THE AIM is clear: The big European powers, led by Germany, want to sabotage Greece's new government, led by the radical left party SYRIZA, by insisting that it continue to repay its crushing $336 billion debt to foreign lenders--thereby depriving it of resources to fund its aggressive reform program.…Socialist Worker
How will the EU strike back against SYRIZA?
Lee Sustar
The far left is as economically illiterate as the political right. No mention in the article that Greece has a primary surplus and thus can actually repay the debt, though delaying interest payments might be needed in order to do that. And no mention of the basic problem, namely the competitiveness disparity as between the EU core and periphery.
ReplyDeleteThat's not the basic problem.
ReplyDeleteThe basic problem is a lack of monetary circulation - caused by oligarchy and German fiscal surpluses.
The 'primary surplus' is an illusion caused essentially by starving the population of food and medicine to pay 'war reparations' to northern creditors.
And that way lies revolution.
The truth is that the bailouts aren't for Greeks. The Greeks already went "bankrupt" and couldn't borrow to spend at the level desired by the Greek population in the EU framework. The Greeks wanted a larger government sector than is possible with EU deficit limits. If you look at where the proceeds of the bailout went, only a few percent went to fund the Greek government and its operations, most was simply to pay off European Banks and Foreign Speculators that bought Greek Bonds. I've seen a couple reports and one said about 70% and the other 90+% was used to repay creditors and make them whole. It simply shifted the financial risks around to EU government.
ReplyDeleteAs is always the case, the long term problem is people outside of Greece want to sell things to Greece but don't want to buy enough Greek goods in return. Over time, they accumulate financial obligations on Greeks and then shift their bad debts to Banks who tend to launder those bad debts into Government debt which ultimately get sold to foreign speculators at a discount. The banking system is doing the job it is supposed to do. The normative aspect is the challenge for the EU, it entails dreaming up productive endeavors for the 25% of Greeks that need something to do since the EU doesn't want them to work for government. The current idea is that they should do nothing until an opportunity presents itself. And that hunger and deprivation will be strong incentives to see and take opportunties available. Instead we're getting golden dawn and political agitation and no real opportunities for the masses.
Truth is that they should never have been allowed into the currency union. But perhaps there were cold war strategic reasons important to Germany and France at the time. Maybe those reasons still exist today given Greece's proximity to the Middle East and Russia. Greece has one of the stronger militaries in Europe and maybe Europe isn't paying their fair share of the benefit Greeks provide for defense of the rest of the continent. They've stood as a solid bulwark against the crazy violence on the other side of their borders. Now the EU governments have to pay for their strategic decisions. They need to pony up. The amounts of money are tiny, small fractions of European GDP.
Here is a more accurate perspective of the "far left":
ReplyDeletehttps://www.wsws.org/en/articles/2015/02/02/gree-f02.html
As far as they are concerned, SYRIZA are sellouts, who have every intention of working out a deal that will continue the status quo.
I think you both are correct. ...
ReplyDeleteThe politicians are not competent and don't understand the how the system is operating. ..
rsp
Pretty good here imo Ryan...
ReplyDelete"Over time, they accumulate financial obligations on Greeks and then shift their bad debts to Banks who tend to launder those bad debts into Government debt which ultimately get sold to foreign speculators at a discount. The banking system is doing the job it is supposed to do."
(I dont know about your word "launder" here tho.... I think they somehow end up with insufficient capital in the Greek banking system and have no choice, etc... there is a lot more to this... )
The orthodoxy of MMT people treat all of that as a "black box" (btw not the only "black box" they retain...) and seem to not want to open it up to understand the operational details of this process... because what they will see inside the black box will probably conflict with their dogmas... so they end up with a pretty strong cognitive bias here and cant get anywhere... all they end up able to do at that point is spew metaphors, etc.. "banksters", "Ponzi", "control fraud", "minotaurs", "toxic waste", etc...
And that hunger and deprivation will be strong incentives to see and take opportunties available.
ReplyDeleteRight. And if there are no job opportunities available wong to lack of investment, public and private, then the remaining opportunity is revolt. Which is what is happening.
Peter Dorman has a rather funny reply to Tyler Cowan on Greece. Somehow, it seems appropriate here.
ReplyDeleteWaiting for the Greek Thatcher.
http://econospeak.blogspot.com.au/2015/02/waiting-for-greek-thatcher.html
Thatcheropoulos!