March 5, 2010

Beware of Greeks Forswearing Thrift, Say the Bubble-Blowing Germans


Today Greek Prime Minister Papandreou visits his German counterpart, probably to beg for a bailout. It’s hard to tell, with every kind of rumor buzzing about for weeks now, each one contradicting the last. Do the Greeks really want a bailout at the price they’d have to pay? Are the Germans willing (able?) to bail them out under any circumstances? Will the Greeks bring in the IMF? What does anyone really think or want? No one seems to know.
The confusion is understandable. The European Union is another creature of the bubble. The concept only ever made any sense if prices rose above the cost of debt servicing forever. So just like every other absurd pretension of the bubble, this one too was doomed to collapse the moment prices peaked and fell.
Attain a unified currency and a unified monetary policy, but otherwise retain full national sovereignty including over fiscal policy. Today we see how luxurious such a concept is.
Now that the music stopped and there’s not enough chairs even for all the gangsters, everyone’s scrambling to conserve what he looted, cast blame, and if possible go into disaster capitalist mode.
We should be clear that the Greek gang, while certainly venal, did spread out the loot more than many other countries. For as long as the bubble lasted, at least some non-rich Greeks such as public workers benefited. Of course, that has set them up to be the scapegoats now that everything’s falling apart, even though the main beneficiaries by far were the rich and powerful, as always. (I don’t doubt the official hostility toward Greece, so suspiciously absent where it has come to a corporate entity like Lehman or AIG, has a lot to do with the fact that some of the Greek loot was spread further than the halls of rapacity.)   
The German government, with a big assist from the Western media, has taken the lead in castigating the Greeks. The lie is that the Germans have been responsible and frugal. In fact, the Germans themselves have been just as irresponsible. Their own budget deficit is running at 6.3% of GDP, over double the EU’s vaunted 3% limit. But of course for Germany and France (7.5%) the rules are made to be broken. They’re only ever meant to apply to those lazy “Club Med” countries. It’ll be funny to watch the Germans indulge themselves in the same rhetoric when the Spanish bailout is at hand. How much did the Germans complain when German money was blowing up the Spanish housing bubble?
Germany is just as insolvent as Greece. But since its economy is bigger it has more inertia, and since it has more clout it has more Too Big To Fail cred and gets a premium on its ridiculous debt. But that just means its own default is postponed.
Here’s the basic chronology. In October Papandreou came into office, discovered the long-running budgetary accounting fraud, and publicized it. Since then he’s been scrambling to find some way to get a bailout while not having to enact “austerity” measures so severe that he’d be committing political suicide at home. He’s been finding it difficult to thread this course between Scylla and Charibdis. (Greeks must be exasperated by now at all these mythological allusions. But look at what Americans have to put up with – comparisons to stuff like Donald Trump and “American Idol”. Consider yourselves blessed there.)
Led by Germany, the EU has demanded the standard crowbar be taken to the people before any candy is dispensed. It wasn’t enough when Greece pledged to freeze wages, cut bonuses, crack down on tax evasion, and raise the retirement age from 61 to 63, provoking widespread protests. Papandreou has since promised a second wave of attacks, raising the 19% VAT to 21%, imposing higher fuel pirces, and abolishing part of the bonus pay of many workers. These are all, needless to say, highly regressive measures, just like the first round. But jolly Olli Rehn, economic commissioner of the ECB, says this isn’t enough gutting and looting: “But further on, in 2011 and 2012, further measures will be necessary.” No word on whether these further measures include his surrendering his bonus, or if he and his colleagues will be undergoing a clawback for their incompetent performance as “economic commissioners”.
The MSM has been especially lurid in its depiction of the sinister “fourteenth month” pay many Greek workers get. Needless to say, we don’t need to take that term seriously so long as the Wall Street scum who crashed the economy and have already stolen $14 trillion from the taxpayers are still collecting “bonuses”. Eradicate all bankster bonuses and then come back and complain to me about any hard-fought element of worker pay.
The “Club Med” version of Phil Gramm’s “predatory borrowers” lie is the standard MSM line. (We’re even getting lectures and Just So stories about Alexander Hamilton of all people. Yes indeed, you can define success any way you want according to your ideology. Saddle the common people with the debts of the rich? Yes, Hamilton is your patron saint.)
Greece has suggested it might turn to the IMF for a bailout. This could make some sense from Greece’s point of view. The IMF would make the same crowbar “austerity” demands as Germany and France, but in return they’d be guaranteed sufficient assistance, whereas Germany and France are making the demands but are still all squirrelly about the candy. Indeed there’s some doubt about whether they even can bail Greece out.
Politically it’s a mess. The German people are just as furious about a possible bailout as the Greeks are about being crowbarred. (Both are certainly putting the American sheeple to shame.)
There’s also the technicality that an EU bailout would be illegal. But no one takes that seriously.
(Yesterday’s Economist story is amusing on this. This passage gave me a grim chuckle:

The German constitutional court ruled two decades ago that the Maastricht treaty was acceptable only if its no bail-out provisions were respected—so any bail-out would have to be disguised to avoid legal challenges.

Ho-hum. Another stupid law. Another stupid treaty. Another stupid constitution. So how will they get around it this time? Such a world-weariness….)
But it’s mostly the economic uncertainty, the bailed-out leading the bailout, which is causing such dithering. Nobody can figure out even in concept what they might want to do. One bailout possibility is for individual countries (i.e. Germany and France) to give foreign aid assistance to Greece. Another is for German and French banks to buy Greek bonds (just like Fed MBS purchases). Or a joint loan from, once again, Germany and France. Or they could guarantee Greek bonds. Nothing appeals, and nobody really wants to do any of this. There’s a real ick factor about it.
But at the same time they’re taking offense at the possibility of IMF involvement. On Wednesday ECB head Trichet said it would be “inappropriate.” It would certainly be humiliating to the EU concept, subversive of its auctoritas.
Meanwhile the speculators have been getting more and more excited. This week the terrorist markets reacted well to the new austerity announcement and the bullish bailout talk. In spite of Greek travails its latest bond issue was oversubscribed. The rates they’re paying, while high, are still low compared to other countries which have been in such a predicament. That’s the Euro bailout premium.
The bond terrorists are trying to use Greece’s small, troubled market to attack the Euro as a whole. The Europeans have been whining about how these acts of war on the part of Goldman and others are “legal” in America. Yes, it’s despicable, but America’s government is despicable, and its law has been hijacked. So Europe should criminalize it. Label them the terrorists they are, indict them, demand their extradition. Make it impossible for them to set foot in Europe. Meanwhile civilly sue those banks in Europe.
But silly me. They don’t really object to terroristic speculation as such. On the contrary they’re committed to it. They’re just whining when they’re the ones getting hammered by it. They’re like Charlie Sheen in “Wall Street”, who’s clearly never repentant about his crimes in general, but only that he brought the assault down on his own people.
These “traders” plan to exploit Greek weakness and use it to destabilize the rest of Europe. They’ll be taking the Continental Tour, from Greece to Spain, Portugal, Italy, perhaps a side trip to Ireland…..
Perhaps as we speak Papandreou and Merkel are discussing these things. We’ll have to wait to find out if the always-classy Germans like Merkel’s coalition ally Josef Schlarmann shout directly in Papandreou’s face things like “Sell your islands, you bankrupt Greeks! And sell the Acropolis too!”
Polite or not, disaster capitalism is always the top item on the agenda. The boom-bust, bubble-crash, rent-extracting/bailout/disaster looting model is now the true “business cycle” according to the system’s agenda. What’s happening today in Europe is the according to the same template as in America in 2008. The Greek gang and the finance terrorists, with the acquiescence of the bosses, ran up public debt for private looting, just like a two-bit third world tinpot despot. Now the crash, and they’re crying for the bailout. Here as before we have disaster capitalism’s quadruple goal: (1) preserve the existing privatized loot, (2) loot more through the bailout, while (3) terrorists use the chaos to speculate, while (4) the gangs seize the opportunity to privatize public property, gut social spending, deregulate, and wage class war on the workers. 
Look around this bailout, and you’ll see how every detail fits into the scheme, just as with all previous bailouts.
Meanwhile the Greek protests have been fiery. In their latest action the people seized the Finance Ministry building. We must hope for such resistance to continue and grow. And maybe the Germans will be next, as their system begins to collapse as well. Every assaulted populace can be the base for a take-back-the-country insurgency. Who knows? Enough protest, and they might even accomplish the seemingly impossible: to wake up the American people.        
So I wonder what’s going on in that meeting right now?