Um... we do all know what's going on in Europe, right?

[cthulu2016]

Last edited Tue May 15, 2012, 01:12 AM - Edit history (1)

The Eurozone really is going to break up, or remain intact via some sort of disruptive means. And in the short term. Most of the drama is likely to play out before the US election.

It's a strangely low-key story, perhaps because it's ultimately about accounting. It does, however, have the potential for big real-world results.

Germany is telling Greece who she must elect, and that if her people vote for the wrong policies Greece will be thrown out of the Euro. (Beats being invaded I guess.)

This is a story about the danger of Right Wing ideas as various ideologues have pushed the Euro to the brink. It should be an ongoing expose of the Right. ironically, however, most of the coverage of this is from Right Wing sources because it's bad and thus presumably redounds to Obama's discredit. Once again, RWers pointing at there own mess.

An example of the sort of scary way people are starting to talk over there: “If Greece cannot meet its obligations and serve its debt the pain will be great,” (Outgoing Socialist Greek Minister for Citizen Protection ) Michalis Chrysohoidis was quoted as telling a local radio station. “What will prevail are armed gangs with Kalashnikovs and which one has the greatest number of Kalashnikovs will count … we will end up in civil war.”

Here's Krugman's rough prediction/analysis from this morning:

Some of us have been talking it over, and here’s what we think the end game looks like:

1. Greek euro exit, very possibly next month.
2. Huge withdrawals from Spanish and Italian banks, as depositors try to move their money to Germany.
3a. Maybe, just possibly, de facto controls, with banks forbidden to transfer deposits out of country and limits on cash withdrawals.
3b. Alternatively, or maybe in tandem, huge draws on ECB credit to keep the banks from collapsing.
4a. Germany has a choice. Accept huge indirect public claims on Italy and Spain, plus a drastic revision of strategy — basically, to give Spain in particular any hope you need both guarantees on its debt to hold borrowing costs down and a higher eurozone inflation target to make relative price adjustment possible; or:
4b. End of the euro.

And we’re talking about months, not years, for this to play out.

http://krugman.blogs.nytimes.com/2012/05/13/eurodammerung-2/

.

[RobertEarl]

1. Scary headline

I thought you were going to tell us that one of their nuke plants had melted down.

Thank Gawd! it's only money and politics.

[cthulu2016]

2. And will, oddly enough, have comparable effects

It's like when they announce economic statistics on TV. I always try to think in terms of, "OH... that means x percent more or less domestic violence, suicide, higher education, braces, etc.. real stuff affecting millions."

[RobertEarl]

5. Search Iceland on DU

And you have no idea about the effects of our newly nulearized world

[cthulu2016]

6. Sorry, I assumed your post was not serious, but rather ironic

If you honestly don't understand the human (and ecological) impact of economics then that's what it is.

[tkmorris]

7. Iceland acted admirably...

But the situation they face in Iceland has jack-all to do with what is going on in Greece, or Spain and Italy for that matter.

Furthermore I expect the poster knows a good deal more about the ramifications of the situation at Fukushima than you give him credit for. Knee-jerking an insult at a poster merely because you disagree with their opinion is not a good way to make your point. In fact it makes it appear as if you can't.

[RobertEarl]

8. Jack all...?

WTF? Iceland told the banksters to take a hike and are doing pretty well.
Greece is still being raped by the banksters.

And the poster claimed that similar effects would be the happenstance and that's like comparing apples with oranges, so I surmised it didn't quite grasp the situation.

You too are comparing money with radiation, right?
Maybe you need to just back up and try again?

[bhikkhu]

10. Not everything scales up all that well

...is the quick explanation.

[girl gone mad]

15. Let's move beyond these specious arguments.

If a tiny country like Iceland can protest until it forces its government to practice democracy, then get out from under its enormous debts, tell the banks and the Euro elites to pound sand, and finally start to return to growth, then so can Greece. Greece has a bigger, broader economy and a richer history of democracy than Iceland.

[former9thward]

17. No a completely different issue.

Iceland did not default on its sovereign debt. That is what Greece may do. Iceland did not do the things you posted.

[bhikkhu]

20. Returning to growth is the key to that

which requires a background of other countries with relatively healthy economies. In Iceland, if the customers for their exports weren't buying, there would be no growth.

And I always keep in mind that the "euro elites" are a part of a system much better than ours - the closest thing to an ideal social democracy on the planet, with better education, social mobility, overall prosperity and equality than we have. Generally speaking, "monied interests" there are outmatched and much smaller in scale than the government, which does act toward the overall good of the people...I'd have to trust that they can find their way through the current crisis (as they have done well through many previous), and I doubt that our opinions or advice on things are worth much.

If the peasants of the Congo, for example, were to begin taking up collections to help the poor here, it would be a nice gesture, but I'd rather they focused on their own poverty first.

[tkmorris]

11. "Maybe you need to just back up and try again?"

No, I got it right the first time. Greece CAN'T handle their issues the same way Iceland did. The situation is different. Greece does not have the money to continue operating it's own government. They either have to cut their spending or borrow to stay afloat and no one will loan them the money unless they institute the austerity measures the lenders (mainly Germany) insist upon.

Iceland didn't have the debt problem Greece does. Iceland was home to several large banks that went bankrupt when the Icelandic govt refused to bail them out. Said banks owed money all over Europe. The EU wanted the Icelandic people to pay off the debt, but Iceland refused to do so, telling the EU to take a hike. Please note that Iceland, unlike Greece, was not a member of the EU. Further note that Iceland did not need to borrow the massive sums of money that Greece requires just to stay afloat; they could afford to tell the EU no and survive. Greece cannot survive without a massive infusion of cash, not as things stand.

Do remember that this is all heavily synopsized. The Cliff Notes version if you will. I've left a lot out for the sake of brevity. I encourage you to study the matter for yourself for a more complete understanding.

One last thing. Economic crises DO affect people in very real ways. Radiation kills people to be sure, but if Greece descends even further into recession and it spreads throughout the EU people will die as a result of that as well. The MANNER in which they die will be different but the end result will be strikingly similar. It's puzzling to me that you not only don't seem to recognize that fact but feel free to ridicule those who do.

[girl gone mad]

13. Greece is already in a depression, not a recession.

Last edited Tue May 15, 2012, 07:14 AM - Edit history (2)

Iceland didn't have Greece's debt problems in part because they refused to bail out the banks and instead forced the bondholders to take writedowns.

Greece can continue operating its own government by returning to the drachma and restoring currency sovereignty. They would survive and begin to recover since a devalued currency would make them much more competitive.

ETA: Iceland is the right model for Greece, as Professor Mitchell has detailed here.

[muriel_volestrangler]

16. Rubbish. Iceland cannot serve as a model at all

Iceland is 1/30th of the size of Greece
Iceland was never in the EU
Iceland already had an independent currency
Iceland has carried on paying everything due on its government debts
Iceland followed capitalist practice - it let failed private businesses go bankrupt, with the shareholders and bondholders taking the loss
Iceland president and new government did what the people wanted; the Greek people want to stay in the euro
Iceland nevertheless cooperated with the IMF

[hack89]

24. No - Iceland went hat in hand to the IMF to borrow billions.

Iceland had a domestic banking crisis - they told domestic bankers to take a hike.

They then went to the IMF and willingly adopted IMF austerity measures in exchange for IMF financial help.

Those banksters have voluntarily written off 75% of Greece's debt as part of the EU bailout.

And to top it off, Iceland has applied to join the EU.

[freshwest]

3. Really? I thought all the more wealthy nations were going to weather this out. The only ones making

The news are Italy, Spain and Greece. Anyone else having a ruckus over there?

What does '...remain intact via comparably disruptive means' entail, exactly?

I know the UK is doing the austerity dance, but AFAIK, the Scandinavian countries and the rest of Europe have settled down quite a bit.

[cthulu2016]

9. Depends on what you mean by weather

If the eurozone GDP is 1.5% lower next year in one scenario versus another that's a big deal for everyone. They are all each others biggest trading partners, and the eurozone is already in formal recession.

So nobody really escapes the effects.

And if disruption reduces GDP it reduces government revenues and more nations get into debt crisises and so on.

The break-up of the euro is inevitable because there is too much economic diversity there to all fit one monetary policy, but it is a disruptive prospect nonetheless.

re: '...remain intact via comparably disruptive means'

Germany will probably throw Greece out of the Euro, but if she did not then something else would have to change dramatically. Greece needs inflation in the Euro because she is in debt. Debtors at fixed rates always want inflation. The people who hold that debt do not want inflation. Germany considers eurozone inflation a much higher price to pay than tossing out the weaker euro-nations. So either way, somebody will think the sky is falling.

Throwing Greece out sucks. Keeping Greece in sucks. Both have big costs for somebody somewhere.

I thought to say comparably versus "equally" because I think eurozone inflation would be by far the best way out... but banks wouldn't think so.

[Lns.Lns]

12. It is not just the banks...

It is Germany as well. They are driving the austerity push with help from Austria, France (at least until this last election), et al. The stronger economy countries do not want to inflate their purchasing power (not to mention the Euro as the only credible threat to our reserve currency status), but it is at the expense of the weaker countries .

Germany really has no austerity to speak of because they structured their economy so that taxes are relatively high, without loopholes, and they take that money and spend it on the people. That creates a strong economy because the people share in the prosperity, they are educated well and most of their needs are handled, e.g. education, medical, subsidies for individual solar, etc. The wealthy people are not obscenely wealthy. Germany has a history of hyper inflation because of reparations from both world wars and it is a scar they carry. I have respect for what they have done, but I also can't help feel they have a tendency to feel superior to others. First by trying to take over the world a couple of times and then by forcing the pain of austerity on those who are not as adept financially without regard to those countries citizens. Not that we do not share some of that lack of humility.

It seems to me that where a country gets in to trouble is when business people get greedy and want wealth just for the power of it (like what has happened to us over the last 30-40 years). When the needs of the people are ignored for too long, they revolt. It is happening all over the world. Someone asked earlier if it is just Greece, Spain and Italy. No. Every country has either been effected or soon will be (including Germany) if this crazy financial frenzy the world is in doesn't stop.

In my humble opinion, Keynes (depending on whose interpretation) has been proven right again on how to stop a crash. Even though it was limited in the scope, it was quick action. We are still reading the Grapes of Wrath rather than living it. However, if we do not stop fighting among ourselves and complaining about what hasn't yet been accomplished rather than banding together to push the needle more and more left (much like the Republicans have done to the right), they will win and the next crash will be undoing of all that has been accomplished since Roosevelt.

And yes, from your original post, just in time for the election...

[crazylikafox]

18. Well reasoned post. I agree with your analysis. Welcome to DU

[cthulu2016]

19. best first post ever

[riderinthestorm]

26. Welcome to DU! Hope you chime in a LOT in the future. Great post. nt

[RainDog]

27. welcome to DU

enjoyed your post

[Maine23]

4. I think once the dust clears Germany will be the major power in the Eurozone.

I dont know if that good or bad.

[Recursion]

14. Cool. That means lower gas prices

Also lower interest rates for Treasury bills. As well as a bunch of petrocountries being very glad they didn't go through with their threat to price oil in euros.

[jwirr]

21. A very dangerous time. Again.

[pscot]

22. K&R

[bvar22]

23. Didn't this scenario "play out" in South America 10 years ago,

Last edited Tue May 15, 2012, 02:31 PM - Edit history (1)

....especially Argentina?

Haven't many Latin American countries told the World Banks and IMF to Take a Hike?

IIRC, things were pretty rough for a few years,
but many of these Latin Americans Countries were successful at wresting their countries from the hands of the 1%.

[font size=3]"The worst enemy of humanity is U.S. capitalism. That is what provokes uprisings like our own, a rebellion against a system, against a Neoliberal model, which is the representation of a savage capitalism. If the entire world doesn't acknowledge this reality, that nation states are not providing even minimally for health, education and nourishment, then each day the most fundamental human rights are being violated."[/font]
----Bolivian Reform President Evo Morales

[font size=1]Psst.FDR said much the same thing in 1944 with his Economic Bill of Rights,
but THAT was the OLD Democratic Party.[/font]

Why isn't Argentina's story being used as a model,
or being promoted in our Media?

The Verboten Story of Argentina’s Post-Default Economic Success

"Even notice nothing is ever said in the mainstream media about Argentina’s economy, save that it had a big default? You’d never know the following about Argentina:

From 2002 onward, Argentina grown nearly twice as fast as Brazil, and has sported one of the highest growth rates in the world.

Its success is not dependent on a commodities boom

It has increased social spending from 10.3% of GDP to 14.2% of GDP

Inequality has fallen. Poverty and extreme poverty have fallen by roughly 2/3

What is particularly striking is how quickly Argentina’s economy rebounded after its default."

http://www.nakedcapitalism.com/2011/10/the-verboten-story-of-argentinas-economic-success.html

I guess telling the World Banks, the WTO, and the IMF to "Get Lost" isn't the kind of success story
that the Media and the 1% want us to know about.

VIVA Democracy!
I pray we get some here soon!


You will know them by their WORKS,
not by their excuses.
[font size=5 color=green]Solidarity99![/font][font size=2 color=green]
--------------------------------------------------------------------------------------------------------------------------------[/center]

[hack89]

25. Argentina eventually payed the IMF back. nt