Taking stock of the Global and Euro Crisis

A Spanish journalist interviewed me on the Spanish language edition of The Global Minotaur. Her questions, however, gave me an opportunity to look retrospectively at the Global Crisis, its Eurozone offshoot and, of course, the worst aspect of the latter, the Greek calamity. In the process, I refer to what I call the ‘death of social democracy’, and its causes, the role of ethics and morality in all this, why Spain is becoming an Iberian Greece even though its public debt and deficit were less than those of Germany in 2008 etc. Read on:

What are the origins of your Global Minotaur theory?

It evolved over many years, beginning with an attempt to explain the manner in which America managed to do something remarkable: to be the first ‘Empire’ that extends its authority and increases its hegemony on the basis of ballooning deficits. The analysis began when, together with friend and colleague Joseph Halevi, we tried to elucidate the global surplus recycling mechanism that had taken over, without warning or international agreement, from the Bretton Woods system. And since the new mechanism, upon which global capitalism was now resting, was based on an incessant flow of tribute (in the form of huge capital inflows) from the Rest of the World to the hegemonic US, the idea came to me that we were living in the age of a new Global Minotaur, with the US deficits in the role of the beast and the rest of the world in the role of the Athenians who were feeding the beast in return for trade, growth and stability.

You claim that it all began in 1971, when USA decided increased its deficits and became a kind of Europe’s vacuum cleaner. Why didn’t anyone stop this action? Why did nobody realise that this system could break down?

There was no one with the power to stop it who also had an interest in stopping it. German and Japanese industrial capital were only too happy to see the demand for their manufactured goods burgeon. Governments in the surplus countries of Europe and Asia benefitted from the growth of their local multinationals. Banks and states in the deficit areas of Europe (from Greece to Spain and, indeed, to Ireland) saw a major influx of capital from Wall Street and the City of London, money that was seeking higher returns in hitherto under-financialised regions. As the Global Minotaur went from strength to strength, the potential instability that it was creating seemed, especially to those who were benefitting immensely from financialisation, like a Great Moderation; an era of permanently zero risk. This is what was so interesting and destructive about the Global Minotaur’s reign: the greater the instability that it was cultivating behind the scenes the more convinced the elites were becoming that a crisis had become impossible.

Your theory resembles Griftopia (Matt Taibbi). It sounds like we woke to discover that we were robbed. Was it a system failure or an organised robbery?

There is no doubt that financiers went well over the borderline into the realm of corruption and graft. And that politicians aided and abetted them. But, all in all, I think that our experiences have the hallmarks of a major tragedy in which, just like in Sophocles and Shakespeare, the protagonists are not necessarily bad men and women. Each did what he or she thought was right, or necessary, at the moment when they are doing it. (We must never underestimate our human capacity to find excuses for what we do.) It is only when the catastrophe hit that they realised they were embroiled in a dynamic that could only lead to disaster. And even when they did recognise it, every attempt to escape the tragedy only immersed them further in it. Perhaps the worst crimes were committed afterwards, while trying to save themselves by pilling up the costs of these ‘bailouts’ on the shoulders of the people they had been defrauding for decades.

In his book, we can notice the economists’ incompetence (Why didn’t they notice the Crisis?, asked the Queen of England? The perversity. The naked greed. Does money fuel Evil?

It was not mere incompetence. It was much, much worse than that. At the time the Global Minotaur was taking over world capitalism, some time in the early to mid 1970s, the economics profession mirrored this development by lobotomising itself; by ceasing to ask pertinent questions and by turning instead to pristine mathematical models which, by design, left no analytical room for real life phenomena like involuntary unemployment, financial sector implosions, recessions caused by ineffective demand. Economists’ careers became wholly dependent on whether they could ‘close’ (that is ‘solve’) their mathematical models. But to do this, they had to impose upon their models assumptions which ensured that these models, or theories, had nothing whatsoever to do with really existing capitalism. In this sense, the less the economists’ models had to say about capitalism the greater their academic and professional career. Furthermore, since their mathematical models contained no systematic probability of a crisis, they were perfectly suited to the needs of financiers who profited handsomely from economic models which ‘valued’ their cherished financial derivatives (thus enhancing their appeal to investors) as if no crisis, no credit crunch, was ever possible. In short, to answer you question directly, economists were coopted by the Global Minotaur, mostly unwittingly. They became, as a profession, and without realising it, the beast’s loyal handmaidens.

You present an interesting theory about power gone: first, self-control is prevalent, second, success comes, third, naked greed appears, and then self-control is lost. How can we escape from this circle?

The only way that almost infinite power can be forced to exercise restraint is if it is forced to submit to democratic scrutiny. During the era of Bretton Woods, which I refer to as the Global Plan, the powers that be in Washington felt that they would rule the world without being accountable to it. Then, during the Global Minotaur era, it was the turn of the financial sector to feel a similar sense of unlimited power. We now live with the results. Democratic control of power is sine qua non for civilised societies.

You write a lot of Keynes. You say that Keynes was an imaginative and creative economist. It seems like we lost all this imagination in recent decades. Maybe we should recover it.

And Marx. And Robinson, Kalecki, Sweezy, Galbraith, even Hayek. As I explained above, the economics profession jettisoned its best thinkers. Economics students and politicians alike were trained by textbooks that purveyed a form of mathematised idiocy, rendering a whole generation economically illiterate and socially disastrous.

You write that this Crisis isn’t an economical crisis, but a political and social crisis. Is it not a ‘moral crisis’ too?

What I say is that it is not a debt crisis. That debt is merely a symptom of a deeper, systemic crisis which, like all serious crises, has many different facets. It manifests itself in the realm of politics (e.g. the Nazis in Greek parliament), of finance (e.g. the banking debacle), in moral conduct (e.g. the sight of social democratic governments attacking the weaker members of society on behalf of bankers) etc.

The Global Minotaur thought that the market can survive alone, without rules. Now we realise that isn’t so. But, is it necessary to begin with a planned economy? Is it the ‘planned economy’ the solution?

One of the great fallacies of our era is that an economy can exist without a state; without a degree of planning. Take the US. It is, supposedly, the least statist, the free-est market economy on the planet. And yet it is very much a planned economy. Without the military-industrial complex on the one hand and the whole gamut of federal planning authorities and institutions on the other hand, America’s economy would collapse tomorrow. More broadly, capitalism had its golden age after the war because Washington planned meticulously the world capitalist economy. So, the question is not whether there should be planning. The question is what kind of plan is implemented, who by, for whose benefit and with what effect. Currently, the banking sector is fully planned and relies entirely on social transfers and central bank operations. Planning is, therefore, used to prop up banks and to keep bankers in profit. What we need is some proper planning of labour markets so that workers’ labour is re-valued and power shifts from what I call today’s Bankruptocracy to society at large.

You worked with the president Papandreou before the ‘crash’. Did nobody see that the crisis coming? Did nobody make a comment about it?

No, they did not see and, moreover, they did not want to hear of it. Social democrats all over Europe, indeed the world, had come to the catastrophic conclusion that capitalism had been tamed, that crises were a thing of the past, and that society’s interests were best served if the financial sector’s wizardry was never questioned. This is, if you want, the main reason why this Crisis has killed of European social democracy.

What do you think about the rise of the extreme right (Amanecer Dorado in Spain too)? Where do you think is the limit? Are we going to have a repeat of Germany in the thirties?

It is the inevitable repercussion of a chain reaction that begins with a Wall Street collapse, a massive real economy recession, a political system that tries to shift the crisis’ costs from the shoulders of those who caused it to the shoulders of the workers, the weak and the disenfranchised, a society that loses its faith in the democratic system and, finally, a serpent’s egg that begins to hatch, spawning little Nazi snakes everywhere.

What is it the solution for Greece? I heard that people are finding it hard to heat themselves in winter

Depression, poverty and deprivation abound. The only solution for Greece is to have a government that says NO to the inane agreements that Europe is forcing it to sign. Simply to say ‘no’ and sit it out while the rest of our European leaders fall over each other trying to find an alternative, a real, solution in place of the current strategy of waterboarding a whole nation.

In Athens it has been a lot of demos and protests, but it seems nothing changes. Why doesn’t civil actions work? Demos and strikes don’t change anything. Is it necessary it should be more violent?

No, certainly not. Violence breeds violence and the only beneficiaries are the extreme right, the segments of the police that want to terrorise society, etc. What we need is European-wide protests, a realisation in Spain, in Italy but also in Germany and the Netherlands that “we are all Greek now”. That even if it does not look and feel like it yet, it is only a matter of time before Europeans north and south, west and east come to see that they have all become Greek.

There are people who say that the citizens have a responsibility in order to get into debt or not. Is it a perversion?

It is a half truth that becomes a perversion when repeated ad nauseum. Every loan requires, like tango, two parties. It is the responsibility of the debtor but equally of the lender to ensure that the loan is viable. And when it ceases to be viable, it is absurd, cruel and stupid to imagine that the responsibility is just that of the debtor’s. Especially when most loans originated during an era of predatory lending, of banks shoving loans down the throats of households and firms.

What are your solution for the crisis, and why does nobody adopt it?

Together with Stuart Holland, we have been proposing for three years now what we call a Modest Proposal for the Resolution of the Euro Crisis. Its great merit is that it would attack the crisis’ three facets simultaneously (debt, banking losses and the recession) without the need for Treaty changes, for Germany to be guaranteeing the loans of the Periphery, or for authoritarian transfers of sovereignty from national governments to the centre of Europe. Why have rational solutions like this not been adopted? I think it is a combination of two reasons that explains it: First, surplus countries need to undergo a gestalt shift; a change of midset that allows them to see that the Crisis is not due to the Greeks and the Spaniards having borrowed too much (that these debts are a symptom, not a cause of the problem). Secondly, surplus countries refuse to adopt policy changes that would make it impossible for them to get out of the Eurozone. While they do not want to get out of it, at the same time they do not want to give up the option of doing so because giving it up would diminish their bargaining power within Europe. And so the Crisis goes from strength to strength.

By the way, a recent measure has been the banking union. What do you think about that?

It would be great! Unfortunately, Europe is adopting the ‘language’ of a banking union in order to deny its substance. The point of the banking union ought to be to recapitalise directly the banks that have a chance of being salvaged (i.e. to give them funds from the ESM directly without them being counted as part of the national debt). Germany has insisted that this will not happen. So, the banking union has become an academic exercise that allows Europe to speak the words ‘banking’ and ‘union’ without effecting a genuine banking union. Another smokescreen, in other words, for covering up Europe’s organised idiocy.

You criticise Germany. In Spain Germany is criticised too. Could it cause a xenophobia’s feeling against German people?

It already has. And it is a tragedy because the majority of German people are suffering too as a result of our governments’ ill-conceived policies.

Do you think that Germany will change its economic policy?

No, I am afraid not.

In the case of Spain, we didn’t have a very high deficit in 2008, but then everything crashed. What happened?

All Eurozone countries of the Periphery shared exactly the same experience: huge capital flows rushed into our countries creating gigantic bubbles. In Greece, they inflated public debt as the government was borrowing on behalf of developers, who then went on to build expensive motorways, bridges, metro system extensions etc. In Spain and Ireland, the capital flowed directly into the banks which lent it to the same type of developers to build, primarily, expensive houses. When the financial sector collapsed in 2008, the capital that had flooded our countries either burnt down or escaped back to Frankfurt, London and New York. Thus, the bubbles burst. In Greece, the state (which had taken the debt onto its books directly) went bankrupt. In Ireland and Spain it was the developers that went bust first, then the banks that had lent them and, lastly, the governments which had to salvage the banks. So, in the end, there is no difference between countries like Greece and Spain, even though Spain had a very low level of public debt just before the crisis began (in comparison to Greece that had a very high public debt to begin with). What matters is total debt. The sum of private and public debt. When total debt is large and funded by inflows from the financial centres, then a crises in the financial centres will give rise to a crash and a rapid rise in public debt in the Periphery. And when Europe tries to pretend that these debts can be repaid by means of large loans, given on condition of austerity that shrinks the national income from which old and new loans must be repaid, then a catastrophe befalls us all.

Do you think that Spain could be a new ‘Greece’?

It already is. Unfortunately.

We have a right-wing party in the Spanish government, Partido Popular. It proposes austerity measures. The problem is that social democracy doesn’t offer a serious alternative. The citizens don’t see social democracy as a solution.

As I indicated above and elsewhere, social democracy is dead. The Crisis killed it off because, before the Crisis, social democrats (like PSOE, PASOK, Britain’s Labour Party) had abandoned their traditional agenda of taxing industrial capital in order to fund the welfare state and, instead, they had adopted the new strategy of siding with financial capital, allowing financial capital to do as it pleases, in the hope that financial capital would continue to earn trillions, of which the social demorats would get a small portion from which to fund the welfare state. In this sense, social democratic parties had become, perhaps without even noticing, the lap dogs of the bankers. When, in 2008, the bankers went bust, the social democrats were cornered into consenting to the funding of the bankers using taxpayer-money and then passing the cost of these bank bailouts to labour and to the weaker members of society. It was inevitable that, soon after, society would turn against social democracy. This backlash has signalled social democracy’s death.

What’s Syriza doing in Greece? Is the party getting somehwere?

Syriza is struggling to mature. To turn itself from a party of protest, commanding 4% of the vote, to a party of government. I have to say I am quite impressed by its leadership’s steep learning curve. At the same time, Syriza is particularly worried that, by the time government falls in its lap, the Greek state will have lost all of its degrees of freedom, leaving Syriza in government but not in power.

In which classic tragedy are we right now?

My worst fear is that this may not even be a classic tragedy. Classic tragedies end, at some point, with catharsis. Calamities, on the other hand, do not end in catharsis. Europe is currently engineering a calamity with catharsis nowhere to be seen.

Well, to the end. Despite the tragedy, do we have reasons to be optimistic about the future?

As a friend of mine used to say, we have a moral duty to harbour infinite hope and plentiful opinions (about everything). I try to remain true to his dictum.

38 thoughts on “Taking stock of the Global and Euro Crisis

  1. Pingback: Friday Reads « Sky Dancing

  2. Yani, I don’t know why, but the video is not posting. It’s an 18 minute segment on Skai with you and Evangelatos titled:

    Γ. Βαρουφάκης: Εκρηκτικό το ελληνικό χρέ – 19/12/2012

  3. Quite frankly this is disturbing to me(see link below). That ideas such as this are embraced by DefenceNet which is none other than a gathering place of Greek fascists, members of Golden Dawn, friends of a deposed king, friends of the Greek junta and generally the septic and unproductive part of Greek society(all fed excessively by the Greek public sector); in fact the most odious and contemptible part of Greek society.

    It’s extremely disturbing to know that certain ideas of the progressive Left are espoused and in fact profited from the darkest and most evil part of society imaginable.

    Either change the message or the analysis or both. The fact that the equivalent of Greek vermin exhibit and embrace the same anti-bank bias is thoroughly contemptible.


  4. Yanis:
    Please keep on speaking out on the euro and global financial crisis. Caught the video online when you appeared at Columbia law school seminar-Modern Money & Public Purpose. Got interested enough to find out more and ordered a copy of your book “The Global Minotaur”. Only half-way through your book but have already spent some research time following up your historical points. To figure out problems sometimes a person needs to stop and think how they got there. Your book has really helped me understand how America got to this point. We Americans have been blinded by the brilliance of our financial system. Since I was college graduate 40+ yrs ago everyday US media’s first note for the day was “Dow Jones Avg” up or down as if our future existence depended on it going up that day. As far as debt is concerned In America the big push is for our government to be like a household and keep itself out of debt without considering the consequences of doing that in our present economic situation. Our media pays little attention to the European crisis unless our stock market is affected by it. In a way I think a lot of Americans would be glad to be called “Global Minotaur”. I check you website daily for new postings.

  5. Why isn’t there seen any connection between the artificially prolonged Euro crisis in the southern european countries and the NATO-induced reshuffle in North Africa and the Mideast?

    Unlike today, where Greeks have to struggle to make ends meet and can’t see beyond one’s own nose, there where big demonstrations going on in the 90ies against NATO’s wars in Yugoslavia.

  6. Sign the petition for the Greek EEZ

    By these signatures of the Greek people, we want to show to all political institutions and especially to the Hellenic Parliament, where the bill of the Law on the Greek EEZ will be voted, that each one of us requests the implementation of the Sea Law in our country, so that we can make value of our hydrocarbons which exist in the Greek deposits, in order to efficiently and strategically exit the economic crisis by our own forces and in the decency which characterizes us.


    • Signing petitions does nothing to the AOZ issue. It’s a 100% economic issue versus a high jacked platform by a demoralized military as a nexus for immediate armaments and keeping defense budgets untouched.

      I have never seen such eagerness to embrace the AOZ issue for anything other than it truly is.

      The minute Golden Dawn became a champion for the declaration of the Greek EEZ it’s a sure sign that you could kiss the AOZ grassroots effort goodbye.

    • Dean

      Still it is the only thing i can do. It doesn’t hurt and i give my trust to Nikos Lygeros as well.

  7. Yanis, Thank you very much. I’m still reading your book, the Spanish translation (I got it a few days ago), and indeed we are very lucky we have it so quickly (though at the minor cost of several typographic mistakes).
    Coluld you tell me at what media is going to be published the interview?

  8. Many say that because of the crisis we are all Greek now.

    History states otherwise.

    For the sake of Historic truth and for all to remember their true origins;
    Origins the powers that be want to hide from you.

    This was not shown even in Greece.
    And it was done by the fans of a football team.
    November 22 ,2012
    Marseilles vs Lil

    The city of Marseilles was founded by Greek Phocaeans around 600 BC.
    At the center of the flag is Proteus.
    The banner underneath reads: We do not deny our origins.

    And because the above is not enough ,here are the maps of the ancient world and its cities.
    To all our brothers and sisters out there that never give up the quest for Harmony.
    Enjoy and remember: We are all Greeks and in every country there are still barbarians. Enemies of humanity.



    • And why not show this too.


      A book by Joseph Jahuda (not just any man) published in 1982 ,a book that was “withdrawn”. A 30 year old research showing that the Jewish ,the Christo-European ,and the Islamic cultures – the triple aspect of modern civilization – all originate from Hellas.

    • Demetri,

      Joseph Jahuda is just as any other man so I don’t quite understand your comment about him!

      On the book itself it can be found here:


      Read carefully what he says about Jews, Greeks and Romans and about Troy!

      This is the most important conclusion which he makes in his book!

      And yes our history and by extension the history of the mediterenean people has been falsified methodically by some circles but these people haven’t been bankers as you falsely assume!

      You need to dig deaper in order to understand who was behind the falsification of the mediterenean history and heritage!

    • Aristoteles

      Thanks for the link.

      About Yahuda.
      At first he had a preconditioned attitude against the Greeks and Romans. Still he did his job and didn’t come to conclusions fast and based on stories of hatred.

      About the bankers.
      I didn’t assume it was bankers. I didn’t say it was bankers. They just became a part a lot later for establishing control over people.
      I conclude that the falsification of Greek history is a work of that in which the bankers are a part of even more nowadays.

      “I realize now that our differences were fratricidal – as fratricidal as the siege of Troy – because i am convinced that the Jews are of Hellenic descent”

      “I am only concerned with undoubted phonetic ,morphological ,and semantic similarities wherever i find them together – not as isolated phenonena ,but as inter-related examples in a systematic survey of what i try to prove is an unsuspected and forgotten branch of Greek literature: the Hebrew bible.”

      “Can it be – as i think ,contrary to all accepted scholarship – that they are intimately related by race and religion as well as by language?”

      “Arabic and Aramaic ,are affiliated to Greek”

      “Spartans claimed kinship with the Jews”

      “Hebrew and Hellenic cultures were twins”

      “Hebrews were Asiatic Greeks”

      and a lot more like a Greek Pharaoh from Crete or Cyprus calling Joseph “bay-eater” ,the Pharaoh being chased away ,another taking his place and Israelites being punished because they were Greeks (then exodus) etc. etc.

      While there are more ,for last but not least ,not at all least i mention this

      “Moreover ,the development of monotheism must now be studied against an Hellenic background ,while it is manifest that the roots of the belief in Jesus as the Son of God reach far back to Hebrew – Hellenic antiquity.”

      This last is easily proven through all the ancient Greek prophecies about Jesus. Yes we have those too.

      Jesus was Greek. Not that it matters for the Son of God.

    • @Demetri:

      “Aristoteles, Thanks for the link.
      About Yahuda.
      At first he had a preconditioned attitude against the Greeks and Romans. Still he did his job and didn’t come to conclusions fast and based on stories of hatred.
      About the bankers.
      I didn’t assume it was bankers. I didn’t say it was bankers. They just became a part a lot later for establishing control over people.
      I conclude that the falsification of Greek history is a work of that in which the bankers are a part of even more nowadays.”


      if you really want to learn who and why has falsified Greek and by extension Roman and Mediterranean history I recommend you to take a look at this link:


      The website covers the historical and to some extend religious work of Father John S. Romanides who did a splendid work of uncovering and publishing the biggest historical falsification of all times!

  9. An excellent and impressive article. It describes in a few dozens of lines nearly everything: how the crisis started, who is (or is not) to blame, the motivations, the differences between North and South and between South and South, an accurate account of what is happening now, and a – gloomy, unfortunately – prediction of what we should expect in the immediate future. Enlightening and cathartic.

    Μπράβο Γιάννη. Αυτό αξίζει να το μεταφράσεις και στα ελληνικά.

  10. Varoufakis explanation remains – for me – the most convincing overall explanation of the global crisis. Something is missing, however. Accumulation of surpluses and the ensuing shortfall in aggregate demand may be the fatal flaw of capitalism. Successful recycling may be the great achievement of the USA since WWII and especially after 1971. But! But are there not some issues in the real economy? If bad Germany refinanced innocent little Greece, would Greece not regenerate the same imbalances and disequilibria, the same corruption, parasitism, waste etc etc ? If Aladdin refinanced the world economy would not the USA again grossly misallocate resources, overspend on arms, waste energy, consume aimlessly etc etc. ? We need to recycle surpluses, we need to refinance growth BUT we need to re-allocate! We need to re-allocate land, labour and capital. We need to give priority to new countries and new sectors. We need to reform, restructure and re-organize, vertically (sectors) and horizontally (countries). How?

    Hari Politopoulos

    • Although convergence and prudence help, any market will generate actors of different productivity. The question is what to do about it and there are just two answers: a. trade fairly at the capacity of the least productive, meaning a deadweight loss, or b. let the more productive actors transfer real value to the least, for the common good.

      The fiscal responsibility camp advocates a. Let everyone consume only within their means. Fine. That means lower overall output and argues for a protectionist system to keep actors trading in equally competitive bands.

      The growth and prosperity camp advocates b. Everyone produces at capacity and the market clears, meaning some form of subsidy. The productive people keep their prices low (like China), the unproductive borrow from inflation, or there’s a direct social transfer.

      I think b is good. That means an EU transfer union, US monetary deficits, and undervalued RMB are all good. Controversially also a credit bubble is good. Failure to accept accounting losses is bad.

  11. This might be of interest to some. Usually discussions of this type are superficial; I was kind of surprised that the first 40 minutes were substantive.

    The question is raised how could you convince primarily the Germans about a need for an OSI(everybody in the panel agreed that without an OSI the whole exercise is useless).

    My point of view is that you need get the top credit agencies involved.(Moody’s, S&P, Fitch etc). It’s only under the imminent threat of a credit downgrade that Germany will be “convinced” to act. The pending German elections is a BS argument and if we wait that long then Greece will lose badly.

    Therefore, the only way to go is with the cooperation of the IMF and US credit agencies to engage in a secret but immediate discussion/negotiation with the Germans. We need to act now.

    • Ι think that the guaranteeing of deposits regardless of the amount, that Fed is pushing for will be the grave of this insane German policy. I will suck money out of Germany like…(you can add)
      It’s a chocolate.

  12. Great interview, exactly what every Greek interviewer should have asked you…

    One correction though, that has nothing to do with the spirit of the interview.

    The first “empire” that used to balloon its debt by recycling other countries’ deficit was Athens through the Delos Alliance in the 5th century B.C.. The methods were the same…

  13. If someone in Spain, Greece, Germany, the rest of the Divided States of Europe and the rest of the world doesn’ t – still – understand the current economic and political deadlock after your analysis above, he/she should better stop reading and start farming tomatoes! In any case, he/she should be in no position of making important decisions and choices of any kind, not even of his/her household.

    Regrettably though, this is exactly the case: people who do not understand what they are doing, are doing exactly what they are supposed not to do, cause people who know exactly what to do and how to do it for securing their interests and avoiding the consequences of past crimes, create new crimes to hide the past, through the exact same people who created the old ones! All of them together hope they will escape the Catharsis, which would resolute the Greek Drama, the Spanish Drama and the rest of the European peoples’ Dramas, whether they are “in due process” or “under development”!

    Will they escape? Will People lose from a bunch of banksters and their political puppets? Or will the people get their power back, before it is too late and they are left with governments without powers, as you say? This is the real question you pose it loud and clear! Only deaf cannot hear it, but still they also can read it! There is no excuse no more: we all know, we are all Greeks, we have no time, Europe falls if we change not the equation! So, let’s CHANGE direction, let’s go Left instead of (extreme) right, let’s do it soon, cause I doubt there is a “later” on the map any more…

  14. Very hard to predict and to separate our hopes for what we’d like to happen from the actual prediction.

    The assumption that I think we share is that financial capital rules by creating money to fund assets that, for a while at least, rise in nominal value. It doesn’t allocate real money like bad textbooks say, and it doesn’t need the value of the assets to be supported by the fundamentals – indeed usually it isn’t.

    The crisis that we have now is the same one we’ve had since the 90s. First there was happy money creation and expansion into housing and, atypically and positively in Greece, infrastructure. Then it was realised that the nominal value of assets was unsupported by the market so it was socialised in an emergency. That was 2008. Now we have a vicious and treacherous defence of nominal asset values for some holders (core European capital, not peripheral pension funds) and a massive levy to transfer real value from a very impoverished society into the bankrups assets (austerity). Runaway deflation in peripheral Europe is a secondary effect.

    Where does this end? Currently it feels like the transfer of funds from core European taxpayers into their banks is an expensive way to prop up their balance sheets, while peripheral austerity no longer really buys anything. My optimistic assumption is that bourgeois and industrial capital in Europe will eventually wise up to this and kick out the financier-sided governments of Merkel and Cameron. If a pragmatic regime takes hold, losses can be wiped out overnight by turning them into an essentially permanent stock of Eurobonds, much like the US does when congress is sane. After a brief resetting period, the polar opposite of 2008 if you will, I’d expect a new cycle of financial expansion, asset price inflation, and real economy growth in whatever becomes the new overvalued sector, perhaps energy. The point is, that doesn’t require benevolence or great leadership. Greed is enough. The current deflationary phase can’t be profitable or exciting for capital, so I’d expect capital, unless it’s extremely and destructively short sighted, to end it and start pumping the next cycle of expansion. My guess is we’re looking at 2013-2015 as the inflexion point.

    The pessimistic view is that the destruction of Europe can continue to pre-WWII or post Cold War Eastern Block levels, or maybe to Latin American levels of destruction and deprivation, because capital doesn’t care. So long as it has a place to stand, some militarised fortresses at Wall Street, City of London, and Frankfurt, and a thing to own (the term invest would be too generous) financial capital doesn’t care what happens to Europe. It will cruelly defend its nominal interests, as financial capital and the Merkel, previously Sarkozy, and appointed Monti governments do, and to hell with the real economy. The flaw I think in this path, and the reason I’m optimistic, is that European capital may be shut out of a thing to buy. China is effectively closed and wise enough to foreign capital, and Wall Street isn’t letting go of whatever has value in the US economy. China is also outperforming others in laying claim to the recovering third world. So purely through geopolitical competition, I think and hope that European capital will be forced to pump growth into europe rather than see it collapse.

    • I am replying because control being at issue must be ended. There are no good imbalances all systems self correct. The lack of understanding of systems nature/process has produced so much suffering overtime, too much. The boiling reactors contain chain reactions through constant cooling (think about that, that’s ludicrous but because the lack of understanding of cause and effect is so widespread for all the reasons Yanis points out about lack insight on the Global financial crisis it goes on as a viable solution to energy needs. No greed is not good, bubbles are not good. The answer is probably the observance of Marginal Utility as the measure of value and the material with the becames marginal the most slowly (both in large and small amounts? Gold. If production is financed through the circulation of real bills based on the final payment in gold from customers the whole issue of demand and deficit disappears PROVIDED the finished products are not speculative which means they must be sold quickly. I am able to understand what was just said in your comment not because I have any academic knowledge in economics, I have none. But because I have read for years- other work as well but especially this- (five or six years) Antal Fekete work on Gold and economic stability and well-being I can understand most of what is said about economic crisises and solutions . Before you dismiss this as nonsense read at least 10 of his articles about gold, real bills, the discount rate. He met Paul Volker in the seventies and turned down a chance to enter the system precisely for the reasons Yanis gave about economist participation in models that leave out everything but what the ones paying for them want to know about(it’s in one of his articles).
      The very thing that will make change impossible is trying establish control in areas were freedom exists and the imbalance will self correct in any way it can. It would be much better to except this understand as a matter of insight than the slippery slope of morality.


      I tried to make this as clear as I could

  15. Astonishing article, well done to both you and the interviewer.
    Very insightful overall, and wonderful to see how you draw on multiple disciplines and discuss the morality.
    The world is better off thanks to independent, upright, knowledgeable commentary like this. Thank you.

  16. “The only way that almost infinite power can be forced to exercise restraint is if it is forced to submit to democratic scrutiny.”

    This is exactly what is lacking in the EU integration model, and exactly what makes what is happening so monstrous. Due to the non-democratic technocracy already in place within the EU, and especially the Eurozone (which is now being illegally accorder powers as a legal entity by the EU) most of the initial steps are well underway; for sovereign countries to object will be difficult because there is no legal forum for objection.

  17. Concerning the EU’s plans for deeper integration, which are already underway, and which, due to its gross democratic deficit amounts to a soft dictatorship (at best) (and there is no guarantee that ‘best’ will prevail) I urge everyone to read the following article ASAP:


    This article parses the treaty document; it is a first part of an analysis.
    I personally find it hair raising!

    • The current EU has become the wet dream of the Franco-German and the bankster eites!

      The current EU looks more and more like an abominable creature from hell, a beast which is about to devour any freedom, democracy and equality.

    • Indeed, great questions. And she did manage to cover most of the issues, as well. Kudos to the journalist.

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