Posts Tagged ‘greece’

Rural migration (tic-toc… tic-toc)

May 16, 2011

It’s been some time since I wrote one of my “tic-toc” posts and although till then what I was writing about could have been considered speculation, this Guardian article bears out some of the logical outcomes I was pointing out.

There are also other aspects of this article that are interesting from my point of view. I am going to post the entire article and intersperse my comments throughout.

http://www.guardian.co.uk/world/2011/may/13/greek-crisis-athens-rural-migration

Debt, unemployment and poverty is causing mass unrest and thousands to seek a cheaper lifestyle outside the capital

High in the hills of Arcadia, in a big stone house on the edge of this village overlooking verdant pastures and a valley beyond, a group of young Athenians are busy rebuilding their lives.

Until recently Andritsaina was not much of a prospect for urban Greeks. “But that,” said Yiannis Dikiakos, “was before Athens turned into the explosive cauldron that it has become. We woke up one day and thought we’ve had enough. We want to live the real Greece and we want to live it somewhere else.”

Piling his possessions into a Land Rover and trailer, the businessman made the 170-mile journey to Andritsaina last month. As he drove past villages full of derelict buildings and empty homes, along roads that wound their way around rivers and ravines, he did not look back.

“Athens has failed its young people. It has nothing to offer them any more. Our politicians are idiots … they have disappointed us greatly,” said Dikiakos, who will soon be joined by 10 friends who have also decided to escape the capital.

They are part of an internal migration, thousands of Greeks seeking solace in rural areas as the debt-stricken country grapples with its gravest economic crisis since the second world war.

“It’s a big decision but people are making it,” said Giorgos Galos, a teacher in Proti Serron on the great plains of Macedonia, in northern Greece. “We’ve had two couples come here and I know lots in Thessaloniki [Greece’s second biggest city] who want to go back to their villages. The crisis is eating away at them and they’re finding it hard to cope. If they had just a little bit of support, a little bit of official encouragement, the stream would turn into a wave because everything is just so much cheaper here.”

GR: Mr. Galos is oblivious to what exactly has caused this crisis which is in fact government intervention. Seeing the devastation wreaked on his nation, Mr. Galos calls for more of what has caused the crisis in the first place in the form of “official encouragement” in order to nudge those that are sitting on the fence to make the move because, as he says, “… everything is just so much cheaper here”.  But that’s exactly the problem and Mr. Galos does not see it. As is always the case, things are “cheap” till government encourages people to make use of something. The moment government encourages some entities to do something, prices will automatically rise not least because when economic actors perceive that there are funds to be had from the government they will feel no compunction at all to take advantage of the perceived free money… because it is government money… and government money is not perceived to be any natural person’s money… but, of course, it is and sooner or later it has to come out of our taxes or increased cost of living somewhere. Similarly, politicians are naturally inclined to give away funds as a way to garner votes from interest groups. Crucially, debt based fiat money allows politicians to be profligate because unlike value based money fiat money is perceived to be cost free. All that is needed, it is thought, is to expand the debt. And, anyway, in an electoral democratic system, a politician is never around to see the extent of the ramifications his/her policies engender.

The trickle into Proti Serron might have gone unnoticed had the village not also been the birthplace of the late Konstantinos Karamanlis who oversaw the nation’s entry into the then European Economic Community in 1981. An alabaster white statue of the statesman in the village square is adorned with the words: “I believe that Greece can change shape and its people their fate.”

Nearly sixty years after they were uttered, a growing number of Greeks, at least, are beginning to wonder whether the old man was right. The drift towards the bright lights of the big cities were by Karamanlis’ own admission one of the great barometers of the country’s transition from a primarily agricultural society into an advanced western economy.This week, as the IMF and EU debated ways of trying to re-rescue Greece and observers openly wondered whether the country would have to leave the euro, Greece appeared more adrift than ever, tossed on a high sea of mounting anger and civil disobedience from people who have lost trust in their politicians, and at the mercy of markets that refuse to believe it can pull itself back from the brink of bankruptcy. “The reality is that these people, they are in deep shit,” the managing director of the IMF, Dominique Strauss-Kahn said recently. “If we had not come they would have fallen into the abyss. Two weeks later the government would not have been able to pay civil servants’ wages.”

GR: Mr. Strauss-Kahn is a product of his environment and cannot therefore admit the perversity of his statement. The IMF rides ostensibly to the help of countries distressed by debt by offering… more debt… Of course, if you understand the nature of debt based fiat money, then you also understand that supranational entities such as the IMF exist precisely to prop up the monetary construct. Debt based fiat money can only exist in an environment of expanding credit regardless of the natural characteristic of debt to conform to the law of diminishing marginal utility. Had the IMF not offered assistance, Greece wouldn’t be any worse off. Look to Iceland for a glimpse of what can be achieved if only politicians had the balls to stand up to banking interests. But of course. A politician is by definition someone that lives by expedients so that biting the hand of the entity that finances your politically expedient programs is not done.

Ironically, it is the medicine doled out under last year’s draconian EU-IMF €110bn (£96bn) rescue programme, implemented to modernise a sclerotic economy, that has made their lot worse. Twelve months of sweeping public sector pay and pension cuts, massive job losses, tax increases and galloping inflation have begun to have a brutal effect. GDP is predicted to contract by 3% this year – making Greece’s the deepest recession in Europe.

GR: The author of the article at once identifies the problem and then negates it. GDP is contracting simply because it had been artificially inflated for so many years prior. If anything, GDP is reverting to its true intrinsic value. The public sector in Greece like in the rest of Europe but, particularly in Latin Europe, is bloated because it is politically expedient to just hire people in order to garner votes from unions and interest groups. One of the most glaring examples of political expediency of the past 3o years was the Italian airline Alitalia where over staffing and staggering losses reached biblical proportions over the years.

In Athens, home to almost half of Greece’s 11 million-strong population, the signs of austerity – and poverty – are everywhere: in the homeless and hungry who forage through municipal rubbish bins late at night; in the cash-strapped pensioners who pick up rejects at the street markets that sell fruit and vegetables; in the shops now boarded and closed and in the thousands of ordinary Greeks who can no longer afford to take family outings or regularly eat meat.

“We’ve had to give up tavernas, give up buying new clothes and give up eating meat more than once a week,” said Vasso Vitalis, a mother-of-two who struggles with her civil servant husband to make ends meet on a joint monthly income of €2,000.

GR: Not to detract from the real drama Ms. Vitalis is experiencing but one of the less intuitively related advantages of decreased consumption is a decrease in the rate of depletion of food stocks, a diminished carbon foot print and the concomitant beneficial effects that counter the devastation of the environment that has, in large part, been brought about by aberrant inflationary monetary policies over many decades. Greens the world over should embrace this crisis. Reduced consumption of animal protein could allow the replenishment of fish stocks that have been decimated over the years as well as the re-stocking of staples that no longer need to be used to rear live stock. Prices drop, the environment is saved and food stocks get replenished. Everyone’s a winner.

“With all the cuts we estimate we’ve lost around €450 a month. We’re down to the last cent and, still, we’re lucky. We’ve both got jobs. I know people who are unemployed and are going hungry. They ask family and friends for food,” she sighed. “What makes us mad is that everybody knew the state was a mess but none of our politicians had the guts to mend it. It was like a ship heading for the rocks and now the rocks are very near.”

GR: Bingo! Except that we are already on the rocks. And, yes, it has been clear for many decades that the system is mathematically not viable… but politics being the expedient animal it is… what is happening was a foregone conclusion… and we are no where near the end of it all...

Greeks also know that with their economy needing another financial lifeline, and few willing to lend to a country in such a parlous state, it will also get much worse before it gets better.

GR: Once again. The author of the article fails to recognize the problem of insolvency brought about by too much debt. Particularly when every single country in the world is afflicted by the same problem. You see, in a global economy, for as long as only one or two countries are afflicted by too much debt as, for example, Japan was in 1989, increasing the debt burden appears to help because a country could still sell goods and services to other countries. But, as time goes by and each country feels the necessity to expand their credit market in order to stimulate the national economy, the diminishing marginal utility of debt ensures that at some point all countries will be buried in debt simultaneously. At that point, more debt no longer helps. And this is the point we are at today.

“In the past, the future always implied hope for Greeks but now it implies fear,” said Nikos Filis, editor of the leftwing Avgi newspaper. “Until this week people thought that with all the measures the crisis would be over in a year or two. Now with the prospect of yet more austerity for more aid, they can’t see an end in sight.”

With unemployment officially nudging 790,000 – although believed to be far bigger with the closure of some 150,000 small and medium-sized businesses over the past year – there are fears that Greece, the country at the centre of Europe’s worst financial debacle in decades, is slipping inexorably into political and social crisis, too. Rising racist tensions and lawlessness on the streets this week spurred the softly spoken mayor of Athens, Giorgos Kaminis, to describe the city as “beginning to resemble Beirut”.

GR: Greece is not at the center of Europe’s crisis. Greece was merely the first in Europe to succumb to the debt crisis. Others have followed Greece since and still more will follow in months to come or till politicians will grow a pair and we let global banks fail.

Yannis Caloghirou, an economics professor at the National Technical University of Athens, said: “Greece has become a battleground, at the EU level where policymakers have made the crisis worse with their lack of strategy and piecemeal approach, and among its own people who no longer have trust in institutions and the ability of the political system to solve the situation. My concern is that the country is slipping into ungovernability, that ultra-right groups and others will grab the moment.”

GR: As a person Mr. Caloghirou is entitled to his opinion. As an economics professor Mr. Caloghirou fails to grasp the dynamic that is afflicting Greece. A debt crisis is not due to lack of strategy and piecemeal approach. It is due to too much debt that has been piled on by deliberate political decree. So, the strategy was not so much lacking as it was aberrant.

Nineteen months into office the ruling socialists, riven by dissent and increasingly disgust over policies that ideologically many oppose, are likewise beginning to show the strain of containing the crisis, with the prime minister, George Papandreou, being forced publicly to whip truculent ministers into line.

A mass exodus of the nation’s brightest and best has added to fears that in addition to failing one or perhaps two generations, near-bankrupt Greece stands as never before to lose its intellectual class. “Nobody is speaking openly about this but the prospects for the Greek economy are going to get much worse as the brain drain accelerates and the country loses its best minds,” said Professor Lois Lambrianidis, who teaches regional economics at the University of Macedonia.

“Around 135,000, or 9% of tertiary educated Greeks, were living abroad and that was before the crisis began. They simply cannot find jobs in a service-oriented economy that depends on low-paid cheap labour.”

GR: Other than to say that exodus of  people whether bright or not is not a big deal, Mr. Lambrianidis hits the nail on the head although I suspect he does so unwittingly. Namely, Mr. Lambrianides identifies the problems of a service based economy but, from what we are given to understand from this limited quote, fails to realize that a service based economy is the inevitable consequence of debt based fiat money.

Just as in Arcadia where the young are choosing to start anew, Greece, he says, needs to rebuild itself if it is to survive its worst crisis in modern times.

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Remember my “tic,toc” posts?

May 5, 2010

Do a search on my blog and read any of the “tic,toc” or any of the “curtailing social expenditure…” posts.

And now the reality. Make no mistake. This will not be confined to Greece. This is what deflation does. Mobs have started roaming the streets looking for politicians and bankers to lynch.

The count down to global war has just sped up.

http://news.bbc.co.uk/2/hi/europe/8661385.stm

At least three people have been killed in the Greek capital as protesters set fire to a bank during a general strike over planned austerity measures.”

Something is not confirmed till government denies it – Spain

May 5, 2010

As goes Greece, so very likely will go Spain, Portugal and a whole swathe of countries inside and outside the European Union as well as individual US states.

The fact that, like Almunia a year ago, prime ministers, presidents, treasurers, the IMF, chairmen of the Federal Reserve and sundry should come out and state that something is complete nonsense and won’t happen only serves to confirm it will.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aUsUDgApn_wg&pos=1

Excerpt:

Spanish Prime Minister Jose Luis Rodriguez Zapatero said speculation of a bailout for Spain is “complete madness” and the nation has “strong solvency.””

Addendum:

It is 6am GMT and I just watched Zapatero on BBC World. The poor guy looks like a little kid whose been found out doing something stupid. Eyes agog, arms aflailing, corrugated forehead, head shaking in fake disbelief. A true cringe inducer this clip was.

Spain is toast.

No joy in confirmation…

February 25, 2010

Greece, Spain, Latvia, California, the UK, Italy… it could be anyone.  It really does not matter. What matters is that this is the clearest indication yet that our monetary system has hit a brick wall; a mathematical brick wall that is enshrined in a monetary logic predicated on accelerating credit and money creation at rates that far exceed the rate of growth of the economy.

The rationale for the use of an unchecked fiat monetary system is well established. Fine. Now we have to deal with the political and social consequences of said system. Namely, when the monetary system hits the wall as it did in the 30s and again in the late 60s and again today, the result is always the same i.e. excess debt, gross industrial overcapacity thus rising unemployment, declining purchasing power,  implosion of asset values with the direct result of a collapse of state tax revenues.

Under these circumstances, rolling over debt becomes increasingly difficult till the moment it becomes impossible. Try this for size. Just in the current year 2010 the USA will have to roll over something in the region of US$450Billion. That’s just the USA.

If you cannot spot the problem, here it is. In a US$ based fiat monetary system predicated on floating exchange rates as we have today globally, sovereign currencies derive their value from the value of other currencies. Hence, sovereign currencies derive their value from other sovereigns buying each other’s sovereign debt.

$450Billion is pretty much a whole chunk of the entire global sovereign ability to buy debt. This means that in order to succeed, the US government must attract virtually the entirety of budgets of most sovereigns thus leaving no funds available for countries to buy any other country’s debt…. ergo… the floating exchange rate mechanism as contemplated by our current monetary system is broken…. kaput; dead; it is no more; it is pushing up daisies;

Where do we go from here?

If our politicians were a sober well meaning bunch, I’d say we have nothing to worry about. A bit of austerity for a few years and we’ll be on our way again.

But politicians being what they are and operating in a legal and political environment that is geared towards ensuring expediency over efficiency or intrinsic value, I say a world war is a lock-in.

The problem starts with the inability of government to finance its requirements via tax revenue.  Thus government increasingly relies on the capital markets. As even the capital markets begin to show the strain, governments must curtail public spending.

http://cbs13.com/local/tracy.911.calls.2.1502690.html

Curtailing public spending brings you this:

http://news.sky.com/skynews/Home/World-News/Greece-Mass-Strike-Over-Tough-Economic-Measures-Sees-Country-Grind-To-A-Halt/Article/201002415558481?lpos=World_News_Second_Home_Page_Feature_Teaser_Region_0&lid=ARTICLE_15558481_Greece%3A_Mass_Strike_Over_Tough_Economic_Measures_Sees_Country_Grind_To_A_Halt_

http://www.businessweek.com/globalbiz/content/feb2010/gb20100224_114271.htm

http://www.independent.co.uk/news/world/europe/europes-winter-of-discontent-1908527.html

As you curtail public spending and as public anger rises, and as the shenanigans of the power elite keep coming to light(http://www.mcclatchydc.com/2010/02/24/88119/as-insurer-hiked-rates-39-executives.html

the public is sure to turn violent.

As the public turns violent, governments take the brunt of the violence and political control may be lost and anarchy and/or revolution ensue.

That’s the point at which governments must have done their homework well in advance and prepared a bogeyman somewhere off their shores so as to be able to, the moment come, turn the attention of the masses away from their own failings and the failings or our entire economic/social/political models.

WOAH…!!! (Greece and the rest of the Western world)

February 15, 2010

Here we go folks….

http://www.reuters.com/article/idUSLDE61824V20100209

From 1. Jan. 2011, every transaction above 1,500 euros between natural persons and businesses, or between businesses, will not be considered legal if it is done in cash. Transactions will have to be done through debit or credit cards

Greece under EU protectorate…

February 4, 2010

http://www.telegraph.co.uk/finance/economics/7150118/Greece-under-EU-protectorate-as-funds-shift-fire-to-Portugal.html

The article describes what is happening in terms of sovereigns trying to find a solution to their predicament. However, much more interesting are the themes the author touches upon but does not explore further. To wit:

Greece’s labour federation immediately called a general strike for February 24, dashing hopes that Europe’s provisional backing for Greek crisis policies would restore investor confidence.”

Unions, students and all unemployed will fight tooth and nail any austerity measure needed to put things right. As I remarked in many previous posts, over past decades society has developed an acute sense of entitlement vis a vis the state and rightly so. In a fiat monetary system, the authorities will always and everywhere confront a political or economic crisis with increased spending. Since 1913, subsequent administrations in the USA and then gradually in Europe and then the rest of the world, have always and still are resorting to inflation in order to solve any problem real or perceived as it may be. Inflation has thus come to be viewed as the natural state of the world and the state as the natural provider and the problem solver of last resort.

Of course, if you read this blog you will know that government spending can and does palliate the tragedy that is the political process in a society based on democratic principles. But that’s all it can do. Excess spending can only postpone the problem for as long as inflation can be expanded into a monetary system. When inflation hits the inevitable brick wall, then drastic measures are needed to re-create the conditions to allow the inflationary cycle to start again. In the meantime, deliberate inflationary policies pander to interest groups including unions and sundry political interest groups thus fostering an acute sense of entitlement. Thus, when the cows come home and spending must be curtailed, society will resist.

Mr Almunia said concerns have spread beyond Greece to other eurozone countries where public finances are spinning out of control, chiefly Spain and Portugal. “In these countries we have seen a constant loss of competitiveness ever since they joined the eurozone. The external financing needs are quite big,” he said.”

Considering that less than a year ago Almunia was boasting about the presumed commercial and financial advantages of EU membership, this is quite a change of heart. But then again. Almunia contradicts himself week in week out because, once again, political pandering is more important than effective action.

Brussels invoked new EU powers under Article 121 of the Lisbon Treaty, allowing it to reshape the structure of pensions, healthcare, labour markets and private commerce – a step-change in the level of EU intrusion.”

Right there is the more interesting tid bit of info that gets no attention whatever. Remember the Lisbon Treaty? Do you remember that it gave us a whole new layer of politicians that despite not being elected by the people have nonetheless serious executive power? Well there you go. But wait! This is not what is important. If you understand what is going on here, then you surely can understand the degree of political sovereignty we have surrendered to what is for all intents and purposes an entity that is very Fascist in inspiration… and now in deed. The more long range ramification of the Lisbon Treaty (and this so far is only speculation on my part) is the ability for the EU to declare war bypassing all traditional political mechanisms that would necessarily require various levels of approvals from civic and political entities alike.

The EU told Greece to “spell out the implementation calendar of (budget) measures within one month”. Athens must be ready to “adopt additional measures if needed” and to submit quarterly updates.”

So that’s what it comes to; threats. Which begs the question: what if Greece doesn’t play ball? Then what could the EU do? What; we are going to send the army to straighten the country out? What does this threat imply?

The gap between what EU demands and what ordinary Greeks seem willing to accept is so wide that it may prove extremely hard for Mr Papandreou carry the country. The top union bloc said the government had “succumbed to the will of the markets” but would now have to face the stronger will of the people.

The top union bloc, like all unions around the world and particularly in the West (with the exception of Germany) fails to grasp the situation. When the monetary authorities can no longer push inflation any farther, there is no money left for political pandering. Certainly there is no money left for political pandering at the level of the great unwashed. And this is what is going to light the tinderbox. The unemployed, the homeless, students, the elderly, the retired and, at some point, even the employed will notice that although we are contributing billions to save the banks, we have no money left for society… that is the point at which the masses begin to get twitchy… that is the point at which, Western governments are going to need a drastic solution…. which speaks to the whole point of this entire blog…

Our options are few and well defined. In order to avoid doing what is necessary, our leaders will plunge us in a world war. I stand by my prediction. War by 2013/2015.

Something is not confirmed till government denies it… (Greece)

January 31, 2010

… the more forceful the denial, the more confirmation something will occur…

And so it is I am reminded of this post when Almunia was already getting all hot and bothered, limbs aflailing saying they have a plan. The time for the plan is now folks.

But, apparently, now Almunia is saying we don’t need a plan because something everyone knows will happen will not happen. And since a plan is not needed, they don’t have a plan B either…

You can’t make this stuff up.

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7104762/Joaquin-Almunia-we-dont-need-a-Greek-bail-out-because-the-country-wont-default.html

Excertp:

No Greece will not default. In the euro area, the default does not exist,” he said. He suggested there was no question that a bailout would be necessary because Greece was a member of the single currency, which afforded it more funding options than would be the case if it was not a member of the euro.

As to why “democracy” can only lead to bankruptcy…

January 7, 2010

Though unwitting, this is the clearest elucidation as to why our political system loosely defined as “democratic” is bound to spend itself into oblivion.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/6942680/Euro-brinkmanship-escalates-as-ECB-shuts-door-on-Greek-bail-out.html

Excerpt:

“[the ruling party] PASOK made wildly unrealistic pledges to secure election last autumn and is now in the uncomfortable position of having to tear up its manifesto. This is potentially dangerous in a Left-leaning political culture where people have yet to accept the need for harsh medicine. Mere hints of austerity over the past two years have been enough to set off street riots, while Communist trade unions are already threatening to strike.”

Essentially, on one hand our governments have failed in their fiduciary duty to provide society with proper education. On the other hand, due in large part to this fundamental shortcoming, we have allowed our “leaders” to build a political and economic systems that can only exist provided inflation can be constantly expanded. Thus, politicians will always make outrageous promises in an attempt to garner votes because offering restraint and a reduction in expenditure is guaranteed never to be seen as a viable option.

So, the point at which inflation can no longer be expanded or, more correctly, the point at which forced inflation loses its traditional multiplier effect on nominal values, our political process prevents us from offering the only solution that would help us come out of this jam; that is, a reduction in expenditure thus a reduction in debt.

And so it is that as inflation loses its perceived effect on the expansion of wealth (which is only nominal rather than intrinsic) then governments become bankrupt. To be clear. Western governments have been fundamentally bankrupt for decades. The difference between then and today is that till very recently government could progressively borrow more thus giving the impression of being able to service its financial obligations and its social and military goals.

Today, the debt dynamic is broken. Government is bankrupt. Social expenditure must be and will be curtailed.

Before large numbers of the great unwashed start roaming the streets looking for some politician or banker to lynch, we’ll have us a world war.

I say 2013/2015 latest

Musical chairs of the dominos… (Greece, Portugal)

December 8, 2009

Who will be the first domino to keel over? Dubai? Greece? Portugal? Ukraine?… the United Kingdom?….  Round and round we go…

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/6755179/Greece-put-on-standby-for-debt-downgrade.html

Excerpts:

The agency placed the country [Greece] on credit watch negative, meaning it is likely to lose its A- rating within months. The country already has the lowest credit rating in the eurozone, but has come under greater scrutiny amid fears that its newly-elected government may avoid imposing significant cuts on the public finances. […] Mr Trichet indicated that the moves carried out so far by the new government had not been sufficient to arrest the fiscal crisis. He said to the European parliament: “we all know the very important and courageous decisions that will have to be taken” […] S&P also revised its outlook on Portugal’s sovereign-credit rating to “negative” from “stable”, blaming a deterioration in public finances. […] It [the agency] added that trimming the budget would likely be complicated by structural weaknesses in the economy and weak competitiveness that would hamper growth.

The emphasis is mine. Let me parse that for you. Public finances must be cut because state tax revenue is disappearing whilst we are simultaneously bailing out banks and corporations and we are financing military campaigns.

With regards to the “important” decisions Trichet alludes to, he means cutting social costs like mail delivery, public transport, refuse collection, road maintenance, health care and pensions to name but a few. That is because the money you have mandatorily contributed not only to taxes but towards health care  or pensions has never been saved. Governments make use of this money as it pours into the state coffers. The money is not there. The money that is supposed to be there is only represented by a book-keeping entry to signify that the government will eventually make good on your pension claim. The reason governments feel no compunction to physically set aside these funds is because governments feel confident in  perpetually expanding inflation. Thus governments are confident that by making use of the money received today, they will be able to pay it back in devalued currency in the future. Hence the reason that inflation is vital to the existence of government. Hence the reason that, in the absence of inflation, governments will become insolvent.

The “structural weakness” that hinders budget trimming schemes is unemployment whilst “weak competitiveness” mostly relates to excess industrial capacity.