Soros tries to snatch hope from the jaws of despair

George Soros has been saying much that is right about Europe for at least the past year. (I have had the opportunity to comment on his musing, mostly approvingly, on a number of different occasions – see for example here and here). His latest piece in the FT (A route-map through the eurozone minefield) is a must-read for all those who want a glimpse of the desperate depths to which Europe has managed to plunge. It is almost as if Soros has given up hope that Europe can do what is right for itself and he is struggling to egg our politicians on to do, at least, that which will buy them additional time in which to reconsider their ways. And all that at a juncture where Soros understands better than almost anyone that we are past time-buying…

Soros’ starting point is that European leaders are incapable of doing that which can end the Crisis’ terrible momentum: Recapitalise the banks centrally (as opposed to a country by country basis) by means of turning the EFSF into a euro-TARP (as we suggested ages ago in our Modest Proposal), creating a mechanism for re-financing the currency union’s sovereigns (via some form of eurobonds), thus guaranteeing that Italy and Spain do not go under, and, last bur definitely not least, implement an investment policy to stimulate demand at a European level.

So, in view of our leaders’ ‘incapacity’ to do the right thing, what is Soros proposing in order to stop the euro-system from goinf belly up within the next few weeks or, at best, months?

  • First, he is proposing that we put bank recapitalisation aside for the moment, placing the idea in the ‘too hard basket’ and, instead, have the ECB issue a blanket guarantee of the banks in exchange for the right to direct the banks to keep lending the private sector.
  • Secondly, regarding the task of keeping Italy and Spain afloat, Soros suggests that (a) the ECB drops its interest rate from1.25% to almost zero (e.g. 0.25%), and (b) the member-states issue new bonds that the private banks are instructed (as part of the same deal described in the above paragraph) to buy at very low interest rates on the basis of a promise by the ECB that the ECB will immediately accept these bonds as collateral, thus promising to turn them into instant cash for the banks. As long as the new bonds had an interest rate above that of the ECB, the banks  would find the whole scheme attractive.
  • Thirdly, and I quote: “During the emergency period fiscal retrenchment and austerity are unavoidable. But the debt burden will become unsustainable without growth in the long term – and so will the European Union itself.”

This is a pretty desperate triptych. It is desperate because Soros must surely know that offering a blanket guarantee to our bankrupt banks is equivalent to a declaration that capitalism is well and truly over. It is one thing to keep the banks liquid via the ECB or to bail them out in exchange for equity and it is quite another to do at the level of the eurozone what Ireland did, foolishly, with its own inane banks: Unconditionally to socialise all their future anti-social behaviour.

Let me, nevertheless, give Soros the benefit of the doubt and accept that desperate times call for desperate measures. Would his guarantee work? I think not. First, Soros’ hope that such a guarantee would be only the first step before the eurozone can get its act together and recapitalise the banking sector at a pan-European level, seems pie in the sky to me. Emboldened by this enormous lease of life, the banking sector will find room and energy to organising massive  resistance against any recapitalisation move. If they can do this now that they are almost down and out, imagine their licking and screaming after have been guaranteed for a year or so by the ECB. Secondly, the notion that, while under the ECB’s guarantee, the ECB will be in a position to instruct the banks to extend credit to business seems extremely optimistic. Put simply, the ECB is afflicted by too much asymmetric information vis-a-vis the banks on matters related to their particular loan books. What the bankers will do, besides cosmetic moves, is take the guarantee, use it in order to concoct new derivative deals and, in essence, maintain their credit strike.

Moving on to Soros’ suggestion regarding Italy and France, the essence here is that the ECB lowers interest rates substantially and guarantees that it will accept as collateral bonds that the banks will be forced to buy, at low interest rates (albeit rates that are higher than those of the ECB’s overnight rate). In effect, the ECB will considerably expand the money supply and indirectly finance the Italian and Spanish states. Will this fly? Not on your (or our collective) Nelie! Germany will simply not wear it. Not even under the threat of the eurozone’s collapse. Berlin will rather reconstitute the DM than go down the road toward a monetisation of sovereign debt that will cut to shreds the very essence of Germany’s postwar model.

Summing up, neither of Soros’ stop-gap ideas emit the hope that he intended to spread. The first one, the bank guarantees, will simple embolden the banks to continue as zombies ad infinitum. The second one runs against the very grain of Germany’s psyche. Neither will get the eurozone out of the woods either due to failure or to German resistance. Meanwhile, the markets are being told that within a week Europe will have produced a definitive plan for providing a backstop for banks and sorting out Italy’s and Spain’s refinancing woes – all that to the tune of a turbo-charged EFSF. Miracles will never cease…

54 thoughts on “Soros tries to snatch hope from the jaws of despair

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  8. One note about how great it is for Germany that the near-collapse state of a number of Euroland member countries keeps the value of the Euro down:
    First of all, the value of the Euro is not actually that low. Compared to e.g. the USD and the GBP, it is now a significantly higher than during the first few years of the Euro.
    Compared to the Swiss Franc, it is lower – but the Swiss Franc is a special case.

    Sure, if Germany still had the DM (or would switch to it now), then the value of that currency would most likely go up. Which would have good as well as bad consequences.

    Good:
    The interest rates could be set to close to zero, which would be good for stimulating the economy.
    Importing goods and services would get cheaper which would give the average German consumer more purchasing power.
    With investments abroad no longer being in the same currency, it would be more obvious that investing in e.g. Greece is associated with a higher risk (for a German investor) than investing in Germany. That would be a factor that would tend to increase domestic investment in Germany, rather than continuing with investing in dubious foreign assets that then go belly-up.

    Bad:
    All German-owned assets denominated in Euros would go down on value.
    German exports would be less competitive as the stronger DM (or whatever it would be called) would push the cost up

    Overall, I would say that the Good outweighs the bad from a German perspective.
    Germany is too focused on exports – which led to too much assets being invested abroad which then go belly-up (first US junk papers, no Greek junk papers).
    So if German export fixation was reduced a bit and the focus was more on developing the domestic economy, that would probably be a good thing for everybody, including Germans.

    So no, I am not grateful for keeping the Euro down. Plus, the way that it’s kept down – by permanent imminent disaster – is not what I like to live with long term.

    • You are too focused on exports because after the Euro introduction all your savings were exported and this killed your domesic investments!

  9. Thanks you for your answers . My aim is to focus on misconceptions . I want to argue with you . Forgive me if some times i get too excited .

    To Dutch-Jack

    “Why do you think that people in Nothern Europe think that Greece shoukd be run by a EU (Troika) dictatorship? Very few outside parliaments want that. This dictactorship is only required to glue the currency zone together. No Euro, no dictatorship, no bailouts.North & south are happy Very simple.”

    My personal belief is that Greece should exit Eurozone . But not at this moment .
    As Mr Varoufakis say , if you have done a mistake , undo it won’t make it necessarily better .

    ( I am referring to Mr Varoufakis because i don’t want to take credit for something i didn’t think of )

    So there is no disagreement on that . It is clear which countries were benefitted by Eurozone . That is not an accusation . It is a realization .
    No doubt , we signed too to be a Eurozone member .

    “80-90% of the people in FI, NL, AT or DE are against the bailouts. This means also that they are against the troika dictatorship. Most want their national currency back so they can live their lives without worrying about debt in other countries. Very simple.”

    Opinions surveys means little to me . It’s just a reflection of the mass media propaganda.

    Do you mean that your banks don’t want their money back ? Because that is what troika does in Greece . I can expand on that if you want .
    Basically , just because you have named something “bail out” doesn’t mean that it is in reality .

    Now the so called deep haircut would have negligible impact in Greece financial condition. You know why? Because they have named it a “haircut” again . Money borrowed from member states with ludicrously high interest rates are excluded . Money borrowed from ECB are excluded . What is left ? According to estimations , the imminent so called “60% haircut ” would be something like 10% .

    “Regarding your post about foreign companies doing business in Greece: this has been the case since Greece joined the EU. If Greece does not like it, it needs to leave the free trade zone. Greek companies have the same right in other EU countries. On top of that you totally overestimate the importance of the Greek market. I saw a statistic for German exports. 0,6% went to Greece. This is insignificant.”

    Well sovereign debt of Greece again is insignificant given the total sovereign debt of Europe . What does this mean?
    On the other hand the bettings made by French and German banks on that debt is huge . Have your government explained that to you?

    If Greece is to leave , it’s going to be according to its own will and interest . I am afraid you are going to accept all the Euro rules , not just the ones that suit you .

    As far as the goods you are saying . I must confess to you that the damage to greek economy was vast . Farmers were forced to trash their production just because it was over the limits set by EU . Financial structures were ruined just because there was no incentive any more because of financial aid by Eurozone . This conversation does lead nowhere …

    “The big difference is that noone in Greece was forced to buy these services or products and if they did, they directy received something in return. For the Dutch taxpayers the picture is different: They are (a) forced and (b) do not get something dicrectly in return. ”

    What you say in not true . For each dutch product greeks bought , a dutch worker was supported and a greek worker was dismissed . In addition , dutch tax payer is not forced to save Greeks but to save its own banks . Don’t blame us for that .

    That’s the main fault , Mr Varoufakis modest proposal fixes . We were all supposed to be european citizens .
    It was not a german product , it was a european product . It was favored for years against products outside EU . But as it turned out , macro-economically speaking it was a german product , not a european one . Greek farmer was “forced” to buy dutch seeds due to incentives given by EU .

    Our anger is towards our politicians , our political system and our financial elite . I suggest you do the same in your country . Because i am sure , all these profits, all these years didn’t end up in german or dutch working people . And the money Merkel is going to raise from your pockets , BE CERTAIN , is not going to mitigate the social and humanitarian catastrophe , about to happen in Greece . They are going to the Bankers once more !

    • “If Greece is to leave , it’s going to be according to its own will and interest . I am afraid you are going to accept all the Euro rules , not just the ones that suit you .”

      The Euro rules are worthless. they have been broken and broken again. However, I believe it is in the interest of most countries to leave this club where you either are a protectorat of the troika or you pay for other countries, your own banks and other countries banks.

      “Farmers were forced to trash their production just because it was over the limits set by EU”

      This idiotic thing has been going on for decades in EU. It is unbelievable.

      >>>For each dutch product greeks bought , a dutch worker was
      >>>supported and a greek worker was dismissed . In addition , dutch tax
      >>>payer is not forced to save Greeks but to save its own banks . Don’t
      >>>blame us for that .

      Correct. But the “Dutch payer” did not get anything. Everybody else did. the Greek buyer, the Dutch worker, the Dutch company and the Dutch bank. So the Dutch payer and the Greek worker were screwed.

      >>>That’s the main fault , Mr Varoufakis modest proposal fixes . We
      >>>were all supposed to be european citizens .

      We might be a little. But there is no European “demos”.

      >>>And the money Merkel is going to raise from your pockets

      She can take money from the Germans. Oh wait they want to establish a European “finance patrol” so all countries will become a protectorate of the EUDSSR. Europe establishes socialism throught the Euro. Let´s see how long the experiment will last.

    • @ Dutch-Jack and all

      “She can take money from the Germans. Oh wait they want to establish a European “finance patrol” so all countries will become a protectorate of the EUDSSR. Europe establishes socialism throught the Euro. Let´s see how long the experiment will last.”

      ——————————————
      Search Google for the book

      Confessions of an economic hitman
      by John Perkins

      Who ever things black ops can only be military ,thing again.
      If you don’t adopt a conspiracy outlook for analysis sake after reading that ,you never will.

      From the Preface

      “Economic hit men (EHMs) are highly paid professionals who cheat countries around the globe out of trillions of dollars. They funnel money from the World Bank, the U.S. Agency for International Development (USAID), and other foreign “aid” organizations into the coffers of huge corporations and the pockets of a few wealthy families who control the planet’s natural resources. Their tools include fraudulent financial reports, rigged elections, payoffs, extortion, sex, and murder. They play a game as old as empire, but one that has taken on new and terrifying dimensions during this time of globalization. I should know; I was an EHM, I wrote that in 1982, as the beginning of a book with the working title, Conscience of an Economic Hit Man. The book was dedicated to the presidents of two countries, men who had been my clients, whom I respected and thought of as kindred spirits — Jaime Roldos, president
      of Ecuador, and Omar Torrijos, president of Panama. Both had just died in fiery crashes. Their deaths were not accidental. They were assassinated because they opposed that fraternity of corporate, government, and banking heads whose goal is global empire. We EHMs failed to bring Roldos and Torrijos around, and the other type of hit men, the CIA-sanctioned jackals who were always right behind us, stepped in. …”

      —————————————
      Also

      There is a study that was published October 16 ,2005 from a Ajay Kapur of Citigroup called Plutonomy.

      The summary

      ➤ The World is dividing into two blocs – the Plutonomy and the rest. The U.S., UK, and Canada are the key Plutonomies – economies powered by the wealthy.
      Continental Europe (ex-Italy) and Japan are in the egalitarian bloc.
      ➤ Equity risk premium embedded in “global imbalances” are unwarranted. In plutonomies the rich absorb a disproportionate chunk of the economy and have a massive impact on reported aggregate numbers like savings rates, current account deficits, consumption levels, etc. This imbalance in inequality expresses itself in the standard scary “ global imbalances”. We worry less.
      ➤ There is no “average consumer” in a Plutonomy. Consensus analyses focusing on the “average” consumer are flawed from the start. The Plutonomy Stock Basket outperformed MSCI AC World by 6.8% per year since 1985. Does even better if equities beat housing. Select names: Julius Baer, Bulgari, Richemont, Kuoni, and Toll Brothers.

      —————————————-
      They tried to bury this.

      Yani,
      what is your opinion about Plutonomy?

    • @ Ilias Trou and all

      “Our anger is towards our politicians , our political system and our financial elite .”

      Yeap. But still let us not forget that we can not accurately say ,at least today ,who is guilty and who is not. Who was blackmailed ,threatened ,cooperated ,betrayed.

      Ofcourse most are guilty because they didn’t find alternative ways to inform the rest.

      I hope everything continuous quietly but dynamically from the people.
      Noone should get affected by the pseudo-anarchists.
      It is time for everybody to know what anarchy truely is. And it is sure not burning ,destroying ,manipulating.

      I had used a term in the past combining anarchy and democracy.
      “Anarchodemocrat”. I think i found a better one.
      Personocracy (Προσωποκρατία).
      I do not know if this term exists. Inform me.

      It is time for something better ,emphasizing the responsibility of the individual.

      Different layers of living. Not a specific ideology superimposed upon others of different characters. Organised freedom.

      Something is forming.

      What do you think?

    • Personocracy

      I read enough about personocracy for now.

      I had something different in mind.

      Some do not take into consideration the human psyche and transactional imbalances of any kind (physical ,spiritual etc.) ,but there are good elements for one to consider.

      I think something good can be formed.

  10. One thing is to listen to Mr. Soros whose claim to fame is that he once successfully speculated against the British Empire (under no circumstances do I wish to play down the intellectual brilliance of this Hungarian emigré).

    Another thing would be to dream how Valery Giscard d’Estaing and Helmut Schmidt would handle the crisis if these 2 leaders were today leading the EU. Their claim to fame is that they knew what they were doing and that they were leaders. Here is my guess what they might do.

    1) Solve the problems at their source. Solve the banking problem directly with the banks (and not via Greece) and solve the Greek problem directly in Greece (a 2-throng strategy: get the budget in order but at the same time invest in the economy).
    2) Have the banks write-down the value of their sovereign risk assets to realistic market values (via decree or whatever). Most banks would wipe out much of their capital & reserves when doing that. Allow these “bankrupt banks” to come to their governments and politely ask for help. Offer them the help by replenishing their equity & reserves with public funds, taking ownership in the process. All of this with a view towards eventually selling the public stake again in the future with a profit.
    3) Should the banks cry “foul game” because their shareholders are being partially disowned, d’Estaing/Schmidt would probably explain to the banks what capitalism is all about; period.
    4) They would then tell the banks to reschedule their sovereign risk loans now that write-downs have been made and losses have been taken. They should reschedule them is such a way that Greece has “breathing space” but not too much breathing space with the risk of dropping reforms.
    5) They would tell the banks and Greece that, from now on, the EU would only finance the Greek budget deficit in agreed upon amounts. If Greece needed more money to finance capital flight or other things, she would need to look for that money elsewhere.
    6) And then they would offer Greece “real help” instead of giving her money to repay the banks. That help could consist of: EU task forces assisting Greece in building up an efficient public administration (this would be a project for several years); developing an economic development plan for the Greek economy; arranging for investment funds to finance productive growth (instead of artificial consumption growth) in Greece; etc. etc.

    Greece has never become at least a somewhat industrialized economy, much less a knowledge-based economy. Someone suggested that Greece could jump over the age of industrialization and move on directly into the age of a knowledge-based economy. Fine with me if that works. But then there has to be a plausible economic development with that as its goal.

    Some fatalist suggested that Greece could never accomplish any of this because she does not have any natural resources and that she is basically condemned to the role of a poor agricultural economy. How many natural resources did the Japanese economy have when it started its economic conquest of the West back in the 1970s? The most important capital of a society is not its natural resources. If you have them, it makes things a lot easier. But the most important capital of a society is its human capital. When that human capital is developed (educated; and Greeks have a high level of education); when it is put to good use; and when that human capital has the strong will to accomplish something — then a society can accomplish practically everything.

    • Well ,you are becoming one of my favourite commentators.
      Now we need favourite “commandators”.

    • First of all we need a government who cares about the welfare , well being and the future of greek people .

      This government must feature crisis management skills , profound knowledge of international play , wide acceptance and support by greek people , and strategic planning capabilities for the future .

      No doubt there is great potential in Greece .
      But this is improbable , ideal and wishful thinking .

      What Greeks CAN do right now , is get rid of this treacherous government . Support each other for survival reasons . Whichever route we may take , it’s going to be difficult .

      Nevertheless , it is inspiring and encouraging that greek people have waken up , are getting organized and are preparing to re-constitute their sovereignty in their own country . Whether this is within Eurozone or outside . This will be determined by Greece’s best interest which varies with time .

    • I agree with your ideas.
      The problem is that the generation of Valerie Giscard d’Estaing and Helmut Schmidt is no longer in charge. They truly believed in Europe, partly for sure because they both had seen what World War II had done to Europe and wanted to make sure that such a thing could never ever happen again.
      I think that now, in many politicians’ heads (as in their electorates’ heads) it is unclear what the EU is all about. It depends on which country you live in. If you are in a country that receives funds from the “richer” EU countries, you would be an idiot wanting to leave. If you are a citizen of one of the countries financing the transfer, you are not so sure.
      Preventing a war is no longer really an objective, because EU countries going to war against each other seems unthinkable anyway.
      So in a way, this has made the quewstion “what is the EU all about” more difficult to answer. Different countries, different interests.
      It is unfortunate that in the last 10-15 years, somehow the consensus concerning the EU was declining rather than rising. So now, politicians are in the situation of having to justify potentially huge spending to save fellow EU countries to their electorate – and have difficulties doing so.
      Because, let’s be honest, in the last decade or two, every country tried to get through the EU what was best for them. Nobody really thought about “what is best for the EU” or what is best for Europe as a whole. Giscard d’Estaing and Schmidt and Kohl were different. They really cared, which made it possible to do something that was against the interest of their own country but to the benefit of the EU. Topday’s politicianas are more like Maggie Thatcher in that respect. Which makes them ill equipped for dealing with a crisis like this one.
      Let’s hope they get their act together, and quickly.

    • @ martin

      It is hard for the governments of the surplus countries to justify to their voters , why their banks are insolvent . It’s not a help to Greece or other countries . The so called “bail out” for Greece was a loan agreement with ludicrously high interest rate which changed the legal terms of the initial debt .
      In addition it ensured that french and german banks ,that had invested in high risk bonds (they have higher revenues for a reason) , would get their money back .
      Given the reassurance by Eurogroup that Greece is not going to go bust before 2013 , they made huge bets on that . And now , under the pressure of international markets , french and german banks are highly exposed , with amounts equal to multiple times the sovereign debt of Greece .

      Of course european governments have a difficult time explaining that to their voters . So , it is Greece , with its anarchic and lazy residents , that didn’t pull through an impossible macro-economic target . As Mr Varoufakis said , it is for a reason that international financial press says that greek sovereign debt needs a substantial haircut . Greece was insolvent two years ago !!!!!!!!
      Insolvent means that there is no possible way to repay your debts !
      It wasn’t a case of liquidity problem to get a loan !

      Merkel et all , now have the will to give money to recapitalize their banks , because it is in their interest too . The alternative scenario is too dark for everyone . Read Mr Varoufakis posts .

      Every country that entered EU was a new market for the surplus countries . It is crucially important for surplus export countries to devaluate euro by adding weaker economies within eurozone . If Germany et all loose this benefit , at that very moment , it would be impossible for them to export to poorer countries .
      Can you comprehend what this means for Germany?

      Nearly 70% of the exports of Germany are within Eurozone .

    • @ Martin

      What you really have to do in your countries is investigate why these governments took such decisions against your own people .
      Why your tax payers gave all that money to your Banks ( via Greece) .

      If you don’t believe me , i can send you a copy of the loan agreement (english version) to see for your self .

      Don’t they give an account for these actions in your country?

      (In Greece they don’t , but this is to change soon)

      Don’t listen to mass media propaganda !

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  12. As anyone who has watched a walking dead movie knows, the only way to kill a zombie is to put a bullet through it’s head.

    Will the Euro leaders do this, that is, kill the zombies who’s very existence depends on continue blood sucking of it’s host (the real economy of production/consumption), and thus turn the banks into public utilities. Of course not. Further attempts to breath life into these zombies only eats away (that’s what zombies do, they eat the living), at the ‘real’ economy.

    The Euro is based on neo-liberal themes and practices, and continued genuflecting before the god of finance capital will continue, even if it eventually means moving towards state capitalism. A blanket guarantee of banks does NOT end capitalism – even if it thrusts a stake through the heart of persistent fairly tales of ‘free’ market capitalism.

    As for Soros, is he not the grand old speculator who places bets on the British pound to enrich himself, and to hell with the consequences? Should he be given any legitimacy at all?

    • The “consequences” that you’re talking about are that a dumb cabinet led by Major was forced to abandon a stupid peg and devalue, thus restarting their economy. Thing that Greece right now can only dream of doing(it’d be sooo good for them, but they can’t).

      Even if you subscribe to the theory that every British citizen payed soros don’t remember how many pounds, it was a fair price – if you elect dumb leaders that sign untenable agreements, it’s only fair to pay. Only in nowdays society, stupidity is entitled to stuff.

      Bank – public utilities?! Where do I sign to be a civil servant? It’s a license to steal for any bureaucracy worth their salt.

  13. Dear friends,
    with all due respect, money supply. confidence in the local governments – or the euro system in its entirity – is just on side of the coin. The economic unification of Europe under a single currency, clearly was not backed up by a uniform political member-nations’ policy – too many “agendas”, too many ethnic “egos” to fight against such a common vision. However, the so called western-type of living, something totally contradictory to the “character” of many Mediterranean countries, coupled with uncontrolled consumer lending by local banks willing to risk their balance sheets against huge short-terms profits based on ludicrous interest margins, has led some European “wagons” – and alas the whole “train” – off track. Risking to infuse uncontrollable social turmoil in an era that peace seemed a well-earned right for the next generation of Europeans, we currently have a single chance to admit the fallacies and unite under a common salvation scheme. It seems to me that whatever economic/political “formula” is finally adopted – if one is to prevail – we “Europeans” must seek at last to feel EUROPEANS putting aside not our history and tradition, but our ethnic misconceptions of uniqueness and grandeur – things that we need last in this time of crisis. What is even more important, we must understand that what we are currently experiencing, is the unavoidable result of a lifestyle we did not really need to adapt and which we certainly must do away with – whatever degree of “pain” and contra-”addiction” this entails – so that a more stable, sociable, humane, rational way of living enables us to think before we choose how to live instead of letting “others” tell us what our lives should look like!…
    Pardon me for saying so, but an old Greek saying says that: “you should not stretch your feet longer than your blanket covers at night, (‘because you could get sick” is one explanation – or yet induce more serious sorts of things to yourself!…). I am sorry to find out that we Greeks have forgotten all about this during the last years (despite others desperately wanting us to do exactly so…).
    Time is up and we all (Europeans – not just Greeks) will have to decide what is best for us all – not what is best for “our people”. Shortsightedness is a costly error and I do not thing we can afford to take the test as we currently stand on the verge of chaos. Civil war is no better than World War, and though a few of us would benefit dearly from such “parties”, I am sorry, but I prefer a less “colorful” display of fireworks around my neighborhood… Please allow me to choose so!

    Kind regards
    George Raikos
    Life Coach,
    Athens, Greece

    • With all the respect ,to my understanding , i think that you are the perfect example of the main media propaganda which takes place in Greece the last two years .

      “The economic unification of Europe under a single currency, clearly was not backed up by a uniform political member-nations’ policy – too many “agendas”, too many ethnic “egos” to fight against such a common vision”

      You are mixing too many things in this sentence :

      Euro is not just a common currency . Who’s controlling its circulation and value ? What were its design features? Why the Euro group was expanded in such a rapid way?

      Can you explain to me what a uniform political member-nation’s policy is? I can not understand what it is .

      “However, the so called western-type of living, something totally contradictory to the “character” of many Mediterranean countries, coupled with uncontrolled consumer lending by local banks willing to risk their balance sheets against huge short-terms profits based on ludicrous interest margins, has led some European “wagons” – and alas the whole “train” – off track”

      You are suggesting that local banks gave uncontrolled loans to mediterranean countries and the problem now is that those banks don’t get their money back ?

      At this stage , the problem is the sovereign debt of southern Europe countries or not ? How is this connected to what you say ?
      There is a connection . By seeking this link in this chain , you will find issues that overtakes greek individual overspending in importance .

      There is plenty of information on the net about what is going on .

      http://epilegmena-videos.blogspot.com/

      (I am just trying to help , don’t take this as advertising, i have nothing to do with this site )

      There are many views . Don’t stick to one of them . Question what you here . And most importantly don’t get depressed .

      By reading the posts of Mr Varoufakis , you will find that there are other problems too . European under investment . European banking sector insolvency . The lacking in Europe of a mechanism to recycle surpluses between countries and why is this important in capitalism . And some great insights too about greek , european and global hypocrisy .

      Surely there are many things to change in Greece and we must work in this direction … BUT

      IT IS NOT A GREEK CRISIS . IT’S A GLOBAL CRISIS . Don’t blame yourself . You have contributed insignificantly to what’s is happening .Some “other people ” have tremendous responsibilities for what’s happening .

      Please if you find what i am saying wrong , at least accept my sincere intention to help .

    • It is not a Greek crisis. It is a crisis of the Euro. Without the Euro Greece (and everybody else) would have just been fine.

      >>>The lacking in Europe of a mechanism to recycle surpluses
      >>>between countries and why is this important in capitalism

      I fully agree. This mechanism is called currency exchange rate!

    • A correction to my previous post :

      FROM
      “You are suggesting that local banks gave uncontrolled loans to mediterranean countries and the problem now is that those banks don’t get their money back ?”

      TO
      “You are suggesting that mediterranean local banks gave uncontrolled loans to citizens in mediterranean countries and the problem now is that those banks don’t get their money back ?”

    • @ Dutch-Jack

      Well i wish all economists stood critical against Eurozone , 15 years ago. Some of them did , but mass media propaganda did the trick .

      I am not a conspiracy theory enthusiast . 70% of mass media in Greece are owned by 3 people . All of them do business with greek public contracts .

      I am sure , some news are more equal than other !

    • “I am sure , some news are more equal than other !”

      That is fully correct. Here in the North they tell everybody lies regarding the Euro since it was introduced even before that. Noone wanted it. OK the people did not want it….

      The EU administration is the only one benefitting from the Euro. It enables them to politically influence the flow of capital (a bit until the sysem breaks). everyone else lost: The German saver, the uneployed Portuguese, …

  14. Everything points towards an inevitable bankruptcy of either the banks or the Euro Zone, perhaps both. Very sad, all that time wasted when we could have had it over with and be well on the road to recovery.

  15. Yanis- how does this differ -in ultimate result- from ECB offer to provide unlimited liquidity for next 12 months ? wont there be pressure to extend thsi again (and again and again) if EU hasnt coem up with definitive solution ? Do you really feel ECB will pull the plug on even more indebted/vulnerabel eurobanks/sovereigns in 12 montsh when they realize there has been no real progress toward solution? I cnat imagient they will want the music to stop then when they find it too painful to contemplate right now !

    Europe si goign to run out of time in any event- aready in recession, rst of world soon to join in in golbal recession that will last at least until 2013, and if Rogoff is right , several years beyond that as this will not be a plain vanilla market cycle recession, plus svereigns have no more bullets left to shoot

  16. Mr. Soros says that, although a moderate keynesian plan is required, for now lets do a extra light keynesian project accompanied with some trickle-down economics and will see about future!

  17. Video from the Euro breakup conference that took place last week in Brussels:

    Prof. Hankel and Prof. Bagus sort a few “facts” that are repeated and reapeated again by politicians out.

    The conclusion gives some hope. Their is no crisis of countries. It is a Euro crisis. The Euro will dissappear. Either in an uncontrolled big bang or it will be derailed before the big bang.

    • Sorry Dutch-Jack, I don’t think you get it.

      The euro is not an island to self-determine what it should do.

      It’s part of the fabric of a global monetary system and I am sorry to tell you that no global citizen gives a rat’s ass about what some europhiles or europhobes think or have to say about the euro.

      In cold economics terms, Germany – because it is an export country -needs and benefits from a lower euro.

      Therefore it is Germany’s job to continuously undermine and sabotage the euro. A weak euro is Germany’s #1 job.

      The bad news for Germany is that they do not dictate the global game. The Americans, Chinese and Russians dictate the global game and are asking Germany to either piss or get off the pot.

      Get it?

    • Hello Dean, if you are all so smart, why is your country so screwed up?

      If a paper currency is successful or not is not determined by a mystic “global game”. It stands or falls with trust of the people. If 100 Mio. people in the Euro zone stop to have trust in the Euro it is finished. Game over.

    • That is an easy answer !
      Because Dean is not the prime minister ! :)

      Can this “mystic global game” tamper with the faith of people in “paper currency” ?

      If it can , then it is dependent on that too .

    • @Dutch-Jack

      “If 100 Mio. people in the Euro zone stop to have trust in the Euro it is finished. Game over.”

      And how will that happen? How will people decide not to have trust? As long as they can cover their needs using money they will. So manipulation of peoples’ needs is a great part of the game and that is how control is being given to the few and utterly irresponsible. Not all have the proper knowledge. A big advantage for the elit. There is no democracy or there would have never existed such a crisis.

    • >>>And how will that happen? How will people decide not to have trust

      History shows this can happen very quickly. What initiates the panic (or insight) can be very different from the root cause of the inflation. The first can be completely irrational but the root cause is not.

      Currently money supply is high, but the speed of circulation is low. We only have asset inflation and relatively low inflation for goods and services, so most people are calm.

      The Euro system is misconstructed. Every nation can start to use the printing press and hence take more benefit than having to pay as a cost. A lot of the cost is externalized on the other Euro Zone countries via inflation. In a crisis we see more of that. (see Target2 balances).

      More importantly the conflict the Euro creates should not be discussed on a country level. –> Not Finland against Portugal. It needs to be looked at stakeholder groups. Individual taxpayers (voters) have other interest than multinationals, banks and exporters. BUT only individual taxpayers can vote. So a weak currency may be good for some stakeholders, it is not for the majority of the voters. Even if Europhile politicians repeat this over and over again.

    • Personally , i don’t understand why German people and northern european citizens generally are angry with Greek people!

      We bought all your cars and goods in general . We even preferred your products from greek ones .

      We even borrowed money to buy your products .
      We used your currency , to buy all your goods .

      All german , english and french big consultancies and construction companies were allowed to do business in Greece . Greece couldn’t pay for all this unnecessary titanic endeavors .

      No problem , european banks were too eager to lend money to greek state , so that all these companies were funded to complete their unnecessary works.

      When this bubble exploded , we were willing to convert our debt (greek bonds) into state towards state debts with collaterals .

      We handed out greek private and public property too .

      We even made ourselves useful as a canary in the mine , and exposed euro faulty design while giving you essential time to protect yourselves .

      We never asked our loan to you back !

      And you still hate us?

      Please ask me what greek people didn’t do all this time . I ll be happy to answer.

    • Read this article .

      http://www.reuters.com/article/2011/10/18/eu-greece-taskforce-idUSL5E7LI1AC20111018

      This is all over the greek sites in greek versions today .
      Personally i don’t believe in smart Greeks , stupid german and all that stuff . I have nothing against northern european people . I have many dear friends there .

      But honestly , IF what’s in the article is really true , YOUR government or financial elite is going to GET YOU in deep **** .

      Read this :

      “You need someone who can speak Greek but who is not on the side of the Greeks,” said the source. “Their powers would be tied to the conditionality of the loan. It has to be presented carefully — call it technical assistance or something. You can’t trample all over them.”

      Your government , in its eagerness to satisfy the appetite of your big all mighty corporations , is going to put you in big trouble .

      It doesn’t take much thinking to comprehend that this is not going to work .

      Don’t believe me ! Read the recent history of Greece . For almost two hundred years , this is all that we do . Resist .

      Please ask me about the loan agreement .Your so called bail out and the memorandum of solidarity that YOUR media are spreading all over Europe . I can send you a copy to see for your self .

      I would like your opinion , honestly !

    • @Ilias:

      Why do you think that people in Nothern Europe think that Greece shoukd be run by a EU (Troika) dictatorship? Very few outside parliaments want that. This dictactorship is only required to glue the currency zone together. No Euro, no dictatorship, no bailouts.North & south are happy Very simple.

      80-90% of the people in FI, NL, AT or DE are against the bailouts. This means also that they are against the troika dictatorship. Most want their national currency back so they can live their lives without worrying about debt in other countries. Very simple.

      Regarding your post about foreign companies doing business in Greece: this has been the case since Greece joined the EU. If Greece does not like it, it needs to leave the free trade zone. Greek companies have the same right in other EU countries. On top of that you totally overestimate the importance of the Greek market. I saw a statistic for German exports. 0,6% went to Greece. This is insignificant.

      The big difference is that noone in Greece was forced to buy these services or products and if they did, they directy received something in return. For the Dutch taxpayers the picture is different: They are (a) forced and (b) do not get something dicrectly in return.

    • Dear Ilias
      I don’t think that Germans and other northern Europeans exactly “hate” Greeks. True, Greece bought all those cars, etc that e.g. Germany so much loves to export. That was good for Germany. What was not so good is that a good part of the shopping was effectively done with money that Greece had borrowed from e.g. Germany and France.
      …and now it looks like we will never seethat money back. So Germany gave you both: the goods and the money to pay for them. Nice, isn’t it? ;-)

    • @Dutch-Jack and Martin

      Manipulation of money flow.

      For Greece to be or appear a really good child of the EU ,certain deals were made ,from which manipulation of future developments was possible but not obvious at the time. Not obvious to the average citizen.

      Farmers should destroy their production ,so prices remain high. That was a must if they wanted support from the EU. This happened to every sector.

      High prices. More cheap imports. Expensive living. Personal debts.

      Then you have the most stupid public debt ever.

      Money is the blood of our society. And there was a circulatory problem like no other. All the blood went to the head. And the head gave bad signals. Wall Street. Stupid deals with stupid “Governing Greeks”. Derivatives.

      The money was eaten ,digested and then……recycled as Greek debt and not only Greek.

      Call me conspiracy junkie.
      Maybe they know exactly what they are doing.

      The average citizen worked ,2 and 3 jobs at a time ,but life didn’t get that much better. Why? The average citizen remained economically average whatever he or she did. Thank God ,they found alternatives.
      And now it is a good time for certain someones to use these alternatives ,these hidden strengths ,as corruption of the average citizen.
      Tax evation etc.

      Distinguish between the corrupted ones and the forced ones.

      Always problems at every sector.

      This has happened ,is happening and will happen elsewhere.
      Time to waky-waky.

      “Hello world”

      ——————————–
      @Dutch-jack

      “History shows this can happen very quickly. What initiates the panic (or insight) can be very different from the root cause of the inflation. The first can be completely irrational but the root cause is not.”

      History shows the knowledge of the time. Now it seems like they will keep the world system functioning ,so that no panic is created.

      What they seem not to understand ,again ,they seem not to understand ,is that there is a limit ,they like it or not. Avoidance of destruction of the system maybe possible until the last minute. Then panic is irrelevant.

    • @Martin

      “What was not so good is that a good part of the shopping was effectively done with money that Greece had borrowed from e.g. Germany and France.”

      The thing is that noone can really ,accurately and effectively know ,whose debt is what debt. Where the money went. Who used the money and how. There are gaps.

      Manipulation of money flow.

      Very smart of them. Very disgusting of them.

      Enjoy.

    • @Martin

      This is an excellent post from Klaus Kastner.

      Klaus i hope you do not mind me posting the link.

      http://klauskastner.blogspot.com/2011/09/speech-to-group-of-young-greeks.html#comment-form

      ————————————

      Also i forgot to mention what is becoming obvious nowadays.
      The possible energy games played.

      Ilias posted about Cyprus. It doesn’t end there ofcourse in my opinion.

      I said in the past that America will play the good cop ,while Germany plays the bad cop. I called them USarians. (Not the people).
      That oil is a big opportunity and not only.

      We are becoming a playfield for the powers.

    • Dimitri, you can post my blog posts whereever you like. I would love to see/read more ideas regarding the future than the seemingly endless analyses of the past.

  18. Yanis, I can’t believe my eyes… Is it you writing or “My Merkel, right and wrong”?
    You write:
    “In effect, the ECB will considerably expand the money supply and indirectly finance the Italian and Spanish states. Will this fly? Not on your (or our collective) Nelie! Germany will simply not wear it. Not even under the threat of the eurozone’s collapse. Berlin will rather reconstitute the DM than go down the road toward a monetisation of sovereign debt that will cut to shreds the very essence of Germany’s postwar model… [It] runs against the very grain of Germany’s psyche.”
    Luckily, however, “the very grain of Germany’s psyche” has not prevented the ECB from doing for the past three-odd years, exactly what Soros suggests – indirectly financing eurozone-states by dishing out freshly printed liquidity at its 1% base rate to zombie banks and allowing them to lend it long-term to distressed states at usurious interest rates (4-6%).
    It’s how Greece ended up in this mess, remember?
    This scandalous ECB “monetisation”-cum-usury on sovereign debt is exactly what Soros timidly seeks to curb, by lowering the ECB base rate (and zombie lending rate) to make sovereign funding cheaper than it is today.

    May I remind you of two relevant quotes from your defence of the Modest Proposal against the assault of …”monetarists”.

    In your reply to Markakis you wrote:
    “If Central Banks were to abstain from the bond market at a time of crisis, the very currency that they are the guardians of will be put under great strain. MONETISING debt is, and has always been, part of what Central Banks do at poignant historical moments.” http://yanisvaroufakis.eu/2011/08/06/what-the-modest-proposal-asks-of-the-ecb-responses-to-a-readers-criticisms/

    And in your magisterial analysis of the EFSF as a “toxic” fund-raiser, you defend the Modest Proposal by offering the ECB a change of “emperor’s clothes” from those of Bundesbank to those of KfW:

    “Our suggestion, in the Modest Proposal, is simple: If the ECB issues these eurobonds in order to fund the servicing of tranches of member-states’ existing bonds and, at the same time, opens debit accounts for member-states where the latter will make their long term repayments to the ECB (at interest rates reflecting the ECB-issued eurobonds), then the ECB’s sterling reputation in the global money markets (aided by the common knowledge that, in the final analysis, the ECB has the capacity to MONETISE debts) will ensure that no further guarantees will be necessary: Investors will flock to buy the ECB’s eurobonds and to fund Europe’s debt relief and recovery”.

    http://yanisvaroufakis.eu/2011/08/04/why-italy-why-spain-and-why-the-efsfs-size-does-not-matter/

  19. Yani:

    Sorry but the Soros musings on Greek containment (the equivalent of leading Greece into a bunker and letting it detonate) are deep down racist. I agree with Soros diagnosis but I strongly disagree with his proposed remedy on Greece. It is obvious that the Soros funds have taken some large positions here and the fellow is touting his horn as a “concerned” citizen when in fact his conflict of interest is enormous.

    Sorry, but I don’t think Soros has any credibility in this conversation and his globalization bias is enough to disqualify him from the get go.

  20. The end of the banks as we knew them does not guarantee that their reapitalisation will mean anything different for the average European.All this process has produced austerity and impoverishment for the weaker states and for all the midle classes.How wil the new master of liquidity NOT demand MORE from the poor Oliver (again) for the sake of HIS (now) banks as this tale takes this new Twist?

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