The following is about the Ukraine, hardly a model of transparency, accountability and democracy. But it is interesting for what it tell us about the thinking of the great imperial powers (GIPs). On the one hand today’s GIPs make a great to-do about the need for democracy, often insisting that it is a condition for aid or IMF financing. On the other, they choose to ride roughshod over Greece’s democracy…and demand, e.g. that Greece’s forthcoming elections be cancelled, or postponed – in case they reject the demands of the GIPs. (See Wolfgang Munchau’s piece ‘Greece must default if it wants democracy’ in the Financial Times of 20 February, 2012.)
And so we read about the Ukraine, which it seems is just not democratic enough for the GIPs. As a result, and again according to the FT (14 February, 2012)
“It’s looking less and less likely that Ukraine, its fragile economy bracing for a eurozone-driven slowdown, will get a boost of confidence and cash any time soon from the International Monetary Fund.
In a weekend interview on Ukraine’s TVi television channel, Philip H Gordon, US assistant secretary of state, said:
“Typically the IMF will focus in on more narrow criteria that are solely in the economic area. Those conditions are hard enough to meet. But I do think that in reality if a country is seen to be violating its democratic obligations, it becomes more difficult for international institutions to support them, especially in this climate where there’s a lot of pressure on funding and a lot of countries that need support.”
Our advice to the people of Greece: it would be unwise to alienate one of the Great Imperial Powers by “violating..democratic obligations”. If Greece were to do so, it would become “more and more difficult for international institutions to support them…..”
“The main opposition candidate for the French presidency has spelt out his intention to reopen discussions on the new European treaty with all signatory countries if he wins the election, a move that would throw into doubt the results of months of negotiations by his opponent Nicolas Sarkozy and the German chancellor Angela Merkel.
“In France the treaty is ratified by parliament, not the head of state … We have a window of opportunity [to renegotiate],” (Françoise Hollande) said.
“Having secured parliamentary approval against a backdrop of violent protest across Greece, Athens must ……produce written commitments from the main party leaders that they will stick to the programme before and after elections which could come as soon as April.”
I appeared on Al Jazeera’s ‘Inside Story’ yesterday to discuss Greece and was joined by Greek Journalist Matina Stavis and Political Analyst George Kapopoulos. During the panel discussion I stated that:
“The Troika are trying to ensure that the money goes straight to the creditors to prevent Greece from defaulting, but in doing so they are stripping Greece of her economic and political sovereignty. They hope to stabilise the situation and make sure that the bankers and hedge funds get paid, and that pensioners and the poor don’t take priority over them.”
Dear patient readers: apologies for another long absence. I have been travelling and working in Africa, and have just not had the time – nor the bandwidth – to blog. Plus, I have found micro-blogging – via Twitter in particular – a satisfying way of staying abreast of developments, as well as logging and archiving both the insights of others and my own comments. I have also joined Google + having despaired of Facebook. The Goldman-Sachs-powered IPO was the last straw. Not an entirely rational reaction, for sure, but I am of an age where my gut instinct increasingly prevails.
I am posting here my contribution to the New Statesman ‘Staggers’ Blog today: on the absurdity of the IFS’s economic analysis, and the malfunctioning of the banking system. Back again soon.
“The humiliation of Fred Goodwin may have appeased a public baying for vengeance, but has done little to fix the broken global banking system or reverse the Second Great Depression. But then the public have been given very little leadership as to how to address the causes of this crisis. Politicians, economists, central bankers and think-tanks have both created an almighty mess, but also sown confusion as to the true reasons for catastrophic economic failure. Instead the public have deliberately been blind-sided, distracted into focussing on a) the public sector and b) a consequence of the crisis: the public finances.
Fred Goodwin’s hounding shows that while you can fool the people some of the time, you can’t do so all of the time. Nevertheless, stripping Goodwin of his knighthood does not fix the banking system, or help the economy recover.
Despite missing the 2007 global crisis completely and despite dismal policy failures, economists’ predictions for 2011 were uniformly optimistic.
“The recovery is expected to proceed at a reasonably modest pace”
was what the CBI predicted in December, 2010, while as always, warning firmly about the one threat they obsess over:
“We now forecast higher inflation in 2011.”
As 2011 fades away, recovery appears remote, and inflation is expected to fall like a stone in January when George Osborne’s misguided VAT rise drops out.
I am no professor of economics; nor do I have a post at the London School of Economics, but in 2009, at a time when everyone was talking up the recovery, I warned, in an interview with The Times, that ‘ the worst of the slump was still to come’.
I was confident of this prediction because New Labour, Liberal and Conservative politicians were building a consensus around austerity – and had not yet tackled the root causes of the crisis.
So, smart Alec (I hear you say) what lies ahead in 2012?
My humble and not very cheering view is that because of the vast unpayable debts of the global private banking sector; because policy makers will not address the private banking crisis; and finally, because politicians wrongheadedly persist with austerity – we can expect things to get a lot worse.
This week I appeared on Newsnight with Gillian Tett of the FT and Louise Cooper of BGC Partners. We discussed our graphs of 2011 (see mine below) and wider questions around the global financial crisis this year – and how ecnomists and policy makers need to respond.
I was asked, along with 9 other top economists, to share my ‘graph of 2011′ with BBC Newsnight as part of their review of the economic year. I chose the chart above:
“This is the chart that struck me most forcibly, both for what it tells us about the debts of the private sector, in particular the private finance sector; but also because of what the Treasury chose not to tell us: that the public debt to GDP ratio is tiny compared to private sector debt to GDP ratio.”
Last week I appeared on Russia’s CrossTalk TV to discuss the Eurozone with James Meadway of the new economics foundation and Joost van Iersel President of the Europe Economic and Social Committee steering committee. Watch the video below:
With thanks to Nomura International Securities and Bloomberg
I have been banging on about how this is a global banking crisis, not a eurozone crisis, for some time now. So I find it poignant to watch European politicians and their advisers in Brussels, piling the pressure on their own shoulders and frantically sweating over a solution to “the eurozone crisis”.
The fact is the eurozone is a side show. This is a global financial crisis, and Graph 1 proves it. It shows the Credit Default Swap (CDS) Spreads on EU and US banks (hat tip to Uldis Zelmenis).
Last week I gave a talk in Brussels at a debate moderated by Pierre Defraigne, Executive Director of the Madariaga – College of Europe Foundation. It was ACitizen’s Controversy with Lars Feld, Professor of Economic Policy at the University of Freiburg and Member of the German Council of Economic Experts.