[np] Austerity is not Greece's Problem (Ricardo Hausmann)

Wed Jul 8 10:05:08 CDT 2015

http://digbysblog.blogspot.com/2015/07/greece-ukraine-and-us-advancing-neo.html

The *actual story* is that the forces of privatization on the "liberal
left" in Europe have found a nation in a great deal of economic trouble,
thanks in large part to looting from outside
<http://www.thomhartmann.com/blog/2011/11/transcript-thom-hartmann-matt-taibbi-greed-greece-andgoldman-sachs-november-1-2011>,
and they're offering a "helping" hand in order to further loot the country
via those privatizing strings. In the minds of the looters (we'll call them
"neo-liberals" below) every government-owned operation (Athens airport,
say) is a missed profit opportunity for someone rich enough to buy it, and
the world would be better if everything were made private.

On Wed, Jul 8, 2015 at 10:02 AM, David Morris <fqmorris at gmail.com> wrote:

>
> http://www.thomhartmann.com/blog/2011/11/transcript-thom-hartmann-matt-taibbi-greed-greece-andgoldman-sachs-november-1-2011
>
> *Matt Taibbi:* Well it's a fairly complicated story but essentially way
> back in I think it was 2001 or 2002 Greece was facing a debt crisis, in
> order to retain it's membership in the EU I believe the situation was that
> their government couldn't exceed a certain number, it was something like
> 60%, of their GDP, or something like that. And so they were in danger of
> exceeding the EU prescribed debt limit and they needed to get around that
> problem. So what they did is they went to…
>
> *Thom Hartmann:* Right, if I may interrupt. And the reason that was a big
> issue was because if they got kicked out of the EU they couldn't use the
> Euro, they wouldn't have access to all the resources of the rest of the
> European Union, they couldn't sell and buy at no tariffs, those kinds of
> things.
>
> *Matt Taibbi:* Exactly, and again this all will end up tying into all the
> problems that Europe is experiencing now, trying to hold the Euro together,
> trying to hold the EU together economically, and so on. So Greece is in
> sort of this economically a rogue state, it was exceeding it's debt limit.
> And so what do you do when you have that situation if you're a sovereign
> entity like Greece, you can go to the invest banks. And what they did is
> they arranged with Goldman, they bought a series of what I call cross
> currency swaps. It's essentially an interest rate swap, or currency swap.
> And all it really did is, it's a derivative instrument that allowed Greece
> to push more of its debt into the future as opposed to having to pay it up
> front. Now there are some people who would contend that what Greece did by
> essentially reworking its balance sheet to make it look like it didn't have
> to pay off that much debt that year, that didn't actually change its debt
> situation. It was still over it's debt limit, it had just rearranged the
> deck chairs a little bit to look like it had less of a…
>
> *Thom Hartmann:* Not only that, it made it worse. Because now they had
> fees that they had to pay to Goldman.
>
> *Matt Taibbi:* Right, right exactly. And that sounds bad enough, but
> what's so incredible about this story is that after Goldman set up you know
> sold Greece all of these swaps, and incidentally this is, we'll get into
> this too, this is something that goes on not just in Greece but in
> countries all over the world and locally here in the United States, places
> like Jefferson County, Alabama. These swaps are everywhere. As soon as they
> did this, what did they do. They went up and they set up an exchange so
> that you could, they and other investment banks could short, in other words
> bet against Greek debt. So they worsened Greece's debt situation and then
> turned right around and bet against them. So all of this sort of leads
> directly to the situation that we're in now, because these situations, all
> it really does is you take a present group of politicians who have
> financial problem and they just hire the investment banks to kick the
> problem to a future set of politicians and that's what's happening now. The
> 2002 politicians created the mess that we're in now.
>
> *Thom Hartmann:* But it was basically the same scam. And these Wall
> Street banksters who basically, just set up and now are bringing down
> Greece, are absent from the news. They're just absent from the news
> reports. Just like they're absent from the news reports when states talk
> about how their pension funds are broke. Nobody ever mentions the fact that
> their pension funds are broke because they were invested in CDOs and
> derivatives that were sold to them by these Wall Street banks. I don't get
> it. How do they get away with this invisibility?
>
> *Matt Taibbi:* I don't know that. I think people don't understand how
> these things work. You know, in the case of the mortgage backed securities,
> this is just outright, you know, theft. I mean what these guys are doing on
> Wall Street, you know, they would, you know, lend money to a company like
> Countrywide or New Century, that would create a huge mass of really, really
> dingy subprime loans. And then they would take those loans, chop them up,
> turn them into AAA rated securities, using some hocus pocus math. And then
> they would turn around and look for suckers who manage state pension funds
> and they would take thes guys to the super bowl and to strip clubs and get
> them to spend a billion dollars of taxpayer money buying this stuff. And
> then when it all blows up, oh well suddenly it's the state is broke and it
> can't pay its pension funds because we're paying too much in salary to
> teachers and firemen or whatever it is. And somehow they forget this other
> story that went on that actually caused the problem.
>
> On Tue, Jul 7, 2015 at 12:59 PM, Dave Monroe <against.the.dave at gmail.com>
> wrote:
>
>>
>> http://www.washingtonpost.com/blogs/wonkblog/wp/2015/07/06/thomas-piketty-accuses-germany-of-forgetting-history-as-it-lectures-greece/
>>
>> On Tue, Jul 7, 2015 at 12:55 PM, Dave Monroe <against.the.dave at gmail.com>
>> wrote:
>> >
>> http://www.zeit.de/2015/26/thomas-piketty-schulden-griechenland/komplettansicht
>> >
>> > On Sat, Jul 4, 2015 at 6:42 AM, Kai Frederik Lorentzen
>> > <lorentzen at hotmail.de> wrote:
>> >>
>> >> When looking out a window, it is easy to be fooled by your own
>> reflection
>> >> and see more of yourself than the outside world. This seems to be the
>> case
>> >> when US observers, influenced by their own country's fiscal debate,
>> look at
>> >> Greece.
>> >>
>> >> For example, Joseph Stiglitz regards austerity in Greece as a matter of
>> >> ideological choice or bad economics, just like in the US. According to
>> this
>> >> view, those who favor austerity must be obsessed with the theory,
>> given the
>> >> availability of a kinder, gentler alternative. Why would you ever vote
>> for
>> >> austerity when parties like Greece's Syriza or Spain's Podemos offer a
>> >> pain-free path?
>> >>
>> >> The question reflects a lamentable tendency to conflate two very
>> different
>> >> situations. In the US, the issue was whether a government that could
>> borrow
>> >> at record-low interest rates, in the middle of a recession, should do
>> so. By
>> >> contrast, Greece piled up an enormous fiscal and external debt in boom
>> >> times, until markets said “enough" in 2009.
>> >>
>> >> Greece was then given unprecedented amounts of highly subsidized
>> finance to
>> >> enable it to reduce gradually its excessive spending. But now, after
>> so much
>> >> European and global generosity, Stiglitz and other economists  argue
>> that
>> >> some of Greece's debt must be forgiven to make room for more spending.
>> >>
>> >> But the truth is that the recession in Greece has little to do with an
>> >> excessive debt burden. Until 2014, the country did not pay, in net
>> terms, a
>> >> single euro in interest: it borrowed enough from official sources at
>> >> subsidized rates to pay 100% of its interest bill and then some. This
>> >> situation supposedly changed a bit in 2014, the first year that the
>> country
>> >> made a small contribution to its interest bill, having run a primary
>> surplus
>> >> of barely 0.8% of GDP (or 0.5% of its debt of 170% of GDP).
>> >>
>> >> Greece's experience highlights a truth about macroeconomic policy that
>> is
>> >> too often overlooked: The world is not dominated by austerians; on the
>> >> contrary, most countries have trouble balancing their books.
>> >>
>> >> Recent advances in behavioral economics show that we all have enormous
>> >> problems with self-control. And game theory explains why we act even
>> more
>> >> irresponsibly when making group decisions (owing to the so-called
>> common
>> >> pool problem). Fiscal deficits, like unwanted pregnancies, are the
>> >> unintended consequence of actions taken by more than one person who had
>> >> other objectives in mind. And lack of fiscal control is what got
>> Greece into
>> >> trouble in the first place (...)
>> >>
>> >> The problem is that Greece produces very little of what the world
>> wants to
>> >> consume. Its exports of goods  comprise mainly fruits, olive oil, raw
>> >> cotton, tobacco, and some refined petroleum products. Germany, which
>> many
>> >> argue should spend more, imports just 0,2 % of its goods from Greece.
>> >> Tourism is a mature industry with plenty of regional competitors. The
>> >> country produces no machines, electronics, or chemicals. Of every $10
>> of
>> >> world trade in information technology, Greece accounts for $0.01.
>> >>
>> >> Greece never had the productive structure to be as rich as it was: its
>> >> income was inflated by massive amounts of borrowed money that was not
>> used
>> >> to upgrade its productive capacity. According to the Atlas of Economic
>> >> Complexity, which I co-authored, in 2008 the gap between Greece's
>> income and
>> >> the knowledge content of its exports was the largest among a sample of
>> 128
>> >> countries (...)
>> >>
>> >>
>> >>
>> http://www.project-syndicate.org/commentary/greece-export-problem-by-ricardo-hausmann-2015-03
>> >>
>> >>
>> -
>> Pynchon-l / http://www.waste.org/mail/?listpynchon-l
>>
>
>
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