Wednesday, July 8, 2015

Greece comes out with its new proposal. Here it is. Ready? It's called, "Let's cave again."


Seriously, dear readers, I am getting as tired of writing this as you are of reading it, but I feel that repetition is important.

ATHENS (Reuters) - Greece promised to implement pension and tax reforms as early as next week as the first step to securing a three-year rescue loan to cover debt obligations, according to a letter requesting the funding from European partners on Wednesday. Read more.

And what are pension and tax "reforms?"

They're fucking cuts (pensions) and increases (taxes) on workers and the poor, of course.

I keep repeating it because I want you to reach a level of incredulousness and disgust that brings you deep, deep, deep, deep, in touch with your own, true, raw, inner feelings. (Either that or, I'm really just a sadist.)

That's how the fire of revolt and revolution will be galvanized within you and within all of us. Mwhahahahaha!!!! (rubbing my hands together devilishly.)

No, really, this is bullshit.

29 comments:

Anonymous said...

What are his options? 28 EU states have put a dog collar around Tsipras's neck, forced him to his knees, and said "Now, suck our di**s!" It's a Eurocrat gang-bang. Nobody from the outside is helping. Greece is isolated and alone, surrounded by enemies determine to punish and humiliate them, and make them beg for tiny bones.

A grexit would be chaotic and catastrophic for Greece in the near term, and probably long term. The new currency would fall rapidly against the euro and dollar; Greece would be starved of imports, have to make a rapid shift to domestic self-sufficiency - which it can't do, and have to go begging again for humanitarian assistance relief.

Unless Greece gets more help from people outside the EU, then the sick, sadistic bastards who run that continent win, and Tsipras has no options.

mike norman said...

"A grexit would be chaotic and catastrophic for Greece in the near term, and probably long term."

You don't know that. You don't know what the long term outcome would be.

Anonymous said...

I know that Greece is already in a terrible depression. The "transition" period from the euro to the new currency cannot possibly be smooth, and will probably push them so much deeper into depression that there is a good chance that the entire place will fall apart in revolutionary anarchy.

They can't just solve this problem by printing and distributing some new, almost worthless currency to buy goods on a domestic market that lacks the inherent capacity to support the country's own population.

NeilW said...

In many respects Greece has submitted to the dog collar on its own accord because, along with most of the European Left, it is obsessed with promoting European Nationalism above the needs of ordinary people.

"A grexit would be chaotic and catastrophic for Greece in the near term, and probably long term."

Not necessarily.

There is no mechanism by which that can come about other than the usual scaremongering bullshit based on half truths and 'previous cases' - all of which were badly managed disasters caused by misunderstandings about how things work.

The current value of the Greek Drachma is infinite. You can't buy any because none exist.

So you're going from infinite to half the value of the Euro based on exactly how much selling from who? Where did they get the drachma from, how will they settle and by what mechanism? And why isn't there demand to buy Drachma to settle tax bills?

Yes the Grexit will be a disaster if you follow the usual central bank playbook of supplying liquidity to any idiot that asks for it. But if you do it differently in a clever manner based upon a simple supply and demand understanding then you can navigate the choppy waters.

Greece sells Tourism, shipping and olive oil. That buys food and other necessities via simple straightforward rationing of imports and clearance of foreign bills via a central bank exchange (if it ain't on the list you can't buy it from abroad).

You then invite the rest of the world to provide Greece with what it needs - exclusive contracts on offer to the highest bidder.

The trick is controlling the new money and introducing it in such a way as to keep control of the supply/demand ratio. It's a variant of open market operations, but it has to be backed by effective and regular tax collection - using brutal methods if necessary.

Make the wheels turn and things turn up and very quickly you can turn down the starter motor of brutal taxation and heavy central spending as the private economy takes root in the local currency.

This is war and requires a war economy.

Malmo's Ghost said...

Christ, he had six months to fashion a contingency plan for just this outcome. The radical left in Syriza has laid out some of those plans quite cogently too. Others here have also argued against Armageddon if Greece bolts the euro.

But all that being said, Tsipras caving on the no more austerity promise is simply a horrible political blunder. He's literally schizoid, talking out of both sides of his mouth almost daily. If Greece is getting booted anyway, why not stick to your guns, especially since you used them to get a no vote only days before. What a spineless wimp.

mike norman said...

War economy. Exactly.

The Greek economy is small (and has been made a lot smaller thanks to austerity), but it produces agricultural products, chemical products, mining and metals and some petroleum I believe. It also has tourism. There's stuff there to trade for hard currency.

It would be tough, initially, but it could get back on its feet and then someone would be willing to extend credit. The moron hedge funds would probably be first, but this time around they'd end up making a killing, I think. Not like before when they bought at the top.

Anonymous said...

Sorry, but I think you folks are in terrible denial, obsessed with your fiat currency fantasy macro, and obsessed with proving some about domestic sovereignty and floating currencies - and possibly some political agenda I don't get. You're asking the Greek people, who are already mired in a profound depression, to play Russian roulette with what is left of their country, using a gun filled with your "maybes", "possiblies" and "not necessarilies".

Greeks overwhelmingly, by massive margins, do not want to leave the eurozone. I'm inclined to think that they are not just idiots, but somehow understand the full scope of their actual predicament and long-term desires better than you guys.

"So you're going from infinite to half the value of the Euro based on exactly how much selling from who?"

I assume the Greek government would introduce the drachma at par with the euro. Market forces would take over from there. And the whole point of introducing a new floating currency is so that they can devalue (to sell all of that olive oil, the vacations. etc.). That means import prices surge. That means shortages, lines, chaos, further unemployment in the near term as the economy struggles to remake itself on the fly. Of course, you can then print up more drachmas, give everyone a worthless Mosler-job with a minimum wage Mosler-salary, and tell them to drive out to the countryside and try to buy cheese and fish or something while the the inflation puts imports even more out of reach.

Malmo's Ghost said...

Dan,

You're skipping the political angle here. Tsipras had choices. He could have run on the platform you're espousing, which is fine. At least there's integrity coupled with honesty but more importantly it's principled and consistent with that approach. He didn't do that, however.

He could have taken the time to explain if you want no more austerity you likely must depart from the euro. If you desire to stay in the euro then the EZ overlords demand austerity. It's one or the other.

If Syriza fully capitulates and remains in the EZ then it's likely bye bye Tsipras and Syriza, but the Greek masses will be no more the wiser on why. Tsipras had a chance to educate for a just way forward and failed miserably to that end. History will not look on his tenure favorably, I'm sure.

Anonymous said...

Malmo, history will look on Tsipras as a man in an impossible position, surrounded by 28 bitter enemies determined to bury him; a fanatical and radicalized racist European community who just seem to hate Greeks; a cowardly and impotent United States unwilling to stand up to a gang of European incompetents and sickos running a brutal, quack austerity cure on their weakest neighbor country (and a fellow Nato member) that is already experiencing a profound depression; and a man receiving lots of bad advice from self-indulgent pundits around the world who are also prescribing pie-in-the-sky quack cures of their own.

The only really viable path out of this mess is a deal: Greek economic overhaul in exchange for some very serious flat-out debt forgiveness. Tsipras claims to have been in dialogue with the US over the past few days. We can only hope they are working behind the scenes on organizing the diplomatic steps that will get from a deal by Tsipras to the debt relief, along the lines that Piketty and most major global economists are supporting. The EU countries have to understand that if they push Greece out of the EZ, the creditors are not going to be paid anyway, so the question is just whether the losses are organized in a rational and orderly way or result from disorganized chaos and a destabilizing failed state meltdown as Greece attempts to rebuild a monetary system on the fly.

Tom Hickey said...

Keep in mind that the ultimate goal is privatization of Greek public assets, just as it is in Ukraine. This requires driving Greece into debt deflation and eventual bankruptcy. Everything is running according to neoliberal plan in both countries.

Ignacio said...

"This is war and requires a war economy. "

This is the problem, they are bargaining over a 1% cut here and there in exchange of more debt and some "reforms" and this is what the population thinks this is about, when it's not. They should be in a war economy mindset and they are not, their politicians lack the knowledge and will to do what is necessary to build an alternative.

Instead they have been can kicking and selling bullshit to their our voters.

P.S: Greece is not food-independent, nor energy, not medicines, basically not any basic goods. They would need the back up of the military and extreme rationing initially if the EU psychos decide to cut Greece down initially.

They are going to take on austerity and ever-lasting depression instead.

Malmo's Ghost said...

Dan,

If Tsipras was/is in an impossible position then cut to the chase and educate the people on why this is so. He didn't do that. Why? In part because of his fealty to a broken and sociopathic EMU, while at the same time knowing that coming clean with the electorate that staying in the EMU requires austerity to infinity, that's why. He sent mixed messages throughout his reign, and it finally has apparently backfired on him and his Party. That's not leadership, that's spineless abdication, no matter where one stands on the Greek predicament.

Anonymous said...

"... while at the same time knowing that coming clean with the electorate that staying in the EMU requires austerity to infinity, that's why."

No, not necessarily. Greece can get more fiscal space for scaling back austerity if they can get serious debt forgiveness. That's what he's pitching for now. What he is counting on is that other global leaders who are not so stubbornly dug in can prevail on the EU to bite that debt bullet and understand that orderly outright debt relief is better for everyone than a disorderly Greek default and chaotic grexit.

Sometimes the bad guys have you balls and there are few realistic ways out. It's a fact of life. All this big talk about bunkering into a war economy, hitching Greece's wagon to Russia or the Brics, throwing a Molotov cocktail into Nato, fast-engineering a whole new currency system on the fly and accepting a giant fall in real Greek wages - all that stuff sounds to me like a collection of gigantically risky schemes, with really whopping downsides.

Greece is the homeland of European culture. They want to be part of Europe and part of what many of them still see as the historic drive toward European integration - it's a big deal to them, even if that kind of thinking is unintelligible to American money traders.

There are no good solutions for Greece right now, because the people with most of the economic power have decided to be dicks. That's a fact. All the yelling and melodrama in the world doesn't change that. So maybe we should beat up less on the victims.

Anonymous said...

The Greek Crisis - What You're Not Being Told

https://www.youtube.com/watch?v=ofNdWTHcIeQ

Matt Franko said...

"a new floating currency is so that they can devalue (to sell all of that olive oil, the vacations. etc.). That means import prices surge. "

Dan, only if they drop the prices of the olive oil and the vacations in terms of the foreign currencies they were trying to obtain ... which perhaps to your point maybe they would if they became desperate for foreign currencies imo you'd have to put in price controls......

"try to buy cheese and fish or something"

They could eat WAAAAYYY better than that... what I've seen happen with this 'globalization' and "free trade" is it puts a lot of small businesses out of business including not the least the Ag sector.. ... I know this family that had a multi-generation mushroom farm up near Latrobe, PA for decades ... it was a good business.... they eventually got wiped out by INDONESIAN mushroom grower USD zombies who came in with extremely low prices in USD terms for their imports probably produced by effectively slaves ...

so this is your "get Greece back to work" theme... they can get back to work robustly provisioning themselves and imo that would not be a bad thing...

He should get a EUR deal and then before the ink is dry start a new Greek parallel currency and use THAT system to do the types of things you advocate for (if it is legal) imo... under the EUR system (with the constraints that comes with that via the treaties as far as NIA targets) they cannot accomplish what you would see them accomplish... to get all of that going they would have to increase leading spending and any EUR deal is going to require cuts to leading flow just watch...

US leading flow right now is about 4.1T and we end up with about a 17T economy (via the NIA approach) so lets say it is about 4x leading flow...

Greece is running about a e180B economy so divide by 4 they should have a federal budget of about e45B.... to have a similar qualitative economic outcome to US ...

Best data I can find has Greece 1Q govt expenditures at e9.5B so do 4x of that and you only get e37B so they need about an additional 20% increase in leading flow to get to where the US is (which still leaves a lot to be desired...) qualitatively....

I would predict any "deal" wont allow for a 20% increase in leading govt EUR spending in Greece... but they could do this with a parallel Greek domestic currency...

rsp,

NeilW said...

"Market forces would take over from there. "

Ah those magical market forces. They are going to create Drachma via their magical powers are they?

Come on. Where's the Drachma coming from to sell and who is going to sell it and settle the trade?

You don't have a mechanism Dan. You just have a bedtime monster story - which is to do with your own personal political angle.

The whole point isn't to devalue at all. The point is to get the economy moving. You don't need to steal demand from other currency areas when demand is so obviously suppressed in your own currency area.

Imports have already been suppressed by five years of madness. So nobody is going to miss much anyway if imports are targeted strategically at needed goods and services.

But it requires military like planning and execution which the Greeks may not be able to do. And they may not want to do it. After all the Irish have been happy with crumbs off the table for years as long as they get to sit at it.

Unfortunately nobody will explain to the Greeks that if you have the Euro you have grinding poverty for decades for anybody who stays in the country.

The appropriate response is to leave. Which is the reality of freedom of movement. It's not a choice. It is a *requirement* that you wander the continent in search of a living.

Matt Franko said...

"They want to be part of Europe..."

Dan now you are starting to sound like our Roger... ;)

Just having a goal doesnt get it done... yes you need the goal (and yes logically first), but then you need competent/qualified people to design the system and then execute the job... those people are MIA from the scene... (look at Varoufakis he's the f-ing Finance Minister and he doenst even know they have a Mint !!! LOL!!! What an idiot!!!)

If nobody knew how to build a bridge, nobody would propose to build a bridge. Operational goals are (typically) set within the KNOWN technological boundaries...

Policymakers have to KNOW what the true technological boundaries are...

But as Bill said today "this aint rocket science" so no R&D is required, the problem remains incompetence/ignorance at the key positions...

And the other thing is imo you dont have to have a common currency to have political solidarity look at the US and Canada or US and Japan and other allies ... youre the one pooh-poohing the "magic money mill" (and I see your point there...) so who cares about the monetary arrangements... they just have to work like any utility system....

What are you saying they cant have European solidarity without a common currency system? What are you saying they cant have solidarity without a Euro "magic money mill"? c'mon you often make the point that it is more than about the "money mill"... so who cares as long as it works...

Youre making too much out of the monetary system ...

rsp,

Jose Guilherme said...

It all depends on the international context of a Grexit.

If the EU does not apply punitive sanctions then Greece can recover quite soon - and be an example for the rest of Europe of how to regain monetary sovereignty and get the economy growing.

Even neo classical economists agree on this. That's the reason guys as diverse as Milton Friedman and Paul Krugman have been saying since the 1990s that a single currency would bring disaster to Europe sooner or later. They were right of course. If Greece breaks loose it will grow again.

And who can prevent the EU from applying sanctions? The US of A. If they tell Europe: "leave Greece alone, we don't want that country destabilized" then the EU, as usual, will meekly comply.

Of course, if the US supports a punitive reaction then a Grexit will be much more complicated. But let us hope a minimum of sanity will prevail in Washington in this case.

Anonymous said...

"Come on. Where's the Drachma coming from to sell and who is going to sell it and settle the trade?"

???? Neil,

The Greek government, I would assume, will re-assume control of the central bank, create deposit accounts and keystroke them into existence of print them, and then exchange them for euros at par with Greek depositors.

But after that, the drachma will float, right? And its value will be set by currency markets.

Of course, the government might then try to peg it - if it is capable of maintaining such a peg. But there is absolutely no reason to introduce the drachma if it doesn't float. What is the purpose of introducing drachmas and then pegging them to the euro? Then Greeks are little better off than they were before.

Dan, only if they drop the prices of the olive oil and the vacations in terms of the foreign currencies they were trying to obtain.

Which of course they will Matt! Again, what is the point of going to the drachma if you then charge everybody the same price you would have charged in euros? And if you then just print a boatload of drachmas, it will fall and you can't maintain the peg anyway.

"But it requires military like planning and execution which the Greeks may not be able to do."

Yeah, duh. And many months of preparation. To do something that almost no Greeks want to do.

And who can prevent the EU from applying sanctions? The US of A. If they tell Europe: "leave Greece alone, we don't want that country destabilized" then the EU, as usual, will meekly comply.

Right. One way or another Greece has to be flat-out bailed out. Either a bunch of Greek debt is forgiven, or Greece defaults on the debt and then no punitive measures are taken to collect it, quarantine Greece, etc. Greece could go to the drachma tomorrow, but Europe could still say, "Great - but you still owe us a shitload of euros."

Ignacio said...

The TTP Obot would support a Grexit? Is hard to say, but Greece can try to seek alliances elsewhere if the bigots in Europe don't want to help.

European nations cannot enforce an embargo, and tbh, there is no case for an embargo, a big chunk of the population would be outraged if the eurocrats try to over-reach like that, even more than what they are doing now with very little political cover in the case of the politicized ordoliberal ECB.

At the end of the tunnel there are pitchforks waiting for them if they go too far, they don't have the military and police power to enforce jackshit anyway, it's all worlds and control of the financial system, both things can be fixed by those who hold the guns (the eurozone national governments), if there is real will.

IMO the most important part of the equation would be for the Greek govt to retain control over the military, if that's guaranteed the rest can be fixed.

A said...

"there is a good chance that the entire place will fall apart in revolutionary anarchy."

Sounds good.

Greg said...

@Jose

"It all depends on the international context of a Grexit.

If the EU does not apply punitive sanctions then Greece can recover quite soon - and be an example for the rest of Europe of how to regain monetary sovereignty and get the economy growing.

Even neo classical economists agree on this. That's the reason guys as diverse as Milton Friedman and Paul Krugman have been saying since the 1990s that a single currency would bring disaster to Europe sooner or later. They were right of course. If Greece breaks loose it will grow again."

Right, excellent points!

This is the internal inconsistency of the neoliberal paradigm in Europe. "They" say that growth is what is necessary for Greece but they run a currency system where it is a zero sum game, especially on the way down like now. So in a zero sum paradigm for Greece to grow, someone else has to contract. Greece cannot grow within the Eurozone, they have to leave.

Anonymous said...

Greece: The Pearl Cast Before Swine

http://www.unz.com/ishamir/greeks-the-pearl-cast-before-swine/


Greek creditors have Grexit scenario 'prepared in detail'

http://rt.com/business/272383-greek-creditors-grexit-scenario/

peterc said...

Dan K, no, it would be key that euro deposits simply remained as euro deposits unless and until the account holder took steps to obtain drachma for tax payments or other purposes.

Taxes would be only payable in drachma. Govt spending would from now on be in drachma.

Existing contracts with govt for goods and services would be redenominated in drachma.

Unless a person or business transacted goods or services directly with govt, they would need to obtain drachma from those who do. Hence demand for the drachma. Provided govt spending remained in sensible relation to an enforced tax obligation, no "market forces" could generate excess supply of drachma. Drachma would only be supplied as demanded.

http://moslereconomics.com/2011/11/17/my-big-fat-greek-mmt-exit-strategy/

peterc said...

And, no, not necessarily (or even likely) exchanged at par with euro, but at a floating rate.

Calgacus said...

Greece is not food-independent, nor energy, not medicines, basically not any basic goods.
Infinitely the most important is food. As far as I can tell, this is an internet meme with no ultimate credible source, no foundation whatsoever. I've never seen anybody who says this cite any source, but if major websites operate that way and say such things without sources, the disinformation spreads.

I'm not finished with looking things up, but here are a couple of sources: Jan. 2012 Greece could feed itself, says farmers conference, quoting Tzanetos Karamichas: "We have to stop undermining Greek agricultural production and terrorizing people about not having enough to eat if the country goes bankrupt" "We can surpass self-sufficiency, create new wealth and support the country."

Also Nov. 2013 Greece is 94% self-sufficient in agricultural products, based on a PASEGES report.

However, not being self-sufficient in every food category is NOT what fearmongers are selling, which is raising a specter of real hunger = not enough calories. This is silly in a modern European country, particularly in Greece. Greece has a very high percentage of its labor force in agriculture, about 12%. Many are among the poorest people, including immigrants, but clearly they aren't going to starve. In addition, there have been reports that the Greek government is stockpiling food and drugs. They aren't stupid, and there have been statements that they have prepared for Grexit, and are not afraid of it.

Because food insecurity is a thing of the past for Europe, little is written about it, and it can be difficult to get information about it, so there is vulnerability to fearmongering. The FAO has no Europe category for its food insecurity reports. A non-guaranteed, top of my head (Fermiesque?) calculation on wheat production from figures there yields about 1400 calories/person/day. Wheat apparently is a weak area for Greece, but that ain't nothing.

Calgacus said...
This comment has been removed by the author.
Ignacio said...

Cagalcus, better then, I must admit that I'm not informed on it and just repeating what I've read somewhere else. Should have known better.

But they aren't definitively not energy and basic medicines independent. My point anyway is that they need to control and have the backup of the military, if they have it it can be done, even if some rationing and war planning is needed initially.

I don't think "the bigots" can do anything about Greece quitting the euro, the wide population wouldn't support any embargo, and anyway they don't have the military to enforce it.

Ignacio said...

BTW that food surplus is using chemicals, which need certain imports to be produced (or are directly imported). The productivity of modern agriculture relies on pesticides, machinery and oil. If you remove all that it will drop to a small fraction of the former.

Something to take into account.