CapitalistImperialistPig

My commentators have been almost unanimous in assigning the most scurrilous faults of character to the Greek people- a remarkable tribute to the power of the EU/German propaganda machine. For these faults the EU and most of my commentators prescribe 100 years of privation and debt peonage. It might not surprise you that Paul Krugman gets a lot of hate mail, and lately a lot from Germany. Some of these latter have compared his criticisms to the German persecution of Jews and others. Because, I guess, criticizing a country's policies in the NYT is just like systematically exterminating a whole people. Nietzsche, who had a keen instinct for his countrymen's weaknesses, loved the word Ressentiment. Here is Wikipedia on the word: Ressentiment (French pronunciation: ​[rəsɑ̃timɑ̃]), in philosophy and psychology, is one of the forms of resentment or hostility. It is the French word for "resentment" (fr. Latin intensive prefix 're', and 'sentir' "t...

Debt and morality. From an interview in Die Zeit. Piketty: ZEIT: But shouldn’t they repay their debts? Piketty: My book recounts the history of income and wealth, including that of nations. What struck me while I was writing is that Germany is really the single best example of a country that, throughout its history, has never repaid its external debt. Neither after the First nor the Second World War. However, it has frequently made other nations pay up, such as after the Franco-Prussian War of 1870, when it demanded massive reparations from France and indeed received them. The French state suffered for decades under this debt. The history of public debt is full of irony. It rarely follows our ideas of order and justice. ZEIT: But surely we can’t draw the conclusion that we can do no better today? Piketty: When I hear the Germans say that they maintain a very moral stance about debt and strongly believe that debts must be repaid, then I think: what a huge joke! Germany is the co...

Greeks gave an empathetic "No" to EU demands. It looks like various Greek haters got their wish, but so did some with opposite views. Here is one of the latter, Paul Krugman in the NYT: Of course, that’s not the way the creditors would have you see it. Their story, echoed by many in the business press, is that the failure of their attempt to bully Greece into acquiescence was a triumph of irrationality and irresponsibility over sound technocratic advice. But the campaign of bullying — the attempt to terrify Greeks by cutting off bank financing and threatening general chaos, all with the almost open goal of pushing the current leftist government out of office — was a shameful moment in a Europe that claims to believe in democratic principles. It would have set a terrible precedent if that campaign had succeeded, even if the creditors were making sense. What’s more, they weren’t. The truth is that Europe’s self-styled technocrats are like medieval doctors who insisted on b...

Sometimes the stars align: Krugman Wolfgang Will the Eu's latest stunt blow up in it's face? TBD. But don't miss Matt Yglesias's take. The real issue here is that your typical middle class Cypriot seems to be getting royally screwed. The European Union demanded that bank depositors take a haircut here for two reasons. One is simply that Germany would rather spend less money than more money. The second is that a lot of large depositors in Cyrpiot banks are thought to be Russian tax dodgers. That made the politics of a more generous bailout especially unlikely. It's also what specifically made taxing Cypriot bank deposits look attractive rather than some other form of tax. Makes the Russians pay! So fair enough. That's why you have the 9.9 percent levy on deposits over €100,000. But why the 6.75 percent tax on deposits below €100,000? After all, those are the deposits that had received official FDIC-style insurance. Why break that promise? Most simply, you ne...

One of the rituals of entering the Marines, or almost any military service, is losing very nearly all one's hair. By that standard, depositors in Cypriot banks are getting just a light trim, but they aren't happy. The problem is that those Cypriot banks made a lot of bad loans - where have we heard this story before? Mostly to Greece. Another problem: there's a lot of money in Cypriot banks from overseas, attracted, I imagine, by the big interest they were getting on those crappy loans. Let me rephrase the problem: the banks were undercapitalized and lent money not wisely but well...stupidly. The financial powers of the EU (AKA Angela Merkel) decided that the best thing to do would be to divide up the losses among the depositors. According to Matt Yglesias: A tax of 9.9% on deposits over €100,000 and 6.75% on deposits below that level. If this were happening in isolation, I would be inclined to say, "good plan." Who better to take the fall than the stockho...

Wolfgang Münchau has a quote on the starkness of the choices : Joschka Fischer, the former foreign minister, said recently that by allowing the eurozone to break up, Germany would for the third time in a century have inflicted utter devastation on Europe and on itself. Those who advocate the strategy of calling Germany’s bluff often assume a degree of rationality that is plainly absent. The Germans have developed a strange narrative of the crisis. Following the debate there, as I do regularly, has a parallel universe feel about it. There is, for example, a denial that the current account surpluses are even remotely a factor. In the German narrative, the economy is like a football game, which Germany is winning. And the chancellor’s job is to support the team against another team – as she did in Gdansk last Friday when Germany beat Greece. Germany, like Ms Merkel, looks unstoppable.

Churchill famously said "America can be counted on to do the right thing - after they've tried everything else." The question now is whether Europe, er, Germany, can be expected to perform to that standard. Auguries are not promising. So far they seem fixated on trying the same thing, over and over.

It looks like the latest attempt to kick the Euro can down the road is not getting much respect from the markets. Or from market watchers . Bloomberg says Europe keeps trying the same thing and expecting a different result. To make Spain’s recovery possible, Europe must break the link between the banks and the government. Instead of lending the money for recapitalization to the sovereign, Europe’s bailout funds should agree to inject it directly into the banks -- as Bloomberg View has advocated. In return, European regulators should have a say in how management would be punished, and whether dividends and bonuses would be paid, at institutions that accepted the money. That alone won’t be enough. The recapitalization should be part of a larger process that would forge a common euro-area approach to dealing with troubled banks, require private bank creditors to share in losses, consolidate the debt of euro-area governments and create a mechanism to stimulate growth in hard- hit economi...

Krugman remains more or less unrelievedly gloomy about the Euro and the latest bank bailout . Though he does finish with an ironic upside: Still, are we much better? America’s near-term outlook isn’t quite as dire as Europe’s, but the Federal Reserve’s own forecasts predict low inflation and very high unemployment for years to come — precisely the conditions under which the Fed should be leaping into action to boost the economy. But the Fed won’t move. What explains this trans-Atlantic paralysis in the face of an ongoing human and economic disaster? Politics is surely part of it — whatever they may say, Fed officials are clearly intimidated by warnings that any expansionary policy will be seen as coming to the rescue of President Obama. So, too, is a mentality that sees economic pain as somehow redeeming, a mentality that a British journalist once dubbed “sado-monetarism.” Whatever the deep roots of this paralysis, it’s becoming increasingly clear that it will take utter catastrop...

Is TARPentry a new kind of capitalism? It happens that in a highly unequal society those who have money may lack things they really want to spend it on, and those without money lack means to buy what they want. Consequently, such a society lacks demand. This puts both rich and poor into a bind. The poor because they cannot afford to buy, and the rich, because there is no good way to invest. Lacking good ways to invest, they stash their money in banks, and the banks lend it out - not to good credit risks, because there aren't enough of them - but to people or governments who are in fact crappy credit risks. This would seem extremely hazardous to the bankers and relatively rich who stashed their money in the banks. The actual bankers, protected by incorporation and the fact that they have already taken their payout, are fine. Stockholders and depositors are seemingly screwed, except for the fact that in a modern economy, massive bank failures are more catastrophic than a bucke...

Paul Krugman doesn't seem too optimistic about the Spanish bailout: The Eurotarp Cometh. The Spanish banks will get some money, and the Spanish government will owe more money to somebody, but says Krugman, the underlying problems of Spanish competitiveness and austerity are not addressed. What has been bought, he says, is time. The question you should ask is, what problem does this solve? It may — may — put a temporary end to the “doom loop” of funds fleeing Spanish banks, forcing the banks to sell assets, driving asset prices down and creating further doubts about solvency. (It won’t help even here to the extent that fears involve euro breakup rather than default). But it does nothing to restore Spanish competitiveness or lessen the suffering from austerity. So the whole thing at best buys time — just like the ECB’s lending program from last fall. What will Europe do with that time? If past behavior is any indication, the answer is, nothing.

There is new talk of a Euro fix, but I don't understand it much. My impression is that the idea is a bad bank which will suck up all the other bad banks and stick the general taxpayer with the bill - Chapter 324 of hapless taxpayers bailing out reckless bankers. The worst part about this idea is that it's just another version of let's kick the can down the road and hope everything works out - or at least that some other poor bastard is responsible by then. The key problem, if I understand it, is the balance of payments between the rich center and the poor periphery. If that's not fixed, we might as well just fast forward to "Hunger Games: Frankfurt."

One might think that an emergency is not the right time to contemplate massive changes in governmental structure, but history tends to show that it's the only time for such changes. Thus, the depredations of the Barbary pirates triggered the formation of the United States and today's Euro crisis is provoking very serious contemplation of a major step toward fiscal union in the Euro zone . It won't be easy - or painless. TBD

Tim Worstall, writing in Forbes, sees Spain Circling the Drain . The problem isn't really contagion, he claims. It's really small regional banks, and the Spanish Regions, that got zapped by the property bubble. All of which leads to an uncomfortable political truth. What’s happening in Spain is not contagion, therefore it is not a sufficient solution to provide a financial firewall through the ECB or some such. The place is going bust because of its own actions, not as a result of some infection from Greece. So a solution to the Greek problems, whichever way that works out, will not become a solution to Spain’s problems. And it’s very difficult from here in Europe to see anyone acknowledging that fact. This is about 50% nonsense, the rest truth. It ignores the fact that all Spain's economic problems are greatly exacerbated by Euro austerity. It also ignores the fact that much of the money to inflate that property bubble came from Germany. Nonetheless, it seems increasi...