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With the nation’s household debt burden at $11.85 trillion, even the most modest challenges to its legitimacy have revolutionary implications.

The legitimacy of a given social order rests on the legitimacy of its debts. Even in ancient times this was so. In traditional cultures, debt in a broad sense—gifts to be reciprocated, memories of help rendered, obligations not yet fulfilled—was a glue that held society together. Everybody at one time or another owed something to someone else. Repayment of debt was inseparable from the meeting of social obligations; it resonated with the principles of fairness and gratitude.

If one debt can be nullified, maybe all of them can.

The moral associations of making good on one’s debts are still with us today, informing the logic of austerity as well as the legal code. A good country, or a good person, is supposed to make every effort to repay debts. Accordingly, if a country like Jamaica or Greece, or a municipality like Baltimore or Detroit, has insufficient revenue to make its debt payments, it is morally compelled to privatize public assets, slash pensions and salaries, liquidate natural resources, and cut public services so it can use the savings to pay creditors. Such a prescription takes for granted the legitimacy of its debts.

Today a burgeoning debt resistance movement draws from the realization that many of these debts are not fair. Most obviously unfair are loans involving illegal or deceptive practices—the kind that were rampant in the lead-up to the 2008 financial crisis. From sneaky balloon interest hikes on mortgages, to loans deliberately made to unqualified borrowers, to incomprehensible financial products peddled to local governments that were kept ignorant about their risks, these practices resulted in billions of dollars of extra costs for citizens and public institutions alike.

…click on the above link to read the rest of the article…

Austerity and degrowth – dealing with the economic crisis and the ecological crisis together

August 16, 2015

Austerity and degrowth – dealing with the economic crisis and the ecological crisis together

This article arises from increasing frustration and irritation about the way that the debate about Greece, and in general about austerity, is framed. My frustration is not only with the policy thugs who are implementing austerity, but also, to a degree, with their critics – which includes the failure of most of the critics of growth to actually get involved in this controversy and argue their own point of view. There have been attempts, for example by Nicola Hinton of the Post Growth Institute. It seems like a tough one to argue for degrowth in the context of the Greek crisis and as an alternative to austerity – but then all the more reason to try. Otherwise a movement for degrowth will never get out of the university lecture rooms into the real world. It will never become a guide or a narrative for the future of society to be realised in practical and popular politics.

Austerity – elite terrorism against ordinary people

So let’s start by reframing the debate about austerity. When Yanis Varoufakis describes what has happened to Greece as “Fiscal Waterboarding” he is part way in the direction that I mean. His description of austerity as a form of terrorism is also right.

The purpose of austerity is to create insecurity and instill fear in the general population in order to protect the finance and banking sector from popular rage against the crimes the participants of this sector have committed against ordinary people. This rage ought to have given rise a long time ago to legal actions and desperately needed fundamental reforms to take away from bankers the right to create money, a right which they have abused at tremendous cost to ordinary people.

…click on the above link to read the rest of the article…

EU’s Greek Debt Austerity Plan Rejected By The IMF

July 31, 2015

EU’s Greek Debt Austerity Plan Rejected By The IMF

I have maintained since the so-called Greek Debt “crisis” began back in 2010, I believe it was,
that the imposition of austerity on Greece could not possibly work and that the only solution was to write down the debt to a level that Greece could service and introduce reforms that loosen the hold the oligarchs have on the Greek economy. The current Greek government has taken the same position, and now the IMF has joined us.

The IMF has said that debt relief measures, that is, write-downs, are necessary and that this necessary measure goes far beyond what the eurozone has offered so far. Asked if the plan could succeed without debt relief, the director of the IMF said, “categorically, no.”

This has been obvious from the beginning to any economist worthy of the name. The fact that
it has taken five years to establish an elementary fact shows how rapacious are the rich. Moreover, it proves in my opinion that the “crisis” was never about debt. It was about using the debt as a weapon to establish that creditors are not responsible for their mistakes when they overlend, and to force the centralization of member states’ tax and spending policies in the EU.

The austerity plan does not address debt. It imposes a draconian fiscal policy on the Greek government.

What Happens When Economists Talk Politics

July 29, 2015

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…

Eurozone Debt Just Keeps Rising—–What Austerity?

July 27, 2015

Eurozone Debt Just Keeps Rising—–What Austerity?

The eurozone is supposedly in a state of recovery. However, in spite of that recovery, public debt and debt-to GGP levels are still rising. Austerity is difficult to find in any realistic sense.

Please consider Eurozone Borrowing Rises to Record as Recovery Remains Weak.

The European Central Bank’s programme of quantitative easing has pushed down interest rates to ultra low levels, encouraging governments to borrow more in the early part of this year, despite turmoil in Greece.

Across countries that use the euro, average debt to gross domestic product reached 92.9 per cent in the first quarter of 2015, up from 92 per cent in the previous quarter and 91.9 per cent in the same period last year, according to figures from Eurostat, the EU’s statistical agency.

Greece remains the EU’s most indebted nation, with debt equal to 169 per cent of annual GDP, but Italy, Belgium, Cyprus and Portugal also carry government debt that exceeds 100 per cent of economic output.

The rise in debt comes despite a pickup in the pace of recovery in the eurozone, with the region’s economy expanding 0.4 per cent in the first quarter of this year — while the US saw a contraction.

Targets vs. Reality

The “Growth and Stability” pact on which the Eurozone was founded limits debt to 60% of GDP and deficits at no more than 3%.

Average Debt-to-GDP is 92.9% and rising.

Eurostat Data shows Ireland, Greece, Spain, France, Cyprus, Portugal, Belgium, Slovenia, and Finland all exceeded 3% budget deficit requirement in 2014.

France and Spain have been given warnings and extensions on numerous occasions.

Greece Sideshow

By any realistic measure, Greece is just a sideshow for what is to come.

Pater Tenebrarum at the Acting Man blog pinged me with this comment: “The true reason for the bust of Greece and other countries – apart from their truly atrocious socialist policies and abominable corruption – isfractional reserve banking. The euro has of course enabled an even bigger credit boom and bust than would have been the case otherwise, but it is not the fixed exchange rate that is at fault, it is the underlying economic policies and the monetary system as such.”

…click on the above link to read the rest of the article…

The Dangers of European Dis-Union

July 24, 2015

The Dangers of European Dis-Union

The “European Project” is under unprecedented stress from fissures both east-and-west (over the Ukraine crisis) and north-and-south (over the Greek and refugee crises) – and it’s unclear whether the Continent’s bureaucrats can keep the European Union from splintering apart, as Nat Parry explains.

The near collapse of the Greek economy and the harsh austerity package forced on Athens by the European Union has led to increasing commentary in recent weeks on what the developments might mean for the “European project” – the one-time seemingly inevitable drive on the European continent for an “ever closer union” based on principles of economic, social and territorial cohesion and solidarity among EU member states.

Far from a demonstration of cohesion and solidarity, as New York Times columnist Paul Krugmannoted in a July 12 op-ed, the lesson learned over the past few weeks is that “being a member of the eurozone means that the creditors can destroy your economy if you step out of line.” In Krugman’s view, the fundamental economics are simple enough: “imposing harsh austerity without debt relief is a doomed policy no matter how willing the country is to accept suffering.”

Krugman is not alone in his bleak appraisal of the situation. In testimony to the House Foreign Affairs Committee’s Subcommittee on Europe, Eurasia, and Emerging Threats on July 14 on the topic of “The European Union’s Future,” prominent American academic Stephen Walt said that the EU, despite its past achievements, now suffers from growing tensions and several self-inflicted wounds.

…click on the above link to read the rest of the article…

Fighting over democracy

July 21, 2015

Fighting over democracy

One of the problems of political science, and social science generally, is that it is hard to prove a hypothesis. A sceptic can always say that there were particular circumstances that affected the outcome. We only get to play our history once.

But the recent events in Brussels in which the ‘Institutions’ settled with Greece have, without any doubt, vindicated the work of the late political scientist Peter Mair. His book Ruling The Void, assembled after his sudden death by his lifelong friend and colleague Francis Mulhern, argued that we were watching a long secular decline in party political engagement, and secondly that our political institutions were being shaped so that they had the appearance of being democratic, but none of the structure. His critical case was the European Union; it looked as if had the right institutions in place, but it was not designed to permit opposition or the expression of representative democracy.

Removing opposition

Here’s one of the key passages from his book:

The behaviour and preferences of citizens constitute virtually no formal constraint on, or mandate for, the relevant policy makers. Decisions can be taken by political elites with more or less a free hand. … Despite the seeming availability of channels of access, the scope for meaningful input and hence for effective electoral accountability is exceptionally limited. It is in this sense that Europe seems to have been constructed as a protected sphere, safe from the demands of voters and their representatives. (pp 108-109)

Whatever failings Syriza has had in its “negotiations” with the EU, and whatever the particularities of the Greek history and situation, it has shown clearly that the EU as constituted is not willing to entertain any form of oppositional view that does not accept the broad principles of both austerity and neoliberalism/neomercantilism, even when this is both bad politics and bad economics.

…click on the above link to read the rest of the article…

Greece crisis: Banks reopen as government eyes return to normalcy

July 20, 2015

Greece crisis: Banks reopen as government eyes return to normalcy

Stock market remains closed

Greek banks opened their doors Monday for the first time in over three weeks, a move that the government hopes will help the economy get back to normal following a period dominated by fears over the country’s future in the euro.

Still, strict controls on the amounts individuals can withdraw remain and new austerity taxes demanded by the country’s European creditors mean that most everyday items are more expensive — from coffee to taxis to cooking oil.

In downtown Athens, people queued up in an orderly fashion as the banks unlocked their doors at 8 a.m., but restrictions on most transactions remained.

Though the daily cash withdrawal limit stayed at 60 euros, the government has given individuals a new weekly limit of 420 euros from this coming Sunday so they don’t need to trudge to the ATM every day.

Ready cash is something Greeks will need as new taxes also came into effect on a wide array of goods and services Monday.

Sales taxes have risen from 13 per cent to 23 per cent on many basic goods — including some meats, cooking oils, coffee, tea, cocoa, vinegar, salt, flowers, firewood, fertilizer, insecticides, sanitary towels and condoms.

Popular services were also hit by the new taxes: restaurants and cafes, funeral homes, taxis, ferries, cram schools and language schools.

The new taxes are part of a package of confidence-building measures that the Greek government had to introduce in order for negotiations on a third bailout to begin.

Since the Greek parliament passed the measures, creditors have sought to relieve the pressure on Greece. The European Central Bank has raised the amount of liquidity assistance on offer to Greek banks while Greece’s partners in the 19-country eurozone agreed to give Athens a short-term loan so it wouldn’t default on a 4.2 billion-euro debt due to the ECB on Monday.

…click on the above link to read the rest of the article…

Greece Is Now A Full-Blown Humanitarian Crisis – In 9 Charts

July 18, 2015

Greece Is Now A Full-Blown Humanitarian Crisis – In 9 Charts

The people of Greece are facing further years of economic hardship following a Eurozone agreement over the terms of a third bailout. The deal included more tax rises and spending cuts, despite the Syriza government coming to power promising to end what it described as the “humiliation and pain” of austerity. With the country having already endured years of economic contraction since the global downturn, The BBC asks, just how does Greece’s ordeal compare with other recessions and how have the lives of the country’s people been affected?

The long recession

It is now generally agreed that Greece has experienced an economic crisis on the scale of the US Great Depression of the 1930s.

According to the Greek government’s own figures, the economy first contracted in the final quarter of 2008 and – apart from some weak growth in 2014 – has been shrinking ever since. The recession has cut the size of the Greek economy by around a quarter, the largest contraction of an advanced economy since the 1950s.

Although the Greek recession has not been quite as deep as the Great Depression from peak to trough, it has gone on longer and many observers now believe Greek GDP will drop further in 2015.

Dwindling jobs

Jobs are increasingly difficult to come by in Greece – especially for the young. While a quarter of the population are out of work, youth unemployment is running much higher.

Half of those under 25 are out of work. In some regions of western Greece, the youth unemployment rate is well above 60%.

Riots in Athens: EU’s Impending Collapse?

July 16, 2015

Riots in Athens: EU’s Impending Collapse?

People move events. The Greek people are trying to shape their own history. They aren’t there yet—even the Left hasn’t quite joined them. But a coalescence of forces is on the horizon: either Syriza radicalizes or it will be left behind. Capitalism by its very harshness is creating its own antithesis. Ideological labels are not important; what is, is a genuine people’s government. The riots in Athens, while the Greek Parliament passed the austerity measures, may be the first sign of the breakup of the EU, itself a political formation of advanced capitalism unable to meet the needs of its poorer members.

“Breakup” is too strong a term. Shrinkage, disruption, and greater transparency, the last signifying EU’s role as spearhead for US-defined globalization, the mix of market fundamentalism and militarism, would be difficult to hide and all three revealing unity as a German-inspired economic monolith for achieving an intra-Europe division of labor, nations rich (North) and poor (South), while providing political cover for NATO in its continued prosecution of the Cold War. Austerity is repression, pure and simple. It is also, as I recently pointed out, the framework for class warfare, in both cases to the extreme detriment of working people. The people in the Athens street know this, know that Tsipras and Syriza have not done right by them. The public workers’ union went out on strike Wednesday. Crowds gathered before Parliament in the evening. Tsakalotos, the new finance minister, was shaken, reluctant to approve the bailout, in microcosm, representing the many, in and out of the party, who saw the mounting pressures and if not succumbed then made a forced choice.

This was not the affirmation one expects from a basic settlement, and rather, a period of deliberation, of gathering force that, should the EU turn the screws further, might well explode, not as revolution, but a willingness to say No and from there leave the eurozone and the EU itself.

…click on the above link to read the rest of the article…

Greece: Sound and Fury Signifying Much

July 16, 2015

Greece: Sound and Fury Signifying Much

All of Europe, and insouciant Americans and Canadians as well, are put on notice by Syriza’s surrender to the agents of the One Percent. The message from the collapse of Syriza is that the social welfare system throughout the West will be dismantled.

The Greek prime minister Alexis Tsipras has agreed to the One Percent’s looting of the Greek people of the advances in social welfare that the Greeks achieved in the post-World War II 20th century. Pensions and health care for the elderly are on the way out. The One Percent needs the money.

The protected Greek islands, ports, water companies, airports, the entire panoply of national patrimony, is to be sold to the One Percent. At bargain prices, of course, but the subsequent water bills will not be bargains.

This is the third round of austerity imposed on Greece, austerity that has required the complicity of the Greeks’ own governments. The austerity agreements serve as a cover for the looting of the Greek people literally of everything. The IMF is one member of the Troika that is imposing the austerity, despite the fact that the IMF’s economists have said that the austerity measures have proven to be a mistake. The Greek economy has been driven down by the austerity. Therefore, Greece’s indebtedness has increased as a burden. Each round of austerity makes the debt less payable.

But when the One Percent is looting, facts are of no interest. The austerity, that is the looting, has gone forward despite the fact that the IMF’s economists cannot justify it.

Greek democracy has proven itself to be impotent. The looting is going forward despite the vote one week ago by the Greek people rejecting it. So what we observe in Alexis Tsipras is an elected prime minister representing not the Greek people but the One Percent.

…click on the above link to read the rest of the article…

Why Greece Is The Precursor To The Next Global Debt Crisis

July 11, 2015

Why Greece Is The Precursor To The Next Global Debt Crisis

The Eurozone fantasy will be one of the early casualties

The one undeniable truth about the debt drama in Greece is that each of the conventional narratives—financial, political and historical—has some claim of legitimacy.

For example, spendthrift Greeks shunned fiscal discipline: here’s an account from 2011 that lays out the gory details: The Big Fat Greek Gravy Train: A special investigation into the EU-funded culture of greed, tax evasion and scandalous waste.

Or how about: Greek reformers want to fix the core structural problems but are being stymied by tyrannical European Union/Troika leaders: The Greek Debt Crisis and Crashing Markets.

Rather than get entangled in the arguments over which of the conventional narratives is the core narrative—a hopeless misadventure, given that each narrative has some validity—let’s start with the facts that are supported by data or public records.

The Greek Economy Is Small and Imbalanced

Here are the basics of Greece’s economy, via the CIA’s World Factbook:

Greece’s population is 10.8 million and its GDP (gross domestic product) is about $200 billion (This sourcestates the GDP is 182 billion euros or about $200 billion). Note that the euro fell sharply from $1.40 in 2014 to $1.10 currently, so any Eurozone GDP data stated in dollars has to be downsized accordingly. Many sources state Greek GDP was $240 billion in 2013; adjusted for the 20% decline in the euro, this is about $200 billion at today’s exchange rate.

Los Angeles County, with slightly more than 10 million residents, has a GDP of $554 billion, more than double that of Greece.

The European Union has over 500 million residents. Greece’s population represents 2.2% of the EU populace.

External debt (public and private debt owed to lenders outside Greece):

$568.7 billion (30 September 2013 est.)

National debt:

339 billion euros, $375 billion

Central Government Budget:

revenues: $119.5 billion

expenditures: $127.9 billion (2014 est.)

Budget surplus (+) or deficit (-):

-3.4% of GDP (2014 est.)

Public debt:

174.5% of GDP (2014 est.)

Labor force:

3.91 million (2013 est.)

GDP – per capita (Purchasing Power Parity):

$25,800 (2014 est.)

Unemployment rate:

26.8% (2014 est.)

Exports:

$35.8 billion (2014 est.)

Imports:

$62.8 billion (2014 est.)

…click on the above link to read the rest of the article…

We Are All (or Should Be) Greeks Now

July 10, 2015

We Are All (or Should Be) Greeks Now

Their ‘No’ vote splashes a spotlight on ugly austerity, and its powerful puppeteers.

The temple of neo-liberalism and its ideology of social suicide in the interests of the banks has been breached. The hysteria in European capitals (particularly Germany) after the resounding “No” vote by the people of Greece is entirely appropriate. For decades now developed country governments and their enforcers, the IMF and the World Bank, have managed to bamboozle people in country after country, convincing them that up is down and black is white — that austerity and recession are nirvana — pie in the sky, bye and bye.

Until now.

The “No” vote — accomplished despite a hysterical campaign of fear by literally the entire Greek and EU media — is like a bright flash of light, however momentary, revealing the true nature of the conditions imposed by international finance and its political puppets in Western capitals. And who better to wield that bright light than Greece’s heretic economist and (now former) finance minister Yanis Varoufakis. An accomplished economist and an even better propagandist, he single-handedly reframed the Greek crisis from one of blaming lazy Greeks to blaming greedy EU banks.

Talk about great theatre: to contrast himself with the endless stream of men in suits from the euro-zone bureaucracy, he gave a news conference the day of the vote wearing a T-shirt. He was rejected by his fellow finance ministers as a negotiator because he, unlike most of them, actually understood economics and was prone to ridiculing their constant repetition of neo-liberal slogans.

The war between democracy and international finance, effectively suppressed for decades by complicit Western politicians and co-conspirators in the corporate media, is now out in the open for all to see. And what we see should have us declare that we are all Greeks now.

…click on the above link to read the rest of the article…

European Leaders Promise The Greek Debt Crisis Will Be Resolved One Way Or Another On Sunday

July 10, 2015

European Leaders Promise The Greek Debt Crisis Will Be Resolved One Way Or Another On Sunday

The wait will soon be over. Greece submitted a final compromise plan to its eurozone creditors on Thursday, European finance ministers will meet on Saturday to discuss the proposal, and an emergency summit of all 28 EU nations on Sunday will make a final decision on what to do. The summit on Sunday is being billed as a “final deadline” and a “last chance” by EU officials. In essence, Greece is being given one more opportunity to embrace the austerity measures that are being demanded of them by their creditors. So has Greece gone far enough with this new proposal? We shall find out on Sunday.

For months, the entire planet has been following this seemingly endless Greek debt saga. Global financial markets have gyrated with every twist and turn of this ongoing drama, and many people have wondered if it would ever come to an end. But now European leaders are promising us that the uncertainty is finally going to be over this weekend…

This time, the leaders’ summit called for Sunday is being billed by all concerned as the definitive moment that will determine Greece’s future in the euro. It’s “really and truly the final wake-up call for Greece, but also for us — our last chance,” EU President Donald Tusk said on Wednesday, the day after the most recent emergency session.

So what is the general mood of European leaders as they head into this summit?

Overall, it does not appear to be overly optimistic.

For example, just consider what the head of the Bundesbank is saying…

Bundesbank Chief Jens Weidmann, meanwhile, said that central banks have no mandate to safeguard the solvency of banks or governments, and stressed that emergency liquidity to Greece should not be increased.

And even normally upbeat leaders such as ECB President Mario Draghi are sounding quite sullen…

…click on the above link to read the rest of the article…

Financial Nonsense Overload

July 7, 2015

Financial Nonsense Overload

Kelly Hensing

“Those whom the gods wish to destroy they first make mad” goes a quote wrongly attributed to Euripides. It seems to describe the current state of affairs with regard to the unfolding Greek imbroglio. It is a Greek tragedy all right: we have the various Eurocrats—elected, unelected, and soon-to-be-unelected—stumbling about the stage spewing forth fanciful nonsense, and we have the choir of the Greek electorate loudly announcing to the world what fanciful nonsense this is by means of a referendum.

As most of you probably know, Greece is saddled with more debt than it can possibly hope to ever repay. Documents recently released by the International Monetary Fund conceded this point. A lot of this bad debt was incurred in order to pay back German and French banks for previous bad debt. The debt was bad to begin with, because it was made based on very faulty projections of Greece’s potential for economic growth. The lenders behaved irresponsibly in offering the loans in the first place, and they deserve to lose their money.

However, Greece’s creditors refuse to consider declaring all of this bad debt null and void—not because of anything having to do with Greece, which is small enough to be forgiven much of its bad debt without causing major damage, but because of Spain, Italy and others, which, if similarly forgiven, would blow up the finances of the entire European Union. Thus, it is rather obvious that Greece is being punished to keep other countries in line. Collective punishment of a country—in the form of extracting payments for onerous debt incurred under false pretenses—is bad enough; but collective punishment of one country to have it serve as a warning to others is beyond the pale.

…click on the above link to read the rest of the article…

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