Greg Palast on Mundell - The Euro as A Weapon of Mass Destruction

[C. Flower]

Interested to see that Greg Palast is visiting Ireland.

http://www.indymedia.ie/article/102035

Also interesting to see his article on Mundell, monetarism, and the Euro as a weapon of mass destruction, creating a crisis situation in which democracy, state property, and workers rights could be swept away in one state after another.

The euro would really do its work when crises hit, Mundell explained. Removing a government's control over currency would prevent nasty little elected officials from using Keynesian monetary and fiscal juice to pull a nation out of recession.

"It puts monetary policy out of the reach of politicians," he said. "[And] without fiscal policy, the only way nations can keep jobs is by the competitive reduction of rules on business."

He cited labor laws, environmental regulations and, of course, taxes. All would be flushed away by the euro. Democracy would not be allowed to interfere with the marketplace – or the plumbing.

Mundell explained to me that, in fact, the euro is of a piece with Reaganomics:

"Monetary discipline forces fiscal discipline on the politicians as well."

And when crises arise, economically disarmed nations have little to do but wipe away government regulations wholesale, privatize state industries en masse, slash taxes and send the European welfare state down the drain.

http://www.guardian.co.uk/commentisf...il-genius-euro

There has been a very conscious use of the Euro to drive these right wing politics through, behind the backs of voters, who have constantly been lied to about the real intent of their European project.

How much longer are people going to be fooled ?

[fluffybiscuits]

Interested to see that Greg Palast is visiting Ireland.

http://www.indymedia.ie/article/102035

Also interesting to see his article on Mundell, monetarism, and the Euro as a weapon of mass destruction, creating a crisis situation in which democracy, state property, and workers rights could be swept away in one state after another.





http://www.guardian.co.uk/commentisf...il-genius-euro

There has been a very conscious use of the Euro to drive these right wing politics through, behind the backs of voters, who have constantly been lied to about the real intent of their European project.

How much longer are people going to be fooled ?

That is an incredible claim that has been put forward but look at the evidence that is in place. Just as the economic situation worsens in Europe we see a massive swing to the right in some countries where there is a lot of economic trouble . A lot of the measures are anti worker too. The redundancy of staff, their emmigration,lowering of wages and the brain drain to other economic states that need the staff virtue of people being forced to leave due to lack of opportunity. Beat the proleteriat often enough and a lot will simply give up or even worse, suicide...

[rebellin]

The Euro Was Intended To Destroy the Nations of Europe

"The idea that the euro has 'failed' is dangerously naive. The euro is doing exactly what its progenitor — and the wealthy 1%-ers who adopted it — predicted and planned for it to do." So wrote Greg Palast in Tuesday's London Guardian, noting that the progenitor, Robert Mundell, saw the euro as "a weapon that would blow away government rules and labor regulations." "I knew him [Mundell] through his connection to my [U. of] Chicago professor, Milton Friedman," Palast added.

Palast described Mundell's view thusly: "The euro would really do its work when crises hit, Mundell explained. Removing a government's control over currency would prevent nasty little elected officials from using Keynesian monetary and fiscal juice to pull a nation out of recession. 'It puts monetary policy out of the reach of politicians,' he said. '[And] without fiscal policy, the only way nations can keep jobs is by the competitive reduction of rules on business.' He cited labor laws, environmental regulations and, of course, taxes. All would be flushed away by the euro. Democracy would not be allowed to interfere with the marketplace — or the plumbing.

Palast continued: "Mundell explained to me that, in fact, the euro is of a piece with Reaganomics: 'Monetary discipline forces fiscal discipline on the politicians as well.' And when crises arise, economically disarmed nations have little to do but wipe away government regulations wholesale, privatize state industries en masse, slash taxes and send the European welfare state down the drain."

The term "structural reforms" is "a euphemism for worker-crushing schemes," Palast wrote, adding that the "currency union is class war by other means." "Far from failing, the euro, which was Mundell's baby, has succeeded probably beyond its progenitor's wildest dreams."

http://laroucheirishbrigade.wordpres...ons-of-europe/

[C. Flower]

That is an incredible claim that has been put forward but look at the evidence that is in place. Just as the economic situation worsens in Europe we see a massive swing to the right in some countries where there is a lot of economic trouble . A lot of the measures are anti worker too. The redundancy of staff, their emmigration,lowering of wages and the brain drain to other economic states that need the staff virtue of people being forced to leave due to lack of opportunity. Beat the proleteriat often enough and a lot will simply give up or even worse, suicide...

The "structural reforms" that are conditional on bailouts are about changes to national law, reduction of minimum wage, ability to sack workers on whim, etc. etc.

This is the main Troika strategy, along with privatising public services and resources.

[Yojimbo]

One of the underlying drivers behind the Euro was the vague hope among people outside Germany was that it would make their governments a bit more German-like and responsible. I think this is still a pretty popular notion - witness the strong support within Greece for staying in the Euro despite everything. Greeks remember what it was like to have a currency under the control of their elite.

While Palast as usual (entertainingly) lets the conspiracy theory rip, the more prosaic truth is that the architects of the Euro were well aware that it was badly designed and that it would provoke a crisis inevitably - but I think the architects were convinced it would create a political situation where more political and fiscal unity became inevitable. I don't doubt that the Libertarian strain that is often found in northern European politics (despite largely social democratic-lite systems) was influential in thinking that they would benefit more from chaos than anyone else. Libertarians are increasingly reminding me of Leninists, they have the same vaguely sociopathic long term view of what is good for everyone.

[C. Flower]

One of the underlying drivers behind the Euro was the vague hope among people outside Germany was that it would make their governments a bit more German-like and responsible. I think this is still a pretty popular notion - witness the strong support within Greece for staying in the Euro despite everything. Greeks remember what it was like to have a currency under the control of their elite.

While Palast as usual (entertainingly) lets the conspiracy theory rip, the more prosaic truth is that the architects of the Euro were well aware that it was badly designed and that it would provoke a crisis inevitably - but I think the architects were convinced it would create a political situation where more political and fiscal unity became inevitable. I don't doubt that the Libertarian strain that is often found in northern European politics (despite largely social democratic-lite systems) was influential in thinking that they would benefit more from chaos than anyone else. Libertarians are increasingly reminding me of Leninists, they have the same vaguely sociopathic long term view of what is good for everyone.

But where (or what?) is the conspiracy theory? I'm reading a text published in 2000 published by the Financial Times with Prentice Hall called "High Finance in the Euro-Zone" (Walter and Smith). It says more or less the same as Palast, but views the same developments in a favourable light.

The book is even overt that the dismantling of workers rights would (they hoped) take place in such a way that by the time people noticed it was going on, it would be too late to oppose it. I will provide the quotation if I can locate it.

The Thatcher - Reagan project was more than just a trend in thinking - there was a concerted push to use the political system to implement monetarism, and Merkel continues in the same tradition, with the same project.

I think that self interest was constantly the driver for "ever closer union" - you will get structural funds - business costs will fall - economies of scale etc. et. The dangers of uneven development throughout the eurozone were noted, but minds were on what appeared to be irresistible benefits.

Is there any possible design of the Euro that is not bad, apart from one that would involve a redistributive budget and equal economic and social aspirations for all Euro state citizens ? That is not going to come without battle royal against the likes of Merkel, Draghi, Noonan, and the rest of them.

Cute capitalists know that their system is one of booms and crunches, and they have learned to make the most of a good crisis.

I don't think anyone is suggesting that they deliberately create crises, apart from a few over-suspicious people who take a quasi-religious view of economics.

Palast is also right that the Mundell solution is no solution at all.

Mundell explained to me that, in fact, the euro is of a piece with Reaganomics:

"Monetary discipline forces fiscal discipline on the politicians as well."

And when crises arise, economically disarmed nations have little to do but wipe away government regulations wholesale, privatize state industries en masse, slash taxes and send the European welfare state down the drain.

Thus, we see that (unelected) Prime Minister Mario Monti is demanding labor law "reform" in Italy to make it easier for employers like Mundell to fire those Tuscan plumbers. Mario Draghi, the (unelected) head of the European Central Bank, is calling for "structural reforms" – a euphemism for worker-crushing schemes. They cite the nebulous theory that this "internal devaluation" of each nation will make them all more competitive.

Monti and Draghi cannot credibly explain how, if every country in the Continent cheapens its workforce, any can gain a competitive advantage.
But they don't have to explain their policies; they just have to let the markets go to work on each nation's bonds. Hence, currency union is class war by other means.

[Yojimbo]

But where (or what?) is the conspiracy theory? I'm reading a text published in 2000 published by the Financial Times with Prentice Hall called "High Finance in the Euro-Zone" (Walter and Smith). It says more or less the same as Palast, but views the same developments in a favourable light.

The book is even overt that the dismantling of workers rights would (they hoped) take place in such a way that by the time people noticed it was going on, it would be too late to oppose it. I will provide the quotation if I can locate it.

The Thatcher - Reagan project was more than just a trend in thinking - there was a concerted push to use the political system to implement monetarism, and Merkel continues in the same tradition, with the same project.

I think that self interest was constantly the driver for "ever closer union" - you will get structural funds - business costs will fall - economies of scale etc. et. The dangers of uneven development throughout the eurozone were noted, but minds were on what appeared to be irresistible benefits.

Is there any possible design of the Euro that is not bad, apart from one that would involve a redistributive budget and equal economic and social aspirations for all Euro state citizens ? That is not going to come without battle royal against the likes of Merkel, Draghi, Noonan, and the rest of them.

Cute capitalists know that their system is one of booms and crunches, and they have learned to make the most of a good crisis.

I don't think anyone is suggesting that they deliberately create crises, apart from a few over-suspicious people who take a quasi-religious view of economics.

Palast is also right that the Mundell solution is no solution at all.

I see the 'conspiracy theory' aspect the implication that a bunch of right wingers were sitting around and came up with the Euro as a wheeze to destroy social protections - lots of people, from left and right were on the Euro bankwagon (and I have to confess to once being an enthusiast myself, I still kick myself for not reading deeper into the subject). There was certainly some thinking that the Euro would undermine the rigid systems in Mediterranean countries where social protection programmes are often very corrupt and inefficiently designed (hence the use of government jobs as a sort of proto-unemployment benefit). But that wasn't necessarily a bad aim.

[riposte]

Eurozone crisis live: IMF issues euro warning

14:42 BST

The full statement issued by the IMF on the state of the eurozone (see 14.29) is now online here.

It includes this blunt warning:

The euro area crisis has intensified. Adverse links between banks, sovereigns, and the real economy have deepened, driving sovereign borrowing costs and risk premiums to record levels. Investors are withholding funding from member states most in need, moving capital "north" and abroad to perceived safer assets. This has contributed to divergences in liquidity conditions and lending rates within the euro area, adding to already-severe pressures on many bank and sovereign balance sheets and raising questions about the viability of the monetary union itself.

Economic activity has weakened and is likely to remain subdued, particularly in the hard-hit periphery countries.

Updated at 14:44 BST
14:29 BST
IMF calls on ECB to act

The International Monetary Fund is pleading with the European Central Bank to do more to fix the eurozone crisis.

In a report released at 2pm, the IMF said the ECB could, and should, do more to prevent the euro unravelling, arguing:

The ECB can provide further defences against an escalation of the crisis.

Its recommendations included

• considering further interest rate cuts

• A "sizeable" quantitative easing package, to stimulate the eurozone economy

• giving the ECB full 'lender of last resort' powers

• restarting its Securities Markets Progamme (to buy up peripheral sovereign debt)

Suggestions 2, 3 and 4 are unlikely to be welcomed by stronger members of the eurozone (think Germany, Austria, Finland...) who could also fear that lower interest rates would drive inflation up.

The IMF, though (which expects the eurozone to contract by 0.3% this year) is again insisting that the ECB must do more:

These could include policies to support demand in the short run and fend off downside risks to inflation, as well as measures to ensure that monetary transmission, currently impaired by financial stress in some countries.

There are problems with the IMF's suggestions, though. QE would probably drag down the yields on safer bonds (awkward, when some are in negative territory already), while Germany is wedded to the idea that closer fiscal union needs to be arranged before the ECB is granted more powers.

http://www.guardian.co.uk/business/2...e37695247b8eb8

[Yojimbo]

Yanis Varoufakis

In summary, borrowing costs in the Eurozone have lost their two anchors: the inter-bank lending rate (courtesy of the sad reality that the banks no longer lend one another) and the overnight ECB interest rate (which banks ignore when lending). The key to understanding this breakdown is governor Noyer’s phrase “the interest rate facing individual private banks depends on the funding costs of the state where they are domiciled and not on the ECB overnight interest rate”. In short, the fear of a disintegration of the Eurozone (that is aided and abetted by silly talk of Greece’s and Portugal’s expulsion) has broken the umbilical cord that normally connects the ECB’s overnight rate with actual borrowing costs of the private sector. Now, the later reflect the fear that the member-state in which the firm or the household are will not be able to refinance itself. In a never-ending circle this fear ensures that the said member-state will not be able to refinance itself and, crucially, guarantees the ECB’s failure to lower interest rates even when it pushes its official rates to zero. This is what a monetary union on the verge of collapse looks like.

http://yanisvaroufakis.eu/2012/07/17...tem-is-broken/

[C. Flower]

Yanis Varoufakis


http://yanisvaroufakis.eu/2012/07/17...tem-is-broken/

While a lot of focus has been put on speculating about individual states leaving the eurozone, there has been a gradual disintegration process going on across the whole zone, with a reduction of cross-border lending and borrowing and a shift to basing transactions on the strength or weakness of the national economy, rather than on eurozone membership. The message is that there is no euro fraternity, but dog eat dog.

Rather than states dropping off the eurozone one at a time, at this stage we are seeing incremental cross-region shifts to carrying out business within national borders.

[riposte]

Euro Falling

After a long lead in time ...... the breakup could happen very quickly.

The euro fell 0.2 percent to hit a low of 78.30 pence, the fourth day running it has marked its lowest level since late 2008

The UK pound rose to its highest in 3-1/2 years against the euro on Wednesday after reporting of comments from German Chancellor Angela Merkel on the euro project spooked investors and encouraged them to sell the euro for safer alternatives.

http://uk.reuters.com/article/2012/0...oreignExchange

[Kev Bar]

Shame I missed that. We should have an upcoming events thread.