Daily Archives: January 26, 2015

Germany vs Greece: The battle commences!

Well done Syriza and well done Alexis Tsipras! The only way is up from here. Surely the economic crisis can’t get any worse for Greece! We’ll see.

The German population will have been fed a steady stream of disinformation on reckless, untrustworthy, lazy Greeks who agreed to borrow money they had no intention of ever repaying and which they have now squandered etc etc.  It’s all nonsense of course!

So where to now? If Greece’s creditors wish to see any of their money back, there has to be a recognition  that something has to change, and notwithstanding any useful improvements that might be made to the Greek taxation system, primarily that change has to come from the Germans and the EU governing class. The Germans, and others, have to realise that if they want to run a trade surplus, which they seem to like doing,  (it was about 7% of GDP the last time I looked), then they should be actively encouraging other countries, including Greece,  to run deficits. The larger their deficits the higher the German surplus.

Naturally, those trade deficits translate into government budget deficits too. That way the Greek government spends Euros into its economy so that ordinary Greeks will be able to afford more German imports and so further increase German trade surpluses.

If there sounds to be an element of  Alice-Through-The-Looking-Glass about all this, and that  everything is working backwards, that’s because there is. As Alice put it:

“If I had a world of my own, everything would be nonsense. Nothing would be what it is, because everything would be what it isn’t. And contrary wise, what is, it wouldn’t be. And what it wouldn’t be, it would. You see?”

Well, no not quite. And, neither do we quite see the point of Germany insisting that Greece and everyone else in  Euroland runs a surplus too.  How can Germany ever be repaid when it always wants to run its own, even bigger, surplus?  Why does it even care  about being repaid in money it can never spend? Germany, and German creditors,  can only ever be repaid when it decides to change its ways and run a deficit in trade and a deficit in its Government budget.

In the world of international trade, debts can only be repaid in things.  ie real goods and services. If Country A exchanges more things, for fewer things, with Country B, so putting Country B into debt, that debt can only be repaid, at some time in the future if Country B gives Country A more things than it gets back.

So, the battle isn’t just between Greece and Germany. It’s between German neoliberal economic stupidity, otherwise known as  ordo-liberalism,  and the idea of scientific rationalism.

As Alice, herself said:

“It would be so nice if something would make sense for a change! “

 

 

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