Let’s Say Germany Enforces More Austerity on Greece: Then What?

Everyone’s holding their breath until mid-June, when the Greek elections take place.  In the meantime, the Eurozone is heading into a deep recession and Germany is bickering with, well, everyone.  Ambrose Evans-Pritchard gives us the dynamic.

Another month of EU stasis is unlikely to prove a winning formula. The eurozone’s manufacturing and service surveys for May were the worst in 35 months. “Truly dismal,” said Howard Archer from IHS Global Insight.

“The Greek exit effect is starting to take its toll on an already brittle eurozone economy,” said Nicholas Spiro, from Spiro Sovereign Strategy. The danger is no longer what will happen if Euroland unravels, but “what is happening”.

Meanwhile, the new President of France is proving to live up to his nickname, “Marshmallow.”

French president Francois Hollande achieved his coup de theatre. The French media gently accused him of staging a choreographed spat with chancellor Angela Merkel over eurobonds, knowing that Germany will not share its credit card with the debtor states until there is a fully-fledged United States of Europe – anathema to France. “While Germany sees eurobonds as the end point, we see them as the starting point,” said Mr Hollande.

His eyes are on France’s legislative elections in mid-June. He has already fudged campaign pledges to withdraw troops from Afghanistan. He risks haemorrhaging support to the Left Front of Jean-Luc Melenchon if he yields on calls for eurobonds, a “growth compact”, and an EU “Tobin tax” on financial transactions.

Officials at the Elysee fear a Red-Rose coalition if Mr Holland’s socialists fail to win an outright majority, evoking memories of Leon Blum’s Front Populaire in 1936 that set off a run on the French banking system and forced the country off the Gold Standard.

The reality is that this is entirely about a grudge match between Germany and the Greek leader Alexis Tsipras.

EU officials hope that the real business of creating an “economic union” to match monetary union will start in earnest once the French and Greek elections are out of the way in mid-June.

They are betting that support for Greece’s anti-bail-out firebrand Alexis Tsipras will peel away as voters reflect on his contradictory promise to tear up the EU-IMF Memorandum and yet keep the euro. Europe’s Green leader, Daniel Cohn-Bendit – himself a star of the barricades in 1968 – accused Mr Tsipras of “deceiving the Greek people” with false hopes. Such criticisms sting.

The ECB can force Greece out of the euro at any time by cutting off emergency liquidity support (ELA) for Greek banks, now running at about €100bn. Germany’s Bundesbank hinted at such action on Wednesday.

So let’s say that Germany wins, and the Greek people are scared enough to vote against Tsipras.  Then what?  Germany wins.  And more austerity.  And misery.
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About Matt Stoller

From 2011-2012, Matt was a fellow at the Roosevelt Institute. He contributed to Politico, Alternet, Salon, The Nation and Reuters, focusing on the intersection of foreclosures, the financial system, and political corruption. In 2012, he starred in “Brand X with Russell Brand” on the FX network, and was a writer and consultant for the show. He has also produced for MSNBC’s The Dylan Ratigan Show. From 2009-2010, he worked as Senior Policy Advisor for Congressman Alan Grayson. You can follow him on Twitter at @matthewstoller.


  1. Stevie b.

    Never mind Greece and the few million Greeks who apparently cheated their way in to the Euro anyway.

    Meanwhile and more importantly, Spain is bust. Both countries should be freed from the Euro straight-jacket and devalue their way back in a package to bring some sort of economic competitiveness to their currently hopeless situations.

    1. Paul Tioxon

      You know, I haven’t seen anything about Spanish government debt, all of the PRIVATE Spanish banks are holding non performing and/or underwater real estate loans. The government suffers not because it borrowed, it suffers because the tax revenues are off due to the stupendously high unemployment, 2x most of the Eurozone, or 25% of its population. It is not a sovereign debt problem.

      1. Ruben

        The Spanish govt is also experiencing debt-related problems because it had to bail out the private banks. I think it put 15 billion euros in the private banking system at the start of the crisis. Now it has to produce 19 more billion euros just to save one bank. Before the crisis the Spanish Govt run a surplus. Nevertheless it cannot be left out of the hook so easily because it contributed to the mortgage frenzy in the private banking sector by sheer incompetence and a great deal of corruption.

        1. Paul Tioxon

          So the private banks that lent all of the money to feed the housing bubble are being propped up by the government, and they are on the hook because? There is no connection between the government and the banking industry’s lousy lending problems, other than the misguided attempts to keep banks from failing on a nationwide scale, and hurting depositors, homeowners, the people of Spain. Should the banks be allowed to fail, could the government take over the administration of housing and banking services, left in the wake of the disappearances of the banks? The government launched a nationwide infrastructure building of a highspeed commuter train service which is “in lieu of” a comparable interstate highway system that was built in the USA after WWII. What I am pointing out, is that the government did not waste money on useless spending due to lack of tax revenues or some other corrupt practices, but invested in the future of Spain to the benefit of its people. The private banks, realizing that the new found linkage of formerly remote areas to the capital and other important cities, overlent and pushed up the value on new homes beyond what they should be. The government is dragged into the whole mess out of its role of controlling what is going on in its territory, now, a socially destablizing financial crisis that it must address in some manner.

          1. Ruben

            “There is no connection between the government and the banking industry’s lousy lending problems, other than the misguided attempts to keep banks from failing on a nationwide scale, and hurting depositors, homeowners, the people of Spain.”

            I think a clear connection can be established at the point of origin, in the passing of the Land/Soil act of 1996 during Aznar first term. This is the birth of the housing bubble, and the birth too of widespread corruption of municipal councils. The socialist govt continued encouraging the inflation of the bubble.

            My main point though is that your original assertion is incomplete. The Spanish govt is currently facing debt problems not just because of a fall in tax revenues and an increase in unemployment benefit expenses, but also because it borrowed euros to bail out the banks, which lent reckelessly to ride the wave of the housing bubble created by … the govt.

          2. Jane

            “I think a clear connection can be established at the point of origin, in the passing of the Land/Soil act of 1996 during Aznar first term. This is the birth of the housing bubble, and the birth too of widespread corruption of municipal councils. The socialist govt continued encouraging the inflation of the bubble.”

            This is an almost perfect confusion of cause and effect. What we saw was a significant collapse in the ability to find profitable investment for capital, exacerbated in the peripheral eurozone countries by a severe trade imbalance. This drove capital into various financial markets in search of renewed profit — most notably, into securitizable mortgages. The regulatory shifts followed from this, they didn’t cause it.

            And this is why unemployment is not just immiseration but index,/i>: it isn’t an outcome of the housing bust, which is a simpleminded assessment of the mechanism, but is consequence and measure of the underlying economic problem of the collapse of profitability in former labor-intensive sectors, mostly of manufacture. And there is no evident solution to his problem, which is why the problem of GIPSI insolvency won’t go away even if there is a Keynesian revelation. There is no route for profitable investment outside FIRE, and thus unemployment will not be significantly lowered in any durable way, and so all they can do is blow another bubble that will burst even more swiftly.

  2. Freddie

    Never mind Greece and the few million Greeks who were forced in to the Euro anyway. Meanwhile and more importantly, Spain is under relentless attack by Banks. Both countries should default, completely reject austerity and western predation masked as competitiveness, only then can they abandon wall street’s financial violence. No more disability payments for the rentiers, go get a job.

    1. YesMaybe

      Speaking of Spain and Greece, I saw a headline on FT that was something like ‘Madrid says Bankia case is ‘unique.’ Reminded me of the eurocrats’ ongoing mantra that Greece’s case is unique.

  3. Jumpjet

    Then what?

    Then I’d advise that no German official sets foot in Greece any time soon.

    1. Military Idiot

      Can’t do it, Greece is a fertile punching bag. Austerity also means buy more German hardware “or else”.

      1. Jim

        Greece is a punching bag b/c the corrupt Greek pols of the two major parties have decided that Greece should be a punching bag.

        Germany is acting in its own self-interest, as it should as a sovereign country.

        It’s the Greek pols of the two major parties who are more concerned with how they are perceived in Brussels than at home who are the problem.

        1. Pete

          Good point about self-interest, but don’t forget that the EU was supposed to be some kind of a brotherhood of nations, not an arm-wrestling arena. Greece, Spain and others joined with the understanding that their sovereignty is guaranteed by the strong countries’ self-restraint.
          This self-restraint is now passe, and suddenly lots of us in weaker EU countries wonder what the hell we are doing in the union, actually.
          So the Germans are doing a good job for themselves – in the short run. If the EU becomes too unpopular, Germany will have to thank itself for what happens afterwards.

  4. Kelly

    If I was on the “winning” side, I’d pretend that voting means Democracy. I’d set off a number of Trojan Horse candidates culled from some culture rebellion from a time long ago. I’d then have the doppleganger pretend to be an advocate of the people, but post election go so hard right, that the people are threatened with indefinate detention, tanks in the streets, heavy fines or worse if they engage in dissent. Winning!

  5. fred

    Then what? Germany wins. And more austerity. And misery.

    Until enough Greeks have so little left to lose that they vote for Tsipras or someone else saying more or less the same things vis-a-vis Germany and the Euro (be forewarned that those others are ultra-rightists – not that the Germans care – but we should).

  6. Susan the other

    I still don’t get it. We established the Federal Reserve after all the States had joined the Union. Although ours was a political union, it really wasn’t much of a fiscal union until we entered WW1. And they are bickering about whether to float some Eurobonds before or after they form a fiscal Union… and the difference is that Germany will lose control of its own financial security for the sake of Europe. When really neither the fiscal nor monetary should contradict the union itself. It should be a functioning financial Union, which is a combination. Do they want a union or don’t they?

    Maybe they need the equivalent of a nice little war to focus them. The very thing they abhor for the sake of Eurooean peace is what they really need in order to achieve a union. They just need a non-European enemy like Libya. Or environmental cleanup. Germany probably has all the toxic dumps it needs to balance out the differences between North and South.

    1. Jim

      Why should there be a fiscal union between the Eurozone countries. The US has more in common with Mexico than Germany with Greece. But no one is clamoring for the US to drop the dollar and adopt some kind of hybrid dollar/peso currency.

      At this point, why should the German voter have to assume Greek obligations. What will the German voter receive in exchange? Will Greek students have to learn German in school? Will the Greek army personnel have to report to a German general?

      1. Dan Kervick

        German voters don’t have to assume Greek obligations. This isn’t about taxing and spending. If the ECB directly funds a spending program in the depressed parts of Europe, it will not be inflationary and German taxpayers won’t pay a cent for it. Central bank liabilities don’t have to come from anywhere. That’s the nature of a central bank.

        The problem is unemployed resources – material resources and human resources – that exist all over Europe and are not being put to work building European prosperity because the EZ is committed to private bank stranglehold on the European financing system.

        1. Carla

          The “private bank stranglehold.” Now let’s remember that phrase as we watch the consequences of the PBS unfold across the globe.

    2. Roland

      Susan, that’s just great. The solution to some Europeans not being able to resolve the contradictions which they created for themselves is…to go attack some non-Europeans.

      That line of thinking reminds me of some bloody fool in the USA (I forget whether he wrote for the NYT or WaPo) who a while ago mused on the economic benefits of invading Iran.

      Capitalism is now coming down to this: civil war at home, or imperialist war abroad, or both.

  7. make the omelette

    Just schedule an offering of Drachma-denominated sovereign debt, then dare the Troika to kick Greece out of the Eurozone.

    1. Dan Allen

      The Germans are so prickly that the Greeks should just dare them verbally, accompanied by one of those weird opend hand insults.

  8. R Foreman

    Greece will never be allowed to leave the EU now, since it’s already been bought with the savings of Germans. If they try to leave we will find out just what ownership means to Germany, in terms of tanks, fighter jets, and elite special forces.

  9. Matthew G. Saroff

    The solution is not to kick either Spain or Greece out of the Euro, it is to kick the Germans out of the Euro.

    They used the Euro to set up a predatory export regime (China lite), and they are at the core of the imbalances f%$#ing up the currency.

    1. Eric

      people in the periphery don’t want to kick out Germany, because that leaves them with a worthless currency

      1. Jim

        If Germany leaves, so will the Northern Europeans nations. The question is, would France leave as well.

    2. Mole


      I am not going to sit here and tell you that the Germans did not leverage their power at the ECB to set favorable rates to ensure their economy became export drive and stronger than the rest.

      Where were the governments of Greece, Spain, Italy, Ireland, etc when they were doing this?

      I will spare the answer, how about buying votes?

      When will people realize that you cannot continue to weaken your currency for ever? I mean, 3 years ago anyone who dared to say that they were weaking their currency was called the devil. All of a sudden we have this group of MMTers that think money grows on trees and now weakening a currency is the cool thing to do.

      Do not point away when shit hits the fan folks. Look in the mirror, you are the cause of your surrows. This ends when you wake up and take your pill.

      1. Susan the other

        But that is already a moot point Mole because every currency and central bank and therefore every taxpayer is already screwed in relative proportion. I think all the world did was turn down the heat. Followup report today on Japan and China (after last week’s reports on Japan being downgraded and China having no growth) indicating they have decided to exchange (each other’s currency) directly without going through a US dominated exchange… that might be worrisome in future if we refuse to evolve. It’s a race to replace carbon-based fuels by all appearances.

        1. Mole


          I already don’t believe anything these politicians say. I would advise you do the same. In other words if you are an investor and China and Japan say they will no longer use the USD, you better BUY the USD because they are going to BUY.

          Just do the opposite of what these morons say and you will be fine. Didn’t Iran, China, Brazil, Japan, Russia, etc, etc say that they would no longer use the dollar?

          Let me give you a different perspective, business men and women decide which currency they will use, NOT governments. The USD will be in use for a really long long time.

          My advise, the USD is the best currency out there, hands down.

        2. reslez

          If the dollar drops our exports get cheaper and all of a sudden companies want to make things here and employ our people. OMG SCARY.

          That’s why every currency issuer wants to devalue right now.

    3. Gerald Muller

      Do not forget that although it is true that Germany has benefited from the euro, it was not a German creation. In fact most Germans were reluctant to join the euro. They loved their Deutchmark too much.
      Anyway the euro is a flawed contruction and should be deconstructed asap, but, hopefully amicably.

  10. genauer

    I think most Germans just dont want to pay anymore,
    and let the blackmailers do what ever they want.

    1. Hugh

      The blackmailers would be people like Angela Merkel, Draghi, and orgs like the IMF, right?

      Got to love your class war approach, but you really need to think it through. The German elites have been sucking up money from the periphery via exports driven by a what was for Germany cheap euro and then providing the periphery with cheap credit to continue the process and drive up debt there. Tell me again who forced German bankers to lend to the periphery?

      But to get back to your main dodge. So Germans, neatly conflating the interests of the German 99% with its 1%, are tired of paying. OK, so they stop. What happens? The periphery defaults on their debts to German banks and the German banking sector collapses, or gets bailed out by Germans, the ordinary 99% kind, paying out the kazoo for the privilege. Either way ordinary Germans lose big time. Sheer genius!

      Nothing we have seen is about fixing anything and setting it right. It is all about the looting. It is just the brilliance of class warriors that they have the German 99% pointing fingers at the Greek 99% when the real looters are the German, and Greek, elites.

      1. Up the Ante


        “Nothing we have seen is about fixing anything and setting it right. It is all about the looting. “

        1. Carol Sterritt

          Actually there are some policies which came about in order to fix things and set them right. I am speaking about the policies that Iceland adopted. Painful for the Icelandic people for a brief while, but far better than anything any other nation has done. Like our trying to prop up the banks that continue to set up bubbles, make exotic and risky bets, crash the system, get propped up by the Central Banks at the expense of the middle class, as after all those banks are just too Big Too Fail ad nauseum.

      2. Warren Celli

        Good comment — regarding this; “Nothing we have seen is about fixing anything and setting it right. It is all about the looting. It is just the brilliance of class warriors that they have the German 99% pointing fingers at the Greek 99% when the real looters are the German, and Greek, elites.”

        When one considers the trillions spent planet wide in the past fifty plus years in this well orchestrated brainwashing for divisiveness (paid for by the marks), and the concurrent trashing of morality, at some point it becomes apparent that there is a lot more than just looting going on. The race to a two tier, ruler and ruled, deeply herd thinned society is on. The brilliance of the class warriors is that most people think it is just another boom bust cycle. This is a major global restructuring of humanity.

        Deception is the strongest political force on the planet.

        1. Up the Ante

          What you wrote is referred to as ‘continuity of govt.’.

          Just ask them, they’ll confirm it.

        2. lambert strether

          What you said:

          “The race to a two tier, ruler and ruled, deeply herd thinned society is on. The brilliance of the class warriors is that most people think it is just another boom bust cycle. This is a major global restructuring of humanity.”

          Well said. Of course, it assumes the rulers think we’re human, right?

        3. Fiver

          Totally agree that it’s a global restructuring. It is financial/corporate globalization that underpins all of this – but do not forget that it was and is a US project that remains centred in the US.

      3. Kiste

        Do you have actually have numbers to back that up? For example, how much of the €350 billion Greek public debt was spent on financing the trade deficit with Germany? And what share of the private sector debt? Please keep in mind that the accumulated trade deficit of Greece with Germany from the Euro introduction onward to 2008 has been around 45 billion Euros.

        And considering that Italy exports about as much to Greece as Germany does, why is Germany the main culprit here again?

        1. Hugh

          Extending credit to the Greeks and the periphery generally was critical to keeping the mercantilist trade cycle with Germany and the core going. But it was not the whole story, as you point out. This credit channel from the North also promoted the blowing of bubbles in the periphery. But the trade cycle and its credit/debt component were key. They were the gateway. Without them, the larger bubble-related credit lines would never have got going.

          Nor is this a case of lazy, profligate Greeks living beyond their means. The problem was not ordinary Greeks. It was not public sector employees or the safety nets. That part the Greeks got largely right. It was that the Greek elites weren’t paying their share of the taxes to support this system. The real profligates were the Greek and German elites. German bankers loaded up the Greeks with debt. A state of affairs the Greek elites had no problem with because it allowed them to keep the system going while steering wealth to themselves through non-payment of taxes.

          Now everyone is trying to take it out of the hides of ordinary Greeks, but, as Keynes observed, debts that can’t be repaid won’t be. So if ordinary Greeks can’t pay, then it likely will be ordinary Germans who do. And like their Greek counterparts, they will be paying not for anything in particular they did wrong but what their elites did and profited from.

  11. scraping_by

    One of the recurring fails in the MSM narrative of the Greek financial/economic crisis is that the nation was bailed out. Far from the truth. They were simply pushed deeper into debt, borrowing to pay for their borrowing.

    It’s got to end somehow, unless there’s a big wink somewhere. That it might be like the “loans” American politicians get. But the public noise says otherwise.

    1. Mole

      Not to sound like an ass but the Greek spent like drunken sailers. At what age do they retire again? How many people are living off of government handouts again?

        1. Mole

          I am here to put some reality in your live Frank. Show some respect to realism and stop dreaming.

          1. Andrew

            Here’s a bit of reality for you….. You know nothing and squawk like a little mainstream media parrot.

      1. Dan Kervick

        No, the Greek govt buget as a % of GDP prior to the recessions was very moderate by European standards. The problem isn’t that the government spent too much, but that it taxed too little.

        1. Mole

          No, the government did tax. People just didnt pay their taxes. Plus, do you suppose paying taxes is something positive for the economy any way?

          When was the last time something good came out of the government?

          1. Ruben

            1960s ARPANET research that led to the internet?
            NSF-funded biomadical research every year?
            Hubble space telescope?

            I don’t like the govt myself, in general, but you are a simpleton.

          2. F. Beard

            When was the last time something good came out of the government? Mole

            When it was forcing people to use gold for money? When it was crucifying farmers on a cross of gold?

          3. Mole

            Guys and girls,

            I am not bashing the government’s role in society. Look at your answers, all are lame…

            The obvious answer should have been to provide a structure for society and to enforce the law. It is the first building block, required to build a good, productive and vibrant economy and society. This is good for everyone living within this society. However, when society becomes full of government dependent individuals, living off a smaller and smaller workforce, you have a problem.

            You would think that the dependent would appreciate, even if the workforce can no longer support this. But you would be thinking wrong because whether they are rich or poor, these people think it’s an entitlement, no longer a “help”. The working class is shrinking, while the entitled class (rich or poor) is growing and growing.

            Our system is bound for collapse and my point on the original post is that we should not see this as a surprise. We want to eat 10,000 cakes and be fit at the same time. This system is infinite whether you print or do whatever you want, and when we hit the wall, limbs will be flying all over the place.

          4. F. Beard

            However, when society becomes full of government dependent individuals, living off a smaller and smaller workforce, you have a problem. Mole

            You mean bankers who steal the population’s purchasing power in order to automate their jobs away so that tools like you can call them bums?

            Piss off. Go preach to the bankers.

          5. Leverage

            Lies everywhere…

            The current situation is not caused by a lack of productiveness or competitiveness. There is plenty of capacity underutilization both nationally, in developed nations, and abroad.

            The share of jobs has been decreasing because, amongst other things, productivity. Have you realized the trend in labour market since decades ago? There is a reason why we have to invent more service jobs and unnecessary marketing and burocracy (both private and public).

            No, there isn’t too few people working to sustain a growing ‘majority’; actually is the contrary. And if your problem is inflation, get your numbers straight, because the majority of the inflation is created by consumption of a minority of the population (and no, these are not people who are sucking from state’s tits; oh well, they are, corporate welfare and all that). As Gandhi (I think) said, there is plenty of wealth for everybody, but not nearly enough to please greed.

            You, sir, are a fool.

          6. JTFaraday

            “Piss off. Go preach to the bankers.”

            So Beard, I was thinking Mole couldn’t be Defiant because Mole spells better than Defiant (sorry to be pedantic), but on further reflection I think you might be right.

            I also think Defiant/Mole should take a chill pill before he ends up like Andrew Breitbart.

          7. Mansoor H. Khan

            Leverage and Beard are on the right track:

            What we have is runaway productivity due to technology and business process improvements, this leads to:

            1) A small percentage of the population that is able to produce most of the goods and services due to automation.

            2) A small percentage also gets most of the income from this production.

            3) A small percentage that is getting most of the income cannot (or at least does not) consume much of what they produce.

            4) Since Net Private Savings = Net Government Borrowing, the government must borrow and give production away (Public assistance programs, etc.) or at least create gov jobs (so net private savings can be spent).

            5) If the gov does not do #4 above we will have a greater depression (a deflationary collapse).

            6) So what is the resolution to this issue? Here is some choices:

            a) Allow currency freedom (allow private and state and local gov currencies). This is Beard’s way. I like it. It takes the best of Austrian thinking but leaves the bad part out (gold buggary out). The bad part about is that it does not deal with how to distribute global resources (crude oil etc.) which will be able to be purchased by the most desirable currency (probably the future 100% reserve U.S. Dollar).

            b) The MMT way and don’t allow currency freedom but have 100% reserve currency. The currency then acts like (it even acts like this now for the most part) an equity share in the U.S. economy. Any NET societal savings can then be distributed to citizens via a monthly bank account deposit (i.e., social credit). This will build (even more) our cultural capital and increase societal cooperation. Only ones to lose out of this will be the runners of casino capitalism (i.e., wall street).

            c) Both with a and b above USD is likely to retain its king status and become the currency of choice for net global savings outside the USA. Would that be a problem?

            d) if peak oil starts squeezing us too much then both a and c can deal with it well via conservation and austerity (the current FRB system cannot deal with and must be done away with). We will have to tax high spenders (not high income earners!) and allocate some of the energy resources to other members of society via social credit discussed above.

            For more see:

            here is how the bankers’ game works:


            mansoor h. khan

  12. lambert strether

    If you want to win a game of chicken, be the first to throw your steering wheel out the window. Then the other guy has to swerve.

    I haven’t seen any steering wheel flying through the air, so either the game isn’t a game of chicken, or….

    1. Dan Kervick

      The Germans are truly idiots; burning down a whole economic neighborhood that they themselves live in because they are being classic German neat freaks about the way some of the neighbors maintain their lawns.

      1. Ruben

        The German govt is not self-righteously stupid as you may think. Ms. Merkel is preparing legislation (for the next legislature) whose practical effect is to increase the purchasing power of lower class German subjects. This is framed in a message of “we have noticed the suffering of low-salary, temporary workers” but in fact it is meant to partially offset the loss of purchasing power at the EU periphery. Read to the last paragraph at the lin below:


  13. Yancey Ward

    Look, the Greeks can do whatever they wish. They should just default and pick whatever currency they want. Germany is just doing what they should do- make the Greeks make a fucking decision already.

  14. gf

    The longer Germany waits to do the right thing the more expensive this will get both money wise and people wise.

    1. Mole


      Greece should go for the holiday this weekend and get the hell out of the Euro. Default on all external debt. It’s gonna happen anyway and the more they wait the more painful it will get.

      As far as Germany, Germany should also do the same. Scrap the Euro and end the nightmare.

      This is what happens when you try to force a union that was bound to fail from the beginning.

      Those looking for a free ride at this point are lunatics. Those sleeping will get a very needed slap in the face.

  15. Lafayette

    They (EU officials) are betting that support for Greece’s anti-bail-out firebrand Alexis Tsipras will peel away as voters reflect on his contradictory promise to tear up the EU-IMF Memorandum and yet keep the euro.

    Not a bad bet, that.

    The same could happen as well to the Looney-Left Melanchon Phenomenon in France. As I have tried to explain – people in the soft underbelly of the EU vote differently from EU northerners. Maybe more of them get sunstroke, but they do like to vote No in the first part of a Two-Round plebiscite.

    Typically, since most of these countries (including France) have always had a Rainbow Pattern of parties – which has meant great government instability over the past half century since WW2 – they like “voting with their sentiments” in the first round that narrows a highly variegated field of candidates down to just the top-two.

    In the second round of voting they tend to come to their senses and vote “with their wallet”. We shall see if the Greeks do not follow this pattern as well.

    Till then, they have Mme. LaGarde over at the IMF – which has already lent their banks a bundle of money that absorbed a lot of Greece’s bad debt – who is exhorting them to pay their taxes.

    Pay what? Yes, their taxes. Avoiding taxes is a National Pastime in Greece. News reports relate that the Greeks have finally got that message and it is increasingly more difficult to avoid the sales-tax when shopping in Athens. The hard part is taxing the Greek fortunes stashed abroad since time immemorial.

    Of course, Bad Habits Die Hard. It will likely also take a small miracle to get the Greek Orthodox Church to pay taxes on its real-estate possessions (from which it is absolved by some quirky law passed in a long distanced past). It happens to be the largest real-estate owner after the Greek government itself …

    But, given the above attitude, one cannot be surprised as to why Greece is getting such strict treatment from the German schoolmarm, Mrs. Merkel.

    1. Mattski

      The rich have never paid taxes; why should the middle-class? As the national projects around which taxes are predicated crumble you will find this becomes more and more a First World problem, too. . . or that the First World is no different than the Third.

      1. Kiste

        Yes, everyone just not pay taxes for whatever reasons one deems convenient, while at the same time demanding First World government services.

        Then blame the Germans for not bankrolling it all indefinitely, because, you know, they might have sold you a car or two, so it’s all their fault.

  16. Nate

    It will be best for the people of Greece to exist EU membership.

    EU is not the same as USA in terms of their union membership charter, as I understand. For instance we have 50 state union and we do have “Greece like” states, that takes in much more Federal government aid than they pay for federal taxes. That would be Alaska and New Mexico. We don’t ask these states to go on Austerity for their state’s spending. Greece’s problem is EURO currency itself. This high valued currency is good for importing goods but exporting domestic produced goods are impossible. The trade deficit has to be made up by increase government spending and austerity will not only be counter productive but will be terminal for their economy. Better to exit now than later.

    In Asia, countries such as S.Korea, Japan, Taiwan will be better suited to join EU type of union because of their strong export industry. EU is pipe dream for most of the EU nations with EURO currency valued at 20% higher than US Dollar.

    1. Mole


      I agree that the Euro is an issue as these governments have different people, different cultures, different spending habits, different savings habits, etc…

      Where I get confused is how your post suddenly ends up defending reckless deficit spending, while trashing responsibility and savings. It’s this freaking simple folks, seriously. Japan has been doing this stupidity for over 20 years and have been in recession for the same time (is this a surprise).


      This irresponsible behavior and mentality needs to end.

      1. Hugh

        You are mired in gold standard thinking, but we have been off the gold standard since 1971, more than 40 years. Europe on the other hand has created a pseudo-gold standard in the euro, and it is killing the European economy.

        Money doesn’t act the way you think it does. Taxation and government spending are ways government redistributes resources (wealth) throughout society. Deficit spending is just one way government accomplishes this. The only constraint on deficit spending is inflation. It is not fictional debt collectors banging on the door, since a government with a fiat currency like ours, could, if it so chose, deficit spend without incurring debt. We actually have seen this in how our kleptocratic elites finance their multi-trillion dollar tax cuts for themselves, their wars, and their bailouts. Huge amounts of deficit spending but very little inflation. In fact, the inflation we do see in areas like oil and commodities does not arise out of deficit spending but financial speculation by the same kleptocratic class.

        There are several schools of thought on this site: MMTers, people like Beard that I would call a free or multiple form monetarist, and people like me who are more resource oriented. But we all get that money has no reality beyond society. It is just a means to effect distributions within society, in part by the private sector, but ultimately refereed by the public sector.

        So when you say that deficits are really, really bad, you are for us like someone who has never seen a baseball game before trying to warn us that that guy on the mound keeps throwing projectiles at those guys around homeplate.

        1. Mole


          I am not here to profess I know better than an MMTer. Believe me Hugh, I am not ignorant to the words stated on these boards. I understand where you are coming from, but you guys bash the rich, while trashing the middle class (savers). Quite honestly, I was probably an MMTer some time in you childhood life.

          I can confidently say that you know that your logic is wrong and you know it. If it is wrong for the rich to take, why is it ok for the government to take in the name of the poor? Why cant this be a voluntary process (is that not the right thing)? If you don’t see the issue than I will draw it for you.

          Times are good -> rich get richer -> government gets bigger -> entitlements grow -> middle class gets squeezed

          Times are bad -> rich still get richer (bailouts?) -> government proposes to “fix” things by “can you guess??????” spending more -> entitlements grow even more -> middle class PAYS AGAIN

          Do you see? The rich have the goal of stealing and getting richer. The entitled class has an agenda, to steal the wealth, sorry to “spread the wealth”.

          I hope you see that my words are not trying to justify a movement, nor agenda, I hope you see the truth in the words you read.

          The middle class has paid for the damn rich. Now, the entitled class is looking for another bailout. Guess who’s gonna pay Hugh?

          1. Carol Sterritt

            I am pretty sure that your remarks have gotten Hugh’s attention. But now he will have to either pretend that he simply doesn’t understand you, or else he will must resort to using the expressions “socialism” and “class warfare.”

          2. Leverage

            The only reason why anyone cries about ‘stealing’ through inflation in an environment where productivity and growth is above inflation is because they are lazy people who won’t invest their money and want a free risk return on their capital, as if hoarding money was something good.

            Idle money is a cost to the rest of society who had to get in debt to create your savings. Stick your head out of your ass and invest, don’t expect a risk free return on capital just because you ‘saved money’ as if this was some sort of divine right fool. Off course as an opportunity cost and a real cost to society it should cost you money (‘inflation’).

            If what you are crying about is that you haven’t seen personally that increase of productivity and growth, then look at who has been hoarding all these benefits (hint: is not the poor entitled to the government) and challenge them? Ah, you won’t, you want to punish the 9 dogs chasing the 9 bones an other dog has (in case you can’t add up: that’s 10 bones for 9 dogs), these 9 dogs do not control the situation.

            Off course when your policies create a situation that will rise an other populist you will cry about that. You talk about reality, that’s the reality: you are unable to see the real consequences of your actions.

          3. Mole

            I happen to think that the market is a better manager of inflation than people like me or you. And I will dare say that what you are afraid of is not a fair game, you are afraid of losing the entitlements just like the rich. The middle class who makes the rich richer and keeps the entitled getting should be up in arms and asking for fair game.

            From your response, there are a few people that get rich. Then there are those that cannot get their “bones”, because they are just unfortunate. What happened to those poor souls working their assess for a tiny piece of a bone? You conveniently leave them out, don’t you.

            Than the battle is not between the souls working their assess of and those waiting for a government bone, is it? But you know damn well that the government will come after those souls and you are ok with that, so long as you are getting your bone.

            Obviously, the government will not dare step on the rich’s boundary and we all know it.

          4. Leverage

            “I happen to think that the market is a better manager of inflation than people like me or you.”

            90% of the inflation is created by market forces, as most money is created or destroyed endogenously by the private sector. And the market is me, you & others according to the negotiation power of each one and demand desires and supply management or capacity. This forces are the ones which create booms & busts, btw. I don’t think you understand the nature of the problem, which is an artificial created monetary scarcity problem (or a poor distribution of financial assets), and tangential resource distribution problem. Because you keep repeating the same mantras, you don’t know even who you should be blaming of the current circumstances. BTW I doubt you know the real data of how and what has driven inflation in the last decades and how it’s shared amongst societies.

            If there is asymmetry in a market (in information, in influence, in share,etc.), and always there is you can’t possibly say there is ‘fairness’ in price formation and in resource consumption. Off course, unless you believe in fairies tales that current wealth distribution is a product of fair production and social structure, or that you don’t give a damn about resource consumption equality.

            And I’m only scared about fools like yourself, that in their idealism will drive us to the abyss of violence (which is where we are headed anyway) thanks to their stubbornness to fix the situation while it’s possible and be flexible enough to change (and challenge) the status quo. You are the German in the late 20’s and 30’s, Mr. Moral Middle Class (anyway, middle class is an oxymoron, a propaganda tool invented during the cool war). The same guy who is unable to put decent people at institutions and then blames the institutions because ‘they are bad/dysfunctional’, the rich because you are unable to tackle them (and directly and indirectly support their agenda) or the poor because their dependency on these institutions (which wouldn’t exist in a fair system); but it was all well during good times. You sir, are a coward, so please, get down of your moral superiority.

          5. Mole

            “which is an artificial created monetary scarcity problem (or a poor distribution of financial assets), and tangential resource distribution problem.” Leverage

            – Inflation is simply an expansion of money and credit.
            – Deflation is simply a contraction of money and credit.

            There is fairness if the people we chose to lead us, take their little dirty hands off and let the markets be true clearing mechanisms. Stop picking winners and losers, meaning, no support for irresponsible behavior (lenders and borrowers alike).

            For god’s sake. You are telling me that if your child eats too much candy and has a stomach ache, the answer is to give him more candy? Not only that, you also think that the cause of the issue is too little candy. You have to pull out a 1000 pound bag and hand it over to fix the problem. Please read your words again, because this is exactly what you are saying…..

            The root of the issue is not the lack of money, it’s too much money and credit and too little capital (wealth) to support it. Creating more candy/currency will make your stomach hurt more and more and more and more.

            Deflation is not a bad thing, nature is calling for this. I have read many comments, including Beards, stating that deflation is a bad thing. Well… tell me how it is a bad thing. Would you rather pay 400k for a house or 200k?

            The market wants prices to drop, why not just let them drop instead of printing more un-backed currency and giving it to irresponsible lenders and borrowers?

            I will venture to say that if you let the irresponsible take the hit they DESERVE, the market will clear the excess credit more quickly and we’ll return to economic growth quicker.

            Irrespective of what you and I say, the market will take course and one point or the other and will FORCE a reset back to balance whether we like it or not. The quicker we realize this the less painful. I know that when this happens Keynesians and MMTers will look to Austrians for blame. Yet Austrians have not implemented a fiscal or economic policy all through this mess. Ain’t it easy to shift the blame?

          6. Leverage

            The root of the issue is not the lack of money, it’s too much money and credit and too little capital (wealth) to support it. Creating more candy/currency will make your stomach hurt more and more and more and more.

            Let’s see, long term inflation trend has been going down since 3 decades ago, despite the human population growing 3 times (and now is stabilizing already and goign tod ecay in more developed nations)! You don’t know how wild inflation could be 2 centuries ago in some periods, now we are literally wasting half the food produced in developed nations, is just silly.

            Productivity has rocketed, literally, by any measure; while income disparities or wealth distribution has gone for the worse. Capital has never expanded faster in history of humanity, ever. And I’m talking about human capital, knowledge, etc. as well as capital goods, production etc. There is capacity underutilization everywhere. And yet when you examine the roots and causes of inflation and who is ‘consuming the most’ you can see clearly the inverted pyramid of resource consumption, yet the fault is of the poor. You social darwinists are truly psychos.

            Deflation is not a bad thing, nature is calling for this. I have read many comments, including Beards, stating that deflation is a bad thing. Well… tell me how it is a bad thing. Would you rather pay 400k for a house or 200k?

            I want real price stability, which ain’t bad, I’m not one of these economists obsessed by growth or that says inflation is necessary, which is bollocks, and even some mild deflation ain’t bad and is only natural effect of increasing productivity with some strong prerequisites: You need to work on your maths, because deflation in the current system is terrible for 90% of the population, where your equity would turn negative and your liabilities would nominally be higher than your assets, and your income would probably decrease, making financial costs and burdens not payable. Until you redesign the system (implicitly or explicitly through certain policies, like Japan has been doing) so that can be solved deflation is mortal no matter how you spin it.

            This is what has been happening to a lot of folks in the last years with housing prices going down while their mortgages principals stayed the same and their incomes stagnated or diminished. Multiply that several times and see how the system collapses.

          7. F. Beard

            Would you rather pay 400k for a house or 200k? Mole

            If it means keeping a job then I’d rather pay 400K. If it means not stealing by deflation then the same answer.

            And don’t expect God is on your side either – He calls the servant who buried his talent “wicked and lazy” see Matthew 25:14-30.

          8. Mole


            Let’s stop kidding ourselves. We don’t really give a damn about the jobs. It’s not about saving jobs, it’s about keeping entitlements going.

            Let’s not throw the religious thingy at me, nature/god is the one asking for the lower prices (is it not?), not me. Am I the one asking for the social mood to change when it comes to housing? No, than go fight it out with god.

          9. F. Beard

            It’s not about saving jobs, it’s about keeping entitlements going. Mole

            Wow! Do you really begrudge the poor, the sick and the old a decent living? And in the case of the old, one they have earned?

            And yes, it is about jobs. You Austerians, in your lust for deflation, are likely to deflate yourselves out of a job.

            And the way I see it, the population is entitled. It has been dis-possessed and dis-employed with its own stolen purchasing power.

          10. F. Beard

            Speaking of welfare, the National Debt is “corporate welfare” according to Bill Mitchell.

            How about we end that, hmm? The US National Debt consumes $500 billion a year in needless interest payments.

          11. Mole


            You want to help your fellow man that you approve of the theft of his wealth via inflation.

            Sure, more jobs will be created by poorer and poorer citizens. Funny how you dissaprove of the fed theft but approve of gov theft.

            The sad part is you know this, and defend with biblical references.

        2. F. Beard

          Anything expanding the money supply is inflationary. Mole

          97% of the money supply is credit. Guess what happens when credit is repaid? IT GOES OUT OF EXISTENCE.

          So are you willing to let 97% of the money supply disappear? Think you would still have a job if it did?

          The rich guys you front for would love it if 97% of the money supply went away so they could buy up everything at fire sale prices or cheaper.

          Quit being a tool! Theft by deflation is just as bad or worse than theft by inflation.

          1. Mole


            Are you asking me this for real or are you acting naive?

            When did i ask for the removal of all credit?

            You guys are masters at ignoring points and taking the topic off course. If you want debates, debate like adults.

      2. kj

        “CANNOT” — meaning ‘impossible’ as in ‘never, ever, ever’. Fascinating example of ideology impermeable to FACT as in empirical evidence. Tell the millions of people who have jobs at local, state and national government levels that “Government CANNOT create jobs”. Let them know IN CAPITAL LETTERS that every day that, well, they think they are going to work … but actually that’s just a fiction… they don’t actually hold JOBS…. instead, they are laboring in a sort of fictional context… and, quite frankly, they and the rest of us would just plain be much better off if we finally woke up and privatized everything because, well, GOVT CANNOT CREATE JOBS.

        Utter nonsense. Govt CAN and DOES crete jobs …. And that’s just direct job creation that happens and has happened through government entities ever since governments have existed.

        Now, there’s also the long history of governments creating jobs indirectly … thanks, for example, to such things as Glass Steagall etc, there were several decades of job creation in the US from the late 40s on …. sound jobs based on sound government regulation …. sound govt created jobs (or, being sensitive to ideological ears, perhaps we should say ‘gov’t fostered jobs”)…. followed by the consequences of empirical-free ideology of ‘govt CANNOT create jobs’… that led to the bubbles … with, yes, temporary jobs that have now disappeared because the ideology that only private sector CAN create jobs (which, by the way entirely ignores the job creation that goes on in the nonprofit sector)

        This is the ideology of neoclassical economics… what Steve Keen calls a ‘pre-science’…. a set of ‘MY WAY OR THE HIGHWAY’ beliefs that, toy models and all, simply repeat — typically IN CAPITAL LETTERS — the mantra over and over and over again that ‘THE GOVT CANNOT CREATE JOBS’.

        It is nonsense. But it is, unfortunately, tightly held nonsense whose true believers are themselves too often not reachable by facts.

        1. Mole


          If the government hires you to manage the garden at the white house and pays you 2 million dollars…

          Where do you suppose the 2 million came from. I will draw this once again for easy understanding..

          A group of responsible citizens pays 2 million in taxes -> the government collects it -> the government pays you 2 million (I wish it was this easy but I will make it simple for you, but most likely the gov will have to charge much more to pay you the 2 million (admin costs??))

          So 2 million went from the hands of a group of tax payers to you. The group of tax payers could have used the money to hire more workers for their businesses, say 10 people. But they can’t hire the 10 because they have to pay taxes. So pay their taxes they do. You receive the 2 million and hire the 10 people above. Is this what you call creating jobs???????

          I will take this opportunity to state that this is opposite to what you MMTers preach. In this scenario you are making one person (most likely someone connected to the government and getting a sweeter deal than other business men) RICH in the process. But you love government taxes, so there you go.

          I will also state that the group of tax payers that paid the 2 million would have probably spent their money in more efficient ways than the government contractor who got the sweet deal and knows there will be more coming.

          1. Leverage

            Where did the 2 millions come from first in any case? Man you are slow… very slow.

            Yes, it’s very probable you are paying way too much taxes for the level of services you receive from the government )which can create jobs by bidding in the market for goods/services or providing them their-self contrary to what you say). And this only helps to feed into entitlements from the government to corporate entities (corporate welfare), as they indirectly control inflation (offset anyway by issuing debt securities). Maybe you should be asking for lower taxes for yourself and ask for lower issuance of securities, and see if the process is sustainable or not via inflation feedback loop (positive or not real growth).

            You are stuck in a net of lies because of your idealism, which precludes you from watching financial and real flows as they are.

          2. Mole


            Did I say I was paying too much taxes? My point was not that I am paying too high taxes, it is that the government CANNOT create jobs because it is not a government function, and I have proven that, you have not.

            You then go on a tangent about blah blah securities, when the answer is much more simple than that, isn’t it? Are you talking about the creation of un-backed currency to support government spending not supported by tax receipts, or simply deficit spending?

            Throw in a couple of what you believe are “sophisticated” words like “securities” or “idealism” to confuse the readers and presto, this guys sounds smart so he must be telling the truth. I am 100% you yourself do not understand what you just wrote, seriously.

            Why don’t you tell us how this “bidding” helps create jobs?

            BTW, I actually think we are paying too low taxes for the amount of government services we received. The reason is simple, taxes have not gone up because the government is able to borrow and deficit spend. So we are taxed via inflation rather than higher taxes.

            Should the government be forced to raise taxes to pay for services, the reckless spending that has been going on would not have taken place because people would have demanded a stop a long time ago (it’s really painful for a political career to raise taxes).

            But hiding this via inflation, and telling people that inflation is something “normal” in an economy is criminal when you find out how it works. This is irresponsible and criminal behavior whether you are rich, middle class, or poor.

          3. Leverage

            How does the private sector ‘create jobs’? Imagine you are a small entrepreneur with his own business to sell whatever good/service.

            You create a job for yourself (or for others employees) because someone is ‘bidding’ the good/service (this is demanding) you are offering. This is supply side economics vs demand side economics, truth is most of the time the economy is driven by demand (and then competition to supply that bid), not because of supply (which off course is important, I wouldn’t deny it, but is not what drives the business cycle mostly).

            The government can bid for goods and services and indirectly creates jobs this way. Think for example, of the whole legal services sector, which is created completely by the government, or think for whatever contractors the government has. Off course by public (or private-public partnerships) enterprises the government can create employment directly 8financing it), you may agree or not with the level of public servants, contractors or whatever, but that’s job created directly by the government either providing

            You have proven nothing, the government creating jobs is essentially the same mechanism the private sector creating jobs: by bidding for goods/services. Off course the difference is the government can force the demand via coercion and the private sector has a much more difficult time doing this (but happens more often that you would say).

            The reason is simple, taxes have not gone up because the government is able to borrow and deficit spend. So we are taxed via inflation rather than higher taxes.

            Oh wow, hahaha. Man you are clueless. 90% of the inflation is created by the private sector, by issuing credit and leveraging through shadow money (re-hypothecation of securities, btw, security is basically a financial asset which represent a claim on a counter-party, nothing fancy about these words, only if you are too slow to Google it). In fact, if the government didn’t issue debt (what I was talking before securities) and just did deficit spend it would be less inflationary. BTW there is no empirical evidence between inflation and deficit spending you liar, zero, nil, nada! Want proof? Look at 2008-2009, trillions in deficit spending and there was no inflation, inflation has risen just when credit has started to recover!

            Defiant/Mole, this is so beyond you, you need to get more informed before doing these uninformed claims.

            P.S: The currency is never backed by anything, not even in the XIX century gold-standard was backed by gold (which was just a price anchor or a limitation on how much you can leverage the currency). There is no such things as debasement of the currency, that’s just silly talk from people who does not know how the private sector will always find ways to leverage the currency and create pseudo-money.

          4. Calgacus

            Mole: Quite honestly, I was probably an MMTer some time in you childhood life. Indeed. And then you were miseducated in the insane raving that is mainstream or Austrian or neoclassical economics. Everybody knows & understands MMT deep down. It is economics that makes sense, that people use in their daily lives, that is intrinsic to human cognition, that children know. As Keynes said to Shaw, his job was to show what sounds like good sense to be good sense, and that the “sound finance” mainstream is crazily improbable nonsense.

            Every child knows where money comes from. The government prints it. Duh. People do not print money that they give to the government. People get money from the government. The government does not get money from people. That is the way it works now, and the way it has always worked.

            The government CANNOT create jobs because it is not a government function, and I have proven that, you have not. No, ONLY the government can ultimately create jobs. Jobs are work for money. Money is a creature of the state. If you got a job from a private employer – where the hell do you think he got his money from? – ultimately, the government. (Yes, there are subtleties and nuances, but that is basically it.)

            Governments have been deficit spending for millenia. If they hadn’t, there would be no money. Deficit spending will not cause inflation unless it is done beyond the private sector’s saving desires. This is an extremely rare thing. Almost always, governments refuse to spend enough, and force many people to be unemployed, which is entirely insane.

            All because people are taught crazy ideas about what money is, and incorrect accounting. MMT is accounting is addition & subtraction. Arguing against it is arguing against arithmetic.

          5. Mole

            Money does come from printing, but wealth does not.

            In fact, the US can print 500 trillion tomorrow if it wanted to. Do you think this will fix our finances? Do you think we will be wealthier?

            We know that printing is useless if there is no wealth to back it up. You can scream and jump and we all know that printing dilutes the outstanding money and does not make the nation wealthier. The rich will of course get richer as they always have first access to credit, while the poor will get poorer and the middle class will continue to disappear.

            The middle class is the one paying and we all know it.

          6. Mole


            The government bids for anything because they have gotten hold of funds via taxes or borrowing. If you cannot understand this, than we are not going anywhere amigo.

            With regards to inflation – can an orange not go higher in price due to storms destroying the supply of oranges? If you think this is true, than inflation is not just an increase in price and anyone telling you so is a damn liar and trying to confuse you.

            Inflation, mi amigo, is an increase in money supply and credit. Read that a couple of times and let it sink because any other definition will confuse the crap out of you. This one is simple and easy for any citizen to understand.

            A rise in prices is simply a symptom of inflation. Let me repeat so that it sinks, it is a symptom of inflation. In other words, if you print, the additional money or credit will chase the goods and services and will result in price increases. But again, prices don’t always rise because of variations in the money supply.

            With regards to the comment about the 2008-2009 item, I think we all know the answer.

            What happens when the amount of credit is being destroyed faster than one can print? Do you know how much credit related to housing has been destroyed since 2008? Go google it mi jenio.

          7. Mole


            Anything expanding the money supply is inflationary. If the government shows up at the treasury and demands 1 trillion created out of thin air, this is inflationary because it dilutes the value of the existing money. This is simple mathematics.

          8. Calgacus

            We know that printing is useless if there is no wealth to back it up.

            There will be less wealth “to back up” the printed money if we refuse to print enough money to allow the economy to produce all the wealth it easily could. If we allow governments to print so little money, hire so few people that there is massive unemployment, as there has been for decades, and particularly right now.

            You can scream and jump and we all know that printing dilutes the outstanding money and does not make the nation wealthier.
            No, printing DOES NOT necessarily dilute the outstanding money. We don’t “all know that printing dilutes the outstanding money and does not make the nation wealthier.” It isn’t “simple mathematics”. It isn’t true. In fact, it is preposterous.

            Why the hell should anyone care what the money supply is & whether it is inflating according to the Austrian definition. Who cares? What does it have to do with the price of eggs? What is important is price inflation, and that is rightly the accepted meaning of “inflation” for a century or so. MMT is not about price inflation, and its policies would lead to very hard money – very low inflation.

            Your ideas about what money is & where it comes from are completely wrong. Every unit of money ever came from someone printing it. The more powerful the printer, the better the money. The basic money we use is government money (and government-backed money), because governments are the most powerful entities. People can’t get money to pay their taxes unless they got it from the government in the past.

            In an army, do newly issued orders “dilute” the value of prior ones? If the Generalissimo is insane & changes his mind every fifteen minutes or issues the same order repeatedly. Sure. But usually, no.

            Suppose one division manages to achieve the objective that the Generalissimo thought it would require two divisions to achieve. Does he then stop issuing orders to the other division? – “because new orders would dilute the old ones” – and does he then stop paying them & giving them food because they aren’t carrying out orders he isn’t giving them? Anybody would say he is insane.

            But that’s how we run economies, based on absurd ideas that construe money & credit as “things”, “objects”, “commodities” rather than orders, a much better analogy.

          9. Mole

            I can only hope you are not in a position of authority.

            Who care what the money supply is? myabe you can ask argentina and zimbabwe, im sure they would make excellent case studies. BTW, it went so well in zimbabwe that they are thinking of sending every citizen of the world a billion zimbabwen dollar. Man i cant wait to get mine.

            I also just learnt that goods and services are valuable because of currency. Goods and services are worthless without paper.

            I agree with one thing you said… wow

          10. EconCCX

            >>Every child knows where money comes from. The government prints it. Duh. People do not print money that they give to the government. People get money from the government.<<

            Cal, every child may think she knows. But even high school economics class teaches that money is created by commercial banks, which lend money they don't have, against a promise by the borrower to pay back a far greater amount. Those digits, once transferred to another bank by the borrower's spending, are counted as money, and are offset on the first bank's books by a borrower from the second bank spending new overdrafts that are deposited into merchant accounts in the first bank. That's net; of course there are banks in between.

            But it means that when somebody borrows from the bank, that much new money is created, requiring that much new deposit insurance. The money doesn't come from the government. This fact is in not the slightest informed dispute, not by those who cherish the money creation process, nor by those who despise it. And with each new dollar created, 1.x dollars of compounding debt.

            The US Treasury sells coins to the private banking system at face value, and paper money at the cost of production, a few cents per note. And Treasury Bills, which are promises to pay in the future for bank credit today, growing and compounding the debt. The Treasury issued some paper money (aka greenbacks) under Lincoln and Kennedy, but such impudence (aka sovereignty) was not long tolerated by the Money Power.

        2. different clue

          Perhaps we just need some clear definitions. What is a “job”? What is “jobness”? And what is it that put the “jobness” into a “job” which makes it into a “job”?

          Perhaps if we can get a real definition of what a “job” is, then we will know whether a job has been “created” or not, once we even know what a job IS, and what it IS that MAKES it a job.

  17. Bakasone

    Daniel Cohn-Bendit has no whatsoever credibility within the left wing. He sold out long ago. No one in Greece wants to know what he says.

    Tsipras is in an excellent position to negotiate with Berlin. The more you owe the more power you have over your creditors. Greece will not leave the euro zone. Bondholders will get another decent haircut and we’ll see who’s been swimming naked.

    1. Lafayette

      Tsipras is in an excellent position to negotiate with Berlin.

      You are dreaming.

      Negotiate WHAT with Berlin? That the Greek national pastime of Avoiding Taxes is a feature and not a fault of the Greek Economy?

      Now pull the other leg …

      We shall see what plans Tsipras has for making the Greek Orthodox Church, which is the second largest owner of property after the Greek government, pay the property taxes of which it is absolved.

      Why should the rest of Europe pay for Greece’s profligacy? Give us one cogent reason, just one.

      1. Calgacus

        Why should the rest of Europe pay for Greece’s profligacy? As Europe’s economies have been entirely demand-constrained since the abandoment of full employment decades ago, even worse than the USA, the rest of Europe benefited from whatever profligacy the Greeks engaged in. Greek profligacy is not the problem, Germany hoarding is. And because Greek demand diminished because of the austerity imposed on it by the innumerate, the rest of Europe suffers (much less of course) because of Greek austerity too.

        The question is: Why should the rest of Europe pay for Germany’s mercantilism, its Euro hoarding, its trade surplus? It shouldn’t. It should print enough Euros to offset the damage this causes Europe’s economies.

        Austerity is the problem. If Germany & the ECB allowed enough Euros to be spent in Greece to provide full employment, the Greeks would get a working economy & increased real wealth, while the German hoarders would get back all the Euros spent there. It would be a win-win & need not be inflationary – perhaps even disinflationary, depending on how well the Euros are spent.

  18. Lafayette


    Then what?

    After the vote in which the Greeks reluctantly dump their Vote of Vitriol for the Looney-Left and return to a semblance of responsible lucidity, a New Government will accelerate the tax collection efforts to enhance revenues with which to arrive at a semblance of debt-maintenance payment.

    It is perfectly obvious that the Greeks could not pay off their mountain of debt in a hundred-years (well, OK, not even in 30 years), so the Banksters who – out of sheer stupidity – kept loading a bad-debtor even more bad-debt will take not a haircut but a head-shave.

    Most of the debt will have to be excused – but only until the Greeks show a willingness to assume the rectifying-pain by means of enhanced debt-collection.

    It’s time to Pay the Piper and their days of freeloading are over. Like Italy, this “correction” should have been applied BEFORE and not AFTER their admittance to the EuroZone.

    As for the rest of Europe, the vote in France indicates that most Europeans have little or no understanding of economic undercurrents that have reduced national competitiveness to dismal proportions. And therefore there is no common will for long-term correction of fundamental labor-market rigidities. Such as low number of hours worked in France and inability to downsize during falling demand in Italy. (See the EuroZone’s general positioning in IMD’s World Competitiveness Scoreboard.)

    And France’s François Hollande’s present touting of the “Growth Fairy” will one day come home to poop upon his balding head. His yapping about growth, growth, growth spawned by spending, spending, spending without the pain, pain, pain of debt-maintenance is the sort of Lunatic Logic for which French Socialists hold a patent.

    It seems obvious that Merkel’s insistence on No Euro-bonds Under Any Circumstance is just a means to get the point across that without the Golden Rule in place throughout Europe (i.e., made into law in each member state) there is not a snowball’s chance in hell that Germany will assume the liability for Euro-Bonds.

    And Hollande is in for a lesson on Political Sobriety at the hands of Schoolmarm Merkel.

    1. Leverage

      The competitiveness fairy… there we go.

      Can you explain how, even after all the problems, the euro is one of the strongest currencies in the world? Can you explain how, even after all the problems, Europe/eurozone runs a trade surplus with the rest of the world?

      Look, there is capacity underutilization EVERYWHERE, but you tell us this fairy tale about competitiveness (surprise, the same the neoliberal elites are telling), as if competitiveness was the problem (when facts are pointing they are not). There is plenty of capital to go around; but the solution is to discipline labour off course, when it has been empirically proven that labour disciplining do little to improve real competitiveness. The same policies that have been going on for more than 3 decades.

      Your zero-sum / race to the bottom version of the world makes no sense. Because if that’s the only version we can achieve, what we should be doing is preparing for a world war anyway.

  19. Hugh

    It’s interesting to see how much neoliberal and libertarian ideology still permeates the debate.

    Mole in the libertarian mold tells us to leave the economy to the free market. This disingenuously overlooks that there hasn’t been a free market since the beginning of time. There has always been some governmental or quasi governmental entity, even if this is just a parent overseeing a child’s lemonade stand, that umpires the process. So the question is, as it always has been, who controls the umpire?

    Mole willfully misunderstands the role of government as umpire in the economy. Government will just make the rich richer and stick it to the middle class. Well the top 20% own 93% of the country’s wealth. This is a total breakdown in the role of government in the economy. It never seems to occur to Mole to push for that 80% living on just a few percent of the nation’s wealth and still comprising a sizable chunk of the middle and once middle class to take back the government and make it work not just for the 80% but for everyone by creating a juster, fairer society.

    Mole’s position represents an incredible mishmash of ideas. All actions by the rich are irrevocable. They game the government. They game the markets. All wealth transfers to them are final. Yet while Mole thinks government can never be made to work for ordinary Americans, what Mole calls the middle class, Mole believes that markets can sort it all out even though these are also controlled directly and indirectly through government by the rich. And despite the fact that if the rich are getting richer faster than the economy is growing, which is in fact the case, the inevitable result will be that at some point, and given the extreme wealth inequality that already exists, a point not too distant in the future, the rich will have all the wealth. Yet Mole insists that while the rich have all the wealth, the “middle class” will pay. Well, I hate to break it to him/her, but under such conditions there is no middle class. There are serfs and lords, and that’s it.

    Re Europe, I had really thought that canard about the profligate Greeks had once and for all been had had a stake driven through its heart. Yet here we see the neoliberals raising it again. Well, I guess that is the point of propaganda. Never let a good lie go to waste. However the answer to it remains the same: Who forced German bankers to lend to Greece? And who benefited? The Germans did generally from the euro because the euro was cheaper than the mark because it was diluted by the peripheral economies. This benefited the German export sector. The removal of trade/monetary barriers also benefited the Germans because they had industries in place to export expensive, high quality goods to the periphery. But while this was all true for the Germans, the opposite was equally true for the periphery. They got saddled with a currency, the euro, that made their goods relatively more expensive on world markets. And in Europe peripheral industries could not develop or compete with larger, already in place German ones.

    At the same time, we are told that the Greek public sector was “bloated”. But this wasn’t the case. It was that Greeks weren’t paying their taxes. And let’s be real clear about this. In kleptocracies, and kleptocracy is the dominant political and economic model, the rich have most of the wealth. So the vast majority of taxes not paid comes from the rich not paying theirs. This brings up the point that ordinary Greeks are being blamed for the crimes and misdeeds of their rich who control the government, the parties, and the economy there pretty much as their counterparts do everywhere else. So even if we blame the ordinary Greeks for not reining in their rich, we better be ready to level the same accusation against ourselves whether we are from the US, the rest of Europe, East Asia, the BRIC, the oil states, or the developing ones. While the 1%s and their kleptocracies come in many shapes and sizes, the world’s 99%s need to realize that they all have a common problem: their 1%s. So by all means let us push the Greeks to overturn the rule of their 1%, but let the rest of us do the same as well.

    1. Leverage

      Regarding Europe this is what I wrote in one of these Auerback rants the other day:

      There are two forces at play here, sometimes the two are the same entities, but not every time.

      Industrial capital in Germany contrary to anglo-saxon countries still is very strong, this is represented by export industry. They favour a gold-standard (even if virtual, like the euro), or a fixed exchange-rate regime.

      Then we have the financial capital power, or the creditors (which at the same time are the biggest debtors, in a credit driven leveraged system), which are determined to extract as much wealth from the debtors as long as they can. If they force too much the strings will break. Along this there is a a subset of capital, vulture capital, determined to obtain as much assets as cheaper as possible profiting from economic chaos and instability.

      All this plays into the current complex game of financial extortion of the people; along this there is the neoliberal idealogical line of labour disciplining in developed nations, which favours any sort of capital and is the major wealth extraction force around and has been for decades. This can be carried out by various methods, all of them end up in diminishing purchasing power of the 99%, working more and being able to get less for your money. Economic progress should be the contrary, working less for more.

      Also there is a deep darwinistic sense in this whole evil game, which promotes zero-sum policies, probably driven by the notion of limited resources. And if you want to keep the rate of consumption of McMansions high, you must suppress the wealth share of the rest of the population. This is the inflation card, inflation created by a minority which end up having most of the share to suppress consumption by the rest of the population.

      And they are winning, period.

      P.S: I don’t like the rhetoric of Auerback who helps the nationalistic xenophobic case and is foolish and moronic. Instead call the names like they are, we are talking about a power game between elites and the people, like in every other case anyway.

      Regarding Mole… he is clueless.

      1. Fiver

        Finally spotted an opportunity to respond to something you said way up the page to Mole (I believe). You say:

        “The only reason why anyone cries about ‘stealing’ through inflation in an environment where productivity and growth is above inflation is because they are lazy people who won’t invest their money and want a free risk return on their capital, as if hoarding money was something good.

        Idle money is a cost to the rest of society who had to get in debt to create your savings. Stick your head out of your ass and invest, don’t expect a risk free return on capital just because you ‘saved money’ as if this was some sort of divine right fool. Off course as an opportunity cost and a real cost to society it should cost you money (‘inflation’).”

        You just pissed on a very large number of people who don’t deserve it in myriad cultures and countries, and in particular their older individuals (maybe you’ve spotted one in your family tree) who are neither wealthy nor other than admirable in their conduct, and who have saved for some reason or other over their long misguided lives (Look! There goes a “saver” now! I swear it! How could you not see him?!!). But anyway, be careful to distinguish between changing the order of things (in what way you would is not at all clear) and simply confiscating the older generation’s “wealth” because they insist on living so long.

        1. Mole


          I am not preachibg for a set price and the same value of money, i will let the market decide. But when you clamor gambling and attack savrrs, wr have reach a step where nature will step in and restore order. It wont be pretty, but much needed.

          Let the market punish the gamblers.

  20. Fiver

    Perhaps someone who believes Germany is the chief villain in this can explain Christine Lagarde’s latest intervention in this “debate”. The IMF is essentially US-owned and though as always headed by a European, at bottom reports to Treasury (Geithner). I rather expect the answers to the question posed lie not in the “politics”, but in what positions JPM, GS, MS, Citi etc., hold IN TOTO and how these might best be played to cash in on the crisis.

    For example, JPM has since the crisis began been running a trade that sets an oil peg to the dollar. In the absence of further ECB “easing” (which would paradoxically strengthen the Euro, thus weakening the $ and raising the price of oil) or action by the Fed, that “peg” is now taking oil down rapidly right in front of the US election. You suppose that isn’t a big deal for the Obama Admin? Any analysis that leaves out the most powerful players, i.e., the Wall Street/Washington complex, will assuredly miss the mark. Any move that really HELPS Europe (and the Euro) at this point hurts the Admin (and how many on the other side of JPM’s bet?). I’d also be asking how JPM’s recent “losses” on various bets might well be linked to this massive scam.

    Latest polls show Greece pro-troika deal now ahead – there is power, and there is Power:


    And the oil game:







    Please note I am 100% in favour of Greece taking its destiny into its own hands. And the same goes for Europe as a whole. That means an end to the US-based, globalized financial/corporate Mob.

    1. skippy

      Hear, Hear.

      Skippy… well said Fiver. Inbalances problem – or – bets expectations getting the ram rod – by – the biggest arm[s. I guess thats what happens when you apply theoretical physics with orders of computational magnitude, too a chaotic enviroment, and it breaks down. The incentive was perverse, how the fook do you imput that little (actualy huge as in enormous) data nugget….eh?

      1. Fiver

        Just saw your comment now, sir. Appreciated. Never thought I’d be living through epoch-scale events, but here we are. Incredible.

      2. Mole


        We have been around for thousands of years and still cant figure out that all we need is free markets. We have been in and out of currency and cannot figure out that yoy can only devalue it until it reaches zero. You cannot mimic social mood, therefore you can never set the required value of money and prime rates.

        You have folks with high degrees of education who cannot figure this out.

        1. skippy

          You would not last 5 minutes in a free market. I ‘ve been to regional free markets, its a gangsters paradise.

          Skippy… Colombia is such a place, go try your skills down there. BTW I agree with ME, you are idelogicaly blind and only concered with personal wealth creation. Everyone else can suck your toilet clean for a yob, if not your finacial equal or better. In addition, your historical prospecive is biased, as in, you seek the answers you want and do not consider the ones that challenge – your – belifes.

          PS. humanitys fate is reduce to a cog in a machine that assigns arbitrary value as a better future for a few as the expense of hte majority? Yet we talk about and use words like morals and ethics… fook me dead!

  21. Lafayette

    Fiver: The IMF is essentially US-owned and though as always headed by a European, at bottom reports to Treasury (Geithner).

    The World Bank is “US-owned”, not the IMF. That is, it’s head has traditionally been a Yank. Just look at the list of its Presidents http://en.wikipedia.org/wiki/World_Bank#List_of_Presidentshere . Recognize Ole Betsy?

    Unless of course, you think money-on-deposit makes the US command of policy unrivaled … which is unrealistic.

    LaGarde will likely be the last European person to lead the IMF for some time. (See the governor’s listing http://www.imf.org/external/np/exr/chron/mds.asphere .) But an American has never led the IMF.

    It is time the IMF opened itself further to the world it actually encompasses.

    Which does not mean that American influence is diminished, but Uncle Sam is hardly the voice he once was at the IMF.

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