26 thoughts on “Sandpit

  1. Well, the fate of Greece has been decided. Recently elected world’s greatest economist (or at least some in Britain think so) Mr Roger Bootle has announced that Greece will exit the euro “in a matter of months”. Reasons why or evidence why, not available.

    Source: Freelander, Blame the ECB thread.

    Freelander, you seem to be slipping on detail. The evidence is in the article you linked. The evidence is 250,000 Pound St to Roger Bootle and the reason is that which is profitable must be good.

  2. And oh wow! Roger Bootle and his team at Capital Economics won £250,000 for their plan as follows; “an exiting member should introduce a new currency and default on a large part of its debts.”

    Man, what a genius! Introduce a new currency and default on its debts. Who woulda thunk it! Bet no-one has ever thought of that before!!!

    Then of course he advocates austerity and inflation targeting, the same old neoliberal, cracked record, zombie economics.

    250K sterling for that! I gave no advice and my non-advice is far less harmful. (First, do no harm.) I reckon I should get the 250K sterling!

  3. As well as not solving the problem of the anarchy as everyone takes their euros out of Greece, there is no way Greece would be allow to unilaterally re-denominate local debt from the euro into the drachma. Much more powerful countries and transnational corporations wouldn’t stand for it. If these debts were not re-denominated then as the drachma dropped like a stone the euro denominated debt would destroy balance sheets in the way it did in Indonesia. You have to have a lot of bottle proposing Bootle’s solution, and even more bottle awarding it a substantial prize! Next stop for Bootle the Bank of Sweden prize?

  4. @Ernestine Gross

    I had read the article, and Bootle’s winning entry. Did seem to have any why to me, although Roger and the judges might have discerned a why.

  5. Freelander says; “there is no way Greece would be allow(ed) to unilaterally re-denominate local debt from the euro into the drachma. Much more powerful countries and transnational corporations wouldn’t stand for it. ”

    Freelander, I have to say that I disagree. Greece is a sovereign nation. It could unilaterally leave the Euro currency union and re-launch a Drachma or New Drachma. It could default on foreign debt. (It’s defaulting on quite a bit now anyway.) New currencies and debt defaults have happened before and while there is some pain for sure, this particular cure can be better than the disease.

    For other countries to “not allow” this to happen they would either have to;

    (a) declare war on Greece (highly unlikely as Greece is a member of Nato and unlikely to be expelled for exercising standard national sovereignty); or

    (b) launch a trade war and complete financial embargo on Greece, again a highly unlikely scenario.

    Nation states and international fianance would figure losses from allowing Greece to exercise sovereignty and exit the Euro would be less than costs and losses resulting from war or a trade war and embargo. How would attacking modern democratic Greece (the cradle of democracy in ancient times) go down in the U.N. and in the many nations with significant expatriate Greek communities? Not too well I think.

  6. There are many ways powerful countries like the US could and would retaliate. After all the
    Greeks don’t have oil or anything else much that the Americans want. Look what the US has done to Cuba with that trade embargo. For one, the US could engineer a military takeover.
    After all, they did it before, and given that was forty odd years ago surely they are due for another. Something else that wouldn’t be too difficult, Obama could simply redirect his drones and lengthen his ‘Kill List’.

  7. @Freelander

    Greece has been in NATO for for 60 years. The USA has been in NATO since its inception in 1949. I know shifting alliances have occurred at other times in history (witness the Napoleonic Wars) but NATO has been solid for its entire duration. The downside of fracturing NATO would be worse than any upside. Turkey has been in NATO as long as Greece i.e. 60 years. The benefits of keeping Greece and Turkey amicable, stable and in the NATO alliance secures the south-eastern flank of Europe against Syria, a Russian ally and now very unstable. (Also more distantly, there is an unstable Iraq and a truculent Iran.)

    You also said it yourself, Greece has no resources the US wants. Why bust up a piece of the currently very solid NATO structure? It would make no geo-strategic sense. The US could perhaps enigneer a military takeover. They have done that before. But would they do that to a NATO ally? I very much doubt it. It would be much more de-stabilising than a Greek euro exit.

    History could prove me wrong on this of course. I will certainly be confounded if it does.

  8. So military coup it is. Got to teach these non-Americans a lesson in respect!

  9. Ikonoclast, a few weeks ago, the Greek people voted for staying in the Euro (not all Greeks of course, but enough to call the outcome democratic.)

    Boiled down to its theoretical core, MMT, like much of international trade theory, works very well for countries with 1 person each (or n identical persons in each, if you like).

    The economic aspect of national sovereignty is never absolute, except for nation states in autarky (no trade in goods, services, financial securities). I can’t think of such a country, although I can think of some societies (tribes) who live in a state of autarky but they don’t bother with a Fed or the Bank of ….

    The economic aspects of national sovereignty isn’t absolute even for the USA and despite the fact that the USA has its own currency (because China decides what the exchange rate is).

    Even during the Keynesian era, fiscal and monetary policies of countries, who were members of the club (Bretton-Woods), were interdependent. At the time, issues arising from this interdependence were discussed under the heading ‘policy coordination’. IMO, what we are observing now in the EU is nothing but policy coordination. Its messy, its difficult, its dynamic and it is part of the European Project. It is an ambitious project: War is not allowed but payments for translators of all documents and speeches into 17-1 Euro-member languages and 27-1 EU countries is allowed. It is easy to talk about the desirability of ‘diversity’; its more difficult to preserve cultural diversity, recognise diverse histories while aiming for a less economically unequal (within and across countries) truly multicultural region where reasoning is an explicit common value that is to be upheld even during the GFC (it is still ongoing).

    During the Keynesian era there were also common constraints (eg. rules under which otherwise fixed exchange rates could be changed). The Bretton-Woods system broke down when the then French President, General de Gaulle, played by the rules (demanding payment in gold rather than US$) and found, contrary to the rules, the USA $ was in fact not convertible. (Luckily, the OPEC countries raised the price of oil – a new problem.) The Euro-member countries have agreed on rules, including rules for changing rules. These rules happen to differ from those who developed institutions that rest on the efficient capital market hypothesis. IMO, we are now observing the reaction of the beneficiaries of the efficient capital market hypothesis to the first major spanner being put in their works with the ESM (which excludes Euro-bonds for the time being until fiscal union is conceivable). This time it is not the French President who is demonised but the German Chancellor, Frau Dr Merkel. Fortunately for Hollande and Merkel and their respective governments and all those Euro-member countries, who reaffirmed their commitment to the European Project, this time the many legal cases and investigations into the actual activities of the ‘efficient capital market’ operators come to their aid.

  10. That the European project is a success is important for world stability, and is also important and valuable for countries like Australia, because a strong European Community will be a strong counter to the hegemonic behaviour of so-called superpowers. Europe will be particularly important when the US descends completely into chaos, which although difficult to put a decade on seems almost inevitable unless that country undergoes some radical changes for the good. Sadly, that seems unlikely.

  11. @Ernestine Gross

    Ernestine, according to Reuters – “Greek conservative leader Antonis Samaras claimed victory in Sunday’s national election, saying Greeks had voted to stay in the euro single currency.”

    Unless there was also a referendum along with the election (which I am not aware of) then there was no popular vote on the specific issue. Admittedly, the euro issue was a key issue of the election. The actual outcome of the election is confused with all parties in the minority and the winning minority party receiving a “gift” of 50 free extra seats in the parliament due to an unusual and inherently undemocratic constitutional rule.

    “The election result featured New Democracy as the largest party, with 30% of the votes and 129 seats (including the 50 extra seats for coming first). The second party was the Syriza Unionist Social Front (SYRIZA) with 27% of the votes and 71 seats. The third party was the Panhellenic Socialist Movement (PASOK) with 12% of the votes and 33 seats. The other parties that won seats were: Independent Greeks (ANEL) with 20 seats, Golden Dawn (XA) with 18 seats, Democratic Left (DIMAR) with 17 seats, and Communist Party of Greece (KKE) with 12 seats.” – Wikipedia.

    I am not sure of the positions of all the parties on the Euro but New Democracy (30%) and PASOK (12%) supported staying in the Euro. That gives only 42% in favour thus far. The other parties from their names would not appear to support the Euro but that is a guess on my part. So at best, the evidence that a majority of Greeks genuinely and democractically want to remain in the Euro is dubious. However, I accept and believe myself that Greece is most likely to remain in the Euro. Whilst believing that, I still contend that Greece would most likely be better off leaving the Euro, floating its own currency, defaulting and instituting a deficit led “New Deal” like recovery. This course would not be painless either but the cure would be better than the disease.

    I accept that “The economic aspect of national sovereignty is never absolute.” But certainly economic sovereignty is further diluted by losing monetary sovereignty. I think key issues here are;

    (1) The notion of an OCA (Optimal Currency Area);
    (2) The undemocratic nature of removing monetary policy from the democratic polity and placing it in the technocratic hands of financial capital; and
    (3) The entire ongoing neoliberal program to remove economic management from democratic control.

    I would question the proposition that an area with mutiple and separate national sovereignties is an OCA. As in points 2 and 3, I further question the agenda behind weakening democratic power over economic management via institutional arrangements designed to hamstring nations and hand power to a supra-national body of unelected technocrats.

    As an honest aside, I have to say it bothers me in some ways to have to be a (socialist left) nationalist rather than an internationalist. However, it seems that large, congolmerate multi-national blocks, in other words Empires, are usually created by various methods of military and economic domination and intrigue. The EU empire is a neoliberal construct designed to subvert democracy, exploit workers and hand power to the capitalists and plutocrats.

  12. Having your own currency just gives defective governments in defective countries one more thing they can muck up. Greece would also be better off without the vote.Germany and France should just boot the Greek government out put in some administrators and fire those in the public sector not doing their job and get some competent people in from outside. If necessary, they might even be best militarily occupying the country until they have sorted it out.

    Alternatively, they could just leave it alone, let it default and become a waste land.

  13. Just like companies, when a country becomes insolvent, the administrators should be put in. When the country is finally out of administration, voting can resume.

  14. Freelander :
    Having your own currency just gives defective governments in defective countries one more thing they can muck up. Greece would also be better off without the vote.Germany and France should just boot the Greek government out put in some administrators and fire those in the public sector not doing their job and get some competent people in from outside. If necessary, they might even be best militarily occupying the country until they have sorted it out.
    Alternatively, they could just leave it alone, let it default and become a waste land.

    Freelander, I hope you are joking. Your views as expressed, if genuine, represent a very dangerous form of paternalism, neo-colonialism and authoritarianism. You advocate France and Germany kicking out the government and ruling Greece. France and Germany have tried that formula for Europe before. France under Bonoparte and Prussia/Germany under various heads culminating with …. you should know who. I’ll stop just short of explicitly demonstrating Godwin’s law but really your post validly asks for it.

  15. Yes, the big two have made noble efforts in the past to reunify Europe. Let’s hope this time it sticks, regardless of pipsqueak troublemakers!

  16. @Freelander

    Are you an Australian, Freelander? Taking your slant, Australia is a pipsqueak troublemaker on the world stage. Who should invade us and take us over in your opinion?

  17. Does anyone else believe that part of the Carbon Tax or a future scheme in the same vein, should have the government buying back all utilities. They could sell it by saying something on the lines of: if the government owns the utilities it would be easier to implement new greener technologies, as they won’t be tied to certain companies and their processes, therefore resulting in Australia further reducing its greenhouse gas emissions. Also the citizens would save money on their power bills, partly due to the use of efficient energies and partly because the utilities wouldn’t be privatised anymore.

  18. @Ikonoclast

    We haven’t defaulted so no need to bring in the administrators! Also we didn’t use fraud to get into the eurozone and pig out on cheap loans. If we had, and had gotten ourself in that situation, who would have much sympathy for us?

  19. It seems to me the Greek electorate is quite sophisticated in the sense that they elected S., who now has to face the music in the EU (where his history is known). I understand S was sick on the day of the first EU meeting.

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