Greece is the horse's head in the left's bed

The best thing that can be said of the weekend is the brutal honesty of those perpetrating this regime change. Wolfgang Münchau - Financial Times

You may ask yourself why Germany, and those who follow her, are publicly torturing and humiliating tiny Greece in such a brutally inflexible and ugly fashion, ignoring contemptuously the democratically expressed will of the Greek people and much of European and even world opinion.

The reason behind it is simple... and to be effective it would have to be.

Frank and open brutality is never subtle, that is the whole point: its message must be clear to all.

The following is an excellent exposition of the message, "to whom it may concern" that has been sent  far and wide, using the misery of the Greek people as its vehicle:

One cannot pursue an even moderate left-wing policy in a system of global capitalism. Syriza never got a chance to apply any of the leftist policies that it says it favors, because it was busy negotiating with the creditors and because it had no genuine freedom of economic decision-making, since basically all its policies were dictated by the troika. Even if it had a margin for maneuver, it is hard to see how its moderately leftist policies (halt to privatization, higher taxation, greater role for the public sector) could be implemented. Notice that we are talking here not of some radical anti-capitalist program but of just broadly leftist policies that try to limit somewhat the unimpeded invasion of the market and private interest into all social spheres. Such policies are obviously unacceptable not only to the mainstream EU but also to many individual governments, which fear Syriza-like movements in their countries. Branko Milanovic - Al Jazeera

However brutality is often a sign of weakness, not of strength. The heartless, tone deaf response of Angela Merkel and Wolfgang Schäuble to the suffering of the Greek people reminds me and many others of the Soviet Union's response to the timid Czechoslovakian liberalization of the "Prague Spring" of 1968.  That was 1968 and "something was in the air", something contagious and the USSR wanted to make sure that no one under their rule "got any ideas" .

Paris - 1968

Today there is also "something in the air". Probably the most influential public figure to speak clearly about that "something" is Pope Francis.

The earth, entire peoples and individual persons are being brutally punished. And behind all this pain, death and destruction there is the stench of what Basil of Caesarea called “the dung of the devil”. An unfettered pursuit of money rules. The service of the common good is left behind. Once capital becomes an idol and guides people’s decisions, once greed for money presides over the entire socioeconomic system, it ruins society, it condemns and enslaves men and women, it destroys human fraternity, it sets people against one another and, as we clearly see, it even puts at risk our common home. Pope Francis: Speech at World Meeting of Popular Movements

The public humiliation of Greece, its government and its people may have exactly the opposite effect to the one Merkel and Schäuble desire. It is certainly a lesson to be learned, but the lesson people take away from this "class" may be one of greater political consciousness, one of unity and resistance, and not one of fear and submission. DS

My European Union Rant

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Now it is the European Union itself that is in danger, mainly but not entirely because of the economic crisis inherited from Wall Street abuses. (...) A new Europe-wide report by correspondents of the Paris newspaper Le Figaro reveals mounting disillusionment with the European Union itself among the voters of its member states. (...) Britain has made the most news about possible withdrawal from the union since the country’s most recent local elections gave the United Kingdom Independence Party nearly as high a popular vote as the ruling Conservative Party, led by Prime Minister David Cameron. (...) There was an immediate rise in demand among Conservative Party members for a referendum on quitting the EU – which the Ukip promises. William Pfaff

The British are talking about leaving the European Union... to put this conversation in perspective, I would trot out the famous quote of Mahatma Gandhi's, who, when asked what he thought of western civilization replied, "It would be a good idea".

If we agree that the heartland of western civilization is comprised of the countries, including Britain, that make up the European Union and we then consider the millions of Europeans that have been killed (by each other) over centuries in Europe's countless wars, religious and otherwise, and its assorted genocides and the millions of its inhabitants that were forced to emigrate to the ends of the earth to escape poverty and tyranny, and then contemplate its record outside Europe of: slavery, exploitation of natural resources, ethnic cleansings and genocides of peoples of color and then consider that so recently having renounced killing one another and so recently, if reluctantly, also laid down the white man's burden, then it might be a tad early and a trifle frivolous to quibble about an institution which might loosely fit Gandhi's description of a "good idea", namely the European Union?

Really all this talk makes me think of a chain smoker, who having been diagnosed with advanced lung cancer and that after having had a lung removed and undergoing intense radiation and ghastly chemotherapy, upon being told that he is in remission goes out and buys a pack of cigarettes. DS

The Spanish Economic Crisis Explained

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In case you are interested, this hour long documentary from the BBC gives a very workmanlike breakdown of how it all happened.

Spain is the canary in the coal mine for the world's top economies, because of its large size and its fragility. The story carries lessons for everyone, everywhere. What happens in Spain first can happen later in more robust economies.

Well made and clearly explained, in one hour with this video, you'll be up to speed. DS

The pain in Spain and America's iron jaw

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This remobilisation of Spanish society, lulled into comfort and complacency during the boom years, in some senses recalls the fevered political and street activity of the transition to democracy after the death of the dictator Francisco Franco in 1975. Yet it is more amorphous and experimental, bypassing politics and Spain’s increasingly tarnished institutions.(...) A salient feature of the present crisis – beyond the immediate drama of Spain’s cost of borrowing and the broader eurozone crisis – is the extent to which Spain’s institutions, the linchpins of the vibrant democracy Spaniards painstakingly built after Franco, have been battered. Financial Times

I don't usually like to blog here about Spain, where I live, because I would have to spend too much time explaining the context of a very complex reality to the majority of my readers, who probably come to that reality burdened with a multitude of cliches about Spain, cliches that I find too boring to clear away. I write about politics, I'm not a travel writer.

I'll make a bit of an exception now in order to explore the advantages that come wrapped in Spain's weakness and the disadvantages for the American people inherent in America's enormous natural strength.

Spain, unlike the USA, is by nature poor, with few natural resources, with practically no rivers of any commercial use, a dry, rocky, challenging terrain that has always made communication between its regions difficult. It is also an extraordinarily beautiful land, but as any farmer of Iowa's flat, boring landscape will tell you, "pretty land is bad land to farm". 

It is a landscape that breeds hardy, fibrous and energetic men and women. This ungenerous, hardscrabble, land is what drove the conquistadors to discover and conquer the Americas take its gold, and create what was then the world's largest empire.

When that empire fell apart Spain languished until Europe's post war prosperity lifted all the boats and finally provided Spain with the capital necessary to modernize its infrastructure and give opportunity for the Spanish people, called "the Prussians of the south", to express again their native energy by building Europe's fourth largest economy.

Today Spain is trying to dig itself out of the debris of an enormous real estate bubble created out of the euphoria of finally finding low interest money in their pockets after centuries of privation.

As the snippet from the Financial Times above indicates this has led to a massive questioning of the basic construction of the Spanish state. In other words, in the midst of disaster the Spanish people are discovering, in the words of Marx and Engels that,

"All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses, his real conditions of life, and his relations with his kind."

And I would maintain that such a facing with sober senses the real conditions of one's life and the relations with one's kind, is one of the most beneficial exercises a human being could undertake in the short time he or she is given to live. I think it was Socrates that said that an unexamined life wasn't worth living. And it is trying to imagine the American people en masse ever waking up to the extent that Spanish people are waking up now, that leads me to meditate on the advantages of weakness and the deadening, sluggish, tyranny of strength.

I have observed over the years that those who can drink large quantities of alcohol without showing its effects are the ones who die of cirrhosis, that the boxers that can't be knocked down, no matter how hard they are hit, are the ones that end up punchy and I wonder if this also applies to the living flesh of the common people of a country whose elites are the most wealthy and powerful and self satisfied in the history of our species.

The United States of America is so big, so populated, so rich, with such a smug and layered plutocracy, so tyrannized by endless interest groups that I cannot imagine the American people ever taking to the streets in a general strike or even more tragically, I cannot imagine that it would ever make any difference at all to their reality if they did. DS

Milton Friedman's "Full Monty" makes its European tour (soon in theaters near your home)

Deep down, the crisis is yet another manifestation of what I call “the political trilemma of the world economy”: economic globalization, political democracy, and the nation-state are mutually irreconcilable. We can have at most two at one time. Democracy is compatible with national sovereignty only if we restrict globalization. If we push for globalization while retaining the nation-state, we must jettison democracy. And if we want democracy along with globalization, we must shove the nation-state aside and strive for greater international governance.  Professor Dani Rodrik, Harvard University

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"Economic globalization, political democracy, and the nation-state are mutually irreconcilable." You might say it louder, but it would be difficult to say it more clearly. Here, in one sentence, Dani Rodrik has encapsulated the cross currents that are creating the turbulence we are living through today.

If you mull over the entire quote at the top of the page you can see that of all the "trilemma", democracy has the roughest row to hoe.

Right now now the IMF style austerity programs are beginning in Greece, Spain and Portugal, with severe cuts in public spending, pensions and other entitlements, labor rights reform.  Next will be Italy and the United Kingdom. But, carrying the debt it carries, even the United States can expect to see it "playing soon in a theater near your home".

This is perhaps the first time that the IMF's full Monty has ever been performed on  rich and a powerfuldemocracy... not just one, but several simultaneously. The financial disaster brought on by irresponsible, if not criminal, speculators, who are making millions at this very minute, is now going to be paid for by widows and orphans (literally).

As Naomi Klein points out in her groundbreaking book, "The Shock Doctrine", extreme Friedmanism normally is executed (choice of word) by people like Indonesia's Suharto, Brazil's military dictatorship of the 1960s, Pinochet or the Argentinian junta. This could be taken as a working illustration of Rodrik's "trilemma".

Now some of the most developed and democratic and historically creative countries in the world are going to experience the Shock Doctrine in full.

I find it simple to predict that many people in these countries are going to rebel and that the new technologies are going to empower that protest, and that the sort of protests seen in Seattle, instead of being confined to activists, will begin to mobilize the same masses of ordinary folks that filled the streets of Europe's cities before the invasion of Iraq. Will democracy survive? Will globalization? Will the nation state? Very dramatic questions, but as theater people would say, it reads better than it plays.

What all this reminds me of is the fall of the Berlin Wall and the collapse of "real existing socialism". The same feeling of exploring terra incognita.

I wrote this awhile back:

When the USSR went down, most observers read it ideologically, that we in the west had "won". Our merit had caused it all to happen. This was probably a big mistake. Perhaps that collapse did little more than reveal that a huge, powerful, system, one that had industrialized an enormous, backward country and made it into a scientific, political and military superpower, one that had defeated Nazi Germany almost single handed in WWII, a power like that could just simply collapse mysteriously. Just up and die. Just like that. The United States, instead of taking a victory lap, might have been more prudent to murmur then, "there but for the grace of God go I" and gotten busy looking to its own vulnerabilities instead of crowing and preening, because it appears that good ol' Grace is seeing somebody else these days.

What is really happening? It's hard to say, but Rodrik and Naomi Klein have the neatest explanations of this supremely confusing moment that I have seen. DS

Meditations on the dollar

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As a long term expatriate I am well placed to comment on the falling value of the dollar. If you live in the states the rise and fall of our currency affects you, but only indirectly and with a delayed effect. For Americans abroad the effect of the falling dollar can be huge. It is catastrophic for army families in Germany and for executives of American companies abroad... And even tragic in the case of American retirees.

I have been living off the local economy for many years now, but one of the reasons my family came abroad to live in the first place was the extremely favorable exchange rate. For people with fixed incomes, living abroad meant access to a much higher standard of living for the same amount of money. That simple.

People who don't travel much or have never had to "play the part" of the American, may not understand how much prestige is/was involved in the value of the dollar, they are easily unaware of what a symbol of power and even glamor it is/was.... (has been?) The last time the dollar was like this was in the 80s, but at that time the Euro didn't exist and the USSR and its army was still sitting in Eastern Europe... Nobody wanted to rock the boat.

By all means keep your eye on the "fundamentals" and, yes, there are some advantages for trade in a falling dollar, but never lose sight of the psychological effect of the dollar turning into what America's old friend Fidel Castro calls "perfumed paper".

Since Bush invaded Iraq we have watched the USA perform a striptease: habeas corpus, human rights, sub-prime, etc, etc and now the USA is down to its g-string and pasties... in this situation having the dollar crash is the "full Monty".

Things may come in a chain reaction now. It is really too difficult to forecast: too complex, too many variables. But nothing good for sure. DS

Michael Hirsh: In the Realm of the Dying Dollar - Newsweek
Abstract: Great powers die slowly. It took years before the world realized that Great Britain was an imperial corpse, sapped of its strength by two world wars. The funeral finally occurred on Feb. 21, 1947, a freezing winter day in bomb-torn, bedraggled London, when the British wrote their own epitaph. That was the day that London cabled Washington: "His Majesty's Government, in view of their own situation, find it impossible to grant further financial assistance to Greece," amounting to a half billion dollars a year and a garrison of 40,000 troops. The British also announced the same day that they were withdrawing from Turkey. "The British are finished," remarked a stunned Dean Acheson, who was soon to be Harry Truman's secretary of State. And so they were.(...) If the passing of American hegemony happens, it will occur very slowly--death by a thousand cuts of credit. One reason why it's so hard for Americans to contemplate their loss of prestige, symbolized by the fall of the once-almighty dollar, is that politicians and pundits tend to cast the issue as all-or-nothing. What would happen, they say, if China suddenly decided to dump the trillion dollars of U.S. debt it holds in reserves? This, however, will almost certainly never occur. While China and other big dollar-holding countries such as Singapore, Russia and the Persian Gulf states are very worried about the erosion in value of their dollar-denominated holdings and inflationary pressure, they also know that an abrupt move to cut their pegs to the dollar or to sell off in large amounts would force a run on the currency. That would leave them even poorer. Instead these countries are pursuing careful reallocations of their investment holdings, shifting slowly to the euro or a "basket" of currencies that will allow them to hedge against the dollar's decline. Credit will become more expensive, the U.S. economy will find itself increasingly crimped, and America's ability and willingness to act as the defense umbrella to the world will gradually peter out. The effect will be more like a slow-acting poison: drip, drip, drip.(...) the country is in such a fiscal hole right now that, as David Walker, the comptroller general of the United States, told my colleague Jeff Bartholet last week, "You could decide not to renew the Bush tax cuts, you could eliminate all foreign aid, eliminate all earmarks, eliminate NASA, eliminate the National Endowment for Humanities and eliminate the entire Defense Department tomorrow, and you still wouldn't solve the problem." READ IT ALL

Russian oil and technicians, key to Iran/Israel conflict

"Israel cannot play Russian roulette and attack Iran, because its nuclear facilities are inhabited by Russian technicians, and Israel imports 60% of its oil from Russia. Because Israel has limited fossil fuels, its energy supply from Russia is of extreme importance for the functioning of its economy. Therefore, Ahmadinejad holds the trump card, while his chief ally, Russian kingpin Vladimir Putin controls most of Israel’s oil supply, and can bring the Israeli economy to its knees." - Global Money Trends

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Much depends on the accuracy of the information above. If Russian technicians are in residence at Iran's nuclear facilities and if Russia supplies 60% of Israel's oil, then any talk of an Israeli attack on those facilities (with or without nukes) is a bluff. If we add to that the growing sensation that Bush's "surge" in Iraq is also a bluff (too little, too late); then it would appear that Bush and Olmert are just "playing out the clock", hoping to hand over the whole mess to their successors. Only a withdrawal of the Russian technicians would indicate that the war option was seriously on the table. DS

Empire Death Watch: Iran turns from dollar to euro in oil sales - The Times (London)

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As any true American knows from birth, the US Dollar is the ultimate, visible and tangible manifestation of God's will on earth and his chosen instrument for expressing it... or so we have always believed... if not in thought and word, surely in deed. So, the subtext of this article could be summed up as, "Mene, Mene, Tekel, Upharsin," which Jimmy Cox once rendered into American English in the following manner:

Once I lived a life of a millionaire,
Spent all my money, didn't have any cares.
Took all my friends out for a mighty good time.
Bought bootleg liquor champagne and wine.

Then I began to fall so low,
Lost all my good friends, had nowhere to go.
If I get my hands on a dollar again,
I'll hang on to it 'til that old eagle grins.

'Cause no, no, nobody knows you
When you're down and out.
In your pocket, not one penny,
And as for friends, you don't have any.

When you get back on your feet again,
Everybody wants to be your long lost friend.
I said it straight without any doubt,
Nobody knows you when you're down and out.

"Nobody Knows You When You're Down and Out"
Words & Music by Jimmy Cox (1923) - Recorded by Eric Clapton, 1992

Iran turns from dollar to euro in oil sales - The Times
Abstract: Iran is selling more of its oil for payment in euros than dollars as it seeks to shift its foreign currency reserves away from the depreciating currency of its political enemy, the United States.(...) Gholanhossein Nozari, the managing director of National Iranian Oil Company, said that 57 per cent of Iran’s income from oil exports was now received in euros. The move reflects a political desire for less reliance on the dollar, as well as a need to avoid further depreciation in currency reserves. Iran’s dollar holdings are thought to have fallen from 40 per cent of currency reserves to just a third.(...) Iran’s decision to switch currencies extends a trend among big oil exporters moving from the dollar as they seek protection from a continuing slide in the petrocurrency’s value.(...) The dollar’s slide protected non-dollar oil importers from the escalation in the price of fuel early this year. Oil was $63 per barrel at the beginning of January, rose to $74 at the start of July and has fallen back to $63 per barrel this month. However, translated into euros, the rise is less impressive — from €53 a barrel to a peak of €58 before a sharp decline to €48. The fall in the dollar against major currencies has had a dramatic impact on the revenues of oil exporters and has exacerbated the rumbling anti- American feeling in the Gulf. Although Gulf Arab states are predominantly dollar export earners, they mainly purchase in euros and yen, buying food, consumer goods and manufactured products from Europe and the Far East. READ IT ALL

Dollar: up in smoke?

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The most interesting point this article that I'm featuring from Der Spiegel makes is that the dollar is not just depreciating against the euro, which would be terrible for Europe; it is falling against many other important currencies too. The pound sterling, the Thai Baht, the South Korean Won and the Chinese Yuan are all rising in value against the dollar. This means that they are holding value in relation to each other. This in turn means that contrary to times past if the dollar crashes today it wont drag the rest of the world down with it. The world economy will just chug along buying and selling manufactured goods to each other, while US software, services and agricultural products will be dirt cheap on the world markets. If an American looks underneath any manufactured thing he finds within his reach he or she will probably find that it was made in a foreign country. Let her have a good look, because it may be some time before she can afford to buy it again. DS

The Fall of the Mighty Dollar - Der Spiegel
Abstract: Experts have been predicting for some time that the dollar would eventually go into a nosedive, and now that time seems to have come. The US currency has lost five percent of its value against the euro since late October, and 13 percent since the beginning of the year. The euro is currently fluctuating around a value of $1.33, which is only 3 cents away from its all-time high in 2004. And yet Trichet's counterpart Ben Bernanke, the chairman of the US Federal Reserve, has done nothing but look on as the dollar plunges. A sea change appears to be taking place on the international financial markets. For years, global capital flowed in only one direction, with $2 billion going into the United States every day. Investors viewed the world's largest economy not only as a bastion of stability, but also as a place that promised the best deals, the most lucrative returns and the highest growth rates. The Americans, for their part, welcomed foreign investment. For them, it was almost a tradition to save very little and spend more than they earned -- essentially achieving affluence on credit. Foreigners financed the Americans' almost obsessive consumer spending, which spurred worldwide economic growth for years. Because the US government was unable to fall back on the savings of its citizens, it too was forced to finance its budget deficit with foreign capital. Both consumer spending and the federal deficit kept the dollar high, because the rest of the world was practically scrambling to invest in the United States.(...) Investors worldwide are becoming sceptical and starting to pull their money out of the United States. They have realized that a people and a country cannot live beyond their means in the long term. The US dollar's exchange rate is starting to crumble as a result of this withdrawal. The depreciation is causing growing concern about what will happen to the global economy if the United States loses its role as an engine of growth. (...) The consequences of a declining dollar for the German and European economy will be determined in large part by the way other currencies develop relative to the dollar. "It would be fatal if only the euro were to rise," says DIW analyst Steinherr. "Then it would only be the euro zone that would have to bear the burden of adjustment." But the foreign currency markets suggest a different development, as the dollar is also losing value in relation to other important currencies. The British pound, for example, rose to new highs last week. Even more importantly, the currencies of east Asian growth regions are also appreciating against the dollar. The Thai Baht, for example, gained about 15 percent against the dollar in 2006, while the South Korean Won gained 10 percent. Even the Chinese Yuan, which slavishly followed the dollar in the past, gained more than three percent. Virtually every economy is bearing part of the burden of adjustment.(...) The perils of a currency crash are not nearly as great as they were in the days of the dollar's absolute dominance 30 or 40 years ago. Globalization has led to the development of a number of growth centers in the world economy which share the burden of turbulence. Gone are the days when an American finance minister could boast: "The dollar is our currency, but it's your problem." READ IT ALL

Dollar and Oil - the price of failure

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One of the seed ideas left over from the 1990s that is keeping us from seeing our own era clearly is the idea that business trumps politics. Everything then was free trade and 'bottom line'. 9-11 didn't "change everything": failing in Iraq has. We have moved quickly into an era where, as Churchill said about the Balkans, we produce "more history than we can digest." The article from the Financial Times looks at the present fall of the dollar from the point of view of fundamentals, but it would be unwise to neglect the political/symbolic angle. All our system runs on oil, the main source of oil is the Middle East, in Iraq, the United States has shown that it cannot control the Middle East. The dollar is the symbol of American power.... As the FT says, "Currency switches are likely to be progressive, subtle and discreet, as untoward attention could hit the dollar, lowering the value of depositors’ remaining dollar-denominated assets." Whistling and shuffling their feet with their eyes on the door. DS
Oil producers shun dollar - Financial Times
Abstract: Oil producing countries have reduced their exposure to the dollar to the lowest level in two years and shifted oil income into euros, yen and sterling, according to new data from the Bank for International Settlements. The revelation in the latest BIS quarterly review, published on Monday, confirms market speculation about a move out of dollars and could put new pressure on the ailing US currency. Market liquidity is traditionally low in December, and many traders have locked in profits, potentially reinforcing volatility. Russia and the members of the Organisation of the Petroleum Exporting Countries, the oil cartel, cut their dollar holdings from 67 per cent in the first quarter to 65 per cent in the second. Meanwhile, they increased their holdings of euros from 20 to 22 per cent, the BIS said. The speed of the shift may help to explain the weakness of the dollar, which recently fell to a 20-month low against the euro and a 14-year low against sterling.(...) Such shifts may be modest compared with the total assets held, but they provide a crucial indication on future thinking. Currency switches are likely to be progressive, subtle and discreet, as untoward attention could hit the dollar, lowering the value of depositors’ remaining dollar-denominated assets.(...) The dollar has suffered weakness because of concerns about global imbalances and the future course of the Federal Reserve’s interest rate policy. READ IT ALL