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June 21, 2015

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From my perspective Greece has had (for centuries now) an extreme shortage of heroes to give lanterns their secondary function back. The vampires have run the blood bank, citizens have for the most part adopted defensive anemia and now the former had no choice but to call on their foreign relatives to keep the bloodflow running. Problem: the first measures were to stop feeding the thralls and ordering a low iron diet on the cattle. To wait for the golden dawn backfired and now the porphyriacs see no choice but to take an extended vacation leaving some uppity thralls in nominal charge to talk with the exsanguinating relatives on the one hand while controlling the exsanguinated and keeping enough of them alive on the other.
The only way out of the situation (if some heros were at hand) is a large-scale bloodbath but that option is not easy to take since those iwth the blood ran abroad and those without stayed home, so liquidity is insufficient.

As rule of the universe I decree: All those rich Greeks and the money they absconded with are to return to Greece this instant. Then the country shall be completely isolated from the rest of the world for 10-20 years with no person or penny being allowed to cross the border. A limited exchange of goods (basics only) will be allowed on a strictly bartering base. Any attempt at profiteering on that exchange will be dealt with harshly (force-parachuting them into Athens wearing orange jumpsuits and distinctive 'profiteer' tattoos being the preferred option). Either that solves the problem or at least those most responsible got to lie in the bed they made themselves.

Hartmut, I sympathize with the frustration. Really I do. But unfortunately your ideal solution seems a bit unlikely to get implemented -- at least in that form. Which may be a great pity, but then life is like that.

It is really shizophrenic. On the one hand I know that the 'lax tax moral' of the common Greek is the result of centuries of rule by parasitic oligarchy where it was suicidal not to be a tax cheat but on the other hand I have no sympathy for the general Greek attitude inherited from antiquity that they are the crown of creation and the only chosen people of G#d. They did not just invent the term xenophobia, they give US manifest destiny nativists a run for their money. Golden Dawn was no accident.
In other words, the country is a basket case and any measure that could actually help one aspect it going to be neutralized (at best) by another part of the problem. My assumption is that in the end the main culprits will not face consequences and the commoners will have to pay the bill (and get nothing in return).
From what I can see, the 'reforms' for the most part are indistinguishable from deliberate sabotage of any chance for Greece to recover. Like forcing a craftsman to sell his tools of trade and forbidding him to look for other kinds of work then blaming him for not being productive. That the craftsman happens to be a prick has little to do with it. That the debt collector happens to be one too has though. And that leaves out players like the Netherlands helping to channel privately held Greek assets to the Cayman Islands for just a small fee.

Which may be a great pity, but life is thus.
Which may be a great pity, but life is such.
While a great pity, such is life.

That's a grew line. I kept trying to make it timeless in my head.

A great line.

Referring to classic Brit kids literature, one of the absolutely essential attributes of "having an adventure" is "getting wet".

Perhaps that's because of the English weather, however.

I think that's called a "values trap"--when a person or group of people are trapped in a cycle of self-destructive behaviors because of what they value.

And it's the absence of any kind of honest broker (or at least one with the means to enforce a fair solution). The 'Troika' most definitely isn't honest (it's just the enforcer).

Do not know enough about the socio-political-economic environment of Greece to comment. Do know that Germany's hard money, German-exports-at-any-cost economic and social policy is not blameless in this situation and must be discussed in any solution intended to last more than 6-12 months.

On the other hand, a horror is defined (by Stephen King) as something where the Dionysian that are totally inexplicable to the rational mind break into our everyday life. I can't remember if King notes it, but that then has you looking around corners and behind curtains just to make sure that it won't happen to you. With an adventure, because the hero makes out fine at the end, you've got no problem saying to your kids 'Let's have an adventure!' So this might seem more like a horror.

Yeah, to those directly involved I suspect that it does seem more like a horror. But then, I think that tends to be true of anything we would think of as an adventure -- if you are directly involved, it is at least close to a horror. (Although perhaps not in retrospect, assuming you got thru it OK. Might make great stories for later years.)

In the middle of this show, The Gist, Adam Davidson believes blaming the Greeks is naive. He believes irresponsible debtors cause more trouble than irresponsible borrowers.

http://www.slate.com/articles/podcasts/gist/2015/03/the_gist_robert_durst_psychology_and_greek_debt_with_adam_davidson.html

Sorry, that should be "irresponsible lenders."

Cranky Observer, I think that should be formulated even more specific: Germany is still selling WEAPONS to Greece (in particular: submarines) because the Greeks are paranoid about Turkey (while both are NATO members). We still insist that they pay for these expensive toys.
Major blame should also be put on Germany's naive insistence of the past that there could be no Europe without Greece, closing both eyes to the well-known (even then) problems.

To put it even more bluntly: We knew that Greece shamelessly lied about her finances, we just didn't know HOW shamelessly. And then we actively supported their crack, I mean arms, habit and to a degree still do (in that we insist on them accepting and paying for the latest and most expensive drug, I mean tanks and subs, deal).
It's not as if there were no other customers (outside Europe/NATO) interested in that shiny stuff and it would be left on the shelf, if Athens would go bankrupt and could not pay [the last part is sarcastic but still essentially true, cf. recent Saudi tank deal].

Not to mention that Germany is perfectly capable of making other "shiny stuff." Stuff for which there is also a market. It would take a little re-tooling, of course. But that's far cheaper than dealing with the fallout from Greece is likely to be.

The original post has an error. There is a procedure for an EU member state to leave the Union. Such procedure reserves two years for negotiations on the practical arrangements. After that a formal treaty ratifies the resignation if all member states agree on the conditions of the exit. If not, the exit becomes immediate at the end of the two-year period.

The latter case would be a catastrophe. It would make the exiting country immediately a "third state" without any trade relations with EU and without WTO membership. The citizens of the former member state residing in other member countries would lose the primary grounds for their residence permits, possibly leading to re-evaluation of their residence status. In essence, it would disrupt their economy completely.

What EU lacks is the exit procedure from euro. That is different from EU. Most likely, such resignation should be made unilaterally: the national government simply converting all euro-denominated holdings within their jurisdiction into the new national currency. It would break international law, but would be within their sovereignty.

IIRC, US banksters, in particular Goldman Sachs, had a role in "packaging" Greek debt, around the time of the 2008 implosion.

Perhaps it's just that GS had their fingers in every pie, but it sure seems like whenever there's a spectacular bankruptcy (Detroit, Riverside? CA, Greece) GS has their fingerprints on it.

Which is not to say that there isn't PLENTY of blame to go around.

Hartmut: "It is really shizophrenic. On the one hand I know that the 'lax tax moral' of the common Greek is the result of centuries of rule by parasitic oligarchy where it was suicidal not to be a tax cheat but on the other hand I have no sympathy for the general Greek attitude inherited from antiquity that they are the crown of creation and the only chosen people of G#d. They did not just invent the term xenophobia, they give US manifest destiny nativists a run for their money. Golden Dawn was no accident."

I can understand your frustration with a country with a problematic attitude. They can cause no end of trouble for their neighbors.

I'm referring, of cours, to Cranky Observer's comment. Germany's vision for the EU was that they would export durable goods and high-level services to the rest of the EU, who'd pay for them with....................

Hartmut: "It is really shizophrenic. On the one hand I know that the 'lax tax moral' of the common Greek is the result of centuries of rule by parasitic oligarchy where it was suicidal not to be a tax cheat but on the other hand I have no sympathy for the general Greek attitude inherited from antiquity that they are the crown of creation and the only chosen people of G#d. They did not just invent the term xenophobia, they give US manifest destiny nativists a run for their money. Golden Dawn was no accident."

I can understand your frustration with a country with a problematic attitude. They can cause no end of trouble for their neighbors.

I'm referring, of course, to Cranky Observer's comment. Germany's vision for the EU was that they would export durable goods and high-level services to the rest of the EU, who'd pay for them with....................

Snarki, child of Loki: Perhaps it's just that GS had their fingers in every pie, but it sure seems like whenever there's a spectacular bankruptcy (Detroit, Riverside? CA, Greece) GS has their fingerprints on it.

Which is not to say that there isn't PLENTY of blame to go around."

The idea that the big money boys didn't know how f-ed up the Greek system was doesn't pass the laugh test.

Those guys have lots of experts in everything, and lots of money to pay retired high-level civil servants and politicians 'consultancy fees'. They would both have known the deep, deep details.

As we've seen in the USA, very smart people with serious skills and knowledge can play ignorant quite nicely, when it's in their bonus interest to do so.

What EU lacks is the exit procedure from euro. That is different from EU.

Lurker, thanks for the correction. (I actually did know that; just got sloppy when I was writing.)

It's rather astounding to watch supposedly smart people insist that a poor nation voluntarily make itself poorer to remit funds to "reckless" lenders (i.e., they were reckless insofar as they made the loans with the knowledge they were implicitly guaranteed by the central bank).

The EU is making the wrong people poorer.

It's rather astounding to watch supposedly smart people insist that a poor nation voluntarily make itself poorer to remit funds to "reckless" lenders (i.e., they were reckless insofar as they made the loans with the knowledge they were implicitly guaranteed by the central bank).

The EU is making the wrong people poorer.

Well, they have to offer 'volontary' slow suicide first before they can go all Shylock* on them (and a mere pound will not do). That way it can be demonstrated how contumaciously oddurate those foul defaulters are thus justifying the tough love to follow (i.e. mandatory blood donation an (imperial) gallon per head).

*apology to the real Shylock since he at least had real grievances.

Since "a pint's a pound", that gallon of blood would be 8 pounds -- i.e. several times what Shylock was asking. Inflation, I guess.

Sorry for the double post - it's Goldman Sachs' fault, of course.

As I said, a mere pound will not do these days. Consider yourself lucky, when/if the demand is not for two gallons and you get charged for the amount you cannot deliver.

I can't argue with much of what Hartmut has to say, but what his account omits is the disastrous refinancing of 2010, for which the creditors were entirely responsible, and which made any Greek recovery almost impossible.

There is a pretty persuasive condemnation of it here:


http://www.telegraph.co.uk/finance/economics/11654639/IMF-has-betrayed-its-mission-in-Greece-captive-to-EMU-creditors.html

The Fund’s mission is to save countries, not currencies or banks, and it certainly should not be doing dirty work for a rich currency union that is fully capable of sorting out its own affairs, but refuses to do so for political reasons.
It was of course a difficult moment in May 2010. The eurozone was spinning out of control. There were no backstop defences – due to the criminal negligence of Europe’s leaders and banking regulators – and fears of a euro-Lehman were all too real.
Yet leaked minutes from the IMF board meetings showed that all the emerging market members (and Switzerland) opposed the terms of the first loan package for Greece. They protested that it was intended to save the euro, not Greece.
It loaded yet more debt onto the crushed shoulders of an already bankrupt country, and further complicated the picture by allowing one large French bank and one German bank – no names please – to offload much of their €25bn combined exposure onto EMU taxpayers.
“Debt restructuring should have been on the table,” said Brazil's member. The loans “may be seen not as a rescue of Greece, which will have to undergo a wrenching adjustment, but as a bailout of Greece’s private debt holders, mainly European financial institutions”.
Arvind Virmani, India’s member, was prophetic. "The scale of the fiscal reduction without any monetary policy offset is unprecedented. It is a mammoth burden that the economy could hardly bear,” he said...

Has the IMF ever done anything but steamrolling countries that fell to its siren song (or to the bribery of the corrupt elites)? I got the impression that it has always been a tool to friedmanize peoples too weak to defend themselves, i.e. tearing up the social contract, selling all assets at the lowest possible price to the most avaricious and unscrupulous privateers/iers and in all but name removing any trace of democracy or balance of powers. They are the Renfields tasked with the removal of all crucifixes, wiping out of all plants of the allium family and drying up all holy water sources before abscondiing with anything silver, so their masters can take over to suck the last drop of blood before the corpse gets diveded and fed to the lycanthropes.

I agree with Nigel and Hartmut, especially the musical melody with which he scores his words.

Anyone who wants more details about this should check out relevant blog posts from Krugman, Matt Yglesias, Brad Delong, and Daniel Davies (aka dsquared) over at Crooked Timber. Based on my reading at those locales, there are few pertinent facts not yet mentioned here.

Greece is currently running a primary budget surplus, so the external/ECB loans are passing through the Greek government on the way to pay interest on previous loans, not support government spending in Greece. And as Nigel's link reports, private financial institutions were able to shed all or most of their exposure to a possible default in the earlier "bailout".

The restructuring the Greek government has already done has resulted in an economy with 25-30% unemployment over the last several years, which does not strike me as comfortable or extravagant.

Not to mention that I, for one, am having a little trouble identifying someone involved who I could consider a hero.

Really? A small country that has to borrow in a currency that is not under their control is somehow the villain here? I find this difficult to believe.

For another take, see this and this.

Make that "a small country which has to borrow in a currency which they voluntarily joined. Being so intent on getting in that they cooked the books to meet the entry requirements."

So yeah, not much victimization in evidence. And no heroism.

"So yeah, not much victimization in evidence."

So much for the responsibilities of due diligence and taking a risk. But whatever. It is also important to note they weren't the only ones breaking the rules.

But again. Whatever.

That was then and this is now. Please provide any reasonable justification as to why ordinary Greeks have to be subjected to such punitive measures as demanded by the Troika.

This is absurd.

Reasonable justification: ordinary Greeks elected the governments which ran up the unsustainable debts. And then elected the governments which, in order to continue to maintain their level of spending, promised to make changes. And then didn't.

And then they elected the current government, which ran on an explicit promise to not make any of the changes that previous government had promised.

That's the joy of democracy. It you elect a government, you are responsible for the messes it gets you into.

I'd say the common Greek had enough of governments that it saw as mere tools of the foreign bloodsuckers and completely corrupt. The guys they elected were the only ones that had not YET totally discredited themselves. That there was outside pressure on them to vote for the Quislings did what it usually does, it backfired.
That does not say that the current government is the one Greece needs but imo they will be no worse off than with the one the Troika would like them to have elected instead (unless of course Greece will be made an example of to show others that resistance is not just futile).

So, imo the current government is not responsible for the mess but will also be unable to get the land out of it since going after the big cheaters, the Troika made itself absolutely clear about that, will under no circumstances be tolerated. Without that the only result will be blood in the streets, if any blood is left after the demanded 'reforms'.

No doubt, the Greek public service is hyper-bloated and something has to be done about that. But the order to simply fire the majority (starting with those that actually do the work) and to annull any obligations towards the common citizenry (but not to the banks and other well-connected circles) will do nothing to get the country back on its feet even if it was willing (and old habits die slowly, so that is in doubt to begin with).

I am not surprised that there is an exodus of the qualified from Greece since it seems clear that there is little hope for and no hope in the country for the time being.

It you elect a government, you are responsible for the messes it gets you into.

I find little in the way of justification here. I guess the same applies to Spain, Portugal, Italy....all of those irresponsible southern spendthrifts. Austerity is burdening them also with unnecessary economic pain.

How can that be? That hot Mediterranean blood?

The problem is Germany. They demand* that they be able to run a trade surplus within the zone and have a strong euro. This will lead to everybody else running a deficit that has to be financed in euros. Since you appear to dislike deficits more than the thought as to what goes on between practicing homosexuals, I'm sure you know where this leads. :)

Perhaps">http://www.cnbc.com/id/">Perhaps Germany should be the one to leave the euro zone.

Either there has to be fuller economic and fiscal integration or the euro zone will crumble.

*I note they, too, appear to have a democratically elected government. Yes, it's messy.

Addendum: If the other Eurozone countries are running a deficit vs. Germany, then the only way they can make it up is to have a positive trade balance with the world beyond the zone.

Germany's insistence on a strong euro inhibits that, since a high euro makes exports more expensive to others in world markets.

link fixed I hope.

Assume Greece stayed on the drachma. I imagine this is what you would have seen:
1. Rampant government deficits
2. (a.) issuing more bonds in their own currency or (b.) borrowing based on somebody else's.
3. Worst case (a.) hyperinflation.
4. Worst case (b.) debt default (cf. Argentina)

Solution? That would be a problem for Greece to fix, not Germany.

So far, the record for the policy of "fuck you, bankers" is 2 for 2 (Argentina, Iceland).

The record of successful outcomes to surrender to the lenders (make poor people even more miserable) is well below the Mendoza Line.

I rest my case.

Krugman on Greece.

Amen.

What a gratuitously stupid and moralistic take on the situation. Greece is in great financial trouble (and others to a lesser degree) because Germany has been allowed to run the European financial system entirely to its own benefit and the detriment of the Mediterranean countries, since the inception of the euro. This has been *loudly* pointed out by experts again and again.

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