Feb 232015
 
 February 23, 2015  Posted by at 7:22 am Finance Tagged with: , , , , , ,


Dorothea Lange “Men on ‘Skid Row’, Modesto, California” 1937

Before we get news in a few hours on the new proposals Greece is required to hand to its slavemasters today, Monday Feb 23, it seems relevant to point out one more time that what is happening to Greece is the result of political, not economic, decisions and points of view. One could argue that Greece is being thrown under the bus because it’s not – yet – deeply enough entangled and enmeshed in the global financial matrix. Just think back to a point Gordon Kerr of Cobden Partners made a few days ago on Bloomberg:

They [Greece] don’t have systemically important financial institutions dragging down their economy ..

In other words, Greek banks are not too big to fail. They could therefore be restructured – by the Greek government itself – without global contagion, certainly theoretically (it’s hard to pinpoint how this would turn out in practice, there are too many variables involved). And that is a major potential threat to other – European -banks, who A) could then also face calls for restructuring, and B) still have money invested in Greece. Just not that much anymore…

Bloomberg’s Mark Whitehouse showed in a piece over the weekend to what extent Germany’s banks pulled out of Greece since 2010. Thanks to the same bailouts that are now being used to try and force Greece into ever more austerity, budget cuts, depleted services and shy high unemployment.

I said it before: the decision to not restructure banks is purely political. It’s not an economic decision, though you will see everyone pretend it is, and claim the banking system(s) would collapse in case of debt restructuring and defaults on wagers. It was decided early on, 2007, that bank debts would, instead of being restructured, be transferred to public coffers. But that’s just a choice, not a necessity.

Moreover, it’s the by far worst choice, if only because it rewards gambling addicts for their behavior, at the cost of everyday people simply trying to make ends meet – and failing -. And this is self-reinforcing: the world today is firmly ruled by gambling addicts and their enablers, because they have managed to get their hands in the till. And they’re not just not planning to let go, they want more.

Here’s what happened to German bank debt in Greece:

Why Germany Might Not Be Bluffing in Greece

As Europe’s high-stakes debt negotiations with Greece reach an impasse, Germany has appeared surprisingly willing to drive the country out of the euro, regardless of the potentially dire repercussions for Italy, Portugal, Spain and the entire currency union. One possible explanation for Germany’s brinkmanship: Its banks have a lot less to lose than they once did. When the European debt crisis first flared up in 2010, Germany’s finances were closely linked to those of the euro area’s more economically fragile members. Its banks’ claims on Greece, Italy, Portugal and Spain – including money lent to governments and companies – amounted to more than €350 billion, about equal to all the capital in the German banking system.

If the periphery countries had forced losses on private creditors, which they arguably should have done, Germany would have had to recapitalize its banks or face an immediate meltdown.

The picture is very different now. The ECB, the IMF and other taxpayer-backed creditors have pumped hundreds of billions of euros of loans into the periphery countries, making it possible for German banks to extract themselves with minimal damage.

Thanks in part to this back-door rescue, the banks have also been able to raise some capital. As a result, they are in much better shape to withstand a Greek disaster. As of September 2014, their claims on Greece, Italy, Portugal and Spain had declined to about €216 billion, or 46% of capital. The upshot: Greece is left with more debt than it can pay, and Germany – with its banks effectively bailed out – has one less pressing reason to give Greece a break. Hardly the right incentives for a happy ending.

Merkel and Schäuble decided to save Wall Street mogul and derivatives behemoth Deutsche Bank at the cost of the Greek people. Not for economic reasons, but because Deutsche has much more political power inside the European Union than the entire Greek nation. Now you know what’s so inherently wrong in that union. Same story for France, where BNP, SocGen and Crédit Agricole had humongous amounts of debt outstanding in Athens. Where’s all that debt now, where’s it gone? Well, check your wallet.

When the decision came to throw either their own biggest banks, or the grandmas of a co-member nation of the currency union under the bus, I don’t think they even hesitated; they probably only went looking for the most efficient way to do it. And they have control over the perfect vehicle for such tasks: the ECB. A allegedly neutral institution that in reality peddles political influence in a way that guarantees the poorer countries will always wind up footing the bill.

And now that the systemic risk that Greece still might have been is effectively gone, and the debt has been transferred to the union’s bottom dwellers, Merkel and Schäuble can talk tough to Greece. Even if it wasn’t the Greeks that created this mess, it was Merkel and the Frankfurt bank CEO’s she confers with on a daily basis.

Banks are more important than people, certainly grandmas. That’s true on Wall Street, and it‘s true all over Europe. But it’s still just a political decision. And one that could be reversed as easily as it was taken. Which it what the paymasters find so scary about Syriza.

For those of you who don’t want to wake up one day to find their own grandmas crushed under the same bus the Greek yiayia’s are under as we speak, it would be beneficial to ponder how perverse this all is, not just the isolated events but the entire underlying system that produces them. And you support this perversity. And don’t fool yourself into thinking that the system won’t come for your grandma too. If you think that, you simply don’t understand how it works.

Home Forums Throw Your Grandma Under The Bus

This topic contains 7 replies, has 6 voices, and was last updated by  Danny B 4 years, 7 months ago.

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  • #19410

    Dorothea Lange “Men on ‘Skid Row’, Modesto, California” 1937 Before we get news in a few hours on the new proposals Greece is required to hand to its
    [See the full post at: Throw Your Grandma Under The Bus]

    #19411

    V. Arnold
    Participant

    Ilargi said;
    For those of you who don’t want to wake up one day to find their own grandmas crushed under the same bus the Greek yiayia’s are under as we speak, it would be beneficial to ponder how perverse this all is, not just the isolated events but the entire underlying system that produces them. And you support this perversity. And don’t fool yourself into thinking that the system won’t come for your grandma too. If you think that, you simply don’t understand how it works.

    Yes, I saw the perversity long ago, just before I left. Its gotten steadily worse, unrelenting one might say.
    My wife and I have discussed this for a few years and have one final debt, our house, actually it’s her house since I can’t own land here. There are no property taxes after the initial purchase, so when we pay it off, in 24 months, it will be free and clear of any and all taxes. One can never own a home in America because one is never free of property taxes, so one pays until death.
    Greece is being f**ked in nasty places by despots. I’ve no doubt the desired aim is the imposition of serf like conditions to those not in the capitalist elite (but despotic humans).
    Jobs will consist of contracts for a given time and duty. There will be no employed in todays sense of belonging to a company as an employee.
    The reason there are so many unemployed is simply because jobs are disappearing permanently. Even if America becomes a manufacturing super power again, via 3-D printing, manufacturing will never be the same again. And 3-D printing is a game changer and is in its infancy.
    We humans are past our expire date and unless we can re-purpose our reason to be; we’ll be useless life forms.
    Being a useless life form is dangerous to one’s health; ‘useless things”.are usually disposed of…

    #19412

    V. Arnold
    Participant

    In my above post I said;
    Jobs will consist of contracts for a given time and duty. There will be no employed in todays sense of belonging to a company as an employee.

    To be clear, I was speaking to America’s economy. This will also be true for all those under the spell of neo-liberal economics.
    Fortunately, some are shedding the spell and seeing reality…

    #19413

    John Rempel
    Participant

    A Greek Background
    The high stakes imposed on Greece are primarily the result of previous governments borrowing recklessly, knowing full well that their debts would never be paid off but gaining ‘friends’ who supplied them with everything from ‘free’ holidays to luxurious homes.
    This goes back to ‘once upon a time’ when Greece was proclaimed by the EU as its poorest country. I had a good friend, a top notch Greek economist who had worked for the OECD and by that time was with the EU. I doubted the ‘poverty’ claim but couldn’t refute it until she said, “You live in Athens and have been to Portugal. Have you seen a single central street in Athens that looks more impoverished than any street in Lisbon?” I hadn’t, but I soon knew why Greece was ‘so poor’.
    National wealth is set to the GNP and/or GDP. These are tied to taxable incomes. Greeks have been avoiding taxes since the Romans, through the Byzantine Empire and the Ottoman Empire perhaps because the tax collectors represented foreign powers. By the time of independence (1832) Greeks had been under foreign control since at least as far back as 27 BC. Almost 2 millennia of tax evasion is a hard habit to break. The figures the EU accepted blindly were grotesquely fraudulent and the Greek governments that forged them gained free money and loans. The EU attitude at the time was, “Ask and it shall be given.” Tell any child to pick anything they want and then worry about whether it’s good for them and affordable.
    Couple this with local government and civil service corruption and here we are today. An example comes from my time teaching EFL in the National School of Public Administration (Εθνικη Σχολη Δημοσιας Διοικησης). The school at that time (1990-96) was in Athens’ centre. A new one was being built in 1996 far from the centre with poor transport. Before it was finished, my director said, it had cost more than the Onassis Hospital. Most of the money came from the EU, I imagine a little of it was free.
    The Greek debt is clearly the fault of stupid European bankers with the same attitude to lending as the IMF who encouraged foolish lending in the USA until 2008.
    Our current government is trying to stimulate an economy which could become self-sufficient. To discourage intelligent planning in Greece is typical of both the Euro zone and the IMFers.

    #19416

    Hotrod
    Participant

    John Rempel,

    Thank you for sharing your personal Greek experience.

    I think one horrific aspect of the current banking criminality is the asset strip mining that naturally follows. What an ingenious way to steal physical assets from countries that are under the financial gun.

    #19417

    V. Arnold
    Participant

    @ Hotrod

    Indeed!

    #19421

    jal
    Participant

    Here was my question on 2015-02-16 after this article.
    Someone took a look and now we can see the answers.
    🙂
    https://www.zerohedge.com/news/2015-02-16/german-lawmaker-demands-all-payments-greece-be-immediately-stopped

    German Lawmaker Demands All Payments To Greece Be “Immediately Stopped”
    As Bloomberg reports,

    Hans Michelbach, a senior lawmaker from Chancellor Angela Merkel’s Christian Union bloc in parliament, says in e-mailed statement that EU needs to react to Greece’s rejection of euro area’s proposal.
    Payments must be immediately stopped and money kept as collateral to secure Greek debt payments
    Talks’ breakdown forces ECB to halt any aid
    Athens let last deadline lapse, national parliaments now won’t have enough time to approve any solution found at later stage
    —–
    Can some tell me where those payments to Greece were going?
    Was it to a German bank? To the IMF?
    Who is getting hurt by stopping those payments?

    #19430

    Danny B
    Participant
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