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The Manufacturing of Consent

by Frank Schnittger Wed Jun 6th, 2012 at 10:08:02 AM EST

So Fear triumphed over Anger and the Irish referendum on the Stability Treaty was passed by a "resounding" 60:40 margin on a 50% poll - more or less as predicted by the opinion polls and close to the average turnout for similar stand alone referenda in the past. Not much of interest here; time to move on to the Greek elections and Spanish banking crisis if the MSM are to be believed.

The government has been quick to spin the result as an endorsement for its austerity strategy and as a positive message to send to the rest of Europe (and the global investment community) of Ireland's unequivocal commitment to the Euro. Sure, there have been the usual noises about the need to promote a growth strategy for Europe and to revisit the "sovereigntising" of private banking debt and the hope that any new strategy devised for Spain involving more direct European bailing out of Spanish banks will be retrospectively made available to Ireland.

Quite how a YES vote was meant to advance that agenda is less than clear. German responses to Irish pleas have already been dismissive: Revisiting the sovereigntising of Irish banking debt would send out a "negative signal" apparently...
Kenny admits immediate bank debt deal unlikely

...but senior German officials dispute Mr Kenny’s interpretation of Ireland’s fiscal treaty vote as a “message to European Union leaders” for a “just” debt deal. “We see no need for movement at the moment,” said Martin Kotthaus, spokesman for finance minister Wolfgang Schäuble.
Indeed. The German Government clearly knows what the Irish people are thinking better than the Irish Government itself...

front-paged at last by afew


When you consider that, of the major parties, only Sinn Fein (with an historical max of 10% of the national vote at the last election) advocated a NO vote, then the 40% NO vote can be put into more perspective. Essentially almost 30% of the electorate abandoned the party line of the parties they generally support and voted NO. Little wonder that Sinn Fein more than doubled it's support (to 24%) in opinion polls taken after the referendum.

However it would be a mistake to regard Sinn Fein as Ireland's answer to the Greek Syriza party. Sinn Fein didn't advocate tearing up the Troika agreement or defaulting on national debt. Their line, as usual, was that the Government had failed to negotiate a good deal, and that any agreement to the Stability Treaty should only be done in the wake of agreement to a more comprehensive European growth and bank recapitalisation plan. As a negotiating ploy, it is hard to fault the strategy, and even conservative independent TD (Member of Parliament) Shane Ross argued for a postponement of the referendum pending a more compressive agreement on bank recapitalisation and growth for Europe as a whole (and Anglo Irish bank promissory notes in particular).

Even the yes side is agreed that most of their voters voted yes "through gritted teeth" acknowledging that "certainty" over access to ESM funding and the safeguarding of FDI to Ireland were essential to Ireland's national interest even if the Stabity Treaty was clearly a bad Treaty when viewed from the perspective of Europe as a whole. As my own local (independent) TD, Stephen Donnelly put it: The Treaty is clearly an economic nonsense, and Ireland would be doing Europe a favour if we rejected it. But Ireland's own narrow national interest is that we pass it so as to reinforce certainty of access to ESM funding, confidence in Ireland's commitment to the Euro, and continued FDI inflows into Ireland which appear to be enabling a very fragile stabilisation of Ireland's economy despite drastic government austerity measures and collapsing consumer confidence.

And so the European house continues to be built on sand, and with an increasingly reluctant and cynical attitude to the European project. The Irish elite, as exemplified by Irish Times editorials was rabidly in favour of the Treaty: How else would we continue to pay Doctors, Nurses, Teachers, Gardai and social welfare benefits if we didn't have access to the ESM? Little mention was made of the fact that our problems in this regard would be much less had we not first bailed out foreign creditors to private Irish banks. Or even of the fact that it makes little sense to refer to "Irish Banks" in an integrated single European market for financial services where light touch regulation was a feature at BOTH Irish and European levels.

I will leave the last few words to Fintan O'Toole:Yes vote an expression of grim fatalism

Here we see the deep strangeness of contemporary Irish politics. In a normal world, if people don't believe the Government, they vote against it. But in the topsy-turvy world we currently inhabit, people voted for the Government line precisely because they don't believe the Government. If people did believe what Michael Noonan had told us - that a second bailout is a ludicrous and inconceivable notion - the main argument for a Yes vote would have collapsed.

The Yes campaign had effectively stopped trying to argue that the treaty, as a response to the euro zone crisis, had any intrinsic merits. The only real issue was, as one voter quoted in a vox pop put it so succinctly, "I am going to vote Yes because we need the money and I don't see us getting it anywhere else". This is the surreal state we're in: people voted Yes not in spite of their belief that Government is bullshitting when it says a second bailout is ludicrous but because they believe it is bullshitting.

This is not "a loud expression of confidence in the Irish economy", it is a loud expression of the belief that the Irish economy is likely to be on life-support for at least the rest of the decade. It is not "another reminder that Ireland is dealing effectively with its problems", but an expression of grim fatalism. People, by and large, do not believe the policy of austerity for the poor and lavishness for dead banks (what should we call it - banksterity? austravagence?) is leading either to economic growth or to a restoration of sovereignty.

And there is a clear reason for this: people are not eejits. They know that the EU expects Gross National Income to decline by a further 1.3 per cent this year, with private and public consumption continuing to fall. They can read the figures that show that long-term unemployment (the really toxic kind) increased by 7 per cent in the last year.

They know that only large-scale emigration is keeping youth unemployment from reaching catastrophic levels. They know that the domestic economy, on which the vast majority of Irish employees depend for their jobs, is still shrinking. They know the Government is still committed to burning almost as much money every year on promissory notes for Anglo Irish Bank and Irish Nationwide as it is taking out of the economy in cuts and extra taxes. They know that the political and governance systems that created this mess remain largely unreformed. If this is evidence "Ireland is dealing effectively with its problems", it is difficult to imagine what ineffective policies might look like.

This delusional talking-up of the state of the country wouldn't matter so much if we could put a cordon of silence around the island. But what are our European partners to make of our pleas for help when we keep saying "ah but sure we're doing grand really"? Or is it that the Government feels there's no danger because it knows that no one believes what it says anyway?

Display:
They know that only large-scale emigration is keeping youth unemployment from reaching catastrophic levels.

Is this true?

They know that the domestic economy, on which the vast majority of Irish employees depend for their jobs, is still shrinking.

Is this?
by Colman (colman at eurotrib.com) on Tue Jun 5th, 2012 at 09:01:33 AM EST
Irish emigration a fact of life but not as bad as it could be - The Irish Times - Thu, Mar 22, 2012
The total number of Irish people emigrating in the 2006-08 period was 42,000. In 2009-11, it was 86,000.

Key Economic Indicators - Ireland - CSO - Central Statistics Office
GDP - SA('10) €m Q4 11 40,100 n.r. -0.2% 0.7%
GNP - SA('10) €m Q4 11 31,523 n.r. -2.2% -7.1%

It's the old GDP/GNP debate.

Whilst GDP is growing marginally, GNP is still falling in a big way according to the latest available figures...

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Jun 5th, 2012 at 09:51:20 AM EST
[ Parent ]
That's only 15,000 extra a year. Does that constitute mass emigration in the Irish context? Less people emigrated because they felt they had to than emigrated because they wanted to. It's bad, but not worthy of the horror film music it always seems to be accompanied by.

GNP is just as bad a measure as GDP, we shouldn't forget that. How do match rapidly falling GNP with your sense of the temperature of the economy?

by Colman (colman at eurotrib.com) on Tue Jun 5th, 2012 at 10:00:37 AM EST
[ Parent ]
Hardly a family I know hasn't been effected by recent (often forced) emigration but the impact is much less than before because improved education=good job prospects overseas and the availability of cheaper travel and social media to lessen the emotional effect. Many of those additional 44,000 who emigrated 2009-11 would presumably be on the unemployment register had they remained here increasing our 430,000 unemployment register numbers significantly.

Irish GNP is (almost uniquely) over 25% less than GDP because of the huge impact of foreign multinationals operating here repatriating their profits. With GNP declining further (relative to GDP stable or growing slightly) we see this dichotomy diverging further. In other words - without the largely artificial boost that multinationals give to Irish GDP our GDP numbers would also be falling and with it, the real level of activity in the Irish economy.


Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Jun 5th, 2012 at 10:26:37 AM EST
[ Parent ]
Well, GDP is at best semi-attached to the real activity in the Irish economy.

Just because things are bad it doesn't make GDP a valid measure of anything.

by Colman (colman at eurotrib.com) on Tue Jun 5th, 2012 at 11:03:06 AM EST
[ Parent ]
Is this all that the yes side could muster?
The Treaty is clearly an economic nonsense, and Ireland would be doing Europe a favour if we rejected it. But Ireland's own narrow national interest is that we pass it so as to reinforce certainty of access to ESM funding, confidence in Ireland's commitment to the Euro, and continued FDI inflows into Ireland which appear to be enabling a very fragile stabilisation of Ireland's economy despite drastic government austerity measures and collapsing consumer confidence.
Bad news for Europe if that's the case, because it will only get worse.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Tue Jun 5th, 2012 at 09:24:38 AM EST
Pretty much. The debate wasn't about Europe at all, it was about best gaming Ireland's national interest, which is the whole fucking problem with Europe right now.
by Colman (colman at eurotrib.com) on Tue Jun 5th, 2012 at 09:25:40 AM EST
[ Parent ]
Why Europe should fear Fine Gael-like `reasonableness' much, much more than it fears Syriza « Yanis Varoufakis
...why did the Fine Gael-led Dublin government push so powerfully in favour of this piece of crippling idiocy? And why did the smart, decent Irish voters said Yes, despite their tradition of saying No to euro-silliness? The answer is simple: They were blackmailed. Ireland's voters were told: Vote No and the flow of money from the troika will cease. And so they voted Yes, even though I suspect that no government minister, no rank and file Fine Gael or Labour Party member, no man or woman on the street believes that the Fiscal Compact they voted for makes sense.

...Europe is being quickmarched, sequentially (one country after the next) off the cliff of competitive austerity - without any winners standing at the end of this gruesome process. Something must end this madness. There must be a circuit-breaker. Ireland could have been that circuit-breaker, with a resounding No to the idiotic Fiscal Pact. It did not happen. On the one hand, the fear that Ireland will be frozen out of the ESM and, on the other hand, the elevation of the troika's `model prisoner' image (for the Irish) onto the Pantheon of Irish virtues, saw to it that madness (in the form of a Yes vote to a Compact that everyone knows to be daft) prevailed.

50% of the electorate didn't vote, which seems to indicate a sense of fatality. 30% voted Yes, possibly for reasons Colman suggests: the gunwhales are just clear of the water, now's not the time to rock the boat.

Why didn't more vote No? No doubt because there isn't a convincing, alternative narrative out there.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Jun 6th, 2012 at 06:15:33 AM EST
Also, the question was "Have you stopped beating your Wozzle?" and the answer was "SQUIDBERRIES!".

The debate was pretty nonsensical and people had no real clue what was going on. Lots of high-information voters were still trying to work it out the week before the debate - my brother seriously rang me to see if I had a clue.

Low turn-out isn't unexpected.

by Colman (colman at eurotrib.com) on Wed Jun 6th, 2012 at 06:19:50 AM EST
[ Parent ]
The turn-out was actually average for Euro-related standalone referenda. Without a "credible" alternative hanging in there makes sense. The alternative offered was articulated by Sinn Fein and the ULA - with a combined electoral standing of not much more than 10%, so why trust them on this one?

The most articulate/intellectual NO critique came from economists - Krugman, Keen, Terrence McDonough, Modern Monetary theorists etc. with little or no skin in the game and who are basically anti-Euro (at least in its current form) or at least very relaxed about the break-up of the Euro.

For Irish people the memory of the PUNT and 15% interest rates and being so small a currency area we can be easily gamed by a mid-size hedge fund is just too recent. We haven't given up on the Euro/EU yet and are alarmed that so many predict its demise.

For better or worse, recent Irish prosperity has been based largely on the Euro/EU and if it can be fixed we would want to do so. We don't see a problem with losing sovereignty to a larger entity provided the place is run better.  Whatever chance we have of managing bankers/global hedge funds/global corporates we hope/think the EU should be able to do a better job.

There is a lot of sneaking admiration for Merkel/the Germans and a recognition that it is unreasonable to expect them to act against their own national interest. The solution is therefore to tie Ireland's national interest as closely as possible to German national interests.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 6th, 2012 at 07:19:36 AM EST
[ Parent ]
There is a lot of sneaking admiration for Merkel/the Germans and a recognition that it is unreasonable to expect them to act against their own national interest. The solution is therefore to tie Ireland's national interest as closely as possible to German national interests.

The triumph of the neoliberals is complete.

by Colman (colman at eurotrib.com) on Wed Jun 6th, 2012 at 07:24:51 AM EST
[ Parent ]
Whatever else "the Germans" may be, neoliberalism does not describe it. The neo-liberal FDP is struggling to make the 5% threshold in many polls and has a high watermark of around 15%.

Germany, like Ireland, has a strong state directed economic tradition and a certain leeriness about unregulated markets. Both economies are export led with a strong positive balance of trade. Both are heavily integrated into the global economy but with a strong tradition of national/regional/sectoral wage agreements and collective bargaining.  Fine Gael, Fianna Fail (and often Labour) articulate the "Swabian Housewife" model of economics quite well.

Germans resent Irish tax avoidance schemes for multinationals (double Irish and Dutch sandwich), but who can blame them if we then go around with a poor mouth? Otherwise we have much it common and few historic antagonisms to overcome. What's not to like if (and it is a big if) the Germans continue to lead this part of the world, and we can hitch ourselves to their wagon?

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 6th, 2012 at 07:45:09 AM EST
[ Parent ]
Actually, I was referring to the triumph of "NATIONAL INTEREST".

If solidarity is dead, so is any EU worth having.

by Colman (colman at eurotrib.com) on Wed Jun 6th, 2012 at 07:55:33 AM EST
[ Parent ]
I know I am getting dangerously close to articulating a "realist" political position, but there is nothing wrong with "national interests" if the nations in question have more in common than they have separating them. Then the task of the EU is to develop cohesion, solidarity, and institutional structures to safeguard the common interests of the sovereign member states as a whole and to mediate/arbitrate where differences remain.

Of course I would prefer an EU based on a much stronger European Demos and institutional base, but the EU as currently configured is still largely an alliance of 27 sovereign member states. A Banking Union with a common regulatory and resolution architecture making bondholders responsible for losses would be a step in the right direction.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 6th, 2012 at 08:37:39 AM EST
[ Parent ]
Even the lip service that was paid to solidarity is fading.
by Colman (colman at eurotrib.com) on Wed Jun 6th, 2012 at 08:43:34 AM EST
[ Parent ]
But even the realists are arguing a Greek exit from the Euro would cost €1Trillion and that it is in "everyone's" interest to prevent this from happening. If Greece ultimately survives within the Eurozone, it won't be because everyone loves them, but because they believe the alternative would be even more damaging for all.

I find it interesting that Merkel was a compliant youth leader in Communist East Germany - a state which was ultimately bailed out by West Germany at massive cost to West Germans and other European states - to a degree that would make a complete bail-out of Greece look small in comparison.

While academic arguments about the wisdom of Kohl's 1:1 revaluation of the Ostmark remain, I don't hear any negative commentary about bailing out East Germany now, although that may be because I am not close to German politics..

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 6th, 2012 at 08:55:43 AM EST
[ Parent ]
and other European states

No, I believe you'll find that the Germans did it all themselves and don't owe anyone anything.

by Colman (colman at eurotrib.com) on Wed Jun 6th, 2012 at 08:56:55 AM EST
[ Parent ]
This is where Enda is failing Ireland badly. He should be giving speeches in Germany and around Europe ad nauseum. The argument that:

  1. The Irish bail-out was actually intended for and given largely to bail-out German banks who had engaged in irresponsible lending

  2. That the low ECB interest rates required to pull Germany out of post re-unification slump had the foreseeable consequence of creating property and other bubbles elsewhere which in part caused the current crisis

simply isn't being made in a manner which has any traction with public opinion. Enda doesn't have to understand the argument. He just has to be able to read a speech. He could commission "a few wise men" of renowned global economists to write it for him.  Keen and Stiglitz and one or two Brits/Germans/French could do the trick.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 6th, 2012 at 09:10:30 AM EST
[ Parent ]
But even the realists are arguing a Greek exit from the Euro would cost €1Trillion and that it is in "everyone's" interest to prevent this from happening.
And the answer is to double down on the punishment, the blackmail and the extortion and cajoling of the Greek political class and the Greek people.

We can only guess what the wrath of Brussels/Frankfurt will visit on Greece after Syriza wins the election in 10 days, but it won't be pretty or indeed in line with any idea of the Europe we want to live in.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Wed Jun 6th, 2012 at 09:07:47 AM EST
[ Parent ]
Or they could conclude that the blackmail failed. They tried installing a puppet regime. They tried having two elections and still couldn't get the result they wanted. So now they are going to have to deal with a Syriza led Government.

The worst case scenario, from Germany's perspective, is not a Syriza led Government, but a weak Government incapable of implementing ANY agreement.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 6th, 2012 at 09:16:49 AM EST
[ Parent ]
I wouldn't put it past them to stop clearing payments with the Greek central bank.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Wed Jun 6th, 2012 at 09:20:06 AM EST
[ Parent ]
That is, presumably, the mechanism for expelling Greece from the Eurozone in the absence of any legal mechanism for doing so. However if that is the route they choose to go in, they can kiss all their Greek loans goodbye. Why should Greece honour its commitments if the ECB doesn't honour its functions as a central bank?

In practice,, the Euro would probably remain in circulation in Greece to fund imports, whilst Greece would create a new Drachma to provide the required liquidity for the domestic economy. A rapid and radical devaluation is probably what Greece needs now in any case - allied to a sovereign debt default.

Officially, Greek membership of the Eurozone mught be deemed to be "suspended" for a time, pending a "normalisation of economic relations and the Greek economy on a new footing.  Hardly a painless prospect. Something akin to a company going into Examinership with the prospect of returning to trading sustainably at some stage in the future.

If the problem was limited to Greece, it wouldn't be a problem. The problem would be the risk of "contagion" to Spain etc.  Hence Greece would be placed in purgatory for a while. Imports to Greece would plummet as exporters worried about credit worthiness and the prospect of being paid in Drachmas of uncertain value. Assets in Greece would become so cheap in Euro terms the asset strippers would move in. But if Syriza could actually govern effectively, the basis of a sustainable recovery could e in place and working within a couple of years.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 6th, 2012 at 09:33:12 AM EST
[ Parent ]
That we're even discussing in these terms is proof positive of the moral failure of the European union and the death of European solidarity.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Wed Jun 6th, 2012 at 09:37:54 AM EST
[ Parent ]
Not necessarily. As organisations mature they move from the visionary dreams of their founders to the pragmatic actions of bureaucrats furthering their organisational self interests. Problems arise when the institutional architecture takes insufficient account of underlying conflicts of interest or new threats in the external environment. The same happens in companies when they grow out of the initial entrepreneurial phase and become entrenched bureaucracies which stifle innovation or the ability to respond to new challenges.

The very fact that we are now talking about a banking Union with common regulatory and resolution frameworks is a positive step. It may not be a vision to inspire a new generation of Euro enthusiasts, but it shows that incremental evolution is still possible.

The lack of empathy with Greek suffering is, of course alarming. Merkel doesn't have the vision to formulate a Marshall plan, or even the vision of her mentor, Helmut Kohl, who initiated a massive transfer Union between West and East Germany (perhaps without fully realising that that was what he was doing).

Certainly the politics and rhetoric have changed in a was that seems entirely anti-humanitarian. Where now the talk of cohesion, structural and regional funds to help less developed regions? It's like dogs fighting over scraps at the moment.

So I don't disagree with your sentiment: I just think that, with better leadership, there is still a lot of potential in what the EU could achieve. It's just an incredibly slow, opaque, and frustrating process; but I'm not a Eurosceptic yet.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 6th, 2012 at 10:12:23 AM EST
[ Parent ]
I'm not a Eurosceptic, I'm sceptic of the human condition.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Wed Jun 6th, 2012 at 10:15:00 AM EST
[ Parent ]
And how do you fix that?

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 6th, 2012 at 10:30:25 AM EST
[ Parent ]
I can't.

Quoting Diogenes, the more I know people, the more I like my dog.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Wed Jun 6th, 2012 at 10:31:36 AM EST
[ Parent ]
But politics, when played well, is the art of ameliorating its worst consequences? And perhaps even fixing a few of the problems on the way. Science and Democracy were distinct improvements on what preceded them. The EU a distinct improvement on the warring Great Powers. The Euro perhaps a slight improvement on the currency speculators gaming casinos which proceeded it. We just have to fix the architecture a bit more so that even incompetent administrators can bolix it all the time.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 6th, 2012 at 10:42:42 AM EST
[ Parent ]
The Euro perhaps a slight improvement on the currency speculators gaming casinos which pr[e]ce[]ded it.

Except it isn't. The Euro is a reenactment of the gold standard. And currency speculation in European currencies was not the problem the Euro was designed to solve.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Wed Jun 6th, 2012 at 10:44:40 AM EST
[ Parent ]
But politics, when played well, is the art of ameliorating its worst consequences?

Begs the question.

Politics is about power. It is mostly uncorrelated with what power will be used for.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Wed Jun 6th, 2012 at 10:46:09 AM EST
[ Parent ]
I didn't know you had a dog.
by Colman (colman at eurotrib.com) on Wed Jun 6th, 2012 at 10:45:28 AM EST
[ Parent ]
I don't like dogs, I'm a cat person and I don't have a cat.

Diogenes' point is that the more you know about people the less you're bound to like them. So the only way to cure cynicism may be lobotomy.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Wed Jun 6th, 2012 at 10:47:36 AM EST
[ Parent ]
I find it works the other way around. The more I get to know people, generally, the more I get to like or at least them. Cats couldn't give a shit either way. They want to be fed and scratched and give you at most a purr in return...

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 6th, 2012 at 10:54:00 AM EST
[ Parent ]
You're saying I could learn to like Merkel with even more exposure to her?

Since I'm expecting her to be Chancellor until at least 2017, maybe I'll yet become a fan.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Wed Jun 6th, 2012 at 12:24:37 PM EST
[ Parent ]
I wouldn't put it past them to stop clearing payments with the Greek central bank.

I would, because that's also one of the first moves Greece would have to take to repatriate money from German bank accounts.

Most or all interbank debts in the Eurozone pass through the local central banks. If the ECBuBa stops clearing transactions with the Greek CB, the ECBuBa has implicitly voided a good chunk of Greek interbank debts to the rest of the Eurozone.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Jun 9th, 2012 at 08:55:07 AM EST
[ Parent ]
I find it interesting that Merkel was a compliant youth leader in Communist East Germany - a state which was ultimately bailed out by West Germany at massive cost to West Germans and other European states - to a degree that would make a complete bail-out of Greece look small in comparison.

And then she chose to 'identify upward' with the Christian Democrats, in the process throwing her former fellow Ossies under the bus and becoming the token former Ossie politico in German political life. But then forgetting about your earlier political behavior and acting as though it never existed is no more without precedence than it is, in this instance, without moral content.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jun 10th, 2012 at 09:39:15 AM EST
[ Parent ]
And creating the EU was ultimately Germany's only means of absorbing the costs of integrating the East.  Germany has externalized those costs on the rest of the Union.
by rifek on Mon Jun 11th, 2012 at 11:37:48 AM EST
[ Parent ]

 articulate the bat-shit insane "Swabian Housewife" model of economics quite well.

Fixed it for you.

by Colman (colman at eurotrib.com) on Wed Jun 6th, 2012 at 07:56:25 AM EST
[ Parent ]
There is no need to gild the lily. The concept that a Swabian Housewife's approach to family finances is the correct model for macro-economic management is indeed bat shit insane, but that is already assumed in the context and construction of the concept...

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 6th, 2012 at 09:43:33 AM EST
[ Parent ]
The FDP doesn't understand that what's sauce for the goose isn't sauce for the gander.  Germany has gone into neo-imperialist mode (We may one day look back and view the EU as the Fourth Reich.) and is behaving thoroughly predictably: protectionism for the homeland, mercantilism for how the homeland is to act toward the colonies, and neo-liberalism for how the colonies are supposed to act.  Germany's great innovation is that, unlike previous empires, it's managed to foist the bulk of the military bill on someone else.
by rifek on Sun Jun 10th, 2012 at 03:30:24 PM EST
[ Parent ]
There is a lot of sneaking admiration for Merkel/the Germans and a recognition that it is unreasonable to expect them to act against their own national interest. The solution is therefore to tie Ireland's national interest as closely as possible to German national interests.
Not a million miles away from the German wiew: Why Berlin is fixed on a German solution to the eurozone crisis
One of the incontrovertible effects of the euro crisis has been to push Germany into the leadership of Europe. The impact will undoubtedly be that Berlin will want Europe to get out of the crisis by being more German - not through some half-remembered Weimar memory of wheelbarrows full of cash, but through a widely held belief in what works for an economy. The rest of Europe simply needs to understand this and work with Berlin.
These are two mirror statements of German hegemony.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Wed Jun 6th, 2012 at 09:01:45 AM EST
[ Parent ]
Germany Hegemony is obviously a traumatic prospect for many in Europe - much less so for many Irish people. They were (almost) our allies against the Brits, after all!

More seriously, if it works, the Irish won't want to fix it. My problem is that I don't think it will work for most in Europe, although it may help shore up a declining Europe in a global context.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 6th, 2012 at 09:20:42 AM EST
[ Parent ]
The point is that whether it works or indeed has a snowball's chance in hell of working has no place in the argument that German hegemony forces others to align their national interest with German national interest. Also, that any attempt to convince the Germans that their chosen policy is actually against their national interest because it cannot attain its stated objectives is pretty much doomed to fail because of the character of ideological hegemony and the self-serving character of the ideology to a German audience (since "we're virtuous" is an essential plank).

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Wed Jun 6th, 2012 at 09:29:07 AM EST
[ Parent ]
Migeru:
Also, that any attempt to convince the Germans that their chosen policy is actually against their national interest because it cannot attain its stated objectives is pretty much doomed to fail because of the character of ideological hegemony and the self-serving character of the ideology to a German audience (since "we're virtuous" is an essential plank).

What I am wondering is how this is playing in Germany. Is austerity popular (guessing yes)? And if so is it important in the sense that those that support it would consider voting otherwise should for example CDU change their tune (guessing no)?

The importance of the second question is agency. If the population supports austerity (abroad of course) but would shrug if policy is changed, then the politicans could change politics with minimal poll losses. So then the reasons - and potential levers - must be found elsewhere.

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

by A swedish kind of death on Wed Jun 6th, 2012 at 02:00:24 PM EST
[ Parent ]
I'm reading Merkel's approval rating is around 80%, for her handling of the crisis.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Wed Jun 6th, 2012 at 02:01:45 PM EST
[ Parent ]
So was Bush after September 11 and his start of the war in Afghanistan. When in crisis, rally around the leader. And so far there has been no German soldiers killed in maintaining the war against the economy.

Of course, that gives Merkel a great incentive to maintain the current policies as they lead to crisis upon crisis.

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

by A swedish kind of death on Wed Jun 6th, 2012 at 03:31:40 PM EST
[ Parent ]
At present there is high approval for Merkel's policy. The Swabian housewife is a very successful narrative. But wait when the crisis hits us... Hopefully the SPD will get it: that's the moment for the opposition, if we have one by then.
by Katrin on Wed Jun 6th, 2012 at 03:53:13 PM EST
[ Parent ]
Hope springs eternal... But, perhaps, a serious economic crisis occasioned by German citizens having to bail out German banks while German exports collapsed might finally convince more Germans that Die Linke does not have cooties, at least to a degree sufficient that other 'leftist' parties could join in a coalition that includes them. Die Linke usually are the ones advocating the most sensible policies.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jun 10th, 2012 at 09:47:25 AM EST
[ Parent ]
And it will continue to be high so long as the Germans think they are winning and proving their virtue over others. However, if you are right, and Germany's current policies are against their own national interest, then their counter-productivity will soon come home to roost.

If we get to the stage where the German economy is seriously compromised by the austerity it is imposing all around, then the German elite themselves will soon become very restless.

On the plus side Merkel's popularity means she has a lot of political capital to take a dramatic policy initiative should she be persuaded one is required. There is no point in having a visionary leader with great plans if s/he has zero political capital to obtain agreement to their implementation. Perhaps she wants to emulate her mentor, Helmut Kohl and achieve some grand bargain of European integration/unification. What is not clear right now is precisely what elements such a grand bargain would entail. I could think of a few possible elements:

  1. Greater fiscal integration, oversight, and harmonisation conducted by an EU Commission "Budget Office".
  2. Common Consolidated tax base.
  3. Tobin Tax
  4. Banking Union - with common oversight and resolution mechanisms - and an enhanced role for the ECB as lender of last resort and with a remit to promote employment
  5. Eurobonds or project bonds
  6. Combining the posts of President of the Council and Commission and making it an elected post
  7. Greatly enhanced European Investment Bank to fund major cross border infrastructure projects
  8. Common Industrial and Energy Policy
  9. Enhanced oversight powers for the EP
  10. Enhanced cohesion, regional and structural funds

Any other ideas?

Why would Merkel and the other key players buy into such a package?

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 6th, 2012 at 06:12:16 PM EST
[ Parent ]
There is no point in having a visionary leader with great plans if s/he has zero political capital to obtain agreement to their implementation.

Who?

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Thu Jun 7th, 2012 at 01:22:28 AM EST
[ Parent ]
Some would argue that Obama is about as visionary as you can get and still be electable within the US, but even he has accomplished relatively little given the constraints of a Republican Controlled congress and the Financial/Military/Industrial complex which really runs the US.

However my point was not that there are many waiting in the wings in the EU (although there may be); my point was that Merkel, for all her limitations, has the political capital to take a major initiative if she can be persuaded one is required.

If, as you say, current German policy is against the German national and broader European interest, then she would have considerable ability to change things. The question mark is against her vision - not against her ability to take and retain control of the levers of power.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Jun 7th, 2012 at 06:52:41 AM EST
[ Parent ]
The question mark is against her vision - not against her ability to take and retain control of the levers of power.

Her vision is to take and retain control of the levers of power.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Thu Jun 7th, 2012 at 07:15:36 AM EST
[ Parent ]
I have to assume the German leadership is constantly balancing the following: Has Germany wrung all the value it can from the EU, or is there still some externalizing Germany can gain from the EU's continuing?  So far they seem to continue to conclude the latter and will be willing to make certain sacrifices to prolong the EU.  Which sacrifices?  I think the element that counts is the extent to which a particular sacrifice impairs Germany's ultimate ability to pull the plug on the EU.
by rifek on Mon Jun 11th, 2012 at 01:15:13 PM EST
[ Parent ]
I'm not seeing an employer and investor of last resort who is definitionally solvent and prepared to carry out unlimited and unrestricted spending in the service of full capacity utilization.

Which means it won't solve the problem.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Jun 9th, 2012 at 09:09:29 AM EST
[ Parent ]
I was including in the list all the things I could think of which are already (in a smaller way) part of the Euro landscape or to which some parties are already committed to an which there therefore some chance that all would agree to as part of a package of acceptable and less acceptable measures.

Your suggestion of an unlimited investor and employer of last resort who is definitionally solvent and charged with ensuring full employment/capacity utilisation is so far outside the current universe of "serious" economic thinking that I can't see any of the major players currently embracing it - except in the aftermath of a major war or existential economic meltdown.

Don't forget most national elites are still living very comfortably - there are no reds under their beds; they are not afraid of a Communist revolution and the Unions have been neutered. Some street riots in a few city centres and an increase in petty crime is all they have to worry about. Why should they seek to fix a system that isn't broke - for them?

The social democrats stopped being a ruling force in Europe when elites no longer had to worry about revolution and found they had no need to compromise with the masses. We are now well into a period of rule by the elites for the elites. Why should they agree to a proposal which effectively ties their hands and limits their power to play off the lower orders against each other - something your proposal would render impossible.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Jun 9th, 2012 at 09:39:01 AM EST
[ Parent ]
They won't.

Which is why the present depression ending in a major European war cannot be ruled out.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Jun 9th, 2012 at 09:49:37 AM EST
[ Parent ]
But if politics is he art of the possible would a package consisting of the 10 items I listed above make a significant contribution towards reducing the risk of a much more serious depression culminating in war?

And if so - how could Merkel be persuaded to adopt it?

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Jun 9th, 2012 at 11:35:41 AM EST
[ Parent ]
By the time Merkel can be persuaded the risk of war is real (as opposed to a rhetorical ploy as in her own speech last year) it will be too late.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Sat Jun 9th, 2012 at 01:51:32 PM EST
[ Parent ]
so you are saying war is more or less inevitable?

If so, by whom, against whom?

(And I don't mean the current class war fought by the elites against everyone else...)

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Jun 9th, 2012 at 02:51:54 PM EST
[ Parent ]
There could be a civil war in Greece, for instance. Turning countries into failed states tends to have consequences.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Sat Jun 9th, 2012 at 04:32:46 PM EST
[ Parent ]
A Civil War in Greece would presumably be between the elite and their stooges and the rest. Arguably that is happening to some degree now. But I took your reference to war to mean a return to the pre-EU era of international wars.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Jun 9th, 2012 at 05:34:08 PM EST
[ Parent ]
Who knows what's next.

I'm still not seeing the level of political violence of the early 1930s, but ask me in 5 years' time. (We're having a violent miner protest in Spain right now, not quite at the level of 1934 yet...)

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Sat Jun 9th, 2012 at 06:19:39 PM EST
[ Parent ]
Migeru:
Who knows what's next

You seem to retreat into the ultimate unknowability of the future and your inability to do anything about the human condition whenever I try to game out how we might achieve better outcomes.

And then you accuse me of being an economist who takes the easy way out predicting that the sea will calm when the storm passes when I am actually suggesting  positive outcomes are still possible where powerful institutional interests have vested interests in more positive outcomes.

Surely it is you who is taking the easy way out?

I know figuring out how the crisis may play out is difficult and fraught with uncertainties, but are we all supposed to just throw up our hands up in despair?

I know economists in general have a lousy track record in prediction, and sociologists often don't even try to predict future societal changes. But isn't politics partly about trying to figure out how things might be improved in the future even within the context of the real world (and economic interests) we live in?

I fear your fatalism is self defeating and in danger of becoming a self-fulfilling prophecy if everyone else took on the same attitude!

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Jun 9th, 2012 at 07:17:18 PM EST
[ Parent ]
I fear your fatalism is self defeating and in danger of becoming a self-fulfilling prophecy if everyone else took on the same attitude!

Did you hear the news from Spain today?

I have no power of influence and I'm sick and tired of those who do making bad decision and ruining our futures.

I have been both predicting what would happen (with some success) and enunciating alternatives that I thought would work but I knew would not be adopted.

So, sue me.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Sat Jun 9th, 2012 at 07:23:02 PM EST
[ Parent ]
Well FWIW you have influenced my understanding of economics, limited though it still might be, and I'm sure others would agree that you have been amongst the foremost thinkers on ET on how better economic policies might be formulated.

However you don't seem to have the same interest in analysing political processes and in how your policy proposals might come to be implemented (even if only in small part).

As you know, it is not sufficient for policy proposals to be self-evidently superior to current policies in order for them to be adopted. A process of education, persuasion, credibility building, coalition building, consensus changing/building has to be engaged in.

Why do crap economists get to be in influential positions of power? Partly it is because their theories don't challenge the current status quo or result in policy prescriptions which further the interests of their paymasters.

But you have often argued that current economic policies don't even serve the interests of the status quo in the way their progenitors think they do. So it may be that their progenitors are better at influencing/persuading/coalition building than other, more theoretically sound economists.

So shouldn't a really good all round economist - acting as a change agent - also be interested in the processes of persuasion/influencing that can result in better policies being actually adopted and implemented?

"Enunciating alternatives" is probably the (relatively) easy part.  Actually getting better stuff implemented can be incredibly hard. I learnt the hard way, in business, that the best proposals/ideas rarely get adopted/implemented unless you've done a lot of groundwork with the decision makers beforehand and build up a track record of credibility and success. Brand building applies as much to schools of economic thought as it does to more mundane products or services.

At some time you have to stop decrying what is and start building what needs to be built for a better future. Being a prophet crying in the wilderness only gets you so far. Even Keynes had to start somewhere.

So I won't sue you. But I do have an annoying habit of challenging people to use their formidable abilities to better effect! It rarely endears me to them at the time. But some have gone on to do great things.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Jun 9th, 2012 at 08:19:33 PM EST
[ Parent ]
You jest.

I have no formidable abilities when it comes to political persuasion, and you know it. And I hope you're not referring to me when you speak of "a really good all round economist acting as a change agent" because I'm neither.

And you confuse "interest in analysing political processes" with "interest in participating in political processes" which, once analysed, I find repugnant, and in which, analyzing myself, I would be unlikely to succeed.

I do what I think I can do well and leave it to others to do what they hopefully will do better. And I have the annoying habit of not agreeing with people who think I have some sort of responsibility to do anything in particular with the abilities they think I have.

If enunciating alternatives is the easy part, I invite you to do it yourself. And since you're the better politician, to build the brands, coalitions, etc, necessary for a better future.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Sat Jun 9th, 2012 at 08:47:01 PM EST
[ Parent ]
Well it's you who accused me of being an economist who takes the easy option, and if I had had the skills to be a politician, I would have given it a try. I'm not suggesting you have any responsibility to do anything you don't want to do: merely that putting everything down to the "human condition" or suggesting it is pointless trying to do anything because no one knows what the outcome might be isn't up to your usual standard of analysis. You predicted war as a more or less inevitable outcome of what is currently happening, so I felt it was worthwhile trying to explore why you thought that had to be the case and whether more positive outcomes might still be possible.  My apologies if I have misunderstood your position. I can see this conversation isn't leading anywhere at this stage so I propose to end my contribution to it here.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Jun 9th, 2012 at 09:27:17 PM EST
[ Parent ]
i think if you stare too deep into the abyss, you tend to fall in.
despair at the human condition is pretty much the stimulus for seeking a better one.

it's a fine line between trying to warn one's hapless fellow humans of dangers ahead and projecting one's own fears on to the future, even creating self-fulfilling prophecies.

orwell tried this, and now his prophetic warning has become a recipe book for tyrants everywhere.

conversely, project too much of one's innocent optimism on the future and you end up with shallow, blue-sky thinking that leads nowhere.

scylla and charybdis...

i think if one could fuse all the talents evinced on ET into one charismatic individual, you'd have a great global statesman/woman.

however, great ideas don't always rebound well on their ideators! :(

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Sat Jun 9th, 2012 at 11:42:31 PM EST
[ Parent ]
You seem to retreat into the ultimate unknowability of the future and your inability to do anything about the human condition whenever I try to game out how we might achieve better outcomes.

The problem is that right now the future is not merely unknowable in some abstract philosophical sense, it is also impossible to forecast. Forecasting relies on extrapolating the interests, circumstances and institutional tools of people and social groups into the future. But in this case, a lot of people are acting contrary to their medium-term interest, because their circumstances are going to change in ways they appear to not currently realize, and the institutional structure within which they act is fundamentally unsustainable in the medium term.

Which means that the outcome depends on (a) how rapidly people realize the conflict between their short-term interests and their medium-term interests, (b) how rapidly people can adjust their actions and tools in light of this realization and (c) whether the unsustainable current institutions prove weaker or stronger than the sustainable current institutions.

All of these are unknowable to outside observers - and perhaps even to inside actors - because they depend on unobservable subjective conditions.

As an example of this problem, we may observe that a war is not in Germany's or the Netherlands' interest. However, we may also observe that until this moment the austerity neurosis has not once been successfully cured, save by the circumstance of finding oneself on the receiving end for an extended period of time. And during that time, the logical propaganda ploy to pacify the German or Dutch public, given the internal logic of current narratives, is a dolchstosslegende about how the feckless Southerners skipped town before paying their tab, and how "we" must now tighten our belts to make up for it.

By the time the currently pro-austerity forces pull back from that brinkmanship, they may well find that they are already over the brink. Or they may not. It all depends on the subjective conditions in decisionmakers whose state and flexibility of mind I do not know. But so far, facts on the ground are not encouraging of the view that they are sane nor particularly farsighted or intelligent.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jun 10th, 2012 at 04:18:47 AM EST
[ Parent ]
I appreciate the difficulty of making predictions or even gaming out possible outcomes of current policies. However if you ARE going to make predictions that current policies WILL lead to war then you have to be able to make out some logical case describing the mechanisms whereby current policies will lead to war between who and who, and with what outcomes. You can't say the future is unknowable and then make bold predictions about the inevitability of war all within the same comment thread.

The other general point I would make is that policymaking is all about gaming out what policy measures are required to prevent certain undesirable outcomes and increase the probability of desirable outcomes. When you are a policymaker, you don't have the luxury of academic detachment. You are an actor in  the system, and if you want to gain support for your proposals you have to be able to show how your proposals will make things better, at what cost, and for whom.

Clearly current policy makers haven't been making a good fist of this.  However if we want to become more influential, or want polcymakers sympathetic to our approach to become more influential, we have to make a case that our policies would have better outcomes than current policies. It is not enough to say current policies have failed to meet their stated objectives or that they will - in some manner yet to be argued - inevitably lead to war.  We have to show that there are better policies which can address the minimal requirements of all key players more effectively to the general incremental benefit of the common-weal than current policies.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Jun 10th, 2012 at 08:37:20 AM EST
[ Parent ]
I appreciate the difficulty of making predictions or even gaming out possible outcomes of current policies. However if you ARE going to make predictions that current policies WILL lead to war then you have to be able to make out some logical case describing the mechanisms whereby current policies will lead to war between who and who, and with what outcomes. You can't say the future is unknowable and then make bold predictions about the inevitability of war all within the same comment thread.

I don't. I say that it is a realistic possibility, because austerity creates the objective conditions for a revolutionary institutional change, while the pro-austerity propaganda seeks to externalize the blame for the catastrophe it causes to social out-groups.

If I have to place bets, I would have to say that I trust in the French nuclear deterrent to preclude a major European war. But I could easily see a coup d'etat in a Mediterranean or Balkan EU member with less than ten million inhabitants receiving more or less overt armed support from creditor nations. Or a Yugoslav wars style punitive expedition against an anti-austerity government that purges its police, press, civil service and/or central bank of far-right agitators.

Do I really think it will get that far? No, I think that the creditor countries will back down from their brinkmanship after the Greek default. But I acknowledge that (a) we are in a situation where it is not historically unprecedented for major powers to fail to back down prior to going over the brink, (b) I can see no plausible story about how they can back down, given the narratives they have cooked up for themselves and their clients, and (c) our political class has, throughout this crisis, consistently underwhelmed even my most pessimistic forecasts.

We have to show that there are better policies which can address the minimal requirements of all key players more effectively to the general incremental benefit of the common-weal than current policies.

Under the present narrative, there are no such policies. The minimal requirements of creditors and creditor states, under the narratives in which they currently operate, involve a repeal of the rules of addition and subtraction.

That means that the dominant narratives will change. The historically default way for human society to change a dominant narrative that is so deeply locked in society's institutions involves lining people up against a wall and shooting them.

Of course, the historically default way for creditor states of obtaining compliance from debtor states involves parking a gunboat offshore from their capital. So you may argue that Europe has a good chance of not reverting to historical norms in this crisis. And you may even be right. But right now, both those stories are plausible.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jun 10th, 2012 at 10:41:52 AM EST
[ Parent ]
I think the current dominant narrative is more fluent that you suggest with powerful actors taking quite different positions, and others hinting they are open to change should other conditions be met. Hence I made up a shopping list of 10 actions above which might constitute a package of measures capable for addressing the crisis at the same time as containing at least some elements favoured by each of the key players and thus minimally acceptable to them as a whole - provided they were convinced it would deliver a "full and final" resolution of the crisis and not constitute just another of a series of concessions they are constantly being asked to make.

In the peace process in N. Ireland negotiations were extremely protracted with all parties signalling publicly and privately the elements which were their "bottom line" minimally acceptable and utterly unacceptable elements. The mantra repeated by all was "nothing is agreed until everything is agreed" to provide cover for participants engaging on proposals which would, in isolation, have been absolutely unacceptable to their constituents.

Lets not forget that most public utterances are part of an ongoing negotiating raindance designed to influence outcomes but only partially sacrosanct in the context of a "comprehensive" settlement containing elements both favourable and unfavourable from the point of each participant.

The key issue for structuring such a negotiation is "Are all the key players with a stake in ensuring a successful outcome represented around the table?" as there is no point in coming to an agreement which does not include all the key players who could sabotage the outcome. Thus all the earlier peace process talks which took place without IRA involvement were futile because the IRA laying down its arms was the only way peace could be achieved. There was little point in the SDLP agreeing something if they could not deliver the support of militant groups.

Part of my reason for some optimism is that almost all of the key players are represented, to some degree, in key EU fora. Some may not be negotiating very well, and others may be over playing their hands, but whilst these institutions remain in place there is always the possibility of slow, incremental process. Reality has a way of interrupting "business-as-usual".

So I don't really see the French nuclear deterrent being relevant to intra-EU conflicts unless the whole institutional infrastructure breaks down. I think we are all underestimating the resilience of the foundations of the EU which have served Europe rather well for 60 years. The architecture of the EU had some known structural flaws - and this is the reaons for much of the current crisis, but that does not mean that the other institutions of the EU cannot move - very slowly - to fix those flaws.

The processes of political and institutional change can be painfully slow and extremely frustrating for the participants - but do not necessarily include war, repression or firing squads on a large scale. The yearning for a benign dictator who can just make decisions and make things happen is not one that we should buy into. Dictatorships are, notoriously, even more inefficient that the "chaotic" democracies they seek to denigrate.

I have a visceral objection to "war is inevitable" narratives because they can become self fulfilling prophesies and betray so little understanding of the complexities and possibilities fro transformational change within peaceful mechanisms. Neither will I join the ranks of professional pessimists and cynics.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Jun 10th, 2012 at 11:26:36 AM EST
[ Parent ]
The most worrying feature in this whole sorry saga is the penchant of the creditor country elites and the EU economic policy establishment for meting out (economic) "punishment" or advocating same, and the favourable reception such rhetoric or actions have received from public opinion, goaded by the press.

There is already an established narrative of moral superiority centered on national/cultural/ethnic divisions. This narrative is popular with a sizeable segment of the population, is promoted by the press and is used by the politicians.

And you want to talk about "the politics of the possible".

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Sun Jun 10th, 2012 at 01:03:57 PM EST
[ Parent ]
This underlines the failure of the European project to promote a European identity. The economic pretext, by which (supposedly) pooling (supposed) common economic interests would lead to greater integration on all other fronts, is responsible for this failure. Because 1) the time has long gone by that any equitable pooling was in fact taking place; 2) the focus on economics obstructed the necessary efforts on other fronts, by eating up resources and/or being a pretext for inaction.
by afew (afew(a in a circle)eurotrib_dot_com) on Sun Jun 10th, 2012 at 02:18:06 PM EST
[ Parent ]
The failure was accepted as inevitable when the Eurozone was unable to agree on real monuments to put on Euro bills. As if somehow picking the Colosseum for a representative building from antiquity for the 5 euro bill would have offended those North of the Rhin. Would it? I find it preposterous but the politicians obviously thought it was a problem.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Sun Jun 10th, 2012 at 05:25:46 PM EST
[ Parent ]
Do you now even want to turn the buildings on the Euro-Bill into a german conspiracy?

What is next, everybody searching for free-masonic symbols?

by IM on Sun Jun 10th, 2012 at 05:32:25 PM EST
[ Parent ]
Of course it wasn't a German conspiracy, just the idiocy of the Brussels establishment and their inability to come up with suitable symbols. I said the design of the bills was an admission of the impossibility of forging a common european identity, not a heinous ply to prevent an identity from arising.

I would have had nothing against using the Brandenburg Gate for the 100 Euro note or the Colosseum for the 5 Euro note, but either my fellow European citizens would have, or the politicians themselves projected their own hangups onto the populatin at large as an excuse.

Like all symbolic facts it's a silly thing if analysed rationally, but we're talking politics and symbolism matters.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Sun Jun 10th, 2012 at 05:47:28 PM EST
[ Parent ]
It was an admission of weakness. Some countries obviously would have left out. But there wouldn't have been a problem to give Germany, France , Italy and Spain a suitable building each.

"but either my fellow European citizens would have, or the politicians themselves projected their own hangups onto the populatin at large as an excuse."

Rather an excuse.

by IM on Sun Jun 10th, 2012 at 06:00:14 PM EST
[ Parent ]
In particular, when they decided to put "classical antiquity architecture" on the 5 Euro bill, that means Roman Empire of which the Rhine was the border at maximum extent. Excuse me for using the dogwhistle phrase North of the Rhine, I really wasn't expecting anyone to be that sensitive.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Sun Jun 10th, 2012 at 06:03:55 PM EST
[ Parent ]
Migeru:
And you want to talk about "the politics of the possible".
Is there any other kind?

Was there any less fear and loathing between N.I. Loyalists and Republicans? Or South African whites and black for that matter?

The petty chauvinist prejudices that have been stoked up over the Euro crisis are pretty trivial compared previous antagonisms and hatreds between Nazis and Jews, the Germans, French, Spanish and British etc. which led to centuries of wars.

I think we need to take a longer historical view on this. The present Euro crisis could come to be seen as little more than a blip on the radar screens of history if (and it is a big if) we can resolve the crisis before it gets a lot worse.

Just because our leaders and MSM have such petty agendas and limited vision doesn't mean we have to buy into their narratives prejudice and racial superiority, and neither should the presence of those petty narratives drive us to cynicism and despair.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Jun 10th, 2012 at 06:35:44 PM EST
[ Parent ]
Austerity has already created at least one failed state, and I would be very surprised if already implemented austerity has not outright killed somewhere on the order of ten thousand Greeks and Baltics by this point.

There's an order of magnitude or two to go before we reach "Russia in the '90s" level of disaster, let alone "African civil war." But we are some way past "blip on the radar."

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jun 10th, 2012 at 07:22:51 PM EST
[ Parent ]
It will be studied by future economists as an example of how not to run a currency union.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Sun Jun 10th, 2012 at 07:25:48 PM EST
[ Parent ]
Alas, it probably won't. If the history of economic thought is any indication.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jun 10th, 2012 at 07:29:00 PM EST
[ Parent ]
Greece had a lot of problems before austerity exacerbated them - an almost complete lack of modern industrial infrastructure, a lack of an efficient tax collection system, and an appallingly inefficient and corrupt public administration system. The Greek elite were getting a free ride. Of course austerity isn't going to solve those problems, but many, assuming creditor nations were never going to bankroll Greece indefinitely, were going to come sooner or later in any case, with or without the Euro, although a currency devaluation would have been a lot less painful.

In allowing Greece into the Euro and lending so excessively for so long, the EU took on some responsibility for these problems, but not all.

Ireland still has issues with a rapacious private medical industry and an appalling legal monopoly which allows the legal profession to charge outrages fees for antiquated services. We can't blame that on the EU. There never was a time when people weren't dying needlessly for lack of prompt medical care. It's a scandal, but not entirely a Euro scandal. You can't take an idealised welfare state as your baseline for countries which never had anything remotely approaching that.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Jun 10th, 2012 at 07:50:23 PM EST
[ Parent ]
I'm not. If I were, the numbers would be a good deal higher (though probably still in the same ballpark - "give or take half an order of magnitude" is a large ballpark after all).

I'm using Russia in the '90s. Less than ten years of "shock therapy" killed on the order of 1 % of Russia's population (most respectable studies place the excess deaths attributable to deteriorating economic conditions around 1 million Russians). Greece, Estonia and Latvia have now had two full years of austerity.

Assuming that the Russian experience is reasonably representative (and there is no reason it shouldn't be), and assuming (conservatively) that for the first decade of austerity cumulative casualties is quadratic in time (people and communities take some variable time to exhaust their reserves before going tits-up), that gives a guesstimate of four in ten thousand. Greece, Estonia and Latvia have a combined population on the order of 20-25 million people. So, back-of-the-envelope math says somewhere on the order of ten thousand casualties. So far.

To place these numbers in context, a mortality of two in ten thousand per year on average is around three times the ordinary mortality from traffic accidents, either two or three orders of magnitude more than from terrorist attacks (depending on whether you count the WTC attacks in your average), and one and a half order of magnitude less than from heart and circulatory disease.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jun 11th, 2012 at 03:42:13 AM EST
[ Parent ]
Greater fiscal integration, oversight, and harmonisation conducted by an EU Commission "Budget Office".

an unlimited investor and employer of last resort who is definitionally solvent and charged with ensuring full employment/capacity utilisation is so far outside the current universe of "serious" economic thinking that I can't see any of the major players currently embracing it

a "full and final" resolution of the crisis and not constitute just another of a series of concessions they are constantly being asked to make.

Pick at most two.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jun 10th, 2012 at 01:19:43 PM EST
[ Parent ]
Given its record why should any think that the EU Commission would usefully accomplish anything? How about converting the EU to a parliamentary form of governance or a more balanced formal executive-legislative-judicial system?

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Jun 11th, 2012 at 04:15:44 PM EST
[ Parent ]
The problem with analogies to peace settlements is that, so long as you can get every major armed group to agree on them, there are no borders which are fundamentally unworkable. They can be impractical, but any peace agreement that can be reached between every major stakeholder can be upheld.

By contrast, there are forms of economic organization which cannot work, no matter how great the unanimity is among the relevant stakeholders that they should be made to work. Every Eurozone state can ratify a paper saying that every state should be a net exporter. But as long as the Euro floats against the yen and dollar, and so long as China retains its current development strategy, that is not going to happen in the real world.

The rules of addition and subtraction are not subject to political compromise.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jun 10th, 2012 at 01:28:38 PM EST
[ Parent ]
Most political settlements contain contradictory and unworkable elements which have to be revisited and revised as reality intrudes. There never is a final solution to economic problems. The current Euro architecture is probably the best than could be agreed 20 years ago. Virtually everyone is now agreed it requires serious revision, and if the next major revision lasts 20 years we will be doing very well indeed. (I wouldn't pitch my expectations so high given our current crop of leaders).

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Jun 10th, 2012 at 06:46:13 PM EST
[ Parent ]
An agreement to federalize budget decisions without federalizing the responsibility for macroeconomic stabilization won't last twenty days, nevermind twenty years. It won't even stop the crisis from getting worse, because the crisis is one of inadequate macroeconomic stabilization.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jun 10th, 2012 at 07:09:39 PM EST
[ Parent ]
I think a possible scenario for EUropean war is 1848ish. The austerity leads to revolutions and/or civil war in countries in the periphery and other states intervene to restore order in cooperation with local right wing elements. Call it Libya on the northern shore.

I don't see how a big war between EUropean powers in any near future considering that big wars takes planning, manpower, equipment etc. How many years did the Nazis spend with building the military?

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

by A swedish kind of death on Sun Jun 10th, 2012 at 04:26:55 PM EST
[ Parent ]
About four years from the commencement of military expansion in '35. Though they weren't really finished building it by the time the balloon went up. They just had the good fortune that neither were the French (and the British were just pitiful).

But that's not the question you need to ask yourself. The question you need to ask yourself is when the political dynamic had moved to where war could no longer be avoided. And that wasn't '39. It was certainly some time after '29, most probably even after the '33 Nazi takeover. Perhaps even sometime after the beginning of the '35 military buildup. But probably not after the '38 Anshluss, and almost certainly not after the first München conference.

So I'm thinking that once visible military buildup commences, you have probably passed the mark for 50 % probability of war.

I'll leave it to someone more knowledgeable about the particulars to discuss the lead-up to the wars in Spain and China.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jun 10th, 2012 at 05:02:20 PM EST
[ Parent ]
... of course the military buildup can be argued to have actually begun much earlier than '35, because a relatively large number of people had already been mentally conditioned for armed struggle by the escalation of political violence caused by Brünning's austerity regime.

But I would argue that this does not materially alter the timeline.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jun 10th, 2012 at 05:09:47 PM EST
[ Parent ]
Also, that any attempt to convince the Germans that their chosen policy is actually against their national interest because it cannot attain its stated objectives is pretty much doomed to fail because of the character of ideological hegemony and the self-serving character of the ideology to a German audience (since "we're virtuous" is an essential plank).

It isn't just that.  In Germany, as in the US, the UK, and an increasing percentage of the world, the issue is what is the "national interest."  If your reference frame is the majority of the citizenry, then these policies are about as productive as a live grenade shoved into your shorts.  If your reference frame is the elite actually running each of these countries, then these policies are performing exactly as planned.

by rifek on Sun Jun 10th, 2012 at 03:39:53 PM EST
[ Parent ]
Whatever chance we have of managing bankers/global hedge funds/global corporates we hope/think the EU should be able to do a better job.

Except that the former are obviously managing the latter.

Not that you're unaware of this. But I wonder how many voters realise the extent to which it's true.

And as for Germany - the realist position is the Tory Gambit: Merkel and her chums stand to make truck loads of money if Greece leaves.

Or at least, they think they do, which is all the motivation it takes.

If they're not thinking long-term - well, that's not unusual either.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Jun 6th, 2012 at 09:39:47 AM EST
[ Parent ]
Unless they are privately shorting the Euro, its hard to see how Merkel and her chums benefit from a Greek exit. The German banking system is still heavily exposed although it has managed to offload much of its Greek exposure onto the ECB. (The Germans can be very European when it is in their interest!).

The bigger, and potentially unmanageable problem is the prospect of Spain/Italy becoming destabilised by a Greek exit. Germany, as the biggest beneficiary of the Euro has the most to lose from it's breakdown. Greece prospering after a Euro exit would be their nightmare scenario as it would provide all other member states in trouble or in disagreement with German Hegemony with a roadmap for exit.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 6th, 2012 at 09:55:13 AM EST
[ Parent ]
You continue to think there's a rational explanation to all this, and a strategy on Germany's part.

This is a pure morality play and if there's any strategy it's in the realm of base power and influence, not a cost and benefit analysis (if such a thing were possible or preferable - see this diary and comments)

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Wed Jun 6th, 2012 at 10:03:28 AM EST
[ Parent ]
Or perhaps not...

FT Alphaville » When strategy is mistaken for stupidity, the curious case of eurozone politicians

At the heart of the crisis is a non-cooperative game taking place between policymakers

(...)

None of these parties want to see a catastrophe scenario for Europe unfold because nobody profits from it. But beyond that there are a range of possible outcomes in which the crisis is resolved in different ways, with the surplus (the gain from avoiding the catastrophe) shared in different ways.

These parties are involved in repeated discussions (games) and we have to look for equilibrium strategies...

The writer postulates that, instead of being the idiots or blinkered ideologues they appear to be, certain players are engaged in reputation-building :
FT Alphaville » (continued)

In particular, it could be beneficial for those representing either side in the game to take actions which look counter-productive in the short run in an attempt to convince the other players in the game that their preferences are more extreme than is actually the case, which in turn may lead the other players to rationally choose a strategy and therefore an equilibrium which favours the player who sought to build a reputation. Were these stratagems being played out in the current crisis it would not be a surprise for market participants to believe that policymakers somehow `didn't get it' or were `behind the curve'.

i.e. brinksmanship leading to a compromise.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Wed Jun 6th, 2012 at 10:14:07 AM EST
[ Parent ]
The problem I have with brinksmanship is the collateral damage. The amount of accruing collateral damage means this is not a game of chicken, this is already a war. Of maybe it is like one of those tribal displays of folk anthropology in which chieftains burn valuable items to one-up one another. In this case it's livelihoods being burned.

Here's Hugo Dixon in praise of brinksmanship:

Cutting off Greece's life support could be the trigger for reintroducing the drachma as the people found the cash machines ran dry. But it could also finally force the people to decide whether they were prepared to back reform - provided the euro zone simultaneously rolled out a proper plan to help the country.


If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Wed Jun 6th, 2012 at 10:19:10 AM EST
[ Parent ]
Brinksmanship works very well, until it doesn't (See German foreign policy 1933-39.).  Unlike Hitler, though, the current players are very much market participants.  Figure out how any strategy benefits the top economic tier, and you figure out what the real game is.
by rifek on Sun Jun 10th, 2012 at 05:42:17 PM EST
[ Parent ]
Perhaps it's because I'm more of a sociologist than a politician, but I tend to look for explanations at an organisational/process level rather than in terms of personalities and moral failings. If I am right there will be a gradual, slow, complex and confused resolution to some of the most grievous of our current problems - in spite of - not because of the leaders we current have.  

There are too many institutional self interests tied up with preserving some semblance of the current status quo, and sufficient institutional players whose interests require a resolution of the worst of our current problems. It won't be pretty, no one will be playing nice. But I see the EU developing positively despite it all - to the ultimate benefit of a large majority of its citizens.

Call me an irrational optimist. Or perhaps an optimist seeking rationality where there is little or none. But I would be profoundly sad at seeing any EU member forced out, or any significant group being marginalised by the power plays currently in motion. Governments lose power when the lose the support of their people, but tend to be replaced by Governments not all that different. I don't think any German Government could survive having been seen to do serious damage to the EU. Call me an optimist.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 6th, 2012 at 10:27:49 AM EST
[ Parent ]
Perhaps it's because I'm more of a sociologist than a politician, but I tend to look for explanations at an organisational/process level rather than in terms of personalities and moral failings. If I am right there will be a gradual, slow, complex and confused resolution to some of the most grievous of our current problems - in spite of - not because of the leaders we current have.

Yeah, well, Max Planck said that A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it. Similarly, the current generation of leaders will eventually step down from power and later die off. The Long Depression of the late 19th century did come to an end after 23 years. I find no consolation in the knowledge that, sociologically, at some point in the future things will be different from the way they are now if only because all the people currently alive will have passed on.

Keynes also said economists set themselves too easy a task if all they say is that once the storm is passed the sea will be calm again. So I won't call you an optimist, I'll call you an economist :P

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Wed Jun 6th, 2012 at 10:40:20 AM EST
[ Parent ]
Thomas Kuhn say Scientific revolutions and paradigmatic change happening rather more rapidly, and despite of, rather than with the help of current thought leaders. But there was no requirement for them to die off first. Sometimes you lose as much with the passing of a generation as you gain. The folk memory of the depression is obviously not strong enough any more to remind people that it wasn't market economics that resolved the Great Depression.

I've been called many things, but no one has ever gone so low as to call me an economist...:-)

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 6th, 2012 at 10:49:37 AM EST
[ Parent ]
The problem is not the leaders, it's the mental poisoning of the social milieu from which they are drawn.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Wed Jun 6th, 2012 at 10:50:59 AM EST
[ Parent ]
Kuhn, however, has limited applicability to organization theory and political theory, because the scientific enterprise has both sociological characteristics (respect for facts, a willingness to admit - indeed place at the forefront - outstanding unsolved problems with the paradigm, and several others which are less amenable to brief summary) and objective conditions (the laws of nature are not negotiable) which differ from politics. In politics, repeated failure on the merits is not a cause for censure, problems are glossed over rather than investigated, and reality that does not conform to paradigm can be forced into the paradigm... up to a point.

Unfortunately, at that point the guillotines tend to come out.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Jun 9th, 2012 at 09:20:01 AM EST
[ Parent ]
JakeS:
reality that does not conform to paradigm can be forced into the paradigm... up to a point.

Daily Kos: "Human are like rats and cockroaches": the coming feudalism

you can't map an infinite plane onto a Euclidean solid.  

a grimly fascinating diary and comments over at lucifer's orangerie.

i feel we're caught in a hostage flick, and the takers are about to shoot greece, with the excuse that the food's running out, and we didn't grovel before our masters low enough, or send the ransom of our first-born with sufficient alacrity.

more virgins, stat!

the world gazes in zombie sorrow, paralysed by an ignorance too deep to fathom, and cheap microwaved popcorn.

i'm hoping when they toss greece's body in the trash, there will be a spasm of worldwide revulsion at the epically heartless and inane pretzel logic that puts banker profits above the real 'wealth of nations'.

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Sun Jun 10th, 2012 at 12:29:43 AM EST
[ Parent ]
Welcome to the lifeboat scenario.
by rifek on Mon Jun 11th, 2012 at 12:01:00 PM EST
[ Parent ]
Migeru:
You continue to think there's a rational explanation to all this

jim jones' followers all felt drinking his koolaide was a rational thing to do.

that's the power of ideation over reason. garbage in, garbage out.

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Sat Jun 9th, 2012 at 11:46:47 PM EST
[ Parent ]
Germany, as the biggest beneficiary of the Euro has the most to lose from it's breakdown. Greece prospering after a Euro exit would be their nightmare scenario as it would provide all other member states in trouble or in disagreement with German Hegemony with a roadmap for exit.

A country - Greece, Portugal or Ireland - leaving or being forced out of the Euro and responding with not just its own new currency but with an offer to form a new currency union run along sustainable lines with any countries who want to join could provide just such a roadmap. Even repeatedly proposing such a policy in a country such as Ireland could have an effect. If such a proposal were pushed compellingly and gained sufficient support that TPTB were forced to respond that, of itself, would be an advance of the discussion.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jun 10th, 2012 at 10:06:10 AM EST
[ Parent ]
A country - Greece, Portugal or Ireland - leaving or being forced out of the Euro and responding with not just its own new currency but with an offer to form a new currency union run along sustainable lines with any countries who want to join could provide just such a roadmap.

Come on, Greece is not Ireland is not Portugal is not Spain is not Italy is not France have cooties. Who's going to want to join an alternative currency union to the DM?

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Sun Jun 10th, 2012 at 12:35:32 PM EST
[ Parent ]
It may be a hard sell, but once two countries join, if the rules are well established, it could trigger an avalanche of defections. After all, a working currency union does have advantages over one that manifestly does not and cannot work. Perhaps Greece could seek a currency union with Iceland.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Jun 11th, 2012 at 04:29:27 PM EST
[ Parent ]
What you propose runs totally counter to the theory that a common currency zone requires a large degree of convergence and integration to operate effectively - to be an optimal currency zone. What is the point of having a common currency between countries that don't even trade much with each other?

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Jun 11th, 2012 at 05:14:07 PM EST
[ Parent ]
In principle, coordinating your central banks can give you a bigger war chest for short squeezing hostile hedge fundies who try to screw you over.

In practice, if you possess the requisite political will to cut hostile hedge fundies off at the knees then you have plenty of other tools with which to do so.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jun 11th, 2012 at 06:23:06 PM EST
[ Parent ]
I still don't see how you get rid of the rating agencies, though. If they decide austerity is good--which they can do because the whole system is based on subjective opinions--and then rate you down for not pursuing austerity, what do you do?

Maybe you need tame rating agencies who rate, by rule, your currency at the highest possible level. Which we used to have in the U.S. until recently...

by asdf on Mon Jun 11th, 2012 at 06:35:25 PM EST
[ Parent ]
The government borrow directly from the central bank and cut out the middleman.

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!
by A swedish kind of death on Mon Jun 11th, 2012 at 06:38:59 PM EST
[ Parent ]
I don't see why any central banker worth his salary gives a pot of lukewarm piss what the ratings agencies say.

The central banker controls the printing press, the financial regulator controls the rules for extending credit, and the treasury controls the aggregate level of demand. If your macroeconomic policy depends on the approbation of the ratings agencies to attain its objectives, then you're doing it wrong.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jun 11th, 2012 at 06:39:17 PM EST
[ Parent ]
See here.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Mon Jun 11th, 2012 at 06:59:37 PM EST
[ Parent ]
But how will the markets do their magic if we don't worship at the altar of the rating agencies? If your objective is to further the interests of the financial elite over and against the interests of the vast majority, then you encode rule by markets over rule by the people.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Jun 11th, 2012 at 07:05:49 PM EST
[ Parent ]
That is what we have. I am proposing an expanding group of countries who want do do otherwise.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Jun 11th, 2012 at 07:32:24 PM EST
[ Parent ]
And as for Germany - the realist position is the Tory Gambit: Merkel and her chums stand to make truck loads of money if Greece leaves.

 Or at least, they think they do, which is all the motivation it takes.

I'm not convinced they see Grexit as a money-maker in itself, but rather as an opportunity to score off the marks who jump in.  So they're spinning it like this to see how many suckers they can rake into the casino.

by rifek on Mon Jun 11th, 2012 at 02:00:38 PM EST
[ Parent ]
Despite the Ireland vote, I start to sense a certain scare in US, UK... about Spain.. and in Spain..(in Spain theya re scare to hell, luckily they are more scared of the a possible intervention, they see Greece and all the power of spanish bankers disappear)) It can certainly be that they realize they are too close to the precipice for comfort.. or it could be something completely different..

So what's your take? Are european elites panicking at long last, over all the german elite? Or not...

can we expect some banking union soon...so that at least the euro survives a couple of months more?

I ask not only Frank.. but anybody around....

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Wed Jun 6th, 2012 at 03:00:22 PM EST
German firms urge rejection of stability mechanism - The Irish Times - Sat, Jun 09, 2012
A protest letter signed by 350 of Germany's best-known companies such as Kärcher, Henkel and Würth attacks the bailout fund and disputes what it calls the "myth that Europe can only survive as a transfer union".

The companies take issue with "political whitewash" over the euro, which it sees as a "driving force for dispute, jealousy and hate" in today's Europe.

"The coercion and consequences of a common currency are beginning to divide European peoples permanently," said the statement. "Not every means is permitted to save the euro - and those who want to save the euro at any price risk the price being Europe." With its statement the association joins a growing wave of protest against the European Stability Mechanism in Germany.

Agreed by EU leaders last July, the ESM is scheduled to begin working next month as a permanent bailout fund with a total financial capacity of €700 billion.

Given that the ESM was the only reason the Irish were persuaded to vote for the Stability Treaty, a failure by Germany to ratify the ESM would be regarded as a breach of trust of the highest order. But for German firms to lobby against the ESM seems like turkeys voting for Christmas, given that they have been the primary beneficiaries of the Euro.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Jun 9th, 2012 at 11:42:28 AM EST
[ Parent ]
Turns out they're right at least in this
"The coercion and consequences of a common currency are beginning to divide European peoples permanently," said the statement. "Not every means is permitted to save the euro - and those who want to save the euro at any price risk the price being Europe."
As to
Given that the ESM was the only reason the Irish were persuaded to vote for the Stability Treaty, a failure by Germany to ratify the ESM would be regarded as a breach of trust of the highest order.
As an advocate of the No in the recent referendum, all I can tell the Irish government and the yes side is "cry me a river".

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Sat Jun 9th, 2012 at 01:49:12 PM EST
[ Parent ]
a failure by Germany to ratify the ESM would be regarded as a breach of trust of the highest order.

Perhaps the Irish expect to be betrayed and are used, even comfortable, playing the role of the betrayed.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jun 10th, 2012 at 10:28:19 AM EST
[ Parent ]
That stereotype might have had some content in the colonial and immediate post colonial period because of the manner the Brits used to use informers to undermine local resistance, but it really has no relevance to the current political situation. Germany failing to keep its word undermines all manner of official and popular narratives - a bit like the Swabian housewife having an affair on the side on which she spends her husband's earnings...

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Jun 10th, 2012 at 10:48:02 AM EST
[ Parent ]
So, what do you expect Fine Gael to do if/when Germany fails to ratify the ESM? And how is the government reacting to the claim by the Spanish government that they will not be required to implement additional austerity as a condition of getting money for their banks? And what would they do were that to turn out to be substantially true?

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jun 10th, 2012 at 12:33:46 PM EST
[ Parent ]
The Irish Government has an ongoing campaign to renegotiate its bank bail-out deal and if the Spaniards end up getting a better deal, the Irish Government will expect those terms to apply retrospectively to Ireland. Failing that, their only real threat is to default of the Anglo Irish promissory notes - something that would drive Angela and the ECB nuts, but which they can do little about because that debt was not covered by the Bank guarantee or the Troika deal.

Whether Fine Gael have the balls to actually follow through on that threat is another matter...

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Jun 10th, 2012 at 05:30:40 PM EST
[ Parent ]
Frank Schnittger:
But for German firms to lobby against the ESM seems like turkeys voting for Christmas, given that they have been the primary beneficiaries of the Euro.

operative words: 'have been'

the glory days of local rich(ly indebted) local consumer markets are done, kaput... on to the new bric frontier!

we're tapped out for now, and will be until/unless we put finance back in the padded cell again, and change the energy paradigm.

they could lend us more fake money to buy more audis, but they have seen the writing on the wall, the payback will be too amortised, too far off into the future horizon to be even remotely virtual.

party's over, best to leave before the cops arrive to mop up the blood and glass shards.

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Sat Jun 9th, 2012 at 11:56:07 PM EST
[ Parent ]
Cry "Havoc," and let slip the German dogs of dissolution.  That was quicker than I expected.
by rifek on Mon Jun 11th, 2012 at 02:09:10 PM EST
[ Parent ]
kcurie:

I ask not only Frank.. but anybody around....

the banks are fucked, period.

and no-one wants to end his career by admitting it.

cause without banks we are little squirmy little human maggots, we all know that.

banks represent all that's good and fine in our society, prudence, thrift and conservative wisdom, right?

they deserve those private hidey-hole cayman accounts and mega-bonuses, didn't you get the memo?

we deserve nothing, indeed we are as nothing, without working ATM's and lotsa cheap credit, life on the never-never, la la la.

and anyone who says different is pinko slime, yar boo.

news at 11... man bites face off poster of che guevara.

going dooooooown with a grin, because we ran out of floors on the elevator to crazy.

see appended sig.

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Sun Jun 10th, 2012 at 12:06:49 AM EST
[ Parent ]
We just keep floating down that very large river in Africa.
by rifek on Mon Jun 11th, 2012 at 02:14:23 PM EST
[ Parent ]
I've had a running discussion with several Icelanders since the kreppa, and throughout the whole mess, there has been a group that was convinced Iceland would be so much better off with the euro than the krona.  My response has always been, "Are you kidding?  The only thing keeping you going is a sovereign currency.  If your monetary policy were dictated from Brussels (aka Berlin West) instead of Reykjavik, you'd have been bludgeoned into peonage by now."  The fates of the Euro-Peripherals are proving that true.
by rifek on Sun Jun 10th, 2012 at 03:19:20 PM EST


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