Category Archives: Doomsday scenarios

Michael Hudson: 2,181 Italians Pack a Sports Arena to Learn Modern Monetary Theory – The Economy Doesn’t Need to Suffer Neoliberal Austerity

By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City and a research associate at the Levy Economics Institute of Bard College

I have just returned from Rimini, Italy, where I experienced one of the most amazing spectacles of my academic life. Four of us associated with the University of Missouri at Kansas City (UMKC) were invited to lecture for three days on Modern Monetary Theory (MMT) and explain why Europe is in such monetary trouble today – and to show that there is an alternative, that the enforced austerity for the 99% and vast wealth grab by the 1% is not a force of nature.

Wolf Richter: Greece, “The Bottomless Barrel,” As Germans Say

In Greece, three-quarters of the independent doctors, lawyers, and engineers declare taxable income below the existential minimum. Tax fraud amounts to €20 billion per year (8.5% of GDP). And tax dodgers owe €63 billion in unpaid taxes (27% of GDP). The country is bankrupt and has been kept afloat by the Troika (EU, ECB, and IMF), of which Germany is by far the largest contributor. But there is a plan. And it’s not an endless bailout.

ECB President Draghi Declares War on Europe’s Social Safety Nets

I’m late to the remarkable interview given by ECB president Mario Draghi to the Wall Street Journal. I find the choice of venue curious, since the Financial Times has become the venue for top European politicians and technocrats to communicate with English speaking finance professionals.

But Draghi’s drunk-on-austerity-Kool-Aid message was a perfect fit for the Wall Street Journal.

Philip Pilkington: Ireland – The Problem Isn’t Ignorance

By Philip Pilkington, a writer and journalist based in Dublin, Ireland

Speaking with a senior figure in Fianna Fail (the party that were kicked out of government last year by the Irish people) earlier this week something dawned on me for perhaps the first time. Namely, that the leaders in Ireland might know exactly what the issues and the problems are in Europe but they remain completely powerless to solve them.

Paul Mason of BBC on How Austerity is Reducing Greece to Developing Country Status

The BBC’s Paul Mason, fresh back from Greece, gives a report on Democracy Now of how living conditions have deteriorated as a result of the imposition of austerity measures. One of the stunners, mentioned in Atlantic Wire (hat tip Lambert), is that not only will some Greeks have to work without pay, some will have to pay for their jobs (yes, that is not a typo). The euphemism is a “negative salary.”

Mason also discusses how this program is radicalizing the public. Communists, Trotskyists and other extreme-left groups are polling at 43%. That’s a strikingly high number. This plus the level of dissent on the street suggests Greece is on its way out of the eurozone. But will the technocrats prevail? As Michael Hudson has stressed here and in other commentary, the banks are succeeding in stripping Greece of assets, an operation that used to be possible only via military force.

From Democracy Now (hat tip Philip Pilkington):

Wolf Richter: Now a Housing Bubble in Germany

Germans are euphoric these days—compared to the dour mood that prevailed for nearly two decades when real wages declined in a stagnating economy with high unemployment. This new optimism is joyriding the powerful German export machine and appears to be impervious to the nightmarish scenarios playing out at the periphery of the Eurozone. And now, Germans have something else to be euphoric about: a housing bubble.

Satyajit Das: It’s All Greek to Me!

Yves here. In case you managed to miss it, there is supposedly an agreement for Greece to get €130 billion. But then we learn that Greece will still need more dough if it meets its target of reducing government debt to GDP to 120% by 2020 (and why is debt to GDP of 120% seen as sustainable then when it is not seen as sustainable now? And leaked documents further note that Greece might not meet its targets (duh!) and its debt to GDP could instead by 160% of GDP, which would require bailouts of nearly twice the amount now contemplated. And “discussions” are continuing in Brussels into the early morning, which says this deal is about as done as the US mortgage settlement.

By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010)

The Greek Prime Minister spoke of a choice between “austerity” and “disorder”. He got both, as the Greek Parliament based the European Union (“EU”) agreed to severe budget cuts and outside rioters protested the plan.

Congress Pushes Iran Regime Change Over Diplomacy

This is a sobering interview on Real News Network with Lawrence Wilkerson, who was Colin Powell’s chief of staff, on how Congress and Obama are painting themselves in a corner over Iran.

Greece is Out of Time, Again

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

There is definitely something odd happening in Europe. I can’t quite put my finger on it, so I thought I would list out my musings on the topic and see what I can come up with.

Wolf Richter: François Hollande Versus the German Dictate

The Eurozone debt crisis has frayed a lot of nerves, particularly among Greek politicians, whose country is on the verge of bankruptcy, and German politicians, who no longer trust Greek politicians—they’d willfully misrepresented deficits and debt in order to accede to the Eurozone and had continued to do so up to insolvency. But now a far bigger confrontation at the very core of the Eurozone is visible on the horizon. And it may bring epic changes.

Marshall Auerback: Greece – A Default is Better Than the Deal on Offer

By Marshall Auerback, a portfolio strategist and hedge fund manager

Pick your poison. In the words of Greek Finance Minister Evangelos Venizelos, the choice facing Greece today in the wake of its deal with the so-called “Troika” (the ECB, IMF, and EU) is “to choose between difficult decisions and decisions even more difficult. We unfortunately have to choose between sacrifice and even greater sacrifices in incomparably more dearly.” Of course, Venizelos implied that failure to accept the latest offer by the Troika is the lesser of two sacrifices. And the markets appeared to agree, selling off on news that the deal struck between the two parties was coming unstuck after weeks of building up expectations of an imminent conclusion.

In our view, the market’s judgment is wrong: an outright default might ultimately prove the better tonic for both Greece and the euro zone.

The Grexit is coming sooner or later

One more post today, this time on Europe. I wrote this outline for Italy in November before the ECB’s Italian job. I didn’t and still don’t see an Italian exit or default as a baseline. However, a Greek exit for the eurozone has been my baseline for a number of months. Citigroup’s Willem Buiter has […]

Marshall Auerback: Greece and the Rape by the Rentiers

By Marshall Auerback, a portfolio strategist and hedge fund manager. Cross posted from New Economic Perspectives

Here’s the draft of the supposed agreement to “sort out” the Greek debt problem once and for all. According to Bloomberg, here are the essentials:

Philip Pilkington: Keeping the Sharks at Bay – More than One Way to Do a Bailout

By Philip Pilkington, a writer and journalist based in Dublin, Ireland

While I was writing on the unsustainability of the haircut deals yesterday, the peripheral bond markets in Europe rallied. My argument was that when other countries started getting uppity and demanding haircuts, European government bond investors would slowly but surely come to realise that they were the ones on the end of the hook and that politicians didn’t give a damn about them. This would eventually result in their piling out of the bond markets, sending yields into the stratosphere. The ECB would then be forced to step in and buy up bonds in the secondary market – or perhaps do something even more responsible, who knows?