Why Greek debt is a problem

“If I understand Daniel’s arguments over the last few years rightly, he thinks that the Greeks should just shut up and get on with it, since (a) the alternative is worse, and (b) given the unsustainability of the debt burden, the richer eurozone countries are going to quietly disappear it at some unstated point in the future when everything becomes less politicized”.

On the contrary, I think that Daniel’s argument is incontrevertible, as such. As Orwell pointed out long ago, the quickest way to end a war is to lose it, and (as Daniel has never failed to point out) there is little or nothing that Greece has with which it can threaten Germany (let alone the Troika) they were always going to lose. I have no idea what will happen on Sunday but it will be one of two things.

1: Humiliating and disastrous climb down for the Greeks, total defeat which may (or may not) lead to some form of debt relief at some indeterminate point in the future

or

2: Grexit, which will probably (not inevitably but probably), lead to economic catastrophe, which may or may not get better at some indeterminate point in the future.

And these two options have not changed one iota since the election of Syriza. They were always the only two options on offer. So, given that, Syriza should just have taken option 1 immediately and saved themselves 6 months of totally pointless struggle.

But things get murkier from then on. As you say: ‘This is not a recipe for long term success at anything apart from fostering grudges on both sides.’ This, not what happens on Sunday, is the problem. I mean, so what if Tsipras signs the deal? This will split his party, therefore new elections, in which it is highly likely that anti-Europeans will win, and we are right back where we started. Or else he doesn’t sign it, therefore Grexit, therefore new elections (and economic collapse) and where does that road lead to? Nowhere good.

As for debt as social control I believe that He Who Must Not be Named wrote a book about it……

Sorry I should have said (for my argument to make sense) given the 2 options, assuming you think that Grexit is too risky an option to take, Syriza should have taken option 1. And it should be noted that at the moment Tsipras does seem to think it’s too risky. And he might be right.

I was thinking on this with respect to interest rates. From a business POV, the Troika could charge 5% or 10% higher rates on the loans. This is not a huge political issue in the creditor countries. Lots of people clamour that the lazy Greeks should get less, hardly anyone says they can borrow but at a higher rate. It’s taken for granted that they can’t pay the higher rate, and the loans are not intended to maximize profits.

But because these agreements are presented as more less standard loans, this reasoning hits a bottom line. You can’t take the next step and say that Greece still can’t pay these rates, they should be 5 or 10% lower yet. 5 years loan at -5%. If the Greek economy is running again convert it to 0% loan with 75% face value, if it’s still bad perhaps stick to -5% for a while longer.

That’s super weird for loans. Out of the question. But if the ‘loans’ are really policy in disguise, it would be normal. Greece needs support now,that’s OK if they are willing to pay their again in the future. No reason why 0% is a natural bottom in that deal.

Many of these discussions come down to how dangerous we think Grexit is. In 2010 it seemed pretty bad for the Greek economy, and therefore the Greek people. In 2015, the people appear to have endured most of the Grexit economic cost already – although the elite still have plenty to lose.

To me I wonder more about the military and paramilitary threats to the Greek people. Is HELBROC something that would simply evaporate, or could they be rallied by someone claiming legitimacy and used to assert authority? Are there other organizations capable of attempting to control the people by force? I just don’t know enough about the distribution of weapons in and around Greece to guess which circle of hell we are talking about.

Hidari @9
“Tsipras seems to be acting under the assumption that, at the moment, it’s just too risky an option to take, given the various cost-benefit scenarios.”

Not sure – I think he is a politician – and he thinks it is risky to be BLAMED for it.

Tsipras is acting, correctly, as if this were still a negotiation, which it is. In order to find out exactly how far he can get the Eurototalitarians to move, especially re debt reduction, he must — and is — acting as if he believed that Grexit would be a disaster. Meanwhile, being smart, they are sitting on plans to minimize the effect of Grexit. Without serious debt reduction commitments (not if you’re good maybe someday) Grexit is the best option since per Hidari we know what happens to Greece if they do a deal without debt reduction, but we don’t know what happens really after Grexit. For those arguing catastrophe, exactly what catastrophe for whom? Everyone except the rich are already catastrophed.

I really liked the framing of the issue, especially in the three points of your last paragraph.

The sad truth is that I would answer “no” to the first (indirect) question (in particular, but not only, because of Krugman-like reasons), “hell, no” to the second (the diversity of European societies cannot be subsumed in a project that assumes we are all, or all soon will be, retired, qualified, middle-class, lutheran Germans with 1,9 grand-kids) and “there is a very real prospect that the behavior of the EU towards Greece will in retrospect be seen as the original crack announcing its demise” to the third.

All in all, prospects look really bleak to me.

“he thinks it is risky to be BLAMED for it.”
Ha! Fair point.

@12 Don’t assume that things can’t get worse. In any given situation, unless you’re dead, things can always get worse.

given the unsustainability of the debt burden, the richer eurozone countries are going to quietly disappear it at some unstated point in the future when everything becomes less politicized. This is not, contra some commenters, a stupid or evil argument

I read Daniel’s argument as an application of Stein’s law: If something can’t go on forever, it will stop. The Euro folks can’t collect these debts, so they won’t.

The problem is, the unsustainability of Greek debt has implications that will take effect long before the eurozone is ready to forgive debt. Stein’s law can be reframed to take Greek agency into account: Greece can’t pay these debts, so it won’t.

@bob mcmanus: I too am worried about when this gets violent, but so far it’s been remarkably peaceful.

Gaius Publius, in blogposts published at Hullabaloo and Down with Tyranny distinguishes between the made-for-CNN cover story and the actual neoliberal reform project. In earlier comments, I called the dawning realization among participants and observers of the divergence between cover story and actual project, the falling away of the mask. This distinction you tactfully elide into a two-part skepticism of the means by which the neoliberal project is being enforced, to sandwich your skepticism of the neoliberal project itself, and your skepticism about the neoliberal project becomes gently and ambiguously pragmatic: will it work?

The rhetoric of pragmatism has been used a lot over the last generation to retail neoliberalism, because technocratic pragmatism is the cover story, is the presentation of neoliberalism in everyday life. It is the third way, the non-ideology of post-history, its fitness vindicated by its survival into our era of technocratic triumph. The convenience of pragmatic rhetoric is in never having to own the ends and means in the same sentence: we accept the aims in idealized and therefore obscure terms, and debate the means ineffectually, discussing whether the means will “work” in some hopelessly diffuse and ambiguous sense.

Everyone agrees, you sagely observe, that the Greek state is “a mess”. “This creates problems”. But, solving problems is hard, so very hard. “The story of the eurozone’s relationship with Greece post-crisis is a story of external powers trying to restructure an entire political system from outside, using the crude tools of control that are available to them.” Poor external powers, having only crude tools. Attempting the impossible. Heroes struggling against hostile gods: it could almost be a Greek tragedy!

But, really, no, it’s just game theory and asymmetric information, leavened with folksy acknowledgment of resentment. The Troika lack “local knowledge” you see. And “public legitimacy”. (It couldn’t be that the Troika started out with public legitimacy coming out their ears, that there were plenty of Greeks who dearly wanted the deus-ex-machina of technocratic probity to aid reform of Greek society long desired locally, but impossible to achieve in the local stalemate of resentments and divisions dating back to civil war and dictatorship.) The EU/Eurozone is underdeveloped as an institutional actor, and cannot deliver on a commitment to a quid pro quo, like promising a debt restructuring as a reward for success. (Again, never mind that the policy program was initiated as a debt restructuring and economic success in the form of economic growth, after a sharp recession and real wage reduction, was the promised reward that never showed up. Never mind that the commitment of the ECB to protect the Eurozone members has been turned into a weapon of political intimidation and extortion.)

At the end of his piece, Henry very modestly and earnestly avers that we should be “arguing about the project”, whether it is fit to purpose and whether it will work over the longer term, before reiterating his narrow and now exceedingly abstract point about debt as an instrument of control: the endogenous ways in which the instrument of debt as a form of political control affects the actors on both sides of the relationship, and whether it makes some successful and mutually acceptable long term modus vivendi more or less likely. (“endogenous ways” — okay, then)

But, it is a little late in the piece, to be earnest and modest. The possibility of discussing whether the neoliberal project of reform is “fit to purpose” and will “work over the longer term” was thoroughly buried beneath fatuous pragmatism much earlier in the OP.

It seems to me that we rely too much on an assumption of integrity in a common purpose to trust our own impulsive rationalizations of a degenerative politics at the end of Empire. We really would be better off, if we just assumed, evil and stupid, at the outset, and moved on from there, dismissing the made-for-CNN cover story as the propaganda that it is without reiteration or consideration.

…the endogenous ways in which the instrument of debt as a form of political control affects the actors on both sides of the relationship, and whether it makes some successful and mutually acceptable long term modus vivendi more or less likely.

One person’s debt is another person’s Capital, and looking at the relations from the standpoint of debt is like looking at the health of a political economy from the standpoint of unemployment and wages. It treats victims as a problem.

Even given that financial Capital is a late and special form, and the stage special, I still have a library of work I can point you to, including quite recently, Fredric Jameson on Neuromancer

FJ:

My argument has been that in the face of the impasses of modernism, which proved unable to handle the new incommensurabilities of that greatly enlarged and as it were post-anthropomorphic totality which is late or third-stage capitalism, science fiction, and in particular this historically inventive novel of Gibson, offered a new and post-realistic but also post-modernistic way of giving us a picture and a sense of our individual relationships to realities that transcend our phenomenological mapping systems and our cognitive abilities to think them.

I agree with this more than I disagree with it, with two caveats reflecting the fact that I’m more optimistic.

First, I don’t think the Greek state was doing the minimum required, grudgingly. They achieved a primary surplus! As the election of Syriza shows, the problem was the opposite-they did too much, too fast. Without getting all “shock doctrine” here, a massive amount of progress has been made in restructuring Greek society in the last five years. Even tax compliance was getting better.

Second, have a look at Bild’s five point plan of advice to Merkel. It includes a 50% write down on the debt, plus €xit. (I noted when I saw it that if Bild were in CT comments, they’d be regarded as more left wing and less pro-German than me). I don’t think at all that popular opinion won’t tolerate a writedown – the problem was always the open-ended commitment with no control over its growth.

But, it is a little late in the piece, to be earnest and modest. The possibility of discussing whether the neoliberal project of reform is “fit to purpose” and will “work over the longer term” was thoroughly buried beneath fatuous pragmatism much earlier in the OP.

Short response is that pragmatism seems to me to beat emoting-our-way-to-victory!(or-alternatively-despair-as-circumstances-dictate). If there’s real disagreement with the arguments of the post, make ’em – but it looks to me like your major objections are more that the post had an insufficiency of rhetorical expressions of outrage. Which, depending on your politics is fair enough – but speaking for myself, I think that pragmatism properly understood is a better way towards thinking about what is actually happening and, contra your claim, provides steps towards a profound critique of neoliberalism rather than an ideological justification for it.

“In Ireland it largely worked….”

(Only short post,but….)

http://www.irisheconomy.ie/index.php/2015/06/26/ireland-in-recovery-greece-in-crisis/

Sandwichman @ 15:

Oh no, you di’n’t!

Pete @19:

But chapter 11,- (is this just an American term?),- is not just about wiping out equity and ceding control to creditors, it’s about reorganizing the business as a going concern and maximizing its ongoing value for all concerned, rather than liquidating the business and selling off its few remaining assets for scrap, (chapter 7). But that is what the creditors here conspicuously failed to do, out of some combination of stupidity and meanness, by insisting fictitiously on full repayment.

I recall Michael Pettis, commenting on the situation, cite someone with decades of experience in default negotiations, to the effect that in the beginning everyone, debtors and creditors alike, pretty much knows what the outlines of a final deal will look like, only it takes a considerable amount of shouting and banging the table to get to the point of emotional acceptance. Only in this case, it doesn’t seem realistic negotiations ever took place, instead of creditors dictates.

This is perhaps a case where the lousy source actually bolsters the credibility of the article, but this is a pretty good and succinct read on the German mentality, which elsewhere I’ve termed “infantile Kantianism”:

http://www.economist.com/news/europe/21650565-german-ordoliberalism-has-had-big-influence-policy-during-euro-crisis-rules-and-order

“I don’t think at all that popular opinion won’t tolerate a writedown – the problem was always the open-ended commitment with no control over its growth.”

It’s not popular opinion; it’s Merkel’s opinion that’s the problem. Far as I can tell, she’s not grandstanding—we’re looking at someone like GWB here.

To the OP, this is the problem of federalism I’ve written about before here. We’re seeing something of the same in the USA, where right wing radicals have paralyzed the federal government, and are happily turning Kansas, Michigan, Oklahoma, and Wisconsin into failed states.

Henry Farrell @ 27

Stripping out the moral outrage is fine with me — I don’t imagine that I have a personal comparative advantage in the moral outrage dept in any case. I am a Yale-trained economist, and I say this is no way to run a railroad. Does that make you any happier?

If you are going to do pragmatism, you had better bring something a bit more technically credible than the diffusion of agency, obscuring of goals and forgetting of history that you were practicing in the preamble to your modest and narrow point.

The neoliberal criticism of Greece as a messed up state seems rest on the fact that no one in Greece pays the taxes that they are supposed to. This is an odd criticism, given its source. Tax avoidance seems to be a pretty common sport in the EU generally.

@35
“Ireland makes a good case for the Irish differences (and I’d agree, it was least poorly situated from day one”
From a macro POV the arguments the Ronan uses may well be valid.
Looking at the Irish economy from the worms-eye POV, the social welfare rates were maintained at among the highest in Europe (€180 approx). Totally unjustified and a drag on the economy one might say… but: it kept a subsistence level of helicopter money floating at ground level. The other countries cut their social welfare and gutted the local-level economies.
Another big difference is that the Irish state has the capacity to collect taxes.
Another is that while it probably has the same proportion of corrupt politicians as anywhere else, the scale of their plundering is more modest and less socially galling.
But my first argument, using social welfare as helicopter money, might have been crucial.

Crisis not conflict

political football: “I read Daniel’s argument as an application of Stein’s law: If something can’t go on forever, it will stop. The Euro folks can’t collect these debts, so they won’t.

The problem is, the unsustainability of Greek debt has implications that will take effect long before the eurozone is ready to forgive debt. Stein’s law can be reframed to take Greek agency into account: Greece can’t pay these debts, so it won’t.”

Who can hold out longer? A corrupt financial system which has already been largely bailed out? Or a desperate Greek citizen seeing what’s left of the social safety net evaporate?

There is a pragmatic science to how many people you have to make suffer to keep a population under control. “All of them except the elite” won’t do it. Driving people to desperation means that you get left wing parties, then riots, then right wing parties (in the current situation). And all that happens on a time scale that may be long for some values of long but is still a lot shorter than the time scale needed for debt forgiveness by forgetfulness.

As I wrote here, the problem is that all alternatives to the status quo are treated as equally crazy. We can agree that, pragmatically, the situation is a failure, right? Then the main alternatives are that it’s a systemic, technocratic/economical, or political failure. And all three of those are “crazy”. It’s crazy to think that this is neoliberalism: it’s crazy to think that economic experts who have been wrong for 5 years and who appear to be incompetent should be fired: it’s crazy to think that this is deeply wrong European politics in which Greeks basically occupy the position that black people do in the U.S. If people want to be able to have a nice conversation with non-crazy comment box denizens ever again, then maybe just one of these things is going to have to be reclassified as not crazy.

“You’re certainly welcome to assert that Portugal and Spain have been failures bu the degree in nothing like what has been seen in Greece.”

What criteria are you using to judge that the Troika policies have not failed in Portugal and Spain? Both have lower GDP than they had pre-crisis; both have far higher unemployment than they had pre-crisis; and both have far worse debt-to-GDP ratios than they did before their bailouts. Their GDP is lower now than it was in 2012! It’s a failure, right?

Here is Mark Blyth’s take on the matter:
http://www.3quarksdaily.com/3quarksdaily/2015/07/why-greece-isnt-to-blame-for-the-crisis.html

I’d just like to add that the idea that the austerity plan put in place in Ireland was a big success is preposterous. The contraction of public spending was very modest compared with what Greece has suffered, but they’re still nowhere near back to their GDP or per capita GDP pre-crisis.

From the O.P.

“If I understand Daniel’s arguments over the last few years rightly, he thinks that the Greeks should just shut up and get on with it, since (a) the alternative is worse, and (b) given the unsustainability of the debt burden, the richer eurozone countries are going to quietly disappear it at some unstated point in the future when everything becomes less politicized. This is not, contra some commenters, a stupid or evil argument – but I don’t know that it’s right either. The Greek state is not the only one that is underdeveloped – the EU/Eurozone one is too…”

Sorry if someone has already mentioned this, but I think SYRIZA should have waited until the UN Assembly on the Post-2015 Sustainable Development Goals.

There is a passage in a draft I have read about relieving overly high debt burdens of developing countries. Greece seems to be more like a developing country so it could form a voting bloc with other developing countries in a similar position, and also as a European country it could try to get support from other EU countries for this too.

If the Greek Government did this they could have then held the referendum after the September Assembly with more international support for debt relief and maybe a UN resolution or something to back up countries with overly high debt burdens.

Seriously guys.

Greece seems to be more like a developing country so it could form a voting bloc with other developing countries in a similar position

Greece isn’t a developing country! It’s not even a middle income country. It’s an OECD economy. It’s richer than every former Communist state in the EU except Slovenia.

> It’s richer than every former Communist state in the EU except Slovenia.

And who wouldn’t trust greek official statistics!

When assessing the success or otherwise of austerity, the logical fallacy to have printed off and posted above your computer is Post hoc ergo propter hoc. Usually in the explicit or implicit form or ‘Our country was in recession. We tried austerity. Our country returned to growth. Therefore…..’

What about Portugal – would that count as a success case?

You’re right, it’s not a developing country by any criteria.

It’s been going backwards at a rate of knots.

dsquared,

“Greece isn’t a developing country! It’s not even a middle income country. It’s an OECD economy. It’s richer than every former Communist state in the EU except Slovenia.”

Greece ($25,858) is much closer to Malaysia’s ($24,654) and Argentina’s ($22,582) GDP PPP per capita than Australia’s ($46,433) England’s ($39,511) or Germany’s ($45,888)

Therefore I think Greece is more like a developing country

https://en.m.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita

thehersch @50, Map Maker @ 51 and Hidari @58
On the idea that austerity per se was a success, or that we even had prosperity during the bubble years. Both ideas need a lot of unpacking and I suspect that austerity for growth would be seen as one of the more seriously deflated illusions if they were.
Bubbles are by definition a bonfire of money. When they are gone people still have to restart; denying them the means of starting by restricting the supply of money into the real economy while re-inflating the financial system is blackguarding.
As I said Ireland was fortunate in holding social welfare to keep things going. There were surely other and better ways of doing so, but it got done.

@67 Tabasco… but Denmark is NOT in Euro, while Slovakia IS…

Could we please stop with the “us vs. them” shit? It is now part of the problem.

There are two conversations going on in comments here, the practical and the ideal. Their separability, for the pragmatists, depends upon assumptions about whether the system can work well enough, with a fix. I am not so sure that it would be anything other than a temporary patch. But the ideal argument, that the underlying issues need to be addressed, misunderstands those underlying issues.

So I think that this is not about growth rates per se, not about a moral and knowledge problem of “evil and stupid”, not about politics or pragmatics either. It looks like an impasse of a broader, deeper, epochal kind.

I think that each of the following sentences is true, however much they conflict: Credit and debt are necessary, intertwined, two sides of the same coin. Credit and debt are failing to secure the whole system. … Austerity doesn’t work: Debtors are forced to find something to produce that has value to the rest of the system, even though there may realistically be nothing much. Easing doesn’t work either: Writing-down debt while providing assistance, even for a temporary period, undermines the intentionality and trust of voters and private investors throughout the rest of the system; and easing, when structured at best, just kicks the problem down the road another year or decade. … Arguing about relative debt-loads or growth-rates tricks you into thinking that you know a way out that can or will work. The success of the economic system in the past (or its relative success) is not a guarantee of success in the future. … Social welfare spending brings hazards of laziness, dependency, inefficiency. Social welfare must be massively increased to prevent immediate human deprivation, and to keep people strong for future economic growth should any be possible or forthcoming.

Und so weiter.

–Does any of this stuff sound familiar? Could Grexit solve the Euro problem?! The Euro problem is IDENTICAL to the stalemates in the US and elsewhere. The political structures are different in each case, but the underlying clues poke through at every joint and junction. “Neoliberalism” and “socialism” are side issues. “Left” and “Right” are side issues. These are ways for idea-jockeys to blame one side or the other, and thus to avoid thinking about how the imperatives of our own system are pushing us beyond the boundaries of individual psychology. We have run-out of new ideas and useful distinctions and definitions, we are just motoring on the old fumes. Why do we keep going around in circles on this?

These sorts of symptomatic impasses are rarely seen, except by psychotherapists. But it’s all of us, now without exception. We are approaching a transformation beyond the millennial psychology of money — it’s been three millennia, at least — and the old rituals are ringing hollow, but we don’t know how to do it, we don’t know where it goes or what comes next.

At this point, starting with a little more grace from ALL sides is the scientific order of the day; and if things are to proceed from evolutionary emergence, then you will know them by their fruits.

Normatively, I agree with Z:

“The sad truth is that I would answer “no” to the first (indirect) question (in particular, but not only, because of Krugman-like reasons), “hell, no” to the second (the diversity of European societies cannot be subsumed in a project that assumes we are all, or all soon will be, retired, qualified, middle-class, lutheran Germans with 1,9 grand-kids) and “there is a very real prospect that the behavior of the EU towards Greece will in retrospect be seen as the original crack announcing its demise” to the third.”

But I wonder about (b). Does it have to be that, ‘the diversity of European societies *(will)* be subsumed in a project that assumes we are all, or all soon will be, retired, qualified, middle-class, lutheran Germans with 1,9 grand-kids.’? The US seems to have maintained some significant regional differences (culturally and economically) under monetary union ?
Also, as a practical matter, is there any plausible political process where the Euro could break up without causing serious economic and political damage (an orderly breakup)? How could countries like Spain, Portugal, Ireland and Greece manage their exchange rates outside of the Euro and would they be better off (keeping in mind the institutional and political culture problems in those countries) ? (These are genuine questions, btw, as I dont understand the ins and outs of monetary policy in any meaningful way)

“Greece ($25,858) is much closer to Malaysia’s ($24,654) and Argentina’s ($22,582) GDP PPP per capita than Australia’s ($46,433) England’s ($39,511) or Germany’s ($45,888)”

Going by GNI Greece is still rated as a ‘high income country’

https://en.wikipedia.org/wiki/List_of_countries_by_GNI_%28nominal,_Atlas_method%29_per_capita

There’s a significant difference between it and Malaysia (which I asssume is because Malaysia is an export orientated economy and profits are repatriated ? ), and standards of living in Greece are still significantly ahead of other EU countries. By any (relative) measure Greece is a wealthy country.

“It basically isn’t an economically meaningful number any more. The purpose of its existence is as a political quantity; it’s part of the means by which control is exercised over the Greek budget by the Eurosystem. The regular rituals of renegotiation of the bailout package, financing of debt maturity peaks and so on, are the way in which the solvent Euroland nations exercise the kind of political control that they feel they need to have if they are going to be fiscally responsible for the bills.”

My apologies if this has already been covered, but the last clause is simply false. The Greek government proposed, among other things, raising taxes on the rich. The EU/ECB said that that wasn’t allowable, since it would be ‘recessionary’. Slashing retirement and gutting the health system wasn’t, in their eyes.

In the end it’s the financial elites crushing any resistance to their looting.

Hidari: “1: Humiliating and disastrous climb down for the Greeks, total defeat which may (or may not) lead to some form of debt relief at some indeterminate point in the future”

That’s what Greece has already suffered over the past few years – humiliation and destruction.. The Troika regards that as a ‘good start’, and are working and driving Greece from depression to depression-squared.

I’m going to Godwin here – for example, if Nazi Germany had won WWII, there’d have been ‘peace’ in the East, but only after a quarter to half of the population was killed, and the rest ground down into slaves. Somebody made a joke that Hitler looked upon Stalin’s horrors as a ‘good start’, which he intended to finish.

Similarly, the Troika regards what it has done in Greece as a ‘good start’, and their end game lies somewhere beyond horrors.

Rich: “If the argument is that Greece has no control and they’d better surrender now rather than later — and continue to be ground down, because they “surrendered” already every year for 5 years — that’s ludicrous politics. People don’t stand for that year after year. Just as happened with the U.S. and Iraq, Greece may well be rubble at the end of the process, but the imperial power doesn’t get that many years before they are driven out.”

This is the most important point of the whole question (note that the right dodges this);
anything which doesn’t take this into account is sadly lacking:

The Troika took a bad situation, and applied quite destructive policies.
When those destructive policies produced destruction, instead of the (stated) desired outcome, they continued and increased them.
As the cycle of destruction increase, the Troika kept on destroying.

The choice for Greece now is between whatever the Troika regards as ‘enough’ destruction, or anything else.

Somebody put it that ‘when you’ve had no job for five years, and no chance of getting a job, it’s not important if you’re not paid in Euros or drachmas’.

Well, the Troika no longer can guarantee what brings growth, though they cannot admit it. They are going with the easy “logic” that taxing the Greek rich would harm growth, and would also get them ejected from the cocktail parties.

At the risk of testing patience by going back to basic economic anthropology, it appears that many people including some economists are unable to stand objectively outside the psychology of money, and thus to see what we are really dealing with now. Money was NOT developed to avoid the necessary coincidence of barter! This came as a later supervenience.

Money has two very different functions, one of them so deep as to be a part of our being. They perhaps began in separate social systems, then became combined:

1. Money began as a method of accounting for how much grain there was in ancient storehouses, so it could be apportioned to the populace by the ancient emperors. Thus, Money = markers for enumeration of stuff.

2. Money also began, in other tribal systems, as objects to be shared in religious ritual, to be handled by everyone and sometimes to be awarded to the best or the fastest or the most admired or the leader. Thus, Money = sign of inclusion of everyone, with agreement by everyone on relative status and gradation. Universal inclusion + agreement on relative status: both integrally psychologically important.

When these two practices became mixed (Felix Martin’s new book locates this event in 6th-century BC Greece, just after Phoenician traders brought Mesopotamian accounting to the Homeric ritual tribes), all sorts of ritual and honorary transactions became listed in money units, and markets for various goods were created inside the social system. (Indeed this also may have been the reason for the beginning of Western science, as the ancient philosophers began to imagine that the natural world might be based upon numbers.)

3. There was an additional crucial function, on the ritual-money side. (Both Martin and David Graeber barely mention this.) The old ritual objects had sometimes been used as payback markers for individual private goods, services or honors rendered during the tribal year. All of these transactions would later be acknowledged in one huge ceremony that returned the ritual objects to their rightful givers at the big annual ritual, for all to see. This function was observed in the “Big Man” system of the Melanesian tribes, and in the potlatch system of the Kwakiutl. This part of the annual ritual festivities was effectively a clearing-house with society-wide recognition.

Thus, the status function is not merely the “hey, look at me” dance of the the Big Man, prancing around in a necklace with the most returned cowrie shells, or today’s young woman with a Hermès bag or Hollywood tinsel.

What is status? You don’t want to lend your own valuable stuff to someone who won’t pay you back — in some way — and you also don’t want to do it, because it will increase the number of people in the world who cannot be trusted, which makes your whole world riskier. Status the anthropological principle, properly understood, is the sign of people to whom you might lend, with expectation of being repaid: people to whom you might give CREDIT. They have that status, and it is what you hope that you have, too. It is a bedrock principle, true of people on the Left as well as the Right, and it is still unclear whether any of us is really able to think or function without it, (although it may now be required to do so).

And in a day when everybody can get access to Hollywood tinsel, and everybody knows that big cars and Learjets are embarrassing phallic symbols, then real status is proper conduct in conversation, and knowing your facts, and meeting your promises. It is unclear whether any of us would really want to think or function without that.

So this is a little bit more of what’s really going on, here. With the austerity debates in the recession, and now with Greece and the Euro, the issue of credit, debt, trust, status is front and center everywhere, for all the world to see. If recent history is any indication, it is not going to disappear, it is going to get worse.

Now there is another hitch, really a minor one, though it is enough to confuse a lot of people: Can money be printed? Doesn’t money itself have to be something valuable, like gold out of the ground, like the imputation of divinity to ritual objects, so that people will receive it readily; and isn’t the fact that it is now printed, the source of inflation, devaluation, and economic distress? I.e, aren’t the gold standard enthusiasts correct? The answer is No: money doesn’t have to have value in itself. But the answer is still: money does have to be tied to the expectation that someone will give you something back, whether it’s someone you lent the money to; or someone else you give the money to, in exchange for a good or service. That means, in today’s system, the printing of money must be linked generally to the level of expansion of production for sale. And this last part is a hitch that’s not so minor, anymore.

(I think a long-term interim strategy to get out of this mess is to directly print money for government monopsonies who pay to private providers for goods and services that are subject to unavoidable and costly market failure, such as healthcare, retirement security, etc. This means that the providers would accept income ceilings (to avoid general inflation) in exchange for employment security, which I imagine will become an increasingly attractive lifestyle option, compared to the mess-and-stress of dispossess-and-regress. In other words, the condition of what “status” is, will change.)

Anyway, back to present-day circus in Europe, or perhaps it should be expanded to, “Creditors and Debtors”…

dsquared: “As the election of Syriza shows, the problem was the opposite-they did too much, too fast. Without getting all “shock doctrine” here, a massive amount of progress has been made in restructuring Greek society in the last five years. Even tax compliance was getting better.”

Now you’re just lying: ‘a massive amount of progress has been made in restructuring Greek society in the last five years’ only in the sense of ‘causing a depression’.

Massive cuts to the pensions, massive unemployment among the youths, to say nothing of a massive sell off of public properties at fire sale prices and the inability to set one’s own tax policies and, of course, the prolonged depression are evidence of the successful progress of the massive restructuring.

The closest thing to “The troika is watching out for their rich golfing buddies” sticking points in the most recent round of negotiations as far as I’ve seen were Syriza’s proposal to raise the corporate tax rate from 26% to 29% and the one-off tax on corporate profits. That’s all. But this is odd, is it not? That means either

1) Syriza didn’t propose any significant income tax raises on higher incomes or wealth taxes worth fighting over. Maybe such taxes would not actually generate that much revenue despite having the optics of being more socially fair and redistributing the burden to the well-off. Or maybe Syriza realizes the Greek state still doesn’t have the capacity to collect these taxes. Or maybe even Syriza also has to appease certain powerful, wealthy interests and cannot risk assaulting their private wealth directly. (Somewhat related: I thought Syriza promised to work with the shipping industry to remove most of their constitutional tax exemptions, but I read something about a month ago [can’t find it now] that the Troika wanted these tax exemptions gone and Syriza objected.)

-or-

2) Syriza did propose such income and wealth taxes, but this did not generate any objection from the Troika institutions and thus never really entered the news cycle. But if the Troika was on board with increasing tax progressivity to make the austerity slightly more tolerable, why wouldn’t they loudly broadcast it in the media?

Now you’re just lying:

Enjoy yourselves, lads. See you later.

Plus, the U.S. has much greater labor mobility, at least in theory, because of having a common language. Unemployment can be uneven regionally in the U.S., but nothing like as uneven as it is in the Eurozone. Unemployed Alabamans can seek jobs in Texas much more readily than unemployed Greeks can seek jobs in Germany. This is one way that European diversity works against stronger union.

dsquared 07.09.15 at 4:05 pm
Me: “Now you’re just lying:”

dsquared: “Enjoy yourselves, lads. See you later.”

I know that I’m throwing a punch in the back, but:

1) ‘There is one rule for contrarians – do not whine’.

2) Your statement “As the election of Syriza shows, the problem was the opposite-they did too much, too fast. Without getting all “shock doctrine” here, a massive amount of progress has been made in restructuring Greek society in the last five years. Even tax compliance was getting better.” is quite clearly false. I’m looking at that curve of the Greek GDP from the interfluidity post upon which you commented, and see a massive and ongoing collapse.

3) In addition, you seem to be blaming Syriza for things done by others long before they took power, although that could merely be clumsy writing.

Most comments to me appear to be off-topic.

Key questions:-

1 – Is it true that the Greek state a mess?

2 – How could this be more than 30 years after Greece joined a Union of supposedly effective, liberal democratic states?

3 – Is anything that is happening at present actually addressing this issue?

PS I have a certain amount of sympathy with the following observation. “There are instances of successful political-restructuring-from-outside in Germany and Japan, but both of those involved (a) military occupation over a long period of time, and (b) relatively strong pre-existing state structures.” I would add that Germany and Japan were comprehensively defeated militarily. Political restructuring from outside didn’t turn out so well in the case of Italy. There are few cases of successful political restructuring from outside because
– it is difficult
– most attempts to do so haven’t really engaged with the difficulties.

According to the Guardian the deal is so sure to improve Greece’s economic outlook that it may well include humanitarian aid. Three cheers for massive restructuring.

Barry in 84 and 93: Before you accuse people of lying, you really ought to take a moment to read what they’ve said, or if you can’t do that, maybe have someone read it to you. You’ve quoted the same dsquared statement twice now, apparently without any comprehension whatsoever.

The interfluidity chart that you didn’t bother to link — you mean this one, right? — supports dsquared’s point. What part of “too much, too fast” is confusing to you?

Moreover, he’s not “blaming Syriza for things done by others.” He’s explaining Syriza’s election by attributing it to the results of actions of others.

Dsquared is a sensitive guy, and appears to be bothered by a rude, boneheaded commentary like yours. If you can’t refrain from saying foolish things, you could at least try not to be nasty about it.

When I see photos of Greeks lining up at the ATM, I fail to notice the aura of third-worldishness that bad teeth and old clothes convey. I do not deny they are suffering, but it is the suffering of educated, healthy, NATO people having their benefits cut. They do not seem to be carrying the heavy burden of hopelessness, seen in hunched shoulders and dead eyes of your typical third-worlder under the yoke of the IMF, who has no pension to be cut, no humanitarian aid on the way, no finance minister arriving on a motorcycle and leather jacket to speak up for them.

My point is, being a third-worder is more than per capita GNP.

I’m not particularly sensitive, I’m just busy. I’ve got my family around me, I’m seeing some really interesting places and I’m trying to get a freelance career started. I have to prioritize things a lot more, so arguing with rude people who don’t really understand what they’re talking about is a lot lower down the food chain than it was when I had a desk job.

Barry – (fwiw, that’s politicalfootball not me you’re responding to) My own perspective on the ‘dsquared situation’ (which I wouldnt normally offer as I try to stay out of this stuff, and I couldnt see why anyone would care) I agree with js on a past thread. At this stage I get a lot out of his input, and would prefer it to continue so it would be better (IMO) if everyone stepped back from this endlessly tedious butting of heads.

“At this stage I get a lot out of his input, and would prefer it to continue so it would be better (IMO) if everyone stepped back from this endlessly tedious butting of heads.”

Everyone except him, you mean?

Joshua W. Burton @ 105

Genius. The Greek version of the $2 trillion coin solution to the debt ceiling.

At this stage I get a lot out of his input, and would prefer it to continue so it would be better (IMO) if everyone stepped back from this endlessly tedious butting of heads.

For the record, I am in favor of butting heads. I didn’t even come out against Barry being an idiot or an asshole. I was just proposing that when Barry insists on being an asshole, he should avoid being an idiot, and vice versa.

” When I see photos of Greeks lining up at the ATM, I fail to notice the aura of third-worldishness that bad teeth and old clothes convey. I do not deny they are suffering, but it is the suffering of educated, healthy, NATO people having their benefits cut. They do not seem to be carrying the heavy burden of hopelessness, seen in hunched shoulders and dead eyes of your typical third-worlder under the yoke of the IMF, who has no pension to be cut, no humanitarian aid on the way, no finance minister arriving on a motorcycle and leather jacket to speak up for them.

My point is, being a third-worlder is more than per capita GNP.” Lupita@ 101.

Always good to see a Lupita comment and the perspective it brings. I wish you would comment more often. I think your observation is mostly correct. The Greeks are not (yet anyway) third-world by any stretch of the imagination. But that is what is so fascinating, macabre, and grotesque about this ordeal. I recall thinking in 2009 when the situation in Greece began to grab headlines, “Shit, it’s really happening. The ‘West’ has begun to colonize itself. Pretty soon everyone is going to owe the World Bank or the IMF a debt they cannot repay.”

We’ve entered the terminal and extremely decadent phase of historical process that began 500 years ago. It’s an old story for 90% of the rest of the world, but for the good little people of Europe, the US, and the Commonwealth countries it’s a new and terrible fairy tale come to life.

the fact that the current Greek government has maneuvered itself into accepting terms far worse it seems, than they rejected as recently as a week ago

What’s the comparison here? What have they accepted, and how does it compare with what they turned down?

“Whatever one thinks of Daniel ( an entirely irrelevant question) the fact that the current Greek government has maneuvered itself into accepting terms far worse, it seems, than they rejected as recently as a week ago entirely vindicates Daniel’s fundamental point – that Syriza bears a large part of the responsability for making a very bad situation a great deal worse. ”

Syriza undoubtedly made things worse (assuming that the deal is as bad as it sounds) because but I’m not sure whether it’s their fault, as such. As Daniel never failed to point out, although he didn’t quite phrase it that way, international politics is about power (and nothing else) which is why the referendum changed nothing (except that it made things worse). War is politics by other means. Ipso facto, politics is war by other means.

If you go into a fight you have to have something to threaten the other person with. As everyone has pointed out, Greece had a weapon when the crisis first started (i.e. before Syriza) as the EU was vulnerable and Greece could threaten Grexit. This would financially hurth the dominant (i.e. richest) powers in Europe (like Germany and France). So had they struck then, the Greeks might have been able to negotiate something. But they chickened out, and the moment was lost. Then the EU took steps to make themselves invulnerable to this threat (or seemingly so….Dsquared wrote a CT post about this) and whether or not this ‘financial firewall’ would in fact work is irrelevant. Everyone believed it would work, and suddenly the Greek threats were rendered null and void.

In other words, the Greeks took a knife to a gunfight, and were rapidly outfought.

We are then faced with a dilemma: in the absence of a credible threat what could do the Greeks do? As many on the left are very belatedly coming to realise, the Euro is an austerity machine. That’s what it does. It doesn’t do anything else.

Therefore, in the absence of credible threats, Syriza were caught in a bind. They were voted in on a promise of a: remaining in the Euro and b: being anti-austerity. But this politics does not exist. Indeed it is a contradiction in terms.

The referendum made things worse because Tsipras was forced (or forced himself) to go on TV and endlessly tell the Greek people something that was not true: that a ‘no’ vote was not a vote for Grexit (if he had told the truth and told them that it was, the result would have been very different). So the Greek populace were led to believe that there was the possibility of Euro membership and anti-austerity.

But this option did not exist, and European politicans correctly ignored the result of the referendum as the Greeks had essentially chosen, not yes, not no, but ‘not real’.

Therefore the referendum in reality weakened Syriza, or more specifically Tsipras as, because of his own position and public statements, the referendum was seen as a vote against austerity, yes, but also as a vote for continued membership of the Euro..

Therefore, he had revealed that in reality his own people did not, in fact, stand behind him. They expected him to keep them in the Euro. Had he not promised them that he would keep them in the Euro?

And so this time he went into a gunfight, not with a knife, but with nothing. And he was quickly, therefore, tied up, stripped, and forced to ‘say uncle’.

Assuming the deal is as bad as it looks, he must resign. Syriza will probably split. There will be riots and marches and so on but they will change nothing because Syriza told the Greek people for six months that Tinkerbell exists. And the riots and protests will be because Tsipras didn’t produce Tinkerbell.

But Tinkerbell doesn’t exist. If the Greeks (and the Irish, and the others) wish to leave austerity, they must leave the Euro. If they stay in the Euro, they accept austerity: permanently. There is no way out of this bind. Syriza was irresponsible in suggesting there was.

@117
If you go into a fight you have to have something to threaten the other person with … the Greeks took a knife to a gunfight, and were rapidly outfought.

Meanwhile the Greek health system is collapsing, which is not the fault of Syriza, however you want to look at it. I doubt that Syriza and the 63% of Greeks who voted No were thinking the way you are.

I like that line of Dan’s. I’ve quoted it myself. But while I think the analysis here is correct, I draw a different conclusion from it.

Of course it is true that, in almost every case, the best outcome for the weak comes from complying with the wishes of the strong. (That is more or less what it means to be weak or strong.) And yet, we don’t in general say that the right thing for the weak to do is comply. On the contrary, we admire precisely those people who defy illegitimate (by whatever standard) claims of the strong even at great cost to themselves.

There’s a phrase I’ve thought to myself, about being in a very bad situation – pretend that you’re in charge of the Polish government, in the summer of 1939. What do you do?

Send your whole navy, instead of just three ships, to Edinburgh. Load them in ballast with gold reserves and cryptographers.

@phenomenal cat. I am very flattered that you remember me. Thank you for your kind post and for welcoming me back. I almost got myself banned the last time I posted so I had decided, like Jerry Seinfeld, to avoid academic circles. Unfortunately, I have been recruited into the reserve army of labor, which has given me ample time to read up on the ongoing global financial collapse and, one would hope, revise before I post.

Ambrose the disreputable at the Telegraph reports a major concession to the Greeks. – debt forgiveness, not restructuring, must be part of the solution. Putin offers a 2 billion pipeline deal to the Greeks and, one suspects, the U.S. explains to the Eurocrats that they aren’t the only ones with cards to play.

Does this development rescue Syriza from charges of incompetence?

@128 Well put . Just finished reading the Telegraph pieces. They see a deal as a huge victory for Syriza. B

Lupita@102: “I fail to notice the aura of third-worldishness that bad teeth and old clothes convey.”

Give the Troika time.

On the other hand, debt relief is on the table for the first time. Let’s see if it stays there, or if it ends up like the public option in the Affordable Care Act.

Rich Puchalsky@131: “They can’t stay in austerity forever.” Course they can. What do you think it means to be third world?

Truth of the matter is, all poverty is now policy.

@127 “Varoufakis told them in the days before the referendum that if the voted no a favorable deal would be done on Monday and the banks would open on Tuesday.”

Tabasco, That’s bullshit. That’s not what Mr. V. said. That’s how the hostile media twisted what he said. Do you not know that or are you ignoring it for propaganda purposes? In other words, are you ignorant or just plain lying?

Video in Greek. It’s Greek to me.

Yanis Varoufakis ‏@yanisvaroufakis Jul 5
“In 24h we COULD have an agreement”, I said. But our toxic media rushed to report that I predicted an agreement within 24h. Go figure!

@118 “But Tinkerbell doesn’t exist. If the Greeks (and the Irish, and the others) wish to leave austerity, they must leave the Euro. If they stay in the Euro, they accept austerity: permanently. There is no way out of this bind. Syriza was irresponsible in suggesting there was.”

What a bizarre statement. Austerity is not a force of nature, it is a deliberate policy put into place.by people with moral agency.

For all the talk about varoufakis, Schauble has a 100 times more power. And it’s been clear that he deserves nothing but contempt from any one who believes in the european project.

“doing what you thought would serve you best” is a choice rather than an inevitability.

And it might be a poorly-informed choice. “It seemed like a good idea at the time.”

Ronan(rf)),

“ZM – or at least, Malaysia and Argentina might be by some measure, but Im *pretty sure* theyre not considered to be generally.”

The Commonwealth of Australia Department of Foreign Affairs and Trade list Malaysia and Argentina as developing countries.

They do not list Greece, but they list a bunch of European countries so I don’t know why they’ve left Greece out, but probably because they haven’t updated the list of developing countries recently enough.

European developing countries: Albania, Armenia, Azerbaijan, Belarus, Bosnia & Herzegovina, Georgia, Kosovo, Macedonia (Former Yugoslav Republic), Moldova, Montenegro, Serbia, Turkey, Ukraine.

But Greece being a developing country was not the main point of my comment, it was just a by the by part of the comment, as the main point was the Greek government should have timed the referendum and campaign to get more transfers/debt forgiveness until after the UN Sustainable Development Goals conference where they could try to get a motion passed on debt forgiveness for, or transfers to, poorer countries like themselves and developing countries to help them progress on the path to sustainable development.

Also I don’t think it is polite to say “I fail to notice the aura of third-worldishness that bad teeth and old clothes convey” — I was talking about Malaysia being reasonably poor a few weeks ago and then I found one of the women I was talking to was Malaysian and she thinks they are not so poor these days, and I think she would be more offended at this characterisation than me saying Malaysia was poor. Also it is more sustainable to wear old clothes so that is not a bad thing, and at the Sustainable Development Goals Assembly I guess this can be pointed out in the discussion on wealthy countries needing to decrease their material consumption to sustainable levels.

http://www.oecdbetterlifeindex.org/countries/greece/

“In terms of health, life expectancy at birth in Greece is almost 81 years, one year higher than the OECD average of 80 years. Life expectancy for women is almost 83 years, compared with 78 for men.”

One thing i think American commenters just cant imagine is how good life can be with 25% unemployment. The kind of low mobility, strong family/local community network along with relatively universal healthcare (i know, theres a problem with that now) can make life quite alright without a regular job. The importance of regular employment in other societies is in large parts due to status, social integration and health care access. Id have no problem criticing the downsides of such a society, especially when its overdone like in Greece, but still, dont make it out to be hell.

In general, many southern European countries had periods with stagering high unemployment and the sky was not falling the way the sky would have fallen in the US or to use another example Japan.

Greece society lacks some basic stuff countries with a far lower overall development level usually have too. And ex-communist countries are another special case anyway, as they are asymetric in their development in their own way.

Theres a question if that asymetric development with a relativly good life has been sustained by EU transfer payments (remember, Greece receives quite nice amounths of net transfers on an ongoing basis besides the debt crisis bailouts) as well as well, acumulating lots of foreign debt.

A H @ 140: “And it’s been clear that he deserves nothing but contempt from any one who believes in the european project.”

At this point, what exactly is “the” European project? Fiscal union? A federal state? With all that has happened in Greece, does anyone seriously believe in plans like these anymore? To me, as a citizen and taxpayer of a country in the northern periphery of the eurozone, talk about some great common project that must not be abandoned, no matter the cost, really frightens me. Not all of us live in Germany, not all of us are doing economically well, and the prospect of having to sign blank checks to keep “the European project” afloat just to save Hollande’s or Merkel’s or Jean Monnet’s ghost’s face is not pleasant at all. This shit is going to cost us all no matter what, but I dare say the electorates in many of the northern euro countries will demand that their politicians keep the cost in check, somehow. This constraint isn’t too good from the Greek point of view, but that’s how I see the political realities now. Unless, of course, the Germans and the French come to a different agreement and then just hammer everyone else into submission.

Had they been serious about Grexit weeks or months ago the Greeks would have begun to order or build new Drachma printing presses.

Why yes! Intaglio plates are expensive — costing a hundred dollars or more — and take a long time to produce — a half-day rather than a half-hour.

I’m a printer. 90% of my posts are made at work in a printing office.

[you destroy security printing plates after they’ve been used because they embody the accurate design and you can’t let them out of your control. Reproducing them if you have the original artwork is trivial.]

Paul Mason’s latest blog: “What was the point of Tsipras referendum?”

… getting it through parliament is not the problem. Getting it through the EU is the problem – and it’s left many Greeks still predicting this is the last gamble before Grexit.”

http://blogs.channel4.com/paul-mason-blog/4131/

So, the question is, does the Troika use the word ‘negotiation’ merely as a euphemism for ultimatum followed by capitulation: that is, is there any room at all for internal Greek democracy in the EZ?

If not, and Grexit is inevitable: the wider consequence is that the EU is finished, because there will be little left worth defending compared with the monstrous injustice that has been done. Merkel and Schäuble’s legacy will be Eurodämmerung, and history will never forgive them: nor should it!

Maybe I’m missing something but how can continued ordoliberalism lead to anything but civil war within Europe, trade war without, and environmental disaster globally, as the rest of the world pursues different forms of neo-liberalism and neo-mercantilism and, implicitly, environmental destruction?

Feeding the corvids, are we?

“If something cannot go on forever, it will stop,”—Herbert Stein

“If this is your estimate of your relation to nature and you have an advanced technology, your likelihood of survival will be that of a snowball in hell. You will die either of the toxic by-products of your own hate, or, simply, of overpopulation and overgrazing. The raw materials of the world are finite.”—Gregory Bateson

“If something cannot go on forever, it will stop,”—Herbert Stein

True. Also true:

If something can go on forever, it will still stop.

If something can’t go on forever, it can still go on a very long time.

“Why yes! Intaglio plates are expensive — costing a hundred dollars or more — and take a long time to produce — a half-day rather than a half-hour.

I’m a printer. 90% of my posts are made at work in a printing office.”

Now this was something I didn’t know! Thank you Collin.

Rich-

Nice, I’d forgotten that. From the same speech, perhaps relevant to the topic: “Every mother who, like Margaret Garner, plunges a knife into the bosom of her infant to save it from the hell of our Christian slavery, should be held and honored as a benefactress.”

ZM – the bit you’re quoting at the end Lupita wrote not me (not that I have any problem with it, just for the sake of accuracy, I agree with Lupita – although I dont think she’s talking about Malaysia or Arg specifically ) My shorthand for trying to decide whether a country in the news is wealthy is how much interest people in other rich countries are paying ; ) You’re right that Malaysia and Argentina appear to be generally considered developing countries.

More generally, on the stock market dip in China. Going from the lack of coverage, is this a storm in a teacup or a real possibility of a new crisis ? (or something in between ?)

Lynn Gazis-Sax @ 161

I despair of ever reading a narrative analysis of what has happened in Greece grounded on verifiable fact. The confusion of narratives has become, itself, a feature of the crisis.

> Now this was something I didn’t know! Thank you Collin.

I did some digging: this isn’t my field, and I understated the cost of intaglio plates by a couple of orders of magnitude. Still, it’s not real money, as you can tell by the fact that noone’s ever been so poor they couldn’t afford to run the presses.

The answer to the question “what did Tsipras & Syriza gain with their antics” is becoming a bit more clear. The gains:

1) Instead of trading more austerity for the last $7 billion from the expiring bailout, they’ll likely trade the same austerity for a much larger new bailout.

2) Debt restructuring is now on the table & being pushed by the U.S. as well as France and other Eurozone members.

3) They’ve driven something of a wedge between France and Germany – perhaps between north and south generally – and likely forestalled Germany’s ambition to force Greece out.

4) The referendum has served as a popular vote of confidence in Tsipras and his government, creating a mandate he didn’t really have before, and allowing him to co-opt the opposition.

Did they mean this outcome? Probably not; but they were faced with an unsolvable problem and apparently determined that the best way forward was to challenge the terms of the debate. To push until something gave. And something gave.

@168 I think your brief summary of a highly fluid situation to be sound. Given that reports of Eurocrat concessions surfaced after the interventions of Russia and the US, I’m guardedly optimistic that Eurocrat objections to the package will wither under pressure from America. I would guess these will largely come in the form of no-money down loans to purchase US weapons systems, security guarantees, and other concessions.

Fairly clearly Henry is right to suggest that we need to think about this problem in political, rather than economic terms, while acknowledging the dynamics are social, political, and economic.

The quote from Tsipras that a Euro exit means armed guards in tourist resorts should not be taken likely, or put to the side, especially in light of the UK government’s decision to remove UK citizens from Tunisia. I’ve no idea just how fragile or robust current security arrangements are, but given Greece’s dependence on tourism it doesn’t take much to imagine what a series of attacks might do to the Greek economy, and to further ignite long simmering ethnic resentments into a full-blown conflagration.

One final irksome point on one of my favorite hobby-horses: the suckiness of the UK Labour party. Where are Syriza’s public champions in the UK? Why is it left to Nigel Farage to articulate the plight of the Greeks within the Euro? I’m not suggesting that all Labour leaders run out to give Tsipras a hug. But where is the public support by, say, one of the four leadership contenders for Syriza and Tsipras. Doubtless their press turds are busy injecting carefully-crafted tweets that show just enough support for Syriza, but not so much as to ‘alienate’ the wealth-producing class, or the Germans.

If their remarks are in the headlines, I’m not seeing them.

@171 Well, I asked for that really, didn’t I. Cheers. I was rather hoping/suspecting that Corbyn, at least, was doing something. Nice to see Owen Jones in the mix, too. Before I add my ‘Yes, buts…” I’ll concede that there are some, including at least one leadership candidate, who are willing to speak up on behalf of Syriza.

Now, on to the task of walking that concession right back. Does anyone in Labour, or the press really take Corbyn seriously? I haven’t read his manifesto/platform, yet. I might. But the fact remains that the first Google hits that come up on the question of the current crisis link to Corbyn’s own website. He’s not getting much ink. Which actually supports my general point – namely that institutional Labour, and its press organs – the Guardian and the Independent pretty much suck.

Digging a little deeper we find that Corbyn’s support is coming from 30,000 newly-minted Unite Labour members. Jones’s puff piece on Corbyn of July 8 makes no mention of Greece, or of Corbyn’s 2008 vote in favor of a new EU referendum.
http://www.publicwhip.org.uk/mp.php?mpn=Jeremy_Corbyn&mpc=Islington_North&house=commons&dmp=1027&display=motions

Conceded. Corbyn is the real deal and he’s making noises. I’d like to see him step on some more toes and ramp-up his pro-EU referendum record significantly. The other three might as well be Conservatives.

Sorry, that should read “If he…,” not “If you…” Freudian slip? Almost certainly.

Why would Labour support Syriza? It’s pretty obvious what’s in it for ukip, less so Labour.

Unlikely , I’d guess, that the US has that much influence here, much less so Russia. I’d say if there was any possibility of Greece becoming a Russian client (and consider Russia can’t even maintain client states on its borders) Merkel would be pretty tempted to take them up on the offer (the Greek people not so much) The Germans are not lying awake at night fearing such an event.

@175 We disagree on this point, not on the factual accuracy of the economics, but on the mitigating factors and the political and social dimensions of the challenge. The choice is between catastrophic austerity overtime, or catastrophic austerity as shock and awe. More on this in a tic.

@176 Point taken re: UKIP and Merkel. Again, more on that. We disagree, I know, on the working class credentials and ideological diversity of UK Labour. I’ve been corrected on the particular of ‘the one with the beard at the demo.” But, Corbyn, could be the exception that confirms the rule.

@177 Thank you for the kind corrective. I hope I’ve learned my lesson. That said, the figures I looked at attributed Corbyn’s second place standing to the bump from Unite. I’ll defer to you on this point for the moment.

As chance would have it, I lunched with an old friend who happens to know rather a lot about another European country that went through something similar. I put no stock in these sorts of anecdotes when I read them myself, so I mention this only in passing. After we had caught up about one thing and, I pressed him rather directly for his opinion on the current mess in Greece.

The first words out of his mouth confirmed the miniscule size of Greece’s economy relative to Europe, which would seem to support your point at 176. He added that figures regarding GDP ignore a very substantial black economy.He was generally very sympathetic to the plight of the Greeks, and opined that the real criminals had absconded with the as much loot as they could put their hands on before the crash of 2008 which they had safely tucked away. He agreed that a propaganda campaign was being waged against the Greeks by the German banks and Goldman Sachs for different reasons. Greece, he argued, had to made to keep borrowing to prevent German banks from having to write off the unpaid Greek debt. Tis they who keep the pressure on Merkel and the Eurocrats. (I have absolutely no idea if this is in any way fair or accurate).
Goldman Sachs, he argued, created the mechanisms to allow Greece to start using Euros, and violated a ton of laws to do so. (See above). I mentioned the current Greek government’s efforts to find out what really happened with Goldman Sachs. His reply was chilling. Who, he asked, among the cast of actors had an incentive to uncover the truth?

Given these circumstances, he argued, Greece had no choice but to leave the Euro behind now and take the inevitable hit. Using the devalued drachma would trigger 100% inflation, often, and require further adjustments. (As if I have a clue if this is true). I suggested that Greek pensions would effectively disappear. Quite likely so.

That’s the short version of a roughly two-hour discussion, leaving out the really gloomy bits. I can attest to his qualifications, but can offer no opinion on his comments, other than to say he’s made a good living and reputation for two decades doing financial forensics. Re: 175 – if you’re ready to send your own cash to fund the kinds of hits you’re asking the Greeks to take, I’d be more sympathetic to your view. Your convictions about Greek actions cost you nothing. Re: 177, I very much hope Corbyn is taken seriously.

All kinds of deadlines looming. Cheers.

The Guardian is now reporting that the Eurogroup aren’t able to agree on a response to Greece, to the extent that they cannot even agree on a post-meeting statement. Overall the group demands more measures from Greece, including some (review & approval of draft Greek legislation) which further serve to colonialize Greece. Greece in turn say they will not agree to a deal that does not at least pay some lip service to debt restructuring.

On the other hand, the Finnish government will fall if they agree to another bailout, so they’re irrevocably in the ‘no’ camp and will not even agree to a progress statement. Germany demands €50b worth of Greek national assets as security against further bailouts, and suggests that Greece consider a Euro vacation instead, leaving for 5 years so they can default outside of the Euro Union, and then returning after they’re clean. One wonders if this is meant to become a standard procedure, and what future lenders will think of it. Italy has broken with Germany and Italian sources have leaked that Italian PM Renzi will tackle Merkel tomorrow.

There’s very little evidence suggesting the majority of Greeks want to exit the Euro.

I don’t disagree, but perhaps you and dsquared oversell this a bit.

Tsipras and Varoufakis were quite clear with the Greek electorate on their strategy. They didn’t exactly say that they would do whatever needed to be done to remain in the Euro, but rather that the Euro would do what was necessary to keep Greece in because (they argued) the creditors would be nuts to do otherwise.

If Tsipras’ capitulation isn’t accepted, I think he will be able to make a strong argument that the eurozone is nuts. When it is revealed that Tsipras had an insane negotiating partner, will the Greeks blame Tsipras? Remember that this is the only the eurozone’s latest insanity regarding the Greeks and regarding monetary policy in the eurozone itself – there’s a history here.

The Greeks might blame Tsipras – and, in fact, maybe they should. Tsipras did indeed promise them a sane negotiating partner that wasn’t intent on crushing Greece.

But what was Tsipras’ negotiating alternative? What was his alternative in discussing these issues with the Greek people? To whom will the Greeks turn? Who has been more right about the Greek situation than Syriza, starting years ago?

The good news is that crisis is the new normal

Certainly Syriza, with Europe’s collaboration, is correctly blamed for/credited with this.

And isn’t Dijsselbloem right, when he wonders how the Greeks can be trusted?

“There is a major issue of trust” between Greece and its eurozone partners, Eurogroup president Jeroen Dijsselbloem said before Saturday’s finance ministers’ meeting.

Given the Greeks’ impossible preferences – remaining in the Euro without crushing austerity – how can Europe trust Greece to live up to any deal?

1) Instead of trading more austerity for the last $7 billion from the expiring bailout, they’ll likely trade the same austerity for a much larger new bailout.

This is not an advantage. They now *need* a bigger bailout. Something like €14 bn is going to be needed for a bank recapitalisation to cover the damage done by the last month – uncertainty is toxic to payment culture and a load of loans have gone non-performing.

Schaeuble’s idiot plan took my breath away. I’d expected him to throw a few bombs, but this is straight out of the worst bits of Varoufakis’ playbook – showing up at a details meeting, holding a half baked plan of your own invention that hasn’t been discussed with anyone else. He certainly doesn’t have a mandate to do that and I very much hope he will be out firmly back in his box. The Finns are more of a problem, though, and I think they will need to be bought out of the deal somehow. I really hope we didn’t lose the Euro some time over the last month.

” I really hope we didn’t lose the Euro some time over the last month.”

People shouldn’t be working out how to ‘save’ the Euro. People should be chasing it to the ruined castle with pitchforks and burning torches, scream ‘burn the abomination!’.

More seriously, I seem to remember a CT post (although I can’t find it now) in which it was revealed that the Euro was intended as a bulwark against the post-war imperial power of the dollar, thereby stopping the long term trend of Europe’s decline into complete political and economic irrelevance. It was a cute idea, but it’s obvious now that it hasn’t worked.

Here’s a factoid I read somewhere on the interwebs: In 1900 Europe comprised 25% of the world’s population. In 2100 it will be 4%. China, India, the United States, Canada…these countries are prospering (amongst other reason) because of economies of scale. That’s why South America is trying to unite. In economics, big is best. The only way the Europeans could compete is if we united, but that’s not really something we are any good at, as history shows.

Me:

“1) Instead of trading more austerity for the last $7 billion from the expiring bailout, they’ll likely trade the same austerity for a much larger new bailout.”

dsquared:

“This is not an advantage.”

For Greek leaders, of course it is. If they’re going to be forced to accept austerity anyway, why not do it in exchange for a 3-year funding commitment than a 3-month funding commitment? If the bid succeeds, blame crazy northerners for the austerity, and you can always default later rather than sooner. If it fails, blame crazy northerners for Grexit, and default sooner rather than later.

Germany must punish the Greeks into becoming more German in order to prevent Germany from screwing Greece over endlessly. See?

Sure, I’m an American and we know this logic. One variant: “It became necessary to destroy the town to save it.”

Kissinger had a variant that also applies. Discussing the seemingly useless Hanoi Christmas bombing in 1972, he said: We had to bomb them into letting us accept their terms.

I just read an article by Monbiot retrospectively thanking Thatcher for keeping the Euro out of the UK. This whole situation is a classic Tory “are sure you want to reinvent politics? how sure are you that you’ve gotten it right?” example that is going to keep conservatives going for another 50 years.

Germany is basically trying to destroy Greece

http://krugman.blogs.nytimes.com/2015/07/12/killing-the-european-project/?_r=3

I realize that Greek people have more important things to do right now than fuck around on CT threads, but does anyone reading this have any ground knowledge of what the mood is among Syriza supporters?

Below is an excerpt from a recent editorial in the Lancet

… Amid talk of new deals, exit from the Eurozone, and the closure of Greek banks, the fact that the crisis in Greece is not only economic, but also about health, should not be forgotten.

… Experience of other countries’ responses to the global economic meltdown of 2007–08 could hold some lessons. As documented in The Lancet’s Series on Health in Europe, Iceland rejected austerity in favour of social protection and active measures to get people back into work; it has weathered the fallout from the global financial crash with no long-term health costs to its population. Although, as the authors note, “extrapolation to other countries should be undertaken with care”, we hope that a humane response to Greece’s economic recovery, whatever that might be, can be realised to ease the health crisis facing the country’s 11 million people.

@195

Germany is basically trying to destroy Greece

Germany is basically trying to destroy Greece
Germany is basically trying to destroy GreeceEurope. Again.

All fixed now.

Iceland rejected austerity in favour of social protection and active measures to get people back into work

Iceland could do this because it has its own currency, which depreciated 50% against the Euro in the 18 months from the beginning of 2008 to the middle of 2009, and which remains at this level today.

Headline: “Creditors Demand Tsipras Defile Mother’s Grave.”

Snark from fairly radical blog.

Creditors Demand Tsipras Defile Mother’s Grave.

Now that’s just ridiculous, because she is still alive.

^ I’m sure Schauble is hard at work on that one.

@205 To reiterate, Syriza promised to end the austerity imposed upon Greece and conditions agreed to by previous Greek governments. Does it appear to you that Tsipras is fulfilling the promises he made to the Greek electorate as recently as last week?

Does it appear to you that Tsipras is fulfilling the promises he made to the Greek electorate as recently as last week?

This is the wrong question, in a technical sense: giving you the answer will hinder, and not help, your understanding. The answer doesn’t mean what you think it means.

[specifically: it’s a very narrow focussed question that’s focussed on an issue that honestly isn’t very important. “He did what he promised” isn’t actually that important to most people: what people want isn’t people not doing what they “promised” to do, but not holding in mind the things they “promised” to consider, to hold in mind before acting. The lies — falsehoods, really, but I’d guess you’d call them lies — that matter to people are the ones about intent, not outcome.]

” I really hope we didn’t lose the Euro some time over the last month.”

We talked about it on the recent university scandal thread: how you never really know what will catch the public eye. #thisisacoup shows an interesting level of interest well outside of Greece. This really seems to be discrediting the entire EU project in a way that the anti-EU right never could have pulled off.

@196: And Syriza friendly paper Avgi is writing that “a coup is underway to overthrow the legally elected government in Greece” and quoting Der Spiegel’s headline about the catalog of horrors.

The Guardian live feed has an excellent set of sub-threads from Athens detailing a Syriza split and imminent elections – the term disastrous appears throughout.

Various media, social and old, are reporting that an agreement has been reached.

Whatever the terms, the pre-July 2015 European comity is gone forever.

@217: At least Germany did a little more to earn the excessively onerous Treaty of Versailles than Greece did to earn this.

The crazy thing for me on a personal level, is that as anyone who has read me here or elsewhere would know, I’m fairly right of center on most things. But believing in markets generally doesn’t mean siding with bankers any time they want absolutely anything. Moral hazard in a capitalist environment requires that if you make a bad investment, you might lose the money. The seeds of the next “we can’t stop ourselves from loaning too much money” crisis have been carefully planted and are going to be watered by Greek blood.

I’ve been having disagreements with people on who took what haircuts on Greek debt in 2011-12 (?), can anyone fill me in on the specifics or recommend something to read?*(and Something to read on the more general response to the banking crisis would also be appreciated . Is there any comparative study or something like that?)

* I’ve read some by Miranda Xafa, karl whelan and Zettelmeyer, Trebesch & Gulati, so anything else.

https://mobile.twitter.com/SKalyvas/status/620424466485612544

There’s a general argument from some people on the left that the Greeks should have left the Euro years ago. Basically, that this kind of outcome was inevitable, and that the Greeks should break from the system before they were worn down by additional years of austerity. This is kind of like the argument for doing something about global warming: as the years go by, the situation gets worse and worse, but since it’s always going to get worse it’s never “too late” to try to do something about it, even though the chances of success keep going down as time goes by.

The counter-arguments were the usual: people don’t know anything about Greece: people are just using Greece as a talking point in their hatred of “austerity” whatever that means: people don’t know anything about the financial system: people don’t understand how bad things will get if the technocrats aren’t allowed to fix things; it’s largely Greece’s fault because they communally cheated on their taxes or voted in the wrong politicians.

The best counterargument is basically explanatory, and says “Greece hasn’t left the Eurosystem because the Greek people don’t want to, even though that might be the best thing to do.” In this case all the technocrats who advised Greece to stay in the Eurosystem really were advocating for the wrong thing and using the trust that the public gives to experts to give bad advice.

Jared Bernstein wrote a measured angry-economist comment. My remark in response: “You just don’t understand greed, guy. Rather a failing in an economist, I would think. This isn’t about austerity: this is about taking. They’re going to strip that place bare. The Parthenon marbles—that will be nothing compared to what is coming.”

Tabasco: “Now that’s just ridiculous, because [his mother] is still alive.” Well, but you see, first he has to kill her.

Sebastian, this is what the left has been trying to tell you, all these years. When greed and sanctimoniousness are in the saddle, all the fine conservative words mean nothing—they are rationalization, nothing more. What could be less conservative than looting the place where Western civilization was founded? It is not the left who would tear down the order of the world. “All fixed, fast frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into air, all which is holy is profaned, and man is at last compelled to face with sober senses his real condition of life and his relations with his kind.”

Marx, I think, was optimistic. No compulsion, it seems, is enough. If Syriza had faced the “real conditions of life and [their] relations with [their] kind” they would have never have agreed to this. And even now, new rationalizations are being prepared.

Lynn Gazis-Sax, my sympathies to you and yours. Dsquared, it seems you were right.

Link to the New Statesman interview.

Re-reading the interview, the first vote on the triptych took place a week before the referendum, when banks were first closed, and Varoufakis came up with his blueprint for Grexit the month before. I definitely think Merkel somehow got hold of this information which explains all the talk about losing trust and the humiliating conditions Tsipras is enduring. Petty but understanding. What I do not understand is Tsipras.

@237

Imagine how much smoother things will run if we can get rid of other stunts of popular will, like elections.

I said it at the time – the referendum stunt was very costly and put Syriza in a worse position no matter the outcome.

What I didn’t realize was the depth of Tsipras’ commitment to the Euro. The referendum makes sense as a preparatory move to either capitulation or Grexit (depending on which way the vote goes). Having the public vote “no” then capitulating makes no sense at all.

Are the rumors true that Tsipras called the referendum with the intention of losing it? That would explain a lot, but wow.

But Tsipras, and his co-conspirator Schauble, have certainly heightened the contradictions. I’ve been impressed by the resilience of the EU, but I’m still not seeing the non-Grexit scenario. I wonder if Schauble can see it.

These people are fools, and we are fools to let them rule us.

Tasty tidbit from Varoufakis’ interview with NS:

Only the French finance minister has made noises that were different from the German line, and those noises were very subtle. You could sense he had to use very judicious language, to be seen not to oppose. And in the final analysis, when Doc Schäuble responded and effectively determined the official line, the French FM in the end would always fold and accept.

Varoufakis is nothing if not communicative. He gave another interview to the Late Night Live radio program of Australia in which, is seems to me, he sets the stage for a coup of his own, saying that Tsipras will have to step down as prime minister, that he lacks the personal and emotional characteristics to confront the crisis, that he was defeated.

He also talks about Schäuble-his-nemesis, who has his own shady plan for re-structuring the Eurozone, which includes Grexit, (Varoufakis knows this because Schäuble told him) and he will reveal it (this on his blog) in an article that will be published on Thursday in Die Zeit.

I think Varoufakis is getting ready to take over by making public his political manifesto.

“And CT headliners? Could we revisit this in six months? Right now, matters look dire, so let’s see how dire the actual results are, a little ways down the road.”

Agreed. Seeing how things look One Friedman Unit in the future would be interesting.

/Not that total failure will bring any accountability but still.

> These people are fools, and we are fools to let them rule us.

The evidence on Schauble in particular points to autism — the utter reality-denying intransigence is very distinctive — but I doubt that your average high-level government negotiator has the experience to spot the signs. And even if they did I expect they’d just think it normal, because like I’ve been saying for years the entire hard right, pretty much without exception, shows exactly the same behaviour.

From the new statesman

It was not even annoyance, it was as if one had not spoken.

[But] Schäuble was consistent throughout. His view was “I’m not discussing the programme – this was accepted by the previous government and we can’t possibly allow an election to change anything. Because we have elections all the time, there are 19 of us, if every time there was an election and something changed, the contracts between us wouldn’t mean anything.

So that would be the first phase. The second phase was where they’d ask us what we intended to do on VAT. They would then reject our proposal but wouldn’t come up with a proposal of their own. And then, before we would get a chance to agree on VAT with them, they would shift to another issue, like privatisation. They would ask what we want to do about privatisation, we put something forward, they would reject it. Then they’d move onto another topic, like pensions, from there to product markets, from there to labour relations, from labour relations to all sorts of things right? So it was like a cat chasing its own tail.

Autism.

Whose autism?

HL: And is that group controlled by German attitudes?

YV: Oh completely and utterly. Not attitudes – by the finance minister of Germany. It is all like a very well-tuned orchestra and he is the director. Everything happens in tune. There will be times when the orchestra is out of tune, but he convenes and puts it back in line.

Schauble’s autism.

100%, top-to-bottom, this happened because a person with a severe, unmanaged cognitive problem was put in charge of fiscal policy of europe.

I live in Greece and in the Philippines. The Greek state bureaucracy is a mess, as is the Philippines. Yet the people are better off in many ways than in the USA. In the USA roughly half of your income goes to the state (if you make six figures, the rest of the wage owners don’t matter IMO), and you get little for your money. In Greece, and in the Philippines, about 10% to 30% of your money goes to the state, and you get nothing for your money. But cost of living is less, so it’s great for retirees and people like me who get their money from outside. The weather in GRE is like California, USA, great, and in the Philippines it’s a Third World without the disease and violence of Africa. What’s not to like? The Greeks used to outlive the Americans before they started eating junk food, and sugar ruined the diets of the Filipinos, but aside from these imported (Western) bad habits, it’s all good.

and you get little for your money

I’m reminded of this Monty Python skit: https://www.youtube.com/watch?v=9foi342LXQE