drachma

Is Greece Planning to Print Energy?

Off the keyboard of Allan Stromfeldt Christensen

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Published on from Filmers to Farmers on March 15, 2015

energy-in-hand

Can these new Greek gods (minus the ties) conjure energy
from thin air? (image: Sergey Khakimullin)

Discuss this article at the Energy Table inside the Diner

Over the past couple of months the story keeping many people on the edge of their seats has been the ongoing dilemma of Greece’s detested debt burden, its Great Depression-worthy 25% contraction of its economy, and its voluntary or even forced withdrawal from the eurozone – the fabled “Grexit.”

For about five years now, heavy austerity policies (cutbacks in government spending) have contributed to what is being described by some as a “humanitarian crisis.” As per stated in the conditions of €240 billion in loans that Greece has received over these years, the Greek government has had to significantly cut back on expenditures, which has included laid off government workers, reduced pensions, a gutted minimum wage, and the selling of state institutions. Partially as a result of this, general unemployment is a bit above 25% while youth unemployment is at nearly 60%; suicide rates are up by 35%; rates of divorce, depression, children suffering from malnutrition, children suffering from physical and emotional abuse, and hospitals lacking basic equipment and medicines are all up; infant mortality has increased 43%; and married women are begging brothels to let them work, but who are then turned away because, well, it’s apparently illegal to sell oneself for sex if one is already betrothed.

Nonetheless, and to the acclaim of many alternative media outlets, late-January saw the stunning election-win of what is called a far-left political party, Syriza. The prime mandate on which it was voted in on by the Greek electorate was to reverse the five-year policy of austerity and to essentially tell its Troika creditors (the European Union, the European Central Bank, and the International Monetary Fund) to shove it where the sun don’t shine.

With Syriza promising to repeal all the aforementioned discomforts, accolades came pouring in, possibly the most astoundingly hyperbolic drivel coming from the online magazine Truthdig.

Exhibit #1: “[T]he Greek people have defied the global ruling class by electing Syriza.”

No, ticking a different box on a ballot while changing nothing about the way you live your life changes absolutely nothing.

Exhibit #2: “[W]hat the European elites perhaps fear most is a successful left-wing government in Greece.”

Painting this as a left-wing versus right-wing issue is about as ridiculous as it gets. That should be made obvious as I continue.

Exhibit #3: “Opposing austerity means nothing more than bringing back the mainstream policies of mid-20th century industrial societies… (which remain in place in Northern European countries),… but that represents an existential threat to the logic of neoliberalism and must be drowned in the bath.”

Long story short, and elaborated upon in a moment, wrong again. Industrial civilization is coming to an end.

And finally, exhibit #4: “Syriza’s appeal… is about more than just alleviating the crisis – it’s about a common-sense vision for a better, fairer society that goes beyond Europe’s progressive social democracies of the second half of the 20th century. And herein lies the tremendous promise of this moment: Out of crisis, an empowered left may be born that not only takes on neoliberalism, but also raises the specter of something truly worth fighting for, the most humane and egalitarian technological societies yet.”

Now please don’t get me wrong – I’m not a fan of neoliberalism in the slightest. But with that out of the way, let me just say then that paralleling the energy of actual slaves that allowed some Europeans to live lives of privileged comfort in the 19th century and prior, what the “progressive social democracies of the second half of the 20th century” were based on was the latest energy of slaves. Or in other words, on fossil fuels. No fossil fuels, no “mid-20th century industrial societies.”

In other words, what’s going on isn’t just another juvenile left-versus-right debate-class game. Because the fact of the matter is that thanks to peak oil we’ve now entered the early stages of a world that is smacking up against the limits to growth. Simply put, since the world’s supply of conventional oil (that under the ground and deserts) peaked in 2005, and since conventional plus unconventional supplies of oil (the former plus tar sands, fracking, and deep sea oil) are all about to peak as well, the world simply doesn’t have the energy required to power the continuation of economic growth. With growth slowing down in some places and even reversing into contraction, this means that there is less economic activity to create revenues to pay off debts. Greece just happens to be one of the first losers in this game of musical chairs, also known as triage from modernity and the industrial economy. Why might Greece be a deindustrializing vanguard?

(graph: The Global Economy, data: EIA)

First off, and unlike a “Northern European country” such as Norway, Greece doesn’t have abundant supplies of oil to power its modern industrial economy, nor to sell on the open market to pay for imports (or to pay off debts). Secondly, unlike Japan (which has barely any domestic supplies of fossil fuels either), exports of baklava don’t quite bring in the revenue that Hondas and Nintendos do, and being part of the eurozone, Greece can’t print out yen (or euros in its case) to paper over all its problems and convey the illusion of solvency.

(That being said, Norway and Japan will soon enough be losing out in the musical chairs game as well: crashing oil prices are already hitting some in Norway hard and are a sign of things to come; and when the world can no longer afford high-tech Japanese toys, Japan is going to be in a world of pain which no yen sorcery will be able to paper over and which will make the Greek situation look like a case of the chickenpox.)

Unfortunately, and as all appearances indicate, Syriza is under just as much of a mass delusion as Truthdig is. As Greek finance minister (and former academic on game theory) Yanis Varoufakis stated in a New York Times opinion piece before Syriza’s election win, he wants to “bring back growth,” to “table our proposals for regrowing Greece,” and that there will be “[n]o more loans – not until we have a credible plan for growing the economy in order to repay those loans [and] help the middle class get back on its feet.”

Again, this is utter nonsense. Unless Varoufakis and company are on the one hand trying to pull a fast one on the Troika, or on the other hand trying to fool the Greek electorate, then it appears that Syriza is just as much of a band of deluded fools as the ones whose offices they took over, and that Varoufakis’ New York Times piece is nothing but a game theorist trying to take game theory to the next level and so game theory-theory other game theorists.

Since, as already mentioned, growth is now over, similar talk about securing Greece a “new deal” is just as ridiculous. In a time of booming growth, sure, it could be possible, but when growth is stagnating the world over – even in China, and even in Germany – foreign lenders aren’t about to sacrifice their middle-class creature comforts so that Greeks can have back their middle-class creature comforts thank you very much.

These specs sure do look nice, but new drachmas and new narcissists just aren’t going to cut it (image courtesy of Pavlos Vatikiotis)

Regardless of that though, if Syriza were to implement a default on Greece’s loans and unilaterally pull off its Grexit from the eurozone, it could thus free itself from the euro straightjacket and enable itself to reissue and print as many new drachmas as it likes, even Greenback-styles, via the government and not private banks. However, not only would a new drachma crash in value the moment it was released, and not only could there be a line-up of unscrupulous and pissed off former creditors itching to take revenge on the newly issued currency, but who in their right mind is going to want to sell oil to Greece for depreciated drachmas, particularly when all they’re likely to get in return for the depreciated currency are container ships of said baklava?

However, even though discussions about money and currency provide plenty of fodder for pundits on the payroll, money has essentially nothing to do with the current problems in Greece. As I explained in my previous post,

the core function of money is that it enables us to command energy – the energy used to move our bodies with, to power our machines, to feed to domesticated animals whose energy we then use to do work (which nowadays generally means entertaining us), etc. In other words, it might be tough and/or inconvenient, but one can get by without money. You can’t get by without energy.

(graph: The Global Economy, data: EIA)

In other words, what Greece needs in order to revive its growth, its middle-class creature comforts, its “European social contract” and “mainstream policies of mid-20th century industrial societies,” and the rest of all that claptrap, is oil. Greece isn’t short on money. It is short on energy.

Is the Greek populace aware of all this? For the most part I would say no, and if solidarity marches with the chant of “let Greece breathe!,” which recently erupted in Paris, Madrid, Amsterdam, Berlin, Copenhagen – basically all over Europe – can be taken as an indication, then the answer is no. Most of Europe apparently hasn’t the slightest clue that remaining in the eurozone (in order to maintain modernity) means debt peonage, and that a quick Grexit means poverty on a whole new level for much of the Greek populace.

So unless Syriza is planning to come out straight with the Greek electorate and inform them that modernity and industrial civilization (the myth of progress) are coming to a close, and that they’re going to have to cut back on – if not give up – their happy motoring, the majority of their imports, and their pirated Netflix feeds, then the only option they have left to make up for their shortcomings is to print energy. But not even these new Greek gods can do that.

(image: Telesur)

To be fair, those on the other side of the negotiating table have even far less credibility to speak for. For starters, when the Troika and the rest of the Wall Street shills state that no further aid will be granted upon Greece until all austerity measures are met, this is a load of disingenuous BS. So are statements by finance ministers who proclaim that “Greece has lived beyond its means for a long time.” Truth be told, only a miniscule amount of those loans actually stayed in Greece, with an even tinier amount going to assist the hungry. The fact of the matter is that the vast majority of the loans are simply shuttled right back to banks in Germany, France, Holland, etc., simply to pay off interest on the old loans and prop up their parasitic banks. In short, it is banks that are being bailed out, and on the backs of Greeks, to boot.

To explain why this must inevitably happen requires a little lesson in banking. As it stands, private banks currently enjoy the racket of being able to create money out of thin air (no, they don’t simply lend out the deposits of others) under the fractional-reserve, interest-bearing debt system. Furthermore, because private banks create and issue out the principal but not the interest, there is never actually enough money in circulation to pay off all the loans plus all the interest. While some players in this game of musical chairs do in fact earn enough profits from their loans to pay back all the principal plus interest charges, since the system was short the funds to pay back all the principal and all interest charges in the first place, not only do some end up short of the funds to make payments on their debts, but since their initial loans were siphoned away as profits by those who managed to pay off their loans and interest (and who may have even stashed away some money as savings) these “losers” in the game sometimes lack not only the interest but even the principal to pay back. In other words, unless they – Greece – miraculously switch(es) roles with one of the “winners” – a Germany – then their loans can never actually be paid back.

On global and national scales, when in the past “losers” in this game have claimed bankruptcy, the system has been able to somewhat absorb the losses thanks to economies growing at strong enough rates. That is, copious and growing amounts of fossil fuels enabled enough economic growth so that new loans could be created quick enough in order to inject new money (“liquidity”) into the system to cover (paper over) the defaulted loans.

However, as things now stand, if enough “losers” in the game were to now claim bankruptcy, not only would they be throwing themselves into a world of pain, but, and through no direct fault of their own, they could theoretically precipitate an implosion of the entire interest-bearing debt, fractional-reserve, house of cards, monetary system. Reason being, since peak oil means that there is no longer an increasing amount of cheap fossil fuels available to spur on economic growth, this then means that there simply isn’t enough new economic activity to seek out new loans to pay off the interest on old loans.

Sure, in the past central banks have ramped up the “printing presses” (also known as “quantitative easing,” or QE for short) in order to temporarily paper over the problems until the oil started flowing again, but this time the problem isn’t that the oil is being held back for whatever political reason(s), but that it has finally reached its maximum level of output. Yes, central banks all over the world are currently “printing” money like there’s no tomorrow, and banks are offering super-low-interest-rate credit cards to pretty much anyone who can fog up a mirror, but in the long run this can only lead to inflated currencies, bankruptcies galore, and things getting uncomfortably hairy.

Since the oil has now peaked, growth can no longer continue and the grandiose fractional-reserve, interest-bearing debt system is coming to an end. For now there is just one Greece, but soon there will be another, then another, then another, until it is discovered that not only the European Union but the entire world is essentially insolvent. No amount of austerity, free market ideology, Keynesian stimulus, or any other fake solution can right this ship.

Sure, in the short run perhaps Russia with its massive fossil fuel reserves will prop up Greece for a while longer, allowing those on the left to pompously vilify those on the right as being the bad guys here. But that just kicks the can down the road and buys Greece – never mind those next in line – just a few years of token respite. On the other hand, perhaps the European Union and Greece are planning for some kind of orderly Grexit. But that still wouldn’t address issues of energy shortages.

In summation, at this point in time there are no options left to avert serious economic pain, but that doesn’t mean that implementing the suggestions that some have been speaking of for years now (and even decades) are all for naught. Although this is putting it a bit simplistically, the more localized our food systems become, the more local currencies we implement (like the Tem in Volos, Greece), the more we strengthen our local democratic systems, the better we’ll be able to deal with the upcoming collapse of our national and global economies.

As I like to say, the best, easiest, and most accessible way(s) to enable this to actually start happening would be to ditch the TVs and forego yet more purchases of brand new cars. But truth be told, those have actually always been good ideas.

Great Grexit Goon Game

Off the keyboard of RE

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Published on the Doomstead Diner on February 22, 2015

drachma

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As of Friday, for all intents & purposes is seemed as though the new Syriza Goobermint of Greece Kapitulated to the the Krauts, continuing onward with the Bailout regime established by the Troika, although with a face saving caveat that they are supposedly going to renegotiate points over the next 4 months.

That isn’t a bad plan, they do need time to figure out exactly WTF they will do once completely cut off from the Western Baking system, all their local banks FAIL, and they have zero money worth anything to pay their goobermint workers with.

The problem of course here is that they went in with a very Hard line and a Mandate from the electorate NOT to continue onward with the bailout regime under any cirucmstances, and to throw off the Debt Slavery Choke hold held on them by the Krauts. When push came to shove, the Academic Marxists running the Syriza show just could not do that. Why NOT?

The issue here is, these folks want to remain a part of the Industrial Economy, and without credit issued by the Western Illuminati, that isn’t possible. They aren’t willing to sacrifice Modernity for their principles of Freedom. They KNOW that repudiating the debt and exiting the system will throw Greece into chaos and send it down the Failed State route, the first European Somalia essentially.

The people who elected them into office DO NOT grasp that exiting the system will even in the best scenario turn them into a dirt poor agrarian nation unable to afford electric lights, cars or Iphones. They still want to live like Krauts and Amerikans live, and figure they can do that if they just repudiate all the debt and go back to the Drachma.

Like all the previous Goobermints of Greece, the Syriza Goobermint is faced with a Morton’s Fork, where no alternative has a desirable outcome. Capitulating to the Krauts and remaining in Debt Peonage to them retains for a while access to modernity, but it does so at the expense of their freedom and the expense of their own credibility. Telling the Krauts to take a Flying Fuck at a Rolling Doughnut declares their FREEDOM, but it is just the freedom to descend into even more hopeless poverty and failed state status. The absolutely could not fulfill any promises of rehiring all their civil service workers and doubling pensions in any money that would work to buy anything imported from outside of Greece.

They are quite likely aware that Greece depends on copious imports of foreign goods, most particularly OIL and Natural Gas to keep functioning a while longer as an Industrial Economy. They are ideologically opposed to the type of finance system that gets them access to this, but they don’t want to give it up. Really, nobody does in any Industrial Economy, except for the few outlier Doomers who recognize the damage it is doing and who realize this type of economy is doomed no matter what is done on the financial level.

To get themselves elected, the Syriza Pols all had to make a lot of Promises that cannot be kept. The only leverage they ever held was that their Grexit would initiate a cascade failure which would take everyone else down with them, but if they are not willing and ready to be the first ones flushed down the toilet here, that threat is meaningless.

Che-RevolutionIf these folks are to retain credibility, they have to be up front and honest with the folks that elected them into office, and expalin to them that the minute they repudiate all the debt and re-issue Drachma is the minute the Greeks have to let go of all things Industrial, all things imported into Greece from other countries. They have to explain to the Greek population that the Debt issued by the Western Illuminati is what gives them access to the products and services of Industrialization. They need a PLAN to make such a transition off Industrialized products and services POSSIBLE, because without such a plan Greece becomes Somalia in short order.

The problem there is that Marxist Revolutionaries or not, most if not all of the folks running Syriza do not grasp that the entire Industrial Paradigm is collapsing, and they are just at the leading edge of this collapse, the Canaries in the Coal Mine. They want to cut a “New Deal” where the Rich folks in Germany will subsidize the Poor folks in Greece, except the rich folks in Krautland do not want to subsidize Greeks, because now that the economy is no longer really growing, any transfer of wealth to the poor means the rich will take a hit on their standard of living also.

New Deals are only possible when the size of the Pie is GROWING, not SHRINKING. The Great Society program of Lyndon Johnson bought off the underclass here in the FSoA back in the 60s, but only possible because dishing out some bennies to the underclass at that time did not stop the ruling class from scarfing up even greater amounts of wealth still present beneath the earth surface and in the populations of even more desperately poor people around the globe, at least when measured in material wealth.

The situation now is quite different than it was in the 1960s. Globally now, all the cheap energy increasing the standard of living and wealth of the general population has been used up, all that remains now is expensive and difficult to extract energy. All the impoverished populations of the world from Mexico to India to China have all been exploited to the max, and their living environments ecologically destroyed in the process. Now, for anyone to become richer, somebody else must become poorer. The rich do not willingly become poorer, so any and all of the bennies won in earlier times are being rescinded now, the welfare state in all countries that had one is being dismantled.

What the Greeks would like to see is a wealth transfer system to move the wealth stolen by the Krauts over the last 50 years through financial manipulation sent back in their direction, but that cannot occur without the Krauts becoming significantly poorer, which of course they are resisting. Besides this, the Krauts aren’t really wealthy, their wealth is the Greek Debt, which the Greeks can’t repay. The wealth has in fact been burned up here by everyone.

Back in Greece, the Blowback is already occurring, and various Syriza Mps are lambasting Tsipras and Souvlakis for Kapitulating. Souvlakis latest speech with the Newzspeak renaming of the Troika as “Institutions” and calling the Bailout an “Extension” isn’t fooling anybody.

http://2.bp.blogspot.com/_3mEHv2LUGWA/ScK2RbecoxI/AAAAAAAABJA/nBrXAZBsU8w/s400/tarredandfeathered.pngSupposedly, on Monday the Greeks will submit a list of reforms which the Krauts have to sign off on, but the Krauts have already said that there is no way they can sign off on them before Feb 28th, with a review by the full Parliament. On the Greek side, it’s hard to imagine how the Syriza MPs will allow Tsipras to submit a list of reforms the Krauts cold find the least bit palatable.

So despite the apparent Kapitulation on Friday, a Grexit still seems quite possible for next week. They already have New Drachma ready to pitch out here, just in case. What they do not have is any credible plan to back that Drachma with anything. In the event they are forced to issue it, quite likely it sets the record for the fastest Hyperinflating currency of all time.

So, the Grexit Game is not quite over yet for the Game Theorists out there to play with. The New Plan the Greeks are supposed to submit on Monday and the Kraut reaction to it will tell the tale. Anything the Krauts can accept will get Tsipras and Souvlakis Tarred & Feathered in Syntagma Square and ridden out of town on a rail.

Stay Tuned to the Diner Channel for the latest in Updates.

RE

Greece & the Eurozone Crisis

Off the keyboard of Brian Davey

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Published on FEASTA on February 17, 2015

euro

Discuss this article at the Economics Table inside the Diner

Note: this is an update to my shortly-to-be-published book Credo: Economic Beliefs in a World in Crisis.

The Syriza government has been elected to power in Greece with an electoral mandate to end the austerity policies imposed on Greece by the European Union, the IMF and the European Central Bank.

The first point to make about this is the obvious one that a government that has power to issue a national currency of its own can always cover a deficit – an excess of spending over tax revenues. This is because, in the end, it can print money to make up the difference. (Or, if you like the government can issue bonds and the central bank can create money to buy them). Countries entering the Eurozone lost this power and with the replacement of the Greek Drachma with the Euro so did Greek governments. The Maastricht Treaty is explicit on this – Eurozone governments cannot be funded by money creation by their own central banks. Money creation is a prerogative of the private banks in Europe, and of the European central bank . If states get into financial difficulties they can get loans, but on conditions. The conditions are taking steps to balance tax revenues and government expenditure.

With the benefit of hindsight it seems almost inevitable that Greece would fall foul of Eurozone financial rules because it had been running a government deficit since 1973 and very high deficits since the early 1980s. Much of government expenditure was used to pay for a very large military budget. After the USA, Greece spent a higher % of its GDP on the military than any other country in NATO. This is partly because of enmity with Turkey but it might also have something to do with keeping the military types happy given that Greece had emerged from a military dictatorship – so the soldiers were given lots of high tech toys to keep them sweet. A lot of these toys were bought from German arms companies who did not complain.

At the same time economic development in Greece was limited mainly to tourism and shipping. Against larger northern European nations, particularly Germany, there was little chance of competing in most forms of industrial production. Instead Greek governments used money to provide public sector jobs, generous pensions and social benefits in a form of “development” that, with hindsight, was never going to be long run sustainable. At the same time many of Greek people, like many the populations in other countries absorbed the idea that the good life was all about self-display, leisure and consumption – an idea that they might have got partly from the stream of tourists from northern Europe to whom they catered.

One commentator has described how the development model was “underpinned by a historically influenced mentality in which property counted for more than work and people admired people who possessed wealth for which they had not had to work”.[1]

In other words the inflated state was associated with a system of patronage – not unlike the systems of well connectedness between business and state that characterise most other “developed countries” – the USA, UK, Germany.

However, all clubs of power not only have insiders but they are formed over and against everyone else – and in Greece the young people excluded by this corrupt club of power organised in resistance against it. It is this that explains the rise of Syriza as a new political force. What we are witnessing with the new government in Greece is a political transformation that is also a generational change.

What has brought this about has been the radicalisation of the population as a result of a humanitarian crisis in which the old “development model” collapsed.

When they entered the Eurozone Greek governments could not continue as before. By joining the Eurozone at the rate of exchange that they did the Greek people got a lot of Euros for their converted drachma and thus plenty of purchasing power to buy lots of imported consumption goods from abroad at very favourable prices. Interest rates were also low.

Times were good – but not for long. The short Euro honeymoon prepared the collapse. The excess of imports over exports can be thought of as an “export of their purchasing power” to northern Europe and a corresponding worsening of the competition situation of the Greek economy. This made the government deficit even worse too – while Greek purchasing power was helping to boost the German economy, it was not flowing back into the Greek economy, and not flowing into domestic tax payments.

The solution which governments used was to disguise what was going on was fiddling the statistics. They fell into a deadly embrace with international financial sharks like Goldman Sachs which, with other banksters, received generous fees for disguising the true extent of the borrowing. Loans were disguised as swaps.

The global financial crisis of 2007/2008 brought the real situation out into the open with the inevitable crisis and recession. With falling tax revenues and rising government expenditure the state financial crisis got worse. The extent of the fiscal fraud was revealed. Nevertheless it was still possible in 2010 for the Greek government to refinance their deficit by again borrowing mainly from European and international banks – albeit at much increased rates of interest. Paying these very high rates of interest then made the government deficit even worse. As so often happens in economics a self reinforcing vicious spiral was occurring.

The subsequent bail out loans made available to Greece by the European Union were mainly used to pay off these bank loans – with only a part going to cover an underlying deficit (ie the part that did not include servicing and repaying bank debt). It was thus not  “Lazy greeks” who were being bailed out  but the banks of Germany, France and Holland. However the ordinary people of Greece were now on the hook to pay back European taxpayers whose governments had made available taxpayer money so that European banks did not make a loss.

The austerity policies imposed in Greece have, in turn, produced a humanitarian crisis and a collapse in its national income. Unsurprisingly, a country whose national income has fallen by 25% is even less able to pay its taxes and its debts and a new political force has been elected to reject a policy direction that is both futile and creating massive distress.

One of the themes of my book is that of bias – economic textbooks claim that economists describe the world as it is rather than describing the world as it should be. There is a claim that economists are aware of the “fact” – “Value” distinction and that they stick to the facts rather than express their values.

Unfortunately, “bias” is not so easily banished as that. When you try to explain the world it involves a choice of where to look for explanations, as well as a choice of the directions and issues you do not to look at. In a political-economic crisis there are conflicts and thus at least two points of view. There are at least two ways of explaining things. Typically the two explanatory narratives have little in common and are about different things. What then happens is that people are pressured to take sides and exposed to arguments where protagonists reduce the complexity of the situation dramatically – this is particularly the case when the public relations industry and the popular press seek to simplify. Then it becomes “Lazy Greeks who will not pay their debts” versus “Greedy bullying Germans”.

If it is almost impossible to avoid “bias” one can at least be explicit about where one is coming from. What interests me, since economics is supposed to be about wellbeing, is the measurement of wellbeing through public health data. When we use public health data to look at the Greek situation what is immediately clear is that there is a “humanitarian crisis”. Instead of measuring wellbeing with a nebulous idea of “happiness” we can use instead use actual mental health data – with statistics for suicides and depression telling us what is going on in .

In this regard firstly, the prevalence of major depressive disorders in Greece has more than doubled from 2008 to 2011, with people facing serious economic problems being most at risk [2]

Secondly increasing numbers of people are killing themselves. A study published in the British Medical Journal tells us that:.

“In 30 years, the highest months of suicide in Greece occurred in 2012. The passage of new austerity measures in June 2011 marked the beginning of significant, abrupt and sustained increases in total suicides (+35.7%, p<0.001) and male suicides (+18.5%, p<0.01). Sensitivity analyses that figured in undercounting of suicides also found a significant, abrupt and sustained increase in June 2011 (+20.5%, p<0.001). Suicides by men in Greece also underwent a significant, abrupt and sustained increase in October 2008 when the Greek recession began (+13.1%, p<0.01), and an abrupt but temporary increase in April 2012 following a public suicide committed in response to austerity conditions (+29.7%, p<0.05). Suicides by women in Greece also underwent an abrupt and sustained increase in May 2011 following austerity-related events (+35.8%, p<0.05). One prosperity-related event, the January 2002 launch of the Euro in Greece, marked an abrupt but temporary decrease in male suicides (−27.1%, p<0.05).”[3]

So let’s be clear on that. Suicides went down when the euro was introduced and went up – not only when the recession started (suicide rates went up all over the world during the recession) but also particularly when the austerity policies were introduced.

In a recession all sorts of people suffer – including some of the rich. Austerity policy induced poverty is, however, particularly directed at those who are most vulnerable. It is those who are most vulnerable that are reliant on others and on the state, so their needs are downgraded. The attack on vulnerable people is to find the resources to save those who are “too big to fail” – particularly the banks.

Austerity policies are also an attack on ordinary people because austerity is not just about economic resources, it is also an exercise in social psychology. Austerity also has elements of scapegoating. In an economic crisis a society is undergoing an immense amount of anger, fear, tension and distress. This is dangerous for the elite that has taken the society into this crisis and the emotions from the crisis must be re-directed away from them. A lot of those negative feelings are thus directed downwards, on more vulnerable people in a process of emotional displacement – in a word in scapegoating.

We have seen similar things in the UK and many countries – groups like disabled people, migrants become targets for the hatred and distress generated as people seek to manage the practicalities of their lives and relationships under more difficult conditions. Powerful emotions are generated and people wonder “who is to blame?”. Governments keen to divert discontent away from themselves work with the media to fix on groups who cannot fight back.

In my book I also described the way in which particular groups of people are pre-disposed to see “the solution” to economic problems as being in pushing around more vulnerable people – “loyal bullies” I call them. Loyal bullies get a chance to persecute people through austerity policies which appear to be exercising greater control, for example over benefit “scroungers and cheats”. An explicit ideology emerges that sees the problems of society in a lack of discipline and cheating and finds the apparent solutions in bullying, bureaucratic harassment and forms of violence. It creates growing fascist tendencies among people, petty autocrats in state bureaucracies and in the police and armed forces. In Greece this has led to the development of groups like “Golden Dawn”.

It is thus no wonder in circumstances like this that mental health problems are on the rise.

Another indicator of the crisis in Greece has been a rising trend in infant mortality which increased by 43% between 2008 and 2012.

One of the main themes of my book is that those who bear the worst consequences of economic crises are rarely the people responsible for bringing that the crisis about. The most powerful people are protected by their wel- connectedness, their favoured client status and access to friends in high places – whether in political office at home (in Greece) and abroad (in international political and financial centres) . They can get themselves bailed out or protected. That’s why responses to economic crises are all about shifting burdens downwards onto more vulnerable people.

You could not get more dramatic evidence in the Greek case than rising infant mortality – obviously infants and children have no role in economic policy formation yet in increasing numbers they pay for austerity with their lives. “Sustainability”, of course, is supposed to be about the rights of future generations – but the evidence shows that the policies increase the chance of children dying before you reach adulthood. Of course most children do survive but when they try to enter the labour market in Greece young people have found that there are no jobs for them. In 2014 youth unemployment was averaging over 50%.

When the IMF and financial technocrats visit a country you can expect a number of things – income will fall, unemployment will rise and the local healthcare system will be attacked.[4]

As a matter of fact, as a proponent of degrowth I actually do see a need for economic contraction – but austerity has a number of features that make it very different from degrowth. Austerity is about attacking the poorest, the weakest and most vulnerable – as well as asset stripping publically owned assets by forcing privatisation on governments in crisis. In Degrowth it would be those who can afford to bear the cuts who would do so while attempts are made to help the most vulnerable cope with the economic contraction. However, this is difficult to achieve in today’s globalised world since, if governments take steps against the rich and well-connected, this elite group have a large number of ways to put their money out of reach.

At the same time as the crisis in Greece was back into the news it was being revealed how the HSBC bank had been helping rich people all over the world avoid tax by setting up swiss bank accounts to put their money in them. Places like the city of London and its associated network of tax havens are all about helping rich people put their money out of reach. That means that when the Greek ruling elite felt threatened they took their money abroad. The technical term is “capital flight”.

Just how huge the sums of money involved are can be seen graphically. A look at this graph reveals that in just a few months in 2010 capital flows out of Greece were roughly of 60% of the 2014 GDP while another 30% was taken out the country in 2011. In the last 5 months of 2014 money was again leaving the country at the rate of 12% of GDP.

If you want to balance a state budget then who exactly is it that has the pockets deep enough to pay taxes with? It is the people responsible for this kind of capital flight. It is that money, shifted out of the country, that needs to be targeted. Successive Greek governments had no intention of doing that – it would have involved taking action against their cronies. In any case they did not have an administrative machinery to do it with. This is what they lost when Greece joined the euro since there can be no exchange control between countries to prevent money moving from one part of the Eurozone to another. Successive governments squeezed ordinary people and the Greek welfare state instead – and were put under pressure to put publically owned assets for sale to global financiers at a knock down price.

The results of this are entirely predictable. When people are impoverished – in the case of Greece losing 25% of GDP – they are less able to pay their debts and their taxes, not more. The debt situation has spiralled out of control and a humanitarian crisis was created. However the next act in this drama has been the election of a government of outsiders who are not part of the crony circle – with a mandate to oppose austerity in order to end the humanitarian crisis.

What happens next?

One thing we can be sure about – neo-liberal politicians in the financial centres over the world want to see Syriza fail. If Syriza are successful they will inspire people throughout southern Europe and Ireland – not to mention any other government under the thumb of the IMF. They will also want to see Syriza fail because Syriza have only one option for reform – to clean up the old corrupt elite and tax where the resources really are. There are policies that could be deployed – like land valuation taxation which would be hard to evade. But policies have to be set up. Administrative machinery has to be created and corruption rooted out. This takes time – and the new Greek government does not have time. Money is being withdrawn from the banks and from the country. To prevent that requires capital controls that the government does not have access to under European union rules. The government will run out of money shortly – and again it cannot create money under European Union rules. The kind of action that the Greek government has to take will be opposed by financial and political elites the whole world over – a new generation of outsiders, who are not compromised and co-opted, is a genuine nightmare and they must be shown to fail.

That is why I find it difficult to believe that European politicians will give any leeway or support to Greece. If Greece were now to exit the Eurozone the process would be chaotic so if I were a politician in Greece I would be playing for time and doing what Argentinian local authorities did – paying the bills with low denomination IOUs which can effectively function as a currency alongside the Euro (Patacones).Then, if the eurozone authorities rule against the Greek government’s actions it would be the European authorities that have slung Greece out and, further, an alternative quasi currency would already be in circulation.

Greek exit from the eurozone would not be painless for the Greeks because it would probably mean a devaluation of the new currency of perhaps 40%. Imported goods would be 40% more expensive. However, the experience of other countries like Argentina is that a devaluation of this sort can lead to an economic recovery. This would give the Greek government time to start working on cleaning up the corruption of the old elite. The new generation could settle in to do their job properly.

In the rest of Europe this would set a number of processes running. It is being said that Grexit would not now lead to a financial crisis as the larger European banks and financiers are no longer so exposed and Greece is, after all, one of the smaller countries in Europe.

Perhaps – however they underestimated the impact of letting Lehman Brothers go bankrupt badly. Even if the financial repercussions are small – the political repercussions in other countries in a similar situation to Greece would be huge.

Endnotes

1.

http://www.taz.de/Neue-Regierung-in-Griechenland/!154307/

2. http://www.bmj.com/content/345/bmj.e7988/rr/694119
3. Branas et al “The impact of economic austerity and prosperity events on suicide in Greece: a 30-year interrupted time-series analysis” 2nd February 2015
http://bmjopen.bmj.com/content/5/1/e005619.full?sid=2cfe20f5-31b3-4ea5-9ca5-d85645fa4ecf
4. http://www.bmj.com/content/345/bmj.e7988/rr/694119

Featured image: money in sock. Source: http://www.freeimages.com/photo/1433053. Author: Uros Kotnik

Greek Chicken Souvlaki Kabuki

logopodcastOff the microphone of RE

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Aired on the Doomstead Diner on February 17, 2015

 

Discuss this Rant at the Podcast Table inside the Diner

 

The Game Continues…

For you Rant Fans, I found a New Gear for this one, and got it into OVERDRIVE by about the 7 minute mark, channeling Peter Finch.  🙂  A little Charlton Heston for Spice too!

Also, be aware I started the script for this last Friday during the first meetings, so the first part is not about the stupidity today, but a preview of that stupidity.

Snippet:

…Well, a thoroughly anti-climactic day here in the Greek Souvlaki Kabuki, as DieselBoom and Souvlakis spent a whole day talking past each other, with absolutely no indication that anyone is going to give an inch here. The Can Kick for this now is back to the 'Deadline' date of next Monday and the ultimatum that the Greeks will be CUT OFF from their Euro Gold Card and left to twist in the wind.

So what's the chances that they can come up with a SOLUTION to the problem on Monday they couldn't come up with today? Slim & None of course, unless somebody capitulates, and neither side can do that. The market of course believes that this is just another one of the endless series of “Deadlines” that will be Can Kicked down the road once again, and that very well might happen. Or maybe not.

What will it take to get a reaction here? Basically, the day the Greeks finally declare a Bank Holiday and start printing New Drachmas. Then Mr. Market finally wakes up from the stupor and does a Charlton Heston Planet of the Apes scene.

You did it! You finally really did it! You Blew it all Up! Damn You! Damn you all the HELL! LOL…

 

For the rest, LISTEN TO THE RANT!!!

 

In case you missed them, here are the last 2 installments of Greek Kabuki…

Troika Trojan horse: Will Syriza capitulate in Greece?

Off the keyboard of Pepe Escobar
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Greek-Debt-Mess

Originally published in Russia Today on February 6, 2015

The 2015 Greek tragedy is a sorry (financial) remix of the Trojan War. But now the troika (ECB, EC, IMF) has replaced Greece, and Greece is the new Troy.

It is now crystal clear the ECB will pull no punches to turn Greece into a European failed state. The rationale: others – from Spain to even, in the near future, France – must not entertain funny ideas. Toe the austerity line, or we’ll get medieval on you.

It was so predictable that the destiny of Athens – and in fact the euro – would ultimately rest in the hands of ECB Governor Mario ‘Master of the Universe’ Draghi, purveyor of the latest QE which in thesis will grant an austerity-ravaged Europe a little extra time to pursue ‘reforms’.

Some background is essential. The troika sold Greece an economic racket, but it’s the Greek people that are paying the price. Essentially, Greece’s public debt went from private to public hands when the ECB and the IMF ‘rescued’ private (German, French, Spanish) banks. The debt, of course, ballooned. The troika intervened, not to save Greece, but to save private banking.

The ECB bought public debt from private banks for a fortune, because the ECB could not buy public debt directly from the Greek state. The icing on this layer cake is that private banks had found the cash to buy Greece’s public debt exactly from…the ECB, profiting from ultra-friendly interest rates. This is outright theft. And it’s the thieves that have been setting the rules of the game all along.

Where’s our money?

The result is that Athens is now broke. Greek Finance Minister Yanis Varoufakis at least embarked on his European tour with a sound proposal; the ECB could move €1.9 billion of profit on the back of Greek bonds; and then release other €10 billion in short-term state obligations, as well as open an emergency line to banks. From the beginning, the key point for Varoufakis was to open the way to renegotiate the €240 billion of the troika ‘rescue’ plan.

ECB hawks – as in Errki Liikanen from Finland – barred these options from the outset, insisting that without a comprehensive agreement, as in total Greek surrender, not a single euro will go to Athens.

What a drag for Prime Minister Tsipras and for Varoufakis – to embark on an European tour as supplicant beggars facing a sterling collection of silky mobsters, including EC president Jean-Claude Juncker and president of the European Council, warmonger Donald Tusk.

Next week there may be an extraordinary meeting of the Eurogroup, ahead of a sparks-will-fly European summit in Brussels on February 12.

The bottom line: it does not look good.

Varoufakis tried to put a brave face, continuing to rule out a Grexit as “hugely detrimental to Greece.”More detrimental would be in fact the Syriza party totally capitulating to the neoliberal Masters of the Universe. This will ensure Greek depression will go on forever. And yes, eventually, the fascist Golden Dawn may accede to power.

Varoufakis, in his press conference with German finance minister Wolfgang Schauble in Berlin, even as he agreed with 67 percent of the current ‘plan’, stressed – soundly – it does not tackle the excesses of corruption and rent-seeking in Greece; and everything is all about debt repayments, not putting the Greek economy back into shape.

For his part, Schauble, predictably, issued a thinly veiled threat of an “uncertain future” without a bailout program. Schauble’s now famous “we agree to disagree” was in fact hardball enveloped in velvet.

There is no evidence as it stands that a complex negotiation of at least a few months will ensue, as Athens tries to restructure how to deal with the troika. The ECB is now tacitly playing the game that Greece is essentially doomed. Ergo, the ECB is voting down Syriza, and actually supporting fascist Golden Dawn. That’s central bank ‘democracy’ for you.

Bomb Frankfurt, anyone?

So in the end it breaks down to this; without ECB cash – at least some cash by the end of the month – Greece risks going back to the drachma without even firing a shot. And yet that’s exactly what legions across Europe are absolutely rooting for. In parallel, no wonder – from Lisbon to Rome – rumblings multiply that if the ECB would have done that to a relatively well weaponized nation, the tanks would be out in the streets (but to do what? Bomb Frankfurt?)

Varoufakis insists, “One thing we will not do is capitulate.” That would translate, essentially, into a Greek default. We’re not there – yet. In the very short term, Draghi also knows that were Athens to get some of the cash it needs short term, there would be war against the Bundesbank. It won’t happen; the ECB and the Bundesbank are partners in crime.

Once again; both the ECB and the Bundesbank came to the conclusion there is no risk of contagion even with a Grexit. So the ‘strategy’ won’t wobble; crush Greece and all’s well that ends well – as in the troika’s terminator economics trampling whole countries underfoot.

Beware of Masters of the Universe dispensing smiles. Draghi and the Zegna-clad ECB goons may dispense all the smiles in the world, but what they are graphically demonstrating once again is how toxic central banking is now enshrined as a mortal enemy of democracy.

 

Pepe Escobar is the author of Globalistan: How the Globalized World is Dissolving into Liquid War (Nimble Books, 2007), Red Zone Blues: a snapshot of Baghdad during the surge (Nimble Books, 2007), and Obama does Globalistan (Nimble Books, 2009).

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