31 Jan 2015

Greece and the Money Lie

"The German chancellor Angela Merkel has ruled out debt cuts for Greece, saying Athens had already been forgiven billions of euros by private creditors and banks." So go the headlines. The Germans are acting like they stand to lose money if Greek debts are forgiven. This is a big lie. The money loaned to Greece was created out of thin air by banks. They charge rent on that thin air, which is the only real money that changes hands.

What those banks stand to lose is not money, but a revenue stream. The Banks themselves have been bailed out to the tune of trillions of pounds resulting from massive losses caused by malpractice and malfeasance. They don't pay tax on the rent they earn and they aren't lending to local business, so none of the rent goes back into the European economy.

The whole thing is a farce. Greece is on track to become a third world country. Merkel fiddles while Europe burns. The Germans are not prudent, they are stupid. We've seen Germans blindly following an ideology before, you'd think they'd have learned their lesson. We can only hope that the new government holds its nerve and tells Merkel to get stuffed.

UPDATE. An article by Francis Coppola reinforces the point. So Whose Problem Is Greek Debt, Anyway? She says "all but about 11% of the bailout money went straight back to the holders of Greek debt by one route or another"

So the money loaned to Greece to help with its debt problem, went straight back to the lending institutions. Almost none of it went to improving the situation in Greece.

However Coppola believes that the problem is not so much the debt as the austerity requirements which make it impossible for the Greeks to pay back the loan. She also thinks that Greek debt is everyone's problem, that the new Greek government is in a much stronger position than people seem to realise, because were they to default on loan payments and exit the Euro, it would signal the end of the Euro. 

15 Jan 2015

Govt Surplus

I'm reading Steve Keen in Forbes. One of the points seems to be that running a sustained government surplus means the government taking more from the public than it gives back in services. This is not even sensible Neoliberalism!

If the government sector is running a surplus then the private sector will have to operate with a deficit, either by running down sayings, or running up debt or some combination of both.

See also Savings, Debt and the Deficit.

5 Jan 2015

1971 - The Beginning of the End.

I've pointed out that 1971 is the year that Nixon pulled the USA out of the Bretton Woods Agreement, marking the end of Western governments basing the economic policies on the world of Maynard Keynes, and opening the door for the rise of economic Monetarism. That year the Lewis Powell Memo outlined the Neoconservative response to the liberalisation of society during the 1960s. While it wasn't the end of liberal government in the UK and America it was the beginning of a new period of politics in which conservatives set the political tone and dominated the political debate.

One of the most vicious anti-liberal policies in the world, America's War on Drugs, was also introduced in the 1971. Our old friend Richard Nixon first used the phrase "war on drugs" in a press conference on June 18, 1971. Minimum mandatory sentences soon followed. The effect on the prison population in the US is evident in this graph that's doing the rounds on Twitter:

In the same period the population has increased from 207.7 million to 316.1 million.

The War on Drugs is estimated to cost US$51 billion per year and probably ruins more lives than drugs themselves. Just as we desperately need rational economic policies, we also need rational social policies.

I think we'll look back and see that 1971 marked the end of liberalism and the rise of Neolibertarianism - the mass of contradictions that wants markets to be free and drug users in jail.