What is meant by this phrase “orderly default” which is all over the news this morning? It sounds so sensible. I think it is another entry in the liars lexicon.
When the banks and pundits say orderly, they mean orderly for the banks. Not orderly for Greece or the Greeks or the Portuguese or Irish.
Greece is going to default. Everyone finally admits this after denying it vehemently. The simple fact is that the Greek economy is not growing fast enough to have any hope of even keeping pace with their debts and the interest on them. Their debts are accumulating faster than their economy is growing. In fact the Greek economy is hardly growing at all – less than 1% at best.
So the ‘orderly’ plan is to give Greece loans to extend the time before the mathematics of compound interest and a contracting economy catch up with them. In this time the plan is to pay off lumps of the principle by selling organs. Organs of the state; a port here, a phone system there. The fisherman sells his boat and his net to clear his debts. And then what? Well then he is fodder for the wage pool and the loan shark.
But ‘putting off’ the inevitable begs the question – why put it off? Who is benefiting by putting it off? If Greece is going to default why not do it sooner, because in the mean time the Greeks are suffering massive violence to the fabric of their society and for what? Certainly not to avoid default. We already know they are going to. It’s just a question of sooner or later. So why later? Who benefits?
The answer is, the banks. Particularly the banks of France and Germany. They would like default put off in the hope that as time goes by their broader financial circumstances improve so that they would be better able to deal with whatever losses come from an eventual Greek default. Put if off long enough and maybe there won’t be any losses. Which sounds sensible – for the banks. But while the delay buys time, literally, for the Banks to improve their broader situation the exact opposite happens to Greece and the Greek people. The longer they wait to default, the longer they struggle to pay off debts that are crushing them and which they will have to default on eventually, the worse their broader situation gets. So the wait and do it slowly scenario is anything but orderly for the Greek people.
So again, why is this slow, ‘orderly’ torture of Greece being advocated?
I think the answer is that for as long as the ‘orderly default’ plan can be enforced upon the Greeks it provides the banks with the delicious prospect of asset stripping an entire nation.
Because that is exaclty what is going on in Greece . What the ‘orderly’ default provides is a window of opportunity when predatory financial players can strip Greece and in future maybe Portugal and Ireland as well, of everything the banks could never get their hands on in any other circumstance.
If you are a business and you get in trouble you file for bankruptcy protection. That is, you protect your assets from predators while you sort out your debts, defaulting on those you cannot pay, cutting deals to pay some small percentage of each debt and then emerge as a chastened but going concern at the other end. This is precisely what Greece and the Greeks are being denied by their own government. The ‘orderly default’ plan is to keep Greece out of bankruptcy protection, keep them paying, keep the nation in a state of semi-anarchy and panic with seemingly no way out of the mess – except by selling off at fire sale prices whatever their creditors fancy – for as long as possible .
This is very orderly if you are one of the banks. You lose nothing. The tax payers in Greece and in your own nations lose because they pick up the tab of keeping the torture going through endless bail outs. The tax payers are like the torturer’s assistant whose job is to revive the victim with a glass of water, so they can be tortured some more. Bail outs solve nothing for Greece, but do serve admirably for keeping the present ‘open for pillaging’ situation going.
In this defenseless state you can then asset strip the nation for as long as the local government can keep the lid on all-out uprising.
And best of all, at the end of this process, you will have a ruined economy, with impoverished people who will work for nothing, without any labour laws left to protect them – since those pesky things will have been swept aside in the austerity measures – and you will also be the new owners of all the assets the people and their nation once owned.
Not only does that give you a compliant nation and workforce, but having such a cowed and defeated place close to hand will serve wonderfully as a crow bar for uprooting any ‘restrictive’ and ‘inflexible’ labour laws and practices in neighbouring countries. And since that is explicitly what the IMF talked about in their blue print for Europe’s future, it is hard not to see this as at least part of the intention of the ‘orderly default’.
Oh dear Golem.
You do realise that your spelling goes to pot when you lose your temper!! oh well better than me, I start effing and jeffing.
A top class addition to the liars lexicon which i hope will be your next book.
bill40
Bill,
thanks for the warning. Not only can I not spell but I can't type either. I do get angry and then I feel in a hurry to press the 'post' button when really I should calm down and run spell check to catch all the errors in the bits I add at the last minute. Sorry!
Hope they're all fixed now.
Game theory would suggest that the delay is engineered in to perpetuate profiteering.
The plan all along is to see how far you can push the Austerity meausures. If this works without a push-back then hey presto profit streams accumulate to the rentier.
If default occurs, then no problem, the profiteers have lined their pockets to bursting point!
More and more analysis of a system already well exposed as an anathema to civilization and democracy.
What is needed is the development of structured thinking and strategies to counter and destroy it before it entirely corrupts the core values of society.
Its 'power' is a myth, and its 'wealth' is surreal, and its defence based on engineered bewilderment; while the confusion caused is marketed as a complicated formula that is reliant on the speed of its spin for survival.
This we already know and are suffering the experience.
What we need from the dissenting gurus, is where, in what manner and how deep to apply the knife in order to achieve the best prognosis.
Wailing at a cancer has never worked.
Golem
I couldn't care less about spelling or grammar only the wonderful message you give out. I will play the euro lottery this week and if I ever win I promise to finance you and your message to the widest possible audience.
I repeat that is a promise!
Bill,
What a kind and generous thing to say. Thank you.
Dear Golem,
Amagerbanken, Denmark, revisited…
Soon "bail-in" will be the buzz-word, to hell with "bail-outs" and "orderly defaults":
http://www.bloomberg.com/news/2011-05-16/sweden-wants-bail-in-model-to-target-senior-bank-creditors.html
Maybe some of your Danish readers can give us an up-date on attempts to soften the wind-down rules that so disturb rating agencies and the financial class?
41 % "hair cut"? More like cutting everything away from the chest and up. Not even medicine has a word for that kind of surgery.
You think 40+ % may be indicative of the amount of rotting "assets" in European banks?
Thank god for sanity somewhere! What I haven't been able to get my head round in all of this is why such a hardline stance on Greece? I mean why would the ratings agencies come out today and say that a parital debt forvigeness will be seen as a default?
To me it seemed like madness. Like trying – on purpose – to make a bad situation worse. Surely the only sane course of action (other than total debt forgiveness but I don't see that happening any time soon under our lords and masters) is a partial re-structuring of the debt that involves writing some of it off.
Yes sure – that means some creditors take a hit – but much less of one than they'll take if the Greek population decide to just take down the government and force a full on, uncontrolled default right?
So why not hedge your bets and take a bit of a hit, give Greece a bit of wiggle room and hope for the best?
Why this hardline stance? Then it clicked. Of course if they let Greece off some of the debt – then no doubt they'll have Portugal and Spain and Ireland demanding the same. So they see their only option as playing hardball.
I'd like to know how you think this will play out Golem? I mean if the Germans do give in and don't force some haircuts on bondholders and the EU gives Greece yet more money (well not 'gives' as such as forces upon with intolerable strings attached but you know semantics and all that) how long do you think the markets will calm down for? Months, a year or two? Weeks?
I do believe that you can't cure debt with debt and I do believe Greece will ultimately default, I just wonder just how long they can stretch this out for?
"The fisherman sells his boat and his net to clear his debts. And then what? Well then he is fodder for the wage pool and the loan shark."
What happens is that the fisherman sells his children into slavery and then becomes one himself.
A good description of the results of this process in a society can be found in the Bible, the Old Testament book of Amos.
Crinkly & Ragged Arsed Philosophers is right.
Jay is right and wrong! They are already in slavery. Debt bondage ends when the creditor is paid. But they cannot be paid. If anyone were to ascertain who these few creditors are, the net beneficiaries, they could be regarded as enemies of the Greek state and appropriate action taken. They are more conscious of this as they have read the Wizard of OZ.
The disease has left rotten flesh. The disease is borrowing excessively. Cap that and the problem disappears.
Thanks Golem, we don't mind the errors as we understand your anger. While things appear to be getting worse, more people are aware of the contents of Amos and that debts and laws mean slavery!
princesschipchops – excuse me for answering but by definition a myth is never played out. You simply keep adding scenarios to it.
That's what makes myths so valuable to those who by chance or design consider they benefit from it.
princesschipchops, looks like the Germans have capitulated:
http://www.guardian.co.uk/world/2011/jun/17/greece-bailout-germany-private-banks
Markets recover…trebles all round!!!
Golem thanks and I second Bills idea that the Lexicon should form your next book but it was the this phrase that resonated with me …
" provides the banks with the delicious prospect of asset stripping an entire nation"
Asset stripping a nation!!
German banks asset stripping Greece!
I don't know but the thought that there can be economic invasion without the tanks would drive me if I was a Greek to some pretty un-euro vision extremes. I mean I was told for a long time Germans were not allowed to even own land in Crete. Memories may be short
( A friends daughter of 19 at University had not heard of Elizabeth Taylor!)
but not THAT short. Once the issue begins to take on that aspect I can see very real rioting and worse. And I could see it sparking similar trouble within Germany too among the young who have no appetite for emulating their grandfather's military exploits using bank debts as the storm troops.
ASSET STRIPPING A NATION!
Its a brilliant phrase because it is exactly what is on the cards… and yet the EU bureaucrats cant see what pure dynamite that might turn out to be.
wirplit
Yes, the asset stripping of a nation will likely lead to a resurgence in Nationalism.
The Wall of Illusions hides many inherent tensions:
http://forensicstatistician.wordpress.com/2011/06/07/wall-of-illusions/
"towards the end of the nineteenth century the world economy started to fracture. National resistance against the liberal state’s free-market methods was coupled with a breakdown of international finance. The first world war failed to address the inherent problems as many nations tried to kick start the Laissez-Faire agenda, culminating in the boom and bust of the late 1920s. In [Polanyi's] view protectionist policies emerged in the 1930s as a reaction to the failure of un-fettered Capitalism. In their own different ways the New Deal, Communism and Fascism were the social responses to the collapse of International Capitalism; a way for society to re-assert it’s primacy over the market."
Forensic
I cant say I am at all in favour of nationalism but I think this wave of protest is likely to transcend such responses as its just as true for Greece or Portugal or Ireland and ultimately for us all. This is more a realization that Capital has no country and is out to screw us.
If actual invasion arouses people's patriotism which is the often passionate response to defend the place where you and your family and community live.. then this kind of financial invasion…using debt ( and debt that is as Hawkeye describes it "odious") might and I'd say should arouse just as intense a response.
The trouble is at the moment the German voter is not seeing it like this they see profligate Greece and good tax paying Germany propping them up.
Even a Guardian article today on the reaction in Athens never once made the point that Golem was making above ….in whose benefit is this default being delayed?.
And without being nationalist about it is time the German people recognized what their own banks were up to not just in Greece but in Ireland. And not just them but French and British banks too.
Maybe they do but its not the impression I am getting from the German Polls on the subject.
This is something that has to to take on international dimensions.