Greece – surplus, stimulus & strategy

by Daniel on February 3, 2015

I have a post up at, outlining some further thoughts about how Greece might go about negotiating. This post was rendered sightly obsolete by the FT headline this morning, but since the plan described corresponds pretty closely to “Program 1” in my article (spoiler: Program 1 is the bad one), I think it’s still relevant. Because Medium restricts comments to 200 characters and requires login, I tend to only get reasonable, concise comments there from people who have thought about the issues. So I thought I’d throw it open here to get plenty of the other kind …

Only kidding. Comments are open on this thread, but I only really want to hear from Greek people. By “Greek people”, I mean a) ethnic Greeks and b) people living in Greece. I have no means of establishing this, other than that regular Mr Angry type commenters whose names are known to me but who have never mentioned any Greek ancestry in the past are not going to get the benefit of the doubt. Everyone else – short questions relating to technical points or asking for clarification will be replied to, but otherwise please don’t. I might make a partial exception for really substantive points made by Spanish, Portuguese or Irish people if there’s a link between the Greek program and the outlook for their own country.



robotslave 02.03.15 at 9:47 am

Well, sir, I’m sure that all seems very fine to you and yours, but I, for one, am not Greek.


Odysseus Laertiades 02.03.15 at 9:51 am

“I might make a partial exception for really substantive points made by Spanish, Portuguese or Irish people”

What about Italians ? Seems discriminatory.


george 02.03.15 at 11:19 am

I started reading a recent piece on Medium about Greece: surplus, stimulus and strategy but when I suspected the author was a) not Greek nor b) living in Greece and was not just making a short technical point I stopped. Thanks for the tip.


Ronan(rf) 02.03.15 at 11:48 am

I had a Greek yoghurt this morning, does that at least get a couple of “+1″s ?


oldster 02.03.15 at 12:09 pm

Ronan’s criterion was definitively endorsed by Isocrates, when he said:

Ἕλληνας καλεῖσθαι τοὺς τῆς παιδεύσεως τῆς ἡμετέρας … μετέχοντας.

i.e. “they are rightly called Greek who share in our culture.”


Ze Kraggash 02.03.15 at 1:22 pm

There’s no Jew nor Greek.


TM 02.03.15 at 1:28 pm

I do hope for many authentic Greek commenters to show up (but you might consider holding a raffle and giving out door prizes – Greek yoghurt anyone?)


Magari 02.03.15 at 1:36 pm

I want to thank Daniel for inadvertently spawning some very funny comments.


Ronan(rf) 02.03.15 at 1:39 pm

I hope Shirley Valentine shows up.


Panos 02.03.15 at 2:02 pm

Alternative – Program 3. Greece maintains a primary budget surplus/deficit of 0, pays 2.5% of GDP out as interest and whole payment is invested back to the Greek economy. This could take many forms, direct foreign investment or equity purchases in Greek corporate etc. and so that there is no ambiguity the ‘lenders’ can decide where to invest.

Not only is this a strong economic signal to the markets but its also a political signal of solidarity to the Greek ailing nation not its corrupted past governments and ‘archousai’ class .


Joshua W. Burton 02.03.15 at 2:03 pm

Et, si fata deum, si mens non laeva fuisset
Impulerat ferro Argolicas foedare latebras,
Troiaque nunc staret, Priamique arx alta maneres.


William Timberman 02.03.15 at 2:09 pm

I don’t know whether or not it can be stretched to fit your guidelines, but in this piece, Wolfgang Münchau sounds rather more Greek than German. I particularly liked the paragraph beginning with Die deutschen Ajatollahs der Ordnungspolitik….


Niall McAuley 02.03.15 at 2:18 pm

Timeo Danaos et commenti ferentes


Peter K. 02.03.15 at 2:26 pm

I have some German ancestry and so feel entitled to comment. My great-grandmother came to America on a boat when she was very young. Her son, my grandfather, fought in the Pacific during Word War II. Two of his cousins were drafted by the Nazis and were sent to the Eastern front, never to be heard from again.

Still, I’d admit that dsquared has a better grasp of the situation from both the economic and political standpoints even though neither of us are Greek. I agree with what he wrote early on: it’s all political.

But what I understand Varoufakis and the Greeks are asking for according to the Financial Times is different from what he suggests above. I thought that the FT reported that the Greeks will ask for a 1.5 percent primary surplus and no write-down of the debt. The Greeks ask that their economy is given some room to grow and say the creditors can say whatever they want about the debt.

That seems reasonable, however I doubt the unreasonable creditors and Germans will go for it. As dsquared points out – and I’m inclined to bow to his expertise – it’s all about political control for the creditors. They won’t give it up or negotiate it away.

There’s the slight hope that Germans will be smart enough to see that a Grexit with a non-disaster post-EU Greece would be a disaster for their project, but I fear it’s a fool’s hope. My great-grandmother was always a stubborn lady. Incredibly hardworking and driven, but stubborn. (Even if this is deleted, it was still a useful exercise.)


Theophylact 02.03.15 at 2:34 pm

I have nothing to offer here but my moniker.


MPAVictoria 02.03.15 at 2:41 pm

I always wanted to join the Greco-Roman wrestling club at my high school but they practiced the same time CBC showed Simpson’s reruns…. So you know…


dr ngo 02.03.15 at 3:04 pm

When I went to college all the fraternity & sorority members were collectively referred to as the “Greeks.” Unfortunately, I never joined, and thus will remain silent hereafter.


Trader Joe 02.03.15 at 3:36 pm

I was a ΣΦØ until I wanted something more then I joined Gamma Delta Iota and have remained one ever since.

The greeks are part of Epislon Upsilon right now, but they too might be Gamma Delta Iota’s if all of these talks turn out to ΣΦØ.


Joshua W. Burton 02.03.15 at 4:04 pm

“Who are these coming to the sacrifice?
To what green altar, O mysterious priest
Lead’st thou that heifer lowing at the skies,
And all her silken flanks with garlands drest?”

(Owed, on a Grecian earn.)


MPAVictoria 02.03.15 at 4:12 pm

It little profits that an idle Greek
By this still economy, among these barren markets
Match’d with an evil troika , who mete and dole
Unequal laws unto our savage race
Who hoard, and sleep, and feed, and pay not debt.
Greatly, we suffer’d greatly, both with those
That loaned us, and alone, on shore.

/Can anyone else do better with the rest of it?


Somf 02.03.15 at 4:18 pm

Do any other eurozone countries have something close to program 2 ?

If not would theTroika be worried about contagion if program2 was followed or alternatively be keen on it as a way forward for other countries ?

Does the ECB announcement re QE create a nice way for the Troika to roll out programme 2 where needed?


Joshua W. Burton 02.03.15 at 4:35 pm

. . . Come, my friends,
‘Tis not too late to seek a newer deal.
Push off, and sitting well in order smite
The hounding Euros; for my purpose holds
To sail beyond the market, and the wrath
Of all the western banks, until I die.
It may be that the Gulf will buy us up:
It may be we shall touch the Cayman Isles
And see the great Onassis, whom we knew.
Though much is taken, much abides; and though
We are not now that strength which in old days
Moved oil and cargo; that which we are, we are;
One equal temper of expatriate wealth,
Made weak by various new reporting regulations, but strong in will
To strive, to seek, to borrow, and not to yield.


MPAVictoria 02.03.15 at 4:39 pm

Well fucking done Joshua!

* Stands up and claps


Andrew F. 02.03.15 at 5:38 pm

Insightful piece.

Scattered and short questions:

Do you think your analysis underweights the importance of the domestic political incentives and constraints on Greek leaders? Do those incentives and constraints align with what would be the best outcome for Greece given your analysis?

Do the incentives and constraints of those on the other side of the table align as well?

Since transparency of constraints is important here, do you see any constraints that are knowable and/or known by both parties, and constraints that are unknowable and/or unknown by both parties? That is, certain structural constraints due to the nature of domestic Greek institutions and law may be known to both parties, but other factors (e.g. Varoufakis’s personal ambitions and the effect on his preferences) may be unknown and unknowable to one or both parties (including perhaps Varoufakis himself).

To what extent is the sequencing of moves important here? Incentives and constraints may change based on the order and time in which all of this occurs.


Andrew F. 02.03.15 at 5:41 pm

Brilliantly done Burton!


Bruce Wilder 02.03.15 at 5:48 pm

I have a couple of questions.

But, first: well done, CT commentariat! (Really dd, have you no self-awareness?)

I looked at the FT article, and it was hard to map what V said to either Program 1 or Program 2.

My questions relate to two areas that really aren’t directly addressed in the article, but on which I think you might have some insight.

1.) In the spirit of a neo-physiocrat, what about the payments/trade balance? What’s the justification for the implication that Keynesian public spending stimulus is the strategic key to the level of Greek business activity and employment? Should this be at the center of a Greek Left gov’t’s “objective function”? Greece is a very small, very trade-dependent country integrated into the EU — whatever its “equilibrium” level of employment, it is an equilibrium determined by terms of trade, no? (A very large part of Greek trade activity — shipping — isn’t domiciled in Greece — I don’t know the implications.) I get why Greece might want the EU as a whole to engage in stimulus, but it seems to me that Greece should be focused on freeing a different set of strategic variables related to its ability to trade on good terms and get resources from abroad.

2.) What about the Greek banks? Aren’t they among the big holders of Greek public debt? And, isn’t the value of those holdings a strategic variable in whether those banks, and the associated payments system, survive the turmoil? Is a potential or continuing run on Greek banks a side-constraint on the political game run by the Greek government? How would this work in the calculations of the political negotiators?

I have some connections in Greece and have travelled there over the years, and so look on with some personal concern. Despite the challenging phrasing of my questions, I do not have a thesis of my own.


Salem 02.03.15 at 5:48 pm

ὁ Δικαιόπολις ᾿Αθηναȋός ἐστιν·


Jay 02.03.15 at 5:54 pm

Nietzsche once thought that the Germans were the new Greek. I hope he was wrong.


MPAVictoria 02.03.15 at 6:42 pm

“Brilliantly done Burton!”

Hey! What am I? Chopped liver?


jwinters 02.03.15 at 6:53 pm

Let’s hear from most Greeks, but no Cretans, please. According to Epimenides, you can’t trust a thing they say.


Doug Weinfield 02.03.15 at 7:33 pm

Well done, MPA Chopped Liver!


MPAVictoria 02.03.15 at 7:37 pm

“Well done, MPA Chopped Liver!”



Spyros Alamanos 02.03.15 at 7:48 pm

1) Greece’s exports are equivalent to 30.1% of GDP. This is significantly lower than Portugal’s 40.65% let alone the Czech Republic’s 77% or Hungary’s 88%. Greece is a pretty introverted economy when its relatively small population (11 million) is taken into account. Greece showed a current account surplus of around o.7% in 2014. However there are a number of problems with this figure. Firstly it does not take into account the large-scale smuggling taking place in Greece, chiefly involving the illegal import of goods from Italy, Bulgaria and Turkey. Sales of smuggled goods were thought to total 20 billion euros in 2013. In addition to this there is the matter of the fictive export of refined petroleum products from Greece (which are in fact immediately transported back to Greece) to neighboring countries which occurs so at to enable refiners and suppliers to evade taxes. If I had to make a guess I would say that Greece was still incurring a substantial current account deficit. If one then proceeds to consider the fact the current account is flattered by significant net secondary income account inflows (EU Cohesion funds and agricultural subsidies) equaling 2.2% of GDP per annum the picture becomes even gloomier.

As regards shipping, shipping firms maintain their tax residence in Greece so as to secure the most favorable tax outcome, since the taxation framework has its aim the maximization of employment in the administrative and logistical aspects of shipping (since ship crews have largely consisted of non-EU nationals (Ukrainians, Filipinos, Pakistanis etc), since the 1990’s, as well the repatriation of capital to the Greece for investment purposes. The policy has been only partially successful. The majority of Greek shipping revenues (for ships flying the Greek flag), stay in Greece only long enough to receive favorable tax treatment and are immediately sent to other investment destinations (the City of London, Swtizerland, Luxembourg etc). Their presence in the Greek economy is for the most part virtual. The following is a concise description of the tax incentives on offer (courtesy of PWC Greece): Tonnage tax in Greece exempts the individual and corporate ship owners from income tax liabilities on the
profits derived from operating Greek and foreign flagged registered vessels. Shareholders of Greek or foreign shipowning companies are not subject to Greek tax on the dividends/capital gains earned from their participation in these companies. Greek offices or branches of foreign legal entities (irrespective of their type) that are exclusively engaged in the management, exploitation, chartering, insurance,
and brokerage of Greek or foreign vessels above 500 GRT (which are not routed in domestic routes) or in the representation of foreign ship-owning companies, (the
so-called ‘Law 89/67 Offices’) are exempt from all taxes, duties, contributions or withholdings imposed either by the Greek State or a third party on the income thereby earned in the course of furtherance of their qualifying activities. Income received by shareholders or partners from a holding company or intermediary holding companies which exclusively hold shares in companies owning vessels with the Greek flag (or with a foreign flag provided that they are registered with NAT for social security purposes) should be exempt from any tax, duty, contribution or withholding in Greece.

2) I estimate that Greek banks hold around 10% of Greek debt, 78% being in the possession of the Troika (69% EU member states (including through the EFSF) and IMF + 9% for the Euro-system central banks and the ECB), and 12% in the hands of other private creditors, 5% consisting of loans from other sources, leaving 12% in the hands of private investors and 5% in the form of Treasury bills (Source: Citi Economics). Whereas even three months ago foreigners had significant positions in Greek treasury bills, they are no longer interested in holding even every short-term debt. Overtime Greek banks will probably come to hold close to 100% of outstanding T-bills. If one then adds a reasonable portion (say half) of privately held Greek debts as owned by Greek banks one arrives at the figure of 10%.


Spyros Alamanos 02.03.15 at 7:52 pm

I apologize for being long-winded.


marcel 02.03.15 at 8:04 pm

My 2 favorite posters/bloggers here are Belle and DD. When I open this blog and see that either of them has posted since I last read, a smile comes to my lips. However, a comparison of this comment thread with the comment threads on either of BW’s last 2 posts gives DD a clear edge. He not only writes excellent analysis and snark (as does BW), his posts inspires a higher quality of comments than do BW’s. Here I must say that Belle’s contribution (i.e., inspiration) is inferior to DD’s.

Sorry Belle.


MPAVictoria 02.03.15 at 8:12 pm

“Here I must say that Belle’s contribution (i.e., inspiration) is inferior to DD’s.”
100% Wrong, 0% Right.

I mean did you see DD in the thread a couple days ago? Banning people at the drop of a hat? DD is way smarter than I and a way better writer, but he is no Belle Freaking Waring.


AH 02.03.15 at 8:35 pm

Is ther a non FT paywalled link to the new proposal anywhere?


Nick 02.03.15 at 9:10 pm

I have always understood the people here to be in agreement that DD is not Belle Waring, and vice versa. Was I wrong?


Ronan(rf) 02.03.15 at 9:16 pm

I assumed they were the same person who plays Brad De Long.


MPAVictoria 02.03.15 at 9:19 pm

“I have always understood the people here to be in agreement that DD is not Belle Waring, and vice versa. Was I wrong?”

Ooo conspiracy theory time! I believe that all contributors and the other commenters here are all actually a single person living underground near the South Pole.

Prove me wrong kids. Prove me wrong.


J Thomas 02.03.15 at 9:26 pm


Ooo conspiracy theory time! I believe that all contributors and the other commenters here are all actually a single person living underground near the South Pole.

Prove me wrong kids. Prove me wrong.

You are not me. Therefore you are wrong.

Do you live underground near the South Pole? I wouldn’t have expected it, but if you do then your own example doesn’t disprove your claim. Otherwise it does.

But go ahead and believe whatever you want. You will anyway. I will accept the possibility that I am a brain in a vat near the south pole that is being given information to think I’m elsewhere. I consider it unlikely but not impossible. If you want to believe with no doubts that something like that is true of all of us, then knock yourself out.


Spyros Alamanos 02.03.15 at 9:51 pm

The financing of the on-going bank run is a crucial parameter of the political game in progress. Mario Draghi has stated that Emergency Liquidity Assistance (the funding that the central banks of the member states of the eurosystem provide to banks under duress with the permission and oversight of the ECB) will only be available to Greek banks as long as Greece is in a program. The present extension of the memorandum ends on the 28th of February meaning that ELA will no longer be available after that date. Given that there is an outflow of deposits to the tune of 1 billion euro a day, this means that the Greek banking system will very soon be verging on the point of collapse.

Thus the essence of the German strategy seems to be to wait for time to pass so as to be able to impose its terms when Greece’s funding needs are at their most acute.

Furthermore the execution of the current budget has been completely derailed because of collapsing revenues. The collapse in revenue is the result of, firstly, the exhaustion of tax capacity (already evident from October), especially as a result of the tax on real-estate (ENFIA), as well the conscious decision on the part of some tax payers to stop paying taxes in anticipation of a drastic reduction of tax rates by SYRIZA. The above factors will tend to minimize Greece’s room for maneuver.


MPAVictoria 02.03.15 at 9:57 pm

J I am doing my best not to engage with your sorry ass and it is very difficult as you are a particularly annoying mix of loon and asshole. So do me a favour and just assume that when I am writing, I am writing to everyone here but you.

Thank you and good bye.


Anaximander 02.03.15 at 10:08 pm

What I’m not understanding about “program 2” in the assumption that Greek public debt is the hands of resident Greek citizens and thus the interest would be paid back into the Greek economy. About 75% of it, in the form of bonds and loans, is in the hands of official creditors, the IMF, the ECB, and mostly the EFSF. There are about 67 bn in gov. bonds and 15 bn in gov. bills outstanding, but, to the extent that they aren’t being held by the ECB, then what assures that they are being held by Greeks and not foreign speculators. To the extent that they are being held by Greek banks, likely they would already have been pledged as collateral in exchange for further liquidity support from the ECB, since my understanding is that even worse assets on the banks’ balance sheets have been packaged into bonds to be pledged for such liquidity.

So what warrants the assumptions that interest on the public debt would significantly revert to Greeks, increasing their macroeconomic space, and that Varoufakis would have missed that point?


Ronan(rf) 02.03.15 at 10:14 pm

AH – if it’s the article you’re after, then just going through google should get you passed the paywall (title – Greece finance minister reveals plan to end debt stand-off)


John Quiggin 02.03.15 at 10:43 pm

I live nearer the South Pole than most of you, at any rate


Tyrone Slothrop 02.03.15 at 10:44 pm

Beware of Greeks bearing bonds.


MPAVictoria 02.03.15 at 10:46 pm

“I live nearer the South Pole than most of you, at any rate”

And the evidence mounts…


J Thomas 02.03.15 at 11:06 pm

#139 MPAV

… just assume that when I am writing, I am writing to everyone here but you.

If I reply to something you say, assume that I am telling it to everybody but you. Don’t even read it. Sure, that takes a little self discipline but I think you are probably capable of learning that much.


Asteele 02.03.15 at 11:11 pm

MPAV I long ago learned to scroll past j Thomas’ comments with out reading them. That’s my advice.


derrida derider 02.03.15 at 11:17 pm

And I’m even more antarctic than John, my dwelling more nearly resembles underground, and I mete out unequal laws unto a race that knows me not …


MPAVictoria 02.03.15 at 11:27 pm

“And I’m even more antarctic than John, my dwelling more nearly resembles underground, and I mete out unequal laws unto a race that knows me not …”

And my head is spinning…


None 02.04.15 at 12:09 am

Isn’t anyone going to do “The Isles of Greece” ?


MPAVictoria 02.04.15 at 1:12 am

None don’t make me confess that everything I know about poetry I learned from reading old Rumpole of the Bailey novels.


cassander 02.04.15 at 1:52 am

Resolve a longstanding political dispute and the debt problem at the same time. The Greeks agree to cede all claims and associated rights to the Aegean islands currently under dispute in exchange for the Turks assuming a lot of Greek debt. Unlike many of the countries in the EU, the Turks actually meet the Maastricht criteria and have an economy several times the size of Greece’s.


deliasmith 02.04.15 at 2:52 am

What strikes me about DD’s post, and the Aunt Matilda post of a few days ago, is that he treats Greece as an individual, as an entity with a single set of needs and desires. Whereas the new Greek government may well be set on meeting the needs and desires of only some Greeks. Difficulties with foreign investments, with rents, with commercial creditors (domestic or foreign), low or non-existent net yields on savings … for many people these are troubles that they read about in the papers but which are of no immediate, direct moment.

And … I would like to say that there seems to be a clear parallel between Programme 1 , Greece and the Troika on the one hand and the current dealings between Rangers and Mike Ashley on the other.


Daniel 02.04.15 at 3:17 am

Well, I won’t be trying that experiment again. I can kind of see the process whereby “I am looking for feedback on my posts on Greece from people who are actually affected by the outcome and who have local knowledge” got mentally translated to “Everyone! Here’s an opportunity to show off and make a load of tossy jokes!”, but it wasn’t my intention. What the heck, wotevs, knock yourselves out, the thread’s dead anyway.


MPAVictoria 02.04.15 at 3:45 am

Oh come on Daniel, this thread delivers! I mean Burton’s contributions alone make it worth a read. And they are only the tip of a very entertaining iceberg.


tony lynch 02.04.15 at 4:33 am

Jeez Daniel can be a downer!


Joshua W. Burton 02.04.15 at 4:50 am

I had always assumed it was initials, but it turns out “dsquared” (or ducdame in the original Welsh) is actually what one of these is called.


Tyrone Slothrop 02.04.15 at 6:03 am

A measure of austerity should be brought against this leavened Greek thread…


Jesús Couto Fandiño 02.04.15 at 6:39 am

If this is not dead yet… and yes, I’m a Spaniard…

– If everybody knows the debt will have to be restructured, because it is impossible to pay, then… why arent we doing that now, instead of leaving it for who knows when? I mean, why isnt that even mentioned by any of the players, including Syriza?

– In a possible answer to the first question… are we talking about only the Greek debt, or do the rest of the EU periphery (… and Italy, which I dont know if it is “periphery” or not) also has a debt that everybody knows it has to be restructured? Or is just a case of doing it for the Greek, watch everybody else ask the same?

– What do you make of the supposed “accelerated recovery” in Spain? True, true in some numbers but bad in others (deflation seems to be here to stay), absolute bollocks cooked up by the government to try and stop Podemos, our local Syriza?


Chaz 02.04.15 at 6:52 am

“AH – if it’s the article you’re after, then just going through google should get you passed the paywall (title – Greece finance minister reveals plan to end debt stand-off)”

I’ve seen people say that before but when I try it it doesn’t work.


Chaz 02.04.15 at 7:06 am

“- If everybody knows the debt will have to be restructured, because it is impossible to pay, then… why arent we doing that now, instead of leaving it for who knows when? I mean, why isnt that even mentioned by any of the players, including Syriza?”

I can tell you Daniel’s answer because he said it in his most recent previous post (still on the front page if you want to read it). They are keeping the debt at its present level (or higher) so they can use it as leverage to control the Greek government (any Greek government). And speaking for myself let me add that it’s also because Merkel et al. have made being really tough on Greece part of their campaign platform and their voters would get mad if they openly forgave Greek debt. Syriza actually did talk about debt restructuring a lot in the campaign, but I presume they are not now asking for a face-value reduction because they don’t think the EU would agree to it, and they think they have a better chance of getting other helpful changes instead.

I will leave the other questions for Daniel himself.


Plucky Underdog 02.04.15 at 7:19 am

Chaz 38 — same here, but it sometimes works if you use the Google News search window (i.e. not just regular Google)


Robespierre 02.04.15 at 7:28 am

Not Greek either, but Italian, so about Italy ^^:
Italy does have a debt of 140% of gdp, but it has a primary surplus and has never run big deficits since the 1980s (we’ve been in demi-austerity since 1992, with exceptions under Berlusconi). We now have a deficit of 3% of the gdp, and a theoretical constitutional requirement to balance the budget over the course of the business cycle, which everyone will ignore. If we can get the economy to grow, our debt can be paid. We’ve been faking austerity ever since Monti went away, with the deficit probably worsening from just over 2% to just under (over?) 3%, which, I guess, is the best that we could go for. Unemployment is 14.5%, but youth unemployment is in the mid 40s % range. Not growing, yet, hopefully will grow in 2015. Having an Italian at the ECB helps wrt being periphery or not.


bob mcmanus 02.04.15 at 7:35 am

What the heck, wotevs, knock yourselves out, the thread’s dead anyway.

Open thread! Maybe very slightly ontopic

Christian Fuchs, Digital Labour and Marx

Although there is the financialization of the information economy, the products of the two realms of finance and the information economy are significantly different in character.

Therefore the notion of informational capitalism does not make sense as a category of totality. It only makes sense for describing the degree to which the capitalist mode of production is using informational productive forces for accumulating capital within class relations (i.e. by exploiting surplus value).

So it looks like on the level of productive forces informatization is not the
dominant characteristic of the global productive forces, but rather an important,
non-dominant trend. Finance capital is the dominant fraction of capital today,
which shows that an important characteristic of imperialistic capitalism is present
today (Fuchs 2010a, c).

Huh. Money is complicated, and Marx on money is famously complicated and controversial. M-M’. Marx claimed that money was both commodity, as in gold, and a symbol, that added surplus value via circulation? And, I think, fictitious capital according to bourgeois economics is barely anything, just claims against future industrial production. Right. This is what I call, “productivism,” I think some Marxists need this definition of fictitious capital in order to support the declining rate of profit analysis. Finance is the largest single sector, but I don’t understand finance at all yet.

Christian Marazzi, Capital and Language, just a taste

Finance, like money in general, expresses the value of labor and
the value produced by labor, but through highly abstract means .

The specificity of finance, in some respects, is that it attempts to
represent the future value of labor and its future productivity. In
any case, analyzing how finance might be understood as an expres­
sion of labor in analogy with linguistic relations, and thereby
grasping what kind of representation finance operates as, seems to
me a promising and exciting idea.

The social structure which permits the attainment of such a result is the
market: the financial market organizes the confrontation between the
personal opinions of investors in such a way as to produce a collective
judgment that has the status of a reference value.

On the financial markets speculative behavior is rational
because the markets are self-referential. Prices are the expression
of the action of collective opinion, the individual investor does
not react to information but to what he believes will be the reaction
of the other investors in the face of that information. It follows
that the values of securities listed on the stock exchange make
reference to themselves and not to their underlying economic
value. This is the self -referential nature of the markets , in which
the disassociation between economic value and exchange value is
symmetrical to the disassociation between individual belief and
collective belief .

It is hard for me to accept that the ones and zeros moving at the speed of light are any kind of real commodity or fixed capital.


bob mcmanus 02.04.15 at 7:49 am

Oh, just to add, Marazzi’s analysis of the “financial crisis as an overproduction of self-referentiality” which is also a social crisis, would also apply to the identity politics, call-out culture, and PC threads.



Conor O'Brien 02.04.15 at 10:18 am

Daniel, you are entitled to decry the nonsense that has broken out on the thread, but just enjoy it.
I was once standing still at a doorway to our barn when I became a ‘swirl point’ for a bunch of young swallows practicing their aerobatics. Any move would have distracted them, so I just enjoyed it.
And then you get that delicious morsel of a link from Joshua W Burton at 60, followed on by the comments on self-referential finance markets from bob at 67 and 68. It’s like sipping nectar from the base of a sweet flower.


Joshua W. Burton 02.04.15 at 12:53 pm

Daniel, you are entitled to decry the nonsense

Oh, nonsense. Reread the OP for tone, and for unprovoked attitude toward us before we even showed up. Vulgar abuse, or else turning this into a dsquared (sense @60), were really the only sensible options . . . and by informal affirmation, we stood up and took the high road.


Vasilis Vassalos 02.04.15 at 1:25 pm

A point of contention is that payments of interest of any meaningful amount flow to Greek residents. The percentage of the nominal in the hands of Greek individuals is very small. Some greek corporates have post-PSI greek bonds, as do pension funds. According to this, the percentage is <5%. That's still a lot of money, ~18bln euros. According to this, 30bln is owned by greek state entities, most probably pension funds. The impact of (non)payment of interest to Greek entities thus requires more attention and you may be on to something important here. But if total interest payments are 2.5% of GDP per the proposed scenario, this means say .3% of GDP going to Greeks (pension funds or individuals). Not trivial, not huge, probably not a factor in deciding upon a plan.

The other issue is the strong assumption that Greece receives no new loans in the foreseeable future. There are many ways to jumpstart the greek economy, but it does need to be jumpstarted. If that is to happen through private investment, it's probably better to decrease taxes or pension contributions for businesses. In the medium term this means lower state revenue. OTOH, lowering further social expenses and public investment is going to be very detrimental. So it is possible Greece will require some new loans. But this isn't something that affects your approach anyway.

Finally, where are the banks in all of this? I assume the ECB continues to finance them as long as necessary. But does it provide enough liquidity to allow them to be useful in financing economic activity? Greece needs a fully functional banking system, not zombie banks. For the part few years, credit was extremely tight, and for growth to return credit is going to be crucial. So, simply keeping the banks afloat is not enough.

All in all, a very reasonable approach. The issue of exerting political control is key. But the role of the banks is tricky.


William Timberman 02.04.15 at 1:31 pm

bob mcmanus @ 67

It is hard for me to accept that the ones and zeros moving at the speed of light are any kind of real commodity or fixed capital.

Electrons and promises, bob. It’s the promises that bedevil us, not the electrons. At least that’s what we’re supposed to accept as gospel. A core tenet of that gospel: if you’re little people, and you have even the teensiest tendency toward apostasy on the matter of promises, then you’re dog meat. That’s why, quirky as they often are, we still need Marxists. And Greeks, of course. Greek Marxists are even better, even if Daniel, among others, considers them something of a pain in the ass.


Vasilis Vassalos 02.04.15 at 1:56 pm

Not to replay a Monty Python sketch, but there is one more, very important issue:

An important part of Proposal B is the policy demands of the lenders. The current Troika MOU had a mix of measures useful for Greece but toxic to its political class (that didn’t get implemented and that the Troika itself threw under the bus early and often) and measures that get trotted out in every IMF programme without regard for context that did more good than bad (some of these measures violate EU policies on social protections). It also had pretty unrealistic assumptions and budgetary goals that led to a policy mix that resulted in 25% reduction in GDP and 25% unemployment. Finally, the mode and method of progress evaluation was an apotheosis of micromanagement and really screamed “lack of sovereignty”. So Proposal B cannot be read independently of what the new Memo looks like.

In fact, SYRIZA had two main election slogans, one concerned the reduction of the debt stock and the other the refusal to continue implementing the measures in the current MOU. It’s unlikely they can or will reverse position on both of them. Reversing position on the debt stock reduction can be finessed, but Troika-imposed “neoliberal” measures of unclear benefit that signal the continuation of current policy are not going to be palatable.


dbk 02.04.15 at 2:47 pm

As a long-term (35 years) resident/worker in Greece, and in response to your (preferred) Program 2, I don’t think Greeks are going to be willing to cede control to an outside austerity-focused regime, whatever euphemism it may go by.

For example, cf. a policy working paper by R. Antonopoulos (available from the Levy Economics Institute) on addressing massive un- and under-employment in Greece caused since 2009. It was announced yesterday (16 hours ago) that Antonopoulos (now Deputy Minister for Employment) will propose the working paper’s option 2.

I’d meant to ask about what percent of Greek bonds are owned by Greek nationals/residents – but Vasilis Vassalos answered my question and yes, that percentage is too small to influence policy – it would be preferable to get some of the estimated 1.400.000 million unemployed back to work, making regular contributions to pension funds and paying taxes.

The Troika (or whatever new iteration is found) and the new government are far apart in terms of public policy priorities. To put it in simplistic terms, the Troika’s priority is debt repayment (or so it would appear from the messages coming from Frankfurt/Berlin/ Brussels the past few days), which seems to mean “restructuring” (to date, primarily associated with privatizations, reductions in the public sector, and severe cuts to the minimum wage, salaries, and pensions, and others of course), whereas the new government’s stated orientation is the welfare of its constituents.

Reneging on their core espoused values would probably cause a political crisis within Greece itself. Unfortunately, there is another party-in-waiting, and I can’t imagine that even those in the centers of financial power think that its rise to power would be good for anyone.

P.S. (1) I guess there are at least two readers of CT in Greece. (2) I’m the stupid reader, i.e. not in finance. Nevertheless, (3) I was not amused by the tenor of this thread.


MPAVictoria 02.04.15 at 3:02 pm

“(3) I was not amused by the tenor of this thread.”

My apologies dbk. None of my comments, and I am sure the other posters feel the same, were intended to harm.


Ronan(rf) 02.04.15 at 3:02 pm

“(3) I was not amused by the tenor of this thread.”

The ‘tenor’ of this thread is because DD adopted a purposely obnxious position from the start and tried to justify it with some bulls**t story about ‘only wanting to hear from people on the ground.’ He adopted the position because of pushback he recieved in previous threads, not because he actually gives a s**t about ‘the local perspective’, (which there was enough room for on the other threads) .. and because he appears to have what my mother would call a martyr complex.
I am also from a country (Ireland) struggling with similar problems, where a significant majority of people I know have either emigrated or are unemployed. Where a substantial number of people I know have lost jobs and houses and where the country has been saddled with an idiotic debt burden. If DD was to use that reality as a smokescreen to shut down debate because john c halsaz was mean to him on a previous thread, I’d happily tell him to go f**k himself.


Joshua W. Burton 02.04.15 at 3:49 pm

@76: “I’d happily tell him to . . .”

Well, sure . . . but wasn’t this more fun? Your first instinct @4 was quite right, and (if I may tip the hat) inspired us all. Hey, we even learned a new word!


dbk 02.04.15 at 3:52 pm


I understand why the tenor of the thread was what it was; I read, somewhat too obsessively, all of DD’s posts-threads because I want to understand how financiers think.

MPA Victoria@75

Thanks. It’s not so much that I took the comments personally, it’s that the tenor of the thread seems incongruous with the facts on the ground, where millions of people’s lives are being pretty much destroyed.


Vasilis Vassalos 02.04.15 at 4:03 pm

Correction on 73

“that did more good than bad” -> that did more BAD than good.

(not that anyone cares at this point I guess)


Joshua W. Burton 02.04.15 at 4:12 pm

dbk @78: I read, somewhat too obsessively, all of DD’s posts-threads because I want to understand how financiers think.

And now (@57) you do. You’re welcome — and I do sincerely hope that the lesson in some small way helps you and the people of Greece who, as you say, are in it for real stakes.


Ronan(rf) 02.04.15 at 4:27 pm

JWB @77 – I hear ya. Absolutely.

dbk – might be of interest (genuinely)

(I won’t say anything else. Hopefully a substantative conversation emerges for those who want it. And if my above warrants a banning from threads I won’t be reading any more anyway, fine by me)


J Thomas 02.04.15 at 4:38 pm

#79 Vasilis

“that did more good than bad” -> that did more BAD than good.

Ah. I wondered.

(not that anyone cares at this point I guess)

I do. I wasn’t going to ask because there are so many little things like that, but it did make me wonder.


Micheal Lunny 02.04.15 at 6:55 pm

I am from Ireland and so I have permission to speak as long as I do not offer opinions on matters outside of my tiny country. I am most grateful for this opportunity.

Firstly I disagree with Daniel that the quantity of the debt has only (only?) political significance, its size its not immaterial to the creditors now and whatever haircut it eventually receives they will be trying to minimize their losses from the whole exercise. Arguing that the final size of the debt (if there is a “final”) will make no difference to how much money Greece returns to the Troika/creditor countries is a big ask.

Secondly for Greece option one (reduced investment but reduced control from the Troika/Deutsche bloc) has a real advantage over option two that goes beyond dignity and sovereignty.

The last five years has pretty clearly demonstrated that Germany, the ECB and the European Commission believe things about the world that just are not true. From the overwhelming importance of structural reforms (see Finland, perfect student, poor grades) to the purgative effects of austerity (both incorrect and immoral, great combo) the actors in control of EU economic and monetary policy have a record of persistent failure and total conviction. Even if Greece had extra funds the conditionality might be such that Greece still ended up more damaged as a country (privatization, I am looking at youhooo).

Finally I find the absence of any engagement with what the Troika and German guidance means for democracy in the EU in general upsetting. Italy and Greece had governments removed, Ireland enjoyed amazing bullying and interference from EU institutions and the German bloc during our referendum on the idiotic fiscal compact and if you read speeches from the ECB they imagine the replacement of national politics with technocratic legal guidelines. (see this gem from ECB board member Benoît Cœuré).

We have a problem with democracy and accountability in the EU and the tendency among our elites to view it only as matter of power relations, institutional mandates and policy tuning shows profound moral failings and a lack of humanity. I do not necessarily think that this will be resolved peacefully.


Phil 02.05.15 at 10:44 am

Damn shame. Could have been a really interesting thread.


The Raven 02.05.15 at 7:24 pm

“I never discuss economic policy with Germans,” jokes a senior eurozone official in Brussels, “because for them it’s not about economics, it’s religion.”—The Guardian

What is it with the Germans?


js. 02.05.15 at 7:55 pm

Out of curiosity, what blogs/people/etc. are people here reading for analysis of ongoing developments? I mean, I know Krugman (obviously), and I check out the people he links to, but beyond that, I don’t know a whole lot. Any pointers would be much appreciated. Thanks!


phenomenal cat 02.05.15 at 8:59 pm

check out the site naked capitalism, if you haven’t already.
it’s got links and commentary/analysis on the latest goings-on. actually,
it would be useful if informed/knowledge people here could comment
on the ECB apparently laying the wood to Syriza’s negotiating position…

Dx2, can we entice you to come back and comment on this development?


js. 02.05.15 at 9:09 pm

phenomenal cat, thanks! Had forgotten about that site. Meanwhile, PK had a different take on the ECB move and Frances Coppola has a similar take and provides more detail.

(By the way, is that a Kinks reference? If so, awesome!)


phenomenal cat 02.05.15 at 9:36 pm

Yep, js.

I’m a paranoid, schizoid product of the twentieth century…


Daniel 02.06.15 at 12:07 am

Dx2, can we entice you to come back and comment on this development?

No, but I’ve written about it on

CT is my favourite blog, but I’m kind of giving up on it as a place for discussion of current economic news issues; the mix of commenters isn’t right for the subject matter.


MPAVictoria 02.06.15 at 12:08 am

Brad Delong is usually interesting…..

/also Atrios. He doesn’t do deep analyses but he says more in a sentence then a lot of people do in a couple pages.


bob mcmanus 02.06.15 at 1:29 am

90: Read that piece earlier today without realizing you’d written it or remembering how I got there.

86: Yves Smith et al at Naked Capitalism are following Greece closely with her hardheaded leftism. “dbk” is showing up in comments, along with other parties closer to the action, and a few traders.

The left columns at Mark Thoma’s place (see left column here) are worth glancing through, updated constantly. Particular posters will usually provide links or summaries of paywalled info. Jacobin and New Left have posts, New Inquiry is more about social leftism.

AFAIAC, “fog of war” is forcing me into patience, and real-time observations of little use unless you have money or life at stake. Way too many rumours and instant analysis out there.

OTOH, #greeklivesmatter is getting started, and organizing political pressure against austerity may be useful, especially on the other side of the pond.


js. 02.06.15 at 1:54 am

I’m a paranoid, schizoid product of the twentieth century…

But have you learned the secret of life, and the sea and the sky beyond? Because that’s really what we’re looking for here!

(I was listening to the album yesterday, it turns out—not actually insane enough to have all the lyrics memorized.)


js. 02.06.15 at 1:57 am

AFAIAC, “fog of war” is forcing me into patience, and real-time observations of little use

This seems like a very sound attitude. I just can’t help wanting incisive seeming commentary that’s going to be proven wrong tomorrow. Isn’t that what the 21st century is all about? Anyway, Naked Capitalism is really good, have been looking at that.


dudley 02.06.15 at 6:29 am

“CT is my favourite blog, but I’m kind of giving up on it as a place for discussion of current economic news issues; the mix of commenters isn’t right for the subject matter.”

And where could one find such a mix?


Chaz 02.06.15 at 7:51 am

Discussion of current economic news issues is one of the main reasons I come here. Today I saw two informative posts by Greek people in this very thread, plus some interesting ideas from non-Greeks (including DD’s article). Not bad.


Aristotelis 02.07.15 at 9:06 am

I am a Greek and peonage is exactly how it feels. I am not blaming Germany for this, I am blaming Greek politicians for placing us in this position and the dysfunctional setup of the euro. Program 2 means that Greece will remain under foreign control for eternity and the endless, exhausting, humiliating and poisonous negotiations will become an annual event.

Stocks matter if Greece is to regain access in the markets and stop borrowing from other european countries. We need some debt relief (ideally in the form of a haircut but realistically in the form of very low interest payments) and a primary suplus that exceeds interest payments for a long time in order to reduce the debt.


Gregor Sansa 02.07.15 at 2:38 pm

When will CT get threaded comments? At LGM we can accommodate jokers and serious comments on the same post because they’re not flattened into an unreadable line.

Also, fewer silly tantrums from the OP.


Lynn Gazis-Sax 02.07.15 at 9:53 pm

Wow! Crooked Timber reserved a comments thread for people like me, and on my birthday, yet, and I missed it, because this happened to be the week I wasn’t checking Crooked Timber.

Seriously, I’m an ethnic Greek (or half ethnic Greek; my father immigrated from Greece). I have no professional expertise that would be relevant here (no economics or game theory), and I’ve never lived in Greece (born and raised in the US, an American citizen). I do read both Greek and German, though, so I’ve been following both Greek and German media through the years of this whole debacle, and I do have family still in Greece (as well as Greek cousins who have moved elsewhere in the EU for work).

I totally understand why Germany has demanded control in return for its loans. What rich country wouldn’t, if asked to make ongoing transfer payments to another country that had mismanaged its budget? Certainly not my own country, where polls regularly show that people pick “foreign aid” as among their top parts of the budget to cut, and way overestimate how big a part of the US budget foreign aid actually is (tiny). And so I buy what most commentators seem to be saying, that Greece probably won’t actually get another haircut right now (though that doesn’t mean Syriza shouldn’t have that on the table at the start of the negotiations), even though its current debt burden is basically fictive, and no one actually believes it will all be repaid.

At the same time, though Greece got into this position to begin with by mismanaging its own affairs, there is no way *any* of the Greek parties, not PASOK, not ND, not anyone, would have chosen the disastrous policies of the past few years (repeated attempts to rapidly reach a primary surplus through austerity, while grinding the economy into a depression) without what Aristotelis, in #97, calls “the endless, exhausting, humiliating and poisonous negotiations” with the troika. Greeks reached the point of figuring out that this wasn’t working because it was killing growth back when the EU was still insisting that it wasn’t working because Greece wasn’t really applying the medicine. So it’s hard to separate Greece’s desire to finally get an economic policy that doesn’t trap them in a stinking depression from Greece’s desire to finally escape from the national humiliation of having others dictate their policies.

I’m not sure how to game this out. I just know that I sure hope Yanis Varoufakis does, because if Syriza doesn’t somehow manage to bring home a win here, the next party waiting in line to try to run Greece is so, so very much worse.


js. 02.08.15 at 12:15 am

So I’m not Greek—though I did date a Greek for a couple of years, maybe that can count for some tiny bit. In any case, I just have a question. Many people have pointed out, including Lynn Gazis-Sax just now, that if Syriza fails, the outcome of the next Greek election is extremely likely to be extremely dire. Is this something that EU/Euroland-powers-that-be do/would/should take into account? And if not, I’m curious as to why not.

(I suppose this is another way of asking whether the Euroland powers should take the fact that Syriza won into account, and I suppose the answers there are depressingly clear. But would like to hear more/otherwise.)

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