Thursday Reads: Power to the People!Posted: November 3, 2011
Good Morning!! Over the past couple of days, I’ve become really fascinated with the situation in Greece. It’s a pretty fluid situation at the moment. On Tuesday Robert Reich wrote a pretty good primer on what is happening and expressed his view that letting the Greek people decide their own fate is the best idea. Here’s a bit of it:
Greek Prime Minister George Papandreou decided in favor of democracy yesterday when he announced a national referendum on the draconian budget cuts Europe and the IMF are demanding from Greece in return for bailing it out.
(Or, more accurately, the cuts Europe and the IMF are demanding for bailing out big European banks that have lent Greece lots of money and stand to lose big if Greece defaults on those loans – not to mention Wall Street banks that will also suffer because of their intertwined financial connections with European banks.)
If Greek voters accept the bailout terms, unemployment will rise even further in Greece, public services will be cut more than they have already, the Greek economy will contract, and the standard of living of most Greeks will deteriorate further.
If Greek voters reject the terms and the nation defaults, it will face far higher borrowing costs in the future. This may reduce the standard of living of most Greeks, too. But it doesn’t have to. Without the austerity measures the rest of Europe and the IMF are demanding, the Greek economy has a better chance of growing and more Greeks are likely to find jobs.
Shouldn’t Greek citizens make this decision for themselves?
Reich argues that it would have been better in the long run if the American people had been consulted about the bank bailouts here.
If Americans had been consulted about the 2008-2009 Wall Street bailout, I doubt it would have happened the way it did. At the very least, strict conditions would have been placed on the banks in return for the money. The banks would have had to eat the losses of the predatory mortgages they sold, and help homeowners reduce those mortgages. They’d be required to improve the capitalization of small banks in communities across the country. They’d be forced to accept stringent new regulations, including resurrection of Glass-Steagall
But we weren’t consulted. The wishes of the American people were considered irrelevant by the oligarchs who run this country. And the European oligarchs are hoping to prevent the Greek people from claiming a right to make a democratic decision.
Of course if the Greek people do decide to default on their debts, there will be serious consequences–for them and for the rest of Europe. Krugman calls it “Eurodämmerung.” He argues that
…the euro was an inherently flawed idea that can work only given a strong European economy and a significant degree of inflation, plus open-ended credit to sovereigns facing speculative attack. Yet European elites embraced the notion of economics as morality play, imposing across-the-board austerity, tightening money despite low underlying inflation, and have been too concerned with punishing sinners to notice that everything was going to blow apart without an effective lender of last resort.
The question I’m trying to answer right now is how the final act will be played. At this point I’d guess soaring rates on Italian debt leading to a gigantic bank run, both because of solvency fears about Italian banks given a default and because of fear that Italy will end up leaving the euro. This then leads to emergency bank closing, and once that happens, a decision to drop the euro and install the new lira. Next stop, France.
Yikes! But Fortune also says Italy and France are in trouble if Greece defaults. And Spain could go bust too.
What worries is that Spain and Italy are not in the Greek situation but they could be. Greece is bust and Spain and Italy could be driven bust. They both have a lot of debt and each year some of that debt has to be repaid. Now governments almost never do repay debt, they just borrow some more and use the new money to pay off the old. Bit like swirling what you owe around a few credit cards.
Which is just fine: except, if interest rates rise then they have to pay more interest on this new debt that they’re issuing to pay off the old. And if interest rates rise enough then they do go bust, as the interest payments they have to make take too much money out of the budget. Switching money around on zero interest introductory rate cards is very different from doing it when you’re being charged 30%.
Now, the general agreement is that when the interest rates are above 6% then Italy and Spain are in danger of going bust. When they’re over 7% they will do so. But of course, when people see that Italian interest rates are above 6% then they become more wary of lending Italy any more money and so interest rates keep on rising to possibly above 7% and game over.
It’s still not clear what Greece is going do in their referendum. Dakinikat says they need to ask the people if they want to leave the European Union or not. German Chancellor Angela Merkel and French President Nicolas Sarkozy have said that the referendum must ask the Greek people if they want to opt out of the Euro, but not the EU itself. Meanwhile, the offer of a bailout of Greece has been called off until after the vote on the referendum is taken. From Naked Capitalism:
The Eurocrats have decided to try to push Greece into line, threatening expulsion from the Euro (note, not the EU) if Greece does not back down. From a practical matter, if the Greeks were to turn down the bailout package, it would lead to a banking crisis, making a Eurozone exit a not that much more traumatic incremental move with considerable upside. And under the Maastrict treaty, Greece cannot unilaterally exit (although as various commentors have pointed out, Nato is not going to send in tanks if the Greeks were to do so).
But this may be an appeal to the Greek public, or more likely, an effort to break Greek prime minister’s Papandreou’s thin coalition on the eve of a vote of no confidence.
So that’s another possibility–that Papandreau’s government might fall. More on the European reaction from Bloomberg:
Led by Germany and France, Europe’s economic and political anchors, the euro’s guardians yesterday cut off financial aid for Greece until a vote they said would be on Dec. 4 or Dec. 5 determines whether it deserves a fresh batch of loans needed to stave off default.
“The referendum will revolve around nothing less than the question: does Greece want to stay in the euro, yes or no?” German Chancellor Angela Merkel told reporters after crisis talks hours before a Group of 20 summit set to begin today in Cannes, France. French President Nicolas Sarkozy said Prime Minister George Papandreou’s government won’t get a “single cent” of assistance if voters rejects the plan.
The hardball tactics open the door for a nation to leave the currency bloc that at its setup in 1999 capped Europe’s progression from war to prosperity and was declared “irrevocable” by its founding fathers. Polls show most Greeks object to the austerity required for aid, yet more than seven in 10 favor remaining in the euro, a survey last week of 1,009 people published in To Vima newspaper showed.
They’re going to have to decide between two awful choices, and the rest of Europe will have to deal with the results of the vote–if there is a default, failures of banks that hold Greek debt and getting Italian, French, and German taxpayers to pay for more bank bailouts–unless Papandreau’s government falls. Read the whole article at Bloomberg to get a sense of how serious all this is.
In U.S. news, Occupy Oakland called for a general strike today. That situation is still fluid as of this writing, 11PM Eastern on Wednesday night.
OAKLAND – Protesters blocked streets near City Hall, smashed windows at a bank and gathered by the thousands in an attempt to shut down the nation’s fifth-busiest port Wednesday.
The Occupy Oakland protest was the largest in a series of rallies in several cities as the Occupy Wall Street movement that began Sept. 17 tried to grab national attention.
A group of about 300 protesters, many of them men wearing black, some covering their faces with bandanas and some carrying wooden sticks, smashed windows of a Wells Fargo bank branch while chanting “Banks got bailed out. We got sold out.”
Are you getting the feeling this genie can’t be put back in the bottle either? The Occupy demonstrations have shown us that we pretty much live in a police state at this point. There very little respect for the protesters’ constitutional rights by local governments or law enforcement. From Counterpunch, here is a report of what actually happened when police attacked protesters in Oakland on Oct. 25.
In a heavily armed pre-dawn raid, on Tuesday, Oct. 25, with back up from armored vehicles and helicopters, the Oakland Police Department in conjunction, with over 15 other police departments from Northern and Central California, stormed the sleepy Occupy Oakland Encampment.
Asleep inside tents of the makeshift Occupy encampment, were over a hundred men, women and very young children. The heavily armed police force, dressed in black ninja-like outfits, and special forces helmets, with full face-shields down, and armed with and assortment of latest riot gear, fired tear gas canisters and concussion grenades into the camp, as helicopters circled above.
Police then attacked and ransacked the entire encampment. In a short time, the camps library, soup kitchen, and children’s center were left in ruins, and over a hundred of the inhabitants were roughed up, arrested and held on high bail. The activists suffered many injuries, including broken bones.
Please read the whole thing–it’s an eyewitness account of a horrifying paramilitary action by police. As everyone knows, Iraq war veteran Scott Olson was critically injured in the melee.
Late last night as part of the general strike, Oakland protesters succeeded in shutting down the Port of Oakland.
Several thousand Occupy Wall Street demonstrators forced a halt to operations at the United States’ fifth busiest port Wednesday evening, escalating a movement whose tactics had largely been limited to rallies and tent camps since it began in September.
Police estimated that a crowd of about 3,000 had gathered at the Port of Oakland by early evening. Some had marched from the California city’s downtown, while others had been bused to the port.
Port spokesman Isaac Kos-Read said maritime operations had effectively been shut down. Interim Oakland police chief Howard Jordan warned that protesters who went inside the port’s gates would be committing a federal offense.
In New York, Los Angeles and other cities where the movement against economic inequality has spread, demonstrators planned rallies in solidarity with the Oakland protesters, who called for Wednesday’s “general strike” after an Iraq War veteran was injured in clashes with police last week.
Organizers of the march said they want to stop the “flow of capital.” The port sends goods primarily to Asia, including wine as well as rice, fruits and nuts, and handles imported electronics, apparel and manufacturing equipment, mostly from Asia, as well as cars and parts from Toyota, Honda, Nissan and Hyundai.
We knew there would eventually be civil unrest, and now we’re seeing it all over the world and here at home. What next? I’d say 2012 is going to be an eventful year.
With that, I’m going to wrap this up. I know there’s lots of other news, but these two stories–Greece and the general strike in Oakland–seem to me to symbolize what’s happening in the world today. People are sick and tired of being bilked by the super-rich, and ignored by the politicians. It’s so chaotic, yet I feel that the only hope we have is for the people to keep resisting as best they can. For so long, I was afraid nothing would wake American up, but I’m finally getting the feeling that we won’t go down without a fight. Let’s keep the elites nervous!
Sooooo… what are you reading and blogging about today?