Daniel Alpert: Tinkerbell Economics – The Confidence Fairy, Pixie Dust and a Sleeping Dragon

By Daniel Alpert, the founding Managing Partner of Westwood Capital. Cross posted from EconoMonitor

While we may be hours away from a partial (and certainly a stopgap) agreement in the talks among the Greek government, the troika and private sector creditors, it is doubtful that a deal will emerge in a fully constructed fashion that will survive its application in the real economy.

It is likely that the only common view amongst participants in the various talks is a desire to try to avoid a disorderly default. Beyond that there is a severe disconnect fostered by parallel realities that seem unable to intersect. Accordingly, a deal that can hold up both in the streets of Greece and in the markets is both illusive and unlikely. Here’s why I think so.

Recently I have had opportunities to meet with and question senior members of the economics establishment within the German government and the broader German intelligentsia. Our meetings were held under Chatham House rules so I can’t name names, but – after several meetings with policy delegations from Germany over the past 60 days – I am prepared to sum up what appears to be the pretty-universally-held German policy position as follows (my apologies if the below evidences some degree of frustration – but these encounters leave me quite chagrined):

• Yes, since 2004 we have been in surplus and have benefited tremendously from debt fueled over-consumption in the periphery.

• Yes, we provided the loans (together with our core partners) to irresponsible borrowers who lacked the fiscal fortitude to protect our money. Shame on us, but we still want our money back (Greece is the only exception we believe we will have to make – and even then, only the private sector will suffer losses).

• Yes, we were a little irresponsible in the early days of monetary union, when the periphery was enjoying the benefits of competitive wages and the global situation was not as unbalanced. But we quickly recognized the error of our ways, remembered that we are Germans and took steps to cut our deficit.

• What you don’t understand is that after we entered surplus and could have shrunk our debt-to-GDP ratio using growth alone, we flogged ourselves with policy aimed at limiting consumption, increasing savings and avoiding a renewed encounter with the dreaded One Hundred Trillion (gr. Billionen) Reichsmark Note inflation we fear every day of our lives (Note: I sometimes jot down how long it takes in conversations with German policy folks before Weimar inflation enters the conversation, along with the aforementioned note). We didn’t have to do this but we did it because we are…well, you know. And during the Great Recession we didn’t just lay off all our workers like you did – we are civilized, we shared jobs (kurzarbeit).









• And by the way, before you tell us how to handle our periphery, you must remember that you in the U.S. were incredibly irresponsible too and destroyed the entire world economy and now you are obsessed with deflation and are printing money like mad which will, of course, inevitably result in [the dreaded One Hundred Trillion Reichsmark Note inflation we fear every day of our lives].

• Yes, yes, we studied Brüning and the deflation of the early 30′s that you say really brought about the National Socialism that nearly destroyed us and resulted in global horror, but we nevertheless attribute the trouble to the Weimar inflation.

• Don’t blame us for being incredibly productive and economically abstemious, we can’t help it if we make the best cars and everyone wants to buy them. And it is not our fault that the countries of the periphery are unproductive anachronisms that make nothing anyone wants to buy at the prices they want to sell their goods for. OK, we should have noticed the latter before we lent them all the money (and probably should have looked more closely at their books) – but it was the euphoria of European unification that made us do it, we’re only human.

• No full fiscal union, no Eurobonds….don’t even think about it.

• It’s one thing for Bavarians to share their wealth and income with northern and eastern Germany, but you must be kidding if you think we can get our electorate to support sending their money to support slothful southerners.

• We will never permit the ECB to monetize the sovereign debts of its member countries the way you have done in the U.S., the U.K. and Japan. Not only isn’t that the deal we made with each other but it will tank the Euro and result in [the dreaded One Hundred Trillion Reichsmark Note inflation we fear every day of our lives].

• There will be no exiting of any country from the Euro System. The System was only designed as part of a continuum leading to the full unification of greater Germ…uh…Europe.

• But we are not yet in a position to support transfer of national authorities, we Germans are not prepared to surrender national sovereignty (but we really did think that the suggestion for installing an Oberführer to supervise Greece was a nifty idea and aren’t sure why it got people so upset). [Fine, no one really used the word Oberführer]

• Finally, we believe in the written word – in law and in treaty. We can make more promises to each other and – unlike the last two times – we can this time honor them. Why do you doubt that?

All of this ends with a full-throated advocacy of the concept that has become known as “expansionary austerity” which forms the bedrock of German and other core nations’ policies towards the massively over-indebted periphery: Countries that have been irresponsible borrowers need only to demonstrate their fiscal discipline and prudence, reduce their indebtedness and reform their inefficiencies and over-regulation and investment and growth will resume because markets will once again have confidence in the economies of those countries. Yes, there it is…the return of the same confidence fairy that supply-siders hold out as the magic pixie dust that allows economies to fly once more without regard to the adequacy of demand or the competitiveness of a given nation relative to others.

In other words Tinkerbell Economics.

[Tinkerbell] was saying that she thought she could get well again if children believed in fairies….’Do you believe?’ Peter cried.

— The Adventures of Peter Pan, J.M. Barrie

There are many quite practical reasons why “Austerianism” will not work, and countless others have written on the subject at length. For the purposes of this essay I will briefly list three:

1. The continuing presence of several of the GIPSI’s within the Euro System effectively blocks two of the three transmission mechanisms that would otherwise enable those countries to re-balance trade. They can neither devalue their currencies nor, given their membership in the EU, can they restrict trade and take action (which would be highly unlikely anyway) to internalize production.

2. The world in general is fighting over insufficient demand relative to a global glut in the supply of labor, productive capacity and capital. Within the Eurozone, the countries of the core have been the principal beneficiaries of whatever internal and external demand exists. Yes, this results from their superior productivity and manufacturing talents, but – relative to global demand – is substantially enhanced by the weakness of the Euro relative to the value of former or reconstituted core currencies. Even if the German view were to suddenly change relative to ECB monetization, the devaluation would be universal (throughout the zone) and would not re-balance trade amongst the 17 member countries.

3. The core-recommended re-balancing transmission mechanism – internal devaluation (falling wages and prices – to the level of depression if the pixie dust doesn’t work its magic) – is functionally impossible. It is the economic equivalent of ancient bloodletting. Not only does it it result in killing off even more internal demand, but it necessitates a level of austerity that cannot possibly be tolerated by citizens of countries that still enjoy sovereign borders and popularly elected governments, merely to repay foreign creditors. They will simply refuse, at the ballot box or through other means. To believe otherwise is very much akin to believing in fairies.

A colleague of mine, present at one of the above mentioned meetings, likened the German response, to Eurozone realities, to Act II of Richard Wagner’s ring series opera, Seigfried. As Fafner the dragon is awoken from his slumber and warned by the conniving Alberich that the hero Siegfried is on his way to kill Fafner, the fearless dragon dismisses Alberich’s warning and returns to sleep.

The world cannot afford the luxury of sleeping on this. What is at stake here is more than the issue of recovering monies lent to Greece. A very substantial amount of European capital is at stake and plans to recover it by placing the populations of the GIPSI’s under indentured servitude to their creditors are the stuff of fairies and pixie dust.

It is past time to tighten the belt at both ends, recognize the money that has been lost throughout the periphery, recapitalize core institutions and bite the bullet on the secession of the defaulting nations. Sorry Tinkerbell!

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  1. F. Beard

    A universal and equal bailout of the entire Eurozone population, including German savers, would fix everyone from the bottom up in nominal terms and need not cause price inflation IF the bailout was combined with a ban on further credit creation and metered to just replace existing credit as it is paid off.

    Professor Steve Keen advocates this at: http://www.debtdeflation.com/blogs/2012/01/03/the-debtwatch-manifesto/ (search for “Modern Jubilee”) though I don’t think he would agree with a total ban on credit creation (at least not yet).

    Until someone can effectively refute that this would work, I’ll just keep boring you and myself with repeating it.

      1. F. Beard

        Participation rate must be 100%… globally. skippy

        Says who?

        Skippy… not going to happen… see history. skippy

        Slavery will never be abolished … see history.
        Women will never be allowed to vote … see history.
        Mankind will never reach the Moon … see history.

        But if you insist on history then read about debt jubilees. What Steve Keen advocates is a modern form of jubilee that does not disadvantage non-debtors.

        Skippy, you do know, don’t you, that you are a conservative?

        1. LeonovaBalletRusse

          F. Beard, a respected book supports your theory in the domain of morals:

          “THE HONOR CODE: How Moral Revolutions Happen” by Kwame Anthony Appiah (New York, W.W. Norton & Company, 2010).

          How would you apply this perspective to the Coliseum of Economics?

        2. skippy

          Thanks for adding what was not there, to begin with.

          Slavery will never be abolished … see history… Still enforced at arm length.

          Women will never be allowed to vote … see history… Scraps, like voting matters… shezz.

          Mankind will never reach the Moon … see history… out of context.

          I’ll keep it real simple beard…. No one with the power to do what you proscribe will ( if they all agreed, conditional ) … they will hand out bags of coke and trucks full of prostitutes long before.

          Skippy… Beard they destroy country’s for profit, murder indiscriminately people of all faith, you have no clue.

          1. Carla

            @skippy: and we’re all we have against them. Shall we use ourselves, or just be utterly useless blobs? It’s an individual choice, I guess.

            @F. Beard: you’re not boring me yet. ;-)

  2. LeonovaBalletRusse

    Thanks for the clarity. Well, Wagner got into the DNA of the *German Romantic* Germans, so they are inclined to expect the inevitable world cataclysm that results from compulsive indulgence in vices such as gambling and inflation. IF ONLY they had been permitted to bring Teutonic Knight *Aryan* Perfection to the entire fallen world the last time, we would not be in this fix.

    So, again, we are *all doomed* until we get it right and become gods on earth. Let Germany govern the world, and we’ll be fine. Try it, you’ll like it.

    “THE CABINET OF DR. CALIGARI” Directed by Robert Veine (2002, Madac Entertainment Group, Inc. (1919)

    “DIE NIBELUNGEN: Siegfried – Kriemhild’s Revenge” a film Directed by Fritz Lang, Screenplay by Thea von Harbou (1924);

    “METROPOLIS” Directed by Fritz Lang (1927);

    “DR. MABUSE: The Gambler” Directed by Fritz Lang;

    “FROM CALIGARI TO HITLER: A Psychological History of The German Film” by Siegfried Kracauer;

    “META-POLITICS: The Roots of the Nazi Mind” by Peter Viereck.

    Inflation! Inflation! Inflation! is the trigger to *inevitable* catastrophe. Germany must nip this in the bud. Isn’t that what they mean?

        1. LeonovaBalletRusse

          He was the Ur-Speculator who would criminalize the world if not stopped, a *symbol* of … Well, can you guess?

          1. aet

            Ah yes, Dr. Mabuse – the true and original “man behind the curtain” – a truly great paranoid fantasy, rich with religious resonance, and a parable for the violent right-wing movements and their associated violent Nazi/criminal/black market gangs then infesting Germany, in the early 1920s .

            That same dramatic concept, the mysterious and sinister, cruel and all-powerful “man behind the curtain controlling events”, was later neutered and emasculated in Hollywood’s 1939 “The Wizard of Oz”.

            PS: Fritz Lang, director of many German silent classics as well as the Dr. Mabuse films, was NO Nazi – nor was he in any way an anti-semite.


          2. aet

            A bit more about Fritz Lang and the Nazis:

            “He had already demonstrated his versatility in both high art and sheer pulp. But his next film got him in trouble with the newly installed censors of culture, the Nazis. The Last Will of Dr. Mabuse (Das Testament des Doktor Mabuse) (1933) had too many uncomfortable parallels to the behavior and repugnant pronouncements of the thugs the Nazis employed to consolidate their power early on. Reichsminister Joseph Goebbels called Lang into his office to apologize for having to pull the film from circulation, and to offer its director the position of studio head of the new production company the Nazis were assembling. Lang immediately resolved to leave the country, in part because of a Jewish heritage he reportedly had the temerity to remind Goebbels of, and did so either that same day (if you believe his own dramatic account) or within the year. ”



            Dr Mabuse, the character, was never intended to be a figure or caricature of an actualized conspiracy as imagined by anti-semitic paranoids.

            Quite the contrary – Dr Mabuse was intended by his creator to be an allegorical portrait, a caricature, of the Nazis themselves!

            Best to remember that, maybe.

  3. Middke Seaman

    Kurtzarbeit reminds me of the Kurtzzug in the S-Bahn in Berlin. For an non-economist and unfinancial person like me the post can be summarized as follows: We are German and you better understand that. To stay fit, you go to the gym, work hard, sweat like a pig, strain your muscles to the point of pain instead of walking the Unter der Linden on a nice summer day.

    The first sentence means: don’t mess with Germany.

    The second sentence means: Austerity is the gym of fit economy.

    Let’s face it, most of the world is that simplistic.

  4. Because

    If Hitler were alive, he would be supporting the greeks and spanish and decry the jewish takeover of German banking who is playing these games and vow to “liberate” Germany from them. Of course, he would invade Greece, but that is another story lol.

    Don’t be fooled. German banking policy is held by the same global order running American banking schemes.

    1. Maju

      That’s a very naive vision of what Hitler and fascism mean. It has little to do with Jews or even racism as such (these are rather accidental sideline issues) but actually with imperialism.

      Hitler was there (from the viewpoint of the German oligarchy, his own party and himself) to conquer an empire for Germany out of Poland and specially Russia with the pretext of anti-communism (and that was something Britain did not want to allow, so they intervened at the Polish step).

      1. LeonovaBalletRusse

        Maju, you might profit from reading the brilliant assessments below:

        “CONJURING HITLER: How Britain and America Made the Third Reich” by Guido Giacomo Preparata (2005)

        “META-POLITICS: The Roots of the Nazi Mind” by Peter Viereck (1941, 1961).

  5. Maju

    I share the analysis almost 100%. There may be some exceptions but I think that are not so much true disagreements as a matter of emphasis:

    I do not think that the World (i.e. World rulers) are sleeping about it at all: they are following these extortion policies with full consciousness and ill-intent. That’s what the IMF has done all the time and Europe, believe it or not, is not going to be less. They want to blow up the Eurozone into a layered neocolonial cake – anything but stopping the exploitation of the Working Class. They really want to do it because they do not want to share the costs or even stop getting their Maddoff-sized benefits (the bubble is still there, it has not really burst in full).

    However this is not truly a layered Greek/insert-country-here/German issue: as there is a common currency and a common market, what happens in Greece unavoidably affects Germany with maybe a small delay. And that also means the revolutionary process which is growing as the Greek state collapses very apparently (hospital collectivizations, urban guerrilla attacks against the President of the Republic and what not) is bound to extend to other parts of the EU (it may take some time but we are watching it since at least 2010 – unlike the North American movement, the European revolutionary heating actually pre-dates the Arab Spring by at least several months).

    The main disagreement is that, while I share the ‘oh-my-god-what-they-are-doing!” emotional state, I do not think that this predatory attitude can be stopped at all: it comes with the system and therefore it is the whole Capitalist system which must be dealt with. It may seem more complicated on first sight but when your gas heater is broken you will have to eventually change it, either before or after it explodes.

    1. Tao Jonesing

      Correct. You clearly see the reality that lies beyond the rationalizations.

      Economics is politics, not a science. Indeed, the word “economics” is merely the current brand for “political economy.” Globalization has gutted the sovereignty of nation states, whose leaders correctly understand the unspoken “or else” that ends every statement of so-called “wishful thinking.” Tinkerbell will kill you (and your family) if you get between her and what she views as her money.

      Even Chuck Norris is afraid of this particular Tinkerbell (or should be).

      1. Blunt

        “I do not think that this predatory attitude can be stopped at all: it comes with the system and therefore it is the whole Capitalist system which must be dealt with.”

        “Globalization has gutted the sovereignty of nation states, whose leaders correctly understand the unspoken “or else” that ends every statement of so-called “wishful thinking.” Tinkerbell will kill you (and your family) if you get between her and what she views as her money.”

        Insightfully correct, on both counts. Those who would preserve capitalism of necessity must preserve the outrageous behavior that is part and parcel of the capitalist milieu.

        The things that Beard and Yves and others here have decried are the features of capitalism, not its bugs. To fix those things will have to be to dismantle and grind to dust the system. Imagine Elijah, I think, the early Jewish prophet who ground the Baals into dust and forced the priests of the deity to drink the water he mixed with the ground statuary.

        Now the picture becomes plain.

  6. craazyman

    Awesome post Mr. Alpert.

    I think this could almost be a movie. I can see all those Germans in my mind, just by reading what you wrote. They all look like Klaus Maria Brandauer from the 1985 film Out of Africa. wow that was a long time ago at this point.

    So where do all these Germans think all the investment will come from? Do they, themselves, have plans to invest? Or do they think it will come down from the skies? Or that somehow the Chinese will? I can’t imagine the Chinese doing anything except copy things. That’s all they’ve done for 100 years is copy things. first communism, then western capitalism. And then even the shopping malls and condo towers that look like something out of a bad dream of Florida. I mean really. What would Li Po say? he’d puke, no doubt. Maybe if the Germans start investing, the Chinese will follow with their usual enthusiasm, and then the Germans can quietly tip-toe away with the profits. hahahahah. Maybe that is the big plan.

    They really sounds nuts. those Germans. How much crazier can this get before it just falls apart? I hear that Scientology is big over there and I can see why. Not much has changed since Duhrer did his portrait of Oswald Krell.

    They’re almost as bad as we are here in the USA. But we eventually figure out what the right thing is, as Churchill said, although even there I’m losing my religion. It’s pixie dust everywhere. But somehow it just might work anyway, somehow, someway that we cannot yet understand. That’s what I find to be the most amazing thing of all.

  7. steve from virginia

    Sadly, your description of the collective (and conflicted) ‘Good German’ appears to be on the mark. That the Germans would white-wash their own complex economic history — leaving out not only Bruning but Rathenau, Hindenberg (and his endless pro-Kaiser meddling in Weimar politics), Stresemann, Von Papen, Schacht, JP Morgan, Bank of England, Owen Young, the Bank of England (and Montague Norman), the Prescott Bush, Creditanstalt, Pierre Laval. After the Armistice, the Spartacists were more important than the Weimar lineup of hacks and retreads (Weimar relied on von Seeckt/German army for support.

    Laval paid for his inability to bend on keeping Creditanstalt afloat when doing so would have prevented the massive run out of banks not only in Europe but around the world: he was hanged by the Gaullists as a collaborator (which he was) when the war ended. Chancellor of the Exchequer (drumroll please) Winston Churchill put war-devastated UK back on the gold standard at a hyper-deflationary rate. BOE/Norman was unable to defend it, pressuring the US Fed and Hoover to defend it instead as the entire currency system in the US collapsed. Not overnight, over a period of months like a Greek tragedy that could not be grappled with or halted, a deflationary unwinding that left the USA free of functioning banks at the time of FDR’s inauguration.

    Germans, they are forgetful aren’t they …

    Not only did Germany default prior to WWII but defaulted again AFTER WWII (with the blessing of Uncle Sugar). This is while the US intelligence services and manufacturers were vacuuming Nazi managers and engineers (the Soviets were doing the same thing. The Mig-15-17 series was an outgrowth of a Focke-Wulf design.)

    Also, our good Germans defaulted on war reparations from WWI (Schacht and JP Morgan together), they paid NO reparations to peoples enslaved by Nazi production machine AFTER WWII until pressed in courts, or by public opinion. No compensation was offered to families of Jews and other massacred in death camps, quarries, mills, defensive works, shipyards, etc. A treaty settlement much like the 50 states’ attorneys’ MERS agreement was made.

    The US looked the other way as well-known psychopaths such as Klaus Barbie took airs in Munich at taxpayers’ expense (yes, the US peeps paid real taxes back then, we didn’t borrow that much after the war relative to DURING the war). Others like Mengele, Gehlen, Brunner, Eichmann discretely sank from view to resurface in Argentina, Syria and elsewhere.

    The Good German ‘Miracle’ was on the US dime (the stimulus did revive the US economy as the Depression ended in 1946 with the Marshall Plan).

    The Good German is like a climate change denier.

    The Good German knows his Gotterdammerung:”when I go, I take all you MF’s with me!”

    All this leaves out the cause of the crisis, no return on the use of Good German Cars: trillions of euros, yen, yuan, dollars, sterling, etc. down the rathole ‘because I HAVE to have a car to drive to work (lie)’. Europe is broke, it has NO capital, it has burned it up for nothing.

    Now it gets what it deserves. Have a nice day, Good Germans! It’s downhill from here …

    1. j.grmwd

      Whooah! Let’s tone down the anti-German rhetoric a little. And let’s not forget that we’re talking about nothing more than the standard IMF structural adjustment package here. As applied to various third world nations for decades. Correct me if I’m wrong, but the Germans didn’t invent that bitter pill. It’s called “the Washington Consensus” for a reason.

        1. j.grmwd

          One can argue about the root causes of World War II all day, the trouble is that playing the accumulated national historical guilt game is nothing but a distraction when the economic problems of today are the result of economic ideology and institutions which are largely supra-national.

          1. Maju

            It could still be a good occasion for Germany to pay all those indemnifications they owe to Greece. They are going to end in their banks anyhow…

        2. F. Beard

          The Great Depression was a major cause of WW II and the Fed was THE cause of the Great Depression. Also, the Fed financed US entry into WW I which led to Germany’s humiliating defeat which was ANOTHER major cause of WW II.

          Who-could-a-node that a money system based on counterfeiting and usury could be so dangerous?


          I would say that it is too late already to prevent WW III (See Iran vs Israel in the news) but I know the Lord is Sovereign and has no problem with last minute rescues.

      1. jimmy james

        Beard, you’re becoming a parody of yourself. Oh, the Fed was the chief cause of the Second World War? What *didn’t* the Fed do? Next you’ll be telling us it was William McChesney Martin on the grassy knoll…

        1. F. Beard

          “The main causes of World War II were nationalistic tensions, unresolved issues, and resentments resulting from the World War I and the interwar period in Europe, plus the effects of the Great Depression in the 1930s.” from http://en.wikipedia.org/wiki/Causes_of_World_War_II [emphasis added]

          “Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.” Ben Bernanke from http://www.wnd.com/2008/03/59405/

          Note: My use of sites to find quotes is in no way an endorsement of those sites. I just pick what Google lists first in most cases.

    2. LeonovaBalletRusse

      steve, so right. That’s why I claim we are being run by a Global Monopoly Finance Cartel, a de facto Global Organized Crime Syndicate, likely an Occult Cabal.

      The did it before, and they are doing it again. It’s the Winner-Take-All .01% and their trickle-down .99% Agents against The Rest.

      It’s the Greatest Game, and now it’s America’s *turn in the barrel*. See the following, so preposterous you know it could be true:

      “Do You Believe in Magick? (4-6)” [1-6] (pq921k2 on Sep 7, 2011);

      Compare findings with book:
      “BABYLON’S BANKSTERS: The Alchemy of Deep Physics, High Finance and Ancient Religion” by Joseph P. Farrell (Port Townsend WA, Feral House, 2010).

      We are NOT in “The Club” — as George Carlin warned us: “They don’t give a F%#K about you! They don’t care about you at ALL! at all, at all. … And now they’re after your PENSIONS, your Social Security!”

      They don’t care about us at all. We are nothing to them. We are *collateral damage*, the *casualties* of their Own Private Endless War.

    3. LeonovaBalletRusse

      steve, We’ll all be *done* but they’ll be right, by Gott. That’s the important thing.

      This ATTITUDE is the Fatal Flaw in a repeating Greek tragedy for the German People, written by the Global Rentier Class, the Absentee Owners of Veblen’s description. What can be done?

    4. LeonovaBalletRusse

      That’s why Hitler tried to have Germany go up in flames with him. It’s the attitude of the Father who murders his children before he commits suicide, certain that he is doing them a favor.

    1. jake chase

      Unfortunately, the German banks are all long CDS written by American banks. The Credit Swaps are the elephant in the room nobody seems to notice. I read somewhere there are $140 trillion of them. If so, the Fed will be underwriting Euro Extend and Pretend.

      My guess is this is not about Germany. It is about Wall Street.

        1. different clue

          Is there something which several hundred million little people could do which would bring down the German banks IN ORDER to BRING DOWN Wall Street? If all of those several hundred million people really all did it?

          “With a head full of plans and a heart full of hate, we can make things happen.” True or False?

      1. SidFinster

        I am pretty sure there is not USD 140 trillion in outstanding CDSs on Greek debt (Greece was never a popular subject for CDS coverage).

        If nothing else, the payments for purchasing and maintaining that level of coverage would be overwhelming.

    2. Praedor

      So it is unanimous then? OK, let’s do it and move on to the next item on the agenda: breaking up the US banks, trying and jailing US banking/wall street execs. I’m OK with this with or without trial. Show of hands?

  8. Hugh

    Excellent. I always add as a reminder when these discussions come up the 6 things Europe must deal do to get beyond its ongoing and never ending crisis:

    1) A democratically organized debt and fiscal union
    2) A strong and interventionist ECB
    3) Dismantling of the current mercantilist trade patterns
    4) Restructuring an insolvent, predatory banking system
    5) Replacement of its corrupt political class
    6) Elimination of its kleptocratic class, through taxation and making them eat the losses from the current mess

    I would also note that it is interesting how the concept of Europe is raised when it is politically and economically convenient but the moment it isn’t, suddenly it becomes Germany, Greece, France, Italy, etc. Seems like being a European is only a sunny day kind of thing and it has been nothing but stormy weather lately.

    1. LeonovaBalletRusse

      Hugh, hell will freeze over before they agree to #3 on your list. This is called “fear of inflation” for some reason.

    2. j.grmwd

      And the sad thing is that Germany is the ONLY country in a position to lead the West back to the kind of non-financialized industrial capitalism you describe.

      1. LeonovaBalletRusse

        More than sad, it’s tragic. This is their opportunity to “save the world” as the Shining Prince. They cannot see it, or else they are enslaved to the *Rentier Absentee Owner Class* who WILL squeeze every drop of blood out the people, and this includes the Global Bankers holding the derivates bag.

        It’s my guess that this is *High Noon* between German and American Banks, a Game of Chicken with very bad odds for both.

        1. j.grmwd

          Yes, Germany could be the savior of Europe. And if not Germany, who. While it’s probably true that banking interests dominate the agenda there too, at least labor and industrial capital still get a seat at the table. I’m not sure that’s the case in any other country, at least not in any country with sufficient economic clout to end the “extend and pretend” games and push for a permanent solution.

          1. Maju

            Neither Germany nor anyone can save Europe, only a determined anti-banks pan-European statesmanship can. But that is like dreaming awake under Capitalist conditions.

            IF the political establishment could break free from the oligarchs, and only then, and take the states and the union to lead the process for the people and not against the people… then all these problems would be just a bump on the road. But while the political establishment remains chained to the will of the banksters (and that is a precondition in the Capitalist system, no mater if the government formula is formal democracy or naked totalitarism) then nothing will be solved and we will keep heading down the road of poverty and popular rage.

  9. James

    The drunks are always the first and the loudest to bitch when the alcohol’s taken away. From one who knows, abstinence is INDEED a bitch.

    1. LeonovaBalletRusse

      James, you’re right. But the Euro Top Dogs pining for the dream of the United States of Europe* to come true, made ERRORS, which they now admit:

      They tried to create a political and fiscal union by the magic of a common currency (trying to fit Cinderella’s slipper on the Stepsisters’ feet).

      They really *knew* that Greece’s figures could not be trusted, but out of *politesse* looked the other way.

      Unfortunately, by DNA, the German mind sees ERROR as FAILURE, and failure as FINAL. This *fixity* makes radical correction difficult, if not impossible.

      1. jake chase

        LBR, the Euro was always one part scam, one part pipe dream. The business interests wanted one market, elimination of protection for parochial interests. The carrot was easy credit. It was a variation on the Reagan revolution in the US. Who cares about job loss and shrinking wages when you get unlimited credit? Well, that one worked for twenty-eight years. The Euro only worked for what, ten, twenty? I forget when the whole thing started.

        Germany is the only honest country in the whole universe of capitalism. Virtue is its own reward. That means you do not get other rewards. Besides, the Germans have a repulsive history. We can always punish them for that. What about Japan’s repulsive history? They were worse. Maybe we can find a way to make Japan pay. The amount of nonsense written about all this is nearly unbelievable. For those who care about reality: stay tune for extend and pretend redux. Same dance, possibly different music.

    2. Carla

      “The drunks are always the first and the loudest to bitch when the alcohol’s taken away. From one who knows, abstinence is INDEED a bitch.”

      Well, DUH…like the teetotalers care if the booze is snatched? But don’t ever, EVER, try to take their donuts.

      Interesting post, and comments. Thanks to all. Economically speaking: Germans, Americans…it makes no difference.

      1. LeonovaBalletRusse

        And don’t think chronic alcoholism isn’t a problem in Germany, and always has been. This leads to the German *grandiosity* recognized throughout history. See:

        “RITES OF SPRING: The Great War and the Birth of the Modern Age” by Modris Eksteins.

        This typical grandiosity goes hand-in-hand with the apparent inability of Germans to be comfortable in PEER relationships. The dominant/submissive paradigm of social relationship has reigned there forever, and seems quite characteristic of *their race*. Perhaps alcoholism by beer makes this so.

      2. Praedor

        I’ll take the booze and the donuts you disgusting fat drunks. Children shouldn’t play with adult toys.

    1. Maju

      I proposed it in the comments section of this blog many many months ago.

      Whatever the case, the acronym is already obsolete because the problem is all-pervading and not anymore restricted to said states.

  10. b.

    Nice bigotry on display. I have little synmpathy for my German brethren, but let’s not forget that their main failing at this time is to be to the other EU nations what the US is to the world, except Germany actually exports goods, not bullshit.

  11. rotter

    Where some Kraut said:
    “Don’t blame us for being incredibly productive and economically abstemious, we can’t help it if we make the best cars and everyone wants to buy them. And it is not our fault that the countries of the periphery are unproductive anachronisms that make nothing anyone wants to buy at the prices they want to sell their goods for. OK, we should have noticed the latter before we lent them all the money (and probably should have looked more closely at their books) – but it was the euphoria of European unification that made us do it, we’re only human.”

    I would respond:
    Im all for the Germans building all of thier Krautmobiles in the Fatherland, where superior(and well compensated union)Laborers will surely make a superior product. Surely the Germans dont need cheap non-union southern US labor, and to bribe crooked american politicians for tax breaks and anti union laws.

  12. aet

    Iran supplies a lot of Greece, Italy, Spain and Portugal’s oil, does it not?

    So I guess Iran is a creditor here, too?

    Oh right, new sanctions….

  13. Michael Moser

    What does it matter for the people of Greece?
    Wouldn’t an exit from the Euro create the same kind of hardship as the austerity measures? With the doubtful bonus of seeing your life savings and pension funds go down the drain due to inflation;
    In any event the fact remains that over there they have
    – a bloated state with a socialist minded bureaucracy
    – a failure to collect taxes;
    How is a Euro exit supposed to solve these basic problems?

    1. Maju

      Euro exit is a mantra of some economic doomsayers and is surely in the agenda of some very influential people but it is actually illegal: Greece would need to exit the EU to leave the euro because the euro is part of the EU, even if there are two exceptions (Britain and Denmark) and a number of other European states on indefinite hold (they are still legally bound to join the euro “soon”).

      A country cannot leave the euro without breaking with EU obligations unless, I guess, an ad hoc treaty is signed first to circumvent this matter.

      “How is a Euro exit supposed to solve these basic problems?”

      It’s not. A free floating national currency could more easily lower production costs by means of inflation making the country more competitive in the international markets in the mid term but it would come with many other drawbacks which are probably not worth the bother.

      A much better case could be done for a sustained devaluation of the euro so it can work better for the less developed European economies, who are bound to compete internationally at very different levels than German or other core-EU big capital and therefore requires a weaker, less overvalued currency.

      However powerful forces in EU, notably Germany as state, drag this collective solution.

      1. Michael Moser

        I fail to understand;
        German Industrialists should be all for a devaluation of the Euro – that should make German exports cheaper;

        So the German state is acting against its industrialists – and is all for the average Joe, who does not like inflation at all.
        I mean Mrs. Merkel must be quite popular in Greece, by virtue of this logic.

  14. JamesD

    Keynsian drivel. So it is “Pixie dust” to reduce indebtedness and regulations to restart production, but it is ok to erect trade barries to “take action” to “internalize production”. Here’s a course of action. Don’t devalue. Default and balance the budget, but include tax cuts. Deregulate like crazy and slash the government to 10% the current size. That will create production and internal SAVINGS, which can be invested in growth. I personally don’t have a problem with some import tarriffs if traded for a reduction in other taxes.

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