and economic/currency/debt contagion that follows. Can it be contained? Right now, PMs are saying yes The NGD/OXI will lose 30+% store-of-value in a short period of time. Life will go on. No one will go to jail. The bigger game is yet to come.

[gnk]

Re: Galbraith on Greece

I have read Varoufakis, and I agree with many of his points when it comes to describing the faults of the international monetary system. Varoufakis should be careful. He has entered the world of politics. It's an ugly world, and I fear that he could become a scapegoat when things go south. I don't think he has a connection to these political parties that comprise SYRIZA and I think they will throw him under the bus in a heartbeat if they feel they have to.

Varoufakis announces resignation as finance minister

[gnk]

Re: Galbraith on Greece

As I recall these IOUs were legitimized by the government allowing them to be used to pay taxes.

Do you think that'll work in Greece?

What's in a name? That which we call a Euro (or a New Drachma?) by any other name would smell as sweet.

The government and the banking system are nearly bone dry. I can't begin to describe to you what that means to the economy. What I have been hearing from business people is shocking - from tavern owners to major importers, to members of shipping families.

Anyway, a parallel currency or IOUs was an idea floated around by Varoufakis, and several hours later, he is no longer Finance Minister. Right now, what matters is what the ECB will do in a few hours.

I said it before, I'll say it again. The election in January was unnecessary. The referendum served an ulterior purpose. SYRIZA is either incompetent or had a secret drachma agenda all along

A complete waste of time, energy, and money. And now we will have to pick up the ruins left of the economy. Tourism is the lifeblood of many local economies in Greece. It's how we maintain a decent living in winter. Some where along the money chain, we all benefit from tourist dollars. Tourism is collapsing fast. Heard a 75% drop in bookings in Crete. The "no" vote isn't going to help. Who would go to a country that may be short of gasoline and medical supplies? I said earlier that Greece is not a place to get sick. I didn't mean that generally. I mean that right now the cap controls are hurting medical supplies. I recently saw a shared post on fb where a pharmacy in Zakynthos was searching for a specific drug.

Money is not moving, and I don't know how a lot of people will make it this winter without tourist dollars.

And winter's coming. (yeah, a GOT reference)

[don]

Re: Galbraith on Greece

Where Do We Go From Here?
Greece Rejects the Troika

by MICHAEL HUDSON

Just after 7 PM Greek time on Sunday, I was told that the “No” vote (Gk. Oxi) was winning approximately 60/40. The “opinion polls” showing a dead heat evidently were wrong. Bookies across Europe are reported to be losing their shirts for betting that the financial right wing could fool most Greeks into voting against their self-interest. The margin of victory shows that Greek voters were immune to the mainstream media’s misrepresentation during the week-long run-up as to whether to accept the troika’s demand for austerity to be conducted on anti-labor lines. (James Galbraith summarizes the misrepresentation in “9 Myths About the Greek Crisis,” Politico.)

It should not have been so great a surprise. Voting age for the referendum was lowered to 18 years, and included army members. Faced with an unemployment rate of over 50 percent, Greek youth understandably wanted no more of euro-austerity.

The Troika’s demand was for austerity to be deepened solely by taxing labor and reducing pensions. Its policy makers had vetoed Syriza’s proposed taxes the wealthy, vetoed steps to stop their tax avoidance, and that the IMF had vetoed cutbacks in Greek military spending (far above the 2% of GDP demanded by NATO), despite even the European Central Bank (ECB) and German Chancellor Merkel agreeing to this. Instead, Jean-Claude Juncker, President of the European Commission, threatened that the EU would expel Greece from Europe – despite there being no law permitting this to occur. And instead of doing what a central bank is supposed to do – provide liquidity (and paper currency) to banks, ECB head Mario “Whatever it takes” Draghi forced them to shut down even their ATM machines for lack of cash. Evidently this was intended to frighten Greek voters to think that this would be their country’s future if they voted No.

It is an old strategy. Andrew Jackson expressed his vindictiveness toward the Second Bank of the United States by shutting it down when it refused to appoint his selected corrupt cronies. He deposited the U.S. Treasury’s money in his “pet banks.” Draghi thus has shown the ECB not to be “technocratic,” but a cabal of right-wing political operatives working to bring down the left-wing Syriza government, even at the possible cost of empowering the far-right Golden Dawn party. The eurozone’s class war in support of finance against labor is now open and in earnest.

The media have not explained that the ECB has set out to wreck Greece’s banking system by refusing to do what central banks are supposed to do: provide liquidity as lenders of last resort. The banks are running out of cash, because Greece’s central bank is not run by the Greek government, but by the ECB following a right-wing agenda. What Greece needs is a domestic central bank – or failing that, a national Treasury – empowered to create the money to monetize government spending on economic recovery.

The vote throws into question just what it means to be what pro-austerity advocates call “committed to the European project.” It evidently means a commitment to yet further economic shrinkage, privatization and hence higher prices for hitherto public utilities, higher value-added taxes on consumers, and lower pensions for labor. Accepting troika demands thus would have been a commitment to financial class war.

U.S. popular media echoed the European right by trying to frighten Greeks and their sympathizers into believing that the vote is whether or not to remain part of Europe – as if Britain does not have its own currency while remaining part of the European Union. So successful has pro-creditor disinformation been that the Euro-Left movement has expressed bewilderment that the Syriza party did not begin immediately, upon its election victory in January, to educate voters on what actually is at issue.

What does it mean to be “committed to the European project”? Committed to financial war against labor – to austerity, privatization, high prices for basic hitherto public utilities. Committed to higher taxes for labor, lower taxes for the One Percent.

This topic was at the center of a meeting at the European Parliament in Brussels on July 2.** There was of course unanimous support for a “No” vote to the anti-labor, pro-creditor demands by the IMF, European Central Bank and European Council. But there also was concern that the Syriza leaders had not spelled out their logic to lead an informed and more detailed discussion of why remaining in the eurozone, subject to public policy being dictated by the IMF and ECB, will make the economy subject to chronic debt deflation, economic shrinkage, pension cutbacks, higher taxes on consumer (but a veto on higher taxes on business), faster privatization selloffs (but not to Russians if they offered higher prices), and no rejection of past insider deals.

There might even be a silver lining in letting the Greek banks go under, if the government nationalizes and indeed, socializes them. A public banking option could provide low real-cost charges rather than the current monopoly pricing. And of course a government-run bank would not lend for money laundering or financial speculation.

But instead of spending the past six months educating the public over just what is at issue with the Troika, Syriza focused on sparring with Europe, evidently to demonstrate how firmly the bank was committed to austerity, and how self-serving IMF head Christine Lagarde has been in overruling IMF staff and board to defend French interests. The problem today, as it was in 2010-11 under Dominique Strauss-Kahn, is that French banks are the major holders of Greek bonds (including via their ownership of Greek banks).

One factor that may have incensed Greeks to vote “No” was the revelation that an internal IMF Debt Sustainability Analysis – which Lagarde had sought to suppress – had endorsed what Syriza’s leader Alexis Tsipras has been saying all along: Greece needed a debt writedown, and had needed it ever since Strauss-Kahn overrode his staff in 2010-11 when they urged the IMF not to capitulate to ECB demands to pay French, German and other private bondholders with Troika bailout loans and making Greek taxpayers liable.

Two weeks ago the Greek Parliament released a report by its own Debt Truth Commission explaining why Greece’s debt to the IMF, ECB and European Council was “odious” and had been imposed on the nation by the demand by Ms. Merkel and other pro-bank leaders that Greece nothold the referendum on the bailout (of French and German banks) that Pasok Prime Minister Papandreou had offered. Finance and democracy have become antithetical in Europe – which prompted the late Frankfurt Allgemeine Zeitung editor Frank Schirrmacher to write his famous editorial, “Democracy is Junk.”***

The left-wing Syriza members with whom I met in Athens, Delphi and Brussels felt that more should have been done to educate the Greek public and expose how impossible it was for Greece to pay the debts with which the Troika (and its pro-bank Pasok/New Democracy coalition that had ruled Greece for a generation). The creditor institutions have refused to climb down on the question of including debt relief in the current talks, pretending that this is an issue for later.

Last Tuesday, Tsipras made his most desperate attempt yet to bring the issue forward. He and finance minister Varoufakis have been widely criticized in the U.S. media for seeming to capitulate to Troika demand. The reality is that they have taken a polite conciliatory stance all along, if only to show how totalitarian and unyielding the Troika has been. The Syriza position has been “We’d like to pay. But there simply is no money – as the IMF’s own calculations have clearly and explicitly shown.”

The Troika have refused to write down a single euro of unpayably high debt. That is what enabled Tsipras to depict his nation as being victimized by the eurozone’s vicious class war. He made the point that the Troika had put nothing in writing about debt writedowns. His seemingly conciliatory position dared them to back up their promises in writing. He was not going to make the tragic mistake that Russian leader Gorbachev made when he was gullible enough to yield to merely verbal NATO promises that it would not move into the post-Soviet countries of Central Europe and the Baltics. The Troika’s position was “Impose austerity now. We’ll talk about debt writedowns later. But first, you must sell off what remains of your public domain, lower wages by another 20%, and force another 20% of your population to emigrate. Only then, when we’re sure that we can’t get another euro out of you anyway, thenwe at least be willing to talk about writing down some of your debt – when we see that you really have nothing left to pay!”

The press represented Tsipras’s position as a back-down. It was actually calling the bluff of the eurozone leaders.

Michael Hudson’s book summarizing his economic theories, “The Bubble and Beyond,” is now available in a new edition with two bonus chapters on Amazon. His latest book is Finance Capitalism and Its Discontents. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion, published by AK Press. He can be reached via his website, mh@michael-hudson.com

Notes.
**“Peripheral debts: Causes, consequences and solutions,” sponsored by by the Eurpean United Left/Nordic Green Left, GUE/NGL (www.guengl.eu). The video can be found here: http://www.guengl.eu/news/article/pr...utions.-2-july. (My speech begins at about 27 minutes.)
*** http://www.voxeurop.eu/en/content/ar...as-junk-status

[gnk]

Re: Galbraith on Greece

Too many lies and mischaracterizations. I have now lost all faith in Hudson. When he ignores the fact that Greece is a basket case of a failed state, and calls anything economic he disagrees with as right wing finance, I find it hard to listen to him. He is just as extreme as the supply siders.

Europe's finance model is nothing like the Anglo American finance model. It may not be squeaky clean, but its not as bad as he describes it.

The issue with the EU is that it has member states and they all have to agree on a debt writedown. How do you tell the poorer nations with fewer/lower benefits and lower median salaries to do that for Greece? That's why in 2012, after the haircut they restructured the debt. As a percentage of gdp, Greece, a country that could not go to the markets to finance itself, was paying down its debt for less than some other EU members. Hudson ignores this because he wants the simplistic david v goliath story.

I would like to see Hudson run a country.

If Greece went it alone and defaulted in 2010, and adopted the drachma, the resulting depression would have been worse, and Greece, given its public sector first culture (clientelism and patronage) would have have ended up like Venezuela within 5 years time.

I'll listen when he addresses corruption, patronage, and clientelism in Greece in detail and explains how he would solve it.

As for the referendum, it has always been open to interpretation. It was faulty as written. And what was its purpose? That's where the story is. I have already explained my own ideas.

[jpatter666]

Re: Galbraith on Greece

Too many lies and mischaracterizations. I have now lost all faith in Hudson. When he ignores the fact that Greece is a basket case of a failed state, and calls anything economic he disagrees with as right wing finance, I find it hard to listen to him. He is just as extreme as the supply siders.

Europe's finance model is nothing like the Anglo American finance model. It may not be squeaky clean, but its not as bad as he describes it.

The issue with the EU is that it has member states and they all have to agree on a debt writedown. How do you tell the poorer nations with fewer/lower benefits and lower median salaries to do that for Greece? That's why in 2012, after the haircut they restructured the debt. As a percentage of gdp, Greece, a country that could not go to the markets to finance itself, was paying down its debt for less than some other EU members. Hudson ignores this because he wants the simplistic david v goliath story.

I would like to see Hudson run a country.

If Greece went it alone and defaulted in 2010, and adopted the drachma, the resulting depression would have been worse, and Greece, given its public sector first culture (clientelism and patronage) would have have ended up like Venezuela within 5 years time.

I'll listen when he addresses corruption, patronage, and clientelism in Greece in detail and explains how he would solve it.

As for the referendum, it has always been open to interpretation. It was faulty as written. And what was its purpose? That's where the story is. I have already explained my own ideas.

Sorry to hear all this gnk -- have you thought about the next few years? Planning to ride the wave regardless?

Good luck.

[gnk]

Re: Galbraith on Greece

Sorry to hear all this gnk -- have you thought about the next few years? Planning to ride the wave regardless?

Good luck.

I'm definitely riding the wave. I'm not the average greek, and if we go drachma, there will be many investment opportunities. I prefer that Greece not go the drachma route, but hey, you go with the flow. Lots of people here will be wiped out. Public employee payrolls will crash... it will be hell for many for a couple years, and then vulture capital will swoop in and buy everything on the cheap. A huge change of asset ownership.

Is that scenario better than EU membership?

Things were stable and improving (albeit slowly) last year.

[vt]

Re: Galbraith on Greece

"Europe's finance model is nothing like the Anglo American finance model. It may not be squeaky clean, but its not as bad as he describes it.

The issue with the EU is that it has member states and they all have to agree on a debt writedown. How do you tell the poorer nations with fewer/lower benefits and lower median salaries to do that for Greece? That's why in 2012, after the haircut they restructured the debt. As a percentage of gdp, Greece, a country that could not go to the markets to finance itself, was paying down its debt for less than some other EU members. Hudson ignores this because he wants the simplistic david v goliath story.

I would like to see Hudson run a country.

If Greece went it alone and defaulted in 2010, and adopted the drachma, the resulting depression would have been worse, and Greece, given its public sector first culture (clientelism and patronage) would have have ended up like Venezuela within 5 years time.

I'll listen when he addresses corruption, patronage, and clientelism in Greece in detail and explains how he would solve it.

As for the referendum, it has always been open to interpretation. It was faulty as written. And what was its purpose? That's where the story is. I have already explained my own ideas."

+1

[touchring]

Re: Galbraith on Greece

I've not been to Greece, so I wondered what Athens looked like on Google street view. I'm quite surprised. Athens looks less developed and has less cars on the street than Kiev. Ukraine only has a per capita GDP of $4000 and lies between 3rd world and developing world.

Among developing nations, Athens looks less developed than Bangkok, Kuala Lumpur or Jakarta.

This makes me wonder if Greece is really suitable to remain in the Eurozone.