Feb 102015
 February 10, 2015  Posted by at 11:06 pm Finance Tagged with: , , , , , , ,

Dorothea Lange American River camp, Sacramento, CA. Destitute family. 1936

I don’t know about you, but I’m having a ball reading up on the preparations for the Wednesday/Thursday talks between Greece and .. well, everybody else. German FinMin Schäuble proudly declares that it’s do what I tell you or you’re finished, Greek FinMin Varoufakis says prepare for a clash. Greek advisors Lazard say a $100 billion debt reduction sounds reasonable, and some anonymous EU official says Lazard are incompetent and counterproductive (not smart, that).

When will the Brussels luxury cubicles understand that the Greek people have voted down their approach fair and square? That they voted down the government that made deals with the Troika for the very and explicit reason that they made those deals in the first place, and that telling the newly elected government to stick by those deals regardless is a corruption of democracy? So far, all the EU has (anyone notice how silent the IMF has been?) is hubris, bluster and chest-thumping.

They play politicians, but Syriza plays real life. Tsipras and Varoufakis stand up for real people, while Schäuble and Dijsselbloem and their ilk stand up only for themselves. And then pretend, in front of their bathroom mirrors and the news cameras, that they protect their own people against the greedy Greeks. As for the 50%+ of young Greeks who have no future, or the countless elderly who go without basic health care, too bad and boo hoo hoo.

The European Union is no Salvation Army, after all. In Europe, everybody takes care of their own, not the others. It’s a union in name only. That’s why Germany, France, Holland bailed out their own banks after these lost big on wagers in Athens, and want the Greek people to pay for those bailouts – at least the union was good for that -.

Claiming the Greeks all borrowed so much and lived it up way beyond their stature, while in reality people are dying who could be saved with simple treatments still easily available in Berlin, Paris and Amsterdam. Greece, make no mistake, has become the third world, whether your atlas confirms it or not.

Their MO is that banks are more important than people, Germany is more important than Greece, and the Greek people are less important than the great EU project that – and they actually still believe this- will make everybody richer. Only, to Tsipras the Greek people are more important. And so the new Greek leader’s partners in the European Union threaten to make things even worse than they already are.

It’s not just hubris and bluster, it’s pure impotence. If the talks this week don’t provide a solution, or a realistic proposal for one, Greece will be very close to leaving the eurozone. Syriza will not agree to continue with the deals the Samaras technocrats have agreed with the Troika, for the simple reason that their voters have trusted them with the mission to throw out those deals. Otherwise, they might as well have stayed with Samaras, and the elections would have no meaning.

Brussels and Berlin – and Paris and Amsterdam – have such trouble understanding what democracy means, they prefer to ignore it. But it was them who saddled their own voters with the debt which results from wagers on Greece gone awry, it wasn’t the Greek population. The entire western world has elected to not restructure the debt of its banking system. And don’t be confused, that’s not an economic choice, it’s a political one.

A lot more money has been thrown at maintaining the banking system, hopelessly bankrupt as it is no matter what, than would have been needed to guarantee the bank accounts of all citizens and all small businesses. Now the banks are still there, and so is their debt, but the people are sinking into an endlessly dark pool. Not an economic choice, a political one.

What we will see envelop this week is a game in which accusations will grow ever more wild and grotesque, but also a game in which Greece in the end will not do what everyone still seems to expect it to do. Because that would require for Syriza to betray the people who voted for them. Not going to happen.

The underlying – but we’re way past that by now – problem was explained quite well by UofMaryland professor Peter Morici:

Greek Revolt Over Austerity Is Long Overdue

Europe has few of the mechanisms that facilitate adjustment in the United States, which has a single currency across a similarly wide range of competitive circumstances. A single language permits workers to go where the jobs are, whereas most Greeks and Italians are stuck where they are born. New Yorkers’ taxes subsidize public works, health care and the like in Mississippi through the federal government in ways the European Commission cannot accomplish.

Germany uses its size and influence to resist changes in EU institutions that could alter fiscal arrangements. Hence, the Greeks and other southern Europeans were forced to borrow heavily from private lenders in the north – mostly through their commercial banks – to provide public services, health care and similar services that were hardly overly generous when measured by German standards.

All this kept German factories humming and German unemployment low. When the financial crisis and meltdown of global banking made private borrowing no longer viable, Greece and other southern states were forced to seek loans directly from Germany and other northern governments. Bailouts implemented by Germany through the ECB, the IMF and the European Commission required labor market reforms, cuts in wages and pensions, higher taxes, and less government spending. All to restore Greek competitiveness, growth and solvency – and all have absolutely failed.

The eurozone is by design and of necessity a predatory ‘union’. The US would be too, to an even greater extent than it is today, if it didn’t have a transfer of federal tax revenue from New York to Nowhere, Nebraska. And it wouldn’t be a union anymore.

So you know, for me, I’m fine with Greece blowing it up. There’s nothing good left from the initial idea that gave birth to the EU. It’s devolved into something utterly ugly, in which fat Germans driving their Mercs and Beamers down the autobahn can yell at their car stereos that those lazy Greeks must pay their due. Which stems from Merkel et al bailing out Deutsche Bank’s insanely outsized derivatives portfolios.

The whole thing is so morally bankrupt, it’s really insane that we’re still trying to have a serious discussion about it. The whole thing, the entire global banking system, is as morally bankrupt as it is financially. And we keep on believing that it matters what Berlin tells Athens to do. Our best hope is that Varoufakis refuses to be told what to do. It’s not as if we did anything about it, after all. We let others do our jobs and watch them do it on TV.

Here’s a prediction for you: the eurozone is ‘past its half-life’, or more correctly, it has over 50% of its existence behind it. It won’t last another 15 years. And perhaps much less than that. And I’m seriously thinking about moving to Greece. Just to experience sanity.

PS: A quantity is subject to exponential decay if it decreases at a rate proportional to its current value.

Home Forums The Euro’s Exponential Decay

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  • #19093

    Dorothea Lange American River camp, Sacramento, CA. Destitute family. 1936 I don’t know about you, but I’m having a ball reading up on the preparation
    [See the full post at: The Euro’s Exponential Decay]

    V. Arnold

    LOL, I’m feeling almost giddy at the prospect of Greece and the PIIGS throwing off the shackles of serfdom. Actually, it’s slavery 21st century style…
    When people are put in positions of impotency, as in America; withdrawl of consent and support are all that is left.


    Somebody please fill me in. If Greece is cut off from any more credit to operate its government by paying people salaries and pension and paying for goods and services, then that means austerity on steroids, right?

    Then the only alternative is to issue a new drachma. Does anyone there know how to do that? If they do surely nobody outside Greece will accept it as payment so it’s still austerity on steroids right?

    Can Syriza survive that? It would be one thing if the populace were willing and able to suffer the consequences but Tsipras leads a minority government. I have only the slightest of doubts that the EU and it’s shadow leader, the US, is ready and willing to throw Greece into super austerity and chaos just to show others what can happen.


    Rapier, I have seen two descriptions of how it would work, both by major bank people, and both say it would be “armageddon” for the Greek people – but then they would say that, wouldn’t they?

    It is easy to print Drachmas, but difficult to get anyone to buy them with “real” currency to give it some international value. If the EU chooses to be really nasty about it, they could refuse to create an exchange rate at all. But Russia has implied that it would do so, and presumably China would do the same.

    There would be conditions, of course. These might include Greece joining the East Eurasian Union, hosting naval bases, making the Russian-Turkish-Greek gas pipeline work, and leaving NATO (this is in Syriza’s party policy already). International banking transactions would be handled by Russia’s RosSWIFT alternative the the west’s SWIFT system. It would mean a huge upheaval for Greece, but they could blame all their problems on the nasty Europeans.

    Russia is also courting Cyprus to do the same (Egypt too), and Greece is intimately close to Cyprus. It could be the answer to both their prayers. Maybe Russia could even broker a peace deal between Greece, Cyprus and Turkey – something that it has never been in the UK’s interests to do.

    The BRICS plus the EEU, plus Greece, Cyprus, Syria, Iran, Egypt, Venezuela, Argentina, Bolivia, Cuba, etc would be a bloc with over half the world’s population, and a good percentage of its productive capacity.


    New Drachma (“ND”) would be backed by everything you can buy with it. For instance, a house in Greece, a business in Greece, Feta Cheese and Greek Wine, there’s all sorts of stuff there that people would want to buy.

    Same is true for USD. It is backed by everything you can buy with it, as well as the pressure that debtors have to repay their debts.

    As long as Greece allows capital flows into the country, a ND would continue to have value. How much – that’s the question. They should probably put some sort of limit so their whole country isn’t sold off to those very Germans…

    The less people can buy with ND, the less value it will have.


    Mathematically speaking all parties involved had the same understanding on these things. In absolutely no way could Greece ever pay the principle of their debt in real terms. I mean if their debt was converted into lets say pounds of gold and they couldn’t use inflation to reduce the amount of the debt there wasn’t a soul that believed they had the ability to repay.

    Again mathematically speaking everyone can agree Greece might be able to make a interest payment but only in good economic years.

    Knowing this than let me state the obvious: a Greek default is not a risk factor investors took into consideration it is a forgone conclusion. So each investor placed money into something knowing there wasn’t the least possibility of return and the principle would certainly be lost.

    Lets say thank you to these selfless souls. Greece move on to the spot everyone agrees you are moving to. Just say special thanks EU and IMF good bye, don’t let the door hit you on the way out. Welcome in Russia and China your new bestest buddies. Get back to what Greece does well – tourism.

    If bankruptcy of a nation is so horrible it sure didn’t look like it for Iceland.


    @ rapier: There is no such thing as a minority government in Greece. The government Left-Right coalition received 162 votes (out of 300) just yesterday (11th February), meaning it has a very strong mandate to proceed to Eurogroup. They also have a 75% + approval rate, 41% from people who voted for New Democracy (according to a poll conducted by austerity-friendly SKAI TV). I don’t see a minority; I see a Putin-like approval of people asking from SYRIZA to do something to save them from the ruins of austerity.


    It is likely that “Extend and Pretend” will continue for 6 months, with the EU and Merkel agreeing to disagree with Tsipras.

    People must understand that Greece was just about to reach a deflationary crash, right before Christmas. There is nearly no money going around, anymore. Nowadays, most people have just a few cents in their pockets. What good is having the Euro as your currency, if you can’t have money to buy the most basic of things? I am betting, if the worst comes to the worst, SYRIZA’s Plan C involves an internal currency or coupons or internal bonds, just to help people survive the storm. Plan C involves going to the US, Russia and China for help, who will gladly give the money just to stick old Angela in the behind and contain the Reich from growing.

    In fact, the problem in Greece is that a large proportion of the population cannot afford to pay their bills, rent, taxes, doctor or their children’s activities, anymore. That is the making of Austerity-as-religion-gone-mad-claiming-your-firstborns-for-Moloch, type of thing. People see that now that propaganda subsides and loses touch with reality. Can you blame them?

    The only way to describe all this disaster as a glorious “success story” anymore (like lap-doggy Samaras insists on doing and annoying everyone) and ask for it to continue forever just-because-Frau-Angela-says-so, is only if you are a fool, a spy, a banker or demented.

    A final note: you can keep a population in-line by means of fear and propaganda – just like it was done until recently – but you cannot force them to commit ritual suicide, claiming you’re their “friend” who is in fact saving their lives! Even in Doublespeak, Death is not Life! Destruction is not Constructive, regardless how politicians may wish so. The needs of the few (aka society), do not outweigh the needs of the many (the rich). So no matter how many scary threats will Scheible make, what people experience is much worst. When I honestly keep telling you that there is no money in my pocket, anymore, and you keep answering “keep giving me your money, I want moooore” – German-style – who do you think wins: you or reality?

    Dr. Diablo

    Won’t Grexit mean superausterity? Yes and no. First of all, Greece has already collapsed so much that they are in a trade surplus, or at least near par. So despite vehement claims to the contrary, they are already in a “better” financial state than even Germany, and are already paying their way on a cash basis. You can’t go down from there, that’s the foundation to health. At the same time, they’re repaying interest on debt fraudulently conveyed to them, from the moment of Euro-entry, organized by Sachs, well-known by every Euro nation and the world, piled on by additional loans added, to a known mathematically bankrupt entity, again illegal. So if they stop paying–which mathematically, they always had to, from 2000 onwards–

    then every dollar not paid to the bankers is used to pay for the people.

    Quite simple math, actually. But more yachts for people who will buy guns to shoot you with, or, say, let your 2nd child go to the doctor and live. Hmmm… A, or B?

    With the realization that Greece has ALREADY hit superausterity, ALREADY taken the pain of exit and has nothing to lose, it’s only the details. I’m sure they’ll suddenly find terrorists there, or an army or something, but it’s going to be pretty hard to convince Greeks to face against Greeks right now. Tsipras could pull a Chavez and buy a Russian rifle for every adult male, that seems to have slowed them down a bit in Venezuela. But technically, if Greece wants to leave, there’s basically not a darn thing anyone can do about it except invade and occupy–which is very expensive and doesn’t look to work right now.

    Financial options, let’s break the box quickly so you can see how broad they are. Charles Hugh Smith from OfTwoMinds suggests why not use the U.S. dollar? How’s that for an outlier? It’s used as the currency of many nations worldwide, is available, has value, must be accepted, and Greece has no way of inflating it. It can be installed in an afternoon, especially as nationalizing the banks (hopefully along a Swedish plan) is one of the platforms of Syriza, past tense. They WILL nationalize the banks, control them, and “reform” them to whatever will Syriza sees fit.

    As above, the more likely choice is to join Eurasian Trade Zone which would give guaranteed gas transit fees, guaranteed trade in tourism, trade, and food, and most likely, weapons. For all the talk of wasteful, spendthrift Greeks, you didn’t forget the billion$ in arms the EU forced Greece to buy, like a couple new submarines? Surely useful heading into the 2010 catastrophe. Having already turned Turkey (or the West trying to topple Erdogan with ginned-up riots turned him) Eurasia would then own Syria, Iran, Turkey, and Greece, splitting Europe off from the Middle East and Israeli gas fields, and Saudi Arabia. As the US hasn’t a prayer of shipping energy to Europe–especially now–then Russia/Eurasia then controls Europe. The End.

    Which leads to the next idea: what makes you think Germany isn’t being strict precisely BECAUSE they know it will force Greece to exit? They want to flip East to save their economy/life, but are in a bind with the US/EU. If Greece exits, the EU shatters, throw in some bank turmoil, then Germany has cover to say, “this thing isn’t working, we’re starting a northern trade zone” which is why Netherlands/Belgium/Austria/Germany all recently got their gold back–to float the new currency block they know they’re starting. Greece will be the excuse. They decided Greece will exit already last year, they need to force it to happen and Tsipras to take the blame.

    Third, of course, Greece can float a Drachma. As above, the support of Russia plus residual ties with Europe will probably make it possible. Since they’re already under crippling austerity with a surplus, I doubt it would be much worse, or anyway not for long. Despite a lot of hot air, Greece has a LOT of resources to back the Drachma. The co-gas fields with Cyprus, Turkey, plus the transit fees, plus the famous ports/shipping, plus ag, plus tourism is what they always had, and there’s no reason to change. Note the problems Greece had started about the time those new gas fields were discovered, and were among the assets slated to be stripped in austerity. Coincidence, I’m sure. But there’s no reason to think it would be anywhere near as bad under the Drachma, after a year or so, than it is now, because it allows people to go back to work and cooperate again.

    Just some ideas.

    V. Arnold

    I do not recall Iceland having near the abject poverty infecting the Greek population at the present time. The Icelanders are still in difficult times, but far better off than the Greeks.
    The future with no clear path is always terrifying, but the future is always fraught with risks and potential rewards as well.
    IMO, there are far too many possibilities for a better existence if the Greeks break away and make their own future; time to wean from the tit…


    I wonder what the prospect is for a military coup in Greece. It has happened before. Whereas something like 90% of the “bailout” money received by Greece flows back to non-Greek banks, a lot of the remaining 10% goes to the military. I remember a story last year about a large order of tanks that was going to go through despite the collapse of the Greek economy. The generals do like their toys.

    Would there be a coup without US support? I think that is unlikely, and the US has recently been making mildly pro-Greek statements. I doubt the US would push regime change on account of the EMU. NATO, on the other hand, is another story. If Syriza pushes for a NATO exit or cozies up to Russia too much, I would expect the US to pull out all the stops to get rid of Syriza, up to and including a coup.


    If you want to keep track of what it is like in Portugal, please follow the link to my blog about it.


    John Day

    In the great game of global power, heading into acute global crisis, Greece offers a big enough economy to reliably model financial reset techniques for the rest of the world.
    Those who face immediate losses of book-value, and those who face losses of political power/position are against starting the reset today.
    They are doomed, anyway.
    The top tier elites know that vast losses are unavoidable, but that you don’t actually “lose” something which never existed yet.
    Credit goes bad periodically.
    Global banking and the military industrial complex are creating complex tensions all over the world.
    It has been painfully evident since 2008 that it is time to cut liabilities by shifting them to somebody (everybody), while gaining title to hard assets, like oil, water, mines and farmland, and making sure that there is plenty of enforcement to back the sanctity of (global) “property-rights”.
    Syriza gets to flirt between the great powers, offering a veto within the Euro, for a modest sum of money over the next 6 months or so. The EU is run by those who never laid out contingency plans for the loss of leverage to force compliance, which they just lost.
    Russia could invest in Greece, block further sanctions, trade with Greece in the EU, and explore joint EU/Eurasian-Union membership issues through Greece. This would likely expand to Spain this summer, and Italy and France are certainly watching with interest.
    China would find ways to quietly help Russia and Greece, out of the spotlights.
    The US seems to have banking and militaristic camps at odds with each other lately.
    Both of those camps have some stressed divisions, too.
    A military coup could be arranged, basically destroying Greece, but it would lose popular support.
    Right now, high degrees of popular support are rare and valuable, going into a reset.
    The quid pro quo for Greek cooperation is about 10 billion Euros, right?
    The US arm of global banking would make an error to let Russia get the benefit and goodwill from Greece, Spain, Italy, Portugal, France, etc.
    They might make that error by seeing the bleeding of Russia as a tactical victory.
    Everybody in the world stands to gain maximally from resetting the debt overhang without WW-3. That is the maximum benefit situation in the game analysis.
    The tough question is how to assure universal cooperation.
    Israel, for instance, has the Samson Option, of nuking friend and foe if Israel comes under “existential threat”.
    Israel is a critical player, and very much unused to any compromise.
    This whole political forced-roll-call coming up in the US Congress, with Netanyahu arriving just before Israeli elections, breaking protocol, looks like it could be “a bridge too far”. The coordination of US response right now may be even poorer than usual.
    That could give Russia a brief but critical edge.
    I still wonder how much overshoot Israel will go for if Netanyahu gets re-elected, especially with a huge electoral “mandate”.
    I suspect this is a dangerous time to overshoot. Putin knows Judo.
    Hollande looks interested in Judo lately.
    There may be many in American politics and military who chafe in their current yokes.

    Formerly T-Bear

    @ TheGreekOne, reply # 19110

    Concerning the lack of currency you mention, an immediate step to alleviate that problem is by issuing a stamped script good for a short period and capable of refreshing with a stamp costing maybe 0.1 % or even 0.01 % for a subsequent (continuous) period renewal. The script would be issued directly to social welfare aid recipients, pensioners, the unemployed, young families, the handicaped and all students. The script should purchase all but luxury goods and all services required. The stamp scheme assures the script is used within a given time period, the continuous stamp renewal keeps the currency value current, reduces hoarding and also provides a revenue to cover administrative costs, possibly a stream of governmental revenue, etc. Such script can transition between printed euro currency and a more permanent Greek issued currency. No one should starve because of the obstinate idiot retards of the troika.


    If the Greek banks are all insolvent, why not sacrifice the banks, declare a debt jubilee, and then recapitalize the banking system with the new currency? People are broke because they are weighed down by debt. They have no equity in their homes, no positive net worth. Erase the debt and they suddenly have net worth again. Not a good plan for renters, but they could add a law that any tenant living in a rented unit that had a bank mortgage can purchase the unit for a nominal payment. If people suddenly have unencumbered assets, it should be no problem to jump start the economy again as long as they have a medium of exchange. What’s wrong with this plan?


    @ shargash: The chances of a millitary coup at this point are slim. Greece is not, at the moment, on the US Empire’s sights; the contrary is true (they use it to contain Germany’s ambitions. Russia does this, also). It is however targeted by an ambitious Germany, eager to establish a Fourth Reich in the EU, asap, to stay ahead in the game of thrones. However, this revisionistic Germany does not have actual “boots on the ground”, no Wertmacht, no Luftwaffe, no armored SS bigades to invade from the North, as it did before. It only wields “financial” and “political” weapons, within a very weak EU. While these are fine to ruin countries or the economy of the world, they cannot produce a successful coup against a government with a 75% approval rating. Let us not forget that it took $5 bn and 10 years of preparations for CIA to succeed in the Ukraine. I’d like to see Germany spending precious euros away from its banks for geopolitik purposes! Then you will have a coup, by raving Frankfurt bankers!

    Finally, let us not forget that too many Greek Armed Forces officers are sided with the Right-wind, old-style, pro country-religion-family, patriot Minister of Defense, Kamenos, SYRIZA’s partner in the government, who represents all the values that neolib Samaras striped away from the conservative New Democracy. So don’t expect any military coup as-of-yet.

    PS However, there were strange reports in the local press that a ‘financial coup’ was in the making, by our beloved EU partners, Germany, set to blow in the first 10 days of SYRIZA’s government. It was supposedly averted when Obama intervened strongly and shooed Frau Angela away. The ‘coup’ involved widespread panic, bank runs, Bank of Greece collaboration, financial attacks, Cyprus-style confiscation of deposits, looting and violence (2008-style, that had left Athens in ruins and forced PM Karamanlis to resign), “terrorist attacks” and widespread euro-media coverage of the misery caused on the “lazy” Greeks, who “lived beyond their means” and defied the mighty will of the Führerin.

    But as Plato taught us, Reality is the stick that hits you on the head, when you question it. The eurocrats keep forgeting that.


    @ Formerly T-Bear: Thanks for you remarks. They are spot on and I have a feeling from some leaks in the Greek press that SYRIZA has a simillar back-up plan in the making for some time now, should things go bad. Much of what will happen depends on Merkel now and the level of her bloodlust to make an example out of Greece, to keep money flowing into Germany from the rest of the South. The Portuguese and Spanish FM’s seem to be happy with the current situation and were the very first to attack Varoufakis viciously, in yesterday’s Eurogroup, like the nice little attack doggies they are! Woof!

    We Greeks are cornered, there is no deny. We do, however, seem to have two powerful allies, Obama and Putin. Each with their own opposing agenda, but set on containing Merkel and her ambitions. We don’t depend on them to survive.


    @TheGreekOne I’m glad to hear that a military coup in Greece is unlikely. I just got back from Argentina, and I talked to a number of people about Chile’s and Argentina’s coups. I don’t think a military coup requires the kind of investment Ukraine required, especially if the military is unhappy with the current government’s policies.

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