Michael Nevradakis and Greg Palast — GREECE’D: We Voted ‘No’ to slavery, but ‘Yes’ to our chains

What’s simply whack-o is that, while voting “No” to austerity, many Greeks wish to remain shackled to the euro, the very cause of our miseries....

Sorry, Alexis, if you want to use the Reich’s coin you have to accept the Reichsdiktat....

The imposition of the euro had one true goal: To end the European welfare state....

It would be refreshing to hear political leaders say the honest economic truth: “Workers of Europe unite! You have nothing to lose but the euro—and your chains.”

Greg Palast

GREECE’D: We Voted ‘No’ to slavery,  but ‘Yes’ to our chains

Greek journalist Michael Nevradakis and US investigative journalist Greg Palast

ht James in the comments

Matias Vernengo — Greece on the verge

I discussed to a great extent the debate between Sergio Cesaratto and Marc Lavoie on the nature of the European crisis, that is, whether it is a balance of payments crisis or a monetary sovereignty one.

Cesaratto argues that a balance-of-payment crisis is possible in a currency union, and that the financial crisis of the Eurozone is indeed such a balance-of-payment crisis....

Yet, as noted by Lavoie, the Eurozone crisis seems to have been caused instead mainly as the result of an initial banking problem, which transformed itself into a public debt problem. In other words, the currency issue, and the functioning of the monetary union seem to be at the core of the crisis, not a balance of payments one....

My argument, discussed briefly here before, is that the Cesaratto and Lavoie hypotheses are one and the same. The balance of payments and the monetary sovereignty views of the European crisis are two sides of the same coin.....

Naked Keynesianism
Greece on the verge
Matias Vernengo | Associate Professor of Economics, Bucknell University

Lars P. Syll — Greece and the true purpose of the euro

Robert Mundell devised it that way. It was anti-democratic out of the gate and bound to be disruptive of social democracy in Europe. As Wynne Godley pointed out in Maastricht and All That.

Lars P. Syll’s Blog
Greece and the true purpose of the euro
Lars P. Syll | Professor, Malmo University

Greg Palast — Trojan Hearse: Greek Elections and the Euro Leper Colony

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.
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.”

Greg Palast

Trojan Hearse: Greek Elections and the Euro Leper Colony

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 the new 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.

Yu Yongding — China’s Trilemma

The Nobel laureate economist Robert Mundell showed that an economy can maintain two – but only two – of three key features: monetary-policy independence, a fixed exchange rate, and free cross-border capital flows. But China is currently juggling all three – an act that is becoming increasingly difficult to sustain.

Project Syndicate
China’s Trilemma
Yu Yongding | former president of the China Society of World Economics and director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, served on the Monetary Policy Committee of the People’s Bank of China from 2004 to 2006. He has also served as a member of the Advisory Committee of National Planning of the Commission of National Development and Reform of the PRC.

Michael Stephens — The “Success” of the Greek Bailouts

Along with ideology and pet economic theories, C. J. Polychroniou suggests another (far more cynical) interpretation [than the failure of austerity as a policy]. The bailout programs, he says, aresucceeding in some respects; the problem is that we may be incorrectly assuming what the main priorities are:

"Amazingly enough, in the face of this ongoing and uncontrolled catastrophe, and despite the IMF’s admission that it misjudged the impact of austerity on Greece’s economy and its people, IMF and EU officials remain as committed as ever to the policies responsible for Greece’s collapse. But while many seem surprised by this apparently contradictory posture, they shouldn’t be. The austerity “shock treatments” administered by the IMF and the EU have two explicit goals: (1) to ensure that the loans are paid back no matter what the cost, and (2) to roll back the average standard of living in order to create highly favorable conditions for international business-investment opportunities and to increase the rate of profit for the corporate and financial elite at home. It is an avowedly class-warfare approach, cloaked in the organization’s holier-than-thou rhetoric about the overall benefits of a neoliberal economic order and the economic drag created by organized labor and workers’ rights, social welfare provisions, and decent wages."

Doh. That was the neoliberal goal from the get-go and it hasn't changed a bit. It's straight up "disaster capitalism" as laid out by Naomi Klein. In fact, although the context is different, the policy is actually quite similar to the assassination of President Allende and installation of General Pinochet in Chile. Neoliberalism is antithetical to democracy and treats workers as a commodity in "the labor market." When C. J. Polychroniou says "roll back the average standard of living," this means reduction in the real wage, and lowering of benefits and protection for workers as well as public services. This is also an opportunity to privatize public resources and enclose more of the commons in order to monetize it "for greater efficiency" through market disciline.

Multiplier Effect
The “Success” of the Greek Bailouts
Michael Stephens

Greg Palast shows how this was the intention of the creators of the EZ, Robert Mundell, evil genius of the euro — For the architect of the euro, taking macroeconomics away from elected politicians and forcing deregulation were part of the plan

Bruce Bartlett — “Taxes and a Two-Santa Theory" -The Origin of Modern Republican Fiscal Policy

Wondering where the Ryan budget comes from?

In 1976, the journalist Jude Wanniski wrote an essay, “Taxes and a Two-Santa Theory,” little noticed at the time and virtually unknown today, that put forward a theory that has had extraordinary influence on the Republican Party. Indeed, virtually everything Republicans say about taxes and spending today echoes that theory.

Read it at The New York Times | Economix
The Origin of Modern Republican Fiscal Policy
By Bruce Bartlett
(h/t Mark Thoma)

Mundell-Laffer on the External Sector; c.1975

Tom posted a link to an article he came across from the late Jude Wanniski's Polyconomics which was a review of a paper written by Mundell and Laffer in 1975. I was a subscriber to Wanniski's analysis some years ago until his sudden passing.

It is titled "A New View of the World Economy", and provides what they believed was an operative description of the external sector in 1975. This was just a few years after the US completely abandoned the gold standard so perhaps at that time, people were very eager to come up with some new ideas as to what a new framework for understanding the global economy would be. Here is an interesting excerpt:

Going a step further, Mundell has revived the proposition, and Laffer has documented empirically, that money, like apples and gold, is also subject to these international forces of supply and demand. When, for example, there is an excess demand for money in the United States relative to the rest of the world, we will import money and run a balance of payments surplus -- i.e., more money will be coming into this country than is going out. When there is an excess supply of money in the United States, we will export money and run a balance of payments deficit. This idea also has its roots in earlier centuries, but is still a minority view among economists everywhere. Balance of payments deficits are thought to represent not a market phenomenon but a structural problem -- i.e., "capital flight" or "undercompetitiveness." Laffer has further demonstrated that when a country`s growth rate accelerates relative to the rest of the world its balance of trade worsens; and vice versa. (As a child grows, it consumes more than it produces.) But such a deficit is not cause for alarm. What is then happening is something perfectly natural. As long as its government does not speed up its own money creation, the country will export bonds to pay for its deficit in trade. All that is occurring is that the rest of the world has decided the country in question, with its higher growth rate, is a good place in which to invest. (Just as parents invest in their growing children).

Some observations:

The authors seem to treat all "money" as a singular fungible commodity, seemingly ignoring the fact that there are different currencies in every country; and the relative value of each (as indicated by an exchange rate) can change over time. Ignoring "Hickey's Law" ;) that a currency must stay in it's currency zone.

They state that a country with a higher growth rate will exhibit a balance of trade that "worsens", implying exports: good, imports: bad. This flies in the face of our current global situation where China has had MUCH higher growth than the US while at the same time running an external surplus with the US that is unprecedented in the entire history of human civilization.

Mundell and Laffer posit that a country can EXPORT bonds to "pay for" real imported goods; and that the country taking possession of a foreign country's bonds looks at such a transaction as an "investment".

These are bizarre descriptions of international transactions. This was written in 1975, just a few short years after the US dropped the gold standard in full so perhaps some understanding is in order as the authors may have been "brainstorming" to try to come up with a new framework.

But Wanniski's affirming review of these claims was written in 2005, and I am not led to believe that either Laffer or Mundell have significantly changed their perception of reality. Both Mundell and Laffer are still influential within economic policy circles. These beliefs may still influence policy recommendations they are making to this day.