It now looks to me like Greece has lost the wrestling match.The Center of the Universe
Greece loses the gambit
Greece
Warren Mosler
Pyrrhic victory to stay in the EZ.
It now looks to me like Greece has lost the wrestling match.The Center of the Universe
36 comments:
I mostly share Warren's pessimism.
The Greferendum was a symbolic vote that doesn't actually *DO* anything. Syriza still believes that it can negotiate a deal with the EU and they'll all live happily ever after.
Perhaps there will be a kinder, gentler austerity deal -- but it will still be austerity, and the Greek economy would continue to contract. Where is the light at the end of the tunnel?
And then consider Ian Welsh's point: "If I were them [the EU powers-that-be] .... I would crush Greece flat and make an example of it. If Greece comes out of this like Iceland, with a healthy economy in 3 years, then other populist movements (left or right) will receive proof that their policies can work. Democracy, as opposed to technocratic rule, will gain legitimacy."
So I dunno what will happen, but I'm skeptical.
Mosler's been wrong about pretty much everything for three years now. Wrong on the shrinking deficit and predictions tied to that, wrong on the euro, wrong on rates, wrong on Saudi oil price setting. He just keeps repeating the same things over and over and over.
I don't read his stuff anymore, but it's here so I saw it.
I am inclined to fade his view, but Greece needs to leave the euro.
One day if one of these markets reverse he's going to say he "called" it.
Dan,
You really have to read Ambrose Evans-Pritchard's article. There is much happening in the background. Syriza really is not standing still. This coupled withe the debt itself being illegal, are cards that have still to be played. They are high cards, that Syriza must hold on to. In Syriza's mind, not only is this a battle for the future of Greece, but it is also the beginning of the war to repossess all of Europe.
There was a method to why it chose ANEL as a coalition partner, and not the moderate left parties. Not only is ANEL right wing, it has close links to the Greek military.
@Unknown, agree that this is a battle not just for Greece but all of Europe. Which is why I think Ian Welsh might be onto something.
The powers-that-be are not going to simply roll over.
"not only is this a battle for the future of Greece, but it is also the beginning of the war to repossess all of Europe."
Hopefully.
Spain next.
Cullen Roche has a pretty concise piece on the referendum:
"So that’s where we sit at present. Will the referendum lead to new bailout terms? And will the ECB backstop the Greek banking system in the coming weeks? If the answer to both is no then the Greeks will almost certainly leave the Euro. They cannot operate without a new bailout inside the Euro and the collapse of the banking system is going to force a new currency creation so that they can utilize the Greek Central Bank to backstop the banks."
http://www.pragcap.com/some-thoughts-on-greece
@lastgreek, agree that the Greferendum is a baby step in the right direction.
But the Troika views it as a baby step in the wrong direction. If Greece rejects austerity and turns its economy around, similar to Iceland, then all the other European countries will want to reject austerity, too.
Dan, I see it as baby steps for Greece ;)
Or how about this metaphor -- they grew some balls (OK, small balls but balls nonetheless).
Warren - I don't know what Mike Norman is so PO'd about but I thought your comment was compelling and original. I'm hearing about a possible ace up Greece's sleeve in the form of a pipeline deal between Russia and Greece. Makes sense because Ukraine and Syrian conflicts are linked together by way of existing or proposed oil/gas pipelines. Oil's well that ends well.
What, he hasn't been saying the same things for three years now, Rombach? Euro is bullish? He's still saying it. It's down 3000 points since he's been saying it. People need to have some humility. Jesus, Rombach. Go write your love letters to Mosler somewhere else, please.
Not only is ANEL right wing, it has close links to the Greek military.
The plot thickens.
Dan Lynch: Ian Welsh: If I were them [the EU powers-that-be] .... I would crush Greece flat and make an example of it.
But the question is: Just how do TEUPTB do that? They've been trying for a while, and they got Syriza. Grexit costs are finite, temporary. Out of the EU? Not automatic, and there are other trade treaties that would bind the EU vs Greece. They're going to isolate a small nation - but one that has the world's largest merchant shipping fleet, 16.2% of the world's total? Good luck.
I think Warren Mosler needs to read more Warren Mosler. :-)
I was kinda surprised it was a NO win, let alone the big margin of victory, considering the bank closings and the scare tactics of the press. That says a lot. And the reason I bring it up is ... if the Greek NO side believed their vote was a vote against austerity, and a year or two later nothing has changed, or things are even worse, maybe then they will consider a Grexit?
Next Elections coming up:
Portugal Oct 2015
Spain Dec 2015
Ireland April 2016
UK referendum 2016
2017: France, Netherlands, Germany, Serbia, Czech
2018: EU, Italy
At a minimum the outcomes in all elections will have more Euro skeptics in parliaments all over the continent if not outright majorities in some countries like Spain. What keeps savvy politicians in power is the ability to adapt to changes in voter sentiment and move away from unpopular policies. Until they do, they empower opposition.
@Calgacus, in addition to continuing to shut Greece out of the electronic payments system, and withdrawing support for Greek bonds causing interest rates to soar, the next step would be sanctions against Greece, similar to what has been done to Russia.
Did it work on Russia? Only slightly. But that is not the point. The point is to send a signal to Spain, Italy, Ireland and the rest -- if you refuse to kowtow, there will be consequences.
If there were sanctions against Greek shipping, I imagine that Greek ships could easily be reflagged.
Tom,
ANEL is the reason that the "Troiks" put in cuts of E500M to the military budget - hoping that Syriza will be foolish enough to accept it. Syriza did not. The cut was there to undercut the support Syriza has from ANEL.
Also, the Russia and Turkey links all come via ANEL and not from within Syriza.
Who would have imagined that there would be more drama and variety in the Greek financial crisis these last few weeks than in the Iliad ;)
Book 1: The Wrath of Varoufakis
Book 2: The Catalogue of the Greek Debt
Book 3: The Duel: Tsipras vs Draghi
...
If you dont have any balances in your account who cares if they close the banks.....
"if the Greek NO side believed their vote was a vote against austerity...."
Not only was the no side against austerity most of the yes side was against austerity. The yes side just doesn't want to leave the euro and fears a no will push them out. No one in Greece wants austerity.
Austerity is always what you think the other guy needs. Have you ever seen anyone recommend austerity of them selves?
THE SEVEN SAGES OF GREECE
1. Cleobulus of Lindos
2. Solon of Athens
3. Chilon of Sparta
4. Bias of Priene
5. Thales of Miletus
6. Pittacus of Mytilene
7. Matt Franko
Matt once again shines forth with another pure, original and pithy statement:
If you dont have any balances in your account who cares if they close the banks.....
+1
"If you dont have any balances in your account who cares if they close the banks....."
Thats exactly how I feel about the stock market right now too. Don't own any.... let it go to zero.
Actually I know too many people who have their life savings in the market so I don't wish for it to crash but I do sleep a little easier knowing I have no exposure.
Well, Greg, we all have exposure to death.
The late Steve Jobs' final act before he died was waving goodbye to his money ;)
http://image.pollstar.com/WeblogFiles/pollstar/1108240439300643895_v2.jpg
Dan Lynch:the next step would be sanctions against Greece, similar to what has been done to Russia.
That would be seriously illegal, against all kinds of treaties including the EU treaties and the UN Charter and would be very unpopular in many countries. It is not going to happen. The EU is not a unitary state with one fuhrer. It is not a sovereign state, even though some have a weird belief it is. Greece is. The EU is not the USA & cannot get away with that kind of crap - and if it tried there would be a phone call from Washington.
Against Russia there had to be a pretext of Russian illegal acts in Ukraine; you can't convince people that Greece is a giant threat to them are evil terrorists. Which is one reason why the Greeks are trying to act within EU law - and are doing much better at it than their opponents in the EU. The Greek government has some power over Greek oligarch owned shipping which is enormous in comparison to their population and needs; they can play hardball with it if others play hardball with them.
Dan Lynch,
You should also see this from Pappas Post - Referendum Shows Crete Defiant Again: “We Cretans Have Waited in Worse Lines”
Is that what you think Merkel's response will be. Look closely at the photo at the bottom of the article
Sorry Mike. Didn't mean to offend you. Guess what I meant to say was that I didn't know what was behind the rift between Warren Mosler and you, and that I liked his analysis of the Greek situation.
Germany has overplayed its hand badly. They have guided Europe into pushing an EU and EZ member state that is already in a deep depression into an even deeper depression and the edge of chaos, all in order to defend the sacred principle that debts must be paid, no matter what. But they don't have the balls to push Greece into total failed state status.
... And if they do go that far, that's the end of the road for Germany as leader of the new Europe. What kind of leader of an economic union turns one of the historically most important countries in that union into a third world basket case? Now that the northern European states have had their satisfying fill of some chauvinistic huffing and puffing about the lazy Greeks, they will realize that going further down the road of German fanaticism is no long-term solution. After all, if they keep pushing Greece into economic nothingness, they aren't going to get paid anyway.
Germany desperately wants Greece to jump off the bridge themselves and leave the euro so that they don't have to try to push them. But guess what? The joke's on the fuhrer, because Greece refuses to leave, and there is no legal mechanism for pushing them out.
Plus, the US isn't going to stand by and watch a bunch of crankypants German fussbudgets dismantle the southeastern tier of a vital Nato strategic theater in the eastern Mediterranean. At the end of the day, the annual Greek debt service just isn't that much money.
Merkel and Germany are going to have to climb down and accept debt restructuring in a joint deal with Greece negotiated by more neutral parties. Greece agrees to restructure, but on terms somewhat more in line with their own social preferences, and in return they get a big fat slice of debt forgiveness.
For those in academic economics, right, wrong, reality itself are sort of mushy concepts, that don't really matter as long as the idea is plausible and clever, it is accepted and celebrated, hardly anyone really knows how to back test data or use stats anyway, so Ça ne fait rien.
Traders are held to a higher standard, much more rigorous analysis and attention to incoming data are practised. If wrong, it is bad form to act like an academic and pretend it is ok. A bit of witty banter and ad-hominem from Mike is a constructive form of pressure, IMO, to call him on his errors and keep his ideas honest and improving. There is no tenure on losing money, billionaire or otherwise, there is no glory in being wrong and losing money. Hoping some day to be vindicated, and insisting current account flows will drive the Euro higher, come on! that stuff doesn't fly in the real world... figure out why it is wrong and explain it properly, get the timing right or shut up with Euro predictions. Of course it will be strong, someday... It is like saying you will be old and gray someday... of course. But lots of interesting things happen before then.
More evidence of how seriously Germany has bungled. This FT piece by Wolfgang Munchau is withering:
http://www.ft.com/intl/cms/s/0/b7ea4b6c-21a2-11e5-aa5a-398b2169cf79.html#axzz3f36ei8wg
"The second error of the Yes campaign was a failure to explain how the bailout programme could work economically. This is not a debate between Keynesian and neoclassical economics, the kind that keeps us endlessly busy on these pages. The Greek referendum united economists with very diverse views of how the world works, including Paul Krugman, Jeffrey Sachs and Hans-Werner Sinn. There is no reputable economic theory according to which an economy that has experienced an eight-year-long depression requires a new round of austerity to bring about economic adjustment." [My italics]
This is not just about Greece. The German economic philosophy has brought Europe 7 years of economic stagnation and underemployment, and the economically weak Europe that has resulted is a giant albatross around the neck of the recovering global economy as well. Europe has to stop being Germany's poodles and shake off the fanatical phase they've gone through.
Does anyone want to comment on this post on the payment system issues relating to reissue of the drachma? In the long term Greece is better off with its own currency but there may be short term problems?
http://www.nakedcapitalism.com/2015/07/the-card-system-demystified-and-implications-for-a-grexit.html
"The joke's on the fuhrer, because Greece refuses to leave, and there is no legal mechanism for pushing them out."
Yes there is. The ECB can close the the Bank of Greece TARGET2-ECB account on notice - as I've already pointed out.
Please stop repeating this nonsense that there is 'no legal mechanism'. There is a very simple mechanism. It is in the terms and conditions of the ECB and the ECB council is ruled by neo-liberals. Since there is no effective enforcement mechanism in the opposite direction the ECB can easily stop Greece from clearing at par via TARGET2.
And that means Greece leaves the Eurosystem and the Eurozone.
The EU treaty is a form of pirate rules. They are not so much rules as guidelines. The US form of 'unconstitutional' doesn't exist within the EU because there is no federal enforcement mechanism.
That post from Yves is scaremongering rubbish.
If TARGET2-ECB access is denied then it will be replaced by Multinational operations with a TARGET2 account in two central bank areas (Greece and somewhere else) who will do the necessary correspondence banking.
Or it will be disintermediated completely. (You can go via Bitcoin between the two areas, or even Gold).
There is money to be made being the middleman. Unsurprisingly the middleman will show up very quickly once the move has been made.
Greece will simply print Y serial Euros and create Eurocoins via its own mint (as it already does!) - all of which fit nicely in the existing ATMs in Greece. The Bank of Greece will operate TARGET2-Greece as it does now. The only difference is that the upstream clearing payment to the rest of the Eurozone will have to go via exchange intermediaries.
Greece will not introduce a 'Drachma'. A 'Greek Euro' will arise as a natural consequence of the clearing difficulties and the mechanisms that arise to get around the problem.
All these difficulties would be a good thing anyway - since high finance wouldn't get clear and permanent liquidity on the exchange pair (i.e. borrowing Greek Euros to clear FX trades). Hopefully Greece would ban such activity to ensure FX liquidity is concentrated on clearing actual foreign trade, not gambling debts.
Well put Neil! I am sure that the Vampire Squid (Goldman Sachs) will offer its services to Greece once again!
Lefties celebrating the no vote appear to have zero interest in exactly how you deal with uncompetitive countries in a common currency area without imposing austerity and assuming successful countries are not prepared to dish out the billions needed for fiscal union.
"Lefties celebrating the no vote appear to have zero interest in exactly how you deal with uncompetitive countries in a common currency area without imposing austerity and assuming successful countries are not prepared to dish out the billions needed for fiscal union."
They will to those permanently wearing ideological blinkers.
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