Harris&Ewing Harding inauguration 1921
The Automatic Earth has been warning of deflation since its inception. There is no other possible outcome once deleveraging starts. And deleveraging has been postponed, and postponed only, through QE programs. Which are a bottomless pit.
• The Great Reset – Act II (Russell Napier)
In May 2011 this analyst changed his mind about the impact of the monetary love being spread around the world by developed world central bankers. He stopped forecasting higher inflation and instead foresaw the return of deflation. Fresh from the battering in the deflationary storm of 2007-2009 investors did not want to hear that such monetary love would be in vain. They counted on central bankers then, just as they are counting on them now, to restore a level of nominal GDP growth that can prevent the severe burning of another painful deleveraging through default. Central bankers, the argument goes, need to boost financial asset prices to achieve higher nominal growth and that higher growth, when finally achieved, will be good for asset prices anyway.
So while their love may be for higher nominal GDP growth, the goodwill this spreads to asset prices should be priced in if it succeeds in creating inflation. However, a list of some prices that have been falling from last year – gold, steel, iron ore, copper, crude, coffee, cocoa, live cattle, hogs, orange juice, wheat, sugar, cotton, natural gas, silver, platinum, palladium, aluminium and tin – must raise questions as to whether there is reflation or whether this monetary love is in vain. This analyst is told that such major decline in prices across a broad spectrum of commodities and products represents a supply shock and not the failure of central banks to spur demand! Such supply side synchronicity is highly unlikely. This is nothing less than a failure to reflate and it is due to the growing crisis in Emerging Markets.
It was in a report called The Great Reset, in May 2011, that this analyst suggested the world was more likely to move towards deflation rather than higher inflation. There were many reasons for this change of mind, but key to it was a realisation that EM external surpluses had peaked. That sounds like a rather esoteric reason to change from an inflationist to deflationist stance, and it was not one that was of any concern to investors. However, the end of a long period (1998-2011) when external surpluses, combined with exchange-rate intervention policies, forced EM to create more domestic high-powered money, while simultaneously depressing the yields on US Treasuries, seemed both important and deflationary. Crucially, The Great Reset predicted this decline in EM external surpluses would produce tighter monetary policy in both EM and the developed world despite the efforts of central bankers to prevent it.
Smear.
• Treason Charges: What Lurks Behind The Bizarre Allegations (Varoufakis)
The bizarre attempt to have me indicted me on… treason charges, allegedly for conspiring to push Greece out of the Eurozone, reflects something much broader. It reflects a determined effort to de-legitimise our five-month long (25th January to 5th July 2015) negotiation with a troika incensed that we had the audacity to dispute the wisdom and efficacy of its failed program for Greece. The aim of my self-styled persecutors is to characterise our defiant negotiating stance as an aberration, an error or, even better from the perspective of Greece’s troika-friendly oligarchic establishment, as a ‘crime’ against Greece’s national interest. My dastardly ‘crime’ was that, expressing the collective will of our government, I personified the sins of:
• Facing down the Eurogroup’s leaders as an equal that has the right to say ‘NO’ and to present powerful analytical reasons for rebuffing the catastrophic illogicality of huge loans to an insolvent state in condirion of self-defeating austerity
• Demonstrating that one can be a committed Europeanist, strive to keep one’s nation in the Eurozone, and, at the very same time, reject Eurogroup policies which damage Europe, deconstruct the euro and, crucially, trap one’s country in austerity-driven debt-bondage
• Planning for contingencies that leading Eurogroup colleagues, and high ranking troika officials, were threatening me with in face-to-face discussions
• Unveiling how previous Greek governments turned crucial government departments, such as the General Secretariat of Public Revenues and the Hellenic Statistical Office, into departments effectively controlled by the troika and reliably pressed into the service of undermining the elected government.
It is amply clear that the Greek government has a duty to recover national and democratic sovereignty over all departments of state, and in particular those of the Finance Ministry. If it does not, it will continue to forfeit the instruments of policy making that voters expect it to utilise in pursuit of the mandate they bestowed upon it. In my ministerial endeavours, my team and I devised innovative methods for developing the Finance Ministry’s tools to deal efficiently with the troika-induced liquidity crunch while recouping executive powers previously usurped by the troika with the consent of previous governments.
Instead of indicting, and persecuting, those who, to this day, function within the public sector as the troika’s minions and lieutenants (while receiving their substantial salaries from the long-suffering Greek taxpayers), politicians and parties whom the electorate condemned for their efforts to turn Greece into a protectorate are now persecuting me, aided and abetted by the oligarchs’ media. I wear their accusations as badges of honour. The proud and honest negotiation that the SYRIZA government conducted from the first day we were elected has already changed Europe’s public debates for the better. The debate about the democratic deficit afflicting the Eurozone is now unstoppable. Alas, the troika’s domestic cheerleaders do not seem able to bear this historic success. Their efforts to criminalise it will crash of the same shoals that wrecked their blatant propaganda campaign against the ‘No’ vote in the 5th July referendum: the great majority of the fearless Greek people.
“So we now have a Europe where the political temperature is rising to boiling point: where the EMU elites are refusing to shift course; and where mischievous lawyers are concocting criminal charges against anybody daring to explore a way out of the trap.”
• This Is A Recipe For A European Civil War (AEP)
It has come to this. The first finance minister of a eurozone country to draw up contingency plans for a possible euro exit is under investigation for treason. Greece’s chief prosecutor is examining criminal charges against a five-man “working group” in the country’s finance ministry for the sin of designing a “Plan B”, a parallel system of euro liquidity and bank payments that could – in extremis – lead to a return of the drachma. It is hard to see how a monetary union held together by judicial power, coercion and fear in this way can have a future in any of Europe’s ancient nation states. The criminalisation of any Grexit debate shuts off the option of an orderly return to the drachma, even though there is a high probability – some say a near certainty – that the latest EMU loan package for Greece will prove unworkable and precipitate the country’s exit from the single currency within a year.
As a matter of practical statecraft, this is sheer madness. The Greek newspaper Kathimerini – the voice of the oligarchy – reported that the charges would include “breach of duty, violation of currency laws and belonging to a criminal organisation”, as well as violating data privacy by hacking into the Greek tax base. The prosecutor appears to have latched onto a legal suit by a private lawyer accusing Yanis Varoufakis of treason. It is nothing less than an attempt to destroy the mercurial former finance minister, lest he return as an avenging political force. The Greek “Plan B” was approved from the outset by prime minister Alexis Tsipras. It was designed originally to create an alternative source of euro liquidity if the ECB cut off emergency funding for the Greek banking system.
The ECB did in fact do exactly that – arguably violating the ECB’s Treaty to uphold financial stability, and acting ultra vires in a purely political move as the enforcer of the creditors – when the Syriza government threw down the gauntlet with an anti-austerity referendum. Mr Varoufakis insists that his plan was based on California’s IOU scheme in 2009 to cover tax rebates and to pay contractors when liquidity dried up after the Lehman crisis. His purpose was to reflate the economy within the eurozone, not to leave it. Yet it had a double function, and there lies the alleged treason. “At the drop of a hat it could be converted to a new drachma,” he said.
Pablo Iglesias, the pony-tailed leader of Spain’s Podemos movement, has drawn his own conclusions after watching Europe’s first radical-Left government in modern times brought to its knees by liquidity asphyxiation, and then further crushed by internal forces within Greece. He accused Germany of imposing a Carthaginian settlement as punishment for daring to call a referendum, and warned that the “limits of democracy in Europe” are now brutally clear. The lesson to be learned is that if Podemos is elected in Spain it must expect a trial of strength (“medir fuerzas”) and make sure it takes power in the fullest sense. You can interpret this how you will, but there is a hint of Leninist defiance in these words, a warning that Podemos may feel compelled to launch pre-emptive strikes against the entreched positions of the Spanish establisment, in the media, the judiciary, the security forces and the commanding heights of the economy.
The fate of Syriza has clearly tainted the radical-Left brand. The EMU creditor powers have shown all too clearly that if you buck the system, your country will pay a bitter price. It is hard to explain to Spanish voters – or indeed to anybody – how Mr Tsipras could accept a package of draconian demands rejected by the Greek people in a landslide vote just a week earlier. Podemos has lost its electoral lead and has dropped to 17pc in the polls, trailing the Socialists by a wide margin. But it would be premature to conclude that this is the end of the story. The deeper message – still entering the collective consciousness – is that no Leftist government can pursue sovereign policies within the constraints of EMU.
Le Monde Diplomatique has posted the article in picture format. Click the link to read.
• The Defeat Of Europe (Yanis Varoufakis)
Le Monde Diplomatique has posted the article in picture format. Click the link to read.
And Schäuble. And many others.
• If Varoufakis Is Charged With Treason, Then Dijsselbloem Should Be As Well (ZH)
What makes matters confusing, is that the core allegation made by Varoufakis, namely that the Troika controls Greece tax revenues and had to be sabotaged, was strictly denied: European Commission spokeswoman Mina Andreeva on Tuesday described as “false and unfounded” Varoufakis’s claims that Greece’s General Secretariat for Public Revenues is controlled by the country’s creditors. In other words, if Andreeva is right, then Varoufakis’ transgression of threatening to hijack the Greek tax system was merely hot air, and the former finmin is guilty of nothing more than self-aggrandizement.
On the other hand, if Greece does find it has a legal basis to criminally charge Varoufakis with treason merely for preparing for a Plan B, then it brings up an interesting question: if Varoufakis was a criminal merely for preparing for existing the Euro, then comparable treason charges should also be lobbed against none other than Varoufakis’ nemesis – Eurogroup president and Dutch finance minister Jeroen Dijsselbloem. Recall from the November 28 post that “Netherlands, Germany Have Euro Disaster Plan – Possible Return to Guilder and Mark”, to wit:
The Dutch finance ministry prepared for a scenario in which the Netherlands could return to its former currency – the guilder. They hosted meetings with a team of legal, economic and foreign affairs experts to discuss the possibility of returning to the Dutch guilder in early 2012. At the time the Euro was in crisis, Greece was on the verge of leaving or being pushed out of the Euro and the debt crisis was hitting Spain and Italy hard. The Greek prime minister Georgios Papandreou and his Italian counterpart Silvio Berlusconi had resigned and there were concerns that the eurozone debt crisis was spinning out of control – leading to contagion and the risk of a systemic collapse.
A TV documentary broke the story last Tuesday. The rumours were confirmed on Thursday by the current Dutch minister of finance, Jeroen Dijsselbloem, and the current President of the Eurogroup of finance ministers in a television interview which was covered by EU Observer and Bloomberg. “It is true that [the ministry of] finance and the then government had also prepared themselves for the worst scenario”, said Dijsselbloem.
This is precisely what Varoufakis was doing too.
“Government leaders, including the Dutch government, have always said: we want to keep that eurozone together. But [the Dutch government] also looked at: what if that fails. And it prepared for that.” While Dijsselbloem said there was no need to be “secretive” about the plans now, such discussions were shrouded in secrecy at the time to avoid spreading panic on the financial markets.
Again, precisely like in the Greek scenario. In fact, if throwing people in jail, may round up Wolfi Schauble as well:
Jan Kees de Jager, finance minister from February 2010 to November 2012, acknowledged that a team of legal experts, economists and foreign affairs specialists often met at his ministry on Fridays to discuss possible scenarios. “The fact that in Europe multiple scenarios were discussed was something some countries found rather scary. They did not do that at all, strikingly enough”, said De Jager in the TV documentary. “We were one of the few countries, together with Germany. We even had a team together that discussed scenarios, Germany-Netherlands.”
When the EU Observer requested confirmation from Germany, the German ministry of finance did not officially deny that it had drawn up similar plans, stating simply: “We and our partners in the euro zone, including the Netherlands, were and still are determined to do everything possible to prevent a breakup of the eurozone.” [..] This is quite a revelation. At that time the German finance minister Wolfgang Schauble had said that the Euro could survive without Greece. Whether it could survive without the Dutch is another matter entirely.
Fast forward 3 years when Greece, too, was making preparations for “preventing the breakup of the eurozone” in doing precisely what Schauble wanted as recently as three weeks ago: implementing a parallel currency which would enable Greece to take its “temporary” sabbatical from the Eurozone. So one wonders: where are the legal suits accusing Dijsselbloem and Schauble of the same “treason” that Varoufakis may have to vigorously defend himself in a kangaroo court designed to be nothing but a spectacle showing what happens to anyone in Europe who dares to give Germany the finger, either literally or metaphorically.
El-Erian comes laden with salt.
• In Defence Of Yanis Varoufakis (El-Erian)
From blaming him for the renewed collapse of the Greek economy to accusing him of illegally plotting Greece’s exit from the eurozone, it has become fashionable to disparage Yanis Varoufakis, the country’s former finance minister. While I have never met or spoken to him, I believe that he is getting a bad rap (and increasingly so). In the process, attention is being diverted away from the issues that are central to Greece’s ability to recover and prosper – whether it stays in the eurozone or decides to leave. That is why it is important to take note of the ideas that Varoufakis continues to espouse. Greeks and others may fault him for pursuing his agenda with too little politesse while in office. But the essence of that agenda was – and remains – largely correct.
Following an impressive election victory by his Syriza party in January, Greece’s prime minister, Alexis Tsipras, appointed Varoufakis to lead the delicate negotiations with the country’s creditors. His mandate was to recast the relationship in two important ways: render its terms more amenable to economic growth and job creation; and restore balance and dignity to the treatment of Greece by its European partners and the IMF. These objectives reflected Greece’s frustrating and disappointing experience under two previous bailout packages administered by “the institutions”. In pursuing them, Varoufakis felt empowered by the scale of Syriza’s electoral win and compelled by economic logic to press three issues that many economists believe must be addressed if sustained growth is to be restored: less and more intelligent austerity; structural reforms that better meet social objectives; and debt reduction.
These issues remain as relevant today, with Varoufakis out of government, as they were when he was tirelessly advocating for them during visits to European capitals and in tense late-night negotiations in Brussels. Indeed, many observers view the agreement on a third bailout programme that Greece reached with its creditors – barely a week after Varoufakis resigned – as simply more of the same. At best, the deal will bring a respite – one that is likely to prove both short and shallow. [..] Now that he is out of office, Varoufakis is being blamed for much more than failing to adapt his approach to political reality. Some hold him responsible for the renewed collapse of the Greek economy, the unprecedented shuttering of the banking system, and the imposition of stifling capital controls.
Others are calling for criminal investigations, characterising the work he led on a plan B (whereby Greece would introduce a new payments system either in parallel or instead of the euro) as tantamount to treason. But, love him or hate him (and, it seems, very few people who have encountered him feel indifferent), Varoufakis was never the arbiter of Greece’s fate. Yes, he should have adopted a more conciliatory style and shown greater appreciation for the norms of European negotiations; and, yes, he overestimated Greece’s bargaining power, wrongly assuming that pressing the threat of Grexit would compel his European partners to reconsider their long-entrenched positions. But, relative to the macro situation, these are minor issues.
Another thing I said days ago. Surprise me, tell me something new. Alternatively: read me.
• Yanis Varoufakis Is Being Pilloried For Doing What Had To Be Done (Legrain)
Yanis Varoufakis has few friends in official circles these days. Greece’s outspoken former finance minister has long been loathed by his erstwhile eurozone counterparts, on whom he counterproductively impressed their mediocrity. Since he has been jettisoned by his prime minister, Alexis Tsipras, and criticised Greece’s capitulation to Germany’s iniquitous demands, his former Syriza colleagues are losing patience with him too. He is becoming the perfect fall guy for having devised a daring escape plan in the event that Greece’s creditors shut down its banking system and severed its international economic ties – as they eventually did. While Varoufakis’s plan to create a parallel payments system based on the country’s tax register was certainly unorthodox, it was completely understandable.
Until the recent revelations, Varoufakis was being criticised for standing up to Greece’s eurozone creditors without preparing a Plan B in case negotiations failed. As many experts and commentators, including me, advised, the Greek government needed to prepare for a parallel currency to provide liquidity to the economy in case eurozone authorities turned off the taps. That way it could credibly threaten to default on its debts while remaining in the eurozone – and thus, it hoped, convince its creditors to offer the debt relief that the depressed Greek economy desperately needed to recover.
But now it turns out Varoufakis did have a plan B, he is being attacked for that too. Some criticise the supposed recklessness and duplicity of preparing for a parallel currency that could have become a new drachma, given the government’s official commitment to staying in the euro. But that is disingenuous. Governments should and do prepare for all sorts of eventualities. The Bank of England is right to prepare for the possibility of Brexit, which may happen even though it is not government policy. One hopes that Whitehall has plans for dealing with a nuclear winter or a catastrophic epidemic. Varoufakis was right to prepare for how to cope with an outcome that wasn’t just possible, but likely.
Others object that the plan wouldn’t have worked. But why not? In principle, the idea of setting up a parallel payments system involving people’s tax numbers is ingenious. Since the value of the parallel currency would derive from the fact that the Greek government accepted it as payment for overdue, current and future taxes, it makes a lot of sense. Given that it takes time to print and distribute banknotes, starting with a purely electronic system is also sensible.
Part of why the tapes were leaked?!
• After Greece, Everyone Will Want A Plan B To Leave The Euro (MarketWatch)
Surely now every finance minister in Europe is going to be continually asked whether they, like the Greeks, have put in place a contingency plan for an alternative currency. It will be a very hard question to answer. If they say no, then they look irresponsible — after all, one of the key tasks of any government is to prepare for all kinds of terrible things that might happen. If they say yes, however, then they undermine their membership in the single currency. It is lose-lose — but that does not mean it is not going to happen. The Irish? They will certainly be expected to have a plan in place, given the underlying strength of their economy, and what happened to them last time around. The Spanish? With the rise of their own anti-austerity parties, they will certainly need to prepare for all eventualities.
The same is true of the Italians and the Portuguese. Once the questions start, they will be impossible to stop. The trouble is, that is now how a currency is mean to work. No one ever asks the governor of Virginia what plans he has put in place should the state decide to pull out of the dollar. No one asks the leader of Manchester Council whether they have prepared for leaving the sterling zone, or the leaders of Osaka whether they might replace the yen. It would be like asking whether they planned to colonize Mars — – the question would be too far-fetched to even be put. It simply wouldn’t happen. That is because properly functioning currency systems are permanent.
The Greeks and the German have changed that. Varoufakis’s legacy is, in truth, a reversible euro. A country might be a member, but only for the moment, and only so long as it works. It will always have a Plan B stored away somewhere, just in case. And yet, that is not a currency. It is fixed-exchange-rate system. The problem is that fixed-currency systems don’t often survive an economic shock. The euro is staggering on for now. But the chances of it surviving the next big wave or turmoil in the markets have just been dramatically reduced.
Hilarious in its tragedy.
• Bulgaria, Greece’s New Treasury (Novinite)
A short trip to Bulgaria is the only thing Greeks have to do to circumvent capital controls, German weekly Der Spiegel says. “Strict controls which actually had to save Greece’s banks from collapse, are leading to a mass exodus to the poorest EU member state,” it reports in a Tuesday article. Up to €14,000 are successfully transferred to Bulgaria every week despite capital controls. Something not only “normal citizens” do (with thousands having opened bank accounts there), but also companies which open branch offices or move their headquarters to the country, Der Spiegel argues. This is partly owned to the fact that one is allowed to have €2000 daily (or €14,000 weekly) transferred from their account for a trip abroad.
A bank employee in Bulgaria is quoted as saying that for Greek citizens it is quite easy to have accounts set up in her bank in either leva (the Bulgarian currency, BGN) or euro – all it takes is an ID document and wait for two hours. “We have many foreign clients. Of course, Greeks too,” she told the author of the article. Greeks are fearing that a return to the drachma might cost much of their wealth. “In the months when Greece’s crisis peaked they have withdrawn around EUR 45 B from their bank accounts. Now they are bringing the money abroad.” For companies, low corporate and personal taxes in Bulgaria turn out attractive, being at 10% compared to Greece’s 29% of corporate tax. The latter rate was introduced to comply with the demands of international lenders.
Lower minimum wage and levels of red tape add to Bulgaria’s appeal, and Greek entrepreneurs are able to set up a Bulgaria-based subsidiary normally in just a week. As a result, there were 11 500 entities with Greek participation in Bulgaria, 2500 more than the year before. Krasen Stanchev, an economist with the Institute for Market Economy, is quoted as saying that some EUR 4.5-5 B have been invested by Greek companies into Bulgaria since the crisis began. “Until a few years ago Greece was still a beacon of hope and a role model for other countries in the Balkans. We were a developed economy, integrated into the West, part of the center of Europe… Now even Albania looks more attractive,” an entrepreneur is quoted as saying.
Something tells me the Greeks will come out of this in good shape.
• Hay For Cheese? Barter Booms in Cash-Squeezed Rural Greece (Reuters)
Panagiotis Koutras, a cattle herder and farmer, recalls how he sold clover for animal feed worth 2,000 euros to a farmer who did not have cash and paid him in wheat. Another farmer offered his heavy equipment to cover €4,000 of a €6,000 bill for products Koutras had supplied him. Kostas Zavlagas, who produces cotton, wheat, and clover recounted how he gave bales of hay and machine parts to another farmer who did not have cash to pay him. “He is going to pay me back in some sort of product when he is able to, maybe in cheese,” says 47-year-old Zavlagas. “It’s representative of the daily issues that farmers face and why they turn to barter trading to resolve them.”
Still, for the country’s tax inspectors, the practice raises questions about whether it is fuelling endemic tax dodging since it is difficult to monitor whether receipts are issued to ensure value-added-tax is paid. “Barter is not illegal as long as the relevant legal documents are issued for every transaction,” said Christos Kyriazopoulos, research director at the finance ministry’s anti-corruption unit. “But we are closely monitoring the phenomenon, it’s something that we have our eyes on.” Many Greeks are reluctant to encourage the use of barter or to talk about it openly, fearing it symbolizes a society moving in reverse after seven years of economic crisis.
“Of course, a barter economy is something that we shouldn’t aspire to and should be a thing of the past – the last time we had it on a large scale was when we were under occupation,” says Stamatis of the Mermix platform, referring to Nazi German rule during World War Two. “But aren’t capital controls a financial form of occupation?”
“The IMF is part of the so-called “quadriga” of bailout monitors that also includes the EC, the ECB and, for the first time, the European Stability Mechanism, the EU’s own bailout fund.”
• Tsipras Faces New Challenge From Syriza Hardliners Over Greek Bailout (FT)
Alexis Tsipras will on Thursday face an unprecedented challenge to his authority, as the central committee of his governing Syriza party meets to discuss the prime minister’s plan to hold a snap election as soon as Greece signs up to a €86bn third bailout. After abandoning its earlier vows of unity, Left Platform, an anti-bailout faction of the party led by Panayotis Lafazanis, the former energy minister, appeared to be preparing for a showdown that could split Syriza and deprive Mr Tsipras of his parliamentary majority. The development was a reminder of the threats facing Greece’s prime minister as he tries to finalise a bailout deal with international creditors that is deeply unpopular within his own leftwing party.
Mr Tsipras has so far succeeded at winning parliamentary support for two packages of reforms connected to the bailout even as he has expressed his own misgivings about them. In the process, he appears to have energised Mr Lafazanis, a former Communist party official who has advocated a return to the drachma. The prime minister is expected to propose an extraordinary party congress for September, provided his government can meet its own tight deadline of August 12 to strike a deal with creditors. The central committee meeting also coincides with the arrival in Athens of Delia Valesescu, the IMF’s new head of mission. The IMF is part of the so-called “quadriga” of bailout monitors that also includes the EC, the ECB and, for the first time, the European Stability Mechanism, the EU’s own bailout fund.
Earlier this week technical experts from the EU and IMF gained access to the national accounting office at the finance ministry for the first time since Syriza came to power in January, reflecting a more accommodating attitude towards the creditors since Yanis Varoufakis, the combative finance minister, stepped down earlier this month. Mr Tsipras’s newfound willingness to negotiate tough economic reforms with the deeply unpopular bailout monitors in order to keep Greece in the euro has left Mr Lafazanis sounding disappointed and increasingly angry.
Maybe Romanians are good with diktats?
• ‘Iron Lady’ To Play Central Role In Next Act Of Greek Bailout Drama (Guardian)
Delia Velculescu, the Romanian economist chosen to lead the International Monetary Fund’s negotiating team in Greece, was dubbed the “iron lady” during the fraught talks over Cyprus’s bailout. Given the poor relationship between Athens and its creditors, her toughness will be tested anew in the coming days. Velculescu arrives in Athens on Thursday amid uncertainty over the IMF’s willingness to throw its weight behind a third bailout for the stricken eurozone state. Alexis Tsipras, the Greek prime minister, hopes to negotiate a deal before 20 August, but the IMF will subject any agreement to rigorous examination. The IMF has indicated that it regards Greece’s debt burden as unsustainable, and any new deal must include debt relief.
It is far from clear whether Athens’ eurozone creditors are ready to offer this. Velculescu will have to decide what role the Washington-based lender is willing to play in any new rescue – and what should be expected of Greece in return. Velculescu is not well known in her native Romania, having left for the US to attend university and later joined the IMF. “Inside Romanian financial institutions, she’s known due to her position at the IMF, but among journalists and the general public she is mostly unknown,” said Cristian Pantazi, editor-in-chief of Hotnews, an online Romanian news agency. “People who do know her here characterise her as a very serious and dedicated professional.”
Velculescu holds a masters and PhD in economics from Johns Hopkins University in Maryland, and has been at the IMF since 2002. She co-authored an earlier IMF review of the Greek economy in 2009, and this, coupled with her time in Cyprus as the IMF’s chief representative between 2012 and 2014, has led to her securing a prominent role in trying to resolve the ongoing crisis in Greece. [..] it was the Cyprus bailout in 2013 that made her name. It was the Cypriot media who portrayed Velculescu as an “iron lady” who was very tough and demanding in terms of fiscal consolidation and the requirements she made on the country. However, those who dealt with her during Cyprus’s bailout talks have a different viewpoint.
“She had a reputation for being tough, but I didn’t experience the toughness in my dealings with her,” said Marios Clerides, general manager at the Cooperative Central Bank in Cyprus. “She and the troika came across as resolved rather than aggressive,” he added. “She has quite a negative reputation in Cyprus,” said Alexander Apostolides, an economics historian at the European University Cyprus, who was a presidential adviser during the negotiations. “We are a male-dominated society and the fact that she was a woman caused some issues,” he said, but added that in his experience she was “a person willing to listen to other ideas and alternatives, more ready than others to hear other approaches”.
Good work. Steve will be able to point out tons of erroneous assumptions in mainstream economics.
• Help Make Minsky Easier To Use (Steve Keen)
Minsky has been programmed almost exclusively by Dr Russell Standish, and $10,000 will buy 100 hours of Russell’s programming time. About A$230,000 has been spent on it so far-with US$128,000 coming from an initial INET grant (when the US$ was worth less than the A$), US$78,000 from a Kickstarter campaign, and sundry other amounts from supporters like Bruce Ramsay, who runs the Ending Overlending page that is linked to from this blog. This funding enabled Russell to build the basic functionality Minsky needed, along with a lot of innovative smarts that set it apart from its much more established rivals in system dynamics programs like Matlab’s Simulink, Vensim, Stella and Vissim that cost thousands of dollars a copy and have been around for decades.
For example, Minsky is the only system dynamics program that lets you use Greek characters and symbols, superscripts and subscripts; it runs plots dynamically while a simulation is running (which only Vissim also does in the system dynamics product space), it s the only program that lets you insert variables and operators by typing directly onto the canvas rather than having to use the mouse and toolbox palettes; and of course it s the only program that supports double-entry bookkeeping to allow complex inter-related financial accounts to be simulated dynamically. But the program is still incomplete.
Some basic things like an IF/THEN/ELSE block are missing; some aspects of grouping don’t work properly yet, you can’t save part of a Minsky file as a toolkit, and so on. I’m putting $10,000 of my own cash in to get these things done now and there are many other features that should be added. These range from simple things like adding shortcut keys for Save As to the final ambitions I have for the program enabling it to model multiple sectors and multiple economies at once. If we can raise another $30,000 or so, we can also address one of the main complaints that I hear about Minsky: to quote my good friend Tom Ferguson, INET’s Research Director, from our dinner together in London last month, “Why is Minsky so hard to use?”
Crack down on the poor.
• Spain Thinks Its Workers Are Not Really As Unemployed As They Say (Economist)
He had the dishevelled air of a bon vivant, someone who enjoyed his food and cared little for appearances. When he showed up in the tiny hillside village of Gaucin at the beginning of the year, driving an old car and asking for directions, no one knew who he was, or cared. But he eased into village life, gossiping with the locals in the bars, mostly about who owned what in the area. He had done his homework on Owners Direct and Airbnb, two home-rental websites, and had a list of a hundred houses that were being rented out to holidaymakers. Next he began asking about villagers who were working part-time for cash as cleaners, gardeners or handymen, some of them officially claiming to be unemployed. Soon the word spread: the taxman had come to town.
The inspectors have come to villages like Gaucin to tackle the Spanish government’s difficulties in collecting revenue, in the face of economic problems that have driven much of the country’s business activity into the shadows. Spain’s economy has been growing lately, creating 411,000 net jobs in the second quarter according to figures released on July 23rd by the national statistics agency. But while unemployment fell 1.4 %age points, it is still an agonising 22.4%, having remained above 20% for five years. As elsewhere in southern Europe, this prolonged stagnation has encouraged workers and businesses to dodge taxes by shifting to the black market.
While northern European countries now promote electronic transactions, shopkeepers and housecleaners in Spain are happy to accept cash in order to dodge value-added tax of 21%. The grey economy is estimated to make up between a fifth and a quarter of Spain’s GDP. The government’s tax crackdown has netted almost €35 billion extra for the state’s coffers in the past three years. But the tax agency (or Agencia Tributaria) sees scope to improve that take. It plans to step up surveillance of social media and e-commerce sites, as well as of businesses such as hotels and restaurants which it suspects of keeping two sets of accounts to under-report income. Members of the public are encouraged to blow the whistle, and to report any payments of €2,500 or more in cash. Tax inspectors are offered financial incentives to meet ambitious targets.
Go Nigel go.
• Nigel Farage On EU Referendum And The Mess In Dover-Calais (BBCBreakfast)
UKIPs Nigel Farage on the EU referendum campaign, and moving it forward as all the other Eurosceptics are lazy bastards, and the immigration mess on Dover-Calais route with illegal immigrants smuggling themselves onto Eurotunnel trains.
