The 101%

The economics and politics of the West are being ruined by the 101%, that brigade of citizens who feel it is their right to consume at least 101% of the value of the taxes they have themselves contributed. And, of course, we are not really talking about a mere 1% above their contributions but vast amounts beyond anything they have contributed themselves. We are beyond safety nets for those who fall through the cracks. This is real money and a major drain on finances.

Two bits of reporting have brought this to mind. There is first Geoffrey Barker’s maunderings in the AFR yesterday. Large swathes of the people of Europe apparently are not in favour of the “austerity” programs being put in place. Whether they live in economies whose governments are bankrupt in many different uses of the term, they want their fair share with fairness related to what they can demand through the ballot box. I particularly like his use of the word “all” in the following passage:

In France, Germany, Greece and elsewhere, voters are challenging the neo-liberal insistence that the imperative of economic efficiency has to trump all notions of fairness and distributive justice.

Well, this so-called fairness doctrine will be the ruin of a great deal. When the Euro finally falls apart, we will see how much the Greeks and others like the inflation that will follow. They can elect who they like but unless the incoming party comes with a magic lantern and genii, unless they get down to work and produce something, there will still be nothing to distribute, and with the Germans not there to bail them out, there will be even less.

Meanwhile the budget here in Australia has raised the standing of the Labor Party at least a tick, and who knows what’s to come? The 101-percenters will not be denied and we have just the government to indulge them at every turn.

 

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44 Responses to The 101%

  1. Annabelle

    Democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing, always to be followed by a dictatorship, then a monarchy.

    –Alexander Tytler (attributed)

  2. JamesK

    It seems inevitable that Greece will be turfed out of the euro tho’ iyt would be better if they voluntarily left it

    Leftism cause moral and spiritual decay in its individual citizens and so it takes a long long time to reverse.

    Meanwhile and for at least the short term more and more people suffer and will suffer in real terms.

    It will be good for the world to see Greece cut adrift to suffer the consequences as a sovereign nation

    It will save far more human suffering in the long term and they might just save their soul.

  3. Sleetmute

    I don’t think you can blame the Greek people for this. They were inappropriately included in the Eurozone by self-aggrandising French and German politicians. As a result, they were basically handed free money by French and German banks on the implied promise that European taxpayers would underwrite the loans. Now, French and German politicians are crying foul and want their money bank from people who could never afford it. Bad luck! It’s like Fannie and Freddie all over again and on a continental scale. I hope the Greeks exit the Euro and so long as they can set a credible monetary policy, they will get moderate inflation and strong growth, like Britain did after exiting the ERM. The losses will be borne by the shareholders of European banks and by French and German citizens, where they belong.

  4. Louis Hissink

    Free money – now that is the problem expressed in a nutshell. The idea of free money seems to have come from the belief that if if interest rates could be dropped to zero, then infinite capital becomes available. I read that somewhere years ago in some exposition of the economics of socialism, but I can’t recall where anymore, but it become stuck in my memory.

    However, if this is how the left, in general, think, then we are indeed facing a period of economic awkwardness, since the general belief of the mob is that, irrespective, society will ensure we are looked after. They just don’t seem to understand that society, and hence government, doesn’t have money of its own. It’s that belief that is the problem – and probably the materialistic equivalent of spiritual utopia.

    If so then we are going to be living in bloody interesting times.

  5. .

    Major Douglas, Keynes, sdfc, chartalism, “modern monetary theory” – it is all the same nonsense.

  6. Myrrdin Seren

    “….economic efficiency has to trump all notions of fairness and distributive justice..”

    Am I missing something – or are most of them in the EU staring down the barrel of mass unemployment and being fairly and equally financially ruined ? With all the historical excitement that thus follows ?

    Reading Ambrose Evans-Pritchard in the UK Tele, about the only way this edifice can be propped up is to make huge transfers of wealth from the remaining productive pockets like Germany, Finland and the Netherlands – at least until they all collectively sink ?

  7. H B Bear

    If the Greeks go back to the drachma they can experience the 10,000% – inflation that is.

    Inflation gets the Germans nervous – a bit like the Japanese and radioactivity for some reason.

  8. Andrew Reynolds

    Steve,
    The more I see of it through this period the more of a fan I am becoming of the Euro. It seems to be acting in some ways like a gold standard. Individual governments are not able to affect its value, cannot borrow too much and expect to be rescued by the printing press and, while the current interest rates are (IMHO) too low, at least they are not directly responding to the short-term needs of a few self-interested actors.
    To me, having Greece drop out of the Euro would only serve to perpetuate the adverse cycle of over-spending, over-borrowing, inflation and devaluation they were stuck in. This period of pain is just acting to sort out some of the structural issues in the Greek economy. If they stick with it then the outcomes will be better than dropping out of the Euro. Staying in means they have to sort out the government finances. Leaving means a lot of short-term pain but staying in the old cycle.

  9. Toxic

    Democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury.

    The perfect but impossible solution: Disenfranchise those who receive more from the government than they pay in taxes.

  10. .

    Sortition, approval voting and referenda.

    That will keep the bastards scared, confused and honest.

  11. .

    REYNOLDS

    I never thought a ponzi banker like you would be a supporter of hard money.

  12. JamesK

    To me, having Greece drop out of the Euro would only serve to perpetuate the adverse cycle of over-spending, over-borrowing, inflation and devaluation they were stuck in.

    Apparently it hasn’t occurred to Andrew Reynolds that the euro is the reason Greece overspent.

    Big german cars and japanese electronics were suddenly cheap to a relatively non-productive society and as a result of being in the eurozone banks were given relative if not absolute European Central Bank guarantees on all loans to the Greek government which they therefore charged at the same interest rates as a loan to the the productive Germans and German state and federal governments.

    I hope Reynolds really isn’t a banker cos he’s clearly irresponsible or clueless or both.

  13. Jc

    Andrew

    Direct and indirect losses would be around 400 billion by some estimates. As soon as they drop out the finger begins to points at the others and their bond markets collapse as they seem to be starting to now.

    This is not a good thing.

    It would best to have the ECB raise liquidity and drop the euro , I think.

  14. Andrew Reynolds

    JamesK,
    The reason the Euro facilitated this was that those who were lending to Greece thought that the Germans would always bail them out. The recent default has put paid to that idea – and good riddance. That was always the key problem. This allowed the lunacy that was the Irish situation, the Italian situation, the Spanish situation and the Portuguese situation to be perpetuated.
    Now that idea has gone, the result is that the rates that each government is paying is related to the risks in lending to each government – but without the associated risk of devaluation, as (effectively) that is gone.
    Much better.
    This will take some time to sort out, but once everyone realises that the result is that governments that over-borrow have no easy way out of the problem the better off the citizens will be.
    Potentially, this is even better than a gold standard – under a gold standard a government could simply re-define the value of its own unit of currency by legislation. Even this option is not available to the governments of the Euro zone. The only real option is to actually fix the problems – however politically difficult it will be.

  15. Andrew Reynolds

    Jc,
    As a short-term fix that might be an option – except they have been trying it to no real avail.
    Having the Greeks (and others) default and having no choice but to balance their budgets (and really balance them – no further borrowing, unlike here) is the best outcome for the long term.

  16. JamesK

    JamesK,
    The reason the Euro facilitated this was that those who were lending to Greece thought that the Germans would always bail them out

    Agreed but that was hardly their fault.

    They were given good reason to think that.

    The ECB was supposed to audit member countries accounts and penalise deficits and debts above published parameters as a % of GDP.

    Now that idea has gone, the result is that the rates that each government is paying is related to the risks in lending to each government – but without the associated risk of devaluation, as (effectively) that is gone.
    Much better.

    Certainly not in the short to medium term.

    Greece’s ability to become productive is stymied becuase of austerity and the euro

    Potentially, this is even better than a gold standard

    You sound like an enthusiastic activist ideologue.

  17. Jc

    Andrew

    If the Greeks leave the euro as I think they will, it’s over, I think.

    The best thing t do is cross your fingers hope the two major parties are voted back in and they don’t leave.

    The liquidity tightening caused by the euro leaving will devastate the world economy because of the knock on mpact I mentioned before.

    At this stage the Greeks have told us they don’t want to reform, so that means an exit.

    There are many permutations to this and I’m not holding to my view in a strong way, but is how I think things will work out.

  18. Jc

    The ECB was supposed to audit member countries accounts and penalise deficits and debts above published parameters as a % of GDP.

    The fucking Germans openly broke the treaty restrictions at the beginning of last decade.

  19. Andrew Reynolds

    JamesK,
    I would agree that it is not better in the short term – but if we all managed our economies for the short term we would just dial up the printing presses. Sure – that’s a disastrous medium term policy, but short term we can all have a party!

    The Euro pact was a dead letter from the start. As soon as it was breached without penalty it was shown for the paper tiger it always was.
    The discipline without it – that of the market – is much better than with it.

    For the last bit – sticks and stones… Try dealing with the actual discussions. Playing the man is never pretty.

  20. Andrew Reynolds

    Jc,
    I’d tend to agree. I am just trying to make the case that staying in, and the Euro generally, is probably better an idea than many would have it.

  21. JamesK

    The Euro pact was a dead letter from the start.

    What making fun of an ideogue like belief is now an ad hom?

    The Euro pact as you call it was more than ECB auditing of national member state accounts it also followed the statements of the leaders of France and Germany to the effect that the the ECB would guarantee loans to member states.

    Banks don’t loan billions of $’s at 1-2
    % on a guess.

    And puleease spare me the self-righteous tosh.

  22. What is true is that socialists can’t help themselves when it comes to other people’s money, it’s their raison d’être

  23. Andrew Reynolds

    JamesK,
    If you are not happy having ad-hom arguments pointed out, then the solution is simple – don’t make them. “You sound like an enthusiastic activist ideologue” was clearly aimed at me as an individual, not my argument. I’m happy to let it rest there if you are.
    .
    As for the rest – they do lend on guesses about the future. That’s all they can do and it is the nature of forecasts, understandings of prior performance, legal frameworks and the other parameters used. They are all educated guesses about the future. It’s called “risk”.
    Get the guess wrong and you may lose. In this case, they got it wrong. The whole Euro pact was designed to protect bankers lending to the Euro area governments. It relied on regulatory structures to try to reduce risk. Those structures, like many other regulatory structures, failed.
    Let’s hope the lesson has been learnt.

  24. JamesK

    You sound like an enthusiastic activist ideologue” was clearly aimed at me as an individual, not my argument.

    Bollox.

    It was aimed at what you said and the way you expressed it.

    And clearly.

  25. Andrew Reynolds

    If you want to believe that, go ahead. How about actually engaging with the discussion?

  26. papachango

    If the Greeks go back to the drachma they can experience the 10,000% – inflation that is.

    Like what happened in 1920s/30s Germany and Zimbabwe more recently? We saw how well that worked out! Golden shower dawn or the commies will take over, then good night irene.

  27. JamesK

    I have.

    I mocked your original fairy tale naiveté and coupled with some salient facts.

    I later pointed out that the euro will only restrict Greece’s ability to be productive.

    Devaluation of the currency is an impetus to produce and export and a dampner on imports.

    All true and hardly difficult.

    And I’m not even a banker let alone an economist.

    You assert in a fanciful manner that the euro is better than the gold standard.

    You haven’t presented even the facsimile of an argument to make the assertion even worthy of consideration let alone credibility.

    Even at a stretch where each state is no longer sovereign it amounts to nothing more than fanciful ideology.

  28. .

    Yeah James, Andrew knows nothing about banking.

    You fucking imbecile.

  29. Andrew Reynolds

    If you want to believe that then, as with the last nonsense of yours, I can’t stop you. Your last three posts were all desperately trying to prove the ridiculous. The rest were not much better.
    You were demonstrably wrong on how banks lend (it has to be a guess – unless you believe banks have crystal balls). Greece has been over-borrowing for decades (or longer) – the Euro had no influence on that. The difference now is that they can’t deflate out of it.
    I’m struggling to find one “fact” on which you were right. Most of it was forecasts – and wrong ones at that.

  30. JC

    I later pointed out that the euro will only restrict Greece’s ability to be productive.

    Devaluation of the currency is an impetus to produce and export and a dampner on imports.

    The Greeks, if they chose could create an internal devaluation, james.

    They could remove all both restrictive labor laws and labor cost adds which amount to a huge % of the wage/salary rate and slap it on VAT. The impact would be to lower the cost of labor and rise the cost of domestic goods and services while making their exports much more competitive. Exports are Vat Free.

    Steve Hanke and John Hopkins economist came up with it.

  31. JamesK

    The Greeks, if they chose could create an internal devaluation, james.

    Well I agree but it’s not an either or proposition.

    Can you imagine the rioting in the streets with the reversal of labour laws and termination payouts?

    The simplest would be soverign control of currency but even that is impossible because now a neodrachma would be immediately valueless rather than influenced by Reserve Bank and national government policy settings.

    I still think they would be better of with a sharp cold bath.

    They need to start behaving like adults rather than spoilt children. Merkozy have tried homourably to give Greece time before the inevitable but Hollande has given the children hope.

  32. Andrew Reynolds

    JamesK,
    Let’s see if we can be civil, hey?

    To pick up on “…the euro will only restrict Greece’s ability to be productive.” This is really starting from the wrong point – it is a very traditional way to look at devaluation. It may be a way – but is it the best way? Dropping out of the Euro will result in the uncertainties inherent in floating exchange rates. Dealing with Greek exporters would then necessarily result in pricing uncertainty – either from the vendor or purchaser side. Given the means of exiting from the Euro, it will take some real time for anything like a stable exchange rate to re-establish itself.
    The method JC suggested, though, take almost no time at all, keeps in place the Euro and also has the side benefit of removing any uncertainty in the pricing of current contracts.

    Your suggested method may be a way of sorting this out – but is it the best way? I very much doubt it.

  33. JamesK

    JamesK,
    Let’s see if we can be civil, hey?

    Andrew give the self-serving condescension a rest.

    It wins you no admiration from this quarter.

    It may be a way – but is it the best way?

    I already said it’s now too late for a safe or optimal sudden change to a neo-drachma in my previous post.

    I think Merkozy honourably tried to buy Greece time before the inevitable.

    It looks with Hollande and the Greek people behaving like folls they’re having even that choice taken away from them.

  34. Andrew Reynolds

    Other than hopping in a cold bath, what do you think the government (whenever one appears) should actually do? You seem to have ow ruled out every possibility mentioned here.

  35. JamesK

    No I haven’t.

    I think exiting the euro is inevitable.

    They needed time before responsibly doing so.

    That timing choice will no longer be theirs very soon.

  36. Andrew Reynolds

    So when you said this: “The simplest would be soverign control of currency but even that is impossible because now a neodrachma would be immediately valueless rather than influenced by Reserve Bank and national government policy settings.”
    Did you actually mean to say “unless” in place of “rather than”?

  37. Lew

    Who gives a stuff? As long as which ever loons are in power in Canberra, when they get booted out of the EU and the value of their currency replicates that of the Weimar Republic(100,000 million Marks for a loaf of bread), don’t decide to shovel billions of borrowed Dollars into the IMF. And as far as the Greeks becoming productive,can someone tell me when was the last time they managed that.

  38. JamesK

    Did you actually mean to say “unless” in place of “rather than”?

    No.

    I’m rather facinated to see where this is heading.

  39. Andrew Reynolds

    You seem to be saying that they should abandon the Euro and take the “…impossible…” step of adopting a currency that would be “…immediately valueless…”.
    A fascinating thought – or have I mis-understood?

  40. JamesK

    Apparently just fascinating

  41. Andrew Reynolds

    So – you were serious, then? Odd, at best. If that is really the prescription of someone who seems ot claim to be an un-enthusiastic non-activist anti-ideologue, then I am happy you accused me of being the opposite.

  42. JamesK

    I said the Merkozy plan was an good interim but that exiting the eurozone is inevitable.

    Perhaps you were indeed confused.

    They should actually have exited 2 years ago.

  43. Andrew Reynolds

    Yet you were the one who called that step impossible. Advocating the impossible is always fascinating.

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