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Bad Lenders Make Bad Loans
Finance as Warfare: The IMF Lent to Greece Knowing It Could Never Pay Back Debt
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SHARMINI PERIES: The latest economic indicator showed that the Greek economy shrank by 0.4% in the last three months of 2016. This poses a real problem for Greece, because its lenders are expecting it to grow by 3.5% annually, to enable it to pay back on its bailout loan. Greece is scheduled to make a 10.5 billion euro payment on its debt next summer, but is expected to be unable to make that payment, without another installment from its $86 billion bailout.

A growing impasse between the International Monetary Fund, and the European Central Bank, Greece’s two main lenders, is threatening to push Greece into default, and pull out of the euro. Meanwhile, the Greece government told its lenders, that we now call “Troika” today, that it will not agree to any more austerity measures. Joining us today, to take a closer look at the Greek situation is Michael Hudson. Michael is a distinguished Professor of Economics, at the University of Missouri, Kansas City. He’s the author of many books, and the latest among them is, J is for Junk Economics: A Guide to Reality in the Age of Deception.

Thank you so much for joining us today, Michael.

MICHAEL HUDSON: It’s good to be here. But I take issue with one thing that you said. You said the lenders expect Greece to grow. That is not so. There is no way in which the lenders expected Greece to grow. In fact, the IMF was the main lender. It said that Greece cannot grow, under the circumstances that it has now.

What do you do in a case where you make a loan to a country, and the entire staff says that there is no way this country can repay the loan? That is what the IMF staff said in 2015. It made the loan anyway – not to Greece, but to pay French banks, German banks and a few other bondholders – not a penny actually went to Greece. The junk economics they used claimed to have a program to make sure the IMF would help manage the Greek economy to enable it to repay. Unfortunately, their secret ingredient was austerity.

Sharmini, for the last 50 years, every austerity program that the IMF has made has shrunk the victim economy. No jjunkecon austerity program has ever helped an economy grow. No budget surplus has ever helped an economy grow, because a budget surplus sucks money out of the economy. As for the conditionalities, the so-called reforms, they are an Orwellian term for anti-reform, for cutting back pensions and rolling back the progress that the labor movement has made in the last half century. So, the lenders knew very well that Greece would not grow, and that it would shrink.

So, the question is, why does this junk economics continue, decade after decade? The reason is that the loans are made to Greece precisely because Greece couldn’t pay. When a country can’t pay, the rules at the IMF and EU and the German bankers behind it say, don’t worry, we will simply insist that you sell off your public domain. Sell off your land, your transportation, your ports, your electric utilities. This is by now a program that has gone on and on, decade after decade.

Now, surprisingly enough, America’s ambassador to the EU, Ted Malloch, has gone on Bloomberg and also on Greek TV telling the Greeks to leave the euro and go it alone. You have Trump’s nominee for the ambassador to the EU saying that the EU zone is dead zone. It’s going to shrink. If Greece continues to repay the loan, if it does not withdraw from the euro, then it is going to be in a permanent depression, as far as the eye can see.

Greece is suffering the result of these bad loans. It is already in a longer depression today, a deeper depression, than it was in the 1930s.

SHARMINI PERIES: Yeah, that’s an important… at the very beginning of your answer here, you were making this very important point, is that although the lenders – this is the Eurozone lenders – had set a target of 3.5% surplus as a condition on Greece in order to make that first bailout loan. The IMF is saying, well, that’s not quite doable, 1.5% should be the target.

But you’re saying, neither of these are real, or is achievable, or desired, for that matter, because they actually want Greece to fail. Why are you saying that?

MICHAEL HUDSON: Because when Greece fails, that’s a success for the foreign investors that want to buy the Greek railroads. They want to take over the ports. They want to take over the land. They want the tourist sites. But most of all, they want to set an example of Greece, to show that France, the Netherlands or other countries that may think of withdrawing from the euro – withdraw and decide they would rather grow than be impoverished – that the IMF and EU will do to them just what they’re doing to Greece.

So they’re making an example of Greece. They’re going to show that finance rules, and in fact that is why both Trump and Ted Malloch have come up in support of the separatist movement in France. They’re supporting Marine Le Pen, just as Putin is supporting Marine Le Pen. There’s a perception throughout the world that finance really is a mode of warfare.

If they can convince countries somehow to adopt junk economics and pursue policies that will destroy themselves, then they’ll be easy pickings for foreign investors, and for the globalists to take over other economies. So, it’s a form of war.

SHARMINI PERIES: Right. Michael, you were saying that the newly appointed ambassador, Ted Malloch of the Trump administration to the European Union has suggested that Greece should consider leaving the European Union, or the euro in particular.


What do you make of this, and will this be then consistent with what Greece is suggesting? Because Greece has now said, no more austerity measures. We’re not going to agree to them. So, this is going to amount to an impasse that is not going to be resolvable. Should Greece exit the euro?

MICHAEL HUDSON: Yes, it should, but the question is how should it do it, and on what terms? The problem is not only leaving the euro. The problem really is the foreign debt that was bad debt that it was loaded onto by the Eurozone. If you leave the euro and still pay the foreign debt, then you’re still in a permanent depression from which you can never exit.

There’s a broad moral principle here: If you lend money to a country that your statistics show cannot pay the debt, is there really a moral obligation to pay the debt? Greece did have a commission two years ago saying that this debt is odious. But it’s not enough just to say there’s an odious debt. You have to have something more positive.

I’ve been talking to Greek politicians and Syriza leaders about what’s needed, and what is needed is a Declaration of Rights. Just as the Westphalia rules in 1648, a Universal Declaration that countries should not be attacked in war, that countries should not be overthrown by other countries. I think, the Declaration of International Law has to realize that no country should be obliged to impose poverty on its population, and sell off the public domain in order to pay its foreign creditors.

The Declaration would say that if creditors make a debt that cannot be repaid, the debt is by definition odious, so there is no need to pay it. Every country has the right not to pay debts that are unpayable except by bankrupting the country, and forcing it to sell off their public domain to foreign countries. That’s the very definition of sovereignty.

So, I’m hoping to work with politicians of a number of countries to draw up this Declaration of Debtor Rights. That’s what’s been missing. There’s an idea that if you withdraw from the euro, you can devalue your currency and can lower labor standards even further, wipe out the pensions, and somehow squeeze out enough to pay the debt.

So, the problem isn’t only the Eurozone. True, joining the euro meant that you’re not allowed to run a budget deficit to pump money into the economy to recover – like America has done. But the looming problem is that you have to pay debts that are so far beyond your ability to pay that you’ll end up like Haiti did after it rebelled after the French Revolution.

France said, sure, we’ll give you your independence, but you’ll have to reimburse us, for the fact that we no longer hold you as slaves. You have to buy your freedom. You can’t say slavery is wrong. You have to make us, the slaveholders, whole. So Haiti took this huge foreign debt to France after it got its independence, and ended up not being able to develop.

A few years after that, in 1824, Greece had a revolution and found the same problem. It borrowed from the Ricardo brothers, the brothers of David Ricardo, the economist and lobbyist for the bankers in London. Just like the IMF, he said that any country can afford to repay its debts, because of automatic stabilization. Ricardo came out with a junk economics theory that is still held by the IMF and the European Union today, saying that indebted countries can automatically pay.

Well, Greece ended up taking on an enormous debt, paying interest but still defaulting again and again. Each time it had to give up more sovereignty. The result was basically a constant depression. Slow growth is what retarded Greece and much of the rest of southern Europe.

So unless they tackle the debt problem, membership in the Eurozone or the European Union is really secondary.

Michael Hudson is a former Wall Street economist. A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002). His new book is: Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy (a CounterPunch digital edition). Sharmini Peries is executive producer of The Real News Network. This is a transcript of Michael Hudson’s interview with Sharmini Peries on the Real News Network.

(Republished from by permission of author or representative)
• Category: Economics • Tags: Eurozone, Greece, IMF 
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  1. Bad Lenders Make Bad Loans

    “* Money loaned out to friends abroad will assure their collapse over time as we will make our usury painful by requiring them to sell off assets at bargain prices to pay us.”
    Excerpt from:
    La Cosa Nostra
    Position: Capo di Tutti Capi

  2. anonymous • Disclaimer says:

    Home loans at one time were underwritten at some lenders by qualifying the borrowers at the teaser rate. Never mind that the interest rate would adjust in six months to ‘fully indexed’ with an increase in the payment.

    I heard the executives of a nationwide lender discuss why they could not change their underwriting standards as it would result in a decline in lending volume. They suffered through higher foreclosures not long after that and then got acquired.

  3. Wally says:

    Greeks are a pathetically lazy, unproductive lot.

    Why is austerity so bad for a people who refuse to work, but want to live the good life? If they think they have it bad now, just wait until they are forced to stand on their own two feet.

    And why do the Greeks allow their government monopolize so much of the economy anyway? Ah.

    Screw them, they repeatedly took the money, the conditions were known. Not a penny more.

  4. Sparkon says:

    Conspicuous by its absence in this article is any mention of what it was the Greeks bought that they couldn’t afford.

    This excerpt from a Grauniad article by Helena Smith may help:

    Yiannis Panagopoulos, who heads the Greek trade union confederation (GSEE), found himself sitting opposite Angela Merkel at a private meeting the German chancellor had called of European trade unionists in Berlin.

    When it came to his turn to address the leader, he instinctively popped the question that many in Greece have wanted to ask. “After running through all the reasons why austerity wasn’t working in my country I brought up the issue of defence expenditure. Was it right, I asked, that our government makes so many weapons purchases from Germany when it obviously couldn’t afford such deals and was slashing wages and pensions?”

    Merkel’s reaction was instant. “She immediately said: ‘But we never asked you to spend so much of your GDP on defence,’” Panagopoulos recalled. “And then she mentioned the issue of outstanding payments on submarines she said Germany had been owed for over a decade.”
    “If there is one country that has benefited from the huge amounts Greece spends on defence it is Germany,” said Dimitris Papadimoulis, an MP with the Coalition of the Radical Left party.

    That comment is followed by a chart showing that Germany indeed accounts for 25% of Greece’s weapons purchases, but conspicuous by its absence in Ms. Smith’s column is any mention of the United States, which accounts for 42% of the Greek total of arms purchases for the period, more than Germany and France combined.

    Thanos Dokos, a leading Greek defence expert, says rational debate on such military extravagance has been made impossible by the supposed Turkish threat and a fear among politicians of being labelled unpatriotic.

    “One could argue that with 1,300 tanks, more than twice the number in the UK, Greece has many more than it needs. But no one forced it to spend so much. It happened because of the threat perception from Turkey and the need to balance Turkey militarily,” he said.

    And so the Merchants of Death are moonlighting as the Merchants of Debt.

    I’m flabbergasted; ‘just flabbergasted

    • Replies: @Wally
    , @Half Canadian
  5. Wally says:

    But Greece DID buy that crap. Show me how they were forced to.

    Greek trade union confederation (GSEE)? Indeed, a huge part of their problems.

    • Replies: @anon
    , @The Alarmist
    , @bluedog
  6. anon • Disclaimer says:

    Greeks are a pathetically lazy, unproductive lot.

    Everyone making this argument is unconsciously reinforcing the point made in the OP…

    the banking mafia have started loan sharking entire countries with the collusion of a corrupt political-media class.

  7. n230099 says:

    Is it really a loan if you know you’ll never get it back? It sounds more like a gratuitous wealth transfer.

    • Replies: @anon
  8. anon • Disclaimer says:

    Show me how they were forced to.

    They weren’t forced.

    The banking mafia in collusion with corrupt politicians (and an either corrupt or innumerate media) run up unpayable debts and then when it eventually blows up the EU and IMF come in as debt collectors to asset strip the country of everything valuable.

    It’s standard loan sharking but on a country size scale.

    The banking mafia are racketeers – should all be in jail.

    • Agree: jacques sheete
  9. @Wally

    A large part of the justification for Greek military spending is the ongoing threat the country faces from fellow NATO member and supposed ally, Turkey, which just goes to show how useless that alliance is in promoting peace in Europe.

    Greece reminds me of Wales … Why did the Welsh nobles sell their people into English Bondage? Because instead of being minor Welsh nobles, they became minor British nobles, which for them was nevertheless a significant step up. Ditto Scotland. And so Greece remains in the Euro and the EU long past the point where the well-being of the people mattered.

  10. anon • Disclaimer says:

    It’s loan sharking.

    Guy has a car worth 1k but no income – loan him $100 he can’t pay back – take the car.

    Country has airports, mines, islands worth 100 billion – loan them 10 billion they can’t repay – take the 100 billion in airports, mines and islands.

    It’s why they’ve been keeping Greece on life support all this time – it takes time to loot a whole country.

  11. Miro23 says:

    The article has a rather political slant. It’s true that Greece got loans that went straight back to European banks to enable them to 1)continue making money and 2) pretend that the loans were good, but still, Greece took the low interest rates that came with the Euro and went on a giant speculative binge the same as the rest of Southern Europe.

    They didn’t have to participate in a speculative credit bubble but they did so through their own choice.

    However, I see that Hudson’s political line only allows him to present the Greeks as innocent bystanders.

  12. Anon • Disclaimer says:

    For such lazy people, ironic that they laid the foundation for Western civilization, isn’t it?

    • Replies: @The Anti-Gnostic
    , @Wally
  13. @Wally

    Greeks are a pathetically lazy, unproductive lot.

    You don’t know Greeks and what does their supposed laziness have to do with it anyway?

    Why is austerity so bad for a people who refuse to work, but want to live the good life? If they think they have it bad now, just wait until they are forced to stand on their own two feet.

    Please don’t confuse Greeks with Israelis.

    And why do the Greeks allow their government monopolize so much of the economy anyway?

    They don’t. Have you kept up with the recent elections? Is it not obvious that the Greeks have no more control over their masters than we in the US do?

    Screw them, they repeatedly took the money, the conditions were known. Not a penny more.

    No, the ruling class took the money; screw them. Make them pay.

    Please bear in mind that the most indebted country in the world is the US. If you think the people are responsible for it, then you better start writing some checks.

    The lenders are the ones who should have known better; screw them.

    • Replies: @another fred
    , @Wally
  14. @anon

    Excellent comment. I don’t know why this stuff is so hard for some folks to figure out.

    Country has airports, mines, islands worth 100 billion – loan them 10 billion they can’t repay – take the 100 billion in airports, mines and islands.

    As we write, there’s an ongoing project to build modern tollways all over the country that only the rich use, and they hardly use them. One can drive from Sparta to Thessaloniki for 700 km either up the West coast or the East on roads the likes of which far surpass anything in the US for condition, and nearly the only traffic you’ll encounter are trucks from the EU.

    Many useless road building schemes deep into the mountains as well. These things go where there were only trails before. I’ve seen the same things in Bosnia and know engineers who were flabbergasted at the infrastructure built in the boonies that no one has ever needed. I’ve been on modern roads way back in the mountains there where people were literally living in dugouts as they had been since the beginning of time.

    The people of Greece and Bosnia barely use the things, haven’t needed them ever, and yet they’re held liable for them.

    Another sad thing is that because of the accessibility, the mountains no longer hold any significant areas of refuge for those who are self sufficient and don’t want to play the banker’s games.

    • Replies: @StillFree
  15. “Sell off your land….. This is a program that’s gone on decade after decade…”

    Is that just loose talk? Clearly it is implyong that the IMFvhas been manipulated for decades before Greece’s problems to make improvident countries sell up their best assets to foreigners. Examples please – with figures – to quell my raging scepticism.

    Moreover foreign owners of assets in banana republics (or olive ones) can’t have much confidence that a sovereign government is going to treat them any more gently than the bondholders who have been stiffed by many countries over the last 300 years, especially when the acwuisition of the assets is resented ss coercive.

  16. Here’s an article for the Wallys of the world. It gives a glimpse of the corruption at the heart of the matter.

    But yesterday the betting was back on the Greek island affair to spell the prime minister’s political doom, after a wealthy businessman and leading power broker in his Likud party, David Appel, was indicted for allegedly paying bribes to Mr Sharon and his youngest son, Gilad.

  17. Michael Hudson complicates his story unmecessarily. Why not suspect that the IMF with a French president is just helping European friends to save the French and German banks (which should have been left to be rescued (with losses to share and bon holders) by their own governments directly as n the UK. More charitably, it was making a gesture of solidarity to the EZ and ECB while it was still possible to believe that internal devaluation by austerity would rectify years of profligacy by Greek governments.

  18. bluedog says:

    Lol well we in the U.S. are a lot like Greece after all we the people didn’t vote for a $ 20 trillion dollar debt ($30 trillion by 2030 so they say) trillions more in future liabilities ,outsourcing of jobs a decline in the standard of living and a whole lot of low paying jobs while we fight off the cheap labor from South of the border, while we wait for the financial system to crash and burn.We like Greece are controlled by the rich and powerful who gladly send our young off to some hell hole to fight some imaginary foe one of our creation so the rich and the powerful can become a little richer and order more tanks airplanes drones and other weapons.
    I see Bush was on the morning talk show this morning hawking a book that he wrote called ‘Wounded Warriors” and I’m sure he left out how he lied the country into war and trust me there will be thousands who will buy it because we the people are just like Greece dead from the neck up..

    • Agree: jacques sheete
  19. @jacques sheete

    The lenders are the ones who should have known better; screw them.

    I have no sympathy for the lenders, but it was the politicians and the bureaucrats who set this Ponzi scheme on its course. The bankers are just raking off their percentage of the ever-growing cash flow as the money moves from place to place. Their prime interest is in keeping the game going so the money keeps flowing through their hands.

    One should regard the bankers as lower level drug dealers while the politicians and bureaucrats are the kingpins who control the trade. Richard Nixon closed the gold window to avoid having to pay for the excesses of the Great Society and that sealed our doom, but “there is a great deal of ruin in a nation.”

    The bankers were let off after the last hiccup because they still are useful in maintaining the trade. The banks will be maintained as long as trade remains near the present high level. When it all finally breaks down there will be many bankers who get it in the neck. Those that survive will do so because of their usefulness to and entanglement with whoever gets control of the State(s).

    When the EU breaks up there will be bankrupt banks galore. Then we will begin to meet the new boss(es).

    • Agree: jacques sheete
  20. Hey Wally and the rest who think it’s OK for one party to accept loans in other people’s names, I have a deal for ya.

    I’m going down to my friendly IMF bank and take out a loan in your name, backed by your assets.

    I’ll use the money to bribe some politicians to make laws that favor my schemes, and since I’ve named you as the backer of the loan, and since I have no intention of ever paying back the loan, you better get out yer checkbook and start liquidating assets.

    If you fail to do that, then you may wanna pray to G-d when the troops knock on yer door in the middle of the night, kick you out, loot the property, then sell it to a buddy for pennies on the dollar.

    And don’t whine when the bank confiscates yer savings, either.

    Sweet deal, eh? Really tough concept too.

    But never mind, the gubbermint is here to protect ya. Uh-huh.

    There’s a six letter word for people who think that way, and it begins with an “s.”

    BTW, this is an excellent article with a superb title.

    Bad Lenders Make Bad Loans

    Mafia racketeer bankers do it knowingly. Connect the dots.

    • Replies: @Wally
  21. greece is being treated like russia during the yeltsin years. but they don’t have a yeltsin, how the hell they arrived at the current situation is baffling. are the greek elites that stupid and self serving?

    that says enough.

  22. Agent76 says:

    This is my all time favorite speech on and about banking.

    May 21, 2013 Why the whole banking system is a scam – Godfrey Bloom MEP

    • European Parliament, Strasbourg, 21 May 2013

    • Speaker: Godfrey Bloom MEP, UKIP (Yorkshire & Lincolnshire)

  23. Antiwar7 says:

    That’s unscientific. Greeks work more hours per year than Germans.

    • Replies: @The Anti-Gnostic
    , @Wally
  24. TG says:

    Yes, well said.

    Here’s another take. We have been brainwashed into thinking that the foundation of capitalism is that debts must be repaid. Rubbish.

    The foundation of capitalism is that when someone makes a bad investment, they lose money.

    If we break this link, we eliminate the entire logic (such as it is) of capitalism.

    You might say, oh if banks lend a pile of money to a corrupt government that is going to steal or misuse the funds and has no rational chance of making good on the loans, and then the banks don’t get paid back, where is the incentive for banks to make bad loans to corrupt governments? Exactly.

    And we see this on so many other fronts, like the US student loan program where lenders get their profits no matter what via taxpayer funds, and they have had no problem loading up students with unpayable debt and this has allowed colleges to become explosively expensive… If lenders had to take the risk themselves, they might not loan $100,000 to a mediocre student at a mediocre college with a nothing degree… and before long that college might not cost $100,000, and people wouldn’t be saddled with low value degrees and massive debts and no job prospects, etc.

    • Replies: @gwynedd1
  25. @Anon

    The people who inhabited the Grecian peninsula during the era of Classical Antiquity went genetically extinct a long time ago. Only a form of their language remains.

    • Replies: @gwynedd1
  26. @Antiwar7

    That’s not the metric that counts. One German running the phyllo dough machine for 6 hours is way more productive than the Greek baker layering it by hand for 12 hours.

    The obvious solution is for Greece to repudiate the debt, withdraw from the EU, and issue her own currency. It’s not the perfect solution–we don’t live in the perfect world–but it’s the only way out if the Greeks want to retain sovereignty.

    Why would any self-respecting nation-state join the EU? Kick that rotten institution over. Confiscate the assets of its senior executives.

    • Replies: @Antiwar7
  27. @anon

    “Country has airports, mines, islands worth 100 billion – loan them 10 billion they can’t repay – take the 100 billion in airports, mines and islands.”

    Yeah, except all that stuff is immovable. Greece could easily exit the EU, repudiate the debt, and nationalise all the pledged assets, and the worst it might get are a few sanctions that might actually be less painful than the current doses of austerity (does anyone think a German or EU army are going to march on Greece?). Any tourists lost from Europe would be more than covered by Russians. The US is also unlikely to turn its back on Greece, regardless of the caterwauling by Europe.

    I’m actually wondering what is holding Greece back … oh wait, it’s the corrupt leadership who are on the EU payroll for selling out their people. Where are the Colonels when you need them?

    • Agree: The Anti-Gnostic
    • Replies: @Philip Owen
  28. mtn cur says:

    Old Hat, all previewed in Steinbecks “Grapes of Wrath,” perhaps Obama would say “It’s Grapes of Math.” Especially note the end of chapter 21. “Money that might have gone to wages went for gas, for guns, for agents and spies, for blacklists, for drilling. . . . . . .”and the anger began to ferment.” And all without being watched over by the “machines of loving grace” that we have now days. Slow learners ain’t we boys? Indeed, I spent my stimulus check from uncle Bama on Ruger hand guns, they’re still American made you know.

    • Replies: @jacques sheete
  29. Muse says:

    The pressing danger is what method will be used to retire the widespread national debt of so many nations.

    The typical response has been war, versus a chapter 11/09 type workout. Perhaps it is no coincidence that Trump is bent on modernizing the US military. I am not sure that anybody gets out of the next world war alive so perhaps it is time for the banksters to take a haircut.

    • Replies: @another fred
  30. gwynedd1 says:

    Debts being paid by someone else certainly isn’t capitalism.

  31. gwynedd1 says:
    @The Anti-Gnostic

    Its also plausible that what contributed to it was easy money. First the gold at Amphipolis infected the Athenians. Then when Sparta inherited it , king Agis said it led to their corruption. After all, finding a large stash of gold in the ancient world is more or less a source of central planning, and by someone whose skill is have good luck. Everything good about Athens was due to ts poor soil without a natural source to monopolize in sight.

  32. @Sparkon

    Greece spends about 2% of their GDP on defense. This isn’t a big reason why they have a debt problem.

    • Replies: @Sparkon
  33. Wally says:

    Pay attention and note that I said “ARE pathetically lazy, unproductive”. That’s present tense.

    And, even you said past tense “laid”.

    Today’s Greeks are not the same as yesterday’s Greeks, haven’t been for ages.

    • Replies: @Anon
  34. StillFree says:
    @jacques sheete

    This sounds similar to Gov Brown’s bullet train in California.

  35. Wally says:
    @jacques sheete

    Indeed, Israelis fit in that category.

    Speaking of elections, who is that the Greeks elected?
    The same ones that keep accepting the money.

    The Greeks made their own bed, they will sleep in it.

    Yes, the US owes a lot of money, but guess what, we just had an election and after a mere month in Trump is already talking of cuts to deal with the national debt.

    • Replies: @Anon
    , @jacques sheete
  36. @Muse

    The banks will definitely take their hits, but they are not capitalized enough to eat the entire debt that cannot be paid. That will require a “bail-in” by bondholders* and depositors. In addition, every nation that can print money will print money (it does no good to print money if your debts are dollar or Euro denominated) and the ones that cannot will at least partially default.

    In order to maintain some level of commerce governments will assume (or attempt) power that will meet pretty severe opposition from many quarters.

    Call me an optimist, but I believe a general World War can be avoided, the costs/devastation are just too high. That does not mean that a lot of people will not die. Minor players will likely lob a few nukes and the bio-weapons will be devastating and available to non-state actors.

    *Keep in mind that many bonds are held by pension plans.

  37. Wally says:

    Productivity levels are practically nil vs. Germany’s.
    Claiming self reported hours vs. actually working those hours are 2 different things altogether.

    Just look at Greece’s situation vs. Germany’s, there you go.

    • Replies: @Antiwar7
    , @anon
  38. Wally says:

    Such excuses would be understandable once, but the irrefutable fact is that the Greeks keep doing the same thing over & over again. They know they can’t pay the money back and don’t care who they screw. They want their elected politicians to lie.

    ‘The first time, fuck you, the second time, fuck me’.

    Pardon my French.

    • Replies: @anon
  39. This guy is deliberately conflating the Eurozone and the EU. He is conflating staying in the Eurozone and leaving it. The whole thing is a confused garbage hardly better than stream of consciousness.

  40. @The Alarmist

    “Any tourists lost from Europe would be more than covered by Russians.” You’ve not paid much attention to Russia. Also dumping Greece and fully embracing Turkey would suit the US very well.

  41. Wally says:
    @jacques sheete

    Give me a break.

    It’s not as if the average Greek isn’t seeing this money in his pocket, propping up his bloated union wages & benefits, paying subsidized government monopoly services that he uses.

    Having said that, Greece should Grexit and stand on their own two feet. But they won’t, because they’ll need to actually support themselves.

    ‘Socialism works until you run out of other people’s money’.

  42. Anonymous [AKA "Lefty Economist Bias"] says:

    Michael Hudson is obviously a lefty economist. Only a lefty economist could say that reforms required in Greece are actually anti-reforms rolling back all the “progress” made by the labor movement. The truth is Greece has a hugely bloated kleptocratic government of the worst kind. The pension promises that were made are of the Detroit Michigan variety, they are pie in the sky fantasy. The prescription proposed by Mr. Hudson is that Greek society at large pay for the sins of their poor excuse for a government, by bringing back the Drachma and printing the money to pay the unpayable, inflating their way out of the pickle all that “labor progress” brought them, see Venezuela for an example of where this Junk Economics leads. While there is truth that unending harsh austerity does not ignite economic growth, the fiddler must be paid. This will likely take the form of some combination of debt relief, austerity & government reform. The sooner the government reform actually occurs, the sooner the debt relief comes and austerity tapers off. Suggesting that giving the keys back to the guys who ran things off the cliff (lefty government beauracrats and progressive lefty labor pols & corrupt unions) is disingenuous. Michael, Paul Krugman was shown the door at Princeton for preaching your Junk Economics because it is garbage. You ought pay attention.

    If Greece makes it out the other side the Greek people will have stable money for the first time in forever. Their children will thank them for having the fortitude to stick it out. Lets hope the Greeks take the long view for their own best interest.

    • Replies: @anon
  43. Anon • Disclaimer says:

    Really? How are they different?

  44. Sparkon says:
    @Half Canadian

    Under the 2012 budget, Greece defense spending was 2.3% of GDP, but the debt was accrued when the defense budget was much higher:

    In 2003, Greek Defense Minister Papantoniou expressed a new goal of reducing arms expenditure from 4.9% of GDP and stabilize it toan average of 2.7%, for the period 2010-2015. Greek defence spending had reached a high of 5.6 percent of GDP, about 13.4 billion euros ($17 billion).


    For 2015, NATO projects that Greece will spend 2.4% of its GDP on defense, which is actually a 0.1% increase in spending over 2014.

    In all, Greece has 2nd highest defense spending in NATO after USA.

    • Replies: @Wizard of Oz
  45. Anon • Disclaimer says:

    Trump is already talking of cuts to deal with the national debt.

    He’s talking about increasing defense spending, which is already the most bloated part of the budget. All the cuts in social spending won’t offset that. If you think he’s going to reduce the debt you need your head examined.

  46. Antiwar7 says:
    @The Anti-Gnostic

    You wrote, “One German running the phyllo dough machine for 6 hours is way more productive than the Greek baker layering it by hand for 12 hours.”

    What’s your source on this?

    Of course, a managing director at Goldman Sachs is a thousand times as productive.

  47. Antiwar7 says:

    First they’re lazy, then they’re unproductive. Which is it?

    I’ll await the results of your formidable research team.

  48. Give me a break.

    It’s not as if the average Greek isn’t seeing this money in his pocket, propping up his bloated union wages & benefits, paying subsidized government monopoly services that he uses.

    So they get a few crumbs while the big pigs hog the bulk of the slop. The average Greek is seeing worse than nothing in his pocket. Even his bank account has been looted. A few lucky ones with connections were able to get their money out of the country. The average Gianni wasn’t so lucky. You should see the closed businesses. It’s a crying shame.

    Nothing’s changed in at least 2500 years. Aristophanes’ play is not only a hoot, but educational. Well worth reading. I find it amazing that the old timers had the scam figured out that long ago, while the vast majority of us moderns remain clueless.

    Oh! what a lot of good things! Why it’s quite full! Oh! what a huge great part of this cake he kept for himself! [1220] He had only cut off the least little tiny piece for me.

    But this is what he has always done. Of everything he took, he only gave you the crumbs, and kept the bulk.

    – Aristophanes, The Knights, 424 BC

  49. @Wally

    Speaking of elections, who is that the Greeks elected?
    The same ones that keep accepting the money.

    Yeah, they have about as much choice in who they vote for as we in the US do.

    You really don’t understand how the scams work, do you?

    This stuff is so basic that it really shouldn’t need explaining and I’m done trying to introduce the concepts to you.

    Hudson is 100 % correct here. Read the damned article, will ya? And ignore the fools who call him a leftist. Even if he is, sometimes even “leftists” get it right and besides, people who think in terms of left vs right are way behind the curve. Those terms are, and have been, meaningless for quite some time.

    Yes, the US owes a lot of money, but guess what, we just had an election and after a mere month in Trump is already talking of cuts to deal with the national debt.

    Talk is cheap, and Trump is just another politician except that he’s basically clueless about nearly everything. (I am happy that he made Hillary and the Republican clowns look as stupid as they are tho.) Please don’t hold your breath waiting for the Trumpster to do anything that benefits us proles and peasants.

  50. @mtn cur

    Slow learners ain’t we boys?

    Yes, and it’s been driving me bonkers for years.

    Indeed, I spent my stimulus check from uncle Bama on Ruger hand guns, they’re still American made you know.

    I used to be a Ruger man but their customer service stinks so bad I’ve been boycotting them for at least 20 years.

    BTW, I think most people would be shocked if they knew what scum owns, (or at least has owned), a lot of American weapons manufacturers such as Remington and Colt. Ruger may still be clean in that regard, but I haven’t kept up to speed on it.

    • Replies: @mtn cur
  51. @Sparkon

    How much is for keeping the Praetorian guard happy and how much for value adding technology and hard assets?

  52. mtn cur says:
    @jacques sheete

    Rugers SP 101 probably doesn’t need customer service, I suspect I could drag mine behind my truck several miles and it would function. Hogues mono grip is major improvement though. Business, politics or water pollution, scum rises to the top. As for our post literate president, I feel bit sorry for him, he is like a bear with a shaved ass, discovering the joy of bee stings.

  53. anon • Disclaimer says:

    Productivity levels are practically nil vs. Germany’s.

    You keep reinforcing the loan sharking argument.

  54. anon • Disclaimer says:

    the irrefutable fact is that the Greeks keep doing the same thing over & over again

    nothing is being given to Greece – taxpayer money is being given to the banks using Greece as an excuse

  55. anon • Disclaimer says:

    The truth is Greece has a hugely bloated kleptocratic government of the worst kind.

    Which reinforces the OP’s point – the international banking mafia have started to loan shark entire countries because the political-media class in the EU have been corrupted enough to let them get away with it.

  56. Anon • Disclaimer says:

    Or that they are humanitarians who see a situation for what it is (aka a pickle) but will still loosen the belt from time to time when the belligerent drunk looks to be on the verge of asphyxiation.

    It ain’t simple and fixing the situation prior to the ems arriving is always preferable. But blaming the medics for the sinning that occurred prior to their arrival on the scene is disengenuous. Best not to have a crooked kleptocrat government but these things happen. The next generation of Greeks will be better off if the present generation chooses reform and stable money via the euro. Here’s to today’s generation of deciders banishing the Paul Krugman school of economics to the dustbin of history where it belongs.


    • Replies: @anon
  57. anon • Disclaimer says:

    But blaming the medics for the sinning that occurred prior to their arrival on the scene is disengenuous.

    The banks who cooked Greece’s books to get them into the EU – which is what allowed the over borrowing – are the ones running the privatization of Greek assets now and Greek politicians involved in the initial cooking of the books went to work in those banks afterwards.

    • Replies: @Wizard of Oz
  58. It’s a Jewish usury thing that never expects debt to be repaid. As John Adams said there are two ways to become enslaved – 1. by force 2. by debt. I hope Greece and other IMF victims take Russia up on it’s generous offer and join BRICS and fast!

  59. Delmas says:

    David Ricardo was a son of a large Jewish family who’d been thrown out of Portugal and then thrown out of Holland. His views on debt and lending are not surprising.

  60. @anon

    You make a lot of assertions. If you know what you are talking about what about naming names?

    The only good reason for Greece to have remained in the misbegotten Eurozone rather than pursue an early Grexit was to apply pressure for needed reforms which couldn’t happen if Greece just slid back on its own to the non tax collecting Third World socialism of its past (and present) with a new devaluable currency. But the German voters aversion to more generous bail out for Greece than needed to prop up the German banks (whose share and bond holders ought to have suffered more btw) is understandable if you read Chapter 2 of Michael Lewis’s “Boomerang”. A railway system which costs 10 times as much to keep going as it received in fares, retirement and state pensions for almost everyone at 55, no income tax paid except by those on salaries from big employers, real estate taxes on false valuations etc etc. A true low trust society.

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