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Greece: On Behalf of Europe
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Michael Hudson is a Distinguished Research Professor of Economics at the University of Missouri, Kansas City. He is the author of The Bubble and Beyond and Finance Capitalism and its Discontents. His most recent book is titled Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy.

William K. Black, author of The Best Way to Rob a Bank is to Own One, teaches economics and law at the University of Missouri Kansas City (UMKC). He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. He has taught previously at the LBJ School of Public Affairs at the University of Texas at Austin and at Santa Clara University, where he was also the distinguished scholar in residence for insurance law and a visiting scholar at the Markkula Center for Applied Ethics.

Black was litigation director of the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and general counsel of the Federal Home Loan Bank of San Francisco, and senior deputy chief counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement.

Black developed the concept of “control fraud” frauds in which the CEO or head of state uses the entity as a “weapon.” Control frauds cause greater financial losses than all other forms of property crime combined. He recently helped the World Bank develop anti-corruption initiatives and served as an expert for OFHEO in its enforcement action against Fannie Mae’s former senior management.

Transcript
US Hedge Funds Get Bailed Out If Greeks Pass Bailout Referendum (1/2)

Part 1

JESSICA DESVARIEUX, PRODUCER, TRNN: Welcome to The Real News Network. I’m Jessica Desvarieux in Baltimore.

If you’re in Greece this week, good luck trying to go to the bank. Greek banks are closed all week after news broke that the country will be holding a referendum vote on whether to accept the bailout measures offered by international creditors. But if the Greek population decides to vote yes for the bailout deal, does this mean that they will be handing creditor banks a bailout?

Now joining us to give us their take on the issue are our two guests. Joining us from Quito, Ecuador, is Bill Black. Bill is an associate professor of economics and law at the University of Missouri Kansas City. He’s a white collar criminologist and a former financial regulator, and author of the book The Best Way To Rob A Bank is to Own One. And also joining us from Germany is Michael Hudson. Michael is distinguished research professor of economics at the University of Missouri, Kansas City. His latest book is Killing the Host: How Financial Parasites and Debt Bondage Destroyed the Global Economy.

Thank you both for joining us.

MICHAEL HUDSON, PROF. OF ECONOMICS, UMKC: Good to be here.

WILLIAM K. BLACK, PROF. OF ECONOMICS, UMKC: Thank you.

DESVARIEUX: So Bill, I’m going to start off with you. Can you just explain to our viewers who’s actually getting bailed out in this deal. Are creditor banks the ones benefiting at the end of the day?

BLACK: Well, the same people are getting bailed out that have been getting bailed out from the beginning of the Greek crisis, and that is foreign banks. So this money just moves in sort of an elaborate circle from the Troika, which is the European Commission, the European Central Bank, and the IMF, through the Greek government, through the Greek banks, and then they pay the foreign creditors. And they pay them just enough that they don’t have to recognize a loss for accounting purposes.

As Michael will explain, of late the big investors tend to be American hedge funds, as opposed to what used to be primarily French banks.

DESVARIEUX: Okay. Michael, I want to ask you about the role of French banks in all of this. Can you just speak to this, give us a sense of how they even got entangled in Greek debt.

HUDSON: Well, today’s problem with the debts really stem back from 2010 and 2011 when Greece obviously couldn’t pay. When Greece joined the Eurozone, it falsified its debt figures. The head of its central bank worked with Goldman Sachs to make it complicated derivatives to hide it all, and that was Lucas Papademos.

Well, in 2010 right after the PASOK party came to power in Greece, they revealed the fact that their figures had been fudged all along, and that the debt was so large that Greece couldn’t pay. So the International Monetary Fund, which hadn’t been making loan–almost had no customers in the world, had its European staff calculate. And the staff unanimously said, Greece can’t pay these debts. These are fraudulent debts that are all, that are way beyond the ability to pay. They’ve got to be written down. And the board of directors agreed.

But Dominique Strauss-Kahn, who was the head of the IMF when he wasn’t going to the sex parties, wanted to run for president of France. And he talked to Sarkozy, and Sarkozy said, wait a minute, French banks are the largest holders of Greek debt. If Greece doesn’t pay and writes them down, the French banks will go under. And German banks are the second. But then at the G8 meetings in 2011, President Obama went over along with Tim Geithner and said, our big campaign contributors are on Wall Street, and they’ve made huge bets that Greece can pay. If Greece doesn’t pay, then all these gamblers and derivative players are going to lose their bets. You’ve got to sacrifice Greece and you’ve got to drive it into poverty, and lend the Greek government the money to pay the bond holders so that our Wall Street banks won’t lose money.

ORDER IT NOW

So the European Central Bank told the IMF if you want to be a player, you’ve got to ignore what the stats said, and they did. And the European Central Bank and the IMF paid over 100 billion Euros to the bond holders. So Greece, instead of owing private bond holders, owed the IMF and the European Central Bank.
Now the European Central Bank wants to get paid, but the debts can’t be paid. So the central bank says, okay Greece. Sell us your islands. Sell us your ports. Sell us your lands. Sell us your raw materials. This is foreclosure time. And if you can’t pay, we want everything in the public domain. And you also have to impose austerity. You have–only 20 percent of your population has emigrated. You only have a 60 percent unemployment rate for youth. You’ve got to increase the unemployment rate to 80 percent, double the emigration, in order for us to make the loans to your government that will turn right around and pay us. [Crosstalk].

DESVARIEUX: But Michael, there really could be real consequences. You mentioned obviously financial markets. There’s some real consequences for them. But what about everyday people? I’m thinking of those folks who might have their money in banks, in the banking system. And if this bank is insolvent, what would happen to them?

HUDSON: There need not have been any consequences for the people at all of Greece not paying the IMF and not paying the European Central Bank, because this money was all paper money created to begin with. It’s just a book loss.
But the Europeans said something else, that although we don’t need the money, we will bankrupt you and we will cause a bank crisis if you don’t comply with what we want. So it’s either austerity or we will smash and grab, take your pick.

DESVARIEUX: Bill, I’m going to ask you the same question. What do you do if you’re a person who’s going to be facing that referendum vote? Do you vote no for this bill, or do you say yes and hope for the best?

BLACK: Well, I would definitely vote against the bankers. What is–the other thing is, Michael is correct, but on top of that the Troika said it’s not enough that 60 percent of your pensioners are in poverty. We want to push it so 70 or 80 percent of your pensioners are below the poverty level as well. And privatization, this is what made, depending on the poll, Carlos Slim the richest or the second-richest person in the world. They’re sold on sweetheart terms to cronies, and this is crony capitalism, basically. People are familiar with Indonesia under Suharto. It’s very similar.

What do you do is, as Michael said, the normal thing that has been done in the past is to write down the debts when they can’t be paid. That is done all the time routinely in the commercial world, and it was done with Latin America back in the debt crisis in the ’70s and ’80s, with what became known as the Brady Plan. So you can’t keep a country, or at least there’s no economically rational basis for doing so, and of course it’s completely inhumane, to keep a country in a condition where it constantly will be in ever greater debt. And that’s precisely what the Troika wants to do.

And as Michael has said, German politicians have openly demanded that Greece begin selling islands. In other words, selling the nation. Just a complete destruction of sovereignty.

DESVARIEUX: All right. Bill Black and Michael Hudson, we’re going to pause the conversation here. In part two we’ll talk more about specifics related to alternatives to this deal. So thank you both for joining us.

BLACK: Thank you.

HUDSON: Good to be here.

DESVARIEUX: And thank you for joining us on The Real News Network.

Part 2

JESSICA DESVARIEUX, PRODUCER, TRNN: Welcome back to The Real News. I’m Jessica Desvarieux in Baltimore.

I’m joined now by Bill Black, as well as Michael Hudson. Bill Black is in Quito, Ecuador, and Michael.

DESVARIEUX: All right. Let’s pick up where we left off. We were talking about alternatives to the deal that’s being presented to the Greek people in this referendum vote. Michael, lay out some specifics. What are some alternatives that would be in the interest of everyday Greek people?

HUDSON: Well, what Bill was describing in the first half is really finance as war. What they want is the same thing that warfare wants. They want the land, and they want a tribute in the form of interest. Basically, the Eurozone went to Greece and said, look, we’re going to–just in case Spain’s Podemos party or other countries want to not pay their debts, we’re going to use you as an example and we’re going to wreck you.

And it’s begun to backfire this week, because what they show is that remaining in the Eurozone itself is pretty hopeless, financially. And the leaders of the Syriza party have said, look, we’re not only fighting for Greece, we’re fighting for all of Europe. And what we want to do is save Europe from austerity. And we want to save Europe by having a real central bank whose role is to create money, to spend money into the economy. We want a central bank that doesn’t give money to banks. We want a central bank that pays for government spending and rebuilding the Greek economy. And we need to be out of the Eurozone in order to do that.

DESVARIEUX: Wouldn’t they also have to reform their tax system, or enforcement, at least, of that tax system?

HUDSON: Yes. I mean, they’re talking about what–a lot of debts are going to be canceled. Not only to the European banks, but we’re talking about a domestic debt holiday very much like Germany’s economic miracle, in 1948 the Allied monetary reform, where they canceled all the internal German debts except for the debts that employers used for wages. We’re talking about a huge debt write off. But you don’t want to make real estate owners suddenly owning their property free and clear. So we need a tax system that not only is going to stop the tax evasion by the oligarchs who have used the banks to avoid it.

ORDER IT NOW

We’re going to take away the tax deductibility of interest payments, so that they can’t pretend to expense all their profits and interest, and we’re also going to have a rent tax. For what we’ve privatized already, we’re going to tax the economic rent to recover for the country what these owners didn’t create, like the phone systems that Carlos Slim made in Mexico that Bill mentioned before. We’re going to collect the economic rent fully in a tax system. So financial reform is going to go hand-in-hand with tax reform, and that’s what terrifies the Europeans. Because they say, wait a minute, all of the money that you call profits is actually rent extraction. It’s all exploitation. You can’t stop exploitation, that’s what our financial system is all about.

DESVARIEUX: But Bill, I could imagine people who are in the elite are going to say, hold on a minute. You want to raise taxes, you want to create new taxes. I’m going to leave. I’m going to another country and setting up shop. What do you make of that argument?

BLACK: Well first, all their money already left. They’ve been evading taxes for years, so them leaving will have next to no effect.

But yes, I mean, forget them. What the Troika has done throughout huge expanses of Europe, roughly nations with half the population of Europe, their leading export these days is their college graduates. As soon as you get your degree, you leave. And that isn’t just the southern periphery, the so-called Mediterranean. That’s also the Baltic states as well.

There’s an incredibly insipid article in the New York Times at the time that we are taping this interview about Bulgaria that says, Bulgarians have no sympathy for the Greeks. Well, and then it turns out this is a hard-right government that has welcomed austerity and produced the usual problems. And of course, their government would fail within 24 hours, as would the Spanish government, if they ever admitted that Austerity was economically illiterate. The equivalent of bleeding a patient to make them better.

So all of these nations and the Troika is locked into this position that they can never admit the truth.

DESVARIEUX: All right. Michael, I know you’re going to be headed to Brussels, you’re giving a speech to the Euro parliament on Thursday on the Greek situation and the IMF. Can you just quickly lay out for us, what are you going to be advocating for?

HUDSON: Well first of all, for treating the debt claims of the IMF and the European Central Bank as odious debts. This means they shouldn’t have been put in place to begin with, and the debts, the money that was lent to Greece, except it went right through Greece to pay the French banks and the German banks, and to enable the American Wall Street banks to make a killing.
The Wall Street banks made whole reputations of buying bonds at 30 cents on the dollar and suddenly they went up to 100 cents on the dollar. The market basically said Greece couldn’t pay in 2010. The market priced its bonds very low. Right now Greek bonds are yielding 33 percent. So the market says Greece can’t pay.

And so when Europe is saying, we want to impose a market economy, everything the European Central Bank and IMF is doing is against the market. They’re not recognizing what any real market analyst realizes, that the debts can’t be paid. We want to create a real market economy by getting rid of the [rentiers?] [incompr.], by getting rid of the exploitation, by writing off the bad debts, by reforming the tax system.

And in–a few years ago Christine Lagarde provided a list to Greece of Greek tax evaders that had 50 billion Euros in Switzerland. This 50 billion Euros is enough to pay–was enough to pay all of Greece’s debts. And the technocratic leader that the financial interests installed, Lucas Papademos, the very man who falsified all of the Greek payments and debt statements in 2001, didn’t do anything at all with the list. He refused to move against the oligarchs.

So what you have is, is really a combination of treason and criminal behavior. Now that there is a crisis in Greece this enables Syriza to get the support of the people to throw the bad guys in jail. I’d like to say to throw the lawbreakers in jail, but they don’t have any laws against that kind of crime taking place. So they have to draw up a whole new set of laws to make Greece a fair economy instead of the unfair economy that the IMF and the European Central Banks have turned it into.

DESVARIEUX: And it’s now being reported by the Associated Press that Greece’s credit rating has been pretty much cut in half, and it’s now a junk, junk credit rating.

I just want to thank you both, gentlemen, for joining us, and we’re going to continue to cover this story here on The Real News. You guys always have such interesting perspectives to bring to this program. Thank you both for being with us.

BLACK: Thank you.

DESVARIEUX: And thank you for joining us on The Real News Network.

(Republished from Michael-Hudson.com by permission of author or representative)
 
• Category: Economics, Foreign Policy • Tags: Eurozone, Greece, Syriza, Wall Street 
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  1. rastignac says:

    Terrific! UNZ, you’re providing a great service by publishing this! (And the piece by Paul Craig Roberts on a related topic.) In whose interest is it that we don’t get to hear/read this kind of stuff in the “regular” media?

  2. […] For an excellent description of what’s really happened to Greece, in plain language, here’s the experts […]

  3. Best article I’ve seen but for the small problem Tsipras and Varoufakis have consistently caved to the pressures and blackmails brought to bear, always moving in the direction of ‘troika’ demands where the ‘troika’ never budged.

  4. Anonymous • Disclaimer says:

    Grease did it guys. They tanked the New World Order. Thank God for lazy, shiftless, indolent Greek scum.

  5. I hope mr Hudson gets an endorsement from SYRIZA probably in the form of free baklava. https://en.wikipedia.org/wiki/Baklava
    I don’t think they will have anything else to give him.
    I thought Black was a serious thinker but from what he says he’d rather see the Greek banking system wiped out. Yep that will help poor people and retirees. Thank you Unz Review for educating the Greek people.

  6. Anonymous • Disclaimer says:

    Nonsense. It’s evident to everybody with a thimble of critical thinking that the allegations of creditors desiring to “drive Greece into poverty, increase unemployment” are made out of thin air. Any decrease in employment in Greece decreases Greek state budget incomes, increases spending, and thus further prevents them to actually pay what Greece ought to pay. Meanwhile Greece continues its generous social policies, funded by European tax money – the only way to stop this is Greek bankruptcy.

    • Replies: @George123
    , @Edward
  7. War for Blair Mountain [AKA "Battle for Blair Mountain"] says:

    Support the Golden Dawn!!!!!…..I pray for a Golden Dawn Greek Government.

    If it ever happens, Noam Chomsky will scream in a high pitched pansy voice:NAZIS!!!!!!!!!…NAZI!!!!!!..NATO MUST INVADE GREECE!!!!!

    Noam Chomsky=GREEDY CHEATING……YOU KNOW WHAT!!!!

    If the Kraut Military invades Greece…Saint Vladimir nukes Berlin!!!!

    • Replies: @Anonymous
  8. There’s nothing new in this rhetoric; nothing that hasn’t been laid out more soberly although the bit about Strauss-Kahn was new to me. Of course smart guys have got into making money out of the mess made by the German, French and Greek governments. That’s a sideshow. There was only ever one excuse for forcing austerity on the Greeks which wasn’t about looking after the French and German banks and maybe Germany’s interest in preserving a misbegotten Euro regime which had come to suit them. That was to force some honest Greek leaders to do the politically difficult things they knew were necessary. Fat chance in reality and it didn’t get far…. Except, after years of hardship the 30 June IMF report tells us that Greece’s economy was just about coming good or at least stabilising and growing GDP when Syriza was elected and blew the chance of further progress. No mention by our contrarian heroes. Why not?
    Another matter not mentioned (assuming what I have read elsewhere is correct) is that the terms of Greece’s still very large debt are such that its present value is a minimal burden on the Budget.

    Still, now is surely the time for Greece to default (again) and get out of the Eurozone. With luck countries like the US, UK and Australia will lend a helping hand while a new responsible government behaves honestly and responsibly and has the advantage of issuing a new currency with a realistic exchange rate.

  9. George123 says:
    @Anonymous

    There is an obvious motive to make Greece “further unable” to pay.

    They can then seize the islands and ports and everything else.

    Get it? You weren’t paying attention to the article.

    • Replies: @Flower
  10. KA says:

    TRanspacific treaty would inlcude banking as well making it possible to bring down local or federal / central government in case of possibility of default and walking away by the sovereign gov. After a few trial( election. New gov,same problem,same threat and same stalemate) resulting in same results -pain,dislocation,the local citizen might opt for the magistratial role imported from outside and imposed on them .
    Greece is the begining .
    At least Greek are made to pay mso should be Goldman Sach .

    There is a lesson for Americans here after Puerto Rico and Detroit and Orange County .

  11. Flower says:

    I have some simple questions.

    If a country HAS to live off debt, how solvent can that country be? If Greece or the USSA or Germany or Bangladesh or any “soverign” nation must borrow in order to continue existing, how much of a country is that? Why did Greece have to “borrow” so much money? The USSA makes the Greeks look like 3rd world pikers when it comes to borrowing money, but we are told that we are the wealthiest nation in the world, does this make any sense to you? If so, why? For those with the usual host of “what if…” replies, may I throw in a couple: What if Greece shows the EU a well earned middle finger? then the Greeks implode a few moments then come back like the Icelanders, what then? If you were Spain, would you be polishing up your own 2nd digit? Italy? France?

    Oh, but I used that ugly word “borrow”. You see, the USSA doesn’t “borrow” any money, we “issue” bonds!

    Here, write this down so you can refer to it later: When Greece goes belly-up there is going to be the largest transfer of wealth via lies, fraud, and outright theft that the universe has ever seen. And 100% of it will be blamed on the Greeks. The saddest part of it is, it will still happen even if Greece doesn’t default.

  12. Flower says:
    @George123

    “They can then seize the islands and ports and everything else.”

    Who is “they”? The Greeks are a fairly feisty people (just ask Xerxes) and I think they might take exception to George Soros laying claim to the Parthenon. What do you think? Oh, Soros will just sic the US Army on Greece? Now, I think I would like to see that attempt. (just ask Mussolini)

    I think a more correct statement would be: They can then TRY to seize the islands and ports and everything else.

    • Replies: @George123
  13. George123 says:
    @Flower

    Yes, of course. They are trying to bully the Greeks into giving in, but they’re obviously not gonna start a war and take over Greece.

    • Replies: @Flower
  14. The American MSM has already come out full-force in favor of still more bailouts for Greece. Do we really need these redundant screechings of Michael Hudson? Extend and pretend, kick the can further down the road, and forever reward profligacy and irresponsibility. But save the bacon of some really wealthy international bond holders, right? So the last few remaining can get out clean while the debt is socialised and taxpayers get saddled with the bill.

    Visit Greece if you dare. Along with an over-proud, indolent populace you’ll find colossal graft and corruption, luxury mansions by the thousand, yachts filling the harbors, privately- and publicly-owned islands; countless billions in marketable assets which could quickly be sold to help pay down the nation’s debts. But why lift a finger to sell or to work when you can blame Germans and get more ‘free money’?

    Look up James Angelos: “The Full Catastrophe: Travels among the New Greek Ruins”

  15. War for Blair Mountain [AKA "Great Battle for Blair Mountain"] says:

    The Greek Military should start sinking Kraut Ships.

  16. Jefferson says:

    Greece is an economic failure and it is not even vibrant diversity’s fault here because Greece has a significantly lower percentage of North Africans, Pakistanis, Caribbeans, and Sub Saharan Africans than France and Great Britain.

    This can be entirely blamed on Greek ethnic inferiority.

  17. Flower says:
    @George123

    I take it that you’ve never seen the IMF in action before.

  18. Edward says:
    @Anonymous

    The Troika doesn’t even care about whether they get their money back. You think they actually care about Northern European taxpayer’s money? If they did they wouldn’t have used it in 2010 to bail the French and German banks out. They know and they knew back then they wouldn’t get it back.

    The debt is being used as leverage to get what they really want. Greece’s ports, islands, being able to dictate economic policy.

  19. Renoman says:

    Never on a Sunday! You would have to kill a lot of Greeks to take Islands and Ports, it would be war for shore!

  20. […] outline  of the modern  Greek  nation, to  put things into  some perspective along with  Michael Hudson and William Black’s extremely damning  analysis of the financial situation in Greece leading up to   the Greek referendum on  Sunday July 5th  […]

  21. joe webb says:

    Greece’s national IQ is 92. Turkey’s is 90…Richard Lynn’s IQ and Global Inequality.

    Hudson is an embarrassingly tendencious fellow, and the other guy is not much better.

    It would be one thing if these leftish sophomoronic characters would acknowledge Greek corruption and sloth and la dolce vita, and then went on to poke a stick into the slithering pack of bankers, but…no, it is just a fabulous rant about getting Greece to sell their islands to the Troika for their parties, doubtless organized by Strauss-Kahn, the moralist.

    Anybody who thinks these guys got it right, is either an extreme leftist, or an extreme and dopey rightest.

    Turkey occupied Greece for 400 years…enough time to ruin Greece thru miscegenation.

    Joe Webb

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