Thursday, May 31, 2012

Corruption starts at the top - even in Greece.

Certainly in Europe & on Wall St. too.
 (hat tip @NickMalkoutzis)

Syriza, the newly dominant political party, faces Greece's challenges:

Better coordinating the official & underground economies.
   (How does one say "return-on-coordination" in Greek? απόδοσης του συντονισμού ?)
Alexis Tsipras says: "we will try to restore faith in the law and convince people that the state is equitable and effective"   (Well said!  Too bad he then goes on to talk overmuch about taxes, instead of public initiative and distributed INCOME!)

Do more of what they were already doing!  "90% of the small businesses' production, which are the foundation of the Greek economy, is not exported. It is sold on the domestic market."  (An enviable record.  Just do whatever it takes to maintain that freedom?)

Find an alternative to staying in the present euro structure.   So far, it sounds like few, if any, have much stomach for going back to the Drachma.

Listen to other voices besides Brussels & ECB eurocrats.  Sound economy first.  Sound banks = ones that produce a sound economy, not the inverse.

Force ECB/Brussels/IMF aristocrats to admit their mistakes, and change both policies & institutional momentum.   Good luck with that.   The aristocrats have their own, established & outlandish revenue streams from market business as usual. They will find it hard to replace the individual security they know with an unknown one. "Gods of money" indeed! We're all Greeks now.

Reconstitute the trust & initiative of the Greek people, after 5 years of forced depression.  

Prosecute the corrupt, former Greek leaders, and even the German firms that bribed them.

Give Greeks hope again, that their trust and loyalty to one another will pay off - that this time will be different.   That would give hope to people in other countries too, hope that the class war between aristocratic parasites and their hosts can be transformed to mutually beneficial symbiosis.   All it takes are the brains to recognize the return on coordination.


Leverage said...

"(An enviable record. Just do whatever it takes to maintain that freedom?)"

This is wrong, they are not truly free, they import basic goods they need for a not collapsing civilization.

In Spain as firms (and banks financing this) are running out of import credit it impacts prices and consumption. The last fool is the supplier, when you go "bankrupt", but eventually it cuts your off. This is a known experience in Spain, these hasty devaluations/"running out of credit" have occurred at least 3 times in the last 3 decades. And probably too in Greece (even more if I recall right), apparently you guys don't get it how it really works, but there is a real reason behind euro Stockholm syndrome.

The problem is the same rotten elites stay in place mismanagement the economy and the political system so nothing is solved.

Occidental nations are dependant on imports, specially fossil fuels. Iceland currency devalued (an other way of running out of credit in the exterior, when the demand of your currency drops), and this has impacted their consumption, and one big advantage they have is their energy independence.

Yugoslavia socialist regime was fairly stable (it was a sort of market socialism based on a mix of small corporations & state enterprises) compared against the crumbling soviet empire and even against capitalist nations, know how it was blown out? Cutting this credit from the exterior, creating a supply shock, this turned to destroy the region as we later have known plaguing it with civil wars and ethnic cleansing.

Probably in the long run staying in the euro is a worse decision as we know, but let's not fool ourself: there are no such things as free lunches. Thinking along this lines will be a disaster in the long run.

Roger Erickson said...

uh, Leverage, if all it took were oil, or any other asset, all civilization would have advances fastest wherever the assets lay

Reality is that selection follows it's own acceleration. Innovation in places like Iceland trumps any old cost.

Remember the headline from ~1834?
"Running out of Whale Oil: World to go Dark."

Future people will look back on the EEU and laugh about today's headlines. "Running out of Will to Think. EEU to go Dumb."

Unless it actually happens, of course.

Repeat after me:

1) Highest cost in any organized system = cost of coordination (Walter Shewhart, circe 1926)

2) Ergo, highest return in any aggregate = return on coordination. [This ain't rocket science. If push came to shove, Greeks never need more than their own selves.]

Leverage said...

I don't see where in my post I've said that.

You can crush any European nation closing imports in less than a week. The supply disruption would turn society into chaos. You are not aware of how post-war Spain was apparently, were the economy was isolated from the exterior, and nowadays society is even more dependant on exterior imports. I mean: is laughable when USA talks about the great depression compared to what I'm talking about, and it was only 5 decades ago (and Greece has happened to have a similar period with the Junta, and not long ago, barely 3 decades).

But I'm not even talking about these levels of disruption.

Technology improves, or technology will improve, it does not mean it's sufficient right now or that you have the capital to do it right now in this nations, from one day to an other. Per capita consumption in Iceland has dropped, specially of foreign imports (which are most things), will it improved in the future? Has it eased the situation of the majority of the population compared to debt-deflation spiral? Sure. Was a free lunch? No.

It's not an opinion, it's happening right now in Spain or in Greece. these nations will get poorer and printing money is not going to cut the pain in the short term. Prices are not going down despite oil and gas going down precisely because of this, incomes are going down and inflation is not going down despite we have negative real growth and are in a depression.

Unfortunately is the local population who has to suffer the process. There are no free lunches, period, and trying to fool people like if there were is not going to help. obviously the greeks now about it and now are at the point where they have to decide short term pain or slow decadence through austerity. But getting out of the the euro will be like getting all the austerity in a single dose and they know it.

Obviously is a better option but is not a panacea. better free and poor than 'rich' and a slave.

Roger Erickson said...

We're talking in circles.

As Warren Mosler keeps saying. If all other people on the planet just disappeared, should Greeks all just commit suicide - because their situation would be hopeless?

No? They'd get by by just banding together?

So why not invest a bit more in coordination right now? If that's always the highest return - then why isn't it pursued?

Frictions, obviously. Any aggregate always has 2 competing functions
..rate of dissociation (local greed reflex)
..rate of association (aggregate reflex)

Any aggregate can drive the social equation in either direction. It depends on whether - & when - they can
a) decide which direction to go;
b) analyze what methods will catalyze which direction;
c) explore those social catalysts better/faster/cheaper enough to decide & act successfully.

Greeks need to plant a Trojan Bourse into their own, cultural decision-market - as do cultures everywhere.

Tom Hickey said...

Excellent point, Roger.

Reminds me that a great deal of military training is to instill the aggregate reflex and suppress the local reflexes (chiefly fear in combat that can amplify the flight reflex, drowning out signals of the fight reflex). The military is constantly drilling, not only to build operational proficiency but to instill "team spirit," which is a colloquial label for the aggregate reflex.

Leverage said...

Roger good points. I don't disagree, but it takes a visionary population to see like this.

Greeks have proven to be dysfunctional "beyond redemption" and this reflexes in their aspirations towards the current status quo, it will take a lot of social changes to head towards the path you say.

What I fear is that the path of less resistance will be taken, and deterioration of the social fabric will continue (in Greece and elsewhere). If this is so we are heading towards a very dark era like we once did some centuries ago in Europe.