Source: М.Хазин, “Актуально о Греции”
Translated by Mikhael
A brief overview of post-election situation in Greece. This is a translation of the Russian version, there is also a published Greek translation
There is a new government in Greece. A left-wing government that has a rather complicated relationship with the “sacred right of private ownership”, particularly when it comes to Greek sovereign debt. In other words, it is leaning towards triggering a full blown debt crisis in the EU (and possibly impacting the entire world). But, as we have been taught back in 2008, a crisis doesn’t just bring problems, it also unveils new opportunities. That’s why it is important to have a more in-depth understanding of Greek politics, in particular to be able to recognize who will benefit from these new opportunities. To be able to analyze the situation correctly, it is necessary to explain one very important point crucial to understanding the events that are unfolding in the EU today.
Debt accumulation was a “reaganomics” instrument used to stimulate consumer demand, first in the USA and then, starting in 1981, across the entire world. In particular, by year 2008, the average household debt in the USA increased more than twofold when compared to 1980 (from 60-65% of available income to over 130%). The situation is a little better in the EU, but in Europe state budgets were used to stimulate consumer demand, resulting in higher national debts. The USA is quickly catching up in that department.
These debts were serviced using refinancing, supported by gradual decrease in borrowing costs (the minimum interest rate set by the Federal Reserve has gone from 19% in 1980 to just about 0% in 2008). Today it is impossible to repay these debts even with zero percent interest rate on refinancing without sharply declining the standard of living for general population. A twofold decline in the EU and the USA would be necessary. But that is unacceptable, which means that these debts need to be somehow liquidated. Either written off or dealt with at the cost of high inflation rates.
I will say this once again: it is impossible to pay off the debt that has been accumulated within the world economy, it simply does not generate financial flows on a scale required for this task. For example, the real average wage in the USA has not changed since 1950’s. All the increased spending happens at the cost of increased household and national debt, and declining savings. This problem must be solved, or it will resolve on its own – through a major economic crisis.
And this problem is already being dealt with. The first experiment was the restructuring of banks in Cyprus. It tested depositors’ reaction to the banks’ refusal to return their funds (or, rather, part of the funds). The experiment was a success – disgruntled depositors have not been able to win a single court case so far. It is possible that some of them were able to settle their claims informally, but such information is not openly available.
However, there is also the problem of national debt, which, in many ways, is a lot more complex as it is no longer about disgruntled ordinary households who can’t really hold the banks responsible, but instead it is going to affect major banks and financial institutions. For this very reason, any actions related to national debt need to be thoroughly planned and tested to avoid any risk. And this is where it would be fitting to recall a phrase from an old comedy: “the most dangerous experiments involve the least valuable members of the crew”.
Note this – when Haider got into Austrian government, Austria was ostracized in EU. A similar reaction could be observed when Jean-Marie Le Pen took part in the final round of presidential elections in France. These were classic right-wing politicians who would be considered mainstream in 1950’s. What about now? Left-wing party wins elections in Greece (with right-wing joining the ruling coalition), but we see no reaction from the EU political establishment, they are silent.
There is also another interesting circumstance. World debt accumulation was made possible by US dollar emission. This emission was supposed to be backed up by new assets, but, since 1990’s, when all former Soviet assets were finally “digested”, nothing new of any considerable value emerged in the world. Therefore, the usual mechanisms of redistribution of the emitted currency no longer work – this is another aspect of falling household incomes in most countries across the world. This brings us to an important question: how can the US be forced to share with the rest of the world?
“Old” elites, who benefited from emission income redistribution for many years, cannot do it – this must be done by new political figures who are currently part of opposition elites. There are minor exceptions such as Hungary. This small (for now?) country in Eastern Europe openly used blackmail when it gave its government control over the central bank. This decision was later revoked, but it is nearly impossible to get the full details of the deal through media resources. Greece has now become the second country in the EU where opposition elites came to power.
I suspect that this particular country will be “the least valuable member of the crew” which will be used to test mechanisms for writing off national debt. Hungary would not be a good choice for this – the government has too much support and its position looks pretty solid. It would be very hard for the EU to force its policies in Hungary.
Let’s reiterate the main point: there is a very high probability that EU leadership wants to use Greece as a “guinea pig” to test national debt write off mechanisms. Greece will get all the “cuts and bruises”, while the rest of the EU will get invaluable experience in minimizing negative consequences of an operation that will eventually have to take place in every country across the world. The main objective of the new Greek government is to get the highest possible compensation for participating in this “experiment”.
I will not be giving advices to the new Greek government – forewarned is forearmed. Especially considering that I do not specialize in politics, I am an economist. But it is necessary to take into account certain developments which might end up being very important. First of all – since opposition elites in the EU will be gaining more and more strength, there is no need to be worried about serious, on the edge of blackmail, confrontation scenarios. They will find their way into world politics one way or another, if not tomorrow, then the day after tomorrow.
Secondly, it is important to understand that the EU (and the world) does not care about Greek national debt, it just needs to test new mechanisms. And after this task is accomplished, the reaction to future attempts to write off or restructure national debt might be a lot tougher. That’s why the solution must be found on the largest possible scale, no need to run small-scale experiments.
Thirdly, EU leadership will try to control the situation by applying pressure on the government “from below”. In other words – various social protests will be organized whenever it will appear that the new Greek government is not “behaving”. And it must be ready for such developments.
Fourthly, there is just not that much time left. Various market indicators are suggesting that US markets have reached critical points in terms of overheating and a considerable correction is imminent. And if it begins, mostly likely there will no longer be enough time for complex operations.
In conclusion, it can be noted that the new Greek government has some very interesting political tools that doubtfulness should be used to improve the economic situation in the country. But they should be used with utmost caution to get maximum benefits and avoid potential dangers.
* * *
The article was translated into Greek: Συμβουλή προς Ελλάδα: «Πουλήστε το τομάρι σας ακριβά!»
Very interesting points raised by mister Khazin. The high national/public debt accumulation mentioned and the experimentation mentioned, could possibly be directed toward the classic objective of financiers/bankers, which is foreclosure. Debt write-down, at the expense of forced privatization of Greece’s national/public assets. ‘There is no alternative’ as Thatcher used to way. Well, there are alternatives, but what will we see? That which the mandarins of finance wish. And so the cuts and bruises are about how the public is forced to concede that which it does not really have to concede.
Joaquin Flores (co-producer of Fort Russ):
“The determining factor is to what extent the Greek military security, intelligence networks, are able to have several complex programs running simultaneously which allows Greeks to make sovereign decisions.”
“Russia is channeling anti-EU forces to promote continental union not transpacific, to free it from Wall St and City of London.”
” Is Greece acting as a transmission belt that doesn’t play a polarizing role that will separate itself from Europe, but can it maintain itself w/in Europe but represent as well the multipolar or Eurasianist thread which seeks to unhinge Europe from being a primarily NATO – dominated econ union.”
https://www.youtube.com/watch?v=SXn1ujZQOJA Greek part begins at 18.
Good information. No surprises. The Elites use everyone for guinea pigs.
Greeks could have moved to China-Russia solution and join the Eurasian development.
Opted for more slavery.
Not feeling too sorry for them. False (ideological) choice.
EU is the prison. Why force your way into prison?
You cannot vote your way to prosperity. First you must break out of the chains.
Easy for you to lecture us. Not so easy, however, to break free of those chains, in the naive way you describe, without getting immediately bludgeoned to death as a nation. Both you and I would like to see those chains broken, but unlike you, if something goes wrong, our families will be affected in the very short term. One does not march head-on against a quantitatively superior enemy. Instead, one picks the time and place carefully, so as to mitigate the disadvantage. For us, to be alive tomorrow is the priority; for you, it is an insignificant detail.
You are an idiot.You sound like an alcoholic.I know. Iam one.You will quit when you are ready by taking another drink.Yea right.Morons.
No I am not. I am pragmatic. And I am greek; you aren’t. You are just another one of those know-it-all, hollier-than-though types. And I don’t care about your priorities; I care about ours, the greek people’s. Syriza chose the wrong place and time for this showdown, and the outcome is: tighter chains.
Anon ! What a great retort !!! It just said it all….good luck over there in Greece !!!
Pragmatic,you are an idiot.By the way I am a Croat living in Canada and am watching Croatia self destruct.Greece has a chance to make history better than Sparta 300.
If only there was no idiots like you.
Alcoholic has one problem only.Its called DENIAL.Get it stupid.Or maybe Greece suffers from Stocholm syndrome.Take your pick.Varoufakis is a dush.
China would give you all the dollars you need without any stipulations.They work on win win policy.
As for Ann unless you were sarcastic get your head back up myour ass and STFU.
Please be polite. An insult is not a reasoned argument. If you think someone is wrong explain why. You only insult yourself when you stoop to insults.
Even the 300 of Leonidas chose the straits of Thermopylae, in order to negate the numeric advantage of the Persians; they did not choose, e.g. the plains of Thessaly. Under your logic, that would make them idiots too. I say they were pragmatic. So spare us the (alcohol-fueled?) name-calling and keep your self-righteous sermons for your own Croatia (that I don’t give a damn about).
PS: What you say about China, simply demonstrates your utter ignorance. Guess what happened in 2008, before the crisis hit Greece, after a previous government signed gas and oil pipeline deals with Russia and leased seaports to the Chinese? Yes, our own mini-Maidan, replete with imported UCK mercenary thugs. And that was just for two ports and a couple of pipelines.
Greece is more useful to Russia and China inside the EU than outside of it.
The truth of the matter is that Greece is a very weak capitalist country, loaded with sovereign debts it can never repay. The repayment terms are extremely lenient to Greece (it’s true if one goes into the trouble of researching the question) but the fact of the matter is that the absolute amount is so astronomical that Greece will never be able to repay.
China and Russia have little interest in shouldering the weakness of Greek capitalism. That is better left to the EU. Russian and Chinese interests are better served by a weak, indebted, divided, feuding EU drowning in its own problems. The only way for Russia to step into Greece is to buy assets (gas distribution, railways, telecoms, tourism etc)
The Chinese may be even more reluctant to step in. But it is not inconceivable, that at some stage, Greece opts to default on its massive debts to the European states and the IMF (leaving massive damages for the Western alliance) and subsequently move into full partnership with China and Russia. This is possible in a pan-European crisis scenario, not for the time being.
Like I said, for the time being, Greece is more useful inside the EU than outside of it. Gradual destabilization and weakening of the entirety of the EU is the Russian goal here, not pulling out a relatively minor country. Putin would like to one day have the entire EU structure collapse into little pieces, Grexit falls far short of the target.
Stavros, if Joaquin Flores is correct, Russia wd like to see EU changed from within to favor Eurasian economic development/trade. That is, to cease being NATO-dominated. I know it’s simpler to suppose the Russians just want EU to fall apart, but when are their diplomatic objectives ever simple?
Anyway, we can agree that the overall goal is Eurasian trade and peace. I personally have no idea how this is to be brought about given the determined plan of the US to cse conflicts and chaos all over Central Asia.
Maybe the Russian aim was to draw some important European countries (especially Germany, Italy, maybe France) away from US domination, but this seems ever more distant. In fact, how can Russia trust the Europeans ever again after recent developments?
In any case, for the European continent to be cooperative to Russia, the current structures of the EU and NATO must be demolished. As long as these institutions of US domination remain in place, Russia will only be facing hostility (mainly) from Europe.
Why is the US in such a hurry?
Well now we know one of the reasons why. Once the US starts snowballing, no one will pay any attention to them. Things are taut right now, so much so that it can break any day now. Russia might look like it is shaking but the US is in a much more precarious position. The results of using derivatives to control everything means a lot of places it can break and it can all come tumbling down. We got a small demonstration of that in 2008.Maybe the reason also to show such recklessness in Ukraine, with time almost run out, and Russia not invading, things are just not working out. Provocations like nato showing up 300m from Russian border are not something to be proud off. It is what hitler does. To intimidate others that there is nothing you can do because I have the power. Russia should have reciprocated and shown up across the border guns waving as well.
The mockery of the Russian Flag waver and the people singing the Russian Anthem was better and suited the “Mouse That Roared” effort by the US military.
Guns? The US would have wet their pants if Russia waved guns.
Ahh, mmw, it’s much worse than a parade. Now they’re importing ABMs laundered thru UAE:
“Obama apparently is going ahead with his plan for NATO missiles to be placed in Ukraine aimed against Moscow, but found a way to do it that won’t violate the warnings by Russia’s President Vladimir Putin against Washington’s directly supplying those arms to Ukraine”
This article detailing US relations w its allies in the Middle East, including its impact upon 9/11, closes w this para:
“The circuitous way in which Ukraine will be buying its weapons is designed to avoid triggering a declaration of war by Vladimir Putin, or else to make non-obvious to the public why he would be justified in doing so.”
http://www.strategic-culture.org/news/2015/02/26/what-behind-ukraine-secret-weapons-deal-with-united-arab-emirates-uae.html posted
And of course the correct response would be an arms deal for the DPR/LC to “buy” arms from Ossetia and Abkhazia.I believe those countries recognized the Republics as states.So they are free to sell them arms.And just as the UAE arms for Banderastan are only a legal cover for US arms shipments.Likewise arms shipments from those states would be a legal cover for Russian arms shipments.Time for correct responses,no time for “partners and colleagues” bs.
The Russians know very well that the US is not going to attack. Washington is just doing this to impress the Estonians, so they don’t start getting impression that NATO is worthless. If the US were really going to attack Russia from Estonia, they wouldn’t be discarding the element of surprise in such a blatant fashion. They would probably create a diversion elsewhere first–maybe in Ukraine.
The Saker Hit the Nail on the Head!!! – 2 days after Syriza’s Tsipras became PM.
The Greek Syriza political Party, the ‘Leftwing Socialists,’ the ‘Militant Socialists,’ their Party leaders have broken their promises. They have sold out. From 1848, most Socialists have supported imperialism, its wars, and Zionism .
The Syriza leader, Greek Prime Minister, Tsipras, gave it away, 2 days after assuming the office of Prime Minister, when he refused to oppose imperialist sanctions against Russia. He voted for the sanctions already in place. That’s all folks!!! There are no excuses.
The Greek Communist Party (PKI), also predicted the Syriza betrayal, and exposed Tsipras (before the recent Greek election).
The proto-fascist Golden Dawn are also having a field day denouncing the pro imperialist, pro banker, sell out betrayers of the Greek people, Syriza.
The peoples of Europe, and the world, must break with the banker Oligarchs of the New World Order. The Bank owners must be arrested and charged with Felony Theft. Their other crimes include terrorist mass murder (such as wars, invasions, bombings, and inciting religious hatred).
Next to be tested will be the leaders of the French National Front, such as Marine Le Pen. Most likely she will win the next election and become France’s President. Will she lead France to National Independence, or, as with Tsipras, betray all her election promises?
In the likelihood of betrayal of the people by political forces pretending opposition to the Oligarchs, who will come to the fore and lead the people forward? Will Delacroix be able to paint any barricades, with a bare breasted Lady Liberty leading the charge? That is the question of our time? Who will join the Novorossiyan Partisan Militia and storm the heavens?
Remember the war in Europe, (actually a war against Europe begun by the Anglo/American Zionists), was begun over an attempt by Ukraine’s elected President , Yanukovich, to resist the EU and their International Banking Cabal, the IMF. His defensive efforts triggered the violent assault against his government, and against the nation that was willing to loan the Ukraine money under much less onerous conditions, the nation of Russia.
The economic and political decisions faced by the Greek, people, and by most of the peoples of Europe, and the rest of the planet, made in necessary for the citizens of the Novorossiyan Peoples Democratic Republics to defend themselves. Their warriors are confronting the criminal Banker Oligarchs, gun in hand.
For the Democratic Republics! Here and There!
The Anarchist Collective
Friend Peter J. Antonsen, let’s see if the left, pure and less pure, give an opportunity to the left for a time in many decades / generations we have in Europe a leftist government. In my lifetime, it is the only one I have seen, and if we continue to help, from left too, to the media and of institutional Europeanoffensive to lay him, I fear it will be the last.
I wonder what is this defeatism and this attempt derails a government that has not even started walking. That within SYRIZA, and within PODEMOS, there is a Trotskyist faction, we know many who we are left, some have had the pleasure of even treat them in person, and assail us the doubts and concerns with these, but we store, because within these formations there are also many decent people. And above all, because the human mass that follows them, from all the ideologies, including former voters on the right, have placed all their hopes in them.
The communist parties, from whom I also, friend, I’m closer, so either have failed or have not been able to reach so many people.
So reasonably, strategically, at this point, I think is to support, to help reach the government which have not yet done, and to achieve the largest possible share of goals which already have got, so that people see with their own eyes, new generations who have not known socialism rather than for its bad press, that another world is possible, it is possible to live as decent people, if not in a pure socialist system,in the closest thing can be achieved in the current circumstances.
If Syriza disappoints, if Podemos disappoints, and worse, if we contribute to it, what comes next is not communism. People, disappointed, aimless, will lie down on arms of fascism, fascism so ugly and scary face like that are facing now our Ukrainian brothers.
When you and I, my friend, we will be hidden underground or already hopelessly in room 101, better we must not regret have paved the way, as surely regret now some well-meaning the Maidan.
Elsi,
The PKI (Communist Party) of Greece has, in its newspaper, & online voiced a strong opposition to Syriza, its leaders (such as PM Tsipras), and accurately predicted the Syriza political trajectory, after the election.
It would be lovely if the Left political forces would live up to their promises. Socialist Hollande, serves the very forces socialists are pledged to oppose (as did the imperialist British Labor Party leader, Blair). We recall, that the 2nd International Socialists supported the imperialist World War I (after promising not to). After the war, the Ebert German Socialists supported the German Army that murdered Spartacist leaders Rosa luxemburg and KIarl Leibknecht, and thousands of other socialists.
In the US, from the political Right, some voices of morality and honor, such as Ron Paul, have opposed the American imperialist moves against Russia and Novorossiya (and opposed American militarism). Other voices from the Center, such as Jesse Ventura, and Edward Snowden, have also opposed America’s Oligarchs. Unfortunately, most of the American political Left support the zionist theft of Palestinian land, as well as the political and military offensive against the Russian people, and the financial robbery of peoples over the world.
It is not as vital whether one is from the Left ot Right, as it is whether or not one is Right or Wrong. If Syriza pulls the rabbit from the hat and fulfills their electoral promises to free the Greek people from the IMF, I will be surprised, but quite happy. The Greek people elected the Syriza; they liked their promises (and their promise). We will see if the electorate is respected, or not.
In all friendship, and on this wonderful Website.
Peter
Its “possible” Marie could win the election.And as much as I think,from our standpoint that would be a good thing,I doubt she will.And the reason I doubt it, is the way the French electoral process works.It is a two-tiered system.Not only does a candidate have to win an election against their rivals (say 3 or 4 are running for the position).But then you have a 2nd election round.And its down to the 2 most vote getters.What can happen is say,1 candidate got 48% of the vote in the first round.And the other 2 or so,had split the other 52%.Then in the 2nd round,the other candidates combine their voters towards 1 candidate (anyone other than Marie),they then win the election.Its been used before to deny victory to someone, the powers that be, don’t want to win.And I think they will use it against Le Pen.I would think a better policy would be to concentrate on the Deputies elections.Try to become the largest party in the Chamber.And also gain in local Department elections.Don’t overlook the Presentational election.But don’t count on that to bring them to power.
Very often, it is in the side-issues, where the political intent is revealed.
When expressing main-focus issues, care is exercised to say what has to be said, both to inform and deceive. But sometimes on the side-issues relative to self-definition, the guard is down and the self scrutiny more relaxed.
Syriza presents itself centrally as the group to end, or at least fight, austerity imposed on Greece.
Even there, however, its pronouncements have been a disappointment compared to its promises.
But by going along with further sanctions on Russia for defending itsinterests and for supporting Ukranian resistance to the U.S./E.U./Nazi-tipped Kiev junta aiming a dagger at Russia’s heart, Syriza exposes a side of itself largely unnoticed.
Basic political orientation is also disclosed by the selection of which issues are central or marginal.
This is true again with Syriza.
The sanctions formally imposed and intensified against Russia, after all, are fully parallel to the informal financial sanctions that have reduced Greece to pauperism.
The financial war against Greece is part of a global financial war, launched on Greece without the slightest military pretext.
So by supporting sanctions against Russia, Syriza in reality is jumping on the bandwagon of the very forces keeping economically enslaving Greece itself, long before the Ukraine conflict broke out.
Sanctions on Russia are of an inextricable unit with austerity in Greece, in no way a side issue!
Very often, it is in the side-issues, where the political intent is revealed.
When expressing main-focus issues, care is exercised to say what has to be said, both to inform and deceive. But sometimes on the side-issues relative to self-definition, the guard is down and the self scrutiny more relaxed.
Syriza presents itself centrally as the group to end, or at least fight, austerity imposed on Greece.
Even there, however, its pronouncements have been a disappointment compared to its promises.
But by going along with further sanctions on Russia for defending itsinterests and for supporting Ukranian resistance to the U.S./E.U./Nazi-tipped Kiev junta aiming a dagger at Russia’s heart, Syriza exposes a side of itself largely unnoticed.
Basic political orientation is also disclosed by the selection of which issues are central or marginal.
This is true again with Syriza.
The sanctions formally imposed and intensified against Russia, after all, are fully parallel to the informal financial sanctions that have reduced Greece to pauperism.
The financial war against Greece is part of a global financial war, launched on Greece without the slightest military pretext.
So by supporting sanctions against Russia, Syriza in reality is jumping on the bandwagon of the very forces keeping economically enslaving Greece itself, long before the Ukraine conflict broke out.
Sanctions on Russia are of an inextricable unit with austerity in Greece!
“Hungary openly used blackmail when it gave its government control over the central bank. This decision was later revoked, but it is nearly impossible to get the full details of the deal through media ”
Thank you for that reminder, Mr. Khazin. Here’s more of the story. Thoughout, “independent” means controlled by the IMF and NOT by the people’s elected representatives.
http://www.reuters.com/article/2014/02/06/us-ecb-hungary-centralbank-idUSBREA151KE20140206
Except no more IMF — Hungary kicked them out a few years back. Now they do have debt at 77% of GDP but it is not IMF debt. A lot of it is long term bonds, so nothing to worry about.
Despite this the EU has “rules” about bank independence and “rules” about paying down debts, all decided by unelected committees. But there’s really not much they can do to a country that doesn’t keep to them AND is not hogtied by IMF loans. On top of that Hungary never entered the Euro zone, still uses her own money, so will easily survive any problems the euro gets itself into, eg with Greece.
Hungary started this experiment years back when the private pension savings were nationalized to be used for writing off debt. Before that it was compulsory to choose a company to play your pension money away on the stock market, The result in the short run was immediate political victory – as they managed to hand out money to people in the process. In the long run: debt reduction failed. Same team in power later won big by removing swiss franc debt. On the whole the hungarian guinea pig has a quite consistent experimental concept: as much independence as possible (no euro, no imf, so on).
“What is not said about the negotiations with SYRIZA” by Vicenç Navarro:
http://blogs.publico.es/vicenc-navarro/2015/02/25/lo-que-no-se-dice-sobre-las-negociaciones-con-syriza/
“The frontage of the German government and the ECB to Greece” by Vivenç Navarro:
http://blogs.publico.es/vicenc-navarro/2015/02/17/el-ataque-frontal-del-gobierno-aleman-y-el-bce-a-grecia/
“The ignored or silenced causes of high public debt in Spain and Greece” by Vicenç Navarro:
http://blogs.publico.es/vicenc-navarro/2015/02/06/las-ignoradas-o-silenciadas-causas-de-la-elevada-deuda-publica-en-espana-y-en-grecia/
“The scandal and robbery of Greek debt” by Vicenç Navarro:
http://blogs.publico.es/vicenc-navarro/2015/02/03/el-escandalo-y-latrocinio-de-la-deuda-griega/
Some remarks on “Relevant Notes on Greece”
§3. Debt accumulation had little to do with contemporary Reaganomics. Debt was a toxic byproduct of Reagan’s economic policies. In eight (short) years those policies took the U.S. from the world’s largest creditor nation to the world’s largest debtor nation. Serendipitously the government discovered that, as was claimed by Modern Money Theory, debt (under specific conditions) was an asset, one that solved, incidentally, the problem noted by Keynes of the economic problems associated with chronic trade surplus to the results of economic depression and Keynes’ ideas on how to contend with world trade imbalances.
§4. Beginning in the mid-nineteen sixties the use of credit took a quantum leap from a purely economic tool supporting and enhancing economic investment into a method to support and lubricate consumption. This period saw the beginnings of the wide-scale use of credit cards as an alternative to universal use of checks to settle purchases and the inherent problems of such a system. What did not transfer from the original use of credit to its successor incarnation was the requirement to service the co-committal debt the extension of credit entails. Many maybe most current problems issue from this failure. It is not debt that is the problem, it is the failure to service debt in an economic manner that is the problem.
§5. Modern Money Theory treats debt as the other side of the coin, so to speak, as credit. Credit is the economic form wealth (the part of wealth not hoarded) takes. The income of wealth is interest. Interest is the return for wealth that compensates for its use (rent), the risk of using that wealth and the time it is used and not available for consumption by its owner. The modern banking system is one of the great wonders of distributing economic income, and its absence may have been the direct cause of the communist system’s ultimate failure to meet its population’s economic needs. Wealth is simply economic income that has not been consumed. Wealth may be represented by capital but is primordial to capital; both share interest as their form of economic income for participating in the economic process.
§6. The arbitrary impoundment of personal and business bank accounts is pure theft and unconscionable if done by any government or agency of government. Normally recourse to law and courts should resolve the conflict of interests. Failing that, history is replete with the carcasses of those who tried such gain – funny how those doing such mischief don’t get much support from those they short (or their friends).
§7. National debt becomes a problem when no way is provided to amortize that debt. Debt is an excellent absorbent for accumulated excess of savings. Instead of a curse, national debt may be the blessing that curbs excessive demand and prevents inflationary pressures from supply prices. That has not been explored to any great extent.
§9. World dollar accumulation has been accomplished through the (gold standard) ghosts of the gold backed dollar that dominated Bretton Woods. Keynes saw his ideas succumb to American mercantilist policies of the gold backed dollar but as for speaking from a debtor power were not given the consideration they deserved for solving the chronic trade imbalances that devastated the world economy beginning with the financial collapse of 1929. Whereas Keynes devised his scheme based upon economic equilibriums as the working principle, the American version had no such operations, relying on trade advantages to supply dollars to trading partners who required dollars not only for trade but to establish monetary reserves for their own currencies to be traded. A historical survey of recent modern economic activity clearly show how misguided American Mercantilism actually is.
This is getting way too long but may show there are alternative ways of interpreting historical events, sometimes to better advantage in understanding the complexities of the modern era. Your article was quite enjoyable to read. The above thoughts were ignited and may be of some service or again maybe not. All the best…….
Addendum:
Three explorations of the pathology facing the world are contained in the following:
1. Tom Hanahoe – “America Rules, U.S. Foreign Policy, Globalization and Corporate U.S.A.” ISBN 0-86322-309-5
2. Corey Robin – “The Reactionary Mind, Conservatism from Edmund Burke to Sarah Palin” ISBN 978-0-19-995911-2
3. Philip Mirowski – “Never Let a Serious Crisis Go to Waste, How Neoliberalism Survived the Financial Meltdown” ISBN-13: 978-1-78168-079-7
together these map the source and nature of ‘the beast’ the world faces. Sun Tzu’s “The Art of War” contains suggestions as to the handling and disposal of such adversaries.
Here is a link to a relevant article just now published. The article seems to be in general accordance with Mr. Khazin’s appraisal. This article notes that Greece may miss an upcoming IMF payment next month, that severe bank runs are occurring in the country, and that the first violent protests have begun against the government. The article mentions that Greece has newly-designed Drachma banknotes and speculates that the recent four month loan forbearance may have been an attempt to make time for an orderly exit from the Euro.
http://www.zerohedge.com/news/2015-02-27/gold-sovereigns-bought-greeks-volume-new-greek-drachmas-designed
Greece is infected with the plague of unpayable debt. They are bankrupt. Any debt that can not be paid will not be paid (except maybe by the lender or their taxcows). If their debt is forgiven, Italy and Spain will want the same deal. It is the same as all forms of life and death, the weak go first. Germany was said to be pleased that the four month loan extension was granted. It is just kicking the can down the road, not a real solution. Now as the ECB talks of their own form of QE, Germany gets concerned, they know the perils of unbacked printing. This will give them legal justification to exit the EMU, and that will be the end of that experiment. The euro is currently going down, eventually it will go away.
Dear Saker
I ve been following mr Khazin writings for some time and I respect his views and his work.
I also understand his propositions about the problems of Greece ( my country ) to be honest and thougthfull. The current government of SYRIZA has reached an intermediate deal with the “institutions” , as we call now our EU “partners” , to earn the borrowed time untill late spring to start applying some of the policies promised before the elections. My country is in a very difficult situation : humanitarian crisis , destroyed private sector , public sector dismantled , a huge national debt , no liquidity , oligopoly and oligarchs still have the real power . All the steps must be taken very cautiously to avoid exactly what mr Khazin calls “potential dangers” .
This is a formidable task and the next few months will be very difficult . By June I believe that we will have the whole picture : if Tsipras will “betray” his promises , so that all the “hurray patriots” who commented here before could feel their utter satisfaction , or not .
I would like to note for mr Khazin that the “right wing” party ANEL , collaborating with SYRIZA as part of the government , is a small part ( 4,7% ) of the Greek Right . The big part ND ( 27% ) is the main opposition party nowadays , after serving obedientely all the troika vices for 3 years , since 2011 , ANEL on the contrary left the ND party when in 2011 the latter decided to comply with the neocon politics and the troika ( EU , IMF , ECB ).
One more note for the “hurrah patriots” . Tsipras under these circumstances did his best for the Ukrainian conflict . He managed along with other countries to postpone any further sanctions for RF. Some reasons :
a) geopolitical issues and a slight but significant nevertheless change of the Greek stance ,
b) economic reasons since the burden of the sanctions is more than 2 billion euros for our country all costs accounted ,
c) there is a substantial greek origin minority in southeastern Ukraine , mostly under ukrop control , that could eventually suffer the consequences of a more “pro RF” stance of Greece some month ago.
I also like to send my deep “thanks” to @ELSI for her comment
The Greek supporter of Novorussia ( you already kow )
“Today it is impossible to repay these debts even with zero percent interest rate on refinancing without sharply declining the standard of living for general population.”
Good grief. A little accounting lesson is called for here.
First, in a double-entry accounting system when a government creates money from thin air (by spending it into the economy) it goes on the ledger as a liability of the government and an asset for the non-government…thus it is technically debt but not in any real sense because there is virtually no reason to pay it back. This is true whether or not there is interest involved (which is just more spending from thin air) or not. If you present a dollar to the government it is “obligated” to give you another dollar in exchange. That is the extent of the obligation. There is no functional limit on how much currency a currency-issuing sovereign can create other than it’s ability to produce goods and services…it’s impossible to buy more than you can produce, so it’s stupid to try to do so, and is usually only done for political reasons (see Weimar Germany or Zimbabwe).
See Japan for an example of how limitless money creation is. “Experts” have been wrong for 40 years wrt Japan and its “mountain of debt”. Arithmetic will trump the experts religious beliefs about money for as long as the laws of arithmetic are in place. If Japan’s economy collapses it will be because it either ran out of customers or it’s production capacity collapsed…the same conditions that caused the hyper-inflations of Weimar Germany and Zimbabwe…the same events that cause all hyperinflation, of which there have been scarce few over history.
On the other hand if you believe you are out of money then effectively you are.
If governments didn’t issue currency this way then the only way possible to have currency in the system would be to obtain loans from banks and spending the money into the economy, or borrow it from another sovereign that, by the way creates every unit of currency it creates out of thin air. Loans create deposits, not the other way around.
Public spending in the US has averaged over 7% since WWII…if we are going to have compound interest then we must have compound growth in spending, and this is only possible with public spending…we cant’t count on people borrowing to fund other people’s income, which is essentially borrowing from Peter to pay Paul. The credit circuit works because the government contributes over 20% of GDP out of the chute, accounting for nearly half of GDP for a multiplier of 2, and unlike Private Investment grows the money supply.
Further, taking out a loan from a bank and spending it is essential spending future income that you haven’t earned yet. How far in the future can you spend income you haven’t earned before you collapse financially, since debt service subtracts directly from your income, reducing your spendable?
So which is worse, high government spending and deficits (which fund savings) or expanding private debt until the system collapses under it’s own weight? (which we have witnessed recently and our parents and grandparents witnessed during the Great Depression). We have already seen that high private debt is always the main cause of banking crises, which is the cause of the vast majority of recessions /depressions. Todays private debt levels as a percentage of income are about double those of historical levels.
Private debt is the elephant in the room, and failure of governments to fund the payments system (with it’s spending) guarantees a financial collapse.
During WWII the US more than quintupled it’s National Debt in less train 3 years yet the following 30 years were the most prosperous in the nations history.
If ANY country sovereign in its own currency repaid it’s National “Debt” (even tried) its would collapse it’s economy because it would be eliminating ALL PERSISTENT SAVINGS in the system…not to mention that trying to do so would kill the payment system underlying the house of cards credit is based upon.
Capitalism is driven by public investment. If the government didn’t spend (in the US public spending is much higher than business Investment ($3.7T compared to $2.7T in 2014). No system is capable of driving itself from the inside…the math can never be made to work because friction in the form of saving will always be and only a frictionless system (one that has never been observed to exist in the known universe) can maintain itself without external stimulus i.e. perpetual motion is not possible, either in a real world system or in a mathematical system (circuit) with known frictions. Flow runs down like ripples in a pond.
Thus anyone talking seriously about “paying back the debt” is seriously deluded. Such an event in the US hasn’t happened since Andrew Jackson did it in the 1830’s and a severe depression followed quickly thereafter. Besides, there is no reason whatsoever to even consider removing all persistent money from the system…money is the only resource that we can’t run out of, and 50% unemployment is the death knell of capitalism.
Clinton ran budget surpluses for two years (1998/1999 or thereabouts) and we’ve been in continuous recession ever since. During that period private borrowing expanded like an exploding star but all it did was lead to a massive transfer of wealth from us to the 0.01%.
Credit is a fools errand for 99.9% of the population because you never know when TPTB are going to stop the music and gather up all of the leveraged assets, and you gotta believe they’re doing it on purpose.
A lab experiment that is currently going on in plain view within the system we call the “Eurozone” is an excellent view into what happens to economies when you starve them of public investment (Greece). A monetary economy can’t grow without growth in the money supply, and GDP cannot grow faster than the rate of growth in the money supply (it never has…so I will take that to the bank). The future is always bigger for a growing economy and it’s impossible to buy the future with todays money, just like it would have been impossible to buy 1950’s output with 1940’s money. In the US GDP doubles about every 9 years…look at the growth in government spending in comparison.
We suffer because we think we are out of money. That notion has and always will be brought to us by bankers and moneychangers, who have been sucking the life out of working people since Biblical times. A hundred generations have learned this lesson and forgotten it.
Now that is all good but the problem comes into play because the government is not spending money on public works so essentially the money ends up with the 1% who only accumulate more and more of it. it never reaches the masses which can use it and increase the GDP. It does increase the money supply of the banks and the markets which again means nothing. Essentially more unemployment, more people who cant afford to spend and there is less spending on infrastructure. If government spending is all it takes why tax people who have the most trouble paying it? Since government just creates wealth and spends it. Ah again, those who horde money never spends it or collects it so they don’t pay taxes on it either, it just collects dust accumulating more of it. We can see that China spent 3 times their GDP on infrastructure projects. hence their economy is growing. People have money to spend hence creating a consumer class, money as such is not stored and hence it flees the country so it is safer than just collecting in the basement. As long as you can export enough to cover the money fleeing. But over all most of the money ends up benefiting the people. So both US and China do the same thing, except the elites in the US saw the people benefitting and told them to eat cake. I now it is tough to see arrogance from some punk college grad making 100K starting. Which is now changing.. So that little difference makes all the difference in the world. But also… This is a biggie…
What happens when foreigners have enough US$’s and don’t want anymore? Your lack of goods would come into play.. a side effect of too much money.. Hording will work to an extent as we are seeing.. But sooner or later it will hit.
“Debt accumulation was a “reaganomics” instrument used to stimulate consumer demand, first in the USA and then, starting in 1981, across the entire world. In particular, by year 2008, the average household debt in the USA …”
This is what Paul Craig Roberts did to the world. He was one of the creators of Reganomics.
thanks saker for article…I really like Khazin now….I have to get it printed to read it carefully
“…it is impossible to pay off the debt that has been accumulated within the world economy”
Well, if we consider that any debt resulting from interest rates is imaginary it is possible to pay all the debts in the world.
Interest rates are millenium fruad. If I lend money to the bank they pay me 1% interest, if they lend the money to me it is 15%. Only a fool would not argue that this is a fraud.
The first person that apporoached the ancient loan shark (probably in the BC era) when offered such a conditions should have hang him (the loan shark) to the nearest pole. And he would have saved us from the crisis today.
I was talking to an old greek communist about crisis 3 to 4 years ago. He is a farmer, not highly educated but with a very sharp mind. His abstract definition of the crisis was this: “Crisis? What’s the meaning of crisis. Did the land stop producing goods. Did all the money burn in a crematorium and now there is none. No in reality crisis means that all the money is gothered to very few individuals.”
He is right, if we keep eluding this foundamental truth and try to explain something as simple, with scientific economics we are getting further away from the solution. World debt is at 200Trilion $. Where do we earthlings owe?
There is a funny sticker nowadays in Greece it says “World debt is at 200Trilion $. The aliens have forwarned us that if we do not pay soon enough they will start confiscating the planets assets immidietly”
Cheers from the land of debt
kaliméra,
voyez les propos d’henry kissinger !!
KISSINGER 1973 grece
The current crisis of capitalism has to do with extremely long-term processes in the global capitalist economy. Things like the organic composition of capital, absolute and relative rates of profit, the under supply of gold etc come into the fold.
The only people dealing with such issues seriously are but a handful of objective Marxists (not the crazies who always forecast imminent capitalist collapse)
These are two serious writers on the matter:
https://thenextrecession.wordpress.com/
And I would especially recommend this blog (which is extremely tough to follow, even for the heavily initiated)
https://critiqueofcrisistheory.wordpress.com/
“Note this – when Haider got into Austrian government, Austria was ostracized in EU. A similar reaction could be observed when Jean-Marie Le Pen took part in the final round of presidential elections in France. These were classic right-wing politicians who would be considered mainstream in 1950’s.”
I’m not an economist so cannot comment on the economic analysis, however I must strongly disagree with ‘these right-wing politicians who would be considered mainstream in the 1950’s.”
For several decades after the end of WW II, Europe was pretty well vaccinated against the extreme right – which is what the parties referred to are. “Classical right wing parties” are understood in Europe as ‘center-right’, not ‘extreme right’, which is what fascist parties are.
Also, unless the term ‘real wages’ has a special meaning in economic discourse, I don’t think you can say that wages in the US are the same as in the 50’s.
What is important about this article is the explanation of how populations were made to over-consume. Bravo!
ok let’s take it from scratch, so we can have a look on the mater ……at 2009 the national debt of Greece was at bond’ s …. something like 95% of the total debt was in national bond’ s, which means that 95% of all debt was ander the authority of the Hellenic parliament and the Greek law …. which means that the Greek court’ s of law and the Hellenic parliament was responsible, to disait if the national bond debt was at the level to be paid off ……after the second bailout of the Greek national bond exchange, the europian central banks had a relief of the Greek bond debt at the rate of 95% relatively …. the biggest exposure on the national Greek bond debt were the France privet banks ….. at that time Greece could easily restructure the bond holders debt, by a common law under a parliament vote ….. and thas to count the private banks as the responsible, of their losses on the Greek bond ….after all the bond is an investment tool – or not ???? ….. so you invested and you lose…but instead of the common sense, we made an exchange of that bond debt through the ECB …. the ECB bought the Greek bond’s at the second stage of trade, for 20% of there first value in exchange of an agreement that will pay in the full, at the time ….
if this is not a romper how can we call it …
that is the reality of the EU ….. the pack of the super zompies ….. if a country fall in the union, it is most common that the people of the the country will pay their wages to the machinery industry of the Germans ….
GEODETIS ….