Greece requested a "no strings attached" extension on their last bailout terms. Germany just rejected the request out of hand. The reaction has been swift and telling:
From a Greek political observer on Twitter (@YanniKouts):
The Germans are going a step too far. Greece will now find many supporters. Germany risks Eurozone crisis.It seems they think sympathy is a currency. No wonder they're in the shape they're in.
Steve Collins from London & Capital Asset Management (@TradeDesk_Steve) is shocked! Shocked, I say!
YOUVE GOT TO BE KIDDDDDDDDING! What does Greece have to do ????and:
Silence from the other Finance Ministries is deafening - we need to hear if they are all just hiding behind the GermansAnd then there is Columbia University's Jeffrey Sachs as the latest in our parade of academic economists - as if Jon Gruber wasn't enough:
Germany & Eurozone must choose to negotiate with Greece. Otherwise Eurozone will fall apart & damage the world.From his blog we learn that Sachs is a "world-renowned professor of economics." I wonder if he thinks the Germans are too stupid to understand the consequences of their stance. That would pretty much be par for academic economists' course.
Sachs worries that finance ministers in Europe will "derail the global recovery." Uh, exactly what recovery would that be? Does he mean the fictional GDP numbers we're fed here at home? Everyone who has actually made dinner lately knows full well that inflation is not under two percent. And if inflation is grossly understated, the mathematics of the GDP necessarily mean that GDP is grossly overstated. So, again, which recovery are we talking about? Europe's?
Sachs' latest post is an absolute masterpiece. If anyone needed any further evidence - after MIT's Jonathan Gruber - that our culture of experts is on the brink of destroying the world economy, look no futher than the link provided above. Let's review:
These are the facts: Greece has a newly elected government because the Greek people understandably have asked for a new approach to overcome the prevailing 26 per cent (sic) unemployment. This new government needs around 90 days to find its feet and make new arrangements with its creditors.So we see unemployment and debt rising together. Hmmm. The solution would seem to be obvious, but nooooo...
During this 90-day period, Greece also needs to make several billion dollars worth of payments to its eurozone creditors and the IMF, and these payments will require new loans. Greece also faces a self-fulfilling run on its banks as a result of the prevailing uncertainty. It is the stuff of introductory banking textbooks. Why keep money in Greek banks if they are at risk of collapse because of a run and a lack of ECB financing?So, after seeing debt and unemployment rise together, the answer is more debt?
Greece and its creditors therefore need 90 days reprieve to sort things out... If they can’t resolve their... disputes during that period, Greece will probably be pushed out of the eurozone... [which] would suffer a decisive collapse of credibility from that point onward.
Both Greece and the eurogroup should say that the 90 days are a period to try to find a creative and mutually satisfactory solution to the existing problems. The debts should be rolled over, with new IMF and European Financial Stability Facility (EFSF) loans replacing those falling due. The ECB should provide liquidity to Greek banks, knowing full well that the deposits now fleeing the country will quickly revert to Greece if and when a new accord is reached. Depositors prefer to keep their deposits close to home when it’s safe to do so.Oh, I see: 90 days to devise a way to make 2+2=8. Sachs seems to think the nature of the problem is a combination of finance and philosophy. If the "world renowned" economist can show us exactly which financial arrangement can make 2+2=8; or under which philosophical construct the Greeks can pull that off, well, by all means make some new loans and please, teach the rest of us how to borrow like this!
Again, we are talking about a cultural expectation of government which allows students to study until they are 30 and then retire when they are 50. There are simply too few people between 30 and 50 to produce in the economy to support this. So the Greek government imposes confiscatory taxes on those between 30 and 50... and then condemns the (inevitable) culture of tax avoidance... all the while borrowing more and more to make up the difference.
Exactly what about this math does Sachs not get?
The Greek government has properly and calmly repeated that it was elected to improve the program, not merely to complete it. This is a plausible position given Greece’s desperate economic situation. As Mr Varoufakis has said about Greece’s economic crisis, “This is not a game.”No, they were elected to make 2+2=8. It is, indeed, not a game. It is a calculator. The only question is when the Greeks will finally be forced to come to terms with what happens when you press the "2", the "+", the "2" and the "=" keys in exactly that sequence. You can try that for 90 days straight and I am fairly certain the calculator's answer will never be eight. And I am not even a "world renowned" economist.
I am certainly no German-basher. Germany has one of the world’s best-run economies. It has earned its prosperity, not taken it from others. Despite the complaints of its less competitive neighbours, German policies are not “beggar thy neighbour”. Greece’s deep crisis is not caused by Germany, but by Greece. Yet Greece has a very deep crisis nonetheless, and the current government is responsible for addressing it, including through good faith negotiations with its creditors. Yet good faith negotiations require both parties.Really? So why would would they sit by and watch Greece's 30 year old students and 50 year old retirees rob them of the prosperity they have rightly earned. The kind of money printing that is necessary here will do just that - rob German savers of their savings through inflation. The Germans have seen this movie before - and it did not end well the last time.
"Good faith" has to be rooted in mathematical realities. 2+2=4, now matter how you cut it, today or 90 days from now. The people complaining are those whose financial bets have been placed on the money printing enterprise of the ECB, or those whose academic theories will be the first things to collapse when mathematical realities finally trump political ambitions and reveal the supposedly free market for the den of thieves it has become.