"Democracy is incompatible with collecting debts"

[KansDem]

Amy Goodman interviewed Michael Hudson, UMKC Economics Professor, this a.m. on "Democracy Now."

(MICHAEL HUDSON) Yesterday, the headline in the Frankfurter Zeitung was "Democracy is Crap," and—or "Democracy is Junk." And the reason that was the headline was the financial sector was saying democracy is incompatible with collecting debts, and when they can’t pay, with foreclosing on the public domain and privatizing a country. You can’t have democracy, and you can’t have debts grow beyond the ability to pay and impose austerity, like the IMF used to do in the third world countries. So, what’s at stake is whether Europe—Greece and other countries—are going to be democratic or whether they’re going to be run by a financial oligarchy, run by the E.U. bureaucracy, basically the European Central Bank, that’s neoliberal, anti-labor, anti-government, and totally in the pockets of the most predatory banks.

AMY GOODMAN: And what does it mean if Papandreou is out?

MICHAEL HUDSON: It could mean a number of things. Either it means that other members of his party—the finance minister, who is against the referendum—will come in and not hold a referendum at all and try to keep Greece on the austerity plan, or there will be a fall in the government, a no-confidence vote, and people will presumably vote for the Conservative Party, which, there, is very much like the Republican Party in the United States.

The reason there have been all of these demonstrations is the same reason that the Occupy Wall Street movement is in New York and the rest of the United States. The frustration is not only at the financial overhead, the debt overhead; it’s at the political fact that there is no choice. Both the Conservative Party and the Socialist Party in Greece, just like the Republicans and Democrats here, are both taking the side of the banks. So people don’t even have a chance to express a democratic alternative to essentially being ground down by debt peonage and letting the economy polarize even further between creditors and debtors.

AMY GOODMAN: And the significance of President Obama being there, and what this means—the meeting of the G20, what is happening in Greece—for the United States?

MICHAEL HUDSON: He’s making the threat that Europe has to cut its own throat in order to save the United States hedge funds and banks from taking a loss on the Greek bonds that they’ve insured. One of the reasons that people have been willing to buy Greek bonds is they bought credit insurance. And the European banks, mostly—maybe not Barclays or Deutsche Bank, but most banks—are not willing to write credit insurance, because everybody at the conference here in Berlin, at the Böckler Foundation conference, every single economist says there is no conceivable way in which Greece can pay its debts. But the Americans, hedge funds and bankers and—have come in and said, "We’ll write a guarantee." And then they lean on President Obama and Tim Geithner to tell the Europeans, "You have to make Greece pay, so that we win the bets that we’ve made, because if we lose the bets, then we go under, and the stock market crashes, and a lot of people can’t collect on their money market funds." So, this is just the naked, brute force that Mr. Obama is doing. He’s basically telling Europe, "Don’t go the democratic route. Support Wall Street."

http://www.democracynow.org/2011/11/3/wall_street_v_greece_g20_opens

So if the Greek people decide not to accept the conditions of a $179 billion EU bailout, which most Greeks oppose, then Wall Street collapses. Is that the way I interpret this?

[NeedleCast]

1. Wall St. Isn't Going To Collapse Over This

Probably see some moderate short term losses because the market hates it when people buck the system. But the market hates a lot of things, so that's not really unusual. In short term and usually in the long term, the market is a poor indicator of the health of the economy.

Banks that invested heavily in Greek debt would be, however, quite fucked.

[DeSwiss]

3. No....

...but http://moneymorning.com/2011/10/12/derivatives-the-600-trillion-time-bomb-thats-set-to-explode/">this will probably do the trick

- K&R

[Spider Jerusalem]

2. it's a lot more complicated than that, and it's not just about "Wall Street"

a lot of banks in the UK, in Germany, in France, etc, have significant exposure to Greek debt, and a major default or a loss by repayment in inflated drachmas instead of Euros would very possibly (although not certainly) precipitate another major financial crisis with the concomitant failure of several financial institutions (and if that happened then Italy would be the next domino to fall; at this point, it's about shoring up confidence, and if a Greek referendum went against staying in the Euro? Goodbye, confidence.) Irrelevant now anyway as there isn't to be any referendum, though.

Edit: see here: http://profit.ndtv.com/news/show/countries-most-exposed-to-greek-debt-186223

Total US exposure to Greek debt: $7.3 billion US government exposure to Greek debt: $1.5 billion of that total. Compare this with UK ($14 billion, with $3.4 billion in Greek bonds held by the government); France ($56.7 billion, of which $14.9 billion is held by the government), or Germany ($33.9 billion, of which $22.6 billion is in Greek bonds held by the German government). So no, Michael Hudson, whoever the hell he is, is pretty much stunningly ignorant. Despite what Americans like to think, things aren't always about the US.

[truedelphi]

4. You are leaving out the part where even if the Greeks do agree to the settlement the

Big Banks want, it is more than likely their nation will still be non-viable.

The only nation that has successfully recovered from the damage the Bankster/Prankster types have done is Iceland. They refused to handle their nation's economy the way the Big Financial Elite desires. There was intense pain, but it soon subsided.

There is simply no way that any nation should agree to the terms the Big Financial Players want until Glass Stagall type provisions go into effect.

Here in the USA, those watching the situation understand that Bernanke "lent" some nine to fourteen trillions of dollars to the major players. Who have "repaid" these loans, not with actual US dollars, but questionable piece of investment paper.

Furthermore, it is also true that one reason that the IMF and the World Bank want oversight of Greece is that Greece is about to open some new gold mines. What better way for the bankers to capture more resources than their stealth takeover of another nation's resources. (IMF and World Bank helped themselves to many So American nations' resources over the past thirty years.)

The average Greek out in the streets know s fatr more anbbout how bad the Biggest Financial Players strategies really are for their nation, than people who immerse themselves in the concepts you speak of.

[DeSwiss]

5. Exactly.

- They figured out that what the banks lent them wasn't money at all. Just http://www.liveleak.com/view?c=1&i=f0b_1293605342">air. Stale, rank, deadly air.....

Iceland Showed The World How To Become Free

Contrary to what could be expected, the crisis resulted in Icelanders recovering their sovereign rights, through a process of direct participatory democracy that eventually led to a new Constitution. But only after much pain. Geir Haarde, the Prime Minister of a Social Democratic coalition government, negotiated a two million one hundred thousand dollar loan, to which the Nordic countries added another two and a half million. But the foreign financial community pressured Iceland to impose drastic measures. The IMF and the European Union wanted to take over its debt, claiming this was the only way for the country to pay back Holland and Great Britain, who had promised to reimburse their citizens.

Protests and riots continued, eventually forcing the Icelandic government to resign. Elections were brought forward to April 2009, resulting in a left-wing coalition which condemned the neoliberal economic system, but immediately gave in to IMF demands that Iceland pay off a total of three and a half million Euros. This required each Icelandic citizen to pay 100 Euros a month (or about $130) for fifteen years, at 5.5% interest, to pay off a debt incurred by private parties vis a vis other private parties. It was the straw that broke the reindeer’s back.

What happened next was extraordinary. The belief that citizens had to pay for the mistakes of a financial monopoly, that an entire nation must be taxed to pay off private debts was shattered, transforming the relationship between citizens and their political institutions and eventually driving Iceland’s leaders to the side of their constituents. The Head of State, Olafur Ragnar Grimsson, refused to ratify the law that would have made Iceland’s citizens responsible for its bankers’ debts, and accepted calls for a referendum.

In the March 2010 referendum, 93% of Icelanders voted against repayment of the banker's debts. The IMF immediately froze its loan. But the revolution (though not televised in the United States), would not be intimidated. With the support of a furious citizenry, the government launched civil and penal investigations into those responsible for the financial crisis. Interpol put out an international arrest warrant for the ex-president of Kaupthing, Sigurdur Einarsson, as the other bankers implicated in the crash fled the country. But Icelanders didn't stop there: they decided to draft a new constitution that would free the country from the exaggerated power of international finance and virtual money. http://www.dailykos.com/story/2011/08/01/1001662/-Icelands-On-going-Revolution">link

[truedelphi]

6. You say - and I agree (but must quote you so can add to my journal -)

Comment from DeSwiss

Icelanders figured out that what the banks lent them wasn't money at all. Just air. Stale, rank, deadly air.....


Iceland Showed The World How To Become Free
URL is at:
http://www.dailykos.com/story/2011/08/01/1001662/-Icelands-On-going-Revolution
Contrary to what could be expected, the crisis resulted in Icelanders recovering their sovereign rights, through a process of direct participatory democracy that eventually led to a new Constitution. But only after much pain. Geir Haarde, the Prime Minister of a Social Democratic coalition government, negotiated a two million one hundred thousand dollar loan, to which the Nordic countries added another two and a half million. But the foreign financial community pressured Iceland to impose drastic measures. The IMF and the European Union wanted to take over its debt, claiming this was the only way for the country to pay back Holland and Great Britain, who had promised to reimburse their citizens.

Protests and riots continued, eventually forcing the Icelandic government to resign. Elections were brought forward to April 2009, resulting in a left-wing coalition which condemned the neoliberal economic system, but immediately gave in to IMF demands that Iceland pay off a total of three and a half million Euros. This required each Icelandic citizen to pay 100 Euros a month (or about $130) for fifteen years, at 5.5% interest, to pay off a debt incurred by private parties vis a vis other private parties. It was the straw that broke the reindeer’s back.

What happened next was extraordinary. The belief that citizens had to pay for the mistakes of a financial monopoly, that an entire nation must be taxed to pay off private debts was shattered, transforming the relationship between citizens and their political institutions and eventually driving Iceland’s leaders to the side of their constituents. The Head of State, Olafur Ragnar Grimsson, refused to ratify the law that would have made Iceland’s citizens responsible for its bankers’ debts, and accepted calls for a referendum.

In the March 2010 referendum, 93% of Icelanders voted against repayment of the banker's debts. The IMF immediately froze its loan. But the revolution (though not televised in the United States), would not be intimidated. With the support of a furious citizenry, the government launched civil and penal investigations into those responsible for the financial crisis. Interpol put out an international arrest warrant for the ex-president of Kaupthing, Sigurdur Einarsson, as the other bankers implicated in the crash fled the country. But Icelanders didn't stop there: they decided to draft a new constitution that would free the country from the exaggerated power of international finance and virtual money. link

[jwirr]

7. Disaster capitalism is alive and well. Until this type of behavior is

stopped no one is going to be free. I cannot help but think that the banks failing may just facilitate this change. They and other world financial institutes are what caused this when they began following Martin Friedman and Ayn Rand. Until they are forced to stop this will continue. We need to go back to the Marshall Plan when nations fail.

[truedelphi]

8. Canyou explain the Marshall plan and how it worked.

I know it was the plan used to see to it that Europe got rebuilt after WWII.

And I think, in part, it helped our Congress draft laws that made sense regarding banking during the S & L crisis of the 1980's. Those laws really worked, at least to a much greater degree than foolish "Shock Doctrine" economic doctrines we have to be part of these days.

I'd would really love to hear more about the Marshall plan, if you have a chance.

[jwirr]

9. I think you would do better to google as I am not so much into the

whole deal but I do know that it involved borrowing money to countries that had severe damage from WWII. That included Italy, Germany and Japan. The money was to be paid back and was used for programs that really helped their economies. In other words instead of creating disasters like banks do today we actually wanted to help them. We also were working government to government instead of through corporate financial institutes that were out to make a buck off the suffering of others.

I think I will do what I suggested and google this - is was a good idea then and probably would be again. We may even need it for our own country.

And after reading about the program I am not so sure it is what we need either as it was basically a way to slow communism down. It appears that Corporatism - multinational corporations started back then.