As the EU drops the hammer on Greece this weekend saying that the country has to go along with brutal austerity measures including minimum wage and pension cuts or else no bailout and and a default, Irish economist David McWilliams offers this clever 10-minute explanation of the European debt crisis.
Please note that the EU’s approach to what Greece needs to do: massive social cuts, forced austerity, balanced budgets enforced by law at the sovereign level, getting rid of the minimum wage, etc. is what Republicans say we have to do here now because our “debt crisis is even worse”. And as McWilliams points out, the real winners are the banks and the one percent.
After all, none of them get government money. All that goes to those various Others: welfare queens, crony capitalists, moochers and looters. Certainly none of that money goes to people who need it, and absolutely not any of it goes to the one percent. Nope.
PeakVT
Did this post take a while to appear for other people?
Anyway, Greece should really tell the EU and, specifically, the Germans to shove it, but it won’t, because the Greek elite don’t want that.
Mino
Maybe they will all come here. Republicans would be happy to have them and Dems would appreciate their restaurants and their voting habits. Win, win.
Show the globalists that labor is moveable, too. Wonder what that would do to their calculations?
Seriously, I thought the WB was having misgivings about this route.
Short Bus Bully
Eventually the elite are going to recognize that they are creating Jacobin type resistance and the whole thing is going to fall if they don’t chill the fuck out with this Dickens inspired austerity trip.
American elites need to pay attention. Us plebes will only sit quiet for so long.
Linda Featheringill
@Short Bus Bully:
Actually, I pretty much agree with you. Traditionally, the working class in Europe has been less passive that we are in the US.
I think that the powers that be in Europe are threatening the existence of the European Union and might be threatening capitalism.
Workers in Europe know how to cooperate. They don’t always do it but they know how.
Bill Murray
@Mino:
It will be like the time just before the Civil War when the losers of 1848 moved to the Midwest and turned that area all populist
aretino
The troika is like Lucy with the freaking football. Every few weeks they have a new set of demands, and they say if Greece will just go along this time, then that 130 billion euro check will really, really be in the mail.
Ron Beasley
It looks like the Greeks may be about to tell the German Banks and technocrats to go f#*k themselves. The house of Greek president Papoulias was attacked last night.
Peter
Having read about the rampant corruption and tax fraud that sunk Greece into this whole to begin with, I’m not as sympathetic towards Greece as I might be. But this is pretty gross on Germany’s part.
fasteddie9318
@PeakVT: Because they’re not the “Greek elite” anymore. The elite are the elite, without the petty national allegiances of the untouchables.
I do wonder how fast those bunnies are going to run when the pitchforks really come out…
Ron Beasley
@Peter: I agree. The Greeks apparently weren’t very good a collecting taxes. The top 20% apparently paid no taxes at all.
Another Halocene Human
Agreed to the other posters that mentioned the elephant in the room–non-payment of taxes.
Why oh why have Germany and France not gone and and insisted that taxes be paid? Hell, even GWB finally got around to that by the end of his second term, going after the scofflaws who had bragged about not filing at the start of his first.
If Greece were facing SHARED SACRIFICE, first of all, they wouldn’t need “austerity into the the stone age” measures, which as the video rightly points out, don’t even work, and they wouldn’t have the populace rioting and sharpening their pitchforks…
If they made serious efforts to force scofflaws to pay after two years or so it would be self-reinforcing because nobody wants to watch their neighbor not pay while they are paying. (The black market, which doesn’t pay VAT, would shrink as well.)
Mike G
@Ron Beasley:
It’s the Republican dream!
Cain
@Ron Beasley:
Seems to me, they can give the finger to the EU, and instead start collecting back taxes for everyone in the 20% for the past 15 years and see how well things go. If there is going to be a war, it might as well be against the 20%.
Brian
Post topic aside. Thank you for the trogdor reference. I have not seen homestar runner in years. You are my favorite from now on.
marcopolo
I just want to say that I really really like these white board graphic illustrated explanation of things. I recall a very nice one discussion the problems with our current education situation among others. I applaud all attempts to rethink how we share information with each other!
West of the Cascades
@Peter: Evidently in what passes for economic warfare the German banks officially are now the winners. Back in the day, folks of Germanic stock referred to these sorts of punitive demands as “reparations” which winners shoved down the throats of losers, as least when actual warfare was involved about a century ago. They had a variety of unpleasant repercussions back then, and I’m sort of surprised that the Germans didn’t learn anything from that.
Ron Beasley
@Another Halocene Human: I think the Germans actually sent some technocrats to Greece to teach them how to collect taxes. I read somewhere they were using Google Earth to find swimming pools – they have a pool tax.
burnspbesq
This is pretty close to a no-brainer at this point.
Default, exit the Euro, devalue the New Drachma, and learn to collect some fucking tax revenue.
If you can’t make a self-assessment system work, then require withholding on every payment imaginable, and require people to prove they’re entitled to a refund.
Peter
@burnspbesq: This. It’ll suck but it won’t suck harder than any of the other options and it’ll actually give them a chance of one day having an economy that’s worth a piss in a pot.
Greece should have never been allowed to join the Euro to begin with. The only reason it was is that the old government cooked the books hardcore, and none of the genius economic minds thought to question why Greece was taking out new loans twice as large as its total on-the-books budget deficit.
Michael Finn
The video didn’t get at the heart of the problem. Which is that all of these countries are being treated like corporations which issue debt to fund themselves. Instead of being viewed as a sovereign country which can always print money or inflate their way out of debt. This is only going to stop happening if Germany agrees to let the Euro depreciate through Euro bonds instead of individual country bonds. They are the savers in Europe, to the tune of approximately $80 billion a year which is coming from the peripheral countries. Until they agree to do this, this crisis is going to go on and on and on…
As for Greece… Those poor people are just fucked. They cannot get out of their debts no matter what they do. They could leave the Euro but their debts are still in Euros. The books are a mess from which they make Lehman Brothers look competent.
Nicole
That video was awesome.
jdrs0819
Ironically, this dude is a Milton Friedman fan.
Michael Finn
@jdrs0819: That was why he was for the banks failing in the video, they took chances and they should have to pay the piper (fairness).
The problem is that if that happens then the banking system of said country collapses. It isn’t like the United States of America where we have something like 8K banks and 7K credit unions, countries tend to have four to five banks total. I think Ireland has something like three gigantic ones. If one of those went down then the entire economy would stall like the engine fell out of a car while driving 40MPH because credit is the fuel.
Ron Beasley
@Michael Finn: It doesn’t have to happen that way. The banks can simply be nationalized – the stock holders lose out but the bank continues to function. That’s what they did in Sweden and it worked out well.
Walker
@Michael Finn:
If they can leave the Euro, then they are fine. They just default. Iceland survived that and was able to get reasonable credit rates in a short period of time.
The problem is leaving the Euro (which keeps them from defaulting), not the debt.
Michael Finn
@Ron Beasley: [email protected]Ron Beasley:
Yes but the credit default swaps that are held by the rest of European banks are many times greater today than they were back then, especially since Europe ordered all of it’s banks to get rid of it’s toxic assets (sovereign bonds in this case)which dumped them onto hedge funds who are going to hold their balls to the fire. Those hedge funds bought so many default swaps it’s just not funny anymore. They can keep this hostage situation going.
@Walker:
Iceland was lucky, in a sense. Their stupidity wasn’t big enough to attract attention.
This isn’t just about Greece anymore. If they default, they will take down rest of Europe by causing the bond rates in those countries to skyrocket, which means it would cause the rest of the dominoes to come falling down. It could even drop the Euro down to parity with the dollar (imagine everybody in a continent losing 30% of their wealth)because you can have inflation if nobody believes that currency is going to be around the next day.
The rest of Europe cannot let that happen. They will enforce repayments from the Greeks to the point of armed occupation before that happens.
Things cannot get worse for the Greeks, short of the bird flu.
RightKlik
“the one percent”
various Others
The prophet Nostradumbass
@Walker: Iceland were never in the Eurozone to begin with.
MonkeyBoy
The recently linked Krugman video got toward the real heart of the matter. The way out of a recession is with increased government spending. However this needs an increased money supply which will lead to increased inflation, say from 1% to 3%.
The wealthy (individuals and banks) do not like inflation because it will decrease the value of their wealth and they would rather try to squeeze blood out of turnips.
Wage earners also don’t like inflation because it means that they can buy less with their pay. But at least inflation is fairly equitable as really being a just a flat tax.
So the rich come up with the “confidence fairy” argument where somehow increased inflation will make people leery of investing in business and will necessarily kill growth – just because they say so not from historical evidence.
So since the wealthy don’t want to pay the inflation tax they kill the economy in a way that lets them hold on to their wealth.
GARY CAMPBELL - So the BITCHEZ CAN READ IT-IF they can READ!
Let the greek people tell them clearly, “Back the fuck off, take your stinkin losses, because if you don’t we are going to burn your houses and businesses to the ground, rape your women and cut your balls off and stuff them in your mouth you sorry cocksuckers!
What makes you think you are so entitled to rule over us?
Fuck you elites, protect your women and children, but we are going to kill you all and reset the world.
That’s the message for the elites today.
I for one look forward to the beginning!
mclaren
Think bigger. Europe slides into the toilet economically until things get so bad that that the riots in the street and the mass strikes and the workers occupying hospitals and post officers and steel plants get so violent that even the army can’t root ’em out.
When Europe collapses economically, whaddaya think happens to America?
Not good for Obama’s re-election prospects, alas.
BruceK
It’s getting more than a little uncomfortable in Greece – and it doesn’t match the international narratives, either. For example, a lot of cash is being pulled from the in-country banks, and contrary to what the pundits think, the majority isn’t being salted away overseas – it’s either gone to pay the emergency taxes – in my case, something like 75% of my take-home this month has to go to that emergency property tax, so I’ve got no choice but to dip into savings if I want to do things like eat this month, and I’m one of the luckier ones – or it’s being hoarded by the less well-to-do against the possibility of Greece going off the euro and suffering a new-drachma inflation crash. Which leads to things like home invasions by people looking for others’ euro stashes.
And there’s the whole issue of it being Germany, of all nations, trying to take a leading role in determining Greek national policy. The last time that sort of foreign meddling happened is still within living memory for a lot of people here (and the Greek response that time is one of the top three national holidays hereabouts).
Oh, and do we even have to go into the negative impact austerity’s had here? Retail sales to ordinary people are dropping off a cliff because the ordinary people are flat-out running out of discretionary income. The less-well-off are choosing between food and heat, and after the taxes are paid – assuming they can be afforded and people don’t end up falling short and getting their electricity cut to boot – a lot of people can’t afford either.
Oh, and then there are the calls coming from places like Berlin saying that everyone in the private sector needs to take a 14% pay cut at the same time their taxes are being hiked to the breaking point. (Look at everyone complaining about extra paychecks being received in the summer and at Christmas. That’s not a bonus – that’s the result of calculating one’s salary on an annual basis, and then dividing it into 14 pieces instead of 12. A 12-inch pie is going to be smaller than a 16-inch pie no matter how it’s sliced, and the guy looking at a 12-inch pie cut into 14 pieces is gonna be pissed if he’s told to throw away two slices by a guy enjoying his 12 slices of 16-inch pie.)
That’s sort of the view on the ground here, and while a lot of people are angry with the domestic government in general – to the point of incoherence and senseless violence a lot of the time – being denounced as a profligate when you’re trying to decide whether to deny your kids food or heat is not going to go down well.
The Raven
When the Greeks start starving, will they default?
We corvids are circling…
John Alexander
Do not overlook the fact that Greece mis-stated their books for years to the EU and the world. They just plain lied about their balance sheet. That is why EU wants some control over Greek finances going forward. We the public should also insist in exchange that big finance also be subject to a serious haircut and additional oversight!
Those who lent those precious euros to Greece to support XYZ (whether it be social benefits or ridiculous military or un-neccessary projects) those lenders should be liable for not doing their homework. This is really not much different than what IMF has been doing to the un-developed/developing nations for many years! It’s about time the public caught-on to this game.
The former Greek politicans are ultimately the ones most responsible for getting Greece into the mess it currently finds itself. After me the flood I guess? Or perhaps something more sinister was at play?
No, you cannot blame average Greek citizen for accepting social programs that the economy cannot afford. How many people really would say: “No, I’d rather forgoe my pension for another 10 years and continue working”?
As the interesting video shows; In the end the poor sucker and his sucker kids and their sucker grandkids pay the bills for a government and financial industry run amuck!