April 23, 2015 archive

Syriza’s Choice: Bail on the People or the Troika

Greece’s Yanis Varoufakis: The Medicine of Austerity Is Not Working, We Need a New Treatment

Greece Flashes Warning Signals About Its Debt

By LANDON THOMAS Jr., The New York Times

APRIL 19, 2015

As the eurozone braced for the prospect of a default, financial markets were jittery last week and Greece’s own short-term borrowing costs were soaring. Repercussions of such a default are so difficult to predict that European officials have spent the last five years trying to avoid one.

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After two international bailouts for Greece since 2010, about 90 percent of its debt is owed to its eurozone neighbors, the I.M.F. and the European Central Bank. At the moment, not one of those lenders is showing a willingness to give any additional payback relief to Mr. Varoufakis and the new left-leaning government in Athens.

Mr. Varoufakis’s next formal meeting with his country’s creditors is set for Friday in Riga, Latvia, where eurozone finance ministers are to assemble for their monthly gathering. Wolfgang Schäuble, the powerful German finance minister, said here last week that no one should expect the meeting on April 24 to resolve anything.

Unless the creditors agree soon to release the next allotment of bailout money, Greece could have trouble making a $763 million payment to the I.M.F. on May 12. It almost certainly would not be able to meet the €11 billion in payments to the European Central Bank, the I.M.F. and payments on Treasury bills in June and July.

Mr. Varoufakis’s main message in Washington was that Greece was doing its best to carry out painful economic overhauls called for under the bailout program, while remaining true to his government’s anti-austerity mandate. “We know we are bound to a program,” Mr. Varoufakis said in an interview late last week, before his private meeting with Mr. Buchheit. “But there is another principle here: democracy.”

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When Mr. Varoufakis flew on short notice to Washington on Easter Sunday to ask Ms. Lagarde for some payment flexibility, he said publicly that Greece intended to meet its obligations. The statement at the time was taken as a commitment by Greece to do whatever it took to pay the I.M.F. and others.

Privately, however, Mr. Varoufakis told colleagues in Washington last week that he purposefully used the word “intend” as opposed to “will” in his public statements on Greece’s payment plans, according to people close to the finance minister who spoke on the condition of anonymity.

Mr. Varoufakis is also well aware that if Greece continues to meet its payment schedule as currently mapped out, the country will end up paying about 12 percent of its gross domestic product to its creditors during his first term as finance minister.

He has said that such a dynamic is not sustainable for a left-wing government elected on a platform of putting the interest of Greece’s electorate before its creditors. The country was just emerging from a deep recession before the January elections and is thought to be slumping back into one.

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But many outside experts are saying that the cycle of creditor-imposed austerity in Greece must stop and that the only clean way to alleviate it would be through a significant debt cut.

“Greece’s official-sector debt should be forgiven,” said Ashoka Mody, a former senior economist at the I.M.F. who oversaw the fund’s austerity program in Ireland. “And we really need to get rid of this Washington-Berlin-Brussels supervision of Greece – this is the most corrosive part of the arrangement, and it undermines both Greece and Europe.”

Greece Endgame Nears

By Yves Smith, Naked Capitalism

Thursday, 23 April 2015 11:16

Despite the market jitters of last Friday, which were triggered in part by the recognition that the odds of Greece reaching a deal with its creditors are far lower than had been widely assumed, Greek-related coverage has ratcheted down, even as Greece seems certain not to get any funds released in the April 24 Eurogroup meeting and is very likely to miss the end of April deadline for getting its reforms approved by the Troika and Eurogroup.

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But the official enforcers have gotten even firmer in their position: Greece must do its homework, as in prepare detailed reforms, and has to hew closely to the existing structural reforms. Christine Lagarde of the IMF last week increased the pressure by saying it would not give Greece a grace period on its payments coming due, as some had hoped.

Never mind that Greece has actually done more in the way of complying than any other European victim and has also shown the worst economic results. Various European officials have stated that they’d rather not have Greece default but they are not prepared to cut Greece any favors in order to avert that outcome. Making sure Greece complies, in other words, is worth the cost of what they believe will be short-term disruption. And they clearly don’t care one iota as far as the cost in Greek lives is concerned.

It’s puzzling to see the Greek government’s apparent failure to acknowledge that the Troika is effectively insisting that it cross its famed “red lines” such as pension “reform” and implementing labor “reform” which means further lowering wage rates. With another government, there could well be important jockeying going on behind the scenes, but heretofore, the ruling coalition has been disconcertingly open about its schisms. And Tsipras still seems to be hostage to the more radical representatives, who represent one-third of Syriza’s block. If they bolt, he no longer has a working coalition.

But if the government plans to hold firm, it really should impose capital controls, which would allow it to talk more openly to the public about what will happen if they do not reach a deal with their creditors. Similarly, if Syriza were to call referendum to convince its creditors that Greece really will default (and maybe exit) if they don’t budge (something the lenders seem to understand full well), it is similarly not clear how they can campaign candidly with no financial firewalls in place.

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It is still astonishing that the European elites have convinced themselves that adhering to the procedures used to implement clearly unsuccessful austerity programs are so important as to justify creating a failed state. Is this what the European project stands for? It’s sadistic and destructive, but there seem to be no cooler heads who can deter the power players, the ECB and the IMF, from this course of action.

Greek default? Wall Street says don’t risk it

By Ben White, Politico

4/23/15 12:31 AM EDT

Some say they are not as freaked out as they were in 2012 about the prospect of always-in-crisis Greece getting kicked out of the eurozone, which could happen if a deal isn’t reached quickly. Some would even like to let the Greeks go and move on with life.

But then people mention Lehman Brothers. And the Russian default. And even an assassination in Sarajevo in 1914. And theoretical discussion of how better prepared the world is for a Greek exit quickly turns into fevered rumination on how it still might spark global financial Armageddon.

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Investors got a taste of just how risky a Greek default and possible euro exit could be last Friday when reports that a deal might not be reached helped spark a global sell-off that at one point saw the Dow Jones Industrial Average down over 300 points. Interest rates on Greek debt also rose to two-year highs.

Rates on other European debt, including the debts of Portugal and Italy, also initially rose before ECB buying kicked in, suggesting that if Greece falls, investors could then start to punish other nations viewed as vulnerable to default. Spiking rates could turn once manageable debt loads into crushing burdens.

Fears over this kind of vicious cycle leave many big Wall Street money managers and executives skeptical of the argument that the world is now prepared for a Greek exit and that such an outcome might actually be preferable to going through these near misses over and over.

These money managers say that if Greece does wind up leaving the eurozone, it will probably not be a “Grexit” at all. That phrase, they say, connotes an orderly process in which the country’s euros are carefully replaced with drachma and nobody panics and pulls all their money out of the bank.

Instead, many Wall Street executives say it’s more likely that a Greek departure would be an accident – now known on Wall Street as a “Graccident” – in which the county is forced out of the eurozone by bank runs and a collapse in investor confidence.

“If a ‘Graccident’ were to occur, it would be very messy,” said Mohamed A. El-Erian, chief economic adviser at global money management firm Allianz. “And the global economy is still too fragile to take a major shock. The good news is that Europe has done a lot to increase its defenses against contagion. But it could still be very dangerous to stumble into an accident.”

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The case for not caring much about a “Grexit” holds that most of the nation’s debt is now held by other countries rather than banks, making financial system failures less likely. Meanwhile, European economic growth is picking up and should be able to withstand a period of turbulence, this line of thinking holds. And Greece has a tiny economy whose collapse would cause localized pain but register barely a blip around the globe.

Some top executives on Wall Street argue that it would be much worse for creditors to cave in to demands for more lenient terms from Greek’s anti-austerity political leaders. Because that would mean other debtor nations would also soon clamor for relief. Better to rip the bandage off and put an end to the charade that Greece will ever pay back all its loans.

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But the more widely held view – in Washington and on Wall Street – is that while Europe has, indeed, built more firewalls and reduced private-sector exposure to Greek debt, the unknown reaction to a “Grexit” is potentially much worse than the annoyingly familiar and increasingly tiresome rounds of angst-ridden talks between Greece and its creditors.

“If Greece leaves, it will never be possible to say again that exit is impossible, and if exit is always possible then you put increasing pressure on the weaker countries,” said Summers. “Of course, it’s also not tenable for the euro area to firmly establish that exit is impossible, or no country will feel any disciplinary pressure. So the matter is quite delicate, and we all have to hope and push for a mutually satisfactory conclusion.”

With people like Rachel Maddow predicting tight passage of Trade Promotion Authority in the House and an easy victory in the Senate, we’d better hope she’s wrong.

Gaius Publius has a devastating takedown of the Wyden-Hatch-Ryan Fast Track Bill over at Yves Smith’s place based on an analysis by Lori Wallach at Public Citizen.  This is the merest summary of the points.

What’s Wrong with Wyden-Hatch-Ryan’s Fast Track Bill – The Specifics

Gaius Publius, Naked Capitalism

Posted on April 22, 2015

When we first reported on the introduction of Fast Track legislation – the bill that makes it possible for Obama and corporate Congress men and women to pass TPP, the next NAFTA-style “trade” agreement, by neutering Congress’ role in the process – we said that the new bill was being analyzed.

That analysis is done, and the results are in. This version of Fast Track is worse than the last version, a bill which failed to pass Congress in 2014. Here are the specifics (pdf) via Lori Wallach at Public Citizen, the go-to person for “trade” analysis. I’m going to focus on the main problems so you’re not overwhelmed with detail. Your take-aways:

• What was bad in the prior agreement is worse, despite Wyden’s intervention.
• Every attempt in the bill to make TPP conform to mandated worker, environmental and currency protections is unenforceable.

Note that the bill failed to attract a single Democratic co-sponsor in the House. This is not a bipartisan bill; it’s a Wyden-plus-Republicans bill, at least so far.

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Click through in the first paragraph to see the extent of the declared opposition in Congress. There is considerable undeclared opposition as well, hidden in the “not sure” statements of members, especially Republicans.

Now some of what’s wrong. (For a side-by-side comparison of this Fast Track bill with the failed last one, click here; it’s enlightening. Hardly anything changed.)

• Fast Track Grants “Trade Authority” to the Next President As Well
• The Bill Makes Congress’ Declared “Negotiating Objectives” Unenforceable
• (E)ven if the currency manipulation requirements were enforceable (and they’re not), that enforcement would change nothing
• Improved Transparency with Hatch-Wyden-Ryan Fast Track? The Opposite
• What About the New “Human Rights” Negotiating Objective?… Again, unenforceable is the feature, not the bug.
• The “Exit Ramp” from Fast Track? Worse Than the Exit Ramp in the Last Fast Track
• What Is “Free Trade” Really? Unrestricted Capital Flow

This “free market” stuff has been with us for centuries in the West, and it’s always about capital and the rights of capital to be free of government. Guess whom that benefits? If you said “capitalists and the politicians who serve them,” you’d be right. You can’t have a predatory Industrial Revolution without that kind of “philosophy” in place as a cover story.

Needless to say, the cover story is still in place. Welcome to the world of TPP.

Some further trenchant paragraphs-

The treaty is toxic in its language. Members of Congress can only read it in “reading rooms” without taking notes. If staff can see it at all, they have to have appropriate security clearances – because the treaty is being classified as a national security document. When Obama lobbied members of Congress recently about passing Fast Track and TPP, he threatened them that if they talked about what they heard in the meeting, they’d be charged with a crime.

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In that atmosphere, and with treaty language that toxic, why would any administration allow copies to float through the halls of Congress? There are 435 House members and 100 senators. Let’s say each has two staff members who would be assigned to read this treaty. You’re now looking at between 535 and over 1000 copies on Capitol Hill. You’d have to assume that one of those copies goes to the press, and then, for Obama, it’s game over.

Bottom line on transparency – isn’t going to happen. If Obama wanted transparency, we wouldn’t be looking to Wikileaks for our only copies.

Proponents of the Wyden-negotiated “exit ramp” – by which the Fast Track process can be ended – ensures that there’s way for Congress to take back its power. Not only is that not true, but it’s a “feature” of this Fast Track bill that’s even worse than the 1988 Fast Track bill.

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So the new exit ramp requires approval by the appropriate Senate and House committees and passage on the floor of both chambers – all of this only after the treaty was signed by all parties, thus requiring that negotiations be reopened on a signed-by-all-parties treaty. What are the odds of that?

By contrast the 1988 Fast Track bill provided a less stringent “exit” from Fast Track via a simple vote of the relevant committees only, and before the treaty was signed. Wyden sold himself for this? It was apparently the sticking point for him.

And some video-

Obama to Get “Fast Track” for Trade Pacts

“A Corporate Trojan Horse”: Critics Decry Secretive TPP Trade Deal as a Threat to Democracy

If you want constructive action here it is- call your Senators and Representative and promise them that if they support this disastrous abandonment of United States Democracy to the naked greed and corruption of Bilionaire Oligarchs and Foreign Corporations you will not only vote against them in the next General Election, whoever their opponent is, you will also do your very best to make sure they lose in the Primary to a strong candidate with the priorities of the public interest as their core value.

And mean it.

Lesser of two evils?  What could possibly be more evil?  And don’t bother Supreme Courting me- TPP sets up a secret Star Chamber of Corporate Jurisprudence that makes the Supremes obsolete and ineffectual.

Do you know why the muse of history plays a lyre?  Well it’s because in the western classic tradition the earliest recorded history is the Iliad.  It’s an epic poem, sung rather than spoken, legendarily written by Homer between 760 – 710 BCE though it’s far more likely that it was assembled out of much older pieces.

It recounts events of the Trojan War which was generally considered by the Greeks to have occurred sometime between the 14th and 12th century BCE.  Modern Historians associate it with Troy VIIa which was destroyed by fire sometime around the 1180s BCE.

Before the development of writing, songs and poems were the best way of preserving the accuracy of oral traditions because they are easier to memorize than prose and errors are recognizable through a failure of rhyme or meter.  Even after written language a sense of history, the concept that there is a continuous sequence of cause and effect and not a random collection of happenings mediated by the actions of gods and fortune, can be slow to emerge.

The “father” of history as is commonly taught today (at least in U.S. primary and secondary schools) is Herodotus who in the 5th century BCE wrote The Histories, an account of the Greco-Persian Wars that occurred in the early to mid part of the century.

Thucydides is often labeled the first “scientific” historian and his great work the History of the Peloponnesian War which recounts events of the late 5th century BCE conflict between Athens and Sparta in which he probably participated or had access to first hand accounts.  Xenophon, another early historian, was considered his successor and wrote about the last stages of the war as well as his own experiences as a mercenary in Persia.  He was a contemporary of Socrates, Plato, and Aristophanes.

Of course the century long slice of time recorded by these authors 2600 years ago really represents the parochial views of a single state, Athens, and as we know today time is much longer than that, even recorded time.  Egypt, Minos, the Fertile Crescent, the Indus Valley, and China among others had vast organized civilizations with their own written language and histories predating the earliest Hellenic efforts by thousands of years.

Those who cannot remember the past are condemned to repeat it.- George Santayana, The Life of Reason

All great historical facts and personages occur, as it were, twice … the first time as tragedy, the second time as farce.- Karl Marx, The 18th Brumaire of Louis Bonaparte

History doesn’t repeat itself, but it does rhyme.― Mark Twain

The great fascination of history is that it’s really a study of human nature.  Because of our underlying psychology and methods of social organization, tantalizing patterns tend to emerge, different in detail but often with the same result.  What I think is important to remember in its study is that the people were no dumber or inherently primitive than you or I.  The thought experiment I frequently propose is the phonograph.

The mechanics of recording and playing back analog sound are not particularly difficult.  You need a diaphragm and a stylus (one unit), a recording medium and a method for moving the recording medium at a constant rate relative to the stylus/diaphragm (another unit).  When recording the diaphragm vibrates with the air pressure generated by the sound and the stylus creates an image of those patterns in the recording medium.  When playing back the stylus follows the pattern recorded in the medium and generates vibrations in the diaphragm which moves the air in a duplicate of the original event.  Now there are some minor details such as amplification but there is no inherent advantage to wax on a cranked cylinder as opposed to clay on a well regulated potter’s wheel.

Where then is the Voice of the Pharohs?

It may in fact exist.  Certain pots with strange spiraling “decorations” do suggest the surface of a record, the problem may be that we have lost the knowledge we need to play them back.  Do you think you could recognize spoken Sumerian if you heard it?  Me either.

And gaps like this are more the rule than the exception.  We can’t fix the Iowa because the tools needed to do it have long since been sold for scrap and most of the craftsmen are dead.  Until the recent revival of vinyl the future of musical recording seemed to be fast deteriorating magnetic films in a variety of incompatible formats or optical dots in a whole different panoply of incompatible formats.

Anyway, many of today’s featured stories have to do with history about which it must always be remembered that it is written by the victors.

History will be kind to me for I intend to write it.― Winston S. Churchill

Science and Technology News and Blogs

• First in Flight? Connecticut Stakes a Claim, By KRISTIN HUSSEY, The New York Times
  
  • More info on Whitehead
• Quick Note on Slavery, Finance, Minsky, and the Panic of 1837, by Lambert Strether, Naked Capitalism
• Clockmaker John Harrison vindicated 250 years after ‘absurd’ claims, by Robin McKie, The Observer
• “Albert is an old fool”: Einstein vs Schrödinger in battle of the Nobel laureates, by Paul Halpern, Salon
• The banker behind Hitler’s shadow empire, by Pierpaolo Barbieri, Salon
• Stegosaurus back plates differed between sexes, new study reveals, by Hannah Devlin, The Guardian
• Scrabble debunks Malcolm Gladwell: What the board game teaches us about expertise, by David Z. Hambrick, Scientific American
• Dark Matter’s Deep Reach, by George Johnson, The New York Times
• Astronomers discover largest known structure in the universe is … a big hole, by Hannah Devlin, The Guardian
• Scientists want to blast space debris with frickin’ lasers, by Andrew Tarantola, Engadget

The law that entropy always increases holds, I think, the supreme position among the laws of Nature. If someone points out to you that your pet theory of the universe is in disagreement with Maxwell’s equations – then so much the worse for Maxwell’s equations. If it is found to be contradicted by observation – well, these experimentalists do bungle things sometimes. But if your theory is found to be against the second law of thermodynamics I can give you no hope; there is nothing for it but to collapse in deepest humiliation.

–Sir Arthur Stanley Eddington, The Nature of the Physical World (1927)

Science Oriented Video

Obligatories, News and Blogs below.

Black Ice Ice Baby

Tonightly’s topic is “Drought Shaming” and our panelists are Kevin Johnson, Judy Gold, and Guy Branum.

Continuity

Going Postal

This week’s guests-

• Wednesday 4/22: Dana Perino
• Thursday 4/23: Neil deGrasse Tyson

Dana Perino is a soulless whore who now plies her stock in trade of baldfaced lies on Faux Noise.

Way to spend one of your last interviews Jon, unless of course you crush her like Cramer.

Jeff Garlin’s web exclusive extended interview and the real news below.