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Greece's Plan B?

by Migeru Tue Feb 3rd, 2015 at 02:14:48 AM EST

In an ideal world, Greece's new finance minister Yanis Varoufakis would succeed in negotiating with the Eurogroup on the basis of his own Modest Proposal. However, we live in this universe and the immediate question arises of how Greece is going to fund its foreign commitments, in particular the redemption of €7bn's worth of bonds held by the ECB and maturing in 6 months. According to the Wall Street Journal,

The next hurdle will be €7 billion in bonds held by the ECB that mature in July and August. Greece doesn't have the cash to repay them, and failure to do so could ultimately lead to Greece's exit from the eurozone.

Syriza Win in Greek Election Sets Up New Europe Clash (January 26, 2015)

Here I outline a plausible (based on the published opinion of Greek government ministers and their associates) plan for Greek economic recovery, consisting of:
  • a universal job guarantee program at the new minimum wage
  • the introduction of a parallel currency in the form of transferable tax credits
  • capital controls

Cross-posted on The Court Astrologer

front-paged by afew


A job guarantee program


Rania Antonopoulos, Greece's new deputy labour minister, is an academic economist specialising in gender equality issues. Nevertheless, she has recently concentrated on the problem of unemployment in Greece. Since 2010 she has been involved as an advisor with the Greek public service job creation program PKE, and since 2013 she has formulated a proposal (and shorter policy summary) for a Minsky-style Employer of Last Resort programme for Greece. Here's the youtube version:

Antonopoulos and her coauthors envisaged four scenarios whose macroeconomic impact is summarised in the below table. According to these figures, a large scale job guarantee program would contribute to reducing Greece's debt/GDP ratio and could reduce unemployment by 1/3 to 1/2. It is clear that, having been appointed deputy minister for labour, Antonopoulos is in a position to enact her own proposal, funding permitting.

AntonopoulosJobGuaranteeProgram

And indeed, as Antonopoulos' colleague C. J. Polychroniou wrote in the NY Times this past week,

One of the main pillars of Syriza's economic program is the creation of 300,000 new jobs for the unemployed under a direct public employment scheme. Such a program will provide relief for a sizable percentage of the long-term unemployed, will boost demand as the newly employed will increase their consumption, and will increase government revenue through the collection of additional direct and indirect taxes provided by the newly employed.

Syriza Is Offering a New Deal for the People of Greece (27 January 2015)

At 300,000 jobs at the planned minimum wage of €751, Antonopoulos' own cost/benefit calculations for a job guarantee program are:
  • 120,000 indirect jobs on top of the 300,000 Job Guarantee jobs
  • A €10,3 billion GDP increase at a total cost of €5.7bn
  • A €3.4bn increase in government revenue from social security contributions, VAT and direct taxes, resulting in a net cost of €2.3bn
A program sized at 550,000 jobs at a €751 wage would have a €10.5bn gross cost.

Funding the job guarantee


In Antonopoulos' reports a number of sources of funds are suggested to cover the costs of such a program:
  • a National Employment Fund and/or a "European Fund against Unemployment" as proposed by former European Commissioner László Andor
  • Debt renegotiation linked to a specific proposal in support of the National Employment Fund
  • Borrowing from the European Investment Bank for work projects dedicated to development (an off-balancesheet item)
  • Tax-backed zero-coupon perpetual bearer bonds as a form of tax-anticipated payment and issued by the Greek central bank
  • Long-term "special purpose" bonds, issued by the Greek central bank in coordination with the European Central Bank
  • an agreement to use the primary budget surplus to kick-start a large-scale JG initiative as, within the parameters of the signed Memorandum of Understanding, 70 percent of the primary surplus would become available to correct "injustices"
  • an interest payments moratorium as it is estimated that Greece is currently spending over 7.5 billion euros annually to service its outstanding sovereign debt
These funding sources also answer the general question of how the Greek government can finance itself, independently of the existence of a job guarantee program. Central Bank participation as envisaged in some of the proposals may not be necessary, or even possible under EU treaties.

A parallel currency


Of the above funding sources I will now focus on the most unconventional one, the issue of tax-anticipation notes. Being zero-coupon, perpetual, bearer assets, these could function as a parallel currency. Rob Parenteau, a colleague of Antonopoulos, has proposed just such a scheme to exit austerity without exiting the Euro.
To accomplish this, the following alternative public financing instrument may need to be unilaterally adopted in each peripheral nation in the eurozone. Federal governments will henceforth issue revenue anticipation notes to government employees, government suppliers, and beneficiaries of government transfers. These tax anticipation notes, which are a well known instrument of public finance by many state governments across the US, will have the following characteristics: zero coupon (no interest payment), perpetual (meaning no repayment of principal, no redemption, and hence no increase in public debt outstanding), transferable (can be sold onto third parties in open markets), and denominated in euros. In addition, and most importantly, these revenue anticipation notes would be accepted at par value by the federal government in settlement of private sector tax liabilities. The revenue anticipation notes could be distributed electronically to bank accounts of firms and households through some sort of encrypted and secure system, or they could be sent as certificates, preferably in denominations of 50 and 100 euros, to facilitate their possible ease of use in other transactions, should private agents elect to do so. Essentially, the government is securitizing the future tax liabilities of its citizens, and creating what amounts to a tax credit that will not be counted as a liability on its balance sheet, and will not require a stream of future interest payments in fiscal budgets.

New Economic Perspectives, 6 December 2013

A parallel currency needs a sufficient penetration in order to gain generalised acceptance as a means of payment. Thus, the question arises what government expenditures, in addition to a job guarantee program, could be used to disperse a parallel currency among the population.

One such money sink is provided by government arrears to the private sector. According to Skai (in Greek), Google-garbled

The overdue obligations of the government to the private sector reached €4.22bn in October 2014 compared with €4.068bn in September. In the same month the outstanding tax refunds remained stable at €718 against €713 the previous month.
Such arrears could be monetised by paying them off with tax anticipation notes.

Preserving Euro reserves


A further use for a parallel currency would be to defray some fraction of the government's current expenditures in order to generate a surplus of Euro reserves. This is particularly relevant in light of the Greek government's need to repay €7bn worth of bonds held by the ECB and maturing in July 2015, as mentioned above. The legal interpretation appears to be that the ECB cannot roll over any government bonds as that would constitute forbidden monetary financing. Moreover, were these bonds repaid in full, Greece might be eligible to participate in the QE program recently announced by Mario Draghi
Question: My first question would be, it's not actually very explicit here in the press release whether that means that you're not going to buy into Greece's debt right now.
Second question would be whether you're also considering buying bonds which are actually already trading in negative territory when it comes to yields.

Draghi: Second question, the answer is yes.
And to the first question, let me say one thing here. We don't have any special rule for Greece. We have basically rules that apply to everybody. There are obviously some conditions before we can buy Greek bonds. As you know, there is a waiver that has to remain in place, has to be a program. And then there is this 33% issuer limit, which means that, if all the other conditions are in place, we could buy bonds in, I believe, July, because by then there will be some large redemptions of SMP bonds and therefore we would be within the limit.
And by the way, let me add, if there is a problem, if there is a waiver, all these are not exceptional rules. They were rules that were already in place before. So we're not creating.

Introductory statement to the press conference (with Q&A) (22 January 2015)

However, if in the next six months the Greek government were to make payments in the amount of €7bn with Euro-denominated scrip as opposed to `hard' Euros, it would accumulate an equivalent amount of Euro reserves which could then be used to redeem the bonds held by the ECB. Greek government final consumption expenditures are roughly 20% of GDP, or between €35bn and €40bn annually. The needed €7bn to be paid in scrip would then need to be 35% to 40% of government expenditures for a 6-month period, which is large but not implausibly so especially as a one-off.

Gresham's law


Gresham's law that "bad money drives out good" would imply that, as soon as scrip begins to be used in the Greek economy, `hard' Euros would be hoarded and scrip used in preference to make payments. Thus the stock of Euro banknotes would cease to circulate and would have to be made up by an equal face value of scrip to avoid deflation of the M0 money supply.

The Greek share of ECB capital is about 2%, which also corresponds roughly to the fraction of Euro banknotes issued by the Bank of Greece. The amount of Euro banknotes in circulation is roughly €1 trillion, of which Greece will therefore have issued some €20bn's worth. Assuming the Greek government issued scrip in the following amounts:

  • €5bn to fund the gross/upfront cost of a 300,000-job Employer of Last Resort program
  • €4bn to pay arrears to the private sector
  • €7bn of current government expenditures to preserve an equal amount of Euro reserves
it would be issuing a total of €16bn in scrip, commensurate with the amount of Euro banknotes in circulation in the Greek economy.

Capital controls


One of the principal motivations for the introduction of a parallel currency is the preservation of government hard-currency reserves, which would be defeated by the capital flight one might expect would be triggered by the introduction of the parallel currency itself. To contain this risk, capital controls would appear to be necessary. Fortunately for Greece, the Cyprus crisis of 2013 demonstrated not only that capital controls are compatible with Eurozone membership, but the willingness of the Eurogroup to introduce them as a lesser evil.

It is quite possible that the market panic triggered by Syriza's accession to power will precipitate a solvency crisis and the need to institute capital controls before, and not after, the Greek government has had time to enact any of the policies outlined above. In that case, the introduction of capital controls Cyprus-style would precede the rollout of a parallel currency which would then appear to be an emergency measure addressing capital flight.

Display:
The alternative currency idea is interesting, but isn't a note denominated, and reedemable, in euros in essence a eueeuro? At least in the impact on the money supply? Which means that it would be its own form of QE?

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sat Jan 31st, 2015 at 11:51:04 AM EST
It's more of a helicopter drop than QE, and in fact no Central Bank involvement is necessary.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Jan 31st, 2015 at 12:15:37 PM EST
[ Parent ]
I was thinking in terms of the poltical impact. I'm  thinking the ECB won't  be amused.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sat Jan 31st, 2015 at 12:29:37 PM EST
[ Parent ]
The ECB can bark but it can't bite.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Jan 31st, 2015 at 12:41:51 PM EST
[ Parent ]
Being completely untrained as an economist it is for quite some time my view that the best solution is a parallel currency.

In my head things would work like this:

  1. The government would start paying (e.g. part of the salary, to suppliers, etc) a (small) fraction in the new monetary unit (which could be called a tax credit and not "money" to avoid scaring people off)

  2. The state would force all agents to be able to manage two parallel currencies (e.g. your bank would have to provide for an account in Euros and another in "tax credits"). Notice that this would take time: you do not change processes overnight. Say 6 months. Notice that managing two parallel currencies is a lot of a management issue. The parallel currency could be 100% electronic, but even so...

  3. The value of these tax credits would fall to 0. They would not be pegged to the Euro. Notice that this is not very serious: the state would only be paying a small fraction of its obligations in the new currency - so other economic agents would not suffer much

  4. At some point in the future the state would require a part of the tax to be payed in this new tax credits: if not, an hefty Euro fine would be applied. The fraction required should be similar to the amount of new money issued.

  5. Economic agents would be desperate for the new money as this would lower their tax expense. This would put the new money effectively in circulation (creating economic activity) and making it severely increase in value and would boot up the necessary confidence.

  6. From this point on, with all the infrastructure in place, serious money emitting could start. With obvious attention to avoid emitting to little or too much.

This was the plan that my untrained head developed. The biggest problem for me is the time necessary (as  it would expose you to retribution from the EU). But I think having a parallel currency requires time to disseminate: Interestingly a 100%-paper currency might actually be faster as it would require less adaptation of IT systems (everything could be informal at the very beginning).
by cagatacos on Sat Jan 31st, 2015 at 12:16:00 PM EST
One more thing: this would have the added bonus of defraying the decision of getting out of the Euro or not. In the future there could be 3 alternatives: 1) only Euro, 2) only New currency or 3) maintain them both.
by cagatacos on Sat Jan 31st, 2015 at 12:17:35 PM EST
[ Parent ]
There is no Grexit.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Jan 31st, 2015 at 12:27:55 PM EST
[ Parent ]
At what point did the EU become the Hotel California?

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sat Jan 31st, 2015 at 12:30:59 PM EST
[ Parent ]
Bloomberg: New Greek Finance Minister Takes His Default Show on the Road (January 27, 2015)
Greece should have never joined the euro area, but now that it's in, a departure would be like falling from a cliff, he said. "The last line in Hotel California explains where we are: you can check out any time, but you can never leave," he told Bloomberg Radio in May 2012.
That's Varoufakis for you.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Jan 31st, 2015 at 12:37:24 PM EST
[ Parent ]
When countries started joining the EMU.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Sat Jan 31st, 2015 at 05:32:58 PM EST
[ Parent ]
When the Maastricht Treaty was signed.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Jan 31st, 2015 at 05:36:18 PM EST
[ Parent ]
Should note i meant to say euro  there.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sat Jan 31st, 2015 at 05:59:13 PM EST
[ Parent ]
It was ever this way.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Jan 31st, 2015 at 06:04:05 PM EST
[ Parent ]
The EU isn't, but the euro has always been.

There is no exit mechanism.

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt ät gmail dotcom) on Sun Feb 1st, 2015 at 07:14:18 AM EST
[ Parent ]
The government would start paying (e.g. part of the salary, to suppliers, etc) a (small) fraction in the new monetary unit (which could be called a tax credit and not "money" to avoid scaring people off)
There is an estimate in the diary that maybe 35% to 40% of government expenditure would have to be in scrip, at least in the first 6 months or immediately after the introduction of capital controls.
The parallel currency could be 100% electronic, but even so...
I would think it preferable to print paper money in small denominations of 5, 10 and 20 euros. I would expect large parts of the Greek economy, especially in the small-island or mountainous hinterland, not to be "bancarised" and to function by preference on  cash basis at present.
The value of these tax credits would fall to 0. They would not be pegged to the Euro.
On the contrary. The Greek government would issue them at par, and the fact that they are redeemable in payment of taxes also at par anchors their value to the Euro during tax collection periods. So the scrip might develop a devalued market price but it could not drift indefinitely away from parity because of these initial and final anchor events at most 12 months apart.
At some point in the future the state would require a part of the tax to be payed in this new tax credits: if not, an hefty Euro fine would be applied. The fraction required should be similar to the amount of new money issued.
This is not necessary. Gresham's law ensures that people will naturally prefer to hoard Euros and pay taxes in tax anticipation notes.
Economic agents would be desperate for the new money as this would lower their tax expense. This would put the new money effectively in circulation (creating economic activity) and making it severely increase in value and would boot up the necessary confidence.
The velocity of money would also increase, and this is precisely the channel by which such tax anticipation notes would have their largest effect. This would be like the Wörgl experiment on a national scale.
From this point on, with all the infrastructure in place, serious money emitting could start. With obvious attention to avoid emitting to little or too much.
The diary estimates imply that you would never have to issue more than about €20bn, or a small multiple thereof.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Jan 31st, 2015 at 12:27:38 PM EST
[ Parent ]
Thanks for the answer, just one issue:

The value of these tax credits would fall to 0. They would not be pegged to the Euro.

On the contrary. The Greek government would issue them at par, and the fact that they are redeemable in payment of taxes also at par anchors their value to the Euro during tax collection periods.

I was just trying to add an additional incentive for economic agents to hold the money. If you need the new money to pay your taxes (as for part of the taxation would be in new-money only) then you would not mind receiving in new-money. I can easily see people disliking the new-money if its only function is paying taxes (and it can be full replaced by the Euro). OTOH if you really needed the new-money (the compulsion payment of part of the taxes in new-money), that would be added incentive.

Furthermore it would be a market-driven approach to setting the value of the new-money. This could come in handy when the state redeems this credits (assuming parity might be an unbearable straight-jacket).

In any case, the success of this initiative seems to depend on getting the quantity of money circulating right (too little will not work, too much might create trust problems).

by cagatacos on Sat Jan 31st, 2015 at 12:43:01 PM EST
[ Parent ]
You're forgetting about Gresham's law. People would hoard Euro banknotes which wouldall but disappear from circulation except for foreign tourists.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Jan 31st, 2015 at 12:44:38 PM EST
[ Parent ]
Do you think SYRIZA is seriously preparing for any kind of plan B? I would imagine that if this is ongoing (and would have to be ongoing for a bit) it would have to be in secret...
by cagatacos on Sat Jan 31st, 2015 at 12:19:06 PM EST
They have to have a plan. What the plan is I don't know, but I know who they are, who their friends are, and what all of them have been writing and saying.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Jan 31st, 2015 at 12:28:45 PM EST
[ Parent ]
Migeru:
I know who they are, who their friends are, and what all of them have been writing and saying.

So does the NSA.

(But they don't understand it.)

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Sat Jan 31st, 2015 at 03:19:35 PM EST
[ Parent ]
Do I pass the Turing test, then?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Jan 31st, 2015 at 05:21:31 PM EST
[ Parent ]
Sorry for hijacking this, but I really find this topic interesting.

With regards to using the alternative currency: could you for people to use it? I know that you can mandate that everyone would have to accept the alternative currency (would you also mandate the conversion rate?), but forcing things is the best way to start a black market (where things would only be sold in Euros or at a heavy markup in the new coin).

What I like about my solution is that it would make economic agents want to have the new currency (in order to pay taxes), like this:

(i) State pays civil servants and (ii) state requires restaurants to pay part of the taxes in new-coin. Thus restaurants would want to have some of its bills payed in new-coin. The state would not be forcing the usage of the new-money (well, via the indirect means of taxing in new-money). If the state would control the money supply with intelligence, it could engender real trust in the value of the new-coin.

by cagatacos on Sat Jan 31st, 2015 at 12:27:06 PM EST
The only compulsion is that the government forces certain people who would be worse off otherwise to accept payment in tax anticipation notes. All the rest is voluntary.

People in the Job Guarantee program may receive a fraction of their wage in tax anticipation notes and 60% in euros. They are better off than unemployed, so they take it.

People owed arrears by the government receive 100% of it as a tax credit for their trouble. They are better off than otherwise, so they take it.

The government pays civil servants a fraction of their wages in tax anticipation notes. Especially the ones who are being reinstated such as the cleaners in the Finance Ministry are better off than otherwise, so they take it.

The government can try to get providers to take a fraction of all payments in tax anticipation notes. They are better off receiving that right now than having to wait maybe 90 days, and having no risk of arrears, so they take it.

People have a choice of paying taxes with these credits or with Euros. By Gresham's law they pay with the tax anticipation notes in preference.


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sat Jan 31st, 2015 at 12:35:16 PM EST
[ Parent ]
Now, I am a restaurant and you come with your tax credit notes, why should I take it?

Yes, up to an amount I could pay my taxes with it so I do not mind taking a share in credits, but it would be worthless in many scenarios. I can use the Euros to take a vacation in Barcelona, but not the tax credits. If I have foreign suppliers, the Euro would be better, and some internal suppliers might actually be going through the same issues as myself.

I am just afraid that lots of people would prefer not to be payed in new-money (economic agents less dependent on the state). And if you force them, then you take the risk of having a black market...

Hence the idea of forcing the use of tax-credits to pay part of the tax: there would be something (very important - tax burden is high) where Euros would be worthless compared to these tax-credits. If you ensure that part of the population is not issued with these (which would be the case of economic agents that do not work for the state), then that part of the population is very motivated to accept them: this would be voluntary circulation.

by cagatacos on Sat Jan 31st, 2015 at 12:54:16 PM EST
[ Parent ]
That's why you need a critical mass of tax notes in circulation. Once you have a few billion's worth of them around they become an accepted means of payment in the local economy.

After capital controls, the government might undertake to exchange them for hard currency at a small discount. Importers will need the assistance of the Greek Central Bank in order to send money abroad for payment of imports.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sat Jan 31st, 2015 at 01:01:28 PM EST
[ Parent ]
Now, I am a restaurant and you come with your tax credit notes, why should I take it?

Because otherwise you might lose business: the customer goes to some other restaurant which does accept payment in tax notes.

Also, I suppose that you would very soon get a secondary market in tax notes, perhaps run by the banks as they are financial intermediaries anyway. Restaurant owner gets 100 € in tax notes. He sell them to his bank for €97. The bank then sell them on for €99 to a corporation which needs to pay taxes, pocketing €1 as profit, and the corporation saves €1 in tax expense.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sat Jan 31st, 2015 at 05:41:40 PM EST
[ Parent ]
Sells them to the bank for €98, I meant.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Sat Jan 31st, 2015 at 05:45:57 PM EST
[ Parent ]
If the restaurant owner wants to preserve his profit margins, he could even add a little sign to the menu: "2% markup on all tax note payments". Wouldn't be much stranger than the "service" or "tip" fees many restaurants in certain countries already use.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Sat Jan 31st, 2015 at 05:56:18 PM EST
[ Parent ]
Tax notes could even end up trading at a discount and we would have re-invented devaluation in the Eurozone...
by Bernard on Sun Feb 1st, 2015 at 04:38:48 AM EST
[ Parent ]
Tax notes would trade at a discount, but with the value of a tax note anchored at parity at issue and at redemption, with less than 12 months to go at any point in time until the next tax or government fee payment, the value cannot drift too far away from parity.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Feb 1st, 2015 at 10:03:43 AM EST
[ Parent ]
a lot of questions I had in the back of my mind.  It seems to me that the parallel currency idea is feasible if difficult to implement within a short timescale.

However it seems to me that the VSP will see it as the issue of a new Drachma in all but name, albeit with a hard parity link to the Euro.  At best it is getting around the prohibition on anyone other than the ECB issuing Euros, and basically represent a Greek version of QE, or monetary financing, in all but name.

I suspect the VSP will go to almost any lengths to stop Greece doing this, legal or otherwise, because of their fear of losing central control of Euro issuance - and of other countries going down a similar route.

Germany/ECB have an enormous incentive to prevent all this from being unavoidable and necessary for Greece, but I suspect they will only be able to act, politically, after Greece has gone some way down this road.  And then they will be bellyaching about the need for a new Treaty to prevent his sort of thing.

Good luck with that.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Jan 31st, 2015 at 01:02:47 PM EST

I suspect the VSP will go to almost any lengths to stop Greece doing this, legal or otherwise, because of their fear of losing central control of Euro issuance - and of other countries going down a similar route.

I would stress the "otherwise" part. I think we will see lots of foul play. If Greece continues on this path all efforts will be done to force her to fail. Illegal and dirty.

by cagatacos on Sat Jan 31st, 2015 at 01:35:15 PM EST
[ Parent ]
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Jan 31st, 2015 at 02:26:03 PM EST
[ Parent ]
This just in...

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Jan 31st, 2015 at 02:29:27 PM EST
[ Parent ]
The demo was actually funny and an occasion to really be amazed at the difference from a week ago. The anarchists were amused and confused. They ended up writing anti-fascist slogans on the sides of police buses, with no-one stopping them. It was a party, and not a cop in sight, not a whiff of trouble

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Sun Feb 1st, 2015 at 08:19:42 PM EST
[ Parent ]
The cynically inclined might consider that's part of the reason why Syriza gave the the Ministry of Defence to the hard-right national-conservative Independent Greeks...

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Sat Jan 31st, 2015 at 05:46:33 PM EST
[ Parent ]
Syriza gave the the Ministry of Defence to the hard-right national-conservative Independent Greeks.

I think the move is brilliant - unless it is the IG that organizes a coup. But their party is probably far too small. The real danger is that they would find most of the military sympathetic to an IG coup.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Feb 1st, 2015 at 01:00:12 AM EST
[ Parent ]
No chance of that they really aren't that organized, and on the economy they're close to worshipful of the SYRIZA leadership. They're giving Kammenos his power trip, and have two SYRIZA deputy ministers by his side to make sure he doesn't try anything funny with military procurements

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Sun Feb 1st, 2015 at 08:22:59 PM EST
[ Parent ]
Even in the wasteland of the U.S. you hear constant drivel about "creating jobs" but nobody ever seems to add "doing what". People are a resource and like cars which are sitting, idling, not turned off, still costing you gasoline, but doing nothing. Plus these people tend to get in trouble, possibly just out of boredom. Why can't some crack economist come up for a productive use for all these idling humans? Think how much more competitive a society would be if the unemployed DID SOMETHING !! useful. That society should be able to out-compete others. Or am I missing something?

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Sat Jan 31st, 2015 at 01:42:00 PM EST
The paradox of capitalism is that it depends on lots of people being unemployed (to drive down labour costs) and at the same time leaves lots of "uneconomic" but necessary work undone: e.g. infrastructural development, better healthcare, childcare, education, housing, house insulation, more sustainable energy etc.

I suspect there is lots of productive currently undone work the 300,000 unemployed people Syriza proposes to give jobs to could do.  But yes, it is a challenge to match the right people to the right jobs and to manage the work effectively so that it delivers "value for money" however you may wish to define value.  But doing so well is only a government doing its job, and in my experience, people are generally will to give more than the job allows.

The other paradox of capitalism is that - for all the monetary incentives - it is very bad at providing fulfilling work and making the most of people's energy and expertise.

It is, for instance, refreshing to see a finance  minister who is actually a very famous and competent economist.  There is probably zero chance of Krugman ever being secretary of the Treasury, or Governor of the FED in the US.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Jan 31st, 2015 at 02:38:06 PM EST
[ Parent ]
"The paradox of capitalism ..."

paradox ??? Is that what that is? That doesn't hold to my definition of a paradox. More like ... this is one of the bullshit aspects of capitalism that the wealthy impose upon the rest of us. Just one of the reasons capitalism must go the way of the dodo (no, not DoDo) before the human species does.

They tried to assimilate me. They failed.

by THE Twank (yatta blah blah @ blah.com) on Sat Jan 31st, 2015 at 03:48:49 PM EST
[ Parent ]
This is not a paradox of capitalism - Bog standard western capitalism works just fine with effectively zero unemployment. This was the social settlement for most of the thirty years following WWII - a period that also saw the mobilization into the workforce of vast numbers of women with no previous experience of formal employment.

Near as I can tell, the oil crisis led to the false belief that full employment equaled inflation, when in fact stagflation was the result of having to pay much more for an import no more useful than before.

And ever since the west has been slamming on the political brakes whenever things looked to be heading back to that superior equilibrium. Essentially, 40 years of Error. This has persisted because it's an Error useful for top down class warfare, but it has had utterly catastrophic effects on overall economic growth, because Adam Smith was not wrong when he observed that the prosperity of a nation is the prosperity of the great mass of it's inhabitants - Trying to become a wealthier nation by keeping down the earnings of labor is a logical fallacy.  

by Thomas on Tue Feb 3rd, 2015 at 03:14:12 AM EST
[ Parent ]
Well both.

Capitalism does include mass unemployment as an option to a larger extent then say planned economy, feudalism or slave economies. In capitalism the claims to capital, resources and labor are distributed with money and these claims still hold even if it isn't used. In contrast, in a planned economy not using labor means losing the claim to it (this incentives holding on to labor, which is another problem). In feudal and slave systems not using labor often means they can run away, thus the lord/owner loses the labor.

This option in capitalism can be fixed - and was in the post-wwII period - by the government in two ways. One is gradually taking away unused claims by allowing inflation and the other is to act as claimant of last resort through employment programs.

Problem is of course that for the owners it is useful to retain claims even if they are not used, leading to a strong aversion agaisnt inflation and employment programs. Which version of capitalism is standard depends mostly on philosophy, I think.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Tue Feb 3rd, 2015 at 06:02:16 AM EST
[ Parent ]
Why can't some crack economist come up for a productive use for all these idling humans?

Dear friend, you have just rediscovered the core insight of one J.M. Keynes. :)

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sat Jan 31st, 2015 at 05:48:12 PM EST
[ Parent ]
Note that Gresham's Law only applies to consumer discretionary income defined as money over and above the amount, in total and percentage, spent on necessary purchases: food, rent, clothing, energy, transportation, etc.  

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Sat Jan 31st, 2015 at 02:22:02 PM EST
Yey, job guarantee!

But just 300,000? Even with knock-on effects and 400,000 jobs that is no guarantee when you have this many unemployed:

Eurostat: Marginal Drop of Unemployment in Greece | GreekReporter.com

In pure numbers, Eurostat's data shows that the number of unemployed Greeks remains staggeringly high: 1.3 million in June. Unemployment affects 23.8% of men, 31.1% of women and 51.5% of people under the age of 25.


Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Sat Jan 31st, 2015 at 03:14:57 PM EST
You have to start somewhere.

One of her scenarios is for a 550,000 job program, 750,000 when you take into account the indirect job creation.

But the current employment program is for 50,000 and underfunded. Let's see what they do. It's only been a week.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sat Jan 31st, 2015 at 05:20:55 PM EST
[ Parent ]
Wish they had gone ahead with the 750,000 job program and then dared Merkel, et. al., to stop them.  

Probably wasn't practical.  (But a boy can dream)

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Sat Jan 31st, 2015 at 07:22:04 PM EST
[ Parent ]
You do this in stages I think. if the 300,000 jobs program works, you double its size.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Feb 1st, 2015 at 03:54:38 AM EST
[ Parent ]
Toward the beginning of the US Civil War Lincoln's Secretary of Treasury, Solomon Chase, arranged loans from the biggest New York banks. The loans were redeemable in gold. So he then exchanged currency from the loans for gold! The banks then had to use that currency as the basis for all of their loans and the US Government had gold to use for foreign purchases. That was the beginning of the National Banking System. Allyn Young wrote a description of this system in an anonymous article he wrote for an encyclopedia in the '20s. Perry Mehrling rescued the work and has had it reprinted. I will try to find a copy and post it tomorrow.

In the case of Greece the Euros would become the gold. This can work. There are precedents.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Feb 1st, 2015 at 01:06:01 AM EST
The thing that stuns me is the amount of money that is causing the crisis. The big worry is about ~€7 billion due in the next six months from an annual GDP ~ €265 billion on a Purchasing Power Parity basis - ranked 50th in size by PPP. For any of the top 10 largest national economies in the world this is chump change. I understand that this will be a recurring problem and that the underlying 'bailout' debt is around €300,000 billion, but the fact remains that Greece could solve its entire problem with a debt moratorium during which what would have gone to interest on the debt is, instead, used to generate the additional economic activity that, in subsequent years will close the gap and make the debt sustainable.

The problems are almost entirely due to the leveraged consequences of default on the currently grossly financialized and fragile Western financial system - combined with the mendacity of the leaders of The West in their explanations of the problems to the public. What is really at stake is not the €300 billion but the whole corrupt, jury-rigged financial system and the stability of the governments that financial system has purchased. TPTB are fighting to save the cancer, not the patient.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Feb 1st, 2015 at 08:44:00 AM EST
Well, if Greece goes to a parallel internal currency, earning Euros will still be difficult in the exiting EU and world economy with leaders still steering the fleet of ships of state resolutely towards the rocks. But, if German and allied 'leadership' does crash the fleet, Greece would have a better lifeboat than most.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Feb 1st, 2015 at 09:02:18 AM EST
[ Parent ]
The whole Euro sovereign debt crisis could have been avoided with €50bn between February and May of 2010 but a moral example had to be made of Greece.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Feb 1st, 2015 at 10:01:42 AM EST
[ Parent ]
Funny how that 'leadership' is ending up making a 'moral example' of those who imposed the 'bailout'.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Feb 1st, 2015 at 10:07:45 AM EST
[ Parent ]
if you understand that 'moral example' really means 'spite-filled bullying about who's boss' it's not so incomprehensible.

The brilliant thing about capitalism is exactly the way that it disguises violent bullying and idiotic status and power plays as sober, upstanding morality.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sun Feb 1st, 2015 at 03:42:40 PM EST
[ Parent ]
Perfectly recognizable behavior in chimpanzee groups as well. That would fit the old Latin mores - a positive description of the ways of a people. The needs of those at the top have turned it into a normative term, with the norms serving them, of course. And the churches were always the first line in enforcing this 'morality', with the powers temporal to back them up with deadly force. Oh how fine and moral the heads of our governments are. And when they are not it is usually because of some sexcapade, not the massive, needless damage they cause for their self serving reasons.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Feb 2nd, 2015 at 01:27:07 AM EST
[ Parent ]
Bear in mind that tax arrears, taxes owed to gvt by people and enterprises, are now at 74 billion Euros. Most of it is unpayable of course, an artifact of the decision to tax the poor and the middle classes to extinction. But that sort of guarantees that there will be enough demand for anything redeemable as tax payment

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Sun Feb 1st, 2015 at 08:27:59 PM EST
That figure puts a whole new spin on the concept. Also, that's a full 40% of GDP.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Mon Feb 2nd, 2015 at 06:01:33 AM EST
[ Parent ]
This means the bulk of the Greek people are in exactly the same position vis a vis their Government, as their Government is with the EZ - i.e. technically and realistically insolvent.

The solution, in both cases, is, as you suggest, for the Government (and subsequently much of the populace) to start paying many of their bills in Tax vouchers.  This may also be a way of slowly leaching out the money the rich have squirreled away much of their cash in Swiss bank accounts.  Insofar as the rich are still running businesses within Greece, paying them in tax vouchers (not acceptable for paying for imports) forces them to use their Euro hoard to pay for their business inputs and lifestyles whilst often only being paid in tax vouchers.

In fact I would argue that any businesses in tax arrears should have virtually all their bills paid in tax vouchers - with a large part of the payment netted off against their tax arrears. Of course they would go out of business (or stop supplying the Government) completely if their arrears were fully netted off their payments, but at least a partial netting off would begin the process of reducing arrears whilst keeping the economy going.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Feb 2nd, 2015 at 07:35:01 AM EST
[ Parent ]
You don't want any netting, because to get out of the depression you want to grow the money supply as much as possible.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Mon Feb 2nd, 2015 at 08:24:46 AM EST
[ Parent ]
Insofar as netting forces businesses to draw on their cash hoards in Swiss banks, it will be a net positive for the Greek economy. I suspect also that reducing tax arrears from those who can pay them will be an important part of the Greek recovery plan - and an essential selling point for any deal Greece may come with international creditors. (Why should poor Germans subsidize much richer Greeks etc.)

None of this precludes a total debt forgiveness programme for the poorest of the poor - as proposed by Croatia - and a partial debt forgiveness programme for the marginally insolvent.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Feb 2nd, 2015 at 08:48:16 AM EST
[ Parent ]
Actually reducing tax arrears from those who can pay them is an important part of the Greek recovery plan. The SYRIZA economics team has calculated that about half of that is unpayable, and is planning on giving both a very large number of installments to pay off the rest and a huge discount if a certain percentage of the debt is settled. They reckon that it is feasible for the greek state to raise 3 billion Euros with this plan in 2015 alone (see 2d pillar of the Thessaloinki program)

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Mon Feb 2nd, 2015 at 10:30:55 AM EST
[ Parent ]
BTW tax arrears to the government have been increasing at a rate of over 1 billion Euros per month (an unprecedented amount) for the past two years at least. Greek taxpayers will have to pay over 11 billion Euros in various taxes over the next six months, and the SYRIZA gvt is planning on ways of exempting the poor from this burden and facilitaing payment for everybody else (within reasonable parameters)

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Mon Feb 2nd, 2015 at 10:34:33 AM EST
[ Parent ]
You don't want any netting, because to get out of the depression you want to grow the money supply as much as possible.

True, but, given the mal-distribution of wealth in Greece and the consequences this has had, forced dis-hoarding by the rich to the public sphere is an unalloyed good on its own. The increase in the money supply can better be dealt with by just increasing the amount of tax credits the government spends into existence.


"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Feb 2nd, 2015 at 09:24:17 AM EST
[ Parent ]
There is talk of a "bank run".  Can the elites with just their capital pull this off or must they "spook the herd"? They would love the public to be at the center of a bank run and then they can say "The public has spoken!!!"

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Mon Feb 2nd, 2015 at 06:53:08 AM EST
Given the uncertainties, it's not at all unreasonable for the individual investor to remove her money from Greek banks. Which is what is happening at the moment.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon Feb 2nd, 2015 at 04:17:36 PM EST
[ Parent ]
Right. If the public wants to move their money out of Greek banks, they can, legally. My question is ... can the wealthy elites fabricate a bank run just by shuttling their vast fortunes around or do they need a compliant public adding to the bank run.

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Mon Feb 2nd, 2015 at 08:31:37 PM EST
[ Parent ]
If the general public can do it what do you need an elite conspiracy for?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Feb 3rd, 2015 at 01:42:44 AM EST
[ Parent ]
The general public might realize they are being actively spooked by the opponents of the current govt. and might decide that they are not going to be used in that way. So if you can't get a bank run out of the public, create a banking problem by using the elites vast fortunes. IMOH the elites won't let "democracy" reverse the results they've achieved over the last decade. The elites want to OWN all of Europe without a blood war which destroys property. Where's the fun in owning a place like Syria or the Gaza Strip?

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Tue Feb 3rd, 2015 at 09:00:56 AM EST
[ Parent ]
When there is a bank run it's always individually rational to take part in it.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Feb 3rd, 2015 at 09:22:54 AM EST
[ Parent ]
So a bank run requires public participation. Is there any evidence that this is currently happening?

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Tue Feb 3rd, 2015 at 03:20:59 PM EST
[ Parent ]
This is a postmodern bank run which need only happen in the wholesale money markets. 21st century banking.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Feb 3rd, 2015 at 03:21:48 PM EST
[ Parent ]
So in answer to the original question, "yes."

But also "no," because there is no legal way for the Eurosystem to cease providing liquidity for cross-border withdrawals (this is the loophole Sinn has been pissing and moaning about since forever).

And bank runs are all about liquidity.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Feb 5th, 2015 at 01:09:10 AM EST
[ Parent ]
Not the Eurosystem, but the Eurogroup can impose capital controls like they did in Cyprus 2 years ago. This is coming within a week.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Feb 5th, 2015 at 02:10:07 AM EST
[ Parent ]
Yes, but that is the opposite of a bank run.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Feb 5th, 2015 at 12:56:42 PM EST
[ Parent ]
It happens after the bank run.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Feb 5th, 2015 at 01:21:25 PM EST
[ Parent ]
Of course. It's hardly going to happen before the bank run.

That would be unsporting.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Feb 5th, 2015 at 04:27:07 PM EST
[ Parent ]
And all together too sane.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Feb 6th, 2015 at 01:47:08 AM EST
[ Parent ]
Greece rules out aid from Russia, argues case in Europe | Reuters
Greek Prime Minister Alexis Tsipras ruled out seeking aid from Russia and said on Monday he would pursue negotiations for a new debt agreement with European partners, but saw little sign of compromise from Germany.

Tsipras and his finance minister Yanis Varoufakis are touring European capitals this week in a diplomatic offensive to replace Greece's bailout accord with the European Union, European Central Bank and International Monetary Fund "troika".

by das monde on Mon Feb 2nd, 2015 at 09:47:03 AM EST
Reuters changed the article under that link. As Zero Hedge notices, Tsipras statement are not that much rulling out.

The headlines and links at Zero Hedge are quite interesting now, as for a Greek carnival.

by das monde on Mon Feb 2nd, 2015 at 06:53:51 PM EST
[ Parent ]
The money quote: "Tsipras words did anything but 'rule out' Russian aid as he said - specifically - "we are in substantial negotiations with our partners in Europe and those that have lent to us," adding that with regards Russia,  "right now, there are no other thoughts on the table.""

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Feb 3rd, 2015 at 08:28:27 AM EST
[ Parent ]
The plot thickens: US Treasury dpt mission, headed by Daleep Singh, Deputy Assistant Secretary for Europe and Eurasia, to arrive in Athens to assist with EU debt negotiations (Source: ANA - in greek)

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Mon Feb 2nd, 2015 at 07:43:00 PM EST
Is this another instance of elites having a much easier time noticing that foreigners are overdoing the peasant gauging?
by generic on Tue Feb 3rd, 2015 at 02:49:56 AM EST
[ Parent ]
Economists' View: 'The Prospects and Consequences of a Possible Syriza Government' (January 23, 2015)
James Galbraith:  Let me carry on for a little bit on how best to think of those provisions.

The superficial presentation one reads in the press is:  financial assistance, but in order to qualify for it you have to make certain reforms, and the point of the reforms is to put your economy back into a position of being competitive and on the path of growth.  And that's been going on for six years, and the results are what we see:  Instead of a growing economy you have an economy and a society stressed to the point of breaking, with massive unemployment and the emigration of substantial parts of the professional class especially, and the weakening of the core social institutions, education, health care, urban services and everything else to the point where they are actually a barrier to investment and economic success.  And you have the impoverishment of large sections of the population, especially the elderly population.  It's at every level a failure.  Then one has to ask, was there a bona fide program for economic recovery in the first place?  And I think it's clear that even if those who argued for this program believed it might produce recovery and growth, these objectives were very secondary or even tertiary considerations in their minds.  It is clear that the policies that were specified as a condition were at bottom not recuperative, but punitive in character.  Punitive in character against the whole Greek nation, and on an improper principle of collective responsibility for the admitted mismanagement of the affairs of the Greek state by previous governments and by the Greek political class.

Roger Strassburg:  Schäuble has said as much.

James Galbraith:  Yes.  If you read Timothy Geithner's memoir, it's clear that he was very struck by this attitude, which reflected a moralizing indifference to the future of Europe.

Roger Strassburg:  That's the attitude of most of the German government and the press.

James Galbraith:  That fact was not concealed by them.  I'm obviously not one of most the unqualified admirers of Secretary Geithner, but on this point, clearly he had recorded an accurate perception and an admirable reaction to that way of conceiving things.

Roger Strassburg:  He was rebuffed by the Europeans.

James Galbraith:  Yes, sure he was.  So we have it on the record in an irrefutable way that it was a punitive rather than a recuperative strategy.  I don't think anybody can really argue otherwise.  A punitive strategy that was in place partly because of the interests of creditors in getting assets at fire-sale prices.  That's basically a debt collector's attitude.  And partly because of the internal politics of the German state at that time, in which a moralizing narrative was politically more useful than a more generous one would have been.

Roger Strassburg:  I don't think that's really changed.

James Galbraith:  Perhaps not, but it is one of the considerations that went into the implementation of the policy in the first place.



A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Feb 3rd, 2015 at 04:37:06 AM EST
[ Parent ]
elites having a much easier time noticing that foreigners

That's foreigners noticing that the elites..., right?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Tue Feb 3rd, 2015 at 04:37:55 AM EST
[ Parent ]
I meant foreign elites noticing that our elites overdo the squeezing. While they of course only enforce their divine rights ensure that their internal markets function efficiently.
by generic on Tue Feb 3rd, 2015 at 04:59:15 AM EST
[ Parent ]
FT: Greece finance minister reveals plan to end debt stand-off

Greece's radical new government revealed proposals on Monday for ending the confrontation with its creditors by swapping outstanding debt for new growth-linked bonds, running a permanent budget surplus and targeting wealthy tax-evaders.

...

Attempting to sound an emollient note, Mr Varoufakis told the Financial Times the government would no longer call for a headline write-off of Greece's €315bn foreign debt. Rather it would request a "menu of debt swaps" to ease the burden, including two types of new bonds.
The first type, indexed to nominal economic growth, would replace European rescue loans, and the second, which he termed "perpetual bonds", would replace European Central Bank-owned Greek bonds.



"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Tue Feb 3rd, 2015 at 03:33:47 AM EST
Watching Yanis Varoufakis' interview with Paul Mason last night (after the meeting with Osborne and the new debt proposal) I find Varoufakis' body language more tense than usual. I think he's getting desperate, and I wonder what Osborne and especially Sapin have told him about EU diplomacy.

Yanis Varoufakis: Greek European deal 'within hours or days' - video (02 February 2015)

Greek Finance Minister Yanis Varoufakis tells Channel 4 News that "you will see in the next few hours, days the whole of Europe is going to bind together and do its job".
Varoufakis is meeting the Italian finance minister today, and I think going to the ECB in Frankfurt tomorrow.

I suspect he's going to get a resounding rejection from Germany, or even worse, not even the time of day—Merkel won't meet with Tsipras in order to "show him isolated", while she has no trouble meeting with Orbán.

At the ECB vote this week on extending Greek Central Bank support for the Greek banks through ELA, the ECB rotation means France, Ireland, Greece and Cyprus sit out this month. Which almost seems designed to engineer a fail.

So "in hours or days" we might find ourselves in a Cyprus crisis scenario all over again.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Tue Feb 3rd, 2015 at 04:50:18 AM EST
[ Parent ]
Or possibly he's new in his job, has just spent a week dealing with a pile of shit reaching to the moon and is tired and stressed.

I wouldn't be reading too much into body language at this stage.

Looking at Paul Mason's face my body language would be tense too - he's actually smirking at Varoufakis.

by Colman (colman at eurotrib.com) on Tue Feb 3rd, 2015 at 05:22:00 AM EST
[ Parent ]
And the poor guy has just had to deal with bloody Osborne!
by Colman (colman at eurotrib.com) on Tue Feb 3rd, 2015 at 05:22:32 AM EST
[ Parent ]
Paul Mason has interviewed Varoufakis several times over the years and about as many in the last month and week. They know each other well.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Feb 3rd, 2015 at 05:52:36 AM EST
[ Parent ]
What I find interesting is that Sapin, for one, and he's not alone, after meeting Varoufakis, made a great performance out of stressing that there would be no debt write-offs.

It struck me at the time that he was perhaps preparing the European public for a deal on growth-linked bonds... he can annouce "See? I told you there would be no write-offs"...

Not bad, if it's a common communication strategy.

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

by eurogreen on Tue Feb 3rd, 2015 at 05:55:21 AM EST
[ Parent ]
Sapin said half a dozen times France would "accompany Greece" in the negotiations, whatever that means.

By the way, is there a video of the presser including the Q&A, or a transcript of the whole thing? I wasn't able to find it.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Tue Feb 3rd, 2015 at 06:01:19 AM EST
[ Parent ]
Greece has dropped to demand of a debt write off and will be happy with a de facto debt reduction - be making the maturity infinite or whatever.

So everybody is already singing from the same sheet here.  

by IM on Tue Feb 3rd, 2015 at 06:27:50 AM EST
[ Parent ]
I would no try to learn EU diplomacy from Osborne and Cameron. Their track record is miserable.
by IM on Tue Feb 3rd, 2015 at 06:30:01 AM EST
[ Parent ]
I wouldn't try to learn to piss  from Osborne and Cameron.
by Colman (colman at eurotrib.com) on Tue Feb 3rd, 2015 at 06:48:26 AM EST
[ Parent ]
Well perhaps if they were the targets...

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Tue Feb 3rd, 2015 at 08:40:34 AM EST
[ Parent ]
Given what we know about Tory proclivities I'd worry they'd enjoy it.
by Colman (colman at eurotrib.com) on Tue Feb 3rd, 2015 at 08:59:59 AM EST
[ Parent ]


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Feb 3rd, 2015 at 09:23:39 AM EST
[ Parent ]
Yeah I wouldn't cross the room to do it if they were on fire. But I never get invited to that sort of party anyway.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Tue Feb 3rd, 2015 at 10:22:28 AM EST
[ Parent ]
Naked Capitalism reveals Greece's predicaments:

The ECB Ready to Put a Choke Chain on Syriza

Pushing out the negotiation timetable to June works for Varoufakis and Greece in two ways. First, it provides more time to try to get backing for the sort of major revamp of bailout provisions that he believes is necessary. Even June is an insanely tight time frame for something so novel and ambitious, but mere weeks is obviously unworkable. Second, the longer Greece is in the news standing toe to toe with various Eurozone power players, the more it will embolden anti-austerity parties, particularly in periphery countries. Spain has regional elections in April, and a strong showing by anti-austerity and/or anti-Eurozone parties, which would give Syriza some tailwinds.

However, there is a fatal flaw with this scheme. Greece depends on ECB support of its banks. And thanks to a bank run that started with Syriza's win and intensified with Varoufakis' bold statements last week, four of Greece's five biggest banks have asked the Greek central bank for emergency support. That means the Greek central bank has to tap the ELA, the Emergency Liquidity Assistance. Any loans made from the ELA are subject to ECB approval.

As the New York Times describes, the ECB is to give its approval on Wednesday. However, many members of the ECB governing board, including most important Mario Draghi, are not at all happy with what they see as Greece's intransigent behavior  [....]  It's an obvious move for the ECB to use the ELA to bring them to heel by requiring that they do a deal pronto or lose access to the liquidity support.

Greek Finance Minister Varoufakis Retreats on Debt Writedowns, Public Spending Promises
With the ECB holding a sword of Damocles over the Greek banking system, in terms of its ability to cut off access to emergency liquidity facilities, and Syriza and Varoufakis personally having rejected a Grexit, they can dictate terms. In their eyes, the only reason to cut Greece any slack is that, as Varoufakis keeps stressing, Syriza is the sole party that is not loyal to Greek's oligarchs. If they want corruption tamped down and the tax system cleaned up, Syriza is the only game in town.
The ECB Tightens the Choke Chain on Greece
The ECB moved today to force Greece to negotiate a deal by the end of the month. That timetable virtually assures that none of the creative measures that Varoufakis has proposed are up for discussion, that the talks will stay within the existing bailout framework. That means all the Troika is prepared to discuss on Greek debt is extensions of maturity and perhaps an interest rate reduction. While that will provide some relief in real economic terms, it is likely to fall well short of what Varoufakis and Greek voters had wanted to achieve [...]

With a bank run underway and funds unlikely to return any time soon, Greece is utterly dependent on ECB support unless it is willing to have its banking system collapse. And that blow in an already prostrated economy is something that Syriza cannot responsibly inflict on voters, particularly when it shifted its campaign in the weeks before election to a moderate, pro-Eurozone posture. The ECB has issued its diktat and Greece has no choice but to fold. Varoufakis may still win some concessions around the margin, but the message is clear: he will get no big breaks on any of his major issues. The most he can hope to get is whatever the Troika is willing to trade for the Syriza's commitment to taking on the oligarchs and reforming its tax system.

by das monde on Tue Feb 3rd, 2015 at 11:32:58 PM EST
If Greece really finds itself in desperate liquidity straits, I wouldn't mind if Sweden provided that bridging loan. Just reading Wikipedia for 5 minutes, I  found 2 billion euros worth of Greek military equipment we (ehem - me at least) would be happy to take as collateral. ;)

Equipment leasing fees could be swapped for rock-bottom borrowing rates, with the fees stepped up (increasing that primary surplus) as soon as the bridging loan is repayed.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Wed Feb 4th, 2015 at 12:18:56 AM EST
[ Parent ]
If this is a holy war for the Troika status quo, Greece can have very few expectations...

Graecia delenda est?

by das monde on Wed Feb 4th, 2015 at 12:48:19 AM EST
[ Parent ]
Well, if the Troika pulls the chain, it might not still be 'right now' and - cue Russia. And WTF? Why are there still no capital controls?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Feb 4th, 2015 at 01:17:58 AM EST
[ Parent ]
You take a cavalier attitude to imposing capital controls. That's a suspension of EU free-movement law that requires some sort of an emergency. It may happen after Thursday if the ECB and Schäuble pull the plug.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Feb 4th, 2015 at 01:46:26 AM EST
[ Parent ]
I don't see that it's politically possible for the ECB to pull the plug in the current climate. It would be a deeply political act, and they would definitely have to cover their collective ass before flushing.

And given the echoes from Europe's capitals, I can't see it happening this week. Angela can smell the wind turning too. When will she make a delphic pronouncement?

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

by eurogreen on Wed Feb 4th, 2015 at 02:35:16 AM EST
[ Parent ]
The Eurogroup meets on the 11th to discuss Varoufakis' plan, so not until after then.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Feb 4th, 2015 at 02:38:03 AM EST
[ Parent ]
It would be a deeply political act, no doubt about that. Which is why, in my comment below, I ask which countries would defend Greece (ie, denounce the political act). Answer (imo), none. And count on the media to obfuscate the political nature of the act. They do that all the time.

eurogreen:

When will she make a delphic pronouncement?

I doubt if she will. She knows how to work things.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Feb 4th, 2015 at 02:39:44 AM EST
[ Parent ]
FirstFT (the new 6am Cut) | FT Alphaville

Greece's finance minister Yanis Varoufakis will meet Mario Draghi today with the hope of persuading him to maintain liquidity in Greece's banking sector after the country's EU bailout programme expires at the end of this month. (FT)

The European Central Bank is already resisting Greece's proposal that Athens raise EUR10bn by issuing short-term Treasury bills as "bridge financing" to tide the country over for the next three months while a new bailout is negotiated. Without this financing, Athens will exit its bailout without access to emergency funding for the first time since the first Greek bailout in May 2010. (FT)

Martin Wolf argues that the Greek government deserves the time to present its ideas and, as the EU is supposed to be a union of democracies and not an empire, the eurozone should negotiate in good faith. At the same time, the Greeks must convince their partners they are serious about reforms. (FT)



It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Wed Feb 4th, 2015 at 03:27:09 AM EST
[ Parent ]
As if Mario Draghi could make decisions by himself.

Varougakis meets Draghi to sound him off on tomorrow's ECB council vote and the correlation of forces within the governing council.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Wed Feb 4th, 2015 at 04:01:38 AM EST
[ Parent ]
Yes personifying the ECB is wrong. Still the record of Draghi of bringing together a majority is quite good.
by IM on Wed Feb 4th, 2015 at 07:45:49 AM EST
[ Parent ]
This month, France, Ireland, Greek and Cyprus are the ones without a vote. How well does that bode for bringing together a majority?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Feb 4th, 2015 at 08:18:48 AM EST
[ Parent ]
Irish central bank Governor and ECB Council member Honahan has more ability than anyone else associated with the Irish banking system but I doubt he will step out of line from a more general (probably German led) consensus. Don't forget the Irish Government is still looking to renegotiate the financing of its bank bail-out and will look to piggy back on any concessions given to Greece.  That requires staying in Schauble's good books even if it is a rather forlorn hope at this stage.

On the other hand, the Government is looking over its shoulder at a likely resurgence by Sinn Fein and Fianna Fail in the next General Election due within the next 15 Months.  Sinn Fein, some independents and much of the media and public is quite sympathetic to Greece as they understand they are being screwed in an even worse way than Ireland was.

So publicly the Government, (and to a much lesser extent) Honahan cannot afford to be outflanked on the left.

It all points to the usual Irish strategy of keeping schtum until they divine how the wind is blowing and waiting to find an angle which might be to Ireland's benefit.  Ireland has very little trade and no strategic interests in common with Greece, so don't expect anyone to go out on a limb for Greece, whatever about public expressions of sympathy.

That might change if Yanis Varoufakis or Alexis Tsipras visited the country and spoke publicly because being held hostage by the ECB is a position that will generate a lot of public support. Whether that will be sufficient to create significant Government support is an open question.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Feb 4th, 2015 at 09:28:31 AM EST
[ Parent ]
If you look at the broad majorities Dragahi was able to assemble, good enough.
by IM on Wed Feb 4th, 2015 at 11:08:42 AM EST
[ Parent ]
as the EU is supposed to be a union of democracies and not an empire, the eurozone should negotiate in good faith
When was the last time the EU did that?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Feb 4th, 2015 at 04:02:10 AM EST
[ Parent ]
A deal to bring modernity to Greece (FT, February 3, 2015)
More significant, however, is whether Greece will run out of money soon. Most observers believe that Greece could find the €4.3bn it needs to pay the IMF next month even if the current programme were to lapse at the end of February. A more plausible danger is that Greek banks, vulnerable to runs by nervous depositors, would be deprived of access to funds from the European Central Bank. If that were to happen, the country would have to choose between constraining depositors' access to their money and creating a new currency.
Or both.
This game of chicken could drive the eurozone into an unnecessary crisis and Greece into meltdown before serious consideration of the alternatives. The government deserves the time to present its ideas for what it calls a new "contract" with its partners. Its partners surely despise and fear what Mr Tsipras stands for. But the EU is supposed to be a union of democracies, not an empire. The eurozone should negotiate in good faith.

...

Many governments would oppose anything that looks like a sellout to extremists. The Spanish government is strongly opposed to legitimising the campaign of its new opposition party, Podemos, against austerity. Nevertheless, Greece and Spain are very different. Spain is not on a programme and owes much of its debt to its own people. It can justify much of its policy mix in its own terms, without having to oppose a new agreement for Greece.



A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Feb 4th, 2015 at 04:09:48 AM EST
[ Parent ]
I wonder about the Spanish government's attitude... If Greece is to be punished severely for trying to apply Syriza's program, will Podemos's support evaporate? Or will there be riots in Spain?

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Wed Feb 4th, 2015 at 05:49:15 AM EST
[ Parent ]
Here's a horribly biased analysis by Simon Nixon: Why the Eurozone May Need to Sacrifice Greece to Save Spain (January 28, 2015)

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Feb 4th, 2015 at 08:22:54 AM EST
[ Parent ]
Cavalier attitude?  --  After Cyprus? That taboo has been broken. And capital controls can be mostly for large transferrs and/or smaller repeated transfers. Most go throught the Greek Central Bank,don't they. They could also include confiscation of large amounts found in luggage of departing citizens. It could be applied to unpaid taxes in most cases.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Feb 4th, 2015 at 09:47:42 AM EST
[ Parent ]
Which EZ countries will support an attack on Greece? Several, at least FI, NL, DE. Which will defend Greece? Probably none (anyone counting on Renzi and Hollande is dreaming).

And count on Merkel to work round Obama.

Folk history will say: the radical left got into power in Greece and five minutes later the banking system collapsed. Which was why the neo-nazis took over.

Big stick the ECB-protection-racketeer is wielding there.

Syriza, get back in line.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Feb 4th, 2015 at 02:20:19 AM EST
[ Parent ]
What is the downside for Greece cutting a deal with Russia? If your own folks ... i.e EU ... will allow you to starve to death while they rob you of all your assets at fire sale prices, I say "SCREW THEM !!!"

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Wed Feb 4th, 2015 at 08:03:08 AM EST
The same downside that the Ukraine government cutting a deal with the West instead of Russia had. Geography and logistics. Also great powers tend to skimp on bribes if their clients have no other options left.
by generic on Wed Feb 4th, 2015 at 08:28:27 AM EST
[ Parent ]
Die Zeit: "I'm the finance minister of a bankrupt country" (4. Februar 2015)
ZEIT ONLINE: Will you ask Russia for help?

Varoufakis: I can give a clear answer to that: That is not up for debate. We will never ask for financial assistance in Moscow.



A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Feb 4th, 2015 at 08:29:15 AM EST
[ Parent ]
Varoufakis seems to try to be the reasonable adult in the room. Looking at the US this usually doesn't makes it trough the press. And we have the language barrier to contend with.
by generic on Wed Feb 4th, 2015 at 09:20:38 AM EST
[ Parent ]
ZEIT ONLINE: Do you believe you've been deliberately misunderstood?

Varoufakis: I hope it's only a misunderstanding.



A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Feb 4th, 2015 at 09:24:58 AM EST
[ Parent ]
(muffled, because he's biting his tongue)

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Wed Feb 4th, 2015 at 12:30:59 PM EST
[ Parent ]
He says that now. Wait till his options run out ... Germany holds firm to screwing the Greeks and the Greek people realize that Varoufakis and his party are all bluster and no action. The enemy elites are out to win at all cost ... all options should be on the table.

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Wed Feb 4th, 2015 at 09:30:34 AM EST
[ Parent ]
Liquidity will be cut to the Greek banks, an emergency Eurogroup will be called, and capital controls will be imposed. Then the more unconventional policies described in my diary may be tried.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Feb 4th, 2015 at 09:41:19 AM EST
[ Parent ]
by THE Twank (yatta blah blah @ blah.com) on Wed Feb 4th, 2015 at 10:43:59 AM EST
[ Parent ]
Baker praises the initial moves by the new government but warns Greece needs an "exit option" to leave the European Union.
Maybe Americans know something we don't...

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Feb 4th, 2015 at 11:00:33 AM EST
[ Parent ]
Dean Baker is as far from power as we are.
by IM on Wed Feb 4th, 2015 at 11:12:42 AM EST
[ Parent ]
You need to peel back the layers of Syriza a little bit. underneath Varoufakis, there are people like Costas Lapavitsas and Tsakolatos.

There are reasons why Tsipras picked Varoufakis. Varoufakis is the moderate interlocutor here.

Lapavitsas, who teaches at U. London, has been advocating Grexit for a very long time.

by Upstate NY on Wed Feb 4th, 2015 at 12:42:41 PM EST
[ Parent ]
Could Greece offer something popular to other European countries?

A subsidized holiday program for poor European families partly financed by unpaid taxes of hotel owners and partly by Greek employment program would be much easier to sell in other European countries than debt writedowns.

by Jute on Wed Feb 4th, 2015 at 08:09:59 AM EST
Greece has better uses for tax arrears (see the diary body).

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Feb 4th, 2015 at 08:25:31 AM EST
[ Parent ]
Great idea, Jute.

I remember back in the seventies hearing that owning five olive trees could support a family in Greece. Massive tree planting projects could halt -and reverse- desertification and improve water retention in the soil.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Wed Feb 4th, 2015 at 09:17:31 AM EST
[ Parent ]
As generic said in the parallel thread, Varoufakis is trying to be the adult in the room. If Greece had wanted to sell Aegean islands to Bavarian parliamentarians, they could have done so in 2010.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Feb 4th, 2015 at 09:39:30 AM EST
[ Parent ]
Varoufakis may not be the only adult in the room, but he will probably be the only one who is not a total sociopath.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Feb 4th, 2015 at 09:51:21 AM EST
[ Parent ]
He may be rescuing economics from that 'dismal' moniker.

Finally... :) Slay the Troika Hydra!

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Wed Feb 4th, 2015 at 09:57:38 AM EST
[ Parent ]
Tomorrow's meeting with Schäuble being a case in point.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Feb 4th, 2015 at 10:09:36 AM EST
[ Parent ]
Beppe Grillo's Blog

"Savings: No thanks. The Greeks have given a negative response to the German policy of saving-the-Euro. . Now the Chancellor has to change her strategy, and if necessary authorise a parallel currency. In the last five days, the enormity of Angela Merkel's catastrophic anti-crisis policy has become clearer than it has ever been. The savings policy that she has insisted on, has led to deflation in the euro zone and to lasting recession in Southern Europe. In the last few days, reactions against this policy have been seen in Frankfurt and in Athens.
Now the European Central Bank is buying State bonds. And from now on in Greece there's a government formed by a coalition of the right and the left, joined together by their anger directed at Ms Merkel.
I don't know what will happen in Greece.



...

THE TINY MISHAP: NEW POLICY FOR GREECE
For the Chancellor this is an occasion for her to have one of her famous "about turns" - just as she had on the nuclear issue. To continue the current policies would be the riskiest alternative. If someone says that the Euro could survive without suffering in the event of a Greek exit, perhaps they are right. But it's also possible that it could spark a chain reaction in both political and economic terms and it could even involve Italy.
Any rational human being can look at these options and understand that a change in policy in relation to Greece, even though it may not be good, is still necessary.
This is why I believe that it's more than likely that Mrs Merkel will go to Tsipras and get an agreement that limits the declared costs for the German balance sheet and that allows Tsipras to pull Greece out of this mess with a strong programme of recovery and a currency that matches that. At that point we'll have a situation like when Winston Churchill said that the Americans always do the right thing in the end, but not before trying out all the alternatives.
However there's danger in the fact that not all those with a part to play will act rationally, or it could be that one or more make a mistake in their judgement. This could happen, if for example, Mrs Merkel were to trust those who play down the consequences of a Greek exit from the Euro. Or, it could be that Tsipras starts playing around and downplays the consequences of a unilateral "haircut". We are in a situation in which the solution to the Euro crisis is within reach - but what is also so close is the deep abyss to be found in the collapse of the Euro. We've reached the fork in the road and we have to decide between our ideology and the future of the Euro." Wolfgang Münchau

Maybe they should move the Greek economy to Bitcoin!

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Wed Feb 4th, 2015 at 11:04:23 AM EST
That's from Münchau's Spiegel column from last week: S.P.O.N. - Die Spur des Geldes: Merkel steht vor dem Scherbenhaufen ihrer Krisenpolitik (26.01.2015)

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Feb 4th, 2015 at 11:09:42 AM EST
[ Parent ]
By the way, too much quotable goodness in this week's column: Ein Grexit wäre noch immer gefährlich (02.02.2015)
Es kann durchaus sein, dass Varoufakis und sein Chef Alexis Tsipras den diplomatischen Bogen überspannen und den Austritt Griechenlands unvermeidbar machen. Angesichts der ideologischen Überfrachtung der Debatte wird man den Deutschen die Wahrheit nur scheibchenweise präsentieren können.

Aber die Verhandlungsposition der Griechen ist alles andere als schwach. Sie werden jetzt zunächst, ohne bei Merkel vorher um Erlaubnis zu fragen, ihre politischen Versprechen durchsetzen - ein Ende der Troika, ein Arbeitsmarktprogramm und höhere Löhne. Und dann werden sie ein neues Finanzierungsprogramm einfordern.

...

Zusammengefasst: Deutschland ist mit seinem Beharren auf der Sparpolitik inzwischen international isoliert. Wenn die Bundesregierung jetzt nicht nachgibt, droht ein Euro-Austritt Griechenlands mit dramatischen wirtschaftlichen und geopolitischen Folgen.

Grexit would still be dangerous (02.02.2015)
It can happen that Varoufakis and his boss Alexis Tsipras overplay theyr hand and make Greece's exit inevitable. In light of the ideologically fraught debate, one can only present the truth to the Germans thinly sliced.

But the Greeks' negotiating position is anything but weak. They will next, without asking Merkel for permission, carry out their political promises - an end to the Troika, a labour market program, and higher wages. And then they will then demand a new financing program.

...

Summed up: Germany is internationally isolated with its insistence on austerity policies. If the German government does not make concession, there is a risk of a Greek Euro exit with dramatic geopolitical consequences.

(and more...)

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Feb 4th, 2015 at 11:49:45 AM EST
[ Parent ]
Münchau:
scheibchenweise

Quote of the day.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Feb 4th, 2015 at 12:04:41 PM EST
[ Parent ]
Syriza doesn't become Greece's Obama ... make a whole bunch of promises to get elected and then go bust. Or is that one of the first principles politics?

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Wed Feb 4th, 2015 at 02:32:08 PM EST
The advantage of Syriza is that they have a comatose state and they can derive no plausible benefit from cooperating with TPTB, so why shouldn't they try to fulfill their promises?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Feb 4th, 2015 at 03:39:58 PM EST
[ Parent ]
I'm all in favor of trying to fulfill promises; I just hope Syriza has more arrows in their quiver than a charm offensive because their opponents won't be charmed into changing policies. I look on the elites as loan sharks who would break your legs if they could get away with it, just as a warning to others who might try to resist.

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Wed Feb 4th, 2015 at 03:53:34 PM EST
[ Parent ]
I asked earlier about a deal with Russia. What about a deal with China. Those folks have excess capital up the ying yang ... think how much in debt. the US is to those folks. There must be someone in China itching to get a foothold in Europe.

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Wed Feb 4th, 2015 at 04:32:41 PM EST
Given that much of what you post here are at best platitudes and at worst absolute bullshit, do you even read what's already been posted? We all wonder if there is someone in China itching to get a foothold in Yurp.

Twanking = mindless masturbation without remorse.

Prattle on...

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Wed Feb 4th, 2015 at 06:29:32 PM EST
[ Parent ]
Greece has already sold its major ports to China.

Entrepots for maritime freight is about all the foothold China requires for the moment.

(And if they now come down on the improper treatment of labour and safety in those ports like a ton of bricks, that might actually have been the one smart privatization in this whole debacle. Because the Greek ports did very badly need the sort of investments that foreign terminal operators have a strong incentive to make.)

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Feb 5th, 2015 at 01:28:37 AM EST
[ Parent ]
What about the announced stop to the privatization of the port of Piraeus?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Feb 5th, 2015 at 02:11:36 AM EST
[ Parent ]
What has been stopped was the further privatization of all docks in Piraeus. The privatization of the docks already given to COSCO will not be disputed

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Thu Feb 5th, 2015 at 10:36:51 AM EST
[ Parent ]
So Greece has sold some pier space slots to China, or what?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Feb 6th, 2015 at 03:07:40 PM EST
[ Parent ]
Greece appears to have sold one or more terminals in Pireaus, but not the port itself.

For those who wonder what the difference between a port and a terminal is, here's the five-minute terminology tour:

  • A harbor is a body of water surrounded by breakwaters (either natural or constructed).
  • A port is a place where ships can anchor in order to move personnel or cargo between ship and shore, or in order to be serviced. A port may be located inside a harbor (and usually is, because ships are expensive and insurance companies frown on naked ports), but this is not technically necessary.
  • A dock is a place where ships can anchor for maintenance. A dry dock is a dock which can be drained of water for maintenance access to the underside of the ship.
  • A quay is a part of the port where ships can anchor for exchange of cargo, personnel and suppliers.
  • A pier is similar to a quay, except that it rests on supports rather than a solid foundation. Piers are not normally found in modern ports called by anything larger than personal pleasure craft.
  • A berth is a stretch of quay or pier which can accommodate a vessel.
  • Several berths are usually grouped together into a single terminal, sharing quayside cargo handling facilities and equipment.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Feb 6th, 2015 at 03:32:25 PM EST
[ Parent ]
What's a wharf?
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Feb 6th, 2015 at 03:58:25 PM EST
[ Parent ]
Depending on which dialect you go by, it can be any of (a) a reinforced berth somewhere between a quay and a pier in construction; (b) synonym for a port; (c) synonym for a dock; (d) synonym for a berth; (e) synonym for a shipyard.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Feb 6th, 2015 at 04:33:21 PM EST
[ Parent ]
In my dialect, a wharf is what the English call a pier. But can also be a quay.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Fri Feb 6th, 2015 at 05:26:38 PM EST
[ Parent ]

(C'mon, it's Friday.)

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Feb 6th, 2015 at 07:05:24 PM EST
[ Parent ]
Varoufakis has made your point recently. He praised the modernization that China brought to the ports.
by Upstate NY on Thu Feb 5th, 2015 at 08:33:52 AM EST
[ Parent ]
Working conditions are dismal even by troika-era standards, however there was a succesful strike at COSCO recently which - at least on paper - gained guarrantees on stopping the most blatant of chinese labor practices.
Also there is the issue that the COSCO docks are quite probably being used as the main gate for smuggling in Greece

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Thu Feb 5th, 2015 at 10:40:18 AM EST
[ Parent ]
Fortunately, container terminals - particularly recently modernized ones - are the sort of assets where it is fairly easy to enforce regulatory compliance: They have a lot of mission-critical interfaces directly with institutions and infrastructure under complete government control, and all the major costs are sunk. Even most of the machinery that is moved in from off-site during the upgrade is almost as expensive to relocate as it is to buy new.

Furthermore the Greek container terminals are, as far as I can tell from the press releases, mostly geared toward ship-to-shore moves. Which means they have almost complete pricing power over their customers (since they can charge clear up to the next-closest terminal plus the difference in last-mile costs, which is normally substantial).

The upshot of all this is that Cosco does not have any strong incentive to put up a serious fight. They'll throw a hissy fit about the new rules on general principle, but fighting a compliance cost that they can easily pass all the way down the downstream value chain to the consignee is probably not worth the political capital they would expend.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Feb 5th, 2015 at 01:11:01 PM EST
[ Parent ]
What the ECB's Move on Greek Government Debt Is Really All About - Bloomberg Business

the move from the ECB should have very little immediate effect on the Greek banks - provided there is not a complete loss of confidence in the Greek banking system in the coming days - and should be viewed as what it is: The ECB is pressurizing the Greek government.

The Greek finance minister Varoufakis has been agitating for Greek debt relief since his appointment after January's election. Today the ECB gave its answer to his moves. If the Greek government does not agree to re-enter a program, then the ECB will not allow its debt to be used as collateral.

The immediate effects should be seen as limited within market space, but huge within the political realm.

The ECB has often been accused of placing too much political pressure on governments. Today's moves shows that it has chosen to ignore those accusations once again and do what it feels is right.

by Bjinse on Wed Feb 4th, 2015 at 04:57:55 PM EST
That last sentence is of course in complete contradiction with the factual content of the article...

The Greek government needs a breathing space during which to renegotiate with EU governments. Denying them this space, the ECB is acting as if there had been no election; as if politics did not exist.

That's an eminently political position.

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

by eurogreen on Wed Feb 4th, 2015 at 05:38:33 PM EST
[ Parent ]
"... the ECB is acting as if there had been no election; as if politics did not exist."

No, they act as if they don't care, they don't need to care, and it would be against their best interest if they did care.

Example: You borrow money from a loan shark but weeks later you tell the loan shark that you got together with your family and voted not to repay the loan. Do you think the loan shark cares about what your family thinks? No, pay the loan back or get your legs broken. Welcome to the ECB. I assume all of the other countries contemplating following Greece's lead are taking notes and planning accordingly.

They tried to assimilate me. They failed.

by THE Twank (yatta blah blah @ blah.com) on Wed Feb 4th, 2015 at 06:16:50 PM EST
[ Parent ]
The politics that matter is the shark power.
by das monde on Wed Feb 4th, 2015 at 06:25:04 PM EST
[ Parent ]
Bullshit.

Read Karl Whelan: So What Did ECB Just Do To Greece?

On the big picture, I had stressed that ultimately the ECB's decisions on what kind of assets could be used to as collateral for normal Eurosystem loans were highly discretionary. I had also suggested that decisions on whether to allow ELA were even more discretionary with basically no standardised set of conditions. Based on this, I emphasised that those who saw the potential March 1 cutoff of ECB funds from the Greek banks as something to do with hard-and-fast ECB rules were well off the mark.
I think tonight's statement confirms this point. The decision to make various types of collateral ineligible was taken on the following basis
Suspension is in line with existing Eurosystem rules, since it is currently not possible to assume a successful conclusion of the programme review
So the Governing Council have decided they can't now "assume a successful conclusion of the programme review". Who knows what they were assuming before? But it should be very clear now that this isn't about hard-and-fast rules. The Governing Council has explicitly made this decision based on their feelings and hunches about how negotiations are going.

At least, unlike in its previous "Fight Club" days, the ECB now admits that ELA is available and will step in to take the place of the regular Eurosystem lending that has been revoked. So there are no immediate implications for liquidity provision to the Greek banks. The ECB is flexing its muscles, letting everyone know that are very close to pulling liquidity from Greece.

Also, read Yanis Varoufakis' the Greek Finance Ministry's statement: on the ECB decision in English:
"This decision does not reflect in no case any negative developments in the country's financial sector and comes two days after its substantial stabilization. According to the European Central Bank (ECB), the Greek banking system remains adequately capitalized and fully protected through access to the ELA.
Now wait for this:
The European Central Bank (ECB) by taking and announcing this decision puts pressure on the Eurogroup to proceed rapidly and conclude a new mutually beneficial agreement between Greece and its partners.
Amazing...
The government daily widens the circle of consultations with partners and institutions to which it belongs, remains unwavering in its goal of  a social salvation program approved by the vote of the Greek people, and it consults with  view to draw up the European policy that will finally ends the self-reinforcing crisis of Greek social economy."


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Feb 4th, 2015 at 07:39:21 PM EST
[ Parent ]
Germany Deserved Debt Relief, Greece Doesn't - Bloomberg
The West German governments that benefited from the debt relief were resolutely anti-Communist and anti-Marxist. CDU, now the party of Chancellor Angela Merkel, ran West Germany for the first two decades of its existence. It was less economically liberal than it is now, and it built a sizable welfare state over the years, but it was still a center-right, capitalist force that believed that only private initiative could lead to more or less universal prosperity.
Legal Options for Ukraine's Russian Debt Problem - Credit Slips
The country's leverage - what little it has - depends in part on whether it can place meaningful legal barriers in the way of any effort to enforce the bonds [...]

Anna's proposal requires legislation making Ukraine's debt to Russia unenforceable in English courts. The proposal is justified as a form of sanctions and is related to one considered in a consultation document prepared by the UK Foreign and Commonwealth Office. Holders of the bonds - which were originally bought by Russia's sovereign wealth fund but will presumably be transferred to another entity - could in theory look to courts in other jurisdictions. But even if a lawsuit succeeded elsewhere, other courts couldn't meaningfully enforce the judgment.

The proposal is elegant, and it has the advantage of being a transparently political solution to what is, after all, a political problem [...]

Joseph and Mitu's proposal is premised on a more radical idea [...] The bulk of the paper is devoted to arguing for a "market for sovereign control" in which control over a region may be transferred from one nation to another, for a price. The exact mechanism for transfer and for setting the price varies by context, but transfer requires the approval of a super-majority in the affected region. Their argument will prove controversial, but it responds to a genuine need in international law. State succession (i.e., the transfer of responsibility for a territory) happens all the time, but international law provides no real guidance on the many resulting questions, such as how to allocate a territory's debts.

by das monde on Wed Feb 4th, 2015 at 07:10:19 PM EST
That Bloomberg column...there are no words.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Thu Feb 5th, 2015 at 08:30:22 AM EST
[ Parent ]
Why, there's something wrong with arguing that W. Germany deserved debt forgiveness in 1953 because it was a bulwark against precisely the sort of evil that Syriza represents?

Sounds fair enough to me.

by afew (afew(a in a circle)eurotrib_dot_com) on Thu Feb 5th, 2015 at 09:49:30 AM EST
[ Parent ]
Right, it's sort of hilarious watching the hyperventilating about "far-left" Syriza, given that they're the ones preaching textbook macro.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Fri Feb 6th, 2015 at 05:55:00 AM EST
[ Parent ]
It's sort of hilarious. In Austria we  get a lot of anti Greece experts on the TV yet they seem to find relatively little to actually disagree with. We had this exchange:
Interviewer: Do you agree that the Greek state will never be able to pay back its current debt?
Dubious Expert: The Greek state has existed for two thousand years.
by generic on Fri Feb 6th, 2015 at 06:06:23 AM EST
[ Parent ]
From what I have seen, most of the German-language media has been pounding away at the Greek government with a vehemence that makes me think it's not the German elite's but the media's own self-respect at stake (they would have to face up to five years of biased reporting). A bizarre episode was when the entire media concluded that ANEL are anti-Semitic, without checking the source, finally done by a taz columnist who found that Kammenos was actually rambling about a supposed lack of tax exemption for the orthodox church vs. Buddhism, Islam and Judaism. Yet, I sense a profound confusion due to the fact that Syriza guys and Varoufakis in particular failed to turn out like what they imagined: no raving lunatics, no Europhobes, no issuers of ultimatums. Say Spiegel put a menacing photo of Tsirpas on the cover with a title calling him the scare of Europe, but then there is an article blaming Merkel's nationalism and another grudgingly admitting that most of the new government's first decisions were correct. Varoufakis's and Tsirpas's one-week tours may have resulted in no practical gains, but IMHO they left an impression.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Fri Feb 6th, 2015 at 05:29:41 PM EST
[ Parent ]
One can detect quite strong signals that the tectonic plates undergirding Yurpeen politix have shifted (are shifting). How it plays out i have no f-ing clue. There remains significant danger, but...

One thing of which i'm certain; the past few weeks are the best we've seen in many years.

I wish we could mobilize hordes of Varoufakis supporters in 'Schland so that Yurpeen leaders recognize this is a deep wave, not to be ignored.

You could say i'm a dreamer, but i'm not the only one...

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Fri Feb 6th, 2015 at 06:22:57 PM EST
[ Parent ]


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Feb 7th, 2015 at 05:37:36 AM EST
[ Parent ]
From what I have seen, most of the German-language media has been pounding away at the Greek government with a vehemence that makes me think it's not the German elite's but the media's own self-respect at stake (they would have to face up to five years of biased reporting).

Sounds like the press here when talking about Iraq.  Don't try to tell Joke Line or Friedman or any of the clowns here it was a stupid idea from the get-go.

Now with the rise of ISIS, there's emerged a narrative of "See, the surge worked, and the whole thing was a huge success before KenyanMuslimSoshulizms ruined it."

Try to tell them that this is exactly what surge opponents said would happen, or that it was Bush who signed the status-of-forces agreement to get out, and all you get is wharrgarbl, as the kids say.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri Feb 6th, 2015 at 06:36:23 PM EST
[ Parent ]
Especially in The South.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Feb 6th, 2015 at 11:25:48 PM EST
[ Parent ]
Certainly a more prevalent attitude in the South, since we have more stupid here.  But it's an astonishingly common (although not majority) attitude even among people who should know better.  Mostly seems to depend on how seriously one takes old media vs the Internets.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Sat Feb 7th, 2015 at 07:13:34 AM EST
[ Parent ]
The Stupid seems to correlate well with fundamentalist attitudes towards religion and bigotry. It is disconcerting to hear mid-level medical personnel commenting as to how they had to just 'go along' with the idea of evolution to get their degree. Ideology, religious or political, seems to overrule common sense regularly.

Mountain Home is a recreation and retirement center. It depends on a reputation for having a good health care system. The ACA, for all its faults, does provide great support to the local hospital by reducing nu-reimbursed expenses and new, paying patients, thanks to the Arkansas 'Private Option'. And it has saved the local sheriff's budget by covering the cost of medical care of prisoners, (another southern industry). Yet, in the recent election, Tea Party Republicans glided to victory on a bed of RW foam and fought to repeal the 'Private Option', which had been enacted with bipartisan support. Fortunately the new (R) Governor Asa Hutchinson wiggled back on his campaign promises, and, along with him, enough of the new Republican Assembly members, to keep the plan. The most basic reason they hate the ACA is that Obama passed it and he is black. Fortunately, the staunchest local racists are making daily appearances in the obituary column of the local paper.    

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Feb 7th, 2015 at 09:06:34 AM EST
[ Parent ]
That's good to hear, actually.  We've been seeing similar movement in attitudes in Florida among Republican legislators and Voldemort with respect to Medicaid funding under ACA.  The more cemented it becomes, the better.

Whatever gets the Reps to the acceptance point so that folks get treatment is fine.

To be honest, I expected a good-sized expansion in coverage under ACA with little cost control.  So far it's working a fair bit better than I expected on both fronts.  It's not perfect by any stretch, but it's doing pretty damned well (big expansion in coverage and costs running less than GDP, if I'm not mistaken).  If we can get the full Medicaid expansion, it'll be a damned fine achievement.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sat Feb 7th, 2015 at 01:42:54 PM EST
[ Parent ]
Repubs who can stick their head out of the foam are rightly terrified at the prospects of being blamed for the all around suffering and tax shortfalls they will have if they don't join. Costs will strangle both their local health care systems, especially in states with large rural populations and or lots of small towns under a thousand, large prison populations and lots of impoverished unemployed older workers - most of The South.

County Sheriffs love the ACA. One of our sheriffs biggest expenses WAS medical care for the typical 80+ prisoners in the county jail and the Baxter Regional Hospital has seen revenues and paying clients increase and pro-bono work decrease.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Feb 7th, 2015 at 04:31:56 PM EST
[ Parent ]
All that is required is to define the struggle between Syriza and TPTB in the EU is to cast this as an existential struggle for soul of 'The West'. Then each country's EPP delegation can howl "Our nation, our values and our way of life is at stake!" Almost always works.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Feb 6th, 2015 at 12:58:09 PM EST
[ Parent ]
"...the sort of evil that Syriza represents" is very easily understood by members of The European Peoples Party in the current European Parliament.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Feb 6th, 2015 at 12:49:00 PM EST
[ Parent ]
das monde:
only private initiative could lead to more or less universal prosperity.

That should read: "...more corporate and individual AND less universal prosperity."

Newspeak alert


'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Sat Feb 7th, 2015 at 10:17:07 AM EST
[ Parent ]
Frances Coppola: (5 February 2015)
Varoufakis's comment is undoubtedly a reference to the fact that pulling ELA from Greek banks would cause their sudden disorderly collapse. The ECB has used this trick before: it threatened to pull ELA from Irish banks in 2010, and it actually pulled ELA from Cyprus's Laiki Bank and the Bank of Cyprus, forcing immediate closure and restructuring. This second piece of brinkmanship resulted in the worst bank bailout decision in the history of the planet, which was (fortunately) subsequently overturned by the Cypriot legislature. Undermining deposit insurance is almost criminally insane.

...

Alessandro Del Prete helpfully sent me this piece by Jacques Sapir which explains how weakening Greece's position could actually strengthen its hand (my emphasis):

In this strategic game, it is clear that Greece has deliberately chosen the strategy qualified by Thomas Schelling, one of the founders of game theory, but also of nuclear dissuasion, as «coercive deficiency». In fact, this term of «coercive deficiency» was imagined by L. Wilmerding in 1943 in order to describe a situation where agencies enter into expenses without prior financing, knowing that morally the government will not be able to refuse funding them. Schelling's contribution consists in showing that this situation can be generalized and that a situation of weakness can reveal itself to be an instrument of coercion upon others. He also showed how it can be rational for an actor knowing himself to be in a position of weakness from the start, to increase his weakness in order to use it in negotiation. Reversing Jack London, one can speak in this instance of a "strength of the weak.". It is in this context that we must understand the renunciation by the Greek government of the last slice of aid promised by the so-called «Troïka,» amounting to 7 billion euros. Of course, having rejected the legitimacy of said "Troïka," it could not logically accept to take advantage of it. But, in a more subtle way, this gesture is putting Greece voluntarily at the edge of the abyss and demonstrates all at once its resolve to go the bitter end (like Cortez burning his ships before moving up to Mexico) and to increase the pressure on Germany. We are here in a full blown exercise of «coercive deficiency».
This explains Varoufakis's "Do ahead" (he probably meant "Go ahead"). He stands at the edge of the cliff, and the ECB says "Do what we want or we will push you over". His response: "Go on then, push".


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Feb 5th, 2015 at 08:59:09 AM EST
Everybody, including Krugman, says that the actions of the ECB it is not such a big deal. So I guess that is correct.

But I can not shake the feeling that things are heading in the wrong direction.

by rz on Thu Feb 5th, 2015 at 09:27:25 AM EST
[ Parent ]
Obviously they are heading in the direction of the ECB pulling ELA and crashing Greece's banks, triggering a Cyprus situation. This may happen at the next ECB council meeting on the 18th.

However, unlike in the case of Cyprus, the Single Supervisory Mechanism is now in place: Greece in the penalty box (5 February 2015)

At the end of the day, it has to be recognised that the ECB is now the supervisor for all the big Greek banks, and under the terms of the Bank Resolution and Recovery Directive, it pretty much has a duty to take action against any bank that is "failing". The concept of "failing" isn't rigorously defined in the primary European legislation, but it's perfectly reasonable to take the view that any bank which can't roll over its funding without official support falls into that category. And that's pretty much all the Greek banks at present. Things could get a lot more interesting before they settle down.


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Feb 5th, 2015 at 09:46:01 AM EST
[ Parent ]
To which I have to say...

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Feb 5th, 2015 at 09:56:51 AM EST
[ Parent ]
Yes but see this:



The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Thu Feb 5th, 2015 at 10:45:45 AM EST
[ Parent ]
Now Syriza not imposing capital controls starts to make great sense: let the ECB deal with the most disastrous consequences of capital flight. And to think Varoufakis was ridiculed for having part of his expertise in game theory!

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Feb 6th, 2015 at 01:05:33 PM EST
[ Parent ]
They need to be ready for the eventuality of the ECB pulling the plug on ELA on the 18th. France, Ireland, Greece and Cyprus will continue to sit out at the vote.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Feb 7th, 2015 at 05:35:02 AM EST
[ Parent ]
The Greek Situation Is Unfolding Rapidly Now... | Zero Hedge

The comments of the Greeks saying that they aren't interested in renewing the bailout deal with the Troika has sent a true shock wave throughout the European financial sector. Just a few days after the announcement, the ECB is starting to think about separating from the troika, which would then solely consist of the IMF and the European Commission.

Such a separation would be highly unexpected as the partnership between the three important institutions seemed to be quite strong. Citing a `potential conflict of interest with its Quantitative Easing program', the ECB is choosing for the easy way out and then it will be interesting to see whether or not the IMF and the European Commission will have enough leverage to force the Greeks to continue to implement changes [...]

[...] the Greeks have now effectively increased the pressure on the ECB and more importantly, central banker Draghi has now been put in the middle of a political mine field.

by das monde on Sat Feb 7th, 2015 at 07:15:34 PM EST
[ Parent ]
Never use Zero Hedge for analysis.

Of course the ECB wants to dissociate itself from the Troika. The Advocate General of the European Court of Justice, in his opinion on the OMT constitutional challenge from Germany, made it quite clear that the ECB cannot be involved in member states' fiscal policy while at the same time buying their bonds in QE as a monetary policy measure.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sun Feb 8th, 2015 at 06:23:21 AM EST
[ Parent ]
BBC: EU lawyer approves ECB bond-buying programme (14 January 2015)
In his opinion, published on Wednesday, Advocate General Villalon argued that the ECB must have a broad discretion when framing and implementing the EU's monetary policy.

He said it would first have to spell out its justification for any bond-buying programme and not be involved in any direct aid programme to any eurozone member state involved.

He also warned that the courts lacked the expertise and experience of the central bank in this area and should be careful about criticising the ECB.

So, for the OMT the condition is that the target country be subject to a "programme", but at the same time the ECB cannot be involved in it.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Feb 8th, 2015 at 06:28:01 AM EST
[ Parent ]
See also Jörg Bibow's Some quick takeaways from the ECJ opinion of Advocate General Cruz Villalón on the ECB's OMT (Multiplier effect, January 14, 2015)
Be that as it may, the AG identifies one important condition that would see the ECB cross the line into the economic policy domain, namely when acting as part of the troika. The ECB can continue doing anything it does right now, but once OMT gets activated it cannot be involved on the troika side of the program country as well, as such a "dual role" would bring it into conflict with the treaties. Interestingly, this call was not made based on criticisms put forward by the usual suspects (Germany's monetary orthodoxy), but by Die Linke.

This part of the AG's opinion may have important implications for the future of the troika. But it does not seem to provide any serious obstacles regarding the ECB's widely expected QE initiative.



A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Feb 8th, 2015 at 06:39:39 AM EST
[ Parent ]
A classic case of: 'Be careful with you demand, you might just get it."

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Feb 6th, 2015 at 01:01:36 PM EST
[ Parent ]
by afew (afew(a in a circle)eurotrib_dot_com) on Thu Feb 5th, 2015 at 10:17:47 AM EST
[ Parent ]
Oops, sorry...

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Feb 5th, 2015 at 10:31:33 AM EST
[ Parent ]
No sweat, worth looking for.
by afew (afew(a in a circle)eurotrib_dot_com) on Thu Feb 5th, 2015 at 10:56:46 AM EST
[ Parent ]
More from Sapir on Merkel's visit to Obama:

Greece's brinkmanship | RussEurope

The United States have sized it all up. We know that Barack Obama has summoned Angela Merkel to Washington on January 9th[8]. On the agenda of this meeting the Greek problem will figure as a matter of course. We note in passing that this shows the constant involvement of the United States in European affairs. All those who crow that the Euro would give us independence in regard to the Dollar, would do well to meditate on the meaning of this encounter. "European" policies are largely decided in Washington. This is moreover quite logical, the Euro being the last line of defence of the Dollar. If it disappears, the Dollar will be exposed stark naked to international monetary speculation.
by afew (afew(a in a circle)eurotrib_dot_com) on Thu Feb 5th, 2015 at 11:02:12 AM EST
[ Parent ]
"European" policies are largely decided in Washington.

Yes? And the european policies since 2008 of all things prove this?

by IM on Thu Feb 5th, 2015 at 01:49:09 PM EST
[ Parent ]
"Go on then, push".
The question is, what is the ECB matrix of values. How is Greece falling off the cliff terrible for them?
by das monde on Thu Feb 5th, 2015 at 05:14:31 PM EST
[ Parent ]
Greece gets kicked out, consequences for ECB:

Short term: increased risk in holding IPSI bonds restarts the speculation. ECB has to intervene if it wants to stop that. ECB bosses does not quite like that.

Long term: Greece rebounds with its own currency, empowering M5* and Podemos in the next Italian and Spanish elections to run on a "leave the euro" platform. And then France, and then everybody else. Leaving the new ECB headquarter as a modern tower of Babel, a cautionary tale of why monetary unions are bad. The names of the ECB bosses are forgotten or remembered in ignominy. ECB bosses really would not like that.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Fri Feb 6th, 2015 at 05:40:49 AM EST
[ Parent ]
Define "Greece gets kicked out".

Right now I'm seeing a bank run followed by capital controls and maybe a parallel currency.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Fri Feb 6th, 2015 at 06:36:02 AM EST
[ Parent ]
If Greek banks are cut off from both using Greek debt as collateral and from the ELA, won't that lead to Greek banks going into receivership? And won't they then need a new currency to fund new banks?

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Fri Feb 6th, 2015 at 06:51:38 AM EST
[ Parent ]


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Feb 6th, 2015 at 06:54:46 AM EST
[ Parent ]
Yes, that is what happens when banks are potentially failing. But if ECB wants them to fail, and cuts of first state debt as collateral and then ELA, won't they surely fail? Is not the ECB leadership in cahoots with the Council and Commission and the Council and other bodies in that flow chart?

Ok, lets assume they are not. ECB sinks banks, banks are refloated through flowchart. That would be kind of interesting because then ECB will have fired at Greece and the volley being caught and neutralised by Brussels. Greece remains in the euro, creditors has lost their main weapon and austerity is defeated.

But if they do are in cahoots, then ECB sinks banks and bansk are not refloated through flowchart. Then the Greek government needs to act in order to keep the payment system working. Which means new banks, ergo new currency. Or would they do this through a parallell currency?

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Fri Feb 6th, 2015 at 09:44:32 AM EST
[ Parent ]
I've got a naïve question:

Why would you have to refloat greek banks if they fail or are failed by ECB?
Why not just let them go? (and create new banks from scratch)?

The greek state would need to give money to physical depositors under the limit of 150k€ per head (that's the rule here in France, I suppose it's the same in Greece). The bank shareholders would be screwed, which would probably attract the attention of Germany as some of them are international investors.

And the effects on the greek economy would be appalling. Probably. More or less than the current -25% in GDP since 2009?

Example:
NBG: 35% of shareholders are internationals.

Pireus: 29% international institutionals, plus huge Hellenic Financial Stability Fund share

by Xavier in Paris on Fri Feb 6th, 2015 at 11:34:45 AM EST
[ Parent ]
The difference between "restructuring" and "re-creating" an entire banking system in the space of a few weeks comes down to little more than the colour of the livery of the restructured banks.

Because a retail payment clearing system is not an optional extra that you can dispense with for a bit while you put together a new one.

So "creating new banks from scratch" cannot go much beyond firing the board and the upper echelons of management, burning the shareholders and some (most) of the creditors, and re-opening the next Monday under a new logo but with much the same operational infrastructure.

Which is also what you do in a restructuring.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Feb 6th, 2015 at 01:52:40 PM EST
[ Parent ]
Couldn't you just take back the infrastructure (computers, datacenters, people) after closure when the company assets are sold by the courts?
by Xavier in Paris on Fri Feb 6th, 2015 at 03:54:55 PM EST
[ Parent ]
If you're talking about just one or two banks, sure.

If you're talking about your entire banking system, then no: Liquidating a bankrupt bank takes at least a full year, which is about twelve months longer than you can afford to go without a functioning retail clearing infrastructure.

And even if you confiscate the assets immediately, rather than wait for the courts to liquidate them, you cannot feasibly replace the personnel or rebuild the organization from the ground up overnight.

If that were possible, then there would be no reason to have retail banking in the first place.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Feb 6th, 2015 at 04:40:36 PM EST
[ Parent ]
Even then, if you're talking about one or two banks, you're probably just going to turn them over to other banks that are in better shape and enact a few measures to help them out and save yourself the headache.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Fri Feb 6th, 2015 at 06:22:17 PM EST
[ Parent ]
Yes, but when dealing with one or two banks, that is not necessarily smart.

With one or two banks, you can turn them over to the central bank and do a more fundamental housecleaning.

With your whole banking system going down the toilet, at most you can make a few examples of some of the most obviously feckless oligarchs. Which I'm all in favor of for its possible effects on the future behavior of other oligarchs. But I hold no illusion that it amounts to a systematic housecleaning.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Feb 7th, 2015 at 12:23:25 AM EST
[ Parent ]
True,  but that depends on the complexity and relative importance of the bank to the system.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Sat Feb 7th, 2015 at 06:46:41 AM EST
[ Parent ]
True, but only a theoretical point. Since a banking regulatory who's stupid enough to allow banks to become systemically important without maintaining detailed, up to date plans for how to triage, quarantine and purge them when the shit hits the fan...

...is likely also stupid enough that it would not take the opportunity to cut them back down to size even if someone handed it a detailed game plan.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Feb 7th, 2015 at 08:10:36 AM EST
[ Parent ]
Yes, although, alas, that's probably not an unreasonable level of stupidity to expect.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Sat Feb 7th, 2015 at 08:57:19 AM EST
[ Parent ]
Greece has four systemically important banks. It's also a country of 10 million.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Feb 7th, 2015 at 08:59:23 AM EST
[ Parent ]
Syriza should set up local, public owned bank-credit unions in every city and province with strong charters and structures that mitigate corruption. Enough effective actions such as this and they will rule for the next two generations.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Feb 7th, 2015 at 09:33:29 AM EST
[ Parent ]
That's a long-term project, maybe for a 4-year term and not for a 4-month emergency.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Feb 7th, 2015 at 10:10:35 AM EST
[ Parent ]
Right, think we're referencing more emergency situations where the whole system could seize and collapse.  The time horizon matters.

I'm not as in love with localization and credit unions as many on the left seem to be.  If I open an account with a bank, my only real concern is whether it's FDIC-insured (or FCUA-insured or whatever the hell the credit union insurance agency is called).  They're all the same dipstick bankers, as far as I've seen.  Don't really care if they're local, regional or national.  I just want to be sure my cash is there when the shit hits the fan.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sat Feb 7th, 2015 at 01:23:03 PM EST
[ Parent ]
The difference is that public banks are chartered for public purpose. Their profits are returned to the governmental entity chartering them and they can set interest rates consistent with both profitability and social need. They can insure low interest rates for local bond issues, etc. There is information at the Public Banking Institute, associated with Ellen Brown.

When you have endogenous money creation it matters who is deciding and on what criteria the decisions are made. Private bankers hate public banks because they can set a ceiling on the interest and profit from financing public projects. The Bank of North Dakota is owned by the State of North Dakota and is as responsible for North Dakota's prosperity as is the Bakken. The model could be relatively quickly adapted to Greece, given the need and the political attitudes of Syriza.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Feb 7th, 2015 at 04:18:47 PM EST
[ Parent ]
Why not just let them go? (and create new banks from scratch)?

That is the essence of what I put into ~ 100 faxes to various members of the US Congress in October, 2008.


"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Feb 6th, 2015 at 03:24:36 PM EST
[ Parent ]
http://www.telegraph.co.uk/finance/economics/11388093/Greek-crisis-put-your-questions-to-Ambrose-Eva ns-Pritchard.html

If they want to keep the euro:
They must repeal the idiot Fiscal Compact since it guarantees twenty years of quasi depression that will destroy Europe altogether and reduce it to a seething mass of hatred, under-investment, and poverty.
They must launch a real New Deal worth €1.5bn of infrastructure and high-tech projects immediately.
They must rewrite the treaties to allow direct monetary financing of deficits ignite this with €2 trillion of helicopter money from the ECB, outright fiscal dominance, not with meaningless attempts to squeeze 20 more basis points out of the yield curve as they aim to to do with their QE.
This would avert deflation and prevent a compound interest trap in half Europe.
They must accept that monetary union means fiscal union. They must abolish the nation states in all but name and accept a latterday, polyglot, dysfunctional, Habsburg Empire.

or

Since this is undesirable, undemocratic, dangerous, and impossible, why not just break the damn thing up

I choose the second. But that is beyond the main issue: a working solution (any of the above) is not in the cards. Pain will ensue

by cagatacos on Thu Feb 5th, 2015 at 09:09:05 AM EST
AEP:
a latterday, polyglot, dysfunctional, Habsburg Empire

Or a functional federation.

by afew (afew(a in a circle)eurotrib_dot_com) on Thu Feb 5th, 2015 at 11:04:10 AM EST
[ Parent ]
Like the US of A. I do not think we have the collective greatness of America (I am not joking, I am serious).

While the above might be discussable, I think it is quite clear that we see each other as individual nation-states, not as a single Euro country.

by cagatacos on Thu Feb 5th, 2015 at 11:18:12 AM EST
[ Parent ]
I see the nationalist right have done a good job selling that idea.

Propaganda works. And once it's worked, you start doing their job for them.

by Colman (colman at eurotrib.com) on Thu Feb 5th, 2015 at 12:16:42 PM EST
[ Parent ]
Also, at the time the US was established, the states were pretty damn nationalist - there's all sorts of provisions designed to protect them. Power of federal government has expanded over time.
by Colman (colman at eurotrib.com) on Thu Feb 5th, 2015 at 12:17:52 PM EST
[ Parent ]
We just need a "civil war" to set things straight. The way this is going, I would not be shocked if we had one...
by cagatacos on Thu Feb 5th, 2015 at 12:38:22 PM EST
[ Parent ]
Given the history of nation states in the Americas, are you sure there wouldn't have been even more war if the former British colonies had not decided to federate?
by afew (afew(a in a circle)eurotrib_dot_com) on Thu Feb 5th, 2015 at 02:02:13 PM EST
[ Parent ]
The way I see the EU now is little different from how I see the German states shortly before Napoleon. Now if "provincialism" could become a negative epithet again without the marriage of an imperialist conflict to a federal notion of nationality...

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Thu Feb 5th, 2015 at 12:40:44 PM EST
[ Parent ]
When British conservatives connect relate the polyglot and dysfunctional nature of the latterday Habsburg Empire to the EU, one always has to wonder what they really mean: do they want to say that the Habsburg Empire wasn't manly enough to suppress all non-core language groups like the Atlantic colonial empires or Russia did, or have they given up on Empire and secretly worship the French model of the nation state with enforced language unity?

At any rate, the way I see it, the multicultural problem of in the latterday Habsburg Empire was that only some language groups got significant autonomy, which they were allowed used to try to assimilate and repress the others, with predictable blowback. I don't see that in the present EU. Moreover, it is a typical folly of historical analysis (especially when used on an analogy to the present) to consider a dysfunction terminal. I don't think there is or has even been any state that wasn't dysfunctional in some aspects, but those that lived long either managed or reformed. (For the Habsburg Empire, one could speculate about an alternative history in which Archduke Franz Ferdinand lives to become Emperor and gets to implement his plan to sideline the hawks and chauvinists in the Austrian and Hungarian government.)

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Thu Feb 5th, 2015 at 01:30:22 PM EST
[ Parent ]
Re: British conservatives:

DoDo:

secretly worship the French model of the nation state with enforced language unity?

You are snarking there, I hope? Not that they really approve of the Celts rabbiting on in their incomprehensible jargon, but all those Eton-and-Oxford types and their swivel-eyed peer chums do have a language of their own, you know? (AND only they can use it, right?).

DoDo:

I don't see that in the present EU.

Neither do I, as long as English is just used as a lingua franca (which I think is the case). In fact, though the present EU is dysfunctional, sick with economic liberalism, and increasingly perverted by nationalist sentiment and also governmental rivalry (not the same thing), the old war hatchets have been buried for generations along with revanchism and "hereditary enemies". This is a new situation in the context of the last, say, five centuries. It could be the context in which individual nation states could live together in peace. It could also be the context for a successful federation.

Which of the two would better protect against free-trade, free-market economic rivalry, and ensure long-term peace, is a question of opinion. For the moment, I'd say that neither individual nation states, nor the current "union", have shown their capacity.

by afew (afew(a in a circle)eurotrib_dot_com) on Thu Feb 5th, 2015 at 02:36:26 PM EST
[ Parent ]


Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Fri Feb 6th, 2015 at 11:28:50 AM EST
[ Parent ]
How's that euro workin' out? | WashingtonExaminer.com

The Brussels elites, needless to say, can't bring themselves to blame the euro. Instead, they blame the voters. "There can be no democratic choice against the European Treaties," said the President of the European Commission, Jean-Claude Juncker, on Thursday.

Don't think that this is just rhetoric. In 2011, elected prime ministers in Italy and Greece were toppled in Brussels-backed civilian coups and replaced by EU functionaries in order to sustain the euro. The EU is not interested in how Greeks have voted. The only question for them is whether Greece can be kept within the monetary union, or whether amputation is the best way to secure the survival of the integrationist project elsewhere. We'll know soon enough which way they have decided.

by das monde on Thu Feb 5th, 2015 at 05:23:14 PM EST
[ Parent ]
Surprised that people are still questioning why Syriza partnered with ANEL and gave them the military ministry.

Not only are they anti-austerity, but they are precisely the sort of folk that Europe will have to deal with in the future if the EU refuses to cut a deal with Syriza. Woe to Greece and Europe when these klutzes grasp power.

by Upstate NY on Thu Feb 5th, 2015 at 03:10:25 PM EST
Greece - a Varoufakis Conversion
Greece's new Syriza government has two major economic challenges to address: a Resolution of Greece's unsustainable debt burden followed by a Transition to a long term sustainable economy.

Conventional resolution of sovereign debt is a debt for debt swap: replacing existing debt with new debt which requires a smaller percentage of Greece's national income and resources to service.

So it is that Greek finance minister Yanis Varoufakis has already tabled a proposal for two new types of debt, one linked to GDP for the IMF and holders of Greek sovereign debt, and the other of perpetual debt, which would replace Greek debt held by the ECB and which would be repaid as and when Greece is in a position to do so.

During 2014 the average duration of Greek liabilities was about 16 years, and the interest payments by Greece required (net) some 2.6% of GDP to service.

This proposal is for a conversion of the existing dated 'debt' liabilities into a modern form of the undated credit instruments ('stock') which pre-date modern banking by hundreds, if not thousands of years.

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Feb 6th, 2015 at 04:43:52 AM EST
Paul Mason
In this regard the move [by the ECB] has already had impact. My social media feeds, and those of people I follow, are now reflecting Greek sentiment changing towards euro exit. The total lack of transparency (who voted? why?) and the right time melodrama from a central bank have made people wake up uncertain about what their central bank is trying to do
by gk (gk (gk quattro due due sette @gmail.com)) on Fri Feb 6th, 2015 at 08:03:52 AM EST
The Wardrobe Politics of Greece's New Prime Minister - NYTimes.com

Whatever the reasons Mr. Tsipras, head of the left-wing Syriza party, initially had for rejecting the tie (he has not worn one in years) -- it gave him a neck rash, he didn't like it, it had negative associations -- he has since realized the symbolic power associated with his decision, and has been wielding it unabashedly.

"I think that if there is something that people appreciate in Syriza and me, it is that we haven't assumed this mentality of establishment parties, with specific ways to dress, to act," he told The New York Times just before the election, honing in on style as an efficient differentiator between what he represents -- new blood, new energy, an alternate approach -- and what the old establishment represents (the people who got Greece into all of their problems in the first place).Continue reading the main story

Think of it as the contemporary version of John F. Kennedy's decision at his 1961 inauguration to take off his traditional silk top hat, which he had dutifully worn, for his swearing-in and address, with all the new-generation symbolism that that entailed. After all, Mr. Tsipras, at 40, is the youngest Greek prime minister in almost 150 years. Sometimes what you don't wear is even more potent than what you do.

But Mr. Tsipras took it a step further.

He said he would wear a tie again, The Guardian reported, when Greece's bailout terms are renegotiated. Message: I'll play your game when you play mine.

The tie as the watershed symbol of the Serious people. As an unabashed tie-hater and a supporter of the Declaration of the Tie, I am thoroughly enjoying this.

by Bjinse on Fri Feb 6th, 2015 at 09:13:05 AM EST
I, on the other hand, am married to a Croat so ties are de rigueur :D

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Feb 6th, 2015 at 09:16:51 AM EST
[ Parent ]
The ties that bind?
How Springsteenian.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Fri Feb 6th, 2015 at 10:24:22 AM EST
[ Parent ]
Dunno how many got that..?
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Feb 9th, 2015 at 01:20:51 AM EST
[ Parent ]
Doesn't everybody know that ties, bowties etc are the last step in a long line of neck-fabrics worn by men that go all the way back to the Croatian mercenaries in french employ during the thirty years war?

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Mon Feb 9th, 2015 at 03:34:33 AM EST
[ Parent ]
I would expect no less of ETers...

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Mon Feb 9th, 2015 at 04:32:08 AM EST
[ Parent ]
I have enjoyed even more Varoufakis' sartorial splendor, as when meeting with Dijsselbloem recently. No tie, and he didn't even bother to get his shirt tucked in!

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Feb 6th, 2015 at 03:51:00 PM EST
[ Parent ]
The lack of a tuck-in was just to distract them from the lack of a tie. Just wait until you see what he has planned next time.
by Upstate NY on Fri Feb 6th, 2015 at 07:05:40 PM EST
[ Parent ]
Never, ever trust an economist who doesn't dress like a complete slob.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Fri Feb 6th, 2015 at 07:20:27 PM EST
[ Parent ]
According to a University of Macedonia opinion poll, the first after the elections, 72% of Greeks approve of the government's confrontation with the troika (22.5 disapprove), and ~60% expect it to continue. This includes majorities from all other party voters except ND, but even among them 43.5% approve.

75% believes that the gvt is determined to keep its pre-electoral promises

35.5% feel fear at the prospect of a GRexit, 9.5% hope, 22% say it won't make much of a difference and 33% say it can't happen

The road of excess leads to the palace of wisdom - William Blake

by talos (mihalis at gmail dot com) on Sat Feb 7th, 2015 at 11:46:38 AM EST
I just hope Syriza does a passable job here.  Because if they fail, I worry that we're going to be terrified by what comes next.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Sat Feb 7th, 2015 at 01:26:11 PM EST
[ Parent ]
Yes. Especially if they fail capitulating. Scary prospect. This small glimmer of hope after 6 years of increasing misery will produce monsters if crushed

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Sun Feb 8th, 2015 at 08:58:42 AM EST
[ Parent ]
The Serious People will make every effort to crush it. That's how liberal democracy fails.

Michael Pettis: Syriza and the French indemnity of 1871-73
By Michael Pettis
(February 4, 2015)

I think most analysts understand that costs will rise during the restructuring process. I am not sure they understand, however, that delays will impose even heavier costs during the many years of subsequent adjustment. There is a lot of bad blood and recrimination among the various parties. I suspect that some of those who oppose Syriza are probably revolted by the thought that a rapid resolution of the Greek crisis would rebound to Syriza's credit, but they must understand that dragging out the restructuring process will impose far greater long-term costs on the Greek people than they think.

...

Enough people seem to hate or fear Syriza that there will be little attempt to approach Greece's problems with enough imagination to give either party what it needs, but in fact with the right cooperation, imagination, and intuitive understanding of how balance sheet structures change overall value creation, a Greek debt restructuring could leave both sides far better off than either side might imagine. Of course if done right this matters far more than for just its impact on the Greek economy. While everyone probably agrees that Greece simply cannot proceed without debt forgiveness, less widely agreed, but no less obvious in my opinion, is that there are a number of other European countries that also need debt forgiveness if they are to grow. Because I was born and grew up in Spain, and my French mother founded and ran a successful business there which my family and I still own, I am confident that I know the country well enough to say that even with some impressive reforms having been implemented under Mariano Rajoy, Spain is nonetheless one of these countries. I suspect that many other countries including Portugal, Italy, and maybe even France are too.

I also know, however, that Spanish debt prospects are an extremely sensitive and emotional topic, and I will be roundly condemned for saying this. Today's Financial Times has a very worrying article explaining why Madrid wants to be seen among the hardliners in opposing a rational treatment for Greece: "when it comes to helping Greece, there will be no such thing as southern solidarity or peripheral patronage." This is the reverse of what it should be doing. In an article for Politica Exterior in January 2012, I actually proposed, albeit without much hope, that Spain take the lead and organize the debtor countries to negotiate a sustainable agreement, but in its fear of Podemos, the Spanish equivalent of Syriza, and its determination to be one of the "virtuous" countries, it strikes me that Madrid is probably moving in the wrong direction economically. Ultimately, by tying itself even more tightly to the interests of the creditors, Rajoy and his associates are only making the electoral prospects for Podemos all the brighter.

Yeah, we're pretty much fucked.


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Feb 8th, 2015 at 10:45:36 AM EST
[ Parent ]
The Serious People will make every effort to crush it.

As the USA did with Cuba. It is not always successful. And Greece might do much better than did Cuba.

I have always liked Michael Pettis' work. Didn't know he was Spanish.


"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Feb 8th, 2015 at 11:09:27 AM EST
[ Parent ]
I heard the other day that if all the S.  European stars united their economies the collective heft would be third worldwide after America and China.
True?

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
by melo (melometa4(at)gmail.com) on Sun Feb 8th, 2015 at 11:27:58 AM EST
[ Parent ]
Irrelevant. Never gonna happen.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Feb 8th, 2015 at 12:14:45 PM EST
[ Parent ]
Varoufakis in the FT, unpaywalled by CNBC: Greece finance minister unveils plan to end debt stand-off (2 February 2015)
The minister anticipated difficulties in clamping down effectively on tax evasion and "rent-seeking behaviour" among Greece's business oligarchs and other wealthy people, but vowed: "We will not cease until we succeed. If we are snuffed out by the vested interests, it will be our honour to have fallen in fighting the good fight."
And then all hell will break loose. As afew said:
Folk history will say: the radical left got into power in Greece and five minutes later the banking system collapsed. Which was why the neo-nazis took over.


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Feb 8th, 2015 at 10:57:47 AM EST
[ Parent ]
At least with Varoufakis Syriza has someone who can see what is happening and find ways to make things work. I don't know about Podemos and the prospect of a right wing coup in a Podemos led Spain.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Feb 8th, 2015 at 11:02:28 AM EST
[ Parent ]
"We will not cease until we succeed. If we are snuffed out by the vested interests, it will be our honour to have fallen in fighting the good fight."

That's very honorable-sounding and all, but we kinda need you to succeed here, Yanis, come Hell or high water.

If the negotiations break down and we head for the cliff -- break it off.  Just drop the currency.  There'll be some chaos going back to the drachma initially, but a year and a half from now, there will finally be light at the end of the tunnel.

My greatest fear is that Syriza doesn't go big, the economy doesn't recover (or, worse, suffers a shock), and the Golden Dawn find their way to power and do what the previous paragraph suggests (without bothering with the negotiation), thereby gaining credibility.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sun Feb 8th, 2015 at 12:06:07 PM EST
[ Parent ]
Even without Golden Dawn in the picture eventual crush or failure of Syriza paints a pretty dismal future: Greece has been ruled by an oligarchic plutocracy for more than a half a century with a few political Dons running the show (the Karamanlis, Mitsotakis and Papandreu clans). Syriza is the first break with this suffocating tradition.
by Ivo on Sun Feb 8th, 2015 at 01:14:01 PM EST
[ Parent ]
Beppe Grillo's Blog

EXPOSURE OF GERMAN BANKS
Tsipras has to keep in mind that the European banks have drastically reduced their Greek exposure from 250 billion at the end of 2009 to 50 billion in 2014. This reduction comes from the use of the aid that the Troika has given to Greece: about 240 billion since 2010. How has this money been used? Most of these funds, have been used for the recapitalization of Greek banks (48 billion), and they've been used to reduce the exposure of the big European banks. The main beneficiaries? German institutions that have reduced their exposure by 80%.

YIELDS
The second factor is the connection between yields in Greece and yields in the Eurozone. Ever since 2010, the growth in the yields on Greek government bonds (that is thus an indicator of an increase in risk ) caused a chain reaction and brought about growth in the yields in Italy, Spain, Ireland and Portugal. Basically, Greece was the most likely breaking point of the euro zone. At the end of 2014, partly due to the unstable political situation, Greek yields started to rise, but unlike in previous years, this has not produced an increase in the yields in the above-mentioned countries.

EXPORTS
The third and final factor is a consideration of exports from the Euro-zone into Greece, - these have had a definite drop and now amount to less than 1.5 billion. If there is a Greek exit, then the drop in Euro-zone revenues will be less severe than the value predicted in 2012. Furthermore, the countries at risk of contagion, have now re-established primary surpluses following on from the big cuts in public spending that were brought in with the austerity measures and thus they have a greater capacity to limit any negative confidence that might result from a Greek exit.

FORECAST
Moody's, the credit rating agency, believes that a Greek exit (Grexit) from the Euro would cause short-term damage to the Greek economy (principally because of the financial institutions being too closely connected to the ECB and because a lot of public debt has been issued under foreign legislation since the restructuring) but, apart from the factors mentioned above, this shouldn't bring in problems of contagion. However, according to Moody's line of thinking, in the medium to long term, if Greece were out of the Euro, it would grow more than the countries staying in the single currency. They too, will probably start to wonder whether it's worthwhile staying in the Euro and putting up with the restrictions, the internal devaluation and the consequences for social welfare. That'll be the biggest systemic risk." M5S Europe



'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
by melo (melometa4(at)gmail.com) on Sat Feb 7th, 2015 at 08:41:18 PM EST
The firebrand Greek PM, during the presentation of his government's policy in the parliament, announced that, "...it was a "historic duty" for Greece to seek war reparations and the return of a forced loan during WWII."

http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_08/02/2015_547025

by Ivo on Sun Feb 8th, 2015 at 03:52:57 PM EST
BBC
The former head of the US central bank, Alan Greenspan, has predicted that Greece will have to leave the eurozone.

He told the BBC he could not see who would be willing to put up more loans to bolster Greece's struggling economy.

Greece wants to re-negotiate its bailout, but Mr Greenspan said "I don't think it will be resolved without Greece leaving the eurozone".

Does that mean that Greece is certain to stay in the Euro, or is he not that consistently wrong about everything?
by gk (gk (gk quattro due due sette @gmail.com)) on Sun Feb 8th, 2015 at 04:00:19 PM EST
Tsipras today presenting the programmatic statements of the new government, pretty much retreated on - not very much. He's not asking for a headline hair-cut, but that's old news, he's willing to slowly implement some of the measures. But it seems that the sum total of the Thessaloniki program is on the table. And aggressively so.

Tsipras favours Greek jobless over creditors in defiant policy speech:

"...Declaring his administration "a government of national salvation", Tsipras said he would also pursue claims to win back from Germany wartime loans that Greece had been forced to make to Nazi occupiers. "I can't overlook what is an ethical duty, a duty to history ... to lay claim to the wartime debt."

Tsipras did signal a new round of belt-tightening - but on the part of ministers and MPs. He promised to sell half of all government limousines and a government jet in a money-raising exercise, as well as trimming back on security. Tsipras said Greece's new class of politician would set the example of frugal living. "We do not need three government aircraft. Politicians can do away with the privilege of having a car," he said...
...The first priority of this government ... is tackling the big wounds of the bailout, tackling the humanitarian crisis, just as we promised to do before the elections," he said. "The bailout failed. The new government is not justified in asking for an extension ... an extension would be a mistake and a catastrophe. We want a new deal, a bridge programme that would give us the fiscal space that a sincere negotiation requires," he said.

Syriza's pledges to the electorate include a freeze on pension cuts, a property tax overhaul, free electricity to those who have been cut off, reinstating jobs and raising the minimum wage. But it remains to be seen how quickly the measures are introduced - a phased approach could save the broke government money, officials have indicated.

"We are every word of the constitution"
Tsipras speech was probably the most viewed inauguration speech in the history of the Greek parliament and it was highly emotional, as well as uplifting - this is the first government in memory which remains true to its core program after the elections, and a government that promises to tackle problems and issues that were considered untouchable until a few weeks ago. As public support of SYRIZA is now verging on the astronomical (by Greek standards) Tsipras concluded his speech in almost Bolivarian timbre, his voice breaking at one point, more than a little verklempt:

"We are living historic moments.
In the dramatic developments of the past few days, the final word, the seal, was set by the people of Greece.
They did not delegate responsibility. They laid bare their soul. They did not authorize anyone. They took their fate into their own hands. They did not vote against. They honored the previous generation who resisted and resurrected this land and saved hope for the generations which are coming. They did not just ignore ultimatums and blackmail. They stood tall.

This people deserves only respect. They deserve to walk proud, to live in dignity.

The current government can only be the voice of this people. In the honor, the history and the culture that this people carry in their luggage we can only be but their volition, nothing more

That's why we won't negotiate our history. That's why we will not negotiate the pride and dignity of this people. These are sacred and nonnegotiable principles to us.

We are flesh from the flesh of this people, we come through the pages of history of this people and this is why we will serve them till the end

We are every word in the Constitution of this country. We took an oath to this Constitution, and this Constitution we will serve - and we will serve it till the end, doing justice to the values, the struggles, the vision, and the sacrifices of the people of Greece..."

The road of excess leads to the palace of wisdom - William Blake

by talos (mihalis at gmail dot com) on Sun Feb 8th, 2015 at 09:08:34 PM EST
Also among the commitments of this government, was granting citizenship to children of immigrants born and living in Greece, thus proving yet again that the impact of the Independent Greeks on government policy is marginal: they were ecstatic at the programmatic statements, with not even an asterisc... (and Tsipras mentioned working towards a mutually accepted name for the Republic of Macedonia, in terms that used to be anathema for IG)

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Sun Feb 8th, 2015 at 09:15:49 PM EST
[ Parent ]
Talos, can you cross-post this on afew's thread?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Mon Feb 9th, 2015 at 05:01:11 AM EST
[ Parent ]
History is Greece's ace card.
by das monde on Sun Feb 8th, 2015 at 10:05:16 PM EST
[ Parent ]
Tsipras Ups The Ante, frontpaged by afew.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Mon Feb 9th, 2015 at 04:35:59 AM EST
[ Parent ]
Greece: Phase One | Jacobin

Tsipras has been traveling a lot over the last period. It was necessary, because he is the leader of a party which until recently had about 5 percent of the vote, and he lacked any credibility as a head of a state. He needed to improve his credibility not to speak of his knowledge of the international scene.

So he went to places or institutions that are patronized by the mainstream or even the economic oligarchy, like the Ambrosetti Forum. These are kinds of very exclusive clubs in which very important people of business and of finance convene and discuss. The impression was that when he was there, he was presenting a much milder version of the approach of the party.

So for instance, when he went to New York and spoke at the Brookings Institute, he made repeated references to the New Deal and Franklin Roosevelt. When he went to Austin, TX he said that Syriza would never abandon the euro, whereas the position of the party -- and also what he himself also said later -- was that we do not want to stay unconditionally in the euro, without qualifications and so on.

All this created the impression that on the very crucial, strategic issues Syriza is not completely clear, and that it has different levels of discourse, thus provoking skepticism about the real intentions of Syriza and how determined it is to resist the pressure which every sensible person is aware a Syriza government will have to face.



'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
by melo (melometa4(at)gmail.com) on Mon Feb 9th, 2015 at 03:32:24 AM EST
The Guardian: Greek finance minister Yanis Varoufakis: `If I weren't scared, I'd be awfully dangerous' (13 February 2015)
When I ask Varoufakis if he has a plan B, for all negotiators surely have a credible alternative, he looks at me wide-eyed. "We constantly hear, `if you don't sign on the dotted line there is going to be Armageddon'. My answer is `let it happen!' There is no fall-back plan. That is my plan B."

What if it does happen, I ask, as images of the chaos bankruptcy would surely entail flicker across my mind. "Well, that is like asking me what happens if a comet strikes planet Earth. I have no idea. None!" he shoots back.



A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Feb 14th, 2015 at 04:08:30 AM EST
And now Paul Mason goes all MMT... Can a Bitcoin-style virtual currency solve the Greek financial crisis? (23 February 2015)
If a parallel currency ever happens (I am writing this on Friday: anything could happen by Monday), it will dramatise one of the key arguments of anti-establishment economists like Varoufakis: that states - not markets - create money.

Money only has value, say these economists, because states decree it. Furthermore, the state is not just standing above the market, regulating the currency: the act of taxing and spending is what creates money, not the act of buying and selling in a marketplace. It's called "modern monetary theory", but it's no mere theory.

If it is right, the obvious practical conclusion is that a state with its own currency is always solvent. It can always create more money and pay people in that money. Therefore, it can always run a deficit - always use state spending to suppress unemployment. The only condition is that people must believe the state will exist in future.



A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Mon Feb 23rd, 2015 at 03:45:59 PM EST


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