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Political Trouble Bubbles in Italy and Spain

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By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness

As you may have noticed the news is a bit slow out of Europe recently. It is the holiday season in which the Euro-elite pack-up and head to the beaches for some R&R. Angela Merkel returned from her break yesterday so over the next week or so we should start to see some clarity around exactly what her government has to say about Mario Draghi’s master plan.

As you may be aware, the plan hinges on Spain and Italy requesting bailouts to ensure that they are legally bound to implement fiscal reforms while the ECB provides a backstop in the secondary sovereign bond market. Obviously none of this has occurred yet, and much of it can’t until the German constutional court decides on the legaility of the ESM in September, so it was no surprise that for the 22nd week in a row the ECB has reported that its total Securities Market Program purchases were €0.

In the meantime the focus is back on Greece where the Troika has been visiting once again. The country still appears to be having troubles determining exactly where the additional €10bn requested by the Trokia is going to come from. There is also another marked change in rhetoric from the German camp with a number of politicians stating it is time for the country to leave the Euro and that Germany will veto any new aid unless there has been 100% compliance with previous programs.

The situation in Greece certainly isn’t getting any better with the latest GDP estimate for Q2 coming in at -6.2% YoY. This is up slightly from Q1 but it still very obviously a depression-like contraction. As I mentioned after the last governing council meeting, the ECB has extended Greece’s ELA program in order to support the country in the short term. In the month of July the facility was used to inject €44bn into the banking system which is obviously still seeing capital flight.

Greece, however, isn’t the only nation that continues to struggle. As you may have noticed if you’ve been following the posts on European PMIs, Italy’s manufacturing appears to have fallen off a cliff and that is flowing through to economic growth:

Italy’s economy contracted for a fourth straight quarter in the three months through June as manufacturing slumped and the euro-area debt crisis intensified.

Gross domestic product declined 0.7 percent in the second quarter, Rome-based national statistics institute Istat said in a preliminary report today. The contraction was less than the median forecast for a 0.8 percent decline in a survey of 22 economists by Bloomberg News. GDP fell 2.5 percent from a year earlier, the most since the final quarter of 2009.

But it isn’t just manufacturing where the economic slowdown is becoming obvious. Much like Spain, although not a systemic issue, Italy’s real estate market is also being affected:

The Spanish and Italian commercial property markets have all but collapsed with the number of transactions in both countries falling more than 90 per cent in the three months to July as investors worry about the future of the eurozone.

Only three property transactions were registered in Spain during the second quarter, down from 58 deals in the previous quarter. In Italy the slide was even more pronounced, with just two buildings being traded during the period, down from 56, according to data from Real Capital Analytics.

As I wrote back in July, Italy presents a large political risk for the rest of Europe. Italian unemployment is above 10% and growing monthly and as the Italian economy slides the support for Mario Monti’s technocratic leadership is likely to slide with it. The man himself has already stated he will not continue after the 2013 elections and internal pressure appears to be growing. Just last week Mr Monti was subtly reminded by the Italian parliament that he is only there because the elected members wanted it that way and he was forced to apologise for making disparaging remarks about Silvio Berlusconi’s economic management. Obviously the closer the elections get the more politicised the economic situation will become, and falling GDP and rising unemployment are easy pickings for an anti-European campaign no matter how irrational that may seem.

Mario Monti, however, isn’t the only one taking the political hit for weakening economy. It is the same in Spain:

Support for Rajoy fell sharply after he was forced in June to seek a credit line of up to 100 billion euros to recapitalize Spain’s ailing banks and then announced a new package of spending cuts and tax hikes worth 65 billion euros.

According to an official poll released this week, if a general election were to take place now, Rajoy’s People’s Party would still win but would get only a 36.6 percent of the vote, down from 40.6 percent in a poll in May and 44.6 percent in the November vote.

Hundreds of thousands of angry Spaniards demonstrated in the streets of Spanish cities in July, with civil servants protesting daily for two straight weeks after their pay and perks were cut. New protests are scheduled in August and trade unions say they could call a general strike later this year.

Reflecting the widespread fear among Spaniards that a new bailout would come with tougher conditions attached, labor union leaders asked King Juan Carlos on Tuesday to mediate with the government to organize a referendum if further cuts were to be on the cards.

Both men still have political capital left, but even if both Spain and Italy do get to a point where they request official help the fiscal adjustment requirements under the programs gaurantee falling economic output for years to come. It seems doubtful that either man would survive such an adjustment. In short, I see the political risks of a European backlash rising in both countries.

It’s Q2 GDP estimates for the much of the Europe tonight, given the PMI correlation the numbers are likely to once again disappoint.

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56 comments

  1. JGordon

    Just an excerpt from Glen Greenwald’s article about something a reader of his had just seen in South Florida:

    “Let me describe the patriotic display at last night’s NFL opener. Men with machine guns at all entrances, to scare off the terrorists. Pat down on the way in, to make sure [my wife] and I weren’t carrying plastic explosives. A moving national anthem with troops out on the field spelling out U.S.A. A moving tribute to the thousands who perished in 9/11 and to our nation’s brave response to that atrocity (which was, of course, the worst thing that ever happened in the history of the world). A U.S.A., U.S.A. chant. Then a Stealth B2 Bomber flew over the stadium, followed by fireworks. At half time, a US Army paratrooper squad jumped out of a plane and landed on the field. Maybe next week they’ll shoot some missiles from unmanned drones.”

    I puked a little when I read that. The US empire is a lot further down the road to collapse than even I had been thinking.

    1. ambrit

      Dear JG;
      I’m assuming the South Florida NFL venue your Greenwald correspondent meant was Tampa. Any Floridian could have predicted the shenanigans described. Tampa has long been a Military Colony, what with the Naval presence and the overseas forces command centre, and the nearly citadel like officers’ retirement subdivisions. The whole purpose of the ‘festivities’ was probably to reassure the ex-military citizens that “all will be well.” Also to let those potentially radical ‘lower orders’ know who’s boss. “We can get you if you step out of line.”

      1. rotter

        Yes that part of the world is often called “The Red Neck Riviera”. That can explain an NFL spectacle in Tampa but what about the REPULSIVE NBC program “stars earn stripes” which is the main focus of the Greenwald piece? That kind of millitary worship is being shoved down all of our throats now. If you are unfortunate enough to know any wal st finance types you will realize that they are mainly what is wrong with our economy and our culture. The massive egocentrism,the nihlism, the narcissitic “patriotism”, the active contempt for any POV than thier own, the fetishizing of war and the millitary etc., these are all prominent traits of the intellectually stunted, morally adolecscent, ultra, ultra reactionary sector called finance capitalism. They have been allowed to grow,like a tumor, out of control and they are engulfing and destroying western civilization .

        http://en.wikipedia.org/wiki/The_Blob

        1. Jan Battam

          the right wing fascists – govt for big business as trhis upports employment and ultimately is best for the country and its people’s prosperity (At least as measured by GDP) ..recall Germany, Spain, Italy in the 1930′s. It leads to majority of the population feeling they have lost their say in the direction of their countres, it also seems to lead to military growth(as you note here and those I knew in Germany in the 1930′s also noted- I spoke to some who had voted in Hitler (yes it was a democracy and democratic election)…why Military as descibed above and big corparate p[ower are so coupled I haven’t figured out..but they always seem to be..throughout history? Any examples where they are not wouold be most welcome!

    2. Kunst

      “Naturally the common people don’t want war; neither in Russia, nor in England, nor in America, nor in Germany. That is understood. But after all, it is the leaders of the country who determine policy, and it is always a simple matter to drag the people along, whether it is a democracy, or a fascist dictatorship, or a parliament, or a communist dictatorship. Voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is to tell them they are being attacked, and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same in any country.”
      – Herman Goering, Nuremburg, 1945

  2. Austin F

    As a nominally progressive political project Europe was finished long ago. Beneath the social democratic facade EU technocrats have been ruthlessley constructing unaccountable institutions (the European commission, the ECB, the round table of industrialists) that bypass any possibility of public control. Europeans have watched their social rights disappear along with their soveriegnty and their jobs. It’s unlikley that the project can continue much longer in its current form.

  3. They didn't leave me a choice

    > Obviously the closer the elections get the more politicised the economic situation will become, and falling GDP and rising unemployment are easy pickings for an anti-European campaign no matter how irrational that may seem.

    Irrational? Why the hell is DE peddling this propaganda trash? The only RATIONAL choice is to kill the EU.

  4. Joe

    But continental Europe has embraced financialization and restricted wage growth so as to be able to compete with the US (and to a lesser extent the UK).

    It’s a bit like Bill Black has been saying– fraud begets more fraud. It’s a bit rich to complain about the lack of ethical finance/economics in Europe, when Europe, as well as having it’s own particular problems was trying to maintain competitiveness with the US.

    Economic contraction in Greece is proceeding, and austerity is arguably working in Ireland. Economies will not remain depressed forever, and it’s about positioning for the upturn. When we get to the bottom are companies going to be bloated or ready to grow?

    As far as Italy is concerned, their biggest danger is political. But then again, that’s nothing new. Spain’s main problem is it’s real estate and financial sectors. Will they learn anything?

    Also, this constitutional court play has been fantastic hasn’t it– sorry, can’t talk now, we’re in court!

    Summary: It’s a mess, every man and his dog’s up to their necks in it, but it’s a tough time.

    1. Austin F

      “Economies will not remain depressed forever…” Why not? It took WWII to end the last depression on this scale. Only public stimulus on a similar scale will end this one.

      “When we get to the bottom are companies going to be bloated or ready to grow?”

      Neither. There is no magic ‘bottom’ and the companies will no longer exist (in Ireland around half a dozen companies die daily as austerity ‘works’).

      1. Joe

        Yeah, but what if we make a comparison with Ireland before it’s bubble economy years?

        And as for the economy never being better again– that’s pretty unlikely. That would mean total collapse, everywhere. No use planning for that, right?

        Gloomy as things look now, every cloud has a silver lining.

      2. skippy

        But, but, the balance sheet is looking a right mighty prettier!

        Skippy… colorful charts are festive and make the bad go away… thingy. People are depressing, especially the ones looking for a hand out… eh.

      3. Ruff

        Really?

        So we had government spending from 1929 until 1940 without any meaningful improvement in the economy and this is what got us out of the depression?

        Than we had this tiny little thing called world war 2 that destroyed much of the production capacity in the EU. Are you surprised that the economy got out of the Depression as we entered the war?

  5. Hubert

    Some basics:

    EU = European Union
    EZ = Eurozone
    Euro = Currency of the EZ

    What is good for one may not be good for the other in the long run.

  6. Gerald Muller

    Rather than public stimulus, what about slashing into the fat that are the numerous civil servants of the EU. On a (very) rough estimate, there are 5 million too many people paid by taxpayers money and not producing anything but often useless paperwork.
    Save those billions of taxpayers money, put those 5 million into productive jobs and I bet you will see one year down the road a real recovery.

    1. Jose Guilherme

      You’re confusing demand with supply.

      If you throw 5 million out of their jobs you won’t have any recovery – you’ll get an even deeper slump as those 5 million stop consuming cars, groceries etc.

      Spending equals income, why is this simple concept so hard to understand?

      1. Ruff

        jose,

        Your logic is flawed.

        Where are the funds to pay these jobs coming from?

        If you can answer that, than you can easily see that government spending does not economic recovery.

          1. Ruff

            This is not the point you made on the original post.

            - Spending via taxes takes from one hand to give the other. The money would have been spent anyway.

            - Issuing new currency devalues the money by the same amount (prices rise when you issue new currency). If devaluation worked, Zimbabwe would be filthy rich. So you are back to square one and no recovery.

            So nor taxes nor devaluation restores the economy.

          2. F. Beard

            Hey Ruff,

            1) “Bank loans create deposits” = money supply increase.

            2) “The repayment of bank loans destroy deposits” = money supply decrease.

            3) Over 90% of the money supply was created by bank loans.

            Question? Do you see a problem if the creation of new bank loans does not at least equal the repayment of existing bank loans? Not to mention that because of interest more money is removed from circulation than was created?

            Please learn about banking before you opine on the wisdom of deficit spending?

          3. F. Beard

            Why don’t you advise as to how loan repayment is bad. ruff

            Because money is the life blood of the economy. Money should be spent, not lent into existence.

          4. Ruff

            I’m sorry,

            - how is repaying loans a bad thing for the economy?

            - How is issuing new money good for the economy?

          5. F. Beard

            - how is repaying loans a bad thing for the economy? ruff

            I just explained. Over 90% of our money supply exists as credit debt. When that credit debt is repaid, it goes back to nothing. How well do you think you would function with less than 10% of your blood supply?

            - How is issuing new money good for the economy? ruff

            Because it increases the ability of people to payoff their credit debt without shrinking the money supply.

          6. Ruff

            “I just explained. Over 90% of our money supply exists as credit debt. When that credit debt is repaid, it goes back to nothing. How well do you think you would function with less than 10% of your blood supply?” Beard

            Using blood is a terrible analogy. What about wording that statement like this: How well do you think you would function with more than double your blood supply?

            The economy will move along with less credit and prices will simply re-adjust.

            “Because it increases the ability of people to payoff their credit debt without shrinking the money supply.” Beard

            Issuing money without backing devalues the currency by the same amount as prices rise, rates rise making it much harder to pay off the interest. So you are left with more worthless money and higher interest on your debt.

            There should be no fed and that our money should not be debt based, but the solution is not more paper or more debt.

          7. F. Beard

            The economy will move along with less credit and prices will simply re-adjust. ruff

            Wrong because debt is measured in nominal, not real terms.

            Furthermore, people were driven into debt with their own stolen purchasing power so seizing their collateral is unjust.

          8. F. Beard

            Issuing money without backing devalues the currency by the same amount as prices rise, rates rise making it much harder to pay off the interest. So you are left with more worthless money and higher interest on your debt. ruff

            1) Fiat is already fully backed by the taxation authority and power of government.

            2) A ban on further credit creation (counterfeiting) would be massively deflationary so additional deficit spending would be needed just to prevent the money supply from shrinking. As it is, the banks are extending less credit so more deficit spending is needed anyway.

            3) Rising interest rates do not make existing fixed rate debt harder to pay.

          9. Mark P.

            Ruff wrote: ‘markets will restore order if they are left alone.’

            [1] Here in the real world, your faith-based belief was utterly disproven by the reality of the 1930s Depression.

            However, I agree that allowing the banks to be subject to bankruptcy in 2008 — that is, be exposed to market conditions and not bailed out — would probably have been preferable to what we have.

            Markets almost always depend on some regulatory order or other to function. In other words, they _rarely _ exist if left alone. Even in Somalia, some warlord or combination of warlords is enforcing what happens in the town square.

            [2] This may also cast some light.

            “Why can’t people understand national accounting?”
            http://www.creditwritedowns.com/2012/05/why-cant-people-understand-national-accounting.html

            ‘… the reality is that the government is an integral part of an open economy with households and businesses that trade domestically and abroad. When the government balance changes, the balances for those businesses and households change too. If you are talking about deficits then, you need to know how changes in the government balance affect the rest of the economy.

            ‘Here’s the thing: when we exchange goods and services with each other, from an accounting perspective, it’s a wash; if you buy my goods, I get money and you get goods of equivalent value. If you pay for those goods with an I.O.U., with a debt, your liability, your deficit in the year we made the transaction, is exactly equal to the asset on my balance sheet and my surplus for the year. I mean this is basic accounting, folks. There’s no hocus pocus. Any person’s, any household’s, any business’s, any group’s, any government’s debt is someone else’s asset. Any person’s, any household’s, any business’s, any group’s, any government’s deficit is someone else’s surplus. Again, it’s basic accounting….

            ‘The same is true for national accounts. At the end of any accounting period, then, the sum of the sectoral financial balances must net to zero. The government balance – the private balance – capital account balance = 0. The government balance = the private balance + the capital account balance. See my post Economics 101 on government budget deficits for the full write-up. I credit British economist Wynne Godley for making this identity relevant to macro economics.

            ‘What does all this mean then? Put simply, the financial sector balances framework means that when the government sector runs a deficit, the non-government sector runs a surplus of equivalent size. So, to move any sector balance in an open economy, you need to move the other two balances exactly opposite in equivalent measure. To reduce the government deficit in any period, the private balance and the capital balance must increase by the exact same amount in that period.

            ‘Thinking about government deficits this way opens a whole new understanding of what cutting deficits means for the economy. What it should mean to you is that deficits are the effect and not the cause. Budget deficits are the result of the ex-post accounting identity between the sectoral balances and should not be a primary goal of public policy. Let me give you an example.

            ‘Why are deficits so high? What I have been saying is that private debt is the problem. Debt has been a substitute for income due to stagnant wages. Now that the credit bubble’s asset price inflation has turned to deflation, people, businesses and banks have found themselves saddled with debts that are not adequately underpinned by asset collateral… As long as household financial assets provide insufficient collateral for the debts that depend on them, the household sector will continue to maintain a reduced level of consumption and investment as a percentage of income to deal with that debt. Businesses see this and reduce their investment too. And we get stuck in a lower-investment, higher savings world that leads to deficits.

            So, in that context, attempts at austerity make things considerably worse. If the government cuts back, the private debt overhang will still be there and the private sector will simply have less money to deal with it. The household sector will still attempt to keep its net saving, its surplus, high and so government cuts will be felt primarily in the form of reduced household consumption and increased private sector defaults. In the context of a still weak banking system, that could create the kind of downward spiral we witnessed during the Great Depression as banks failed.’

          10. Ruff

            Mark P,

            You are confusing where I’m coming from. Markets need government and the enforement of laws, no doubt. But it does not need help to clear itself of issues within itself.

            As you correctly stated, we are worst off because we bailed out the banks.

            I; however, do not subscribe to the mentality that we cannot survive without the government intervening in the economy, taking money from people and giving to other people, and this being necesary for growth. This is actually part of the issue, it’s not the solution and will never be. Let me be clear upfront, I am not opposed to taxes.

            If we the people produce and consume, than why do we need the government to consume for us? Either by taxation or devalution, it is not adding anything to the economy, you are merely transfering wealth from one pocket to another. This should be opposed at all costs and the prove is Cuba, communism does not work.

            The sad state of affairs is that a multitude of teachers accross our education system subscribe to this. Perhaps their career has not been filled with reality.

            Humans only produce when they can gain in the process. Although many of us produce to help their fellow citizens, this is not the case for the majority. We are eager to put the hands out for “free stuff”, but we are terrible at pulling money out of our pockets and giving.

            If this is the case, than we should promote productivity within this confine. Let humans gain while producing and let them keep most of their hard earned wealth.

            The government has its role in our society and that is to enforce the law. You are right, we cannot survive without laws, but we sure can thrive with less government intervention in the markets.

          11. F. Beard

            There should be no fed and that our money should not be debt based, but the solution is not more paper or more debt. ruff

            I agree that there should be no Fed but inexpensive full legal tender fiat is the IDEAL way to payoff debt to the counterfeiting cartel, the banks. And after that debt is paid off, the fiat should be demoted to legal tender for government debts only.

          12. Ruff

            Mark,

            With respect to the great depression. What got us into the mess was the same issue we had today, fractional reserve lending and excessive debt. Do not blame the issue on gold, blame it on Fractional Reserve.

            The pain was actually prolonged by the government measures which included government spending and trade barriers (Smoot Hawley). This was a combination for disaster and appears to be where we are headed again.

            If we dont stop this non-sense and stop asking for more debt, we may end up with a solution much like we saw in the 30s, another world war. Just cross the finfers and hope it does not take place in the US.

        1. Jose

          If the economy is below potential issuing “new currency” increases the quantity supplied (real GDP), not prices.

          1. Ruff

            Oh it definately shows up in prices.

            Isn’t this economics 101, supply and demand?

            So you believe in the supply side (issue more currency), but conviniently dismiss the demand side.

            Wouldn’t issuing more currency result in more money chasing ever fewer goods, which would thereby result in higher prices, which would thereby offsett the value of the increased money supply? Again, look at Zimbabwe.

          2. They didn't leave me a choice

            >Wouldn’t issuing more currency result in more money chasing ever fewer goods, which would thereby result in higher prices, which would thereby offsett the value of the increased money supply? Again, look at Zimbabwe.

            Your argument is flawed on a fundamental level. You assume that the world economy is running at near capacity and increasing money supply in those conditions would indeed cause the “more money chasing ever fewer goods”. Unfortunately the converse is true. There is massive overcapacity all over the world economy. Did you just happen to miss the news a couple of days ago that the chinese industry capacity utilisation had fallen near 60%? What we have is a massive lack in /demand/, not supply of goods. Expanding the money supply via direct stimulation is the only way to get out of the situation without full societal disintegration or destruction of production capacity via war.

            Also on Zimbabwe, you conveniently forget that it was Mugabes hair brained land reform attempts that destroyed Zimbabwean agriculture and thus their most important production base that caused prices to skyrocket.

            I’m not sure if you’re just ignorant, or intentionally trying to push propaganda, but either way, please stop it.

          3. MyLessThanPrimeBeef

            Expanding the money supply via direct stimulation is the only way to get out of the situation without full societal disintegration or destruction of production capacity via war

            ——-

            Is it possible that is not the only way?

            Is it possible to keep money supply the same (or shrink it) but give more money to the 99.99% by going after off-shore tax haven money? Or by a more equitable distribution of wealth with more to the 99.99% who will spend?

            Pumping more money just furthers the status quo of wealth inequality and outflow of money to offshore tax havens.

          4. Jose

            Flat AS curve (economy below potential) plus AD curve shifting to the right (more deficit spending, aka “money printing”) equals higher quantity produced with no extra inflation.

            This is what Europe needs now – not blind budget cuts and growth-killing tax increases imposed by technocrats from Brussels and Frankfurt.

          5. They didn't leave me a choice

            >Is it possible to keep money supply the same (or shrink it) but give more money to the 99.99% by going after off-shore tax haven money? Or by a more equitable distribution of wealth with more to the 99.99% who will spend?

            >Pumping more money just furthers the status quo of wealth inequality and outflow of money to offshore tax havens.

            You might be correct if not for the problem of debt. As long as the overhang of private debt exists, we have to pump extra money to the system to ensure that the debts are eliminated. Having it eliminated slowly via bankruptcies is just too cruel and, if possible, concentrates wealth even further as the creditors extract their metric fucktons of flesh.

            And in general I do agree with you that in addition to simply pumping money into the system, actions must be undertaken to ensure more equitable distribution, via taxation and other measures.

            And I guess reimplementing the rule of law on the 1% for a change would also be nice…

          6. MyLessThanPrimeBeef

            Addressing wealth inequality is the fundamental issue.

            The 99.99% take on debt to stay alive.

            The 0.01% leverage for greed.

            When we address the wealth inequality issue, people are more likely to take on debt to benefit themselves.

            We got enough money already…just not in the right places.

            Pumping more money with the current delivery channels will just send them to the same wrong places.

          7. Ruff

            They didn’t leave me a choice,

            Interesting…

            You may be right with regards to capacity. But wouldn’t prices just fall to a level where people can afford them?

            The issue is too much debt, not a lack of.

            So we have 2 choices.

            1) Issue more debt and prolong the pain. It would also for sure make matters worst when the collapse comes. I can come up with multiple examples of why this is the wrong choise.

            2) Don’t do anything and let prices fall to where they may. Markets a self clearing mechanism anyway. Some would argue this is painful, I argue #1 is more painful as it prolongs the pain and will cause more calamity when it hits.

            I pick number 2, but it seems most are fixed on number 1. Let’s see how long we keep fooling ourselves into believing issuing more debt will solve our issues.

          8. Ruff

            MyLessThanPrimeBeef,

            I agree that we dont have wealth in the right places. But just as a better athlete wins over the other, markets will restore order if they are left alone.

            Most rich are incompetent, but use the hands of the government to bully the little guy. We can sit here and argue against the rich for ever, but only the government can enforce the law.

            Not me, nor you, nor anyone else.

          9. Ruff

            They didnt leave me a choice,

            Note that you are thinking in the same line as bernanke and the current government stooges. They also think they got it right. Just a tiny little more debt will get us out of this mess.

            Can anyone remind me if returning things to equilibrium is a market function? Doesn’t everything return to the mean?

            Perhaps we do know better…

          10. MyLessThanPrimeBeef

            Ruff, I am not sure if markets will restore order if left alone.

            The slave market probably would not restore order if left alone. Maybe it would, but certainly not the human dignity market.

            What would restore order, though, is nature. Nature always restores order, her own chaotic order, that is. You may be a billionaire, but nature eventually claims or reclaims you and the money reverts back to nature and the 99.99%, except it doesn’t. Why? human interference through politics and offshore tax havens. So, government is where one goes, or rather the people would go, to address that deficiency.

          11. Ruff

            MyLessThanPrimeBeef,

            Agreed. Than it’s a matter of approach.

            I feel letting people earn a living, stopping government handouts and enforcing the rule of law is not only the existing law, but it is the answer. The regular Joe will eventually catch up to the elite if the government decides to enfore the laws they agreed to enforce when we voted them into office.

            Others would like to see the same government that did not represent them all these years, suddenly represent only the benefit of the 99%. Even if that means taking from a rich person who legitimately earned the money. Let’s not forget “rich” is a relative term.

    2. Austin F

      You have several thousand rent seeking bankers subsisting on fraud, a class of professional dividend drawers underwritten by the tax payer, a whole social layer of speculators, spivs and shysters connected to the corporate sector. All expecting grandiose returns and salaries. It’s the bizarrely misnamed ‘private sector’ that’s dragging down the economy and subsisting on stolen money.

    3. JustAnObserver

      Gerald Muller wrote: On a (very) rough estimate, there are 5 million too many people paid by taxpayers money and not producing anything but often useless paperwork.

      This is such a classic neoliberal, corporate friendly, meme I’m constantly amazed that it goes without direct challenge. So …

      1. Where does the 5 million figure come from? Sources please. (*)

      2. “not producing anything but often useless paperwork” Prove it. The onus is on you to make the distinction between “useless” and “useful” paperwork. (+)

      (*) The Op-Ed pages of the WSJ don’t count.

      (+) To help you on your way: Does the “paperwork” involved in saving the German forests from acid rain back on the 80′s & 90′s count as “useful” or “useless”. Or, further back than that, the UK Clean Air Acts of the 60′s & 70′s.

  7. jsmith

    Really nice and detailed overview/resolution of the EU crisis from the Socialist Equality Party of Germany (PSG):

    http://www.wsws.org/articles/2012/aug2012/reso-a14.shtml

    19. Greece serves as a laboratory of social counterrevolution, setting the benchmark for all of Europe. Faceless Brussels officials decree the destruction of tens of thousands of jobs, the reduction of pensions and wages, and the privatisation of public services. Democratically elected governments are forced to resign and are replaced by nonelected technocrats. Voters who oppose the cuts are intimidated and blackmailed. The manner in which German politicians defame Greek voters recalls the grimmest chapters of European history, when German occupation officials barked out their orders in occupied Greece. Behind the scenes, preparations are being made for a military or police dictatorship in the event of bankruptcy. As the crisis deepens, democracy is a luxury the bourgeoisie can no longer afford.

  8. Markar

    Yves Im surprised you would consider anti- Eu sentiment in Italy irrational. Leaving the EU is the only rational thing for Italy to do and the only way out of the mess they are in. They still have a manufacturing base from which a devalued lira would help exports and curb unemployment and 2000 tons of gold with which to support the currency while the economy recovers. Italy was a far more productive economy before joining the EU.

  9. rotter

    “civil servants protesting daily for two straight weeks after their pay and perks were cut”

    “perks”??? “perks” like health care or a retirement fund?? are those “perks” now?

  10. liberal

    Ruff blithered, upthread,

    I; however, do not subscribe to the mentality that we cannot survive without the government intervening in the economy, taking money from people and giving to other people, and this being necesary for growth. This is actually part of the issue, it’s not the solution and will never be. Let me be clear upfront, I am not opposed to taxes.

    LOL.

    The biggest government intervention in the economy, “taking money from people and giving to other people,” is land ownership in the absence of high land taxes.

  11. liberal

    Gerald Muller blithered upthread,

    On a (very) rough estimate, there are 5 million too many people paid by taxpayers money and not producing anything but often useless paperwork.

    What do landowners produce? Absolutely nothing. Yet they rake in 10-20% of GDP.

    The ordinary progress of a society which increases in wealth, is at all times tending to augment the incomes of landlords; to give them both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay incurred by themselves. They grow richer, as it were in their sleep, without working, risking, or economizing. What claim have they, on the general principle of social justice, to this accession of riches? In what would they have been wronged if society had, from the beginning, reserved the right of taxing the spontaneous increase of rent, to the highest amount required by financial exigencies? (John Stuart Mill)

    Both ground rents, and the ordinary rent of land, are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. Though a part of this revenue should he taken from him in order to defray the expenses of the state, no discouragement will thereby he given to any sort of industry. The annual produce of the land and labour of the society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before. Ground rents, and the ordinary rent of land, are therefore, perhaps, the species of revenue which can best bear to have a peculiar tax imposed upon them. (Adam Smith)

    1. Ruff

      Wow..

      Its always easy to blame others. Perhaps subsidies need to be removed, but markets should decide how much everyone gets paid.

      Our current system (fractional reserve) is fraud and unfair.

      1. Leverage

        LOL markets, specially in RE. Your faith is outstanding. Never stop believing, don’t let accumulated empirical data to sake your view in the slightness of how land ownership exploitations works in practice please.

        AS per your previous comments, you demonstrate that you don’t know how the monetary & banking system works (or for the sake of it, has ever worked), that you can’t do basic arithmetic operations and that you clearly don’t know previous history about deflationary periods and how dangerous they are to peace & progress. Hell, we haven’t even scratched worldwide deflation and democracy is already at danger and potential of global & national conflicts arising.

        Why should we take you seriously?! You artificial-scarcity lovers are the biggest danger we have right now and are driving us to a new era of extremism and violence. But don’t worry, we are getting there, you will get it, and you are not going to like it.

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