Posts Tagged ‘insolvency’

Time For Euro To Get Tough?

September 22, 2011


The Obvious Solution To The Euro, And European Sovereign Insolvency Crises, Or How To Get Civilizing Compliance From Washington Such As A financial Transaction Tax. 


Some of the American press about Europe and the euro, is borderline hateful. The Wall Street Journal, September 20, 2011, in an editorial (“Global View“, Bret Stephens) was comparing Europe to a “Madoff like event“, a “parade of horribles“. “What comes next is the explosion of the European project.”

Timothy Geithner, the pinocchio from Wall Street (also secretary of the Treasury), blocked any talk of a Financial Transaction Tax (to pay for the Greek bail-out), proposed by France, Germany and Austria. Instead Geithner claimed that what was truly damaging was the fight between the European Central Bank and the European states. So Geithner would invent anything, to avoid talking about worldwide financial piracy, and the capital flow problems it creates.

When facing such hostility, it’s high time to do something to about it. There is an aggressive method to solve the euro crisis, and rescue Europe from her enemies. I am going to propose it now, and you can probably read it in “The Economist” one of these days. I doubt “The Economist” will like it.

Speaking of “The Economist”, that European magazine, was far from hateful about the euro, and sounded even very worried (!), in its last issue. No less than 5 articles therein in just the last issue flew at the rescue of the European currency. This shows how bad things are getting, as “The Economist” has always made a point of being dismissive of the European Union.    

“The Economist” ran a cover story about the euro, where it proposed to save the euro in the exact same way that I have proposed to save it: let the states which are insolvent, default. Right away. (For technical reasons, if a strong distinction is not kept between insolvent and illiquid states, there is a danger of a contagion, propelled by market manipulators, to simply illiquid states, such as Spain or Italy.)

Instead the present method used to save the likes of Greece, is to lend some more, to those insolvent states, so that they can pay their preceding loans. Not only that’s idiotic, using new debt to pay old debt, but the math are getting increasingly worse, quickly, as the interest rates of the insolvent states are going up, quickly. Hence the states are driven ever deeper into insolvency, in the guise of rescuing them.

This is why the inevitability of default ought to be accepted soon, and being prepared accordingly. After default of the insolvent states, such as Greece, European states could rescue, and, or nationalize the banks, as needed.

To those who feel it’s a tall order, a reminder: the Greek Gross Domestic Product is no larger than that of just one French department, the Hauts de Seine (92). France has 101 departments. Surely France could keep the Haut de seine afloat, if it went bankrupt. A fortiori France could keep afloat just a few banks which lent to the Haut de Seine, the case equivalent to the Greece situation.

Another possibility “The Economist” considers is a euro break-up. Everybody, even the big bank UBS, which studied what would happen, agree that it would cause, even in Germany, a PERMANENT loss of GDP of at least 40%, and maybe above 50% (if it were combined with probable complications with the EU itself). So euro destruction is about as interesting as committing suicide.

The solution that I proposed and that now “The Economist”, in its wisdom, duplicate, is the nice method. Unfolding slowly, it will allow the Greeks to start to have with taxes, honesty and accounting a more Franco-German attitude. This is more or less what the Merkozy strategy is. Except that worthy duo obstinate themselves to claim that Greece will not default, which is impossible… for the good and simple reason that the Greek state has been already defaulting since July, a detail omitted by the ignorant.

In truth, Merkozy knows that Greece will default, but they are trying to gain time (hoping for god knows what: elections will come and those two conservatives, and arch conservatism at the service of plutocracy will be defeated, to be replaced by more pro-European socialists).

However, there is another solution about which absolutely nobody talks. It is not a nice, but it will send the problem back where it originated, with the American based plutocracy. I have restrained myself all too long, and I see no warrant of arrest coming for Goldman Sachs.

Moreover, I got somewhat irritated, because I read and heard all too many nasty fools equipped with bully pulpits, who are obviously not well. Enough with the mania of maniacs bellowing unimpeached. Time to reply in kind. I am tired of listening to selfish American pundits and policy makers, coming up with one outrage, after the next, repeating exactly the mood of 1930, when the USA brought its tariffs up unilaterally… by 50%.

We are increasingly at one of these moments, when one has to choose between democracy, and plutocracy.

Athens, the primal direct democracy, a modern state in so many ways, some more modern than we can yet muster, was undone by deep philosophical mistakes. At least deep enough for the happy quarto of Socrates, Plato, Xenophon and Aristotle, and hundreds of their less gifted commentators and duplicators ever since, not to have noticed them. At the root were several ethical failures (which are presently duplicated by the USA and, to  a much lesser extent, European powers).

The Athenian crisis had two phases, separated by a century. In the first phase, Athens was philosophically erroneous, not to say mass murdering criminal, and, as a result, lost the Peloponnesian war. Athens then got nearly destroyed, losing half of her population. Socrates, having corrupted the young plutocrats, was executed. In a sort of hubristic repeat, Germany would engage in the same sort of mix of hubris and mass murdering crime, 22 centuries later. Germany was not as philosophical, and had less to boast about, and its psychological collapse into hell was incomparbly worse (although its enemies were very generous, and it did not get punished as severely as Athens… which happened precisely because so many had Athens’ envy).

The second phase in the destruction of Athenian democracy was lower key, but terminal. It was more sneaky, underground, and a greater lesson for today.

It was a close run thing, but Athens lost a war to (by then defunct) Alexander (“the Great”) ‘s generals. And Athens lost in part, at the very least, because Athenian plutocracy preferred to live under Macedonian fascism and its militaro-industrial complex rather than fighting to death for Athenian direct democracy. OK, granted, Macedonian fascism was not as terrible an enemy as Achaemenid Persia, but it extinguished direct democracy for 23 centuries (and counting…)

Is there an equivalent situation today? Sure. For example the euro is threatened by a conspiracy of various plutocrats and their devices (including Goldman Sachs). Europeans are fighting back, but softly. Why so soft? Because of a kind of breathing together of European leaders with American superrich (Sarkozy has several direct family connections with plutocracy in general, and American plutocracy of the New York type, in particular; Cameron is outright a small plutocrat, Berlusconi, a very big one, bunga bunga, as he says).

When the Macedonian shock troops invaded Athens, the anti-fascist philosopher Demosthenes took poison. How would a really strong philosopher oppose the Wall Street order of king dollar? The order of Wall Street supreme? what ideas are worth taking poison for?

It’s the world’s simplest thing: let the European Central Bank buy INDEFINITE AMOUNTS OF DOLLARS whenever the euro is above one dollar. It would cost nothing. Problem solved.

USA visited by own devices: financial 9/11, nothing left this time, smoldering ruins of the USA plutocracy all over. Indeed the entire strategy of the American plutocratic order has been financed by others, using tricks such as the ubiquituous, but cheap dollars.

So what I propose is the equivalent of what Europe did in 1930, when it retaliated with its own tariffs. Some will say, that this is nasty, not very philosophical: why can’t we go on with the beatings and punishments? Well, nasty breeds nastier. So far, the USA has had a free ride with the world socio-economic order, for 67 years. And it’s not working. Actually, civilization is going backwards, as the USA was the only country to officially back torture and extra judicial processes, in its desperate search for military supremacy. even Hitler’s Third reich never went down that slippery slope.

If the Greek currency, the euro, was down 40% it is sure that Greece’s most important industry, tourism, would improve dramatically. Add to this a 50% default in the Greek debt which is in euro, and the Greek insolvency problem vanishes.

How come nobody proposed this? Well, plutocracy is one, worldwide. Plutocrats are jailers in arms. Plutocracy knows that it is Wall Street and its pets in government, especially the government of the USA, look at boy Geithner, who have set up the excellent system for the superrich as it is. To keep it, one has to keep a mighty Wall Street and Washington sucking its toes.

As I hinted, a massive devaluation of the euro would break the economy of the USA. Oops.

The USA is still the world’s greatest manufacturer, in added value. American exports would collapse. That would bring the crisis where it belongs. Then Americans would have to face their responsibilities. There would be a depression. But there is already a depression. Just its main source, Washington. has been more protected by various tricks than it deserves to be, including by having the dollar as the world currency, while keeping it low enough.

It is time for European leaders to stop making a plutocratic compatible discourse. Europe, even Great Britain, even Switzerland, are fundamentally socialist,  the USA is fundamentally plutocratic (watch Obama boasting about getting all his ideas from the world’s richest men). It is time for Europe to go socialist on the biggest scale, as it will have to, when recapitalizing the banks with half a trillion dollars.

In August, the new (French) IMF director, Christine Lagarde, claimed that European banks needed 200 billion euros in fresh capital. The markets are obviously unwilling to give them, leaving us with the states. In other words, as the American route of just giving to the superrich would be resisted by European streets, European banks, many of them, need to be nationalized. Now, as I write this, the IMF is saying that 300 billion euros is needed for recapitalization of European banks.

Don’t be surprised that the arch conservative, plutocratic friendly, European governments are in denial, whine that it ain’t so, and keep on pointing at Greece (which just lowered retirements by 20% above 1,200 euros a month).

The European street is anti-plutocratic, Americanism is vaguely perceived as plutocratic, as the “hopey-changey” thing (to quote Obama quoting Palin) is fading away as the smoke and mirrors it was (Obama himself seems unable to give one example of realized hopey-changey). This will get worse, as the truth gets clearer.

Obama had decided to double American exports in five years, or, otherwise said, to export the USA’s depression, while filling up his plutocracy’s coffers. Well, visit him with his own medicine. It’s only fair.

Even the arch conservative governments in Europe have to calm down their streets. After Sarkozy judiciously suggested that Palestine ought to be admitted as an observer state at the United Nations, tensions went down.

It is time for Europeans to take care of themselves. That means if treated nastily, fight back nastily. And beware of not being led by Trojan horses, as the Athenians were. Once is enough. Resist imperial fascism with all your might. Krugmania sings on all roofs that devaluation is the solution for Greece? Thus act accordingly. Devalue the euro, it can be done tomorrow.


Patrice Ayme