is profoundly stupid and misleading. Over at Americablog I stumbled across a post written by Kevin Drum on the Greek debt crisis, a post which was also linked to approvingly by Digby. It is what passes for smart on the left, these days: superficially correct, but riddled with massive assumptions. Back when blogging was my job, I took out garbage like this regularly, these days I do it rarely, but I’m going to tackle this one because the embedded assumption aren’t just sewage, they are toxic to dealing with the current depression we’re in. Let’s start with the New York Times (I incorrectly attributed this first quote to Kevin Drum, for which I sincerely apologize):
A return to the drachma is unlikely to offer a quick cure for Greece’s ills. Default on the nation’s $500 billion in public debt would become a certainty, depositors would take their money out of local banks and, with a sharp devaluation of as much as 50 percent, inflation would loom. A return to the international credit markets would take years.
It didn’t take years for Argentina when they defaulted. When Iceland told Europeans to go take a long flying leap of a short pier, it didn’t take them years. In fact, my best guess is it would take a year, maybe less. There is too much money chasing far too few returns. Contrary to the idea that there isn’t enough money in the world, the problem is that there is too much, and it is chasing diminishing returns. Remember a default isn’t a bankruptcy, in a default Greece says “we aren’t paying this back as scheduled, we’ll pay you back… eventually”. My suggestion would be to transfer it into 100 year bonds with 1% interest. If creditors don’t like that they don’t have to take it, they can then try and collect on their credit default swaps, but if they make that claim, the Greek government considers that debt cancelled (you don’t get paid twice.)
Moreover, once Greek returns to the Drachma, it can print money. At that point it can’t default on any new bond issues as long as they are issued in Drachma. On to Kevin Drum:
Here’s the thing, though: Greek debt is largely held by German banks that made the loans. [See update below.] If Greece has been irresponsible, so were the German banks that happily loaned out the money. So if Greece defaults, the banks go kablooey. But they’re too big to fail, which means the German government would be forced to bail them out. And guess where the bailout money comes from? Tax dollars.
This means that German taxpayers have a bleak choice. They can shovel lots of money to Greece to keep them from defaulting, or they can refuse, and then shovel lots of money into German banks to keep them from collapsing. Either way, German taxpayers are going to foot the bill.
No, no they don’t have to bail out the banks. Not for the full value of the default (if Greece just said “we won’t pay”, as opposed to “we’ll pay at some point”.) The banks have shareholders and bondholders. Those institutions and people take the losses. Some of them are public (pension funds, etc…) but many of them aren’t. Let them eat their losses. The banks go under, you refloat them, but the cost of doing so is far less than paying off all the bad loans, because the private actors have taken their losses and any excess losses, well, they’re just written off. Same as when you realize cousin Fred ain’t ever paying you back than $100. It’s gone. Done. Over with.
The only reason “all the debts” must be paid off is because the rich demand it. They don’t want to take their losses. This is what should have been done in the US. It is what should be done in Europe. It is what our lords and masters refuse to do at all costs, because the people who own them, or they themselves, or their friends, or their lovers, are the ones who will take the bath.
(on defaulting and going to the Drachma)
But it puts Greece into a death spiral. They can’t pay their debts, so they cut back, which hurts their economy, which makes them even broker, so they cut back some more, rinse and repeat. There’s virtually no hope that they’ll recover anytime in the near future.
According to the IMF, hardly an organization that wants countries to default, the effect on the economy of defaulting is one year of sharp pain, followed (perhaps) by a few years of lesser growth than otherwise. In other words, not that bad, and no worse than Greece has already suffered.
More Drum:
If Greece exits the euro, it will become terrifyingly obvious that other weak countries might exit too. Portugal, Spain, and Italy are the obvious candidates. Investors, spooked at the thought of their money being stuck in a country that might exit the euro and devalue all its bank deposits, would start huge runs on banks in those countries. The ECB would have to intervene and provide liquidity without limit. It would be a disaster.
Uh huh. Or those countries could simply slap on currency controls, which experience shows (most recently and clearly in the Asian currency crisis of the 90s), works. And permanent austerity, which is what France and Germany want to impose on Italy, Greece and Spain (with the apparent cooperation of their political classes, I might add) will erode the value of the bank holdings in time anyway. Drum’s not exactly wrong, but it’s the other options, which never get mentioned, which matter.
There are economic tools for dealing with these issues. Capital and currency controls are one of them, the distinction between default (we’ll pay you eventually, as opposed to we’ll never pay you) is another. The question of who is being bailed out (private investors, in large part) is another. And bailing out those investors is a political act, their money is their political power. The current political class, who is complicit with the current monied class, of course wants to bail them out.
All of this is before we even get to the horribly anti-democratic nature of all of this: the repeated refusal of the political class to allow referendums, the complicity of all major political parties in the process (notice there is no party to vote for if you want to default), and so on.
There is no actual democracy in any part of the world which is attached to the Wall Street centered financial system. Calls can run up to 1000:1 against TARP and it will pass. Strong majorities can be for or against particular policies and if the elite disagrees, that’s all that matters. There are no parties to vote for if you are against the current system.
In a sense, this is fair. Westerners thought that they could have consumer democracy: they didn’t have to participate in it except at election time, when they would vote for parties and platforms paid for and produced by someone other than them. Coke(tm)/Pepsi(tm) politics – you have a choice, you can choose either Coke or Pepsi! Politicians aren’t paid by you (their salaries are the least part of their real income) why would you think they care about your concerns?
You don’t pay for politicians or politics. This is the Facebook rule: if you don’t pay the freight, you aren’t the customer, you are the product. Politicians compete for the money and favors of the rich, and what they sell is the ability to wrangle you: to pass the austerity bills, to cut the benefits, to privatize the jewels of the public system, to force through the multi-trillion dollar bailouts. They control government for the benefit of the rich.
And the rich pay all the way down the line. They control the media, right down to the bottom, to make sure that what is discussed is what they want discussed, in the terms they want it discussed. That default isn’t that bad: forbidden. That currency controls mitigate damage in these circumstances: forbidden. That lenders will lend to defaulting countries almost immediately: forbidden.
I will discuss the pointlessness of media and “popular sentiment” in a post soon. In the meantime, realize that even the supposed left feeds you intellectual sewage on a regular basis.
Notice something: Oakland is where the Occupy movement voted to try a general strike of sorts. Since the Longshoreman’s union is onside, this will have an effect.
Oakland is also where the worst police brutality has occurred, and it began before the vote on the general strike.
The police and mayor are fools. By committing atrocities, they are forcing people to engage in effective action. They are forcing the protestors to strike back and do something which will actually hurt the powerful.
But the police and mayor are also doing the necessary work of educating people. These folks would not believe those of us who told them that simple peaceful protest would not accomplish anything. Only the police, and a Democratic mayor whose resume is that of a DFH, could convince them of that.
I have said little about OWS, because there is little to say. OWS is necessary. People needed to try for peaceful redress, to make an attempt to convince elites to do the right thing, and see the response of the elites. The response was foreordained, but you can’t tell anyone anything, so they have to learn at the end of a nightstick, or while suffering from tear gas or pepper spray, or while being forced away from helping a critically injured man.
This will continue to play out, as it must. It is necessary and insufficient, but it will produce the cadre of radicals who will go on to the next steps.
– Frederick Douglass
In our current age the word demand has been debased. A day does not go by without some person or organization “demanding” an apology or retraction or that someone do something.
These are not demands as a prior generation would have understood them.
Why?
Because there is no “or else”, not even an implicit one.
When I was a child if someone demanded something of me I always understood that they meant “or else”.
A demand which does not have a threat or a promise behind it is hollow. It means nothing. It is not, in any meaningful sense, even a demand.
A request is very distinct from a demand yet we use the word demand when we are really requesting something.
We have grown infantile in our relation to power, in our understanding of power and in our use of the language of power.
Sometimes the powerful will give something that is requested. If they do, it is because they were already considering it, because many amongst them think the benefit exceeds the cost.
But power concedes nothing that matters to the powerful without a threat, it never did and it never will.
by beating protestors, destroying their medical gear, sending riot cops in to stop “serving food without a permit” and throwing protestors camping gear in garbage trucks.
Yes, this is an education. They are teaching them that the police and elites are their enemies.
I am bitterly amused.
Someone explain to me what will convince them to stop? What’s the theory, here?
Only thing I can see, on the current terms of engagement, is for the protests to grow so large that the police literally can’t throw them all in jail, because there is no room. Might set up camps, then, but you can overwhelm them too. Are enough Americans going to be willing to be arrested for this to work? It’d be great, if so.
Once upon a time, a man informed George Bush Jr. that he didn’t like the President’s policies. Bush then said “who cares what you think?”
Bloomberg and Wall Street may not like Occupy Wall Street, but they aren’t going to negotiate in any meaningful sense.
Why should they?
What are the consequences, for them, of not cooperating? They have to see some noisy people. Does it appreciably reduce their income? No. The men or women they get to sleep with? No. The amount of power they have over DC? No. Their actual physical safety, or the safety of those they care about? No.
For Occupy to be successful, on its own terms, will require shutting down Wall Street and probably all of NYC. There must be so many people on the street that it is impossible to arrest them all or to get rid of them without resorting to a lot more than a whiff of grapeshot. The elites must be be faced with a decision tree “negotiate or lose a ton of money and be massively inconvenienced or shoot hundreds of thousands of people and build mass detention camps.” That will require two or three million people occupying New York City.
Remember, modern elites are trained to think in terms of cost-benefit analyses. If the cost to them of not giving in is less than the cost of not giving in, they won’t give in. It took trillions of dollars to bail out Wall Street. They take home billions of dollars in personal bonuses. You must cost them, personally, more than that, for them to want to give in.
If you want politicians to take out Wall Street for you, it has to be worth their while. Either the Koch Brothers have to pay them to take out one part of the elite on behalf of another part of the elite, or they have to know that not only will they lose their positions if they don’t do it (remember, the Soviet Politburo had more turnover than the Senate does) but that they will never have a good job afterwards, that whatever monied interests they have served either will not be able to give them a good life afterwards, or they will be unable to enjoy that good life.
You want a velvet revolution? A revolution in which you never so much as throw a punch? You’re still going to have to make the elites decide to give you what you want, or you will have to have the unilateral power to remove those elites and replace them with your own leaders.
Rephrase Bush’s “who cares what you think?’ as “Why should I care what you think?”
Don’t bother trying to appeal to shared morality, ethics or fellow feeling. These people were selected because they are functional sociopaths. They do not care about your suffering. Their ideology labels you as worthless eaters and them as the only truly productive people in society. Everything they have is because they earned it, and everything you have is because you sponged off your betters. That is what they believe.
They will not give you what you want, whatever that is, unless they either have no choice, or you make it rationally their best choice (and then they’ll screw you on the reverse side, everything they give you they will take away again, which is what you get for thinking you can cut a deal with such people).
is fund-raising off of Occupy Wall Street. Welcome to co-option, whether you like it or not. Most big blogs and organizations like MoveOn exist to beg, nothing more, nothing less.
They are fundamentally a right wing party, and their leader is a serial liar about important policy issues. But, at the end of the day, the NDP did not want to win. If they had wanted to win they would have promised a referendum on repealing the HST. They refused to do so, they chose to run as liberal light “no new income taxes” and so they lost. If Ontarians want to be lied to about taxes, they can vote Liberal.
As for Horwath, she needs to go. Does not have what it takes.
Seems her comment on #Occupy is that people should obey the law, and she wasn’t talking about the cops. Oh, and she’s against marijuana legalization.
Leaving all else aside, this is awful politics in the most technical sense. Her statement, if she didn’t want to endorse #Occupy should have been something like “this movement shows that until we reform Wall Street and the Banking system unrest will continue to grow,” or something similar. As a politician, when asked about something, say it proves the need for your program. In Warren’s case it’s even plausible.
But let’s be frank, she is a stalking horse for Obama. She is deep in his pockets, supported strongly by his organization. She is the spokesman for “saving the Middle Class”, saying things which Obama can no longer say and pass the laugh test. The problem with “saving the Middle Class” is that for the people in #Occupy movement, it’s too late. Most of the core people are no longer in the middle class. Saving those still in it will do nothing for them, even if the policies suggested would work, which they wouldn’t.
But what this mainly reveals is that Warren is incompetent. She has just told most of the left, the very people who are reluctant to work for Obama, that there is no real point in working for her. She may believe in some consumer protections, but she’s still a conservative Democrat, who just wants to tweak the status quo. She regards the #Occupy people as illegitimate, as law breakers. She wants to keep the war on drugs going, even though, as a Law Prof, she has to know it doesn’t work and causes unimaginable suffering.
Contemptible and incompetent.
Most people don’t want to hear this, because they want the easy solution.
I’ll just note that Occupy Wall Street is necessary and insufficient. That is, the revolt of the students and the young intellectuals is necessary. It must occur. It is insufficient. It’s nice that the unions are swooping in and out, but they are not committed to the idea in blood, and the working class and minorities are not showing in significant numbers (take a look at the pictures. White, white, white.)
Likewise, as Stirling Newberry notes, now that Occupy Wall Street has demands, they are very mild. They aren’t even as radical as FDR. The view of what is wrong with the world isn’t wrong “Wall Street!”, but whenever specifics are mentioned, they are insufficient to fix America’s problems, or even the problems of the class of people who started the movement.
At this point in time only radical solutions will work. That means radical: everything must go. Every institution in American society has failed. Every single one. They must all be shut down and the purposes they were meant to serve must be assigned to new institutions. You cannot save the Fed in its current form. You cannot save the banks. You cannot save the military or the police or the judiciary or the universities. And, most importantly, you cannot trust or do business with the elites who currently run society. They must be run out of power entirely, their riches taken away from them, and those who have committed crimes (virtually all of them) must be thrown in prison.
Radical.
The protestors are not radicals.
Fortunately, the NYPD has been instructed to provide the necessary education, by being brutal, breaking the law repeatedly, and by engaging in serial deception. They are instructing the protestors that there is no rule of law in America, because laws applied unequally are always unjust. They are instructing the protestors that even if they are good citizens who do everything the cops say, they cops will still brutalize and arrest them. And they are instructing them that the police’s masters will not negotiate. They will concede nothing of importance.
These lessons are important, because they lead to radicalization. When the Occupy movement is spent, one way or the other, some of its veterans will become radical cadres. They will understand that negotiation with the current system, and the current elites is impossible, and understanding that, they will take the necessary steps.
They elites may, as in Egypt, at some point, decide to switch lead horses. Dethrone one part of the elite and put another in place. Rick Perry, were he President, for example, might be happy to get rid of the Fed and to engage in some purging of Wall Street. This would not mean a return to a functioning liberal democracy, however. (I know that the usual suspects are going to scream that Tahrir Square was a great success. It was not. It enabled a coup by one part of the elites against the other part. That does not mean it was not, and is not laudable, it does not mean it was not and is not necessary, it means that it was only a step on a long road. It is unlikely there is going to be a velvet revolution, and people need to stop thinking there will be. Likewise people need to face facts, and those on the left are as bad at it as our elites are.)
None of the above is to disrespect the Occupy movement. I’m a big believer that they’re doing something important and that they deserve props for putting themselves on the line. Their embrace of apparently leaderless leadership is a master stroke of organizing, and indicates they understand that any visible leadership will be destroyed, smeared or co-opted. This is all good, but it is useful for those of us on the intellectual margins to disengage our emotions, keep our hopes in check, and look at the state of play dispassionately.
This is a step on the road. It is necessary, but it is not the whole of the journey. This is also where we are, and anyone who wants to contribute to a better future should be supporting the Occupy movement.
