Ian Welsh

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

Category: Europe

Ireland: With left wing parties like these, who needs right wing parties?

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On January 24, 2011

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Betrayal is ash in the mouth:

This followed successful negotiations this evening in Dublin between Ireland‘s finance minister Brian Lenihan and the finance spokespersons of the opposition parties to pass the finance bill by Saturday.

They agreed to a timetable to pass the crucial finance bill that will implement harsh austerity measures outlined in last December’s budget

It is also interesting to note that any party which had opposed it and run in the next election with a promise to either repeal it or put it to a referendum would have had a good shot at winning, but it appears none have chosen to do that.

Betrayal.

And worse than betrayal, the politicians are such lapdogs of monied interests, so desirous of keeping their access to imported luxury goods and being treated nicely by European elities, that they won’t even seize the opportunity to be powerful, to win an election.  This is similar to what we have seen in Washington, where the checks and balances the Founders believed would keep everything on an even keel have failed because politicians are more interested in money and their post-electoral careers, more concerned with being buddies with the rich, than they are with protecting or advancing their own power.

With a left like this, who needs the right?

As I’ve said before, this entire generation in power, “left” or right, must be swept from power.  As a group they are either faithless or gutless, always willing to stand down or sell out, never willing to fight for the people they claim to serve.

Hope!

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On November 13, 2010

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No,  I’m not being sarcastic.  I still have little hope for the US, but I am very heartened by what is happening in Europe.  The French actions and now the British students rioting.  It is, ironically, even more hopeful that the British government wants to try a student for attempted murder for throwing a fire extinguisher off the roof.  Next, they’ll be hanging people for stealing chickens.  The massive overreaction and the clear double standard, given the war criminals who ran the British government, none of whom have been prosecuted, is the sort of thing which indicates a loss of legitimacy, a loss of legitimacy which often leads to revolution: peaceful or otherwise.

At this point, my best guess is that when push comes to shove in Europe, the left will actually win in most nations.  They aren’t wimps, they are willing to fight, they are willing to clash hard with the cops and they are willing to directly attack the interests of the ruling class.  Unlike in the US, where the people willing to risk violence are right wingers, in Europe more are on the left wing side.

The economic collapse of the Eurozone, as multiple nations are forced to beggar themselves to bail out bankers and the rich, is similar to what is happening in the US, what is different is that the people in multiple nations are fighting back.  I’m hoping the Irish wake up and tell the Eurocrats to go fuck themselves, that the deal of joining the Euro was “we give up a lot of autonomy for a lot of prosperity” but that if they aren’t getting the prosperity, they want the autonomy back.  Multiple nations should sincerely threaten to go off the Euro. At this point they are getting economically crushed by being on it and forced to pay off banker’s losses, without the advantages of having their own currency. Right now they are going to take the economic hit they would take by going off the Euro, so they might as well do it.

Odds that the Euro doesn’t exist in 10 years are now, in my opinion, more than 50%.  It is not serving the peripheral nations interests, they are being offered a standard of living roughly equivalent to the 50s.  (My Eurocrat friends (you know who you are) will tell me this is unthinkable, and won’t happen.  We’ll see.)

The pendulum, in Europe, is swinging away from the right.  That’s good news.

So, HOPE!

(Oh, as an aside, who cares whether this sort of thing increases or decreases public opinion?  Public opinion is irrelevant, all that matters is the costs for the elites who make decisions.)

What would Turkey’s NATO allies do in the case of a Turkish/Israeli throwdown?

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On June 1, 2010

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The general assumption has been that if push comes to shove between Israel and Turkey, that NATO allies will not support Turkey, and that the US will supply Israel, but not supply Turkey.

I wonder if those two things are both true.

It’s interesting to note that Britain, normally a staunch Israeli ally, in response to the attack on the aid flotilla in international waters called for an end to the Gaza blockade.  As with both Turkey and Israel’s actions, one imagines this may be driven by domestic political concerns.  To put it simply, Britain has a lot more Muslim citizens than Jewish ones, and England’s Jewish residents tend to be liberal and unlikely to become radicalized and blow things up.  Electorally, helping Palestinians may be a winner.

In the US, AIPAC and the Jewish lobby are generally considered amongst America’s strongest lobbies.  But it’s worth putting in perspective—when George Bush senior tackled AIPAC, he crushed them.  The vast majority of likely Democratic voters aren’t that sympathetic to Israel.  And to mess with Israel, all Obama has to do is stop protecting it at the UN, which is completely under his control, and not preferentially ship supplies to Israel in the case of a crisis, something which is also 100% inside the executive’s purview.

Obama has been snippy with the Israelis in the past, as when new settlements were announced during vice-President Biden’s visit.  While it’s hard to read Obama, I think it’s clear that he hasn’t appreciated the way Israel has taken the US’s support for granted.

And hey, changing the conversation from the BP oil spill can only be good.

I also don’t think it’s clear that Israel can use its nukes on Turkey without any other nuclear power threatening retaliation.  Glassing a major metropolis is not something likely to make Britain, the US or France happy.  In the US the idea of using nukes seems to occasion something of a yawn, but in the rest of the world it is the ultimate taboo.

Likewise, I’m not entirely sure that if Israel attacks Turkey’s military vessels in support of what may soon be considered an illegal blockade of Gaza, that other NATO nations won’t back Turkey up if it responds with a naval blockade of its own.  In particular, I’m not sure that the new British government comes in on Israel’s side, nor am I sure France does.  And either of those nations is more than capable of slapping Israel around if Israel gets too big for its britches.

Israel’s been pissing off its friends for a long time now.  This particular attack seems to have been done for domestic political reasons, and was a deliberate flouting of international law, a slap in the face “you won’t do anything about this, we can do whatever we want.”

Works, until it doesn’t.  I don’t know if Israel has crossed the line, but I think it may have.  For Britain, in particular, to come out with a statement calling for the end of the Gaza blockade is not a small thing.

All of which is a long way of saying, I’m not so sure the US, and particularly Britain, will automatically support Israel in any confrontation with Turkey.

As the Euro and the Pound come under pressure bend over and kiss Europe’s economy goodbye

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On May 24, 2010

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The catch-22 continues.  First, the Euro under pressure:

Global Markets Overview: A sudden drop in the single currency reverses an early tentative advance for stocks as traders once again frett about the fragility of the eurozone economy

Second, the Pound under pressure:

Speculators extended their short positions in sterling to record levels after the recent UK election as worries escalated over the government’s finances

Third, austerity in Britain:

Britain will be a “leading voice for fiscal responsibility” within Europe as it embarks on a sustained programme of cutting public spending, chancellor George Osborne said on Monday.

Announcing an initial £6.2bn of cuts for the current financial year, Mr Osborne said it was important to cut the deficit urgently so that debt repayments did not “spiral out of control.”

Fourth, a bank in Spain goes under:

The euro came under renewed attack on Monday as concerns over Europe’s fiscal problems intensified after Spain’s central bank took control of a savings bank.

CajaSur, a 146-year-old lender owned by the Catholic Church, was taken over by the Bank of Spain in the latest move by the central bank to restructure the country’s troubled mutually owned banks, or “cajas”.

Here’s the catch-22.  Investors are worried about deficits, so they get out of bonds or demand higher rates and attack currencies.  The response to that by governments is to slash spending: austerity.  But austerity will crash out the economy, which will hurt the stock market and weaken the state’s ability to repay bonds.

As long as governments feel they are at the mercy of the hot money, and as long as the hot money insists that governments both be fiscally austere and have good economies, there is no way out.

Notice, that while China has significant issues, it does not have this issue because it does not rely on hot money.  No smart government should.  Currency flows are far too fast, not only should there be a tax on all currency flows but every smart country should make it essentially impossible to move large amounts of money in and out of its economy quickly without taking a huge haircut.  Flighty money is more trouble than it’s worth.  Money that wants to come, and stay, and really invest in the economy should be welcome, but fast money should be heavily discouraged.   The harm done by such money is far larger than the good.

Likewise the hot money needs to be taught a lesson.  Such “investors” seem to think that they deserve higher than market returns in exchange for lending money.  The people borrowing money are expected to bear all the risk, and expected to get less than market returns (since they’re giving the surplus to the hot money).  Would you borrow money under such circumstances?  Of course  not, which is why no one who doesn’t have a sure thing does, which is why the economy doesn’t grow, because the idle money thinks it deserves most of the returns and none of the risk, and entrepreneurs aren’t interested in that deal.

Greek Mistakes, European Misery and the Coming Decade of Suck

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On May 7, 2010

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1) killing bankers isn’t what’s needed.  The people who need to be scared are their own rich, and their own politicians, who voted for the cram down instead of deciding to end tax evasion, primarily by the rich, and which by itself is enough to close the gap and avoid austerity measures.

2) Voting in right wing governments.  You get what you vote for.

When you refuse to tax the rich, the only other option is to soak the middle class and the poor.

Meanwhile the Brits have voted for cuts, cuts, cuts.  They too are about to get what they asked for.  Austerity.

This contagion is going to spread, because Europe is fundamentally in the same mode as the US: spare the rich, cram down the middle class.  The lesson taken by the elites from the crisis was that the rich must be appeased at all costs, because if they aren’t, they will go on strike, and crash the world economy.

What happened yesterday on the stock market proves it–nearly a 1,000 points off the DOW in seconds.  The stock markets are no longer free markets, their movements are controlled by a relatively small number of actors with very deep pockets, who can make them go up or down whenever they choose.

There was an opportunity to break the power of these folks—to wipe them out, but it required calling their bluff, not caving to them.  That opportunity has now passed.  While the world economy remains very fragile and could go into a tailspin any time if anything goes wrong, best guess is we have another really lousy recovery and economic cycle to look forward to, if austerity measures don’t crash it out entirely.  Over 80% of any gains will go to corporate profits, virtually nothing to ordinary citizens, and we’ll have another lost decade in which for virtually everyone the economy sucks.

There are solutions, but it’s clear that the elites in most countries aren’t willing to do anything about it, and frankly the population keeps voting for right wing governments (whether called that or not), so they’re getting what they vote for.  (Say what you will, Obama was the most right wing of the major Democratic candidates.)

So, get ready for another era during which the deep liquidity, the hot money, is completely catered to—even more than it was in the last era.  And get ready for an era in which, to paraphrase George Bush “who cares what you think? is the unofficial motto of government when dealing with ordinary people.

Shock Therapy in Greece

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On March 8, 2010

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Whatever the problem, the solutions are always the same:

This austerity plan aims at saving some € 4.8 billion at the expense of the Greek population, for the purpose of repaying creditors. The money saved will also be used to pay the fees of Goldman Sachs, a bank which we now know helped the government conceal part of its debt. Among the measures to be taken:

- a freeze on recruitment and reduction of civil servants’ salaries (heavily reduced 13th and 14th months, reduced bonuses, coming after a 10 % decrease in salaries decided in January);
- a freeze on retirement pensions;
- VAT increase from 19% to 21%, despite the fact that this is an unfair tax that hits poorer people harder;
- dramatic cuts in social budgets, including the Social Security budget.

Somehow progressive tax increases never seem to occur.  Somehow a pan-European Tobin tax never happens.

The interesting question though is this: how many European governments played the exact same games Greece did?  How many are concealing their true fiscal picture, which is much worse than people think?

The answer, dear friends, is most of them.  Including the Germans, who have been acting very high and mighty.

The only people in the world even stupider about financial engineering than the US were the Europeans, who bought toxic waste by the boatload.

They forgot what Americans forgot.  There’s no free lunch.

Ever.

Nice country you have there, be a shame if anything happened to it

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On January 7, 2010

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is the title of an email a friend sent to me about the threats made by Britain and the Netherlands to Iceland, when Iceland’s President refused to ratify a bill which would have required Iceland to pay 5.5 billion US to the Netherlands and Britain.  When Iceland’s banks failed, Britain and the Netherlands made up the deposits, and now they want Iceland to pay.  If Iceland doesn’t, they have threatened to spike both its entry to the European Union and its 10 billion dollar aid package from the IMF.

The President’s decision means there must be a referendum to determine the fate of the bill.  A lot of folks are decrying this and insisting that Iceland should pay, but the background and the consequences aren’t that simple.

First, by European law, only the first 20K of each account is covered.  Iceland already passed a bill in which they agreed to pay that back, and that bill was not vetoed.  England and the Netherlands insisted that they cover all of the money, not just the amount legally required.

Second, Iceland is a small country,with a population of 316,960.  That isn’t even as large as most Canadian suburbs.  The cost per citizen, including children, people out of work, and seniors, would be $17,352.  Given Iceland is in complete economic collapse, that is a massive burden they simply can’t afford.

Third, the banks were essentially unregulated.  Britain, yes Britain, gave them licenses to operate despite the fact that other European nations lobbyed against it.  Given how lightly regulated British banks were, this means that Icelandic banks were being used by the City (London) to do things too dubious even for the City.  And given what the City was (and is) willing to do, that means they were black holes. You put your money in a country like Iceland where the banks are set up for those sort of unregulated operations, you take your bloody chances.  The old saying “you can’t cheat an honest man” applies.  The depositors wanted largely unregulated earnings.  In exchange they need to accept the risk that comes with it.

Fourth, a fifth of the population had signed a petition asking the President to block the law and force a referendum.  Responding to that is democracy.

Fifth: the corporations are limited liability corporations.  Are countries responsibility for all the debts of limited liability corporations in their country?  I don’t think so.

Britain and the Netherlands are extorting money with what amounts to threats to turn Iceland into a third world country where people may well starve to death.  They are doing so to bail out depositors who were greedy or stupid enough, or both, to be put money into banks set up precisely because they were doing stuff too risky even for London to do and which are limited liability companies.

After Gordon Brown used anti-terrorism laws to seize Icelandic assets, this is a further descent into thuggery and blackmail and those who say that Icelanders should pay it all off should think very carefully if they want their country to be forced to pay off all its private companies debts to foreigners.

For shame.

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