Saturday, 4 July 2015

The Greek referendum, why is it important?

1- I am not idolizing Tsipras. In fact, I lost faith in Syriza and in Varoufakis some time ago. Corrupt Greek politicians brought Greece into the Euro without a referendum - by using the same accountants from Goldman that Germany used. They should at least decide on austerity.

2- There's ton of points to reform and make better the Euro-system. There's Varoufakis, Hollande's and Galbraith's Modest Proposal - which are changes that don't require modifications of the treaties And then there's simply mods which can be applied but require new treaties - such as for the ECB to guarantee euro bank deposits and to discipline the banks on the asset side; which they are completely unregulated.

3- There's no question how much German political elites (German exporters and banks) benefited after the adoption of the Euro. If you think it's post hoc ergo propter hoc, then you're not looking at the other half of the balance sheet. Every net exporter of goods and services is a net importer of aggregate demand. Since all member states are de jure and de facto currency users - the net exporters of aggregate demand will ultimately get the axe of the neoliberal machine when private debt deflation will cause weak aggregate demand levels to increase the deficits and debt to GDP ratios of the countries in question - thus violating arbitrary Maastricht rules and setting up the stage for the Troika to do some extend and pretend, while profits are privatized and losses socialized. Point of the matter is that there's no modeling one country to be like another. You will always have regions that will be in net deficit to others and vice-versa. The European Investment Bank can play the role of surplus recycling - till this fucking continent of idiots will have the sense to create a Federal Government (and Federal Treasury). So, while the rest of the world contracted bank debt to fuel both Germany's domestic private and government sectors, Merkel et company went on to spew the 'virtues' of fiscal discipline/responsibility - and then when deleveraging happened within the foreign sector (the deficit countries), Merkel took the initiative to attack them for being lazy (ant vs grasshoper story, which is a cunning and totally false analogy in the realm of economics) and irresponsible with their finance. All of this happened in the Great Moderation, and no one in the mainstream saw the great crisis coming. In fact, some of them were writing/praising the Great Moderation and predicting a future of stability and prosperity, just as the crisis was unfolding in '08. So this is where one spots the lie, if one understands double-entry accounting. While you were building your surplus on the back of other people's deficits it was alright. When those people started having problems, you (Merkel et com) come in and start to talk of bullshit ethics and zombie economics, while you subjected people needlessly to socio-economic hardships just to prove that you're the one running the show and by making an example out of Greece, you keep the rest of them (the Periphery) in line.

4- You don't require fiscal transfers. You don't require to levy a special tax on people and then to distribute that income to the deficit regions. The ECB can do that via key-strokes by letting the government fiscal position to float in consequence. To let the automatic fiscal stabilizers do their job i.e. enlarge the fiscal deficit during the downturn and close the deficit during the upturn. Active measures should only be taken to ensure that full employment and price stability are achieved and maintained. There is no fixed deficit to GDP rule or debt to GDP that will allow that to happen. It needs to be mercurial, for the nongov sector has its own behavior - and the gov reacts to it (that's what endogenous money creation means) - private sector creating bank debt which leverages off of HPM (high powered money).
Net fiscal deficits are equity for the nongovernment sector. How that equity is appropriated, though, is another story.

5- The people of Greece, and the people of any other country for that matter, cannot be expected to insure euro bank deposits. It's neither fair nor is it a possibility for them to do so. It's like the government of Wales trying to insure pound bank deposits, or the government of Detroit trying to insure dollar bank deposits. They can't do that. The Central Bank is supposed to do that - because the CB has the hotwire and the printing press. In the EZ's case, it's the ECB who should take on the role of deposit insurance.

Conclusion is, it matters what the Greeks will vote for on Sunday. If they vote yes, that's a triumph for ignorance, for fear, and for future poverty (via austerity) not just for them, not just for the Periphery, but for the whole damn Union and mayhaps even beyond. If they vote no, then that may empower people in other parts to stand up for their rights and not cave in to fear-mongering propaganda, to blackmail, to theft, and to zombie economics (economic myths which refuse to die). It's important for the future of our own personal wallets & welfare.

No comments:

Post a Comment