Austerity and Neoliberalism in Greece, Richard Wolff & Barry Herman / The New School

[mother earth]

3. For those perhaps like me, who have been wondering why the stagnation in talks with the EU, I

thought you might enjoy this opinion, it spoke volumes to me.

http://www.oftwominds.com/blog.html

When Europe Gets Greece's Jingle Mail: Dealing with Default (May 15, 2015)


The costs and consequences of Greece exiting the Eurozone may well dwarf the financial losses triggered by Greece's default.
The term Jingle mail originated in the great popping of the housing bubble 2008-2011. It refers to defaulting homeowners mailing the keys to their house back to the lender, and it denotes the finality of default: it's over.

The dream of ownership and easy wealth leveraged by vast debt: over. The dream that loans to marginal borrowers were as good as loans issued to qualified buyers: over.

And most importantly, the lender's dream that marginal borrowers could somehow make the payments if the terms were tweaked is also over.

Which brings us to the jingle mail Greece is about to send Europe. Greece is analogous to the marginal home buyer who took on way more debt than the household could afford. Europe is analogous to the lender, who faces a spectrum of unsavory options:

1. Accept the reality of default, write off the loans and accept the horrendous losses.

2. Play for time by renegotiating the loan, reducing the payments, stretching the payments over a longer period, etc.

3. Bury the non-performing loan as zombie debt: the loan disappears from the performing loans but isn't listed as a non-performing loan, either. It has become a zombie loan, neither performing nor non-performing.

Both of the latter strategies are versions of kicking the can down the road: what the lender does not want to do is report the loss and deal with the consequences (such as insolvency, lawsuits, etc.)

So the lender strings the debtor along, squeezing enough interest out to justify the claim that the loan is performing and the asset (i.e. the loan) is still worth its listed value.

The European leadership has done a grand job of stringing Greece along to maintain the illusion that default is not inevitable and final. This stringing the debtor along has yielded impressive returns for Greece's lenders, at considerable cost to non-Oligarch/non-vested-interests Greeks. Note how little of the Greek "bailout" actually went to the citizenry of Greece and how much was interest paid to Europe's financial powers.

MORE:
http://www.oftwominds.com/blogmay15/Greece-default5-15.html

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The powers that be enjoy much during the kicking the can down the road phase which is lasting quite a long time. No wonder things are not changing. The status quo...here and everywhere is enabled for good reason, always...

So, when you look at places here in the US (life Prof. Wolff explains) and you look at Greece, understand that wherever you hail from, whatever you endure, the principles that are behind these ills are all the same. Stay tuned...sea changes...gives new meaning to climate change, doesn't it?