Greeks May Hold $510 Billion Trump Card in Renegotiation

Not counting the money owed by private debtors, including banks.

By John Glover

Greek voters are demanding their leaders renegotiate the terms of rescue packages that have imposed unprecedented austerity on the country since 2010. One potential prime minister, Syriza party leader Alexis Tsipras, has pledged to tear up the EU-led bailout agreement. With Greece owing a sum roughly equal to Switzerland’s economy, the fallout for taxpayers could be calamitous if the country walks away.

“Greece has got some strong cards to persuade them to go easy on austerity,” said John Whittaker, an economist atLancaster University Management School in England. “Everyone fears a Greek departure from the euro because they’ll lose money and lose political capital.”

Euro Integration

European governments have poured money into Greece since its first rescue was agreed in April 2010 in a bid to keep the country in the euro and prove that monetary union, a symbol of European post-war integration, is irrevocable.

Hollande has lived inside the fishbowl his entire adult lives

Political Science

"The French are a free people, who will not allow their future to be determined by the pressure of markets or finance."

       ~ French presidential candidate François Hollande, Ecole Nationale d'Administration (ENA), class of 1980

By Fred Sheehan

Hollande expressed an ardent belief of every ENA graduate (popularly known as énarques, a popularity not often witnessed beyond the campus gates.) Economics professors from Harvard, Princeton, and Oxbridge also dismiss markets. They went so far as to claim all markets identify the right price all the time, thus avoiding the need to understand them. Markets are there to be used: a means to institute public policy. Such policies are imposed by the ruling few.

The Bretton Woods gold standard constrained the ambitions of superior persons. When President Nixon defaulted on the United States' gold payment obligation in 1971, he opened the floodgates to Policy Making without Consequences.

Class War by Judo

The old-fashioned wrestling for crumbs

By Anthony de Jasay

Marxists and most Frenchmen hold that since all value is produced by labour, all of it should be paid out in wages except the part taken by the state, a body which by rights ought to belong to the workers anyway. All private profit is stolen from the working class. It is incumbent on the state to claw it back from the capitalists.

Class warfare is the mode of clawing back the profit, through complete success requires actual revolution. For the hard Left, this is the true aim of class warfare. For the soft Left, well-drilled labour unions in closed shops squeezing profits by tough collective bargaining are fighting the good fight. A more formidable arm of class war as practised by the soft Left is the collective mandate an electoral majority hands to the state to "slice the national cake" by transfer payments and public goods, so that its distribution will be more favourable to the working class than the original distribution intended by those who had arranged the baking of the cake in the first place.

A time for the French to keep their heads

Dreaming of a new revolution - short of money to pay for it

By George Walden

When the last French socialist president, François Mitterrand, was preparing for victory, it was my job as a diplomat to accompany him on a trip to London to call on Jim Callaghan. En route from the airport to No 10, I arranged for him to drop in to Kew Gardens. A mistake. He was so enthralled I couldn’t get him out, and we turned up a trifle late for the prime minister.

Hollande Must Betray His Supporters to Save Them

Wisely, his campaign was more about posture than specifics

By Clive Crook

French voters are deluding themselves if they think the man they just elected president offers a viable alternative to the departing Nicolas Sarkozy.

Francois Hollande’s socialist program is inoperable. Let’s hope he understands that. If he doesn’t already, he soon will.

Hollande’s campaign was a throwback to Francois Mitterrand’s failed socialist experiment of the early 1980s. The new president doesn’t oppose Europe’s fiscal pact because it needlessly imposes too much austerity too soon -- which is true. He opposes the very idea of structural reform. In France the government already spends 56 percent of gross domestic product. Hollande now promises, among other things, to hire tens of thousands of extra civil servants and roll back Sarkozy’s increase in the retirement age from 60 to 62.

Operation Self-Deceit

New Documents Shine Light on Euro Birth Defects

Newly revealed German government documents reveal that many in Helmut Kohl's Chancellery had deep doubts about a European common currency when it was introduced in 1998. First and foremost, experts pointed to Italy as being the euro's weak link. The early shortcomings have yet to be corrected.

By Sven Böll, Christian Reiermann, Michael Sauga and Klaus Wiegrefe

It was shortly before his departure to Brussels when the chancellor was overpowered by the sheer magnitude of the moment. Helmut Kohl said that the "weight of history" would become palpable on that weekend; the resolution to establish the monetary union, he said, was a reason for "joyful celebration."

The Death Spiral of Debt, Risk and Jobs

The systemic misallocation of capital puts the job market in a death spiral

Debt, risk and employment are in a death-spiral of malinvestment and debt-based consumption.

Economists look at debt, risk and the job market as separate issues. No wonder they can't make sense of our "jobless recovery": the three are intimately and causally connected. An entire book could be written about debt, risk and jobs, but let's see if we can't shed some light on a complex dynamic in a few paragraphs.

Risk: As I described in "Resistance, Revolution, Liberation: A Model for Positive Change", risk cannot be eliminated, it can only be shifted to others or temporarily masked.

Why Breaking a Store Window Isn’t Anarchism

Scratch a left-wing “anarchist” and you will find a coercive despot
by James Miller

How we use words has a tremendous impact on the ideas that reach prominence and influence how societies evolve.  Just think of the loaded term “democracy” and the poisonous vitriol spewed at anyone who points out the utter immorality of a governing system where the majority is able to trample over the minority.  Then there is “capitalism” which was not originally a term of simple description but of scathing critique to the uninhibited market.  Or consider what the term “liberal” means in context of contemporary politics.  What once described those who advocated free trade, peaceful foreign relations, and a laissez-faire approach to the economy means, today, the exact opposite.  “Liberal” is now used to describe social democrats who seek to use the state as a force to compel more equitable outcomes in all private matters.

Keynesians vs Austrians

The debate is hotting up

Last week, an Austrian-School economist, Robert Wenzel, gave a speech to the New York Federal Reserve, and separately Bloomberg hosted a television debate between Ron Paul, who is running for the Republican Presidential nomination, and Professor Paul Krugman, one of the foremost advocates of Keynesian economic policy. The debate between advocates of big government and small government is beginning to move into the media.

It is not so much a question of who wins the debate: rather it is that the minority Austrian view is being noted by a few economists at the Fed, and that Krugman, who last year turned down an opportunity to debate economics with Robert Murphy of the Ludwig von Mises Institute in America, presumably felt more comfortable defending his interventionist beliefs against a politician than a trained economist. Whatever your opinion, the fact that some establishment economists are at least curious about Austrian economics and that Ron Paul is getting air-time for his views is a good thing, if only because it makes people aware there is an alternative to establishment economics.

Posturing against austerity

An infantile disorder

The left-wing groups making electoral gains in Europe are driven by a desire to avoid reality rather than a determination to create a new one.

by Brendan O’Neill 

Given that a Socialist president has been elected in France for the first time since 1981, and that the two main parties in Greece have taken a drubbing in a general election, it’s understandable that the local elections in Italy have been overlooked. That’s a shame, though, since those elections produced a result which speaks powerfully to the state of European politics in 2012. In Italy, an actual comedian was elected, a joker, a man who made his living from making people laugh and who has now become someone who ‘shakes the cage of traditionalist politics’. Indeed, funnyman Beppe Grillo won a ‘massive victory’, leading one waggish headline writer to say that the Italian people had ‘the last laugh in local elections’.

The idea of EU austerity is a myth

EU Voters Nix Austerity, Though It's Not Been Tried

The stunning outcomes of elections in France, Greece and Italy were called "a sweeping repudiation" of austerity by more than one media outlet. But how can you repudiate something that's never been tried?

By IBD Editorial

The EU tried austerity, but it didn't work. The media and Europe's beleaguered leftist politicians have made that their refrain, and apparently a lot of European voters now agree.

How else can you explain why French Socialist Francois Hollande ousted centrist incumbent Nicolas Sarkozy in Sunday's election — and why anti-austerity parties on the left and right made gains in Greece's parliamentary elections over the weekend?

When Elites Depart

Why do complex societies collapse? 

By John Robb

One of the benefits of having a son that is a scholar of ancient warfare, from Alexander the Great to the Byzantine Empire to the Mongols, is that we can have wide ranging discussions on very deep topics.  Of perennial interest to us: why do complex societies/civilizations collapse?  

One of interesting working theories we have is that while complex societies can be in decay for a long period of time, they only collapse when its favored elites abandon it/betray it.   

Here's an example from Roman history written by Joseph Tainter:

The Collapse of The [Western] Roman Empire

One outcome of diminishing returns to complexity is illustrated by the collapse of the Western Roman Empire. As a solar-energy based society which taxed heavily, the empire had little fiscal reserve. When confronted with military crises, Roman Emperors often had to respond by debasing the silver currency (Figure 4.2) and trying to raise new funds.

The poisonous Keynesian prescription

Paul Krugman is clueless about the European economic crisis

By Nile Gardiner

New York Times columnist Paul Krugman’s latest piece “Death of a Fairy Tale” is yet another rant against austerity measures in Europe, especially in Britain. Such measures, he argues, would be disastrous for the United States, even though the world’s superpower is now more than $15 trillion in debt, with the highest deficits since World War Two. Krugman has consistently argued for a big government approach towards America’s economic problems – greater stimulus spending, higher taxes, and more bailouts.

The Nobel prize-winning economist’s article is highly misleading in its claim that austerity is the cause of Europe’s economic woes today, an assertion that is not backed up by any evidence. Last Friday, Krugman wrote that:

Running out of other people's money

Francois Hollande’s election victory is a symbol of the EU’s decline

By Nile Gardiner

Nicolas Sarkozy’s defeat at the hands of French Socialist leader Francois Hollande has sent shock waves throughout Europe, and will significantly challenge the fragile austerity consensus across the EU. Jean-Marc Ayrault, the likely next prime minister of France, puts it in uncompromising terms:

"We must get out of this austerity in Europe and tonight all our partners in governments around Europe have understood that was the choice of François Hollande to re-orient Europe."

Hollande’s victory spells trouble ahead for both Angela Merkel and David Cameron, who face general elections in 2013 and 2015 respectively. Both Merkel and Cameron have championed the need for budget cuts in the face of Europe’s massive debt crisis, and face growing domestic opposition to their support for austerity measures. If Merkel falls in the Autumn of next year, the balance of power within the EU will shift dramatically to the Left, with Britain and Spain as the two leading conservative-led governments in Western Europe confronting a re-engineered Franco-German axis that would back greater stimulus measures as a solution to Europe’s problems.

The Tyranny of Good Intentions

Empire to Fight 'Atrocities'

by Nebojsa Malic

What is to be made of the Emperor’s announcement of the "Atrocity Prevention Board", in the waning days of April? Without a doubt it is a carte blanche for "regime change", for intervention wherever, whenever, against whomever. That, then, puts it in a remarkable continuity with the 2008 "Bush Doctrine," itself a logical extension of the Brezhnev one.

Nor is this a recent phenomenon. As early as Obama’s inauguration, it was clear he would embrace continuity, rather than the change he promised. Rather than ending Bush’s wars in Iraq and Afghanistan, pointless after the death of Osama bin Laden, Obama made them his own. Instead of hunting al-Qaeda, the troops were hitched into the oxcart of "nation-building" and democracy promotion. Even after the official exit from Iraq, and the recently negotiated exit from Afghanistan, to maintain the client regimes in Baghdad and Kabul, the Empire will need to maintain garrisons and spend further treasure. Which keeps dwindling, as it is.

Greece is at the epicentre of a new euro crisis

Greece's chaos will spread

By Philip Aldrick

Contagion risks are back with a vengeance. With Greece edging towards the euro exit gates, pressure is building in familiar territories. Yields on Portuguese sovereign debt have spiked even more rapidly than those on Greek debt. Spanish and Italian borrowing costs are creeping up. The markets are pointing to another imminent euro crisis. And, once again, Greece is at the epicentre.

The people of Greece know what they don’t want – they don’t want any more austerity. If another election is called to sort out the mess of last weekend’s result (the talk is of holding one on June 17) and the result is again a roughly 70pc vote against austerity, it will probably mandate the government to ditch the bail-out.

That would mean a euro exit, a return to the drachma, a massive devaluation, and a default on the remaining private sector debt. If that is what the people of Greece do want, it carries enormous risks.

A Strange Austerity Diet

Fiscal Austerity in Europe Doesn't Mean Large Spending Cuts

By Veronique de Rugy

We are told that austerity in Europe has failed. The elections in France and Greece, for instance, are supposedly evidence of people’s opposition to severe cuts in spending. However, the growing anti-austerity backlash against Europe ignores one fundamental point: If there is austerity in Europe, in most cases it hasn’t taken the form of massive spending cuts.

Following years of large spending expansion, Spain, the United Kingdom, France, and Greece—countries widely cited for adopting austerity measures—haven’t significantly reduced spending since “austerity” supposedly started in 2008.

Foreign Policy Theater of the Absurd

You gotta laugh – to keep from crying

by Justin Raimondo

A Russian general has threatened military action if the US and its NATO allies go ahead and build a “missile shield” in Eastern Europe: “A decision to use destructive force preemptively will be taken if the situation worsens,” say Russian chief of staff Nikolai Makarov. That the “shield” is of dubious effectiveness, and is mainly a cash cow for US defense companies, are not factors the Russkies are willing to take into consideration: their main beef seems to be the implied insult of Washington claiming the shield isn’t designed to protect against future aggression emanating from Moscow, but against an alleged Iranian missile threat to Europe. Hey, they seem to be saying: what about us? Aren’t we a threat, too?

The Gold Dinar

“The Dinar and Dirham represent a moral movement of maximum individual freedom”

The following news stories, coupled with the recent unveiling of a gold ATM in Abu Dhabi seem like the first steps on the road to a trend:

1. Apparently the Malaysian state of Kelantan introduced some time ago the gold Dinar and the silver Dirham as legal tender, and the coins are in circulation with at least 3 different banks responsible for coinage and distribution. Interestingly, one of the reasons given by the chief minister of the state of Kelantan for introducing the coins, is that:

“the poor would be protected against inflation by the intrinsic value of the precious metals”

Who would have expected an Islamist party member from provincial Malaysia to speak words straight from an Austrian Economic Theory textbook?

A grand circle of history

A World Tour of Addictive Stupidity - Quite a long journey

Addiction to welfare, deliberately promoted for reckless political aims, is capable of extraordinary damage. The West is about to find out the hard way leaving the door open for a grand circle of history

By Charles Crawford

Let's start in Beijing, back on October 24^th 1860. British and French forces are busy burning down the Old Summer Palace in their fury at the torture and mistreatment by the Chinese of an allied delegation. China accepts defeat; its markets are to be opened up at long last to Western trade.