Sunday, 2 August 2015

Varoufakis rotting on about the Eurozone.

Here is the rotter Varoufakis rotting on about the Eurozone- (my comments are in bold)
paradox lurks in the foundations of the eurozone. No paradox lurks in the foundation of the Eurozone provided its Central Bank is genuinely independent of any and every Govt. Why? Money is the solution to a coordination game for a unit of account and a store of value. No doubt, Credit Creation does need a Govt. to provide Law and Order and plug market failures but, to fulfill its function it must appear independent. Otherwise the Govt could use it for deficit financing and gain an invisible tax type windfall due to temporary money-illusion. A Govt. controlled Money Supply is a paradox- it is a case of the poacher being appointed game-keeper without his pay-off matrix being changed. 
Governments in the monetary union lack a central bank that has their back, while the central bank lacks a government to support it. Rubbish. The Central Bank needs Govts. to plug market failures. It is in its own interest to back Governments which do their job properly. The ECB is not causing a problem for any Govt. which is truthful and follows the rules. It can't help Varoufakis because he is a liar and his policies would destroy Greece. Suppose this was not the case. Suppose the ECB, or a post Grexit Greek Central Bank, backed him to the hilt. What would happen? Hyperinflation and Economic collapse.
This paradox cannot be eliminated without fundamental institutional changes. But there are steps member states can take to ameliorate some of its negative effects. One such step that we contemplated during my tenure at the Greek ministry of finance focused on the chronic liquidity shortage of a stressed public sector and its impact on the long-suffering private sector.
In Greece, where the central bank is unable to support the state’s endeavours, government arrears to the private sector — both companies and individuals — have been a drag on the economy, adding to deflationary pressures since as far back as 2008. Such arrears consistently exceeded 3 per cent of gross domestic product for five years.
The phenomenon is both the cause and consequence of delayed tax payments to the state, reinforcing the cycle of generalised illiquidity.
To address this problem, our simple idea was to allow the multilateral cancellation of arrears between the state and the private sector using the tax office’s existing payments platform. Taxpayers, whether individuals or organisations, would be able to create reserve accounts that would be credited with arrears owed to them by the state. They would then be able to transfer credits from their reserve account either to the state (in lieu of tax payments) or to any other reserve account.
Suppose, for example, Company A is owed €1m by the state; and it owes €30,000 to an employee — plus another €500,000 to Company B, which provided it with goods and services. The employee and Company B also owe, respectively, €10,000 and €200,000 in taxes to the state. In this case the proposed system would allow for the immediate cancellation of at least €210,000 in arrears.
Okay, lets try this. My cousin Vivekides Iyeromogolou pays 100 Euros cash in bribes to get a Govt. contract to supply 100,000 of worthless rubbish- profits to be split according to the time honored formula such that all relevant wheels are greased. 
Currently, since the ECB won't play ball, Vivekides gets nothing but a Credit in the Govt. ledger- which discourages him from such activity. 
Under Varoufakis's scheme, however, he can immediately- no questions asked- trade this 100,000 to some guy who genuinely owes that much in taxes. Currently this guy is paying up in Euros using his domestic Bank account because that Bank might go bust anyway. Under the new scheme he can have his cake and eat it too. Essentially you now have the possibility for a complicated deal where a criminal with some 'black Euros' can get a 10,000 credit in his Bank account so as to create a 'legal' front for his criminal gang, by paying Vivekides 1000 Euros cash down in return for which Vivekides hands over his 100,000 credit for worthless rubbish. This 100,000 credit eventually finds its way to a genuine tax payer- a, perhaps, not over scrupulous businessman holding 'blue Euros' (on an analogy with the Argentinian blue dollar, which functions like an unofficial foreign exchange auction)  arising from off the books, or falsely invoiced, transactions by exporters, who now settles with the Greek Treasury at a much smaller sacrifice of Internationally accepted fungible assets than would otherwise be the case. Everybody wins- except the Greek Treasury which gets stuck with its own worthless scrip. Varoufakis just fucked over his own Govt.- again!
Suddenly, an economy such as Greece’s would acquire important degrees of freedom within the existing European monetary union. In a second phase of development, which we did not have time to consider properly, the system would be made accessible through smartphone apps and identity cards, guaranteeing that it would be widely adopted.
In other words all current tax payers with access to black or blue Euros would immediately be able to buy 'tax Euros' for pennies. The Treasury gets worthless 'tax Euros' which no one will be willing to receive for the supply of stuff which aint worthless simply. Govt. can't buy anything. It can't raise any revenue. The State has withered away- thanks to Varoufakis's genius. No doubt, as a former President of the Black Student's Alliance at Essex university circa 1978, Varoufakis will be declared President for Life by the grateful Greek people whose desire to adhere to the 'Europeanist' project actually meant joining Zimambwe and Somalia and Sudan as IMF defaulters because as Varoufakis said 'Greeks are the Blacks of Europe'.
The envisaged payments system could be developed to create a substitute for fully functioning public debt markets, especially during a credit crunch such as the one that has afflicted Greece since 2010. Organisations or individuals could buy credits from the tax office online using their normal bank accounts, and add them to their reserve account. These credits could be used after, say, a year to pay future taxes at a discount (for example, 10 per cent). Not 10 percent, but something which asymptotically approaches 100 percent.
As long as the total level of tax credits was capped, and fully transparent, the result would be a fiscally responsible increase in government liquidity and a quicker path back to the money markets. It doesn't matter if tax credits are capped or not, what matters is their velocity of circulation. Modern technology means this can rise exponentially with respect to any 'transparency' audit. The Govt. has just given away for a farthing all its future tax revenues. it can still approach the market but only with privatization offers.
Handing over the reins of the finance ministry to my friend, Euclid Tsakalotos, on July 6, I presented a full account of the ministry’s projects, priorities and achievements during my five months in office. The new payments system outlined here was part of that presentation. No member of the press took any notice.
But when a subsequent telephone discussion with a large number of international investors, organised by my friend Norman Lamont biggest loser in History till you came along, and David Marsh smooth talking literary stock broker of the London-based Official actually not official at all Monetary and Financial Institutions Forum, was leaked — despite the Chatham House rule we agreed with listeners, under which speakers are not identified — the press had a field day. Committed to unlimited openness and full transparency, I granted OMFIF permission to release the tapes. And were thus revealed to be so stupid as to say 'I will deny I will say what I am saying' even though the thing was being recorded. Moreover, you have now authorized them to release the tape. In any case, no 'Chatham Rule' applies to a confession of criminal conspiracy. If one of your listeners thought you had provided evidence of having broken the law, they had a duty to report it.
While I understand press excitement about elements of that exchange, such as having to consider unorthodox means of gaining access to my own ministry’s systems, only one matter is of significance from a public interest perspective. There is a hideous restriction of national sovereignty imposed by the “troika” of lenders on Greek ministers, who are denied access to departments of their ministries pivotal in implementing innovative policies. You wanted to hack the Public Revenue Secretariat which is independent. George Osborne can't get my tax records- thus discovering that I am actually David Cameron's English tutor (as I have repeatedly explained Dave is actually a French Cambodian lady-boy who took my on-line conversational English course and even now turns to me for help with his diction)- because though the HMRC is a branch of Govt. it is non-ministerial. Why are you boasting about conspiring to commit a crime? How fucking stupid are you Whathefuckis?
When a loss of sovereignty, arising from unsustainable official debt, yields suboptimal policies in already stressed nations, one knows that there is something rotten in the euro’s kingdom. No question. What was rotten was you. The Eurogroup gave you a hearing, then decided to meet without you. You- with your brilliant grasp of law- said 'that's illegal' and rushed to brief the best barrister to approach the European Court for an injunction. I'm kidding. You asked someone at the Secretariat who, surprise surprise, simply quoted the Eurogroup's own view that it was an informal body. 
Suppose the European Court had granted you an injunction- i.e. suppose the Eurozone has a design flaw- then something really would be rotten at the heart of the zone. But, since it can get rid of bad apples, this no longer seems to be the case.
Why speak of sub-optimal policies? You are shit. What fucking optimal policies could you implement? The Eurozone prevented you from destroying Greece. That's the real story here.

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