Citizen Action Monitor

Economist Michael Hudson: How the Greek people could stiff the bankers

No 216 Posted by fw, July 11, 2011

“Look this debt that you say we owe and have to pay off by privatizing our assets, you knew that we rioted. You knew the whole population was there. You knew that the people were asking for a vote. It doesn’t matter that the Socialist Party has sold out. They’re corrupt. The people are not behind this loan and when we repudiate the debt, you can do one of two things: 1) either you can take us out of the Common Market, the European Union, and you can kick Spain and Portugal out; 2) if you do, we’re going to form our own union and this union is not going to pay the debts to you because no country can be expected to push itself into a generation of depression in order to pay creditors who simply create all this credit to lend to governments on computer keyboards.” Economist Michael Hudson

In an interview with Paul Jay of The Real News Network, economist Michael Hudson discusses the significance of the Greek parliament’s passage of austerity measures, speculates on possible outcomes, explains why ordinary Americans should care, and alleges that Treasury Secretary Timothy Geithner is prepared to sacrifice Greece so that American banks can make money on Greece’s debts.

Watch the 9-minute interview here. My transcript follows.

INTERVIEW TRANSCRIPT

GREECE A DRESS REHEARSAL FOR UNITED STATES — Paul Jay interviews Michael Hudson, July 11, 2011

Why should Americans care about what’s going on in Greece?

PJ – In Greece, the parliament has passed the austerity measures and, judging by the reaction of the stock markets and investors, everyone was rather pleased with that. Stock markets shot up for the next few days. The euro went up. There was even optimism about the future of the economy. But that’s the whole point – there was optimism on the stock markets and bond investors. In fact, that’s how the whole story’s been covered. It’s all from the point of view of speculators. But what does what’s happening in Greece have to do with ordinary Americans? Now joining us to talk about this is Michael Hudson. Michael is a distinguished research professor at the University of Missouri, Kansas City. He’s the author of Super-Imperialism, The Economic Strategy of American Empire, and he joins us now from New York City.

So, why should ordinary Americans or ordinary North Americans care about what’s going on in Greece?

“You have an identical strategy being used between Greece and the United States”

MH – Because what’s happening in Greece is a dress rehearsal for what’s going on in the United States. Already, a few weeks ago in Athens the protesters had signs up referring to Wisconsin, on the problems here. What’s happening in Greece in the last week is exactly what’s happened in Minnesota with the close down of government. And the demand for privatization – [for] Greece to sell off its roads, it’s land, its port authority, its water and sewer – is just what Illinois [has] been doing, what Chicago’s been doing, what Minnesota’s been told to do and what American cities are trying to do.

Financial interests see this as their chance to privatize Greek and US public assets

So you have an identical strategy being used between Greece and the United States. Greece is the first domino since Iceland. And the financial interests that are looking at the post-2008 debt crisis as a grab-bag think now is the chance for us to make our move. Now we can take all this debt that we’ve built up and we can get out of the financial system, we can turn it into direct ownership of property. We can own the Greek islands, we can own the Greek public domain, just like we can own what Minnesota, Chicago, Wisconsin and California own and all of a sudden have a huge virtual foreclosure process.

PJ – I mean the alternative obviously would be to do something on the tax side, especially in Greece where the wealthy pay no tax at all. Of course the American scenario where they pay some tax but not nearly historic tax rates. But this seems to be one of the prime objectives in the Greece situation, stripping the state of its assets and getting rid of what public ownership there is.

How Iceland president vetoed collapsed Icesave Bank’s bill to UK

MH – Well this is what they tried to do in Iceland after trying to make the Icelandic government, meaning the taxpayers, liable for the bank losses that were basically a result of fraud. And that was stopped in Iceland by the president saying, “Wait a minute. If we’re to push and economy into a generation of economic depression there’d better be a vote on it. Otherwise it’s not legal.” Underlying international law today is the idea that if a debt is taken on by a country it has to be taken on democratically. Although the Icelandic parliament went along with the debt, the Social Democratic Party, the people had voted against it, first of all by over 90 percent and then later they voted a few months ago against being liable for debt, that legally they don’t owe, by 3 to 2. So all of sudden England had to pay out its depositors the money that it owed in the very beginning. It wasn’t able to strong-arm Iceland.

So the Europeans said okay, maybe we’ll have better luck with a country that already is tied into the Eurozone. And Greece, Portugal and Spain are the main governments in trouble. So the government in trouble was the socialist government. In Europe the word ‘socialist’ means right-wing, way to the right. The word ‘conservative’ the equivalent to the Republicans, they’re to the left of the socialists. So the socialists in Europe – I won’t call them national socialists because they’re international socialists – basically they support the financial sector. It’s a travesty . . .

PJ – It’s not so unlike what we’re seeing in Washington with the current Democratic Party administration.

MH – Well you can say it, but it’s a travesty of how the social democratic and labour parties began a century ago.

Parliament’s austerity measures won’t save Greece

PH – When I was reading the business press after the Greece parliament passed the austerity measures and people were buying back into the EU and talking about revived confidence in the European Union and all that, it felt a little bit like Alice in Wonderland territory because everything I’m reading is saying everyone knows sooner or later Greece will default anyway because it really hasn’t solved any problems. So you’re wondering what all the elation is. But then you realize it really is so much about this privatization. They’re elated because they’re going to start picking the bones of the Greek economy.

European bankers trying to force Greece to privatize its public assets

MH – Well in between right now and the time they default there’s going to be a huge foreclosure. So what Europe, what the bankers are playing for is time. The French and the German banks want to take all of their available loans that they have made to the Greek government and turn them over to their own central banks so the European taxpayers, meaning industry and the population, have to pay, not the speculators. So first of all, the banks are going to dump their bad loans on the government just as what happened in Ireland. Secondly, they’re going to try to force the government to privatize the sell-off under depressed conditions everything in the public domain.

Here’s how the Greek people could stiff the bankers

Now, in the American press you have what you refer to as this feeling of irrationality. The press says well they’re just a lot of people rioting. What can they do? What they’re doing is laying a legal foundation for simply repudiating the debt. Because they can now argue:

“Look this debt that you say we owe and have to pay off by privatizing our assets, you knew that we rioted. You knew the whole population was there. You knew that the people were asking for a vote. It doesn’t matter that the Socialist Party has sold out. They’re corrupt. The people are not behind this loan and when we repudiate the debt, you can do one of two things: 1) either you can take us out of the Common Market, the European Union, and you can kick Spain and Portugal out; 2) if you do, we’re going to form our own union and this union is not going to pay the debts to you because no country can be expected to push itself into a generation of depression in order to pay creditors who simply create all this credit to lend to governments on computer keyboards.”

PJ – And the whole thing’s a little rich anyway because those European banks that are putting it to Greece were themselves the recipients of enormous bailouts by the American Fed, which is another reason why this should matter to ordinary Americans.

Geithner’s “deal with the devil” offer to Greece

MH – There’s another factor for Americans. And that was pushing Europe into this right-wing position is the Obama administration, and specifically Geithner, the Secretary of the Treasury, Geithner says, “Wait a minute. American banks have made huge, billion-dollar, maybe, for all we known, a trillion dollar bet that the Greeks will repay us. They made derivative plays, they’ve made cross-party insurance and American banks would lose money.” Now, if there’s a choice between American banks losing one dollar and Europe going into neo-feudalism for a generation, Geithner will support the one dollar. He says, “Sacrifice yourself. Throw yourself on the stake so that our banks can make money on their debts.” And the European bankers obey.

PJ – I’m guessing we have not heard the last from the Greek people or the Spanish people about all of this?

Americans should brace themselves for their own deal with the devil from Obama

MH – You can look at what’s happening in Greece when it says cut back your pensions, cut back your social security, cut back your medical care. This is exactly what we’re going to see done in the next two weeks by the Obama administration.

RELATED READING

  • Deficit Reduction versus Democracy by Shamus Cooke, Countercurrents, July 11, 2011. In Greece the majority of people have exposed the anti-democratic policies of their government, which is trying to impose massive cuts to social programs to fix Greece’s budget problems. Sound familiar? If the Greek government doesn’t change course it will have zero popular backing, i.e., it will be a dictatorship. Obama’s silence on this situation in Greece is very telling. . . .. In order to follow the Greek and Wisconsin examples of massive mobilizations, there must be an organizational push within working class organizations to make it happen. . . . Democracy is no longer expressed in the halls of Congress nor in the White House and must therefore be transferred to the streets.
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