The incommensurate aims of the Greek people

I am continually amazed at the arrogance of the Eurozone leaders who in the face of palpable professional failure hold a straight face and continue to advocate the same disastrous policies as if nothing had happened over the last 7 years. I don’t believe they suffer from – cognitive dissonance. I think they know full well what they are doing and they personally do very well out of the chaos their policies are causing. But it is almost certain that the Greek people are suffering from a cognitive disorder brought on by historical experience and, more recently, by the media onslaught that has erroneously claimed that there would be catastrophic consequences if Greece dared to leave the Eurozone and restore currency sovereignty. The stated aims of the Greek people are incommensurate and there doesn’t appear to be a broad debate going on in Greece, which might make that inconsistency transparent.

The latest – opinion polling – from Greece with respect to the standing of the parties shows that:

Syriza has a 20.2% lead over main opposition New Democracy (ND) … Asked about their voting intentions, 36.7% of respondents said Syriza, 16.5% ND, 6.1% To Potami, 5.4% Golden Dawn, 3.9% KKE, 3.1% Independent Greeks and 2.5% Pasok.

57% of respondents prefer Alexis Tsipras as Greek prime minister, 21% prefer Antonis Samaras while the 18% answered none of them.

So the sentiments that were manifest at the January national elections have persisted except that New Democracy appears to have lost support. Certainly, Syriza’s support has not seemed to change at all.

At the January 25, 2015 legislative election the standings of the parties were:

1. Coalition of the Radical Left (SYRIZA) 36.34 per cent
2. New Democracy (ND) 27.81 per cent
3. Golden Dawn (ΧΑ) 6.28 per cent
4. The River (Potami) 6.05 per cent
5. Communist Party of Greece (KKE) 5.47 per cent
6. Independent Greeks (ANEL) 4.75 per cent
7. Panhellenic Socialist Movement-Democratic Alignment (PASOK-DP) 4.68 per cent
8. Movement of Democratic Socialists (KIDISO) 2.46 per cent
9. Union of Centrists (EK) 1.79 per cent
10. Teleia (Apostolos Gkletsos) 1.77 per cent

The respondents were also sure (mostly) that the Greek government would come to some sort of agreement with the Troika:

46% believe that there will be an agreement between the Greek government and lenders, 29% answered “probably yes”, 9% answered “no”, 10% answered “probably not”.

Although a significant minority did not think that the process reflected what we might call “negotiations”:

On the question whether the government has negotiated hard with Greece’s lenders 43% answered “yes”, whereas 29% said that the negotiation was “non-existent” …

Another poll was reported on May 11, 2015 from enikos.gr which told us that – More than 85% of Greeks want to stay in Eurozone.

Only “12.2% wish the opposite”.

Further, contrary to the other poll:

Nearly 75 (74.1%) of respondents think that Greece and its Euro partners will try to find a common ground and reach an agreement with mutual concessions, while just 20.6% thinks the opposite.

And:

More than 70% (71.9%) of respondents says the Greek government should make mutual concessions in order for Greece to remain in the Euro zone.

But then you read that the Greek people still have a so-called ‘red-line’ when it comes to the type of reforms that are tolerable.

1. 91.7 per cent of the respondents thought that the Greek government “should not accept an increase in VAT (Value-Added Tax) concerning basic commodities, 89.4% is against salary reductions and 85.8% against pension cuts”.

2. “More than 7 out of 10 of the respondents (75.2%) think the government should not accept the reduction of Social Solidarity Benefit for Pensioners (EKAS) or the reduction of the number of people who are receiving it.”

But despite the strong support for Syriza, only “21.3% of the respondents think the government should accept an agreement with our Euro partners only in case that such agreement includes all the demands of Syriza, even if that bring about a Grexit.”

But interestingly “nearly 40% (39.1) would opt for Grexit and implementation of other policies” if the concesssions required involved further cuts in “salaries and pension and increase in taxation”.

So how does one make sense of that seemingly inconsistent set of majority preferences? It is clear that a significant minority understand that the only option if the ‘red-line’ is crossed is to exit.

But still, a majority of Greeks do not want to accept or, perhaps, do not understand, that they – You can’t have your cake and eat it.

There are strong reasons for the preference to remain in the Eurozone. In a broad sense, it gives the battle-hardened Greeks a sense that they are in something that leaves their tawdry military dictatorship history behind.

There are also persistent effects – now they are in it and their nominal savings are denominated in Euros – then the fear is that major losses would occur if redenomination followed an exit.

There is a sense of timing as well. Had the costs that have since been lumbered on the Greeks from recession morphing into austerity-driven depression been anticipated, say in 2008, would the support for staying still be as strong?

The argument that things cannot get any worse so why accept more pain (from exit) is often used to defend these seemingly irrational polls.

The point is obvious:

1. Syriza was elected to stop austerity and it defined some sort of ‘red line’ beyond which it was unacceptable to cross. So there is a resonance of that in the opinion polls. The Greeks will tolerate cuts but not in certain areas.

2. Unless it leaves the Eurozone, it has to strike a deal with the Troika (however it is named these days). Without the credible threat of exit, all the bargaining power is in the hands of the creditors. They appear more concerned with enforcing the austerity dogma than the possibility that the Greeks will not be able to meet their debt repayments.

After all, the ECB, which holds a significant portion of Greek’s public debt knows (but would not admit it) that it can just write the debt off without impeding its own operations. That is the capacity of the currency issuer.

3. Syriza doesn’t have a credible threat because it has failed to educate the people of the costs and benefits of exit against on-going austerity. The logic of its electoral success was that it could march to Brussels and tell the elites that austerity was over and everyone would shake hands and that would be it.

The logic of the Eurozone, however, the antithesis of fiscal activism, unless the activism is of the austerity bent. If they concede to Greece that austerity is damaging and there is an alternative, then the game is up for them.

The whole structure and rules of the monetary union would be seen to have failed. So there is no way there will be significant concessions from the Troika.

4. So the Greek people want to remain in the Euro but don’t want the austerity to continue – two incommensurate positions.

That is the hallmark of a cognitively dissonant state.

It is no surprise that the population is so scared of leaving the Eurozone, despite it being a poisoned chalice.

They have been bombarded with Op Ed articles such as this one – Greece would face dire consequences from a euro exit – as its people know – which appeared recently (May 13, 2015) in the UK Guardian for some years now.

This article claims that:

It is not in the interests of either Greece or the rest of the eurozone to reinstate the drachma. An exit from the euro would lead to a run on the banks and the collapse of the Greek banking system. If Greece was shut out of international money markets, the temptation would be to meet the government deficit through printing money, leading to rapid inflation. People’s savings would be wiped out. And an effective devaluation might do little for Greece’s balance of payments anyway, except possibly through tourism. Poverty would become increasingly widespread.

Okay, the catastrophe hypothesis.

First, the run on the banks could be easily prevented through nationalisation and deposit guarantees. The government would be able to fund the guarantees as a result of restoring its capacity to issue the currency.

Then the question would be the conversion rate between the new currency deposits and the former Euro-denominated deposits. If the new currency depreciated significantly, then in the short-term there would be losses in the exchange.

But we have seen it in Argentina and, more recently, Iceland, once the crisis is over, the exchange rate adjusts back and what were initially losses are reduced or even converted to gains. It is not an unambiguous disaster.

Second, “international money markets” are powerless against the capacity of a currency-issuing government. The latter can set yields through appropriate central bank intervention should it wish to (unnecessarily) continue issuing debt.

If the “international money markets” don’t like the yields on the bonds offered then the central bank can purchase all the tender each time.

And, of course, such a government would not have to issue any debt at all. So it could fund domestic expenditure include a national Job Guarantee and infrastructure revitalisation to the limit of the available real resources.

No one would surely suggest that there are no idle labour resources that could be brought back into productive use via appropriately targetted job creation policies.

Please read my blog – Who is in charge? – for more discussion on this point.

Third, the hyperinflation bogey is always introduced when it becomes obvious that the ‘international financial markets’ scare is non-binding.

Whenever governments increase their deficits, mainstream economists and their pawns in the financial media make claims about the likely inflation that they say will result.

The large fiscal and monetary stimulus packages introduced by many governments to offset the GFC have not resulted in the predicted inflation.

It isn’t the first time that the doomsayers have been proven wrong. When QE was first introduced in Japan in the 1990s, mainstream economists rushed to predict that the massive expansion in central bank reserves would be inflationary.

Students in every mainstream macroeconomics class, and that means almost all students, would have predicted, based on the nonsense they were learning, that the high deficits and high public debt ratios in Japan at the time, should have driven interest rates sky high, that bond markets should have stopped buying government bonds, that the government should have run out of money, and all the time that these disasters were unfolding, that inflation should have been be galloping towards hyperinflation.

Nothing like that happened.

Neo-liberal economists wrote off their mistakes by claiming that Japan is ‘so strange’ that it is a ‘special case’ and therefore not generally applicable.

Their ad hoc defense was convenient because the Japanese experience with sustained high fiscal deficits, the world’s largest public debt to GDP ratio, close to zero interest rates, and deflation, was totally at odds with their economic theories.

It was a mind-boggling failure to explain reality.

Undaunted by their failure to understand Japan, the neo-liberals rehearsed the same logic when governments around the world introduced massive stimulus packages to combat the GFC. The economists were once again quoting from their undergraduate macroeconomics textbooks and predicting that it was only a matter of time before these nations would be heading down the Zimbabwean path.

Despite the significant increase in deficits and central bank reserves, inflation has been stable or falling. The economists were wrong again!

There are two arcane textbook notions that render so-called Overt Monetary Financing (OMF) taboo for neo-liberals. One (the money multiplier theory) is just plain wrong while the other (Quantity Theory of Money) has limited applicability during a recession.

Please read my blog – OMF – paranoia for many but a solution for all – for more discussion on this point.

The first notion is the rather technical sounding concept of the ‘money multiplier’, which links so-called central bank money or the ‘monetary base’ to the total stock of money in the economy (called the money supply).

Please read my blog – Money multiplier and other myths – for more discussion on this point.

The second notion then links the growth in that stock of money to the inflation rate. The combined causality then allows the mainstream economists to assert that if the central bank expands the money supply it will cause inflation.

As is often the case, many financial commentators who wax lyrical about the dangers of OMF do not even fully understand the theoretical route that is alleged to link central bank monetary expansion with inflation.

If there is idle capacity in the economy and firms who supply TVs, food, cars, etc have the capacity to supply those goods and services then they will defend their market share by increasing output and sales at the current price levels on offer.

Firms typically ‘quantity-adjust’ rather than ‘price-adjust’ when there is excess (idle) capacity. Otherwise, they risk losing market share.

Further, whether the government issues bonds or not does not alter the risk of inflation arising from government spending. The risk is tied to the idle capacity available not to the monetary operations that might accompany the spending.

Deficit spending increases private bank account balances once all the transactions (purchases and sales) that arise from the initial spending impulse are accounted for.

The extra bank account balances may be used to buy the newly issued government bonds. In this way, the sale of debt by the government is really ‘borrowing’ funds that the government has already spent into existence when it ran the deficit.

The sale of bonds just alters the composition of the portfolio of assets that are held by the non-government sector (more interest bearing bonds and less bank deposits).

In that context, it makes no sense to say that government borrowing rations finite ‘savings’ which could alternatively finance private investment.

Please read my blog – Central banks can sometimes generate higher inflation – for more discussion on this point.

The UK Guardian assessment is typical of the mainstream catastrophe viewpoint that ignores the opportunities that would be provided to the Eurozone states if they restored their own currency and took some heed of what Argentina was able to achieve when it ignored the warnings and threats of the IMF and the international bankers and restored its own sovereignty.

There is nothing irrevocable about the euro or the Eurozone.

The UK Guardian article claims that:

A Greek exit would also damage Europe’s fragile growth prospects.

It would immediately stimulate growth in Greece. From the minute the government reversed its penurious fiscal position, GDP growth in that nation would start to rise.

From the wages of those employed in the Job Guarantee, from their spending in local shops, and from the orders placed with construction companies to renew decaying infrastructure.

It is a lie to claim otherwise.

Ultimately, and to the extent that the new currency depreciated somewhat (I don’t think it would much because it would be initially in short supply), exports would be boosted.

The UK Guardian article is worried about the “contagion” because the “markets would then focus on the next country likely to go down the same route and make it prohibitively expensive for it to borrow”.

More like, the residents in those other nations would start to see Greece prospering again and start demanding some of the same action from their own governments.

The elites are desperate for Greece to remain in the Euro because it can never become a demonstration case of how bad the common union actually is. While it stays in the monetary union, it can be blamed for profligacy and the workers can be accused of being lazy or overindulgent, especially when spurious comparisons are put out with Germany.

But once Greee leaves the Eurozone, then it will become obvious to all that the austerity lie is a lie. Greee would grow quite quickly from day one and demonstrate, just as Argentina did, the capacity of ones own currency.

The author of the UK Guardian article, by the way, works in the London financial markets (the City).

Out of interest, I checked how much variability there was in GDP per capita among the Eurozone states and compared it to measures of income per capita in the US and Australian states.

One measure of variability is the – Coefficient of Variation – which expresses the standard deviation of a sample as a percentage of its mean value. It has the advantage in ratio scales (like income per capita) because it is a so-called – Dimensionless quantity – is can thus be used to compare samples of different units or vastly different mean values.

Taking the GDP (or state income) per capita measures for Australia (data from the Australian Bureau of Statistics), US (data from the Census Bureau), Canada (data from Statistics Canada), and the Eurozone (data from Eurostat) we find the following results for the Coefficient of Variation:

1. US (2013) – 18.6 per cent.

2. Australia (2013) – 26.5 per cent.

3. Canada (2013) – 31.7 per cent (26.9 per cent if we exclude the outlier Northwest Territories).

4. Eurozone (19 nations) (2013) – 41.6 per cent.

In other words, three functional federations generate much less variability in total income among the constituent units (states, territories, provinces) than the nations signed up for the Eurozone.

This is because they have federal fiscal capacities which reduce the variability of economic outcomes across the sub-federal political units.

I agree with the latest offering of Guardian writer Larry Elliot (May 26, 2015) – Grexit: bookmakers put smart money on an unwise move – who says that:

The economic argument for Greece staying in the euro is weak. National output is down by a quarter in five years. The debt-to-GDP ratio is heading rapidly towards 200%. One in four people are unemployed and there is widespread poverty.

Demands from Greece’s creditors for more austerity is, in these circumstances, inhumane and economically crass

He also notes that the desire to remain in the eurozone yet not have to succumb to more austerity “is not an option”.

Which means that Syriza will likely fragment given the propensity for the leader to come to terms with the Troika and Syriza will, ultimately, prove to be a flawed experiment.

Conclusion

It is hard to tell what the balance within Syriza is between pro- and con Euro. But what is clear, under current political constraints it cannot deliver on its elected platform. In which case, what is its rationale?

One thing is certain – the elites hate the likes of Syriza and will grind it into the ground.

Maybe that is why the Finance Minister is now appearing more isolated and not playing along with the script. All power to him for exposing the elites and the austerity obsession for what it is. See – Varoufakis refuses any bailout plan that would send Greece into ‘death spiral’.

That is enough for today!

(c) Copyright 2015 William Mitchell. All Rights Reserved.

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    21 Responses to The incommensurate aims of the Greek people

    1. GrkStav says:

      “So the Greek people want to remain in the Euro but don’t want the austerity to continue – two incommensurate positions.”

      Only if one assumes that ‘the Euro’ (i.e. the EU and the Eurozone) will remain ‘as is’. In that case, yes, the positions are incommensurate.

      If not, if e.g. the idea is for an EU that is premised on actual popular sovereignty, with the European Parliament as a proper EU-wide Legislative branch (not the charade that it is, at present), with an actual EU ‘Federal’ sovereign, that imposes and collects taxes in euro and spends euro into the EZ, and is closer in its relationship to the ECB de facto and de jure to the relationship between the U.S. Federal government proper and the FRB then the ‘no (further and unnecessary) austerity’ and ‘stay in the EU and euro’ positions are not (as) incommensurate.

    2. Bob says:

      The other thing to note is if Greece strikes a deal, the euro will increase in value, harming Greek growth and net exports and increasing deflation. Warren Mosler has been making the case that the euro is undervalued due to irrational QE fears and now (justified) Grexit fears. But with ideological restrictions on currency purchases at the ECB, J-curve, etc the move up may be extreme.
      Meanwhile euro trade surplus and tight fiscal policy drain euros and make them harder to get.

    3. Bob says:

      GrkStaf, this won’t happen until Greece gets more allies. This won’t happen because Mario “Hannibal Lecter” Draghi will only stop the country from going bankrupt if they accept austerity and “structural reform.”
      Greece needs Grexit now!

    4. bill says:

      Dear GrkStav (at 2015/05/27 at 17:16)

      Under your second option (full federalism) then the Eurozone can work and deliver prosperity. I live in NSW (and Victoria some of the time). I wouldn’t want either to adopt their own currency nor leave the Australian federation.

      The question is what is the probability of the second option. In my book on the Eurozone I analyse that case and conclude there is a very low to zero probability of a properly functioning federation arising.

      best wishes
      bill

    5. Bob says:

      “More like, the residents in those other nations would start to see Greece prospering again and start demanding some of the same action from their own governments.”
      I strongly disagree with this. This has already happened in Iceland (and Argentina.) No more knowledge gained and the corporate media will spin it as disaster.
      Plus, when Greece or other countries are at risk of leaving, the euro declines in value, so the competitiveness boost is less.
      There is too much talk of finance and not enough talk in real terms – could you give us more Grexit details how will Greece plan it and obtain basic resources.
      Now oil price is down perfect time to do it!

    6. Bob says:

      The euro disaster won’t end until the German citizens vote out neoliberal policy and exit the euro – boosting the value of their savings and reducing inflation.

    7. Neil Wilson says:

      The desire of the Left elite, of which Varoufakis is one, is for a Federal Europe. That is the end game and they sacrifice all on that premise.

      Unfortunately it is a pipe dream that will not happen. Firstly the people of Europe don’t want it and secondly the corporations of Europe won’t allow it to happen.

      What you will get instead is a new Holy Roman Empire – an imperial project run by corporations for corporations with the ordinary people taking the place of the slave class that keeps it going.

      The right wing powers that be must kill themselves laughing as the Fabian elite do all the dirty work for them.

    8. Bob says:

      “The desire of the Left elite, of which Varoufakis is one, is for a Federal Europe. That is the end game and they sacrifice all on that premise.”
      Which is why we have to convince the right to do this. See e.g. my German strategy. I think eventually the nationalist right will exit and it will be deja vu over again in Europe. But the neoliberal right just love the current system.

    9. “One thing is certain – the elites hate the likes of Syriza and will grind it into the ground.”

      Nope.
      Marxists are effective centralizers of power and therefore of tremendous use when the appropriate conditions arrive.
      The money power has control of the stuff and has little use for money in the conventional profit seeking sense.
      When you have all the money in the world you will seek more then profit , you will seek control over thoughts and actions.
      These guys play a long game.
      Their goal is to turn the world into a larger Holland.

      New kids will be born into this world.
      They will have no understanding of the past other then absurd fairy tales.
      These roboten can be further moulded into the bankers image or at least in the images they require.
      All they need is more time……..kids born in 2008 are already the age of 7. – they know no different.

      PS notice children today – they do not play as we once did.
      Games 1000s of years old are now defunct.
      Their minds can be more easily shaped.

    10. James Schipper says:

      Dear Bill

      Greeks with substantial savings would indeed be the losers if their savings were converted to drachmas at the ratio of 1:1. However, what percentage of the Greek population has substantial savings?

      How about the idea of using 2 conversion ratios? Let’s say that the normal ratio would be 1:1, but the ratio for bank deposits would be 1.5 drachma for every euro. If someone has 10,000 euros in the bank, he will have 15,000 drachmas after the conversion. If he receives a pension of 800 euros, he will receive a pension of 800 drachmas after the conversion.

      Regards. James

    11. Tsigantes says:

      Writing from Athens.

      It’s interesting to note that while voter intention has risen fractionally for SYRIZA (.36%) every other party in parliament
      has lost support, to a total of 20.82%; ND dramatically with an 11.31% loss, while PASOK at 2.5% is out of parliament.

      Apropos your comments about the Greek conundrum (as I have noted here before) wanting to stay in the eurozone is
      NOT commensurate with loving the euro (not!) / eurozone (not!) / EU (not!). In fact there are some significant polls (EU
      Gallop poll 2014) which show EU/euro-love in Greece way below 50%. The question asked was different though, i.e.
      actual attitude, and not concerned with the negotiations underway. If Greece could get out without further punishment
      from the EZ, with a debt haircut, have its own currency and be a sovereign state once more, I can assure you that the
      poll would be unanimous in favour.

      The real reason is FEAR.

      – Fear of MORE pain by the 42% of the population in which families and extended families are wholly dependent on
      one old age pension supplemented by charity, garbage picking and the like; and fear / solidarity with this enormous
      group from the better off (and just barely better off). More than 60% of Greeks are dangling on a thread of subsistence/barely scraping by.

      – Fear of massive retribution from the Eurozone re debt resolution if default / Grexit occurs.
      5-6 years of trolling, threats, disinfo, propaganda, austerity, indifference to humanitarian disaster, economic
      destruction and continued demand for even more austerity (and refusal to admit mistakes) since February has bred into
      our bones the conviction that Greece could be incredibly worse off.

      – Propaganda from EU, ECB, IMF, and Wall st/EU press. We have understood that it is propaganda, and withstood it, but
      the sheer relentless malice driving it provokes the reasonable assumption that there is no possibility of anything but further punishment. For any of the actors to peddle back from their lies would confirm them as lies: not gonna happen.

      – Understandable confusion amongst the general populace as to the outcome of default / Grexit.
      Conflicting information / scenarios makes this impossible to judge for most ordinary (non-economist) people. We
      would of course LIKE to believe we’d get back on our feet and flourish (in the long term we believe that would be the
      case) but are afraid that this could be pie-in-the-sky wishfulness, in light of points 2 & 3 above, and in light of
      countries like Argentina.

      – Yes, the timing is bad by now. When Grexit could have been helpful back in 2010, no Greek had experienced
      the EU/EZ predations, lies and bad faith. Also, see point 1. But we KNOW nothing will be better under Eurogroup’s prescriptions and only worse. Thus, our red lines. As for savings, the rich took their money out years ago. The middle
      class with savings took them out of the banks recently. Businesses too removed any fat they may have. All that is left
      in Greek banks are tax accounts, payroll and public/private bodies.
      Meanwhile any illusion that Europe represents a civilisational vaccine immunizing us against our military junta past
      died long ago. A homegrown junta we can at least deal with!

      – One reason trotted out is that default / Grexit will only benefit the rich. Usually by Leftists with jobs. Stupid in my
      eyes in that the rich benefit in all situations these days unless someone politically targets them: only SYRIZA can do
      that. And is doing that.

      – Nobody is worried about the banks since they are virtually empty and technically – though not yet officially – nationalized.

      – A portion (and gov’t) are afraid of forced Grexit from the EU by way of EU malice since EU maritime borders are also Greece’s maritime borders and while Turkey acknowledge’s the EU’s EEZ under international law it refuses to
      recognise the Greek and Cypriot EEZs, militarily violating our seas and airspace daily. See Turkish non-recognition of Cyprus as a state.

      Concerning your point 3, given SYRIZA’s strategy, the one thing it cannot afford to do without being called out by the
      Eurozone / ECB / IMF is publicly prepare Greeks for exit / default; and without causing panic amongst the small % of
      the electorate that is genuinely pro-EZ/EU; and without bringing the powerful 20% of oligarch-supported corrupt
      crony greeks /their media into serious, perhaps panicked reaction. Since the media onslaught against SYRIZA and
      pro-Eurogroup/IMF/EU/EZ emanates first & foremost from Greece to the foreign press (the media is 92% owned by oligarchs and 100% of all TV) this is a force to be handled carefully.

      Finally, Greece’s geo-strategic importance to the US (and now again with its Russia policy), resulted in the Truman
      Doctrine 1948 and NATO entry in 1952, all external options have to be played carefully. But consider this: the sale of
      the Pireaus port to the Chinese, used as proof of SYRIZA’s “betrayal” of its mandate and Left principles – (the
      right wing anglo media defends Left purity? please!) – was noted carefully (and not mediatised) for what it is: a consolidation of China’s maritime Silk Road in Europe.

    12. John Doyle says:

      Here’s a sensible take on Greece’s dilemma.
      I’ve already said exit the common currency but stay in the eurozone, just like Britain.
      http://mythfighter.com/2015/05/17/what-does-the-eu-really-want-from-greece/
      Rodger Malcolm Mitchell has these sensible ideas, in 7 points

    13. Stuart Medina Miltimore says:

      And now the only argument they have left is the geopolitics of Greece’s membership in NATO, EU, etc…

    14. Adam K says:

      I disagree with the statement that there is no alternative this time. The neoliberals can be easily defeated with their own weapon. The best and possibly only way to induce Grexit is to spark panic and cause a massive run on the banks, preferably when it is impossible for the ECB to raise the limit on ELA. This will cause a domino effect and after a while (a few days) the process will be irreversible because of triggering of the payments of CDS contracts. People will be on the streets demanding “something” that is a guarantee of their deposits which can be obviously provided in the new currency but not in the old. This event will remove any room for the compromise (accepting the diktat) with the so-called “lenders” which is still possible. The panic can even be sparked by Varoufakis alone resigning from the government while delivering a speech spilling the beans about the so-called negotiations and telling the people to get the cash from banks before capital controls are imposed or a haircut (like in Cyprus) is enforced on deposits. He just needs to speculate a little bit – he doesn’t need to technically lie. I don’t believe he is the only person capable of introducing Drachma but he might be the only person who has the balls to pull the trigger. He has nothing to lose anyway because the Eurocrats want to topple his government and this is inevitable when it starts fracturing and splitting.

      What about the ELA (emergency-liquidity assistance program)? Wall Street Journal says (today) that “There hasn’t been any raise, since there is an unused liquidity buffer of 3 billion euros ($3.3 billion) and deposit outflows have stabilized at very low levels,” a Greek bank official said.”…”Greek banks were forced into ELA in February after the ECB suspended an exemption that had allowed banks to use junk-rated Greek government bonds as collateral for regular ECB loans. Since then, the Greek central bank has lent some EUR80.2 billion to Greek lenders.”

      This number, if true, is also actually the answer to the question I asked a few months ago about the outflow of deposits from the Greek banking system.

    15. Matthew 7:20
      Thus, by their fruit you will recognize them.

      Could the simple objective be to absorb the Greek economic refugee nation into the wider monetarist goo / gunk culture of the world.
      The economic tactics used on Greece have a war like intensity.

      The closer you are to village life the more bombs seem to drop on your head.
      Certainly Spain and Greek village life still remain in the memory of old folk unlike northern Europe.

    16. Jason H says:

      Unfortunately I feel the media will convince people that the Grexit has been all bad for the country and ignore the facts on the ground and scare people into believing their lies so far. Remember facts are just an annoyance to the bro-liberal elites that control the media. Hopefully enough people can visit Greece and see for themselves.

    17. Kevin Harding says:

      Neil Wilson is spot on in pointing out how the ‘liberal left’ or as he put it
      the ‘Fabian Elite’ are the useful fools of neo liberalsm.
      I think there are two reasons for this .One is the commonly held fallacy
      that the enemy of my enemy is my friend.Revulsion of Xenophobia and
      justifiable aversion to nationalism has led the liberals to not see the
      woods for the trees.
      Secondly there is a fundamental misunderstanding about the nature of power.
      In particular the relationship between democracy and power.The most
      important argument to win is the chartalist description of money transactions.
      To understand the reality of sovereign monetary power.

    18. Andy says:

      Bill

      In the event of Greece reintroducing its own currency, how important do you think it is that, at the same time, they develop and adopt robust taxation policies, at whatever level of deficit, in order to secure the viability of that currency in years to come ?

    19. micky9finger says:

      the Troika (however it is named these days)
      Changing the name seems so orwellian, but if we change it let’s stick with the Russian flavor and call it the organs.

    20. Daniel D. says:

      Neil Wilson says:
      Wednesday, May 27, 2015 at 18:11

      The desire of the Left elite, of which Varoufakis is one, is for a Federal Europe. That is the end game and they sacrifice all on that premise.

      Unfortunately it is a pipe dream that will not happen. Firstly the people of Europe don’t want it and secondly the corporations of Europe won’t allow it to happen.

      What you will get instead is a new Holy Roman Empire – an imperial project run by corporations for corporations with the ordinary people taking the place of the slave class that keeps it going.

      The right wing powers that be must kill themselves laughing as the Fabian elite do all the dirty work for them.



      I think these are excellent points.

      I also wonder if any/many look at the current Grexit question through the prism of the geopolitical power structure?

      It seems to me, at least, that the Atlanticist paradigm plays a larger role in this.

      If one reflects upon the recent and ongoing Ukraine struggle, Russia demonstrated that Americans are calling the shots in the EU and that France, Germany et al are mere vassal states in this arrangement. Not only through foreign policy (outsourced to NATO, which is US controlled) however, also when it comes to the domestic economies of those nations within the EU. National opinions of the EU electorate or elected leaders of the member nations do not figure in these decisions.

      The adoption of self-harming US authored sanctions, cancellation of the Mistral contracts and the gratuitous destruction of the south stream gas pipeline are but of few of the recent examples of US control over the EU, when US interests are concerned.

      Greece is bargaining with the Troika / EU which had its corporate mission statement forged in Washington. Washington certainly does not want to see the EU project fail, which surely a Grexit would trigger as many have argued. Should that happen, the world order deck would be once again shuffled and it’s difficult to imagine that the US would be dealt a winning hand.

      I am certainly no expert, however, I would guess that national interests would win the day and Germany, France and others would see their futures on the eastern horizon and act accordingly.

      Although Greece has no practical alternative, I would argue that Greece is negotiating with the wrong partner(s). The EU / Troika are the suits in the room representing their paymasters and cannot make a deal without the blessing of Washington.

      American Treasury secretary, Jack Lew, vows to use upcoming event to press Greece and European ministers to forge a rescue deal
      Lew later spoke to Greek prime minister Alexis Tsipras by phone.

    21. Bob says:

      Andy,
      I would call for land value taxation – look it up, although I am unsure what Bill thinks.

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