Moon of Alabama Brecht quote
July 16, 2015

Billmon: The Eurosystem's (Monetary) Control of Europe's Politics

Note: This post was composed from a Twitteressay by Billmon.

J.W. Mason lists some Lessons from the Greek Crisis:

Before the crisis no one even knew that national central banks still existed — I certainly didn’t. But now it’s clear that the creditors’ unchallenged control of this commanding high ground was decisive to the outcome in Greece. Next time an elected government challenges the EU authorities, their first order of business must be getting control or cooperation of their national central bank.

The quote says "control or cooperation," but I can guarantee the latter is never going to happen.

It is nearly impossible to exaggerate the degree to which the campaign for central bank "independence" has made them the enemies within for any left governments.

The central bankers waged a 50-60 year political war to wrest back the monetary flexibility that the break down of Bretton Woods gave to national governments. Having won that war across most of the developed world in the 70s and 80s, they extended the battlefield to the emerging markets in '90s and '00s.

The autonomy of central banks (meaning the political allegiance to Wall Street/London City/Frankfurt etc.) was maybe the biggest neoliberal victory of all. If rightwing political victories (Reagan, Thatcher et. al.) were the beachheads of the Great Counterattack on social democracy then "independent" central banks became the citadels of the occupation forces: Neoliberalism's "Republican Guard."

Ironically, the ECB was originally conceived - or at least was sold to the European left - as a way for governments to regain monetary flexibility at a higher level. As a way to a) escape US dollar hegemony and to b) outflank the Bundesbank by formalizing the joint political control of European monetary policy. I do not know if the hack establishment Social Democrats who sold that vision ever believed it, but if so, more fool them. Because what the European Monetary Union became, obvious now, was a way to turn the vision on its head: formalize joint MONETARY control of Europe's politics.

The "Eurosystem", the network of national central banks governed by the European Central Bank, gives central bankers unprecedented ability to squeeze and manipulate national governments in a coordinated way. It is as if every government in the Eurozone ALREADY has a colonial entity watching it like the Troika's agents are supposed to watch Syriza in Athens. And, since the ECB Governing Council (like other EU institutions) tries to operate by a non-transparent "consensus" (i.e. the votes are not revealed), the degree to which national central bank heads are representing the ECB in their countries, rather than the other way around, is often not clear.

As long as the cozy comprador system tied peripheral governments to the core (i.e. Berlin), the role of the ECB and the Eurosystem could be obscured. Peripheral governments appointed "made guys" (i.e. banksters and/or their technicians) to national central bank boards and pretended to govern. Core politicians and their local comprador politicians let the Eurosystem technicians in Frankfurt tell them what "structural reforms" they should push to make the EMU "work."

But the moment an outsider government like Syriza came to power, the role of the Eurosystem and the national central banks in it could no longer be hidden. The fact that the Greek National Bank was an instrument of the ECB in Frankfurt, not of the Greek government in Athens, became obvious to everybody. The ECB's role as the muscle behind the Eurogroup's (Berlin's) diktats put the Greek National Bank in the position of helping to choke its own banks and terrorize its own citizens. And under the rules of EMU the Greek government was completely powerless to do anything about it. A defining moment.

The inescapable conclusion is that the allegedly "independent" Eurosystem now operates not as a network of central banks but as a parallel government.

The role of the Eurosystem within the half-hidden political order of the eurozone really is comparable to the Soviet or Chinese Communist Party. Like the Communist Party, the Eurosystem is now the "leading organ" of the neoliberal order, operating at all levels of the EU structure and providing "guidance" to elected political structures which are not formally under its legal control, but in reality are dominated by it. And behind the administrative apparatus of the party (Eurosystem) is the Central Committee (Eurogroup) and the Politburo (the key creditor government officials). And behind THEM is the real locus of the party's centralized power: the General Secretary (Germany/Merkel).

So J.W. Mason is quite right: it is impossible for any left government to attack the dictatorship of finance unless it controls its national central bank. But while control of the national central bank is necessary, it is hardly sufficient. As long as the EMU exit is off the table, verboten, so to speak, control of the national central banks only eliminates the "near enemy."

Ultimately it comes down to political will, which in parliamentary democracies, comes down to public support. As long as the majority (of all voters or of propertied influentials, depending on the system) is more loyal to the Euro than to national sovereignty an effective challenge to the dictatorship of finance is impossible - no matter how many national central banks the left controls.

Posted by b on July 16, 2015 at 10:57 UTC | Permalink

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You know this 'independent' central bank as tool of the neolibraconian consensus is the most salient point drummed home about Russia : the central bank as 5th column.

And the Russian central bank preceded the ECB, didn't it? When the boys from Harvard went to Russia to 'straighten' things out they conducted an experiment ... and discovered it worked just great : rinse and repeat. Russia was the archetype of the gelded European nation to come.

So the next time says Russia is not a part of Europe I'll say ... not only of Europe, but the first European nation subverted by the gnomes of neolibraconia.

The Europeans who still have a pulse ought to note now just who their real enemy is : hint, the one that's occupying Europe. And who is their fellow European victim. And ban together to defeat their common enemy ... well run him out of town on a rail, at any rate.

Certainly rearrange their banking arrangements.

Posted by: jfl | Jul 16 2015 11:33 utc | 2

Thanks for the link to J.W. Mason, b., that's good stuff ...

Posted by: jfl | Jul 16 2015 12:02 utc | 3

The secret/unaccountable oligarchic nature of the ECB is similar to its counterpart in the USA.

Personally, I prefer to know my oligarchs so I can scrutinize their loyalties, policies, and performance.

One advantage the Chinese have over us is that their oligarchy is publicly accountable. It sets the national agenda, passes the legislation and finances the whole show as one unified body. We know the guys and their responsibilities and can readily see if they're succeeding or failing.

It's time we put aside our attachment to formal democracy and longed, aloud, for our oligarchy to become accountable. It doesn't sound very exciting, I know, but it just might save our asses.

Posted by: Gantal | Jul 16 2015 12:38 utc | 4

One of the key reasons that Wall St/City/Frankfurt want universal "austerity" is not just that they want people to be frightened, impoverished and insecure; but in particular, because it has the desirable effect of suppressing the political participation of people who must continuously walk the edge, just to get by - and by now this is about half the population -and who might otherwise participate in the political process with decisive effect.

Rise like lions after slumber
In unfathomable number
Shake your chains to earth like dew
That in sleep have fallen on you
Ye are many, they are few.

H.L. Mencken is also very good on this subject - the need of the self-appointed elite to distract and render impotent the average person, and how greatly the big shots hate and fear the "mob".

Posted by: Timon | Jul 16 2015 12:48 utc | 5

http://www.analyzegreece.gr/interviews/item/145-frank-slijper-an-insane-level-of-military-spending-led-greece-to-massive-debts-for-weapons-does-not-need


Got this interesting piece of info on how Greece became debt ridden.....basically spending big on arms

why would a small country like Greece need to be the second biggest spender in nato after the USA. ...

According to an editorial published by the Greek conservative newspaperKathimerini, after the removal of the right-wing military junta in 1974, Greek governments wanted to bring disenfranchised left-leaning portions of the population into the economic mainstream[28] and so ran large deficits to finance enormous military expenditure, public sector jobs, pensions and other social benefits.

Greece is, as a percentage of GDP, the second-biggest defense spender[29] in NATO, the highest being the United States, according to NATO statistics.

The US is the major supplier of Greek arms, with the Americans supplying 42 per cent of its arms, Germany supplying 22.7 per cent, and France 12.5 per cent of Greece's arms purchases.[30]

Everybody and I mean everybody is king fu fighting
those bankers are as fast as lightning

Posted by: mcohen | Jul 16 2015 12:57 utc | 6

@5

The US allowed the Greeks to have a non-military government in return for those arms purchases, and the military agreed to 'step down' in return for skimming rights on all those military contracts.

Posted by: jfl | Jul 16 2015 13:06 utc | 7

Good post by Billmon and very interesting link posted by nmb, above.

For anyone who may have missed it, Andrew Gavin Marshall published an in-depth, well researched article, July 7, which paints a broad and ominous picture of where the EU is headed.

Between Berlin and a Hard Place: Greece and the German Strategy to Dominate Europe

Excerpt on centralization of monetary control:

"The European Commission is the third pillar of the Troika based in Brussels, functioning as the executive branch of the European Union overseeing a vast bureaucracy of unelected officials with responsibility for managing the union[…].

"Brussels was to be given the centralized power to approve and reject national budgets of eurozone nations, establishing a technocrat-run ‘fiscal union’ to match the ECB’s role in managing the monetary union. EU institutions would have “more powers to serve like a finance ministry” for all the nations of the eurozone, potentially with its own finance minister, “who would have a veto against national budgets and would have to approve levels of new borrowing,” said Mr. Schauble, the German Finance Minister".

Note: Technocrat-run EU institutions which would have the power to control national budgets of EU member states.

How about that? Anyway, Marshall's article is packed with information and is well worth reading in full.


Posted by: dana | Jul 16 2015 13:09 utc | 8

Interesting. I’ve always been suspicious not specifically of the EU Central Banks or any CB (that is another ball of wax, role of CBs in general) but of the two-tier structure. Here again we see a glaring peculiarity of the crazy EU construction. Federations (or structures close to them that use one currency) only need one central bank. This is the case for Switzerland, UK, Germany under the mark and so on. I’m not clear about the US structure so I leave that out (it is not the number of banks in themselves but their function.) What, ya know, are these local Central Banks supposed to do? When clearly they must be dependent on the ECB? And if they are not, what is the point of the ECB? I remember how it was sold - malarkey (as in the article) - … (see for ex dana above)

Masks coming off.

Posted by: Noirette | Jul 16 2015 13:37 utc | 9

Thank you, indeed.

Posted by: Bardi | Jul 16 2015 14:12 utc | 10

@B:

I like to read your thoughts and the research you do on this blog. But this article shows that you haven't got the faintest clue of what you're talking about. You're vastly overstating the influence of central bankers.

Posted by: Willy2 | Jul 16 2015 14:29 utc | 11

It should be obvious with how the ECB structure was formed that any country that uses the euro as its currency is dependent on the ECB for liquidity if there is deposit flight from the banks in that country.

There is only two ways for a country to retain full sovereignty. One have a national currency with a national monetary authority that controls it and second a government that if it runs a deficit has the ability to borrow in private markets and maintains a currency board (e.g: Ecuador which uses the US dollar).

Ecuador is a good example where its government debt became untenable. It defaulted on the debt and so was for all intents shut out from private debt markets, so the government could not run a deficit. It continued to use the US dollar as its currency.

Greece had to make a choice. Continue in the eurosystem and accept the hegemony of the eurogroup or exit. It's parliament accepted the former. One can blame Schauble and Merkel all you want but the bottom line is that the Greek government and parliament acquiesced to its loss of sovereignty. The Greek people have the power to change it if they want. They just have to decide to exit the eurosystem and elect a government that does that.

In France, Marine Le Pen is clear. She will take France out of the eurosystem if elected. Of course we'll have to see if she honors her campaign promise but at least she is categorical about it. Syriza got elected promising they'll be able to get a better deal compared to the center-right party before them. In this case the Left in Greece delivered an even worse result for the average Greek citizen.

Posted by: ab initio | Jul 16 2015 14:32 utc | 12

Well,Willy 2,the South Koreans think they are awful powerful,their papers accuse(NYTS)Jewish banksters of screwing with their companies.Samsung issued an apology for them.sheesh.

Posted by: dahoit | Jul 16 2015 15:17 utc | 13

"Ultimately it comes down to political will, which in parliamentary democracies, comes down to public support."

This highlights why state/corporate media is where efforts should be focused, instead of the fervent GOTV campaigns. It's just my opinion, but in the struggle for achieving public support, the key battleground is not the voting box, it's the idiot box.

The oligarchs have built a stable base on ignorant TV watching rubes, that base has to be shocked out of it's complacency. The fourth estate is their key instrument of power.

It's why so much effort was put into campaign's like operation mockingbird, and its various 'child' programs. Representative democracy is a joke if the electorate isn't informed.

Posted by: phildem | Jul 16 2015 15:51 utc | 14

@ 13: "The oligarchs have built a stable base on ignorant TV watching rubes, that base has to be shocked out of it's complacency. The fourth estate is their key instrument of power."

Absolutely true, but, don't hold your breath waiting for a change.

Posted by: ben | Jul 16 2015 16:03 utc | 15

b - thanks.. interesting post in that you seem to be venturing into trying to formulate a concept of how critical the financial system as it is presently defined impacts countries specifically within the euro.. as jfl points out - the recent dynamics in russia are another case in point.. brics is another fairly recent development which is in direct competition with the system in place that most people are in the dark about... well, when i mention the imf, world bank, special drawing rights, bank of international settlements - some of those institutions folks have heard of, but generally don't know much of anything about..

take a look at voting power in the imf membership at the bottom of this page.
then take a look at the basket of key international currencies used at present by the imf to define special drawing rights..

the other doozy is oil priced in us$...

i call it a financial ponzi scheme.. if you want to leave the mafia, or want to think you can work outside the mafia, you better be very prepared for the financial mafia coming after you... the coincidence of the patterns of destruction of countries in the past 15 years, beginning with iraq, and moving onto libya, syria, russia and moving on towards greece - all fit a pattern here and it has much to do with finances.. i wish more people were up on how finances drives many of these military agendas and how countries either work with the mafia, or they set themselves up for a lot of suffering attempting to break free of the same.. that's how i see the planet being run financially..

Posted by: james | Jul 16 2015 16:08 utc | 16

I'm not convinced that the situation is as bleak as is being suggested.

The term 'left' (imo) is a derogatory epithet coined by Abusive, Ignorant Right Wing Cranks to describe people whom Right Wing Cranks dare not debate in public.
It's all about minimising exposure of their Abusive Ignorant Crankiness.
Hence all the behind-closed-doors negotiations and oaths of silence and confidentiality.

NATO, and now the European Commission, are fraudulently undemocratic 21st Century versions of the Star Chamber and modern people should have as little respect and tolerance for any Star Chamber as their forebears found the good sense to adopt and execute several centuries ago.
No-one should ever feel obliged to tolerate the intolerable.

Posted by: Hoarsewhisperer | Jul 16 2015 16:42 utc | 17

IMO these 'lessons' miss the biggest one for the left: the loss of independent media. What good is protesting neolib control via banks if no one is listening?

Governments easily manipulate corporate controlled media via access journalism. Thus we get factual truths intermixed with propaganda spin that is relentlessly pro-business, pro-establishment.

Greece is a case in point. As described in Greek Government Insider Lifts the Lid on Five Months of 'Humiliation' and 'Blackmail', the Troika was gradually increasing pressure on Greece to do what the Troika demanded. They withheld billions of euro to Greece and cut off liquidity to the Greek government. Then they waited as the financial pressure on Greece grew. But along with those measures was a caustic media that painted Syriza as incompetent, then undemocratic (because most greeks wanted to remain in the euro), then irresponsible (for calling a referendum), etc.

Too often we give the media a pass when it has been well documented that business and government tries to control MSM (and increasingly other media as well) via access journalism, advertising revenue (a few industries dominate) writing stories that cite in-the-tank 'experts' from establishment-friendly think-tanks and controlled opposition.

Even within Greece, Syriza had trouble getting their message out because oligarchs own virtually all of the media! And many blogs also fell for the spin - even those that have been critical of the media in the past like Yves Smith at nakedcapitalism.com - despite the fact that the delay in Greece putting forth a proposal before the April 30th deadline could be logically attributed to the 2-step process that the Troika had forced (describing how they would service the debt would severely undermine Greece's position in future debt restructuring talks).

A Left that is not in touch with the people - and whose message is undermined by establishment-friendly media - is a disaster far greater than the loss of control of the financial system. The Left's greatest strength should be its connection with the people that it fights for. Yet, instead the Left has allowed itself to be marginalized by a corporate media that has strengthened the centrist 'faux Left' at the expense of the progressive Left. So much so that many people today identify THE LEFT with the identity politics that forms 'the base' for the fauxLeft. In short, people of the 'Left' are viewed as selfishly wanting something for themselves at the expense of others. (It should come as no surprise that reporting about Greece often fell in line with this line of thinking.)

For activists that are outside the centrist political establishment - anti-war, climate change, the environment (fracking, nuclear energy, etc.), inequality, constitutional and civil rights, etc. - it is very difficult to reach a wide audience. All 'change' is channeled into the pro-business, pro-establishment centrist political system. Anyone who is not a centrist is suspect.

Greece's coherent arguments quickly fell off media radar as sniping about their incompetence and their oh-so-strange Finance Minister took center stage. This put even more pressure on the Greeks and deterred potential allies. And the spinning continues. The understanding of most people still does not go much beyond this: the Greeks don't want to pay their bills and Syriza are incompetent radicals that made the problems worse and can't be trusted. In the face of this onslaught by the Troika and Troika-friendly media, Syriza's resistance is all but ignored in favor of trumpeting Greece's defeat (a warning to others?).

=

Is there any hope? Maybe.

1) Syriza formed a government with nationalists (ANEL). Why the Left is depicted as unpatriotic is beyond me, but the left may be getting its patriotic mojo back as WAR and trade deals are increasingly understood as benefiting an international elite. I could see similar political alliances forming in other countries. (In the US, I think the establishment had feared a potential Tea Party - Occupy alliance.)

2) Media reform (or the threat of it). The Greek government has begun investigations into media bias during the referendum (there was very little coverage of government rallies and government positions, etc.). If the Syriza-led government falls, any media reforms are probably less likely.

Ron Paul's "audit the Fed" movement got some traction which caused the Fed to take notice. "Truth in media" efforts should probably be re-doubled.

3) Education. We need to retain humanities education. Higher education is turning into vocational training. For example, IMO it's difficult to appreciate the myriad issues and import of the neolib consumer-oriented approach to government vs. the democratic citizen-oriented approach, without a humanities education.

Also, people don't usually react until it is too late - partly because few have enough learning to understand the impact that new policies will have. They try to make up for their lack of understanding by relying on trusted representatives like Obama. TTIP is a case in point. Look for demonstrations about Obamatrade in a few years when it is too late.

Posted by: Jackrabbit | Jul 16 2015 16:52 utc | 18

Following, a link to a German documentary about the various mechanisms of the EU [Troika, Eurogroup, European Commission, Council, etc] which are being used as devastating tools to beat down and extract wealth, vampire style, from Greece [and Cyprus], in order to revive comatose banks and line the pockets of investors, through privatization of public property.

This documentary does a good job of demonstrating just how the power of technocratic branches of the EU is being rolled out to pillage Greek, Portuguese, Cyprus economies, plunging the respective populations into ever greater misery.

The Trail of the Troika [1:29:22]

Posted by: dana | Jul 16 2015 17:25 utc | 19

@ 15

james, If you read the Shock Doctrine by Naomi Kline you can follow the same financial rape of South American countries in the 70's that the financial mafia are doing now to the middle east.

The world needs to have a discussion about the world of private finance that exists now and what could be if all finance were sovereign.

Posted by: psychohistorian | Jul 16 2015 17:34 utc | 20

Let me add to the discussion my repeating postulate that if inheritance and ongoing private ownership of property are effectively neutered, the whole tenor of our social organization stops being Gawd of Mammon focused, kills the existing power bases and allows humanistic leadership to emerge instead of the puppet psychopaths of the global plutocrats we have currently.

Posted by: psychohistorian | Jul 16 2015 17:42 utc | 21

The role of the European Central Bank and their buttler, Stournaras, at the Greek Central Bank in this fiasco needs this kind of discussion, and more, since it lies at the heart of German blackmail and coup attempt of the Greek government. Thank you b for this post.

@5

One reason that there have been inordinate arms purchase by Greece is that the Greek elite -- media, oligarchy, politicians (especially the latter) are up to their armpits in corruption, and one of the vehicles for corruption is arms deals.

The all powerful "socialist" minister of defence under Papandreou and minister of development under Simitis is now in jail, almost prime minister, now serving 20 years in the hoosgow, for being bribed by German arms dealers (Siemens, among others). It is widely believed that the previous governments went after this easy and obvious target to cut off investigations of others, a lot of others.

The nationalist minister of defence under the Tsipras government, Panos Kammenos is sending document after document to prosecutors involving a bewildering array of bribery, thievery, fraud, and so on in the Greek armed forces. Submarines that lean, helicopters that can’t fly, because of onerous service after purchase contracts. The list is huge.

One reason why both German and Greek corruptos hate him so much, and tried to bring down the Tsipras government. It remains to be seen if he keeps his post, after Tsipras’s deal with the Germans.

The other, of course, is the Turkey threat, also used to justify military procurement.

Posted by: Thrasyboulos | Jul 16 2015 18:26 utc | 22

pychohistorian @20

if inheritance and ongoing private ownership of property are effectively neutered...

A lot minds must be opened before that is even possible to contemplate. Right now, most people rely on the upper classes for structure and order - which to them as security and jobs. What do you propose to offer as a replacement? And how is that better than reforms that include: 1) a progressive tax system that crushes oligarchy; 2) really tough measures against government influence and corruption; 3) publicly funded campaigns and media; and 4) various reforms in education?

Posted by: Jackrabbit | Jul 16 2015 19:04 utc | 23

Quote from Jacobin from an article titled The End of Europe.

http://tinyurl.com/nt2g8g3

The discussions with Greece are thus a formal process designed to politically defeat Greece’s left forces, burying any prospects of meaningful political change across the continent. This is the only explanation for the creditors’ inflexibility despite Tsipras crossing all Syriza’s red lines in terms of pensions reforms, tax policy, privatizations, and market liberalization. This punitive stance was made crystal clear by late June, when the ECB actively incited a bank run, warning of an “uncontrollable crisis,” and abruptly capped its emergency loans to the banking sector, triggering bank holidays and capital controls.

Also in the site, an informative behind the scenes interview with Left Platform Syriza MP, Stathis Kouvelakis.

Posted by: Thrasyboulos | Jul 16 2015 19:31 utc | 24

Here's another lesson: Resistance works.

The Troika was willing to 'punch' Syriza's ticket ("Welcome to the Club"!) with minor concessions. But Tspiras/Varoufakis did not simply accept what the Troika demanded.

As bad as the deal is, Greece managed to get the debt restructuring that the Troika had refused to talk about. They had even refused to put their promises of a future debt restructuring in writing.

Many are saying that Greece should've prepared for GRexit; critizing Syriza/Tspiras as too establishment and too europhile to contemplate that path. But they have bought time to prepare for the next round. And in the next round, it may be that a GERexit is on the table as well.

Euro QE is not a magic elixir; just more extend and pretend. It'll exacerbate core vs. periphery problems as much as it exacerbates inequality (as it has in the USA). And political and fiscal integration is hard to do when people feel that they are not treated fairly.

Posted by: Jackrabbit | Jul 16 2015 19:34 utc | 25

This $50 billion Greek asset theft fund that was willingly handed over by Syriza traitors, as well as other politicians responsible, Is exactly the collateral needed for a independent Greek central bank to create, let's say for eg, a fractional reserve base of 10% to create $500 billion.

With that now $500 billion, the Greek government could pay off all the debt, including the criminally induced ones, and it's based on those $50 billion worth of assets.
And That's only if you agree to the idea of paying off all your criminally in deuced debts.

An independent and sovereignly principled government or parliament would do exactly that.
And there's more fractional reserves using National assets that can be used to grow the economy and serve the people.

Syriza knows this, but since they are unprincipled, Ideologically weak, cowardly towards their aggressors and more interested in power than public service, means you're never get that from these freaks.
Obvious from day one. Judge them on their actions, not on their whingeing on how they've been mistreated and violated.

How the fuck is it accepted, that private banks can print as much national currencies as they like, but the owners of the those national currencies - the people and the government - cannot do with fractional reserves and money printing, like what the private banks do.

Posted by: tom | Jul 16 2015 19:45 utc | 26

The main thing I see is how OVERLY COMPLEX the nexus of private and public fiscal policy is. No wonder almost every country on earth are heavily indebted, and locked into similar day-to-day nightmares.

It's designed to fail, it's designed to empower a small elite class of bankers, royals and politicians, and it's designed to destroy countries at will at the behest of the Anglo order

Posted by: aaaaa | Jul 16 2015 19:55 utc | 27

Greece managed to get the debt restructuring that the Troika had refused to talk about.

They did? Debt restructuring has not been reported as part of this "deal," only a vague promise to revisit it at a later time. Is this what you mean?

Posted by: bksalt | Jul 16 2015 20:13 utc | 28

Well, on the one hand, there's the question of who lends what. On the other hand, there's the question of what means are being used. The US controls the financial circuits. VISA, Mastercard, IBAN. If they don't want, they put a stop, as with Iran.

Posted by: Laguerre | Jul 16 2015 20:17 utc | 29

Today, Syria appealed for international assistance, after 500 Greek pensioners arrived in a ricketty boat, seeking a better life...

Germany has demanded they be repatriated. To pay back what they owe :-)

Posted by: DavidKNZ | Jul 16 2015 20:24 utc | 30

jackrabbit@17, I would like to point out that the Greek populace ignored the media when they voted in the referendum, so I think the importance of such propagandistic power is overblown. Once you lose faith in that source of information, it's gone; it doesn't come back. Russia under the Soviets is a case in point, and currently also there is an erosion in US confidence that what they see and hear is trustworthy. What happened after the referendum confused the public, and that was a huge mistake.

Back a ways, in support of Tsipras, I wanted him to do as Putin has done and shore up that public confidence because then you can make decisions in the moment and the support will grow. Immense popularity is a powerful weapon. Varoufakis was correct in seeing that as an important pivotal moment, when the people supported the 'no' vote that Tsipras had also supported. The course he chose confused his supporters. Paramount should have been the dictum that the people could not bear further austerity and that was that - the austerity they would face at that point would be the prideful kind that can see a brave future beyond.

Tsipras had embraced the New Deal outlook, but he forgot Roosevelt's famous saying, 'You have nothing to fear but fear itself.' Varoufakis welcomed, FDR style, the banksters' hatred. It's too bad Tsipras could not do the same. Long lines of grateful poor people stood by the tracks as FDR's funeral train passed. Will that happen for Tsipras? There's a Greek saying that one should count no man happy until after his death. Roosevelt, loved by his people and by history, was a happy man. I hope there's time for Tsipras to become one as well.

Posted by: juliania | Jul 16 2015 20:45 utc | 31

Tsipras cowered and failed completely.
There will be come riots, then Greece will smolder and disappear from the public news cycle for a while, until something new pops up somewhere else. The end.

Posted by: aaaaa | Jul 16 2015 21:05 utc | 32

PPS/23: Review of Current Trends in U.S. Foreign Policy, 1948 CE


Furthermore, we have about 50% of the world's wealth but only 6.3% of its population. This disparity is particularly great as between ourselves and the peoples of Asia. In this situation, we cannot fail to be the object of envy and resentment. Our real task in the coming period is to devise a pattern of relationships which will permit us to maintain this position of disparity without positive detriment to our national security. To do so, we will have to dispense with all sentimentality and day-dreaming; and our attention will have to be concentrated everywhere on our immediate national objectives. We need not deceive ourselves that we can afford today the luxury of altruism and world-benefaction.

For these reasons, we must observe great restraint in our attitude toward the Far Eastern areas. The peoples of Asia and of the Pacific area are going to go ahead, whatever we do, with the development of their political forms and mutual interrelationships in their own way. This process cannot be a liberal or peaceful one. The greatest of the Asiatic peoples—the Chinese and the Indians—have not yet even made a beginning at the solution of the basic demographic problem involved in the relationship between their food supply and their birth rate. Until they find some solution to this problem, further hunger, distress, and violence are inevitable. All of the Asiatic peoples are faced with the necessity for evolving new forms of life to conform to the impact of modern technology. This process of adaptation will also be long and violent. It is not only possible, but probable, that in the course of this process many peoples will fall, for varying periods, under the influence of Moscow, whose ideology has a greater lure for such peoples, and probably greater reality, than anything we could oppose to it. All this, too, is probably unavoidable; and we could not hope to combat it without the diversion of a far greater portion of our national effort than our people would ever willingly concede to such a purpose.

Between Berlin and a Hard Place: Greece and the German Strategy to Dominate Europe, 2012 CE


As Chancellor Merkel and other German leaders would frequently remind the rest of Europe and the world, with 7% of the world population, 25% of global GDP and 50% of world social spending, Europe’s economic system was unsustainable and uncompetitive in a globalized economy. Germany’s vision for Europe was aimed at introducing “rules to force Europe’s economies to become more competitive.” But competitiveness was defined by Germany, and thus, “the rest of Europe needs to become more like Germany.”

I nearly choked when I read Timothy Geithner quoted at the beginning of dana's link ... but it makes perfect sense. None of this is about 'economics' - that chimerical, dismal 'science' - all of it is about politics, and power politics, and imperial politics.

The Germans - like everyone else - can see the US has had its run and is headed for its fall. But they also know that Germany by itself is not of a size to pick up where the US leaves off, when the US leaves off. So Germany needs to take over Europe.

I think I've heard this before.


Between 2008 and 2013, the Greek government cut 40% of its budget, healthcare costs soared, tens of thousands of doctors, nurses and other healthcare workers were fired, drug costs rose, as did drug use with HIV infections doubling and a malaria outbreak was reported for the first time since the 1970s, while suicide rates increased by 60%. ... Unemployment has grown to 26% (and over 50% for youth), wages dropped by 33%, pensions were cut by 45%, and 40% of retired Greeks now live below the poverty line.

Cleanliness is next to Godliness. The Germans are cleaning up Greece, and Europe.

The IMF's latest move - fake debt reduction for Greece, the kind of stuff that flows out of Geither's pie-hole in dana's link above - seems to be overt recognition of this fact, bringing it into play.

So they new dynamic will be the US on one side and Russia on the other, containing Germany's New Europe?

Makes sense, really. (None of this makes any sense ... only to the zero-summers playing games with our world). China surely has its eyes on all that Lebensraum in eastern Russia. The US and Russia can team up to defeat the NAZIs who have 'stolen' the Ukrainian revolution (to contain both Europe and China). (And then the US can double-cross Russia when the time is ripe).

Hey, looks like it's 'working' with our new, soon to be 'best friends' in Iran.

Arghhhh. Makes me want to stop reading the news, stop watching the movie. Or do something to help change it.

Posted by: jfl | Jul 16 2015 23:50 utc | 33

More on the reaction to Germany's power plays, from Fort Russ ...

"Germany's policies pose a danger to Europe for the first time since 1945"--A View From Poland

... and the US' possible doubly convoluted play as hypothesized by Joaquin Flores last September ...

Pravy Sektor Coup as ISIS Scenario: NATO to Feign a ‘Unilateral’ Alliance With Russia

... just substitute the US for NATO. Germany has certainly knocked the scales from some eyes. I can't imagine Russia will be drawn in.

Greed and geopolitics do make strange bedfellows though. Nations don't have friends they have interests. And it's hard to see any of these 'nation' that have identified its citizens' interests with its own. Of the big ones ... maybe Russia under Putin? All he has is the support of the Russian people.

Posted by: jfl | Jul 17 2015 2:29 utc | 34

bksalt @27

Today the ECB agreed with the IMF on debt restructuring/re-profiling. I don't think the EZ/Troika can walk that back at this point. The question is how much relief they will actually get. I doubt it will be as much as it should be.

I expect more Greece-related uncertainty and turmoil in the weeks and months to come because the 3rd bailout needs to be negotiated, and there are aspects of the potential deal that will cause friction, like how much debt relief Greece actually get and how much of the 50bn Euro privitization Greece can actually accomplish (it was tried before and failed), etc.

Posted by: Jackrabbit | Jul 17 2015 4:46 utc | 35

Excellent thread.

Syriza has shown, I suppose, that gaining access to power isn't enough. The party has to be involved with its members and those they hope to make members. Helping people get access to food, medicine, security, and anything else the state is refusing to help with. The left cannot just win elections, it must be threatening to those in power. It must be prepared to take control of those things the people demand they control (and it must be willing to relax when the people demand this). People must look to the organization in Latin America, that is all I can say. There, under the harshest repression, democracy is thriving.

The story of Greece I suppose is a lesson for the rest of the left parties though, who of them has a chance outside of Podemos - and what of Podemos anyway. They don't seem particularly able sadly.

The world- but especially the west - in the last 30 years, has changed so fundamentally that democracy is nowhere to be found. Nor democratic forms of social organization are even gone for the most part. And now they are turning the screws on whatever remains. Even the middle classes live under turn-key totalitarianism, as it was said by someone, (as opposed to before, where it was just the lower classes) and everyone knows this. And it is proved more and more with each passing event it seems. The people are thoroughly boxed in and controlled, but unlike juliania I think the media has so much to do with it. The massive media conglomeration is a keystone of the changes over the last 30 years, as well as the emergence of the internet - brought to a great many people by those media conglomerates.

The oligarchs of the west are determined to return to their royal status and complete political power they had before WW1. This is really a hopeless feeling attached to this, their seemingly complete victory over democracy. And I imagine that is much of the point...

Posted by: guest77 | Jul 17 2015 4:48 utc | 36

I haven't read this all, but looks very applicable to our times...

The network of global corporate control - https://archive.org/details/TheNetworkOfGlobalControl

Stefania Vitali, James B. Glattfelder, and Stefano Battiston

Abstract
The structure of the control network of transnational corporations affects global market competition and financial stability. So far, only small national samples were studied and there was no appropriate methodology to assess control globally. We present the first investigation of the architecture of the international ownership network, along with the computation of the control held by each global player. We find that transnational corporations form a giant bow-tie structure and that a large portion of control flows to a small tightly-knit core of financial institutions.

This core can be seen as an economic “super-entity” that raises new important issues both for researchers and policy makers.

Posted by: guest77 | Jul 17 2015 4:52 utc | 37

juliania @30

Yes, Tsipras seems to have been ambivalent. The referendum was a bold move that actually worked in his favor but then turned cautious. Maybe he worried that if he threatened GRexit Schauble and the Troika would call his bluff?

In an earlier thread, I likened Tsipras to Chamberlain, who had the best intentions but is remembered as an appeaser. This may seem like a dramatic comparison but Michael Hudson has made the point that economics is now war by other means.

Chamberlain satisfied the public's overwhelming desire for peace just as Tspiras satisfied his public's desire to stay in the Euro. Each one had misgivings about the deal that they signed. Chamberlain began to rearm - especially building up British air power. Tsipras may also prepare for a future confrontation with the Troika.

Posted by: Jackrabbit | Jul 17 2015 5:33 utc | 38

Only one entity can enforce malevolent austerity against the Greek people and that is the Greek state.

And the government in charge of that state is Syriza. The Greek people's enemies has a Greek face too.

Posted by: tom | Jul 17 2015 5:54 utc | 39

The role of the Eurosystem within the half-hidden political order of the eurozone really is comparable to the Soviet or Chinese Communist Party.

No, it's not. Billmon doesn't understand the structure. He's not seeing it clearly, and is not getting to the root of the problem.

The individual EU countries that use the Euro cannot create their own currency. They GAVE UP their sovereign currency for a foreign one, the euro, when they agreed to make themselves subservient to the Maastricht Treaty.

The Maastricht Treaty did/does not allow for a 'federal government of Europe'. It ONLY concerned itself with a monetary union, and it set down strict rules for entry (for instance, a nation's deficits could be no more than 3%--an insanity). It allowed for the creation of a central bank, the European Central Bank (ECB), whose operating rules were dictated by the Maastricht Treaty (and subsequent revisions).

But crucial to understand is this: a central bank CAN ONLY SET MONETARY POLICY. You need a 'federal government' to SET FISCAL POLICY. The EU doesn't have that. Sure, it has the EU parliament, and it has a bunch of unelected officials running the ECB. But it has no overlord, no elected oversight, that can rule in conditions like Greece is going through to ease sectoral pain, and stop the bleeding of ordinary citizens. That requires fiscal policy. The only way that fiscal policy can be changed in the EU is by a change to the treaties. Or the blessing of Angela Merkel, because Germany has captured the ECB.

Let me try to put this in perspective. The US has a federal government AND a central bank. Despite what all the Federal Reserve haters and the 'get rid of the IRS' people claim (inaccurately), the US central bank is a creature of Congress and must answer, by law, to the federal government twice a year. It is the US Treasury's banker, and must, again by law, return all profits each year to the US Treasury.

The US federal government creates fiscal policy. This is the direction for the country that the central must follow and support trhough monetary polices. Fiscal policy is Congress’ job although they haven’t done it properly for 30 years. For example, if one of the 50 states is in trouble—let’s be hyperbolic: devastating earthquake, massive drought, asteroid hits--Congress can authorize (“appropriate") funds--creating them 'out of thin air’—to help the state. With no debt to children or grandchildren.

Why? Because the US federal government issues the currency, the 50 states only use them. The 50 states cannot create their own currency, just like the countries that use the euro. But the 50 states have the protection of the US federal government.

The formerly sovereign countries in the EU that use the Euro are like the 50 US states now. They cannot create their own currency, which would give them the policy space to pay their own citizens and denominate all the debts incurred in their own currency. They are dependent on the ECB, a goddam central bank that has no fiscal authority, to help them. EVEN THOUGH, in Europe, the ECB issues the Euro ‘out of thin air’. The ECB is a collection of central banks. And right now Germany’s central bank is dominant because it has climbed to the top—Germany was deeply in debt before the euro took over—on the backs of the other nations.

You will not begin to understand what is going on until you realize that the euro was designed by the famous French economist, François Perroux, in 1942 in anticipation of Hitler winning WWII, which was expected then. The plan was that they (the Nazi Pétain government wanted to be aligned with the German hegemon) would introduce a pan-Eurpoean currency and force adoption by the southern and eastern European countries to control and impoverish them. Mitterand, aligned with the Nazi/fascist Cagoulard in the late 1930 and 40s, was a Pétain enthusiast; this only came out in 1990. It was Mitterand who pushed through the euro, if you will check history. Perroux’s monetary replacement was the blueprint for the Maastricht Treaty and the subsequent treaties.

Posted by: MRW | Jul 17 2015 6:05 utc | 40

re, My @39,

And look what happened to the Ukraine when it gave up its plan to join the EU monetary union in February 2014. All hell broke loose. The people who really understand what's going on and would have profited from it--Obama is 100% ignorant of how the US monetary system works and therefore can't determine what's going on globally--were enraged.

Posted by: MRW | Jul 17 2015 6:25 utc | 41

@tom | Jul 16, 2015 3:45:06 PM | 25

How the fuck is it accepted, that private banks can print as much national currencies as they like, but the owners of the those national currencies - the people and the government - cannot do with fractional reserves and money printing, like what the private banks do.

1. Private banks cannot "print as much national currencies as they like."

2. Fractional reserve banking does not exist. It died 80 years ago in most modern economies. I think only Hong Kong and Bulgaria (I think) use it now. The US doesn’t' use it. Neither does any single country in the EU or Europe. Fractional reserve banking can only exist in countries that have a gold standard.

3. The only entity that prints the euro is the ECB, although the national central banks do it for the ECB under contract. BUT. BUT. BUT. These national central banks do it by keystroke. They don't control the physical printing presses. Besides, physical currency is such a small part of the currency.

4.

but the owners of the those national currencies - the people and the government
any country using the euro is not using a "national" currency. They are using a foreign currency.

Posted by: MRW | Jul 17 2015 6:46 utc | 42

@19/20 psychohistorian.. i like where you are coming from, but people are slow to change and always looking for leadership.. many think that because someone is rich or has a type of power that comes with money, that they will be good enough to lead.. that is a mixed bag to me personally.. there are just as many losers with money as not..

@28 Laguerre.. thanks.. you've given a specific example to my more generalized observations already posted.. indeed - visa and mastercard are a part of the same ponzi scheme run by the same kleptomaniacs under the guise of whatever they want to pass themselves off as.. playing with the bank of international settlements is only a step away..

@35 guest77 quote.. "The world- but especially the west - in the last 30 years, has changed so fundamentally that democracy is nowhere to be found." i think that is very true..

@39 mrw.. good post, but you are not addressing the issue directly either.. making a comparison to what was a country like greece to one of the states in the usa, cheapens the idea of what a country is.. the euro has done this too.. doesn't mean we have to go along with it, but in terms of drawing a parallel, it isn't a bad one to make. and of course the big difference here is now that greece has given up it's control of monetary policy, as have all the other countries gobbled up in this insane idea of an european community - greece is an opportunity for everyone within the stupid structure to see it for what it is - a complete rip off of any shred of democracy that might have remained...

mrw - we've had these conversations before.. you appear to think the fed reserve is some sort of good two shoes neutral structure that follows a mandate and is not beholden to malevolent interests.. i see it as just the opposite.. the euro was another way to diversify the ponzi scheme by duping a lot of ignorant people into something they would have been better knowing more about.. i would be curious to hear a response from you that provides an answer as to the solution here.. mine would be greece to say fuck you to the euro currency and go back on it's own...

Posted by: james | Jul 17 2015 7:06 utc | 43

@jackrabbit.....you said that us "lower class" folk rely on the "upper class" folk to keep the world running

In the 66 years of my life I have seen untold potential waiting/begging for opportunity and I think your neck might break watching the momentary vacuum be filled getting rid of the top 50K social parasites and their attendant sociopaths. It is a myth that us poor 99% can't make it without the 1%. It is a myth that has been around for centuries and never has been true. The 1% are and have been an impediment to that advancement of humanity for quite some time. In most major ways we stopped evolving during the Enlightenment period when faith didn't become deprecated but instead became one of the tenets of the Western form of social organization, others being private property/finance, inheritance and "rule of law".

If all that were to change by neutering inheritance and ongoing ownership of private property (yeah, neuter public policy influence of religions too)
With Capital being returned to the global Commons, public education regains its priority and is a right for all but at the higher levels; and private education disappears. With those of faith no longer being in control of public policy, population control can be discussed, managed and alternatives like birth control researched/provided. We have answers for many of our pressing social problems, but we do not have the will to break out of the anthropological mold we are in.

Would the 99% agree to develop and use a technology that burdened the next thousand generations of humans to manange the potentially extinction causing effluent (i.e. Fukushima)? We live according to a very sick, no longer defensible and currently committing war crimes against humanity form of social organization, who's administrators we used to prosecute at the Hague 70 years ago. American empire is now the tool of the global plutocrats and the odds of the 99% wresting control away and changing the course of our species and world look slim.......but creating textual white noise on the intertubes is cathartic.

Posted by: psychohistorian | Jul 17 2015 7:29 utc | 44

@42 james,

mine would be greece to say fuck you to the euro currency and go back on it's own...

Me too. Except they should have started 18 months ago. It's more complicated than saying, "Hey! Let's print Drachmas and have some Ouzo."

I'll answer the rest of your post tomorrow because it's 3 AM here.

But I couldn't let this pass or I won't go to sleep. ;-)

you appear to think the fed reserve is some sort of good two shoes neutral structure that follows a mandate and is not beholden to malevolent interests.

No, I don't. Far from it. But I am clear-eyed about it's legal place in the US financial structure. Congress created that financial structure over the last 80 years; it was, however, a gradual process. It's all recorded in the Congressional Record, and you can read it for yourself. I don't believe there are a bunch of hook-nosed Jews colluding in a basement in the City of London running the joint the way G Edward Griffin implies. Congress granted a level of independence to the Fed--a technically smart decision--and various Fed chairmen over the decades have exercised it. But some of them have instituted horrific decisions, and because the elected House of Reps understand boo-fuck-all about how the monetary system works, they didn't take the chairman to the woodshed. That's how you spawn "malevolent interests." Ignorance.

Posted by: MRW | Jul 17 2015 9:08 utc | 45

It is a matter of weighing the advantages of belinging to a central, stable currency or of having the sovereignity to borrow and print money as you wish.

What nobody wants to admit is that Greece, although a small country, is nonetheless Too Big to Fail, and the ECB cannot allow it to go down or it will drag the US and EUropean economies down with it and cause considerably more damage than any bailout.

The political trick is selling that notion to German citizens, who are raised to believe that saving money is a cardinal virtue, borrowing is a necessary evil to be avoided wherever possible, and that declaring bankruptcy is a moral abomination.

And in the end, taxpayers are not bailing out Greece, they are bailing out the banks who facilitated the financial crisis that it finds itself in.

Posted by: ralphieboy | Jul 17 2015 9:51 utc | 46

Regarding events of past 6 months between Greece and the EU
(and Greek membership of the euro).
Following the recent Greek capitulation,it is clear to almost everyone now that the fuse has been lit beneath the euro.(and possibly even the entire European project.

Eurosceptism is starting to break out (and its only just starting) throughout the entire EU.
We can now all see politicians such as Marine Le Pen getting elected in next French Presidential Election on a purely "leave the euro now" ticket.

PS the entire Europe project was always predicated on a "lets destroy individual National Sovereignty" premise (a sort of EUSSR).

I never did understand why when Communism officially died around 1990
that it seemed to make an almost simultaneous and miraculous rebirth, but then Europe is the land of Dracula
and various other 19th century horror stories.

Posted by: chris m | Jul 17 2015 10:06 utc | 47

A national currency can also be a large part of national identity, which is why there is no chance of the UK ever joining the Euro unless some day in the (distant) future the Pound devalues to 1:1 and they vote to join the Euro on the condition that the Pound devalues no further and that they get to keep Pound notes within the territory of the UK as legal tender.

Posted by: ralphieboy | Jul 17 2015 11:05 utc | 48

Great post
here's the interview with the architect of the euro who confirms the purpose of the common currency
According to investigative journalist Greg Palast, what’s happening to Greece is a bug not a feature. Palast managed to interview the economist who designed the Euro who confirms some of my longtime suspicions about the European Union.

“The imposition of the euro had one true goal: To end the European welfare state. For Mundell and the politicians who seized on his currency concept, the euro itself would be the vector infecting the European body politic with supply-side Reaganomics. Mundell saw a euro’d Europe as free of trade unions and government regulations; a Europe in which the votes of parliaments were meaningless. Each Eurozone nation, unable to control neither the value of its own currency, nor its own budget, nor its own fiscal policy, could only compete for business by slashing regulations and taxes. Mundell said, “[The euro] puts monetary policy out of the reach of politicians… Without fiscal policy, the only way nations can keep jobs is by the competitive reduction of rules on business.”

Posted by: camelotkidd | Jul 17 2015 13:38 utc | 49

psychohistorian @43

I'm not arguing against your goal. I think there are many milestones along the way, and those are difficult enough to achieve.

I also think that, by focusing on your goal, you open yourself up to criticism of being anti-capitialist. I think the problem is NOT capitalism but the regulation of capitalism. (I am not convinced that regulation of capitalism is impossible as some seem to believe.)

Posted by: Jackrabbit | Jul 17 2015 14:43 utc | 50

Syriza has shown, I suppose, that gaining access to power isn't enough. The party has to be involved with its members and those they hope to make members. guest77 at 35.

I agree, also pretty much with the rest of the post. What happened is that there was a power vacuum in Greece (when PASOK threw in the towel and the old structure crumbled) and the only ones willing to enter the breach were Syriza. One might also say that in Greece the political power structure does not match the real power structures in a good or efficient way. This democratic hoopla is all peachy cool when it is Swiss burghers discussin’ and votin’ on the color of the trams, or property tax, while being faithful to their ‘radical’ or ‘socialist’ -whatever- roots. In Greece, in its present form, it does not work. See for ex. the fantastical abyss between the OXI vote and the acceptance by the elected representatives of even harsher austerity.

Ideally, in a hypothetical genuine, true? democratic system, after the OXI vote a unitary or even technocatic Gvmt should have been formed (ironically, Tsipras did just that in a way ..) behind the OXI vote, to collectively resist and bargain (doubt any positive result would have been forthcoming but who knows), but naturally that was not possible.

One argument is that the ‘Left’ must be ‘more in touch’, ‘must reform’, must be ‘more grass roots’ etc. (Sounds a bit like what they say about the EU, heh? And in Greece that argument is made, plenty) - true, but imho it won’t be enough. No way.

So some other avenues have to be explored, sought, implemented.. One imperative (under the present cirucumstances) is national sovereignity, see in Greece, New Democracy being say ‘for austerity’, ‘for the euro’ and so on because they are tied up in comprador not to say Mafia circles linked to the EU, big capital, banks, instituted corrupt structures, tax evasions, etc.

Anyway this debacle has shown that parliamentary democracy is not to be afforded to small powerless countries that have been taken for a ride. I think ppl are seeing that now, that facade is cracking.

Overall the EU is in deep sh*t. It won’t survive for very long in its present shape.

Posted by: Noirette | Jul 17 2015 15:00 utc | 51

re 48. In my experience on other affairs, Greg Palast is best known for his inventiveness and imagination.

Posted by: Laguerre | Jul 17 2015 15:09 utc | 52

camelotkidd

This article fails to note the 'eurosclerosis' that plagued Europe in the 70's and 80's. Uncompetitive economies with large social obligations and clientist political systems that still exist in some areas.

The 'evil genious' moniker doesn't really fit. I doubt he is the only economist that would've offered such a solution. And he is certainly not the only guy that found European labor laws of the time to be a costly headace. I think he just got there first. And his demeanor is grandfatherly not menacing.

And he is not unmindful of how his work can be misused. When I took his advanced economics class in the early 90's I argued against the excesses of supply-side economics while others in the class seemed to be eager to show their support of what they assumed Mundell believed in. I got an A-.

=

There are problems with the Euro - the disparate economies, the lack of political and fiscal union, the uneven benefits, etc. - but blaming it on the academics seems like scape-goating, and nearly as bad as blaming it on the victims. Should we blame Marx for the fall of the Soviet Union?

Posted by: Jackrabbit | Jul 17 2015 15:16 utc | 53

Posted by: Jackrabbit | Jul 17, 2015 11:16:30 AM | 52: "I took his advanced economics class in the early 90's I argued against the excesses of supply-side economics"

Ah. Can you stir a revolution amongst apparatchik technocrats? These compradors have too much investment, as they always will, and the fantasy of regulated capitalism they will always regard as a fraud too far.

Posted by: Comrade X | Jul 17 2015 15:39 utc | 54

What exactly did Greece's central bank do that undermined Syriza?

Posted by: trouvere | Jul 17 2015 17:14 utc | 55

@43 psychohistorian.. i agree with your viewpoint..

@45 mrw.. thanks.. that last quote was a cheap shot from me.. i apologize for that!!! i just couldn't remember what your position was on teh topic of the fed.. i always enjoy reading your commentary.

@51 noirette quote "Anyway this debacle has shown that parliamentary democracy is not to be afforded to small powerless countries that have been taken for a ride. I think ppl are seeing that now, that facade is cracking.

Overall the EU is in deep sh*t. It won’t survive for very long in its present shape." i agree. lets see how slow or fast the changes happen..

Posted by: james | Jul 17 2015 17:14 utc | 56

Conrade X

Too many economists have not spoken out about the excesses. Economists couldn't even put together a proper ethics policy.

Sometimes I wonder if economists shouldn't publish anything until it has been reviewed by a few sociologists (and maybe vice versa).

Posted by: Jackrabbit | Jul 17 2015 18:06 utc | 57

@Jackrabbit, 57:

If you took all the economists in the world and laid them end to end, they'd all point in different directions...

Posted by: Vintage Red | Jul 17 2015 18:17 utc | 58

MRW @42

How do you reconcile the contradiction between your points 1 and 2.

If Private banks "cannot" print as much money as they like ( point 1 ), then how can fractional reserve banking Not exist in most of the world ? ( point 2 ) . If fractional reserves do not exist then they free to print as much as they like.

Of course whem I say they can "print as much as they like" , that is not a children's imagination interpretation where the private banks are free to print infinitelt, that's of course the private banks have been unlinked from previously acceptable amount of printing/keyboard strokes, to create money.

And your 3rd doesn't make any sense at all. How does a gold standard have any restrictions on having a 10% fractional reserve, 1000%, or 1,000,000% of gold holdings ? Gold doesn't make decisions, regulations and enforcement are the decision-makers. Whether it's gold or fiat.

Posted by: tom | Jul 17 2015 20:34 utc | 59

And your point 4 is right. It is my argument to why no country should join a single currency like the euro, and nations should always have their own sovreign national currencies

Posted by: tom | Jul 17 2015 20:38 utc | 60

Me @59.

Sorry but my third point was actually a part of your second point

Posted by: tom | Jul 17 2015 20:42 utc | 61

Thanks b. I think this post gets to the core problem that puzzles me. What is happening to the Eurozone? You do not get 19 member states to goosestep in unison to subjugate a people unless they are ordered to do it and the structure of the organization forced them to comply. Greeks and the people of the other peripheral states will revolt. The Eurozone is dead as of today except it won’t die till later.

I can only surmise the ECB and the financial oligarchs who control it recognize the instability of the financial system and they dare not officially declare a Greek default less their house of cards collapse. Thus, the Troika dropped a financial neutron bomb on Greece; forcing them stay in a dead Eurozone.

Posted by: VietnamVet | Jul 17 2015 22:33 utc | 62

"If Private banks "cannot" print as much money as they like…"

I realize I'm not MRW, but banks can only 'print' money when qualified borrowers walk through their doors and take out a loan (which, at least in the U.S., they haven't been doing much of for over seven years…outstanding credit has yet to reach the 2008 high, but its finally getting close).

…and 'print' means spending. Printing is meaningless if some entity doesn't spend the money into existence. We could 'print' trillions of dollars and store it in a warehouse…it would be as if it never existed. Stay money comes into existence the moment it lands on a non-government balance sheet.

Anyway, only about 1-2% of our money is physical currency and coins…around $1T last time I checked. The rest is just numbers on balance sheets.

Every central bank in the World has gone on record that loans create deposits…there is no such thing as Fractional Reserve Banking.

http://www.bankofengland.co.uk/research/Pages/workingpapers/2015/wp529.aspx#

“in the real world, there is no deposit multiplier mechanism that imposes quantitative constraints on banks’ ability to create money in this fashion. The main constraint is banks’ expectations concerning their profitability and solvency.”

The Fed has similar papers available, and both Alan Greenspan and Ben Bernanke have publicly stated that we create money by marking up non-government bank accounts.


Posted by: paulmeli | Jul 17 2015 23:23 utc | 63

"Only one entity can enforce malevolent austerity against the Greek people and that is the Greek state.

And the government in charge of that state is Syriza. The Greek people's enemies has a Greek face too."

I don't believe this at all. The Greek state is dependent on other states. Syirza finds itself in an impossible position. To imagine that it is as simple as Syriza flipping a switch and they have just neglected to do so simplifies everything far, far past anything sensible or reasonable.

I'm not saying Syriza made all of the right mover, but neither do I think they can be considered "the Greek People's enemy". Not at all. They appear to be being honest. But we'll know by the reaction of the Greek people to them to know how the Greeks feel about what has been "accomplished".

Posted by: guest77 | Jul 17 2015 23:52 utc | 64

psychohistorian@ 44

I really like your ideas. A breath of fresh air and humanity.

Posted by: notlurking | Jul 18 2015 0:33 utc | 65

Jackrabbit@38

Sorry to be late on here. The Chamberlain comparison is an interesting one, and Tsipras' tragic flaw may be his devotion to the Eurozone - I think it is his, not really any perceived mandate, because surely he knows a good leader makes choices as events change - to go back to my example, that's what FDR did, and very risky choices they were. Some of FDR's didn't work, so he did other things. He was making it up as he went along, and I think that's very similar to what would be needed in exiting the eurozone. You would have to bring the people along with you, with the confidence and trust that something needed to happen, charting a new course. Tsipras doesn't seem to have been willing to do that, and consequently he runs the risk of being just one more in the line of leaders who have caved under pressure.

I think it has a lot to do with lack of faith in the people themselves on the part of such leadership. Obama showed this when he didn't take public financing but already was turning to the banksters. He didn't need to do that, and he probably would have even had a bigger vote tally if he'd stayed with the people. I wonder why this new leadership seems so divorced from sympathy with those who elect them and whom they presumably serve? I don't think Tsipras is as two-faced as Obama, but he's starting to wear the same shoes. The tragedy is the Greek people so much need him to step up - the way a tennis player steps up if he's really a champion. I think there's still time but it's getting late. If he keeps on with this deal, history will take note. That's a huge price to pay.

Posted by: juliania | Jul 18 2015 5:08 utc | 66

Tsipras ... he messed up. If 'his' deal goes through Greece suffers the full catastrophe. The thing to do is to prevent that happening. Tsipras is a lame duck. It makes little difference why he messed up ... character flaw, bribery, incompetence, all the usual failings of the political class. The point is he has set Greece up for more lethal loans and so his 'program' must be repudiated. The only way I can imagine that happening is via the direct participation of the Greek people in their government. If there is a majority NO! on the new' program, good. Make a counter offer ... when (if, I suppose, to be inclusive) it's rejected, exit the euro - there's life at the end of the tunnel. If not ... well, they're done for, aren't they? Debt-slaves of the German-dominated EU : deprived of their remaining assets and their own government.

Posted by: jfl | Jul 18 2015 5:24 utc | 67

Lapavitsas Calls for Exit as the Only Strategy for Greek People (the video, audio and transcript):

Why this capitulation? Why have we come to this after all the enthusiasm of six months ago? After the surge of grassroots support in this country and in Europe? The answer is clear to me. And it has to do with the wrong strategy, that was good enough to win elections, but proved disastrous in government. What is this wrong strategy? It's very simple, expressed openly time and time again. We will achieve radical change in Greece, radical change in Europe, and we will do it within the Eurozone. That was the strategy. Well, that's not possible, period.

As far as I'm concerned, the Greek left has found its leader. Lapavitsas says it all, clearly and brilliantly: Grexit and nationalize the banks.

You can't advance if you do not understand that Syriza has failed, if you keep making excuses for their failure, or try to pretend it was anything but failure. Greece must leave the euro. This has been obvious for several years, but unreasoning, 'no matter what' Eurozone love, especially prevalent within Syriza and generally among the middle-class European left and pseudo-left (Podemos, I'm looking at you!), MUST be abandoned. The euro doesn't love you; it's time to stop loving it back.

The MAIN task for the European left, if it wants to be left rather than neoliberal, is to abandon the euro. It's easy: listen and be persuaded by Lapavitsas.

Posted by: fairleft | Jul 18 2015 6:58 utc | 68

More from Lapavitsas:
Finally, the deal is quite clearly neocolonial. The government of the left has signed up Greece to a neocolonial agreement.

And it is--it is neocolonial for many reasons. I will mention three. First, the deal proposes the establishment of a privatization fund of 50 billion Euros which will basically sell public property under foreign management. 25 billion of that, the first 25 billion, will go to the banks by the agreement. If there's anything left, and there won't be anything left because they'll never make 50 billion, it might go to repaying the debt and possibly to investment. Essentially, then, this fund will sell what it can of public property to recapitalize the banks. We've just agreed the deal that sells the family silver to recapitalize the failed Greek banks.
~~~
The real winner of this deal is obvious. It's staring you in the face. The real winner is the Greek oligarchy expressed in the mass media. That's why the mass media are thriving and celebrating [a win].
~~~
Because the monetary union in which, to which Greece belongs, is not ideological. I mean, it is, but it isn't just ideology. And it isn't just a balance of forces. It is an institutional mechanism. The sooner the Greeks understand this, the better for all of us. It is an institutional mechanism, it is a monetary union that's, it's a hierarchical body that works in the interests of big business and in the interests of a few countries within it. That's what the EMU is.
~~~
Now, what do we do, then? What we need to do is to withdraw our consent to this agreement. To withdraw our consent to this agreement. And to redesign a radical program that is consistent with our values, our aims, and what we've told to the Greek people all this time, all these years. And that radical program is impossible without Euro exit. The only thing that we really need to do is focus on developing a plan for Euro exit that will allow us to implement our program. It is so obvious I'm amazed that people still don't see it after five months of failed negotiations.

Posted by: okie farmer | Jul 18 2015 8:10 utc | 69

http://www.bbc.com/news/world-europe-33578778
The former Greek finance minster has said his country's economic reforms are "going to fail", just as formal talks on a huge bailout are set to begin.

In a BBC interview, Yanis Varoufakis said Greece was subject to a programme that will "go down in history as the greatest disaster of macroeconomic management ever".
~~~
I may disagree with [PM Tsipras] and I declared that by resigning my post
~~~
The bailout could total €86bn (£60bn) in exchange for austerity measures.

In a damning assessment, Mr Varoufakis said: "This programme is going to fail whoever undertakes its implementation."

Asked how long that would take, he replied: "It has failed already."

Posted by: okie farmer | Jul 18 2015 8:23 utc | 70

Varoufakis is just whining. He doesn't provide a solution to the immediate and staggeringly important problem, imposition of worse austerity on Greece's people. He sounds not dissimilar to Tsipras, who also says he's unhappy/pessimistic yada yada. They're like old men complaining about the weather. Whining and whinging, Tsipras has signed up to carry out the police state repression that's the only way his new legislation can be carried out.

Even though the solution/escape is clear, as Lapavitsas points out. It's almost as if the Syriza apologists are incapable of saying/thinking the word 'Grexit'. Who is holding their tongues?

Posted by: fairleft | Jul 18 2015 8:51 utc | 71

parking weapons like f-16 and submarines in countries is a good idea...they are maintained and serviced and kept ready for active service...this all under the cover of arms deals etc etc.

there is only one flaw..the government of that country must be trusted....they cannot change sides...greece is in a unique position.opposite north africa,on the med, so it is well positioned for launching of attacks,on countries like libya or tunisia or even egypt.

discrete crete sounds like a good name.

Posted by: mcohen | Jul 18 2015 10:59 utc | 72

"Varoufakis is just whining. He doesn't provide a solution…"

Exactly. There is no solution that doesn't include leaving the Euro and reclaiming monetary sovereignty (although that alone won't do it…they need astute, competent leadership too). A solution that presumes changing the fundamental Euro structure to include a fiscal component is never going to happen, the big guns (Germany) would leave before that would happen.

Playing long shots works in the movies, in real life not so much.

Most of the billions of words that have been written on this subject have been little more than wailing and gnashing of teeth. Denial.

There are several stages to go before there is any viable solution that citizens will sign on to, that won't be co-opted by TPTB.

Posted by: paulmeli | Jul 18 2015 12:15 utc | 73

I'm not saying Syriza made all of the right mover, but neither do I think they can be considered "the Greek People's enemy". Not at all. They appear to be being honest.

Posted by: guest77 | Jul 17, 2015 7:52:02 PM | 64

What a load of utter nonsense.

Honest?

They demanded the right to seek a mandate from the people before proceeding.

They then got exactly the mandate they claimed to have sought . . . . . .

. . . And then, promptly ignored it entirely.

=======

There's nothing "honest" in that.

Cynical? Absolutely

Manipulative? Certainly

Threacherous? Most definitely

But "honest"? . . . . GTFO!.

Posted by: honest! | Jul 18 2015 13:28 utc | 74

@71, @73

And you guys are just endlessly whining about the whiners ... the political class has chosen its preferred 'solution'. They're all done. If there is to be a real solution it has got to come from the Greek people.

@37

That's quite an article. I cut and pasted the picture of the 'bow-tie' graph and made the table of the 50 top controllers from page 33 sortable below it.

page 33 of The network of global corporate control

I'll try to summarize the significance of the bow-tie graph and its abbreviated labels tomorrow, for those who don't want to read the full article themselves.

Twenty-four of the top 50 controllers are nominally American.

Forty-four are financial.

Posted by: jfl | Jul 18 2015 14:06 utc | 75

Posted some time back about the ESM (etc.) Here some info that give OK descriptions.

Eric Zuesse, global research

http://tinyurl.com/pqwbvqa

> a link in that article to the Treaty (automatic download)

then this, from the Corporate Europe Observatory

http://tinyurl.com/o3eyg25

> a link to a leaked text explaining the Troikas plans for the privatization fund (that 50 bn) pdf

http://corporateeurope.org/sites/default/files/esm_report_to_greece_0.pdf

for some extra financial info (the only available to the public?) one must go to their site and click through and through - all automatic downloads.

http://www.esm.europa.eu

As MRW writes, at 40, there is no resemblance between EU financial and pol. structures those of the Soviet, Chinese Communist Parties.

MRW maybe you are hyping the Nazi past? Mitterand and Thatcher particularly were against the re-unification of Germany. Mitterand wanted to lock Germany down in the Euro in an ‘alliance’ (or because he was a bankster’s man, in fact laws prohibiting speculation were lifted in France well before Billy C’s annulment of Glass-Steagall, the US played catch-up) and Germany made the trade, with difficulty (attachment to the mark, independence, etc.) Controlling countries through their currency and banking system is not an original or particularly Nazi idea. For ex it works right now in parts of Africa with the CFA and nobody talks about it. The French didn’t borrow that idea from the Nazis.

Posted by: Noirette | Jul 18 2015 15:43 utc | 76

Jackrabbit at 38, juliania at 66, jfl & fairleft >67

Like many, I've been waiting for the longest running drama on the Athens stage to finally get to the last act before attempting to make sense of the staging, plot and characters.

I still don't think we're quite there yet; probably a little more political fall-out still, but not much, see e.g., a majority of the Syriza Central Committee opposed the austerity deal.

The question of the political leadership of the left, however, is always an interesting topic. Also from the 17 July "Links" page at - dare I mention the name? - Naked Capitalism, John Pilger at Alternet argues thatThe Leaders of Greece Are Some of the Phoniest Idealists You'll Ever See. It seems hard to disagree.

Having set aside the mandate of the Greek electorate, the Syriza government has willfully ignored last week’s landslide “No” vote and secretly agreed a raft of repressive, impoverishing measures....

The leaders of Syriza are revolutionaries of a kind – but their revolution is the perverse, familiar appropriation of social democratic and parliamentary movements by liberals groomed to comply with neo-liberal drivel and a social engineering whose authentic face is that of Wolfgang Schauble, Germany’s finance minister, an imperial thug. Like the Labour Party in Britain and its equivalents among former social democratic parties such as the Labor Party in Australia, still describing themselves as “liberal” or even “left”, Syriza is the product of an affluent, highly privileged, educated middle class, “schooled in postmodernism”, as Alex Lantier wrote. [I could not immediately find whatever Pilger is quoting, he is affiliated with the "wsws" website; such sad sloppiness at a major site in these days of html coding...]

For them, class is the unmentionable, let alone an enduring struggle, regardless of the reality of the lives of most human beings. Syriza’s luminaries are well-groomed; they lead not the resistance that ordinary people crave, as the Greek electorate has so bravely demonstrated, but “better terms” of a venal status quo that corrals and punishes the poor. When merged with “identity politics” and its insidious distractions, the consequence is not resistance, but subservience. “Mainstream” political life in Britain exemplifies this.

This is not inevitable, a done deal, if we wake up from the long, postmodern coma and reject the myths and deceptions of those who claim to represent us, and fight.

How then do democratic movements ensure that their leaders views and priorities accord with their own, and can be held responsible and be replaced? What sort of leadership is needed for industrial as well as political democracy?

Posted by: rufus magister | Jul 18 2015 16:09 utc | 77

ps to 77 -- Amongst the parties affected by the Munich Agreement, I think Edvard Beneš, the Czechoslovakian President, is a better fit for poor Tsipras.

Posted by: rufus magister | Jul 18 2015 16:18 utc | 78

"the political class has chosen its preferred 'solution'. They're all done. If there is to be a real solution it has got to come from the Greek people."

No kidding?

I don't know what's worse, repeating the obvious ad nauseam or whining.

Posted by: paulmeli | Jul 18 2015 16:54 utc | 79

Having set aside the mandate of the Greek electorate, the Syriza government has willfully ignored last week’s landslide “No” vote and secretly agreed a raft of repressive, impoverishing measures…. a quote by rufus at 77

NO. Syriza was elected on a platform of ‘staying in the EU-Euro’ and at the same time ‘reducing /abolishing austerity.’

This mandate might be considered contradictory or ridiculous, illusory, doomed to fail, etc. (Yes I agree.)

Also Syriza has a slim voter support and thus had to form a coalition Gvmt.

Well in function of that contradictory mandate they managed (at terrible cost and perhaps misguidely) half of it. Staying in the Euro.

What is surprising? Nothing.

Why they chose the one above the other is abundantly clear.

Posted by: Noirette | Jul 18 2015 18:00 utc | 80

RM@77

I enjoy good discussion and criticism but this carping and sniping about Syriza from the US Left says more about writers such as JP and the weaklings of the Left, that have attained a new level of meaninglessness, and has allowed someone like Bernie Sanders to claim to be a Socialist without any real blowback, is trying.

Posted by: Wayoutwest | Jul 18 2015 18:24 utc | 81

The failure of SYRIZA to break Europe's stranglehold on Greece suggests the necessity for radical measures. Tsipras made a lot of noise, but the lack of will to take Greece off the Euro played into the Troika's hands. If anything positive comes from Greece's humiliating surrender, it's that the Troika cannot be negotiated with. Anti-euro political parties in Europe must take note; preparations must be made to exit the common currency. Full Stop.

There is no equivocation here. Only preparations to abandon the currency matters. All else is conversation. I don't expect Tsipras or SYRiZA to last much longer as a political force. The left must regroup to make plans to leave the Eurozone. However, given SYRIZAs surrender, the left will lack credibility. The right will most likely emerge as the more political force. Probably in conjunction with the military, which will need to be deployed to reorient the Greek economy off the Euro.

Posted by: Greg T | Jul 18 2015 22:14 utc | 82

@79

It seems not to be obvious to the Greeks, or as obvious as the unmentionable 500 kg gorilla in the center of the room. Any links to popular organizational sites in Greece? I can well imagine that the MSM would not publicize them.

Posted by: jfl | Jul 18 2015 23:01 utc | 83

@77

' if we wake up from the long, postmodern coma '

Coma ?, comatose ?, zombie ? Uh oh ! ... Niagara Falls ! Slowly I turned, step my step, closer and closer ...

I guess if you say it with an Australian accent it's ok?

Posted by: jfl | Jul 18 2015 23:08 utc | 84

paulmeli at @63 has got it exactly right. In all modern economies on a fiat currency, loans create deposits.

Bankers, as a result, create ‘credit money’, NOT new interest-free money. (Credit money also means that one person’s asset is another person’s liability. At the commercial banking level within the real economy that includes collateral, timed repayment schedule, and interest owed, which is income to the issuing bank. Everything nets to zero at this level across the macroeconomy.)

The US federal government, on the other hand, adds new money into the economy. Only entity that can. Only the US federal government can introduce new, interest-free money into the economy, and it does it via congressional spending based on the needs of its citizens, and where it wants the economy to grow (giving 40% of it to the financial institutions is NOT GROWTH). Which the mo-fos we’ve elected do not understand.

One small quibble, Paul. The amount of physical currency, physical cash and coin, is around 11.5% to12% of the available money. The rest are treasury securities. Don’t forget that countries like Ecuador are pegged to the USD and need US cash for their citizens. Ecuador’s central bank orders them from the US Treasury (Bureau of Printing and Engraving) and puts up 100% of the demanded amount in assets (treasury securities) to pay for them.

Posted by: MRW | Jul 18 2015 23:29 utc | 85

Tom @61

Sorry for the delay. I’m traveling. Good questions, btw.

First, let’s clear up what fractional reserve banking is. This is a lousy simplistic example, but it will work. And let’s imagine a small western town with one bank, which I will call Bank Buckeroo. Introducing a second bank in the town mean I would have to explain how interbank reserves work, and it doesn’t matter in this explanation. [BTW, US banks DO NOT LEND their reserves; reserves serve another purpose in the US banking system; namely to help the Federal Reserve retain the overnight interest rate target that banks charge each other. Canada, for example, doesn’t even have a reserve requirement for their commercial banks.]

Fractional reserve banking explained

OK. Johnny Schwartzburger sidles into his Bank Buckeroo and deposits 100 bucks in cash in his savings account.

Now Bank Buckeroo has got $100 more than it had yesterday.

Because the reserve requirement is, say, 10%—the FRACTION of the loan that the bank must retain under “fractional reserve banking"--Bank Buckeroo holds onto $10 and can loan out $90.

Sally Sweetpea needs $90 for her beauty shop and she borrows $90 from Bank Buckeroo, and deposits that in her checking account.

Now Bank Buckeroo holds onto $9 (10% of $90) and can loan out $81.

Old Ray Saddleback needs $81 to buy supplies for the only café in town, so he hits up Bank Buckeroo for an $81 loan.

Bank Buckeroo holds onto $8.10 (10% of $81) and can loan out $72.90.

Paddy O’Gilligan needs $72.90 to top off his supply of whiskey at the only bar in town (and this banker likes his whiskey), so he borrows $72.90 from Bank Buckeroo.

Bank Buckeroo holds onto $7.29 (10% of $72.90) and can loan out $65.61

You see where I’m going with this. Eventually, Bank Buckeroo will have reserved all $100, but will have extended credit against that $100 to customers that he knows are good to pay back their loans. Under the gold standard system before 1933, each dollar had a statement on it that you could exchange 20 of the one-dollar bills for one ounce of gold (not exactly the statement but that’s what it meant). It was a "fixed exchange rate.” The value of a dollar (US) was fixed to the value of gold. So Bank Buckeroo has Johnny Schwartzburger’s original $100 in cash that guarantees it can trade-in the cash for $100 in gold anytime it wants. It’s protected against that loss. The only thing the banker has to worry about is whether his customers can pay back the new loans, and he knows their creditworthiness intimately.

That all changed in 1933—no more gold standard in the US

We went off the gold standard. The value of the USD was no longer pegged to the value of gold, the supply of which the US federal government could not control globally except for certain US mines. Each new goldmine find globally affected the value of the dollar before 1913 and led to extraordinary panics and busts in the last half of the 1800s. More gold available meant the value of the dollar dropped, and that affected international trade, and whether people exchanged their dollars for gold stateside and hoarded it, further diminishing the amount of money available in the real economy. It was the National Gold Something-or-Other Act in 1900 that pegged the USD at $20/ounce.

Interestingly enough, it was Marriner Eccles, whom FDR made the first chairman of the Federal Reserve three years later, a Republican Mormon banker from Provo UT who appeared before the Senate and House of Representatives in 1932/33 to make the case for dropping the gold standard (he wasn’t the only one however). Eccles became more popular than Miley Cyrus. Eccles had seen the devastation that the banking system was doing to his municipal and rural customers. Eccles was 22 when he made his first million after his father died and he had to take over the family businesses, which included a bank. He was a financial genius who could speak plain English to commoners about banking and esoteric financial concepts. His ideas predated John Maynard Keynes by three years. (BTW, Keynes was never taught in American universities, so anyone sneeringly invoking Keynes doesn’t know what they are talking about. The first Nobel Laureate in Economics, Paul Samuelson, is supposed to be the explainer and keeper of Keynes ideas, but Samuelson admitted in 1989 in a video interview that he never read more than half the book, and that he never understood Keynes’ ideas to begin with.)

[to be contd]

Posted by: MRW | Jul 18 2015 23:31 utc | 86

Correction: Each new goldmine find globally affected the value of the dollar before 1913

Should read: Each new goldmine find globally affected the value of the dollar before 1900

Posted by: MRW | Jul 18 2015 23:34 utc | 87

Tom @61 [contd.]

If Private banks "cannot" print as much money as they like ( point 1 ), then how can fractional reserve banking Not exist in most of the world ? ( point 2 ) . If fractional reserves do not exist then they free to print as much as they like.

[…]

And your 3rd doesn't make any sense at all. How does a gold standard have any restrictions on having a 10% fractional reserve, 1000%, or 1,000,000% of gold holdings ? Gold doesn't make decisions, regulations and enforcement are the decision-makers. Whether it's gold or fiat.

Loans create deposits. Yes, 'out of thin air’. Bankers can say ‘Yay' or ‘Nay' based on the cut of your jib, or the color of your skin, although they are not allowed to.
Banks don’t print money. They issue credit, i.e. ‘credit money'. They mark up the customer’s bank account with computer keystrokes in the amount of the loan. Banks issue credit money based on two things: (1) customer creditworthiness, (2) customer income. They also require collateral.
Banks have to maintain reserves in their banks accounts at the Federal Reserve on all the loans they make.It is a percentage of the loan, and banks cannot loan out this money. If the bank doesn’t have enough reserves in their Fed account, they have to borrow from other banks at the Fed Funds Rate, or overnight interest rate, set by the Fed. (The Fed uses this overnight interest rate to promote or demote bank lending in the economy, among other things.)
If the bank has been making bad loans or is overextended—this goes to your Point 1 about banks being free to issue as much credit money as they like—and other banks know that, the other banks might not loan it any reserves.
In that case, the solvency-suspect bank has to slink to the Fed’s Discount Window where they can borrow the required reserves, but the interest rate is punitive, and it usually alerts bank examiners that there’s a problem at the bank. So having to go to the Discount Window is not something a bank wants to broadcast.
By law, the Federal Reserve must supply reserves to banks within the federally chartered banking system, or declare the overextended bank insolvent.
A ‘check and balance’ on a bank loaning out as "as much as they like” is meeting its reserves requirement.

About gold. When you have a gold standard, you’re on a fixed exchange rate: X amount of currency for each ounce of gold. That’s when fractional reserve banking makes sense because the bank only wants to loan out X amount of money based on the amount of gold in the kitty. It’s up to the banker to make intelligent and safe decisions about who he loans to by doing his due diligence.

On a gold standard, he who owns the gold, owns the country. When we got rid of the gold standard, goldminers and gold owners stopped owning this country, including Mr. Rothschild. We fucked him up the ass. Our money is based on the ‘full faith and credit of the US federal government' and we issue our own currency. To boot, we are the reserve currency worldwide.

Posted by: MRW | Jul 18 2015 23:36 utc | 88

The thread didn't take my formatting in @88. Here is the first half presented in a clearer format:
----------------------------------------------

In response to Tom's @61

• Loans create deposits. Yes, 'out of thin air’. Bankers can say ‘Yay' or ‘Nay' based on the cut of your jib, or the color of your skin, although they are not allowed to.

• Banks don’t print money. They issue credit, i.e. ‘credit money'. They mark up the customer’s bank account with computer keystrokes in the amount of the loan. Banks issue credit money based on two things: (1) customer creditworthiness, (2) customer income. They also require collateral.

• Banks have to maintain reserves in their banks accounts at the Federal Reserve on all the loans they make.It is a percentage of the loan, and banks cannot loan out this money. If the bank doesn’t have enough reserves in their Fed account, they have to borrow from other banks at the Fed Funds Rate, or overnight interest rate, set by the Fed. (The Fed uses this overnight interest rate to promote or demote bank lending in the economy, among other things.)

• If the bank has been making bad loans or is overextended—this goes to your Point 1 about banks being free to issue as much credit money as they like—and other banks know that, the other banks might not loan it any reserves.

• In that case, the solvency-suspect bank has to slink to the Fed’s Discount Window where they can borrow the required reserves, but the interest rate is punitive, and it usually alerts bank examiners that there’s a problem at the bank. So having to go to the Discount Window is not something a bank wants to broadcast.

• By law, the Federal Reserve must supply reserves to banks within the federally chartered banking system, or declare the overextended bank insolvent.

• A ‘check and balance’ on a bank loaning out as "as much as they like” is meeting its reserves requirement.

Posted by: MRW | Jul 18 2015 23:41 utc | 89

Some reporters are finally beginning to understand what I have been yammering on here over the past 18 months:

Why America Is Not The Next Greece
The key difference is that the United States has its own central bank -- the most powerful one in the world.

http://www.huffingtonpost.com/entry/why-america-is-not-the-next-greece_55a814c5e4b04740a3df6b11?

Posted by: MRW | Jul 18 2015 23:45 utc | 90

jfl at 84 - Touche!

Posted by: rufus magister | Jul 19 2015 1:38 utc | 91

Noirette at 80 -- I believe it refers to the mandate against austerity that many took the "No" vote to be.

Wayout at 81 -- To be fair, Pilger is saying this is just one more example of a much larger problem endemic to much of the contemporary left. Let's not lose the forest for the trees.

Posted by: rufus magister | Jul 19 2015 1:42 utc | 92

@MRW

"One small quibble, Paul. The amount of physical currency, physical cash and coin, is around 11.5% to12% of the available money. The rest are treasury securities."

Yes, that's true. I tend to include Treasuries as cash equivalents so include them in the calculation, but your distinction is correct. In order to be used for spending securities have to be turned into cash.

Posted by: paulmeli | Jul 19 2015 12:33 utc | 93

jfl @ 83

Greece's citizens, along with the bulk of citizens in the World, have no idea how money works, which is why people like MRW and myself have trouble following these discussions without piping in when the other Gorilla in the room is ignored. There are two parts to the problem, the tyranny of the arithmetic and the political.

Before one can solve a problem one has to define the problem. Leaving monetary economics theory out of the definition makes a solution unlikely unless it happens to be stumbled upon by accident, which doesn't seem to be happening.

If Greece's citizens don't understand how the Euro system undermines their prosperity how can they decide whether to leave the Euro or not?

Posted by: paulmeli | Jul 19 2015 12:41 utc | 94

PM@94

I thought it was corruption and greed along with the Bust of '08 that undermined all of our prosperity. In Greece the Troika has certainly turned a recession into a depression but the other EU members are not prospering under austerity.

The end of growth may doom Greece to suffering decline whether they remain part of the EU or return to petty nation state status isolated from their natural partners in Europe.

Posted by: Wayoutwest | Jul 19 2015 14:26 utc | 95

@86, @94

But isn't it a question of MRW and the loaves and fishes?

Monetary economics theory, as defined, is a shell game. A very profitable one, but it suits no one's interests but the banksters'.

Credit ought to be a utility like water or sewage, depending on your point of view. There's no reason to put up with the banksters' roping it off and renting it to us.

Posted by: jfl | Jul 19 2015 16:16 utc | 96

Wayoutwest @ 95

"I thought it was corruption and greed along with the Bust of '08 that undermined all of our prosperity."

The GFC and events like it are the effect , not the cause.

One can say greed and corruption is a cause but those things have always been a part of human nature.

Regulatory failure is the proximate cause of our loss in prosperity, especially wrt banking crises. The Great Depression (banking crisis) led to Glass-Stegall, under which we had none, to the point that the elites were proclaiming that the problem of bubbles and crises was gone forever…the "Great Moderation"…until Glass-Stegall was repealed and government-sanctioned corruption became the norm.

I say government-sanctioned because those responsible have never been punished. It's a willful failure of the rule of law.

That and as all of the benefits of productivity have been accruing to profits governments have tried to grow their economies while spending less (in relative terms), which is, simply stated…impossible. See here for some evidence of this:

https://research.stlouisfed.org/fred2/graph/?graph_id=246996

…which shows the growth rate of U.S. Federal spending year-to-year. The average is around 7%, last year it hit zero and remains very low…but it has been heading to aero for a long time. Something's got to give.

The problem began in the late 70's-early 80's as governments shifted from public investment to credit-led growth (neo-liberalism, supply-side, "trickle-down" economics).

"The end of growth may doom Greece to suffering decline whether they remain part of the EU or return to petty nation state status isolated from their natural partners in Europe."

If you mean the end of growth in terms of limited resources, you seem to making the assumption that growth is limited by real resources only…it is possible to have growth with efficient use of resources that focuses on human services…labor. The corporate model of constant growth fails under this paradigm.

Unfortunately we are doing our best to eliminate labor altogether with little thought as to who then would be the customers?

They just aren't that into us.

Posted by: paulmeli | Jul 19 2015 17:20 utc | 97

jfl @ 96

"Monetary economics theory, as defined, is a shell game. A very profitable one, but it suits no one's interests but the banksters'."

You are conflating monetary economics with finance, or credit. Finance is a shell game, or can be. Bankers are in control of this in many respects, but would be much less so if properly regulated. Finance is a totally separate system, independent except that as a consequence of saving, debt service relies on expansion of the money supply by other means, as described by MRW above, i.e. government spending (investment in the commons).

Monetary economics is a description of how a monetary system operates, based on simple double-entry accounting rules as applied to economic definitions such as GDP, Investment, saving, net exports, etc., i.e. the Flow of Funds. Everything is out in the open, so where is the shell? Anyone that can add and subtract and is curious can keep up with a monetary system…it's no different than managing a checkbook.

I fully agree that the credit circuit should be operated as a public utility, and no private individuals or groups should profit from the creation of credit using the state money system.

Effectively, credit is a bubble system, since it creates nothing (it splits zero's into assets and liabilities) and allows us to spend income (the asset) we haven't earned yet…it's a bubble because the bill is payable in the future, and if the debt service gets beyond the ability of debtors to pay the bubble pops and we get a banking crisis.

One can only wonder if a more thorough understanding of these systems would improve matters, but the systematic censoring of this subject has always been promoted by TPTB so that no one is allowed in 'the game' if they try to reveal the truth. See here for an example:

Krugman to Lietaer…don't touch the money system

Obviously, Greece is another example… how institutions that are supposedly in the public trust can take on a political role (which is clearly outside it's mandate) and punish a member that tries to operate outside of the 'game'.

Posted by: paulmeli | Jul 19 2015 18:12 utc | 98

paulmeli

Thanks for your posts. I agree that there are “sacred” issues that are avoided unless you become marginalized. Today is awful. The scarcity of jobs means that just being out of work too long black balls you. There is no substitute economic/political system. The Greeks are subjugated because they have no alternative but revolt. The West has ceased to care about the people.

Posted by: VietnamVet | Jul 19 2015 19:53 utc | 99

jfl @96

MRW and the loaves and fishes
Wow. I'm flattered you took the time to create that table, and you brought a broad smile to my face. Sincerely.

There's just one thing: Bank Buckeroo doesn't give the reserves to the Fed under a fractional reserve system. It uses those funds locally to create new loans. Remember I was just showing a simplistic example of how fractional reserve banking works.

So your table just needs two transaction lines, the first two. (A third line would be what is available to the bank to loan out.) The second line should read, "What Bank Buckeroo retains," which affects what it can loan out subsequently. Then, as each new person asks for a loan, the amount available to the bank to loan out decreases but what the bank retains increases.

Posted by: MRW | Jul 19 2015 20:35 utc | 100

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