From:   Snafu <snafu@thething.it>
Sent time:   Sunday, November 06, 2011 8:36:18 PM
To:   september17@googlegroups.com
Subject:   Re: [september17discuss] Greek PM Papandreou resigns, forms coalition with conservatives, continues austerity
 

there is no real direct relationship between the Greek debt and the

bankers who own it. Over the past few years the Greek government had to

keep raising the interest rates on the state bonds in order to borrow

money and finance its operations. In July 2011, the two-year interest

rates on the Greek bonds reached an astronomical 26%. Once again,

Standard&Poor and other rating agencies played a key role in downgrading

the value of the bonds all the way down to "junk" in 2010, forcing the

government to raise the interest rates to the current unsustainable

levels. This means that anything that is contributed by the Greek

taxpayers goes to pay only for the interest rates (not even) and does

not attack the debt itself. Further as the government is forced to

privatize everything and engage in massive layoffs in the public sector,

the economy keeps plummeting, in turn increasing the debt. This is a

downward spiral for which there is no end in sight and that will cause

the Greek default. It is a certainty and it should have been done much

earlier.

 

The European and U.S. banks who own the state bonds of countries such as

Greece, Portugal, Spain, and Italy are "exposed" to these risks and

therefore see their capitalization plummet on the stock market. As a

result, France and Germany had to rush to announce the creation of a new

bailout fund to protect the banks from such exposure. Such a fund,

however, will be too small to bail out the Italian debt and this is the

reason why they are keeping Greece alive--in spite of the fact that

everybody knows it is clinically dead. Because the consequences of a

Greek default could ignite panic on the stock markets and hence massive

speculation on the banks that are more exposed, they try to avoid this

risk by keeping the Greeks attached to the umbilical cord of the IMF/EU

loan.

 

As I said before, as supposedly neutral evaluators of financial risk,

the rating agencies are becoming de facto a new form of sovereign power

that stands above the states and the banks themselves. Their power is

simply immense. The relationship between the states and those who own

their debt is mediated by the rating agencies' risk assessment. If China

owns over a trillion of the US debt that is considered a good

investment... until S&P downgrades the U.S. debt. Once the rating on

your debt becomes too low you have to raise the interests on the state

bonds in order to sell them, and once these rates begin exceeding 6% or

so, you are in serious trouble as the GDP in mature capitalist countries

does not grow fast enough to pay for anything but the interests.

 

On 11/6/11 4:36 PM, Doug Singsen wrote:

> http://www.guardian.co.uk/world/2011/nov/06/papandreou-greek-leaders-unity-deal

>

> This was probably inevitable. All the Greek pro-capitalist parties

> have now merged, leaving the anticapitalist parties of the far left as

> the only political parties outside the "grand coalition" in favor of

> austerity. The anticapitalist parties have been key leaders in the

> fight against austerity and have now achieved unprecedented levels of

> popular support as a result. Papandreou's party, PASOK, is supposedly

> "socialist" but in fact has defended the interests of the bankers and

> speculators over those of Greek workers (much like the Democrats in

> the US). The whole point of slashing social services and laying off

> workers is to cut government expenses so they can pay back more of

> their loans to banks and speculators, whose high interest rates helped

> drive up the Greek debt in the first place. (The other major factors

> in the creation of massive Greek debt were the inability of Greek

> industry to compete with Germany and other European powers, the lack

> of monetary flexibility caused by Greece's entry into the Eurozone,

> and the economic collapse of 2008, which was also caused by the banks

> and speculators. The supposed "laziness" and "overspending" of the

> Greek government that the US media is always talking about are not the

> real economic causes of Greece's crisis, but rather are designed to

> distract attention away from the real causes, which all go back to the

> interests of the banks, international corporations, and speculators.)

> Unions, most of which had previously supported PASOK, are now in the

> process of breaking with PASOK and allying with the anticapitalist left.

>

> Doug

 

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