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What Happens When Economists Talk Politics
What Happens When Economists Talk Politics
As the “Varoufakis Files” provide everyone interested in the Greek tragi-comedy with an additional million pages of intriguing fodder -we all really needed that added layer of murky conspiracy, re: the Watergate tapes-, a different question has been playing in my head. Again. That is: Why are economists discussing politics?
Why are the now 6 month long Greece vs Troika discussions being conducted by the people who conduct them? All parties involved are apparently free to send to the table whoever they want, and while that seems nice and democratic, it doesn’t necessarily make it the best possible idea. To, in our view, put it mildly.
For perspective, please allow me to go back to something I wrote 3,5 months ago, May 12 2015:
Greece Is Now Just A Political Issue
[..] the EU/troika anno 2010 decided to bail out German and French and Wall Street banks (I know there’s an overlap) – instead of restructuring the debts they incurred with insane bets on Greece and its EU membership- and put the costs squarely on the shoulders of the Greek population.
This, as I said many times before, was not an economic decision; it was always entirely political. It’s also, by the way, therefore a decision the ECB should have fiercely protested, since it’s independent and a-political and it can’t afford to be dragged into such situations. But the ECB didn’t protest. [..]
The troika wants the Syriza government to execute things that run counter to their election promises. No matter how many people point out the failures of austerity measures as they are currently being implemented in various countries, the troika insists on more austerity. Even as they know full well Syriza can’t give them that because of its mandate. Let alone its morals.
…click on the above link to read the rest of the article…
The Number One Lesson From Athens
The Number One Lesson From Athens
There’s arguably nothing that’s been more hurtful -in more ways than one- to Greece and its Syriza government over the past six months, than the lack of support from the rest of Europe. And it’s not just the complete lack of support from other governments -that might have been expected-, but more than that the all but complete and deafening silence on the part of individuals and organizations, including political parties.
It’s no hyperbole to state that without their loud and clear support, Syriza never stood a chance in its negotiations with the Troika. And it’s downright bewildering that this continues to get so little attention from the press, from other commentators, and from politicians both inside Greece and outside of it.
This gives the impression that Greece’s problems are some sort of stand-alone issue. And that Athens must fight the entire Troika all on its own, a notion the same Troika has eagerly exploited.
It’s strange enough to see the supposedly well-educated part of the rich northern European population stay completely silent in the face of the full demolition of the Greek state, of its financial system, its healthcare and its economy.
Perhaps we should put that down to the fact that public opinion in for instance Germany is shaped by that country’s version of the National Enquirer, Bild Zeitung. Then again, the well-educated in Berlin allegedly don’t read Bild.
That no massive support movements have risen up in “rich Europe” to provide at least financial and humanitarian aid, let alone political support, can only be seen as a very significant manifestation of what Europe has become.
…click on the above link to read the rest of the article…
The Death of Democracy in a Byzantine Labyrinth
The Death of Democracy in a Byzantine Labyrinth
The project of European Union, and its single currency experiment, were politically an attempt to unite fractious nations in order to put an end to a history of horribly destructive conflict. Economically, the goals were to scale up governance in Europe, to transition from the national to the transnational level in order to wield more power as a larger trading block. As such it was very much in line with the global trend of the last thirty years towards scaling up almost everything. However, as we have observed before, such expansions are inherently fragile and self-limiting:
This in-built need to expand, sometimes to the scale of an imperium in the search for new territory, means that the process is grounded in ponzi dynamics. Expansion stops when no new territories can be subsumed, and contraction will follow as the society consumes its internal natural capital….
….A foundational ingredient in determining effective organizational scale is trust – the glue holding societies together. At small scale, trust is personal, and group acceptance is limited to those who are known well enough to be trusted. For societies to scale up, trust must transcend the personal and be grounded instead in an institutional framework governing interactions between individuals, between the people and different polities, between different layers of governance (municipal, provincial, regional, national), and between states on the international stage.
This institutional framework takes time to scale up and relies on public trust for its political legitimacy. That trust depends on the general perception that the function of the governing institutions serves the public good, and that the rules are sufficiently transparent and predictably applied to all. This is the definition of the rule of law. Of course the ideal does not exist, but better and worse approximations do at each scale in question.
…click on the above link to read the rest of the article…
Was Greece Set Up To Fail?
Was Greece Set Up To Fail?
I started writing this on my last night in Athens for now, Wednesday, and had no time to finish it then:
On the eve of my temp absence from this great city, a few things. I could simply extend my stay, which might be slightly cheaper, but A) flights to Athens cost less all the time, and B) I have to go see my mom in Holland, who’s not doing well at all. On top of that, Nicole arrived in Holland last week, and we might as well just fly out back here together in a few weeks.
My ‘job’ here is by no means done, anyway. Because of the general strike today, another Solidarity Clinic that I wanted to donate some of your AE for Athens Fund money to, is closed (update on the Fund tomorrow). Parliament is debating the latest Troika strangle plan as we speak, and who knows what tomorrow will bring? An entire economy is being deliberately suffocated, and all in all it’s just total madness. Quiet madness, though (update: and then the riots broke out..).
Two things I’ve been repeatedly asked to convey to you are that:
1) you can’t trust any Greek poll or media, because the media are so skewed to one side of the political spectrum, and that side is not SYRIZA (can you imagine any other country where almost all the media are against the government, tell outright lies, use any trick in and outside the book, and the government still gets massive public support?!),
and:
2) Athens is the safest city on the planet. I can fully attest to that. Not one single moment of even a hint of a threat, and that in a city that feels very much under siege (don’t underestimate that). And people should come here, and thereby support the country’s economy. Don’t go to Spain or France this year, go to Greece. Europe is trying to blow this country up; don’t allow them to.
…click on the above link to read the rest of the article…
The Troika And The Five Families
The Troika And The Five Families
Personally, like most of you, I always thought Germany, besides all its other talents, good or bad, was a nation of solid calculus and accounting. Gründlichkeit. And that they knew a thing or two about psychology. But I stand corrected.
The Germans just made their biggest mistake in a long time (how about some 75 years) over the weekend. Now, when all you have to bring to a conversation slash negotiation is bullying and strong arming and brute force, that should perhaps not be overly surprising. But it’s a behemoth failure all by itself regardless.
First though, I want to switch to what Yanis Varoufakis told the New Statesman in an interview published today, because it’s crucial to what happened this weekend. Varoufakis talks about how he was pushing for a plan to introduce an alternative currency in Greece rather than giving in to the Troika. But Tsipras refused. And Yanis understands why:
“Varoufakis could not guarantee that a Grexit would work …
…[he] knows Tsipras has an obligation to “not let this country become a failed state”.
What this means is that Tsipras was told by the Troika behind closed doors, to put it crudely: “we’re going to kill your people”. He was made an offer he couldn’t refuse. And Tsipras could never take that upon himself, even though the deals now proposed will perhaps be worse in the medium to long term, even though it may cost him his career.
Criticism of the man is easy, but it all comes from people never put in that position. Varoufakis understands, and sort of hints he might have had second thoughts too if he were ever put in that position.
…click on the above link to read the rest of the article…
Tsipras Invites Schäuble To Fall Into His Own Sword
Tsipras Invites Schäuble To Fall Into His Own Sword
Too many voices the past few days are all pointing the same way, and I’ve always thought that is never good. A guessing-based consensus, jumping to conclusions and all that. Look, it’s fine if you don’t have all the answers, no matter how nervous it makes you.
What I’m referring to in this instance is the overwhelming conviction that Greece and Tsipras have conceded, given in to the Troika, flown a white flag, you get the drift. But guys, the battle ain’t over yet.
So here’s an alternative scenario, purely hypothetically (but so in essence is the white flag idea, always got to wait for the fat lady), and for entertainment purposes only. Let ‘er rip:
Tsipras, first through holding a referendum, and then through delivering a proposal that at first sight looked worse than what the Troika provided before the referendum, has managed a number of things.
First, his domestic support base has solidified. That’s what the referendum confirmed once more. Second, he’s given the Troika members, plus the various nations that think they represent them, something that was sure from the moment he sent it to them: a way to divide and rule and conquer the lot.
Tsipras has set the IMF versus the EU versus the ECB. Schäuble snapped at Draghi last night: ”Do you hold me for a fool?” Germany itself is split too, Merkel and Schäuble are at odds. Germany and France don’t see eye to eye anymore. The US doesn’t see eye to eye with any party involved.
Italy is about to tell Germany to stop its shenanigans and get a deal done. The True Finns may get to decide the entire shebang, with less than 1 million rabid voters calling the shots for 320 million eurozone inhabitants.
…click on the above link to read the rest of the article…
Someone Pull The Plug or This Will End in War
Someone Pull The Plug or This Will End in War
I was going to write up on the uselessness of Angela Merkel, given that she said on this week that “giving in to Greece could ‘blow apart’ the euro”, and it’s the 180º other way around; it’s the consistent refusal to allow any leniency towards the Greeks that is blowing the currency union to smithereens.
Merkel’s been such an abject failure, the fullblown lack of leadership, the addiction to her right wing backbenchers, no opinion that seems to be remotely her own. But I don’t think the topic by itself makes much sense anymore for an article. It’s high time to take a step back and oversee the entire failing euro and EU system.
Greece is stuck in Germany’s own internal squabbles, and that more than anything illustrates how broken the system is. It was never supposed to be like that. No European leader in their right mind would ever have signed up for that.
Reading up on daily events, and perhaps on the verge of an actual Greece deal, increasingly I’m thinking this has got to stop, guys, there is no basis for this. It makes no sense and it is no use. The mold is broken. The EU as a concept, as a model, has failed and is already a thing of the past.
It’s over. And anything that’s done from here on in will only serve to make things worse. We should learn to recognize such transitions, and act on them. Instead of clinging on to what we think might have been long after it no longer is.
…click on the above link to read the rest of the article…
Volatility and Sleep-Walking Markets
Volatility and Sleep-Walking Markets
A recent Business Insider chart of the day feature was particularly interesting. Called The stock market is asleep, it observed that the US market has been in a period of very low volatility:
Market technician Ryan Detrick noted that it’s been 8 weeks since we’ve seen a weekly move of at least 1% up or down in the S&P 500. That’s the longest such streak we’ve seen in 21 years.
Markets enter such periods of complacency when there has been a long uptrend, with periods of very low volatility reflecting where the market has come from, not where it is going. Such periods are far more likely to be a sign of an impending trend reversal than of a continued uptrend.
Under normal circumstances, markets can be expected to show more variation, with regular inhalation and exhalation indicative of healthy risk perception. The loss of that pattern, indicating extreme complacency, is a leading indicator of a rude awakening. The VIX index, or volatility/fear index, is at extreme lows, indicating a historic level of complacency. It is no surprise that this coincides with a market extreme.
…click on the above link to read the rest of the article…
I Fear The Greeks, Even When They Bring Gifts
I Fear The Greeks, Even When They Bring Gifts
Just another normal morning at the Automatic Earth. Shaking off the local drink – when in Rome.. – and perusing a thousand views and pieces, many on the inevitable topic of ‘Da Referendum’. And I got to say, I can’t even tell whether it’s just me, but there is this huge divide between what a simple vote can and should be, and how it is perceived and presented.
And no, it’s not my ouzo-riddled stupor, it’s what common sense I have left that has me wondering what causes the divide. Case in point, Bloomberg has a piece called “Tsipras Asking Grandma to Figure Out If Greek Debt Deal Is Fair”. The implied connotation being that asking grandma about anything other than knitting patterns and souvlaki recipes is asking for trouble. What does she know? Politics should be decided by politicians. Well, and bankers of course. And Bloomberg editors. Did I mention economists?
Tsipras Asking Grandma to Figure Out If Greek Debt Deal Is Fair
Economists with PhDs and hedge-fund traders can barely stay on top of the vagaries of Greece’s spiraling debt crisis. Now, try getting grandma to vote on it. That’s what Prime Minister Alexis Tsipras is doing by calling a snap referendum for July 5 on the latest bailout package from creditors.
The 68-word ballot question namechecks four international institutions and asks voters for their opinion on two highly technical documents that weren’t made public before the referendum call and were only translated into Greek on Saturday. Worse, they may no longer be on the table. IMF chief Christine Lagarde told the BBC late on Saturday that “legally speaking, the referendum will relate to proposals and arrangements which are no longer valid.”
…click on the above link to read the rest of the article…
The People Must Be Overthrown
The People Must Be Overthrown
Perhaps I should apologize for writing about Greece all the time. Thing is, not only have I just arrived in Athens last night (and been duly showered in ouzo), but Greece is the proverbial early harbinger of everything that’s wrong with the world (not to worry, I know that’s a hyperbole), and of everything that could be done about it.
That places a responsibility on the shoulders of Syriza leader Alexis Tsipras and his team that maybe they don’t want, and for all I know don’t deserve either. But they’re all we have, and besides, they’re all their own people have. In that sense, this is not about everything that’s wrong with the world, other than that’s the same as everything that’s wrong with Greece.
I was struck last night, talking to people here in Athens, by how much their appreciation of Tsipras, his overall composure and the way he handles the Troika talks, has increased over the past five months. They were doubtful about him before the Syriza election win; they no longer are.
Still, the negotiations are nice and all, but they’re not going anywhere, and they never will. The Troika side of the table is interested in one thing only: to humiliate Athens and force it into ultimate submission, along the lines of those photographs we’ve come to know of Abu Graibh.
Yanis Varoufakis labeled the Troika policies vis-a-vis Greece ‘fiscal waterboarding’ when he started out as finance minister, and here’s thinking he should have stuck with that image in a much more persistent and a much louder fashion.
Yes, we know, Syriza doesn’t have the mandate to take the country out of the eurozone. A daily dose of fear tactics in the domestic and international media still have Greeks, even Syriza voters, scared stiff about going it alone.
…click on the above link to read the rest of the article…
The Only Good Deal For Greece Is NO Deal
The Only Good Deal For Greece Is NO Deal
The only thing that would really go towards beginning to solve the problems with Greece is for Athens to NOT sign a deal. The short version of why that is so: it would leave the EU intact for longer. And the ECB.
Neither have any viable future, but as they go down, they can cause a lot of damage and pain. It’s mitigating that pain which should now be our priority no. 1, the pain that will result from the demise of Europe’s institutions. But we see precisely zero acknowledgment of this. Anywhere.
All that attention for whatever comes out of yesterday’s, and today’s, and tomorrow’s Troika vs Athens talks is very cute and nice and all, and putting on a ‘phantom summit’ is hilarious, but in reality it’s all based on a far too myopic picture.
Maybe that’s what you get when you’re only looking at life as exclusively consisting of things that can be either bought or sold, which seems to be the way the entire world press interprets the negotiations, the only way they have of interpreting anything. But this is not about money.
There’s more to life than money. That is to say, there’s a lot more going on than those talks and the deal-or-no-deal results that may or may not emanate from them. To wit: If the past 5 months or so have made anything clear, it’s that the eurozone has no future at all, and the EU as a whole has very little.
There is no trust left between Brussels and Greece, and therefore at the same time also not between Brussels and Rome, or Madrid. Italy and Spain could be the next to receive a five-month treatment like the one Greece has had, and the people there sense it. Even if their present governments do not.
…click on the above link to read the rest of the article…
Inciting Bank Runs as a Negotiating Tactic
Inciting Bank Runs as a Negotiating Tactic
The troika of Greek creditors has gone into full-frontal morals-be-damned attack mode, handpicking arms from a weapons arsenal we haven’t seen used before, and that we never should have seen in an environment that insists – and prides – on presenting itself as a union, both in name and in spirit. Now that they are being used, there no longer is such a union other than in name, in empty words.
This has turned into the kind of economic warfare one would expect to see between sworn and lethal enemies, that the US would gladly use against Russia for instance, but not between partners in a union founded on principles based entirely and exclusively on being mutually beneficial to everyone involved.
Those principles, and everything that has been based on them, the common currency, the surrender of ever more sovereignty on the part of the nations involved, the relinquishing of national powers to the various supra-national bodies in Brussels, has for everyone involved been based on trust. Nobody would ever have signed up to any of it without that trust. But just look where we are now.
When spokespeople at the troika side of the table stated on Thursday that they don’t know if Greek banks will be open on Monday, they crossed a line that should never even have been contemplated. This is so far beyond the pale, it should by all accounts, if everyone involved manages to keep a somewhat clear head, blow up the union once and for all. If a party to a negotiation that can’t get its way stoops to these kinds of tactics, there is very little room left for talk.
…click on the above link to read the rest of the article…
Greek Parliamentary Debt Committee Declares All Debt Illegal
Greek Parliamentary Debt Committee Declares All Debt Illegal
For a while now, I’ve had a German saying floating around my files, that I didn’t really know what to do with. I know now. The saying is:
In der Not ist der Mittelweg der Tod.
Which loosely translates as:
In emergencies, the middle ground is lethal.
It seems like the Greek parliament thinks along just those lines. A preliminary report issued today declares all debt illegal. You can read the entire report behind the link. Here is chapter 8, Asessments of the Debt. I’d say this is somewhat inflammatory.
Hellenic Parliament’s Debt Truth Committee Preliminary Findings – Executive Summary of the report
Chapter 8, Assessment of the Debts as regards illegtimacy, odiousness, illegality, and unsustainability, provides an assessment of the Greek public debt according to the definitions regarding illegitimate, odious, illegal, and unsustainable debt adopted by the Committee.
Chapter 8 concludes that the Greek public debt as of June 2015 is unsustainable, since Greece is currently unable to service its debt without seriously impairing its capacity to fulfill its basic human rights obligations. Furthermore, for each creditor, the report provides evidence of indicative cases of illegal, illegitimate and odious debts.
• Debt to the IMF should be considered illegal since its concession breached the IMF’s own statutes, and its conditions breached the Greek Constitution, international customary law, and treaties to which Greece is a party. It is also illegitimate, since conditions included policy prescriptions that infringed human rights obligations. Finally, it is odious since the IMF knew that the imposed measures were undemocratic, ineffective, and would lead to serious violations of socio-economic rights.
…click on the above link to read the rest of the article…
Is Telling Lies A Democratic Right?
Is Telling Lies A Democratic Right?
While I’m on the Greece topic again today, I can’t help but pointing out some of the changes in tone I’ve noticed in the press recently, shifting towards outright oftentimes vicious if not ridiculous antagonism vs Greece. Remember, there is an agenda, there are pre-cooked narratives galore, and these people are not your friends.
I won’t be able to cover all the things I would like to right now, let’s start with just the one. And I’m warning you: it might get philosophical.
This is from Marc Champion for Bloomberg yesterday:
Tsipras Isn’t on the Side of Democracy
Recently, I asked whether the Greek government actually wants to strike a deal on its debt, or if its increasingly erratic approach to negotiationsmight reflect a determination to ensure that Greeks blame their creditors, not their government, for a coming meltdown. [..] Here’s what Tsipras saidin a statement about the abortive talks and current bailout:
“One can only suspect political motives behind the fact that the institutions insist on further pension cuts, despite five years of pillaging via the memoranda. The Greek government has been negotiating with a specific plan and documented proposals. We will wait patiently till the institutions adhere to realism.
Those who consider our sincere wish for a solution as well as our efforts to bridge the gap as a sign of weakness, should have in mind the following: We are not only carrying a historical past underlined with struggles. We are carrying our people’s dignity as well as the aspirations of all Europeans. We cannot ignore this responsibility. It is not a matter of ideological stubbornness. It has to do with democracy.”
Tsipras’s proposition that he’s championing the hope of downtrodden masses across Europe is nonsense. Germans may be wrong and unfair to prefer losing the loans they made Greece to taking a haircut, but they have a democratic right to believe they’re correct.
…click on the above link to read the rest of the article…
QE Breeds Instability
QE Breeds Instability
Central bankers have promised ad nauseum to keep rates low for long periods of time. And they have delivered. Their claim is that this helps the economy recover, but that is just a silly idea.
What it does do is help create the illusion of a recovering economy. But that is mostly achieved by making price discovery impossible, not by increasing productivity or wages or innovation or anything like that. What we have is the financial system posing as the economy. And a vast majority of people falling for that sleight of hand.
Now the central bankers come face to face with Hyman Minsky’s credo that ‘Stability Breeds Instability’. Ultra low rates (ZIRP) are not a natural phenomenon, and that must of necessity mean that they distort economies in ways that are inherently unpredictable. For central bankers, investors, politicians, everyone.
That is the essence of what is being consistently denied, all the time. That is why QE policies, certainly in the theater they’re presently being executed in, will always fail. That is why they should never have been considered to begin with. The entire premise is false.
Ultra low rates are today starting to bite central bankers in the ass. The illusion of control is not the same as control. But Mario and Janet and Haruhiko, like their predecessors before them, are way past even contemplating the limits of their powers. They think pulling levers and and turning switches is enough to make economies do what they want.
Nobody talks anymore about how guys like Bernanke stated when the crisis truly hit that they were entering ‘uncharted territory’. That’s intriguing, if only because they’re way deeper into that territory now than they were back then. Presumably, that may have something to do with the perception that there actually is a recovery ongoing.
…click on the above link to read the rest of the article…
