The horror of austerity is not the consequence of Greek profligacy: it was designed into the euro’s plan from the beginning.
This was explained to me by the father of the euro himself, economist Robert Mundell of Columbia University. (I studied economics with Mundell’s buddy, Milton Friedman.) Mundell not only invented the euro, he also fathered the misery-making policies of Thatcher and Reagan, known as “supply-side economics” – or, as George Bush Sr. called it, “voodoo economics.” Supply-side voodoo is the long-discredited belief that if a nation demolishes the power of unions, cuts business taxes, eliminates government regulation and public ownership of utilities, economic prosperity will follow.
The euro is simply the other side of the supply-side coin. As Mundell explained it, the euro is the way in which congresses and parliaments can be stripped of all power over monetary and fiscal policy. Bothersome democracy is removed from the economic system. “Without fiscal policy,” Mundell told me, “the only way nations can keep jobs is by the competitive reduction of rules on business.”…
Greece’s ruin began with secret, fraudulent currency swaps, designed a decade ago by Goldman Sachs, to conceal Greek deficits that exceeded the euro zone’s 3%-of-GDP limit. In 2009, when the truth came out, Greek debt holders realized they had been cheated. These debt buyers then demanded usurious levels of interest (or, if you prefer, a high “spread”) to insure themselves against future fraud. The compounding of this interest premium brought the Greek nation to its knees. In other words, the crimes committed to join and stay in the euro, not Greek profligacy, caused the crisis.
The USA, Brazil and China escaped from depression by controlling their money supply, government spending and currency exchange rates—crucial tools Greece gave up in return for the euro.
Worse, once the Trojan hearse of the euro entered Athens, tourism, Greece’s main industry, drained to Turkey where hotels and souvenirs are priced in cheap lira. This allowed Dr. Mundell’s remorseless wage-lowering machine, the euro, to do its work, to force Greece to strip all its workers of pensions and power.
Greece fell to its knees, with no choice but to beg Germany for mercy.Greg Palast
But there is no mercy. As Germany’s Schäuble insists, democracy, this week’s vote, means nothing. "New elections change nothing in the accords struck with the Greek government,” he says. “[Greeks] have no alternative.”
h/t Dan Lynch in the comments
Palast had already explained this in greater detail in Robert Mundell, evil genius of the euro, linked to at MNE on June 29, 2012.
This is all by neoliberal design to bring Thatcherism-Reaganism to Europe and convert the welfare states there to market state like Thatcher's plan for the UK and Reagan's plan for the US. It would become more effective in the EU by denying currency sovereignty and making the EZ nations dependent on thenew DM euro. The eurocrats knew exactly what they were doing — imposing TINA.
This is not conspiracy theory, but a an actual conspiracy as Palast explains.
This is all by neoliberal design to bring Thatcherism-Reaganism to Europe and convert the welfare states there to market state like Thatcher's plan for the UK and Reagan's plan for the US. It would become more effective in the EU by denying currency sovereignty and making the EZ nations dependent on the
This is not conspiracy theory, but a an actual conspiracy as Palast explains.
Dr. Alain Parguez at Rimini in February 2012 gave the longer history, and it was even more sinister. Listening to his talk is very difficult. I had to speed it up with software, then I spent the better part of four months, whenever I had the time, verifying every word.
ReplyDeleteI'll have to read this before I comment. Mundell may have been used, in the sense that he was pliable.
Your second link is wrong. Here's the right one:
ReplyDeletehttp://www.theguardian.com/commentisfree/2012/jun/26/robert-mundell-evil-genius-euro
Thanx MRW. Fixed now.
ReplyDeleteMundell is wrong to claim that in a common currency system “the only way nations can keep jobs is by the competitive reduction of rules on business.”
ReplyDeleteIn such a system, uncompetitive countries DO HAVE TO cut their costs SOMEHOW OR OTHER. And a “reduction of rules on business” is a possible way of doing that, especially if those rules are defective.
However, an alternative and not too painful way to cut costs is to reduce everyone’s income in money terms: that’s employees and employers’ incomes. Since wages are a significant contributor to the cost of living, that cut in wages, at least in theory, does not equal a big cut in real living standards.
That all equals internal devaluation. However, the latter certainly tends to be more painful that devaluing the currency of a monetarily sovereign country.
Mundell is looking at it from the practical standpoint of power relationships more than economics. This betrays his ideology and intentions. Given the power structure under the existing system, cuts come mostly if not exclusively from workers rather owners and employers. Because forcing owners and employers to bear costs is "socialism."
ReplyDeleteBut with a correct view of the monetary system, none of this is operationally necessary anyway. The "necessity" is ideological.