EU Crisis

Stranded Expectations

Off the keyboard of Albert Bates

Follow us on Twitter @doomstead666
Friend us on Facebook

Published on Peak Surfer on July 19, 2015

Visit the New Diner News Page for Daily Updates from around the Collapse Blogosphere

PeakSurfer

Discuss this article at the Economics Table inside the Diner

 

  
 One of the birthplaces of civilization is having its cradle rocked again. Apart from the subjugation of women, children and slaves, Greece's beta version, going back 2500 years, was pretty cool – men in togas strolling though olive groves asking existential questions about life, the universe and all that. An updated version, without the wars, slaves and chauvinism, might not be half bad.

Today Greece is the European Union's current favorite whipping boy – the example to be made in order to keep all the other Ponzi'd patsies in line. It is no small irony that despite street protest bringing a new, defiant Syriza  (“from the roots”) government to Athens and a resounding No! Icelandic-style referendum placing Greece in technical default, the realities of needing a cash drip to keep pensioners breathing and buses running have given the upper hand to German, French and British banksters. 

The irony is compounded when one glances at the score sheet for total debt to GDP, with China at 250%, Germany 302%, Greece 353%, USA 370%, Britain 546%, Japan 646% and Ireland at an enchanted 1,000%.

Commented Dmitry Orlov:

The IMF won't lend to Greece because it requires some assurance of repayment; but it will continue to lend to the Ukraine, which is in default and collapsing rapidly, without any such assurances because, you see, the decision is a political one.


After the US-controlled International Monetary Fund acknowledged that Greece has no possibility of ever repaying its debts, the central bankers’ bank, the Bank of International Settlements, recently issued a very blunt warning

“[T]he world will be unable to fight the next global financial crash as central banks have used up their ammunition trying to tackle the last crisis."


If neoliberalism has a Hall of Fame, surely China has a bronze bust somewhere near the entrance. Literally millions of Chinese, newly employed and making consumerist wages, have opened stock trading accounts. For them, its the Roaring Twenties. What changed? China took extreme measures to increase the liquidity in their financial system – precisely what the European Central Bank denied to Greece. 

Liquidity is what pays off the account holders in the event of a run on the bank, because in reality, banks don't store money or any other assets, they only record accounts of running debts. Liquidity builds confidence. Liquidity is what Ben Bernacke forced down the throats of the Wall Street cabal to staunch the bloodletting in 2008. When Europe pulled the liquidity backstop away from Greek banks, ATMs ran dry and depositors took a haircut on their holdings, but systemically, it was much worse than that.

 


 

Greece, Spain, Portugal, Italy and other debtor countries have been under the same mode of attack that was waged by the IMF and its austerity doctrine that bankrupted Latin America from the 1970s onward.

–Michael Hudson

Currently, the average USAnian's net worth is at a record high, but if you were to try to find that average person, it could take you quite a while. Seventy million US citizens are teetering on the edge of financial ruin. They’re one paycheck away from default on their mortgage or health insurance premium. How does one explain their record high net worth? (a) concentrations of extreme wealth at the top of the pyramid; (b) inflated real estate and other asset valuations; and (c) inflated valuation of the dollar, backed by nothing more than vivid imagination. Fantasy is infectious, so there has been a capital flight to Turtle Island on the expectation that it would be a bastion of stability, its deregulated regulators standing as a tall cliff over the tsunami about to engulf the world economy.
 

Hellenistic Greece "Diadochen1" by Captain_Blood – Own work.
Licensed under CC BY-SA 3.0 via Wikimedia Commons

The Greeks invented modern banking a couple millennia ago – credit based trade, hedge funds, options, foreign exchange, and so on. And, as we might expect, what's happening in Greece now is nothing new. Athens suffered a land and agrarian crisis in the late 7th century BCE and its citizens took to the streets, throwing bottles and protesting food prices. The Archon (city manager) Draco made severe reforms in 621 BCE ("Draconian" they were called), but these failed to quell the conflict. The crisis lasted another 27 years until the moderate reforms of Solon (594 BCE) lifted austerity while paying off creditors, with the added benefit of firmly entrenching the aristocracy.

The first financial crisis happened in Greece around 600 BC. Since then, Greece has defaulted on their loans more often than any other country in the modern world. In the past 200 years or so, Greece has defaulted about half the time.

Even though Greece has already received $284 billion in bailout money over the past five years, they still couldn’t get it together. One reason why was because most of that money went to financial institutions, and only a small portion went to the people.

Another reason why was due to their pension system. By now, everyone has heard the stories of the hairdresser example… That is, someone who’s worked as a hairdresser for three years, then retires around age 50-55 and receives nearly a full pension. Multiply this by more than two million pensioners, along with a whole lot of other financial problems, and you see why Greece is in such deep trouble.

Aden Forecast
 


Our spider senses tingle when we hear someone reading from one of Ronald Reagan's index cards about mooching welfare mamas driving a Cadillac. Those spendthrift pensioners! Originally the Greek debt was owed to French, Dutch and German banks but now is owed mainly to agencies like the European Financial Stability Facility, run on behalf of 19 governments, that most recently lent Greece (to kick the can down the road) 145 billion euros borrowed from the bond markets at high interest. Hmmm. Sounds a lot like the sub-prime market of, say, 2005, with European banks in the position of Countrywide and AIG.
Brian Davey writing for Feasta says:

If you kick the can down the road repeatedly you eventually run out of road. What should have happened much earlier in this process was an admission that the French, Dutch and German banks had made a mistake lending to Greece and they should have taken their loss. Perhaps Greek officials and Goldman Sachs, which helped to hide the fact that Greece could not pay, should have been prosecuted.


Davies goes on to draw the crucial link between energy and economy:

[W]hile Greece (and Spain and Italy and Ireland) was growing there were good reasons to send money to Greece – to invest in the building of holiday hotels for example, or in the building and civil engineering companies that built the hotels and the roads to the resorts. This was not buying and importing Greek goods – but it was putting money back into the pockets of Greeks in the form of investment in the business activities of a growing economy. If deficit countries are growing then mechanisms will exist to recycle purchasing power internationally. Once growth stops then there is no reason to send money to deficit countries and they are in trouble – as has happened throughout southern Europe and Ireland. I think that this is the most plausible way of seeing things. And the reason that growth began to fall off was rising energy prices because of depletion, because we are reaching the limits to economic growth. Because energy enters into all economic activities this undermines growth because people and companies struggle to service their debts AND pay the higher energy prices. That’s the ultimate reason that interest rates had to come down through quantitative easing.

 
Looking at a historical chart of US debt, one sees that it remained virtually unchanged from first ill-fated settlement in the 16th century, showing only slight bumps with each major war, until approximately 1970 when it went ballistic. What happened then? Gold bugs will tell you it was Nixon taking the dollar off the gold standard, unleashing the beast of fractional reserve banking and fiat currency. Rather, we find it more plausible that 1969 was the year US oil production peaked and, like their Greek counterparts, US companies began to struggle to service their debts AND pay the higher energy prices.

The US trashed Bretton Woods when it took the dollar to the oil standard by getting Saudi Arabia and other producers to sell their oil for dollars only. If you wanted to buy oil you needed dollars, and so dollars flowed back into the US, favorable trade balances masked the dollar's inflation (and the massive debt to sustain cheap energy) and American banks laughed all the way to the voting booths.

Meanwhile, life in Greece goes on, amid the financial wreckage. As Jan Lundberg, who has been trying to revive commercial sail transport in the Mediterranean (to replace more than four million fishing and small cargo vessels now spewing oil smoke and bilge) reports:
 

The jump in homelessness, many of the housed doing without heat in winter, and foregoing improvements in life that people had grown accustomed to, are well known. So it is no wonder that money is almost universally seen as the problem and the solution. The once hopeful consumer population has been ravaged: 1.3 million people, or 26% of the workforce, are without a job (and most of them without benefits); wages are down by 38% since 2009, pensions by 45%, GDP by a quarter; 18% of the country’s population unable to meet their food needs; 32% below the poverty line. Almost 3.1 million people, 33% of the population, are without national health insurance.


The ECB could solve Greece’s problem with a few computer keystrokes. The effect would actually be to stimulate the European economy.
 
Instead, Greece remains a whipping boy to keep the rest of the periphery in line. If either side decides to reject the latest deal, we could see an exit from the European Union, and a return to the drachma. This would likely be good for Greece but not for the EU, which could then see so many countries exit that the central currency tumbles into obscurity.

If Greece switches to drachmas, the funding possibilities are even greater. It could generate the money for a national dividend, guaranteed employment for all, expanded social services, and widespread investment in infrastructure, clean energy, and local business. Freed from its Eurocrat oppressors, Greece could model for the world what can be achieved by a sovereign country using publicly-owned banks and publicly-issued currency for the benefit of its own economy and its own people.

 Jan Lundberg says:

There are two kinds of people, whether in Greece or elsewhere: those who welcome or understand that fundamental change and discontinuity are inevitable, perhaps on the way too soon for convenience, and, those who fervently want the level of income and consumption of the past — regardless of economic and ecological realities. Fortunately for Greeks, they have a continuous and ancient society under the surface of the unstable transnational corporate state.


Summer in Greece often brings wildfires and this year is no different, although climate change doesn't help. In 2007 one fire covered 25.000 hectares north of Athens and as we write this flames are again creeping towards Athens from the North and the government has called out the Air Force and Army to help fight 34 separate fires. Isn't it lucky they still have organized fire departments and emergency responders there? They have come very close to not having that.

Greece is retracing its steps back through the ascent of Western Civilization to an earlier era when the best hedge was a good olive press. Many there, as elsewhere, cannot imagine losing the perks of advanced civilization. Stranded expectations – whether in Athens or Brussels – cloud peoples' thoughts. We are all Greeks. Harder lessons are coming. 

Knarf plays the Doomer Blues

https://image.freepik.com/free-icon/musical-notes-symbols_318-29778.jpg

Support the Diner

Search the Diner

Surveys & Podcasts

NEW SURVEY

Renewable Energy

VISIT AND FOLLOW US ON DINER SOUNDCLOUD

" As a daily reader of all of the doomsday blogs, e.g. the Diner, Nature Bats Last, Zerohedge, Scribbler, etc… I must say that I most look forward to your “off the microphone” rants. Your analysis, insights, and conclusions are always logical, well supported, and clearly articulated – a trifecta not frequently achieved."- Joe D

Archives

Global Diners

View Full Diner Stats

Global Population Stats

Enter a Country Name for full Population & Demographic Statistics

Lake Mead Watch

http://si.wsj.net/public/resources/images/NA-BX686_LakeMe_G_20130816175615.jpg

loading

Inside the Diner

A wonderful new opportunity. Sign me up.

Vatican Caught Using Charity Donations To Cover Budget Shortfalls12/11/2019While Pope Francis has long preached about the ills of economic inequality and sins of capitalism, the Catholic church has been robbing Peter’s Pence to the tune of over $50 ...

John Vibes, Truth TheoryWaking TimesThe technology needed to harness solar electricity is growing by leaps and bounds with each passing year. Researchers and entrepreneurs are always finding new and exciting ways to apply the technology. Some of the...

Older people in Japan are strapping on exoskeletons to help meet the physical demands of their jobs and remain in the workforce longer.Japan’s population is rapidly ageing, with a record 28 per cent of people aged 65 or older. This has led to a short...

Recent Facebook Posts

After dancer strips at Seattle conference on homelessness, agency director suspended

Dept. of We’ve Run Out of Words: After dancer strips at Seattle conference on homelessness, agency director suspended https://www.seattletimes.com/seattle-news/homeless/after-dancer-strips-at-seattle-conference-on-homelessness-agency-director-suspended/

9 hours ago

Scientists shocked by Arctic permafrost thawing 70 years sooner than predicted

Scientists shocked by Arctic permafrost thawing 70 years sooner than predicted, in the latest sign that the global climate crisis is accelerating..

9 hours ago

The Cold Dark Truth in the ‘Afghanistan Papers’: America Doesn’t Care About Losing

The Cold Dark Truth in the ‘Afghanistan Papers’: America Doesn’t Care About Losing- Never-ending defeat is preferable to U.S. leadership..

9 hours ago

Utility Executives Kept Flint's Tainted Water a Secret

Utility Executives Kept Flint’s Tainted Water a Secret– Email exchanges show senior employees and Flint officials knew the tap water was poisoned..

9 hours ago

Ask the Naturalist | What Caused this Mass Worm Stranding? - Bay Nature

Naturally, 2019 Closes with Thousands of 10-Inch Pulsing “Penis Fish” Stranded on a California Beach- https://baynature.org/2019/12/10/naturally-2019-closes-with-thousands-of-10-inch-pulsing-penis-fish-stranded-on-a-california-beach/

9 hours ago

Diner Twitter feed

Knarf’s Knewz

Mayor LaToya Cantrell has declared a state of emer [...]

CHICAGO – Agribusiness is increasingly turning to [...]

Since October, a wave of anti-government protests [...]

Diner Newz Feeds

  • Surly
  • Agelbert
  • Knarf
  • Golden Oxen
  • Frostbite Falls

[img]https://scontent.forf1-1.fna.fbcdn.net/v/t1.0 [...]

Doomstead Diner Daily December 15The Diner Daily i [...]

Doomstead Diner Daily December 14The Diner Daily i [...]

This is How a Society DiesAmerica and Britain are [...]

Florida man died from meth overdose before h... [...]

Quote from: UnhingedBecauseLucid on March 18, 2019 [...]

CleanTechnicaSupport CleanTechnica’s work via dona [...]

QuoteThe FACT that the current incredibly STUPID e [...]

Mayor LaToya Cantrell has declared a state of emer [...]

CHICAGO – Agribusiness is increasingly turning to [...]

Since October, a wave of anti-government protests [...]

Scientists have unlocked the power of gold atoms b [...]

Quote from: azozeo on August 14, 2019, 10:41:33 AM [...]

Wisconsin Bill Would Remove Barrier to Using Gold, [...]

Under extreme conditions, gold rearranges its atom [...]

The cost of gold futures on the Comex exchange inc [...]

OK, I gave it to myself.    Guaranteed FREE Shippi [...]

The remission is OVAH!  The Cancer is BACK!  I got [...]

1 week, even 2 here in Alaska is total BULLSHIT! Y [...]

Now UP on GEI!  REposted on 01 December 2019A Worl [...]

Alternate Perspectives

  • Two Ice Floes
  • Jumping Jack Flash
  • From Filmers to Farmers

Missing In Action By Cognitive Dissonance     As a very young pup, whenever I was overdue and not ho [...]

Politicians’ Privilege By Cognitive Dissonance     Imagine for a moment you work for a small or medi [...]

Shaking the August Stick By Cognitive Dissonance     Sometime towards the end of the third or fourth [...]

Empire in Decline - Propaganda and the American Myth By Cognitive Dissonance     “Oh, what a tangled [...]

Meanderings By Cognitive Dissonance     Tis the Season Silly season is upon us. And I, for one, welc [...]

Event Update For 2019-12-13http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.htmlThe [...]

Event Update For 2019-12-12http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.htmlThe [...]

Event Update For 2019-12-11http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.htmlThe [...]

Event Update For 2019-12-10http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.htmlThe [...]

Event Update For 2019-12-09http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.htmlThe [...]

With fusion energy perpetually 20 years away we now also perpetually have [fill in the blank] years [...]

My mea culpa for having inadvertently neglected FF2F for so long, and an update on the upcoming post [...]

NYC plans to undertake the swindle of the civilisation by suing the companies that have enabled it t [...]

MbS, the personification of the age-old pre-revolutionary scenario in which an expiring regime attem [...]

Daily Doom Photo

man-watching-tv

Sustainability

  • Peak Surfer
  • SUN
  • Transition Voice

Our Final Exam in Madrid"Why are we hauling giant container shiploads of Christmas decorations from Vietnam to England? [...]

First cut of the Madrid climate summit"“Buying an offset to fly here is absurd. It takes decades for a tree to grow enough to recoup [...]

"The drift towards near-term human extinction must be averted at all costs."I confess. I a [...]

"Since 2005, winters in Mexico have been my Hemingway Machine."  As winter descends upon m [...]

Waterboarding Flounder"Serious oxygen loss between 100 and 600-meter depths is expected to cover 59–80% of the ocean [...]

The folks at Windward have been doing great work at living sustainably for many years now.  Part of [...]

 The Daily SUN☼ Building a Better Tomorrow by Sustaining Universal Needs April 3, 2017 Powering Down [...]

Off the keyboard of Bob Montgomery Follow us on Twitter @doomstead666 Friend us on Facebook Publishe [...]

Visit SUN on Facebook Here [...]

What extinction crisis? Believe it or not, there are still climate science deniers out there. And th [...]

My new book, Abolish Oil Now, will talk about why the climate movement has failed and what we can do [...]

A new climate protest movement out of the UK has taken Europe by storm and made governments sit down [...]

The success of Apollo 11 flipped the American public from skeptics to fans. The climate movement nee [...]

Today's movement to abolish fossil fuels can learn from two different paths that the British an [...]

Top Commentariats

  • Our Finite World
  • Economic Undertow

Not terribly surprising! Companies maximize return to shareholders. I recently received a note from [...]

Interesting video! A person might think that after word of the problems involved, the message might [...]

https://www.spglobal.com/marketintelligence/en/news-insights/trending/q_Gxj71eJ1pYQi3OiHXdgQ2 This a [...]

I'm not sure how the price of extracting Australian coal competes with Russia, indonesia, or Ch [...]

The conference was a remarkable success. Rousing speeches were made. Angry fingers were waved. And a [...]

Trump was born in 1946 so he's another stinkin' Boomer. Bernie and Biden were born during [...]

The millennial consensus is that Boomer is more a state of mind than an age. A lot of older millenni [...]

Bill Clinton was first boomer president, followed by Bush, Obama, and Trump. True, neither candidate [...]

Biden and Bernie are members of the Silent Generation. Neither one is a boomer. I think Trump is on [...]

RE Economics

Going Cashless

Off the keyboard of RE Follow us on Twitter @doomstead666...

Simplifying the Final Countdown

Off the keyboard of RE Follow us on Twitter @doomstead666...

Bond Market Collapse and the Banning of Cash

Off the microphone of RE Follow us on Twitter @doomstead666...

Do Central Bankers Recognize there is NO GROWTH?

Discuss this article @ the ECONOMICS TABLE inside the...

Singularity of the Dollar

Off the Keyboard of RE Follow us on Twitter @doomstead666...

Kurrency Kollapse: To Print or Not To Print?

Off the microphone of RE Follow us on Twitter @doomstead666...

SWISSIE CAPITULATION!

Off the microphone of RE Follow us on Twitter @doomstead666...

Of Heat Sinks & Debt Sinks: A Thermodynamic View of Money

Off the keyboard of RE Follow us on Twitter @doomstead666...

Merry Doomy Christmas

Off the keyboard of RE Follow us on Twitter @doomstead666...

Peak Customers: The Final Liquidation Sale

Off the keyboard of RE Follow us on Twitter @doomstead666...

Collapse Fiction

Useful Links

Technical Journals

Thermal environmental design in an outdoor space is discussed by focusing on the proper selection an [...]

The present work shows the experimental evidence carried out on a pilot scale and demonstrating the [...]

Climate change is expected to affect the occurrence of forest pests. This study depicts a method to [...]

The grapevine (Vitis vinifera, L.) has been long since recognized as an ozone-sensitive plant. Ozone [...]

Climate change imposes great challenges on the built heritage sector by increasing the risks of ener [...]