Saturday, 25 July 2015

Pyrrho's indalmoi

Recalling her bridal gift of lustrous cloak, lapidary clasp
Odysseus burns under a beggar's name
Pyrrho, indalmoi are a hind in a hound's grasp
Penelope weeps both are tame.

Monday, 20 July 2015

To a Po-Co Enoch Soames

Now every Hungryalist Zulieka has wrought a Po-Co Enoch Soames
& Globally gazumped, 'plain Preston men' have re-bought unknot homes
To my rue, I must close my correspondence with you
Having heard nothing kind, nothing clever, nothing true.

Saturday, 18 July 2015

Bankers are poets playing possum

Carl Melchior, a frail little Jewboy, and Keynes, a thick lipped Cambridge sodomite; had cast a disturbing shadow over International Finance, over Economics's project of achieving pure ergodicity, over Enlightenment's project of turning its various National Bildungsburgertums into brokerages simply; at a time when, a respectably married, strapping, over six foot tall, Oxford man, Thomas Stearns Eliot- of sound Brahmin stock- was a couple of years into his Banking career.

Thus he wrote this-  (my, purely interpretative ,comments being given in bold)
'FEW critics have even admitted that Hamlet the play is the primary problem, and Hamlet the character only secondary. And Hamlet the character has had an especial temptation for that most dangerous type of critic: the critic with a mind which is naturally of the creative order, but which through some weakness in creative power exercises itself in criticism instead.'

Frail little Jews, who fall off their horse and are invalided out of the Regiment, are barred from Creativity; cogitations raging amongst those rootless Cosmopolitans can at best be 'Criticism'- i.e. such agitation is that of the arbitrageur merely, arbitrarily discounting things of the Blood, the Soil, and that blood Christ on the Cross shed upon the soil of the King-Emperor's new Protectorate in Palestine; thus Ruth is redeemed, Soil freed from Abrahamic bondage, and neither a pituitarily disordered & too heavily bleeding Womb, nor a hydrocephalic Trench War's anonymous for too teeming Tomb, need any longer carry a Pharaisacal and Meretricious burden of resistance to aesthetic univocity such that certain combinations of words can't cash out as wergild thus undermining a privileged Catholicism of moral fungibility.

 These minds often find in Hamlet a vicarious existence for their own artistic realization. Such a mind had Goethe, who made of Hamlet a Werther; and such had Coleridge, who made of Hamlet a Coleridge; and probably neither of these men in writing about Hamlet remembered that his first business was to study a work of art. The kind of criticism that Goethe and Coleridge produced, in writing of Hamlet, is the most misleading kind possible. For they both possessed unquestionable critical insight, and both make their critical aberrations the more plausible by the substitution—of their own Hamlet for Shakespeare’s—which their creative gift effects. We should be thankful that Walter Pater did not fix his attention on this play.
Eliot elegantly, for by elision, pays tribute to, his distinguished compatriot, Santayana's bit of Anti-Boche War Work- the latter's essay on Hamlet- but only so as to contemn Pater's, actually Hemsturhuisian not Cyrenaic, yet nevertheless bestial, for Cambridge, Apostles amongst whose number Keynes stood forth most vulgar and unabashed.
Pater, as Harold Bloom points out, did treat of Hamlet as rising above the mere Pharaisaical arbitrage of the Law's virtuously severed head and Libetinage's' more and more madly violated, for for aye maiden bed, to deal with the exceptional- that which defeats Carl Schmitt's lame Hecuba defence of his own traitorous misprision- by reason of incarnating Agrippa's trilemma, the impossible Trinity of Father, Son and an Unholy Ghost.

It occurs to me I'm writing sophomore Eng Clit type shite.
I'm 52 and got serious drinking to do!
I'd better just cut to the chase-

Your wares to mourn, Saqi, unbind your hair
What Wine, now, can my Vision impair?
Bees all in black tho' in red the blossom
Bankers are poets playing possum

Friday, 17 July 2015

Varoufakis on Schauble

This is Varoufakis on Schable- my comments are in bold.

The reason five months of negotiations between Greece and Europe led to impasse is that Dr Schäuble was determined that they would. You said he was determined to get Greece out of the Euro. Clearly, if that was his intention, he failed miserably. Negotiations between Greece and Europe did not end in an impasse. You lost.
By the time I attended my first Brussels meetings in early February, a powerful majority within the Eurogroup had already formed. Revolving around the earnest figure of Germany’s Minister of Finance, its mission was to block any deal building on the common ground between our freshly elected government and the rest of the Eurozone.[1] A deal was built. It was based on your side's abject surrender.
Thus five months of intense negotiations never had a chance. Condemned to lead to impasse, their purpose was to pave the ground for what Dr Schäuble had decided was ‘optimal’ well before our government was even elected: That Greece should be eased out of the Eurozone in order to discipline member-states resisting his very specific plan for re-structuring the Eurozone. This is no theory of mine. How do I know Grexit is an important part of Dr Schäuble’s plan for Europe? Because he told me so! Okay, Schauble is a shrewd s.o.b. He played you by saying- 'I'm gonna get you out of the Euro'. You blab this to Tsipras. He throws in the towel. All you have proved you are shit at negotiation.
I am writing this not as a Greek politician critical of the German press’ denigration of our sensible (sic!) proposals, of Berlin’s refusal seriously to consider our moderate debt re-profiling plan, of the European Central Bank’s highly political decision to asphyxiate our government, of the Eurogroup’s decision to give the ECB the green light to shut down our banks. I am writing this as a European observing the unfolding of a particular Plan for Europe – Dr Schäuble’s Plan. And I am asking a simple question of Die Zeit’s informed readers:
Is this a Plan that you approve of? Is this Plan good for Europe?

Dr Schäuble’s Plan for the Eurozone

The avalanche of toxic bailouts that followed the Eurozone’s first financial crisis offers ample proof that the non-credible ‘no bailout clause’ was a terrible substitute for political union. Wolfgang Schäuble knows this and has made clear his plan to forge a closer union. “Ideally, Europe would be a political union”, he wrote in a joint article with Karl Lamers, the CDU’s former foreign affairs chief (Financial Times, 1st September 2014).
Dr Schäuble is right to advocate institutional changes that might provide the Eurozone with its missing political mechanisms. Not only because it is impossible otherwise to address the Eurozone’s current crisis but also for the purpose of preparing our monetary union for the next crisis. The question is: Is his specific plan a good one? Is it one that Europeans should want? How do its authors propose that it be implemented?
The Schäuble-Lamers Plan rests on two ideas: “Why not have a European budget commissioner” asked Schäuble and Lamers “with powers to reject national budgets if they do not correspond to the rules we jointly agreed?” “We also favour”, they added “a ‘Eurozone parliament’ comprising the MEPs of Eurozone countries to strengthen the democratic legitimacy of decisions affecting the single currency bloc.”
The first point to raise about the Schäuble-Lamers Plan is that it is at odds with any notion of democratic federalism. A federal democracy, like Germany, the United States or Australia, is founded on the sovereignty of its citizens as reflected in the positive power of their representatives to legislate what must be done on the sovereign people’s behalf. That positive power is subject to judicial review. A Local Authority can't set an illegal rate, a Govt. can't levy an illegal tax. A sovereign country can bind itself by Treaty not to set illegal taxes or provide illegal subsidies. E.C countries already are barred from setting import taxes or providing export bounties for inter-European trade. It is no great stretch for National Budgets to be brought under the purview of a European body. Greece would have benefited if this had happened 15 years ago.
In sharp contrast, the Schäuble-Lamers Plan envisages only negative powers: A Eurozonal budget overlord (possibly a glorified version of the Eurogroup’s President) equipped solely with negative, or veto, powers over national Parliaments. The problem with this is twofold.
1) First, it would not help sufficiently to safeguard the Eurozone’s macro-economy.
2) Secondly, it would violate basic principles of Western liberal democracy.

1)  No political arrangement can safeguard any Macro-economy whatsoever. Otherwise, there'd be no subject called Macroeconomics. Instead, under that heading you'd have a notice saying see 'optimal political arrangement for safeguarding the Macro-economy.'
2) If Western Liberal Democracy has 'basic principles' then other truths can be derived from them. If what is proposed violates one or more such basic principle, it follows that it must violate one or more derived ratio such that an illegal action has occurred. Hence the proposal would be struck down as unconstitutional.
The Judiciary acts as countervailing power on the Executive in a negative manner- preventing it from doing certain things. It can also direct the Executive to do certain things under threat of punishment. It can't, however, take the place of the Executive and do those things itself. This does not represent some great scandal for Liberal Democracy. Rather, it is necessary to its existence.

Consider events both prior to the eruption of the euro crisis, in 2010, and afterwards. Before the crisis, had Dr Schäuble’s fiscal overlord existed, she or he might have been able to veto the Greek government’s profligacy but would be in no position to do anything regarding the tsunami of loans flowing from the private banks of Frankfurt and Paris to the Periphery’s private banks.[2]  Why would money flow from Frankfurt to Paris if the fiscal overlord has ordered a fiscal contraction in Greece? Suppose Bankers be crazy, what is to stop the Chairman of the ECB from going on TV and saying so? Those capital outflows underpinned unsustainable debt that, unavoidably, got transferred back onto the public’s shoulders the moment financial markets imploded. Unavoidably, you cretin? Just because you, personally, fucked up as an advisor doesn't mean such stupidity was unavoidable. Post-crisis, Dr Schäuble’s budget Leviathan would also be powerless, in the face of potential insolvency of several states caused by their bailing out (directly or indirectly) the private banks. How fucking stupid are you? Don't you get that bailing out Banks, like regulating them, is the Central Bank's job?
In short, the new high office envisioned by the Schäuble-Lamers Plan would have been impotent to prevent the causes of the crisis and to deal with its repercussions. Moreover, every time it did act, by vetoing a national budget, the new high office would be annulling the sovereignty of a European people without having replaced it by a higher-order sovereignty at a federal or supra-national level. We KNOW the current system can be improved by addressing issues the Plan raises. We don't know it would be impotent but do know that the reasons you have given are utterly specious. Sovereignty is not annulled every time the Executive is barred from an illegal act. Judges don't suddenly turn into Chief Magistrate's of the Republic, taking over from elected officials. Instead, the Executive's menu of choice is constrained in a useful way and so they make better decisions.
Dr Schäuble has been impressively consistent in his espousal of a political union that runs contrary to the basic principles of a democratic federation in your worthless opinion. In an article in Die Weltpublished on 15th June 1995, he dismissed the “academic debate” over whether Europe should be “…a federation or an alliance of states”. Was he right that there is no difference between a federation and an ‘alliance of states’? I submit that a failure to distinguish between the two constitutes a major threat to European democracy.

Forgotten prerequisites for a liberal democratic, multinational political union

One often forgotten fact about liberal democracies is that the legitimacy of its laws and constitution is determined not by its legal content but by politics. To claim, as Dr Schäuble did in 1995, and implied again in 2014, that it makes no difference whether the Eurozone is an alliance of sovereign states or a federal state is purposely to ignore that the latter can create political authority whereas the former cannot. Says who? If Churchill had been killed, who would have succeeded him as head of the Imperial War Cabinet? Atlee? No- Jan Smuts, a South African. Switzerland is a Federal State. The British Commonwealth was an Alliance. Who would have had greater authority within their respective territories, Smuts or the Swiss President? Varoufakis knows shit, talks shit and when called to negotiate for his country in their hour of need, he puts his hands down his pants and pulls out fistfuls of shit which he then proceeds to eat claiming it to be chocolate pudding.
An ‘alliance of states’ can, of course, come to mutually beneficial arrangements against a common aggressor (e.g. in the context of a defensive military alliance), or in agreeing to common industry standards, or even effect a free trade zone. But, such an alliance of sovereign states can never legitimately create an overlord with the right to strike down a states’ sovereignty, since there is no collective, alliance-wide sovereignty from which to draw the necessary political authority to do so. How fucking metal are you? Fuck you think happened in Germany in 1866 and 1870? The Prussian King was the head of an alliance. He became not the Emperor of Germany but German Emperor with perfect legitimacy.
This is why the difference between a federation and an ‘alliance of states’ matters hugely only to you, you ignorant fuckwit. For while a federation replaces the sovereignty forfeited at the national or state level with a new-fangled sovereignty at the unitary, federal level, centralising power within an ‘alliance of states’ is, by definition, illegitimate, and lacks any sovereign body politic that can anoint it. Rubbish. The German Emperor was perfectly legitimate. Too much so, for the good of the Germans. Nor can any Euro Chamber of the European Parliament, itself lacking the power to legislate at will, legitimise the Budget Commissioner’s veto power over national Parliaments. Now you're just making things up.
To put it slightly differently, small sovereign nations, e.g. Iceland, have choices to make within the broader constraints created for them by nature and by the rest of humanity. However limited these choices, Iceland’s body politic retains absolute authority to hold their elected officials accountable for the decisions they have reached within the nation’s exogenous constraints and to strike down every piece of legislation that it has decided upon in the past. Really? Iceland is not a 'Rule of Law' country? Anyway, it has just 300,000 people.  In juxtaposition, the Eurozone’s finance ministers often return from Eurogroup meetings decrying the decisions that they have just signed up to, using the standard excuse that “it was the best we could negotiate within the Eurogroup”. Unlike M.Ps returning from Westminster who bring back Hospitals and Factories and flying Unicorns for their constituents coz. the UK aint in the Eurogroup so everybody can have anything they want without any need for tiresome negotiations.
The euro crisis has expanded this lacuna at the centre of Europe hideously. An informal body, the Eurogroup, that keeps no minutes, abides by no written rules, and is answerable to precisely no one, is running the world’s largest macro-economy, with a Central Bank struggling to stay within vague rules that it creates as it goes along, and no body politic to provide the necessary bedrock of political legitimacy on which fiscal and monetary decisions may rest. Which is why you guys are desperate to stay in the Eurozone. The alternative is talking monkeys like you shitting on everything in Parliament.
Will Dr Schäuble’s Plan remedy this indefensible system of governance? If anything, it would dress up the Eurogroup’s present ineffective macro-governance and political authoritarianism in a cloak of pseudo-legitimacy. Legitimacy is a good thing, especially if it is 'pseudo' from the p.o.v of a loony toons like you- okay, maybe this kraut aint so bad. The malignancies of the present ‘Alliance of States’ would be cast in stone and the dream of a democratic European federation would be pushed further into an uncertain future. You are stupid, your dreams are toxic. Their being pushed into the future is a good thing.

Dr Schäuble’s perilous strategy for implementing the Schäuble-Lamers Plan

Back in May, in the sidelines of yet another Eurogroup meeting, I had had the privilege of a fascinating conversation with Dr Schäuble. We talked extensively both about Greece and regarding the future of the Eurozone. Later on that day, the Eurogroup meeting’s agenda included an item on future institutional changes to bolster the Eurozone. In that conversation, it was abundantly clear that Dr Schäuble’s Plan was the axis around which the majority of finance ministers were revolving.
Though Grexit was not referred to directly in that Eurogroup meeting of nineteen ministers, plus the institutions’ leaders, veiled references were most certainly made to it. I heard a colleague say that member-states that cannot meet their commitments should not count on the Eurozone’s indivisibility, since reinforced discipline was of the essence. Some mentioned the importance of bestowing upon a permanent Eurogroup President the power to veto national budgets. Others discussed the need to convene a Euro Chamber of Parliamentarians to legitimise her or his authority. Echoes of Dr Schäuble’s Plan reverberated throughout the room.
Judging from that Eurogroup conversation, and from my discussions with Germany’s Finance Minister, Grexit features in Dr Schäuble’s Plan as a crucial move that would kickstart the process of its implementation. A controlled escalation of the long suffering Greeks’ pains, intensified by shut banks while ameliorated by some humanitarian aid, was foreshadowed as the harbinger of the New Eurozone. On the one hand, the fate of the prodigal Greeks would act as a morality tale for governments toying with the idea of challenging the existing ‘rules’ (e.g. Italy), or of resisting the transfer of national sovereignty over budgets to the Eurogroup (e.g. France). On the other hand, the prospect of (limited) fiscal transfers (e.g. a closer banking union and a common unemployment benefit pool) would offer the requisite carrot (that smaller nations craved).
Setting aside any moral or philosophical objections to the idea of forging a better union through controlled boosts in the suffering of a constituent member-state, several broader questions pose themselves urgently:
  • Are the means fit for the ends? Yes, because those means got shot off you.
  • Is the abrogation of the Eurozone’s constitutional indivisibility a safe means of securing its future as a realm of shared prosperity? You're just babbling nonsense here.
  • Will the ritual sacrifice of a member-state help bring Europeans closer together? Yup. That and a barbecue with lots of beer.
  • Does the argument that elections cannot change anything in indebted member-states inspire trust in Europe’s institutions? Yes! It eliminates political risk.
  • Or might it have the precise opposite effect, as fear and loathing become established parts of Europe’s intercourse? Fear and loathing, for you, we will always have with us.

What conclusion can we draw from Whatthefuckis's cri de coeur? This Schauble guy- an Accountant of some sort- got the measure of Whatthefuckis and played him like a hillbilly banjo. The result- Greece can stay in the Euro, if it grows up. Otherwise it can leave and no one will shed a tear. 

Final Score
Boring Accountants- 1 , 'Brilliant' Economists- 0
So, no change there then.

Comment by Yorick's bones-
I understand that times are troubled and discussions get heated. I am in principle not interested in the heat, but in the arguments that (should) drive discussions. You seem to have some, and I would like to ask you some questions about them:

(1) Do you think Varoufakis is wrong, or that he is lying? Not necessarily pertinent, but interesting.

(2) Do you also think all the nobel laureate economists (I can think of a couple) who have supported him are wrong? Or lying?

(3) Do you think that Schäuble, whose interests are at least as vested as those of Varoufakis (being more than the latter a man of politics), is being more truthful, or just more economically savvy?

(4) Or do you think that the Americans' interests in the case of the Greek crisis are as vested as the Germans' or the Greeks', if less obvious? Then what would you say they are?

(5) The way I see it, many economists have been saying that the measures that have been proposed in the current deal have historically been proven to be inefficient, if not ineffectual, in their task of cleansing and repairing the Greek economy.* Do you think the measures proposed will actually help the Greek economy recover?

* (6) I am taking the cleansing and repair of the Greek economy to be the aim of these measures, because a healthy and functional economy is a requisite for the servicing of a debt, which in turn is the creditors' alleged goal in this whole affair. Is that not so?

REPLY to a comment by Yorick's bones-
Thank you for your comment
I appreciate the distinctions you make. We visualize Econ Policy as facing a menu of feasible choices. A particular pick may be advocated for many different reasons- some specious, some normative purely, some 'strategic' (i.e. disingenuous), some purely alethic. Furthermore, the advocate of a particular pick may have a compelling 'white box' theory- i.e. the guy saying pick x, has a convincing explanation of why picking x will set off a series of plausible events such that the objective y is achieved- whereas an opponent of x may only have a 'black box' theory backed by empirical evidence of a regularity. Finally, Econ (to Yannis's disgust) can't do interpersonal comparisons. There is no way to know whether Bill Gates getting richer is better for billions of people than a patent troll attorney engaged in a nuisance value legal case against him.

This means that any policy prescription can have some  sane honest advocate
Econ as a subject is aware that there is no objective method to 'mechanically' distinguish strategic from alethic responses. This problem of 'Preference Revelation' is why Politics can't be reduced to Economics. Rather there is a supervenience relationship characterized by multiple realizability.

I interpret your first sentence as equivalent to the above- and agree.
Turning to your questions.
1) Varoufakis is a Game Theorist who tried to be a 'Conviction Politician' rather than a tactician. This means 'Kavka's toxin'  has salience. Varoufakis signals he is willing to take poison at time t and it is plausible to think that he is prepared to die by taking that poison even though he knows he won't have to take the poison and will get a million dollars as a result.
If Kavka's toxin, or Newcombe type problems predominate, then a general solution lies in the trade off we make between devoting cognitive resources to alethic investigation as opposed to imperative valency. Mahatma Gandhi faced a Kavka's toxin problem. He had to be a loyal seditionist otherwise he lost obligatory passage point status between the British and the Revolutionaries. He resolved the quandary by devoting a lot of resources to imperative gestures (spinning cotton, making salt) and none to alethic investigation (he could easily have found out that the cotton he was spinning was negative value added or that sea salt was more expensive than the taxed commodity). We can forgive Gandhi because maybe he lived at a time when Brown people believed the White Man was chosen by God to be his Master and thus bound to be superior.
What about Varoufakis? He is saying 'I am swallowing Kavka's toxin (i.e. my tactics are suicidal for my country) for the sake of a Democratic Politically United Europe which will make systematic transfers from Rich to Poor regions so as to equalize real incomes and Life Chances'.
If we give Gandhi the benefit of the doubt, why not Varoufakis?
The answer is Gandhi gave up Law, he condemned its practice, long before he did silly things like spin cotton and try to make salt. Varoufakis was an economic adviser to the Greek Govt. and still is a practicing Economist- i.e. he can't avail of Gandhi's way of winning the Kavka's toxin challenge. He can't adopt a hypo-mechanist, hyper-mentalist position since his profession commits him to hyper-mechanist, hypo-mentalist alethic investigation as opposed to mystic rapture.
Is Varoufakis 'lying' or deluding himself or just incompetent? To answer that question- which involves identifying the Muth rational demarcation procedures relevant to distinguishing 'lie' from 'self-delusion' and relating this to competence under cognitive trade-offs- we first need to establish whether Varoufakis is 'wrong'- i.e. is his 'dream' Muth Rational? Would all agents, having the same information set and possessing the correct theory, identify Varoufakis's claimed objective as a Rational Expectations Eqbm, robust to hysteresis?
No. Not at all. Varoufakis's 'democratic Political Union' isn't incentive compatible. It falls at the first hurdle to be the Muth Rational 'correct' theory. Varoufakis knows this. Ergo he is acting in bad faith to all.
2) Krugman & Stiglitz & so on don't believe in Varoufakis's supposedly morally prescriptive dream for Europeans, but they do believe in a specific 'bastard Keynesian' policy prescription and interpret everything in that light. Thus, if claiming Varoufakis is right causes the Eurozone to start printing money like crazy and if this causes aggregate demand to rise, then that's a good thing because all 'austerity' is simply the result of collective stupidity- the paradox of thrift. These people are wrong and sometimes they do tell lies but essentially they are commodities in themselves. Varoufakis isn't yet a commodity in himself. His income still mainly derives from actions as an agent, not a principal.
3) Schabule is an Accountant- not a good one and thus a run of the mill politician. He is associated with quite large scale transfers as well as the abject failure of Privatization type initiatives. His perceived ascendancy would tend to cause the Euro to depreciate- which is good for Germany because it increases sales to the rest of the World while paying less, as a proportion, to poorer members. Thus, in this round, the stupid Accountant won and the 'brilliant' Economist lost.
4) America is concerned that its own Corporate investments, supply chains, and intellectual property rights are protected and appreciate more than proportionately. It has shown it can bend the IMF to its will- so it is effectually  hegemonic and has indeed extended the Roosevelt Corollary to the Monroe Doctrine to Europe. America has always pretended to be a bailiff but actually told other countries to forgive debts owed to them by others- which is why there were no formal, as opposed to de facto, Second War Reparations- but made sure that any haircut for its Govt. was associated with a more than proportionate gain for its Corporations. Nothing in this current Crisis has changed that- which is why the Euro has fallen against the dollar despite low oil prices.
5) No measures have been suggested that will help the Greek economy to recover. However, if that economy shrinks enough, Greece has no alternative but to recover in much more dynamic form. Ulysses did much better once Proteus, the Old Man of the Sea, got off his back. If Schabule first got Tsipras drunk on power by tricking him and if Party Politics in Greece has truly been poisoned, then well and good.
6) Shrinking the Greek Economy as well as the expected Permanent Income of Creditors is the outcome, if not the stated aim, and that's feasible, indeed salutary, ceteris paribus given that, currently, no value adding incentive compatible model for Public Sector intervention obtains.

Like most ordinary people, I feel all Europeans should have a Social Minimum, on the basis of improved factor mobility and democratic subsidiarity- such that Tiebout manorial rents are equitably distributed- and this should be gradually extended to other countries once they undergo 'demographic transition'.

Varoufakis type 'zero-sum' long term  transfers can't become sustainable or significant on a continent wide scale unless 2 conditions are fulfilled
1) factors must be inelastic in supply in the 'rich' areas
2) no preference revelation or mechanism design type problem arises.
This is implausible unless the tax collectors come from the poor region and are completely honest and have access to a window of Momus and thus can see into the hearts of men.
As a matter of fact, you can have sustainable transfers where there is a countervailing benefit- for e.g. rich regions give some cash to poor regions in return for which their Investments appreciate- i.e. there is an Aumann type correlated equilibrium. Here monetary union or the gold standard (if credible) removes uncertainty and signal extraction type problems thus rendering the game positive sum.
Graciella Chichilnisky's work is relevant in this context. Normally preference diversity can't be too much or too little and so it looks as though super-states will be more fragile. However, 'limited arbitrage' is itself canalised, so to speak, provided (this is the ideal outcome under monetary union) there is increased local Public Good Tiebout model competition such that transfers are internalized under the rubric of subsidiarity. In other words, voting with one's feet replaces the farce of voting.

Thursday, 16 July 2015

Does the IMF care more about Greece than the Germans do?

But that is the impression being created.
Germany is the cruel step-mother and IMF is the good fairy saying 'Poor old Cindy really can't do all the household chores as well as stitch beautiful ball-gowns for her ugly step-sisters.'
Nothing could be further from the truth.
The IMF is supposed to be a hard-ass which only lends when it can get its money back.
The World Bank is supposed to be the 'good cop' to its 'bad cop'.
But the IMF has to do what Washington tell it to. Since Greece is in NATO, America has ordered it to lend to Greece.
To get out of this jam, the IMF has to tell stupid lies.
First time round, it pretended Greece could dig itself out of its hole by carrying out sensible reforms.
Greece still defaulted because the Greeks went and voted for a bunch of jokers- some of whom had seemingly impressive Academic Credentials.
The IMF is now pretending that previous debt is what will prevent Greece defaulting on the loan Washington will force it to make. This is silly. Greece is a sovereign country. It can pick and choose who to pay. Unless its Govt. does a 180 degree turn- i.e. fulfills not just the Eurozone conditions but goes many steps further- it won't be able to repay any fresh loans except from even bigger loans which no one will provide.
The IMF has provided itself with a tiny fig-leaf but no one is fooled because it is just a giant a-hole being plowed by Washington's dick.

Still, surely writing off Greek debt at this time is a good thing no matter who suggests it or what their intentions are?
The answer, once again, is Oxi.

Suppose you owe me a £1000 and want to persuade me to take pennies on the pound.
What should you do? Well, that depends. Suppose you want to borrow more money- in fact are desperate to do so.
Should you
1) Claim to be utterly crap at making money
2) Say that even thinking about repaying debt to us will cause you to ring me in the middle of the night to rant and rave at me for having sexually abused you as a child, though I'm 20 years younger than you, and that you will get a Doctor's certificate to say I have to turn up for 'recovering from incest' sessions in his office where you can vent your anger at me and, if I tell you to fuck off, you will spread your lies about me all over the neighborhood.
The answer is no. What you need to do is say
1) Listen I've got a plan to turn my business around. I'm gonna use this money you're lending me to get a new machine which will make me the cheapest producer and so I'm gonna bag all the orders and in a few years time I'm gonna be on top. Tell you what, why don't I pay you back everything at that time?
2) Guys I owe money to a lot of you and that's keeping me up nights. I'm determined to repay all of you even though I did some stupid things with the money you lent me before. This is because I've turned over a new leaf.

Yannis Whatthefuckis takes a different approach.
This is from his blog-
For the first time, the IMF recognised that, in its fifth review assessment, there was a low probability that Greece’s public debt would prove sustainable.
Here is an extract from the IMF’s own report confessing that, to portray Greek public debt as sustainable (without substantial debt relief), its researchers had to make the assumption that “…Greece would go from having the lowest average total factor productivity (TFP) growth in the euro area since it joined the EU in 1981 to having among the highest TFP growth, and that it would go to the highest labor force participation rates and to German employment rates.” Pigs would, of course, sooner fly!
PIGS can raise TFP. Ireland was a PIGS country. It showed rapid TFP growth in the past and might well re-emerge as a Financial Services/Tech hub whose strength is directly linked to that of the Euro. Spain is a much bigger country but it's industrial woes won't last for ever. The Portuguese and the Spanish and the Irish aren't saying 'our people are lazy and stupid and will always be so. We will never work as many hours or as efficiently as the Germans. We are pigs. We can't fly.'  This is because they think their people are smart and can work harder than the Germans and that is why their living standards will converge and fiscal harmonization will seem natural. Greeks aren't stupider than Irish people. They may well be smarter than Germans. But electing Yannis Whatthefuckis was a dick move. He says Greeks are shit. He thinks some foreigners turned up in tanks in 1967 and conquered Greece and that the same thing is happening again except Greek banks are gonna start rumbling down the streets of Athens shooting at people coz some evil foreigners have worked bad mojo on them.

The IMF has been under pressure to lend to Greece coz its part of NATO. It did so once saying 'heck, the Greeks aint stupid. They will raise productivity and boost growth to get out of this jam.' This optimism proved embarrassing to them coz Greece elected fuckwits who said 'hey, we're Greek. Greeks are shit. Didn't you know?' and defaulted.
Still, the IMF is under renewed pressure from Washington to hand over more cash. Just as they once pretended that Greece might boost TFP by electing smart people not worthless fucktards, now they are pretending the new loan they will be forced to make could be sustainable provided the E.C.B takes a massive haircut.
The problem here is that Yannis has already told the world that Greece is a pig. It can't fly. It will need to borrow more and more just to carry on rolling in its own shit. In Real Estate jargon, there is no point playing the game of 'Extend and Pretend'. There's a fucking pig living in the McMansion. It smells like a sty, it looks like a sty, it is a fucking sty coz that's a fucking pig living in it.
Send your best realtor round with fresh baked cookies. It's not gonna help.
This isn't a desirable property- it is a pig sty.
Send in the bailiffs and you are no better off,
This pig has sovereign immunity.
What's more this pig blogs all its incontinent thoughts. It says 'Greece can't play 'Extend and pretend' because Greece smells like a pig, looks like a pig- it's a fucking pig and Greece is a pig sty. Trust me, they appointed me Finance Minister. It doesn't matter if the pig's creditors write off all its debts. It doesn't matter if they lend even more than they already have. Pigs don't return money lent to them. Sorry, IMF, America may force you to lend to us again. You won't get the money back. We are pigs. We can't fly.

Is Greece genuinely a pig, as opposed to a PIGS country, which is why it alone can't straighten up and fly right?
There is only one Greek- or Greek-Australian- who likes eating his own shit and calling it chocolate cake- who is genuinely a pig. But he is no longer in the Govt. Hopefully, he soon won't be in Parliament.
If Greece shows it can repay future loans, then it can pay some small percentage of past loans. It is in no one's interests to write off those past debts because Greece has non Eurozone creditors. The IMF is worried lest its money ends up in the hands of private Vulture Funds. The way to prevent that is to increase not decrease Greece's liabilities.
If you come to me to ask me to take pennies on the 10,000 you owe me- it is better for you to say you owe other people 10 billion. If you say you owe nothing, I won't take a haircut.

Greeks are smart. Sooner or later they're going to fulfill their destiny as a financial/R&D hub for their Region. They're gonna want to show larger not smaller debts at that time (hopefully, by then, the U.S Supreme court would have quashed the Vulture Fund vs Argentina ruling which so terrifies the IMF) so as to get everybody to agree to the biggest possible hair-cut.

As for Whatthefuckis, send him to Donald Trump as an Economic Adviser. Those two deserve each other.

Wednesday, 15 July 2015

Tsipras & Penthesilea

The Greeks are a great people- no one denies it. Tsipras has not been in office long and he may well turn out to be a great man at least compared to the insufferable Yanis- who was supposed to be the virile, Mathematical Economist, equivalent of Achilles, having his way with a moribund Malinvaudian model of full employment, much mourned by Europa's peoples, but instead he turned out to be a jeering Thersites making mock of that Penthesilea's post-mortem violation.
If Tsipras really has made the Greeks 'one nation', then Greece can define a Social Minimum and implement it using purely California debt instrument type fiat currency. The E.C.B is dis-intermediated because we are speaking of a purely internal transfer. However, if Greece really was 'one nation' they would have done this long ago. Moreover, there would be no obstacle to fiscal policy harmonization (without which monetary union has a more rocky path). 
Tsipras and Euclid Tsakalotos are merely posing as Communists. Merkel, but for her Christian Faith, would have been the better sort of Communist Party apparatchik. She sees through them because both Christianity and (genuine) Communism privilege the satisfaction of basic needs of the poorest and more vulnerable. So does Judaism- the Mussar (ethical) formula is 'the material needs of the other are my spiritual needs'. But who is the 'other'? The Bible says it is the poor, the down-trodden, the stranger, the one in need.
I must admit, like many non-Greeks, I was taken in by George Papandreou. His academic credentials, his family history, his physical appearance- we thought he would solve Greece's problem more quickly than Spain or Ireland or Portugal. It could have happened. The man is not evil. Just weak. Or, no, not weak in his own person, but weak in his faith in the Greek people's tropism to alethia.
Perhaps, if Greece had had to suffer Communism the way Angela Merkel had to- though, it must be said, because of Tito they got more than a taste of that type of gangsterism- then Papandreou would have had no ancestral Erinyes haunting Syntagmata Square and could have put Greece into Europe on the basis of commitment to a Social Minimum and the same rule-set for all.
This is not 'austerity' it is sacrificing one's ill gotten 'economic rent' for the common good, the European ideal.

Varoufakis and Versailles

Update- The German 'stab in the back' theory which empowered the Nazis gained credibility from the myth that Reparations (which were never paid but made possible a net capital inflow) had bled Germany white. The well educated Liberals who conjured up this myth, thinking it would improve their country's bargaining position, became its first victims. I am not suggesting anything of the sort will happen in Greece. The Versailles analogy is hot air simply even if Piketty and Krugman have endorsed it. 

Yannis Varoufakis is on TV quoting Keynes on the treaty of Versailles.
Keynes believed there would be a 'secondary burden' associated with German reparations. Ohlin proved him wrong ten years later and a whole bunch of economic historian who have run the numbers confirmed this long ago.
Keynes was aware that English Economists were parochial and didn't understand Capital markets. Yet, he made up his mind before reaching Versailles or talking to French economists.
The fact is France was punished with higher proportional reparations after Waterloo than Germany after Versailles. The Allies had learned their lesson. If you don't make the culprit pay for his crime, he will repeat it. France wasn't crippled by reparations.  It paid up ahead of time. The same thing happened in 1873. Why did it do so? It was occupied. It had no choice. This did not prevent it from recovering quickly- indeed, it was probably a blessing in disguise, like Britain's Napoleonic War debt, for the development of its Capital markets and the relative position of the bourgeoisie with respect to the Aristocracy and the Church.
Versailles, however, was a disaster because Germany wasn't occupied and forced to pay. It ended up taking more than it gave and this helped it re-arm.
If it had been forced to pay, the Army wouldn't have had the resources to get into politics and pursue an agenda of conquest. That would have been a good thing. Germany would have better off if it had either voluntarily paid its debts or been forced to do so at bayonet point.
In 1953, because West Germany was under military occupation, people believed it would actually pay when it said it would because American and French and British soldiers were on German soil. Of course, it is not enough to be weak and willing to pay. You also have to show you can pay without starving to death. Germany's creditors gave it a decent margin for subsistence and left it to get on with the job. Of course, there was a proviso- viz. if Germany re-unified then the discount would cease to apply. At that time, people thought a re-unified Germany would be a militarily strong Germany. There would be no American or British troops on German soil. German re-unification has happened but we still have soldiers across the Rhine. Still, perhaps, an opportunity was lost to extort money from the Germans at that time. But there's no point crying over spilled milk now.
Varoufakis pretends that the E.C.B is actually a Social Fund. Its job is to take money from rich members and give it to poorer States. Bulgaria is poorer than Greece but isn't part of the Eurozone, so tough titty Sofia.
The E.C.B isn't a Social Fund. It is a Central Bank. Does Newcastle ring up the Governor of the Bank of England and say- 'Oi, gissa geet walla wonga or us gadgies gannin' proper radgie like!' Well, that probably does happen, but the point is no Governor of a Central Bank starts printing money and sending to anyone who rings up with a sob-story because that way madness lies. The Euro would start trading at a discount- i.e. all Eurozone members would be paying an invisible tax- if people believed its Central Bank was actually a Social Fund.
Syriza, not Schauble, humiliated Greece. It's cool to turn up at the Head Master's office without a tie- if you've already got a Scholarship to Balliol or your Single is storming the Charts. Call him a Nazi till you are blue in the face. Then get on your motorbike and roar off into the sunset.
If, however, your weeping Mommy and Daddy are in the Head Master's office pleading with him not to expel you for touching yourself in Chemistry class, then do wear a tie. Slick back your hair. Explain, in an unctuous voice, that the lab instructions were unclear. Anyway, Bunsen burner is what the Sociology Tutor calls your cock.
Yanis himself had a parachute out of Greece. But, did he really put in place some stop-gap California debt instrument mechanism to take the strain of 'oxi'? It doesn't appear so.
Thus, though he can get on his motorbike and roar off into the sunset, Greece is left in the unenviable position of having to explain why it touched itself in Chemistry class.
Let us look at what he has to say for himself. My comments are in bold,
  • A New Versailles Treaty is haunting Europe – I used that expression back in the Spring of 2010 to describe the first Greek ‘bailout’ that was being prepared at that time. If that allegory was pertinent then it is, sadly, all too germane now. In 2010, the analogy wasn't wholly fatuous because Portugal, Italy and Spain and Ireland were more or less in the same position and it was by no means clear that other Eurozone countries might not develop similar difficulties. There really could have been a 'Great War'- albeit one of words.This is no longer true. The Portuguese and the Irish and even the Spanish have no sympathy for Greece- more especially because of Yannis's own foolish behavior. There is no Great War at the heart of Europe. Just a small country on its periphery being told it has to play by the rules or get off the field.
  • Never before has the European Union made a decision that undermines so fundamentally the project of European Integration. Europe’s leaders, in treating Alexis Tsipras and our government the way they did, dealt a decisive blow against the European project. Never before? How about the Greeks vetoing Macedonia's entry just because they think Alexander was actually Greek so only Greece gets to have territory called Macedonia? Suppose the Greeks get their way. Suppose Europe becomes a two tier affair such that a Eurozone member which won't pay its debts gets as much money as it wants while its neighbors who are part of the E.U but not the Eurozone get nothing despite being poorer. Would that be good for the 'European project' or would it be a catastrophe? Imagine what would happen if the European Central Bank says 'we'll print as many Euros as are required to bail out improvident countries which won't honor their debts.' Faith in the Euro would be destroyed. Every member would be in a race to run up the largest possible debt. The result would be hyper-inflation and the collapse of the economies of member states. Showing Greece the yellow card, by contrast, even if it results in Grexit from the Euro, or even the E.C, has no very great adverse effect. If Greece goes, then Macedonia and Turkey can come in. So what if it allies with Putin? That will just bleed Russia dry that much quicker.
  • The project of European integration has, indeed, been fatally wounded over the past few days. And as Paul Krugman rightly says, whatever you think of Syriza, or Greece, it wasn’t the Greeks or Syriza who killed off the dream of a democratic, united Europe. Are France and Germany and Poland and Italy and Spain and so on any less integrated now that Greece has been shown the yellow card? Will they become less so if Greece leaves? Nope. Getting tough on Greek increases, not reduces, the incentive compatibility of the Union. Greece hadn't done fiscal policy harmonization. Yannis himself says the Greeks can't manage their Public Sector. Obviously a country unable to run itself can't sustain a standard of living based on borrowed money. Whether it keeps the Euro or has some hyper-inflated currency of its own doesn't matter. It's going to keep getting poorer. The dream of 'democratic, united, Europe' was predicated on voters not electing shit-heads. Yannis was a shit-head. But he didn't come out and say 'I'm a shit-head'. He pretended he was a super-smart Game Theorist. Suppose the Greeks stop voting for shit-heads, or that shit-heads like Yannis realize that they will be exposed as shit-heads if they take office, then Greece can voluntarily choose to embrace policies which will make it wealthier long term. The European dream is back on track.
  • Back in 1971 Nick Kaldor, the noted Cambridge economist, had warned that forging monetary union before a political union was possible would lead not only to a failed monetary union but also to the deconstruction of the European political project. But we now know that Kaldor was wrong. He was wrong about a lot of things. That's why nobody has heard of him outside Lefty English circles.  Later on, in 1999, German-British sociologist Ralf Dahrendorf also warned that economic and monetary union would split rather than unite Europe. Ralfie was slow-witted- a fucking Sociologist for fuck's sake. He thought the State could emerge by the 'favor' of a pre-existing 'Civil Society'- and that's what happened in America because, obviously, Washington was a Red Indian, not a Colonist who, but for an accident, would have gone to school in the mother country like his older brothers. All these years I hoped that they were wrong. Urm... you're a Game Theorist buddy. Ever heard of the folk theorem of repeated games? Why do you have to 'hope' they were wrong when it is bleeding obvious they were wrong because their arguments were wholly specious? Now, the powers that be in Brussels, in Berlin and in Frankfurt have conspired to prove them right. Conspired? What fucking conspiracy are you talking about? Everything happened in the open. We all saw you shove your hands into your pants and yank out something you claimed to be chocolate pudding, though it smelt like shit. You ate it yourself in front of the Tv cameras, remarking how good it tasted. Now you think there was a secret conspiracy involving Berlin and Brussels and Frankfurt which caused other people to refuse your invitation to share your chocolate pudding.
  • The Euro Summit statement of yesterday morning reads like a document committing to paper Greece’s Terms of Surrender. It is meant as a statement confirming that Greece acquiesces to becoming a vassal of the Eurogroup. Yannis, you said Greece can't 'extend and pretend' anymore not because the Europeans wouldn't extend but because you couldn't even pretend to be competent. You said the Greek Govt. can't run the Public Sector properly, while you were part of that Govt. The Eurozone believed you because you kept putting your hands into your pants and pulling out great fistfuls of shit which you ate thinking it chocolate pudding. You did this while you were a Govt. minister. Vassalage isn't the right word here, mate. A vassal might be courageous and intelligent. At the very least he will have mental competency. You showed you lacked even that. Notice, you didn't get this deal, Euclid did. He may be as shite as you but at least he doesn't blog about it. 
  • The Euro Summit statement of yesterday morning has nothing to do with economics, nor with any concern for the type of reform agenda capable of lifting Greece out of its mire. It is the job of Greece, not the Euro-summit, to lift Greece out of the mire- as opposed to eat its own shit and offer that shit around calling it chocolate cake. There is a technical word for this notion. It is called 'subsidiarity' . Look it up sometime. It is purely and simply a manifestation of the politics of humiliation in action. Yannis you kakked yourself in public and are still eating your own shit. This is not 'the politics of humiliation' it is a failed politician humiliating himself on his blog. Even if one loathes our government one must see that the Eurogroup’s list of demands represents a major departure from decency and reason. If a Greek loathes your party, he will want to see it humiliated. Now you are out of Govt. the Eurogroup isn't insisting Brussels control the funds released from Privatisation- which you advocate because you say the Greek Govt. is utterly shite. Since you are no longer part of the Govt. this is no longer axiomatic so the Eurozone has indeed moderated its demands in the name of decency, if not reason.
  • The Euro Summit statement of yesterday morning signalled a complete annulment of national sovereignty, without putting in its place a supra-national, pan-European, sovereign body politic. Because 'subsidiarity' might still work in Greece now you are out of the Govt. Europeans, even those who give not a damn for Greece, ought to beware. Of you, you great big shit-eating fuckwit.
  • Much energy is expended by the media on whether the Terms of Surrender will pass through Greek Parliament, and in particular on whether MPs like myself will toe the line and vote in favour of the relevant legislation. I do not think this is the most interesting of questions. Of course not. You are a fuckwit who eats his own shit. The crucial question is: Does the Greek economy stand any chance of recovery under these terms? Yes, provided not all Greeks are as fucked in the head as you- a reasonable assumption since you set the bar pretty damn high. This is the question that will preoccupy me during the Parliamentary sessions that follow in the next hours and days. Because you still think your shit is chocolate cake. The greatest worry is that even a complete surrender on our part would lead to a deepening of the never-ending crisis. You completely surrendered control of your anal sphincter. Other Greeks don't have to do the same thing. The crisis, in any case, can't be 'never-ending'. Worst comes to the worst, Europe can send food packages and Medicin sans Frontieres can move in and put you in a strait-jacket. 
  • The recent Euro Summit is indeed nothing short of the culmination of a coup. In 1967 it was the tanks that foreign powers used to end Greek democracy. Coz Pattakos and Papadopolous aren't Greek names at all. They are German.  In my interview with Philip Adams, on ABC Radio National’s LNL, I claimed that in 2015 another coup was staged by foreign powers using, instead of tanks, Greece’s banks. But it was the Greek Govt. which you advised, that bailed out the Banks. OMG! You aren't Greek at all! That's why you don't know how to spell your own Christian name! Gee whiz, there really is a conspiracy! What's next? The revelation that Angela Merkel is actually Aliki Merkapopoulous? Obama is actually Denis Roussos? Fuck me! The Birthers were right after all! Obama's daddy was Greek not African! This conspiracy goes all the way to the topPerhaps the main economic difference is that, whereas in 1967 Greece’s public property was not targeted, in 2015 the powers behind the coup demanded the handing over of all remaining public assets, so that they would be put into the servicing of our un-payble, unsustainable debt. Why are you still talking about Greece? Take the next plane to New York. You can be Donald Trump's Economic Adviser. Hilary Clinton is obviously just Nana Mouskori without the glasses! The American public has a right to know! Also, I'm sure, they'll really dig your chocolate cake.