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How Germany Is Blowing Up The European Union
How Germany Is Blowing Up The European Union
As Germany is set to reject a Greek loan extension request (and no, international press, that is not the same as an extension of the bailout program), Steve Keen uses proprietary numbers issued by the OECD – which is supposed to be on Germany’s side?! – to show how dramatically austerity has failed in Europe- that is, if the recovery of the Greek and Spanish economies was ever the real target. It certainly failed the populations of the countries.
The problem is that nobody, not even the OECD can for Germany to answer to a report. But that does not make the case that is made, any less obvious, or bitter for that matter. Not many people remain ready to think that Greece will do what it has said it will, but I think they have been very consistent in their stated goals, and people get distracted too much by semantics at their own peril.
As Steve shows, and Syriza proclaims, more of the same is not on the table, for good reason. It will and can only make matters worse for Greece. Germany – and the ECB – choose to entirely ignore the consequences of their theories, in particular the humanitarian crisis they have caused in Greece. And any political union that ignores the misery it unloads upon its citizens has a short shelf life.
…click on the above link to read the rest of the article…
Meet the bureaucrat who had the courage to tell the truth (and probably won’t have a job tomorrow)
Meet the bureaucrat who had the courage to tell the truth (and probably won’t have a job tomorrow)
It’s not very often that you hear a senior government official refer to their economic situation using the word ‘crisis’.
Yet with uncharacteristic bluntness of any government official anywhere, at least one senior Chinese government official is sounding the alarm bells.
And he would know.
Guan Tao oversees the foreign exchange of China’s $4 trillion stockpile of reserves, so he has an incredibly unique view of capital flows and currency movements in and out of the country.
Currency movements and capital flows are extremely interesting indicators.
They don’t necessarily tell you that there’s a problem. They tell you that people have figured out there’s a problem.
Look at Greece, for example.
The government is bankrupt, another default is looming, and the country is literally about to run out of money. It’s pretty obvious that there’s been a problem for a very long time.
But the central bank data in Greece now shows that roughly 8% of all customer deposits have vanished from the Greek banking system so far this year.
That’s an astonishing figure.
…click on the above link to read the rest of the article…
Game theory and the king’s new clothes
Game theory and the king’s new clothes
I’ll admit to being a bit obsessed with Syriza and the Eurozone at the moment (here and here): it is by some way the most interesting development at the moment in both politics and economics. And I’m also interested in the idea that Yanis Varoufakis’ background teaching game theory might have some bearing on the outcome of the talks with the Eurozone, especially now that he has gone out his way, in the New York Times to say that exactly the opposite is true. It’s worth spending a bit of time on this.
Selfish players
In an op-ed article in the NYT, he spelt this out.
“Game theorists analyze negotiations as if they were split-a-pie games involving selfish players. … The trouble with game theory, as I used to tell my students, is that it takes for granted the players’ motives. In poker or blackjack this assumption is unproblematic. But in the current deliberations between our European partners and Greece’s new government, the whole point is to forge new motives. To fashion a fresh mind-set that transcends national divides, dissolves the creditor-debtor distinction in favor of a pan-European perspective, and places the common European good above petty politics, dogma that proves toxic if universalized, and an us-versus-them mind-set.”
As it happens, Bill O’Grady has done a game-theoretical analysis of the Syriza-Eurozone negotiations, and it’s easy to see why the “negotiations” are not going well. This is the pay-off table from Syriza’s side of the desk.
…click on the above link to read the rest of the article…
Greece and the Endgame of the Neocolonial Model of Exploitation
Greece and the Endgame of the Neocolonial Model of Exploitation
With the bankruptcy of Greece now undeniable, we’ve finally reached the endgame of the Neocolonial-Financialization Model.
We all know how old-fashioned colonialism worked: the imperial power takes physical control of previously independent lands and declares its ownership of the region as a newly minted colony.
What’s the benefit of controlling colonies? In the traditional colonial model, there are two primary benefits:
1. The imperial power (the core) extracts valuable commodities and low-cost labor from its colony (the periphery)
2. The imperial power sells its own high-margin manufactured goods to the captured-market of its colony.
This buy low, sell high dynamic is the heart of colonialism, which can be understood as one example of the The Core-Periphery Model (June 11, 2013).
The book Sweetness and Power: The Place of Sugar in Modern History is an excellent history of how this model worked for Great Britain.
The tensions this model generated in the colonial elites of America are brought to life in Tobacco Culture: The Mentality of the Great Tidewater Planters on the Eve of Revolution.
This traditional model of colonialism was forcibly dismantled in the 1940s-1960s. Former colonies established their political independence, a process that diminished the wealth and global reach of former colonial powers.
…click on the above link to read the rest of the article…
Failed Discipline, Failed Reforms and Grexit: Why the Euro Failed
Failed Discipline, Failed Reforms and Grexit: Why the Euro Failed
There is no substitute for the discipline of a market that cannot be manipulated by political elites.
It’s not that difficult to understand why the euro is doomed to fail. Given its structure, there is no other possible outcome but failure. Greece’s exit (Grexit) will simply be the first manifestation of the inevitable structural failure of the euro.
To understand why this is so, we have to start with two forms of discipline: the market and the state.The market disciplines its participants by discovering the price of not just goods and services but of currencies and the potential risks generated by fiscal and trade imbalances.
When nations issue their own sovereign currencies, the global foreign exchange (FX) market enforces an iron discipline on all participants. If a nation prints excessive quantities of its currency without boosting its production of goods and services by an equivalent amount, the FX market punishes this nation by devaluing its currency.
The market provides unwelcome feedback to the imbalances of interest rates, credit and currency: imports become prohibitive, nobody wants to buy the nation’s bonds unless the interest rate compensates for the higher risk, and so on.
…click on the above link to read the rest of the article…
YANIS VAROUFAKIS: THE STRAW THAT BREAKS THE PONZI’S BACK?
YANIS VAROUFAKIS: THE STRAW THAT BREAKS THE PONZI’S BACK?
What do you do when your opponent won’t play by the rules? Worse, what do you do when your loan ‘partner’ (aka ‘debtor’) declares Calvinball, where the only rule is there are no rules, and proceeds to go off the deep end? The result, to put it mildly, is utter chaos, at least for those who expect the (self serving) rules to be adhered to. After all, the central bankers’ henchmen admonish, we’re all civilized here. So come back to the table and play nice. “Do it for the kids,” they plead – the epitome of hypocrisy since their stacked deck and tilted playing field does precisely the opposite.
There is an old and familiar saying in the financial world, no doubt a product of game theory brinkmanship, which speaks to the role reversal of power and leverage once the monster debtor owes such an astronomical amount they can no longer pay to service the note, let alone chip away at the principal. The supposedly weak suddenly inherit the Earth, or at least they wield a very long lever along with a fulcrum with which to move the central banker’s world.
It is most likely a safe bet to say those reading this article clearly see the unsustainability of the present day economic system. The vicious cycle of debt requiring ever more debt just to tread water leads nowhere else but into the abyss of inexorable socioeconomic crumble, if not all out chaos and collapse. At the very least we are facing war; the only real question is will it be worldwide and involve a nuclear exchange.
…click on the above link to read the rest of the article…
Memo To Obama: Butt Out Of The Greek Crisis—-You’ve Dispensed Enough Keynesian Poison At Home
Memo To Obama: Butt Out Of The Greek Crisis—-You’ve Dispensed Enough Keynesian Poison At Home
At the moment, Europe is struggling to pass an inflamed financial gallstone. The sooner that Greece is permitted to escape the debt clogged financial ducts fashioned by its Brussels paymasters, the sooner the entirety of Europe can begin the cure of debt liquidation and return to honest finance.
In their wooden-headed insistence that Greece remains obligated to 100% of its crushing $350 billion debt load, the Germans are, ironically, doing the work of the financial gods. By making it literally impossible for the new Greek government to abide by its voter mandate, Berlin is paving the way for “grexit” and is thereby setting-up the catalyst for the Euro’s demise. And with it, of course, the obliteration of the EU’s rotten regime of bank bailouts, central bank money printing and fiscal policy anesthesia.
Hallelujah! Europe and the world desperately need a big, bloody sovereign default, and there is no more worthy case than Greece. As Finance Minister Varoufakis so inconveniently stated last week, Greece is a “bankrupt state” and has been since the crisis first erupted back in 2010.
Accordingly, the Brussels bailout transfer of that impaired debt from the banks and investors, which had so richly earned the right to experience deep losses owing to their lack of prudence, to EU taxpayers was a stupendous act of economic and political folly. It paved the way for the very evil that the fiscally resolute Germans profess to fear the most. Namely, central bank financing of state deficits and the unleashing of politicians to thereby ultimately bankrupt it.
…click on the above link to read the rest of the article…
Greece and Euroland’s Crumbling McMansion of Debt
Greece and Euroland’s Crumbling McMansion of Debt
All the gimmicks lenders press on borrowers to maintain the artifice that the loan is being serviced are financial frauds.
Sometimes the best way to summarize a complex situation is with an analogy. The Greek debt crisis, for example, is very much like the subprime mortgage crisis of 2007-08.
As you might recall, service workers earning $25,000 annually got $500,000 mortgages to buy McMansions in subprime’s go-go days. The applicant fudged a bit here and there on income and creditworthiness, and lenders reaping huge profits from originating and selling mortgages were delighted to ignore prudent underwriting standards and stamp “low-risk” on the mortgage because it was quickly sold to credulous investors.
The bank made its money in transaction and origination fees, and passed the risk of default on to investors who accepted the fraud that the loan was low-risk.
The loan was fundamentally imprudent and risky because the borrower was not qualified for a loan of such magnitude. But since the risk was distributed to others, the banks ignored the 100% probability of eventual default and skimmed the profits upfront.
Greece was the subprime borrower, and its membership in the euro gave the banks permission to enter the credit rating of Germany on Greece’s loan application. Though anyone with the slightest knowledge of Greece’s economy knew it did not qualify for loans of such magnitude, lenders were happy to offer the loans at interest rates close to those of Greece’s northern neighbors, and then sell them as low-risk sovereign debtinvestments.
…click on the above link to read the rest of the article…
Athens vs. Brussels: Greece Inches Closer to Renewal of Debt Crisis
Athens vs. Brussels: Greece Inches Closer to Renewal of Debt Crisis
The new government in Athens is intent on forcing Europe to change its approach to Greek debt — thus far in vain. A confrontation is brewing, and both sides stand to lose.
After new Greek Finance Minister Giannis Varoufakis had been repeatedly rebuffed on his introductory tour of European capitals, he opted for flattery and solicitation during his visit to Berlin last week. German Finance Minister Wolfgang Schäuble, Varoufakis said, had been an object of his admiration since way back in the 1980s for his dedication to Europe. He said that his host’s career, focused as it has always been on European unity, has been impressive.
Varoufakis went on to say that Germans and Greeks are linked by their experiences of suffering. Just like the Germans, who were yoked with the burdensome Versailles Treaty after losing World War I, his country too has been humiliated by agreements forced onto it from the outside. Both countries, he said, suffered from deflation and economic depression, the Germans in the 1930s and the Greeks today. “The Germans understand best how the Greeks are doing,” Varoufakis said.
Schäuble’s sympathy for Varoufakis’ plight was limited. Indeed, the German finance minister sees Greek demands for an end to the troika and for a renegotiation of previous agreements as an affront. “We agreed to disagree,” is how Schäuble summed up their meeting, a tête-à-tête that took 45 minutes longer than the one hour that had been scheduled.
Just one day prior to his meeting with Schäuble last Thursday, Varoufakis had been given the cold shoulder at European Central Bank headquarters in Frankfurt. ECB head Mario Draghi rejected virtually all of Varoufakis’ requests, including his demand for more leniency on debt repayments. That evening, the ECB opted to stop accepting Greek government bonds as collateral, a move which will make it even more difficult for banks in Greece to access liquidity. The move came as a surprise to Varoufakis. Draghi had told him nothing about it during their meeting that morning.
…click on the above link to read the rest of the article…
Could Turkey Become the New Ukraine?
Could Turkey Become the New Ukraine?
The deepening crisis in Ukraine is boosting Turkey’s decade-long efforts to establish itself as the lynchpin in energy flows from eastern providers to European customers.
On February 8, Turkish Energy Minister Taner Y?ld?z and Gazprom Chief Executive Officer Alexei Miller surveyed possible routes for the so-called “Turkish Stream” gas pipeline, a multi-billion-dollar project that could funnel up to 63 billion cubic meters of natural gas under the Black Sea from Russia to Turkey, and on to Greece and the European Union.
The project, announced by Russian President Vladimir Putin during a December 2014 state visit to Turkey, shook the energy world. It would supersede the partially built Russia-to-Bulgaria “South Stream” pipeline.In mid-January, Moscow announced Turkish Stream would replace its existing pipelines crossing Ukraine to European markets.
Construction of the Turkish Stream’s first section should be completed by December 2016, according to Gazprom.
The pipeline’s cost and size leave lots of room for doubt about whether the project will ever be realized. Skeptics suggest it is a mere bargaining chip for Moscow in ongoing maneuvering with Brussels over Ukraine-related sanctions.
…click on the above link to read the rest of the article…
Keeping Greece in the eurozone is worth the pain: Don Pittis
Keeping Greece in the eurozone is worth the pain: Don Pittis
To misquote Mao Zedong, creating a single currency is not a tea party. Despite former U.S. central banker Alan Greenspan’s disparaging comments about the future of the euro, Americans had far worse problems creating a single currency.
The question facing the Europeans as they hammer out a deal with Greece is whether the long-term advantages of the euro outweigh the pain of the current ructions. If the American experience is any guide, it is worth it.
Greenspan has been widely quoted as predicting the collapse of the eurozone, led by the forced exit of Greece. In the interview on the BBC, however, Greenspan did not specifically link the two, as in cause and effect.
But he did say that, in the long term, the European currency union is untenable.
“There is no way I can conceive of the euro continuing unless and until all of the members of the eurozone become politically integrated,” Greenspan told the BBC’s Mark Mardell.
What Greenspan conveniently seemed to forget is that for Americans (and even Canadians), settling on a single unit of payment was a long and painful process. It costs money. And if U.S. history is any guide, it does not depend on perfect political integration.
…click on the above link to read the rest of the article…
Athens vs. Brussels: Greece Inches Closer to Renewal of Debt Crisis
Athens vs. Brussels: Greece Inches Closer to Renewal of Debt Crisis
After new Greek Finance Minister Giannis Varoufakis had been repeatedly rebuffed on his introductory tour of European capitals, he opted for flattery and solicitation during his visit to Berlin last week. German Finance Minister Wolfgang Schäuble, Varoufakis said, had been an object of his admiration since way back in the 1980s for his dedication to Europe. He said that his host’s career, focused as it has always been on European unity, has been impressive.
Varoufakis went on to say that Germans and Greeks are linked by their experiences of suffering. Just like the Germans, who were yoked with the burdensome Versailles Treaty after losing World War I, his country too has been humiliated by agreements forced onto it from the outside. Both countries, he said, suffered from deflation and economic depression, the Germans in the 1930s and the Greeks today. “The Germans understand best how the Greeks are doing,” Varoufakis said.
Schäuble’s sympathy for Varoufakis’ plight was limited. Indeed, the German finance minister sees Greek demands for an end to the troika and for a renegotiation of previous agreements as an affront. “We agreed to disagree,” is how Schäuble summed up their meeting, a tête-à-tête that took 45 minutes longer than the one hour that had been scheduled.
Just one day prior to his meeting with Schäuble last Thursday, Varoufakis had been given the cold shoulder at European Central Bank headquarters in Frankfurt. ECB head Mario Draghi rejected virtually all of Varoufakis’ requests, including his demand for more leniency on debt repayments. That evening, the ECB opted to stop accepting Greek government bonds as collateral, a move which will make it even more difficult for banks in Greece to access liquidity. The move came as a surprise to Varoufakis. Draghi had told him nothing about it during their meeting that morning.
…click on the above link to read the rest of the article…
The Euro’s Exponential Decay
The Euro’s Exponential Decay
I don’t know about you, but I’m having a ball reading up on the preparations for the Wednesday/Thursday talks between Greece and .. well, everybody else. German FinMin Schäuble proudly declares that it’s do what I tell you or you’re finished, Greek FinMin Varoufakis says prepare for a clash. Greek advisors Lazard say a $100 billion debt reduction sounds reasonable, and some anonymous EU official says Lazard are incompetent and counterproductive (not smart, that).
When will the Brussels luxury cubicles understand that the Greek people have voted down their approach fair and square? That they voted down the government that made deals with the Troika for the very and explicit reason that they made those deals in the first place, and that telling the newly elected government to stick by those deals regardless is a corruption of democracy? So far, all the EU has (anyone notice how silent the IMF has been?) is hubris, bluster and chest-thumping.
They play politicians, but Syriza plays real life. Tsipras and Varoufakis stand up for real people, while Schäuble and Dijsselbloem and their ilk stand up only for themselves. And then pretend, in front of their bathroom mirrors and the news cameras, that they protect their own people against the greedy Greeks. As for the 50%+ of young Greeks who have no future, or the countless elderly who go without basic health care, too bad and boo hoo hoo.
…click on the above link to read the rest of the article…
Europe’s Greek Showdown: The Sum Of All Statist Errors
Europe’s Greek Showdown: The Sum Of All Statist Errors
The politicians of Europe are plunging into a form of ideological fratricide as they battle over Greece. And “fratricide” is precisely the right descriptor because in this battle there are no white hats or black hits—-just statists.
Accordingly, all the combatants—the German, Greek and other national politicians and the apparatchiks of Brussels and Frankfurt—- are fundamentally on the wrong path, albeit for different reasons. Yet by collectively indulging in the sum of all statist errors they may ultimately do a service. Namely, discredit and destroy the whole bailout state and central bank driven financialization model that threatens political democracy and capitalist prosperity in Europe——and the rest of the world, too.
The most difficult case is that of the German fiscal disciplinarians. Praise be to Angela Merkel and her resolute opposition to Keynesian fiscal profligacy and her stiff-lipped resistance to the relentless demands for “more stimulus” from the likes Summers, Geithner, Lew, the IMF and the pundits of the FT, among countless others. At least the Germans recognize that if the EU nations are going devote 49% of GDP to state spending, including nearly a quarter of national income to social transfers, as was the case in 2014, then they bloody well can’t borrow it.
Notwithstanding the alleged German led austerity regime, however, that’s exactly what they are doing. Germany has managed to swim against the surging tide of EU public debt, lowering its leverage ratio from 80% to 76% of GDP in the last four years. Yet the overall debt ratio for the EU-19 has continued to soar—meaning that the rest of the EU drifts ever closer to fiscal disaster.
…click on the above link to read the rest of the article…
Behind The Global – Game Of – Thrones
Behind The Global – Game Of – Thrones
Greek PM Alexis Tsipras yesterday laid out Syriza’s stance, and from what I saw he didn’t pull even one punch. Despite all the suggestions from the financial press throughout the past week that Tsipras and Varoufakis reneged on campaign promises to seek debt write-downs, they didn’t, and never have – other than perhaps in semantics.
Which I don’t find the slightest bit surprising. I would have been very surprised if they had. The misinterpretation, and the faulty expectations, are easily explained through the fact that – most of – these guys are not politicians, which they very deliberately expressed in the way they dressed for their meetings with ‘Europe’s finest’.
They don’t see the ‘space’ career politicians see to negotiate away the mandate their voters have given them. For them it’s simple: we were elected on our program – which in this case happens to be to end the misery forced upon Greece by the European and Troika schemes -, and we’re not going to move away from that just because ‘the other side’ starts threatening us, or (a crucial difference in politics) because our voters may not vote for us again in a next election.
In their view, trying to scare Greece into even more submission, which is the overlying message emanating from Brussels and beyond, is entirely null and void because Greece can’t – and shouldn’t – sink any lower than it has. Very and refreshingly simple. No surprise there, but, at least on my part, just support and admiration. Syriza is fighting the fight many others don’t have the intellect, the chutzpah and/or the courage for.
…click on the above link to read the rest of the article…
