Galbraith on Greece

[don]

Re: Galbraith on Greece

You're right. My mistake. I was thinking about how Germany supported the rebels in Spain to overthrow the government.

You saved me on the The Magic Flute question - glad I could help

[don]

Re: Galbraith on Greece

from a friend of mine on the Greek situation:

"it's the reduction of pensions, less govt.jobs,etc. that has to be brought under extreme control. The debt would take care of itself."

He's a retired banker who made a killing when his bank was sold to one of France's TBTFs, and he's not even a Greek . . . and yet he knows.

[don]

Re: Galbraith on Greece

Every age group but 65 and older voted "No" in the referendum as the following Greek "No" Vote Demographics shows.

image: http://1.bp.blogspot.com/-xFAMRCnF0F...mographics.png



The following email was to a reader of mine. The email comments on the state of affairs in Greece as well as my proposed Way Forward.

"No Dreams and Nothing to Lose"

Nothing to Lose writes ...

I don't give a **** for politicians, I just care about my country.

I am a 30 year unemployed person with a bank account that has less than $10,000 left. What do I have to lose?

I don't have dreams for my life anymore. And I haven't even begun to live. For 5 years we suffered, and we are no better off.

Before the IMF came, Greek debt was around 118% of GDP. After two bailouts, debt is now close to 175% of GDP.

Is that progress?

The official unemployment rate is close to 30%, imagine how much the unofficial might really be.

More than 10,000 have committed suicide. That's about 1/1000th of the population.
They just don't let us breathe.

This picture Sums Up the Bailout Success.




Finance minister (Mr. Varoufakis) said today that an IMF report showed the debt was unsustainable from the start and that financials wouldn't get better even by 2030.

I don't know if the changes your friend proposes will be done.

At least Tsipras is young and unlike of most of the politicians that are deeply corrupted and bribed. Some politicians that have been in the government for the last 40 years have accumulated wealth of more than 2 billion US dollars and have more than 50 houses.

The media propaganda to vote 'Yes' last week was disgusting and more than obvious. Politicians that were hiding in their caves for more than 5 years came out to talk people into voting 'Yes'.

Even politicians from other countries encouraged us to vote for 'Yes'. How would you feel if our politicians encouraged the US citizens to vote for a specific US president?

I expect Tsipras' government to fall because most ensconced EU blackmailers simply don't want him. Perhaps they just to get rid of him once and for all. If they back down and Greece wins something out of the situation, Spain and Portugal could be next.

No road is easy, but I prefer to be free and poor than some banker's or a German politician's economic bitch slave.

I want all of them to get the f*** out of my country and let me be. I also want all the corrupt politicians in jail. Do I ask too much?

No Vote Explanation

85% of those 18-24 voted 'No'. 72.3% of those 25-35 voted 'No'.

The email from "Nothing to Lose" explains the overwhelming 'No' vote perfectly well.

Why should those not at all responsible for the mess suffer just so that some banks and bondholders could get paid? After all, that's who really got bailed out. Greece was not aided in the least.

[don]

Re: Galbraith on Greece

Who Doesn't Lose? (You'll Never Guess)

Long after Greece has left the Eurozone and Germany is using the Deutsche Mark as its currency, the people of the two nations, antagonized to a level unseen since World War II, will be accusing each other of benefiting more from the brief but tumultuous period of the common currency.

In reality, nobody had put a gun to Greece's head and told it to lever up, enriching local oligarchs and corrupt politicians, taking advantage of credit that was artificially cheap only due to the common currency and an implicit monetary, if not fiscal, union.

Germany, whose exports account for nearly 50% of GDP, on the other hand experienced an unprecedented exporting golden age, made possible only due to an artificial currency, the Euro, that was by definition created to be weaker than the Deutsche Mark and benefitted from any bout of weakness in Europe's periphery, such as the past 5 years.
The truth is, when things were good nobody second-guessed any decisions for a second, and since the rising economic tide lifted all boats, nobody cared.

And then the tide rolled out, displaced by trillions in bad loans and gargantuan mountains of sovereign and financial debt, which ultimately would lead to the first, then second, then third and then an all-out cascade of sovereign defaults.
Sadly, the losers - regardless of the propaganda and jingoist rhetoric - are the ordinary, common, taxpaying people of Germany and Greece (and every other European nation), who enjoyed a few brief years of artificial prosperity, which in retrospect was entirely due to debt, masked well by the "currency swaps" and other financial engineering concocted by banks such as Goldman Sachs, in clear violation of the Maastricht treaty which is now a long-forgotten memory of the founding ideals behind the Eurozone.

For every loser there is a winner, and in the case of Greece and its tragedy, just as millions are about to lose everything, a few not only made billions but quietly, under the guise of "sovereign bailouts" transferred their entire risk onto the taxpaying public.

They are shown in the chart below.



It is that transfer of private-to-public risk, which is also the main reason why the public debt of so many European countries, not only Greece, whose debt is record high despite a default to its private creditors in 2012 and where only 10% of bailout proceeds ever made it to the actual economy...



... but the entire periphery has soared in the last few years.



Inevitably, there will be many angry people, because what is about to come to Europe will be hardship unlike anything seen in generations. Our suggestion: before neighbor takes it out on neighbor, study the following map closely because just like Libor was an impossible conspiracy theory until it was a proven fact, what is happening in Europe was propagated and effectuated by one bank more than any other.

This one:


Or, one can ignore this as merely yet another conspiracy theory. And that's fine.

But there is one critical, factual loose end that has to be investigated.

Back in June 2012, the ECB, whose head was the recently crowned Mario Draghi who had less than a decade ago worked at none other than Goldman Sachs, was sued by Bloomberg's legendary Mark Pittman under Freedom of Information rules demanding access to two internal papers drafted for the central bank’s six-member Executive Board. They show how Greece used swaps to hide its borrowings, according to a March 3, 2010, note attached to the papers and obtained by Bloomberg News. The first document is entitled “The impact on government deficit and debt from off-market swaps: the Greek case.” The second reviews Titlos Plc, a securitization that allowed National Bank of Greece SA, the country’s biggest lender, to exchange swaps on Greek government debt for funding from the ECB, the Executive Board said in the cover note. From Bloomberg:

In the largest derivative transaction disclosed so far, Greece borrowed 2.8 billion euros from Goldman Sachs Group Inc. in 2001 through a derivative that swapped dollar- and yen-denominated debt issued by the nation for euros using a historical exchange rate, a move that generated an implied reduction in total borrowings.

“The Greek authorities had never informed Eurostat about this complex issue, and no opinion on the accounting treatment had been requested,” Eurostat, the Luxembourg-based statistics agency, said in a statement. The watchdog had only “general” discussions with financial institutions over its debt and deficit guidelines when the swap was executed in 2001.

“It is possible that Goldman Sachs asked us for general clarifications,” Eurostat said, declining to elaborate further.

The ECB's response: "the European Central Bank said it can’t release files showing how Greece may have used derivatives to hide its borrowings because disclosure could still inflame the crisis threatening the future of the single currency."

Considering the crisis of the (not so) single currency is very much "inflamed" right now as it is about to be proven it was never "irreversible", perhaps it is time for at least one aspiring, true journalist, unafraid of disturbing the status quo of wealthy oligarchs and central planners, to at least bring some closure to the Greek people as they are swept out of the Eurozone which has so greatly benefited the very same Goldman Sachs whose former lackey is currently deciding the immediate fate of over €100 billion in Greek savings.

Because something tells us the reason why Mario Draghi personally blocked Bloomberg's FOIA into the circumstances surrounding Goldman's structuring, and hiding, of Greek debt that allowed not only Goldman to receive a substantial fee on the transaction, but permitted Greece to enter the Eurozone when it should never have been allowed there in the first place, is that the person who oversaw and personally endorsed the perpetuation of the Greek lie is none other than Goldman's Vice Chairman and Managing Director at Goldman Sachs International from 2002 to 2005. The man who is also now in charge of the ECB.

Mario Draghi.

[gnk]

Re: Galbraith on Greece

Bankers aren't angels, we all know that. Should I post a series of US-based Banker scandals and we can compare lists? Is that what this is all about? Do you really think the Anglo American model is not as bad as the European model? Just look at the two economies and see which one is more financial-based.

But anyway, this is about Greece, and Greece's past and current leadership, as well as its culture that permeates all levels of society. You want to talk about corruption? How about an entire nation, at all socio-economic levels? How about dysfunction?

I'm all for regulating and punishing banks. But to paint Greece as an innocent victim to further your crusade against bankers puts Greece in a dangerous position. Greece will never be able to reform. There is a streak of victimhood based on foreign influence in Greek culture, much of it warranted, I agree, but it is also a way out, a way to ignore self criticism, self reformation, and at the end of the day, helps perpetuate corruption in Greece.

When foreign elite intellectuals hammer the "enemies" of Greece and leave out Greece's own ineptitude and corruption, they elevate corrupt politicians that distract voters from addressing what really needs to be addressed in Greece.

And this current government, during the past weekend, urged its people to vote "NO" because a "NO" vote would help the government get an agreement in 48 hours, and the banks would be open by Tuesday.

Neither happened, of course. But they had the chance to put on their show of a referendum, mention Krugman and Stiglitz, and Tsipras was able to consolidate his power. All at the expense of the Greek economy.

Thanks.

[jk]

Re: Galbraith on Greece

there's plenty of blame to go around. the banks, and goldman in particular, facilitated a deception that was desired by the greek government. the corruption and cronyism were perpetuated by the greek gov't. otoh, after facilitating the deception, i wouldn't be surprised to learn that goldman had a huge short position in greek bonds prior to the haircut of a few years ago. there was and is looting going on, of greeks and their present and former bondholders, this looting perpetrated by both greeks and non-greeks.

[jpatter666]

Re: Galbraith on Greece

there's plenty of blame to go around. the banks, and goldman in particular, facilitated a deception that was desired by the greek government. the corruption and cronyism were perpetuated by the greek gov't. otoh, after facilitating the deception, i wouldn't be surprised to learn that goldman had a huge short position in greek bonds prior to the haircut of a few years ago. there was and is looting going on, of greeks and their present and former bondholders, this looting perpetrated by both greeks and non-greeks.

Unfortunately Greece and the rest of the EU are in what appears to be a classic Mexican standoff.

1. A Mexican standoff is a confrontation between two or more parties in which neither party can proceed nor retreat without being exposed to danger. As a result, all participants need to maintain the strategic tension, which remains unresolved until some outside event makes it possible to resolve it.

[Woodsman]

Re: Galbraith on Greece

Unfortunately Greece and the rest of the EU are in what appears to be a classic Mexican standoff...

It's hardly unique to Greeks/EU. It's the basis of governance across the globe.

"A credibility trap is a condition wherein the financial, political and informational functions of a society have been compromised by corruption and fraud, so that the leadership cannot effectively reform, or even honestly address, the problems of that system without impairing and implicating, at least incidentally, a broad swath of the power structure, including themselves.

The status quo tolerates the corruption and the fraud because they have profited at least indirectly from it, and would like to continue to do so. Even the impulse to reform within the power structure is susceptible to various forms of soft blackmail and coercion by the system that maintains and rewards.

And so a failed policy and its support system become self-sustaining, long after it is seen by objective observers to have failed. In its failure it is counterproductive, and an impediment to recovery in the real economy. Admitting failure is not an option for the thought leaders who receive their power from that system.

The continuity of the structural hierarchy must therefore be maintained at all costs, even to the point of becoming a painfully obvious, organized hypocrisy.

[gnk]

Re: Galbraith on Greece

there's plenty of blame to go around. the banks, and goldman in particular, facilitated a deception that was desired by the greek government. the corruption and cronyism were perpetuated by the greek gov't. otoh, after facilitating the deception, i wouldn't be surprised to learn that goldman had a huge short position in greek bonds prior to the haircut of a few years ago. there was and is looting going on, of greeks and their present and former bondholders, this looting perpetrated by both greeks and non-greeks.

We agree on a lot, but I don't want to let the people (not all, but a lot,too many IMO) off the hook.

Who voted in every Greek government and why?

I think you know the "who" but here's a hint on the "why":

1) Hiring voters for unnecessary gov't jobs
2) Telling tax authorities to "look the other way"
3) Giving unions everything they want
4) Allowing hundreds of professions to qualify for early retirement based on the dangerous professions category (ex: hairdressers work with caustic chemicals and TV journalists have to deal with bacteria on microphones - I'm not making that up.)
5) Giving extreme benefits to public sector workers - ex: up to two months vacation, and free higher education, even if it is abroad
6) Giving contractors carte blanche on proects

For example, if you're a worker at the Electric Power company, you vote for the candidate that offers the best benefits. And they actually deliver. The entire population looked the other way, until.... the system came crashing down on everyone. Then everyone got holier than thou on everyone else.

Goldman was a footnote in this story that helped them continue the game. Euro adoption also continued the game. The corruption was already there. The banks were brought in to continue it.

Is it a moral obligation for a bank or a country like Germany to warn another country about the effects of its corruption? Imagine if Germany, during the peak of the bubble, lectured Greece on its irresponsible management. That would have went over well in Greece.

I would like to add - Germany, actually the EU, needs a FCPA type law to be enacted (if not already) and enforced.

[jk]

Re: Galbraith on Greece

We agree on a lot, but I don't want to let the people (not all, but a lot,too many IMO) off the hook.

Who voted in every Greek government and why?

I think you know the "who" but here's a hint on the "why":

1) Hiring voters for unnecessary gov't jobs
2) Telling tax authorities to "look the other way"
3) Giving unions everything they want
4) Allowing hundreds of professions to qualify for early retirement based on the dangerous professions category (ex: hairdressers work with caustic chemicals and TV journalists have to deal with bacteria on microphones - I'm not making that up.)
5) Giving extreme benefits to public sector workers - ex: up to two months vacation, and free higher education, even if it is abroad
6) Giving contractors carte blanche on proects

For example, if you're a worker at the Electric Power company, you vote for the candidate that offers the best benefits. And they actually deliver. The entire population looked the other way, until.... the system came crashing down on everyone. Then everyone got holier than thou on everyone else.

Goldman was a footnote in this story that helped them continue the game. Euro adoption also continued the game. The corruption was already there. The banks were brought in to continue it.

Is it a moral obligation for a bank or a country like Germany to warn another country about the effects of its corruption? Imagine if Germany, during the peak of the bubble, lectured Greece on its irresponsible management. That would have went over well in Greece.

I would like to add - Germany, actually the EU, needs a FCPA type law to be enacted (if not already) and enforced.

i wasn't letting the greek people off the hook. it's been their gov't and their participation in all the scams. they have mostly been petty looters. then there are those who've been looters on a grand scale.

[santafe2]

Re: Galbraith on Greece

"it's the reduction of pensions, less govt.jobs,etc. that has to be brought under extreme control. The debt would take care of itself."

So save the Euro and continue to shrink the economy or go back to the drachma, save the economy and shrink the currency.

[Woodsman]

Re: Galbraith on Greece

So save the Euro and continue to shrink the economy or go back to the drachma, save the economy and shrink the currency.

It looks like Germany is destroying the Euro and the European project. The have behaved as little shop keepers owed a bill and mercilessly demanding payment after the debtor has lost their job, savings home. If this is how Germany behaves as a great power, let it be divided again before it destroys Europe a third time. If this is Germany ascendant. why continue to build a European Nation out of the EU and the Eurozone?

We're talking about money here; the fiat kind and one of the easiest things for a state to "make." They risk fracturing Europe over electronic ledger entries and lovely intaglio printed portraits on little pieces of colored paper. If the Greeks and Germans and the banksters could engage in a massive "let's pretend" exercise to enable Greek entry, surely a similar bit of make believe would do the trick to resolve the problem their magical thinking created. Everyone who stood to gain "wanted to believe" and so fantasy became reality. How are things different today?

Germany is destroying the EU to save the Euro. So typically German.

[don]

Re: Galbraith on Greece

"it's the reduction of pensions, less govt.jobs,etc. that has to be brought under extreme control. The debt would take care of itself."

So save the Euro and continue to shrink the economy or go back to the drachma, save the economy and shrink the currency.

My retired banker friend did a succinct job in expressing his alligience to the 1% solution.

[don]

Re: Galbraith on Greece

a bigger picture?

Washington has a higher interest than the interests of the US financial interests who purchased discounted sovereign debt with a view toward profiting from a deal that pays 100 cents on the dollar. Washington also has higher interest than the interests of the European One Percent intent on using Greece’s indebtedness to loot the country of its national assets.

Washington’s higher interest is the protection of the unity of the EU and, thereby, NATO, Washington’s mechanism for bringing conflict to Russia.

If the inflexible Germans were to have Greece booted from the EU, Greece’s turn to Russia and financial rescue would put the same idea in the heads of Italy and Spain and perhaps ultimately France. NATO would unravel as Southern Europe became members of Russia’s Eurasian trade bloc, and American power would unravel with NATO.
This is simply unacceptable to Washington.

If reports are correct, Victoria Nuland has already paid a visit to the Greek prime minister and explained to him that he is neither to leave the EU or cozy up to the Russians or there will be consequences, polite language for overthrow or assassination. Indeed, the Greek prime minister probably knows this without need of a visit.

I conclude that the “Greek debt crisis” is now contained. The IMF has already adopted the Greek government’s position with the release of the IMF report that it was a mistake from the beginning to impose austerity on Greece. Pressured by this report and by Washington, the EU Commission and European Central Bank will now work with the Greek government to come up with a plan acceptable to Greece.

This means that Italy, Spain, and Portugal can also expect more lenient treatment.

The losers are the looters who intended to use austerity measures to force these countries to transfer national assets into private hands. I am not implying that they are completely deterred, only that the extent of the plunder has been reduced.

As I have previously written, the Greek “debt crisis” was an orchestration from the beginning. The European Central Bank is printing 60 billion euros per month, and at any time during the “crisis” the ECB could have guaranteed the solvency of any remaining creditor banks by purchasing their holdings of Greek debt, just as the Federal Reserve purchased the troubled mortgage backed “securities” held by the “banks too big to fail.” This easy solution was not taken.

The orchestration was a benefit to Western financial interests in general by enabling enormous speculations on the euro and gambling with derivative bets on sovereign debt and everything connected to it. Each successive “crisis,” such as Sunday’s No vote, became cover for an attack on oil or other commodities. The rigging and manipulation of markets can be hidden by pointing fingers at the latest “crisis.”

John Perkins in his book, Confessions of an Economic Hit Man, describes the process by which Western financial interests intentionally over-lend to weaker countries and then use the pressure of the debt to force the transfer of the countries’ wealth, and often sovereignty, to the West. The IMF and its austerity programs have long played a role in the looting.

In exchange for reducing euro debt on Greece’s books, Greece was to turn over to private interests its water companies, ports, and protected islands. Unless the One Percent can purchase the current Greek government as it purchased previous governments (for example, with payoffs to borrow money with which to purchase submarines), the referendum has frustrated the looters.

In my book, The Failure of Laissez Faire Capitalism, I explained that the Greek “debt crisis” had two other purposes. One was to get rid of the practice of restructuring a country’s debt by writing it down to a level the country could afford and to establish in its place the new principle that people of a country are responsible for the mistakes of creditors who over-lend. The write-down is no longer to occur on the balance sheet of the creditors’ but instead becomes a write-down of pensions, social services, and employment. This, too, is a process of looting.

The other purpose, as Jean-Claude Trichet, the previous head of the European Central Bank, made explicitly clear, was to further reduce the sovereignty of member states of the EU by transferring authority over fiscal policy (tax and spend decisions) from national governments to the EU in Brussels.

Washington favors this centralization of political power in Europe, and Washington favors the One Percent over the people. However, above all Washington favors its own power and has acted to prevent a Greek exit, which could begin the unraveling of NATO.

Russia and China have missed an opportunity to begin the unraveling of NATO by assisting Greece’s departure from the EU. Whatever the cost, it would be tiny in comparison to the military buildup that Washington is forcing on both countries. Russia and China might have decided that Washington could no more accept Greece’s alignment with Russia than Russia can accept Ukraine becoming a member of NATO.

[Polish_Silver]

Does Greece need to borrow?

GNK,

I read that Greece actually has primary surplus this year. But does the nation have the political environment to keep it that way?

With a surplus, they could abrogate debt, leave the euro, and just use Drachmas. No need for foreign investors. That is not so simple
if some of the debt holders are internal. I also think the talk about "economic output down 25%" is a little misleading. If you are borrowing money, it is easy
to pump up an economic output number. The question is, what would the economic output have been if the country was not borrowing? That is really hard to answer.
The USA will have to do this experiment at some point.

Now has Greece actually paid down it's debt, or just ceased from more borrowing?