And all this with a Socialist as PM. I know how we crack that European parties are to the left of what they are here. Obviously this really isn’t true anymore.

Greece getting out of the euro, readopting the drachma, and devaluing are the way to go. That way they’ll have some credible sovereign way to control things. It probably won’t be enough but necessary nonetheless.

Thinking back a decade to Argentina’s dilemma, devaluing was one important part of the solution there, but not the only part. They also had (and still do) a robust agricultural export market to help. The booming commodities market was not of Argentina’s making, but it happened, and helped save them.

Greece doesn’t have any of that second factor in its favor. Perhaps that makes exiting the euro and devaluing its own currency all the more urgent.

“German Finance Minister Wolfgang Schäuble, who is reportedly doubtful that the country can be saved from bankruptcy, is preparing for the possibility of Greek insolvency. Officials in his ministry are currently reviewing scenarios for handling such a situation, exploring what it might mean for the rest of the euro zone. Under the first scenario for a Greek bankruptcy, the country would remain in the euro zone. Under the other, Athens would abandon the common currency and reintroduce the drachma.”

More here.

Greece’s only hope is to abandon the euro, and go back to drachma. Thus, they will regain control over the country. Otherwise, bankers are going to drain the life out of the Greek economy for a century. There is no other way. Just declare bankruptcy, and screw the rest of Europe.

Heard the austerity program described as ‘applying a leech to the patient’, which seems quite apt.

If Greece fails (likely), Portugul will be right behind. I think Spain would be the next speculator target.

Given that Germany is no longer willing to play banker (who could blame them?), you’re going to see a lot of governments turn inward to protect their own banks. Even France will have to accept reality at that point and do some writedowns.

Out of curiousity, does ANYBODY know of a country in history where austerity such as is currently being preached has actually worked to restart an economy?

Boxturtle (Insanity(n): The act of doing the same thing repeatedly and expecting a different result)

Wonder what the PTB have on the PM.

More bloodletting is on the menu. When will they wake up and get out of the euro? Greece may have problems but they are compounding it by going the austerity route. I wonder when all the PIIGS decide to exit and leave the euro to their northern members and maybe France. Sounds like a sort of war is in the offing. Hope it doesn’t get hot.

Has Greece made some announcement about going back to the drachma.

I thought they should have done that from the start and may have typed a comment to that regard. And tell their creditors to go to hell, just renig on debt payments until creditors were willing to bargain.

I’m no expert on sovereign debt repudiations but in the few cases I’m familiar with, credit gets reestablished quickly once the economy returns to health, so there doesn’t appear to be any downside.

Reelection money. Much like Obama, when push comes to shove, money talks and compassion walks.

I have this vision of the White House with a driveup window and a lighted menu board with items like “Criminal Forgivness $20M” “Financial bailout $100M” “Mainstream Media ignorance $10M” “Access to Unnamed sources $10M” “Town hall tickets $15.00″

Boxturtle (You want fries with that?)

If they exit the euro but do not reneg on the debt, they could have an even more severe problem. They will have debt denominated in another currency (the euro). The only way to get that money is to buy it on the open market. That is what the Weimar Republic did and that was one of the major causes of the hyperinflation b/c they had to use more and more of their currency as it continually depreciated.

Has Greece made some announcement about going back to the drachma.

Nothing public. I get the impression they’re not even disucssing it. I suspect I’m supposed to get that impression.

Germany is “contingency planning” for a greek exit. Dunno if they made those statements for market consumption or if they have inside information.

Boxturtle (If think if Greece was really planning an exit, you’d hear France squeal around the world)

Excellent point; thanks for making it.

One might A the simple Q: Why are creditor-debtor contracts sacred but not employer-employee contracts, but that would be rhetorical.

I’m off. Be well.

me too.

Deleveraging Society

We’re used to the dynamic of an overinflated market deleveraging and deflating. Societies aren’t markets, and there are obvious reasons that they should not be treated as if they were; so we’re not used to the thought that the same deleveraging dynamic can work on a whole society. Well, we better get used to the idea of societies deleveraging, because it sure begins to look like that’s exactly what’s happening, in Greece and throughout the developed world.

What makes societies in the developed world subject to deleveraging is that they have pushed their economies up to stratospheric heights on the back of consumerism. Capital failed, starting about a century ago, to do what Marx thought it would do, and grind Labor down inexorably to the limit of bare subsistence wages. Labor was allowed to get more than bare subsistence, and it promptly returned that surplus as consumer spending, allowing a virtuous cycle (well, virtuous if you assume that economic growth is virtuous) whereby more consumption begat more production, allowing wages to get further beyond bare subsistence, thus more consumption, etc.

Well, it begins to look like Capital is back in the saddle. It wants its money back, and it doesn’t care (it is, after all, an impersonal force) if it has to use a vicious cycle to deleverage our consumer society back to the point that Labor gets susbsistence and no more.

Oh, sure, from the viewpoint of society as a whole, all would suffer, industry and its captains as well as workers, from the massive contraction that this deleveraging would bring. But that’s the point. The pre-condition for Capital being back in the saddle is precisely that the climate of opinion has put us in a spot in which no one in power is looking out for the common good. Corporations have been given free rein because the prevailing conventional wisdom tells us that they know what’s best, and whill do what’s best, to achieve economic growth. But, of course, each corporation will, in fact, do exactly what is best for its individual growth, and that means squeezing their workers down to subsistence wages. Sure, it would be better for that corporation, it would have more demand to profit from, if other corporations didn’t imitate it, if they paid their workers ever higher wages so that they would have the money to spend on that corporation’s product. But an individual corporation gets the best of both worlds if it defects first and most ruthlessly from the social contract by which all give up the short-term advantage of paying lower wages in order to get long-term higher demand.

I’m not a prophet. I’m not even an economist. So I’m not going to say that this deleveraging is inevitable. But it has already begun. Sure, maybe we will be scared back from the brink, and reinstitute the societal control over corporations that we have let lapse. Maybe we’ll bring back Social Democracy, and revive its manifestation in this country, the New Deal. But what can be predicted confidently, is that this deleveraging becomes inevitable if we don’t do that, if we don’t get society back in the saddle, and take the reins back from Capital.

Maybe Marx wasn’t wrong about Capital inevtiably grinding down Labor, maybe he was just premature, didn’t reckon on the last minute assertions of societal control that, about a century ago, halted the process by wresting control of society from Capital. Well, Capital is back, busily wresting control back from society. We should probably stop it before it deleverages our consumer society to the point that the workers have nothing to lose but their chains.

simple..he and his family have a Swiss bank acct…with added coinage…used to know some top tier Greeks…hell look at Prince Phillip

If they had a real democracy and govt they could declare the debt odious issue criminal and civil charges against GS and all, and use teh Iceland money to rebuild their country and financial markets again.

nothing can save greece with more countries to follow.

these are totally corrupt politicians owned by the banks who create this debt then insist it be payed off on the backs of the people.

i tell you all it wont happen as the german people who are paying this debt have had enough!

china will also be entering economic crisis very soon.

the only hope is to break up the EU which should never have formed anyway and for ALL these countries to simply default on this fake debt.

if you want the model look at norway who went after the criminal bankers and told them you are going to jail and we are NOT paying for your debt!

and btw….theeconomies of greece and the US…ARE in a depression and have been since 2008.

and the worst..has yet to come!

I’m beginning to think there’s more going on here than we realize. Obviously, elected politicians like Papandreou know they are harming their citizens and committing political suicide with these grim austerity measures. So why do they persist? For that matter, why does Obama insist that the American Social Safety Net be cut even though that unpopular stance jeopardizes his own re-election chances? If the people in democratic nations are no longer in control, who is? If political accountability no longer determines the actions of elected leaders, what does?

The answer, I think, is that the world financiers, the superrich, the hedge fund managers and their ilk now have the western political world in a death grip. These economic terrorists have the power to destroy national economies on a whim or a hunch. Worse, I’ve come to conclude that the world economic system itself is a fraud that continues to exist only because everyone in power demands that everybody pretend it is viable. It is a Ponzi scheme and everyone is terrified of being left holding the empty bag so nobody allows anybody to stop pretending. The illusion must continue uninterrupted or it collapses like a house of cards.

Everyone knows that Greece can never repay its debts. Everyone also knows that the austerity measures being imposed only guarantee that the Greek economy will deteriorate ever more rapidly. You ask why Greece doesn’t just leave the EU. I think it is because German banks are the primary holder of Greek debt and they will suffer, some perhaps terminally, if Greece defaults. Greece must be kept afloat because the relatively healthy European economies will tremble and maybe crumble if Greece leaves the EU or otherwise defaults.

So why is Obama doing it? Why is Obama pursuing deeply unpopular attacks on the American Social Safety Net? Even allowing for his neoliberalism, one would think a politician like Obama would be motivated by reelection to do avoid pushing such extremely unpopular measures. What explains it? The world’s most powerful financial players — the World Bank, the IMF, the Federal Reserve — are all American either in fact or practice. The U.S. has used the IMF and World Bank to export “vicious capitalism,” often forcefully, over the past 30 years. Naomi Klein’s Shock Doctrine details the phenomenon. I believe that the Shock Doctrine has come home to the Western World and now even to the United States, like Frankenstein turning on his creator. The institutions and policies the United States elevated and forced upon the world have become more powerful than the nation that created them.

I’ve always felt that Greece has one major problem they have never addressed. Their food is just not very tasty. I know the “Eastern Mediterranean” diet is healthy. But it tastes mostly yukky.

Another thing, all the houses are painted the same color, white. That’s GOT to drag the economy down. You go into a paint store and they only got ONE color.

And lastly, guys in those skirts and the leotards with stupid hats. Their corrput politicians have spent them into a huge debt hole that they may NEVER dig out of. Oh, Im sorry, that’s the United States.

P.S. Did you see that Greek cruise ship from Epirotiki Line that was sinking and the captain was the FIRST one OFF the ship. Should tell you something about their leaders.

I agree – austerity is nuts.

However getting the rich to pay taxes is not – the idea of a property tax levy that will be appended to electricity bills, shutting off electricity if not paid, takes the rich out of the delays of the court system where judges can be bribed – it is a good collection technique used in one form or another in the US (heck, in those cities that try to not turn off unpaid utilities, if the city utility bill is not paid it is “attached” to the home and the mortgage company required to pay it as part of the mortgage loan collection – your monthly payment for the mortgage goes up with foreclosure if not paid).

Greek cruise ship from Epirotiki Line that was sinking and the captain was the FIRST one OFF the ship -

The 100 year old Epirotiki Line was taken over by the very rich that had the usual morals of the very rich – it was not a “Greek” thing – but the reaction to the event was – a forced sale, the end of the company, with the assets being picked up by Royal Olympia Cruises – at least that is how I heard the tale one late night in Athens!

:-)

I have no clue what really happen, but cruises on Royal Olympia have gone well for myself and all friends, relatives, and strangers.

LOL -

Anyone that has tasted Greek food knows that is a joke – indeed the complaint about not tasty is usually that the food is over seasoned for bland English taste buds that run away in fear of onion and garlic and herbs.

But the military outfit is as strange as the Scottish folks wearing short womens dresses – skirts – called “kilts”. Indeed both cultures used bagpipes in war (the Greeks first of course) with the Scots still having bagpipe “bands”.

And sanitary homes and streets despite animal use for transport – lime wash everywhere making for white colored homes – they really did not understand the Brit/EU love of painting homes and barns in a mix of animal blood and milk, and then walking around next to and in animal shit.

Greece is indeed a weird country.

:-)

Not just any old socialist, but the guy is the president of the Socialist International!

Tax hikes won’t work if there is no incentive for businesses and individuals in Greece to pay their taxes. Perhaps if those required in Greece actually paid taxes there would not be a problem. Perhaps if all in America paid their fair share–extremely high income, dividends, business taxes, ect–there would not be a problem here either.

Make all businesses in America pay their taxes. If they threaten to leave, fine. Let them be protected by Banana Republic police forces and military, and allow the other nations to nationalize them on a whim.