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The Greek deal opens for expansionist e-currency

by fjallstrom Sat Feb 28th, 2015 at 04:23:41 AM EST

Considering the interest in alternative currencies, I did not want to leave the discoveries of this community sitting inside a long comment thread. In particular since a write-up I did in Swedish got some attention.

front-paged by afew


First off, the deal includes the infrastructure for an e-currency controlled by the Greek government:

Migeru:

Reform VAT policy, administration and enforcement. Robust efforts will be made to improve collection and fight evasion making full use of electronic means and other technological innovations.
[Public finance] Payment procedures will be modernised and accelerated while providing a higher degree of financial and budgetary flexibility and accountability for independent and/or regulatory entities.
* Devise and implement a strategy on the clearance of arrears, tax refunds and pension claims.
Establish a transparent, electronic, real time institutional framework for public tenders/procurement - re-establishing DIAVGEIA (a side-lined online public registry of activities relating to public procurement)
Improve swiftly, in agreement with the institutions, the legislation for repayments of tax and social security arrears
Step up enforcement methods and procedures, including the legal framework for collecting unpaid taxes and effectively implement collection tools
issuance of a Citizen Smart Card that can be used as an ID card, in the Health System, as well as for gaining access to the food stamp program etc

Then add that both Greece finance minister Varoufakis and its deputy labor minister Antonopoulos has argued tax credits in different forms as a way to finance expansionary policies without deficits.

And then you end up with:

eurogreen:

You hand out smart cards to the entire population. They are initially intended for accessing the health system, and for food stamps. Every citizen has an account created by the government. Retailers and health providers need terminals, obviously.

Then, some time later, ta-daa, you roll out Citizen Smart Card 2.0. It's the card you already have, but now you have an "Air Miles" account, with an initial free allocation on it. You can use your Air Miles to pay your tax. Retailers who accept food stamps will accept them for payment too, using them for their own tax liabilities, and exchanging them with other companies (all companies can have an Air Miles account too). Government income support would also be paid through the system, perhaps pensions...

Pretty quickly you have critical mass for a purely electronic currency -- I don't see any immediate need for physical scrip.

generic:

And you need to wire up all stores anyway since you want to collect VAT effectively. Who can object to that.

Also add from the program:

GREEK GVT REFORM AGENDA.pdf

Evaluate the pilot Minimum Guaranteed Income scheme with a view to extending it nationwide

And:
GREEK GVT REFORM AGENDA.pdf

[P]rovide targeted assistance to employees between 50 and 65, including through a Guaranteed Basic Income scheme, so as to eliminate the social and political pressure for early retirement which over-burdens the pension funds.

So Greece has in exchange for a bridge loan committed to, among other things, establishing what is in effect an e-currrency controlled by the Greek government and to provide a basic level of support to all citizens, possibly through said e-currency.

Also, having an e-currency in place should make handling a forced exit out of the euro much easier. The digital payment structure is there and physical money can be rolled out in timely fashion. Since this gives a better negotiation position to the Greek government, I would say it also decreases the risk of Greece being forced out.

All in all, quite a coup. It is like only one of the finance ministers involved knows what he is doing.

Display:

I felt it belonged here too.

by fjallstrom on Sat Feb 28th, 2015 at 04:29:45 AM EST
For those who may be wondering, fjallstrom used to be a swedish kind of death.
by afew (afew(a in a circle)eurotrib_dot_com) on Sat Feb 28th, 2015 at 04:53:44 AM EST
So Greece has in exchange for a bridge loan committed to, among other things, establishing what is in effect an e-currrency controlled by the Greek government and to provide a basic level of support to all citizens, possibly through said e-currency.

Did they actually get any money yet? As I see it what the agreement bought them was an end to the bank run. Whether the Eurogroup will cough up even a single cent is still to be seen.

Von überall könnte das Volk, Urbrut alles Undemokratischen, Zelle des Terrors, über die gewählten Hüter von Wachstum und Wohlstand® kommen. - flatter

by generic on Sat Feb 28th, 2015 at 08:07:27 AM EST
Frank Schnittger:
Re: Shock horror! (4.00 / 3) The problems aren't primarily technical, its all been done before in some form. In theory you could have state owned banks open a new account for each "qualifying" citizen. These accounts will hold credits denominated in Euros but trade-able only in return for food items or taxes due.  Cards would be issued against each account. State wages or payments to suppliers would be paid in part to these new accounts, and in part in whatever is currently the usual way.

New accounting systems would have to be set up to account for the split payments at both Government procurement/HR level and employee/supplier level. Food shops and tax offices would have to receive terminals capable of settling bills from these new accounts.  Some anti-fraud audits would have to be conducted to prevent supemarkets accepting such payment for non-food items, but perhaps they would be less than keen to except non hard cash in the first place - especially if they received more in credits than they need to pay their taxes. Those who refuse to acept tax credits in payment at all might lose business or perhaps even a licence to trade.

Some companies who supply a lot of services to the Government would end up with more tax credits than the taxes they actually owe or are due to pay.  They will want to be able to trade tax credits for real cash.  Banks might be allowed to facilitate this trade provide the seller could prove they were fully tax compliant.

Companies with millions in cash stashed in Switzerland might have to draw on their cash hoard in order to pay their (especially foreign) suppliers as foreign suppliers won't accept tax credits - but receive only tax credits in part payment. Thus hard cash would slowly be leached out of its hides.  But all accounting systems would have to be able to deal with effectively two currencies being used to settle single bills - not a usual IT requirement.  Probably some bills would be settled in hard currency, some in tax credits but many suppliers would be unhappy if they already had enough tax credits to settle their tax liabilities.  Some might only accept payment in tax credits for a discount, and so a grey market might be born.

There are many precedents for businesses operated in two currencies - some N. Ireland shops accept Euros as well as Sterling often at a standard notional trading rate. such systems should be adaptable to running a parallel currency, but for simplicity I suggest an official 1:1 parity should always be maintained, whatever happens on the grey market.



Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Feb 28th, 2015 at 08:26:16 AM EST
It is like only one of the finance ministers involved knows what he is doing.

That almost certainly is indeed the case. Amongst the rest are, at best, a few who have a decent understanding of the conventional ways of operating a currency system. I don't think there are any who have a synoptic view of the whole field of economics that even starts to compare with that of Varoufakis, who is at home doing comparative analyses of different economic theories and systems and then getting involved in actual applications. He is a two eyed man in a kingdom of the blind. Please rebut have I done any other ministers an injustice.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Feb 28th, 2015 at 09:35:09 AM EST
[ Parent ]
I can find at leasy four member of the EuroGroup with a solid academic economics career:
Of the ones who are civil servants, only Maria Luís Albuquerque from Portugal has a lifelong career in public finance as an economist.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Feb 28th, 2015 at 09:46:24 AM EST
[ Parent ]
Italy being the only large country on this partial list does not supprise, given its difficulties. It is sad, but not surprising to me that the list contains no representatives of the more influential countries. When lies and bullshit have things going the way of TPTB why be concerned with competence at anything else?

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Feb 28th, 2015 at 10:00:21 AM EST
[ Parent ]
"Doktor" Schäuble takes the cookie, though:
In 1971 Schäuble obtained his doctorate in law, with a dissertation called "The public accountant's professional legal situation within accountancy firms".


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Feb 28th, 2015 at 10:05:02 AM EST
[ Parent ]
I am interested in such issues.
by IM on Sat Feb 28th, 2015 at 11:35:32 AM EST
[ Parent ]
No offence, those are certainly interesting issues.

But in the case of Schäuble that's not a basis for running a heterogeneous monetary union.



A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Feb 28th, 2015 at 11:58:52 AM EST
[ Parent ]
My own observation from watching the succession process in small but successful business firms in LA in the '70s was that they often, upon the death or disability of the founder, ended up being run by an accountant and I noted to one hapless, technical salesman working for such a firm in such a situation: "Companies run by accountants go broke! - unless they are accounting firms." He quickly agreed. It is slightly different with countries but the same logic applies. Dysfunction results.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Feb 28th, 2015 at 12:30:42 PM EST
[ Parent ]
Companies need entrepreneurs and businessmen. Countries need statesmen.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Feb 28th, 2015 at 12:31:35 PM EST
[ Parent ]
Hes was writing about accountants in professional accounting firms and their professional duties - keeping the secrets of clints and what not. About accountants selling services from outside, in other words.
by IM on Sat Feb 28th, 2015 at 12:52:12 PM EST
[ Parent ]
" for running a heterogeneous monetary union. "

And where exactly did you learn in 1973 to run a currncy union?

by IM on Sat Feb 28th, 2015 at 12:43:44 PM EST
[ Parent ]
(generic you)
by IM on Sat Feb 28th, 2015 at 12:47:22 PM EST
[ Parent ]
The (supposed) groundwork on single currency unions by Mundell dates from the 1960s. The notion of a single currency for Europe was then (until the early '70s) a hot number. The crises of the '70s put it on the back burner, to be picked up again in the '80s.
by afew (afew(a in a circle)eurotrib_dot_com) on Sat Feb 28th, 2015 at 12:51:12 PM EST
[ Parent ]
In 2000 Mundell wrote about his experiences in an an article I read as part of my Money and Banking course. In it he surveyed the history of the gold standard and noted the problem of expanding the money supply as required to keep the economy growing. This was during the Bretton Woods period, where gold was pegged at $35/oz. to the US$ and all other currencies were pegged to the US$. Mundell was a strong proponent of the gold standard as it provided an efficient means to redress trade imbalances by automatically correcting the relative valuations between currencies via gold flows or revaluation of a currency.

Mundell was an advisor to Richard Nixon and attempted to make the case for revaluing the gold fix of the US$ upward to reduce pressure for gold flow out of the USA during a long plane flight during which he was seated next to Nixon. But Nixon was too distracted to really listen and the opportunity was lost. I find this interesting as it seems it would probably work. The problem is that for most gold bugs the idea of an adjustable peg for gold makes their heads explode. The consequences of not making changes was the US going off the standard and 'closing the gold window' in 1971 - with no formal replacement for international settlements mechanism for FX.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Feb 28th, 2015 at 02:36:22 PM EST
[ Parent ]
Just like Napoleon said that the problem with England was that it was a nation of shopkeepers, the problem with Schäuble being the most powerful politician in the Eurozone is that you en up with a monetary union of beancounters.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Feb 28th, 2015 at 02:10:32 PM EST
[ Parent ]
Napoleon lost.
by IM on Sat Feb 28th, 2015 at 02:26:47 PM EST
[ Parent ]
But not before wrecking half of Europe.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sat Feb 28th, 2015 at 03:15:28 PM EST
[ Parent ]
But to Russia, not England.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Feb 28th, 2015 at 05:03:45 PM EST
[ Parent ]
One historical parallel after another, each more and more disconcerting! :D

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Sat Feb 28th, 2015 at 06:20:33 PM EST
[ Parent ]
Both.
by IM on Sun Mar 1st, 2015 at 01:49:03 PM EST
[ Parent ]
Sure, in the fine tradition of the English getting their asses handed to them for several solid years, and then claiming victory when they get bailed out by someone who actually knows how to fight against people who shoot back.

Now, don't get me wrong, the English were great at naval warfare, and at butchering defenseless natives in the colonies. But land wars against countries with population, organization and technology base roughly on par with their own? Not so much.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Mar 1st, 2015 at 02:23:17 PM EST
[ Parent ]
There was a little campaign in spain.
by IM on Sun Mar 1st, 2015 at 02:32:35 PM EST
[ Parent ]
Where the English took the credit for what was essentially a local insurgency. Until the Spanish guerrillas demonstrated the French could be defeated the English didn't get involved.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Mar 1st, 2015 at 02:47:18 PM EST
[ Parent ]
As an aside, I've been reading a book on Goya's caprichos recently and I was stunned to see how much Spain suffered not only of the war itself but of the long standing consequences on spanish politics, the reformists being associated with the Napoleonic war and therefore suffering from repression after the french defeat. Goya himself, who is not suspect of being a support of the french, had to refrain from publishing some works and has seen some of his close friends suffering from the monarchist repression.

A free fox in a free henhouse!
by Xavier in Paris on Sun Mar 1st, 2015 at 04:13:45 PM EST
[ Parent ]
Spanish history is a wretched mess:
The Trienio Liberal (Spanish pronunciation: [ˈtɾjenjo liβeˈɾal], "Liberal Triennium") was a period of three years of liberal government in Spain. After the revolution of 1820 the movement spread quickly to the rest of Spain and the Spanish Constitution of 1812 was reinstated. The Triennium was a volatile period between liberals and conservatives in Spain, and constant political tensions between the two groups progressively weakened the government's authority. Finally in 1823, with the approval of the crown heads of Europe, a French army invaded Spain and reinstated the King's absolute power. This invasion is known in France as the "Spanish Expedition" (expédition d'Espagne), and in Spain as "The Hundred Thousand Sons of St. Louis".


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Mar 1st, 2015 at 05:19:36 PM EST
[ Parent ]
This was actually part of the Revolutions of 1820, the second of the six big pan-European revolutionary waves.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sun Mar 1st, 2015 at 05:33:37 PM EST
[ Parent ]
But this is after the napoleonic/revolutionnary time in France.

I was more into the first round of semi-liberalisation, the one that led to 1812 constitution: a paradox that ideas brought by the french military presence were at the same time used against France and pro-monarchy, just to be crushed by the same monarchy when the french presence was no longer there to enforce them.

We could also speak of the tragedy of logistics, the lack of being a main reason for military depredation in Spain by the french army and the subsequent revolt by the spanish people starved to death by military requisitions.

A free fox in a free henhouse!

by Xavier in Paris on Tue Mar 3rd, 2015 at 11:52:28 AM EST
[ Parent ]
The Enlightenment idea(l)s were not brought to Spain by the French military presence. Spain as a French client was part of the same cultural milieu in the 18th century and the first thing the Spanish did after kicking out Napoleon was to enact a liberal constitution in 1812. But the French-inspired intelligentsia got associated with Napoleon's occupation in the people's mind, and the rest is 170 (reactionnary) histoty, 160 years of it.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Mar 3rd, 2015 at 12:01:08 PM EST
[ Parent ]
I did not say that liberal ideas had been brought into a desert Spain by french troops, but that the liberal in Spain had been bolstered by the presence of the french army (at the time, there were also a feeling of hope in some places at the advance of the french army, before the effects of war were felt, because of the aura of the french revolution. A lot of people accross Europe sincerely bought into the Empire=Révolution=Liberty, whereas from the french point of view, Napoleon is a kind of counter-revolutionnary: his politics were of stopping the reform mouvement and give it a conservative tinge that would render it acceptable for a bigger part of the elite.

And actually I'm not saying anything myself: that's just from a book read in spanish two weeks ago about Goya and the people around him.


A free fox in a free henhouse!

by Xavier in Paris on Wed Mar 4th, 2015 at 04:36:18 PM EST
[ Parent ]
Well, I was reading up a bit and what happened was that after the French Revolution the Spanish monarchy became reactionary and for about 15 years until Napoleon's invasion in 1807-8 the liberals' political influence was on the wane.

But the fact is that the Spanish patriots fighting the occupation were liberal, too, as evidenced by the constitution of 1812.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Wed Mar 4th, 2015 at 04:41:21 PM EST
[ Parent ]
It is also what I said above. And they got screwed because they were associated to a foreign invasion even though some of them fought against it.

At least, that's the message from the book I read, which describes close friend from Goya hoping to use the french presence to get rid of some spanish bad habits (mainly religious influence that they criticized), and being deceived as the war -curiously quite secondary from a french perspective- takes its toll.

Anyway, as I haven't got enough background to argue here, and as I don't want to get involved into a new flaming debate here, after the one with IM, so count me as convinced. You may delete my messages if you find them too off base.

A free fox in a free henhouse!

by Xavier in Paris on Wed Mar 4th, 2015 at 04:59:58 PM EST
[ Parent ]
Anyway, as I haven't got enough background to argue here, and as I don't want to get involved into a new flaming debate here, after the one with IM, so count me as convinced. You may delete my messages if you find them too off base.
Where did that come from?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Mar 4th, 2015 at 05:27:04 PM EST
[ Parent ]
"Until the Spanish guerrillas demonstrated the French could be defeated the English didn't get involved."

clever, these shopkeepers.

by IM on Mon Mar 2nd, 2015 at 06:53:18 AM EST
[ Parent ]
Sure, that absolutely is the way to use a local insurgency, as Putin is also demonstrating in Ukraine right now.

But bragging about your martial prowess when everyone else did all the real fighting that won the war for your side is just pathetic. It would be like Iran crowing about how great the Revolutionary Guard is for winning the Iraq war.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Mar 2nd, 2015 at 07:41:35 PM EST
[ Parent ]
I haven't said anything about martial prowess. I just pointed out the the shopkeepers defeated Napoleon.
by IM on Tue Mar 3rd, 2015 at 07:09:13 AM EST
[ Parent ]
And JakeS pointed out that shopkeepers only bragged about defeating Napoleon...

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Tue Mar 3rd, 2015 at 09:54:37 AM EST
[ Parent ]
To revisionist for my taste. I stand for now by the traditional interpretation that bear and whale defeated the egale.
by IM on Tue Mar 3rd, 2015 at 10:17:04 AM EST
[ Parent ]
Actually, it's really a government influenced by shopkeepers. Wealth of Nations (courtesy of Marxists.org)
To found a great empire for the sole purpose of raising up a people of customers may at first sight appear a project fit only for a nation of shopkeepers. It is, however, a project altogether unfit for a nation of shopkeepers; but extremely fit for a nation whose government is influenced by shopkeepers.
by gk (gk (gk quattro due due sette @gmail.com)) on Tue Mar 3rd, 2015 at 01:01:27 PM EST
[ Parent ]
Since the late 17th century  has been a government of elites of wealth and power, divided between landed and commercial/manufacturing interests. It wasn't until the second half of the 19th century that the opinions of actual shopkeepers even really mattered. They were too far down the hierarchy and the elites were too good at getting what they wanted from the electorate, such as it was with the very limited voting franschise. As the franchise broadened the elites simply stepped up their game to stay ahead.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Mar 3rd, 2015 at 01:58:17 PM EST
[ Parent ]
This is why England relied so heavily on Continental mercenaries since the Renaissance. I am certainly no military historian, but, on two occasions, they did rise above the typical behavior and field at least competent armies, under Marlborough and under Wellington. The English never took to 'the Prussian Drill' with any zeal and were less susceptible to the nationalistic and revolutionary fervor that made France so strong after 1789. And that is not a bad thing, IMO.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Mar 2nd, 2015 at 09:19:07 AM EST
[ Parent ]
The English did better out of their navy, and the privatised militias created by/for the East India Company.

The rule was you didn't march around killing people - you did deals with the local big men, and/or introduced drugs and taxes and slavery, and then you marched around killing people, but only if you really had to.

Only the Dutch had a similarly indirect approach to international diplomacy. France, Spain, and the Habsburgs had a more direct and continental Big Arrmy tradition, which made for plenty of set-piece battles, but not so much long term 'growth and stability.'

If you don't understand how sneaky the British Establishment is, consider that England went through the Enclosures, the Industrial Revolution, wars with the Continent and the Colonies, a century of Dickensian squalor and oppression. and two world wars, but hasn't had a significant Euro-style revolution since the Civil War - and even that was largely a fight between merchants/pirates/barons and the monarchy.

And monarchy was restored almost immediately anyway.

While the UK likes to pretend it's the modern cradle of democracy, the reality is it's the modern cradle of neo-Machiavellianism, and the spiritual home of neoliberals everywhere.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Mar 2nd, 2015 at 09:52:02 AM EST
[ Parent ]
The two paragraphs preceding the money quote add valuable information:
Varoufakis is the newest finance minister in the Euro Group; Schäuble has served the longest. Varoufakis is a professor of economics, a man always good for a clever turn of phrase and a beaming smile. Schäuble is better known for being caustic and irritable. He is a lawyer by training and prefers practice to theory; he is matter-of-fact and deeply skeptical of those who seek to grab the spotlight. And he doesn't hold university professors in high regard.

Since Schäuble has gotten to know his new colleague from Athens, his appreciation for economy professors has dropped even further. He is suspicious of those who believe in their own theories and who think that the world is predictable. For Wolfgang Schäuble, societal behavior cannot be easily explained, not even by social scientists. That is why, he believes, negotiated rules -- and adherence to those rules -- is the best policy.

For Yanis Varoufakis, the euro is a defective currency. For Schäuble, it is his legacy.
(Money quote my bold)


Pacta sunt servanda is the only ground on which Schäuble can really stand. He dismisses everything else. This is sustainable for him only because, as the representative of Germany, his duty was to protect the integrity of the rebranded Deutchmark - like a good accountant doggedly protecting the integrity of his company's books and accounts - all else be damned. His attitude is as understandable as it is inappropriate to the present situation in the Eurogroup.  Change can only come with a change in leadership, or when, as last week, Merkel overrules Schäuble.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Feb 28th, 2015 at 12:52:00 PM EST
[ Parent ]
It is important to understand a bit of the history of the accounting profession here. Prior to the launch of Visicalc in the summer of '79 for the Apple II accounting was a really grinding profession requiring people with excellent numeric skills and a willingness to devote their lives to endless basic mathematics calculations. A business spread sheet was a thing of beauty, but any change might take a day to propagate through all of the rows and columns. Just doing the calculations to keep double entry books for companies up to date fully occupied most accountants' work days. This is also why economists only took, at most, intro accounting and held it in low esteem, failing to appreciate the power of double entry bookkeeping and stock and flow analysis for the most part as a consequence.

VisiCalc changed all of that. Now changes in an electronic spreadsheet propagated themselves through the spreadsheet automatically. Accountants found that they now could offer their employers and clients what if analysis and a whole range of higher order tasks. This pre-VisiCalc world of accountancy was the world in which Schäuble submitted his dissertation in 1971. Rules, rules, rules. Interestingly, rules did not keep him from accepting the cash donation over DM 100,000 contributed by the arms dealer and lobbyist Karlheinz Schreiber back in 1994, which led to him stepping down as head of the CDU and has dogged him since. So I guess he has some flexibility about rules.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Feb 28th, 2015 at 02:08:12 PM EST
[ Parent ]
I remember some of the brighter accountants messing about with Visicalc in the early 1980's and wondering what it was all about.  My enlightenment didn't come about until Lotus 123 and later Excel 4.

BTW - how do you know that a football team is made up of accountants?

It's the one with 11 goalkeepers....

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Feb 28th, 2015 at 04:49:48 PM EST
[ Parent ]
For Wolfgang Schäuble, societal behavior cannot be easily explained, not even by social scientists. That is why, he believes, negotiated rules -- and adherence to those rules -- is the best policy.
Two comments on this: the insistence on the essential unpredictability of society is a basic ingredient of Austrian economic "theory", and I suppose it is a justification for the Ordoliberal focus on "rules", but then who sets the rules, and based on what, and what do you do when unpredictable reality unpredicted when the rules were set does intrude and show the rules are inadequate? Do you rail that pacta sunt servanda?

The second observation is that I used to like German legal positivism until I saw the effect of legalistic adherence to rules on Euro crisis resolution.

As I don't like natural law as a basis of justice and I'm not religious, I'm left without a universal basis for law and justice, but I guess that just forces me to be responsible for my own political choices.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sat Feb 28th, 2015 at 02:24:46 PM EST
[ Parent ]
For Schauble it seems that the answer to 'who sets the rules' is that it is natural for them to be set by the wealthiest and most powerful people in the society. That is the essence of conservatism back to the days of absolute monarch and monarchism as the ultimate conservatism. So what can be wrong with accepting DM 100,000 from Schreiber to do what he wanted done. It would all just seem to him to be a problem of appearances, but quite natural.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Feb 28th, 2015 at 02:46:48 PM EST
[ Parent ]
In addition the whole point of conservative 'sound finance' rules is to remove any discretion from fiscal policy.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Feb 28th, 2015 at 03:29:27 PM EST
[ Parent ]
Max Weber's focus on rational rules as the basis of bureaucracy and modernity comes to mind: cf "The Protestant Ethic and the Spirit of Capitalism"

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Feb 28th, 2015 at 04:45:48 PM EST
[ Parent ]
Well, rational rules IS a step forward, if an insufficient criterion.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Feb 28th, 2015 at 06:01:08 PM EST
[ Parent ]
I think you got carried away. Schäuble is not a liberal but a conservative, for whom "rules" have a much stronger meaning. And even the "rules" mantra is not Schäuble's actual thought but a smokescreen narrative provided by Spiegel (and originating with Schäuble himself): Schäuble is not some retired school teacher struck in old ways but a seasoned manipulator who in truth has no trouble with the concept of changing the rules when it suits his agenda (think enhanced police powers).

Schäuble's and Spiegel's goal is to divert from a counter-narrative, which would be:

Varoufakis is the newest finance minister in the Euro Group; Schäuble has served the longest. Varoufakis is a professor of economics, a man always good for a clever turn of phrase and a beaming smile. Schäuble is better known for being caustic and irritable. Varoufakis is a macroeconomist and prefers an open consideration of facts to blind adherence to dogma; he is matter-of-fact and deeply skeptical of those who have no understanding of the issues but make policy via backroom deals. And he doesn't hold career politicians in high regard.

Since Varoufakis has gotten to know his old colleague from Berlin, his appreciation for career politicians has dropped even further. He is suspicious of those who moralise instead of arguing facts and think that rules come before understanding.

For Yannis Varoufakis, macroeconomics cannot be easily understood, even by economists. That is why, he believes, listening to expert advice -- and constant evaluation of what worked and what didn't -- is the best policy.



*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sat Feb 28th, 2015 at 06:44:09 PM EST
[ Parent ]
Of course. It's not about rules, it's about power relationships.

The basis of all right-wingery is a monarchic belief in the absolute freedom of privileged individuals and countries to do whatever the fuck they like without responsibility or consequences.

Rules are expedient to the extent that they promote those 'freedoms'.

The order of cause and effect is - start with the power relationships you want, then persuade everyone that the rules that promote those relationships are somehow economically, politically, socially, and even scientifically inviolable.

Greece and Varoufakis are challenging that by saying that the rules and the power they maintain are debatable, and may even be subject to democratic constraints.

Macro is actually a red herring. It may or may not be amenable to rational analysis, but its role here is to promote political persuasion and leverage, not to predict the future.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Feb 28th, 2015 at 07:49:19 PM EST
[ Parent ]
That depends on what 'liberal' means. In economics and political science in England it meant the transition from traditional ways of handling land, labor and capital that had evolved organically, even if not with much consideration for the lower rungs of society,  over thousands of years. At least it understood that the needs of subsistence of the lower classes had to be taken into account. Liberal economics turned many of those concerns into 'externalities' and smashed the organic view of society into millions of individuals, each with the 'personal responsibility' to take care of themselves, regardless of how impossible that might be. Such problems were not the concern of businessmen, who had to operate now according to the 'rational' rules of the new liberal economic political economy.

Classical Liberal Economics was the champion of the business class and the middle class against the rules of the feudal order. Especially of interest were changes to the way in which the biggest embodiment of capital - land - was treated, and of the substitution of 'rule of law', adjudicated by impartial trained jurists for rule by the aristocracy from traditional practice, but labor was next in line. And the rationality was from the context of economic competition. That is the core of present day conservatism and 'ordoliberalism' seems to me just another suit of clothes for the ideology, perhaps with truncheons as accessories.

I certainly did not take Schauble to be a liberal. Nor do I find adherents of the Austrian School to be particularly liberal according to how that term is used today. But then 'liberalism' today remains tainted by the economic liberalism of its youth in the early 19th Century. But Socialism has been smeared beyond recognition by a concerted, well funded 50 year PR campaign from the right. Karl Polahyi's Great Transformation is my touchstone here. He was a Socialist in Red Vienna after WW I who moved to England where he wrote his much neglected masterpiece. Unsurprisingly, conservatives prefer to ignore it. It would be hard for them to deal actively with his criticisms.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Feb 28th, 2015 at 08:11:22 PM EST
[ Parent ]
That depends on what 'liberal' means.

Liberalism is a centuries-old family of ideologies that developed in rather different directions in different parts of the world over the past two centuries, although all past and present forms are based on some notion of "freedom". In South America, 19th-century liberalism was much like Whig liberalism, and it moved further right to become the class ideology of the narrow urban bourgeois. In the USA, 19th-century Whig liberalism made way in the 1930s to a liberalism you are familiar with today, one emphasizing "[government provision of] equal opportunities [to practise individual freedom]" (which took roughly the same position as Social Democracy in Europe), while those liberals who didn't want to go the Big Government route chose the "libertarian" tag. In Europe, parallel to Manchester capitalism, there have been forms of liberalism that emphasized a radical rejection of royalism and clericalism, and forms that absorbed nationalism (the notion of "national freedom") and thus weren't against state intervention in the economy. In the mid 20th century, these made way to new forms that reacted to fascism and communism. These included the Central Europeans going into US exile and mingling with the libertarians there who advocated a full withdrawal of the state from the economy, and who birthed neo-liberalism (in which, IMHO, the central ideological novelty is that it is okay to impose "economic freedom" by taking away people's political freedom of choice). In post-WWII West Germany, one of significance was ordoliberalism, which wanted the state to limit itself to imposing order and rules upon private competition with the aim of limiting both the excesses of capitalism and the excesses of collectivism. But there was a wider notion (including but not limited to ordoliberalism) of "social liberalism", which viewed wealth concentration as an inherently corrupting and oppression-breeding condition prone to trigger a blowback and thus to be tamed by strong state re-distribution. This had influence not only on the card-carrying liberals of the FDP, but parts of the CDU (and later the SPD), though it shouldn't be over-valued: for many it was a fig leaf, a counter to "real existing socialism" across the Iron Curtain, and its anti-monopolistic theses never stood a chance against the idea of national champions (especially when large state companies like telecommunications or railways were eyed for privatisation from the eighties). But this liberalism is not Schäuble's background, while liberalism developed further since 1989 in Germany, too: the ordoliberal notion of imposing order to limit excesses of capitalism (in particular reining in and splitting up employer associations) or the social-liberal notion of re-distribution to counter-act wealth concentration are gone almost completely, while the rest merged with the imported Anglo-Saxonized neo-liberalism.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Sun Mar 1st, 2015 at 03:58:33 AM EST
[ Parent ]
ARGeezer:
But Socialism has been smeared beyond recognition by a concerted, well funded 50 year PR campaign from the right.

42% of Germans find that socialism/communism are a good idea that was only implemented badly. https://www.freitag.de/autoren/felix-werdermann/linksextremes-deutschland/view?utm_content=buffercfa b3&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer   Someone should organise them.

by Katrin on Sun Mar 1st, 2015 at 04:30:26 AM EST
[ Parent ]
I should have more specificly aimed that remark at Anglo countries. Advantage Germany and much of Continental Europe today. But the current EPP ascendance has rendered that moot and success of financial interests in governmental capture has gone just as badly, if not worse, for any concern about Social Europe as has developments in the USA. Worse because Germany and Europe had much more in the way of social protection to lose.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Mar 1st, 2015 at 12:17:36 PM EST
[ Parent ]
Yes, that makes sense. I believe that even the Anglo countries have some socialist traditions to connect to, though. The problem is that in most countries there is no party or organisation that could convincingly try to organise these people. And if Syriza fails, this will remain so.
by Katrin on Sun Mar 1st, 2015 at 12:52:50 PM EST
[ Parent ]
The wealthy buy out and/or co-opt all potential threats. And co-opted government officials, often personally convinced of the 'rightness' of their positions, add a serious layer of official disapproval. Then almost all media is owned by very wealthy people and the editors know where the red lines are.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Mar 1st, 2015 at 01:25:20 PM EST
[ Parent ]
I certainly did not take Schauble to be a liberal. Nor do I find adherents of the Austrian School to be particularly liberal according to how that term is used today.
Maybe I'm influenced by both the kind of people who call themselves "liberales" in Spain, as well as by Germany's Ordoliberalism.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Mar 1st, 2015 at 09:46:02 AM EST
[ Parent ]
I have never been able to call myself a 'liberal' since reading The Great Transformation. I have liberal views on social issues - which is almost  all that remains of 'liberalism' in the USA. When the economic aspects are ignored you are missing the train and getting only the whistle. That is how we have ended up where we are.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Mar 1st, 2015 at 01:28:47 PM EST
[ Parent ]
This Spiegel article is a nice study in propaganda: it narrates Schauble's (supposed) thoughts throughout, but completely omits those of Varoufakis. The third-person talk gives a semblance of objectivity to an absolutely biased piece.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sat Feb 28th, 2015 at 03:12:32 PM EST
[ Parent ]
A Spiegel Alert automatically popped up in my head.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Feb 28th, 2015 at 03:19:25 PM EST
[ Parent ]
We haven't used that macro for some time: SPIEGEL alert

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sat Feb 28th, 2015 at 03:27:39 PM EST
[ Parent ]


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Feb 28th, 2015 at 07:16:45 PM EST
[ Parent ]
And what is Schäuble up to now?

ekathimerini.com | Schaeuble softens tone, says Greece 'needs time'

"The new Greek government has strong public support,» Schaeuble said in an interview with German newspaper Bild am Sonntag.

"I am confident that it will put in place the necessary measures, set up a more efficient tax system and in the end honour its commitments.

"You have to give a little bit of time to a newly elected government,» he told the Sunday paper. «To govern is to face reality."

Schaeuble also insisted that his Greek counterpart Yanis Varoufakis, despite their policy differences, had «behaved most properly with me» and had «the right to as much respect as everyone else».

Well if you combine the obviously Schäuble-approved Spiegel article and the above, it's his usual Overton-window-shifting tactic: say something inflammatory and then pretend that you meant it in a much more harmless way than interpreted by everyone.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Sun Mar 1st, 2015 at 01:26:10 PM EST
[ Parent ]
At least he didn't plagiarize it....
by gk (gk (gk quattro due due sette @gmail.com)) on Sat Feb 28th, 2015 at 12:27:37 PM EST
[ Parent ]
Wait...
by afew (afew(a in a circle)eurotrib_dot_com) on Sat Feb 28th, 2015 at 12:51:39 PM EST
[ Parent ]
I'm sure he didn't. Not that I particularly trust him, but any German politician as prominent as he is will have had his thesis thoroughly examined on the internet for any hint of plagiarism.
by gk (gk (gk quattro due due sette @gmail.com)) on Sat Feb 28th, 2015 at 05:13:39 PM EST
[ Parent ]
They might be economists, but how many economists have even heard of the Wörgl experiment, one in a hundred? How many considered it even vaguely relevant to the current situation before Münchau started writing about parallel currencies in the Financial Times last week or so?

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Sat Feb 28th, 2015 at 06:16:52 PM EST
[ Parent ]
So askod died in a swedish kind of way... and was instantly reborn as fjallstrom, welcome back!

Greece Deal Shows Hostility between Schäuble and Varoufakis - SPIEGEL ONLINE

Varoufakis' spell had been broken -- in Schäuble's mind, at least.

More like vice-versa... Schauble's model is outdated and broken, leaving the hopes of Europe broken under its yoke.

Millions suffer and die so a few obscenely rich people can gamble other people's money with no moral hazard and when their profit arrow misses the target they bring out the rules (which they themselves have broken when convenient) and blithely claim to have the answers for all countries, even as their own country itself is starting to feel the cruel pinch of their delusional, heartless policies.

Schauble needs to back away slowly from his extremist position before he finds himself alone and stranded by the rest of Europe.

(Who have learned through watching the PIIGS suffer that their Grand Plan for European Economic Unity was a two-edged sword that could only ever have sustainably succeeded were every country in the EU in a perfect perma-heaven presided over by Our Lady of Perpetual Growth surrounded by her retinue of gossamer confidence fairies, all riding twinkly pink unicorns.)

All cashing in on hail to the eternal bubble machine!

Try to look Serious as you take your chips to be cashed, while the casino collapses into rubble behind you...

"Learn the rules, so you can break them correctly" Dalai Lama.

"A fool with a tool is still a fool." - Abraham Verghese

by melo (melometa4(at)gmail.com) on Sat Feb 28th, 2015 at 09:41:22 PM EST
"Our Lady of Perpetual Growth surrounded by her retinue of gossamer confidence fairies, all riding twinkly pink unicorns"...

you're in good form today, melo!

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Mar 2nd, 2015 at 02:06:16 PM EST
[ Parent ]
ekathimerini.com | Tsipras unveils coalition's first bills, due next week

Prime Minister Alexis Tsipras set out on Friday his government's immediate legislative plans, while at the same time insisting he would continue to pursue debt relief and refuse to sign a third bailout for Greece.

...However, the bulk of Tsipras's speech was focused on outlining what legislation his government plans to bring to Parliament next week. The prime minister said that the first bill would introduce measures aimed at tackling the "humanitarian crisis," including the provision of free electricity to 300,000 households living under the poverty threshold.

...The second bill relates to the introduction of a new payment plan for overdue taxes and social security contributions. The scheme is set to allow applicants to pay in up to 100 installments and will mean that anyone owing up to 50,000 euros cannot be arrested over their debts.

The third draft law will protect primary residences with a taxable value of up to 300,000 euros from foreclosures. Finally, the government also intends to introduce legislation next week that would pave the way for public broadcaster ERT, shut down in June 2013, to be reopened. Tsipras stressed that this would not burden the public budget.



*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sun Mar 1st, 2015 at 04:21:06 AM EST
ekathimerini.com | Spain, Portugal sought to trip up gov't, Tsipras says

Addressing SYRIZA's central committee on Saturday, Tsipras said that Madrid and Lisbon officials had sided against Athens during negotiations on February 20 that led to a four-month extension of the country's loan deal.

"We were up against an axis of powers led by Spain and Portugal, which for obvious political reasons sought to lead the whole negotiation to the brink," Tsipras said.

"Their plan was, and it remains, to wear down, topple or bring our government to unconditional surrender before our work starts to yield fruit and before the Greek example affects other countries," he said. Both Mediterranean countries will hold elections this year.



*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sun Mar 1st, 2015 at 04:31:54 AM EST
[ Parent ]
What's new? Sócrates and Zapatero leave PES for EPP (by Luis de Sousa on March 5th, 2011)
We finally seem to have some coordinated effort from the PES to tackle the crisis. The socialist family has gathered in Greece to present an alternative path to the austerity-rules-all course imposed by the conservatives. They lure to have a thorough answer to the new economic governance rules proposed by Merkel and Sarkozy, now being refined to be voted by the Council later this month. Shy to some extent, it nevertheless points to the obvious building blocs needed to both deal with the crisis and reinforce the Union. The creation of an European Treasury, the creation of an European tax, even the reference to the needed structural paradigm change to build an Economy for the XXI century, all of it seems to be considered by the PES leaders.

...

Unfortunately, two socialist leaders missed the meeting: Zapatero and Sócrates. They don't seem to be interested in an alternative to the conservatives' policy. They are now themselves conservatives.

4 years later, the EPP is in government in both countries, and it is to be expected that the two countries would be hostile to a radical left government in Greece. But the PS and PSOE, now in opposition, are also unsympathetic to Syriza just like 4 years ago they were embarrassed to be seen supporting Papandreou.

A pox on all their houses.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sun Mar 1st, 2015 at 09:43:27 AM EST
[ Parent ]
You could probably add Hollande to that list.

But why are the so-called socialist parties hostile? What needs to change to make them supportive?

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sun Mar 1st, 2015 at 12:42:29 PM EST
[ Parent ]
What needs to change to make them supportive?

Brain transplants. Living brains for starters. Theirs have been zombified.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Mar 1st, 2015 at 12:48:54 PM EST
[ Parent ]
But France is not a crisis country.

"So-called socialist" parties in Europe are actually all in favour of 'sound finance' and of 'austerity later'. They are fully wedded to the Eurozone institutional structure as it is now and see no need to reform it. And, in the case of Greece, evidently their local allies are Pasok, Kinima and maybe To Potami so purely out of tribal allegiance Syriza is not one of them.

The Social Democrats also have a superiority complex relative to those to the left of them (the "lyrical left", "traditional left", "romantic left"...). They see them as idealists who just need to grow up and learn more about politics.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sun Mar 1st, 2015 at 01:19:23 PM EST
[ Parent ]
They see them as idealists who just need to grow up and learn more about politics.

Something that looks ever more comical when coming from serial election losers and junior coalition partners.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Sun Mar 1st, 2015 at 01:30:42 PM EST
[ Parent ]
This (with my emphasis) is representative of that attitude:
This discourse is what irritates the Social Democrats most. "We share many values, but we doubt whether their anti-establishment position will be compatible with the politics of compromise," says Kathleen Van Brempt, a heavyweight among European Social Democrats. The Belgian MEP admits to "sympathy" for this "traditional left" but urges them to reconsider their stance contrary to negotiating with other groups: "In Europe, to take your proposals forward, one must reach agreements with other forces."
(El País, 2 November 2014)

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Mar 1st, 2015 at 01:58:15 PM EST
[ Parent ]
Like Demcrats in the USA they found it necessary to take the money of the rich and then had to find ways to still look themselves in the mirror. They succeeded in that.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Mar 1st, 2015 at 02:02:03 PM EST
[ Parent ]
ekathimerini.com | Greece to prioritize IMF repayments but wants talks on ECB-held bonds, says Varoufakis

In an interview with The Associated Press, Yanis Varoufakis also said Athens intends to start discussions with its creditors on debt rescheduling in order to make the country's massive debt sustainable, at the same time as working on reform measures that need to be cemented by April, the finance minister said Saturday.

"The IMF repayments of course we are going to prioritize, we are not going to be the first country not to meet our obligations to the IMF,» the 53-year-old said, speaking in his office in the finance ministry overlooking Athens' central square and the country's parliament. «We shall squeeze blood out of stone if we need to do this on our own, and we shall do it."

However, «the ECB repayments are in a different league and we shall have to determine this in association with our partners and the institutions."

The ECB has always insisted on full repayment and it's not clear they would accept a rescheduling.



*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sun Mar 1st, 2015 at 04:33:25 AM EST
[ Parent ]
European Tribune - The Greek deal opens for expansionist e-currency
Since this gives a better negotiation position to the Greek government, I would say it also decreases the risk of Greece being forced out.

Nobody has argued against this, so I guess I had a point, even if it was mostly arguing by gut feeling.

To try to go beyond gut feeling, lets look at the main actors.

Eurogroup majority. Goals: continued austerity, not losing face. Tools: threat of Grexit.

Greek government. Goals: ending austerity, staying in power. Tools: power of Greek state aparatus.

If the power of Greek state aparatus makes the threat of Grexit less useful, I would say the best option for the eurogroup majority would be to makes noise to save face and not try to kick Greece out.

I must say that the last months actions has made it clear that my view of what it means to kick Greece out was incomplete.

Means to kick a country out of a currency:

  1. Withdraw backing for state debt - done long ago
  2. Not accept state bonds as security for banks loaning from central bank - done in janury
  3. Liquidity support to banks - not gone yet
  4. Drum up bank run - on hold for now

Does the list go on? What could ECB and or the eurogroup do if it really, really wants Greece to start using something otehr then euros?
by fjallstrom on Mon Mar 2nd, 2015 at 08:26:18 AM EST
What could ECB and or the eurogroup do if it really, really wants Greece to start using something other then euros?

Greece could adopt currency controls and the Greek Central Bank could seize all of the Euros it could and then use these as the backing for an alternate, internal currency, electronic, paper or both. That is the system on which much of the US banking system operated from the US Civil War until the Fed came on line in 1913. Then the ECB, IMF and Eurogroup member states could actively facilitate 'market attacks' on this new currency to drive it away from par with the Euro, which would not be a bad thing for the Greek economy unless they managed to get the currency to appreciate.

Meanwhile Greece would formally remain in all of the various governing boards in the EU and Eurogroup and be able to vote and veto as appropriate. They could make life miserable, if not as miserable, for other states as well as for Greece. At some point the Russian card might well get played, and just blocking certain actions that adversely affect Russia would really upset some in the Eurogroup as well as the USA.  
 

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Mar 2nd, 2015 at 09:51:36 AM EST
[ Parent ]
No longer clearing transfers with the Greek central bank would be pretty final.

To add to your list:

Eurogroup: Tools: Capital controls, see Cyprus. Goals: Excluding outsiders from power, crushing of the Class enemy.

Commission: Grabbing as much power from the Eurogroup as possible. Tools: Bureaucratic infighting. Collaboration with the Class Enemy. Everything else that can be done without a budget.

Not only are Syrizia political outsiders, this would be the first leftwing government in Europe since [fill in once an example comes to mind]. I'm sure the reactionaries will go to extremes if they fail to force a surrender/betrayal.

Von überall könnte das Volk, Urbrut alles Undemokratischen, Zelle des Terrors, über die gewählten Hüter von Wachstum und Wohlstand® kommen. - flatter

by generic on Mon Mar 2nd, 2015 at 12:32:03 PM EST
[ Parent ]
Not only are Syrizia political outsiders, this would be the first leftwing government in Europe since [fill in once an example comes to mind].
Remember that Cyprus had a Communist government at the time of the 2003 bank crisis and imposition of capital controls... but Communist and all it was fully on board with the island's "offshore hedge fund" business model.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Mon Mar 2nd, 2015 at 12:48:07 PM EST
[ Parent ]
I remembered actually, but as you say Cyprus was hardly known for its socialist economic policy. Though I wouldn't be surprised if the Euro ministers didn't remember until they decided to ground it into the dust.

Von überall könnte das Volk, Urbrut alles Undemokratischen, Zelle des Terrors, über die gewählten Hüter von Wachstum und Wohlstand® kommen. - flatter
by generic on Mon Mar 2nd, 2015 at 03:55:21 PM EST
[ Parent ]
Cyprus was the banker to too many Russian oligarchs. Obviously a legitimate target.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Mar 2nd, 2015 at 10:46:52 PM EST
[ Parent ]
No longer clearing transfers with the Greek central bank would be pretty final.

The full power of the US Treasury's vaunted 'economic warfare' unit would be employed to trash anything they try to do through Western clearing houses, BIS, Western Central Banks, etc. I would expect them to try to achieve what the USA did with Cuba October '60, but without the formal embargo. But now there is an alternate clearing system coming into operation through China, Singapore, Hong Kong, etc. But having to suddenly re-route all of your trade and finance arrangements in a day or two would be catastrophic in the short term. OTOH, so would be continuing with the insisted 'austerity'. And cutting Greece off from Western international clearing would make it impossible for Greece to deal with its debts and would be like the ECB, EC, and IMF locking Greece out of the Euro area, analogous to manufacturers locking out workers in a strike. By making it impossible to pay they would, in a sense, be giving Greece cover to default. It would be the market's reaction to the tens to hundreds of dollars worth of defaulted debts held by various banks that would then come into play.

Such an action would also provide a justification for Syriza and Greece to make any deal they could find with Russia and China, along with any one else who would accept payment in currencies other than the Euro, US$, of various western major currencies. It might be awkward for the US Treasury and/or the BIS to prevent an oil exporter such as Indonesia or Brunei from settling for oil shipments in their own currency or Chinese Yuan. I certainly don't know, nor do I suspect does anyone else with a high degree of certainty.

I think it would be a high stakes roll of the dice.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Mar 2nd, 2015 at 11:05:21 PM EST
[ Parent ]
Greek Kolotumbas Increasing at Disconcerting Rate | naked capitalism

Greece is staring to make contingency plans; Ambrose Evans-Pritchard reports that the government has designed new drachmas. But he argues that neither side holds the upper hand, since the prospect of a powerful Grexit is a powerful weapon.

That view may be part of what is informing the sometimes self-sabotaging aggressive Greek posture. And it may not be accurate. The US and UK press have expressed more concern about the risk of a Greek departure from the Eurozone. And recall that it took a lot of external pressure on Germany, not just from the US and UK governments, but from NATO too, to get Merkel to rein in Schauble.

However, the concern that led Eurogroup to relent may not have been about a Greek departure, but a disorderly Grexit. If enough of the hardliners (the ECB, the IMF, and the more bloody-minded members of the Eurogroup) share that view, Greece's likely assumptions about its negotiating leverage, and what degree of concessions its "partners" are prepared to make would prove to be off base.

Now, I must say I disagree with most of what Yves' writes in this article.
There is no good faith here, the negotiations are at least partly conducted for the benefit of the audience and there is no way that Spain and Portugal will be anything less than hostile. One of the few assets Greece has is that the Eurogroup's case is macoeconomic nonsense and in a fair discussion they look like clowns compared to Varoufakis. So letting him continue to talk with journalists is essential. Greece has no other way to plant a news story and would completely loose any track in the bigger societal discussion.
She also puts still too much faith in stories based on "officials'" take on things even after the earlier draft wars have shown that the Euro side has no compunction about bare face lying.

still her take is based on years of experience negotiating in the financial sector and not an irrational fear of Tony Blair lurking under the bed.

Von überall könnte das Volk, Urbrut alles Undemokratischen, Zelle des Terrors, über die gewählten Hüter von Wachstum und Wohlstand® kommen. - flatter

by generic on Mon Mar 2nd, 2015 at 03:51:45 PM EST
[ Parent ]
Now, I must say I disagree with most of what Yves' writes in this article.

Including the first paragraph. What Ambrose Evans-Pritchard actually reported was

Greece's new currency designs are ready. The green 50 drachma note features Cornelius Castoriadis, the Marxisant philosopher and sworn enemy of privatisation.

The Nobel poet Odysseus Elytis - voice of Eastward-looking Hellenism - honours the 200 note. The bills rise to 10,000 drachma, a wise precaution lest there is a hyperinflationary shock as Greece breaks out of its debt-deflation trap at high velocity.

The amateur blueprints are a minor sensation in Greek artistic circles. They are only half in jest.

by gk (gk (gk quattro due due sette @gmail.com)) on Mon Mar 2nd, 2015 at 04:23:41 PM EST
[ Parent ]
From the end of the AEP column:
Alekos Flambouraris, the government affairs minister, has already begun uttering the fatal word "delay", as if were possible to delay an IMF payment without triggering a total collapse of confidence. Syriza insiders warn privately that default is becoming an alarmingly real possibility. "It is so bad that anything could happen. I can't talk any more, the phones are bugged," said one official.

He blamed the European Central Bank (ECB) for setting off a "self-fulfilling deposit flight" from the banking system by refusing to accept Greek collateral in exchange for loans. This decision was made within days of Syriza's landslide election, and before EMU's elected leaders had issued any opinion.

The ECB's pre-emptive move is seen in Athens as counter-insurgency warfare against the first radical-Left party elected in Western Europe since 1945. It will not be forgotten lightly.

The outflows were brisk even before that. Deposit losses reached €12.8bn in January. This is showing up in the "Target2" payment data of the ECB system. The Greek central bank's liabilities to the rest of the EMU network rocketed from €49bn in December to €76bn in January as capital flight accelerated. They may have hit €100bn by now.

This is double-edged. Creditors have even more to lose if Greece spins out of control. A full repudiation of debt to the EMU institutions and states would cost over €300bn. It would be the biggest default of all time, by an order of magnitude.

I had read the same post by Yves but decided not to quote any of it. She spent years with Nomura and has the perspective and experience of a large bank bank executive. She has much more than that, but that was her home for so many years it is not possible not to be seriously influenced by that mind set. Bankers have never dealt easily with revolutionaries, except when they can easily have them crushed. And what is happening is much more political economics than economics a la 'mainstream' economics, which likes to pretend politics has nothing to do with economics. Yves knows this also, but it is hardly her long suit.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Mar 2nd, 2015 at 11:38:38 PM EST
[ Parent ]
I think her conclusions do follow from her premises:

  • Greece is running out of money and needs funding right now.

  • The people who Greece has to convince to get funding is the Eurogroup.
  • If those hold true then yes the memo was total surrender since they conceded the right to evaluate their reforms to the institutions. This also turns their later communication strategy incoherent.

    But do they? On the second point I clearly disagree. I'm more than halve convinced that the Spaniards would advocate blocking the ports and bombing the population centers if they could be seen as doing so. What limits the Euros' action phase is public perception and fear of an exit. At least Schäuble would have no future if he is seen to push Greece out of the Euro and then demands the 300 billion hole in the ECB's balance sheet be filled by fresh tax money. Which he probably would since he is a believer.

    On the second I also disagree. A default in and of itself is no problem, except if used by the ECB to force capital controls. And at least in the case of the IMF the Greek position is that the ECB should just hand over the two billion they owe them to the Fund. If the ECB refuses and than uses the resulting default to murder the payment system they really need to be in control of the media narrative. Because otherwise that looks like a carrier limiting move.

    Finally I think she puts too much importance on the exact language used since in private sector negotiations everything you say can resurface in court. Here the only court that matters is the one of public opinion.

    Von überall könnte das Volk, Urbrut alles Undemokratischen, Zelle des Terrors, über die gewählten Hüter von Wachstum und Wohlstand® kommen. - flatter

    by generic on Tue Mar 3rd, 2015 at 04:22:23 AM EST
    [ Parent ]
    For me it was a question of emphasis. I don't doubt she is correct as far as expressing how Greece is viewed by the world banks and their executives. But what matters here is how to deal with that, and giving too much solicitude to those sentiments leads to surrender. Too little MAY lead to default and forced exit, but I think Greece's best chance is sailing as close to that head wind as possible and tacking as it must. The very thought of the ECB filling a $300 billion hole in Eurogroup banks deriving from a Greek default, much as the Fed did with the GFC, would be the end of the world for much of the conservative political elite. The could not but see that as inflation - "Three Hundred Billion Created Out Of Thin Air!!". The only other place the money could be obtained is from those 80 individuals who own more assets that the bottom half of the population combined. They cannot even contemplate such a thing. It would be worse than the Bolsheviks.

    As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
    by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Mar 3rd, 2015 at 09:35:29 AM EST
    [ Parent ]
    The very thought of the ECB filling a $300 billion hole in Eurogroup banks

    I think the 300 billion are supposed to be the whole damage, including official creditors and central bank balances. Only a very small part of this involves private banks directly.

    Von überall könnte das Volk, Urbrut alles Undemokratischen, Zelle des Terrors, über die gewählten Hüter von Wachstum und Wohlstand® kommen. - flatter

    by generic on Tue Mar 3rd, 2015 at 09:47:17 AM EST
    [ Parent ]
    Of course, but it undermines the narrative: "Debts must be paid!" In REAL money, of course. And gives rise to the awkward question of why this can be done for banks and not for the people.

    As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
    by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Mar 3rd, 2015 at 09:50:48 AM EST
    [ Parent ]
    What exactly are "the Eurogroup banks"?

    A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
    by Migeru (migeru at eurotrib dot com) on Tue Mar 3rd, 2015 at 09:51:03 AM EST
    [ Parent ]
    I would take them to be all the national central banks supervised by the ECB by treaty obligations, all of the banks they supervise and those new institutions responsible for resolving insolvent banks and stabilizing financial conditions in Eurogroup countries.

    As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
    by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Mar 3rd, 2015 at 09:58:08 AM EST
    [ Parent ]
    Those are not the ones that would take a direct hit if Greece defaulted, I don't think.

    A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
    by Migeru (migeru at eurotrib dot com) on Tue Mar 3rd, 2015 at 10:03:01 AM EST
    [ Parent ]


    A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
    by Migeru (migeru at eurotrib dot com) on Tue Mar 3rd, 2015 at 10:11:25 AM EST
    [ Parent ]
    The IMF and ECB would take a $15 billion hit this year if they force a default. So, take careful aim and see if you can only blow off a toe or two. Then the question becomes: "who holds the Greek Treasuries and how forthcoming will they be to able to extend and pretend?" Forthcoming I believe. Do you really believe that their principles are worth $15 billion a year? If they take that kind of hit it is a sign that they see Greece's actions as an existential threat to their whole system - which it is. But they only up the ante by calling the debt. That action also raises an existential threat to their own continued wealth and power.

    I recall reading about 11% yields for holders of Greek treasuries in 2014. Many of them seemed to be hedge funds. I would bet that a lot of those bills are spread around Eurozone banks. They needed to get returns somewhere. Looks like about $15 billion in Treasury bills all together. More hits to the same suspects in 2016. Of course if they force a total debt repudiation by Greece the entire structure of the new ESFS will almost cerainly dissolve, unless the money to cover those out year liabilities is already in the fund, which I have trouble believing. So another piece of paper ass cover dissolves in the rain.

    As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

    by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Mar 3rd, 2015 at 01:48:15 PM EST
    [ Parent ]
    Of course there is no good faith, and Varoufakis has a principled opposition to piling more debt on an insolvent country. If Tsipras has appointed him finance minister and he has agreed, it's not to take the €7bn of the last tranche of the last program, or to agree to a "third program" worth €30bn to €50bn.

    In addition, the Eurozone core is convinced, especially Germany, that the financial risks are finally ringfenced and Grexit is manageable.

    Finally, Syriza is from the radical left, so it is ideologically opposed to the EPP and ALDE, and a direct competitor to the PES. What this means is that there isn't a government in the Eurozone, or an EU Commissioner, that is friendly to Greece's government. At most the Social Democrats or Labour politicians will be condescendingly sympathetic, and that if they're from Latin countries (up to and including Belgium - compare the attitudes of Van Brempt MEP and Dijsselbloem, both Socialists/Labour).

    So Greek default is probably a given, and thus Varoufakis' job is to on the one hand help create the conditions for Greece to survive it, and on the other hand to contaminate European public opinion with as much good macroeconomic sense as he can. Hence the disarming honesty, the refusal to give ballpark figures he's not confident he can deliver on, the "I'm the finance minister of a bankrupt country", and the "If we are snuffed out by the vested interests, it will be our honour to have fallen in fighting the good fight".

    A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

    by Migeru (migeru at eurotrib dot com) on Tue Mar 3rd, 2015 at 05:06:40 AM EST
    [ Parent ]
    In addition, the Eurozone core is convinced, especially Germany, that the financial risks are finally ringfenced and Grexit is manageable.

    I think this is key.

    While Germany believes that Grexit is manageable, Grexit gets ever more likely, because what reason is there for Germany to compromise?

    And it has to be clear eventually to Syriza that it is impossible to satisfy Germany and save the Greek economy.

    Hence - Grexit.

    by Metatone (metatone [a|t] gmail (dot) com) on Wed Mar 4th, 2015 at 08:56:52 AM EST
    [ Parent ]
    While Germany believes that Grexit is manageable, Grexit gets ever more likely, because what reason is there for Germany to compromise?

    "Manageable" is not the same as "better than any alternative". The incentive can be that, while it may be manageable, a better situation could ensue without it.
    For different definition of better, depending on what they care about. For some, it could mean how history will judge them. Regrettably, Schauble is too old to care as much about his future as we would like and seems intent on leaving the wrong kind of trail. But maybe others will see things differently.

    Anyway, I am not saying you are wrong necessarily, just that it may not be as direct a conclusion as it seems.

    Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

    by Cyrille (cyrillev domain yahoo.fr) on Wed Mar 4th, 2015 at 11:55:39 AM EST
    [ Parent ]
    Spain insists Greece will need a third bailout - live updates | Business | The Guardian

    Spain's economy minister is happily wading in on the Greek debate again today after getting in to a bit of hot water earlier in the week.

    Luis de Guindos is sticking to his guns, repeating his comment that Greece will need a third rescue in the region of €30-50bn.

    De Guindos told a conference in Barcelona that Europe would use the four-month bailout extension secured by Greece to assess what progress has been made, and what the next move should be.

    We have given ourselves these four months to one, see what the real situation is, to see how Greece has met conditions and to try and establish what happens next ... which is fundamentally a third rescue.

    He added that ministers at next week's eurogroup meeting would consider Greece's liquidity needs and debt maturities.

    De Guindos comment earlier in the week that the eurozone was working on a third rescue package for Greece ruffled a few feathers.

    In response, a spokeswoman for eurogroup chief Jeroen Dijsselbloem insisted that finance ministers were not discussing a third bailout.

    One assumes he's talking about an extend-and-pretend package like the last two, on condition that the Greeks stick to the rules that ensure it will be unsustainable...

    Still, it seems surprisingly honest and lucid of him to say it.

    It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

    by eurogreen on Wed Mar 4th, 2015 at 09:17:10 AM EST
    [ Parent ]
    He's an asshole.

    A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
    by Migeru (migeru at eurotrib dot com) on Wed Mar 4th, 2015 at 10:09:56 AM EST
    [ Parent ]
    I just read on the Guardian life blog that Greece "successfully sells 1.14bn euro worth of 26-week T-bills at yield of 2.97% - up from 2.75% last month".

    A yield of 2.97%? Is that calculated for the the 6 month or for a full year? It seams extremely low.

    by rz on Wed Mar 4th, 2015 at 10:09:34 AM EST
    That's the annualised yield for 6-month borrowing. So Greece will pay 1.5% after 6 months, if that makes sense.

    A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
    by Migeru (migeru at eurotrib dot com) on Wed Mar 4th, 2015 at 10:12:40 AM EST
    [ Parent ]
    Seems pretty high in relative terms:

    A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
    by Migeru (migeru at eurotrib dot com) on Wed Mar 4th, 2015 at 10:40:59 AM EST
    [ Parent ]
    Wow! 0.25% for Italy! that is incredible.

    Since it is only for 6 month, I guess the risk for the creditors is rather small, so the yield is then not so bad.

    by rz on Wed Mar 4th, 2015 at 11:09:18 AM EST
    [ Parent ]
    It's basically a bet that Varoufakis will agree to a new program in 4 months' time :P

    A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
    by Migeru (migeru at eurotrib dot com) on Wed Mar 4th, 2015 at 11:10:50 AM EST
    [ Parent ]
    I think the important event this that it only did rise vom 2.7 to 2.9 and not farther. so Greece can still get money.
    by IM on Wed Mar 4th, 2015 at 11:11:40 AM EST
    [ Parent ]
    Well if the ECB is buying and all governments try to reduce issuance of new bonds the result will look silly. It's official, there are no more sellers of bonds.

    Von überall könnte das Volk, Urbrut alles Undemokratischen, Zelle des Terrors, über die gewählten Hüter von Wachstum und Wohlstand® kommen. - flatter
    by generic on Wed Mar 4th, 2015 at 11:46:04 AM EST
    [ Parent ]
    Ex-FinMin Hardouvelis transferred money abroad out of 'fear of default'
    The former Finance Minister Gikas Hardouvelis faces continued questioning over money he allegedly transferred to an offshore tax haven.

    Gikas Hardouvelis, the man who headed Greece's Finance Ministry until the January 25th elections unseated the New Democracy-led government, has revealed that he transferred large sums of money [~€450,000] out of the country in 2012 out of fear that the country was headed for a default and euro exit.

    The money transfers took place only a few months before Hardouvelis became a key adviser to the technocratic Prime Minister Lucas Papademos who led a unity government following the resignation of George Papandreou. Hardouvelis went on to become Finance Minister in 2014 [...]

    by das monde on Tue Mar 10th, 2015 at 01:24:21 AM EST


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