One of the dangers of trying to understand what is going on in the Eurozone if you are a hapless but interested American isn’t simply that you’d have to be fluent in a lot of languages to keep on top of the media, but the media themselves are, as NC readers know well, not exactly reliable. Look at how much dictation from business and political leaders masquerades as news in the US. And we have a less controlled press than, say, Italy does.
So I will give readers some fresh data points and let you duke it out.
Data point one. One of my colleagues studied in Germany, has extensive, high level political and economic contacts there, and reads the press daily. He also describes his sang froid as “somewhere between that of a Chinese sage and a dead animal.”
Needless to say, he not prone to overstatement or overreaction and also has a propensity to makes Delphic remarks.
He said the Eurozone is over. In pretty much those words, a simple sentence, no caveats or conditionals. I nearly fell out of my chair. This apparently reflects the German recognition as a result of the Italian elections that they will not be able to surmount domestic opposition in Italy and potentially other periphery countries and would rather pull the plug than continue funding their trade partners. He said there was a fair bit of discussion of Germany leaving the Eurozone after the election. I quizzed him on how they thought they could do that, since the new DM would presumably trade at a big premium to the Euro. We discussed that the likely outcome would be further labor “reforms”. Maybe I am naive, but I don’t see how this would not undercut an critical German strength, that of the good, if also sometimes combative, relationship between German workers and management. My source finally said widespread recognition of the existential impasse at most a couple of months away. He’s never this definitive.
Data point 2. From Duarte via e-mail:
I saw the March 2nd protests here in Portugal referenced in the Links. The article from Al-Jazeera says most of the things usually mentioned in public news reports, but here are a few more details:
The real unemployment rate, if you discount statistical shenanigans, is actually 25,6% (calculations here, but only in Portuguese).
The Screw the Troika movement is actually a front group for the Left Bloc and the Communist Party (which controls the main union). This might be of concern, as we have no idea if they actually mean to shake up the system or just grind down the government to get some more percentage points in the next elections and then put a lid on the protests. They have a long history of chocking out threats to the system that come from the Left, but this time they might actually be desperate (it’s extremely rare for them to work together on anything, due to ideological and historical grudges). Events will tell.
The marches were powered not only by the unemployed young people but also by a lot of retirees that are being fleeced by cuts and thrown out of their homes by the explosion of taxes on home owners and landlords. It is also a lot easier to kick people out of their homes now. Other than that, its the usual horror stories of cuts to education and health as seen in Greece.
The article mentions tens of thousands of people, but this doesn’t make it justice. At least a million people took to the streets (Portugal has 10 million inhabitants). Video from the events in Lisbon here.
The government has said nothing so far. This is very unusual, as they usually come out of the Reichstag bunker to congratulate protesters for upholding the spirit of peaceful protest and dissent that is the hallmark of a healthy democracy or some crap like that. For atleast a few weeks before the protest, goverment members were ambushed everywhere they went by groups of people singing a revolutionary song, which led to their humiliation in the news (a brilliant marketing strategy by the organizers). Hatred towards the goverment is now universal (they don’t dare go anywhere without heavy escort), even by sectors of their own party. The only exception is the Socialist Party, which is poised to take the seat of the Social-Democrats and don’t want to denigrate them too much, since they will follow the same politics (kind of like the shift from PASOK to New Democracy in Greece).
This significance of this report is the scale of the protests (at least 1/10th of the local population) and the fact that officials are concerned about their safety. And they also appear to recognize that even the usual PR rituals might backfire.
Data point 3. Excerpts from a post by Yanis Varoufakis on conditions in Greece:
..in a depression there are no silver linings. Even profitable companies go under because, for instance, the Greek banks’ guarantees are not acceptable overseas, the result being that Greek manufacturers cannot import raw materials on credit – which, in turn, means that their capacity to produce is severely constrained and cannot supply consumers even if profitable and even if they have a full order book. So, the combination of failed banking, wholesale retrenchment in the private sector, savage cutbacks in the public sector, ridiculous new taxes imposed on the exhausted band of dependable taxpayers (who are a minority in view of the tax immunity of the upper class) – all this conspires to create a long Winter of Discontent. One that has lasted for three years and counting….
As you might expect, an imploding social economy cannot but bring down with it its health service system. Pension and health funds have run out of money long ago. Their unpaid bills to pharmacies and pharmaceutical companies causes the latter to stop importing a large variety of medicines (since they lack the cash to do it), and demanding up front cash from patients before they order their medicine from the pharmaceutical companies – in full knowledge that the patients may never get their money back from their fund. Add to this the severe reductions in the size of pensions and wages, plus the rampant unemployment, and you get the picture….
According to an article in The Guardian, Greece is facing a humanitarian crisis with over 10pc living in extreme material deprivation? Is that the case?
If anything this is an under-estimate. The humanitarian crisis is proliferating fast and catches up with hitherto middle class people. We have homeless families who until a few short months ago had a home and whose members had some kind of job. Now they have fallen through society’s cracks, perhaps irreversibly.
Now in theory, what happens in Greece is immaterial as far as the Eurozone is concerned. It’s too small in and of itself. The one way it could make a difference was by leaving and showing an exit was possible, which would have given it leverage had it seriously threatened to depart. That would have led to contagion to the other periphery countries, since they might be emboldened to act (or at least depositors would not be willing to take the chance that they might). But even though it appeared last year that a referendum on the Eurozone might have supported an exit, the pols have played successfully on fears of what going alone might mean, and Greek voters seem to have been cowed into inaction.
Thus Greece for the Germans served pour decourager les autres, to show what would happen if you let your debt levels and finances get as badly out of whack as Greece has. But that might have backfired. Citizens in periphery countries now suffering high unemployment might decide they’d rather take more pain now and gain control over their destiny rather than face being broken later on the Trokia’s rack.
As I said, I don’t have an answer here. I’ve long thought the technocrats underestimated the risk of democratic revolt. Those tail risks are bigger than you think! The European elites beat back that threat in Greece, but Italy may (stress may) prove to be different.
But separately, I’ve heard amazing assessments from my hedgie buddies as to what some fund managers think a Eurozone breakup would mean for US markets:
The US intelligence agencies have been examining this intensely (trust me). In the optimistic scenarios. the best outcomes were to have a strong up move in markets, with lots of liquidity everywhere, when the EuroEvent went off. This will be positioned as a tremendous plus for everyone…a growth driver! Bad debt will be eaten up by sovereigns and central banks. Rebuilding and infrastructure on steriods!
Anyone who can fathom how you get to that conclusion (beyond religious faith in the Fed), please explain it to me. Have they not considered what happens to all that debt the ECB bought if there is no Eurozone, or the Eurozone is very much shrunken? And Germany has so much nice shiny infrastructure already they had trouble in the crisis finding anything more to do on that front. This whole crisis is in large measure the result of the iron grip neoliberal thinking has on policy-making. That wasn’t dented one iota as a result of the global financial crisis. Why should a second eruption change that, absent a lot of further upheaval in terms of who is in the power seat?
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Oh no it’s only 3-4 months away from Summer, how will the politicians charge their summer vacations to the “deal” .. I mean Operation Rescue Europe.
“The US intelligence agencies have been examining this intensely (trust me).”
Well, if the US intelligence agencies believe it……that means I believe exactly the opposite.
I laughed at this too.
US “intelligence” weren’t capable to predict collapse of CCCP, although with neofeudal creature called EU they have far easier job.
They did predict the collapse and bloody disintegration of Yugoslavia, if I recollect it properly. I remember reading an article in the Herald Tribune in I guess the spring of 1991 about a CIA forecast for the following 18 months. At the time there was this Serbian guy I was hanging out with once in awhile, and I asked him what he thought. Nonsense, he said. “CIA Propaganda.” A fews week later. . .
WRONG!
They were actively involved in destruction of Yugoslavia. Huge difference. Actually, they were working on it since liberation of Yugoslavia 1945.
Of course! Let’s blame Yugoslavia’s break-up on the CIA!
The real reason having nothing to do with the centripetal forces of intrinsic mutual hatred amongst religions and ethnicities (that go back centuries) throughout what was once called the Balkan States. Right?
From WikiP:
Actually, I got a better story on why Yugoslavia was allowed to fall, told to me first hand by the leader of a small Macedonian liberal party. He had a CIA pseudo-diplomat friend who once told him: “your country has lost its strategical relevance”. The Macedonian replied: “I’m glad to hear that”. The spy then sentenced: “I wouldn’t be glad if my country would become strategically irrelevant”. Months later the country broke apart, he concluded a bit sadly.
In other words: there was no interest in breaking apart Yugoslavia in the Cold War (the independent socialist regime was after all an approximation to the Teheran-Yalta agreements, which placed that state 50-50 in Western and Eastern spheres of influence – it also played, along with other neutral states a balancing role as buffer state). But after the collapse of the Soviet Bloc that role was not anymore relevant and it became free for the taking.
Europe is much more important than Yugoslavia however. But it may indeed have become less strategically relevant after the Soviet collapse. They may think they can afford to let it fall… unless it becomes a new seed for socialism as result. What IMO is what will happen in due time, because the peoples of Europe have no other choice: socialism or slavery.
Didn’t the Milosevic party drive the breakup by insisting
that Yugoslavia continue to be run as a Serbo-Communist Plantation with the Milosevic faction firmly in control from the Big House? Didn’t some of the non-Serbian co-Republics and their inhabitants first try getting some personal and political freedoms and liberties and turned to independence in frustration at being denied these things? Wasn’t that Slovenia’s first preference, and independence only Slovenia’s second preference on being denied the first?
Didn’t the Milosevic Red Fascists then drive the process further and faster by deciding to create a “Greater Serbia” at the expense of immediately neighboring Republics? Do I have the sequence of events wrong?
Does the endgame for Milosevic’s Greater Red Fascist Serbia project contain some lessons for the “Milosevoid” Likudiformists as they pursue their “Greater Israel” project?
Certainly the post-Titoist Greater-Serbian nationalism of the Milosevic cliqué was a key element that pushed Yugoslavia to its collapse. I would not call that “Communist”, although it certainly retained a lot of degenerated Socialist elements. It was however closer to the Russian takeover of the Capital by a handful of bureaucrats and military/spy cadres. They organized the longest-running and most stable hyperinflationary economy ever on Earth so they could sell their products (oil, weapons) at or even under market values. State salaries were fixed in Deutsche Marks, so the many citizens with a public job or subsidy, remained relatively content.
But it must be said that, under Tito and for some time after him, Yugoslavia was a very advanced country with a very high standard of life for all, even Albano-Kosovars (whose territory was never segregated as a republic because they are not Slavs but had a huge autonomy) were doing well in those times.
The ethno-political aspect of the Yugoslavian collapse began in Kosovo and ended with its independence, still somewhat precarious maybe. With the rise of Milosevic (who was in control of major oil companies and banks, not really different from your usual GS partners except in the details) the leadership of Serbia changed from Yugoslavian-Socialist to Serbian-Nationalist-Opportunist. This was supported by the Army, which was 70% ethnic-Serbian and had Serbian Nationalist secret plans in case of a secessionist crists, as it happened. They kept the pretense of Socialism (Milosevic’s wife lead the smaller pretense of a “Communist Party”, while Slovodan himself lead the “Socialist” one) but they relied heavily on the terrorism managed by far-right Chetnik groups, which they used to terrorize minorities in Kosovo, Vojvodina (Hungarians), Batchka (Muslim Serbo-Croats) and the ethnically cleansed areas of Bosnia and Croatia.
Rather than “Red-Fascists”, I’d talk of Fascists under a pretense of the Red Flag (something like P.R China after Mao for example). Although this was not too obvious because Yugoslavia always had a mixed economy, with a very active free market at non-strategic levels.
Maybe the most important element of the Milosevic regime however was the control of the mass media, TV especially, which did not report anything uncomfortable for the regime. This, back in the day, I compared with Berlusconi’s grip on the Italian media but today nearly every Western country is in the same situation, with nearly all the media in very few and very powerful hands.
There can’t be democracy without free media, and this is very different from just “free market” media: it requires decentralization of the control of the media and to some extent the affluence of communitarian media as well. We are heading in the opposite direction: a most dangerous fascist-like concentration of the opinion-making machinery again.
“The US intelligence agencies have been examining this intensely (trust me)”
Oh, dear.
IFF ‘hedgie’ has the entrée to suck at the murderous-dictator tit, like a Soros or a Stephen Norris, she might be able to interact with the SESs and appointees. This group of high-powered assholes does one thing only: they piss stolen money away for political purposes. Absent massive corruption, they couldn’t keep a lemonade stand running.
Otherwise, heaven forfend, ‘hedgie’ got his poop from a GS-grade spook. The crucial thing is this: in their spare moments these apparatchiks may be ratfucking reformers or arming al Qaeda, but every minute of every day, 24/7, they’re obsessively burnishing their resumes for their bigtime post-retirement job in “the money game,” or whatever they poignantly imagine it’s called. They strive heroically to market vocational skills with absolutely no commercial value. What comes out when they talk about commerce or finance is like what little Edwina daydreams while she’s shaking her Day-to-Night Barbie and making it talk.
Let’s hope ‘hedgie’ has a functioning bullshit detector with a very loud klaxon.
The political system so far has been more resilient in this crisis than I would have thought. It was remarkable that most “periphery” contries still voted pro euro. That has now changed with the election in italy and I am a bit surprised how especially the german market seems to ignore that.
The reason is probably that these political changes that are know coming up throughout europe will induce a policy change of Germany and the euracracy. Some time down the road, probably not later than september they will come up with a “growth pact” financed via the ECB. This would provide a huge boost to the southern european economies inasmuch as they have succeeded in implementing at least some reforms.
After yesterday eurogroup summit, it looks like Berlin and Brussels have decided to give more time to reduce the budget deficit to countries that need it. That would be consistent with Merkel’s election campaign strategy centered around the success of her “tough love” policies for the euro area. But this could be too little too late… We shall see. Interesting snippet on US intelligence agencies views on the Eurozone. I don’t know whether to be more astounded by their ridiculous views or by the fact that some absolute returns managers are actually listening to them. I am not even sure this means more alpha for the rest of us because the consequences of a Eurozone breakdown could be so devastating that they may not be tradable.
I suspect the intelligence agencies are assuming that the breakup of the EZ will mean each country will issue their own currency thereby enabling them to control their economies better and ridding every country of the now troika imposed “grand bargain”. Amazing to me that the EZ enabled European great betrayal before US gets its.
I do believe however that before the EZ implodes the elites will head it off with stimulous, probably with large enough infrastructure projects funded by the European Investment Bank – their intent will be to give just enough relief to working people and the unemployed to hold the neoliberal-captured EZ project together, thus heading off electoral defeat. Europeans love the Euro, just a little relief would go a long way to appease them on staying with the project.
Another election like Italy’s, in say, Spain or Netherlands, could make the neoliberals change course. but only temporarily, but they have come so close to bringing their new world order to a vital part of the world that they will not give it up without employing every trick they can think of to keep the bankers’ coup going.
It seems that predictions of the end of the euro and/or the EU are becoming like predictions of the appearance of the messiah. Many believe it has to happen eventually, but somehow it keeps not happening. Last year we were treated to “the euro is days away from collapse” but I guess we can’t be quite so definitive now.
One can still recall George Soros’ 3 months warning on the Euro. Well the man gained 1 billion during the recent Yen devaluation, so all in a day’s work, in fact I would pay for a drone the size of a fly that can stick around George’s office so that I can mimic his moves.
>> Have they not considered what happens to all that debt the ECB bought if there is no Eurozone,
I anticipate a round of global debt-forgiveness. The central bankers have been buying each others’ paper and will eventually forgive each other.
I don’t know that that helps feed anyone though, except for bankers and direct recipients of government pork (e.g., military contractors).
Yves writes, “As I said, I don’t have an answer here.” I believe what is unfolding is the crashing of neoliberal capitalism against the shoals of the obdurate reality of thermodynamics -in shorthand: peak oil. If there’s less net energy to go around your society’s economic activity must contract. Greece recently has been downgraded to a “developing economy,” as if “It’s delightful, it’s delicious, it’s de-lovely” when in really Greece is submerging in a vortex of the allocation of death and despair (for example, the health system is essentially collapsing but neoliberal public health officials here in the USA write that this is “structural adjustment to economic recession”). Neoliberalism holds that a shrinking economic pie is an impossibility. Therefore, preserving –indeed increasing- the wealth of economic elites –hence the Catfood Commission instead of shoring up the safety net and reigning in finance is in order.
This is an interesting observation (quote):
“The US intelligence agencies have been examining this intensely (trust me). In the optimistic scenarios. the best outcomes were to have a strong up move in markets, with lots of liquidity everywhere, when the EuroEvent went off. This will be positioned as a tremendous plus for everyone…a growth driver! Bad debt will be eaten up by sovereigns and central banks. Rebuilding and infrastructure on steriods!”
I’ve been speculating that so much of our own (US) government’s moves toward austerian policies has been coordinated with US banks, and specifically calculated to effect a breakup of the Euro and disunity between EU countries, a la Julius Caesar’s divide-and-conquer campaigns in Gaul. This would have the effect of chasing capital out of Europe and into US markets, denominated in $US instead of Euros.
Think about it. If you were part of the US bank-government-bank complex, you would want to eliminate anything that competes with the dollar, divide the countries that use that competing currency, and devalue their illiquid assets (RE, utilities, manufacturing) after the crackup (and therefore create attractive merger/acquisition targets). If the EU leadership did the right thing and supported its middle class/consumer base, as well as truly unified, it would stand a better chance against the U.S. hegemon, but as it is, it more resembles the spectacle of a dozen cats tied by their tails to a pole for the amusement of Lloyd Blankfein and Jamie Dimon. All led by the political descendents of the people who thought World War I was a great idea. Now, adherence to debt peonage instead of military alliances is what will cause the catastrophic and utterly predictable consequences.
As an aside, or perhaps supporting evidence, this explains why the big corporations are running around like their tits are caught in a wringer on the subject of taxing their billions off shored in foreign (read: Irish/European) accounts. They want to get that back in the United States and denominated in $US so they can turn around and buy up European assets for $US pennies on the Euro.
GE has been throwing the biggest hissy…leaves me wondering if the shadow bank (they are) is finally at the world of hurt.
I wonder about that. Do they even realise that their “asset purchases” might mean jack shit once the revolutions start for real. Blowing billions of ficticious money on assets whose ownership can turn equally ficticous on a drop of a hat may not be the most wise thing to do…
I don’t think even yanks are stupid enough to not understand that their “asset” “ownership” matters only so long as they control their european quislings. Then again, ideologues don’t make the best thinkers, it is possible that the neoliberal scum just might be delusional enough.
“…dictation from business and political readers masquerades…” READERS? eve honey, babe, fix that typo. Love, adam smith, yer buddy
I live in the Netherlands; we’re in recession, unemployment is growing, and Rutte et al are implementing more cuts and giving away more money to the banks. But there’s little sign of a euro breakup on the horizon here–at least as far as I can tell. The Dutch aren’t happy about the situation, but seem to believe ‘experts’ are managing the situation as they can, and are hoping for the best.
My view is that the EZ will continue if and until one of two things happen. Either the powerful parts of the troika and Germany decide a break up is in their interest, or popular movements rise to the level of being able to force it. Neither of these seems likely to me at this time.
A third option, where the ECB and EZ policies shift toward a Keynsian approach, seems to have about a zero percent chance of emerging in policy circles, or anywhere else with power/leverage, though the policies would be popular and could probably manage the problems pretty well, though the big banks would have to take a haircut, and on some level powerful people would have to admit they were completely wrong and/or deceitful…Which obviously aint gonna happen.
I am encouraged by the protests, but I’m afraid I see the elections in Italy along the same lines of Greek and French elections, and popular protests in Spain, Portugal, etc. In order to affect policy–much less ‘change the system’– I believe what’s necessary is a lot more organization, and radicalism, and real clearly stated goals as well as more coordination across borders. We could well be in the process of this occurring, but unfortunately, I think we’re still a long way off.
I think what the eurocrats are trying is to ‘manage decline’ for the majority and enrich the few. To NC readers, that seems obvious, I’m sure. But from my vantage, as well as that of friends in France, Germany, and Spain, I don’t think the EZ is finished–not by a long shot. Alas. But I have no insider knowledge, and am only voicing my sensibility.
Andrew said:
This seems to be pretty much the same thing Duarte said above:
In Mexican Americans: The Ambivalent Minority, Peter Skerry aruges that organizational politics is the most difficult and obstacle-laden type of politics. Furthermore, elite-network politics has become masterful at exploiting protest politics, and benefits greatly from it.
“[P]rotest politics in California is less concerned with bargaining to achieve concrete objectives than with venting frustration and moral outrage,” Skerry notes. “Lacking concrete objectives, their protest endures as dramaturgy.” An attorney friend of mine in San Antonio calls it “junkyard dog politics.” They bark when a theif enters the junkyard, but then go lay down and go back to sleep while the theif steals the junkyard blind.
The protest politicians also greatly enhance the power of the elite-network politicans in what Skerry calls the “antagonistic symbiosis.” “Despite the friction and downright animosity evident” between the two groups, the elite-network polticians “need activists in order to get taken seriusly by their benefactors in the Democratic Party,” Skerry explains. “By pointing over their shoulders to the ‘crazies’ behind them, they ensure themselves a role to play.” In essence, Skerry concludes, the protest politicians “enhance the opportunity for the elite-network politicians to act as brokers to the Democratic leadership.”
Organizational politics is anathema to both elite-network and protest politicians, because such efforts inevitably detract from their own objectives, which of course have nothing to do with all that unglamorous and twice-told stuff about the workers.
Just because something is inevitable doesn’t mean it’s imminent.
Was it Hudson who said that debt that is un-repayable will not be repaid.
What starts a depression – lots of debate but it comes down to high asset prices driven by compound interest – to much money coming from the pockets of consumers to the point that even basic survival is threatened – food, shelter and community. What ends a depression? basic survival needs are available to all.
What sustains a depression? Special interests and privilege.
I hope you get my thoughts – if not feel free to criticize.
Those that have – will always think their way is best as demonstrated by them having. Those that have – will look in horror at those that do not have – could they themselves find themselves in that horror?. Those that have – will promote their way as it seems to be the way that works for them and, if those that don’t have, would only follow their way, things would be better for all.
The problem – those that have – only have what they do by extracting rent (interest only income streams) from those that receive income from productive work….the balance has shifted to far from one income stream to the other. Those that have special interests and privilege do not recognize that debt that is un-payable will not be repaid.
Yes, the European Union will fall if the people who make up the union are excluded from owning an interest in the union, starved of a way to survive food, shelter, trade mechanism and union. Those that have – will have to realize that their gain was the majorities loss and, they will have to return their gains to productive use or they will lose what they have – productive use….such things as infrastructure, rebuilding etc.
The humans who have-not – they all know they can produce things, they wonder why they can not be put to work that serves themselves and those around them while creating a life for themselves that is fulfilling beyond just survival.
After all – they are humans who have the same ability as every other human – on this planet- to produce goods and services that enable themselves to lead fulfilling lives while helping others. Even the remaining remnants of hunter-gatherers lead fulfilling lives, cultural and community values, companionship, full bellies, intelligence equal to the rest of the world — (remember, all famine is man made…all human misery is man made. That which is not man made- other men aid to relieve)
So, what is it that is so hard to understand? Millions of homes stand empty while millions are homeless! Huge amounts of work need doing (like humans doing work to prevent catastrophe) while millions have no job!!! Millions starve while half our food production goes unused!! Millions die while we are at our highest level of medicine – on an ever increasing graph!! The list goes on and on.
No government can stand when it’s population is starving or dying while plenty surrounds. No system can long stand human injustice and suffering. No system can stand the imbalance we see….where the rewards go to those that are too coward to take risk and gaze only upon their navel of money while, all the while, civilization stops progress…waiting for the cowards to move their gaze forward, waiting for them to overcome their fears. Well, I think, politically speaking, the majority of the brave folks and, those who have some compassion for the frightened cowards, have had enough and are starting to move forward. We still hear the cries from the cowards..the rent extractors – ‘Who is going to pay us?’ – well I got some bad news for ya Chicken Littles – debts that can’t be paid back, will not be paid back.
Are we once again at a point of globally deciding on a reset that can lead to human activity doing what is now considered normal or will it lead to a renaissance? Not a renaissance in the classical sense but one of a modern sense… a new one all together?
“No government can stand when it’s population is starving or dying while plenty surrounds.”
The British government in Ireland during the Potato Famine stood (and still stands) while a quarter of the population died in a country that was a major food exporter during the entire famine.
The situation with the Soviet Union in Ukraine in the 1930s was not too different.
I wish what you said were true, but history says otherwise.
Tom, bravo!
Look at how much dictation from business and political leaders masquerades as news in the US. And we have a less controlled press than, say, Italy does.
Love the description of our journalists: “dictation from business and political readers masquerad[ing] as news”, (that is so dead on) but wonder if apparent degree of control over the press means less stenography or more.
I lived in France in the 70’s and found (then at least) that government controlled news was curiously more objective than ours. The way one friend (French) put it was that the government, which pretty much controlled the news on TV, was aware everyone would assume it to be pure propaganda so they made an effort to be objective. French pride. The result wasn’t saying much, but still, facts would occasionally “hop” over the filters where that never happened in the US except by mistake and mistakes in this country were and are as rare in the news as in commercials.
Of course, the French model has become much closer to ours over the last few decades. It’s now almost purely commercially controlled and not living there makes it difficult to judge, but I still get the impression that US journalism literally defines “the speed of light” for opacity to facts and translucence to extraction/business oriented propaganda.
Although I feel we will eventually witness the death throes of neo-liberal economics that time is not now. I fear that kick the can down the road will be played as long as possible and what we will witness is a slow economic decline punctuated by sharp jolts. Of course these periods of decline will be hidden by irrational exuberance, bullish market moves and the creation of even more absurd financial products.
There are likely problems underlying our economic malaise that we cannot conceive until the current problems are resolved. Until the financial class is overthrown it will be impossible to even deal with the damage done by neo-liberalism and resource constraints. I just fear they will prove immovable incumbents for quite some time.
I think I can understand to some extent your German colleague’s reaction. Germany has gained enormously from the euro, selling their wares all across the Med countries, something they would not have been able to do without the euro. Now that they have milked the said countries almost dry and now that rebellion starts such as in Italy, they have no more use for the euro and may think they would be better of with a new DM that, in their heart, they have always regretted.
What the break up scenario would be is anyone’s guess. Maybe the most simple idea would be to load as much debt as possible on the ECB and once the euro is dead, all that debt instantly becomes shitloads of worthless paper (actually computer data).
It is the second act that is the most difficult. What next? Countries recreate their old currencies and each central bank credits the banks and the treasury with keystrokes of zillions of Francs, Pesetas, etc. Old euros are exchanged for the new currency and destroyed. Bank accounts are re-credited in the new currency. FOREX woud be in havoc for a while a
The possibility of complete chaos is, however, very real.
I think I can understand to some extent your German colleague’s reaction. Germany has gained enormously from the euro, selling their wares all across the Med countries, something they would not have been able to do without the euro. Now that they have milked the said countries almost dry and now that rebellion starts such as in Italy, they have no more use for the euro and may think they would be better of with a new DM that, in their heart, they have always regretted.
What the break up scenario would be is anyone’s guess. Maybe the most simple idea would be to load as much debt as possible on the ECB and once the euro is dead, all that debt instantly becomes shitloads of worthless paper (actually computer data).
It is the second act that is the most difficult. What next? Countries recreate their old currencies and each central bank credits the banks and the treasury with keystrokes of zillions of Francs, Pesetas, etc. Old euros are exchanged for the new currency and destroyed. Bank accounts are re-credited in the new currency. FOREX would be in havoc for a while and I have no idea how international trade would adapt.
The possibility of complete chaos is, however, very real.
I think your data point #1 is the most important: Germany will be the first to leave the Euro. I used to believe it would be one of the debtor nations, unable to face the pain of austerity, that would finally take the plunge. But Greece has shown that it doesn’t matter how much pain the Troika inflicts on a debtor nation: it can still be cowed into submission. Therefore, call me cynical, but I don’t think even 10% of a country staging mass protests, or >25% unemployment is enough democratic action to force a country’s elites to separate from the Euro (For example, I’m still amazed that Greeks are worried that with a Euro exit they wouldn’t be able to import oil, when under the Euro, they have trouble finding enough food. Such is the ability of a population to be manipulated by their fear of the unknown…). So a Euro breakup will come when German elites (not the hoi polloi) believe that’s their best option.
I believe your hedgie buddies are on crack. But if enough of them are similarly drugged, then they can certainly make the market move the way they wish it to. So I wouldn’t bet against their irrational views. But that said, I believe *if* markets behaved rationally, then stock markets would go down with a Euro breakup. The hedgies are correct that people would look for safety following a Euro disintegration. But it won’t be American stocks. It’ll be American bonds (and possibly German bonds). And that’s assuming someone (The Fed, the Bundesbank) will make whole all the Euro debt that would otherwise default. Just look at past events. Every time there was a risk of Euro disintegration, or even the possible default of just *one* country (even someone middling like Greece) the stock market didn’t go up. The bond market did. That makes sense. After a >50% decline the last time around, and flash crashes every month, the American stock market still isn’t viewed as a safe haven by the world (not even by the average American retail investor). Now once the dust settles after a Euro breakup, more money might come into the US stock market as investors rebalance their global portfolios. But that’s a long ways off.
I looked into what Nostradoomus had to say about this and found this arresting quatrain in EASY MONEY: THE SPECULATOR’S GUIDE TO FORTUNE TELLING FOR FUN AND PROFIT, but I can’t tell whether it means go long or go short or what. I think it means buy gold and kick back and find something else to do other than macroeconomics. Maybe that’s just my reading of it, hard to make sense of any of this stuff (until after the fact and only if you lucked out). Then yer a jean-uss.
all states that were unjoined will come as one
the old empire will arise from land to land
until the new princes live out their day
pursued by swordsmen from a mob they flee
the sunlike stone raised on each throne, each land
feasts upon its hungry sores, slave to slave
all looking for a secret sign to hail
the conquered will rejoice, their blood returned
-The Undiscovered Quatrains of Nostradoomus, trans. by D. Tremens, Scholar of Quatrains, GED
Nostradoomus… LOL… I love that!
Here’s some Nostradoomus rappin’ for y’all http://www.youtube.com/watch?v=XyL0hL9B5ig
i don’t even know why i try an reply to you…all i do is backspace, wipe tears and try again
i have to thank you for the laffs…but this one hurt(s)
Get a grip. It’s not that funny. ;-0 (Unless yer on the couch blowing a bong getting the giggles in wild coughing fits of reefer smoke). I put the big short trade on today thanks to Chris Martenson. I have ’till April 20 when the call expires. If it doesn’t work, I’m sending him the invoice for my losses. haha Ya gotta make all this macroeconomics pay somehow. No pain no gain.
IF Germany abandons the euro it may be a good thing for the Eurozone or whatever remains of it, provided that emergency measures are taken, like nationalizing the banks (paid in long-term bonds, of course) and the remaining euro is sensibly devalued. It’s already 10 years too late for this last but better late than never, right?
But the reality on the ground looks too gloomy for the Eurozone to survive even without the whip of Germany and IMF’s destruction-and-looting doctrines.
My real question is not if the Eurozone can survive as it is (it cannot: you cannot survive if your costs are internationally non-competitive because of an extremely overvalued currency – learn from the euro, gold-buggers!) how will the various states arise from the devastation that this crisis is creating. Military rule? It won’t work. We know that the military is unable to rule in the Age of Internet, at least not for long. They would also be unable to apply any remedy that does not cause more destruction and more social upheaval.
So the only solutions are clearly socialist: either a “soft-handed” version Chávez-style in which Capitalist companies are put to work for society by a strong (mostly) non-corrupt and radical government, or the “strong” version of real socialism, where Capitalist ownership does not exist anymore at all.
Of course applying such much needed remedies will cause bloody confrontations. So I imagine we are heading for a very dramatic period in Europe, more than most can expect.
The lesson from Venezuela is that mixed models recieve the worst of both worlds. This was also the case with the Sandinistas of Nicaragua. On one hand, society suffers from capital strike, owner lockouts, artificial shortages before elections, etc. On the other hand, society recieves none of the benefits of central planning (Walmart has proven the efficiency of central planning in the Information Era). This eventually and inevitably leads to “desgaste” (a Spanish word) and discrediting of Socialism among the public.
Criticisms are generally good, not just for Venezuela, where political polarization has been relatively high, in the last decade+ but Bolivia, Ecuador and indeed Nicaragua. I personally prefer the radical model but I suspect that if Europeans reach Bolivarianism now it’d be a huge step forward: first of all, nationalze the banks, then the energy corporations, tax the rich, cap the salaries like the Swiss just did, etc. I doubt they are ready for anymore than that by the moment: mass media brainwashes well and the petty bourgeoise attitude of love for property most can only dream with remains.
The lesson from Venezuela is that mixed models recieve the worst of both worlds. This was also the case with the Sandinistas of Nicaragua. On one hand, society suffers from capital strike, owner lockouts, artificial shortages before elections, etc. On the other hand, society recieves none of the benefits of central planning (Walmart has proven the efficiency of central planning in the Information Era). This eventually and inevitably leads to “desgaste” (a Spanish word) and discrediting of Socialism among the public.
Sorry for the duplicate comment. I recieved a 404 error the first time and I assumed that it failed to post.
This whole catastrophe has truly changed how I viewed Europe. I always assumed they were (on average) far smarter than Americans and had more control over their governments. Watchin Europeans (in unison with Americans) vote in government after government that destroys their lives is truly bewildering.
Bewildering is definitely the word for it. But it does show that we are all one human family. All except for the 1%. What word shall we devise to designate them?
Ferdinand Lundberg invented a phrase . . . The Rich And The Super Rich. He even wrote a book about it.
Been tramping around SW Ireland these past few weeks….
Talking to farmers and stuff over a few pints.
They always have this Beal Bocht thingy going but this time it is really different.
Output Input and Income in Irish Agriculture – Preliminary Estimate.
http://www.cso.ie/en/releasesandpublications/er/oiiap/outputinputandincomeinagriculture-preliminaryestimate2012/#.UTXS-aLwmSo
annual decrease of 12.3% in the operating surplus.
Total intermediate consumption (diesel , fertiliser , feed etc) increased by 9.0% or €438m.
Feedingstuffs increased by 22.0% or €259m ! (bad summer)
Got a lift from a sheep shearer / farmer yesterday……….
Things are bad.
Income (cash flow) has not increased but input costs keep rising
The basic math of the EZ doesn’t work so at some point it will go splat. It would already have blown up if not for some timely interventions by the ECB. Right now, we are coming to the end of the current episode of can kicking. Its psychological end will come with the German elections. The odds are little will change as a result of them, but we don’t know if the ECB or even the Fed will intervene yet again. All of the action so far has really been at the elite level. As always the primary danger here is miscalculation precipitating a systemic event.
Discontent bubbling up from beneath may pose an existential threat to the kleptocratic structure of the euro but it has not yet achieved critical mass anywhere. What we should be looking for is the destabilization of one of the periphery governments (chaos) or a major shift away from the traditional parties to a new movement with clearly defined goals (new political grouping). Beppe qualifies more as a protest vote. He is a challenge to other players in the system but not to the system itself.
So that is what we should be looking for miscalculations, chaos, or a new political grouping. What we will not see is reform of the eurozone or the addressing of its critical problems which for the umpteenth time are these:
1) Lack of a democratic fiscal and debt union
2) A predatory and insolvent financial sector
3) A weak central bank serving the interests of the financial sector
4) Europe internal mercantilist trade patterns
5) Thoroughly corrupt political classes
6) Massive wealth concentration in a ruling kleptocratic class
Even if the euro goes, most of these problems will remain for whatever political and economic systems follow it.
Re IA scearios – well, he says it’s the “best” scenario. That may well be “thing blow up, we get a month of really bad stuff but then we get things much better” (better say because some equilibrium between investors to SPIGs and workers there will be found as compared to now where it’s all heaped on labour). Bad debt could indeed get eaten by CBs (do you really think that Fed would let US banks blow up from Euro debt? After what they did in the South American blow up last century?), because that’s what they do these days, and EuroBreakUp would give them a nice excuse, palatable to public (easy to blame someone else, preferably foreign who you know can’t be trusted).
Greece may well ask UNRA for help (which it can’t when it’s in EU, or rather can, but the loss of face for Gree (and EU) politicians would be suicidal) etc. etc.
What I’d be intereste in is what they think is most likely scenario and/or the whole range. With consulting background, surely you know that “best scenario” is not the same as “expected scenario”, so picking up the best outcome in the most optimistic scenario and saying “this is unbelievable” is not exactly fair – after all, the best with most optimistic should be possible, but more or less unbelievable due to the number of things going right at the same time. Which, as aside, is why just about any optimistic scenarios tend to be the least usefull.
A picture is worth a thousand words. On the capability of the Fed to engage in a new, massive round of stabilization if the EU self-destructs in the near future, see the graphs of the US monetary base at
http://businessforecastblog.com/the-rhino-in-the-room/
We have an independent PBS station, a 2nd public TV broadcaster, that has none of the mass market consumption content. They daily broadcast Democracy Now, Japanese NHK with English, France24 and RT-all in Eng with Max Keiser and Thom Hartman shows. It is clear what is similarly important worldwide, and what gets the attention of the French, Africa and what gets the attention of the Russians-every weak point and ugly truth about the USA. The French elections are turning point against austerity, because, it is first important to say austerity is a policy, second that it is the wrong policy and third, it will be reversed for the welfare capitalism that we are know works. How much actually political muscle can be used to back up the fighting words is part of the ongoing political power struggle. You don’t see much if anything about France in our Queen Mum and Royal Brit bullshit fetish on all media.
The French station has some round table discussion with French, American and Brits, among others, trying to make sense out austerity and Euro-disaster. There is much more reporting of video clips of people clashing with police in the streets from all over Europe whenever it happens. There seems to be no denial of a bad situation getting worse with each day, people suffering beyond what Europeans thought they would ever go through again. I saw a report about the bribery of Greek hospital workers and doctors with the envelope full of cash, and the crusade of one administrator who put up decals of an envelope with a red circle and the slash through it . It was a warning to not bribe anyone. Doctors would be fired, etc. In Greece, fee for service has reached new lows, it just like American health care now.
http://www.mindtv.org/styles/mind/www/about.html
Paul Tioxon: “You don’t see much if anything about France in our Queen Mum and Royal Brit bullshit fetish on all media.”
U.S. beats Romans:
Circuses are sufficient.
No bread is needed.
(Rejoinders in 5-7-5 haiku, onegai shimasu).
In the absence of bread,
What will feed the acrobats?
Will they starve and work?
test
The only all night store in my area (Southwest) is Walmart Supercenter. If I need something after midnight I go there. That’s when you see them. The parking lot is half full, and it’s a huge parking lot. Windows cracked just enough to get air. The quiet wail of a baby, maybe. These are families sleeping in their cars.
The Walmart people (checkout counter) tell me that they come inside in the morning to wash up. But they have a routine and orderliness about it so that it doesn’t seem like a stampede. The checkers know who they are but don’t say anything and don’t tell their managers, because as one said to me, “I’m one paycheck away from being out there myself.”
I check the church parking lots at night when I drive by. They have overhead lighting, so it’s well-lit. The church is dark inside. There are 10 cars parked in back. Families.
I cannot describe to you the despair that wells up in me when I see this. Four years of this.
I got rid of the TV portion of my cable service because I could no longer bear to listen to ANY of the drivel that East Coast anchors and pundits were mumbling about this recession, its causes, and the utter lack of real concern coming out of DC that they fail to attack. I lived in Manhattan half my life. Right on the Park. 59 St. I know the broadcaster drill. Picked up in limo to get to makeup, howl at producers, do the show, one hour to get the same young producers one the same page for tomorrow, limo takes you to lunch or dinner, a little shopping, maybe some grooming or gym action, limo takes you home, or maybe to dinner with a fatcat you want to know, go home. There’s no reading, no delving into data. Your producers do it, or you get your ideas from the fatcats you sup with, the “producers.” I blame each and every one of them for this mess post 9/2008. The only indignity they showed was the horror of realizing while the crisis was going on that their portfolios would be affected. Not one call for the heads of these banks to go to jail for their fraud. (Except Dylan Rattigan, and they canned him for that.) Not one scream or cry of outrage when Obama said he wasn’t going to investigate them, which was when I realized I’d been had. And it’s the news directors behind them (or over them) who are protecting their uptown tribe.
“Look at how much dictation from business and political readers masquerades as news in the US.”
business and political READERS? what reader is dictating anything? not me.
readers = leaders
Mercury retrograde. Cut some slack.
well it did get fixed. you ‘n’ eve can have all the slack you want, now hear.
The passivity, so far, of Americans and Europeans in the face of what elites are doing to us amazes me, but I don’t think brainwashing or media propaganda or the like explains all that much of this. Especially for the educated, the information about what is really going on is so easily available that one must actively work to avoid knowing it.
Part of the source of this passivity is a highly evolved system of co-optation developed since the 60s and the absence of large pools of talent untapped by the elite (as African-Americans and women were in the 60s).
Part of it is the success of long-term deradicalization, the most successful of which was the crushing of those parts of the labor movement that had broader aims, not just a better contract for one group of workers and who cares about anyone else.
Part of it is the failure since the 60s to develop an inclusive value system, spirituality, that could both speak to people, and provide a believable alternative leadership. And to both support the personal development we need in order to mature our societies and to connect that personal development with the social development. (That last link is stunningly missing in personal development circles.)
Part of it is that things have changed so fast, particularly the de-industrialization of most of the 1st world, the introduction of over a billion desperately poor workers into production for the 1st world, and all the changes in communication, that hardly anyone has too clear an idea of what is going on. Our old categories and understandings no longer match reality well enough, but we have not had the social basis for developing new understandings quick enough. Here, the corporatization of universities has played an important destructive role.
I don’t think that even the elites really understand the changes underway or where they are “leading” us. But as long as they can continue their plundering, they don’t need to. We do.
I believe that underlying and connecting all of this is the transition of the cutting edge of the economy to knowledge production decades ago and the failure of society to adjust. But that particular theory does not seem to be convincing anyone. Sigh.
But please do see that the question of exactly what is actually keeping so many so passive for so long is the single most crucial question right now.
I don’t think that there is “passivity”, just shock and relative disorganization. Last year Spain and the USA, and also Greece and Portugal, saw their plazas crowded with people who demanded something else. In Europe at least protests have not ended at all. But of course the power of the Capitalist-Oligopolists is huge: they are pay salaries and bribes, own the media and brainwash us all every single day with messages of suicidal “realism” (yes, I know it’s an oxymoron), preachings on the alleged death of the Communist dream and lots of football.
But passivity? Not really, the pot is still boiling hard and can overflow at any moment.
That the hedgie thinks only exciting prospect of turing of a trading profit from a Euro breakup, and not the human cost, is exactly why he may, and probably should, end up hung from a lamp post one day
“This whole crisis is in large measure the result of the iron grip neoliberal thinking has on policy-making.”
Do not forget the real enablers of those policy choices to be the Central Banks with the Fed in the lead with their longterm inflationary monetary policies. It undermines not simply sound markets due to their central planning efforts but destroys in a barely perceptible manner those human values that are essential for the smooth functioning of a society. Certain individual responsibilities for society’s cohesion and solidarity as well as many risks should not and cannot be delegated to the state as we otherwise end up as slaves at the end of the day.
“One of the dangers of trying to understand what is going on in the Eurozone if you are a hapless but interested American isn’t simply that you’d have to be fluent in a lot of languages to keep on top of the media, but the media themselves are, as NC readers know well, not exactly reliable.”
The media in Europe are IMHO decent. At least on non strictly financial matters. They rarely stink in the way the US ones do (except for a few with a Pizza taste).
When it comes to issues that relates to banking, the picture is of course bad. More because there is little to no interest into finance in most Euro countries.
For some obvious historical reasons, the Spiegel or the Figaro will never engender the AEP style of journalism that Yves seems to enjoy (I do too).
Money is course an issue in business circles here. But most people do not equal money with banking on the old continent.
Mind you there is a life (and even a business one) outside HF, investment banking and al.
“Look at how much dictation from business and political leaders masquerades as news in the US.”
Situation is different in Europe.
Fewer interesting bloggers such as NC. But the press is overall less under control of business. May be under pressure by government but certainly within limits.
Overall business lobbies and government ones do not overlap enterely. Media can and sometimes do take advantage of their position as an arbiter.
“And we have a less controlled press than, say, Italy does.”
Italy media are, and this well known, among the worse in the Eurozone. You should pity them but certainly not generalize on European media from Rome or Milan.
At least at the current stage.
Dear Yves, as a regular reader of your blog, I value your opinions highly. But as to your colleague who supposedly knos Germany so well, let me say bluntly that he obviously has no clue. German mainstream opinion advocating leaving the Eurozone? Baloney plain and simple.
Kai from Munich
Dear Yves
I also value you blog very much but I agree with Kai. Main stream opinion against the Euro? Berlin preparing leaving the Euro? No way, I believe. Germany is an extremely cautious country and there´s no pain as of yet. Why should they run this extreme risk? Also I try to read between the lines of the press and especially the financial publications. I really can´t discern any particular alarm about Italy.
I just know that I have had it with Government and their interference. I just want to be left alone. Stuff their pension schemes, stuff their health, their education, their snooping and duvet lifting. I don’t want to pay for it, I don’t want to be part of it and I couldn’t care less what they do, just count me out.
You can keep your fake food, your medicines, your news and your garbage. I am not interested, I will not be part of it and I couldn’t care less.
I was not born to slave for others, and I don’t expect anyone to do that for me. If the fat cats want to fight or want taxes off me, go and do it yourself, count me out.
I don’t see an EMU breakup happening. Debt restructuring and repurposing the ECB beyond propping up sovereigns that have been ruthlessly coerced into propping up hopelessly insolvent banks seems more likely. Why give up on a “United States of Europe” when both the U.S. and U.K. are themselves saddled with insolvent derivatives junkies masquerading as banks? Fears of individual European sovereigns per the consequences of leaving the EMU are hardly overblown. The London-New York Axis of Fraud is licking its chops, as the report on the analysis of so-called “U.S. intelligence agencies” rather reveals. What I find hard to believe is that the lessons of the 1920s and 1930s are not dominating political discussion, and that outrage among EMU partners over having been led into a financial trap laid by forces outside the union is somehow off the radar.
European union is a passion or it’s nothing.
doesn’t anyone here read the GEAB bulletins? why is this conversation structured around the hypothesis that the option for the common good is secession?
and Yves, re your colleague who knows Germany so well,
that he’s a cold fish is not a credential.
“And Germany has so much nice shiny infrastructure already”
Au contraire. If anything, Germany’s infrastructure has been feeling seriously neglected for some time. True, Berlin and the east have their share of bridges to nowhere. But in general, gone are the glory days of the Autobahn and high speed rail. Broadband (mobile or otherwise) is severely lagging. The university system has been underfunded and overstretched for decades.
Check yesterday’s links for a fine example: The Kiel Canal in “disrepair.”
Pepe Escobar’s take, from Italy, 3/11/13.
“the Fall of the House of Europe”- in detail.
http://www.atimes.com/atimes/World/WOR-01-110313.html
Bohdan, that’s a good read. Thanks.