Showing your displeasure
Here’s the NYT in 1938, reacting to accusations that big business was deliberately causing a depression to show its opposition to FDR’s policies:
To some minds it has suggested that the idea of severe reaction, deliberately caused by finance and industry as a lesson to the New Dealers, still has possession of some minds at the capital. This somewhat crude conception may have been based on the legendary Hindoos who committed suicide on the doorstep of a disliked individual, in order to show what they thought of him. But it hardly belongs to sober American thinking. (3/7/38, p. 25.)
I have no idea what the Greek government is up to, but I strongly believe that Greek citizens are “sober” enough to not want to commit economic suicide. Eventually they’ll be able to find a government that knows what it’s doing. Hopefully within a few weeks:
“If a ‘yes’, who are we trusting, who are we working with to then implement that programme?” asked Mr Dijsselbloem.
This weekend, for the first time, Mr Varoufakis hinted his government was prepared to reshuffle cabinet posts or even coalition members if that was required to win back trust.
“If the people give us a clear instruction to sign up on the institutions’ proposals, we shall do whatever it takes to do so “” even if it means a reconfigured government,” he told the eurogroup on Saturday.
Some within Mr Tsipras’ Syriza party have even suggested the government would resign if it lost Sunday’s vote. That could clear the way for a technocratic government akin to the one that last governed amid Greece’s debt crisis in 2011.
As usual, don’t believe the headlines. There are no “deadlines” in Europe.
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28. June 2015 at 14:40
Mr Sumner i live in Greece. I believe that the current government is incompetent. But its clear that the creditors blackmail our country. They have done this many times in the last 5 years. They also did it in Cyprus. They did it in Ireland etc etc. Excuse me but i dont want to stay in this monetary union.
28. June 2015 at 14:52
Thanos, I certainly can’t blame you for wanting to leave the euro. Greece never should have joined.
28. June 2015 at 14:56
I will give just one example. In 2011 prime minister Papandreou tried to call a referendum. The government had just agreed to a second bailout. He wanted to ask the people if they agreed to the terms of the second bailout. Merkel and Sarkozi intervened and forced Papandreou to change the question posed by the referendum. The question they wanted was “Euro or Drachma”. Papandreou initially agreed but after some days European and Greek politicians deposed him and installed an unelected prime minister.
The same has happened now. Tsipras called for a referendum on the terms of the bailout. The creditors again refuse this question. They do not only refuse the question of the referendum but they also cut off liquidity!!!
28. June 2015 at 15:00
They also refuse debt restructuring. the ignore the fact that Greece slid itno in deflation over the last 27 months etc etc.
I repeat: Deflation over the past 27 months:
http://wbponline.com/Articles/View/48815/prices-in-greece-fall-for-27th-straight-month
28. June 2015 at 15:05
Sorry for the typos
28. June 2015 at 15:10
You have to think Syriza is just doing everything it can to 1) squeeze every last concession possible 2) demonstrate to voters they have done #1. I expect Greece will fold, solvency is not such a horrible fate.
The July 5 referendum makes perfect sense, given the fantasy world of victimhood the Greek electorate is living in — Thanos above is a great example, most Greeks probably do see demands to have some credible plan pay back what they borrowed as “blackmail.” By July 5th they will understand the consequences of default. Possibly Syriza is smart enough to already understand this, and this way whatever happens they have the political cover of the referendum.
Greece might be better off exiting in the long run, but it seems much more likely that in the short run they will keep lying to everyone (especially themselves) for a while longer. It’s not like they can’t make bad-faith promises, accept another $50B or so, and then default. I don’t see socialists turning down free money.
On the other hand it’s possible they don’t understand they can’t just print drachmas and expect anyone to accept them as payment. In that case they’ll quickly trade “austerity” for hyperinflation and Golden Dawn may soon be running the country.
28. June 2015 at 15:11
I also forgot to mention that Mr Dijsselbloem said tha even if people vote “Yes” in the referendum this is not enough because they dont trust the Greek government!! So they want to humiliate us.
28. June 2015 at 15:16
No TallDave. I dont live in a fantasy world and i expect you to apologize. You dont know me. I am a classical liberal and i dont support SYRIZA.
I recognize that my country is uncompetitive and we have done many things wrong. But from 2010 until today the troika decides (in collaboration with the Greek government) the economic programme of Greece. They refuse to acknowledge any mistake.
28. June 2015 at 15:19
This the proposal of the European Commision:
http://news.in.gr/files/1/2015/List%20of%20prior%20actions%20-%20version%20of%2026%20June%2020%2000.pdf
28. June 2015 at 15:24
Thanos — When people begging for more money call the conditions made by the people they are begging from “blackmail” they are not living in reality. You can call yourself whatever you like, but the tenets of classical liberalism do not allow for such fantasies.
28. June 2015 at 15:24
The Greek people do not live in a demofracy. Or maybe even a sovereign nation. They are unable to vote in a new central bank policy—woe to the population without a way to control the insufferable pretensions of central bankers.
Can Greeks vote for a robust growth-oriented monetary policy?
If not…they have decades of gloom ahead. It took the Bank of Japan 20 years to change…but the ECB may take even longer.
Ao orderly Grexit is the best option.
28. June 2015 at 15:27
Wr do not beg for more money. We have a primary surplus from 2013. Wr demand a debt restructuring. A debt restrucuring is a Classical Liberal solution. So please stop the creditor propaganda.
28. June 2015 at 15:27
We do not beg for more money. We have a primary surplus from 2013. Wr demand a debt restructuring. A debt restrucuring is a Classical Liberal solution. So please stop the creditor propaganda.
28. June 2015 at 15:29
I also want to remind you that they do not give free money to us. They LOAN money to us and they earn interest.
28. June 2015 at 15:30
Thank you Thanos, I believe the phrase is “quod erat demonstrandum.”
28. June 2015 at 15:34
I expect you to apologize. You insulted me and this is unacceptable.
28. June 2015 at 15:39
Again, this is a wonderful example of the pathology of Greece. While you are entitled to your fantasies of who owes you what and what constitutes asking for more money, the rest of are not bound by your illusions.
28. June 2015 at 15:47
I am sorry TallDave but you confuse Feudalism with Classical Liberalism. I think Feudalism is your ideology.
28. June 2015 at 15:57
I don’t know about “blame” or “blackmail”, really, but it does seem the results of a disorderly exit and devaluation (maybe that’s the only kind, I don’t really know much about these processes, either) might b very bad
28. June 2015 at 16:11
Just so I’m clear are you calling Greece leaving the euro economic suicide? If so-unless I misunderstand you-then I totally disagree. Doing that there will be short term pain but in the long term the economy will have a huge weight lifted off of it.
Like Nick Rowe says-‘What took them so long?’
http://worthwhile.typepad.com/worthwhile_canadian_initi/2015/06/bank-walks-and-options.html#more
28. June 2015 at 16:15
Thanos don’t feel bad. TallDave is just a boor-and a bore-who insults everyone to gratify his own undeserved sense of superiority. He even picks on the mentally ill.
What is the Greek word for bully? I apologize for my boorish countryman. We Americans aren’t all like that.
28. June 2015 at 16:17
Furthermore Thanos I don’t think you’re living in a fantasy world at all if you want to leave the euro. If you and your fellow Greeks are smart you should vote no next week.
28. June 2015 at 16:22
Mike Sax i love Americans!!! I admire your country, your economic system and your politcal system. Greece has a lot to learn from the United States.
I think you have to admit that the Europeans have made many mistakes in the last few years. Read for example how did the ECB treated Ireland in 2010.
28. June 2015 at 16:25
Thanos, Surely you understand why the Greek government is not trusted?
Yes, Greece would be better off in the long run with its own currency, but not ruled by a government like Syriza. If it’s Syriza or the euro, I’d take the euro.
28. June 2015 at 16:26
Thanos, If you are a classical liberal then I presume you understand what’s going on in Argentina—which is ruled by a Syriza-type party.
28. June 2015 at 16:31
Mike Sax i dont know if i will vote “yes” or “no” yet. It is a hard decision. Unfortunately they decided to close the banks until the 7th of july. We would be able to withdraw only 60 euros every day from the ATM. Many people panicked and tonight there were huge lines at the gas stations. I dont know if the people will be able to travel and vote.
Also the Europeans dont accept the question posed by the referendum. For them it is only “Euro or Drachma”.
28. June 2015 at 16:32
Thanos, The mistake in Ireland was bailing out the banks. Neither banks nor governments should be bailed out.
28. June 2015 at 16:39
Scott Sumner of course i understand why the Greek government is not trusted. But if you compare what SYRIZA promised before the elections with what they are accepting now as part of the compromise you will conclude that the Greek government is honest about this compromise.
Of course i know what happened in Argentina. Personally i was in favour of the Euro and i supported a full fiscal and banking union!!! But i realize this wont happen. The Germans and other countries oppose it. So maybe the best solution for Greece is to return to drachma and decide to implenent free market reforms. I remember Gary Becker said that in 2011.
28. June 2015 at 16:42
I agree Scott Sumner. The ECB forced the Irish government to bailout the senior bondholders of Irish banks. The ECB threatened to cut off liquidity if they didnt accept it. Tahey also forced them to sign a programme with IMF and EU etc etc
28. June 2015 at 16:52
http://www.telegraph.co.uk/finance/economics/11138980/ECBs-treatment-of-Ireland-and-Italy-is-a-constitutional-scandal-yet-nobody-held-to-account.html
28. June 2015 at 17:25
@Thanos – I am a fellow Greek (dual national). Your multiple posts and being defensive with TallDave is a classic stereotype of a noob hotheaded Greek, and you play right into the hands of your enemies. Really don’t be such an online malaka. Tell us something interesting like how much money you have in Euro and will lose (I have 1000 Eu).
28. June 2015 at 17:37
@Sumner: “I have no idea what the Greek government is up to, but I strongly believe that Greek citizens are “sober” enough to not want to commit economic suicide. ” – what? What kind of apocalyptic talk is this? Specifically, what bad things will happen with Grexit? I know, specifics are not your strong point, though you did seem to call the Swiss bank ending the Euro-franc peg a while ago (lucky guess). Economists…
28. June 2015 at 17:50
One should never underestimate how great/awful creative destruction can be. I know I am breaking Goodwin’s Law here, but the Nazis were very creative in their destruction.
In the case of Greece, I amazed they lasted this long and it appears divorce papers are already being negotiated.
28. June 2015 at 18:40
Shrug. Reality always has its discontents, but begging for money is still begging for money, whatever isms one invokes. The classical liberal solution for Greece is the same as ever: cut spending to sustainable levels and pay their debts. I won’t waste any more time on debate over whether water is wet.
I have to agree with Cole, though — ECB monetary policy is an absolute disaster, and that’s true for most of the Eurozone. With free market reforms, Grexit could look pretty good in 5-10 years, although that seems unlikely now.
28. June 2015 at 18:55
Thanos, You said:
“So maybe the best solution for Greece is to return to drachma and decide to implement free market reforms.”
Bingo—I’d vote for that!
28. June 2015 at 19:19
I guess I just don’t understand the idea that it’s irresponsible to stop following policies that have produced 25 percent unemployment.
– Matt O’Brien
Saying the Euro is wrong for Greece doesn’t mean Greece doesn’t need free market reforms as well. Argentina shows that:
1. Unemployment decreased significantly in the years after the dollar peg.
2. Living standards continue to be hurt by lack of free markets, corruption, etc. Living standards are also hurt in the short-run with capital controls and currency devaluation.
The Eurozone appears to only have some back-breaking path where, maybe 20 years from now, the living standards will be somewhat better if the Eurozone successfully enforces structural reforms. Each of those 20 years won’t have the short-term capital controls and chaos, but that’s at a tremendous cost.
28. June 2015 at 20:01
Ideally, Greece would agree to pay back its debt, cut spending enough to do so, enact free market reforms, and leave the euro in orderly fashion, and appoint a CB that targeted a healthy nominal GDP trend.
It’s an unfortunate statement on the human condition generally that none of those things is likely to happen even though it should be relatively obvious by now that such a path would maximize overall living standards. But Acemoglu’s work shows pretty definitively that knowing the right thing to do rarely results in it actually happening.
28. June 2015 at 21:50
Surely Greek voters understand that they elected earlier governments who a) joined the Euro and b) borrowed to the hilt and c) wasted that brrowed cash?
If you vote eejits in, decade after decade, who else’s fault can it be? Syriza stood on a completely impossible platform, and won a landslide. Is that a sign that the Dutch voters are ungenerous with their tax Euros?
What an absolute shambles.
28. June 2015 at 22:29
Syriza was voted in on a platform that promised the impossible: keep the Euro and get rid of creditor demands for budget balance / surplus. It’s a good thing if the Greek population is finally asked to prioritize one of these promises over the other.
29. June 2015 at 01:18
you are being ridiculous Ray Lopez.
29. June 2015 at 03:25
I have no idea how whether there are ‘free market reforms’ or not it could be worse than the status quo for Greece. They are already now at 1994 levels of GDP per capita.
I also don’t get what there is to complain about with Tripas calling an election. If the Greeks vote for austerity then they have nothing to complain about.
If they don’t then so much the better. I think no is the better vote for them but either way they will own the decision.
Tripas promised an end to austerity in his campaign. I guess everyone just figured he’d break his promises to please the Troika like the Pasok party did. Sure and look what happened to them.
People complaining about the election-I saw some finance ministers from the EU just going crazy on CNBC this morning they’re so outraged-are just admitting what was already obvious: they are against democracy.
They think they run Greece not the Greek people.
29. June 2015 at 04:04
It was the greeks themselves who already made a decision. By withdrawing their money form the banks the greeks FORCED a decision upon the greek government.
29. June 2015 at 04:31
Juncker and Hollande again said today that the vote will be about the currency. This is incredible. I cannot believe this is happening. The prime minister called a referendum on bailout terms. But it seems the Europeans ignore us.
29. June 2015 at 04:33
“Implement free market reforms” ??
A greek break down would only increase the incentives for MORE corruption.
29. June 2015 at 04:53
I am sorry Thanos, but if you cannot understand why everyone in the world, except for our current government and… you, believes that the referendum is actually about participating in the euro or not, then there is not much anyone can do to help. (I will try to avoid taking over the section with our… saga anymore. I will only add that a) we only have ourselves to blame and b) however, our only excuse is a decades-long getting used to easy money (not in a monetary policy sense…) without having actually earned it, that – among other things- has destroyed our way of thinking about how an economy works).
ps. @Thanos again – Ray, as expected, was much more insulting to you.
29. June 2015 at 05:04
– Greece has benefitted massively from the Euro “project”, even BEFORE the introduction of the Euro.
In 1990 greek interest rates were at 25% and went down to ~5% in the year 2000.
29. June 2015 at 05:48
@lysseas – since when is “malaka” an insult? I hear it all the time in the street, it’s like “dude”. Well, almost like dude. How much money do you stand to lose lysseas? I saw what was coming several years ago and got out, even though my Greek lawyer told me I was scared over nothing and Greece would never exit the Euro. Ti malakas…
29. June 2015 at 05:55
Mike Sax opines;
‘Furthermore Thanos I don’t think you’re living in a fantasy world….’
High praise, indeed.
29. June 2015 at 05:57
People (wrongly) think that a Grexit (+default) will be beneficial because it will entice european people to go on (a cheap) holiday in Greece more.
I have my doubts about that. People who were holding those greek bonds will have to (partial) write off on those bonds and that hurts their wealth. Making it more unlikely that those people still have money to have a holiday in Greece.
29. June 2015 at 06:08
Scott, I fail to see your point in bringing up Argentina. I would have thought the situation in Argentina analogous to Greece now, would be the early 2000s. Are you saying there shouldn’t have been default (or debt restructuring) in Argentina in the early 2000s? Instead, it should have just continued with its depression? The subsequent statist policies which they followed don’t seem relevant here.
By the same token, shouldn’t Greece have had debt restructuring in 2010, and indeed now, since there is no way it can pay the debt? Barry Eichengreen points out this in his article here. https://theconversation.com/path-to-grexit-tragedy-paved-by-political-incompetence-43988
Syriza of course brought this issue up, but was forced to back down very early by the creditors.
29. June 2015 at 06:16
Yes Patrick Sullivan i live in a fantasy world. You should come here and taste the experience.
29. June 2015 at 06:20
A greek break down would only increase the incentives for MORE corruption.
Yeah, too-tight monetary policy historically seems to lead to more socialism, not free market reforms. As I keep pointing out to my GOP friends, NGPDLT will benefit them: had the Fed not been too tight in the 1930s we might have avoided the huge Democratic majorities of the FDR era and world history itself might have taken a different arc — the world economic depression certainly fed some national fantasies in Europe as well…
29. June 2015 at 06:38
Matt, I don’t see why Greece couldn’t grow fast, even within the euro.
Anand, I point to Argentina because the benefits of depreciation were mostly offset by the incompetence of the government. It should not be about austerity vs socialism, there ought to be a third option. In any case, I agree that greece would be better off with its own currency.
And I’ve never understood why Greece’s debt is unpayable. Yes, they probably won’t pay it, but there’s no technical reason why they couldn’t. They simply made a (perhaps rational) calculation that they are bettor off not paying their debt.
29. June 2015 at 06:41
Scott,
Are you now supporting Greece leaving the Euro? Krugman just came out today and said, now with bank holidays and capital controls, they may as well leave.
I’ve thought all along they should leave, along with every other southern Euro member and Ireland.
And you’re quite right that there should have been no bailouts, but the monetary policy wasn’t there to hold things together in absence of bailouts, so this system is, always was, and always will be unworkable, at least without further fiscal integration.
The behavior of the troika has been an abomination, with northern Euro countries all to happy to let Greece skirt Eurozone fiscal rules for years, and then suddenly demand what in summer cases are arbitrarily harsh terms for bailouts, including forcing bank bailouts and helping to subvert democratic processes on countries like Greece. Yes, Greece committed some fraud, and there should be laws that put those politicians and Goldman Sachs people responsible on prison, but the continued unnecessary suffering of the Geek people is unconscionable.
And, the IMF shouldn’t even exist, and organizations like this shouldn’t be helping bail out developed countries.
29. June 2015 at 06:56
I shouldn’t comment using my smart phone.
29. June 2015 at 07:02
It seems strange to say that the benefits of depreciation were offset by the incompetence. Perhaps that is true after many years, but after Argentina defaulted in 2001, after a little less than a year of chaos, it grew for about 9% a year for the next 5 years. I am guessing that Greece would be thrilled if it grew half as fast as Argentina did.
The main point here is that Syriza had at least had the thought of pushing for restructuring when everywhere else the idea was to capitulate to creditor demands, which hadn’t worked for 5 years. Many people supported them even though they did not agree on all its other ideas because they agreed that the “business as usual” was not working. I would have thought that was the lesson to be learnt from Argentina.
As to why Greece can’t pay back the debt, that is because its economy is in the tank. Even if angels instead of incompetents ran the Greek govt. it couldn’t pay back the debt with the program that was imposed on it. For a large part of the last five years, Greece was under technocratic leadership. It drastically reduced labour costs, but exports remained flat. It is hard to blame Syriza for trying a radical approach, which makes a lot of sense to me based on the Argentine history.
29. June 2015 at 07:05
Scott,
One question of mine you didn’t answer, when you only conditionally favored Greece leaving the Euro last week, is how do things turn out well for Greece if they stay? Yes, leaving might make things horrible for a while, but where’s the upside in staying, other than avoiding a more acute, but what should be a much more temporary crisis?
I would ask the same question with respect to Spain, Portugal, Italy, and Ireland. How do they ever even reach their growth potential again? Why tolerate similar problems in future downturns, even with somewhat better, but still woefully inadequate ECB policy? I don’t see the upside.
By the way, I find it interesting that Euro-area markets generally are being walloped today. I wonder if Germany and France will come back to the table if the market reaction continues to be Lehman-like, even in their countries.
My impression has been quite the opposite of yours in some respects recently. I think the troika are idiots and less competent in these negotiations than Greece. The Greek government has a mandate to negotiate hard(if not always competently), and now we’ll find out if they have a mandate to leave the Euro altogether. That is, if Germany and France don’t cave in. I suspect the cowardly Germans and French will cave in if they’re worried enough that Greeks will say yes to leaving.
29. June 2015 at 07:08
Anand,
Well said.
29. June 2015 at 07:50
Scott,
I should point out, by the way, that Syriza has been incompetent in this process. They should have surprised the troika with a reform proposal that would address any legitimate concerns, while trading it for some debt restructuring/relief and much looser monetary policy. I suspect they wouldn’t have gotten looser monetary policy, so they then could have left at least looking somewhat competent in the process.
I also think Syriza calling for this referendum is a horrible mistake and abdication of leadership. In my view, they should hold to their guns on behalf of the Greek people and take Greece out of the Euro altogether, without a complete capitulation by the troika. Then, if unpopular, they could resign, instead of potentially ruining the negotiating position of the next government.
29. June 2015 at 08:05
bubblemonger,
You wrote: “People (wrongly) think that a Grexit (+default) will be beneficial because it will entice european people to go on (a cheap) holiday in Greece more.
I have my doubts about that. People who were holding those greek bonds will have to (partial) write off on those bonds and that hurts their wealth. Making it more unlikely that those people still have money to have a holiday in Greece”
Greece is a tiny country. The majority of Europeans hold no Greek debt, though the knock-on effects of leaving the Euro, if mismanaged, on other Euro countries could certainly mean Euro citizens have less money to travel with.
29. June 2015 at 08:35
@Scott: Agree & Disagree. Somehow, somewhere the european citizens will be forced to foot the bill. And that reduces their ability to go on holiday in Greece.
If they even have the courage to go on holiday in Greece. Turmoil in Greece WILL spill over into other eastern european countries. I am looking at Turkey & Poland. That will be of much more importance than Greece.
29. June 2015 at 09:20
Scott, I agree the IMF should not exist, but I view the Greek situation differently. I think Greece (and countries like Italy) need massive supply side reforms.
In the abstract I support Greece having its own currency. But I’d vote yes, because a no vote means leaving the euro AND having Syriza screw up the economy with socialist policies. At least with a yes vote you can hope for a change in governance. Greece was beginning to recover before this government plunged them back into recession.
If a different party were in charge I might vote no (it would be a close call.) Greece isn’t going to grow at 9% for 5 years, even if they leave the euro.
29. June 2015 at 11:23
i suspect that we all ignore this\
if the result of grexit is continued depression. and maybe a decade or more in the wilderness of being cut of from international financial support.
vs
accepting continued austerity (even increasing it) continuing the current depression for another 5 or more years with little expectation of nothing more than continued depression.
since either option seems to be the same result in the near term.
and in reality only one has even a glimer of a chance of improvement some day
which would you pick?
29. June 2015 at 18:14
Scott,
Your quality posts, filled with logic and evidence, once convinced me that Krugman was wrong on fiscal stimulus and that monetary policy was the solution to this great recession.
As for Greece, I see Krugman making macroeconomic sense: without economic growth, Greece will never be able to repay its debts. And without monetary expansion from the ECB, fiscal stimulus is the only way to get growth in Greece.
Hence Syriza is basically right in their fundamental logic.
Your arguments, I cannot understand, except that you seem to believe debtors prisons might work on a macro scale.
I know you are smarter than that – I just can’t for the life of me see what kind of solution you propose.
Obviously monetary expansion by the ECB (e.g. 5% inflation) would solve most of the Euro’s woes. But Germany will never accept inflation above 2%.
And to get 5% average inflation in the eurozone, Germany will need to have inflation between 5% and 10%.
Grexit seems more realistic than that.
30. June 2015 at 06:57
dw, The dream scenario would be a yes vote Sunday, a new technocratic government, then leaving the euro in 6 months.
JL, I agree that Greece would do better with its own currency, but unlike Krugman I’m a supply and demand-sider, whereas he’s just a demand-sider. Krugman can’t explain why Austria is doing better than Greece right now. Indeed even Spain is doing better. To Krugman, that’s just luck. In contrast, I see very real reasons for why some countries do better than others–they have more neoliberal policies. Krugman thinks the Argentine government has done a good job, I think they have been a disaster.
But on the euro Krugman and I completely agree, it’s been a disaster.
You said:
“And without monetary expansion from the ECB, fiscal stimulus is the only way to get growth in Greece.”
I strongly disagree, that’s demand side thinking. Supply-side reforms could produce rapid growth.