Feb 132012
 
 February 13, 2012  Posted by at 2:56 am Finance
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altUnknown Aftermath April 1865 “Richmond, Virginia. Destroyed Richmond & Petersburg locomotive.” Aftermath of the Confederate evacuation in which Richmond’s business district, accidentally torched by its own citizens, burned to the ground, the flames extinguished only with the aid of the occupying Federal Army

In response to the latest suicidal austerity demands of the Troika hit squad, protestors in Greece burned a German flag while the Greek daily paper Dimokratia adorned its front page with the headline, “Memorandum Macht Frei” [memorandum makes you free]. These elements of the populace are unsurprisingly reacting to the fact that bureaucrats in Washington, Berlin and Brussels are signing away the living standards of the Greek people while telling them that it’s all being done for their own good and is absolutely necessary for peace and prosperity in Europe.

Ambrose Evans-Prichard pointed out in a recent blog post that the Troika’s plans for Greece are far worse than what was demanded of [or offered to] Germany after the second World War, and much more similar to what was demanded of it after the first one (we all know how well that worked out). In 1953, the Western powers granted Germany 50% relief on its external debts with very few conditions attached, and now Greece is struggling to get that same amount with absolutely impossible conditions attached.

The main reasons for this difference in treatment are a) Greece is not nearly as strategically important to these Western capitalist powers as Germany was back then and b) the financial elites simply cannot afford to create a precedent of debt forgiveness in the current environment of unprecedented public and private debts. What is perfectly clear, though, is that the continuously shape-shifting complex of bailout, haircut and austerity measures advocated for Greece have been destined to fail since they were first conceived.

Germany’s Carthaginian terms for Greece 


The EU deal will in theory cap Greece’s public debt at 120pc of GDP in 2020 – at the outer limit if viability – after eight years of belt-tightening and depression, if all goes perfectly.

 

Since nothing has gone to plan since Europe’s austerity police began to administer shock therapy eighteen months ago, even this grim promise seems too hopeful.

 

The Greek economy was expected to contract by 3pc in 2011 under the original EU-IMF Troika plan. In fact it shrank by 6pc, and is now entering what the IMF fears could become “a downward spiral of fiscal austerity, falling disposable incomes, and depressed sentiment.”

 

Manufacturing output fell 15.5pc in December. The M3 money supply crashed at a 15.9pc rate. Unemployment jumped to 20.9pc in November, up from 18.2pc the month before, and is already above the worse-case peak pencilled in by the Troika.

 

Some 60,000 small firms and family businesses have gone bankrupt since the summer, the chief reason why VAT revenues dropped 18.7pc in January. The violence of the slump is overwhelming the effects of fiscal retrenchment. So much Sisyphean effort for so little gain.

 

You can argue that Greece has dragged its feet on EU-IMF demands – though the IMF is careful not make such a crude claim, offering mixed praise in its last report.

 

But as Professor Vanis Varoufakis from Athens University says: “If we had better implemented the measures, the worse it would be: the economy would be comatose, and the debt-to-GDP ratio would be even more explosive.”

 

So yes, like Germany accepting the terms of the Carthaginian Peace with a gun to its head in 1919, Greece signed “an insincere acceptance of impossible conditions” - to borrow from Keynes – hoping that sense would prevail with time.

But now that politicians from nearly all parties in the Greek Parliament have once again passed a ruinous fiscal austerity package (most likely without bothering to read it), as both the technocratic leader Papdemos and the “opposition” leader Samaras warned that all hell would break loose if they voted against it, the people of Greece and of the world should rid themselves of any misplaced anger and remember where all the wealth is really going – supranational bankers and corporate elites.

Bureaucrats and politicians in Athens are just as complicit as those in Berlin and in Washington, and they are all serving a higher master. It’s not the German people who are benefitting, and, in fact, they are also paying a very hefty price to keep an impossible currency union in one piece. Through the IMF and EU bailout mechanisms, Germany has already sunk tens of billions of euros into Greece for no benefit whatsoever, except buying some time for “firewall” protections from financial contagion (i.e. the ECB’s LTRO).

Even that temporal benefit is very close to running out, as German politicians have reached the point where they may be upping the ante so high that the current bailout and austerity plans will be stopped dead in their tracks and Greece is forced to leave the Eurozone (of their own volition, of course). The tone of Merkel’s administration has noticeably shifted towards strong implications that nothing Greece does will be good enough anymore. German Finance Minister Wolfgang Schauble said on Friday that “we can’t keep sinking money into a bottomless pit”.

The policy cannot command democratic consent over time. The once dominant Pasok party has collapsed to 8pc in the polls. Support is splintering to the far Left and far Right, just like Weimar Germany under the Bruning deflation.

 

The next Greek parliament will be packed with “anti-Memorandum” fire-breathers, and any attempt by Greek elites to prevent elections taking place must push street protests towards revolution.

 

In a sign of things to come, the Hellenic Police Federation has called for the arrest of Troika officials on Greek soil for attacks on “democracy and national sovereignty”.

 

It is clear that Germany’s finance minister Wolfgang Schäuble wishes to expel Greece from the euro, calculating that Euroland is now strong enough to withstand contagion, and that the European Central Bank’s `Draghi bazooka’ for lenders has eliminated the risk of a financial collapse.

Schauble’s mindset and motive are much less than pure, but he is right – Greece cannot survive in the Eurozone without any bailouts or austerity, and it can’t survive with them either. Even the most measly sums of bailout money that have already been authorized to be used for the Greek people are not being delivered to them, because the Greek government is having trouble “absorbing” the funds. English Katherimini reports:

Delays in Absorption of EU Funds

 

The European Commission is closely monitoring 181 projects in Greece, for which some 11.5 billion euros will be dispersed. While much of this money is going toward infrastructure schemes, 4.3 billion euros is being allocated through the European Social Fund for projects to help with employment.

 

However, Kathimerini understands that of these 4.3 billion euros, more than 1.1 billion has not yet been absorbed despite the unemployment rate surpassing 20 percent in November. The schemes are meant to be overseen by the Education and Labor ministries but they are finding it difficult to get the projects off the ground.

 

The Labor Ministry says that the schemes it is responsible for were to be run by the OAED employment organization, but sources said that it is too weighed down at the moment dealing with the rapidly increasing number of unemployed Greeks. The total figure of Greeks without jobs passed the million mark in November.

 

As for the Education Ministry, sources said that staff shortages are making it difficult for officials to plan the programs that will absorb the EU structural funds which Brussels has made available.

The Germans must look at that and correctly assume that there is absolutely no reason for them to continue backstopping these funds for Greece, which is implicitly a bill for the rest of the EU periphery as well. They may have greatly benefitted from the all-consuming debt slaves of Southern Europe in the past, but not any longer. The only clear and efficiently carried out purpose of the bailout measures is keeping the major banks solvent as they scatter toxic assets across the smoldering remains of European and American taxpayers, and as their executives and directors continue to receive outrageous levels of compensation for nothing but negligence and fraud.

All of the major western banks are given access to virtually unlimited cheap credit at their respective central banks through ZIRP, discount loans, LTRO, etc., while the average citizens and small businesses have seen access to affordable credit plummet for years now. Thousands of these businesses, which actually have the capacity to hire workers, go bankrupt every month, while the major banks are kept out of bankruptcy proceedings at all costs. In the meantime, they can fraudulently foreclose on your home and settle any and all litigation surrounding the issue out of court in one fell swoop.

On top of that, many European banks have been at least partially nationalized and therefore have explicit guarantees from their respective governments, while those other wholly-private fat cats have to make do with only implicit guarantees. Why should the banks even care about taking a 50-70% haircut on the value of Greek bonds when the bailout funds will be directly transferred to them, their governments will be on the hook for any capital shortfalls and they can post all manner of toxic waste to the ECB as collateral for unlimited 3-year funds? These are the true perpetrators of mass injustice and exploitation in our system; our urban and suburban consumer complexes are their concentration camps.

They are the only ones who stand to gain from the systematic gutting of social safety nets and the imposition of slave wages across Europe and North America. Everyone else, including the Greeks, the Germans, the French, the British, the Americans, etc. stand to lose and lose big. The Greek people, especially, are now at a very important crossroads that will be difficult to navigate. They must stand up against the degrading farce that took place tonight in Athens behind closed doors, but they must also refrain from being swept up into anti-German, reactionary fervor. At the end of every painstaking day, only recognizing the true nature of collective oppression can make you free.

Home Forums Die Wahrheit Macht Frei

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February 13, 2012 at 2:56 am #8631

ashvin

Unknown Aftermath April 1865 “Richmond, Virginia. Destroyed Richmond & Petersburg locomotive.” Aftermath of the Confederate evacuation in which Richmo
[See the full post at: Die Wahrheit Macht Frei]

February 13, 2012 at 5:14 am #708

mrawlings

Yeah, it’s enough to really make a feller mad. Save that fire Ash, I expect these outrages are just the beginning (or the end of the beginning, or the beginning of the end). However we might choose to put it- there is a part of me that can’t help but think TPTB are like sharks in a feeding frenzy. Could they even choose to do otherwise? Has the momentum of events, and the pattern logic of Capitalism made all of this inevitable? I think so.

In a similar light, I don’t think I should be surprised when the people of Greece completely lose it and start stringing up bankers and politicians.

February 13, 2012 at 9:29 am #710

Viscount St. Albans

Thinking along the lines of mrawlings above….
Devil’s advocate:
It’s a finite world and everybody’s hungry.

Somebody eventually had to turn off the spigot.
How else would it be done?
We’re only human.
It’s belt tightening by hook or by crook. Would the Molotov cocktail throwers voluntarily reduce their gasoline consumption? voluntarily substitute eggplant for lamb?
Ashes to ashes
and there’s only one path home.
What’s the point of fire and brimestone in a deterministic system?

Isn’t that the central question: Is it a deterministic system?
http://en.wikipedia.org/wiki/Deterministic_system

If it is, and I suspect it’s so, then doesn’t this all sometimes feel like empty navel gazing?

We’re all permitted to pick our roles and our costumes for this drama, but Mr. Goldwyn paid good money for the screenwriters, so don’t deviate from the script.

February 13, 2012 at 2:29 pm #713

ashvin

Predictably, New Democracy “opposition” leader Samaras is still stuck in electioneering mode, and has said that his party can renegotiate the package just agreed to when they get in power two months from now. That, in turn, just provides more fodder for Germany to justify cutting off the cash.

Also predictably, there has been extensive rioting in response to last night’s boondoggle. I told you it was a neoliberal edifice!

Telegraph wrote: 11.03 Some pictures coming in of the clean-up in Athens after last night’s trouble. Estimates are that 45 buildings were wholly or partly destroyed. The deputy mayor said rioters attacked “emblematic buildings, about 10 neo-classical edifices”.

All semantics aside, I am less deterministic about the evolution of this whole situation than I used to be. In terms of Engel’s theory of historical materialism (most of that was written by Engels, not Marx), for example, I tend to agree with more modern thinkers that the original formulation was too simplistic. The system definitely carries a lot of momementum for all those invested in it, which obviously includes the financial elites, and there is more range of freedom at the bottom than the top, but choices still exist for everyone involved. Not really something that can be established beyond a doubt one way or the other, though.

February 13, 2012 at 2:52 pm #714

sensato

The Global Economic Crisis: Can Canada escape a lost decade?

On January 26, 2012, in Ottawa, the Canadian Centre for Policy Alternatives organized an event titled “The Global Economic Crisis: Can Canada escape a lost decade?” The first session examined perspectives on the crisis and the way forward, and featured Yanis Varoufakis (Department of Economic Sciences, University of Athens) and Stephany Griffith-Jones (Initiative for Policy Dialogue, Columbia University).

Varoufakis considers Canada and Australia to be in a short-term sweet spot.

February 13, 2012 at 2:54 pm #715

el gallinazo

One of your best articles to date, Ash. Not a long road from Die Wahrheit Macht Frei to an Arbeit Macht Frei “community.” I am afraid that in a year’s time, NATO will have to pull some troops off the Iranian front to crush the the New Greek Republic. I understand that the Greek police had used up all their tear gas yesterday (for real), and Merkel was asked if she had any old Zyklon-B canisters lying about, and not to worry about the expiration dates.

Since the Viscount brings up a question of determinism, I will throw in my two drachmas. Individuals have free will to make their own decisions, though overcoming old inertial habits (karma) requires much stamina. When groups of individuals approach the millions, the general outcome becomes increasingly deterministic for obvious reasons of statistical probability. However, there are instances where an individual’s free will can have a global effect. For me, the most obvious example in modern history would be JFK and the Cuban Missile Crisis. IMO, most presidents would not have bucked the pressure of the Security State, and we would have been plunged into an all out thermonuclear war. Of course he paid the ultimate, personal price for these decisions, which included firing Allen Dulles as CIA Director, a couple of years later. On a spiritual, not biological, level, evolution is a very individual affair. One has to do one’s best and let the cow chips fly where they may.

And as a public service, let me remind any Americans reading this – if you see anything unusual, be sure to report it to the unit leader of the VIPR road block nearest you.

February 13, 2012 at 6:58 pm #717

jal

I would think that by now someone would have look at the other side of the “Greek coin”.

First, the logic is that the center collects tributes, resources and wealth from the periphery to support its lifestyle.
The understanding is that the center is Germany and France and that Greece is the periphery.

Then, why has Greece been the one getting the tributes, resources and wealth at the expense of the financial system which is now being propped up from failure by the supposedly center?

Why is Greece, being considered periphery, been the one enjoying the lifestyle that is suppose to be reserved for the center?

The logic seems to indicate that it was Greece that did the conquering of the EU and that the EU does not want to send anymore tributes, resources and wealth to the center, Greece.

February 13, 2012 at 9:23 pm #719

ashvin

jal,

We should remember that Germany’s GDP per capital was still at least 1.5x greater than Greece’s as of 2011, and that gap is widening rapidly. Greece was not really receiving “tributes and resources” from the center, but was artificially increasing its wealth through large amounts of private and public debt creation (like most other economies), which in turn helped the center grow their “productive economies” as well.The common currency allowed for that to happen, and now Greece doesn’t have the productive economy (cash flow) to back up even a small portion of those debts. There is no doubt that capital is pouring out of peripheral Greece like there is no tomorrow, and into central institutions (as opposed to the citizens of central nations). In terms of capital/resource flow, the periphery has greatly expanded to encompass a large majority of people in the world.

February 14, 2012 at 2:44 am #727

Supergravity

Normative Gravitism postulates that Gravity is a recursive algorithm bounding a maximally spatially open universe, wherefore only massfulness yields choice. Providing also that the cause of time is relativistic mass, a moral heuristic may be compiled wherein good is voluntary, or of its own accord, and evil is involuntary, or against its will. As a derivative function Capital is subject to Gravity in any market geometry, if not at fair value.

February 14, 2012 at 4:34 am #729

jal

Since Year of EU entry, 1981, it is too far fetch of an idea that the Greeks were smarter than the the bankers and the fund managers.
They could not have worked out a plan to get the “center” to give them a lifestyle reserved for “center”.
There is no way that the “center” got taken in by the Greeks. The bankers orchestrated it all for their commissions.
That the Greeks managed to kick the can 20 years down the road and sucked all that money etc. from the “center” must be absurd.

/sarcasm off

February 15, 2012 at 1:13 pm #751

ashvin

Greek Finance Minister Evangelos Venizelos:

Our country is waging a battle of survival within the euro zone – a battle of social conhesion and national dignity. However we are in a peculiar situation becase we continually have new terms, new conditions. This is because, manifestly, there are now forces within Europe that are playing with fire because they believe the [loan agreement] will not be implemented … and who consequently have prepared and want Greece out of the euro zone.

This has to be understood here in Greece by all political and social forces. We have to rally so as not to give anyone the excuse or alibi to enforce such a scenaro, a frightening scenario not only for Greece but for the world economy.

Meanwhile, more contradictory nonsense out of Greece. New Democracy leader Samaras has signed a “pledge” to new austerity measures, but still wants to renegotiate the plan…

SamarasAdvisor wrote: We also said we should modify the plan to allow for prompt [economic] recovery. We don’t want to make recovery a top priority but we insist that it becomes an additional priority, that it be be applied in tandem with other policies to allow the economy to breath. Is this such an irrational, stubborn view when the [rescue] plan to date clearly hasn’t worked?”

It’s not because the objectives are wrong. From the beginning we agreed with them. But there is a missing ingredient.
Even if it was perfectly implemented the numbers didn’t add up. We are not saying that we are against austerity but we have to change the mix and allow for recovery.

We are feeling a little embarassed that again and again they want us to show our committment to the plan. When we say prioritize recovery we mean we want to discuss it with them, not do anything unilaterally. Even if they allowed us to do whatever we wanted to do we would still stick to the programme.

February 15, 2012 at 5:55 pm #756

jal

NOW … you remind me that its bad everywhere and getting worst.

Only the center is allowed to direct the flow of tributes, resources and wealth from the periphery.
The USA has been doing it for 30 years by borrowing from other countries and spending more than it raises in taxes.
For Greece to have done the same thing is not even an idea worth considering.
Those who prefer normal “economic talk” can check out the following by the market ticker.

http://market-ticker.org/akcs-www?post=202029

This is elmementary mathematics, but nobody wants to deal with it. 

GDP = C + I + G + (x – i)

GDP = private consumption + gross investment + government spending + (exports − imports)

Now … what happens when “the center“ finally decides that it has been used by the periphery.

1 .Austerity is the punishment for Greece
and/or
2. The financing of the spending binge come to a stop.

See …

http://www.zerohedge.com/news/russia-dumps-treasurys-14-consecutive-months-china-slashes-holdings-lowest-over-year

Russia Dumps Treasurys For 14 Consecutive Months; China Slashes Holdings To Lowest In Over A Year

3. Of course, there is the final solution which we are presently seeing. You can pretend that the party is not over by “printing money” until someone decides that your tokens of exchange are worthless.

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