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 top! Perhaps 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.