Archive for the ‘Germany’ Category

Uber Greece: When The Main Industry Is Lying

July 25, 2015

Paul Krugman in  Uber and the New Liberal Consensus  points out that:“Uber actually brings two things to the taxi market. One is the smartphone revolution… The other is the company whose workers supposedly are free contractors, not employees, exempting the company from most of the regulations designed to protect employees…

…The “new liberal consensus“, argues (based on a lot of evidence) that wages are much less rigidly determined by supply and demand than previously thought, and that public policy can and should nudge employers into paying more. If that’s your policy plan, you really don’t want to see employers undermine it by declaring that they aren’t really employers…promote the use of new technology without prejudicing the interests of workers. But progressives need to work on doing that, and not let themselves get painted as enemies of innovation.”

Notice that Uber got lots of mileage from lying that they are an employer without employees. As technology and innovation advance, the law is left behind, and thus so are the punishments for violating it, or its spirit. We have seen a lot of that in the case of Greece. Lying has been supreme about how and thanks to whom, and most prominently, for whom, money is being created. Sometimes it feels as if we belong to an age where lying is the main industry. Engineering is good, lying, more profitable.

Another day, another economist from Munich lying about Greece, in the New York Times, while quoting (favorably) Goldman Sachs. “Why Greece Should Leave The Eurozone“:

“To compete, Greece needs a strong devaluation — a relative decline of its price level. Trying to lower prices and wages in absolute terms (for example, by slashing wages) would be very difficult, as it would bankrupt many debtors and tenants.

It would arguably be better to inflate prices in the rest of the eurozone…If the rest of the eurozone posts inflation rates of slightly less than 2 percent, as the E.C.B. hopes, Greece would be competitive after a decade or so, provided that its price level stays put…

What about the solution favored by leftists: more money for Greece? No doubt, enormous government spending would bring about a Keynesian stimulus and generate some modest internal growth. However, apart from the fact that this money would have to come from other countries’ taxpayers, this would be counterproductive, as it would prevent the necessary devaluation.”

The question of corrupt economic advice keeps coming back. Dreadful advice keeps on coming: first rescuing the private banks with state money, ruining the state, then austerity, ruining the economy. Now they want to make Greece worthless, because they say it will improve the economy.

By forcing on it a devastating devaluation, do Germans want to buy Greece on the cheap? Often it looks like it. The Greeks own more worthy property than Germans do. This property is valued in Euros. Germans cannot buy enough of it. But they could, if the currency used by Greeks became worthless, which is what many German economists advocate.

Those who want to make Greece worthless say: that would improve the Greek economy. However, the Greek economy depends upon tourism (which is roaring ahead), petroleum imports (which would become immensely expensive if Greece devalued), refined petroleum products (those contracts are in dollars, so would not profit from a devaluation) and shipping (all contracts are in dollars).

Ridiculous ideas are rolled out. Take Finland: it’s in recession, with 10% unemployment, still Finland accuses Greece. But, truly, what Finland needs is the same as what Greece needs: easy money and tons of it. Same observation for the Netherlands. That same “leftist” solution, the one the USA implemented for itself.

Hence why the nefarious advice? Because Europe has many enemies and many economists’ repute depends upon sinking the EU, while Wall Street profits from it.

The advice has been to bleed the patient, until he gets better: that’s austerity. Now the advice is to bury the patient, until it revives, raising from his ashes.

All what Greece needs is an anti-oligarchic revolution. Some in the EU will help achieve it.

And that’s why precisely the hysteria has been so great about sabotaging the EU by kicking Greece out. The powers that be don’t want a successful anti-oligarchic revolution. As all European states are supposed to be in the European Monetary Union, and Greece does not want out, this is the violence one was talking about.

Patrice Ayme’

What Are Germans So Angry About?

July 15, 2015

… THAT GERMANY IS NOT THE HEGEMON.

The terrible war between Sparta and Athens which destroyed Greece, started because Sparta wanted to be seen as the hegemon of Greece. Whereas, truly, all indicators were that Athens was the rising hegemon.

And the reasons for this were deep: the racist, fascist exploitative model of Sparta, far from being a leader, was going down, whereas Athens, whom Pericles described as an “Open Society“, was going up. Athens is the leader (hegemon) that we are following today.

Smart people learn from history, and France, in particular, has long pondered Athens’ fate.

Balancing a budget is worthy, as long as there are not excellent reasons to make it unbalanced.

A military situation is an excellent reason for unbalancing the budget of a state. The USA generated a massive deficit in World War Two. So did Britain, or France.

Hegemon Celebrates In Style Victory Over Germany In The Case Of Greece, July 14, 2015

Hegemon Celebrates In Style Victory Over Germany In The Case Of Greece, July 14, 2015

The USA deficit was from credit extended by the USA, to the USA. In other words it was convertible into a tax. The debt could be extinguished by taxation. And that is exactly what FDR, Truman, and Eisenhower did (tax rates were hiked up as high as 93% under Ike).

The British or French debts were credited by the USA, and that meant a sort of slavery, looking forward, as happened. France has seriously recovered. In August 1914, 38 million Frenchmen were invaded by 122 million German speakers. Now there are significantly more young Frenchmen, than young Germans.

Right now, the French Republic’s army is making war, or containing organized outlaws on several continents (South America, Africa, and Eurasia) and many countries. The French government does not have the money to do so. Thus the French government ought to keep its budget unbalanced. The French imbalance is targetted at 4.5% of GDP (in violation of Euro regulations by 50%).

British budgetary imbalance is only at 3.7%. The price Britain pays for this better budgetary balance, is to play now only a puny military role… relative to France. France does not like that, her only serious ally being now, once again, the USA. Same old same old, just as in the 1780s…

Germany has a primary budget imbalance of zero percent. Which may look balanced, but is not, because it’s mentally imbalanced to count cents, while Europe burns.

A republic which does not defend its values is not a Republic.

Balancing a budget can kill an economy: the Greek GDP is somewhat down 30% from its peak. However Greece has a primary budget excedent: that means that the Greek government spends less than it receives in taxes, fees, etc. The reason for the Greek overall current account deficit is payment of interest to (world government’s) institutions such as the ECB, the ironically denominated European Stability Fund, the IMF, etc.

The French government knows all of this, and is, truly, the real hegemon of Europe. So when the French president drew the line, Germans, most of them against keeping Greece is the Eurozone, according to polls, had to capitulate.

Another 85 billion Euros is going Greece’s way. Dr. Merkel, in the end did the reasonable thing, what the French government told her to do (and she overruled her hawkish, asnd somewhat deranged finance minister).

However, the Germans are angry. Very angry. The New York Times ponder “Germany’s Destructive Anger“.

http://www.nytimes.com/2015/07/15/opinion/germanys-destructive-anger.html

The author, Jacob Soll, an American, played a role in Greek debt drama (rumors are that the debt may have been overestimated). Says he: German anger, and we know they are angry. Finance Minister Wolfgang Schäuble was reported to have started yelling during Saturday night’s negotiations. France and Italy have both made huge loans to Greece, but neither country has expressed hostility to Greece. Why is Germany so angry?

As an economic historian, I got a taste of this resentment…”

Indeed why are the Germans so angry? Because they are resentful. About what? Nietzsche was so intrigued by German Resentment, that some view him, first, as the philosopher of resentment.

How did Germans got so crazy, once again?

Mr. Soll, a professor of history and accounting at the University of Southern California, is the author of “The Reckoning: Financial Accountability and the Rise and Fall of Nations.” He concludes: “German attendees circled me to explain how the Greeks were robbing the Germans. They did not want to be victims anymore. While I certainly accepted their economic points and, indeed, the point that European Union member countries owe Germany so much money that more defaults could sink Germany, it was hard, in Munich at least, to see the Germans as true victims.

Here lies a major cultural disconnect, and also a risk for the Germans. For it seems that their sense of victimization has made them lose their cool, both in negotiations and in their economic assessments. If the Germans are going to lead Europe, they can’t do it as victims.”

Krugman makes similar observations in “Angry Germans“.

Says Paul: “Germany’s sense of victimization does seem real, and is a big problem for its neighbors.”

Germany’s sense of victimization is how it got to hate the French, the Slavs, and the Jews. Just read Hitler’s Mein Kampf: it starts with Germany victimized by the French, then smoothly transit to it being victimized by the Jews…

Why so angry?

Because the truth is out: Germany is not the hegemon of Europe. It tried, once again, and completely failed. Once again. The French Republic stood in the way, gathered around her a more powerful coalition than Germany, in the Eurozone itself, and then added the IMF.

The IMF made first a 180 degree turn: it has concluded that the Greek debt, as it is, is completely unsustainable, and should be cut drastically (Tsipras proposed 30%, I propose 50%). All serious students of debt agree. And Germany used that trick several times in the last 150 years.

Meanwhile, the USA had rallied the French position. The USA has created for its economy 13 times more money than the Eurozone.

France won. France won even Merkel.

France is the hegemon of Europe, Germany the moribund. Because, assuredly, only the mentally moribund would strike such a stupid position about Greece with so much obstinacy, absent any capacity for reason and introspection.

Patrice Ayme’

Piketty Pickets Titanic Teutonic Ignorance

July 6, 2015

Watching the entire German political establishment (so-called “Socialists” from the SPD Schultz, Gabriel, etc…) threaten Greece with punishments not in their powers to inflict… One is reminded that some countries have a habit of lying (this is, basically, what Nietzsche already accused Germany of doing… 130 years ago).

I said the entire German establishment… But for, paradoxically, Angela Merkel. Instead she, correctly, went to take her orders in Paris (a good instinct). After his victory the Greek Premier called Hollande first… And Hollande told him that Greek finance Minister Varoufakis had to go. Varoufakis had gone a truth too far, namely that plutocrats and their agents are terrorists.

You Two Better Solve This By Cutting Greek Debt 30%, Or History Will Punish You

You Two Better Solve This By Cutting Greek Debt 30%, Or History Will Punish You

In August 1914, the German Socialist Party, the SPD, supported the wild attack of Prussian and filthy rich plutocrats against the rest of the world, and in particular, the French Republic. A month later, the entire German army got nearly annihilated east of Paris (the First Battle of the Marne).

Why is it that the SPD cannot learn? (Germany is governed by a SPD-CDU coalition headed by CDU’s Merkel; Merkel, just like Hitler, needs the approval of her Parliament. Differently from Hitler, she can’t just send the SS to help approval.)

Countries are not just affected by their own cultures, ideologies, systems of thought. They are also influenced by something more pernicious, systems of mood. The mood that welcomed Auschwitz and another 5,000 extermination camps in Nazi Germany, was not made by Hitler, contrarily to despicable legend. Hitler just accompanied the exterminationist mood. That, in turn, was implied by a great admiration for Luther, one of the worst men. Ever.

Martin Luther was one of the great thought criminal, ever, because of his vicious anti-Judaism (many others, more courageous than Luther had criticized Catholicism before, without hating the Jews).

This is a serious PHILOSOPHICAL problem. Friedrich Nietzsche (who had fought against France in the Franco-Prussian war of 1870-71, before realizing his mistake), wrote hundreds of pages on the madness of the German herd, and its strident anti-Judaism.

Somehow the Nazis turned around Nietzsche’s philosophy against himself.

I thank John Rogers, a commenter on this site to attract my attention to (French) economist Thomas Piketty’s interview below.

Piketty wrote “Capital in the XXI Century”, a book where he presents (part of the) problems in economy and finance long exposed on this site (and its ancestor), and a few of the solutions (although I go much further, as I consider the public-private fractional reserve system a fundamentally fascist system, which has, ideally, to be outlaed in the long run)

This interview with Thomas Piketty puts it all in perspective:

DIE ZEIT: Should we Germans be happy that even the French government is aligned with the German dogma of austerity?

Thomas Piketty: Absolutely not. This is neither a reason for France, nor Germany, and especially not for Europe, to be happy. I am much more afraid that the conservatives, especially in Germany, are about to destroy Europe and the European idea, all because of their shocking ignorance of history.

ZEIT: But we Germans have already reckoned with our own history.

Piketty: But not when it comes to repaying debts! Germany’s past, in this respect, should be of great significance to today’s Germans. Look at the history of national debt: Great Britain, Germany, and France were all once in the situation of today’s Greece, and in fact had been far more indebted. The first lesson that we can take from the history of government debt is that we are not facing a brand new problem. There have been many ways to repay debts, and not just one, which is what Berlin and Paris would have the Greeks believe.

“Germany is the country that has never repaid its debts. It has no standing to lecture other nations.”
ZEIT: But shouldn’t they repay their debts?

Piketty: My book recounts the history of income and wealth, including that of nations. What struck me while I was writing is that Germany is really the single best example of a country that, throughout its history, has never repaid its external debt. Neither after the First nor the Second World War. However, it has frequently made other nations pay up, such as after the Franco-Prussian War of 1870, when it demanded massive reparations from France and indeed received them. The French state suffered for decades under this debt. The history of public debt is full of irony. It rarely follows our ideas of order and justice.

ZEIT: But surely we can’t draw the conclusion that we can do no better today?

Piketty: When I hear the Germans say that they maintain a very moral stance about debt and strongly believe that debts must be repaid, then I think: what a huge joke! Germany is the country that has never repaid its debts. It has no standing to lecture other nations.

ZEIT: Are you trying to depict states that don’t pay back their debts as winners?

Piketty: Germany is just such a state. But wait: history shows us two ways for an indebted state to leave delinquency. One was demonstrated by the British Empire in the 19th century after its expensive wars with Napoleon. It is the slow method that is now being recommended to Greece. The Empire repaid its debts through strict budgetary discipline. This worked, but it took an extremely long time. For over 100 years, the British gave up two to three percent of their economy to repay its debts, which was more than they spent on schools and education. That didn’t have to happen, and it shouldn’t happen today. The second method is much faster. Germany proved it in the 20th century. Essentially, it consists of three components: inflation, a special tax on private wealth, and debt relief.

ZEIT: So you’re telling us that the German Wirtschaftswunder [“economic miracle”] was based on the same kind of debt relief that we deny Greece today?

Piketty: Exactly. After the war ended in 1945, Germany’s debt amounted to over 200% of its GDP. Ten years later, little of that remained: public debt was less than 20% of GDP. Around the same time, France managed a similarly artful turnaround. We never would have managed this unbelievably fast reduction in debt through the fiscal discipline that we today recommend to Greece. Instead, both of our states employed the second method with the three components that I mentioned, including debt relief. Think about the London Debt Agreement of 1953, where 60% of German foreign debt was cancelled and its internal debts were restructured.

“We need a conference on all of Europe’s debts, just like after World War II. A restructuring of all debt, not just in Greece but in several European countries, is inevitable.”
ZEIT: That happened because people recognized that the high reparations demanded of Germany after World War I were one of the causes of the Second World War. People wanted to forgive Germany’s sins this time!

Piketty: Nonsense! This had nothing to do with moral clarity; it was a

rational political and economic decision. They correctly recognized that, after large crises that created huge debt loads, at some point people need to look toward the future. We cannot demand that new generations must pay for decades for the mistakes of their parents. The Greeks have, without a doubt, made big mistakes. Until 2009, the government in Athens forged its books. But despite this, the younger generation of Greeks carries no more responsibility for the mistakes of its elders than the younger generation of Germans did in the 1950s and 1960s. We need to look ahead. Europe was founded on debt forgiveness and investment in the future. Not on the idea of endless penance. We need to remember this.

ZEIT: The end of the Second World War was a breakdown of civilization. Europe was a killing field. Today is different.

Piketty: To deny the historical parallels to the postwar period would be wrong. Let’s think about the financial crisis of 2008/2009. This wasn’t just any crisis. It was the biggest financial crisis since 1929. So the comparison is quite valid. This is equally true for the Greek economy: between 2009 and 2015, its GDP has fallen by 25%. This is comparable to the recessions in Germany and France between 1929 and 1935.

ZEIT: Many Germans believe that the Greeks still have not recognized their mistakes and want to continue their free-spending ways.

Piketty: If we had told you Germans in the 1950s that you have not properly recognized your failures, you would still be repaying your debts. Luckily, we were more intelligent than that.

ZEIT: The German Minister of Finance, on the other hand, seems to believe that a Greek exit from the Eurozone could foster greater unity within Europe.

Piketty: If we start kicking states out, then the crisis of confidence in which the Eurozone finds itself today will only worsen. Financial markets will immediately turn on the next country. This would be the beginning of a long, drawn-out period of agony, in whose grasp we risk sacrificing Europe’s social model, its democracy, indeed its civilization on the altar of a conservative, irrational austerity policy.

ZEIT: Do you believe that we Germans aren’t generous enough?

Piketty: What are you talking about? Generous? Currently, Germany is profiting from Greece as it extends loans at comparatively high interest rates.

ZEIT: What solution would you suggest for this crisis?

Piketty: We need a conference on all of Europe’s debts, just like after World War II. A restructuring of all debt, not just in Greece but in several European countries, is inevitable. Just now, we’ve lost six months in the completely intransparent negotiations with Athens. The Eurogroup’s notion that Greece will reach a budgetary surplus of 4% of GDP and will pay back its debts within 30 to 40 years is still on the table. Allegedly, they will reach one percent surplus in 2015, then two percent in 2016, and three and a half percent in 2017. Completely ridiculous! This will never happen. Yet we keep postponing the necessary debate until the cows come home.

ZEIT: And what would happen after the major debt cuts?

Piketty: A new European institution would be required to determine the maximum allowable budget deficit in order to prevent the regrowth of debt. For example, this could be a commmittee in the European Parliament consisting of legislators from national parliaments. Budgetary decisions should not be off-limits to legislatures. To undermine European democracy, which is what Germany is doing today by insisting that states remain in penury under mechanisms that Berlin itself is muscling through, is a grievous mistake.

“If we had told you Germans in the 1950s that you have not properly recognized your failures, you would still be repaying your debts. Luckily, we were more intelligent than that.”
ZEIT: Your president, François Hollande, recently failed to criticize the fiscal pact.

Piketty: This does not improve anything. If, in past years, decisions in Europe had been reached in more democratic ways, the current austerity policy in Europe would be less strict.

ZEIT: But no political party in France is participating. National sovereignty is considered holy.

Piketty: Indeed, in Germany many more people are entertaining thoughts of reestablishing European democracy, in contrast to France with its countless believers in sovereignty. What’s more, our president still portrays himself as a prisoner of the failed 2005 referendum on a European Constitution, which failed in France. François Hollande does not understand that a lot has changed because of the financial crisis. We have to overcome our own national egoism.

ZEIT: What sort of national egoism do you see in Germany?

Piketty: I think that Germany was greatly shaped by its reunification. It was long feared that it would lead to economic stagnation. But then reunification turned out to be a great success thanks to a functioning social safety net and an intact industrial sector. Meanwhile, Germany has become so proud of its success that it dispenses lectures to all other countries. This is a little infantile. Of course, I understand how important the successful reunification was to the personal history of Chancellor Angela Merkel. But now Germany has to rethink things. Otherwise, its position on the debt crisis will be a grave danger to Europe.

ZEIT: What advice do you have for the Chancellor?

Piketty: Those who want to chase Greece out of the Eurozone today will end up on the trash heap of history. If the Chancellor wants to secure her place in the history books, just like [Helmut] Kohl did during reunification, then she must forge a solution to the Greek question, including a debt conference where we can start with a clean slate. But with renewed, much stronger fiscal discipline.

***

I read, and approved what Piketty said. I would add this: only two countries, Denmark and deluded Britain, have an opt-out of the Euro currency. All other European countries are supposed to adopt the Euro (and Denmark is already pegged to the Euro… As the Swiss Frank basically is… by spurts). Thus, to kick Greece out of the Eurozone is a bit like wanting to kick it out of the Union. Interestingly, too, Greece has not breached some democratic aspects that other countries (namely Austria and Hungary nearly did, exposing themselves to sanctions… The Austrian case was resolved, Hungary is still under close watch).

Thus Greece really is making plutocrats and their obsequious servants furious. Some think the banks of the USA got 13 trillion dollars of money from the government (namely, the Fed). Europe’s ECB gave only one trillion Euros. It’s high time to write some huge checks to relaunch the European economy. In the case of Greece we are talking about making a 100 billion gift. Scaled to the entire European economy, that is ONLY five trillion Euros. Notice it’s smaller than the case in the USA.

Last, but not least: California, with many times the economy of Greece, got broke a few years back. It paid employees with IOUs (I Owe You). Now California has fully recovered, thanks, in great part, to its knowledge economy. So, no panic. Just keep money flowing to Greece’s necessary functions, such as science and education…

Patrice Ayme’