Thursday Reads: Power to the People!

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?

40 Comments on “Thursday Reads: Power to the People!”

    • Fannie says:

      thanks for coverage of Occupy Oakland……….you know any city with 50% unemployment rate is just a ticking bomb…………..

  1. bostonboomer says:

    Euro rises on speculation Greece will scrap referendum plan.

    The 17-nation currency advanced versus the yen before Group of 20 leaders discuss the region’s debt crisis at a summit today and Mario Draghi addresses his first policy meeting as European Central Bank President. The dollar and yen weakened as European stocks gained, damping demand for the relative safety of the U.S. and Japanese currencies. The ECB will keep its benchmark interest rate at 1.5 percent today, according to economists surveyed by Bloomberg News.

    “The bounce in the euro today may possibly be related to signs of disagreement amongst Greek politicians over whether they will vote in favor of the government,” said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “If the government were to fall, that could be perceived at least temporarily as euro-positive as it could reduce the risk of the referendum taking place.”

  2. bostonboomer says:

    UK Guardian: Greek government on the brink of collapse over debt crisis.

    The Greek government stands on the point of collapse, with the country set for a general election over membership of the euro rather than the referendum planned for early December.

    Calls for a national unity government embracing the opposition also intensified as EU political leaders and financial markets demanded an end to the regional uncertainty unleashed by a small country on the periphery of the eurozone and called for measures to prevent a slide into Europe-wide slump.

    George Papandreou called an emergency meeting of his cabinet for noon local time (10am GMT) on Thursday after his finance minister broke ranks over the referendum and several socialist deputies quit or threatened to quit his Pasok bloc in parliament.

    Papandreou’s political survival both as prime minister and head of the Pasok party will be determined by the cabinet meeting. Filing into parliament for the session MPs said they would listen to the leader’s assessment of the Cannes meeting before they “made up their minds” as to whether to back the confidence motion.

    “The PM has realised that his referendum call has backfired disastrously,” one Pasok cadre told the Guardian. “He knows the vote cannot be held and that the overriding question now is when the country holds elections.”

    • Peggy Sue says:

      I get the feeling we’re watching slo-mo flim on Greece, the death scene in all its permutations before the body hits the floor.

      The thing that fascinates me is that Iceland, where the citizenry took a hardline and gave the international bankers and colluding politicians [and their threats] the finger, went through a very rough time of shifting and sorting things out. But they’re now on their way to financial health, while the rest of the world is left wriggling on the hook. The financier/bankers’ remedy is slapping severe austerity measures on the populace and ever-increasing, soul-crushing debt. And this, from the very parties who got this whole mess rolling!

      Iceland appears to be another ‘little engine that could.’ :0)

      • bostonboomer says:

        I’m not sure about their financial health, but they lead in economic equality for women, according to the World Economic Forum.

        Four Nordic countries — Iceland, Norway, Finland and Sweden — top the chart in promoting equality of the sexes, and the United States continues its ascent, rising from 19th to 17th place.

      • ralphb says:

        Argentina also did it earlier. They also are a success story after a strategic default.

        • dakinikat says:

          They did it with a lot of help from the US also. Same with Russia and the Mexico examples. US taxpayers paid dearly to bail out citibank and others back then because they were heavily into those countries. We paid for that as much as any one.

  3. mjames says:

    Looks like the referendum is off. The all powerful and corrupt (and flat-broke) banks strike again.

    • dakinikat says:

      Yeah, I just saw that: Greek PM backs off plans for referendum

      Greece is sunk either way but it appears that the majority of people and the opposition party don’t want to leave the EU. I can hardly blame them. They’d still be in a third world country if they had their own monetary policy still. They’re in this problem because banks enabled their corrupt government. Same with Ireland, Spain, and the others. However, the benefits of the EU are huge. I can’t imagine them wanting to go back to what the country was prior to that because at least they couldn’t corrupt monetary policy now and it was awful prior to integration. The inflation rates and the unemployment rates were horrible. They inflation is not the problem it was back then at all when their governments could print money any time they wanted to.

      • ralphb says:

        There doesn’t look like a good way out of this for anyone though. It doesn’t seem that Greece would be long term worse off without the Euro. Argentina and Iceland seem to have pulled it off fairly well. Though they were always sovereign.

        • dakinikat says:

          They still have huge issues. What they have, however, is buy in from their people to endure the decade it will take to correct the problems. If the people realize they’ve got a Hobson’s choice to make, then they need to be fully asked which bad outcome they want to endure. I don’t think it’s fair to them to not have a voice. Iceland is still in trouble, but the people there are more resigned to it because they chose the method of suffering.

      • bostonboomer says:

        I haven’t seen anything yet about how “the people” are reacting to having democracy dangled in front of them, only to have it snatched away. This reminds me of Obama’s debt ceiling debacle. None of the people who will pay the price for the decisions of these elites have anything to say about what happens to them. NYT:

        In an address to his party’s central committee on Thursday evening, he said there was no need for a referendum now that the opposition New Democracy party had said it would back the debt deal. He invited that party to become “co-negotiators” on the new deal.

        “The question was never about the referendum but about whether or not we are prepared to approve the decisions on Oct. 26,” he said, referring to the European Union debt deal. “What is at stake is our position in the E.U.”

        Shortly afterward, the finance minister, Evangelos Venizelos, stated bluntly: “The government announces formally that we are not carrying out a referendum.”

        The decision to drop the referendum came after the opposition leader, Antonis Samaras, switched course and decided to back the loan deal, which would involve a 50 percent write down of Greece’s debt. Earlier, Mr. Samaras had been content to sit on the sidelines and scoring political points by opposing the deal and previous bailouts.

      • ralphb says:

        Wonder what happens if civil unrest in Greece forces democracy back into play?

        • dakinikat says:

          Greece’s dilemma: A loss of sovereignty or penury?

          Here’s an op ed on that from a Canadian

          Many observers have said the referendum was the democratic thing to do. Many others, though, fear the outcome, and question why Mr. Papandreou did what he did after the fact. It’s clear that the pressure built to the point of the Greek leader deciding to pull a -put-up-or-shut-up move.

          Whether or not there’s a referendum, the issue of Greece being able to repay its debts remains, said CMC Markets analyst Michael Hewson.

          And even if the referendum is off the table, that “still leaves the issue of the vote of confidence and any possible new transitional government.”

          Greece can’t be kicked out of Europe’s monetary union, but it can choose to quit on its own. And what was once unthinkable is now suddenly on the table.

          But there would be a huge cost to Greece leaving the euro zone and returning to the drachma, one that would include a deep currency devaluation, high inflation, a hit to Greek banks and higher unemployment, already in the 17-per-cent range.

          And don’t rule out the embattled Greek people, who have shown their anger at Mr. Papandreou’s cuts, which are tied to the bailout money. Polls show they want to stay in the euro zone, but that they’re violently opposed to austery measures, which isn’t a surprise.

          I think the polling indicates they want to stay in the EU. Greece was a worse mess before they joined, but either way they will be a mess. They just need to pick their poison. They’ll lose all kinds of FDI and trade businesses if they pull out because no one will want to go back in there knowing full well that Greece’s monetary authority was hyperpolitical before and created inflation. They’ll lose either way. If they stay in the EU, their economy won’t completely unravel. If they stay in the EU, they’ll lose sovereignty. Guess it depends on if you want your business to survive or you want the idea of a nation state in tact. Frankly, I’d go with staying in the EU because I wouldn’t want to face losing all those benefits plus the idea that monetary policy would go back to the same corrupt political and business class that created this mess to begin with. That sure was an expensive Olympics game. Goldman Sachs and the Greek politicians must’ve really made big on them.

      • bostonboomer says:

        Dak and I were talking about this last night. My guess is that there will be lots more civil unrest when the increased austerity kicks in. I don’t know much about Greece, but from what I’m reading, Papandreau’s government could still be in trouble. It will be interesting to watch.

      • mjames says:

        I guess the referendum was just a political ploy – and I guess it backfired. At least on the jackass who proposed it.

        No one – and I mean no one – in a position of power seems to give a rat’s ass about the unemployed, the underemployed, the sick, the elderly, the poor, and on and on and on.

        There is no solution by ordinary means. I’d be okay with seeing all banks go under. Not happy, but okay. I mean it. They have brought down the entire world. Let the shareholders do whatever they need to do to recoup their losses, like suing the various CEOs, CFOs, and boards of directors directly for fraud and mismanagement. That won’t work either, of course, but let them try.

        The banks have no money. This is all a charade (all of it, here, there, and everywhere) designed to keep the insolvent banks afloat and the rich continuing to rake in what little is left of the dough. Seriously, the banks have no money of their own and they’ve gambled away all of ours.

        Shortly, this is going to make the Great Depression look like a minor economic hiccup. Very few are acknowledging the full scope of the bankruptcy. It is too horrible to contemplate. It will consume us all.

      • bostonboomer says:

        He offered to resign last night. But he withdrew his offer along with the referendum according to the latest stories I’ve seen. I wonder if the resignation is back on? This thing is moving too fast to keep up with!

  4. bostonboomer says:

    Paul Krugman is not happy with Ben Bernanke: Dear Ben: It’s Not 2007 Anymore

    The Federal Open Market Committee has spoken. It expects very high unemployment for at least the next three years, while it expects inflation to be below target. By any interpretation I can think of, the Fed therefore expects to fail to honor its dual mandate of price stability and full employment. To deal with this shortfall, it proposes doing … nothing.

    But that’s not what has me upset, since that’s been the way of things all along. What got me was Ben Bernanke’s response to a question about whether the Fed might adopt nominal GDP targeting, or more broadly change its policy framework in some way that might help us escape the Lesser Depression. And his answer was no, because the standard approach has demonstrated “its benefits in terms of macroeconomic stabilization”.

    Click link to see chart.

    You can see the Great Moderation, which might have led the Fed to believe, circa 2007, that it had this stabilization thing under control. But now, after four years and counting of slump?

    And anyway, we don’t want “stabilization” right now – we want an escape from a slump that is crushing our future. This is no time to be basing policy on hopes that one of these years we’ll find ourselves back in the Great Moderation.

    I have always had the working assumption that Bernanke was being as dovish as he could manage given his board, that in private he understood just how much we need radical action. Maybe not – and that’s very bad news.


  5. bostonboomer says:

    European Central Bank cuts key interest rate to “address looming recession.”

    Speaking to reporters after overseeing a meeting of the E.C.B. governing council for the first time, Mr. Draghi put the emphasis on risks to growth rather than prices. He warned that the bank was likely to make a “significant downward revision” in its forecast for euro zone growth and that data signals a mild recession.

    “In such an environment, price, cost and wage pressures in the euro area should also be moderate,” he said. “Today’s decision takes this into account.”

    But Mr. Draghi disappointed those who want the E.C.B. to aggressively buy European government bonds, using its ability to print money to overwhelm the market and stamp out the debt crisis. He stuck to the E.C.B. position that the bond purchases are temporary and limited, and justified solely as a way for the bank to maintain its control over interest rates.

    Rather, it is up to national leaders to regain investor confidence by controlling spending and removing excessive regulations and other obstacles to growth, Mr. Draghi said.

    Austerity is still the official policy.

    • mjames says:

      But but but … nothing has any value, so who the hell do they think they’re kidding? I’ve stopped believing it’s austerity that’s the policy. The “policy” is covering up the fact that the banks have no money, the countries have no money, nobody except a few at the top has any money. And covering up that the banks and Wall Street and Corzine and Rubin and Dimond and all of these crooks have gambled away everyone’s money except their own. Corzine has been doing the same thing since he headed up Goldman Sachs. No doubt in my mind.

      And what do we have? Obama. The (non) constitutional (non) scholar non-economist non-thinker who can’t tell his ass from his elbow and never held a principled view on anything ever. And Obama’s leader – Geithner, from the school of “let me rip off everybody in the world except the wrongdoers.”

      This is going to get real ugly real soon.

  6. bostonboomer says:

    Cain accuser got $45, 000 settlement.

    • dakinikat says:

      I wonder if the Washington DC set–LIndsey Graham for one–is going to go on tv again tonight and talk about how that isn’t that much money again like they did last night.

      • bostonboomer says:

        I guess to them, it sounds like a couple of month’s pay. They’re so out of touch with real people. It won’t be long before one of the woment talks.

      • ralphb says:

        I’m sure they will unless there is a 7 figure settlement somewhere.