The Greek Debt "Agreement"

Pretty clearly, no "negotiation" took place in Vienna.  The Germans — who, at last, seem to have achieved their WWII goal of taking over Europe — dictated the terms.  Tsipras, faced with the crash of the Greek banking system, had no choice but to agree.

Personally, I believe that immediate "Grexit" is preferable to yet another round of destructive austerity.  Maybe there are enough members of the Greek parliament to say "no," as the Greek people said "no" last week.  Okay, I understand that a substantial majority of Greeks want to stay in the Eurozone, but it won't do them any good if they have no euros to spend.

The euro was a bad idea from the beginning, as the British recognized when they opted to stay with the pound.  Not only Greece, but Spain, Portugal, and Italy would enjoy a great deal more economic autonomy if they had their own currencies.  If Europe ever is politically unified, that will be the time for a unified currency.  All the euro has accomplished is to put the bankers in charge.

In the meanwhile, it's time for Greece to cut its losses and default.  The future is grim for Greece no matter what it does, but real recovery will come sooner if Greece has its own currency.

Μην αφήνετε τους Γερμανούς να κατακτήσουν και πάλι στην Ελλάδα. Πες ΟΧΙ!

My big fat Greek... bailout?

Those of us who are not Greek ought to be pretty happy today, relatively speaking. Two out of three leaders of the Greek coalition government seems to have approved the German diktat requiring concentration camp style austerity, and the Parliament will either accept it or reject it on Sunday. It could be close.

A lot of people out on the streets of Athens and other Greek cities seem to think Parliament should reject it. I'm emotionally inclined to agree with the angry mobs. Honestly, I don't know what will happen to the Greek people if there is a disorderly default, but I'm pretty sure about what will happen if they do accept Auswitch austerity.

Greece will be totally fucked for many years.

Most important, it is not Greece that will be bailed out by the current plan — the plan provides for a bailout of European banks. The IMF, ECB, and European Commission will pay into an escrow fund for the new Greek bonds, which will pay the banks first. Should there happen to be anything left after the banks are sated, that remainder goes to the Greeks.

In the meanwhile, Greece is in the fifth year of what is being called a recession but really is a depression, and that depression continues to be made worse by austerity imposed from outside. The new measures require Greece to reduce its minimum wage by 22%, and all wages are likely to fall as a result. 20% of the government jobs that have driven the Greek economy in the past will be eliminated, elevating the current 20% unemployment rate. Nobody expects a drop in the prices of things like food, fuel, and rent.

Personally, I'd be inclined to go with the drachma. Greeks who still have savings in Euros, I'm sure, will get them out of the country. Those who have Euro denominated debt can default along with their country.

Screw the banks.

Well, here's to democracy... I guess

Nominal socialist George Papandreou is referring the current Greek bailout deal to the Greek public in a referendum. The pundits seem to think he is "tossing the dice," hoping the Greek public will back his negotiated deal, and thereby shutting up the voices of opposition. That interpretation seems unlikely to me.

Could it be that Papandreou remembered that he is, at least nominally, a socialist? I sincerely hope so. I hope he returned from the negotiations asking himself, "What have I done?" From a political perspective, he might very well be asking himself how the Socialists let the Greek center-right seize the issue. Don't political labels mean anything?

(These days, probably not. Hell — Obama is accused of being a liberal.)

I would like to think that Papandreou's decision to put the bailout plan to the Greek people arises from pangs of socialist conscience. Most Greeks seem to understand that while austerity may be good for European banks, it is not necessarily good for Greece. Whatever chaos an "uncontrolled" default might cause around world financial markets, for the Greeks, following in the footsteps of Argentina seems like the best bet to me. I've already posted my unsolicited advice.

I just hope the rest of us survive it.

Hey, what happened?

While I've been calming down from that last post — not to mention the consummation of that Faustian bargain I mentioned — it seems many others have been getting a bit more excited. Today's market plunge may be just more of the "volatility" which indicates that nobody knows what the hell is going on. On the other hand, it just may be that investors finally have figured out that austerity is not likely to be good for their investments.

After all, the corporate world has been sitting on its money and spending bupkes for the past couple of years, and plutocrats tossing their loose change around at Bergdoff-Goodman and Tiffany do not an economy make. When the United States joined Europe in the cult of what Krugman calls "the confidence fairy," it appears many Wall Streeters decided it was time to listen to the economists rather than the Koch brothers.

Then, of course, there's the SUPER-COMMITTEE, whoopie doo! Since the Republicans already have sworn that no tax increase supporters nor loophole closers will be appointed to their six, one supposes they are assuming at least one of the Democratic appointees will be an Obamesque anilinguist (and one assumes that we all can assume they are correct in that assumption. And, okay, I haven't calmed down all that much.)

I know I swore off making predictions a while back, and hence I will refrain — but I just can't see anything good coming out of any of this.

Double Dip?

Bad news all around this past week — jobs, housing, the markets, what-not — but, especially, politics. The Republicans are determined to drive the US economy into a hole it can't climb out of, and the Democrats are going along for the ride.

All but a few corporately connected economists see the budget deficit as a medium- to long-term problem. Do we have to deal with it? Of course — but we don't have to balance the budget next year, the year after, or the year after that. Anyway, the best way to balance a budget is through economic growth, and austerity programs — no matter what certain ideologues have to say about it — never lead to growth.

The whole idea that businesses will fail to invest because they are afraid their taxes will go up is idiotic. Taxes can only be a percentage of profits (after the usual heavily lobbied deductions and exclusions), so if that percentage is something less than 100%, investments that increase profit margins make economic sense. If a company makes an extra billion that is taxed at 50%, that's still an extra half-a-billion.Even if it's a risky investment, if it pays off it amounts to greater profits. If it fails, it's a write-off, and the tax rate doesn't matter — it may even save the company some money on the taxation of its more profitable ventures.

I do not advocate allowing the US to default on its debt, and I think a responsible Congress would have voted to increase the debt ceiling last week with no commitments to deficit reduction. Now is not the time to play dumb political games. As a matter of fact, now is a time to stimulate job growth through greater deficit spending — enough, this time, to make a real difference.

It won't happen, of course, because too many Americans are economic illiterates, and because the Republican commitment to further enriching the rich is the foundation of the current party's existence. Only by shrinking government can further upper-income and corporate tax cuts be made possible.

I am trying to learn more about Gary Johnson, a dark horse candidate for the Republican presidential nomination. I'm starting to think that a libertarian Republican just might be a better choice for 2012 than a corporatist Democrat — and that somebody (possibly with Tea Party endorsement) has to turn the Republican Party away from its own corporatist commitments. With Johnson (or, even, Ron Paul), progressives just might get more than they will out of Obama.

Eric Cantor on Taxes

Naturally, we already know House Majority Leader Eric Cantor's take on taxes: cut them, with special emphasis on cuts for the rich and for corporations. Yesterday's speech called for a 25% maximum rate, with the usual trickle-down rationale — let the rich and the corporations keep more of their money and they will, as Republicans like to express it, "invest in America." This is supposed to lead to rapid job growth.

As usual, the basic premise is fallacious. Top tax rates in the United States already are extremely low. Corporations are, in common parlance, "sitting on mountains of cash." Why? Thanks to low demand caused by high unemployment and concomitant excess productive capacity, it doesn't make sense to "invest in America."

As for wealthy individuals, they certainly are looking for places to invest the extra cash they pocketed thanks to the Bush tax cuts and their unconscionable extension under Obama. The sad fact, though, is that American business and industry doesn't offer very satisfactory returns on investment these days. Surplus funds are more likely to go to faster growing parts of the world like India and China, used for commodities speculation, or sunk into the new social media bubble. (Social media companies, by the way, provide very few new jobs.)

What we need — contrary to both Republican and Democratic talking points — is more government spending, because the private sector just is not coming through. If we can pick up employment — in infrastructure improvement, education, health care, environmental preservation, and other areas where we need lasting, long-term improvements — demand for private sector goods and services also will grow.

What we don't need is European style austerity programs. They're only making things worse in Europe, and they are beginning to have the same effects here.

Debt, more debt, and a bit of Afghanistan

I've been remiss. Sorry. Let's try to catch up a little.

So the US reached its current debt ceiling today, and Timmy Boy Geithner was only too happy to dip into the pension funds of federal employees to prolong the suspense. Nobody was surprised, and the yawns resonated across the Potomac. Wall Street, apparently, is not at all worried.

Why isn't Wall Street worried? My guess is that the Street is sure that nothing that happens will be in any way damaging to the Street. Oh, for Christ's sake, that's not a guess — that's just a totally non-creative reading of the way life is, these days. All I can hope for is that Democrats won't give in to "triggers" unless there are tax increase triggers as well as spending cut triggers. Hopefully, they won't have to look to Obama for leadership.
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Dominique Strauss-Kahn is in a New York City jail at the moment. Is it entirely likely that he, as a powerful world leader, has the testosterone, the hubris, and the disdain for lower class African immigrants to be guilty. Quite possibly, if he stopped to think at all, he presumed she was an illegal, and hence wouldn't report the assault.

On the other hand, it's not outside the realm of possibility that he was set up. Nicholas Sarkozy can't be terribly upset — in fact, quite a few champagne corks must have been popping at UMP headquarters when the news broke. A more likely scenario, though, is that certain bankers holding short positions on Greek debt find it in their interest to stop another bailout of Greece. With Strauss-Kahn out of the picture, the inevitable default is likely to come far sooner.

NYPD says it has forensic evidence supporting the alleged assault, which seems a little odd considering it took the form of what Bill Clinton famously called "not sex." The maid, who came from a Francophone country where France continues to exercise a good deal of economic power, must have shown extraordinary presence of mind — especially for a presumably traumatized woman pushing around a cart well stocked with those little bottles of mouthwash. Yes, testosterone, hubris, and disdain offer a more likely explanation, but I'm just saying that's not the only explanation.
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Meanwhile, John Kerry and a few others are suggesting that the recent Osamacide makes a somewhat accelerated exit from Afghanistan more acceptable. Sadly, somewhat accelerated is not likely to mean "next week," but at least Petraeus is keeping his mouth shut for the moment, which is appropriate for the future director of the CIA.

Now, if only Asif Ali Zardari and Ahmad Shuja Pasha can persuade Pakistani Islamists that they really didn't have anything to do with bin Laden's assassination, and also persuade Hamid Karzai he's better of accommodating Pakistan than India, some real progress in getting the US the hell out of Afghanistan might be achieved.

Standard and Poors Downgrades Congress

A couple of days ago, Standard & Poors announced that there is a one in three chance that it will downgrade US debt from its customary AAA rating within the next two years. The bond market barely flickered, indicating that nobody who mattered was terribly concerned. Granted, S&P's reputation for accurate evaluation of risk suffered somewhat in 2008, but the real reason for the collective yawn was that bond traders understood the announcement was a political rather than an economic statement.

(Yes, the stock market took a bit of a dive following the announcement as the amateurs panicked, but it rapidly recovered. One might be curious to know just who was shorting the most volatile stocks just prior to the S&P pronouncement.)

So, what was the political point S&P wanted to make? In the words of the shop teacher from South Park, "Hey, you kids! Quit messing around!"

More than anything else, Wall Street values stability — especially since it has shown itself to be so inept at risk management. While nobody in his or her right mind believes the US ever would default on its debt, S&P probably thinks there might be enough idiots in Congress to create instability by playing politics with the debt ceiling right up until the last minute. If the rest of the world gets to thinking that our government is approaching critical mass for idiocy, US debt markets — private as well as public — could suffer.

A statement similar to S&P's was sent by the bond trader PIMCO earlier this year, when it announced it no longer would be purchasing US debt, thereby implying distrust of government. The real reason PIMCO is getting out of the market for government debt is that is pays such low interest — specifically because it is so very safe an investment.

Look a little deeper, though, and there may be cause for concern. S&P issued virtually identical statements — twice — with regard to UK debt. It is widely believed that those "devaluations" helped elect the Cameron government, and encouraged the current British austerity program.

Would Wall Street prefer a compromise closer to the Ryan proposal than to the Obama proposal for debt reduction? Well, S&P speaks for a lot of very wealthy individuals. What do you think?

Debt and Taxes

Now is not the time to begin deficit and debt reduction — the economy remains in precarious condition, and unemployment and underemployment remain terribly high — but it certainly is time to start thinking about working towards a more "pay-as-you-go" system of taxation and spending. Sorry, Democrats, but spending cuts are needed; and sorry, Republicans, taxes will have to go up.

A good place to start cutting is military expenditures. The Cold War is over, and America's current adversaries are incapable of launching the kinds of attacks that require more complex and more expensive weapons systems to repel. Military contracting, by the way, is not labor intensive, so job losses would be manageable.

The Bush wars in Iraq and Afghanistan created far more enemies than they eliminated, and the Obama "surge" in Afghanistan is getting nowhere because there is no legitimate government to take over an area once it has been "liberated" from the Taliban. Let's just cut our losses, and get out with all deliberate speed. While we're at it, we can also remove our bases from Japan, Europe, and the Middle East. We can deal with terrorist strongholds with small, highly mobile forces and Predator drones.

Another cost savings could come from eliminating farm price supports. Not subsidizing corn, for example, would not only save money, but enhance public health — reducing the cost of medical care.

Yes, both the savings ideas offered above would arouse bipartisan opposition. You always can count on bipartisanship when it comes to protecting sacred cows.

As for tax increases, it makes sense to look for the money where the money is — that is, look to the individuals and corporations that have the most of it. There should be no cap on Social Security deductions, and the tax should be applied to all income, not just salary. On the other hand, there should be a cap on deductions for mortgage interest — and that cap should be gradually lowered.

There has been plenty of talk lately about a value added tax, or VAT. The good thing about a VAT is that it is hard to notice, and hence does not draw as much public anger as its first cousin, the sales tax. The bad thing about a VAT is that it is a form of sales tax, and so is regressive.

A better approach, I believe, is to stick with the income tax, but to make it much more progressive by adding more tax brackets, especially at the top end. There also must be much stricter limits on deductions and credits — taxes should not be used to create social policy. Interestingly, half of all deductions for charitable contributions are for donations to churches. I cannot imagine what social goods churches provide that make them so valuable to the American people.

None of these ideas will balance the budget, of course — much more sacrifice will be required, and supply-side nostrums about rising tides lifting all boats are just dead-out wrong. Yes, a stronger economy will help, but even in full recovery, we still will have to figure out what to do with all those people in their forties and fifties who will remain structurally unemployed. The welfare state is here to stay.

Debt Burdens

I graduated from Queens College of the City University of New York in 1967. My instructors all were either tenured or in tenure-track positions — I was never taught by an adjunct. Except for very nominal registration fees, the cost to me was zero.

Queens College still is a bargain. In-state, full time students pay about $5000 a year in tuition, and many qualify for some sort of financial aid. If they're living with their parents, it's manageable — less so for those who must be self-supporting. What I'm wondering, though, is why we no longer can afford to provide free post-secondary education?

Two thirds of those attending college depend on loans to pay their way through, and the average debt upon graduation is over $23,000. Starting out in a job that pays $35,000 a year, such a level of debt is an incredible burden. Starting out in an economy that might not provide any job at all makes the burden far greater. Graduates in bad financial straights may defer payment, but interest continues to accrue.

The result is young people putting their lives on hold. Student debt is one reason for delaying marriage and children. It's also a reason to hang onto essentially crappy jobs — just to keep up with the loan payments. Taking a risk means risking bankruptcy — a bankruptcy where student loans and credit card debt are not forgiven.

We are wasting a hell of a lot of talent by strangling it with debt. If I could get my hands on the throat of a bank that has been collecting government subsidies for offering high interest student loans, I would squeeze. Hard.

I don't have solutions. We are at a point where the evil rich should be hammered into pulp by the collective (Yes! Collective!) baseball bats of virtually everybody else, but don't expect anything from Timmy Geithner, whose asshole is open to the fucking of anybody with sufficient assets.

The New Deal wasn't about economics. It wasn't about socialism. It was about morality. It was about doing the right thing. Now, all of that is lost. Had Roosevelt been able to push through a national health care program, you can bet nobody would be trying to dig up the money to pay for coverage so as to avoid paying fines. Frankly, I think the whole "compromise" with single payer is sickening.

Welcome back to the 19th century. Bend over, working people. There's a lovely assortment of shafts all ready to fuck you — hard.

Leverage over Russia?

Well, it was a pretty dumb move on the part of Mikheil Saakashvili. I don't know what he expected to happen when he picked a fight with Putin, but he can't be all that surprised by how Russia responded. He should be even less surprised by how the West responded to the Russian invasion. Maybe Saakashvili figured the conflict was inevitable -- and probably it was -- but why he thought now would be a good time to get it going is beyond me.

Western Europe is totally dependent on Russian oil; the U.S. is preoccupied with Iraq and Afghanistan and economic meltdown, and Bush is a lame duck who's already blown whatever moral authority this country may once have had. So far, Georgia's had no support from the West save a few vague threats about taking the G8 down to G7 again. But wait -- the U.S. does have style="font-style: italic;">some leverage over Russia, come to think of it.

There's that little matter of the $100 billion we owe them. What if we threatened them with default?

Yes, yes, I know -- defaulting on a debt can wreak havoc on a country's credit rating. On the other hand, one could argue that repaying money owed to belligerent, aggressor nations who invade and occupy other countries only serves to encourage them. (Yes, yes, I know -- the description fits us as well as it does them -- but hell, they don't owe us money!)

Am I joking? Maybe -- but considering how much money we owe sovereign wealth funds and powerful corporate players in potentially troublesome countries around the world, why not take this opportunity to use our colossal fiscal irresponsibility to achieve world peace? Think about it -- crazy as it sounds, it might even work.