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Peter Mertens about the future of finance and the role of grass root movements

Peter Mertens, leader of the Workers’ Party of Belgium, believes the Eurozone debt crisis is pushing member states towards “a very large number of social conflicts.” Mertens told RT that Europe faces three alternatives – Saving the euro with “authoritarian measures by taking national sovereignty overnight to the European level”, Breaking up into “two, three or four Europes”, or
Adopting a socialist model, “where banking system is public, where energy system is public, where there is democracy.”
He believes Europe needs radical changes to its financial sector and that grass root movements , people’s demand is vital.

You can enjoy his interview here:

 

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Reminding you what Democracy looks like. 1.

There is no point on agonizing over good politicians winning some elections, for the world to become a better place.

Winning the elections and gaining the power are two completely separate things.
True power lays behind the parties and will not stop getting its way until we , the citizens, realize the following old-old, basic, simple fact:

The root of  Democracy
is for its citizens
to Be rulers and to Be ruled
AT THE SAME TIME.

That means actively participating on all public decisions and actively participating on all public positions.

Far from transferring the responsibility for your own life’s decisions, to someone else.., no?

I was reminded of this fact , when I was re- reading Aristotle’s  “Politics” ( Poli=City).
I found his description of  the private person, very illuminating. I also found very indicative of how the Athenians felt about their Democracy, his fierceful  writing against “elections” and “elected representatives” or “professional politicians”, as the Athenians called them. So, I thought I share…

( An interesting note: A private person = Idiotis, in Greek.That’s where the English word” idiot” comes from!
A very accurate translation, as you are about to find out…)

The Idiotis did not care to attend in the weekly public assembly ,”Agora”, were all decision making was going on. On other occasions he was failing to perform adequately to his random (drawn) public office position. Athenian society considered an Idiotis (private person..) to be an unworthy, lazy, stupid and selfish citizen. Becoming an Idiotis was loathed. One was deprived of any political rights, ownership was made public and the Idiot was exiled or even killed if his idiocy was deemed to have been harmful for the City.
Aristotle goes on describing the “professional politician” as the worst kind of private person. Even though he attends every single meeting he does that as a sole profession, thus seeking power for self-preservation.
Being an idiotis with power he is expected to take care of his personal well-being and not that of the City.

Having an electoral system (like other City /States had) was laughed upon from the Athenians.
It meant you are not your own Ruler anymore.
It meant you are an Idiot, who depends on Idiots.

So, please stop depending. Let’s get to the point.
I’m only agonizing for the moment to come, when WE, Citizens,
finally decide to focus our discussions on the exact steps we need to take,
in order to become Self-ruled thus Self-sustained.

Only then, will there be no room for malice, injustice and misery.
Only when ALL of us make sure of it, constantly and consistently.

This is what Democracy looks like.

 

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Enough, enough of saying it is the capitalists who are to blame!

It has been a while, since I shared. There was elections and then again, so lots of great opportunities for commenting and sharing, but I wasn’t feeling very excited, everything seemed to be a repetition, until….
I found this:
[blip.tv http://blip.tv/play/AYLxwDkC?p=1 width=”480″ height=”299″]

John Holloway is talking at the Left Forum’s closing plenary and he is making a point that I would, finally,
love to spread!

Enjoy watching it!

For those of you who’d rather read what he had to say, you can find a part of the speech in English and the whole translation in Greek, following:

“….Enough, enough of saying it is the capitalists who are to blame, that it is the bankers’ fault. The very notion is not only absurd, but dangerous because it constitutes us as victims. Capital is a relation of domination. The crisis of capital is the crisis of domination: The dominators are not able to dominate effectively. And then we go into the streets and tell them that it is their fault. What are we saying? That they should dominate us more efficiently? It’s better to take the simpler explanation and say that, if the relation of domination is in crisis, it is because the dominated are not docile enough; they are not prostrating themselves sufficiently. The inadequacy of our subordination is the cause of the crisis.

Capitalism is not just a system of injustice. It is a system of accelerating exploitation, a system of intensifying destruction. This can be theorized in many ways…. But what it means is that capitalism is a dynamic of attack. There is an unending drive to go faster, an unending transformation of what capitalist labor means. And this means not only an intensification of labor in the factories, but the ever increasing subordination of all aspects of life to the logic of capital. The very existence of capitalism is a constant turning of the screw–and crisis is quite simply the manifestation of the fact that the screw is not being tightened fast enough.

Somewhere, it is meeting resistance. Resistance on the streets and in the squares, perhaps. Organized resistance, certainly. But also, it may just be the resistance of parents who want to play with their children, lovers who want to spend an extra hour in bed, students who think that they can take time to criticize, humans who still dream of being human.

We are the crisis of capital. We who do not bow low enough. We who do not run fast enough…..”

[…]Please watch the speech for the rest!He makes an interesting example of Greece, later on, elaborating on the choices people make and how they rebuild their future. He closes by saying:

“….“We will try to build a different sociality.” … If capitalism cannot provide the basis of life, then we must do it in other ways; by forming networks of mutual support… This is a lot more complicated and a far more experimental way forward, in which there is no correct line, there is no revolutionary purity. Quite possibly, our prefigurative forms of sociality are not yet strong enough to ensure our survival and there have to be compromises. But that is clearly the direction in which we must push—clearly the direction in which we are pushing and are being pushed. This world we are trying to create. This world without answers. A world of “asking, we walk.” A world of experiment. But we are guided by our “No!” to the inhuman, obscene, destructive system of capitalism. And guided by a utopian star distilled from the hopes and dreams of centuries of struggle.

Crisis, then, confronts us with these two options: Either we take the highway of subordination to the logic of capital, in the clear knowledge that this leads directly to the self-annihilation of humanity, or else we take the hazardous paths—many paths—of inventing different worlds, here and now, through the cracks we create in capitalist domination. And as we invent new worlds, we sing loud and clear that we are the crisis of capital. We are the crisis of the rush toward human destruction…and proud of it. We are the new world that is pushing through. ….”

Translation source (thank you!):www.revolution by the book.akpress.org

Here it is in Greek:

“…

Για μένα είναι πραγματικά ευχάριστο αλλά και λίγο τρομακτικό να βρίσκομαι εδώ μαζί σας, επειδή στην πραγματικότητα είναι η πρώτη φορά που μιλάω στην καρδιά της σατανικής αυτοκρατορίας. Θέλω επίσης να ευχαριστήσω θερμά τους φρουρούς της πύλης στο αεροδρόμιο χτες που με άφησαν να μπω και να σας επισκεφθώ σ’ αυτή τη γη της «ελευθερίας», που μου επέτρεψαν να έρθω να σας δω στη φυλακή σας. Ίσως με άφησαν να περάσω επειδή δεν έχουν συνειδητοποιήσει ότι υπάρχει μια ανταρσία στη φυλακή, μια εξέγερση στην καρδιά της αυτοκρατορίας.

Είμαστε εδώ για να γιορτάσουμε το 2011 που ξεχειλίζει στο τρέχον έτος, το 2012. Ένα έτος γεμάτο από ένδοξες εξεγέρσεις σε όλο τον κόσμο, καθώς η ανυπακοή μας έκανε ξεκάθαρο ότι εμείς είμαστε η κρίση του κεφαλαίου. Είμαστε η κρίση του κεφαλαίου και είμαστε περήφανοι γι’ αυτό. Αρκετά πια με το να λέμε ότι φταίνε οι καπιταλιστές, ότι είναι λάθος των τραπεζιτών. Η ίδια η σημασία αυτών των λόγων δεν είναι μόνο παράλογη αλλά και επικίνδυνη, επειδή μας θυματοποιεί. Το κεφάλαιο είναι μια σχέση κυριαρχίας και η κρίση του είναι κρίση της κυριαρχίας αφού οι κυρίαρχοι δεν είναι ικανοί να κυριαρχούν αποτελεσματικά. Μετά κατεβαίνουμε στους δρόμους και τους λέμε ότι είναι δικό τους λάθος; Τι λέμε ακριβώς; Ότι δεν ασκούν κυριαρχία αρκετά αποτελεσματικά; Είναι σίγουρα καλύτερο να δεχτούμε την πιο απλή εξήγηση και να πούμε ότι αν η σχέση κυριαρχίας βρίσκεται σε κρίση αυτό συμβαίνει επειδή οι κυριαρχούμενοι δεν πειθαρχούν αρκετά, επειδή δεν υποκλίνονται επαρκώς. Η έλλειψη υποταγής μας είναι η αιτία της κρίσης.

“>Το κεφάλαιο δεν είναι μόνο ένα σύστημα αδικίας, είναι ένα σύστημα που επιταχύνει την εκμετάλλευση, που εντείνει την καταστροφή. Αυτό μπορεί να αποδειχτεί με πολλούς τρόπους, με το νόμο της αξίας και τη συγκρότηση της αξίας από τον κοινωνικά αναγκαίο χρόνο εργασίας ή από τις θεωρίες για την πτωτική τάση του κέρδους. Το νόημα ωστόσο είναι ότι το κεφάλαιο είναι μια δυναμική που επιτίθεται. Υπάρχει μια ατέρμονη προσπάθεια να κινείται συνεχώς πιο γρήγορα, ένας αέναος μετασχηματισμός του τι σημαίνει καπιταλιστική εργασία. Αυτό δεν αφορά μόνο την εντατικοποίηση της εργασίας στα εργοστάσια αλλά την συνεχώς αυξανόμενη υποταγή όλων των εκφάνσεων της ζωής στη λογική του κεφαλαίου. Η ίδια η ύπαρξη του κεφαλαίου είναι το αδιάλειπτο στρίψιμο της βίδας και η κρίση είναι απλώς η εκδήλωση ότι η βίδα δεν βιδώνεται αρκετά γρήγορα, ότι κάπου συναντά αντίσταση. Αντίσταση στους δρόμους και τις πλατείες ίσως, οργανωμένη αντίσταση σίγουρα, αλλά επιπλέον ίσως είναι η αντίσταση των γονιών που θέλουν να παίξουν με τα παιδιά τους, των εραστών που θέλουν να μείνουν μια ώρα ακόμη στο κρεβάτι, των φοιτητών που σκέφτονται ότι χρειάζονται χρόνο για κριτική σκέψη, των ανθρώπων που ακόμα ονειρεύονται ότι είναι άνθρωποι. Εμείς είμαστε η κρίση του κεφαλαίου, εμείς που δεν σκύβουμε αρκετά το κεφάλι, εμείς που δεν τρέχουμε αρκετά γρήγορα.

Και η κατάσταση της κρίσης έχει στ’ αλήθεια δύο διεξόδους. Η μία είναι να πούμε, συγνώμη για την έλλειψη υποταγής μας και να ζητήσουμε περισσότερη απασχόληση, περισσότερες δουλειές. «Σας παρακαλούμε, εκμεταλλευτείτε μας περισσότερο και θα εργαστούμε σκληρότερα και πιο γρήγορα, θα υποτάξουμε κάθε πτυχή της ζωής μας στο κεφάλαιο, θα ξεχάσουμε όλες αυτές τις παιδιάστικες ανοησίες του παιχνιδιού, της αγάπης και της σκέψης». Αυτή είναι η λογική της αλλοτριωμένης εργασίας, η αναποτελεσματική λογική της πάλης από και μέσω της εργασίας, που γίνεται αντιληπτή ως αλλοτριωμένη εργασία, ενάντια στο κεφάλαιο. Το πρόβλημα στη συγκεκριμένη διέξοδο δεν είναι μόνο ότι χάνουμε την ανθρωπιά μας αλλά ότι αναπαράγουμε το σύστημα που μας καταστρέφει. Αν καταφέρουμε τελικά, πράγμα μάλλον απίθανο, να βοηθήσουμε το κεφάλαιο να ξεπεράσει τις κρίσεις του τότε θα συνεχίσει πιο γρήγορα, πιο γρήγορα, πιο γρήγορα να υποτάσσει κάθε μορφή ζωής, ανθρώπινης και μη, στις εντεινόμενες απαιτήσεις της παραγωγής αξίας. Και έπειτα θα έρθει μια άλλη κρίση και μετά μια άλλη και μια άλλη, όχι για πάντα επειδή ίσως δεν αρκετά μακριά η εξαφάνιση της ανθρωπότητας.

Η εναλλακτική, επειδή νομίζω ότι είναι η μόνη εναλλακτική, είναι να πούμε ανοιχτά όχι, λυπούμαστε, εμείς είμαστε η κρίση του κεφαλαίου και δεν θα γονατίσουμε, δεν θα δεχτούμε αυτό που μας κάνει το κεφάλαιο, είμαστε περήφανοι για την έλλειψη υπακοής και την άρνησή μας να υποκύψουμε στην καταστροφική δύναμη του κεφαλαίου. Είμαστε περήφανοι που είμαστε η κρίση του συστήματος που μας καταστρέφει.

Κοιτάξτε την Ελλάδα, το επίκεντρο της σημερινής χρηματοπιστωτικής κρίσης. Εκεί η κρίση είναι ξεκάθαρα κρίση ανυποταγής. Οι καπιταλιστές και οι πολιτικοί δηλώνουν πως οι Έλληνες δεν υποκύπτουν αρκετά, δεν εργάζονται αρκετά σκληρά, τους αρέσει να κοιμούνται το μεσημέρι και να βγαίνουν το βράδυ και τώρα πρέπει να πάρουν ένα μάθημα, πρέπει να μάθουν τι σημαίνει αληθινός καπιταλιστικός εργάτης. Και δίνοντας ένα μάθημα στους Έλληνες προτίθενται επίσης να δώσουν ένα μάθημα στους Πορτογάλους, στους Ισπανούς, τους Ιταλούς, τους Ιρλανδούς και όλους τους υπόλοιπους ανυπότακτους του κόσμου.

Και απέναντι σε αυτή την κατάσταση υπάρχουν μόνο δύο εκδοχές. Η μία είναι να πούμε όχι, όχι, είμαστε καλοί εργάτες, απλώς δώστε μας περισσότερες δουλειές και θα σας δείξουμε πόσο σκληρά μπορούμε να εργαστούμε, θα ξαναχτίσουμε τον καπιταλισμό στην Ελλάδα. Και η άλλη εκδοχή είναι να πούμε, ναι, έχετε δίκιο, είμαστε τεμπέληδες και θα παλέψουμε για το δικαίωμά μας στην τεμπελιά. Θα παλέψουμε για να μπορούμε να κάνουμε τα πράγματα με τον δικό μας ρυθμό, με τον τρόπο που εμείς θεωρούμε σωστό, θα παλέψουμε για τον μεσημεριανό μας ύπνο και να για να βγαίνουμε αργά το βράδυ. Επομένως λέμε όχι στο κεφάλαιο και στην καπιταλιστική εργασία, επειδή όλοι ξέρουμε ότι η καπιταλιστική εργασία κυριολεκτικά καταστρέφει τη γη, καταστρέφει τις συνθήκες της ανθρώπινης ύπαρξης. Πρέπει να χτίσουμε μια διαφορετική μορφή κοινωνικότητας.

Η πρώτη λύση του να πούμε ότι είμαστε καλοί εργάτες μοιάζει περισσότερο απλή, περισσότερο προφανής αλλά πιθανώς είναι μόνο μια αυταπάτη επειδή οι περισσότεροι σχολιαστές αναφέρουν ότι η ύφεση στην Ελλάδα θα διαρκέσει πολλά χρόνια άσχετα με το πόσο θα συμμορφωθούν οι Έλληνες.

Αν θέλετε να μάθετε με τι μοιάζει η παράταση της αποτυχίας του κεφαλαίου χωρίς την ελπίδα μιας ριζικής αλλαγής, τότε απλώς κοιτάξτε πέρα από τα σύνορά σας την τραγωδία στο Μεξικό ή κοιτάξτε πιο κοντά τις δικές σας πόλεις. Η άλλη επιλογή του να πούμε όχι στο κεφάλαιο και να οικοδομήσουμε μια διαφορετική κοινωνική σχέση είναι αυτό που πολλοί Έλληνες προσπαθούν να δημιουργήσουν αυτή τη στιγμή από επιλογή και από ανάγκη. Αν το κεφάλαιο δεν μπορεί να παρέχει την υλική βάση ζωής, τότε πρέπει να την δημιουργήσουμε με άλλους τρόπους, συγκροτώντας δίκτυα αμοιβαίας υποστήριξης, διακηρύσσοντας «κανένα σπίτι χωρίς ρεύμα» και οργανώνοντας ομάδες ηλεκτρολόγων που επανασυνδέουν το ρεύμα· με το «δεν πληρώνω» φόρους και διόδια· μέσω του κινήματος της πατάτας με το οποίο αγρότες διανείμουν αγροτικά προϊόντα κατευθείαν στις πόλεις σε πολύ χαμηλές τιμές, μέσω της ίδρυσης ανταλλακτικών παζαριών, της δημιουργίας κοινοτικών κήπων και της επιστροφής στην ύπαιθρο· επίσης με την ανάκτηση εργοστασίων, ενός νοσοκομείου και μιας εφημερίδας. Αυτή είναι μια περίπλοκη και πολύ πειραματική μορφή να προχωρήσουμε, στην οποία δεν υφίσταται σωστή πολιτική γραμμή ούτε επαναστατική καθαρότητα, αποτελεί μια προεικονιστική μορφή κοινωνικότητας όχι ακόμη αρκετά δυνατής ώστε να διασφαλίσει την επιβίωσή μας. Και πρέπει να υπάρχουν δεσμεύσεις, αλλά είναι ξεκάθαρα η κατεύθυνση προς την οποία πρέπει να ωθήσουμε τα πράγματα και να ωθηθούμε και εμείς οι ίδιοι.

Ο κόσμος που προσπαθούμε να δημιουργήσουμε, είναι ένας κόσμος χωρίς απαντήσεις, ένας κόσμος όπου περπατάμε ρωτώντας, ο κόσμος ενός πειράματος. Αλλά καθοδηγούμαστε από το όχι μας ενάντια στο απάνθρωπο, ξεδιάντροπο, καταστροφικό καπιταλιστικό σύστημα και από ένα ουτοπικό αστέρι που ανατέλλει από τις ελπίδες και τα όνειρα αιώνων πάλης. Η κρίση επομένως μας φέρνει αντιμέτωπους με αυτές τις δύο επιλογές. Είτε θα επιλέξουμε τη λεωφόρο της υποταγής στη λογική του κεφαλαίου έχοντας πλέον συνειδητοποιήσει ότι οδηγεί αναπόφευκτα στην αυτο-εκμηδένιση της ανθρωπότητας, είτε θα ακολουθήσουμε τα επικίνδυνα μονοπάτια, πολλά μονοπάτια, επινόησης ενός διαφορετικού κόσμου εδώ και τώρα, μέσα από τις ρωγμές που δημιουργούμε στην καπιταλιστική κυριαρχία. Και καθώς επινοούμε διαφορετικούς κόσμους βλέπουμε τώρα, καθαρά, πως εμείς είμαστε η κρίση του κεφαλαίου, εμείς είμαστε η κρίση ενάντια στην βιασύνη να καταστραφεί ο κόσμος και είμαστε περήφανοι γι’ αυτό. Εμείς είμαστε ο νέος κόσμος που λέει «στα τσακίδια κεφάλαιο»………….”

Τζον Χόλογουεη, Νέα Υόρκη, 18 Μαρτίου 2012

Μετάφραση: Κ.Ν.
Πηγή (με τις ευχαριστίες μου!) : eagainst.com

 

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“Euro exit strategy crucial for Greeks” Must read

On Guardian 21/6 2011, Costas Lapavitsas wrote:

Greek default and exit has always been the most likely outcome of the eurozone crisis. The truth is that economic and monetary union has failed, not least because it has created an unsustainable gap between core and periphery. For peripheral countries, EMU membership is likely to be a source of stagnation and income inequality. For Greece it has already been a failure of historic proportions.

The problem faced by the country in 2009-10 had much in common with the rest of the periphery: vast public and private indebtedness, low competitiveness, huge current account deficits, and rapidly ballooning public deficits and debts. The response of the EU was obtuse. A so-called bailout was advanced to Greece, but at rates 3% and 4% above those paid by Germany. Severe austerity was imposed, cutting national income by 4.5% in 2010 and probably 4% this year.

Even a first year undergraduate could have worked out that the last thing a bankrupt needs is further punitive loans and a cut in income; inevitably the stabilisation plan has been a disaster, missing just about all its original targets. The numbers are breathtaking. Under current policies, the EU/IMF/ECB (European Central Bank) “troika” expects sovereign debt to rise to 200% of GDP in 2015, up from roughly 150% at present. Servicing the debt will cost 12% of GDP – vastly more than expenditure on health and education – while the government deficit will be 15% of GDP. The country will be unquestionably bankrupt. Fully aware of this, financial markets are refusing to advance a penny in new private loans. And since the troika had planned for Greece to return to the markets in 2011 on the back of the expected success of the stabilisation plan, the crisis has reached fever pitch.

The response of the troika reveals systemic failure at the heart of the eurozone. Greece will receive another large loan but must impose further austerity, including wage and pension cuts, perhaps 150,000 lost jobs in the civil service, more taxes, and sweeping privatisation. And what is likely to happen if the country accepts this? By the calculations of the troika, in 2015 sovereign debt will be 160% of GDP, servicing the debt will cost 10% of GDP, and the government deficit will be 8% of GDP. In short, Greece will still be bankrupt.

What, then, is the point of the fresh bailout ? The answer is rescuing international bondholders and buying time for banks. Jean-Claude Trichet, the ECB president – an unelected bureaucrat – has imposed his will on Angela Merkel, Europe’s most powerful politician. In 2015 Greece will be bankrupt but its debt will be held overwhelmingly by public lenders: the EU, ECB and IMF. When default comes, the banks will be out of it and Europe’s taxpayers will bear the burden. Meanwhile, Greece will have gone through the austerity mangle, putting up with official unemployment of about 15%. And when the EU writes Greek debt off, as it must, it will impose extortionate demands, perhaps including open pressure to exit the eurozone.

Unfortunately for the troika, this time the Greek people have worked out the nastiness of what is proposed. They are also profoundly angry at their politicians, and at being slandered. After all, they work longer hours than most people in the EU and, as wage earners, can’t avoid tax. The Rubicon appears to have been crossed in recent weeks as the country is openly weighing the option of default and exit.

Should that take place, it will be a major blow to the economy. But Greeks are prepared to put up with straitened circumstances if they see a path to recovery, something EU policy is denying them. A political force that promised to deliver default and exit in a democratic and sovereign manner while putting people before banks would sweep all before it. As for the EU, it would have to deal with the aftermath for banks and EMU, hopefully finding someone other than Trichet to guide it.

 

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Money, explained in 3:47!

Do you want to know What is Money? Did you think you already knew? Let’s see if you were right!
This 3:47 video, will act as a small intro, causing questions and ruining misconceptions.It can not get simpler than that! For those of you , who wish to know more about the truth of creating money, I suggest further investigation! You could, also, browse through the “Role of banks” category of this blog. You will find some more analytical videos and articles on the topic.

Enjoy!

 

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Why the PSI is dead and the Modest Proposal

An article by Mr. Varoufakis. Professor of Economics and writer. You can visit his blog, for this and more interesting and informative articles, here.

 

A brief history of Greece’s PSI

In the beginning there was Wholesale Denial. Then the Denial began to subside under the weight of circumstances. It did so slowly, agonizingly so, with the result that, in the process, Greece lost any capacity it might have had to rebound. It also caused the Crisis to spread like a bushfire throughout the eurozone, turning liquidity problems into unyielding insolvencies first in Ireland, then in Portugal. Still, to this day, Denial is in the air. But it cannot remain intact, without the whole eurosystem crashing and burning. The Greek PSI may be the harbinger of denial’s end. If not, it is hard to see what will stop the juggernaut of the Crisis from destroying the few chances the euro has of survival.

Taking things from the top, the Wholesale Denial began life two years ago when imploding Greece was issued a triple ‘Nein’: No bailout, no interest rate relief, no haircut.[1] A few months later, with a second credit crunch looming, one of these Neins was revoked. The calendar read May 2010 when a massive bailout was agreed. But, still, no interest rate relief to mention and, of course, no haircuts. A few short months later, when it became abundantly clear that the disease had spread to the Emerald Isle, and it was on its way to the Iberian peninsula, Germany decided that another of the three Neins ought to be revoked: There would be haircuts, but not until the creation of the permanent ESM in 2013. It took another eight months of so (early summer of 2011) before the Greek haircut was given a snazzy new acronym, PSI they called it[2] (making it sound as if it was the bright idea of the… private sector).

The idea was not without appeal: Why should the taxpayers of the surplus countries fork out untold zillions to shore up silly bankers, who knew quite well why they were receiving interest rate premia by lending to basketcases like Greece, without having the bankers themselves take a haircut too? How else would banks be given an incentive to think twice before lending to profligate states? Such talk sounded good in the Federal Parliament, in Berlin, but also in Athens, in Paris, wherever the politicians used these ‘lines’ to feign ‘toughness’ in front of an audience aching for the bankers’ blood.

Alas, in the era of, what I call, Bankruptocracy,[3] even a haircut imposed upon bankers can be a blessing in disguise for the most sinister operators of the runaway banking sector. After the Greek PSI was announced in July 2011, shadow banking (hedge funds, special vehicles et al) lived its finest hour. They bought en masse Greek government bonds, at basement prices, with a view to swapping them for fresh bonds of much greater value. Why? Because PSI Mk1 specified no face value loss but a drop of expected net present value (estimated at around 20%) due to a swap with new bonds of much longer maturity. So, hedge funds bought old Greek government bonds (GGBs) for 30% to 35% of their face value in order to exchange them with bonds whose value was estimated at 80% of the old ones’ net present value. A nice little earner. This was one of the reasons why PSI Mk 1 bombed out, leading to PSI Mk2 in October 2011. (The other was, of course, the fact that this pitiful diminution in Greece’s debt burden was neither here nor there given the viciousness of the Greek recession.)

Back to the drawing board, our European leaders came up with a deeper haircut in October 2011. They called it PSI Mk2 and even had the foolish Greek PM fall on his sword, to be replaced by a hitherto loyal ECB functionary, so as to ensure that PSI Mk 2 would become Greece’s new light on the hill; a beacon of the last glimmer of hope for a desperate nation. PSI Mk 2 envisaged an impressive sounding 50% reduction in the GGBs’ face value which, in present value terms, would result in a haircut no less than 60% (since the interest rates charged on the new bonds, that would be swapped with the old ones, could not exceed the interest rates charged by the ECB and the EU for the original bailout funds). In other words, holders of GGBs would be hair-cut in two ways: a 50% reduction in face value and an interest rate less than 5% which would cut further into the present value of the old GGBs.

Alas, there is never a dearth of silver linings for the shadowy universe of our modern financial sector. Even when facing such a substantial haircut, many financiers will find something to smile about. In the case of PSI Mk 2, their smiles can be traced to two reasons: First, many of them bought GGBs for something around 30%. If PSI Mk2 implies an overall (present value) haircut of less than 70%, they are home and dry. Secondly, hedge fund managers have had more playful thoughts: Given the EU’s zeal to keep the semblance of a voluntary haircut (a ‘private sector initiative’) alive, what is there to stop them from pursuing a legal battle against any compulsory expropriation of even a cent of the GGBs they hold? Already a major hedge fund has opted out of the negotiations with the Greek government over the terms of PSI Mk2, clearly preparing for a legal challenge or, more precisely, for extracting a nice little out of court settlement once the all-singing-all-dancing PSI Mk2 ‘concordat’ is announced by the Greek government and the  EU.

In short, and so as not to overlabour the point, PSI Mk2 is dead in the water. The shenanigans of the shadow banking sector (which, lest we forget, includes not only the hedge funds but also, remarkably, the ‘proper’ banks shady Special Vehicles) plus the predictable deterioration of the Greek economy have put paid to it. The negotiations may go on for a little while longer, the announcement of a brilliant agreement may be made but, in truth, the idea that the Greek haircut will put Greece’s debt-to-GDP ratio back on a course towards 120% has sunk without trace. And if you need hard evidence for this, the European Summit of 9th December provided it even before 2011 was seen off: Officially, Europe’s great and good announced the end of PSI as a policy of the new ESM; Europe’s future central, permanent bailout fund. It had all been a mistake, they seemed to confess.

And now what?

This year’s first significant statement came from Athanasios Orphanides, the Central Bank of Cyprus’ Head and his country’s  representative on the ECB’s Council. In a letter to the Financial Times, published on 5th January 2012,, Mr Orphanides wrote: “Government debt markets are about trust”, blaming the Crisis’ inexorable progress within the eurozone on “…[a] collective failure of euro-zone decision-makers.” So far so excellent. As for the PSI, Orphanides repeated that which many have said before him: It signalled to investors, especially non-Europeans, that “euro-zone sovereign debt should no longer be considered a safe asset with the implicit promise that it would be repaid in full.” Like I have been writing ad nauseum in this blog since PSI Mk1 was announced, back in July 2011, Orphanides agrees that the Greek PSI, rather than being the bankers’ scourge, has proven a bonanza for shadow bankers and mainstream banks’ Special Vehicles. [He mentions the example of funds that purchased GGBs 35 cents or 40 cents on the euro who now insist on an agreement that allows them to profit from the swap.]

Now, some will say, with considerable justification, that the Head of Cyprus’ Central Bank is saying all this because Cypriot banks are sinking in a mire of their own making, having bought oodles of GGBs. Still, the fact that Mr Orphanides has an ulterior motive in calling for an end of Greece’s PSI is not the reason why his argument is lacking. The reason is that he is making precisely the same mistake as that Mrs Merkel, Mr Sarkozy and, indeed, the Greek government have been making for almost two years now: They keep thinking of the Greek public debt crisis in isolation to (a) the deep malaise of Northern Europe’s banks and (b) the public debt difficulties of most eurozone states. The fact is that the Greek crisis cannot and will not be dealt with unless the ‘solution’ is part of a systemic redesign that deals with (a) and (b) as well as containing a program for stemming the tide of recession that is currently engulfing our continent.

As evidence of Mr Orphanides’ narrow focus, which detracts from his case against Greece’s PSI, I offer the alternative that he is proposing: Greece should be issued, in lieu of the failed PSI, thirty year loans at 3% interest rates. Similar suggestions come from different quarters (see here an article by George Zestos) canvassing the idea that, instead of the PSI, the ECB ought to guarantee GGBs (with the Greek government paying the ECB a small premium in return for these guarantees). The problem with such proposals is that they fail to incorporate their solutions to the Greek Problem within a broader plan for Europe. Mr Orhpanides cannot possibly believe (and I do not think he does believe) that 3% thirty year loans can be extended to Greece but not to Ireland, Portugal, Italy, Spain, Belgium even. And he cannot believe that the banks will be left with ECB loans but not be forced to recapitalise ‘big time’. But where will the trillions involved come from? He does not answer the question, leaving it to us to imply that he is in favour of eurobonds. But then the question becomes: What sort of eurobonds?

The continuing appeal of the Modest Proposal

So, we have returned to the question that this blog has been built upon over the past year and a half. We certainly need eurobonds. But we neither need nor want eurobonds jointly and severally issued and backed by member-states (for reasons that Mrs Merkel can explain better than anyone; namely that such bonds will sell at interest rates that are too high for Germany and not low enough for the periphery). And since we cannot have a Federal Treasury do this on Europe’s behalf (as opposed to member-states), it is imperative that it is the ECB that issues and backs such bonds so as to convert the Maastricht compliant part of the eurozone’s aggregate public debt into Union/Eurozone debt; a common pool of debt that is, however, to be serviced pro rata by member-states at interest rates reflecting not their individual credit ratings but those of the ECB that organises this debt conversion on the Union’s behalf. (For more see our Modest Proposal.)

Interestingly, George Zestos’ recent proposal (mentioned above) points in the Modest Proposal’s direction. Zestos’ idea that the ECB should guarantee new issues of GGBs is, in fact, more radical than our proposal for ECB bonds issued on behalf of each member-state and to be serviced in the long run by the member-state. While Zestos is asking of the ECB effectively to take on its books the new issues of Greek, Italian and Spanish bonds, the Modest Proposal, much more… modestly, suggests that the ECB issues debt on behalf of these member-states but then charges them for their servicing on the basis of some super-seniority baring loan agreement. In fact, the two ideas are close in spirit except that the Modest Proposal (i) gives more guarantees to the ECB that it will not have to print to service member-states’ debts and (ii) gives international investors more ground for confidence (since they would be much happier buying bonds issued by the ECB than bonds issued by Greece or Italy under a complicated insurance scheme backed by the ECB).

To recap, the Greek PSI was always an error in search of a rationale. It gave shadow banking a great new opportunity to profiteer at the expense of Greece and of Europe and escalated the latter’s Crisis rather than help tame it. The question is: What is the alternative? After two years of studying carefully all alternatives, I still believe that our Modest Proposal is the natural candidate. More recently, I had the dubious honour of talking to a hyper-smart Goldman Sachs apparatchik. He more or less agreed with the Modest Proposal’s basic thrust, albeit in a manner not at odds with the usual cynicism associated with his firm. This is how he put it: “Well, in the end your proposal will be adopted by default. Once the ECB has accumulated so many rubbish bonds, they will have to start borrowing to service them. Once they make it official, they will see the merits in charging the member-states for the cost of servicing what will effectively be ECB-bonds.” As they say, the Devil has the best of tunes.


[1] A fourth Nein was not even verbalised: A Nein to an exit from the eurozone.

[2] Private Sector Initiative/Participation

[3] The New Regime that emerged from the ashes of 2008 in which the greatest power to extract rents from the rest of the social economy was granted to the banks with the largest black holes in their assets’ books. See my Global Minotaur for more.

 
 

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Rebrading Greece – Exquisite talk

An extremely interesting and passionate meeting was recorded on 11th November 2011,
during EEDE’s (Advertising & Communication Companies Union) 11th “Aristoteli” Conference, in Thessaloniki, Greece.

The conference topic was “Rebrading Greece” and the talks addressed the need for the country to rise up from the unprecedented attack and slander that it has been under and explored the effects this attack has had on economy, politics, diplomatic relations etc, but also on Greek people’s self image, as well.

This is one of my favorite talks.

The talk is in English with Greek subtitles, made by Mr Peter Oikonomides,
Global Brand and Communications Consultant, with a great deal of international experience,
including many world wide famous brands.

Enjoy Mr Oikonomides, as he manages not only to demonstrate his abilities in branding,
but also to emphasize the need for the Greeks themselves,
to believe in their own
inherent ability to imagine and change their future
as they have been doing, for the past 5.000 years.

 

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