Monday, January 26, 2015

New Greek Finance Minister said, "Greece will neither want to leave the euro nor threaten to do so."

Oh well, this thing's going nowhere. It's got the liberal disease of big talk, no action, written all over it.

The new Finance Minister is this guy, Yanis Varoufakis. He once said, "Greece will neither want to leave the euro nor threaten to do so."

Done. Finished. Toast.

There is  no way that Tsipras and Syriza can deliver what they say they will deliver while in the euro. NO. WAY.

The sad thing is, this guy Varoufakis taught at University of Texas. That's where MMTer and economic liberal, James K. Galbraith teaches. Too bad he didn't learn a thing or two while he was there.

69 comments:

Malmo's Ghost said...

He does say this in your link:

“If it is in my power to determine,” he explains, “Greece will neither want to leave the euro nor threaten to do so. We should not have entered the euro – this is crystal clear, but once in, the Eurozone is disastrous to get out voluntarily.

That does not mean we should lower our heads and do as we are told lest we are thrown out. No, we should veto misanthropic policies within the euro, demand debt restructuring within the euro, and never give them the opportunity to claim that we opted out of the euro voluntarily. If they want us out, they should kick us out with no help from us. In so doing, however, they will be bringing down their own houses too…”


Letting the EU do the dirty work by kicking Greece out for not following through on the EU's torturous austerity polices might actually be a stroke of genius in the end. And it sure reads in large part the newly elected government is for all intents and purposes telling it's masters over in Brussels and elsewhere in the region to shove their onerous conditions up their collective asses.

Kristjan said...

Yes Malmo's Ghost but they sound totally unreasonable. we won't pay our debt, keep giving us the money. Podemos in Spain understands that they can't do what they want to do in euro framework. What is the purpose of Syriza doing this? Continue with the nightmare? Varoufakis understands monetary system, he understands that euro is flawed. They are not supporting federalism in Europe. It is hard to understand.

Kristjan said...

May be this is a bluff from Syriza, they know that Europe will not accept their conditions, they default and issue their own currency. You have to consider that there was no support for drachma in Greece. They would not have won the elections if they had promised that.

Malmo's Ghost said...

Kristjan,

The votes are not there to exit the eurozone. I also don't think Varoufakis is talking about repudiating the debt but rather restructuring it. Perhaps the terms Greece lays down for restructuring are intended to get them booted out, but that's on the EU, not Greece, as Varoufakis intoned. Short of a political consensus to leave the eurozone (which Greece certainly lacks internally) getting kicked out for not rolling over to draconian demands is the only game in town POLITICALLY.

Ignacio said...

This is a catch-22 situation.

Varoufakis is a smart guy, he has worked with Galbraith and he is aware of MMT (even if he does not agree with it). I would say he has a relatively good understanding of the monetary system, at least not in the "completely moron" camp! If he didn't he wouldn't have proposed some of the things he has.

But the problem with the left in Europe is that they are enamoured with the idea of "United States of Europe" and so they are indirectly strange travelling companions of the neoliberal elites in the European institutions and Germany. this is a trait all over the place of many European politicians from center-right to radical to left. I get it, I also love the concept, although I don't think you can manufacture a Nation State through internal violence which is what the bullies in some countries or European institutions think.


It's sad to say, but I don't think this ends until the far-right gets some power in Europe (like LePen in France). Al other option is the revolt of the rest of Europe against neoliberal Germany and it's export-driven partners. But this will take time and the revelling countries must 'hold up' until this happens over time (one by one, Italy, Spain, France, etc.). OFC meanwhile the situation may back-fire as you suggested in the other post and this will be an other big indirect win for "Team Neoliberal" in Berlin-Brussels-Frankfurt and more TINA bull-crap feed upon our throats.

Michael Norman said...

"Even if he does not agree with it." [MMT]

There you go. Case closed.

Malmo's Ghost said...

Ignacio,

Just to clarify. Describing Marine Le Pen as far right does a disservice to the term. She would be far far left were she in America. Far to the left of Elizabeth Warren to be sure. She's not a neoliberal, which I guess makes her a right winger relative to Europe's neuvo-left.

Tom Hickey said...

Ignacio, you are likely correct. Syriza is an outlier and Greece is a tiny country. The real challenge is from the right in large countries like France.

And in the background is Michael Hudson's refrain, "Debts that cannot be repaid won't be repaid."

The only way to repay the debt is to sell off public assets and that's where the rubber hits the road.

Jure Jordan said...

I guarantee you that Varoufakis totaly agrees with MMT.
I have been reading his blog for years and he never strayed from MMT. His book Global Minotaur is all about global movement of money, he does not imply goods with it. He is straight money talk full MMT.
His proposal Modest Proposal to euro problem is created in cooperation with James Galbraight and Hummond.
Trust me he is MMT, but more interstate MMT then internal like you are.

He talks more about what is possible for EU then what is possible for Greece, knowing that if Greece exits the EZ, the whole EU and Europe will be in trouble bringing down Greece with it, maybe even continue on to war.
He wants to stop such slide toward destruction toward war.
He wants ECB to be like FED, he wants United States of Europe and he understands how US became what it is.
Varoufakis always uses comparisons of US states to show how wrong EU setup is. To show how fiscal transfers keep US together.

Ignacio said...

Well, even if half of what has been suggested by him was done we would be in way better shape that the current distasteful situation.

In fact it would create a de-facto European treasury and a pseudo fiscal union which, in the end would get the gold-standard bis aka the euro much more closer to other modern fiat currencies.

Not that it's going to happen any time soon, but if the whole situation politically forces "neoliberal team" to un-entrench the situation it will be a win for us "the peasants".

I expect the next two years to be a battle between both positions, a waiting game of who can gather the most support and hold up better. If the turmoil continues in the rest of Europe at a good pace and the opposing factions can hold up a big enough group of anti-austerity/anti-neoliberals can achieve power we may see some changes.

One advantage in Europe is that the smoke and mirrors are quickly collapsing, and that the battle here is about running on the gold-standard (Germany and companions) vs. running a proper fiat currency (rest). 'Monetary financing' vs. 'non-monitary financing'.

Kristjan said...

you might be right Malmo's Ghost but I think Ignacio is right. We have these left libtard dreamers in Europe, they dream something up on a paper and start living in their dream. They are in denial mode now. Would the left support such high unemployment, cutting social benefits etc. No they wouldn't but their dream would shatter if they didn't. This is an utopic project that will end bad, there is no other way. Euroscepticism won big time last European Parliament elections, yet they continue like nothing happened. If you are against euro then you are not progressive, you are not for united Europe. It won't be dismantled orderly, utopian projects never are. Euro will break up EU too I think, final blow will be the elections in France in two years. Their tolerance for unemployment and EU dictated rules is much lower than in Greece. The population doesn't understand that there is something wrong with the euro, they are unhappy with the results, they blame It on imigrants, taxes etc. The left keeps dreaming on.

Ignacio said...

Malmo, if I was French I would probably vote LePen, even if for the political reality right now in Europe asks for it! Yeah I understand that USA political landscape is completely different and the Democrats are like the neoliberals in Brussels and Germany here in Europe (in economic matters at least).

As for Varoufakis and MMT, I'm pretty sure I read a comment by him once that he didn't completely agree with it etc. But in practice he is "one of the good guys", he would be a 1000% improvement over the unelected elites ruling Europe right now.

Tom Hickey said...

The right is nationalistic, economically liberal, and socially & politically conservative. The far right parties in Europe are intensely nationalistic and xenophobic.

The left is internationalistic (the Internationale) and socialistic (Workers of the world, unite).

Kristjan said...

"Well, even if half of what has been suggested by him was done we would be in way better shape that the current distasteful situation.

In fact it would create a de-facto European treasury and a pseudo fiscal union which, in the end would get the gold-standard bis aka the euro much more closer to other modern fiat currencies."

You cannot create central entity that taxes and spends like that. Member states need to sign away their governments' power to do that. You need referendums in member states for that. the federalists would do those referendums right now if they didn't know that those referendums would fail to provide yes. So this is deadlock situation, It will break up like the Soviet Union did. As long as there is economic growth and living standards go up, people are willing to put up with the fake democracy that the EU really is. When there is no more growth, the whole thing falls apart. They have no idea how to generate the growth.

Tom Hickey said...

I believe that Jure Jordan is correct about Yanis. These folks probably also realize that they do hold aces up their sleeve, I believe but are playing with their hand close to the chest right now since it isn't yet time to bring out the aces.

They know that a Grexit would severely damage the EZ if not blow it up, and the eurocrats know it, too. They know the position of the banks and where the debt lies.

But Syriza is not going to begin negotiations with threats since that would be a counterproductive strategy politically. However, the economic advisors know that they can threaten Grexit if push comes to shove and the troika won't back off.

Whether they have the balls to play that card is another thing. They would get blamed for blowing up the EZ and perhaps starting yet another European war.

The troika is banking on their not have the balls to play that card.

They cannot threaten to play the card unless they are willing to carry through.

So back to game theory.

Tom Hickey said...

BTW, I am not sure exactly what "disagreeing with MMT" means. A good many PKE economists are essentially on the same page but disagree with each other over some details. But they agree on the really important stuff.

Malmo's Ghost said...

Tom,

My point is that Le Pen isn't far right, at least in the way you label it as an invective. Needless to say I'm a big fan of her.

Ignacio said...

Tom agreed, but economically speaking, I think it's fair to say that most parties in Europe are to the left of the Democrats in USA. Probably 'progressives' in USA could find place comfortably in some centre-left parties in Europe. That is, if we were running out of the euro ofc.

Kristjan I agree. It all sounded very good on paper (for the majority of the population) until problems arise. You cannot do nation-building based on oppression of your own people. The only way I see Europe becoming more unified in the close future instead of the current destructive path is if an external power would threaten the existence of all the nations of Europe.

Even if they try to fake such thing with Russian or the Islam as enemies, they are not a credible threat to Europe, not more than it's own elites and their irrational economic policies.

Tom Hickey said...

#FreeSpeechStories: A family feud on the French far-right, BBC Trending

Kristjan said...

"Tom,

My point is that Le Pen isn't far right, at least in the way you label it as an invective. Needless to say I'm a big fan of her."

I would put It the same way, her father(founder of the party) was extremist, she is more mainstream. She promises to get rid of the euro the first thing she would gain power. No person on the left has said that. Because they are for "United Europe"

Tom Hickey said...

Ignacio, there is no political left on the screen in the US, none. There are people on the real left in the US, but they have no representation in politics to speak of. And I doubt that even the people on the real left in the US would be considered really Left in Europe.

Calgacus said...

Well, here is what Mosler said about Varoufakis back in 2012. As far as I recall, he hasn't gotten up to snuff since then, though I could be and hope I am wrong.

Malmo's Ghost said...

Tom,

My last comment on Le Pen (didn't mean to threadjack).

You must be confusing Marine for her father. Certainly her views on immigration differ from his. Daddy is the xenophobe, not her.

Kristjan said...

"Ignacio, there is no political left on the screen in the US, none. There are people on the real left in the US, but they have no representation in politics to speak of."

How about Sanders Tom. Show me one guy like this in Europe? Even one!

Tsipras's mumbling about ending austerity doesn't count.

Malmo's Ghost said...

FWIW, The global markets seem to be anticipating business as usual.

Philippe said...

Varoufakis took part in the modern money and public purpose talks at Columbia last year.

Ignacio said...

I recommend reading today's Naked Capitalism article on Syriza and the comments. As usually insightful stuff, quoting from the comments:

Syriza is split into an anti-euro Left Platform, representing about a third of the delegates to the party congress, and a pro-euro majority. The majority itself is divided into a left-wing and a right-wing, which appears to be a divide between pro-euro anti-capitalists and pro-euro reformist social democrats.

The right-wing has been working to reduce the power of the party congress, increase the power of the leadership (which they largely control), and weaken Syriza’s more confrontational positions.

Philippe said...

Varoufakis explains why he is against leaving the euro here:

https://www.youtube.com/watch?v=g9UFsBMFSAs&t=18m24s

Malmo's Ghost said...

To Jure Jordan's point, is there any way going forward the EZ will become a Untied States of Europe? Too much embedded national histories and attendant cultural baggage made this a non starter in the first place, so I say no way, at least as far as the eye can see.

Jure Jordan said...

Calcagus
Regarding Mosler's comment on Varoufakis, Mosler always notes that he does not know how non fiat system is set up, EZ is not fiat system and Varoufakis talks about euro system.
ANd btw, Mosler is heavy right side, he claims that there is no difference if you cut taxes to rich or to poor.
It is so wrong because rich will save while poor will spend imediately, huge difference in outcome. The GDP will come out the same with either tax cut, but unemployment would not be same. Meaning: Nominal GDP would be same, but not real GDP.

Tom Hickey said...

Sanders is the only self-identified socialist in the US Federal government that I know of. He is a democratic socialists not a communist. Communists are absent from the political scene in the US, and no one in politics self-identifies as even Marxian let alone Marxist or Marx-Leninist, at least anyone that shows up on the screen.

And even Bernie doesn't get how money works from what he's being saying. Hopefully, Stephanie will set him straight about it. Then we'll see if he actually "talks the walk."

Tom Hickey said...

Marine Le Pen is more politically correct that the rest of the family, but many suspect that this is a matter of convenience. She is not disavowing more extreme followers, either. We won't know unless she gets in power and then we'll see what happens.

Tom Hickey said...

I would assume that Warren was saying that Yanis doesn’t yet realize that a government that issues its own floating rate currency and doesn't borrow in currency it doesn't issue is a currency sovereign, with all that implies.

This is a key difference between MMT and those close to MMT. According to Warren this is the insight that launched his "soft currency economics," which was subsequently elaborated by Randy and Bill and then the other MMT economists that joined them later.

Kristjan said...

Thanks Ignacio, interesting about Syriza.

Tom, I am from Eastern Europe where Marxism, Leninism and Communism is laughed at, you cannot make It into politics when you say that you are a Marxist. But that doesn't matter we don't have them, I have talked to politicians and they are in mainstream parties yet they are communists in every respect. Yet when you start talking to them about MMT, they might say impossible, they are against It like most PK are.Might be the same in US?

Kristjan said...

"But that doesn't matter we don't have them"

should be: but that doesn't mean we don't have them

Tom Hickey said...

@ Kristjan

Right. You don't have to call yourself something if you are the real thing. And if you call yourself something that doesn't necessarily mean that you actually are that.

Right about the US, too. Many that agree with MMT say it is either politically impossible or unworkable and are unwilling to give it a shot politically. Warren reports running into this in some interesting stories in his book, 7DIF.

Jonathan Larson said...

I am pretty sure that Norman is right about this. Lefties really haven't been a part of the discussion of monetary policy since the 1940s. My guess is that Greece's left is just as goofy as ours.

Monetary policy has traditionally been the concern of small businesses and farmers (and anyone else that has debt as a condition of their employment). It was the main topic of political discussion here in the midwest between 1873 and say, 1953. Of course, there were a lot more farmers then.

My fear for Greece is that if a bunch of money gets pumped into their economy, most will end up as consumption because they cannot feed or power themselves without imports. In theory, they could figure out ways to solve these problems and in theory, they could print the necessary money to power these projects. In practice—wow, there is another question I am clearly not qualified to express an opinion.

Kristjan said...

Greeks can block any anti-Russian sanctions at EU level. No more consensus, Tsipras can block every one of them. Those are not decided in European Parliament. Russia is offering Greece gas sales to Europe http://redpilltimes.com/greece-board-turk-stream-pipeline-russia-cannot-held-hostage-stupid-illogical-eu-politics/ and Russia offered Greece to lift import sanctions on food id Geece leaves EU. Iceland doesn't want to join the EU now because of Its stupid politics. You cannot say that there is some neoliberal conspiracy going on, they are just stupid.

Malmo's Ghost said...

To summarize:

--Greece isn't exiting the EZ of their own accord.

--There isn't going to be a United States of Europe.

--The EZ's onerous terms will not be met by incoming Greek govt.

--Virtually anything short of a Greek exit will do little to extract Greece for the eurozone vicious vice.

--A likely outcome for not complying with EZ sovereigns/bankers will be a Greek expulsion from the EU.

--The fallout from that scenario could be catastrophic politically for Greek politicians, who will be blamed for the disaster at home and abroad.

--War???

Jure Jordan said...

Kristjan
I am also from ex communist country, from Croatia.
But there is noone in Croatia that is recomending anything communist like. I do not believe that there is anyone in your country that recommends worker's ownership, baning banks from printing money and transfering it to state.

Only those two things differ in communist from capitalist system.
1) worker's ownership and
2) only state can print money, not banks.
Everything else is same.
And i do not believe that anyone in the whole Europe is talking about those two points, anyone with some weight in politics.

And even among capitalist states there are some examples of those two points.

Jure Jordan said...

@ Malmo's Ghost
"There isn't going to be United States of Europe"

In what timeframe?
True that since 2008, EU turned the trend toward selfdestruction, but Syriza comming into power can accelerate that or reverse the trend.

What makes USA the USA. It is the single currency that makes people cooperate around single goal. Single currency makes a society connected as a familly, forcing them to cooperate and share so that single currency can succede. The sense of fairness is what keeps people together.
For a single currency to succede, it has to have fiscal transfers that will permanently distribute from surplus agents to deficit agents. Where are deficit and surplus agents?
EVERYWHERE.

Inside familly; surplus parents permanently give to deficit kids.
Within subdivisions in a city, one subdivision (where rich live) gives more into city budget then poor naigbourhoods, surplus to deficit
Indusrial zones give to city budget much more then residential zone.
One city gives much more to state coffers then other city
One state gives permanently more then other state.
Some states receive much more in military funds then others, permanently
Some states have larger proportion of retirees then others, receive much more pension funds then other states.
And other examples.

For the USA to function as it does, there has to be permanent transfer of surpluses to deficit agents without ever calculating the debt. This is called fiscal transfers.

State of Illinois have been giving more then it receives from federal funds since forever, while Luisiana have been receiving more then paying since forever.
And nobody calculates the debt nor complains about it. This is what makes familly work, and also what makes a country work.

For US of Europe to become, they have to make ECB as FED, as lender of last resort to EU banks, not individual states to pretend to be that while they have no power to be.
Then EU wide pension system, EU wide education funding, EU wide health funding, police and infrastructure system funding.

They just started talking about all this.

Kristjan said...

Jure Jordan,
Oh yes, there are communists in my country who want to abandon private property. They don't talt about It loud because the are in mainstream parties and their ideas are not being supported in majority but I talk to a lot of people and I know what they are. There are socialists who want to abandon the market and calculate prices. One thing MMT has thought me is that there are people with all kinds of different political ideas and once you open yourself up that you are out the box, they do too, even the nazies.

Jure Jordan said...

@Kristjan
Many capitalist systems calculate prices, especially in EU, not all prices but a lot of them.
Only difference is the mechanism to controll the prices.
USA subsidizes corn, oil, cars, grains.
This changes the price just as communist calculating the prices. Outcome is the same while the mechanism is different.
And this is done mostly to for international competition not for internal reasons. WTO has banned price games but human ingenuity is overwhelming in going around such regulation.
What is French doing with grain prices?, they are making it unbeatable in EU market.
What is with credit terms?
Low interest is killing foreign banks, there is no real free market in any capitalist developed countries.

I have never heard any Croatian talking about baning private property, ever. I trust you that your country is different.

Magpie said...

I see the discussion centers around the eurozone membership issue. Understandable, perhaps.

Well, there were two parties who did promise to take Greece out of the eurozone.

I'm not Greek, but if I were, I would never have voted for one of them: the Golden Dawn, eurozone or no eurozone. And, to be honest, I wouldn't do that for ideological reasons. Hopefully, most of those commenting here wouldn't, either (but one never knows).

There is another party who also promised to take Greece out of the eurozone. And, if I'm perfectly honest, I doubt most here would have voted for it (like me, for ideological reasons, too), although I would have considered it at the moment of casting my vote: KKE, the communist party.

What does this all tell you guys about ideology and economic theory and policy?

Bob said...

If Bernie Sanders were a democratic socialist he wouldn't be a senator. He'd be working to build a political movement from the ground up, with zero ties to the political establishment.

Ignacio said...

Something people seems to be forgetting: Syriza has chosen as a partner ANEL, which is an euro-sceptic party.

I don't know which is their strategy, probably force the Troika to win time, so there is a rise of euro-sceptic and/or leftists governments across Europe so they can threaten the neoliberals in Brussels as a coalition.

Calgacus said...

Jure Jordan: Regarding Mosler's comment on Varoufakis, Mosler always notes that he does not know how non fiat system is set up, EZ is not fiat system and Varoufakis talks about euro system.... I disagree about Mosler, who has written about the Euro - here is an unfortunately even older piece debating Varoufakis.
As for Varoufakis, I think that a correct understanding of monetary operations, a la Mosler, might conflict with his "Global Minotaur" theory -which to my limited knowledge, reverses causality and mistakes the symptom (international whatevers) for the disease (unemployment & inequality). That is a problem with even good economists - there is too much for them to unlearn. And Germany is the Minotaur to Greece, not the US. So I sadly doubt much has changed since 2011-2012.

Malmo's Ghost - I think all your points are likely - except the last two. I think Mosler, Varoufakis and others exaggerate the pain and consequences of leaving the Euro. The Russians have it right & are giving the Greeks some maneuvering room in any case. Though more corpses have been created by people in business suits than in tanks, its not like the Germans are sending Panzer regiments to Greece. The suits kill by convincing you to kill yourself.

Mosler & Pilkington make an interesting comment in that old post- if Grexit causes "deflationary collapse" - which is hardly necessary - that "might actually work to their [Greece's] advantage". But again, I think everybody is overstating the necessary consequences to both sides.

Tom Hickey said...

The speculation about a collapse seems to be based on assumptions about the amount of peripheral debt that the core banks hold. In the case this debt cannot be repaid, the EZ banking system could go down in flames, dwarfing the crisis in the US. If the ECB "found" the means to help the banks after all the talk about no money for the people, there could be some disgruntled peasants with torches and pitchforks.

Ignacio said...

If Greece is kicked out of the eurozone it will show the way to other countries. It will be seen that there is no such apocalypse, Greece will improve in a couple years, the ECB will seep up and print gazillions if necessary to stop any bank collapse, and at that point it will be seen the emperor has no cloths and is just a crony welfare-for-the-bankers regime and the biggest scam in the history of mankind, robbing a whole continent of their future.

It's pretty much the best thing could happen in absence of real democracy at European level and giving the neoliberals in Frankfurt-Brussels the middle finger. I really hope the euro-morons are so dumb that they force this situation so all their house of cards falls apart.

Vincent Cate said...

Greece has a primary budget surplus equal to 4.5% of GNP. This means that is they simply default on the debt then the government gets to spend 4.5% of GNP more than it does now. Also, as this will stimulate the economy revenues will go up, so in the end it will be even more than this. While not exactly ending austerity, it will be a huge step in that direction.

Neil Wilson said...

Yanis is an EU fan as can be seen from his website. Therefore he is an integrationist.

There are a lot of people in Europe - those that get invited to the parties - who are one world liberals. They really get upset about borders and getting rid of them is their overriding concern regardless of anything else.

Not entirely sure why - particularly as 'freedom of movement' has been co-opted by the right into 'requirement to move to where we want you to be'.

As usual in politics the simple approach is 'impossible' because of the politics. Even the usual approach of getting the local NCB to 'buy' the government debt is complicated because the Greek central bank is privately owned again - Swiss style.

That generally means you can't just buy the debt and hand back the interest as a dividend. You have to swap the government debt almost at par to avoid a distribution issue.

Ultimately Greece needs more Euros spending in it, and that has to come from mobilising the stock of Euros currently stuck in Germany et al doing nothing - or from the ECB failing to enforce the 'no overdraft' requirements of the treaty.

Raising the spectre of 'Nazi war reparations' might be one of the negotiating tools to get Germany to write out some of the Greek government debt.

The 'Debt Jubilee' idea - again so beloved of those in the left who like their personal moral thunks - essentially resets the current system so that we can carry on for a few more years doing the same thing.

There are several ways that this can be fixed. Yanis main plot is to get the ECB to finance the 'European Investment Bank' which is essentially a backdoor way of issuing Eurobonds and then putting the money into countries that need it.

A different form of private debt essentially backed by 'in the bank' funding directly from the ECB.

That would limp the system on for a couple more decades until the outstanding amounts there became 'unsustainable'.

Neil Wilson said...

"This means that is they simply default on the debt then the government gets to spend 4.5% of GNP more than it does now. "

No it doesn't at all. It's a dynamic system.

The 'primary surplus' has been brought about by denying the citizens health care, schooling and probably food. aka a collapse in imports.

Stuff the 'primary surplus' crap. Greece gets to do what all of us do - which is spend until the bank tells us that we can't.

The difference here is that the bank that has to say 'No' is the ECB and doing that has serious political consequences for the whole of the Eurozone.

If I were Greece I would just spend on what needs to be created, and issue bonds at low interest rates to those that want them. I would dare the ECB to bounce the cheque that would fund the health care of dying children. I would dare the ECB to fail to purchase the bond that relieves the starving child.

Neil Wilson said...

"EZ is not fiat system and Varoufakis talks about euro system"

EZ is a fiat system. Warren knows darn well that tax cuts to rich have less spending than tax cuts to poor and has said so - but you can't cut taxes to the unemployed because they don't pay that much tax.

The key point is that saving financially has the same effect as taxation in suppressing spending. So if you let people save, even encourage people to save then you get to tax less and be more popular.

The trick is to make sure that they don't get the income in the first place unless they earn it.

Neil Wilson said...

It's also important to note that James K Galbraith is one of the co-authors and sponsors of the 'Modest Proposal' Yanis put forward.

Jamie's recent interviews have been very politic on that point as he shows here

Matt Franko said...

" Yanis Varofakis, a newly elected MP and tipped by some to be the next finance minister, said Greece was subjected to “fiscal water-boarding” without any offsetting cure. “We have Ponzi austerity, based on unsustainable and ever increasing debts,” he said.

this statement by YV does not exhibit technical competency... and he uses these words:

"water-boarding", "Ponzi", "unsustainable", "debt"

These words could come right from some nut-job libertarian debt doomsday idiot....

He needs a new vocabulary.

imo he is just another all heart and no brains.

Seems like he thinks he may be able to negotiate a debt rescheduling as "pump priming" to get the Greek economy going... pump priming doenst work the system is not a perpetual motion machine...

Malmo's Ghost said...

Matt, you do understand Greece isn't a currency sovereign, so debt does accumulate/matter?

Read Neil's link. And YV is far from being an economic moron.

Kristjan said...

Ignacio wrote:"If Greece is kicked out of the eurozone it will show the way to other countries. It will be seen that there is no such apocalypse, Greece will improve in a couple years, the ECB will seep up and print gazillions if necessary to stop any bank collapse, and at that point it will be seen the emperor has no cloths and is just a crony welfare-for-the-bankers regime and the biggest scam in the history of mankind, robbing a whole continent of their future.

It's pretty much the best thing could happen in absence of real democracy at European level and giving the neoliberals in Frankfurt-Brussels the middle finger. I really hope the euro-morons are so dumb that they force this situation so all their house of cards falls apart."

To me It seems the best options right now. And they are stupid at EU level. So EU has to offer conditions to Tsipras that he has to refuse. There might be referendum in Greece, who knows. If they continue too long with the euro, this government will collapse before long.

Malmo's Ghost said...

Here's a link to YV's Modest Proposal: Modest Proposal

It pretty much reads that Greece desires to stay with the EZ, but not under present terms and conditions. I think it's reasonable at first glance, but I have no idea if the troika will bend to those terms. There are a lot more insightful folks than me who perhaps can comment on the likelihood of it's viability. Seems to me if it fails then the nuclear option of Greece leaving the EU would certainly be a possibilty.

Matt Franko said...

Mal well then tell the Jerkmans that we will ban imports when we hit 3% GDP...

All you have to do is show them the SBE graph and tell them "we will comply"... then the north will s their p's when they see their exports collapse... and EUR/USD goes below 1.00

EXPLAIN to them MATHEMATICALLY why the policy is unworkable for both sides... I dont think YV can do this as he does not understand the issue from a MATHEMATICAL perspective...he is all semantics... "water-boarding", "Ponzi" (ha! he must have read Minsky! LOL! there is some deep analysis for you NOT!)

at least he has never demonstrated this ability imo...

they should not have hired an economist for this position....

Matt Franko said...

and not a banker either....

peterc said...

As an outsider looking in, my hope is that Syriza has a strategy either to provoke Greece's expulsion, frustrate Germany into returning to the Deutsche Mark, or win significant reforms and concessions in the event that Germany fears the eventual consequences of Greek exit more than Syriza.

Along with most others here, my impression is that Yanis, like James G, is not 100% MMT, but is closer than most. Being non-doctrinaire, he is difficult to categorize.

Years ago, I had the good fortune to be one of the tutors in an introductory macro course designed and taught by Yanis and Tony Aspromourgous at Sydney Uni. They were not 100% MMT, but the course, at that time, was about as good as could be expected in a mainstream economics department, including on monetary matters.

I tend to agree that nothing short of a full MMT understanding is really sufficient, but I wouldn't necessarily assume Yanis lacks that understanding, even though his public statements have not demonstrated it.

In any case, if we are going to disassociate with the Yanis's and James G's of the economics profession, along with other heterodox economists, we are basically consigning ourselves to a camp of roughly half a dozen prominent academic MMTers. Syriza may well amount to nothing in the end, considering the powerful forces it is up against, but Yanis and most other Keynes, Kalecki and/or Sraffa influenced economists are among the good guys IMO.

It seems that there may also be a short-run vs long-wun political decision to make for those directly involved. While MMTers often seem to be in favor of the nation state over internationalism, MMT itself is agnostic on the point. In principle, a democratic single-currency Eurozone could work. The trouble is, it is far from democratic right now. One solution -- the quicker solution -- is to ditch the Eurozone project and go back to currency sovereign nation states. But another solution -- probably harder and slower to achieve -- is to make the Eurozone democratic, with a democratically accountable fiscal authority in place to effect appropriate fiscal transfers. If Syriza or anyone else in Europe prefers the latter solution, and has decided to work towards that goal, that is really a matter for Europeans to decide.

Kristjan said...

I agree with Matt. Varafoukis is trying to hide the fact that there is a problem, namely member state governments having too much power politically versus European Parliament. This causes different labor price producitivity ratios in member states, if your ratio is above average, you are going to be a debtor, there is no way around It. Now he is trying to hide the neccessary fiscal transfers because there is no political support for them in EZ. Mario Dreghi recently said that there is no other way than structural reforms. Mario was talkinf about US fiscal transfers and central federal government and said we won't have those in Europe in any foreseeable future.So Mario understands what's wrong with the system. syriza is dreaming, I really hope that they will get rid of the euro. This right now might be their political game, so they are not the bad guys who left euro and broke up european integration, It was Europe who left them no other option.

Malmo's Ghost said...

Three out of four Greeks desire to remain in the EZ. Thus to keep the coalition together, a repudiation of the EZ isn't politically feasible. Syriza has no choice but to do what is possible to remain in the EZ while at the same time removing the boot on their neck. The Modest Proposal is likely the only card they can play at this point. If that goes down in flames then the ball's in the troika's court, and they don't have viable options either. I can't see any middle ground here. It's the MP or you can probably see the coalition government dissolve before your eyes.

Kristjan said...

things like this might soften the EU

The new Greece government has opened up a row with Brussels about Russian sanctions, even before the cabinet was sworn in.


A toughly worded statement on Russia issued Tuesday by European Union heads of governments didn’t have the consent of Greece’s new Prime Minister Alexis Tsipras, according to two Greek officials.

“The statement does not have Greece’s consent,” a government official said. The official added that the Greek government will put out a statement later saying the European Council, the body which issued the statement, didn’t follow the correct procedure to win Athens’ consent."


They might see that hard line really weakens EU. My understanding is that Tsipras can veto any new sanctions against Russia, they are nod decided by the EP.

Jure Jordan said...

Kristjan
You are right, and Varoufakis had mentioned that Greeks will use veto power to block any legislation in EU since it requiers absolute consensus.
Greeks can vote no on everything as part of negotiations. It is not that Germany is only with leverage, it was that Greeks never used their leverage. Now Syriza will atempt to change that.

Ignacio said...

Greece must hold up until elections in Spain, that may suffice. Though they may need elections in France too.

In Italy with the North League on the rise situation will become increasingly unstable.

Unfortunately the whole thing may take a couple years to implode, and with Greece under humanitarian crisis, there may be a civil war or conflict over there if the neonazis keep gaining power.

I'm not sure how strong the eurocrats/germans think their leverage is over Greece, the outcome depends pretty much on this.

Kristjan said...

Their leverage is strong over Greece as long as Greeks don't want to leave the euro. Any government that grexits will be seen as a failure.

If they are serious about this( I believe they are) in Greece right now, then they are making plans for drachma, just to have a plan B.

Clonal said...

Two things that people appear to have missed in this discussion - Randy Wray wrote:
Quote:
C.J. continues: “Interestingly, the task for the implementation of the employment program has been assigned to a colleague of mine at the Levy Institute, Rania Antonopoulos, who has been appointed deputy minister of Labor and Social Solidarity under a Syriza-led government.”

As well as this pointer to Rob Parentau's article How to Exit Austerity, Without Exiting the Euro

Anonymous said...

A purpose of the “Greek financial crisis” is to establish that EU members are not sovereign countries and that banks that lend to these non-sovereign entities are not responsible for any losses with regard to the loans. The population of the indebted countries are the responsible parties. And these populations must accept the reduction of their living standards in order to ensure that the banks do not lose any money.

This is the “New Democracy.” It is a resurrection of the old feudal order. A few super-rich aristocrats and everyone else serfs obliged to support the ruling order. The looting that began in Greece has spread into Ukraine, and who knows who is next?

With only 37% of the vote, does Syriza have the clout to stand up for Greece against the looters?
Can Greece escape from a situation comparable to the European Dark Ages when populations were ravaged by marauding raiders? Perhaps if Greece realigns with Russia and gains financing from BRICS.

http://www.paulcraigroberts.org/2015/01/29/democracy-dead-west-paul-craig-roberts/