Adults In The Room

by John Holbo on May 5, 2017

Yanis Varoufakis’ new memoir sounds pretty damn interesting.

He’s in Washington for a meeting with Larry Summers, the former US treasury secretary and Obama confidant. Summers asks him point blank: do you want to be on the inside or the outside? “Outsiders prioritise their freedom to speak their version of the truth. The price is that they are ignored by the insiders, who make the important decisions,” Summers warns.

Elected politicians have little power; Wall Street and a network of hedge funds, billionaires and media owners have the real power, and the art of being in politics is to recognise this as a fact of life and achieve what you can without disrupting the system. That was the offer. Varoufakis not only rejected it – by describing it in frank detail now, he is arming us against the stupidity of the left’s occasional fantasies that the system built by neoliberalism can somehow bend or compromise to our desire for social justice.


The first revelation is that not only was Greece bankrupt in 2010 when the EU bailed it out, and that the bailout was designed to save the French and German banks, but that Angela Merkel and Nicolas Sarkozy knew this; and they knew it would be a disaster.

This charge is not new – it was levelled at the financial elite at the time by leftwing activists and rightwing economists. But Varoufakis substantiates it with quotes – some gleaned from the tapes of conversations and phone calls he was, unbeknown to the participants, making at the time.

I enjoyed his interview with Doug Henwood back in March. He seems to think moderately well of Macron, which makes me feel a bit better.



casmilus 05.05.17 at 10:43 am

“Elected politicians have little power; Wall Street and a network of hedge funds, billionaires and media owners have the real power, and the art of being in politics is to recognise this as a fact of life and achieve what you can without disrupting the system. That was the offer. Varoufakis not only rejected it – by describing it in frank detail now, he is arming us against the stupidity of the left’s occasional fantasies that the system built by neoliberalism can somehow bend or compromise to our desire for social justice.”

Was Blair an example of a Left fantasist, or the sort of person Varoufakis was offered the chance to become?


nastywoman 05.05.17 at 12:13 pm

‘that the bailout was designed to save the French and German banks, but that Angela Merkel and Nicolas Sarkozy knew this; and they knew it would be a disaster.’

but – what if – the bailout was designed to help the Greece?

As without any question it would have been the UTMOST (political) disaster for Germany and France -(the strongest believer in ‘Europe’ and the ‘inventors of the Euro) to see even such a small country like Greece being bankrupt and ‘leaving’.

And this is what I never understood in the logic of Varoufakis – compared to that UTMOST ‘political’ disaster the ‘disaster’ for the German and French Banks would have been – comparable – a ‘very tiny disaster’?


nastywoman 05.05.17 at 12:26 pm

– or to say it more straightforward: It’s not always all about the dough!
-(as we could learn from Germany taking millions of refugees)

And watching – how not only in Germany politicians ‘discipline’ their Banks and money men – and kind of keep them under control – makes one wonder why so many of my fellow Lefties and nearly all of my fellow Americans -(and the Varoufakis Dude) – so often insinuate that it’s – always – all about the dough?


Layman 05.05.17 at 1:37 pm

“but – what if – the bailout was designed to help the Greece?”

The ‘bailout’ is a series of loans by the EU to Greece, which Greece must then use to pay back debts owed to German and French banks; and in return for which Greeks must suffer recession, unemployment, and the dismantling of their social safety net. So, who was being helped again?

If Germany and France wanted to help Greece, they’d have (for example) forgiven a lot of the debt, something even the IMF says they should do, but something they refuse to do because it is better politics to punish Greek retirees than it is to give away German taxpayers contributions to lazy Greeks.


YourPalGarrett 05.05.17 at 4:39 pm

At #2 & #3: it certainly wasn’t done to help Greece. Yes, those other countries want Greece to stay in the EU. If people lose confidence in the EU, the whole project will likely fall apart. That’s main worry. Plus Greece had benefited by being part of the EU and many of their officials probably didn’t want to exit either. However, I think the richer nations basically tried to force Greece into a form of debt slavery.

The deal with Greece was absolutely made in bad faith. It imposed incredibly severe austerity policies on the Greek populace. Greece could not reasonably adhere to those policies and that’s why the leftist government has not been fully cooperating with the deal. It was cynically made.

The IMF knew that Greece could not repay the debt based on the very strict terms they set. There’s good evidence to suggest that this arrangement was made so that many of Greece’s public or commonly owned goods/industries could be privatized. In was an under-handed land grab. In this sense, I think it’s very much about the dough.

The reason that it has not panned out well for Germany and France seems to be that the EU is essentially flawed. The current system does not allow the EU to be nimble in the face of crises. Really Greece (and the rest of PIIGS) needed stimulus and that would have called for the wealthier EU nations to essentially have to make sacrifices, which they didn’t want to do. My supposition is that they thought it would send a message that up-and-coming EU nations could behave badly and then get bailed out. In that way, I think it’s also about the dough.

Finally, it’s no secret that austerity economics are fashionable amongst international financial elite, even though they don’t seem to work. I think that’s just a weird hang-up/cognitive bias. In late 2015 or early 2016, the IMF released a paper saying that their commitment to austerity might have to be reconsidered but these things change slowly. In that way, I suppose it’s not all about the dough.


nastywoman 05.05.17 at 6:31 pm

Yes – yes – and yes – the Anglo-Saxon narrative of what happened – which never includes any mentioning of the debt is nearly interest free – and matures in about 50 years – and once was cut by fifty percent and then Angela Merkel was reminded ‘Banking’ that she can’t do that.

And I’m all for 100 percent debt relief for Greece as – German and French Banks -(and especially British Banks) – easily have enough dough to write if all off -(like the derivatives they still hold from US Banks) – BUT what I’m NOT for – is to turn Greece again into one of these poorest countries in Europe – Greece once was before the Euro – and the bailout at least helped to prevent it. – The major fact which always seems to be forgotten in the very stereotypical Anglo-American narrative.

Or what did the British ‘friends’? of the Greek say:

NOT a Pound for Greece – and – sorry – but that’s not a help at all!


nastywoman 05.05.17 at 6:40 pm

and again @5
– the statement that ‘the EU is essentially flawed’ aways makes me smile and reminds me on my wonderful youth in Italy where (supposedly) ‘the system was sooo ‘flawed’ that I was told nearly about any week that ‘IT would collapse’ – and as I now hear the same argument nearly every day from my fellow American citizens about US…

What in the world are we talking about?
I mean if Macron will be IN Europe at least will avoid the Idiocracy in every major country!


Mitch Guthman 05.05.17 at 6:41 pm

The problem with Larry Summers is the problem with idealizing courtiers such as corporatist politicians or lobbyists as agents of change. People like Summers work hard to ingratiate themselves with powerful people ostensibly for altruistic purposes. Maybe it happens but too infrequently to count on and usually not until the courtier has gotten his, which typically takes a very long time and invariably imposes painfully large costs on the rest of us.

Essentially, as Summers describes the choice, it’s something of a paradox. If you want change, you need to be an insider. But being an insider means also means being a team player who never rocks the boat but also never achieves anything except for being an insider. And, of course, making some very good money.

After reading the excerpts from his memoir and the two opinion pieces he wrote on Macron, I think Varoufakis knows he got rolled and he’s given up. Basically he’s thinking about how much better his life would be if he could be Tony Blair


nastywoman 05.05.17 at 7:41 pm

‘After reading the excerpts from his memoir and the two opinion pieces he wrote on Macron, I think Varoufakis knows he got rolled and he’s given up.’

Not really – as he still seems to think it’s all about ‘the dough’.
And as it seems to be – that people who think it’s all about the dough hardly ever will understand people who have completely different priorities – he also in his opinion pieces pretty much misunderstood the (other French) and German ‘Lefties’.

Or as hinted before – in the case of Greece the other European Lefties major objection might have been to avoid a complete (cultural and political) Greek suicide.


Layman 05.05.17 at 8:44 pm

“…which never includes any mentioning of the debt is nearly interest free…”

Because in this case the interest rate is irrelevant. The bailout is a bailout of German and French banks, who issued loans they knew were unwise but did so on the bet that they would be bailed out by German and French taxpayers if things went wrong. The money passes through Greece on its way to those banks, to make the bailout palatable to German and French taxpayers, who don’t want to pay for the bad loan decisions of banks; and the Greeks are punished for it – they have their economy and social safety net destroyed – for the same reason, that German and French taxpayers don’t want to pay for the bad borrowing decisions of lazy crooked Greeks.


Sebastian H 05.05.17 at 9:38 pm

This is the kind of thing that a lot of people suspected (and which should have been a big deal with Clinton if we weren’t talking about her emails and if the Republicans hadn’t nominated an insane person). It feeds populism because it breeds (quite possibly appropriate) distrust about the ruling elites.

The Rust Belt felt like the ruling elite from both parties lied about globalism. The Leave voters felt like the ruling elite from all parties lied about globalism. The Greek voters felt like the ruling elite from all parties lied about globalism.

Presuming Macron defeats LePen this time, will the ruling elites let him do much to make it so the working class doesn’t feel he’s lying about globalism? I guess it depends on who gets elected in Germany?


novakant 05.05.17 at 9:51 pm

I wish somebody could give a reasonably objective explanation of how Greece got into this mess in the first place and how we can prevent such developments in the future. I do wonder why the sh#t always has to hit the fan before everybody comes up with amazingly intricate explanations of how much better they would have dealt with the situation once it’s completely messed up already. Shouldn’t scientists and other experts predict stuff? (Cf. also Ireland)


Gabriel 05.05.17 at 10:17 pm

I cannot understand how someone could read the article by Varoufakis and come to the conclusion that he thinks ‘moderately well of Macron’. The point of the article is literally ‘Macron is not as a bad as Le Pen and Macron correctly identifies some of the problems facing the EU, even though in every case it’s a misdiagnosis.’


F. Foundling 05.05.17 at 10:56 pm

@OP: ‘He seems to think moderately well of Macron, which makes me feel a bit better.’

This doesn’t make me feel better about Macron, it makes me feel worse about Varoufakis. He himself points out that Macron is ‘the minister who stripped full-time French workers of hard-won labour rights’. He points out, in addition, in the Le Monde piece he links to, that Macron wants to decrease the income tax and to reduce central aid to local communities. Macron is an indisputable neoliberal, an enemy to labour rights, the welfare state and everything that the intellectual left claims to hold dear outside of social issues. What offsets this, in Varoufakis’ view, are a couple of text messages and phone calls in which Macron claimed to be somehow trying to assist the Greek cause (except that he somehow never made his alleged solidarity public, and Varoufakis himself mentions how the social-democratic government representatives also displayed solidarity in private and the opposite in public). So the good news is that, allegedly, Macron was secrectly reluctant to impose neoliberal policies on Greece, while he has been openly and demonstrably doing his best to impose neoliberal policies on France! Give me a f***ing break.

Apart from the insider palace gossip, Varoufakis is giving us the evergreen line – for the emptieth time, obey party discipline and unite against the fascist (who the establishment for the emptieth time has made sure will be the only alternative to the neoliberal). First they do everything to make sure the few remaining proponents of labour rights and the welfare state like Sanders, Mélenchon etc. don’t get to ‘the finals’ (and some so-called ‘leftists’ here even openly celebrate that), then they announce, barely concealing their happiness and relief, that we have no choice (again). And for some reason, according to Varoufakis, when faced with the choice between policies that harm ethnic minorities and policies that harm workers and whoever needs the help of the welfare state (i.e. the majority of the population, including ethnic minorities), we must always automatically choose the latter, without even taking the trouble to consider and compare the specific extent of the harm likely to be done, because it’s 1940 all over again!

Umm, no, it’s isn’t. Right-wing populists have already governed in coalitions in several European countries (Austria, Norway, Denmark); appalling as they are, they aren’t Hitler and nobody is going to the gas chambers. Le Pen in particular has done a lot to distance the party from its Nazi roots and to moderate its stances on social issues, even trying to woo Muslim voters, and she espouses left-wing positions on the welfare state and on the government’s role in the economy (definitely to the left of Macron). I am not a French voter and I’m not really sure what I would do if I were one, but I can definitely see why someone would refuse to rally behind Macron under such conditions.


kidneystones 05.06.17 at 12:06 am

Macron’s emails have been hacked and dumped online.

‘Russia did it’ is a key component of the Reuters account and explicitly connects the hack to the US elections “U.S. intelligence agencies said in January that Russian President Vladimir Putin had ordered hacking of the Democratic National Committee and the chairman of Hillary Clinton’s Democratic campaign to influence the election on behalf of Donald Trump, her Republican rival who went on to win the U.S. presidency.”

Which is remarkable given what Senator Diane Feinstein just stated that despite the much trumpeted charges that the Russian government ordered the hack, the Democratic Senator has seen no evidence pointing to collusion between Russia and the Republican then-nominee.

What is clear is that a private corporation run by former British intelligence officials (recall the role ‘sexed-up’ intelligence by the British played in the invasion of Iraq) hired to compile anti-Trump oppo asserted that Trump hired Russian prostitutes to defile a bed once used by the Obamas in Russia – an account no reputable US journalist would touch, but that nonetheless ended up being splattered all over the press.

I like Varoufakis and agree that his memoirs will make excellent reading. The little I know of modern French political practices makes it difficult to believe that Macron is anything but ‘better’ than Le Pen. Nothing better encapsulates the dismal choice EU failures have forced upon the European voters. Agents of Pitt, the Masons, and of Rome then. Russia now). It will be closer than the polls suggest, but Macron should survive to confirm the verities of the Varoufakis charges. The next set of failures should secure an FN victory.


Layman 05.06.17 at 1:47 am

novakant: “I wish somebody could give a reasonably objective explanation of how Greece got into this mess in the first place and how we can prevent such developments in the future.”

It’s not so hard. Previous Greek governments lied about the state of Greece’s economy in order to get into the EU. The EU more or less knew they were lying, but EU fervor triumphed and Greece was allowed in. Successive Greek governments continued to lie about economic performance and statistics to remain in compliance with EU standards. Again, everybody knew they were lying (performance was always revised downward later) but no one cared and money continued to flow to Greek debt backed by the EU Central Bank. Bankers made zillions, then came the global financial crisis, credit dried up, and Greece was unable to find private bank buyers for their debt. Because they could not service their debt by selling more debt, they were suddenly in danger of default.

As for predictions, lots of people said at the time that Greece’s problems were structural and their debt unsustainable, which meant that loaning them more money to pay their debts simply kicked the can a bit further down the road without addressing the real problem by writing off the unsustainable debt. If Greece had a sovereign currency they borrowed in, they could have inflated their way out by printing money and paying their debts. But they didn’t have that option. If they knew what was coming, perhaps they would have abandoned the Euro and defaulted on the debt, but that would be very bad, too. So instead of forgiving the debt, the EU opted to punish them by loaning them more money under extreme conditions, and the Greeks opted to take the punishment.

The penalty exacted by the EU for loaning them more money to pay their structurally unsustainable debt was the imposition of austerity budgets requiring Greece to run a primary surplus during a time of recession, basically sucking demand out of the system, driving down wages and employment, which depressed government revenues further, in a downward spiral. So the structural problems got worse, not better, with each new tranche of loans and each new government budget.

What makes things worse is the apparent necessity of a morality tale, in which it is asserted that Greeks were lazy tax cheats who retired younger than Germans, to big pensions, and thus caused the crisis; which meant that of course the debt could not be forgiven and therefore somehow fall on the shoulders of hardworking, thrifty Northern Europeans. Never mind that the roots of the crisis were misdeeds carried out in secret by Greek elites, aided and abetted by bankers up to and including Goldman Sachs, who helped the Greek government hide their true financial condition for years. Never mind that Greek workers retired no younger than did Germans, or that they worked longer hours than do Germans, for lower wages than those Germans. It’s certainly true that Greece suffers from a tax collection problem, but that is a problem which has persisted more or less since the time of Socrates, and was hardly a secret to anyone involved in bringing Greece into the EU, or anyone rushing to loan them money before the crisis.


F. Foundling 05.06.17 at 2:47 am

Just an addition to my 14, lest it should be read as some kind of positive assessment of Le Pen: there is no doubt that, while softening her image and trying to woo more moderate voters and even Muslims, she has also continued to maintain her traditional racist and xenophobic base by various more or less obvious ‘dogwhistling’ statements and proposals such as a ban on the public wearing of religious symbols, including headscarves, to complement the already present burqa ban. While many mainstream right-of-centre politicians and even some in the Socialist Party have also been working to capitalise on xenophobia, there is no doubt that Le Pen is a highly unsavoury figure, even if one were to ignore the decidedly blackshirt origins of her party. However, her slippery manoeuvres and demonstrated readiness to backpedal also indicate that even if she were elected (which is extremely unlikely this year), that wouldn’t result in some kind of Nazi apocalypse either.


peter ramus 05.06.17 at 3:00 am

Summers asks him point blank: do you want to be on the inside or the outside?

This Summers story sounds remarkably like the one recounted in Elizabeth Warren’s memior A Fighting Chance, in which she writes:

Larry leaned back in his chair and offered me some advice. I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want. But people on the inside don’t listen to them. Insiders, however, get lots of access and a chance to push their ideas. People — powerful people — listen to what they have to say. But insiders also understand one unbreakable rule: They don’t criticize other insiders.

Is that just good old Larry’s standard opening line? Hi, welcome to the Illuminati?


Pavel A 05.06.17 at 5:00 am

Here is kidneystones again, acting as a kind of a molded leather rooster container for my (former) peeps.

Here is the thing, Russia has engaged in hacking multiple campaigns in the Europe and the US in support of alt-right candidates. This is basically now an indisputable fact.

Russia in Germany (hacked the bundestag, spread misinformation about fake rape, etc):

Russia in the Netherlands:

Russia in the US (hacking over a dozen small campaigns):

Russia in France (oh look, security firms are confirming Russian involvement and predicted it over a month ago):

“What is clear is that a private corporation run by former British intelligence officials…”
This is the most specious argument ever. This does not in any way discredit the idea that the Russian government has been engaged in mass-scale cyber warfare against EU states and the US. It’s like there is a pattern here or something…

Hey kidneystones, do you need me to write a recommendation letter to the former motherland? You’re doing such a great job, I wouldn’t dream of you not getting the recognition you deserve!


Ben 05.06.17 at 5:46 am

Was going to post the same thing, peter. It sounds very much like the wearying “I’m 25 and shuffle papers at the State dept. and wow let me tell you how the world *actually* runs” conversations I’ve had with friends who went to DC

They all, to a person, now work as lobbyists.

The Varoufakis op-ed on Macron is indeed weak tea (a text message saying “I did all I could”, really?) but a Varoufakis blog post goes into a bit more detail: on Macron’s telling, he was shut out of the negotiating room in July 2015 (i.e. paid a big personal political cost) because Merkel caught wind he wanted to avoid putting Greece in an austerity straight jacket.

The only evidence Varoufakis gives for this is Macron’s word, though . . . still kinda sounds fishy


phenomenal cat 05.06.17 at 7:13 am

I read the Varoufakis Guardian thing with not a little interest. He makes some decent arguments for Macron, but one line seems off–out of tune as it were.

He claims Macron was one of the few working to mitigate the imposition of austerity that was inevitably coming down the pike (how Macron was doing this remains unclear). He quotes a text from Macron saying, “I do not want my generation to be the one responsible for Greece exiting Europe.” Okaaay. The quotation doesn’t offer much in the way of evidence of Macron’s goodthinking re: Greece–so far as I can see. It was pretty clear at the time that most if not all of the major players did not want a Greece exit. I don’t recall many other offers on the table. Greece had to stay and Greece had to pay the finance sector with the loans the Troika were so generously offering. Pretty much the definition of a deal you can’t refuse.

Perhaps Macron’s motivations were running diametrical to other Euro finance minister types and his behind-the-scenes actions were clearly working against the structural pillaging of Greek society. Varoufakis is obviously in a better position than me to know what Macron thought and was or was not doing.

Still, at the end of the piece he alters the Macron quotation to say Macron didn’t want his generation to be responsible for “Europe strangling Greece.” The slippage between the predicates “exiting Europe” and “strangling Greece” sets my official junior Masters of Suspicion warning buzzer a-buzzing….From everything I’ve read, there was no not-strangling Greece option(s) being seriously considered. To claim otherwise doesn’t seem credible. Maybe Varoufakis’ book will give new info or insights; such as Macron and others behind the scenes were working feverishly on not-strangling solutions. Maybe.

As for Macron not wanting an Exit. Well, yeah. No one who really mattered did–including Varoufakis and Tsipras. So, did Macron offer this up during the woefully short interval when Grexit actually constituted a threat to Brussels and the banks; that is, before Greek negotiators decided to roll over and show their collective belly by essentially telling the Troika: “we want to stay no matter what, but we are going to negotiate like fierce hoplites for a better deal so watch out”? At any rate, Macron being pained over the possibility of Grexit tells one almost nothing useful about his politics, ideology, or governing inclinations. I’d love to be proven wrong, but, assuming he wins, Macron is likely to be exactly what he appears to be and will govern accordingly.

peter rasmus @18: when I read that anecdote I thought, “I’ve heard exactly that before. Did Varoufakis share it previously?” But it was Warren. What it says about those who occupy the highest positions of power, and what the essential function of the “job” is, is so vulgar in its obviousness it’s hardly worth noting. The interesting bit is what it says about Summers. I think he believes he’s offering a helpful nugget of “realism.”

Less, “welcome to the Illuminati, this way to the Citibank sponsored innocent child blood sacrifice dungeon, please read the following list of do’s and don’ts as we make our way.” More, “It’s super cool here, dude. The parties are fun as hell. It’s totally worth it even if it gets a little weird sometimes. I mean, we all get weirded out sometimes….but yeah, just remember, don’t ever talk shit about anybody in here cuz you won’t get to come back. The parties are just so cool!”

What is Summers’ background? Did he come from modest or quasi-modest beginnings? His advice definitely sounds like it is based on the story of a coquetteish, yet intelligent and witty and full of esprit, social climber who goes to King Louis’ court and makes good.


kidneystones 05.06.17 at 9:12 am

@19 Thank you for this. I put no stock whatsoever in ‘intelligence’ that ends up in the press.

I fear you misunderstand my position. I do not dispute for a second that Russia is spying and hacking on any number of targets. What I find troubling is your touching belief that Russia is the only malevolent actor involved in this activity. I don’t believe for a second that you are entirely unaware of the fact that China, Iran, Israel, Pakistan, France, Great Britain, Germany, Sweden, Turkey, and any number of nations and private corporations are all involved in precisely the same activity, in addition to the US and it’s many security organs, private and public. Yet, Russia is evidently the actor responsible for all the hacks you cite. What about the others and the hacks that go unreported?

Attributing all such activities at the door of a single actor reduces the challenge of providing compelling evidence, or entertaining the entirely plausible possibility that nations, on occasion, hack the the systems of their own citizens and funnel the documents to the press. And then there are groups such as Anonymous who have their own capabilities and agendas.

You’re entirely welcome to lay the each and every hack at the door of Putin. He’s enough of a thug that I personally require no fresh evidence to believe him capable of any crime. Where we differ is that I don’t believe him to be the author of every crime. Spying and hacking is a constant feature of our world and Russia is just one of many actors involved.

Hope this doesn’t come as too much of a terrible shock to you. I very much doubt, btw, that your hostility towards Russia, China, and North Korea matches my own. If I’m wrong, good for you!


Guy Harris 05.06.17 at 9:41 am

phenomenal cat:

What is Summers’ background? Did he come from modest or quasi-modest beginnings?

Depends on your definition of “modest or quasi-modest”.

If the Wikipedia article is to be believed:

Summers was born in New Haven, Connecticut, on November 30, 1954, into a Jewish family, the son of two economists, Robert Summers (who changed the family surname from Samuelson) and Anita Summers (of Romanian-Jewish ancestry), who are both professors at the University of Pennsylvania. He is also the nephew of two Nobel laureates in economics: Paul Samuelson (brother of Robert Summers) and Kenneth Arrow (brother of Anita Summers).

so not exactly upper-class wealthy, but also not exactly middle-middle or lower-middle or working-class, either – father, mother, and two uncles all economists. Definitely a comfortable background.


Dipper 05.06.17 at 11:11 am

What is all this fuss over Russia interfering in elections?

For the EU referendum in the UK we had clear foreign interference, namely Obama threatening us that if we didn’t vote to Remain we would deb at the back of the queue, and now in the French Presidential election there is clear foreign interference again with EU leaders and Obama voicing clear support for Macron. If you are worried about foreign interference in elections, there are two examples right there.

And as for the US presidential election, I still haven’t heard a convincing explanation of how Russian hacking was responsible for Hilary Clinton not visiting Wisconsin. Did they secretly cancel her plane tickets?


Dipper 05.06.17 at 3:32 pm

@ Layman 16

One way to avoid this kind of thing happening in the future is to not bail out banks that make loans that demonstrably cannot be repaid. Bailing out the banks creates a clear moral hazard; it incentivises banks to provide loans that cannot be repaid on the understanding that when the borrower defaults the banks get both the property of the borrower and the loan paid back.

The Greek people don’t have to pay the loans back. They can emigrate to a different country and so avoid paying Greek taxes. Also, they can avoid passing on the debt to their children by not having any children. The European Commission report on Ageing Populations predicts the Greek population falling from 11.0 million in 2013 to 8.6 million in 2050 – a reduction of over 20%. On doing some rough calculations on birth/death rates this is 0.9 million from low birth rate and 1.5 million from emigration – 15% of the 2013 population.

Greece is far from alone in having a projected reduction in population. Nevertheless, as the population goes down the debt per person goes up, and the benefits of emigrating increase. Greece is approaching a spiral of emigration, and surely that must be a bad thing. The EU should be offering its citizens hope, not punishment.


derrida derider 05.07.17 at 8:06 am

Yeah, Summers’ family trade is very much academic economics. Samuelson and Arrow can lay fair claim to being – behind Milton Friedman – the most famous American economists ever. I believe Summers also has sundry other relatives in the business – I bet they always talk shop at family gatherings.

Samuelson and Arrow were both known Democrats, but neither ever counted as Washington insiders – especially Arrow, who was by US economist standards a real lefty.


Dipper 05.07.17 at 11:59 am

“The first revelation is that not only was Greece bankrupt in 2010 when the EU bailed it out”

Just to go on about this like a stuck record, bankruptcy is a wonderful thing. It is the process that gives capitalism its humanity, that motor that drives innovation and productivity, and it has been denied to the Greeks.

Without a bankruptcy process, debts hang round peoples necks for the rest of their lives. One mistake, one failed venture, and you are bust forever. Your creditors own you, you are a slave to their demands. It leads to perverse incentives where people invest in ventures not because they hope they will succeed, but because they hope they will fail and the investor then owns the failures in perpetuity.

Bankruptcy gives people life after failure. It allows them to wipe the slate clean and start again. simultaneously it encourages responsible investing, as the failure of a venture will ultimately come back to the investor. It forces good governance and responsibility.

Capitalism without bankruptcy is just a brutal process of slavery, of accumulation of wealth and power in the hands of vested interests, and deprivation from individuals of ever breaking out of their lowly status as their every mistake will result in the loss of their freedom. This is exactly what has been handed to Greece.


novakant 05.07.17 at 12:29 pm

Thanks, Layman


Pavel A 05.07.17 at 7:26 pm

I entirely agree that there are a number of state and non-state actors operating within the intelligence/SIGINT/cyber warfare sphere and that information about how these actors operate is scarce/adulterated at best. I guess my argument is that sometimes we have nothing to go on except what the press tells us (I wish this were otherwise but have neither the power or the connections to change this) and the general MOs of the operators. At some point you sort of have to choose something to go on and be open to change your mind as new evidence arises.

The pattern of hacking/spear phishing/social engineering fits the Russian capabilities and interests well enough. US programs like the former Echelon aren’t going to really promote alt righters (they were intended more for business espionage). China’s work has focused primarily on stealing technology and trade secrets. Pakistan and N. Korea all work with relation to their respective interests in the area (India and South Korea respectively, not the EU).

It’s also possible to talk about all of these things as false flags and black propaganda, but that becomes even more baseless as the evidence dwindles, regardless of the fact that most major intelligence agencies probably posses the capability to carry out intelligence operations masquerading as other nations. I get that. We’re in a very different age now. I just think that in these specific cases, Russia seems like a better fit for meddling in US and EU elections than say Pakistan or Anonymous.

If you can’t tell the difference between someone openly advocating on behalf of a political leader and a hostile state agent secretly hacking a server and releasing the documentation for a politically-motivated reason, then I can’t help you and I doubt anyone can. Also, your ideas about how bankruptcy works are pretty silly. Not only does bankruptcy destroy your ability to function as a borrower (you know, the thing all modern economies rely on to some extent), bankruptcy is in many cases politically opposed by capitalists themselves (you know, the lenders). Oh, and also bankruptcy can be created artificially through naked shorting and other market mechanisms (which partially finished off Greece). So much for the kinder, gentler Capitalism.


nastywoman 05.08.17 at 1:06 pm

@16 and beyond

our Leftie frineds in Greece always had a bit a problem in confronting their own Oligarchy – and in a country which could be considered ‘the mother of all European Oligrachies that’s not that good – and unlike Spain – where the so called Left attacked their own money men at every ‘center of corruption’ (google:’Ruta Del Despilfarra’ Valencia) – the so called Left in Greece tried some easier way(s) out in attacking mainly the money men from outside their country – which was highly understandable from Varoufakis point of view… but perhaps a bit countreproductive if at the same time thousands of Greek money men -(who easily could have bailed out their country themselves) – where leaving Greece – like rats a sinking ship to ‘establish’ themselves again in London or Paris. (The London colony with about 40 000 rich Greeks might be the more ‘eloberate’ one?)
And this ‘fact’ was so widely known in Europe – and certain cases of corruption of Greek Oligarchs were so mindboggling – that even the most solidaric Socialists and Social Democrats in all the other European Countries had a very hard time to explain to their followers to keep on helping Greece.

And to make matters worst – some of ‘our’ best progressive economists -(like Paul Krugman) – forgot that ther is a YUUUGE difference between US and Europe and they started to built the narrative which Layman is repeating – about ‘the austerity’ – the austerity’ and for sure it was the austerity too – but in his argumentation he somehow gave US right-wingers a lot of amunition, that they could use the outrageous examples of the corruption of the Greek Oligarch F…faces – as examples for Europeas (supposedl) failed ‘Welfare States’

And that was NO – No good at all – or just as bad as Le Pen using -(how terribly ironic) the anti-Euro and European arguments of Anglo-American Economists for her ‘fascistic nationalism’.

Which reminds me – Can’t we be a little bit less… confused, that ‘stuff’ like that stops happening?


phenomenal cat 05.08.17 at 4:53 pm

Thanks Guy Harris and derrida derider.

Certainly none of that indicates a modest or quasi-modest background. By no means an “elite insider” or whatever, but those biographical facts are pretty optimal for a real go-getter who desires elite economic courtier status.

Re: Macron: the following quotation from a piece by Frederic Lordon on the change Macron will bring. Link to the whole below.

“It does indeed take all this large-scale enterprise of falsifications on media steroids to cover up — as is necessary — the enormity of what has to be slipped across: politically speaking, a pure service of one class, and “technically” the intensification of everything that has failed for the last three decades. In an irony characteristic of hegemony in the Gramscian sense, the party of those who warble on about “realism” is precisely identified with its loss of almost any relation with reality, even though it still succeeds in invoking “reality” as its best argument.

In the neoliberal era, “realism” names the continual transfiguration of patent failures into successes that are always and constantly still to come. What reality has long been condemning outright, “realism” orders not only that we continue to follow, but that we deepen it. The explanation for its disappointments is that they are only “temporary,” that “we haven’t gone far enough,” that we had settled for “half-measures” and the “true break” is always still to come. And that has been going on for thirty years. The perfect identity of arguments between Fillon and Macron, on this register, should be enough to indicate where this latter is really situated, and which term really prevails in his “both Right and Left” shtick.”

Yeah, nastywoman. It’s interesting how the Greek uberwealthy and oligarchic were able to avoid Greek taxes, Euro austerity measures, and the repatriation of monies back to the virtuous northern banks and governments. Just not quite as interesting as, say, German trade balances with a economic small-fry like Greece in a single currency market.


nastywoman 05.08.17 at 6:01 pm

-‘Just not quite as interesting as, say, German trade balances with a economic small-fry like Greece in a single currency market’

Germans need that money to be able to afford their next vacation on Santorin – as the hotel prices there in the last years have exploded -(up to over 300 Euros a night) – and if no ‘all the year saving his money for Greek vacations German’ will be able anymore to pay these prices we really have to worry about Greece – and for sure I’m just joking but economics ingeneral and especially in ‘Urp’ are very complicated and so my Greek Cousin says: ‘Better a credit from the EU we won’t ever have to pay back as no credit at all’ – and he is joking for sure too – but as the proud owner of a hotel in Santorin he can afford it and only get’s panicky if ‘Americans’ and especially American economists try to explain Greek Economics to him and how important it would be to get out of the Euro in order to do something for the Greek Trade balance – then he get’s very serious – uses all kind of Greek cursewords I can’t print here – and says: Why can’t Americans shut up if it comes to economics in Greece in general – and in Europe specifically -(as ‘economics’ in Greece are REALLY much, much more complicated than all of these theoretical ‘stuff’ you might read about ‘trade balances’ between Greece and Germany) – – and I promised him once I would post that on an ‘American’ blog –
and so I now did -(with the hope it really get’s posted)


nastywoman 05.08.17 at 6:21 pm

and about Macron @31

The election of Macron just proved that the difference between sanity and insanity in France is about 30 percent – while in a country -(I should not name it’s less than 2 percent) AND that fact makes me so proud of France – the French People – and especially Europe – that I waved my European passport yesterday -(while I had put ‘the other passport for a while in a very, very dark place’) – and that’s why we should thank Macron to the utmost degree – that he really has protected US ALL from another F…face and so the article you quoted is far, faaar behind that fact!


Mitch Guthman 05.08.17 at 8:14 pm

Nastywoman at 33,

Or it might be that the sanity of the French is that that millions of them, mainly of the left and center-left, held their collective noses and voted to sacrifice their economic futures and worsen their quality of life in order to defeat their ancient and common enemy.


john c. halasz 05.08.17 at 9:46 pm

This is for nastywoman especially:


phenomenal cat 05.08.17 at 10:21 pm

Right, your Greek cousin only gets panicky if Americans and/or American economists start spouting off on the complexity of the Greek economy? He’s had a lot of run-ins with Dean Baker, has he? Maybe Larry Summers can change his mind.

I’m not French and had no say in the election, but for now I’ll pass on offering Macron my gratitude for saving the Republic.


phenomenal cat 05.08.17 at 10:25 pm

Looks like Mutti is telling him a bedtime story. Very sweet.


nastywoman 05.09.17 at 9:01 am


‘Very Sweet’ –

isn’t it – thinking that for centuries the tribes of these two killed and conquered each-other every few years?- and thus: ‘sweet’ probably doesn’t ‘cover’ the whole awesome dimension of the French-German friendship – and if these two where able to… ‘overcome’ and to be at the center of such an amazing admirable project of peaceful understanding as Europe – it makes one optimistic that WE – might be able to do the same ‘thing’ – one day – too.
-(I mean ‘AC’ – After Clownstick)


MisterMr 05.09.17 at 12:06 pm

@Layman 10

“to make the bailout palatable to German and French taxpayers, who don’t want to pay for the bad loan decisions of banks”

Actually even this isn’t true: as long as the creditors don’t spend the money, German and French (and other european) taxpayers don’t have to foot the bill, the only thing that happens is that the public debt/GDP ratio of european countries (other than Greece) goes up.

But european countries previously pledged to keep the debt/GDP ratio stable and actually an unplausible low ratio of, IIRC, 60%. Transferring the bill from Greece to other european countries would then force other european countries to admit that this target is nonsensical, or either force the taxpayer to pay and have a primary surplus, that obviously is contractionary so it’s a no no.

So in pratice Germany and other european countries forced austerity onto Greeks in order to be justified to force austerity on their own citiziens, which sounds very stupid because it is, but this is what happened.

Another way to put this is that everyone in europe believes that the solution of every economic problem is for everyone to be a net exporter, and they wont take “it’s impossible” as an answer.


nastywoman 05.09.17 at 1:18 pm

‘Another way to put this is that everyone in europe’…-
actually believes ‘something completely else’ – and I just don’t get it how anybody outside of Europe could believe otherwise?

I mean – did you ever visit this tremendously diverse and diversified ‘Continent?
You know: Europe is BIG – it’s actually YUUUGE – and it is sooo divers that for example a Finn speaks a completely different language than an Italian – and about ‘economical believes’ – you probably will find every single economical believe which is possible on this planet in Europe – thes how YUUUGE Europe IS.

And please don’t believe – and repeat – all of this nonsense a lot of US economists – who probably know about as much about ‘Urp’ as our President Von Clownstick’.
Such believes are bad for world economics AND the environment!
And if you doubt my words?-
Just remember how WE -‘US Economical Masters of the Universe’ – just a few years ago nearly sank the whole worlds economy – so WE can’t trust those guys!


MisterMr 05.09.17 at 2:31 pm

@nastywoman 40

Hi Nastywoman!

Actually I’m italian (and I’m a pro-EU guy too, I would like a “United states of Europe”).
I can’t speak for all the political traditions throghout the EU, however in Italy the center-left party is actually quite austerian, and there are quarrels with the EU about how much austerity to impose on Italy, but not on wether to impose austerity; Berlusconi on the other hand was much more a deficit spender but he increased deficits in a way to increase wealth for wealthy people and not to increase income for workers (I think Trump will be something similar for the USA, as was Bush).

I don’t think either policy (debt based growth or austerity) really works, the correct policy would be an increase in real wages and in the wage share, but I really don’t see any big party or nation in the EU going in that direction (nor do I expect the UK to go in that direction after brexit).


john c. halasz 05.09.17 at 2:51 pm


I find your many posted comments to be sheer confabulations, void of analytic substance and referential relevance, in short, themselves quite Trumpish.

MisterMr BTW is an Italian of decidedly leftist persuasion, so I think you might give him some credit for knowing what he’s talking about, even if he has yet to take the Grand Tour of Europe. His comment at @39 was entirely accurate IMHO.

Wynne Godley was English, not American, and his inter-sectoral financial balances approach to GDP accounting is key to understanding the Eurozone crisis, which the Eurocrats have ignored to everyone’s detriment except their own. He published a piece in 1992 in the LRB before the ratification of the Maastricht Treaty which pretty much predicted the eventuality of the current crisis. Look it up.


nastywoman 05.09.17 at 6:02 pm

Ciao Bello –
and how wonderful (to be Italian) – as only an Italian might understand that ‘everyone’ – alone in Italy – can have so many different beliefs in all kind of solutions to our economical problems that the ‘tipical’ US solutions -(just throw enough doug on the problem and it gets fix) are rendered ad absurdum.

But I’m curious – how does an Italien get into this US-Eco-Lingo with highlights like:
Net exporter?

I mean the word in Europe is: ‘Sustainable’ – All of Europe wants ‘sustainable’ e-comix – which could bring us to
@ 42
– I couldn’t agree more – it’s actually ‘super-trumpish’!
-(and wasn’t there a… ‘band’ once with the same name?)


MisterMr 05.10.17 at 1:08 pm


“But I’m curious – how does an Italien get into this US-Eco-Lingo with highlights like: Net exporter?”

probably I read too many english speaking blogs?

In reality net exports are clearly a priority for many in Italy.


nastywoman 05.10.17 at 4:10 pm

‘In reality net exports are clearly a priority for many in Italy.’

Are you sure you are not talking about the perspective from the US – by an Italian who lives in the US? – as many in Italy are very proud that the country – indeed – is one of the most successful ‘Exporting Countries’ in the world -(I believe Nr.7) and in 2015 – according to the Economic Complexity Index (ECI) Italy ‘exported $446 Milliarden and imported $404 Milliarden, resulting in a positive trade balance of $42,2 Milliarden.


Guy Harris 05.10.17 at 7:41 pm


But I’m curious – how does an Italien get into this US-Eco-Lingo with highlights like: Net exporter?

Perhaps because:

1) a country can be a huge gross exporter and still have a huge trade deficit. Exhibit A: the United States of America, which, according to the WTO’s statistics for 2015, had exports of 1.5 trillion dollars in 2015, and a trade deficit of 805 billion dollars;

2) as MisterMr quite correctly notes, it is literally impossible for every country to be a net exporter, at least until we open up trade with the Moon/Mars/Fomalhaut IV/the space colonies/pick your extra-terrestrial economy.

(Amusing irrelevant side note: macOS autocorrect changed “Factbook” to “Facebook”. No, I am not kidding.)


Guy Harris 05.10.17 at 7:49 pm


Are you sure you are not talking about the perspective from the US – by an Italian who lives in the US? – as many in Italy are very proud that the country – indeed – is one of the most successful ‘Exporting Countries’ in the world -(I believe Nr.7) and in 2015 – according to the Economic Complexity Index (ECI) Italy ‘exported $446 Milliarden and imported $404 Milliarden, resulting in a positive trade balance of $42,2 Milliarden.

1) That’s precisely what MisterMr said – “In reality net exports are clearly a priority for many in Italy.” – which indicates that being “one of the most successful ‘Exporting Countries’ in the world” is “clearly a priority for many in Italy”, if they’re proud that the country has a 404 US-billion US-dollar positive trade balance. Did you misread him as saying “…are clearly not a priority”?

2) “resulting in a positive trade balance” I.e., to use that nasty bit of “US-Eco-Lingo”, they’re a… net exporter. See? Maybe that term isn’t so bad.


john c. halasz 05.10.17 at 10:35 pm

nastywoman @45:

You’re just ostentatiously putting your economic ignorance on display again.

*Net* exports are a standard component of the GDP equation: Y = C + I+ G + X. Together with net factor payments mit comprises the current account balance, which if negative is subtracted from GDP or vice versa, and which is the obverse mirror image of the capital account, which means a negative CA involves the country importing capital, i.e. accumulating debt obligations to foreigners. Internationally, all current account balances sum to zero, so for every country running a surplus,one or more countries must by accounting identity be running a deficit. Domestically, dividing the economy into 4 sectors, household, private business, government, and foreign, the financial balances between them also by accounting identity must sum to zero. So if one sector is net saving, one or more of the other sectors must be net dis-saving, and a current account deficit means that the foreign sector is net saving, so one or more of the domestic sectors must be net dis-saving, and if the public sector is forced to run a surplus, then the burden of further debt accumulation falls on the 2 private sectors.

Since joining the Euro the Italian economy grew by just 1% up to the financial crisis, (i.e. .1% per year), and shrank by 5% after the crisis hit remaining stagnant since then. The banking system is on the edge of collapse, not due to any foreign lending, but due to accumulating NPLs in a stagnant economy, with EZ rules preventing any bailout, i.e. public re-capitalization or nationalization, while public debt/GDP has risen far above the ostensible 60% ratio, due to a contracting economy and a debt burdened private sector, while EZ rules are forcing a reduction in public debt and demanding structural surpluses, further putting contractionary pressure on the economy. The small CA surplus it’s now running does little to ameliorate the situation, though it is being forced up Italy by EZ austerity rules, even as Germany is running a CA surplus of almost 9% of GDP, which virtually forces other EZ countries to seek for export markets outside the EZ, even as Germany also benefits its exports by virtue of a depreciated currency that is far lower than would be the case if Germany still had its own currency, and the EZ is thus exporting its deflationaqry problems to the rest of the world. And the once vibrant and advanced Italian industrial sector in the north, mostly comprised of SMEs, and among the richest in the world, has been foundering ever since Italy joined the Euro, losing its currency flexibility while facing the relentless pressure of German exports (and wage dumping policy).

So here are historical charts of Italian and German current account balances:

Further, your idea that it is American economics that misunderstands the situation is the opposite of the truth. To the contrary, it is the export of American economics models, methods and doctrines, (DSGE, monetarism, “supply side” reforms in the name of efficiency, such as tax reductions on capital, wage “flexibility, i.e. reduction, and deregulation), promoted through international institutions such as the IMF and OECD, that were adopted by the EZ and EU, and have signally contributed to the crisis with their voodoo.

I’d never heard of the ECI, but I looked it up and it is the brainchild of Ricardo Hausmann. Really, Ricardo Hausmann? The guy who wrote the “dark matter” paper in 2005 or so, explaining why profits for U.S. MNCs investing abroad were so much higher than foreign MNCs investing in the U.S. as due to superior U.S. management skills. Brad Setser, a specialist in international flow of funds, ripped that paper to shreds, showing that the observed data was entirely due to international tax arbitrage and evasion strategies by MNCs. Before that he was chief economic adviser to Venezuelan President Andres Perez in the early 1990’s, before having to flee to Harvard to save his life.


john c. halasz 05.10.17 at 10:38 pm

The links didn’t work as intended. Click on Max to get the full historical charts.


nastywoman 05.11.17 at 1:12 am

Thank you very much for all the economical information – but as an avid reader of Paul Krugman’s blog I’m kind of familiar with the funny US perspective of ‘Economix in ‘Urp’ – and it for sure was my fault – not to make sure (enough) – that about ‘anyone in Europe’ –
I was just trying to figure out from ‘where’ the information about ‘anyone in Europe’ came from?

Just like a silly European tourist visiting our homeland and trying to figure out the different use of ‘words’ and lingo in different parts of the country.

AND to figure out how it works -(‘linguistically spoken’)- if somebody who was once from Urp suddenly uses the Eco-lingo of a Paul Krugman.

Is it really about reading too many US blogs about European Economical problems?

Now that would be ‘no good’ as it would be much, much better to read European Blogs -(and newspapers) about European Economical Problems – at least to get the lingo…. not ‘right’ but let’s say: sounding more ‘authentic’ – just like ‘anyone in Europe who currently uses ‘sustainable economy’ much more often – than perhaps some word called: ‘net-exporter’.


john c. halasz 05.11.17 at 1:51 am


You were prolly thinking of “Supertramp”, perhaps best known for “The Logic Song”.


Guy Harris 05.11.17 at 7:50 am


just like ‘anyone in Europe who currently uses ‘sustainable economy’ much more often – than perhaps some word called: ‘net-exporter’.

1) “Net exporter” is two words in English, so it’s a phrase, not a word (in English, we don’t combine words into compounds as much as they do in your native language, which is a bit infamous for its long compound words :-)), and it’s not called “net exporter”, it is “net exporter”.

2) It’s a perfectly fine phrase, which means “country that runs a trade surplus”; there is no reason to avoid its use. The concept of running a trade surplus exists in any economies that use money, so it’s not as if it’s a concept that makes sense to economists from one region but not another region, or that makes sense in money-based economies in one region but not in economies in another money-based region (and European economies are most definitely money-based, just as the US economy is; what do you think the Euro is, chopped liver?).

3) Being a “net exporter” is sustainable only if the rest of the world being a “net importer”, as in “collection of countries that collectively run a trade deficit”, is sustainable, so talking about “sustainable economies”, and trying to make your economy sustainable, is probably a better idea, in the long run, than talking about “net exporters” and trying to ensure that your economy will forever be a “net exporter”.


MisterMr 05.11.17 at 3:00 pm

Just to make it clear, I’m an italian living in Italy, and I’m not an economist.

My conclusion about european economical choices is based on my interpretation of the most likely outcomes of european economic policies, and on the assumption that if some country has a policy that is likely to result in X, then that country “wants” X.

Of course countries are not people and policies are not chosen by “all the people in a country” but by political systems, so “everyone” and “wants” are words that are supposed to be read with some elasticity.

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