Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Download
Standard view
Full view
of .
Look up keyword
Like this
1Activity
0 of .
Results for:
No results containing your search query
P. 1
"Whither Greece", Michael Hudson

"Whither Greece", Michael Hudson

Ratings: (0)|Views: 22|Likes:
Published by Giuliano Valverde
The fight for Europe’s future is being waged in Athens and other Greek cities to resist financial demands that are the 21st century’s version of an outright military attack. The threat of bank overlordship is not the kind of economy-killing policy that affords opportunities for heroism in armed battle, to be sure. Destructive financial policies are more like an exercise in the banality of evil – in this case, the pro-creditor assumptions of the European Central Bank (ECB), EU and IMF (egged on by the U.S. Treasury).
The fight for Europe’s future is being waged in Athens and other Greek cities to resist financial demands that are the 21st century’s version of an outright military attack. The threat of bank overlordship is not the kind of economy-killing policy that affords opportunities for heroism in armed battle, to be sure. Destructive financial policies are more like an exercise in the banality of evil – in this case, the pro-creditor assumptions of the European Central Bank (ECB), EU and IMF (egged on by the U.S. Treasury).

More info:

Published by: Giuliano Valverde on Jun 27, 2011
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as DOCX, PDF, TXT or read online from Scribd
See more
See less

07/06/2013

pdf

text

original

 
Whither Greece
 
By Michael HudsonJune 26 2011
Information Clearing House
 
 ±The fight for Europe¶s future is being waged in Athens and other Greek cities to resist financial demandsthat are the 21st century¶s version of an outright military attack. The threatof bank overlordship is not the kind of economy-killing policy that affordsopportunities for heroism in armed battle, to be sure. Destructive financial policies are more like an exercise in the banality of evil ± in this case, the pro-creditor assumptions of the European Central Bank (ECB), EU andIMF (egged on by the U.S. Treasury).
 
As Vladimir Putin pointed out some years ago, the neoliberal reforms putin Boris Yeltsin¶s hands by the Harvard Boys in the 1990s caused Russia tosuffer lower birth rates, shortening life spans and emigration ± the greatestloss in population growth since World War II. Capital flight is another consequence of financial austerity. The ECB¶s proposed ³solution´ toGreece¶s debt problem is thus self-defeating. It only buys time for the ECBto take on yet more Greek government debt, leaving all EU taxpayers to getthe bill. It is to avoid this shift of bank losses onto taxpayers that AngelaMerkel in Germany has insisted that private bondholders must absorb someof the loss resulting from their bad investments.The bankers are trying to get a windfall by using the debt hammer toachieve what warfare did in times past. They are demanding privatizationof public assets (on credit, with tax deductibility for interest so as to leavemore cash flow to pay the bankers). This transfer of land, public utilitiesand interest as financial booty and tribute to creditor economies is whatmakes financial austerity like war in its effect.
 
Socrates said that ignorance must be the root of all evil, because no onedeliberately sets out to be bad. But the economic ³medicine´ of drivingdebtors into poverty and forcing the selloff of their public domain has become socially accepted wisdom taught in today¶s business schools. Onewould think that after fifty years of austerity programs and privatizationselloffs to pay bad debts, the world had learned enough about causes andconsequences. The banking profession chooses deliberately to be ignorant.³Good accepted practice´ is bolstered by Nobel Economics Prizes to provide a cloak of plausible deniability when markets ³unexpectedly´ arehollowed out and new investment slows as a result of financially bleedingeconomies, medieval-style, while wealth is siphoned up to the top of theeconomic pyramid.
 
 
My friend David Kelley likes to cite Molly Ivins¶ quip: ³It¶s hard toconvince people that you are killing them for their own good.´ The EU¶sattempt to do this didn¶t succeed in Iceland. And like the Icelanders, theGreek protesters have had their fill of neoliberal learned ignorance thatausterity, unemployment and shrinking markets are the path to prosperity,not deeper poverty. So we must ask what motivates central banks to promote tunnel-visioned managers who follow the orders and logic of asystem that imposes needless suffering and waste ± all to pursue the banalobsession that banks must not lose money?
 
One must conclude that the EU¶s new central planners (isn¶t that whatHayek said was the Road to Serfdom?) are acting as class warriors bydemanding that all losses are to be suffered by economies imposing debtdeflation and permitting creditors to grab assets ± as if this won¶t make the problem worse. This ECB hard line is backed by U.S. Treasury SecretaryGeithner, evidently so that U.S. institutions not lose their bets on derivative plays they have written up.
 
This is a repeat of Mr. Geithner¶s intervention to prevent Irish debtalleviation. The result is that we enter absurdist territory when the ECB andTreasury insist on ³voluntary renegotiation´ on the ground that some banksmay have taken an AIG-type gamble in offering default insurance or betsthat would make it lose so much money that yet another bailout would benecessary[1]. It is as if financial gambling is economically necessary, not part of Las Vegas.
 
Why should this matter a drachma to the Greeks? It is an intra-European bank regulatory problem. Yet to sidestep it, the ECB is telling Greece tosell off its water and sewer rights, ports, islands and other infrastructure.
 
This veers on financial theater of the absurd. Of course some specialinterest always benefits from systemic absurdity, banal as it may be.Financial markets already have priced in the expectation that Greece willdefault in the end. It is only a question of when. Banks are using the time totake as much as they can and pass the losses onto the ECB, EU and IMF ± ³public´ institutions that have more leverage than private creditors. So bankers become the sponsors of absurdity ± and of the junk economicsspouted so unthinkingly by the enforcers, cheerleaders for the banality of evil. It doesn¶t really matter if their names are Trichet, Geithner or Papandreou. They are just kindred lumps on the vampire squid of creditor claims.
 
The Greek crowds demonstrating before Parliament in Syntagma Squareare providing their counterpart to ³Arab spring.´ But what really can they
 
do, short of violence ± as long as the police and military side with thegovernment that itself is siding with foreign creditors?
 
The most effective tactic is to demand a national referendum on whether toaccept the ECB¶s terms for austerity, tax increases, public spendingcutbacks and selloffs. This is how Iceland¶s President stopped his country¶sSocial Democratic leadership from committing the economy to ruinous(and legally unnecessary) payments to Gordon Brown¶s Labour Partydemands and those of the Dutch for the Icesave and even the Kaupthing bailouts.
 
The only legal basis for demanding payment of the EU¶s bailout of Frenchand German banks ± and U.S. Treasury Secretary Tim Geithner¶s demandthat debts be sacrosanct, not the lives of citizens ± is public acceptance andacquiescence in such policy. Otherwise the imposition of debt may betreated simply as an act of financial warfare.
 
 National economies have the right to defend themselves against suchaggression. The crowd¶s leaders can insist that in the absence of areferendum, they intend to elect a political slate committed to outright debtannulment. Across the board, including the Greek banks as well as foreign banks, the IMF and EU central planners. International law prohibits nationsfrom treating their own nationals differently from foreigners, so all debts inspecified categories would have to be annulled to create a Clean Slate. (TheGerman Monetary Reform of 1947 imposed by the Allied Powers was themost successful Clean Slate in modern times. Freeing the German economyfrom debt, it became the basis of that nation¶s economic miracle.)
 
This is not the first such proposal for Greece. Toward the end of the 3rdcentury BC, Sparta¶s kings Agis and Cleomenes urged a debt cancellation,as did Nabis after them. Plutarch tells the story, and also explains the tragicflaw of this policy. Absentee owners who had borrowed to buy real estate backed the debt cancellation, gaining an enormous windfall.
 
This would be much more the case today than in times past, now that thegreat bulk of debt is mortgage debt. Imagine what a debt cancellationwould do for the Donald Trumps of the economy ± having acquired property on credit with minimum equity investment of their own, suddenlyowing nothing to the banks! The aim of financial-fiscal reform should be tofree the economy from financial overhead that is technologicallyunnecessary. To avoid a free lunch to absentee owners, a debt cancellationwould have to go hand in hand with an economic rent tax. The publicsector would receive the land¶s rental value as its fiscal base.
 

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->