The NO Vote

The Greeks have soundly defeated eurozone efforts to depose their allegedly "leftist" government by a margin of 61 to 39 percent.  Even though they had no way of knowing the impact of their decision on Greece's future, they clearly understood that banker-imposed austerity policies have been a complete failure, and rejected them.  The next move must come from the "troika," and what that move will be remains to be seen.

Nobody — not even Wolfgang Schäuble — really wants to see Grexit, but serious obstacles stand in the way of the debt relief Greece needs.  Yes, the IMF admits that Greece will be unable to pay its debts, but the ECB and other lenders will resist: after all, one doesn't want to set a bad example for other southern European nations.  If I had to guess which European leader is most upset by the "no" vote, my nominee would be Spain's Mariano Rajoy, whose government already is under pressure from Podemos, the Spanish political movement that bears a close resemblance to Syriza.  Rajoy just might be serving his last term, and a Podemos majority in the Spanish parliament certainly would be disruptive across Europe.

In Greece, things are likely to get worse before they get better, but glimmers of light are just barely perceptible at the end of the debt tunnel — which would not be the case if the shameless European propaganda campaign had succeeded in effecting a "yes" victory.  More austerity can only feed into an endless downward spiral.  Even Grexit offers more hope.

Yay, Cyprus!

How very nice that the Cypriot Parliament decided that abdicating the guarantee on deposits under €100,000 was unacceptable.  Take that, fucking Angela, and if you have political problems with your anal retentive base, that's your problem.

Stop and think about it.  One of the greatest contributions of the Roosevelt administration was the FDIC, the government guarantee of deposits into saving and checking accounts.  Europe emulated the Roosevelt initiative, and banks suddenly felt a hell of a lot safer.

The German recommendation for how to bail out Cyprus strips away that depositor confidence.  I can't be any happier that the Cypriot Parliament told the Germans to go fuck themselves.

Meanwhile, in Greece...

By this time, I expect that just about everybody has concluded that Greece — and the rest of Europe — would have been better off had Greece never joined the Eurozone.  The big question now is whether Greece should leave the euro behind, and go back to the drachma.  Today's demonstrations (riots?) were pretty clear indications that many Greeks are very unhappy with the austerity demands by the various international lenders which might delay Greek default.

Granted, Greece (like Occupy) makes it clear that letting anarchists lead your opposition movement doesn't work very well.  Nevertheless, I have to sympathize with the Greek protesters, because Greece is not in recession.  Greece, with a 25% unemployment rate, is in depression, and the EU is doing nothing to correct that.  Austerity is the last thing needed to correct a depression.

If Greece defaults, German banks will take a big hit.  Nobody exactly knows how big a hit, but a little inflation in Germany probably would be worth it.  When the Spaniards and Italians follow, Germany will be dead in the water.

Things fall apart;

....................... the center cannot hold;
Mere anarchy is loosed upon the land...

It's really disheartening how frequently and aptly one can quote Yeats these days.  What passed for the center in Greece took a clobbering as Greek voters moved both left and right.  In a couple of days, we'll get to find out if the leftist coalition, Syriza, can form a government now that New Democracy has failed to do so.  It doesn't look good; both because New Democracy was awarded an extra fifty seats in the 300 seat legislature because it squeaked into first place, and because the Communists refuse to join any coalition government.

Next, the Socialists get a turn to fail, and then there will have to be a caretaker government while new elections are held.  At that rate, it doesn't look good for Greece getting the next installment on its bailout.  A Greek default — which just about everybody expected was inevitable anyway — might do the trick of loosing "mere [economic]  anarchy upon the world."

François Hollande disrupted a decades-long pattern of French incumbent victories by defeating Sarkozy — despite Sarkozy's pandering to first round supporters of Marine Le Pen.  In both Greece and France,  "the worst," demonstrating quite a bit of "passionate intensity" helped the quasi-fascist Golden Dawn and National Front parties lay claim to influence that will not be ignored.

Yes, left and right, voters were voicing their discontent with German dictated austerity measures — and, in a larger sense, with the plutocracy that came to replace the natural "center" over the past three decades.  They are tired of having their lives twisted this way and that for the sake of a cabal of big banks, hedge funds, and multinational corporations.  The question remains, though: do they truly understand who they hate and why they hate them?

Election Season

Tomorrow there will be elections in France, Greece, Italy, and Germany.  In November, there will be elections in the United States.  Not everybody may see just how those elections are interconnected, but if they don't, at the very least, they ought to try. The European voting should be seen as a plebiscite on austerity, the modus operandus of the European Union since the financial debacle.

The Italian elections are local but, like last week's local elections in the UK, may be an indicator of how the electorate is swinging.  The elections in Germany are for the Schleswig-Holstein region, and have the potential to push Angela Merkel out of power if the Social Democrats and the Greens do well and are able to form a coalition.

There is a lot more attention, of course, to the national elections in France and Greece.  Polling shows Francois Hollande, the Socialist, leading Nicolas Sarkozy.  France, unlike a bunch of other European nations, isn't quite in official recession yet — but the handwriting is on the wall.  Hollande says he wants European action to stimulate growth, and it seems the French populace is responding to that message.  The question, at the moment, is what kind of winning margin he can achieve (assuming he wins.)  Nobody knows which way the National Front (the Tea Party of France) will turn, if they bother to vote at all.  It would be very amusing is they went for Hollande.

The Greeks have sufficient parties and political schisms so that it is possible that no coalition government might be formed.  Most of Europe is hoping that the socialist Pasok party and the conservative New Democrats (makes you think of Clinton) gather enough of the vote to form a coalition government (!) that can pander to the Germans enough to keep Greece in the Eurozone — but the situation is really crazy.

At the moment, the United States too is in austerity.  The (inadequate) Obama stimulus has run its course; the Fed is standing pat; the states continue to dump cops, teachers, motor vehicle clerks, etc.  According to the most recent figures, job growth appears to be slowing.

The Republican answer to this is more austerity — albeit, unlike the Europeans, Republicans refuse to raise taxes (especially on the very rich), and hope to "balance the budget" on the backs of the poor.  The example of Europe sliding down the economic drain means nothing to the corporate elite, the rentier class, and the rest of the plutocrats.  Hell, it won't hurt them.

The vast majority of America (including Democrats) consists of economic illiterates.  Pointing out that so-called "balancing the budget" by decimating government is exactly what failed in Europe will do little good.  I really hope Obama has a plan — however shifty and devious — to overcome the stupidity of the American people.  Needless to say, I also hope that, somewhere in his heart, there is a little "Old" Democrat who will do the decent thing when he no longer has to worry about re-election.

Is Europe wising up?

In the wake of the first round of French elections, people are beginning to pay more attention to the growing number of voices in Europe suggesting that German led "austerity for all" is not working. Europe as a whole has a 10.8% unemployment rate, and unemployment in countries like Greece and Spain are depression level. Italy and now France have joined the rolls of countries which must pay more interest on their sovereign debt.

Mario Monti, Christine LeGarde, and a great many European economists have been calling for pro-growth policies to offset the negative spiral created by austerity. Countries cannot balance their budgets when tax revenues are falling, and tax revenues won't increase until individuals and businesses are earning more. Businesses cannot grow without markets for their products, so even export driven Germany is in a slowdown.

Here in the United States, Republicans want us to do just what didn't work for Europe, but with one important difference: while European austerity programs include tax increases, Republicans want to cut taxes even more than they already have, with special emphasis on taxes for wealthy individuals and corporations. They maintain that such cuts will encourage the richest of the rich to invest more, thereby creating jobs, and expanding the economy. Yes, it's good old "trickle down" again.

American corporations are sitting on mountains of cash but not using it for job creation or business expansion — primarily because there is no demand for their products. The super-rich, who also have mountains of cash at their disposal, are back to gambling on derivatives, not entrepreneurship (unless you count financing superPACs as entrepreneurial activity.)

So how do the Republicans mean to balance the budget? By taking the food out of the mouths of hungry children, reducing senior health care benefits, and generally screwing everybody who depends in any way on government safety nets. There's a word for that.

Evil.

Saving the Euro

Greece and Italy have been handed over to technocrats, tasked with taking the difficult steps that politicians find impossible. Democracy, clearly, is incompatible with austerity. Make people suffer (most often for the sins of economic elites,) and they vote you out of office. It's as simple as that.

In Spain, the Socialists have been replaced by the center-right Partido Popular — not because Spaniards have suddenly become more conservative, mind you, but because the Socialists were presiding over the austerities forced on Spain by other Eurozone countries (mostly Germany.) Since the Popular Party will be obliged to continue the same unpopular policies the Socialists began, we can expect it to get a lot less popular in short order. Watch out, amigos, here comes another technocrat.

As for mes amis en France, your turn will come as well. Sarkozy is not long for power, and nobody in French politics will want to take responsibility for austerity measures. Yet another European technocracy would not be a surprise.

The source of all the unpopular austerity is Germany. The eternally anal-retentive Germans just can't stand it that their neighbors to the south were inclined to spend more than they earned. Their disapproval goes beyond the economic: it is moral disapproval. Since the southerners were so profligate and generally naughty, Germans feel, they don't deserve to be bailed out. Most Germans probably believe they ought to be birched on their bottoms.


As I see it, the most straightforward way to save the Euro is for Germany to drop out and return to the deutschmark. Maybe they can form a monetary union with the Netherlands, Europe's other economically responsible country. After that, the rest of the Eurozone can inflate its way out of debt.

Word is that there are some financial whiz kids in Germany quietly thinking through this solution. It's extreme, but if the German ants won't save their grasshopper neighbors, it may be the only remaining possibility.

The Latest Eurodebt "Solution"

If there's anything the latest news out of Europe shows us, it's that markets bounce around like crazy on any news at all — even news that doesn't mean very much. Of course, the market professionals (and especially their computer algorithms) like volatility. Anyway, let's take a quick look at what's been announced.

First, even after their bondholders take their "voluntary" 50% haircut, the Greeks still can't afford to pay. All the extreme austerity measures the Greek government has been forced to accept have so crippled the Greek economy that the likelihood of Greece paying anything at all is very small.

Second, European banks have been required to increase their capital reserves. Granted, their capital reserves should be a lot larger — but rather than dilute their stock too far by selling shares to raise cash, they can be expected to cut back lending even more, stepping down even harder on Europe's economic brakes.

As for beefing up the European rescue fund enough to "ring-fence" Italy and Spain (and hopefully not France), the "plan" would inspire a lot more confidence if there were a real plan. Hoping the Chinese and Russians will come to the rescue is not a "plan."

I can't wait for next month's "solution."

Απονομή, η ελληνική κυβέρνηση!

(That is supposed to say, "Hey, Greek government!" but I must admit it's Greek to me.)

Anyway, I thought you guys were supposed to be Socialists — so what's with the sucking up to the ECB, the private banks, and the IMF? Those are your people in the streets. Don't fuck them over.

There's an odd chance your rocky, sunwashed little country could bring down multinational capitalism by tipping over banks like a row of dominos. That would present a big problem for the rest of the world, but in Greece you'd hardly notice the difference. Everybody knows you're going to default, so why keep torturing the Greek people when you could start helping them now.

First, of course, you have to leave the Eurozone. Yes, we all know there never was an orderly way provided for a country to do that, so you'll have to improvise: start printing drachmas, and use them to pay your very numerous government employees. Pick any conversion rate to the Euro you like. Close your banks long enough to replace all their euros with drachmas. Pretty soon, what's left of your private sector will be paying its employees with drachmas too, because they'll be a lot cheaper than Euros; and those who sell goods and services will have to accept them because they'll be the only currency around. The idea, of course, is to end up with a devalued currency. The tourists will love it.

There will be, of course, a black market in currency — which will help to devalue the drachma even more. Inside Greece, though, prices will adjust to the new (old) money. Imports will be very expensive. Local producers will sell more of whatever they produce. Maybe you can find something other than tourism to sell abroad.

Gather together all the euros you can get your hands on — it doesn't matter how many. Set some aside so you'll have a little foreign reserve for when you really need imports, and explain to your creditors that all they'll be getting is what you have left to give them. Their haircut might take some scalp along, but you can just shrug in that charming Greek way you have, and go about your business.

Granted, nobody will give you credit for quite a few years but, at last, you'll learn to live within your means — and don't worry about the Germans invading again. They can't get blood from a stone.

Greece and the Eurozone

The street protests in Greece continue, as more and more Greeks figure out that they are being asked to transform themselves into citizens of a third-world country for a generation or so for the sake of minimizing losses by the banks of Europe. US exposure seems to exist mostly in the form of credit default swaps; how many, one wonders, were written by taxpayer owned AIG?

All in all, it looks like Greece, shortly followed by Portugal, Ireland, Spain, and Italy, soon will be forced to accept "bailouts" of the very rich by the middle classes and the poor.

Forced? Uh huh. If it turns out to be "politically impossible" to persuade ordinary outer-edge Europeans to vote for governments that will impose the requisite "austerity" measures needed to keep the super-rich fat and happy, the availability of governments (through coalitions and similar tricks) will be sharply reduced — leaving only those "democratically elected" governments willing to play along.

Can it be stopped? Can the megacorps be compelled to take "haircuts" for fear of far greater losses, perhaps to neck level? It may depend on the Greeks.

From my perspective, it would be better to take our chances on a Greek default — and see what shakes out — than to keep the bailouts going and spreading until the eventual default becomes devastating to the point of worldwide depression. The Greeks, of course, will not be letting me write their economic policy — but maybe somebody that somebody listens to will start the conversation, and quiet the whining of the Germans and the European Central Bank.

The Eurozone — like NATO, perhaps — just expanded too fast. Letting Greece in in the first place was a sure indication of poor oversight. Right now, Greece really needs the drachma, Portugal needs the escudo, and Ireland needs the Irish pound You can't have a unified monetary policy without a unified fiscal policy — and for the Eurozon, such a policy is far, far away.