Today’s Editorial in the NYT clearly explains what we have all been saying all along! Europe has the resources and the mechanisms and everything to stave off this crisis without running begging hand out stretched to the Chinese, who quite sensibly want no part of this. I mean stringent austerity measures on its best customers? Why should they bother?

http://www.nytimes.com/2011/11/30/opinion/germanys-denial-europes-disaster.html?_r=1&hp

What is wrong with the woman???? I refer of course to Angela Merkel, but of course this includes the whole of the German Poltical/Economic community. Have they gone collectively blind? Or is it that they have been collectively afflicted by the lucky gambler’s syndrome (aka stock broker syndrome). Since it has been on the up and up for so many years, it believes it is invincible and always right. But when the gambler or the stock broker reaches this point it is inevitably the point of Nemesis. When he crashes. The trouble is, this is like the nursery rhyme, of:

Ringa aring a roses, a pocket full of posies, Atishou Atishou, we all fall down!

And we all fall down means ALL of us, US economy too.

The only reason Germany even has this position of bullying dominance today is because of the enormous amount of funds poured in to the German economy by the American Marshall Aid plan. And, I must add, the work of all those hordes of indolent lazy good for nothing gestarbiters (including a large number of Greeks and Turks and Slavs).

Merkel is hell bent on punishing the miscreants who don’t keep to strict germanic discipline in budgetary matters.  Well, if miscreants should be punished she should at least admit that her own country only got to where it is because the victors then not only decided punishment would be counter productive but that what was needed was a great influx of aid to get the country back on its feet and into the mainstream of economic life.

This unbelievable chancellor would do well to ponder that policy that lead to peace and prosperity for so many years before she goes plunging us ALL back to where her country started from some sixty years ago.

When I was a student at the LSE, many long years ago, it was the age of student unrest and the famous or infamous ‘sit ins’. At that time, after the LSE had been occupied for several weeks and was therefore not functioning, there  was a brilliant cartoon in the papers. It depicted two City of London gentlemen looking at the news headlines, which said ‘London School of Economics still closed because of sit in‘. One of the men says to the other, ‘Thank God for that! If we have no more Economists, then perhaps we can finally start getting the economy right again!’

At the time it was funny, today it is apt. Today Economists are predicting decades of recession and misery for the whole world. Dates like 2020 even 2050 are being bandied about for when recovery may just start. Furthermore, here in Greece, we are being told in all pompous seriousness that our debt to GDP ratio in 2021 (note the specificity of the date) will be as bad as it was in 2009, as if they could really know what either our debt or GDP will be in 5 let alone 10 years time! (Their 2010 predictions of what the would be in 2011, have already been proved fatally wrong!)

Which is just it. What is the wise Economists’ success rate when it comes to predictions? Remember the 80’s when it was being seriously predicted (in fancy magazines such as Wired not least) that there would be no more boom and bust cycles that economies from here on would be nothing but up and up and so on? That recessions were a thing of the past? That all this hedging etc had ushered in a new era of economic infallibility and more such garbage? Not to mention official predictions in the early naughties (take 2005 for instance), and what all the predictions were for the future then? Not only did nobody, but nobody at least in the official economist establishment, predict the crash (and subsequent related Armageddon which even now they cannot get their heads around) of 2008. And this even though the conditions generating the crash were staring them right in the face! 

So take cheer. They have repeatedly got it all wrong. One of the reasons why this is so is what Professor Varoufakis has said in his talks. The mathematical modeling mania that took over all of economic academia. If you have four unknowns and decide to take one or even two of them as granted, then you may indulge in beautiful mind games and structures, none of which will have any relation to reality. The other is quite simply human nature. You can see it every time everywhere there is a stock market boom, from the late 1920’s down to the recent spate throughout Europe (remember the Yuppies?).

And that is that when everything is going up, people instinctively believe this will go on forever. Until it all crashes. Equally, when everything is going down and down and deeper down, people instinctively believe that this is it! Things will be going from bad to worse perpetually. Until… well yes, until real life, proves them wrong!

Again we come to the Economists’ inferiority complex and insistence on thinking of their pursuit as a science. But
also all of us. We need stability, we need to feel that things are under control, and therefore to be told and to
believe what will happen a few years down the line. But the truth is that in reality just about anything might and
will happen, that will change the whole course of the world and not necessarily in 10 years (now why should it be
10? I suppose German neatness is responsible for that here).

The ancients and agricultural communities being closer to nature than we tend to be today, knew that life is
governed by cyclicality. And yet we remain caught up in the linear conception of the development of events.Everything that goes up will keep going up and everything that goes down will keep going down. And yet anyone who bothers to dabble in a little history can see that it never works that way.

Which is why, I suppose, in his exuberance, Francis Fukuyama called his book ‘The End of History’. After all, how else could one explain away the truth of history in this ideological prediction that nothing would ever go bust any more, except by declaring that ok guys, there will be no more History. Convenient. But just how quickly was that proved totally wrong?

So the plain truth is that we don’t know what will happen. Nobody can know what will happen. That is why Oracles
always spoke in riddles. We can take guesses from wild to calculated ones, but no such guess or estimate will ever
be closer to the truth than having one’s palm read by a gypsy, perhaps.

So when you hear all these predictions of doom and gloom, that things will be bad for 10 years and all that, take cheer. They don’t know any more than we do. Don’t forget, in all their analyses Economists always add the caveat ‘ceteris
paribus‘ or ‘all things being equal. But of course they never are! 

Latest OECD report: Europe is entering recession! Oh really? How on earth did that happen, I wonder? But don’t anybody worry. Mrs Merkel will put it right. Just all tighten up your belts even more with even more stringent austerity measures, and recession will go away. Won’t it Mrs Merkel? Well yes! Of course! It will be succeeded by outright Depression!

The dynamic duo, out to save Europe and the Eurozone single handedly strikes again! I say single handedly because Merkel only has one pair of hands, though Sarkozy has many tongues? Now before you all go misinterpreting that remark, I hasten to add that by ?many tongues? I mean the proverbial ?he speaks in many tongues?.

Okay, so what is the wizard wheeze this time? Much the same as the old one. Same old, same old, as they say. Tighten belts, squeeze the people, throw the Economy into greater recession, and when you?ve done all that we might let you in to our elite club of the AAA rated states, and THEN we might start talking about the infamous Eurobond!

Will it work? Though there is sense in unifying the Eurozone?s Finance Ministries and vetting the budgets (or even dictating them I suppose) by a central authority (presumably German of course?), is that really what should be done right away now in order to avoid the Eurozone bust up?

Because yet again, it smacks of too little too late. A two tier Euro? Maybe. It could work. As to the AAA rated countries? Well, the way she?s gone about things, Merkel may end up with a dwindling band of thieves for all her best efforts. (Sarkozy, for one is shaking).

But when the real problem is galloping recession throughout Europe, verging on outright depression, (which is primarily what is threatening all those triple and double A ratings and so on, rather than the debt/deficit arithmetic), is squeezing the Economy in a way that throws it into the vicious cycle of more and more recession, really the best and only option? I doubt it. But then who am I to know?

Fortunately we have been blessed with the Merkozy leadership that will sail the ship safely to calmer waters and then finally to the safety of shore! Now should we crash into the rocks on the way, that won?t be their fault will it? It will be ours. Anyway, whose ever fault it may or may not be, we know perfectly well who is going to pay for all this mess.

I sometimes feel a strange nostalgia for that humane contraption designed by Dr. Guillotine.

As Germany?s bloody minded refusal to contemplate anything that might stop the Euro?s galloping advance towards disintegration, more and more sane voices are adding themselves to the clamor that SOMETHING MUST BE DONE! And not only must something be done, but quickly and not at Frau Merkel?s slow and laborious pace.

Her ideas of first making strict rules to punish all those nasty deviants from budgetary rectitude through a schoolmarmish mentality may be all very well for one who hasn?t a clue how economies work. But does she really believe she has the luxury of time ahead of her?

A recent article in the Economist screams out about the imminent danger of the bust up, urging that ?pigheadedness? should stop! Now what a term to apply to Germany! PIG headed? In all its wisdom and spot on analysis here, I do believe that the newspaper has made one mistake. When it says that (among other things) even the new government in Spain which is firmly committed to reform and austerity has made no difference to the markets and rising debt costs.

But surely, just how could this dogmatic ?commitment to austerity? be calming to the markets in any way? What the markets really want to see is growth and not recession which is what austerity inevitably produces. And in this case, with a vengeance! Look at Greece if you have to, though it is an ugly sight.

Ultimately, I fear, neither Frau Merkel, nor the EU Commission (joke?) nor any other players are going to come up with a solution. Somehow the forces of the bursting economic bubbles will provide the solution themselves despite the leading players? best or worst efforts. What will that be? Interesting.

And as is the Chinese proverb goes, woe to the person living in interesting times!

But isn?t it interesting that the more interesting the times, the less imagination and spunk our ?leaders? seem to have?

The Economist Article: http://www.economist.com/node/21540255 for which I have Chrys to thank for bringing to my attention.

The whole of the European project is turning ugly. People don’t matter. Only the bankers’ accounts. With more and more Europeans being violently pushed under the poverty line (not least by ‘socialist’ governments) strikes and demonstrations by desperate people being ‘squeezed until the pips squeak’ proliferating all over the Eurozone, while the arrogant and willfully out of touch European ‘leaders’ and their side kick unelected and unaccountable Eurocrats tell us, No! You can’t hold a referendum! (God forbid that the people, the great unwashed, the sans culottes should actually have a say), or in Italy, No! You can’t hold an election! What a thought! It is at the very least refreshing to hear a Member of the European Parliament say it out loud and to their faces. See link below for Nigel Farage’s speech.

http://www.youtube.com/watch?feature=player_embedded&v=ZVdVsLiQu4U

Wouldn’t it be uplifting to hear a similar speech by one of our own Members of The European Parliament?

I would like to thank my friend Nico for sending me this video.

Or A TALE OF TWO PROVERBS

The first proverb I wish to quote with relation to the European debt crisis is that ?the road to hell is paved with good intentions?. For reasons which have been explained far better and in depth by serious analysts, the sovereign debt crisis engulfing the whole of Europe, and not just insignificant little Greece, resulted from the 2008 crash of the banking sector and the general destabilization caused by all those enormous bubbles bursting one after another.

Now the remedy prescribed by Europe with Germany as its steam engine and Great Decider, has been a policy of austerity and cut backs in order to reduce deficits and debt. Perhaps not an unreasonable policy, you may think, especially if you do not happen to be aware of the economic history of the world over the past century. But be that as it may, it is certainly a good intention.

The second prong of this crisis is that all European banks are grossly undercapitalized and far too exposed to the sovereign debts of the badly behaved countries, or PIGS. So another part of the object of this exercise has been to try and help these smelly inferior pigs remain solvent so that they can repay their exorbitant debts and keep the banks afloat. Again an excellent intention.

However, when put into practice with an iron fist, things don?t seem to be working out so nicely, and certainly no way as originally envisioned.

Now, take Greece with its bulging debt and yawning deficit. Plans were drawn up (one is told at least) whereby this whole situation would be put to rights through increased taxation and salary and pension cuts, within three years. We were originally told that we would be back in the markets by 2011. Whoops!

One could write whole treatises on the whys and the wherefores, but one can look at it quite simply. The idea was to recycle funds through Greece to keep the banks safe and solvent. Ok. But what about the Greek economy? Oh! Well, they do need to reduce their deficit. Of course they do. And they do need to reduce their debt. Well, yes? of course? But how? By going further and further into debt only in order to pay their loans?

The more you owe, the more you borrow, and often at shark rates, and? well, what on earth is that going to solve? And then the deficit reduction. Well, unfortunately nothing acts in a void. The more you increase taxation, and indirect taxation (VAT) in particular, the more you throw the whole economy into greater and greater recession, hence generating greater and greater need for even more financing.

So what we have now achieved in Greece is the destruction of the revenue generating private sector and hence deeper and deeper recession, requiring more and more taxation to be generated from?? The Economy? What economy? It has already imploded.

Furthermore, we have been promised at least another two years of enormous recession (I do believe the correct term for this is outright depression), with absolutely no commitment to growth. And after ten years of this catastrophic policy we are told we shall have achieved the debt to GDP ratio we had in 2009 when the crisis exploded.

Is it my fault I prefer nonsense rhymes to explain this? Anyway, who says that in 10 years we will have that ratio at all? If this policy of extortionist taxation feeding the vicious circle of growing recession carries on, our debt to GDP ratio will not be 120% as predicted optimistically, but something nearer 1,000 to 1,000,000% of GDP, quite simply because we shall have hardly any GDP left to speak of.

So this brings us to my second proverb. A Greek one here, as is fitting. There was a farmer whose finances were getting worse and worse so he realized he had to cut costs if he was to remain afloat. But what costs could he cut? He decided the best thing would be to train his donkey (that is his means of transportation) not to eat, so in that way he could save money on the straw he had to buy him every day to feed him. Well, his experiment was quite successful in that his initial savings on expenses bore this out. Only, well. The donkey died.

Afterword. The same thing happens when you train your pigs not to eat too, you know. After a while they die.

Despite his best intentions and better judgment on taking charge of the ECB, it appears that Mario Draghi, considered a capable, intelligent and efficient banker, has now succumbed to the German Juggernaut.

The German directorate?s Nein to everything and anything that could lead to an active part by the Central Bank in alleviating the European debt crisis, has now extended to forbidding the bank from buying up Italian and Spanish bonds to shore up the spiraling rise of interest costs, our so called ?spreads?.

As a result, spreads have not only gone up for the bonds of the countries in greater trouble but for all bonds of the Eurozone countries. Not to mention the pressure piling up on France, the second largest economy of the Eurozone, being threatened with the loss of its triple A status.

Meanwhile back to the original sneeze of this galloping pneumonia, tiny little Greece, a furore has arisen which is incredibly childish and potentially equally dangerous.

After days of uncertainty and turmoil, Papandreou relinquished the premiership, giving way to a so called Unity government under a respected technocrat. This new government consists of the old government?s ministers plus a number of new ones for the other two parties supporting this government, the conservative New Democracy party and the LAOS right wing party.

Greece was due to receive the sixth tranche of its bail out loan somewhere back in September. It remains pending, having been put off for all sorts of serious and not so serious reasons. Now it has been stalled again because the German Minister of Finance has declared roundly that Greece will not get one cent unless the Leader of the New Democracy party signs a firm commitment to follow the dictates of the new bail out plan. (A demand already complied with by the other factors of this government).

Now, the leader of ND refuses to do so, maintaining that he is already committed through his support of the government and a letter he sent to the European leadership of his party and so on, and that insistence on yet one more written commitment is demeaning. At the moment it appears that both are refusing to budge. Playground mentality again.

Now, we have been informed that if Greece fails to receive this tranche, by mid December there will be no more money in the kitty at all, and therefore, Greece will have to declare a default on all loans and payments outstanding, in other words the country will go roundly bust.

Will this eventuality leave the rest of the Eurozone unscathed? If not, then will the Juggernaut have blown the whole fleet of Europe roundly out of the water? And might this not affect the whole of the global economy?

If so, has everybody gone mad, including the playground bully, aka The German Juggernaut?

?You are old father William.? the young man said,

?And your hair has become very white;

And yet you incessantly stand on your head?

Do you think at your age, it is right??

?In my youth,? Father William replied to his son,

?I feared I might injure the brain;

But, now that I?m perfectly sure I have none,

Why I do it again and again.”

(two more stanzas) 

?I have answered three questions, and that is enough,?

Said his father, ?don?t give yourself airs!?

Do you think I can listen all day to such stuff?

Be off or I?ll kick you downstairs!?

(Nonsense verse by Lewis Carroll)

Lewis Carroll was a mathematician and logician, author of Alice in Wonderland, Alice through the Looking Glass and numerous poems of ?nonsense verse?. A brilliant mind who conveyed hard truths through so called ?nonsense?. In this age of utter nonsense we are living in, his insights could be very helpful!

THE NEW GREEK BUDGET

I would say that a large majority of the Greek public were relieved if not actually pleased by the appointment of an intelligent technocrat as Prime Minister of our country.

However, the publication of the proposed Greek budget for 2012, approved if not compiled by our new Prime Minister, is evidence that our hopes were very short lived.

This is a ludicrous, impossible document. Surely, rather than all the convoluted details, it would be better to state simply and honestly, that look here, since we can?t do anything else, we hereby decree that Greece shall be under a Pinochet style dictatorship with a pinch of communism added. All property is to be confiscated (which is what the multiple property taxes shall achieve). All labour will be nationalized and people will be expected to work on below subsistence wages henceforth (for the lucky minority that may have some kind of work). Although unemployment will rise dramatically and public health deteriorate enormously because of all these measures, there will be no social security for anyone, either in the way of health care nor, of course any unemployment relief.

And at the end of all this, what? Oh! We will no longer have a budget deficit! Well, yes, maybe, but only because we will no longer have a budget at all, still less an economy, nor even a country. Will this repay our enormous debt? No. But then since we will all have died, or, the lucky ones, emigrated in the process, it won?t matter. Hordes of northern tribes will just swoop down into the waste land that used to be Greece and just pick and chose what they want to appropriate with no resistance from a dead population.

This new budget is nothing more than a death sentence. And not even by being put to death through a merciful injection. No, this is death by slow, painful excruciating torture. If that is the best our savior technocrats and politicians can come up with, then they must not be surprised when a bloody revolution erupts in all its anarchy, possibly stringing up some of them from trees and rubbing salt in their wounds, as happened with the black marketers during the German occupation of Greece.