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It's all part of the propaganda war - which I'd note has been fantastically successful - we can see that by the steady trickle of commenters who come here to defend Germany from being picked on by evil, irresponsible, lefty, thieving theorists like me.

The propaganda war is to pretend that austerity in a Lesser Depression works - and that it is Greek failings, rather than the failing of the European political class to actually attempt to get the Eurozone out of recession that is the problem.

by Metatone (metatone [a|t] gmail (dot) com) on Fri Feb 17th, 2012 at 08:32:31 AM EST
[ Parent ]
The main problem our "successful" leaders have is that facts are stubborn and they can see their policies aren't working. Someone has to take the blame. So big finger points at Greek lies and cheating.

Yes, it works. I've been surprised by people irl who normally, honestly, wouldn't be all that clued up about European affairs (and who, mostly, were kiddies when Greece joined the EEC), who know with absolute certainty that Greece has been cheating on Europe since Day One.

Fits neatly in a frame of shifty, dishonest Southerners.

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Feb 17th, 2012 at 10:45:26 AM EST
[ Parent ]
well, yes, they are all out to get you. Its all a big conspiracy.

On the other hand, the "serious" people like yourself around here seem to to advance policies that center around either printing more money or directly taking it from Germany in order to finance consumption in Greece and similar places, burdening the coming German generations with even more absurdly high debt that it already has.

Every Euro in debt needs to be paid for, each year, in interest, money that is missing elsewhere. The German federal government in 2001 already spent more than 16% of its budget only to pay interest alone - one in seven tax Euros goes directly to the banks, without actually helping anyone.  Meanwhile streets and public infrastructure crumble, the social net is subject to increasing budget cuts and the ability of the political system to effect change is shrinking every day.

Any suggestion to increase this incredible and obscene amount of debt is somewhere between dangerously foolish and willfully and destructively reckless.  

Accusing Germans who occasionally point this out of propaganda shows only how far the loss of reality in these small self-debating circles has progressed.

The mostly inevitable crash of Greece is a menetekel, a living example of where no nation wants to end, under any circumstances.  But, apparently, the leading debaters around here want nothing more than bring the whole of Europe to that point, into a deadly spiral of debt, inflation, bankruptcy and collapse.

There are good arguments to point to issues that need solving; and the trade imbalance in Europe is certainly one of them. But as long as the policy prescriptions from "theorists like you" (to quote your own expression) only consist of money printing and transfer payments, you should not be surprised to be treated the way you are.

by cris0 on Fri Feb 17th, 2012 at 09:06:14 PM EST
[ Parent ]
directly taking it from Germany in order to finance consumption in Greece and similar places

If that's what you got from the discussions here you weren't paying attention. In fact no one here is asking Germans to pay a dime for Greece. Most people here (and complain if I overgeneralize) would have liked nothing better than to allow Greece to default in 2010 and let the banksters take the hit. These sort of debt crises are a mechanism in which "investors" and banks get bailed out at the expense of richer country taxpayers and indebted country workers. I would be very happy if the German parliament voted against the new loan to Greece. Accepting this loan would be a disaster for the country. I'll set aside of course the fact that Germany is not giving money to Greece but loaning money to Greece, at 5%, making a nice profit since it borrows it a 2%.
Money printing on the other hand is a reasonable process especially during depressions, as the 1930s taught everyone.

The idea that you can destroy democracy and drive everyone to poverty in order to "pay back debt" I thought was abandoned in the Middle Ages.

Note that austerity, isn't an answer to the debt problem (destroyed economies don't pay back debts), it's an elite political strategy against labor and against the achievements social Europe, everywhere in Europe. So if you think the buck will stop in Athens, you're in for a surprise...

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

by talos (mihalis at gmail dot com) on Fri Feb 17th, 2012 at 10:01:08 PM EST
[ Parent ]
The idea that you can destroy democracy and drive everyone to poverty in order to "pay back debt" I thought was abandoned in the Middle Ages.

As a side note - it wasn't abandoned. Treaty of Versailles.

But you are right, of course. Thinking people abandoned that idea long ago, because it never worked except in a few very limited circumstances.

But in order to restore a primary budget surplus it's the standard treatment: its what happens when you default, just on a much bigger scale.

I'll set aside of course the fact that Germany is not giving money to Greece but loaning money to Greece, at 5%, making a nice profit since it borrows it a 2%.

Except, of course, you, and me, and just about everybody else understands that Greece is neither able nor willing to ever pay that money back.

Which makes that "loan" what?

Note that austerity, isn't an answer to the debt problem (destroyed economies don't pay back debts), it's an elite political strategy against labor and against the achievements social Europe, everywhere in Europe.

I doubt that. First, "Austerity" is a big word without a decent definition. Germany ran "austerity" politics for most of its recent history and yet has one of the most advanced social networks in Europe. Basically, what got us off track, financially, were three things: the unsuccessful Keynesian episode in the 70ies, Kohl's economically botched reunification, and of course the current crisis. Each of which dwarfs the ones before it.

The point of prudent financial policy isn't a balanced budget per se. Others have noted that one method of dealing with debt is growing out of it (which, fwiw, is only sustainable as there actually is long term growth, which leftists tend to oppose for ecological reasons). So, yes, you can increase debt, in a limited fashion, but only as much as far as it is compensated by growth - and preferably somewhat less.

And if THAT is austerity, well, its the only long term sustainable policy at all. All other policies lead to the Greek end game.

Note that I do not reject Keynesian boom-bust spending by that - at least not the way it was originally conceived. The problem with Keynesian reality is that there is no political system that ever managed to implement the "and in boom years we pay back the debt we incurred in a bust period" part.

Not even Germany. Especially not Germany.

by cris0 on Fri Feb 17th, 2012 at 10:50:01 PM EST
[ Parent ]
Treaty of Versailles.

So you are one of those Germans who, a few months ago, I suggested might be favoring the current treatment of Greece on the grounds that this was what was done to Germany via the Treaty of Versailles! The repetition-compulsion neurosis of Freud: do unto others as has been done unto you.  And my suggestion was dismissed here as being unlikely. By the way, the problem with that behavior is not just that it is unjust, but that it doesn't even work - at least to relieve the anxieties which provoke the behavior.

We never learn. The stupidities of our ancestors we compulsively repeat. But this reminds me of descriptions of my behavior at age 3 with my cousins. My girl cousin was a year older and larger. My boy cousin was my age but smaller. She would hit me and I would hit him! Not very noble, but that is how children are.

The response of visiting on Greece the sort of devastation that was visited on Germany after WW I is, at best, neurotic. Greece never attacked Germany, quite the opposite. And Hitler repaid France in spades for Clemenceau's infamous 'pound of flesh' revanchist treaty. But that didn't stick, so now you want to accomplish by economic means what could not be accomplished by military!  Q.E.D.

Having read accounts of Versailles, including Keynes' The Economic Consequences of the Peace, which reads like a summary of inter war events but was written in 1919, I felt that France, if not the other countries attacked by Germany in the late '30s, had brought a good portion of its disaster upon itself, (by no means to excuse Nazi Germany for its actions).

Thank you for confirming my suspicions.

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

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Feb 18th, 2012 at 01:26:41 AM EST
[ Parent ]
Should have said "So perhaps you are...

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Feb 18th, 2012 at 03:29:20 AM EST
[ Parent ]
Except, of course, you, and me, and just about everybody else understands that Greece is neither able nor willing to ever pay that money back.

Which makes that "loan" what?


It makes that loan a transparently obvious effort to disguise the bailout of the German banks who made bad loans as an attempt to help to feckless southerners one last time to comply with their obligations - at the cost of seriously increasing those obligations and seriously degrading the ability to pay, via the 'austerity' conditions. This makes no sense economically, but plays well politically to the popular press while giving still more claims for which German banks can be reimbursed by foreigners.

The maddening thing about this is that Greece, like Ireland and Portugal, have been foolishly noble about trying to honor their obligations, and, instead of recognizing that effort and helping them do so, this is seen as a justifiable opportunity to make more money off these countries via the 'rescue'. In reality this is most likely to end up simply as one more way for the German financial elite to milk the German public while getting them to cheer on the efforts, as Greece is suffering far more.

This is similar to what lower class whites in the US South long accepted as their final consolation for being screwed over, bankers and plantation owners, officials, etc.: "At least you ain't no nigger!" I come from that background, have rejected that thinking and know with whom I stand. Such manipulation is most pathetic when it is most successful.

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

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Feb 18th, 2012 at 01:46:32 AM EST
[ Parent ]
The maddening thing about this is that Greece, like Ireland and Portugal, have been foolishly noble about trying to honor their obligations, and, instead of recognizing that effort and helping them do so, this is seen as a justifiable opportunity to make more money off these countries via the 'rescue'.

See the poor are honest. I.e., strategic default is a tool for the rich. And the level of personal and national "pride" that the Greek people show is actually an atavistic sign on secular poverty.

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker

by Migeru (migeru at eurotrib dot com) on Sat Feb 18th, 2012 at 02:14:01 AM EST
[ Parent ]
Germany ran "austerity" politics for most of its recent history and yet has one of the most advanced social networks in Europe.

Germany's austerity was a protectionist exercise in which Germany piggybacked on the rest of the Eurozone to pay for the reunification.

Colour me unimpressed.

And of course it won't work for the Eurozone as a whole, because the world outside the Eurozone is not going to let the Eurozone piggyback on their recovery.

Basically, what got us off track, financially,

A creative rewriting of the present. There is no European government finance crisis. There is a European trade imbalance crisis.

were three things: the unsuccessful Keynesian episode in the 70ies,

Historical revisionism. The Keynesian policies in the '70s were perfectly successful at their objective - which was to maintain output and employment.

They were not successful at containing inflation, but (a) inflation doesn't matter, so fuck that. And (b) the '70s inflation was imported and therefore not amenable to fiscal policy solutions.

The point of prudent financial policy isn't a balanced budget per se. Others have noted that one method of dealing with debt is growing out of it (which, fwiw, is only sustainable as there actually is long term growth,

False. The government can simply elect to pay zero per cent interest on its bonds.

And if THAT is austerity, well, its the only long term sustainable policy at all. All other policies lead to the Greek end game.

False. Look at Japan.

The problem with Keynesian reality is that there is no political system that ever managed to implement the "and in boom years we pay back the debt we incurred in a bust period" part.

Because it is totally unnecessary. Governments do not have to pay back their "debt," ever.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Feb 18th, 2012 at 03:48:40 AM EST
[ Parent ]
Germany's austerity was a protectionist exercise in which Germany piggybacked on the rest of the Eurozone to pay for the reunification.

It might surprise you, but history didn't start in 2002 or 1999.

Because it is totally unnecessary. Governments do not have to pay back their "debt," ever.

Yea, because after frequently defaulting they have no problem to attract new lenders.

Just how stupid do you think people are?

by cris0 on Sat Feb 18th, 2012 at 08:06:17 AM EST
[ Parent ]
Yea, because after frequently defaulting they have no problem to attract new lenders.

Just how stupid do you think people are?

Ahem.

Fitch Upgrades Iceland Rating To First Step Of Investment Grade (FEBRUARY 17, 2012)

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker

by Migeru (migeru at eurotrib dot com) on Sat Feb 18th, 2012 at 08:13:06 AM EST
[ Parent ]
Different situation.

Iceland never defaulted. They just (prudently) refused to guarantee certain debt of their failed banks (something that Ireland should have studied much more closely before doing the opposite).

They found other creative solutions to maintain a banking sector sufficient to service their (relatively small) domestic economy; solution which may or may not work in bigger states.

If investors did learn something from that is "do not lend money to loosely regulated Icelandic banks" - which do not exist any more anyway.

They also might learn "trust the instincts of Icelandic politicians" - which actually could improve their bonds' reputation.

by cris0 on Sat Feb 18th, 2012 at 09:10:19 AM EST
[ Parent ]
With this statement you have lost whatever credibility you had.

In the United States, Cris? Your contribution is really unwelcome. You should spend more time on US politics.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Sat Feb 18th, 2012 at 09:40:15 AM EST
[ Parent ]
In the United States, Cris?

That's the default setting for new users...

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker

by Migeru (migeru at eurotrib dot com) on Sat Feb 18th, 2012 at 09:42:11 AM EST
[ Parent ]
talking about default....

The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Sat Feb 18th, 2012 at 09:49:57 AM EST
[ Parent ]
ah.

hmm.

Thanks for the pointer. Corrected.

FWIW, this kind of mandatory data collection is not a good idea. That particular selection list would benefit from an "undefined" or "world citizen" line.

by cris0 on Sat Feb 18th, 2012 at 10:09:25 AM EST
[ Parent ]


tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Migeru (migeru at eurotrib dot com) on Sat Feb 18th, 2012 at 10:21:42 AM EST
[ Parent ]
ET 1.01 you mean?

Would be good.

by afew (afew(a in a circle)eurotrib_dot_com) on Sat Feb 18th, 2012 at 10:43:18 AM EST
[ Parent ]
ET 1-plus-epsilon.

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Migeru (migeru at eurotrib dot com) on Sat Feb 18th, 2012 at 10:46:00 AM EST
[ Parent ]
what are you talking about?
by cris0 on Sat Feb 18th, 2012 at 09:56:37 AM EST
[ Parent ]
Iceland defaulted on its depositor guarantee. Which has far higher seniority than mere government bonds.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Feb 18th, 2012 at 09:42:49 AM EST
[ Parent ]
except, as to my knowledge, it didn't.

Uk and the Netherlands' loud yelling to the contrary notwithstanding Iceland made it clear very early that it only considered Icelandic domestic savers guaranteed; and afaik those were compensated to the legal limit.

Aside from that, even if you were right and Iceland had really changed the order of seniority in favor of its bondholders here, that again would boost its reputation with bond investors. The increase of which was the original point Migeru was making.

by cris0 on Sat Feb 18th, 2012 at 11:37:56 AM EST
[ Parent ]
Uk and the Netherlands' loud yelling to the contrary notwithstanding Iceland made it clear very early that it only considered Icelandic domestic savers guaranteed; and afaik those were compensated to the legal limit.

Yeah, except that under the relevant international treaties and domestic law, domestic and foreign depositors are equally covered by depositor insurance. Because depositor insurance is based on the country the bank lives in, not the country the depositor lives in.

That's an insane rule, of course, but no more insane than expecting Greece to pay for Germany's export subsidies.

If an ex post facto law can change a default into a not-default, then I propose that Greece et al introduce such a law stating that all government debt issued prior to such and such date is payable in Monopoly money.

Problem solved!

But if you still don't like the Icelandic example, you can have Argentina, Russia and 1920s Germany as examples of the world not ending just because you go with the Argentina Alternative.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Feb 18th, 2012 at 11:56:30 AM EST
[ Parent ]
So where do you think money comes from? Some wizard shitting gold ingots?
Or would you agree that it is created by the Central Bank?
by generic on Sat Feb 18th, 2012 at 08:15:50 AM EST
[ Parent ]
Well, it's actually created by the commercial banks. In the short run, the Central Bank just accommodates it.

Otherwise the "real economy" would be swimming in money from the ECB's "nonstandard liquidity measures". Instead, the ECB's liquidity is ending up... as excess bank reserves at the ECB.

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker

by Migeru (migeru at eurotrib dot com) on Sat Feb 18th, 2012 at 08:54:30 AM EST
[ Parent ]
True but all state debt must be bought with CB money so I don't think it is misleading to say that all the money we are talking about here is created by the CB.
by generic on Sat Feb 18th, 2012 at 09:07:01 AM EST
[ Parent ]
It's quite possible that the announcement of 3-year liquidity auctions, the second of which will take place at the end of the current month, is responsible for the drop in bond yields in recent peripheral bond auctions (Spain and Italy, mostly). After all, banks know in advance they'll be able to turn the bonds into cash.

However, none of this liquidity is free or cheap, despite the low interest rate (you have to take into account the valuation haircut for collateral).

See Why Deutsche Bank Avoids The LTRO

Sometimes, there is news that isn't what it seems. Today, we got one of those: Deutsche Bank (DB) saying that it didn't take advantage of the LTRO due to its wish to keep its reputation.

...

So German public debt yields 0.2%, Deutsche Bank would be losing money on it if it decided to buy and deliver such debt at the LTRO. This means that for Deutsche Bank to make money on the LTRO, they would need to buy debt from the troubled countries, which at this point obviously no bank official wants to increase exposure to.

So the LTRO is a way for banks to make money, but one that works mostly only for the periphery, troubled, countries and their banks. And Deutsche Bank isn't avoiding it because of its reputation; it is avoiding it because it doesn't want more exposure to the sovereign troubles, and there is no money in it otherwise.



tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Migeru (migeru at eurotrib dot com) on Sat Feb 18th, 2012 at 09:41:00 AM EST
[ Parent ]
The historical experience is that states can access the international money markets again after 18-24 months. See, e.g. Russia, Iceland and Argentina.

Besides, states only need to borrow to fund their current accounts deficit. Which, when you default on all foreign debt, means your trade deficit.

So yeah, a year or two of fuel rationing, and then they're in the clear. So far, Greece has suffered two solid years of far greater arbitrary cruelties in pursuit of an economic theology that has been wrong about everything of any importance for the last two hundred years.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Feb 18th, 2012 at 09:35:26 AM EST
[ Parent ]
It might surprise you, but history didn't start in 2002 or 1999.

Indeed. The recent episode of (West-)German mercantilist wage suppression began in 1991.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Feb 18th, 2012 at 09:44:55 AM EST
[ Parent ]
Speaking of 1991, if German "solidarity" was compatible with the destruction of the East German economy, a fortiori there's no problem with doing the same with the Eurozone doing the same to Greece.

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Migeru (migeru at eurotrib dot com) on Sat Feb 18th, 2012 at 09:47:12 AM EST
[ Parent ]
The same and worse.
by Upstate NY on Sat Feb 18th, 2012 at 10:28:03 AM EST
[ Parent ]
Which could have been avoided if East German salaries and fortunes had been repressed, by for example swithcing 2 Eastmarks for 1 Deutschmark.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon Feb 20th, 2012 at 01:11:36 PM EST
[ Parent ]
True, but if the Bundesrepublik had had even a half-assed industrial policy for the East, the salaries would have recovered in short order.

The fortunes would not, of course. My heart bleeds for them.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Feb 20th, 2012 at 02:25:12 PM EST
[ Parent ]
Sure, I agree. Salaries would have climbed back up at the pace East German industry had modernized, just like in Poland, Czech republic and so on.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon Feb 20th, 2012 at 02:29:41 PM EST
[ Parent ]
'Ways and ways' are a matter of priorities. Who takes the hit. The wealthy or the workers? Germany wanted to reunify, but not at the expense of the wealthy and powerful.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Feb 20th, 2012 at 02:53:22 PM EST
[ Parent ]
As it was, the BuBa retaliated against Kohl by being extra hawkish, which was a contributing factor to the 1992 crisis which ejected the Pound and the Lira (and nearly the Franc) from the ERM.

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Migeru (migeru at eurotrib dot com) on Mon Feb 20th, 2012 at 03:13:56 PM EST
[ Parent ]
JakeS:
And (b) the '70s inflation was imported

could you please explain/enlarge on this? are you referring to OPEC and the results of their change in policies then, lines at gas pumps etc?

'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 19th, 2012 at 08:38:09 AM EST
[ Parent ]
"As a side note - it wasn't abandoned. Treaty of Versailles."

Yeah, well, the treaty of Frankfurt (1871) imposed to France greater payments in terms of percentage of GDP, and it was paid in two year -despite there having been major fighting in France in 1870 against not a single shot on German soil in WW1.

It was a political decision to pretend that Versailles was an economic impossibility.

Germany loves giving debt morality lessons despite having been the worst debt offender of the 20th century.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Sat Feb 18th, 2012 at 06:31:43 AM EST
[ Parent ]
Naother instnace of historic revisionism.

To quote Wikipedia:

the total sum due was decided by an Inter-Allied Reparations Commission and was set at 269 billion gold marks (the equivalent of around 100,000 tonnes of pure gold). This 100,000 tonnes of gold is equivalent to more than 50% of all the gold ever mined in history (est. 165000 tonnes) which was clearly not within the means of the Germans to pay. Consequently their only way of paying back the debt was in devalued Gold Marks which ultimately led to the hyperinflation;

The treaty of Frankfurt mandated 5 billion francs, to my knowledge the gold equivalent of 4.5 billion gold marks.

So there is a factor of about 50 between them.

by cris0 on Sat Feb 18th, 2012 at 08:34:41 AM EST
[ Parent ]
Well, I read several articles that came to that conclusion back in 2010 but admittedly cannot manage to trace them right now. It might be that part of the reason for the conclusion was that France had to pay within three years whereas Germany was allowed to spread its payments over decades, therefore being able to grow a lot in the interval.
Still:

"the total sum due was decided by an Inter-Allied Reparations Commission and was set at 269 billion gold marks" is more than misleading.

-That was the initial sum but it was promptly brought down to 132 billion marks. Please note that it is estimated that Germany had caused 150 billion marks of damage to the neighbouring countries.
-Yes the currency was called gold mark and one can give a gold weight equivalent, but this would give the impression that it had to be paid in gold which was certainly not the case. It took many forms, including sharing intellectual property (unlike for the treaty of Frankfurt, where it was entirely in currency).

I don't know about the exchange rate in those days, but "So there is a factor of about 50 between them. " is worse than misleading.

First, 132 is less than half of 269.

Then, the German GDP in 1919 was VASTLY superior to the French GDP in 1871 (especially stripped of Alsace and Moselle). I did make my case in terms of percentage of GDP, which in the case of the treaty of Versailles you should spread over several decades (thus the percentage of GDP would fall rather a lot over time).

Which is not to defend the treaty of Versailles. I agree with Keynes in that respect. Now, what Germany insists Greece suffers is probably worse than what Versailles asked of Germany -although Greece did not launch a war in the other European countries.

As for the insistence that Greece follows the European treaties (that were passed with no little political flexing of muscles) come what may, even where they are demonstrably unworkable, well, France abided by all its obligations of the treaty of Frankfurt until 1914. Germany did not.
Yet it's Germany giving the morality evening classes these days.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Sat Feb 18th, 2012 at 01:08:01 PM EST
[ Parent ]
Except, of course, you, and me, and just about everybody else understands that Greece is neither able nor willing to ever pay that money back.

Which makes that "loan" what?

Default does not equal lack of eventual payment. You can bet Greece will pay these loans back. I hope you also realize that the amount loaned to Greece so far is 80 billion, 13 billion of which come from Germany.

In all prior defaults, even when the money wasn't loaned to Greece but instead to a Bavarian prince who used the cash for his own purposes, Greece paid the money back (unlike in Germany's defaults) at often incredibly high interest rates (20%+++).

The troika loans have seniority over all other loans, and now we find out the ECB just swapped its bond purchases in the secondary markets for senior notes.

by Upstate NY on Sat Feb 18th, 2012 at 10:09:02 AM EST
[ Parent ]
Except, of course, you, and me, and just about everybody else understands that Greece is neither able nor willing to ever pay that money back.

It's not able, yes (it's elites are very willing, it's not like they're going to pay for it) but that realization and the actions that should follow it were never allowed to be articulated, and no policy implications were drawn from it. Quite the opposite, the whole episode was used as a time saving device so the ECB (i.e. the EU taxpayer) could be burdened with the private debt of German and French banks, so it could default at taxpayers expense not the bankers.

Germany ran "austerity" politics for most of its recent history

No. Germany had austerity of the type we're talking here under Heinrich Brüning, AFAIK, and the results of that are well known

But in order to restore a primary budget surplus it's the standard treatment

What? destroying democracy? And why is a primary budget surplus more importance than independence and why does it make mass suffering OK? And again destroying the economy worsens debt and destroys much more than the current economy. One has also to look beyond first order effects...

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Sat Feb 18th, 2012 at 10:40:30 AM EST
[ Parent ]
cris0:
long term growth, which leftists tend to oppose for ecological reasons)

Does. Not. Compute.

supporting real growth in quality of life for populations well served by their governments, enacting intelligent, especially ecologically intelligent policies are what being a 'leftist' is all about.

supporting the present giveaways to the already rich, plundering resources for short-term gain, these are the bailiwick of the right.

'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 19th, 2012 at 08:33:55 AM EST
[ Parent ]
24-48 hours ago you called a few of us conspiracy theorists for claiming that Germany and a couple others were deliberately coming up with additional demands for the Greek bailout so as to force Greece to abandon the eurozone.

Here we are and the same conspiracies are conventional wisdom, not only much remarked upon by serious columnists in newspapers all over the world, but by Greek politicians and then the head of the EC commission and even Germany had to deny after the Dutch flunkies took it several steps too far.

by Upstate NY on Fri Feb 17th, 2012 at 10:41:16 PM EST
[ Parent ]
conspiracy theories don't become more plausible by the number of adherents they have. I stand by that.  The theory that the evil Germans are purposely "humiliating" the poor Greeks to drive them out of the Euro is ludicrous. The theory is a politcal weapon to a political end - namely inducing Germany and others to accept the current bailout with a minimum of conditioons and oversight.

Here we are and the same conspiracies are conventional wisdom, not only much remarked upon by serious columnists in newspapers all over the world, but by [...] politicians

The same could have been said about "The Protocols of the Elders of Zion" at its time. Didn't make them more true, either.

by cris0 on Fri Feb 17th, 2012 at 11:01:07 PM EST
[ Parent ]
So, you think it's reasonable for the troika to show up in Greece 1 1/2 weeks ago and demand austerity measures, which the Greeks duly pass despite huge demonstrations and a general strike.

The next morning the Eurogroup demands 325 million in additional cuts.

Commentators everywhere say they have moved the goalposts. Some even predict the Eurogroup will come up with lame additional demands after Greece approves the bill.

Roesler and the Dutch FM talk of Greece not meeting deadlines immediately about an hour after the new demands.

Huge demonstrations occur as the Greek Parliament votes on the new demands and passes them.

The very next morning, Schauble and others mention new increased requirements. Signed affidavits. On Sunday the day before, Samaras said of course he would sign such a document. He assured that everything would be ready for Wednesdays meeting.

Monday the Eurogroup rejects Greece's plans to cut 300 million from the procurement of military weaponry (gee, I wonder why!!???). They say Greece has not done it homework. They will not proceed with the bailout if Greece cuts its military.

On Tuesday morning as Greece assures it will come up with a different mix for the 325 million (all within less than the span of 24 hours) the Wed. meeting is canceled. Why? Because they don't trust Samaras to sign the document. Meanwhile, in Athens, Samaras is wondering what all the fuss is about. He assured two days earlier he would sign the document by the Wed. deadline he had been given. He signs it and sends it, and not only that, he takes a .pdf of it on Tuesday morning and plasters it on the ND website.

Wed. comes and the meeting has been canceled. The Greeks have long met all the additional requirements. Schauble makes his black hole comment and says Greece has not met the requirements of the debt sustainability prerequisite (a study which shows Greece's austerity program is not working -- NO SHIT, SHERLOCK!!!). A Dutch Deputy FM weighs in that the bailout program will be split and Greece will not receive its answer until AFTER new elections.

Wed. night the Greeks receive word that a new permanent viceroy will be appointed for Greece, that there will be a new escrow account. The Greeks meekly accept.

Surprised by the level of scorn and humiliation the Greeks have accepted, Schauble adds one more heaping spoonful: the elections will be canceled, no Democratic elections for Greece, the two party leaders in the unity gov't have to step down for technocrats.

Apparently, the Dutch flunkie doesn't get the memo because he's still bleating about giving the Greeks an answer after the next election.

Friday morning coms and we hear of yet another new demand: all minor parties even outside of gov't, even splinter parties and tiny parties, must sign the document avowing fealty.

People like Hans Werder Sinn come out discussing how Greece must leave the euro, the CEO of Bosch comes out and says the same thing, several others in and out of German gov't...

...and here we are on EuroTrib discussing whether deliberate and very silly demands were made on Greece in order to get them to leave the eurozone!!!!

by Upstate NY on Sat Feb 18th, 2012 at 10:25:38 AM EST
[ Parent ]
Can you make this a diary, with links?

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Migeru (migeru at eurotrib dot com) on Sat Feb 18th, 2012 at 10:32:24 AM EST
[ Parent ]
Unfortunately, I am leaving for a 4 day break this weekend. When I get back, I'm sure I can piece this together.

This will all come from the Guardian running blog and the Daily Telegraph.

by Upstate NY on Sat Feb 18th, 2012 at 05:41:32 PM EST
[ Parent ]
I think this also warrants a more general answer.

While this "humiliate them until they break" is imagination, it is quite conceivable that the surplus states, as a plan B, methodically prepare for making the case to cut Greece off, both to their own electorates and the EU public at large.  I think it is conceivable to interpret the meticulous insistence on detail of the powers that be in that context.  And if they do their job, at the moment they do this they will also have a plan to incentivize Greece to move the way they want it to move (i.E Bankruptcy with or without Euro).

Contrary to certain newspapers I fail to see this as evil. To the contrary, it is good political craftmansship. If they don't have a plan B in the current situation they are fools, and you don't go into a decision phase of that kind without a clear understanding of the desired outcome and the path you get there.

by cris0 on Fri Feb 17th, 2012 at 11:28:47 PM EST
[ Parent ]
While this "humiliate them until they break" is imagination, it is quite conceivable that the surplus states, as a plan B, methodically prepare for making the case to cut Greece off, both to their own electorates and the EU public at large.

Nice spin. You realise, of course, that when you strip out all the newspeak, what you're saying is "deliberately and methodically forcing Greece out of the Eurozone after plundering it to the greatest extent possible is pure fantasy, but deliberately and methodically forcing Greece out of the Eurozone after plundering it to the greatest extent possible is quite conceivable."

Contrary to certain newspapers I fail to see this as evil. To the contrary, it is good political craftmansship.

The two are not mutually exclusive. McCarthy's House Unamerican Activities Committee was excellent political craftsmanship.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Feb 18th, 2012 at 03:57:14 AM EST
[ Parent ]
You realise, of course, that when you strip out all the newspeak, what you're saying is

Nope.

Contingency-planning something and actually doing it is a world of difference.

by cris0 on Sat Feb 18th, 2012 at 08:43:34 AM EST
[ Parent ]
Not when you systematically foreclose on all other options.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Feb 18th, 2012 at 09:37:25 AM EST
[ Parent ]
On the other hand, the "serious" people like yourself around here seem to to advance policies that center around either printing more money

Give the man a cookie.

During a depression, you print more money and spend it to defend output levels. This has been known at least since the first serious study of the Long Depression.

Every Euro in debt needs to be paid for, each year, in interest,

No, the ECB is free to set the policy rate to 0 %, so that's just plain false.

The German federal government in 2001 already spent more than 16% of its budget only to pay interest alone

Completely meaningless figure. The only internationally comparable figure is the one for the consolidated government. Eurostat has it, why aren't you using it?

But, apparently, the leading debaters around here want nothing more than bring the whole of Europe to that point, into a deadly spiral of debt, inflation, bankruptcy and collapse.

The Eurozone is definitionally solvent in its own currency, the Euro. The Eurozone has balanced foreign accounts, and can therefore not become insolvent in foreign currency in the foreseeable future.

The Eurozone therefore cannot go bankrupt. Full stop. End of story. Claiming that the Eurozone can go bankrupt is a lie.

And I don't give a shit about your neurotic inflation phobia. 6-8 % inflation is a good thing.

There are good arguments to point to issues that need solving; and the trade imbalance in Europe is certainly one of them. But as long as the policy prescriptions from "theorists like you" (to quote your own expression) only consist of money printing and transfer payments, you should not be surprised to be treated the way you are.

Higher inflation in Germany is the only way to solve the trade imbalances without breaking the Eurozone or introducing transfer payments. Transfer payments is the only way to solve the trade imbalances without higher inflation in Germany or breaking the Eurozone.

If you want neither transfer payments nor higher inflation in Germany, then, by elimination, you want to break the Eurozone.

Because the rules of addition and subtraction are not amenable to political compromise.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Feb 18th, 2012 at 03:40:16 AM EST
[ Parent ]
I'm not entirely sure about radically higher German inflation being necessary, even if it would be helpful (especially for Sweden...). Periphery nations can get out of the "big closed economy"-mindset and start competing with nations outside the Eurozone. However, the people who should be clamoring the most for higher German inflation is German workers, who haven't had any pay increases for a decade.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon Feb 20th, 2012 at 01:19:36 PM EST
[ Parent ]
No, they can't start competing with nations outside the Eurozone. Floating exchange rate, remember?

Nor is it desirable for them to do so.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Feb 20th, 2012 at 02:31:41 PM EST
[ Parent ]
I fail to see how Greece becoming competitive with non-EZ countries would strengthen the Euro so much that the newly gained competitiveness would be lost.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon Feb 20th, 2012 at 02:47:42 PM EST
[ Parent ]
Because that's the point of floating the currency: To make sure that the external account takes care of itself.

With the external account in balance (as it must be unless you want to argue that the ECBuBa is going to start printing Euro in bulk to buy dollars and Yuan?), and Germany attempting to run a surplus, there must be a deficit somewhere else in the Eurozone.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Feb 20th, 2012 at 02:52:22 PM EST
[ Parent ]
It's like the Archimedes principle for fluids. Size doesn't matter - the floating exchange rate will do the trick. It then becomes a question of intra-EU competition, and I don't know about you but I'd like the EU to be an area of cooperation, not of cutthroat races to the bottom (we've seen how well that has worked over the past 15 years).

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Migeru (migeru at eurotrib dot com) on Mon Feb 20th, 2012 at 03:16:39 PM EST
[ Parent ]
cris0:
The German federal government in 2001 already spent more than 16% of its budget only to pay interest alone - one in seven tax Euros goes directly to the banks, without actually helping anyone.  Meanwhile streets and public infrastructure crumble, the social net is subject to increasing budget cuts and the ability of the political system to effect change is shrinking every day.

Which is an excellent argument for changing the EMU treaty and letting all governments borrow directly from the ECB that they own. That would also solve the immediate crisis in the trade deficit countries as there would be no debt auctions to speculate on. Instead of doing as is done today and letting ECB borrow money to banks that borrow to states. Remember that all money must start from the central bank anyway.

Of course, removing this subsidy from the banks would quicken their demise as the European banks are systematically insolvent, a fact that all our politicians are busy papering over by insisting that all debts should be repaid. If you don't trust me on the that, trust Mervyn King:

US embassy cables: Mervyn King says in March 2008 bailout fund needed | Business | guardian.co.uk

1. (C/NF) Since last summer, the nature of the crisis in financial markets has changed. The problem is now not liquidity in the system but rather a question of systemic solvency, Bank of England (BOE) Governor Mervyn King said at a lunch meeting with Treasury Deputy Secretary Robert Kimmitt and Ambassador Tuttle. King said there are two imperatives. First to find ways for banks to avoid the stigma of selling unwanted paper at distressed prices or going to a central bank for assistance.


Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Sat Feb 18th, 2012 at 04:22:36 AM EST
[ Parent ]

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