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Sunday, July 05, 2015

Greece says NO (Plus: A question of fonts)


Everyone said the vote would be close. It wasn't:
Figures published by the interior ministry showed 61% of those whose ballots had been counted voting "No", against 39% voting "Yes".
This is the true beginning of the rebellion against neoliberalism: A large segment of the world no longer feels very charmed by the current economic system.

We need an alternative.

The IMF has known since 2010 that the bailout terms imposed on Greece would serve only to make the situation worse. The "no" vote cannot have come as a surprise. Why were they not prepared for this day?

A commenter on Moon of Alabama has it right...
While I sympathize with your frustration, the problem is the moral hazard created by the ECB and German government whereby private debt held by mostly German banks could be offloaded unto the backs of European taxpayers. Under those circumstances, why wouldn't banks lend money to an already heavily indebted country that had no hope of ever repaying it? Since the banks can unload their non-performing loans onto German citizens, while keeping profitable loans for themselves, that is what they did and what they will always do if you let them.
If you follow this argument to its ultimate conclusion, it seems possible that the another economic rebellion could begin to brew in Germany itself.

More here:
Greek governments — not the current, much maligned Syriza, but decades of its predecessors — treated the state like a teat from which clients and friends of electoral victors might suck. The Greek state has been a shady, opportunistic borrower, no doubt, the kind of character no one would lend money to with any great expectation of seeing it back.

And yet, that’s precisely what bankers in the relatively not-fucked-up Eurozone countries did! These people were not naïfs. They knew the Greek state was sketchy. But precisely because it was sketchy, prior to the financial crisis its debt paid slightly higher interest rates than that of safer Eurozone sovereigns. European banking regulations attached zero risk weights to all EU sovereigns, rendering it nearly costless for banks to simply manufacture deposits to purchase sovereign debt. Eurozone sovereigns were default-risk-free as a regulatory matter and currency-risk-free from the perspective of Eurozone banks. The European financial system was architected to make lending to Greece — and Spain and Portugal and Italy — a money machine for bankers with little career risk over a medium term. Sketchy credits tend to punch above their weight in terms of volume of issuance, so there was a lot of nice paper to buy.
You should read the rest of that essay; it's terrific.

Just before the vote, Paul Krugman proved (with charts and everything) that austerity cannot solve the Greek crisis. The measure that everyone considers virtuous, effective and necessary does not have the virtue of effectiveness and is therefore unnecessary.
And just to be clear, I’m basically doing textbook macroeconomics here, nothing exotic. It’s the austerians who are inventing new economic doctrines on the fly to justify their policies, which appear to imply not temporary sacrifice but permanent failure.
So now the search begins for a new system.

A long time ago, I proposed an alternative. Let us recognize that industrial capitalism (making shit) and financial capitalism (Goldman Sachs and environs) are two very different animals, requiring two different sets of rules. Laissez-faire is for the industrial capitalists. Go get 'em tigers: The leash is OFF.  (Or at least is very elastic.) But socialism -- or, as some might call it, democracy -- should be the rule when it comes to finance capitalism. The Greek crisis would not have happened if the banks that made the loans were run by representatives accountable to an electorate.

The font conundrum. I'm designing a new font, one designed to mimic hand-printing. It's primarily meant to be used in comics, but I think it could also prove effective in other contexts.

Just for giggles, this font will include all sorts of rare and unusual glyphs -- including the symbols for many of the world's currencies. Mine will be the first lettering font that includes symbols for Bitcoin, Litecoin and the new rupee. (Why? Because you never know. Maybe the mysterious inventor of Bitcoin was Magneto.)

Here's the thing: The euro has replaced many currency symbols. But as of today, the euro is falling fast. And by fast, I mean fast. So now I'm wondering: Should I also design glyphs for the old currency symbols, the ones replaced by the euro, the ones we all thought we would never see again?

We may need them soon.
Hey Keynesians....quick....go tell the Greeks how much better it would be for them to get into more debt.
There's a difference between debt and robbery. What the IMF does is a swindle, and it should not held against Keynesianism. The IMF makes sure that small countries are always mired in debt, through deals made with (usually) corrupt officials; the brunt is borne by the people, who did not vote for this debt and who must suffer from austerity measures. Keynesianism is about governmental willingness to incur deficit spending to fund JOBS. Very different.
The other point about Keynesianism that is always forgotten by its enemies (and even some of its friends): Deficits are to be run up only during times of crisis. When times are flush, THAT is when belts are supposed to tighten and debts repaid.
To quote that political and economic philosopher, Dick Cheney: "Reagan proved that deficits don't matter." And they didn't matter during Reagan's lifetime. Now that the US has more financial obligations that can ever possibly be paid, they're starting to matter. But as Dick pointed out, we now live under a system whereby debt is increased evermore yearly, until it can't be increased any more and the system collapses. The Greeks are there now; sometime in the future it will be our turn.

There are rumblings of a Greek military coup.
When we had a Keynesian system we also had a lot less debt. Hence, we don't need a new system, we need to go back to the old system. Back and to the left.
Muffin, Japan was was way ahead of us with the real estate bubble, the stock market bubble, the collapse, and 9% interest rates. If you want to see what's coming, look at Japan.
My favorite crackpot, Webster Tarpley, emphasizes "making stuff" as necessary for Greek economic recovery, ideas similar to yours for "industrial capitalism vs. financial capitalism:"
"If expelled from the euro, the Greek government will have no alternative but to declare a bank holiday to carry out the nationalization of all commercial banks in this country, without exceptions...The National Bank of Greece will establish...a revolving fund subject to increments as needed:
- Infrastructure development..
- Promoting Greek shipping and shipbuilding...
- The support of Greek agriculture.
- Greek petrochemicals and energy production.
- Developing light industry.
- Enhancing tourism and recreation.
- Improving the health care system.
- Investing in human capital through education and training.
- Export financing and guarantees for...products and services."
I should have said "0% interest rates".
So does this make me your second favorite crackpot?

Being number two, I try harder.

Somewhat more seriously, the distinction between finance capitalism and industrial capitalism used to be widely accepted.

And John Kenneth Glabraith (whom I hope you do not consider a crackpot) used to talk about the absurdity of using one term -- "capitalism" -- to describe very different phenomena. As I recall, he once said that there is a vast difference between ATT and your local dog laundry. (Back then, ATT was, like, a thing.) So I guess you can say that that Galbraith was the one who first got me thinking along these lines.

Crackpots of the world, unite!
Not every nation can be a manufacturing and export powerhouse. Someone has to import all that stuff. It's also wholly legitimate to remedy balance of payments problems with invisibles.

In other words, Greece's problem is not that they have a massively powerful finance sector. There problem is that they have no successful industries at all. The have less viable farmland than most other places in the EU, they have no real resource-extraction or energy reserves, their fishing is nothing special and they have no history of industrial development. The only thing they've ever had to support their nation in the modern era has been tourism, which is reliant on being affordable to people in other, richer, countries. That means they need a weak currency, and ever since they joined the Euro things in Greece have cost more and the holiday-makers have all gone to neighbouring Turkey, which still has a horribly weak currency.

So, rather than developing entire industries and new products and finding markets for those and so on, surely it would be easier to just bring back the tourists by leaving the Euro.
If you want your font to be backwards compatible, then you really should design symbols for Marks, Francs, Lira, Pesetas, etc., because you might need to make historical reference to them sometime. Then again, the whole political/monetary union might easily fall apart in the future, too. Of course, a symbol for the drachma may be urgent.

The American union is seriously cracked (fracked?) at present, but it hardly compares to the potential fractures of European society, where feuds between peoples often go back hundreds of years. Czechs and Slovaks share the same language and culture, but couldn't remain one nation; Belgium (!) has devolved into three separate linguistic and political units (Imagine Rhode Island breaking up). In the postwar era, a French official reportedly once said, we love Germany. In fact, we love Germany so much we hope that there will be two Germanies forever.

So by all means, go to it, design those once and future monetary symbols.
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