How indeed.

Draghi's ECB has just made a move and I don't understand why. Come Feb 11th, they will no longer accept Greek bonds as collateral, effectively cutting off one of Greece's last two sources of credit. What remains is the Emergency Liquidity Assistance (ELA) provided to the Greek Central Bank, through which the entire banking system must now get most of its credit.

Why did they do it? Why now? I don't think it has something to do with the Advocate Generals opinion piece the other day, declaring the ECB's membership in the troika to be a conflict of interest and that fiscal policy is not to be used as a tool to influence poltical decision-making.

Could it be pure idiocy like the time they pulled to plug on Cyprus only to backpeddle shortly after? Or might they be trying to force a move on part of Germany and Greece? "Stop messing around and get your ducks in a row NOW." -- that sorta thing? Is it mere posturing of sorts, a shot across the bow of Greece?

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Edit #1

I really don't like this. It looks like disaster, smells like disaster and tastes like disaster. And it's entirely too close for comfort. Are they truly going to turn Greece into a failed-state over principle? The way they casually discuss the lives of nearly 11 million people, and the future of the European Union as well, is bone-chilling.
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In the meantime, Schäuble's meeting with Varoufakis went just as expected, reports indicate. Schäuble won't budge a bit. Negotiations with the troika are mandatory, and fiscal waterboarding must be resumed at once. There will be no compromise, not with him in charge. He'll push Greece off the cliff without blinking even once. Convictions worthy of a Templar, that one. Worth remembering that he admitted taking 100k in bribes from an arms dealer in '94 and still managed to become Minister of Finance. A living legend, just not the kind I'd prefer.

With regards to hyperinflation, most folks over here seem to have forgotten, or maybe they never learned, that Chancellor Brüning's austerity regime led to deflation in 1930-32, pushing unemployment to 23%. What followed was a massive influx in membership and infuence for parties at both ends of the political spectrum, similar to Greece. Except in our case, it wasn't the left (KPD) who won the elections in '32...

Nah, I think he's saying that there is a cultural bias towards being overly cautious on inflation. Whereas the kind of fiscal policy size needed to stimulate Greece is in excess of what politics would allow in Germany, who is effectively dictating Greece's debt terms at the moment.

I mean, right now the eurozone as a whole is risking falling into deflation because of this cautiousness, where people spend less in expectation of lower prices, the value of debts rise and you get secular stagnation a la Japan's lost decade.

@RedSky

Selling assets and, to a certain degree, the reduction of public employment is an unreasonable demand. There's too much controversy about the effects it has, with me being clearly biased to one side.

Privatisation of essential services (healthcare, public transport, electricity, water) is being opposed or even undone in significant parts of Europe, since it generally came with worse service at much higher costs and no accountability whatsoever. Therefore I see it as very reasonable for Syriza to stop the privatisation of their electricity grid and their railroad. There are, of course, unessentials that might be handed over to the private sector, but like Varoufakis said, not in the shape of a fire sale within a crisis. That'll only profit the usual scavengers, not the people.

Similarly, public employment. There's good public employment (essential services, administration) and "bad" public employment. Troika demands included the firing of cleaning personnel, who were replaced by a significantly more expensive private service. And a Greek court decision ruled the firing as flat out illegal. For Syriza to not hire them back would not only have been unreasonable financially as well as socially, it would have been a violation of a court order. Same for thousands of others who were fired illegally, according to a ruling by the Greek Supreme Court.

Troika demands are all too often against Greek or even European law, and while the previous governments were fine with being criminals, Syriza might actually be inclined to uphold the law.


On the issue of reforms, I would argue that the previous governments did bugger all to establish working institutions. Famously, the posts of department heads of the tax collection agency were auctioned for money, even under the last government. Everything is in shambles, with no intent of changing anything that would have undermined the nepotic rules of the five families. Syriza's program has been very clear about the changes they plan to institute, so if it really was the intent of the troika to see meaningful reform the way it is being advocated to their folks at home, they would be in support of Syriza.

Interventions by the troika have crashed the health care system, the educational system and the pension system. Public pension funds were practically wiped out during the first haircut in 2012, creating a hole of about 20 billion Euros in the next five years.

I would like to address the issue of taxation specifically. Luxembourg adopted as a business model to be an enabler of tax evasion, even worse than Switzerland. In charge at that time was none other than Jean-Claude Juncker, who was just elected President of the European Commission. He's directly involved in tax evasion on a scale of hundreds of billions of Euros every year. How is the troika to have any credibility in this matter with him in charge?

Similarly, German politicians are particularly vocal about corruption and bribery in Greece. Well, who are the biggest sources of bribery in Greece? German corporations. Just last week there was another report of a major German arms manufacturer who paid outrageous bribes to officials in Greece. As much as I support the fight against corruption and bribery, some humility would suit them well.


As for the GDP growth in Greece: I think it's a fluke. The deflation skewers the numbers to a point where I can't take them seriously until the complete dataset is available. Might be growth, might not be. Definatly not enough to fight off a humanitarian crisis.

Surpluses. If everyone was a zealous as Germany, the deficit would in fact be considerably narrower, which is a good thing. Unfortunatly, it would have been a race to the bottom. Germany could only suppress wage growth, and subsequently domestic demand, so radically, because the other members of the Eurozone were eager to expand. They ran higher-than-average growth, which allowed Germany to undercut them without going into deflation. Nowadays, Germany still has below-target wage growth, so the only way for Greece, Spain, Portugal and Italy to gain competetiveness against Germany is to go into deflation. That's where we are in Europe: half a continent in deflation. With all its side effects of mass unemployment (11%+ in Europe, after lots of trickery), falling demand, falling investment, etc. Not good. Keynes' idea of an International Clearing Union might work better, especially since we already use similar concepts within nations to balance regions.

Bond yields of Germany could not have spiked at the same time as those of the rest of the Eurozone. The legal requirements for pension funds, insurance funds, etc demand a high percentage of safe bonds, and when the peripheral countries were declared unsafe, they had nowhere to go but Germany. Also, a bet against France is quite a risk, but a bet against Germany is downright foolish. Still, supply of safe bonds is tight right now, given the cuts all over the place. French yields are at historic lows, German yield is negative. Even Italian and Spanish yields were in the green as soon as Draghi said the ECB would do whatever it takes.

The current spike in Greek yields strikes me as a bet that there will be a face-off between the troika and Greece, with very few positive outcomes for the Greek economy in the short run.

QE: 100% agreement. Fistful of cash to citizens would not have solved any of the core issues of the Eurozone (highly unequal ULCs, systemic tax evasion, tax competition/undercutting, no European institutions, etc), but it would have been infinitely better than anything they did. If they were to put it on the table right now as a means to combat deflation, I'd say go for it. Take the helicopters airborne, as long as it's bottom-up and not trickle-down. Though to reliably increase inflation there would have to be widescale increases in wages. Not going to happen. Maybe if Podemos wins in Spain later his year.

Same for the last paragraph. The ECB could have stuffed the EIB to the brim, which in return could have funded highly beneficial and much needed projects, like a proper European electricity grid. Won't happen though. Debt is bad, even monetised debt during a deflation used purely for investments.

In the current situation, "structural reforms" is used to subsume two entirely different sets of measures.

The first is meant to remove what you previously mentioned: corruption in all the shapes and forms it takes in Greece, from a (intentionally) broken tax system formed over decades of nepotism to a bankrupt national media in the hands of oligarchs. The institutions of the Greek state are precisely what you expect when a country has been run by four families (Papandreou, Samaras, Mitsotakis, Karamanlis) for basically five decades.

This kind of structural reform is part of Syriza's program. Like you said, it'll be hard work and they might very well fail. They'll have only weeks, maybe a few months to undo significant parts of what has grown over half a century. It's not fair, but that's what it is.

The second kind of "structural reform" is meant to increase competitiveness, generally speaking, and a reduction of the public sector. In case of Greece, this included the slashing of wages, pensions, benefits, public employment. The economic and social results are part of just about every article these days, so I won't mention them again. A Great Depression, as predicted.

That's the sort of "structural reforms" Syriza wants to undo. And it's the sort that is expected of Spain, Italy and France as well, which, if done, would probably throw the entire continent into a Great Depression.

I'd go so far as to call any demand to increase competitiveness to German levels madness. Germany gained its competitiveness by 15 years of beggar-thy-neighbour economics, undercutting the agreed upon target of ~2% inflation (read: 2% growth of unit labour costs) the entire time. France played by the rules, was on target the entire time, and is now expected to suffer for it. Only Greece was significantly above target, and are now slightly below target. That's only halfway, yet already more than any democratic country can take.

They could have spread the adjustment out over 20 years, with Germany running above average ULC growth, but decided to throw Greece (and to a lesser degree Spain) off a cliff instead.


So where are we now? Debt rose, GDP crashed, debt as percentage of GDP skyrocketed. That's a fail. Social situation is miserable, health care system basically collapsed, reducing Greece to North African standards. That's a fail.

Those are not reforms to allow Greece to function independently. Those are reforms to throw the Greek population into misery, with ever increasing likeliness of radical solutions (eg Golden Dawn, who are eagerly hoping for a failure of Syriza).

So yes, almost every nation in Europe needs reforms of one sort or another. But using austerity as a rod to beat discipline into supposedly sovereign nations is just about the shortest way imaginable to blow up the Eurozone. Inflicting this amount of pain on people against their will does not work in democratic countries, and the rise of Syriza, Podemos, Sinn Féin, the SNP and the Greens as well as the surge of popularity for Front National and Golden Dawn are clear indicators that the current form of politics cannot be sustained.

Force austerity on France and Le Pen wins the election.

Meaningful reforms that are to increase Europe's "prosperity" would have the support of the people. And reforms are definatly needed, given that the Eurozone is in its fifth year of stagnation, with many countries suffering from both a recession and deflation. A European Union without increasing prosperity for the masses will not last long, I'm sure of it. And a European Union that intentionally causes Great Depressions wouldn't be worth having anyway.

Yet after everything is said and done, I believe you are still absolutely correct in saying that the pro-austerity states won't blink.

Which is what makes it interesting, really. Greece might be able to take a default. They run a primary surplus and most (90%+) of the funds went to foreign banks, the ECB and the IMF anyway, or were used to stabilize the banking system. The people got bugger all. But the Greek banking system would collapse without access to the European system.

Which raises the question: would the pro-austerity states risk a collapse of the Greek banking system and everything it entails? Spanish banks would follow in a heartbeat.

As for the morality of it (they elected those governments, they deserved it): I don't believe in collective punishment, especially not the kind that cripples an entire generation, which is what years of 50+% youth unemployment and a failing educational system does.

My own country, Germany, in particular gets no sympathy from me in this case. Parts of our system were intentionally reformed to channel funds into the market, knowing full well that there was nowhere near enough demand for credit to soak up the surplus savings, nowhere near enough reliable debtors to generate a reasonable return of investment without generating bubbles, be it real estate or financial. They were looking for debtors, and if all it took was turning a blind eye to the painfully obvious longterm problems it would create in Southern Europe, they were more than eager to play along.

Not the entire rest, actually. Just the pro-austerity forces currently running the show (Germany, Finland, Netherlands, Austria, etc). Syriza have strong support in Spain (Podemos), France and Italy, the three major countries on the receiving end of austerity.

If Varoufakis' analysis of the situation in Europe is correct, almost everything the troika (ECB, IMF, European Commission) has done since the beginning of the crisis was counterproductive and the underlying economic theories were wrong, plain and simple.

It would be an open challenge to conservative ideology in European governments and to a sort of market fundamentalism that has been the overwhelming drive behind most major policies enacted over the last two decades, particularly in the last seven years.

Can't have that. The Emperor is not naked. Greece is not bankrupt, austerity leads to growth and deflation poses no risk.

25% unemployment, 50+% youth unemployment, GDP down by 25%, poverty through the roof, dumpster diving on the richest continent on the planet -- whatever led to this (hint: austerity) needs a special place on the wall of things never to be done again.

Yet they want to implement it in France and Italy as well, which is why the conflict with Greece is actually a high stakes game about the future of the entire Eurozone.

Like I said, my own views are heavily biased against austerity for a multitude of reasons. And to see my own government forcing it upon significant parts of the continent makes me sick.

Haha!

If everyone's a babysitter, well, that's not a genuine division of labor, is it? And if money can only buy babysitting, well, that's not really money, is it?

And free markets don't work by agreeing through contract how much a currency will buy. If you restrict currency to one "babysitting" unit only, then, of course you'll have problems. You don't need to "print" more of these tokens. Deflation will invariably take place instead in an actual market, not in one where you have to contractually "centrally control" the value of each token.

And of course, a prison camp is not a free market. No entrepreneur can simply start supplying the goods and services needed.

The prison camp does not represent a "free economy," but only a prison camp economy.

I don't think either of those two examples are useful in any real way, but what exactly did you think you'd learn from them?

This isn't "how an economy works," but it's maybe how a non-divisible "currency" works in a one product/service "market;" or how a food embargo works.

P.S. If you really want to understand how economies work, you should read Mises' "Human Action" (PDF) and stop being lazy, thinking you'll learn something from these short youtube videos. (Once you hear Krugman mentioned, it's enough to know that everything that follows is about as rooted in reality as a kindergartner's fingerpaintings.)

This video's always worth revisiting...

This will lead to a massive expansion of the money supply, causing extreme cycles of inflation, followed by deflation and chafe. It will also result in an upside down class-based economy where the DDD holders will overshadow the AAA holders..

On a personal note, my wife is going to make us Bank!

... but we practice a closed economy at home. So I guess SHE is going to make bank and I will make broke.

Man or Astroman? carved-out and rode the punk-surf-space-schtick for years and is still goin' strong-The future of rock and roll will be carved-out in garages and basements once again, this next wave fleshed and transcribed from small home-studios through YT, ITunes-hits, and WOM.
Radio is dead, rap/hip-hop is as deflated and over-cooked in an oven of unwatched souffles, and pop and country???.....Complete shit without a soul. Time for another fat wave of rebellion and focused anger at establishment in music.

There's a guy on youtube who demos how to do it using a paperclip hole in the section of the balloon outside your mouth---the art is in the slow, and unnoticed deflation.

http://www.youtube.com/watch?v=dwL6MowK43A

Your video, Barney The Dino Gets Deflated - Macy's Thanksgiving Parade, has made it into the Top 15 New Videos listing. Congratulations on your achievement. For your contribution you have been awarded 1 Power Point.

This achievement has earned you your "Pop Star" Level 9 Badge!

What if the issues Democrats and Republicans agree on prove that both parties agree on basic principles that virtually everyone else agrees with, too (even libertarians), such as equality, fairness, public safety, prosperity, and freedom?

What if where there are disagreements between the two parties, it's because these basic principles are in conflict, and each party prioritizes different values when they're in conflict generally speaking?

What if the reason that politicians cross over and/or meet in the middle is because both sides often decide that their prioritization of values wasn't going to work best in that particular situation, and favored pragmatism over political dogmas, and that neither conservative nor liberal ideologies work 100% of the time, and you have to some degree adapt your ideology to address new societal issues that couldn't be foreseen?

What if having a starkly different choice that's unpractical and doesn't work when the rubber meets the road in public policy, such as applying libertarian principles 100% consistently to everything, is worse than what we have now?

What if the solution to the broken political system is to replace failed somewhat pragmatically formed policies with different pragmatic policies arrived at with ideas based on reason, facts, and open mindedness, not blind following of principles of any political ideology?

What if the reason why our current political culture is broken is precisely because the divide between the parties has become increasingly bigger, to the point that at least one side would rather the government not function than let changes they don't like go into effect? What if it's increasingly the case that choosing to vote for a Democrat or Republican actually is more of a "real choice" than it has been for quite sometime, and that deflates this entire argument of Americans not having any "real choice" between the two?

Cop was too close. The rider was nervous because a guy with a gun was angry at him. That guy with a gun also happened to be a cop, so your responses had best be extremely well thought out and measured so as to deflate the situation as much as possible. The rider wasn't nervous because he felt guilty, that's just silly. By the way, the answers provided were masterful and sublime despite the situation and hesitations.

It sounds like Shepppard IS the angry cop.

It's slowly deflating.

Sounds like a deflating accordion!

I got a long list of needs gotta satisfy 'em all
And the first on the list is a bag of Tylenol
Cause I'm stressed out thinking I don't have the time at all
To get my shopping done, let me start here, on the top at one

First, I need to check my e-mail
Oh shit, yahoo front page news, another celebrity female
That had a wedding recently, the marriage epicly failed
I need to click the link because I need to get the details

Soon as I click it I'm hit with a little ad
That reminds me of a need that I already had
It's an absolute must have need it really bad
Before I read the story I be rushing out of my pad

Now I'm in my car speeding cause I'm itching to find
A Mickey D's drive through so I can sit in the line
Gotta get in it in time, can't waste a minute of time
The McRib's only there for a limited time

And then I'm hit with a sign, that makes a switch in my mind
Reminding me of a need of a different kind
A brightly colored advertisement on a bus bench
Makes me head to Target to pick up tents

Cause tomorrow they're coming out with Call of Duty 84
And it's a necessity I camp out at the store
You never know they might never fucking make any more
I'm gonna rush to the front when they open the door
And trample over any people that fall down on the floor
This ain't a game, this is war
If you produce it I'll consume it if you shove it down my freaking throat
Everybody else got it, I don't wanna miss the boat

[Hook x2]
It's a lot of shit I really really need
And I need to get all of it at a really fast speed
I'm aware I'm a puppet of another man's greed
I don't care, I'm in love with all this shit I really need

[Verse 2]

My duffle bag is packed
With my phone, and my pod, my shuffle, pad, and mac
Got all of my i's dotted, if they made it I got it
And I'mma open my wallet for the next iProduct

Gotta try to give them all that I can bruh
Cause every phone that I own needs to have multiple cameras
And my last one only had one
How can I be seen from boths sides of the screen, I mean

If I don't desperately plead and request for my upgrade
I'll definitely bleed to death or die of AIDS
I need better resolution, more gigs!
Angry birds is old, I need war pigs!

I need to tell the landlord as far as what is concerned
I gave Apple every cent that I earned
So I'mma be late, now I need a Tecate
To deflate this stress caused by not letting my needs wait

[Hook]

"God damn man I just need to relax, watch some late night TV
Aw infomercials... Aw fuck I need all this shit too!"

[Verse 3]

I got a lot of insecurities, use 'em to attack me
I'm going bald, getting fat, plus I got acne
I'm looking like a combination of all the before pics
Please pretty please let me make you more rich

Cause I need to get over whatever it is that I'm sick from
List some symptoms, I bet I could pick one
Yeah I got the fifth one, out of 45
Stomach aches, surely I need that particular drug to take

The terrorists got me scared as shit
Time to buy a terror kit, with a mask for air in it
God bless my soul, I need to invest in gold
The economy as we know it is about to fucking fold

And we're all gonna die if I don't fucking buy
All the oil's running dry, asteroids from the sky
Who am I, where am I, what am I, I just need to fucking find
The nearest Wal-Mart that's got a gun to buy