Tiny, tiny people
Jul. 9th, 2015 06:16 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
koganbotThis long post by Steve Randy Waldman has been getting attention in the econ blogosphere and is a slamming bit of writing that's also clear and coherent and seems to explain a lot.
http://www.interfluidity.com/v2/5965.html
The two money quotes, so to speak:
http://www.interfluidity.com/v2/6013.html
Of course, as I've said often, I'm not an economist and don't have the knowledge or ability to truly evaluate such arguments. That Waldman’s explanations resonate with me is actually not a good reason to think they're right, in fact is a warning light. Not that it’s a reason to think his explanations are wrong, either. But one of the things that resonates is that the villains in Waldman’s story, the European policy and business elites, created and chose a story that resonated with them and that gave them a villain and scapegoat and simultaneously absolved themselves of the responsibility for examining what they themselves had done and for changing what they’re now doing. The psychology behind their story choice isn’t unlike mine, though I’m not an actor in this story and my self-interest is purely psychological. I’ll also quickly point out that Waldman is emphatically not saying there were no other bad actors, or, for that matter, that there was never any idealism or genuine concern mixed into the elite behavior. The sin he identifies in the elites is their refusing to acknowledge that there was a Europe-wide failure that involved many parties, and that there was a system that encouraged it.
More links:
Paul Krugman has been blogging daily about Greece. Maybe his two most crucial posts are:
Breaking Greece
Austerity Arithmetic
First one in brief (my words): The creditors are dictating that the Greeks adopt supply-side policy (spending cuts rather than tax hikes), but these are fantasy proposals that will not help an economy that's running 20 percent below capacity.
Second one in brief (my words): Let's say we try to raise the primary surplus by 1 percent. At best this will take decades to reduce the debt ratio, but it may well never reduce the debt ratio, in fact may raise it, forever.
(I myself don't pretend to understand the calculations in the second one.)
One from Simon Wren-Lewis, like the Waldman but in a measured tone of voice.
The Greek people have paid for their governments’ mistakes — and for the errors of the Troika
Nate Silver has a fascinating though speculative post about not just why the opinion polls were so wrong on the Greek referendum ("no" winning by only 3 or 4 percentage points, not the 22 it actually won by), but why at the end they all pretty much agreed with one another, so were all more or less equally — and drastically — wrong. Given the volatility of opinion and the chaos brought on by the snap referendum and the bank defaults, opinion polls should have wildly disagreed with one another. So Silver suspects "herding," which means that towards the end, when a pollster got results that were out of line with most other pollsters' published results, the pollster either suppressed the findings or altered them. Basically, pollsters didn't trust their own numbers and didn't want to look like fools (safer to be wrong along with everyone else than risk being the only one who's wrong). But also, respectable opinion/conventional wisdom (whatever you want to call it: pundits and journalists and financial markets and banks and brokers etc.) overwhelmingly supported "Yes" and assumed the public would too, and this influenced both the pollsters and the betting markets, the latter uncharacteristically being even more wrong than the opinion polls.
Basic takeaway: polling is getting harder for a number of reasons, and pollsters are adapting or fudging their numbers to compensate, without really knowing what they're doing.
An article from Alison Swale and Andrew Higgins at the New York Times is interesting because it quotes two experts who, though they appear to be saying the same thing, are actually making points that are almost completely at odds.
Angela Merkel Faces Monumental Test of Leadership After Greek Vote
Each expert seems to be saying that politics is transcending or superseding economics, but actually expert number one (Techau) is saying that, while Germany's tough stance has been dictated by economics, Merkel now may be softening the stance to accommodate the political need for European integration and solidarity. Meanwhile expert number two (Ruparel) says that, while the economics always supported the Greek position against austerity, this issue has never been just about economics; it is also about accommodating politics throughout the Eurozone, especially German politics, which pushes for toughness against the Greeks.
And here, a piece in the Telegraph by Ambrose Evans-Pritchard that I just don't know what to make of. Its kicker goes,
Prime Minister Alexis Tsipras never expected to win Sunday's referendum. He is now trapped and hurtling towards Grexit
One of the commenters over at Yves Smith's Naked Capitalism said it "reads like the kind of story you’d see at the supermarket checkout." But Smith claims Pritchard's article is sourced, withrock star former Greek Finance Minister Yanis Varoufakis one of the sources. (She doesn't say how she knows this.)*
Finally, today, from Liz Alderman and James Kanter in the NY Times, Tsipras seems to have caved (which I was pretty sure would happen), though you never can tell. I'll wait till someone who knows a lot tells me what to think.
Greece Submits 11th-Hour Bailout Proposal to Creditors
*Well, Varoufakis is quoted in the piece, but not in regard to any of its sensationalistic claims.
http://www.interfluidity.com/v2/5965.html
The two money quotes, so to speak:
With respect to Greece, the precise thing that European elites did to set the current chain of events in motion was to replace private debt with public during the 2010 first "bailout of Greece." Prior to that event, it was obvious that blame was multipolar. Here are the banks, in France, in Germany, that foolishly lent. Not just to Greece, but to Goldman's synthetic CDOs and every other piece of idiot paper they could carry with low risk-weights. In 2010, the EU, ECB, and IMF laundered a bailout of mostly French and German banks through the Greek fisc. Cash flowed into Greece only so it could flow out to rickety banks. Now, suddenly, the banks were absolved. There were very few bad loans left on the books of European lenders, everyone was clean, no bad actors at all. Except one. There were the institutions, the "troika," clearly the good guys, so "helpful" with their generous offer of funds. And then there was Greece. What had been a mudwrestling match, everybody dirty, was transformed into mass of powdered wigs accusing a single filthy penitent (or, when the people with their savings in just-rescued banks decide to be generous, a petulant misbehaving child).And
For the record, my sophisticated hard-working elite European interlocutors, the term moral hazard traditionally applies to creditors. It describes the hazard to the real economy that might result if investors fail to discriminate between valuable and not-so-valuable projects when they allocate society's scarce resources as proxied by money claims. Lending to a corrupt, clientelist Greek state that squanders resources on activities unlikely to yield growth from which the debt could be serviced? That is precisely, exactly, what the term "moral hazard" exists to discourage. You did that. Yes, the Greek state was an unworthy and sometimes unscrupulous debtor. Newsflash: The world is full of unworthy and unscrupulous entities willing to take your money and call the transaction a "loan." It always will be. That is why responsibility for, and the consequences of, extending credit badly must fall upon creditors, not debtors. There is one morality tale that says the debtor must repay, or she has sinned and must be punished. There is another morality tale that says the creditor must invest wisely, or she has stewarded resources poorly and must be punished. We get to choose which morality tale we most use to make sense of the world. We do, and surely should, use both to some degree. But if we emphasize the first story, we end up in a world full of bad loans, wasted resources, and people trapped in debtors' prison, metaphorical or literal. If we emphasize the second story, we end up in a world where dumb expenditures are never financed in the first place.There were several comments challenging his contention that "In 2010, the EU, ECB, and IMF laundered a bailout of mostly French and German banks through the Greek fisc. Cash flowed into Greece only so it could flow out to rickety banks." Here is his response:
http://www.interfluidity.com/v2/6013.html
Of course, as I've said often, I'm not an economist and don't have the knowledge or ability to truly evaluate such arguments. That Waldman’s explanations resonate with me is actually not a good reason to think they're right, in fact is a warning light. Not that it’s a reason to think his explanations are wrong, either. But one of the things that resonates is that the villains in Waldman’s story, the European policy and business elites, created and chose a story that resonated with them and that gave them a villain and scapegoat and simultaneously absolved themselves of the responsibility for examining what they themselves had done and for changing what they’re now doing. The psychology behind their story choice isn’t unlike mine, though I’m not an actor in this story and my self-interest is purely psychological. I’ll also quickly point out that Waldman is emphatically not saying there were no other bad actors, or, for that matter, that there was never any idealism or genuine concern mixed into the elite behavior. The sin he identifies in the elites is their refusing to acknowledge that there was a Europe-wide failure that involved many parties, and that there was a system that encouraged it.
More links:
Paul Krugman has been blogging daily about Greece. Maybe his two most crucial posts are:
Breaking Greece
Austerity Arithmetic
First one in brief (my words): The creditors are dictating that the Greeks adopt supply-side policy (spending cuts rather than tax hikes), but these are fantasy proposals that will not help an economy that's running 20 percent below capacity.
Second one in brief (my words): Let's say we try to raise the primary surplus by 1 percent. At best this will take decades to reduce the debt ratio, but it may well never reduce the debt ratio, in fact may raise it, forever.
(I myself don't pretend to understand the calculations in the second one.)
One from Simon Wren-Lewis, like the Waldman but in a measured tone of voice.
The Greek people have paid for their governments’ mistakes — and for the errors of the Troika
Nate Silver has a fascinating though speculative post about not just why the opinion polls were so wrong on the Greek referendum ("no" winning by only 3 or 4 percentage points, not the 22 it actually won by), but why at the end they all pretty much agreed with one another, so were all more or less equally — and drastically — wrong. Given the volatility of opinion and the chaos brought on by the snap referendum and the bank defaults, opinion polls should have wildly disagreed with one another. So Silver suspects "herding," which means that towards the end, when a pollster got results that were out of line with most other pollsters' published results, the pollster either suppressed the findings or altered them. Basically, pollsters didn't trust their own numbers and didn't want to look like fools (safer to be wrong along with everyone else than risk being the only one who's wrong). But also, respectable opinion/conventional wisdom (whatever you want to call it: pundits and journalists and financial markets and banks and brokers etc.) overwhelmingly supported "Yes" and assumed the public would too, and this influenced both the pollsters and the betting markets, the latter uncharacteristically being even more wrong than the opinion polls.
Basic takeaway: polling is getting harder for a number of reasons, and pollsters are adapting or fudging their numbers to compensate, without really knowing what they're doing.
An article from Alison Swale and Andrew Higgins at the New York Times is interesting because it quotes two experts who, though they appear to be saying the same thing, are actually making points that are almost completely at odds.
Angela Merkel Faces Monumental Test of Leadership After Greek Vote
Each expert seems to be saying that politics is transcending or superseding economics, but actually expert number one (Techau) is saying that, while Germany's tough stance has been dictated by economics, Merkel now may be softening the stance to accommodate the political need for European integration and solidarity. Meanwhile expert number two (Ruparel) says that, while the economics always supported the Greek position against austerity, this issue has never been just about economics; it is also about accommodating politics throughout the Eurozone, especially German politics, which pushes for toughness against the Greeks.
And here, a piece in the Telegraph by Ambrose Evans-Pritchard that I just don't know what to make of. Its kicker goes,
Prime Minister Alexis Tsipras never expected to win Sunday's referendum. He is now trapped and hurtling towards Grexit
One of the commenters over at Yves Smith's Naked Capitalism said it "reads like the kind of story you’d see at the supermarket checkout." But Smith claims Pritchard's article is sourced, with
Finally, today, from Liz Alderman and James Kanter in the NY Times, Tsipras seems to have caved (which I was pretty sure would happen), though you never can tell. I'll wait till someone who knows a lot tells me what to think.
Greece Submits 11th-Hour Bailout Proposal to Creditors
As details of the new offer emerged, it appeared the Prime Minister Alexis Tsipras was capitulating to demands that he urged his countrymen to reject in the referendum last Sunday, like tax hikes and various measures to cut the costs of pensions.I don't know. Greece got blasted. Syriza doesn't have a mandate for Grexit. Maybe the Syriza group and their coalition partners figured that even if Greece could hack an exit from the euro and eventually prosper, the short run is far too hard. Or maybe I'm reacting too soon, and this isn't close to over.
But Mr. Tsipras seemed to have gained ground on debt relief, his one bedrock demand. Germany’s truculent finance minister, Wolfgang Schäuble, finally gave a little on that Thursday, admitting that “debt sustainability is not feasible without a haircut,” or writedown of debt, even if he then appeared to backtrack.
*Well, Varoufakis is quoted in the piece, but not in regard to any of its sensationalistic claims.
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mandates
Date: 2015-07-10 03:38 am (UTC)Re: mandates
Date: 2015-07-10 06:11 am (UTC)Okay, I haven't been tracking this all that closely, but as far as I know no one in the public official leadership of Syriza has ever argued publicly in favor of Grexit. When they won in January they said they were going to negotiate to end austerity and stay in the eurozone. In the runup to the referendum they said that a "no" vote was not a vote for Grexit. They said they would sue to stay in the eurozone if the EU tried to throw them out. In his speech celebrating the "no" victory Tsipras specifically said it was not a mandate for a rupture with Europe. Of course, I can't source these and I'm about to go to bed anyway and I'm damned if I'm going to post any more links, but I trust my memory on this. Syriza said all along that they could win the negotiation and stay in the eurozone. They were probably wrong, and there could well be factions within Syriza who have no illusions about this and thought Grexit could or should be the outcome. But Syriza's official policy is that Grexit won't be the outcome. Or if Greece does get thrown out, that's not on them but on the rest of the EU.
Re: mandates
Date: 2015-07-10 10:12 am (UTC)My perspective (responding mainly to the original Renzi query):
Date: 2015-07-10 10:22 am (UTC)Syriza came on the scene — won the election/formed the coalition — with a tactical plan and a strategic plan.
The tactical: to negotiate a new package with the troika (as the previous one was shortly to run its), which gave much better protection to the vulnerable and did not impact so ruinously on growth etc.
The strategic: to begin to enable a Europe-wide pushback agains the ideology of austerity
Grexit was/is strongly contra-indicated at both levels: (first) with Grexit you'll get (probably much) worse austerity. The balancing argument that at least you now have control of your economic destiny is, unfortunately, weak — Greece is a net importer of food and fuel. Second: the general pushback could/can never be effective if it only manifests in one quite small country (population-wise, it’s quite big geographically), with not much economic leverage (see point above, abt being a net importer). For pushback to become a thing at all, Europe-wide, and for it to benefit Greece, Greece has to be in Europe still, working closely with the other pushers-back (for starters: Italy, Spain, Portugal; beyond this: with emergent opposition anti-austerity parties in the Northern countries). (In the UK, the SNP is strongly anti-austerity, but badly needs fellow cohorts to buttress it; on its own it is easily strong-armed economically by its neighbour to the south.)
The upshot of this — anti-Grexit, anti-austerity, pro its own elderly, poor and unemployed — at these two levels was a very tangled political ask. Essentially they had to send conflicting signals in at least four directions.
1: to the troika, saying we are serious about negotiation but have very strong red lines.
2: to the emergent Europe-wide anti-austerity movement (qua movement, which it wasn’t quite yet, last year): we will not back down, we will win, we will smash the system.
3: to the pensioners etc back home — we will protect your well-being
4: to businesspeople looking to invest in Greece and oligarchs already there — your money is not only safe here, but all will benefit!
As a coalition — of quite uneasy bedfellows — they also had to keep their own group sweet, though this would be easy to do by backchannels. (i.e. by calling a meeting to say, “we’re about to say this abvout such-and-such, don’t worry about it, it’s a necessary tactic, we’re still on-track” <— you can communicate with your own political compadres like this, on the QT; less so with the various engaged publics)
My basic judgment is that they badly screwed up the tactical levels from the get-go. They were ill-prepared, had a poor understanding of what were the red lines for their opponents, and an equally poor understand of where the fracture lines were between their opponents (esp.between the EU bit of it and the IMF, in my opinion). They didn’t go into negotiations detail-rich, with firm offers and firms nos, they went in mainly with a bunch of just daft toontime stuff, which looked unserious because it very possibly was (this is back in February).
Re: My perspective (responding mainly to the original Renzi query):
Date: 2015-07-10 10:22 am (UTC)(Tellingly, quite a lot of the Greek oligarchs are pro-Grexit, because they know they can/will make a killing in those circs.)
BUT: at the strategic level, I think the picture is different, and not so pessimistic. Not only have differences publicly emerged within the troika (the IMF publishing the damning report, which the other two prongs of the troika tried to suppress, or at least delay. But — just in the last week — France has at last re-awoken as a counterforce against Germany with the EU, supporting Greece. It’s not yet expressing itself as a particularly radical counterforce, but this doesn’t (necessarily) matter at this stage; what matters is that it's no longer wealthy centre vs beleaguered periphery. This is a grouping within the EU that Renzi can caucus with (as can Spain and Portugal, and probably others). It’s (maybe) the beginning of a (very) sluggish sea-change in the current overall culture of the EU, which is after all a long-term project, begun as a way to counterbalance German and French* interests in Europe so that they didn’t keep going ruinously to war with one another — and in an important way, I think Syriza’s theatre has been the catalyst for this. Not least because there are people in every country who can recognise themselves in the Greek pensioners. Sadly, I think Syriza have sacrificed the short and possible medium-term well being of their own pensioners (and supporters generally) to enable this potential sea-change.
*French diplomats are admired and feared the world over: they understand their opponents perfectly, they are charming and urbane, they dig in and don't budge, they stick at it till they get what they want. France as patron of the southern European faction of course has problems, but it also changes the game.
Re: My perspective (responding mainly to the original Renzi query):
Date: 2015-07-10 01:23 pm (UTC)About the IMF, and its recent report (which I haven't read but wouldn't have understood if I had): as soon as the report came out there was a battle over how to spin it. The first news account I saw was actually claiming — perhaps correctly — that fundamentally the report was an attack on Syriza for hurting the Greek economy over the last five months, about how things would have been progressing well if only Syriza had not come to power, and that the release was intended to hurt the "No" campaign and help the "Yes." Then I read commentary that emphasized how the report called the current debt burden unsustainable and was an implicit call for debt relief, and the claim (has it been verified, or this just more spin?) that the other two troiks had attempted to suppress the report's release for fear it would encourage a "No" vote.
Can "troiks" be a coinage? I do like your "prongs" as well, implying that the troika are a fork to jab with. Unfortunately, etymology identifies "troika" as being a Russian three-horse open sleigh (or something), the term deriving from the Russian word for "three," not the Russian word for "fork."
In any event, Simon Wren-Lewis thinks the IMF (or its leadership, at any rate) is still stooging (my word) for the other two troiks, and he links Peter Doyle, who apparently thinks the report itself is half-assed (my word); I say apparently because I haven't read the Doyle paper, out of fear of not understanding it. I'd assume there are rifts within the IMF.
As for austerity, Krugman's claim has been that, for its proponents, it's never really been about balancing budgets, but rather about destroying public spending for education and social security, etc., but also that its proponents have no clue what it does to an economy at the zero-lower bound.
Btw, according to news accounts the Greek
surrenderproposal doesn't even guarantee that the Greeks get actual debt relief, only the promise that debt relief will be discussed; meanwhile, Greece gets money (is it a loan or a gift?) and an extension, right? — the money presumably being for immediate needs and to meet payments to creditors. (I know, this seems weird, the troika forwarding money to Greece that Greece turns around and pays back to the troika, but isn't this what at least some or even a lot of the Greek "bailout" has fundamentally been?) Anyway, where's the path by which Greece grows its economy, rather than continuing to tread water or even to lose more by contraction than it gains by spending cuts? How does unemployment go down? And how does Europe overall get going? Even without Greece, recovery is tenuous throughout, right? (Again, I'm not an economist and anyway haven't been keeping up with the ongoing story.)Re: My perspective (responding mainly to the original Renzi query):
Date: 2015-07-10 03:38 pm (UTC)Hmmm. My fear is that the people in other countries who should identify with Greek pensioners, or with Greek school teachers whose savings and employment are at risk or gone, don't get it at all, that, e.g., German and French school teachers and pensioners have no idea that it was potentially their own savings and jobs that were rescued in the first two "Greek bailouts"* but do believe that bits of their own money are being taken away to pay for the profligate Greeks.
And my other fear is that the "people in other countries" (not to mention in Greece itself) most inspired by the "No" vote aren't those who identify with the pensioners but those who think the fundamental problem is immigrants. Not that anti-immigrant populists and nationalists can't also oppose austerity. Fascist parties have historically had socialist wings (suppressed once the Fascists took power, I believe, though I don't really know my history here, esp. of Mussolini and Peron). But the European leadership has recently been as irresponsible regarding immigration as it has been regarding Greece and debts, and of course it's Italy and Greece where most of the immigrants are first landing.
Btw, if Angela Merkel has a pitch to get German voters and politicians to support debt relief and aid, it may be by inserting the adjective "humanitarian."
Oh, and lj is out right now, so I might as well keep typing. Krugman just posted commentary on Oliver Blanchard's defense of the IMF, the key phrase maybe being "given the political realities."
But anyway, Krugman is getting ever more adamant that absent substantial debt relief Greece's only way forward is via Grexit. Presumably he has some idea why others think Grexit would be crushingly bad for Greece. (I gather Yves Smith** is in this camp, and you seem to be too.) I don't think he's ever answered them directly, though. He thinks the current course guarantees a never-ending or at least long-term continuation and even worsening of the ongoing disaster.
*At least that's Steve Randy Waldman's take, which I've decided so far to believe.
**I haven't yet made the time to catch up on her take.
Re: My perspective (responding mainly to the original Renzi query):
Date: 2015-07-10 03:58 pm (UTC)re the effect of grexit: i don't know enough to know at all myself what the result would be (from what i've read i tend more to be persuaded by the people saying it would worse -- as you say, krugman never seems to have answered this) but up above i was trying to outline what i think syriza's line is, rather than mine
a lot of what i read is basically daniel davies's twitterfeed @dsquareddigest, where he discusses matters with economists, journalists and the like -- he's much more of a pragmatic believer in "kick it down the road" than krugman, esp.with regard to euro-stuff, and i think has a better practical instinct for the difference between what the agreement says right here right now and how it will actually be operating in a year's time
Re: My perspective (responding mainly to the original Renzi query):
Date: 2015-07-10 04:22 pm (UTC)I assume Krugman's argument would be that the past five years of can-kicking has made things much worse, that the longer you prolong it the worse you make it.
I'd think the poor "kick-the-can" metaphor had been kicked to death by now, but not only did it reappear last week ("It is no longer possible to kick the can any further"), but the apparent agreement does, in fact (or in metaphor, at least), kick the can down the road once more. In the long run we'll be dead, but the can will still be rolling.
I think a lot rides on whether hints and promises of debt relief are actually credible.
Re: My perspective (responding mainly to the original Renzi query):
Date: 2015-07-12 03:22 pm (UTC)(2) Another version of the Renzi question — who will stand up to Merkel? — might be, what the hell do Mario Draghi and Christine Lagarde think they're doing? I'm assuming, perhaps very incorrectly, that (a) Krugman is more-or-less right in his Keynes-Fisher-Friedman arguments for being anti-austerity, and (b) Draghi and Lagarde would likely agree with him, and agree that recovery of Europe as a whole, not just of Greece and not just of the periphery, are at risk from austerity. If so, what do they think they're doing, and why?
I do gather — but I know fuck all about this, too, as I haven't been paying attention to the Merkel or Germany story over the last couple of decades — that sentimental arguments (think of the suffering Greeks!) and combined sentimental and hard-nosed EU arguments (think of unity!) can sway Merkel and Germany because these appear as stories of Germany and the north sacrificing for the larger good, rather than stories where they admit to having acted like obtuse, greedy fucks. (Again, I don't feel competent to make the latter judgment, but it was fun to type.)
(3) So, in today's New York Times, reporter Andrew Higgins repeats — more explicitly and mindlessly than he had in the earlier article of his that I'd linked in my post — the idea that the argument for being tough with Greece and rejecting its proposal is "economic" but the argument for more-or-less accepting it is "political," based on the need to keep Greece in the eurozone and hence to assure European "solidarity." He doesn't quite say this, actually (just says that the latter argument is political), but fundamentally he doesn't know what he's saying when he uses the terms "economic" and "political." It's not that he's wrong in calling the "solidarity" argument political, but he doesn't know what distinction he's making, or for that matter what the economic considerations are for Europe more-or-less accepting the Greek proposal, or for Europe trying to get "tougher" terms, or for Europe pushing Greece out of the Eurozone.* Not that I know either, but something I would put in an analysis, if I were writing one, is that the distinction between the "economic" and the "political" is not absolute, given that not everyone's economic interests are the same and that there can be power i.e. political struggles as to whose interests prevail, and those two terms "economic" and "political" really do not take care of themselves, when typed into a supposedly explanatory article. In any event, he's not stating what he thinks the economic arguments would be. What are the economic reasons for or the economic consequences of any of the possible policies or outcomes?
*As a matter of fact, he doesn't seem to distinguish between the latter two, or make clear whether the toughies want Greece out of the eurozone or just think they can make Greece accede to even tougher terms. Seems like the toughies want guarantees that Greece will do — or will be forced to do — what it promises. Meanwhile, the toughies themselves don't imagine that they themselves and their prescriptions can come across as unreliable, given the disastrous last five years in Greece. My guess — emphasize guess — is that for voters in Northern and Eastern Europe, pushing Greece into default and off the euro is preferable to keeping Greece in the euro under softer terms, because to do the former feels tougher, even though it means the creditors get nothing more, rather than what they'd get if Greece stayed put.
Re: My perspective (responding mainly to the original Renzi query):
Date: 2015-07-12 03:47 pm (UTC)*In the long run, Greece is dead.
Re: My perspective (responding mainly to the original Renzi query):
Date: 2015-07-13 04:05 am (UTC)(But "people who should know" is not a good source. If they're not willing to go public, you either don't say what they told you or at least you say why they're not willing to go public. Even if you're just blogging.)
Also this, a couple sentences earlier: "Tsipras apparently allowed himself to be convinced, some time ago, that euro exit was completely impossible. It appears that Syriza didn’t even do any contingency planning for a parallel currency (I hope to find out that this is wrong)."
So, Syriza organizes its life even worse than I organize mine.
Re: My perspective (responding mainly to the original Renzi query):
Date: 2015-07-13 11:06 am (UTC)[UPDATE: I found Tsipras's actual statement. An excerpt: "The measures include those that Parliament has voted on. Measures that will inevitably create recessionary trends. However, I am hopeful that the growth package of 35 billion euro that we achieved, debt restructuring, as well as securing funding for the next three years will create market confidence, so that investors realize that fears of a Grexit are a thing of the past—thereby fueling investment, which will offset any recessionary trends."]
Meanwhile, our friend Matteo Renzi has been heard from, crediting himself with helping to ensure that the trust fund that the Germans demanded (and got) would be located in Greece, not Luxembourg:
*"Agreement" should probably be put in quotes; a "deal" (NY Times word) has been officially reached, and presumably the Greek parliament will acquiesce, but I'm reading that continuing negotiations are required even before there's the "bailout," much less "debt restructuring." Those last two phrases in quotation marks are my scare quotes, meaning I don't see how a new loan, most of which doesn't actually end up in Greece, amounts to a "bailout," or what "restructuring" actually means here. NY Times is finding a lot of pessimism for the long-term among financial experts, and further reference to can-kicking, the poor can seemingly unable to kick the bucket.
Re: My perspective (responding mainly to the original Renzi query):
Date: 2015-07-13 01:06 pm (UTC)Perhaps "decreasing the debt to GDP ratio" should really read "for paying down debt while the GDP shrinks even more, but what the hell."
Presumably, Krugman would consider this document delusional.
Also, it actually includes what I would consider insulting language if I were the Greeks. And, language aside, it's basically saying that, contingent upon you Greeks doing what you've shown yourself to be too irresponsible to do before, and instead doing what we tell you, we will consider — not commit to, mind you, but just consider — "possible longer grace and payment periods."
Now, strategically, if I'm Greece and Italy and France — let's say the latter two really are in Greece's corner — I might be willing to take the insults (they don't actually make me look bad) and say to myself, "even if they're not commitments, they're in writing, and will be hard for the creditors to renege on."
But what I don't see, beyond my not knowing what the path is that reduces unemployment and actually really actually really really really does significantly decrease the debt to GDP ratio, is what the path is to getting European voters to abandon austerity. No leader is willing to give them a narrative. Just by looking at comment threads, I'm more likely to see narratives about "Germany got its debt forgiven in 1952, what hypocrites they are now!" and "the bankers got a bailout and are making the Greeks pay." Although I'm guessing these narratives are right, they're really beside the point. They're not an argument against austerity.
Krugman's Keynes-Fisher-Friedman-based arguments against austerity are not hard to understand conceptually. As a laymen, I don't understand and probably never will understand the stuff about multipliers that Krugman uses to justify the arguments, but I do understand the basic concepts. E.g., if we all are cutting expenses at the same time, we lose as much or more in income than we gain in savings and so end up at least as far in the hole as we already were. This is because our income comes from what other people spend, but in these circumstances the other people are cutting back too, rather than purchasing our products, hiring us, etc. Your spending is my income and my spending is your income. Whether the argument is right or not, the concept is easy. Someone with a megaphone has to decide the European voters are not too stupid to understand.
(Yeah, the actual arguments about investment versus savings etc. are more complex, and about why wages are sticky, and why governments can get away with big spending in a liquidity trap; but even those can be simplified to "No businesses are going to increase production when there's no demand, but they will park their money in government bonds, giving the government the ability to spend without crowding out business spending.")
correction
Date: 2015-07-10 05:28 pm (UTC)Re: My perspective (responding mainly to the original Renzi query):
Date: 2015-07-13 07:08 pm (UTC)the original matteo renzi question
Date: 2015-07-10 10:39 am (UTC)was: if SOMEONE is going to stand up to angela merkel -- and if syriza have essentially nopw capitulated -- is that someone italy's matteo renzi
above is my rather digressive answer: that i think syriza's seemingly doomed (and thus ill-advised) theatre over the last six months may have catalysed the beginnings of a europe-wide anti-austerity movement, some of it from countries (such as spain) able to inflict genuine hurt on the EU/EZ that greece never could*
*actually this is inaccurate: grexit five years ago would have led to massive contagion and collapse; but much of the intrastructure allowing this was rebuilt in the interim
We have mail
Date: 2015-07-10 08:13 pm (UTC)Meanwhile, the Greek proposal includes getting a loan, which the NY Times is
thoughtfullyblithelyinsouciantlyeagerlycalling a "bailout." Debt restructuring may be part of the deal (perhaps in negotiations to come). Actual debt writedown is still vigorously opposed in the north and east. Also don't know how much of the loan will be used for interest and debt payments and how much fordancing with trained sealsother stuff. Maybe the latter is to be financed by newly, beautifully collected taxes.no subject
Date: 2015-07-13 03:40 pm (UTC)the widespread #thisisacoup hashtag may have been twitter hyperbole, but it's an indication of a collectivity of support and sympathy that very much crosses national (and indeed continental) boundaries -- and that, within the euro, is exactly where the anti-austerians need to begin from, as a political counterforce (i continue to believe that this counterforce has to be within the EU rather than outside it: because outside i think the potential and necessary collectivity will always be too easy to pick off and defang with bilateral agreements with the local hegemon)
(in a sense the primary medium-term problem for any resurgent populist pro-keynesian politics is that it -- almost by definition -- tends to be top-down and technocratic) (i don't see an easy solution to this, except in the corralling of sheer numbers without them splintering into mere regional groupings) (ie not an easy ask AT ALL)
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Date: 2015-07-13 06:04 pm (UTC)no subject
Date: 2015-07-13 06:18 pm (UTC)My feeling is that to achieve better-informed voters we need to create more interested voters, and I mean "interested" in an aesthetic sense: people who discover that they find the economic ideas FUN.* That's a hard one even among intellectuals, though I do think it's one of Krugman's strengths: in a sense he's the Stephen Jay Gould of economics, or one of several. This does mean that, in the U.S., he reaches PBS type leftists but not the downtrodden. In Europe is there more of a chance to interact with the latter, say an actual working-class/underclass marginal intelligentsia that converses with the official intelligentsia?
*So, more interesting voters, as well.
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Date: 2015-07-14 09:41 am (UTC)the immediate caveat is obviously whether tsipras gets the agreement though the greek parliament; there's the risky element in the agreement that he refers to as stupid; and several of the ppl he debates with on twitter are very sceptical about the actual solvency of the greek banks -- their discussions (at 140 characters a time) got very technical and acronym-ridden, so i literally have no idea what the real issues are there
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Date: 2015-07-14 12:31 pm (UTC)(As I continue to talk out my ass, my guess is that the way around this bad result is for the eurozone to undergo much greater integration — both fiscal and political. But beyond all the obvious linguistic and cultural reasons this isn't going to happen soon, Germany and the like (the countries Krugman's calling "undervalued") have absolutely no immediate financial incentive to make the change, and plenty of incentive not to. So, unless they've got a clear-eyed view of the overall health and prospects of the continent — I'm assuming they don't actually have a clear-eyed view of anything — nothing along these lines gets done. Maybe Draghi can make them see?)
*He actually wrote "counties," so I've corrected his spelling.
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Date: 2015-07-14 12:39 pm (UTC)(and i suspect the "pasting" remark is actually more aimed at commenters vaguely citing krugman talking points without thinking them through -- DD does think krugman isn't as good at the endless intricacies of euro *politics* as he might be, but he doesn't think he's thoughtless or negligeable) (tho flippantly loose side-eye is a bit typical of the DD style, so who knows)
on twitter last night, he sketched an argument that basically -- while he thinks it's currently the only game in town, because so dauntingly much richer than most of co-europeans, so has to be worked with -- he thinks germany is quite wrong in its judgment and analysis, primarily because it took the wrong economic lessons from unification (i.e. of east and west germany), but that it's behaving rationally based on entirely the wrong premiss... it would be actually good to see him expand on this, and he might
Okay, this seems stunning, but I don't know if it is, actually, or what it portends
Date: 2015-07-15 05:02 am (UTC)The insistence isn't in the actual document, and the NY Times source is anonymous.
This is what the report says:
Um...
(1) Not knowing what this actually means or how these things work, or the current payment schedules, but assuming the IMF gets its way and one of the choices is adopted, what does this mean for Greece in the very important short run? Are they immediately paying less, or does that come in a while? And if Greece is still forced to run a large primary surplus, doesn't that still create all the austerity problems that will continue to lay waste to Greece? Or does the debt relief provide relief from that, too? (For sure, I don't understand economics.)
(2) But anyway, doesn't this IMF demand massively put the whole deal in question? That is, if the anonymous source is correct, the IMF has flatly said it won't go forward if Greece doesn't get debt relief. This is a twist that Germany wouldn't have been expecting, right? The NY Times's Jack Ewing reports that the IMF analysis on Friday included the idea that Greece needed debt relief, but this was ignored in the deal. So, is the IMF now telling Germany and its fellow toughies, You can't ignore it, since otherwise we're not going through with this, 'cause the terms are impossible for Greece? Is there a calculation on Lagarde's part that Germany is taking it on the chin in international opinion, so if Germany says "No" now, it looks as if Grexit is completely the creditors' doing?
And might the IMF be signaling, also, that if Greece is kicked out and defaults for sure, that's on Germany, and the IMF may be there to help Greece on the other side? Or am I making things up? Well, I'm sure I am. I don't know how these things work.
So tell me what to think.
Re: Okay, this seems stunning, but I don't know if it is, actually, or what it portends
Date: 2015-07-15 09:33 am (UTC)b) as you wondered above, the deal reached on late sunday is only step one of an on-going discussion, to enable ELA to free up the banks a little in the immediate term -- however the stuff that tsipras has to get through the greek parliament, essential as it is for step one, is ALSO essential for step two and beyond -- so i think what the imf is doing is laying down markers for what must get discussed by germany in step two (and germany is now somewhat on the back foot than say a week ago: it's revealed its hand and its plan, schauble has voiced the heresy of driving a nation out of the EZ, and declared that some creditors always wanted grexit and were essentially pushing hard for it -- except they didn't get it) (the heresy out loud is what woke france up basically)
c) so i think the IMF statement puts pressure on germany (i've seen commentators wondering if the imf is a proxy here for the US, which -- apparently -- would prefer grexit not to happen, but this is just speculation) (or perhaps wants germany reined in somewhat)
d) the IMF analysis on friday was some way out of date -- this new one is the updated version -- but definitely gave support to the forces critical of germany in the meeting, intended or no
*bcz write-down remains a serious red line in some EU countries, and they need a formula to agree to it de facto w/o admitting it
**DD's line was also that debt relief is not an immediate problem compared with ELA and getting the banks up and running again -- plus enhancing relief immediately will only make quite a small difference to greece's immediate payments -- so it was better not to bring its added intractability into the sunday deal (but this was before sunday, and before the deal was made: in the event it WASN'T brought in, discussion of it being kicked a short while down the road)
Re: Okay, this seems stunning, but I don't know if it is, actually, or what it portends
Date: 2015-07-15 11:42 am (UTC)https://twitter.com/DuncanWeldon/status/621220974009155584
Re: Okay, this seems stunning, but I don't know if it is, actually, or what it portends
Date: 2015-07-15 02:20 pm (UTC)(ii) The austerity issue doesn't go away, and it's not one that waits for the medium term, either. Greece is in a 1933-size Depression with no tools to combat it and no end in sight. Or are those second two statements — no tools and no end — an exaggeration? What tools? What way out? Again, if Greece is being ordered to run a large primary surplus, and to do so by cutting spending and raising money through regressive taxation, and the eurozone is stuck in low inflation that helps creditors and kills Greece, where does recovery come from? It isn't as if Greece is being told, "Cut your pensions but compensate elsewhere by spending in some way that better increases productivity, e.g., public works, infrastructure, education." Greece is being told to cut spending, period. Or am I wrong about that? It's what Krugman's been saying daily (just now: "trying to pay off high debt through austerity without any kind of monetary offset is basically a recipe for debt deflation and failure").
(iii) I speculate that the timing of yesterday's IMF report/ultimatum may specifically be intended to help strengthen Tsipras' hand with Parliament and Syriza; he can say, We're not just being given the promise of debt relief, we're being given an actual guarantee.
(iv) Where is Germany's center left? Not a rhetorical question; I'm not following German politics closely. But if Schäuble's (and Merkel's?) goal has now been nakedly revealed to be (at best) to rid the eurozone of Greece and (at worst) to punish Greece, at the expense of the creditors' getting their money back, what narrative do the Social Democrats give to their voters to justify continuing to put in with Merkel, or for having put in with Merkel so far? Or is the line still, We (Germany) weren't really pushing for Grexit, we only raised the possibility because Greece continued not to acquiesce to our continued reasonable (as opposed to ever-escalating and onerous) demands?
(v) Has the German diplomatic elite drastically hurt itself with some other diplomatic elites, say that of France and Italy and the U.S.? To quote Krugman again, "Who will ever trust Germany’s good intentions after this?"
Re: Okay, this seems stunning, but I don't know if it is, actually, or what it portends
Date: 2015-07-15 07:11 pm (UTC)Re: Okay, this seems stunning, but I don't know if it is, actually, or what it portends
Date: 2015-07-16 03:34 pm (UTC)quickly to lay out why i think davies is often a useful corrective to economists and financial journalists = he was (until very recently) a very successful stockbroker, which is to say someone who has learnt to trust his instincts on the shape of the working market, where the strengths and weaknesses and trades are, the flows and the flaws and the stoppages, when to buy and when to sell -- so his commentary is based on experience and feel first, and applied theory a distant second, if you like, though he is very well read in the theory: less how it's MEANT to work, more how it actually DOES work (in his experience, which he gained making or losing money for clients).
Like Krugman, he is very much at heart a Keynesian -- he thinks Galbraith the elder is one of the great writers on money and has a lot of time for Galbraith the younger -- but essentially in his analyses he is following his nose and instincts as a trader, and then trying to fill in the underlying explanations for this. I also think he's absolutely honest -- certainly in the sense that he doesn't spend a lot of time saying things that make him popular in the territories he comments.
In my original post, I wanted to offset two levels of understanding: the tactical (syriza at the negotiating table attempting to get the stimulus package they actually needed) and the strategic (syriza on your TV attempting to wake the counterforces that will stand up against the austerity dragon). Obviously it's far too soon to say where we are -- but my own rough scorecard is that they've done worse with the tactical than people expected but much better with the strategic, and that this failure and success are intimately linked (they possibly couldn't have got the second without the first). I don't believe it was remotely intentional -- because it would have been unconscionable -- but in a sense they have allowed the sacrifice of greek wellbeing to be the price of conjuring at least the possibiliity of the emergence of an opposition. Even though the latter remains more hope than effectively reality, it is definitely a Very Good Thing. And actually kind of unprecedented in Europe-wide politics. We shall see.
Re: Okay, this seems stunning, but I don't know if it is, actually, or what it portends
Date: 2015-07-16 07:56 pm (UTC)You attribute to DD the idea that Merkel's premises are based on the experience of Germany's early '90s unification, this experience and these premises not being applicable to Europe as a whole or to the current situation, but Merkel/Schäuble decisions being rational extensions of these bad premises. The word "rational" here is kind of iffy: "rigidly, deductively logical without taking into account counter-evidence or noticing alternative explanations" would seem to fall short, though I don't know if what I wrote is a fair account of what these people are doing; but also, if their idea is, "Everyone needs to become a net exporter, like we did," it doesn't even pass muster as deductive logic (again, don't know if that's a fair assessment of their ideas).
In PR terms, the last two weeks have been a disaster for Merkel and Schäuble internationally, even if they've done well with the German populace and some in the north and some in the former eastern bloc. Well, no, of course I'm not certain about this, either, and hanging around the econ blogosphere isn't necessarily a good way to find out about broad public opinion. But press accounts more and more are including phrases such as "unsustainable debt" and statements such as "economists oppose austerity as being unworkable" and so forth. Of course, the media still leaves out explanations as to why economists oppose it, so "austerity" is functioning as a buzzword. But still, it's one that's now starting to buzz more and more negatively for a lot of people. So indeed you may be correct that the conversation is changing. Meanwhile, the German govt. comes across as simply having argued in bad faith, and Syriza comes across as honest if not competent.
Schäuble, by the way, is now publicly saying that Grexit might be best for Greece, 'cause it allows Greece to devalue its currency. Presumably, he's not saying that Grexit should include a Greek default. Krugman also seems to think that Grexit would be the best of bad alternatives for Greece, but I assume Krugman would include a Greek default as part of the maneuver.
My guess is that Krugman thinks that a United States of Europe just isn't going to happen, so that conditions will always remain unequal as to who benefits from policy, and that once a country is in trouble, depression-like conditions will always prevail during the "internal devaluation," one that occurs via unemployment rather than a not-possible-in-the-eurozone devaluation of currency — and this is inevitable even when European leaders aren't fundamentally supply-side nitwits and austerity nuts.
Speaking of Coppola, looking back at a previous post of hers, I see that Lagarde had made it clear publicly last week in a speech to Brookings that the deal had to include debt writedowns; though I'm guessing she didn't explicitly say, "Or there's no fucking way that the IMF will participate" (I can't find the full text). So, one possible explanation for why Schäuble et al. didn't include guaranteed debt restructuring is that they assumed all along that they were going to force Greece out, that they were making offers that Tsipras could not accept, so it didn't really matter what they included or didn't include. Perhaps he's still hoping the deal falls apart.
"Schäuble, if you reach an agreement after such long and hard talks, you have to stand behind it"
Date: 2015-07-16 10:59 pm (UTC)Bernanke
Date: 2015-07-17 06:47 pm (UTC)And
He also says that, while structural problems may have an impact on long-term growth, they've little to do with either causing or getting Europe out of its current pickle. "Cost-saving measures are less relevant when many workers are already idle."
This seems stunning (cont'd)
Date: 2015-07-15 05:11 am (UTC)But now?
Does the IMF move help Tsipras or help those in and out of Syriza who want to vote against the deal? BBC's Robert Preston thinks the IMF statement would embolden Syriza's hard left not to cooperate with Tsipras, but I'm not sure that's right.
So, again, tell me what to think.
(Btw, Brad DeLong has included "Groptimism" in his Must Reads. Meanwhile Krugman, not particularly in relation to "Groptimism," which he may not have seen, continues to poo-poo the idea that "structural reform" can have much potentially stimulative effect.)
Oh, and this just in from Josh Barro:
The I.M.F. Is Telling Europe the Euro Doesn’t Work
More dsquared
Date: 2015-07-28 06:55 pm (UTC)2010 and all that — Relitigating the Greek bailout (Part 1)
which he conveniently summarizes at the end:
2010 and all that — Relitigating the Greek bailout (Part 2)
(Davies is responding to Simon Wren-Lewis's "The Eurozone's cover-up over Greece," which Davies respects but, not surprisingly, doesn't altogether agree with.)
There's a Part 3 to come. Of course, I basically skipped the tables, and can blithely say, "I'm not informed enough to have an opinion." Which brings up a more recent post by dsquared musing on how few readers he got for Part 2, owing, he presumes (correctly, I'm sure) to the fact that the numbers make it difficult for lay people. I'm fundamentally with him when he — very koganically — says he's not going to dumb down (and he does think the lay people can grasp, with effort). But my general rejoinder would be, "If we have a responsibility to learn, you have a responsibility to teach." (Of course, in my own practice this varies from post to post.)
no subject
Date: 2015-12-24 09:04 am (UTC)no subject
Date: 2015-12-24 09:33 am (UTC)http://dan-hancox.blogspot.co.uk/
https://www.facebook.com/dan.hancox.31
http://www.lrb.co.uk/v37/n24/dan-hancox/can-they
http://www.theguardian.com/commentisfree/2015/feb/09/ernesto-laclau-intellectual-figurehead-syriza-podemos