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In the news media (e.g. NPR, BBC, CNN, etc.) there is a dominate consensus that Greece must eventually give in to demands to reduce pensions and make further cuts in government spending in exchange for a new loan to help pay off defaulted loans, even if acknowledging that the Greek people have high unemployment and a failing economy.
However, for those not yet exposed to an alternate perspective which is not generally aired in the news media, you might read this bit of a rant by Prof. William K. Black. William Kurt Black is an American lawyer, academic, author, and a former bank regulator. Black's expertise is in white-collar crime, public finance, regulation, and other topics in law and economics. He developed the concept of "control fraud", in which a business or national executive uses the entity he or she controls as a "weapon" to commit fraud. In this piece, William Black make ssome some interesting points about the Greek crisis, of which I cut and paste a few excerpted points:
1. That economists overwhelmingly believe on the basis of theory and experience that austerity in response to a Great Recession constitutes economic malpractice akin to bleeding a patient until it restores him to health.
2. That austerity has caused, as predicted, a human catastrophe in Greece
3. That austerity and the oxymoronic "labor reforms," by reducing wages and the safety net throughout the eurozone, the bailout of German banks, and the sale of Greek infrastructure and islands to wealthy Germans at fire sale prices are very much in the interests of the elite German corporate and banking CEOs that dominate domestic German politics, the Germany economy, and the troika
4. That when a debtor has unsustainable debts, the normal and desirable response is to negotiate a troubled debt restructuring (TDR) to reduce the debt to a level that can be repaid. Even the IMF, the mother of monstrous austerity, admits that the Greek debt is unsustainable.
5. That a TDR was done for German[y], which was essential to its economic recovery. (after WWII)
6. That the Greek "bailout" was a bailout of foreign EU banks, primarily French and German – not the Greek government or people. That bailout of the eurozone's largest banks is funded by eurozone taxpayers. The muted reaction of the commercial markets to the Greek "No" vote is largely attributable to the fact that the bailout of French and German banks by eurozone taxpayers has been completed. The remaining loss exposure of the large eurozone banks on the loans they made seven or more years ago to Greek banks is tiny. The reason EU elected officials are so apoplectic to the Greek "No" vote is that the eurozone taxpayers are on the hook because they bailed out the (primarily) French and German banks. If the eurozone taxpayers suffer losses in the range of one hundred billion euros those taxpayers might turn on those EU elected officials who represent the interests of elite bankers at the expense of the peoples of the eurozone. The NYT article ignores all this and, without any analysis, treats the bailout as if it were a bailout of the Greek people.
To me it this final point which resonates after witnessing the the U.S. bailout of to-big-to fail banks after making a number of risky (sometimes fraudulent) loans to homeowners.
(Score: 4, Insightful) by bradley13 on Friday July 10 2015, @08:25AM
There's no doubt at all that the bailouts were primarily intended to aid the European banking system, rather than Greece. Really, I don't know of anyone claiming otherwise.
However, this is completely separate from his austerity point. Yes, austerity has hurt a lot of individuals. However, as a country Greece was following in the footsteps of almost all other Western countries, spending far more money than it was taking in. These overall debt levels have not yet come home to roost, but who really doubts that they will?
Greece has the further, specific problem that it cannot just print more money to inflate its way out of debts. Essentially the rest of the Eurozone is doing this, but Greece needs a lot more inflation to balance its debt. The US is the poster child here, with a long-term inflation rate approaching 10% [shadowstats.com] (officially it's a lot lower, since the index was been carefully redefined in the 1990s to produce this effect). The fact that inflation is essentially a huge, indirect tax on savings and pensions - essentially stealing from your population? Nah, we won't mention that...
Sooner or later, the debt monster is going to come home to roost. That is going to be a damned painful reckoning, worldwide.
Everyone is somebody else's weirdo.
(Score: 2, Interesting) by anubi on Friday July 10 2015, @09:09AM
The whole concept of fractional reserved banking seems to have an illusion of "helping" others afford things they otherwise could not, but in practice tends only to enslave the borrower... as now the repayment of a loan plus usury now requires additional "dollars" that are brought into play only by issuing yet more loans.
The banker ends up owning everything, yet had to produce nothing but forms and handshakes to "earn" it.
I believe the US is fixing to see our debt come back to bite us pretty soon. I see lots of retail stores ( mostly fashion junk ) closing around me, but I am waiting for the other shoe to drop as the Christmas season approaches with people maxxed out on debt. A ceasing of the lower classes to spend at the mall will send ripples all the way up the supply chains. Every dollar taxed from the lower income people is a dollar that did not go into a local business till. As our Government looks for more ways to tax the little guy to have money to motivate the rich guy, I see a cascade of business failures in our future.
Incidentally, there is a lot of buzz on the net concerning September 23. A lot of it concerns a meteor impact with Earth, which I consider extremely improbable, however a lot of it also concerns a collapse of the economy brought on by too many people in debt, with riots and ensuing military action being prepared for. There is also a significant amount of buzz about Wal-Marts being repurposed as military supply depots, as Wal Mart has the worlds most advanced logistics systems in place.
I am also noticing the powers that be are really pummeling late-night TV with seminars on house flipping. I noted the exact thing happened just about a year preceding the 2008 crash, and these things happen about every seven years. My speculation is that we are nearing the "power stroke" of the economic engine transferring wealth to the rich, and they are trying to get as many proles as possible to plunk down any money they have into real estate - whose value is extremely dependent on loaned money - whose availability is also controlled by the elite. Deliberately crashing the economy allows them to foreclose and the little guy lose what little he had in the first place.
All by pandering to greed, bait, and switch.
I remember watching Bernake hike the FED rate, subsequently bringing the whole world economy down via debts that could not be repaid. I am seeing the new Fed chairman making noises about doing the same thing... but this time the fed funds rate is zero. If the economy is crashed again, this time, how will they "add liquidity to the market by reducing the interest rate" if the interest rate is already zero? I feel our economy is already like a jet airliner soaring ten feet above the ground, and the pilot is considering moves that may stall the plane?
Consider these charts [google.com] of how we have traded "growth" for debt since World War II ( when we were the only industrial nation on this planet not bombed out ). It looks like we are completely out of cards to play to coax more dollars into circulation by dropping the interest rate. Now, debts are coming due, and the little people flat do not have the money to pay all the hands that are now outstretched... not with a pen and a shake, but for their payment: not only principal but usury as well. People are already going further and further into debt just to pay usury!
I believe we are one signature away from a global financial meltdown, as on paper, a very few banking elite "own" everything, but when they try to take possession of it, riots will ensue. All it will take now is just one head to be placed in front of the FED microphone and it hocks up a rate hike.
"Prove all things; hold fast that which is good." [KJV: I Thessalonians 5:21]
(Score: 2, Interesting) by caffeine on Friday July 10 2015, @09:46AM
It is my understanding that most economies operate on endogenous money supply rather than a fractional reserve system.
To me the big question is, if money can be created at zero cost as needed by the economy, why does it come with interest attached?
Why don't we just create what we need to do what is needed and ensure low unemployment, the money is destroyed whey the debts are repaid. No need for interest and no need for the banker class.
(Score: 0) by Anonymous Coward on Friday July 10 2015, @10:23AM
I know that interest is a red flag for the left, but it is an important regulator in a market economy. You can't just "create what we need", because usually you don't know how much that is, and even if you did, you wouldn't know who would need it and who would just want it. That is also why people get uneasy when central banks lend at close to or even under 0% interest. Economies which nevertheless do "create what we need" sooner or later end up with hyper inflation (see Venezuela for a current example).
(Score: 1) by caffeine on Friday July 10 2015, @12:59PM
Most currencies are floated and the market defines the exchange rate. This makes it fairly easy to drive any country into hyperinflation by devaluing their currency and making their debts impossible to repay. Surely the Germans understand this after WWI reparations drove the Weimar Republic into hyperinflation.
In my opinion, employment rates are a good indication of how much money is needed to grow the economy.
(Score: 2) by SubiculumHammer on Friday July 10 2015, @06:13PM
Yes. Modern Monetary Theory often say the aim should be 100% employment
(Score: 2) by Runaway1956 on Friday July 10 2015, @02:46PM
You err. The government can indeed "create what we need" - the Fed does it all the time. I think that GP's question was, "Why are we paying interest on it?" THAT is the 64 trillion dollar question. We owe the banking cartel nothing - we can start printing our own money any time we take a mind to.
(Score: 0) by Anonymous Coward on Friday July 10 2015, @02:51PM
No you can't. Well, at least not for long. Because then you'll get trouble with the authorities.
(Score: 1, Informative) by Anonymous Coward on Friday July 10 2015, @07:16PM
You didn't make it clear in your comment that, despite its deceptive name, The Fed (The Federal Reserve) in -not- part of the gov't.
It's a cartel of 12 private banks--with a really sweet deal:
When USA.gov collects taxes, it just hands that over to those private bankers--no payment required; no interest charged.
The Federal Reserve Act of 1913 was a giant windfall for the largest private bankers.
Ellen Brown has noted that an allegory of those times, disguised as a children's tale, is The Wizard of Oz. [google.com]
-- gewg_
(Score: 4, Informative) by Runaway1956 on Friday July 10 2015, @02:43PM
"why does it come with interest attached?"
Because, our congress abdicated it's right and responsibility to print money, and ceded that right to a private banking institution, which is profit driven. When "Greenbacks" were still in circulation, government still had a controlling influence over the economy. As those government-issued notes were phased out, congress lost all ability to control the economy. Today, if congress wants to exercise some influence on the economy, they must first ask permission from our "Central Bank", or Federal Reserve.
The banking cartel owned our asses before any of us were ever born.
(Score: 1) by khallow on Friday July 10 2015, @04:17PM
To me the big question is, if money can be created at zero cost as needed by the economy, why does it come with interest attached?
Because it can't be created with zero cost. Inflation is the huge problem with arbitrary money creation.
Why don't we just create what we need to do what is needed and ensure low unemployment, the money is destroyed whey the debts are repaid. No need for interest and no need for the banker class.
The thing is, we don't need more money. We need things. Merely having more money doesn't feed you or mentally stimulate you. And really aside from the rent seeking, there's nothing wrong with the current currencies.
(Score: 2) by SubiculumHammer on Friday July 10 2015, @06:11PM
Yes, but this is the point isn't it. It has nothing to do with debt denominated in one's own fiat currency. It has to do with inflation and deflation. Right now inflation is not the problem. We have low inflation. Fiat creation of money would not be a problem at first, but as inflation creeps up you lower the spigot, or raise taxes to maintain control of the rate of inflation.
but it doesn't have much to do with debt. Debt just means we have made a contract to create money out of nothing to pay for the interest. If those interest payments get too high as to inflate the currency, then we have a problem...But thus is just a sliver of the number called debt.
(Score: 1) by khallow on Saturday July 11 2015, @12:10AM
Right now inflation is not the problem. We have low inflation.
But if you create a bunch of money, you make it a problem.
Debt just means we have made a contract to create money out of nothing to pay for the interest.
No. Debt is the borrowing of current wealth from another party and paid for from future income.
(Score: 1, Insightful) by Anonymous Coward on Friday July 10 2015, @10:15AM
The U.S. would not have as much debt if corporations paid taxes. Instead we let them hide money in foreign countries so they can sneak out of paying. It is high time that the bank owners and corporations started seeing hard jail time for their financial schemes. I am still waiting for the Goldman Sachs guys that sold everyone on mortgage backed securities being a sure thing get their long jail terms.
(Score: 0) by Anonymous Coward on Friday July 10 2015, @11:14AM
You will have to include ratings agencies that gave AAA ratings to those Mortgage-backed securities.
And being the devil's advocate:
The role of a bank is to satisfy its customers requests, not think of their long-term financial future and security. If someone wants to buy MBS's, sell it to him.
(Score: 3, Interesting) by Runaway1956 on Friday July 10 2015, @02:50PM
Let the buyer beware, ehh? Never mind predatory business practices.
In MOST sane and rational societies, sales of those toxic securities would be called "extortion", "graft", "fraud", and several other things.
But, you're cool with fraud, so long as the Good Old Boys on Wall Street are committing it.
(Score: 2) by SubiculumHammer on Friday July 10 2015, @07:56PM
EU banks make risky loans to Greece for high profits. Greece can't pay. EU bails out bankers, American style. Greece only gets more loans at the expense of every day Greek retirements.
(Score: 4, Interesting) by M. Baranczak on Friday July 10 2015, @12:28PM
The US is the poster child here, with a long-term inflation rate approaching 10% (officially it's a lot lower, since the index was been carefully redefined in the 1990s to produce this effect).
That is one way to look at it. Here's another:
7 years ago, various crackpots were predicting that runaway inflation would hit the US any moment now. In reality, inflation stayed low, but the crackpots never admitted they were wrong, they just started fudging the numbers.
(Score: 4, Disagree) by threedigits on Friday July 10 2015, @01:23PM
The fact that inflation is essentially a huge, indirect tax on savings and pensions - essentially stealing from your
populationrich? Nah, we won't mention that...FTFY.
The truth is, inflation is only a problem for those wanting to live of interests and rents. For people living from their own work, without big long-term savings (or those with mortages or other debt) usually benefit from it.
(Score: 2) by deimtee on Saturday July 11 2015, @02:01AM
Inflation steals from the middle-class by erosion of their savings and defined benefits, and from the poor because wage increases always lag price increases.
They get a slight benefit back by the decrease in value of any debt they hold. Note that this benefit is always less than the interest they are paying on that debt.
The rich don't hold much cash, and they benefit far more from the above two effects than any piddling losses in the cash they do hold.
If you cough while drinking cheap red wine it really cleans out your sinuses.
(Score: 0) by Anonymous Coward on Friday July 10 2015, @04:55PM
The US is the poster child here, with a long-term inflation rate approaching 10% (officially it's a lot lower, since the index was been carefully redefined in the 1990s to produce this effect).
This assumes that this 1990s system is correct. The description in the website doesn't really go into it, so I could see it either way. It could be the 1990 number overstates inflation or the changes are all politically motivated to mask the real inflation numbers. For example (all the following are hypothetical):
1) The previous system said "lard is a staple food and so counts." That's more difficult to find now and thus expensive, so this would overstate inflation. Likewise if it said "computers are not a staple consumer good so doesn't count" would likewise overstate inflation as computer prices have gone down.
2) The previous system included things like education and healthcare, but then these were subsequently removed to make inflation numbers appear lower.
Clearly there is a lot of politics (and economics) behind the inflation numbers. To what extent these influence the current official inflation rate, and whether they overstate or understate inflation, is more difficult to say.
Ignoring all the official facts and figures, do you honestly feel like everything costs 10% more each year (assuming you live in the US)? Or just take this year compared to last year. Speaking for myself, I sure don't. Things are creeping up in price, but certainly not 10% each year.
(Score: 2) by monster on Friday July 10 2015, @05:18PM
Well, there is a lot of people saying that the greeks must pay their debts, even in Soylent News, as you can see in the story about the greek referendum from some days ago.
Given that most of the people weren't responsible of the debt and that the bailouts were an aid to the creditors, why should they now bear the weight of paying them off?
There's a lot of misinformation and prejudices going on in this whole affair.
(Score: 2) by SubiculumHammer on Friday July 10 2015, @06:03PM
I hear this all the time. If the whole world is in debt then the world blows up? Who are the owners of these debts? Debt is a number. Money is paper. It is a tool, and when that tool no longerworks, it is discarded.
(Score: 0) by Anonymous Coward on Friday July 10 2015, @09:59PM
Sure, in the end it's all just a few numbers, which may not mean much after all is said and done. But in the meantime, those numbers right now still do have meaning, because we humans give them meaning. Try telling the bank that you won't be paying your mortgage because "it's just a number". I bet they will not be amused.
When a large number of people have so much debt that they become extremely cautious about spending money, then society slowly grinds to a halt, as businesses receive less revenue from sales, manufacturers and builders receive less orders. Businesses faced with lower revenue cut costs or close up shop, leading to more unemployment, which brings even more people into financial trouble. The whole thing creates a positive feedback loop that is devastating to society.
Sure in the end, maybe there will be some giant economic restructuring by governments to remove debt, maybe change currency, but in the meantime, there is chaos.