Greece has had enough. Enough of this insane, devastating, austerity. That's what their leaders are telling the IMF and other lenders. "We're done!"
| “It’s killing us,” says one Greek cabinet minister. Athens can’t force through another round cuts to pay pensions and social services: “An angry population will take matters into its own hands, the government will collapse and we may end up with political crisis in a near-bankrupt euro-zone country which nobody will know how to control.” |
The Greek government realizes that any more of this insanity and there won't be a government anymore. You can only whip the people so much, otherwise you'd better just kill them because the ones who are left will rise up and fight.
We may be getting a lot closer to Greece leaving the euro.
Read article here.
16 comments:
We have spent 30 years getting into this hole. So-called "Keynesian economics" is a bald-faced fraud as practiced today - indeed, as ever practiced. Keynes prescribed surpluses during boom years with the accumulated surplus not spent on new programs but rather held in reserve for bad times, when it would be spent. This is not deficit spending, it is capital formation to be expended to help people in time of need! The raw economic abortion practiced by our political and economic establishment under the claim of "Keynes" would be worthy of slander and libel lawsuits were he alive.
Quote from Karl Denninger that can't be better put.
Anon,
A govt operating under a FFNC regime cannot "hold money in reserve for bad times".
Denninger is in the wrong paradigm. His paradigm is one that looks at "money" as some type of physical entity that can be "held in reserve"; we have computers nowadays... the problem continues to be tremendous over-taxation...
Hi Tom and Mike :
What are the similarities and or differences between "usury" and "renting" ?
Usury is related to collecting interest on loans. It usually means exorbitant interest relative to risk.
Economic rent is similar, but interest is a subset of economic rent. Economic rent is different from the ordinary meaning of rent, which is payment for temporary use. Economic rent is gain in excess of economic efficiency, especially due to extraction based on capture.
OK
Now what does MMT say about usury and then what does it say about rentings ?
which does MMT concern itself more ?
As per the MMT paradigm, as far as I can tell, the natural rate of interest should be zero. In other words, the charging of any interest at all should be considered usury.
Clonal, the natural rate of interest is zero means refers to the fed funds rate, not all interest rates. It's the target rate the Fed sets on interbank lending. When there are excess reserves and no IOR, then the rate falls to zero. Since the government fiscal balance is generally in deficit, resulting in excess reserves, the "natural" rate is zero.
See Warren's paper of that name in mandatory readings at moslereconomics.com
"Now what does MMT say about usury and then what does it say about rentings ? which does MMT concern itself more ?"
MMT as a monetary description and macro theory doesn't say anything directly about either. MMT does suggest policy options, and that is where this would figure.
Tom,
In the MMT model, there can be NO private bank lending with interest.
The problem comes because while the private banks can create new money, all the money that they create has to be paid back to them with interest. The banks do not create extra money to pay that interest. They cannot legally do so, and nor is there any incentive for them to do so. The money to pay the interest has to come from growth - this can be managed as long as the real growth rate is greater than or equal to the interest charged, and that the interest is paid in full every period, and no compounding of interest EVER occurs, and there are no bankruptcies and no foreclosures.
If the real growth rate is less than the interest charged, which has been the case since ~1979 the difference has to be made up by government deficit spending. Generally this results in a wholesale transfer of wealth to the financial sector since the government deficit spending will not provide much excess income to the non banking sector.
Even where the real growth rate is higher than the interest, unless the growth rate is twice the interest rate, the net wealth will shift to the financiers.
Of course the above assumes that the economy has no other real resource constraints, and it can continue to use exponentially increasing real material resources.
Clonal, this assumes that money is completely endogenous. That is false. Exogenous money increases non-government net financial assets.
The exogenous/endogenous distinction is central to MMT and often overlooked by those making this argument, or they think that interest on tsys is unsustainable, which is not the case in a fiat system. Interest on tsys adds to non-govt NFA.
However, it is true that a debt-based monetary system does require constant growth and eventually the world may run up against a limit as population expands. But even without a debt-based monetary system, global population cannot outrun the availability of real resources to meet its needs sustainably. The issue is not essentially financial. It is a finite stock of real resources.
Tom,
In my argument above, I have specifically laid out the distinction between the endogenous money (the money created by the private banking cartel) vs exogenous money (created by the government)
The exogenous money can take care of the interest problem, but this use of the exogenous money will (unless the exogenous money created is at least double the interest payments) cause a shift of wealth to rent seeking finance - and will cause increasing income and wealth disparities. But even in this scenario, this money creation will lead either to inflation, or to real economic growth.
As I have already pointed out that indefinite real growth on a finite planet is just not feasible.
This leads me inexorably to the conclusion that charging of any interest at all is not a socially desirable thing.
The only conclusion I can derive from this line of thinking is that banking cannot be privately owned. The banking has to be nationalized, and interest treated as a tax, and government spending to regulate the net money supply. The government spending can address gross inequalities that inevitably result from human economic interaction.
Clonal, as I argued with Gail the actuary over this, the sustainability issue is not monetary or financial. It has to do with real resources. The way out, if there is one, is through technological innovation — what Bucky Fuller called "design science," i.e., doing more with less.
There is no actual affordability problem involved in sustainability. It is the wrong direction to be looking. The world needs to commit the necessary resources to education, basic research, R&D, and investment in scaling up technological innovation ASAP.
It looks like we have about two decades before the big bite, and scaling up will take that long if we start now in a serous way. If we don't, go figure.
Clonal, I agree that funds funnel up due to defective institutional arrangements including perverse incentives and economic rent land rent, monopoly rent, and financial rent. Tax policy should be targeted toward negative externality first, and economic rent is an externality. Institutional reform is also required.
Taxes have two functions, controlling inflation when effective demand outruns the capacity of the economy to meet it by withdrawing NFA, and also to discourage negative behavior that introduces inefficiency and creates a drag on the economy. Increasing inequality due to economic rent is a negative externality.
Tom,
The interest issue is very critical to both real growth and wealth disparity issues. See my reply to you in the thread below.
How will we Pay Thread
Anonymous: "Keynes prescribed surpluses during boom years with the accumulated surplus not spent on new programs but rather held in reserve for bad times, when it would be spent." Where? Modern "Keynesians" say this all the time. But they never say where Keynes said this, as James K. Galbraith has pointed out. Keynes knew that the idea that a government can save up its own currency, hold it in reserve, is absurd. Of course he was for countercyclical spending, but that can easily just mean smaller deficits during booms, larger ones during slumps.
@ Clonal
Agree. Interest rates determine the cost of capital and have a direct impact on investment. This is why the CB should only be concerned with interest rate setting from this standpoint and leave price stability to fiscal policy since it is more effective.
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