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Thread: Yanis Varoufakis - New Bottle, Old Keynesian Wine

  1. #16
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    Default Re: Yanis Varoufakis - New Bottle, Old Keynesian Wine

    We should save Capitalist structures because the left died in 1989?
    Worthy of a thread in itself, maybe.
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    Default Re: Yanis Varoufakis - New Bottle, Old Keynesian Wine

    Quote Originally Posted by Griska View Post
    We should save Capitalist structures because the left died in 1989?
    Worthy of a thread in itself, maybe.
    If there was such was started, and I hope it's not, it would have to the title of Martin Luther King's famous sermon "Sleeping Through the Revolution". Dr King, of course, did not use the excuse of the failures of the past, to put his life on nthe line in the U.S. Civil Rights Movement.

    Since the response was written to C Flowers, I am anxious to read what Flowers makes of it. But, I will say, in my first read through, it doesn't change my negative impression of his Irish speech, and only reinforces it.

    History is rife with examples of those who aptly criticized the enemy until it came time to facing him in battle.

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    Default Re: Yanis Varoufakis - New Bottle, Old Keynesian Wine

    My comment: A blog post of this is requested if possible.

    Hi Yanis, How are things?. Hope it’s as hot in Athens as it is in Dijon, France today. I am on C.Flower’s rapidly growing Irish site, so I was interested in her reply to your recent talk, and your equally interesting reply to her in turn. I also believe that C. Flower did simplify the crisis somewhat, though she was correct in her analysis of the falling average rate of profit in my view. This of course leads to falling wages, and increased austerity(or to use a less imperialist term which you might consider adapting, state extortion) as the running dogs of the imperialist system that are bosses and politicians then race together to catch the rabbit by the neck and squeeze the life out of society.

    I feel that Private property itself and it’s numerous global boom/busts in the last 40 years, the flow of untaxed invisible hotmoney which is theoretically worthless yet practically systemic to neo liberalism, have accelerated the demise of imperialist economics. I do not believe that capitalism existed. Perhaps it never truly existed because there have always been oligopoly like structures as far as I can tell from the relatively intermediary economics that I have so far studied. The baker over the street job(or theory if you like, sorry I forget I am not speaking to other Irish people sometimes) offering cheaper bread than his 2 local rivals is literally if you watch Michael Moores capitalism a Love story, straight out of a MCarthyist US propaganda film.

    I don’t believe we should look at preserving a failed and evil economic system for the sake of fearing a return of Nazism. Firstly to imply that the only possible alternative to imperialism is Nazism is an insult to progressives and revolutionaries all that they stand for, or at least it can come across as relatively dismissive of a better more democratic way of owning the means of production. I use the term revolutionaries because we do, in the view of millions of people around the world, live in revolutionary times. Yanis’s own country is probably the most revolutionary one right now-obviously I am saying this as a total outsider but I believe that the demands of increasing numbers of Greek protesters are Direct Democracy and a revolutionary economic system under the political will of the people, just like the people currently occupying Wall Street, marching across Israel and Palestine and elsewhere in the Middle East, and the hundreds or even thousands who will hit Brussels on October the 15th for the 15.O Democratic protest against the undemocratic and inequal nature of the imperialist EU system. I think that perhaps I will join them as I am 6 hours from Brussels by bus, if I can find anyone who wants to tag along.

    Not only does democracy not exist in my view, but nor does capitalism. I believe we live in an imperialist system. That is why 99% of the western world’s banks since 2008 have been kept alive merely for the sake of a few brown envelopes and in my view, because German Bondholders such as certain Irish finance ministers, might have been Irish banking bondholders themselves-and considering that the Greek Prime Minister sold 1.3 bn in CDS’s that are now worth about 30bn USD a few years back, I would guess that this is politicians simply saving themselves and their mates in the banks and big developers as well, rather than capitalism(hence why they have created the imperialist system-not a system of risk and reward with inherent inequality, poverty, mass death when medecine could easily be afforded if it were made public to all, and war, but rather one of low tax breaks at all costs, and bailing the running dogs that are the different vested interests of the bourgoisie-mates of politicians more or less-out of the kennel).

    I am sorry if I did not have the eloquence and detailed quotes that your replies respectively deserved. Finally might I add, that we Irish have a word for the bourgeois. It’s called a Gombeen, which comes form the Irish word Gombin. During the great hunger of the 1840′s and 1850′s in Ireland, Irish and English elites(many of them Irish too) loaned to the impoverished sections of society at unaffordable rates to buy food, basically making slaves out of a fifth-half(or more, who knows the real figures. officially a million and a half died or left) of the country’s population. Hence the word Gombin/Gombeen which means a shady dealer who is borderline evil that profits out of the suffering of others. If the globalisation of gombeenism that is not enough of a reason to revolutionize against imperialism, I don’t know what is.

  4. #19
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    Default Re: Yanis Varoufakis - New Bottle, Old Keynesian Wine

    Quote Originally Posted by Apjp View Post
    My comment: A blog post of this is requested if possible.

    Hi Yanis, How are things?. Hope it’s as hot in Athens as it is in Dijon, France today. I am on C.Flower’s rapidly growing Irish site, so I was interested in her reply to your recent talk, and your equally interesting reply to her in turn. I also believe that C. Flower did simplify the crisis somewhat, though she was correct in her analysis of the falling average rate of profit in my view. This of course leads to falling wages, and increased austerity(or to use a less imperialist term which you might consider adapting, state extortion) as the running dogs of the imperialist system that are bosses and politicians then race together to catch the rabbit by the neck and squeeze the life out of society.

    I feel that Private property itself and it’s numerous global boom/busts in the last 40 years, the flow of untaxed invisible hotmoney which is theoretically worthless yet practically systemic to neo liberalism, have accelerated the demise of imperialist economics. I do not believe that capitalism existed. Perhaps it never truly existed because there have always been oligopoly like structures as far as I can tell from the relatively intermediary economics that I have so far studied. The baker over the street job(or theory if you like, sorry I forget I am not speaking to other Irish people sometimes) offering cheaper bread than his 2 local rivals is literally if you watch Michael Moores capitalism a Love story, straight out of a MCarthyist US propaganda film.

    I don’t believe we should look at preserving a failed and evil economic system for the sake of fearing a return of Nazism. Firstly to imply that the only possible alternative to imperialism is Nazism is an insult to progressives and revolutionaries all that they stand for, or at least it can come across as relatively dismissive of a better more democratic way of owning the means of production. I use the term revolutionaries because we do, in the view of millions of people around the world, live in revolutionary times. Yanis’s own country is probably the most revolutionary one right now-obviously I am saying this as a total outsider but I believe that the demands of increasing numbers of Greek protesters are Direct Democracy and a revolutionary economic system under the political will of the people, just like the people currently occupying Wall Street, marching across Israel and Palestine and elsewhere in the Middle East, and the hundreds or even thousands who will hit Brussels on October the 15th for the 15.O Democratic protest against the undemocratic and inequal nature of the imperialist EU system. I think that perhaps I will join them as I am 6 hours from Brussels by bus, if I can find anyone who wants to tag along.

    Not only does democracy not exist in my view, but nor does capitalism. I believe we live in an imperialist system. That is why 99% of the western world’s banks since 2008 have been kept alive merely for the sake of a few brown envelopes and in my view, because German Bondholders such as certain Irish finance ministers, might have been Irish banking bondholders themselves-and considering that the Greek Prime Minister sold 1.3 bn in CDS’s that are now worth about 30bn USD a few years back, I would guess that this is politicians simply saving themselves and their mates in the banks and big developers as well, rather than capitalism(hence why they have created the imperialist system-not a system of risk and reward with inherent inequality, poverty, mass death when medecine could easily be afforded if it were made public to all, and war, but rather one of low tax breaks at all costs, and bailing the running dogs that are the different vested interests of the bourgoisie-mates of politicians more or less-out of the kennel).

    I am sorry if I did not have the eloquence and detailed quotes that your replies respectively deserved. Finally might I add, that we Irish have a word for the bourgeois. It’s called a Gombeen, which comes form the Irish word Gombin. During the great hunger of the 1840′s and 1850′s in Ireland, Irish and English elites(many of them Irish too) loaned to the impoverished sections of society at unaffordable rates to buy food, basically making slaves out of a fifth-half(or more, who knows the real figures. officially a million and a half died or left) of the country’s population. Hence the word Gombin/Gombeen which means a shady dealer who is borderline evil that profits out of the suffering of others. If the globalisation of gombeenism that is not enough of a reason to revolutionize against imperialism, I don’t know what is.
    I think your post is right on. Between you and C Flowers I hope Yanis will reexamine his conclusions.

    I think that the Gombeen image is a perfect indictment of globalization-- and is the viceral reason many indignatos are organizing for a revolution against the imperialism that is killing their countries. I look forward to your participation in the October demonstration in Brussels with a big green banner that saysown with Gombeen Globalization
    Educating a Renaissance...http://www.laroucheirishbrigade.com//

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    Default Re: Yanis Varoufakis - New Bottle, Old Keynesian Wine

    A 2-prong strategy is required for Greece: (a) get the household in order and (b) develop the economy. All the brainpower so far is focusing on getting the household in order and solving the debt issue. In reality, first has to come a viable Business Plan for the Greek economy (including getting the household in order) and with that plan in hand, one can negotiate a solution to the debt problem. The internet is full of proposals regarding the latter but little, if anything, has been proposed regarding the former.

    Regarding possible solutions to the debt problem, Varoufakis's Modest Proposal may work or may not work. One never knows ahead of time. But it is the most convincing one to me so far. My own proposal would be a much simpler one: follow the traditional strategy of a debt rescheduling - reschedule the debt with existing creditors by moving way into the future the maturities of principal and much of the interest. If Greece has about 150 billion EUR more debt than she can handle today, the solution is not a haircut. The solution is to reschedule this amount out to 30 years or more and capitalize the interest. And the remainder is scheduled out to shorter periods with interest payable from the start in amounts which are deemed to be "bearable" for Greece (e. g. 12% of budget expenses).

    Nevertheless, I leave the financial engineering to others and, as said before, Varoufakis' proposal seems a workable one.

    As a former banker, I would not want to enter into any rescheduling discussions with a borrower without first seeing the borrower's Business Plan for a viable future. A Business Plan for Greece should be a plan which shows how the Greek economy can employ the maximum number of Greeks in a productive manner (optimization of human capital) and how it can utilize the country’s economic potential or competitive advantages to the fullest extent; this over a period of a couple of decades. My own proposal is here. I wish the bulk of the discussion would focus on possible proposals. The only thing which I have seen so far is a McKinsey Report showing how 500.000 new jobs could be created in Greece during the next 10 years. It appears that it was successfully ignored by politicians.

    Essentially, my thinking goes exactly along the lines of C. Flower's thinking with one exception: I do not believe that Greece has to worry about world-wide macro-trends as regards the distribution of production and jobs. Greece is a small enough country to play the role of a niche-player and a niche-player can be successful in niches which go completely again a global macro-trend. For example: if the US imposed taxes on imports and started a "buy-American-drive", the world economy would go into shock. If Greece did something similar, the world would hardly notice.

    Consider me naive and/or a dreamer: I don't need to have an Ouzo-dream to picture a Greece which becomes a tiger economy in the Eastern Mediterranean. Why? Because Greece's problems are so obvious that they can be easily identified and worked on. Because Greece as de facto a still developing economy has so much catch-up potential. Because Greece has never come close to making a serious effort to develop the country's potential of human capital, natural resources and competitive advantages.

  6. #21
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    Default Re: Yanis Varoufakis - New Bottle, Old Keynesian Wine

    Welcome, Klaus Kastner.

    I think there is a lot of truth in what you say about the potential of Greece - indeed Ireland was in that position of "unused opportunity" before its bubble of the 2000s.

    My concern is that the world economy is in a very serious crisis and also a battle between the interests of the wealthy and powerful and the rest, and that Greece will not be allowed to develop its potential without a political shift from the former to the latter.

    I'll reply more fully later today.

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    Default Re: Yanis Varoufakis - New Bottle, Old Keynesian Wine

    Offhand: I don't see how "the world" can prohibit Greeks from saying something like the following: "We'll go through our list of imports and all the things which we can produce ourselves we'll try to produce ourselves". How can "the world" prohibt Greeks from "buying Greek products" (as opposed to imports) if that is what Greeks want to do?

    How can "the world" prevent Greeks from offering incentives to foreign investors which makes their capital move voluntarily to Greece? Are they going to prevent Greeks from transferring some of their own offshore capital back to Greece?

    The proposal below comes from a retiree who is married to a Greek and who spends a good portion of his time in Greece. What if greater minds than mine come up with ideas how Greeks can help themselves instead of living off the help of others? Is "the world" going to pass a law prohibiting Greeks to help themselves?

    http://klauskastner.blogspot.com/201...or-greece.html

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    Default Re: Yanis Varoufakis - New Bottle, Old Keynesian Wine

    Quote Originally Posted by Klaus Kastner View Post
    Offhand: I don't see how "the world" can prohibit Greeks from saying something like the following: "We'll go through our list of imports and all the things which we can produce ourselves we'll try to produce ourselves". How can "the world" prohibt Greeks from "buying Greek products" (as opposed to imports) if that is what Greeks want to do?

    How can "the world" prevent Greeks from offering incentives to foreign investors which makes their capital move voluntarily to Greece? Are they going to prevent Greeks from transferring some of their own offshore capital back to Greece?

    The proposal below comes from a retiree who is married to a Greek and who spends a good portion of his time in Greece. What if greater minds than mine come up with ideas how Greeks can help themselves instead of living off the help of others? Is "the world" going to pass a law prohibiting Greeks to help themselves?

    http://klauskastner.blogspot.com/201...or-greece.html
    I look forward to reading your blog. What you are proposing though on the face of it is protectionism, which is against EU law (although it is very advantageous to smaller/weaker economies that need to grow their own productivity). Did you read "Globalism and its Discontents", by Stiglitz? In the south east Asian crisis of the 90s, the countries that came out best put on capital controls, devalued, invested in education and invested in developing their own productive capacities.

    Greece, like Ireland, is locked in to a situation in which those things would not be legal.

    The world economy is globalised: many factories make a single component, so could not be nationalised easily under state control. The whole basis of the EU has been to prise open the national markets for exploitation by corporations, the big fish of course then eat the little fish. Politics are also globalising rapidly.

    Going back to a self-sufficient national economy would mean, imo, a severe contraction of the economy and living standards.

    Protectionism is attractive in some ways, but in times of crisis can escalate causing a crunch, economic contraction, trade war sometimes leading to global conflict.

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    Default Re: Yanis Varoufakis - New Bottle, Old Keynesian Wine

    The term "protectionism" is such a bad word... I would prefer to call it the "infant-industry-assistance".

    Let's face it (and all Greeks reading this: please don't take this personal!): Greece is by and large a developing economy which hasn't even come close to something like a middle-market industrialized economy. In the 1950s/60s, Greece was so poor an agricultural economy that even today ghost towns are witnesses to all the Greeks who emigrated. In the 1960s/70s, the guest-workes went to Central Europe and transferred their savings back to Greece, causing some form of rising living standard. Still, Greece had a very low standard of living in the 1970s. Things changed with the money-inflow after joining the EU and things really changed with the avalanche of cheap loans after the Euro. The fact is that today's standard of living is the direct consequence of debt flowing into the country and being spent on consumption. Stop the money flow from abroad and the standard of living will have to return to decades ago. This is mathematics and not economics.

    Everyone talks about Greece's having to become competitive in a short time. Come on! Greece first has to learn what competitiveness is all about and Greeks need to really want to be competitive. No one pays attention to cultural differences. It seems the Germans would like Greeks to become Germans (thank God that won't work!). The Germans have always attached great value to material well-being. On the other hand, when Diogenes was offered by Alexander the Great to pick any wish that he might have, Diogenes opted for "move out of the sun" and not for a huge palace or something "German" like that.

    What Greeks have not yet had to experience and/or learn is that the level of competitiveness has something to do with the standard of living. Particularly since the Euro, Greeks had all the reasons in the world to believe the illusion that one could have Germany's standard of living (or even better) without the competitiveness of Germans.

    So Greece really needs development aid, not so much money but rather transfer of know-how and realism. Foreign investment, which is my proposed solution, would provide both. And then Greece will need time to gradually accomplish a shift in mentality and value structures to allow competitiveness to enter at least those Greek minds who really want to be competitive.

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    Default Re: Yanis Varoufakis - New Bottle, Old Keynesian Wine

    Quote Originally Posted by Klaus Kastner View Post
    The term "protectionism" is such a bad word... I would prefer to call it the "infant-industry-assistance".

    Let's face it (and all Greeks reading this: please don't take this personal!): Greece is by and large a developing economy which hasn't even come close to something like a middle-market industrialized economy. In the 1950s/60s, Greece was so poor an agricultural economy that even today ghost towns are witnesses to all the Greeks who emigrated. In the 1960s/70s, the guest-workes went to Central Europe and transferred their savings back to Greece, causing some form of rising living standard. Still, Greece had a very low standard of living in the 1970s. Things changed with the money-inflow after joining the EU and things really changed with the avalanche of cheap loans after the Euro. The fact is that today's standard of living is the direct consequence of debt flowing into the country and being spent on consumption. Stop the money flow from abroad and the standard of living will have to return to decades ago. This is mathematics and not economics.

    Everyone talks about Greece's having to become competitive in a short time. Come on! Greece first has to learn what competitiveness is all about and Greeks need to really want to be competitive. No one pays attention to cultural differences. It seems the Germans would like Greeks to become Germans (thank God that won't work!). The Germans have always attached great value to material well-being. On the other hand, when Diogenes was offered by Alexander the Great to pick any wish that he might have, Diogenes opted for "move out of the sun" and not for a huge palace or something "German" like that.

    What Greeks have not yet had to experience and/or learn is that the level of competitiveness has something to do with the standard of living. Particularly since the Euro, Greeks had all the reasons in the world to believe the illusion that one could have Germany's standard of living (or even better) without the competitiveness of Germans.

    So Greece really needs development aid, not so much money but rather transfer of know-how and realism. Foreign investment, which is my proposed solution, would provide both. And then Greece will need time to gradually accomplish a shift in mentality and value structures to allow competitiveness to enter at least those Greek minds who really want to be competitive.
    Again, "infant industry assistance" is exactly what worked in the Far East in the 1980s and 90s, according to Stiglitz. But it worked at a time when world consumption was increasing, not contracting. How would the infant industry compete with the very adult German industry and the teenage Chinese industry ? Import controls ?

    And if everyone in Greece is living in poverty, who is going to buy stuff ?

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    Default Re: Yanis Varoufakis - New Bottle, Old Keynesian Wine

    Yes, at least for some time special taxes on imports in the sum of 30-40% (staggered from zero on essential imports to 100% on luxury goods). Believe me, it is not easy for a free-marketer like me to argue that but there is no other way. The pain is reduced when there is simultaneously a drive for new domestic production for import substitution. Details are in my "Endgame for Greece" paper.

    If Greece returned to the Drachma, imports would automatically become 30-40% more expensive (if not more) but then across the board. A return to the Drachma is out of the question because, in my opinion, it would lead to civil anarchy in Greece. Thus, Greece has to hold on to the Euro but simulate a situation - at least for some time - as though she had returned to the Drachma.

    Today's standard of living of Greeks is basically the result of foreigners lending Greeks the money so that they can import what they need. Stop the money flow and the standard of living goes out the door. And the money flow in the form of debt will come very close to stopping.

    I would not argue this way if I saw only the slightest chance that Greece, through becoming more competitive, could reduce the gap in the current account through increased exports and services. Exports currently cover imports in the order of 40-45% (78% for the USA; 93% for Italy) and even though they are growing, they are at such a low base that we will not live to see the day where exports cover imports by, say, 70%. And tourism is so large that a huge growth there would also appear improbable. So import reduction is the only variable left (plus, of course, foreign investment).

    Obviously, if foreigners continue to lend Greeks the money so that they can import the products which they need (and don't really need...), the system would go on. But we are talking about 20-25 billion EUR which foreigners would need to lend Greece annually going forward and this is where my doubts come in.

    And, as another violation of my free-market belief: capital controls must be implemented to stop the official capital flight via bank account (the capital flight via cash one can't stop). 50-70 billion EUR have left Greek bank accounts in the direction of private foreign accounts in the last 2-3 years. All financed by the ECB. In other words, European tax payers sent money to Greece so that wealthy Greeks could send their money to, say, Switzerland. No way that this should go on!

    Again, a return to the Drachma would solve this problem in a hurry because there simply wouldn't be enough foreign currency to permit capital flight via bank accounts. So one has to simulate what would happend if Greece returned to the Drachma.

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    Default Re: Yanis Varoufakis - New Bottle, Old Keynesian Wine

    Quote Originally Posted by Klaus Kastner View Post
    Yes, at least for some time special taxes on imports in the sum of 30-40% (staggered from zero on essential imports to 100% on luxury goods). Believe me, it is not easy for a free-marketer like me to argue that but there is no other way. The pain is reduced when there is simultaneously a drive for new domestic production for import substitution. Details are in my "Endgame for Greece" paper.

    If Greece returned to the Drachma, imports would automatically become 30-40% more expensive (if not more) but then across the board. A return to the Drachma is out of the question because, in my opinion, it would lead to civil anarchy in Greece. Thus, Greece has to hold on to the Euro but simulate a situation - at least for some time - as though she had returned to the Drachma.

    Today's standard of living of Greeks is basically the result of foreigners lending Greeks the money so that they can import what they need. Stop the money flow and the standard of living goes out the door. And the money flow in the form of debt will come very close to stopping.

    I would not argue this way if I saw only the slightest chance that Greece, through becoming more competitive, could reduce the gap in the current account through increased exports and services. Exports currently cover imports in the order of 40-45% (78% for the USA; 93% for Italy) and even though they are growing, they are at such a low base that we will not live to see the day where exports cover imports by, say, 70%. And tourism is so large that a huge growth there would also appear improbable. So import reduction is the only variable left (plus, of course, foreign investment).

    Obviously, if foreigners continue to lend Greeks the money so that they can import the products which they need (and don't really need...), the system would go on. But we are talking about 20-25 billion EUR which foreigners would need to lend Greece annually going forward and this is where my doubts come in.

    And, as another violation of my free-market belief: capital controls must be implemented to stop the official capital flight via bank account (the capital flight via cash one can't stop). 50-70 billion EUR have left Greek bank accounts in the direction of private foreign accounts in the last 2-3 years. All financed by the ECB. In other words, European tax payers sent money to Greece so that wealthy Greeks could send their money to, say, Switzerland. No way that this should go on!

    Again, a return to the Drachma would solve this problem in a hurry because there simply wouldn't be enough foreign currency to permit capital flight via bank accounts. So one has to simulate what would happend if Greece returned to the Drachma.
    There are a lot of people in Greece already on the bread line, or below it. You are basically talking about starving them out. I can't see why a return to the drachma would be impossible. They would have to default of course, but they will anyway. And slap on capital flow controls.
    Is it personal debt that's the problem ? They would have to reform the bankruptcy law, as we should. They would have to burn the debt by pegging it to the drachma, not the euro. The drachma would then devalue and there would be runaway inflation, which would erode the debt. The kind of transformation of the economy that you are talking about, if feasible at all would take decades, even if it was desirable. I don't think that a return to national self sufficiency is on the cards.

    I like your luxury goods tax btw, but on its own it's not going to solve much.

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    Default Re: Yanis Varoufakis - New Bottle, Old Keynesian Wine

    The anarchy-guess of a Euro-exit is, of course, only my guess but it is not an unrealistic guess. Greek society is incredibly split: you have those whom you describe near the bread line and you have the others. The former didn’t benefit unduly from the Euro-boom and didn’t have an excessive standard of living; call them the “losers”. And you have the others who used this period to personally enrich themselves in unbelievable fashion; call them the “winners”. In the last 2 years it was mostly the “losers” who bore the brunt of the cost cutting measures. The young generation (very well educated, by the way) has basically no future perspective. And the “winners” are for the most part still enjoying a very good life (my personal guess is that the “losers” would be a clear majority). There are really 2 Greece’s and 2 types of Greeks. The tension between them has become enormous. Add to that a one-time loss of 30-40% on all domestic financial assets in case of a Euro-exit and you have a toxic cocktail.

    In sum, Greeks are not poor. The state’s privatization potential is enormous and estimated in the 3-digit billion EUR area when sold orderly and over time (according to the Troika, 50 billion EUR in the next 3 years alone). Greeks hold about 200 billion EUR in domestic bank deposits (almost the level of Austrians). The Euro-cash under mattresses can only be guessed. The Greek upper class is among the wealthiest in the world with hundreds of billions EUR in foreign accounts. The “winners” own residential real estate, cars, yachts, etc. beyond the imagination of people in Central Europe.

    It is the economy which is poor or devastated because this wealth is nothing other than the offsetting booking entry to the foreign money which flowed into the country since the EU (mostly as debt).

    Whether personal debt is a problem I don’t know. I would suggest, though, that there are a lot of “hidden strengths” in Greece (like the money under mattresses). If there weren’t, many families would indeed today be under the bread line. Those hidden strengths and family structures are what keeps society afloat these days.

    The luxury tax on imports wouldn’t solve a thing per se. The only way my ideas make sense is if the reduction of imports is offset by new domestic production (import substitution), economic growth, etc.

    People near the bread line are best helped when they can find jobs and income. Jobs will only come into existence when there is more domestic value generation. Greece has tremendous potential for new domestic value generation because she could produce so much domestically which she is now importing. And then there are the new fields where McKinsey sees a potential of 500.000 new jobs over the next 10 years. My waterfall-chart would be something like this:

    New foreign investment (perhaps Greek offshore money) --- new domestic production (right way: import substitution; medium term “new fields”) --- new domestic employment --- new personal income, income taxes, corporate taxes, etc. --- less dependence on foreign debt.

    I am not shooting for national self-sufficiency. All I am shooting for is a situation where the economy comes closer to living within its means. In the last 10 years, Greeks have spent 80% more abroad then they earned abroad. None of this would be a problem if Greeks were guest-workers abroad and sent their savings back to Greece to cover the hole (as in the 1960s/70s). As long as this hole needs to be financed with debt, it will automatically shrink going forward one way or another as the debt flow comes to a halt (and if that is not offset with new domestic value generation, the standard of living of Greeks will tank).

    What is starving out Greeks is that they need to import what they need for a standard of living and that they need foreign debt for that. None of this could have happened under a Drachma because access to foreign currency would have been the scarce resource and put a limit to this trend. We all know that it would have been smarter to leave Greece out of the Euro. Perhaps in a couple of years when things have calmed down again, the Euro-exit can become an option. Today, I fear, it would be the end of social peace (and perhaps even democracy).

    Yes, my proposal is a generation project but Greece’s mess can only be cleaned out over at least one generation. However, there could be a very quick change towards a positive future perspective once foreign investment starts (and to start that, all you need is a new Investment Law guaranteed by the EU and some Free Trade Zones where foreign investors would be offered all the incentives they seek). I have lived in Chile when the Chicago-Boys managed to turn the country within 5 years from a corrupt, communist planned economy into the “darling” of foreign investors. It was all their Foreign Investment Law (and the foreign investment mentality which Chileans had and which Greeks still have to acquire).

    To be sure, I am about as far away from admiring planned economies as anyone. However, I have learned that there are times when an economy no longer has the self-healing forces which it needs to pull itself out from a mess. That is where, in my opinion, an economy needs to be “managed” (not planned!). By that I mean new rules and regulations which appear a bit “planned” but which in actual fact allow the economy to develop self-healing forces. Greece’s favorite neighbors to the North (FYROM) have in only few years become the shooting stars in the latest World Bank/IFC report on the ease of doing business in a country (up to 22 from 34; Greece is at 100). Why in the world should Greece not be able to accomplish the same?

  14. #29
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    Default Re: Yanis Varoufakis - New Bottle, Old Keynesian Wine

    Yanis was just interviewed on CNBC.

    Basically said Greece is screwed. They cannot pay their debt and cannot leave the EUR (he says it is not realistic for deficit countries to leave).

    He says austerity has never worked and will never work
    Politics is the gentle art of getting votes from the poor and campaign funds from the rich, by promising to protect each from the other. ~Oscar Ameringer

  15. #30
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    Default Re: Yanis Varoufakis - New Bottle, Old Keynesian Wine

    Quote Originally Posted by DCon View Post
    Yanis was just interviewed on CNBC.

    Basically said Greece is screwed. They cannot pay their debt and cannot leave the EUR (he says it is not realistic for deficit countries to leave).

    He says austerity has never worked and will never work
    Where does that leave Greece now?
    History is the only true teacher, the revolution the best school for the proletariat - Rosa Luxembourg

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