Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Category: Financial Crisis Page 3 of 12

Syriza Will Put Bailout to a Referendum

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On June 26, 2015

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This is a correct action. 

In an unexpected move, Prime Minister Alexis Tsipras went on national television early Saturday to call for a referendum on July 5 so that Greek citizens can decide whether to accept or reject the terms of a bailout deal proposed by the country’s creditors.

This is now a democratic decision. I hope the Greeks say “no,” but it is their decision, and the consequences of either vote will now be their responsibility.

Meanwhile, this will apparently be the German newspaper Bild’s headline tomorrow.

Bild Greek Referendum Front Page

Apparently, democracy is now “blackmail.” Also apparently, I was wrong about Europeans not being willing to be open in their contempt for popular sovereignty.

Blessings upon the Greeks. They will need them.

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Greece and the Emperor’s New Clothes

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On June 25, 2015

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We are all familiar with the story of the Emperor’s new clothes, yes? The emperor is sold “clothes” which are imaginary, wanders around naked, and everyone pretends he’s clothed until a child points out he’s naked?

Commenter MFI pointed out yesterday that Oliver Blanchard, the chief IMF economist, had made the following assumptions about Greece in July of last year:

1. The Greek economy would grow by three percent both this year and every other year until 2020.
2. Inflation would average between one percent and two percent a year both this year and every other year until 2020.
3. The Greek government would run a primary budget surplus of four percent a year.

As MFI points out, at best, these assumptions are delusional. Greece is in forced austerity; they aren’t going to make these targets.

Edward Harrison has been on the same beat:

…the IMF revised down its estimate for Greece’s 2014 gross domestic product by some 22 percent in the space of 18 months.

And:

Greek GDP forecasts collated by Edward Harrison

Greek GDP forecasts collated by Edward Harrison

As Edward and MFI note, these are damning.

But they are of a piece with estimates of the effects of austerity. Austerity is a reduction in demand. Reduction in demand leads to economic activity being lower than it would be otherwise. Governments who spend less money buy less stuff, this is indisputable. Then, everybody has less money and almost certainly buys less stuff as a result, thus reducing the size of the economy.

Meanwhile, money has been given to rich people and corporations who, mostly, have not spent it and when they have spent it, they’ve spent it on luxury goods.

Austerity cannot help but reduce GDP. This is what it is designed to do.

But it is sold as a way to make economies better. You cannot, as a government or quasi-governmental agency (like a central bank or the IMF), admit that austerity will make the economy worse and many of the people in an economy to which it is applied worse off.

The question, then, is the old one. “Evil, or stupid?” Is Blanchard, for example, such an ideologue that he believes the assumptions which allow him to forecast a better economy under austerity? Are the other economists who have made similar forecasts similarly stupid? I mean, assuming moderate stupidity (normal), they might have believed it in 2008 or even 2010, but we’ve seen the effects of austerity since the financial crisis, and that’s going on seven years.

These people are either very stupid or are doing what they feel they must to keep their jobs and their membership in a very lucrative club. If they were to say, “No, these policies don’t work,” would they keep their jobs?

It’s not that we don’t know austerity doesn’t work, if by “work” you mean “improve the economy more than not being in austerity would,” we do. It’s only ever worked in theory by making very dubious assumptions, and it has never worked in practice.

So, at this point, if you believe austerity works, you’re either an extraordinarily blind ideologue, or you’re crooked, on the payroll, and know what you’re doing.

Austerity is the policy that the IMF, most central authorities, and all neo-liberal parties (which means almost all parties in power in the EU) believe in. It is a policy which works: It puts public assets up for sale which would not be otherwise, so that rich, private investors can buy them up. Combined with “unconventional monetary policy” (the two are Siamese twins), it makes sure that the rich get richer, corporations are flush with cash they do not use to hire workers, and that everyone who isn’t rich, or part of the close retainer class, loses.

You really, really don’t want to fall out of that close retainer class. They are paid very well (Lagarde receives a six hundred thousand per annum salary, entirely tax free), they are treated well, and their future job prospects are secure, as are those of their families.

The Emperor, in other words, is bloody well wearing clothes. If you want to remain the chief economist of the IMF, you had best remember that.

Austerity does what it was meant to do. I predicted its course in 2009, as did many others, and it has performed exactly as expected.

It is working: Its advocates are its beneficiaries. The people who enforce it are benefiting as well and there is a sufficient constituency, both at the elite level and the common level, to keep it going (remember, Cameron was re-elected in the UK, and Labour got many votes when its essential promise was “slightly kinder austerity”). A few countries (Germany, for example) are winning under this policy regime.

So austerity will continue. It is a successful policy which does what it is supposed to do and which has a constituency sufficient for its continuation. It must be sold by lies, to be sure, and many of those who sell those lies probably believe them, because they personally benefit from pushing austerity and people prefer to believe that they are honest and working for good.

Others, I am certain, know it is being sold with lies. Who falls into which camp? Who knows? The end affect is the same.

The Emperor has no clothes and beatings will continue until morale improves.

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The Lesson of Greece Is that Europe Is Run by Functional Sociopaths or Psychopaths

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On June 24, 2015

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Syriza has made an offer which includes pension cuts and VAT tax increases, and “institutions” have refused to accept it, saying that (among other things) parametric measures aren’t acceptable (though they accepted them from Spain and Ireland). They will now counter-offer.

By “among other things” they mean:

Labour laws, collective bargaining, pension reform, public sector wages, opening up closed professions, investment as well as value-added tax and corporation tax.

You do not believe, in any case, that any of these things will be good for ordinary Greeks, do you?

Total Greek Debt is about 330 billion Euros. 246 billion of that is “bailout funds,” of which over 90 percent went to private banks. As I (and many others) noted back in 2010, Greece should have defaulted then. This “problem,” such as it is, is now almost entirely the creation of attempts to bail out private lenders who should have done their due diligence, and who deserved to lose their money.

I note that the ECB is doing 1.1 trillion of “unconventional monetary policy,” about a third of which is Greek debt–mostly debt they piled up after 2010. A hundred billion of that, piled into 100 year bonds at 1 percent interest would about deal with the problem; Greece could handle the remaining debt.

A hundred billion, in today’s world, is really not that much money.

But the issue has never been Greek debt, per se, the issue has always been making it clear that no one can default and get away with it, let alone leave the Euro. Greece has been used to make an example, and when they elected a government with a mandate to negotiate an end to austerity they had to be taught an extra lesson for thinking that democracy trumped the right of debtors to run the government of those who owe them money and can’t pay it back.

(This is not remotely an exaggeration, as the terms of the deals made include the Government having to run new policies past “institutions”).

Greeks do not want to leave the Euro. They cannot devalue their currency, which is what they need to do, without leaving the Euro. They do not, apparently, even want to default and stay in the Euro.

In other words, Syriza has no bargaining position based on a popular mandate. Its mandate was “end austerity, but do it without being able to make any credible threats.”

Based on its public mandate, Syriza has no BATNA–Best Alternative to a Negotiated Agreement. In essence, they must take anything that Europe offers.

Or Syriza can turn to the public and say, “there is no deal to be had.”  But “institutions” never give them the time necessary to, say, run a referendum to get a mandate.

Greeks want to stay in the Euro, as commenter Mandos has often pointed out, because the Greek government is terribly run. They’d like to be run by the German government. The problem is, the Germans aren’t offering the government Germans get, they’re offering austerity run by the Greek government.

If Greeks want a good government, they’re going to have to create it themselves. The first stage requires giving a government a mandate allowing them to do what reason and reality both dictate must be done: seriously threaten to default and/or leave the Euro, and follow through with the threats if a good deal isn’t forthcoming.

Absent this, Syriza’s only choices are to buckle, or to do something for which they don’t have a mandate. Of course, sometimes doing the right thing goes against the wishes of the majority of the population–and these are big steps, so it is hard to blame the Greeks for being squeamish. And in hard electoral terms, if Syriza did the right thing, the economy would need to improve before the next election or they’d be out.

But, also in hard electoral terms, they may as well, because if they don’t, they’re going to lose the next election anyway. The Greeks voted them in to end austerity; they will have failed, and the Greeks will most likely try someone else.

Good luck to Greece, the Greeks, and Syriza. They’re going to need it. But luck tends to come to those who are thinking straight about the reality of their lives, and the Greeks aren’t.

As for the “institutions,” let this be your daily reminder that our leaders are functional sociopaths, at best, but act more like psychopaths. Austerity has meant immense suffering, but it is more important to them to bail out their rich donors and friends and help make them richer and more powerful, than it is to make tens to hundreds of millions of lives (far beyond Greece) less miserable.

Psychopaths.

When you’re trying to predict how European elites will operate, assume that they are sociopaths on a good day, psychopaths on any other day. The pain and suffering of those whom they do not personally know is not real to them, and they do not care how bad life is for anyone who doesn’t make their lives, personally, better.

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World Economy Heading for Recession

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On April 5, 2015

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That seems most likely to me. China has been stalling out for some time, Japan’s “stimulus” didn’t work, Europe has been suffering under austerity for years (despite some minor good news), the other emerging economies are doing badly, the petro-states have been hammered by the drop in oil prices and now the US job market has fallen off a cliff after a few months of excellent results.

Those results were driven almost entirely by the drop in oil prices, but were unsustainable with most of the rest of the world economy in the doldrums.  Low oil prices should be generally good for everyone but oilarchies, but their effect is muted (in comparison to past decades) by the oligarchical and oligopolistic nature of our economy.  Put simply, there are too many barriers to entry for new businesses to arise and even lower oil prices don’t put enough money into ordinary people’s hands to create enough new demand for long enough.

In an economy where individual sectors tend to be controlled by a few companies, and where those companies are already awash with money, more money means little; those with pricing power will simply take it away and add it to the stockpiles of money they already aren’t using for anything productive.

The standard solution to the situation we’re in now would either be to implement very high corporate and individual marginal taxation (if private actors won’t spend, take the money from them) and/or to break up oligopolies and/or to heavily regulate them so that they aren’t sopping up all the excess cash in the economy.  (Why are app stores still allowed to take 30%, for instance?)

Since we refuse to do any of those things, and since we only print money to give to rich people and corporations (thus pooling money at the top, doing little for widespread demand), the western economy (which includes Japan) remains stagnant. You may get a few good months here and there, but that’s all you’re going to get.

Labor Force Participation Rate Graph

Labor Force Participation Rate Graph

Let’s discuss some individual countries and regions. First, take a look at the above labor force participation rate graph. It shows the number of people either looking for work or who have work.  Can you tell that there were a few good months?  That’s how good the American economy is after your few good months. It didn’t really improve much, it just went horizontal.

You need a few years of such job results to make a difference.  And that’s before we get to the fact that most of those jobs were low-paying and that all of the gains of the last economic cycle have gone to the top three to five percent of the population (depending on how you slice it).  And the top 1% has done better than 3%, the top .1% better than the top 1% and so on. This is your economy on unconventional monetary policy.

Japanese monetary base and inflation to early 2015

Japanese monetary base and inflation to early 2015

Ah, unconventional monetary policy. In Japan they call it “Abenomics.”  The idea was to get inflation going in the Japanese economy–get the Japanese to spend and bring Japan out of its 30 year slump. The chart to the right shows how well it has worked.

But don’t think that money has been “wasted!” Abenomics may have done nothing for ordinary people, but it’s helped a lot of rich people become richer. That money went somewhere. In Japan’s case, a ton of it will have gone overseas, with foreigners borrowing for low costs in Japan and then speculating with that money elsewhere for higher gains (or so they hope).

Unconventional monetary policy is, and always has been, about giving money to the rich, wealthy, and corporations. At first, it was about bailing them out after the financial collapse. Now, it’s just about giving them money, lots of money, in a way that the hoi-polloi can’t access.

This brings us to Europe and austerity. Austerity is a wonderful thing, if you’re rich. Public assets are put on the selling-block which you normally could never buy and they are put there for cheap. You get to own more of the economy, your relative wealth increases. While it’s true that one might be richer in a generally prosperous economy, you must remember, this isn’t about absolute wealth. It’s about relative wealth. Better to be somewhat poorer and able to lord it over everyone else, than be richer in a world where the peons don’t have to kowtow to your every whim or don’t have to live miserable, want-filled lives. If the price is a lot more poverty, that doesn’t affect you in any meaningful way.

Not all peons suffer, of course.  A lot of Germans do very well in the current regime.  As the South of Europe suffers under austerity, they’re doing great. The worse the southern economies are, the better for Germany, since it reduces the price of the Euro, increasing German exports. If everyone in the Euro area was doing well, Germans wouldn’t be doing nearly so well. If the price is suicides, widespread poverty, homelessness, and so on, that’s certainly a price Germans are willing for Italians, Spanish, Greeks and Portuguese to pay.

Meanwhile in Canada, there is a housing bubble which kept on going from the point where the US bubble collapsed. Better, inflated prices are guaranteed by the Federal government, so when the bubble bursts, it can cause maximum damage to public finances. With oil prices falling, and with Canada now a petro-state (as I noted almost a decade ago) due to deliberate government policy, those housing prices are looking less and less sustainable.

In the UK, we also have London’s housing bubble (which is to say, the majority of the actual economy of the UK, if you want to call a housing bubble and financial services an economy, which UK politicians do).  This shouldn’t be a surprise, since the UK hired Canada’s ex-central banker to come to the UK and do what he did to Canada: Blow a nice big bubble. The UK hardly has any other economy besides real estate and financial ponzi schemes, so we’ll see how that works out for them.

In general, understand this: The world bailed out bankers and brokers and traders  and they went back to doing what they were doing before. Blowing bubbles. There are CDOs out the wazoo, there are stock market bubbles, there are real-estate bubbles in various places (they just tend to be more localized now, but they’re still huge).

The economy will NEVER be good for everyone until this is changed, but that doesn’t precisely mean this is unsustainable. The elite’s had one fundamental realization and it was this:

“We can print as much money as we want and as long as we make sure it doesn’t get into ordinary people’s hands it won’t blow up the economy.”

Many people expected that unconventional monetary policy would cause general inflation. It hasn’t because the money stayed in the hands of a very few people and major corporations. It did cause massive inflation in the things rich people buy, but not general inflation.

So the rich, and the politicians and central bankers they own, aren’t worried about the various bubbles because they handled them in 2007 and 2008, and they’re sure they can handle them the same way if they burst again. These bubbles may never all burst at the same time again, because if they show signs of doing so, the elites can always just have the central banks print money and buy up assets before they even become distressed.

As long as there is no actual price discovery (and how can there be), there is no real threat to the only part of the economy that matters: The economy of the people with enough money buying up politicians.

Everyone is addicted to this game, even China, which has printed unbelievable amounts of money (more than Japan, America and Europe combined) and has used it to create vast amounts of unused and unusable housing and other boondoggles. China, granted, wants much of the benefits to get to ordinary people (because the Chinese are still willing to riot extremely violently and the Communist party’s leadership knows their lives are on the line), but they’re still playing the late-capitalist game of credit pumping, rather than the mercantilist game which built the Chinese economy. That makes sense, in a way. As China’s customer-economies stagnate, it becomes harder and harder to create widespread growth for the most populous country in the world through simple exports.

The correct strategy would be to start decoupling and move to a domestic market, and in a sense, the Chinese have tried that, but they’ve bungled it on boondoggles. Capitalism of the variety we do today is terrible at redistribution and redistribution is what the Chinese economy needs, in a huge way, in order to boost widespread demand.

So that, my friends, is your world economy on austerity and unconventional monetary policy.  As I predicted right after Obama put out his worthless “stimulus” program in early 2009, for most people, the economy will not recover for at least a generation. It will only recover then if the population is willing and able to rebel, peacefully or violently. If not, we are in for decades of stagnation and decline, exacerbated by the absolute certainty of catastrophic climate change.

And so it goes…

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Do Tsipras and Syriza want to resist Austerity?

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On February 25, 2015

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By Mark From Ireland (Elevated from the comments)

(In response to my article on whether Syriza got owned, Mark writes):

Did Syriza get owned?

Yes and No. Syriza is a coalition between a variety of factions ranging from PASOK lookalikes to people with genuinely socialist principles. I’ll be interested to see how Alekos Flambouraris for example will react, will he help “sell” this within the Syriza coalition?

If the currently dominant faction (who have always wanted to work within the Euro framework and are very pro-EU) are to succeed in getting Syriza to accept this capitulation they’re going to have to override internal resistance. From whom? My guess would be that the resistance will centre around Panagiotis Lafazanis and the “Left Current/Left platform” grouping. The “Left Current/Left platform” are, I believe, fairly well organised and they do have a consistent critique not only the current state of affairs but also of capitalism per se. Lafazanis and his comrades can truthfully say that in attacking the capitulation to the troika that they are merely defending the platform upon which Syriza stood and that anybody who wants to vary or overturn that platform has to provide cogent and compelling reasons as to why. But the problem that Lafazanis and his comrades face is both one of policy and of internal organisational strenght. Principles are all very well but if you don’t control the party structure you’re going to lose every time. I said above that they’re “fairly well organised” but are they as well organised as Tsipras and his supporters?

Tsipras’ opponents to the left face a very real problem and one which reminds me in a way of the problem faced by the British Labour left when confronted with Tony Blair. Like Blair Tsipras has a substantial personal mandate and like Blair he’s got a record of going over the heads of his critics to party congress (he’s already successfully done this over candidate lists) and also like Blair he’s got a record of successfully campaigning alone – of very pointedly not campaigning alongside the left-wingers. Just like Blair he can say that Syriza’s victory is a personal victory brought about by him. (He’s also tried Blair’s strategy of giving difficult posts to left-wingers* how that will work out is something that will tell us a lot. Blair successfully marginalised his internal opposition using it whether Tsipras can do the same I just don’t know as the Blair/Tsipras analogy can only go so far).

So the question in a way isn’t so much one of whether or not Syriza got owned as one of whether Syriza is a coherent and viable movement without Tsipras and his followers. I have my doubts.

I hope that Greece manages to resist but I doubt they’ll resist if Tsipras remains at the helm as he never wanted to resist in the first place.

*What for purposes of shorthand I’ll call the Bennite and Militant tendencies

Did Syriza get owned?

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On February 24, 2015

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The details of the Syriza request to the Troika are here, for those who want to read the actual list. The public statement is here.

The best analysis I’ve read of the deal, as compared to Syriza promises, is by Stathis Kouvelakis, in the Jacobin Magazine.

Kouvelakis makes the case, convincingly to me, that Syriza caved, and got virtually nothing of what it wanted.  Here is a summary of what Syriza wanted:

Not consenting to any supervisory or assessment procedures, it requested a four-month transitional “bridge program,” without austerity measures, to secure liquidity and implement at least part of its program within balanced budgets. It also asked that lenders recognize the non-viability of the debt and the need for an immediate new round of across-the-board negotiations.

But the final agreement amounts to a point-by-point rejection of all these demands.

…..

In the Eurogroup’s Friday statement, the existing program is referred to as an “arrangement,” but this changes absolutely nothing essential. The “extension” that the Greek side is now requesting (under the “Master Financial Assistance Facility Agreement”) is to be enacted “in the framework of the existing arrangement” and aims at “successful completion of the review on the basis of the conditions in the current arrangement.”

Kouvelakis goes through the agreement point by point, and backs up his argument.  You should read the entire piece.  More important than proving the obvious (that Syriza got virtually nothing) is why.

The question that emerges, of course, is how we landed in this quandary. How is it possible that, only a few weeks after the historic result of January 25, we have this countermanding of the popular mandate for the overthrow of the memorandum?

The answer is simple: what collapsed in the last two weeks is a specific strategic option that has underlaid the entire approach of SYRIZA, particularly after 2012: the strategy that excluded “unilateral moves” such as suspension of payments…

Kouvelakis calls part of this the “good euro” strategy—the supposition that anyone in power in the Euro area wanted Syriza and Greece to get real debt relief and exist austerity.  This, as I have argued in the past, is delusion:

The key here is psychological. Greeks need to admit that their fellow Europeans do not care how badly they suffer; need to acknowledge that they are not seen as Europeans by their fellow Europeans, and need to look East and South for their survival and future prosperity.

Until Greeks get through their heads, and hearts, that the other European countries are not their friends, they will continue to suffer.

Unilateral is the key word.  Greece cannot depend on any other nation in Europe to look after its interests, let alone Germany (the very idea that the German government cares one whit how much Greeks suffer is so laughable as to move beyond fantasy into insanity).

Greece must do what it can it unilaterally.  This doesn’t mean no negotiation, but that negotiation will not be with Europe or Germany or the ECB, it will be with other countries who need what Greece has to offer enough to make a deal.

Read the Jacobin article.  And understand what just happened, because as Kouvelakis notes the only thing worse than defeat is pretending it was victory.

None of this means that victory is not still possible.  But it is only possible if Syriza spends the next few months planning moves which do not require Europe’s approval.

I genuinely hope they do.  The sooner they do, the sooner Greeks will be better off (though yes, the transition will be painful), and the sooner the current European and World system, which is causing so much unnecessary suffering, will end.

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Syriza and Greece Seem to Have Been Owned

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On February 21, 2015

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So, the Greeks have an understanding for an extension of the loan agreement.  On Monday they have to present the “reforms” they will be undertaking in exchange for it.

I don’t know what those reforms will be, but I know that the agreement still gives the Troika (now called “institutions”) veto power over Greek policy.  The key text in the mealy-mouthed statement is this one:

The Greek authorities commit to refrain from any rollback of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions.

The Greeks also promised to pay back everything.

Yeah, Tsipras may be attempting to portray this as a victory, but it’s not.

The bottom line here is that Syriza weren’t really willing to default or Grexit.  One can note that they campaigned on ending austerity, but staying in the Euro.

That was always problematic: yes, that’s what many Greeks want, so it was a political winner, but if they were serious (and it appears they were) it left them without the ability to actually negotiate a better deal.

Much has been made of the fact that Greek Finance Minister Varoufkis is an academic specialist in game theory.  In the the early days he seemed serious about being willing to default.  It appears he wasn’t, it was a bluff.

I’m not an expert on game theory, but I do know something about it, and about negotiation and I’ll tell you this, for threats to work they must be credible, and to be credible you must be willing to actually go through with them.  Faking is never as good as sincerity.  Having campaigned on “have your cake and eat it too”, Syriza was in a bad position to negotiate with Europe.

I had hoped they were negotiating to show the Greeks that no good deal was possible, then would be willing to say to Greeks “only default and Grexit is viable.”  So far, it appears not.

It’s worth noting that reports are that Southern politicians in places like Portugal, Spain and Italy were pushing for no debt forgiveness.  For their own political futures, they need to be able to say “there was no alternative”.  But, of course, debt forgiveness would be good for all of those countries, meaning politicians pushing against it for Greece (setting a precedent allowing it for them) are acting  against the best interests of their own countries.  There is a word for such people, and it starts with “T”.

The Greek Communist party refused to join with Syriza in a coalition government because they expected this to happen, they have been proved correct.  If Syriza does not get a very good deal, or spend the next few months making the case to Greeks for default; in other words, if they don’t turn this around, then they will have their one term and the Greeks will turn to someone else.  Golden Dawn, the fascist party, came in third, but Syriza voters, being left-wing, might prefer the Communist party.  We will see.  Syriza, after all, is not very left wing at all.

It should be noted that we don’t know what threats were made behind closed doors. My guess is that they were very harsh: Greece cannot feed itself, it cannot fuel itself, it has very little to offer in exchange for the foreign currency it requires to buy what it needs.  A default and a Grexit where the Troika and other European countries were not trying to punish it could be managed.  But one where they did seek to punish it would be difficult.  Syriza may not have properly gamed out how to survive in that scenario, and may have been surprised by how punitive the Troika intended to be in the case of default and Grexit.

If so, that is political incompetence (and game theory incompetence).  One should always know what one’s best alternative to a negotiated settlement is.

I’ve written in the past how Greece could handle such a scenario.  (Here and here.)  It’s not an insoluble problem, but it does require being willing to backhand Europe as hard as they have backhanded Greece and then to get even nastier.  Greece has a lot to offer Russia, for example, and Russia can take care of Greece’s fuel needs easily in exchange for Greek bases and so on, which essentially cost Greece nothing.

The key here is psychological. Greeks need to admit that their fellow Europeans do not care how badly they suffer; need to acknowledge that they are not seen as Europeans by their fellow Europeans, and need to look East and South for their survival and future prosperity.

Until Greeks get through their heads, and hearts, that the other European countries are not their friends, they will continue to suffer.  Until they are willing to take the losses that Grexit and default will impose, things will continue to get worse.  (Being genuinely willing to take those losses is also the only way they might be avoided.)

I note also that sheer idiotic incompetence of Syriza in not putting in place currency controls to prevent capital flight during the negotiation period.  This is virtually an own-goal it is so stupid, and should bring into question just how smart Varoufkis is (or Tsipras, if he over-ruled Varoufkis.)

I wish the Greeks the best. But as with all those who have been horribly damaged by neo-liberalism and austerity, they need to get through their heads that those in charge of the policy have no fellow feeling for them; that people like Merkel, Shauble and the Germans who support them are enemies, not friends, let alone family members in some big European family which cares about all Europeans.

This is economic war, with the casualties that implies.  The Germans and the ECB are treating it as such; the collaborators in Italy, Portugal and Spain are treating it as such. Until ordinary people, and the representatives they put their faith in start treating it as such, they will continue to lose.

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The Greek Pivot East and the Future of Greece In Europe

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On February 3, 2015

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In my most recent article on Greece and Syriza’s options I pointed out that cutting deals with other pariah nations might be wise.

Practically the first thing Greece did was say that they will not be onside for any more Russian sanctions.

Russia said they would consider, if asked, bailing out Greece.  (This is a way of saying, “go ahead, ask”.) Given Russia’s own reserve problems, one wonders where it would find the money, BUT my guess this is a “if you default” scenario.  Russia won’t pay off European banks for Greece, but if Greece defaults, it will help Greece running. (Not least, most likely, by selling them heavily discounted hydrocarbons, and probably even loaning them the rubles to buy them with.)

That takes care of one of Greek’s main problems: food, oil/gas, and medicine—what they MUST have which they MUST buy from other countries.

A few words on Greece’s negotiations with Europe are also in order.  First, note that the “bailouts” given to Greece mostly weren’t — 89% just went back to lenders.  Worse, the imposed austerity conditions caused an actual collapse in GDP and employment, which means that the cost of the bailouts was far more to the Greek government and economy than the actual amount of money received.

In other words, this was all just a bullshit way of bailing out banks, and as the FT notes, only because bailing them out direct was “embarrassing”.  To avoid embarrassment, millions were impoverished, people set themselves on fire, and Greece was devastated.

This, people, is why I say, and mean, that Merkel is monster.  A disgusting, rotting excuse for a human being, let alone a statesman.  Millions suffered, not just in Greece but in the other peripheral countries, for no good reason.  Austerity is just the voodoo economics of the modern day, but even more devastating.

The deal Greece wants is more than fair to “lenders”.  And I mean “more than fair” literally.  They deserve to be defaulted on, because they didn’t do their due diligence, and all loans since the financial crisis at the very least, should NEVER have been made.

An independent Bloc is desperately needed in the world.  BRICS plus allies, with their own payment system, reserve currency and international trade and settlement system.  Until it exists, countries like Greece will feel (and often be right) that they have no choice but to buckle under to whatever terms the West sets.

Enough.  This suffering is not required in any world which runs on rational economics AND has as its goals the welfare of everyone.  It never was required.  All of the deaths, job losses, homelessness, hunger and so on was optional.  It was chosen because it suited oligarchs and politicians like Merkel.

This is the world you live in. It must be changed.  Since core westerners are unwilling to change it from withing in time to save millions and millions from suffering; it will have to be changed by those it is most severely impoverishing.

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