by Ramin Mazaheri
Part of the problem of criticizing the “pan-European project” is that you have multiple bodies which overlap. And you also have some nations which are part of one, but not another. Or which pay into one body, but abstain from another.
A clear analysis is needed of the most important part of the pan-European project: the Eurozone. The Eurozone is the most important because it controls the money in the world’s largest macro-economy.
By comparison, the European Union is mainly a regulatory body, and their extremely modest annual budget – about the size of Denmark’s – reflects that.
There is a relentless focus among Western media on the European Union over the Eurozone, but this article hopes to put the emphasis where it should be: follow the money. But to examine the Eurozone you have to bring up something which mainstream media likes to ignore – the Eurogroup.
The Eurogroup rules the Eurozone and its 19 member states. It also governs the “bailouts” to member nations like Greece.
Basically, if you find the EU to be undemocratic…well, you haven’t seen anything like the Eurogroup.
The Eurogroup: The banker cabal hidden in plain sight
I reviewed the fake-leftist book “And the Weak Suffer What They Must?” by former Greek Finance Minister Yanis Varoufakis. The analysis and proffered solutions from this self-declared “erratic Marxist” are not Marxist at all, but his eyewitness unveiling of the cartelized capitalist structure that is the Eurogroup has truly been an enormous contribution to European democracy.
The Eurogroup is, at face value, an informal monthly meeting of the finance ministers of the member countries. Ah, government representatives getting together for discussions and planning – sounds democratic, right? Hardly….
I will quote Varoufakis often, because his matter-of-fact condemnations will carry more weight than my own:
“Moreover, the Eurogroup, where all the important economic decisions are taken, is a body that does not even exist in European law, that operates on the basis that the ‘strong do as they please while the weak suffer what they must’, that keeps no minutes of its proceedings, and whose only rule is that its deliberations are confidential – that is, not to be shared with Europe’s citizenry. It is a set-up designed to preclude any sovereignty traceable back to the people of Europe.”
So there are no rules, no records, no democratic process and no democratic accountability…and this is what is in charge of the world’s largest economic engine.
These are appalling realities. They cannot be diffused widely enough or often enough.
Thanks to the whistle-blowing of Varoufakis, we also know that there is also essentially no discussion at Eurogroup meetings: The Troika (the IMF, European Central Bank and European Commission) initiates, dominates and outlines the terms…and then the finance minister-members vote. In short, the overwhelming majority of participants in the group which governs economic policy (and thus social policy) are bankers, former bankers or intimately tied to high finance. When bankers run economic policy, one shouldn’t be surprised if the resulting social policy is for the benefit of bankers.
As Varoufakis relates, maybe the finance ministers will speak, or maybe they won’t even be allowed to speak. Maybe finance ministers will be allowed to disseminate documents which support the positions taken by their democratically-elected governments, or maybe they won’t even be allowed to champion a differing position. Many will justifiably ask: What’s the point of voting in any politician if they have little to no chance of influencing policy at the highest level – the Eurogroup?
The Eurogroup is not an EU institution and cannot declare any legally-binding decisions. It can never be blamed for a bad decision, nor held accountable, because it is not answerable to any parliament or body politic whatsoever.
In short: it is the perfect cabal.
An undemocratic Eurozone produces only hopeless non-democracies
It is axiomatic that that when politics does not rule – where there is no law or regulation – the rich are the rulers. It is also axiomatic that in a climate of total deregulation the richest nation will benefit the most.
Unsurprisingly, the US pioneered the concept of mass deregulation in the early 1980s, which they foisted on Europe as much as possible in order to ensure the status quo-dominance of US corporations. Washington may have even created a Frankenstein’s monster, because the Eurogroup has achieved the American dream of total deregulation even more than in America.
We owe Varoufakis a debt of gratitude for extensively detailing the utter lack of democracy within the Eurogroup. What’s absolutely appalling is that most media do not hammer these facts repeatedly, but even seem totally unaware of them.
In this sense – critique of the status quo – Varoufakis’ book is essential reading for Europeans who want to know what principles their society really is based upon. For all the nonsense about “European work-life balance” and “third way politics”…that may have applied pre-Eurozone, but it sure doesn’t apply anymore.
After all, what do you get when your leadership group has no democracy, no oversight and no records? You get anti-democratic oligarchy: the richer members controlling the poorer ones:
“…Dr. Schauble and the Eurogroup had succeeded in overthrowing our government by asphyxiating us enough for Prime Minster Tsipras to surrender…our newly elected government could choose any policy mix it liked as long as it was virtually identical to the calamitous one imposed by the Troika on previous Greek governments.”
The Eurozone is, and has always been from its inception as the European Coal and Steel Community in 1951, merely a cartel of high finance which wants only to preserve its economic dominance and monopolies. The Eurogroup is the most anti-democratic, the most brutal and the most hypocritical aspect of the pan-European project, and Varoufakis makes that clear in multiple appalling passages.
“When I asked a friend who played a central role in Greece’s induction talks how they had managed to convince Germany to let Greece into the Eurozone, his answer was fantastically unassuming: ‘We just copied everything the Italians had done, and a few tricks used by Germany itself. And when they threatened to veto our entry, we threatened them back that we would tell the world what Italy and Germany had been up to.”
“Give me a part of the action, or I rat you out.” Is that not the very definition of criminal collusion on the part of Greece’s 1% with the 1%-ers in other nations?
“Of course, the Maastricht Criteria’s real purpose was to allow into the Eurozone countries that did not meet these criteria and then force them to do whatever it demanded to meet them.”
Only France, Ireland and Denmark held referendums on Maastricht ratification, anyway.
“When it comes to countries like Germany and France, the rules are meant to be broken. But for countries like Greece the rules are the rules are the rules! Even if they are unworkable and unenforceable. The Greek state can default against the weakest of Greek and non-Greek citizens, against pension funds and the like, but its debts to the ECB are sacrosanct. They have to be paid come what may. But how?”
The loans are not meant to be repaid, of course, but to exist indefinitely so that the 1% can live in ease thanks to the curse of compound interest.
But who was the first country to break the EU fiscal deficit rules? France and Germany, in 2003, and they united their power to make sure they did not face sanctions (and certainly not the Troika). But in 2011, when countries like Ireland, Greece and others were loaded beyond economic recognition with (French and German) banker bailout debt, it was a totally different story.
Francois Hollande, notably, broke the fiscal deficit rules when France wanted to increase military spending after the Bataclan attacks. Military spending, of course, is always ok for the 1%, so the increase was approved.
France just announced that they will be under the fiscal deficit rule of 3% this year – one year early. Even if the “fiscal deficit rule” fig leaf has withered from overuse, no matter – austerity will continue anyway in 2018 with 16 billion euros of cuts. Housing and Job Ministries will be slashed, and the major cuts to social security will be paid for by slashing the already poverty-line incomes of the elderly.
These were just a handful of examples of Eurogroup’s hypocrisy/tyranny/treachery listed by Varoufakis, but rest assured that I could add many others.
Just for fun – remember Iceland?
And yet to be against the European project makes you a racist, jingoistic, hillbilly, deplorable….
Iceland – which we all looked at with horror in 2009, assuming they would be in debt for generations AND also living on what must be a frozen and lonely speck of an island – has just been declared the “3rd happiest country” according to the UN.
I guess Iceland is a bunch of deplorable racists, because they cancelled their plans to join the EU. Well, Iceland has one thing which Marx valued perhaps above all: the right to determine their own destiny in order to fulfill their potential:
“‘Surely there is no room for small sovereign countries in this globalized world,’ I was told by another finance minister during a break in a Eurogroup meeting. ‘Iceland can never truly be sovereign,’ he concluded….However limited these choices might be, Iceland’s body politic retains absolutely authority to hold its elected officials accountable for the decisions they have reached within the nation’s exogenous constraints and to strike down every piece of legislation that it has decided upon in the past. In this sense, small, powerless Iceland continues to enjoy full sovereignty while the comparatively omnipotent European Union has been stripped of all forms of sovereignty.”
It’s a pretty bad scene when you can’t even stand up for yourself as much as an Icelander….
Can we combine the Eurogroup with a parliament? Not in real life….
What is clear is that the Eurogroup operates with even more power than the US Federal Reserve and the Bank of Japan because there is absolutely zero citizen accountability. Right now, the Troika steers the 19 national budgets the way they want, with Germany their public Rottweiler.
But now you say that you want Eurogroup citizen accountability? You mean, regarding the crucial questions of national budgets and are they in line with the rules/sound economic thinking?
Ok then, a “leviathan” in Varoufakis’ words (or perhaps just a “Eurozone Finance Minister”), must be created to accept or reject the 19 national budgets. But you can’t just have an executive branch – you need a legislative branch as well. What is this, a state of emergency, where laws get made by decree and cops are the judges? Of course that’s unacceptable in the freedom-loving West, don’t be fatuous….
So there are 3 minimum conditions for this Eurozone Parliament:
1) The Eurozone Parliament can hire or fire the new “Eurozone Finance Minister”. 2) It must approve the final contents of every national budget. 3) The Parliament’s powers are clearly defined by a Eurozone Constitution.
This would move the Eurogroup from the current cabal system to 18th century bourgeois democracy; from the Dark Ages to the Enlightenment, but well short of the Industrial, Socialist and Digital Revolutions.
Regardless of how ultimately reactionary such an “improvement” would be, Varoufakis acknowledges that all of this speculation is a political impossibility:
“It is crystal clear that at least two of these conditions will not be met. Neither the German government nor the Parisian elites would countenance allowing the euro chamber to hire or fire the leviathan. Nor would they dare embark upon the writing of a euro constitution.”
This means it would take a true revolution in ideology and practice to even get these paltry bourgeois powers added to the Eurozone. And why would The People make a true revolution…and then be content with something so pathetically inadequate and unmodern?
In keeping with a historical theme I elaborated in the previous article of this 7-part series, France’s historic effort for an anti-austerity Eurozone, France in 2017 remains far more progressive than their slightly-more dominant neighbor to the east: Macron wants a finance minister, parliament and budget for the Eurozone…but he’s not going to get it. Merkel has only expressed tepid proposal for a Eurozone Budget Minister, and two things appear likely: he or she will be German, and Germany will insist that the post holds much less power than the other 18 Eurozone members would prefer. After all, why would Germany want to change the status quo? As that article discussed, Germany has been a rabidly anti-communist, pro-American, economically-imperialist country ever since the US decided shortly after WWII that West Germany was to be reindustrialized in order to become their main client state in Europe.
What does have a lot of support from France and Germany is a “European Monetary Fund”, which would simply codify the current bailout fund.
Democracy can wait, but safeguarding bank bailouts cannot, LOL….
The first rule of Eurogroup is: ‘You don’t talk about Eurogroup!’
Such facts make it clear why the Eurogroup cannot be considered compatible with democracy, and thus cannot be supported. Full stop.
You might support creating a new Eurozone or changes to the Eurozone structure, but supporting the current Eurozone is simply morally indefensible, and you don’t have to be an open communist like me to see that.
What will you get if you keep supporting it, like by voting for mainstream politicians or fake “outsiders” like Macron? You will get exactly what has occurred ever since the Eurozone project began in earnest after the fall of the Bretton Woods monetary system/gold standard in 1971 – crisis and austerity across the Eurozone:
“Each one of those heart-rending attempts at monetary union led to the same pattern: a promising beginning that soon degenerated into tears and recriminations as economic warfare erupted and recession impoverished the weakest Europeans.”
Hmmm, efforts at capitalism turned out typically-capitalist results…shocking.
The secret is out about the Eurozone’s false prosperity of the late 1990s and 2000s – it was all built on the ruses of high finance. But – and this actually really important right now – nothing has been fixed since the 2012 sovereign debt crisis:
“Since then it has been in a deep crisis reinforced largely by the European Union’s denial that there is anything the matter with its currency’s rules, as opposed to their enforcement.”
Should we be surprised that the banker cabal that is the Eurogroup has concocted a “recovery” which has only targeted the needs of bankers?
The Quantitative Easing that is the alleged “fix” has only gone to the 1% and fueled property price bubbles and stock bubbles; the Eurozone’s average growth rate – the “real economy” – since 2011 has been 0.8% – total stagnation.
What’s amazing is the mass denial – the real propaganda effort – that back in June a pathetic projected 1.7% growth rate for the Eurozone qualified as a “surprise recovery”. Jobs don’t even begin to be created until 1.5%…and unemployment is essentially stuck at record highs in multiple countries. This makes the projected growth rates of 1.8% and 1.7% for the next two years just as pathetically inadequate.
I can best describe the media hypnosis like this: If a bully punched you 10 times yesterday, but only 8 times today, I suppose you could say that “things are getting better”…I would hope that no one paid you for that analysis, however.
What’s certain is that QE has to stop soon, simply because they are nearly out of bonds to purchase.
There’s no reason why they should even be buying bonds from economically healthy, trade surplus Germany, LOL, but the ECB will reach their 33 percent limit of debt in Germany this spring, at the current rate. Germany gets paid first, of course, not the countries which actually need it – Greece is excluded from QE.
And what happens when Germany’s 1% can’t get free money? Well, I can tell you it’s not: they finally start playing nice.
I have another theory: High finance/financial media around the world (and not just Germany) has decided they are not reaping enough from the years of no-questions-asked free money – years of gutting Greece has them sharpening up their Troika tools for the tastier meals of Spain and Italy. Therefore, they are trying to dupe/pressure everyone into stopping QE – thus the crazy nonsense that 1.7% annual growth is a “recovery”.
So, given all these real facts and plausible theories I have listed, the reality is that ECB chief Draghi is expected to announce in October that “tapering” will begin.
I have repeatedly written that when high finance is no longer being placated by the free money of Quantitative Easing, they will go back to what they were doing in 2012: squeezing the national bond markets in Europe and provoking a crisis across the Eurozone.
Here is another, different case of willful blindness: the Eurozone is the same as the US. Many believe that just because the US had no major bond problems after they started tapering their QE, then the Eurozone won’t have any issues as well. One size fits all, right?
But they ARE very, very different regions! Firstly, the US isn’t dumb enough to be run by a Eurogroup.
Secondly, the risks in the national bond markets for Eurozone nations are not anywhere as secure in comparison with the United States. They weren’t as secure in 2012, and the Eurogroup’s policies have not corrected these differences in risk whatsoever in 2017. Nor has the Eurogroup strengthened the resilience of the “real economies” in their member nations – indeed, austerity policies and labor code rollbacks have worsened the real engine of the “real economy”: the People (everyday consumers, for our capitalist readers).
So even if Draghi kicks the can down the road for a few months, a crisis is inevitable. For the reasons I’ve listed and because: this is capitalism.
And this is where Varoufakis’ lack of leftism – his failure to see capitalism as incorruptible pattern of guaranteed corruption – blinds him to the reality that the Eurozone should not be saved with his right-wing solutions, but scrapped completely in favor of central planning, safety nets, regulations on cabals: modern socialism.
The Eurozone is still as primed for collapse as ever, but that is the title of the next article in this series.
And as regards the Eurogroup…what else needs to be said?
These are our masters, and it is the IMF, ECB, and banker-loving, ex-banker finance ministers who pull the strings. All of us in the Eurozone must dance, even if these mobsters have already broken so many legs and backs.
This is the third article I have written in a 7-part series on today’s Eurozone which will combine some of Varoufakis’ ideas with my 8 years of covering the crisis first-hand from Paris.
Here is the list of articles slated to be published, and I hope you will find them useful in your leftist struggle!
Varoufakis book review: Rock star economist but fake-leftist politician
Why no Petroeuro? or France’s historic effort to create a permanently anti-austerity Eurozone
The hopelessly corrupt structure of the Eurozone
The Eurozone: still as primed for collapse as ever
The Eurozone has likely entered its final calendar year, contraction coming
The English-speaking world’s fear of calling communism, ‘communism’
Forced recession as a tool of social war against the 99%
Ramin Mazaheri is the chief correspondent in Paris for Press TV and has lived in France since 2009. He has been a daily newspaper reporter in the US, and has reported from Iran, Cuba, Egypt, Tunisia, South Korea and elsewhere. His work has appeared in various journals, magazines and websites, as well as on radio and television. He can be reached on Facebook.
This Is Not a Coup – The European Financial Dictatorship fully exposed
If you want to drill deeper into the history of the formation of the EU, I suggest you read Joseph P. Farrell’s The Third Way, The Nazi International, European Union and Corporate Fascism.
In it he traces what he asserts is the influence of the “Madrid Circular,” a document circulated in 1950 by the German Geopolitical Center in Madrid which outlines a plan to create what looks remarkably like what was actually created in the following decades: a cartelized EU industrial sector ruled by an unelected bureaucracy accompanied by an elected parliament with no actual power. The legal structures were anticipated by Germans in the 1940s who continued to hold high office after the war and sat at the table drafting the structure underpinning the EU.
Pogohere, Dr Joseph Farrell’s site http://www.gizadeathstar.com is the “other” site I go to on a very regular basis. I am a member there, and donate monthly here.
He is a brilliant, wise man, and between the Saker and Joseph I feel I get an excellent overview of what is going on in the world today. Great that you mentioned this amazing man.
central banks in european countries follow the dictacts of ecb, and have diplomatic immunity, while producing the equivalent to laws, which is unconstitucional in about every european country…
Keep them coming Ramin, can’t wait for the next part!
Aye. Keep them coming Ramin!
I was going to read the article but I am tired of the same mantra: No leftist at all, not Marxist at all… Leftism and Marxist destroyed the Russian Empire and now it is destroying the Western World, without these horrible ideology Russian borders would be much bigger and the West would be in decline economically and spiritually
” central planning, safety nets, regulations on cabals: modern socialism.”
These attributes, along with state funded education, subsidised healthcare, superannuation, no- fault accident scheme, are all found in that well known socialist Nirvana called Godzone, better known as Aotearoa or N.Z.
Whether we “down under” are being destroyed, as you allege , is a moot point.
I guess I have a lot to learn about New Zealand.
But just keeping all these great Communist-created concepts for yourself while being a part of the Five Eyes intelligence ring to destroy others…makes one not socialist at all. Socialism requires a minimum of support for the anti-imperial struggle outside one’s own borders, if not the all-out commitment of Trotskyism.
Even if NZ have these things for themselves…doesn’t really seem like they have them for the Maori. I could be out of date regarding New Zealand, however.
Right – because Five Eyes intelligence is all about destroying countries without including New Zealand, Australia and Canada on the hit list. And these countries can just opt out – for the greater good – like with NATO. I think there’s a lack of realpolitik in that belief- and this leads to the accusation that proponents of communism are utopian.
Well it’s kind of the same old story isn’t it? I think you’re saying that communists are too idealistic, and then I’ll just say that you have no ideals at all – realpolitik.
I don’t agree with that, because even espousers of non-idealistic realpolitik do have some ideals of moral worth and value…it’s just that the ideals of socialism are morally superior, overall. Voila.
Being too idealistic is far from the greatest sin or the greatest hindrance to success and unity. I didn’t say it was easier, though….
All these things , goods if you like , and more , are available to Maori. Pacifica are also included.
Maori are favoured in law to address historical grievances arising from the imperial actions of ever perfidious Albion.
It’s good that you bring up Five Eyes. Not every Kiwi loves the idea, but few understand what it is that we are involved in.
Google- Waihopai protest. We do have some form , even if only symbolic. You probably know about the ANZUS tiff . The sentiments expressed by the NZ people were not in relation to nuclear technology alone .
Sorry . Spelling mistake . . .pacifika. It’s a new word in English.
“outside one’s own borders,”
We are an insular people. For obvious geographical reasons if nothing else.
I doubt that there is popular support within NZ for either imperial , or anti-imperial interventions in the rest of the world. Been there; done that. There is still a lot of grief associated with this sad chapter of our short history cf Anzac Day.
Perhaps. That was not foremost in our minds when these policies took shape. Universal suffrage was adopted very early in NZ.
The Great Depression made the need for social welfare very obvious . A substantial urban segment had developed, and lacked the means to house and feed themselves, temporarily. NZ was in transition to an all- inclusive society. So social welfare was obviously needed to ensure social harmony. Call it christian (with a small c), communistic, or sustainable small group behaviour.
NZ began as a subsistence type of economy and rapidly became export -oriented because of the small human population in comparison to the large agricultural output.
The global economic system that characterises the current ” Western civilisation” was already entrenched. C’est la vie , non?
I don’t call the current system capitalism in any purist sense. It may once have been so , but not for a long time now.
The two ideology which is the democracy and socialist both have it’s flaws in example if ideally under no corruption :
-socialist which by it’s ideology is to ensure the fair treatment, opportunity, and accommodation to people however it denied the merits of the brighter and hard workers. Whether you’re smarter or work harder you may not get rewarded better than everyone else.
However it make the country better at setting up their decision and accomplishing it while also make an effective use of it’s resources (fair use, no overspending).
-democracy by it’s ideology is the direction and the decision the country would make determined by the votes of the many in effect to make sure the power wielded at the top will ensure the benefit of the many. The flaws in this is everyone has an idea to be thrown in the brainstorming phase making the decision reached harder in addition to the time it spent. It also widening the interest it has to accommodate in major and minor issue making the country direction loose and planning unclear. It offers an opportunity more liquid and diverse the power in top.
Learn history. Russian ruling elites destroyed their empire, by getting involved in a war. High Russian official Pyotr Durnovo warned the tsar in a memorandum of February 1914, that the war would be the end of the reign of contemporary ruling class. Beside that, the Russo-Japanese war and subsequent revolution of 1905 should had been sufficient warning not to repeat the same on a greater scale. Nonetheless, they ignored it and lost the monarchy as institution in Feb.1917. At that time Bolshevik party had virtually no part at power yet. It was a minority in Petrograd Soviet, with exiled leaders (who soon returned). As the situation worsened during 1917, due mostly to continuing war, they grew strong, and took power in October. Contrary to endlessly repeated conservative ideological blabber, the Bolsheviks didn’t start the terrible Civil War either. It was started by the Czech legion, which enabled the yet weak and disorganized White guards to consolidate.
That is how the picture looks like when you focus on actual facts and not on ideological phrases.
It’s too bad you didn’t read this one because I am very appreciative of Varoufakis’ work in this case.
I am not accusing him of fake-leftism here: I am praising and relaying his criticisms of the Eurozone.
And since you dislike leftism and Marxism, you might be very happy to see that Eurogroup contains none of this!
Re ” I am very appreciative of Varoufakis’s work in this case. ”
Very important to avoid ad hominem arguments and charges.
There was so much disappointment in Varoufakis and Tsipais after the Greek elections and the subsequent financial adn economic fiasco that for many, their names have simply become mud.
But that doesn’t mean that they have nothing to say about what happened.
In fact, surely they are the primary sources for what really happened.
From Ramin’s writing in this piece, it looks as though Varoufakis in his book has tried to provide a better picture of the kind of pressures that were applied to him and Tsipras and Greece.
Maybe they should have reacted differently than how they did.
But, tout comprendre, c’est (presque?) tout pardonner.
Any source of insight into the Eurozone Deep State seems to be worth setting aside the ad hominems against Varoufakis and making the best use of Varoufakis’s firsthand reportage on behind-the-scenes strong-arming techniques.
Here is an interesting and, I believe, relevant interview:
You know Grover Furr’s outstanding research, Ramin? He’s damn right, no doubt. So no wonder. Leonardo is simply repeating the big lie ( https://youtu.be/ObD9OGsh498 ) about Stalin and real socialism as taught by the West’s (Roth-child Zionist) tyranny, its ‘educational’ system, and its fake-leftist agents such as Trotsky, Hitler, Khrushchev, Varkoufaris, Soros, Julian Assange, and so forth (see e.g. Gearóid Ó Colmáin’s latest article).
Grover Furr and Ludo Martens are prodigious sources — they wipe the floor with Western lies and slanders about Stalin’s USSR, whether the odour of these lies is predominantly “left” or “right”.
Leonardo’s verdict “Leftism and Marxism destroyed the Russian Empire and now it is destroying the Western World” has an unintended grain of truth in it. Just as with today’s Cultural Marxists, European Marxism was characterized by a fiercely anti-Russian orientation right from its very inception (also totally hostile to the peoples raped and enslaved by European imperialism, mind you). Like the Russophobic Wesrern Liberals 2 decades ago, the Russophobic Western Marxists of the early 20th century were drooling with feverish delusions about once and for all putting their boots firmly at the throat of Mother Russia. In their case, that would be for the Greater Good of Humanity as personified by the “advanced” Western Workers and their imperialist self-esteem, echoed by the supreme Western bootlicker Trotsky. Along came Stalin and eradicated the 5th column. The parallels with today’s world are quite plain to see.
Leonardo’s second conclusion to the effect that, this time around, it is the West that’s being devoured is quite correct, if for a different reason. Neoliberalism made the West believe it could do without any physical production of its own. Parasitism, decadence, and limitless consumer credit all along the line. Cultural Marxism with its addiction to infantilism and sexual depravities seems like a highly appropriate “philosophy” of the West while it’s sinking and stinking like never before.
I am familiar with Grover Furr, many thanks.
Stalin and Mao, along with many others, heck, all of the other leftists, are so totally vilified that you can’t even have a reasonably intelligent conversation about them with the average westerner. When you only read 100% negative things in the newspaper or magazine…that’s just the way it is.
What’s unfortunate is that Stalin was denigrated by Kruschev for purely political reasons – to push out Stalin supporters and replace them with his supporters. This did not happen in China. So Mao is George Washington on steroids there, and quite justifiably, while Stalin remains homeless. The fact that the Russian Revolution devoured its own father, while China did not, goes a long way in explaining the implosion of the USSR….
The rehabilitation of Stalin is a hard but necessary task for leftists. Considering that during the Stalin era tens of millions were wiped out by capitalists and their anti-Communist fascist brothers – as the hundreds of millions forced to live in economic and cultural apartheid – it is really not that hard. I’ll get around to writing that article one of these days, but it needs many articles.
Please do write that article (those articles)…I think it would be a very valuable contribution to shed even a little light on what has been intentionally obscured by every conceivable interest group.
Thanks much for another great article!
You write that QE has “only gone to the 1% and fueled property price bubbles and stock bubbles”. I understand roughly how this works, but in the spirit of “follow the money” I would like a clearer picture of the actual process by which this happens.
The ECB, for example, explains QE like this:
1) The European Central Bank buys bonds from banks.
2) This increases the price of these bonds and creates money in the banking system.
3) As a consequence, a wide range of interest rates fall and loans become cheaper.
4) Businesses and people are able to borrow more and spend less to repay their debts.
5) As a result, consumption and investment receive a boost.
6) Higher consumption and more investment support economic growth and job creation.
7) As prices rise, the ECB achieves an inflation rate below, but close to, 2% over the medium term.
My understanding is that (1) through (3) are roughly correct, though maybe not the full story. First question, then: is QE only being used to buy bonds from banks, or is the ECB buying other asset classes too (like the BoJ, for example)? Second question: when the ECB says it buys bonds from banks, I take it this means only a select group of the largest banks get to sell bonds to the ECB, though the details here are a bit fuzzy. Which banks are part of this in-group? How do they qualify for this free money?
Next, I gather there’s another fiction in (4) because while interest rates are indeed lower, the big banks are getting free money from the ECB while small businesses and individuals are paying interest at “market rates”. Also, we keep reading economic news about a “retreat” in lending and a dramatic decrease in capital flows since the global financial crisis (GFC).
The reality of (4) is that the big banks are using the free money from the ECB to play the market, while telling small businesses and individuals that conditions are “too risky” to loan them money. The ECB is thus flooding the financial system with liquidity, but it’s mostly flowing into speculation. This is why stocks and RE are in a bubble.
The reality of (5) and (6), then, is that a disproportionate chunk of “investment” is just flowing through the investor class back into assets that are already in a bubble. It’s not really going into job creation, as the employment rate (e.g. in France) clearly hasn’t changed much since QE began.
The reality of (7) is that by creating all of this credit, the ECB inflates the money supply (their target is 2%), but in fact this means is that the value of the euro is being debased. Prices rise because the value of the euro is sinking. Thus, wage earners must work longer hours to have the same purchasing power. In effect, then, their money is being transferred upwards to the rentier and investor classes.
This is my rough understanding. There may be errors and/or important details that I’ve omitted. If you (or anybody) could speak to my questions or fill in gaps, I’d be very appreciative.
I answered one of my own questions. It looks like the ECB doesn’t just purchase bonds as part of its QE policy, but in fact a variety of assets. In the case of the US, the Fed purchases assets from a group of 20 “primary dealers”, which are in fact global banks. The ECB seems to have a larger number of counterparties. ECB refers to QE as an “asset purchase program” and now an “expanded asset purchase programme (APP)” which is composed of four different sub-programmes for different types of securities. Details are here:
The ECB is purchasing €60 billion ($71 billion) a month of these assets, i.e., putting money in the accounts of the banks participating in the program, in exchange for assets which the ECB then takes onto its balance sheet. The current plan is to continue this €60 billion/month plan at least through December of 2017.
Very glad you like the series and I really appreciate your informative comments.
I think you need to add in this to your list of 7 ECB steps:
0. The European Central Bank generates money from thin air, which is backed by nothing tangible, simply by tapping numbers on the keyboard.
And then they follow your steps, theoretically. They don’t get to number 4 – actually loaning out the money to small and medium businesses and individuals, i.e. the heart of the real economy. They have kept it for themselves for stock buybacks, asset price inflation, and the stock market.
So I have just restated essentially what you said. The end result for the average person is indeed decreased purchasing power and increased angst. Case in point – I just paid three euros for a can of orange juice on a highway (privatized during be Chirac era and which costs about €40-€50 to drive nine hours from Paris south to Marseille). Anyone over the age of 15-20, realizes that I just got robbed for the orange juice. Socialist will agree the the highway’s land should always belong to the public/ common good, and the highway itself.
“Thin air” money is fine when directed properly, but it has not been directed to the real economy. If a myth works – run the myth. But the myth is not working. By not implementing number four, the steps you listed are not fulfilled. Money doesn’t have to be backed by gold or silver, but if it’s backed by faith, it has to be good faith. It isn’t, and that’s why QE has created a bubble, and also why Bitcoin is becoming popular.
Regarding your question: the bond program is governed by the “capital key”, which awards proportions according to nation. It’s not efficient in that it buys bonds from nations like Germany and the Netherlands, who are not in need of assistance. This was because these types of surplus nations refuse any sort of “handout” to nations distressed by bailing out German and Dutch bankers… And thus their hand is out even more!!!
As you noted, the €60 billion euros per month I’m going to the banking industry, which is of course dominated by the dominant Western nations. The ECB also has a much smaller corporate bond buying program, for corporations which are incorporated within the Eurozone. This is a much better way to get money to corporations, thus increasing investment and hiring, but it is only €5-€10 billion per month and was started only in 2016.
Thanks very much for speaking to my questions (and also regarding Werner’s critique of central banks in my other thread, below). Things are coming more into focus now.
Since it sounds like your upcoming articles will speak to these issues in more detail, I’ll just sit back and look forward to the next installments in the series!
This is an excellent series by Ramin Mazaheri. It is so helpful to read analysis by someone who understands how economics and finance really work, and who can state these things as simply as they actually are.
This one sentence by the author spells out clearly the underlying structure and dynamic of the world:
While money is created simply as a tool of life, the LOVE of money itself is said to be the root of all evil. And nothing speaks of the love of money like compound interest – the daily automatic shaving of the coin.
I’m glad that Mazaheri is a socialist, and speaks plainly of the value of social enterprise. I look forward to more.
agreed…excellent research and articles…..so pleased saker is posting these.
Yes, as I have always known. The EU is nothing more than a private empire of private bankers, known as banksters, created for plundering sovereign European states. The EU Central bank is in the hands of private bankers. Remarkable. A day will come when historians will have a tough time explaining how this monstrosity, known as the EU, was ever created.
“After all, what do you get when your leadership group has no democracy, no oversight and no records? You get anti-democratic oligarchy: the richer members controlling the poorer ones”
Also known as “European values”. Worldwide colonial plunder and perpetual war on an ever wider scale. Today, the global elites are fed up even with their Euro-American mass base. Interesting times ahead.
“European values” are about caring for each other. EU values, that’s something very different..
Ramin, this was an amazing article!! Finally you seem to “get it”. Varoufakis says he’s a Marxist, because he’s a thinker. Marx was not a communist, but a thinker, you must remember that. You refer to Varoufakis as a “whistle blower”, which is exactly what he wants! This is his legacy, exposing the bullshit! The EU, the Euro and the “eurogroup”(WTF!). None of this is a coincidence. They’ll push it(together with Macron), til it can’t be pushed anymore(too many dead).
I like what you said about Marx being a thinker and not a Communist – I will remember that to avoid dogmatism.
But I will also keep in mind that we can be thinkers and also active citizens who are pushing to make society more moral, equal and just. Clearly a lot of great leftists we’re both theoretically and practically involved in the struggle.
Can’t help myself, Mr. Schauble made it all very clear to everyone involved:
Ramin, since you bring up the term regularly… I have been beating my head with a question: what is the definition of capitalism? In other words, what is the attribute of an economy, the absence of which makes it no longer capitalist?
Money? No… it has existed long before the emergence of what we call the capitalist system.
Markets? The same… In one form or another.
Taylorism? Debt? Banking? Other?
I have read several views, but none definitive. What is your view as a leftist?
Yes this is the area where we fail to understand each other. But it may be that this is irrelevant. Elitism corrupts capitalism absolutely when it seeks control of the money supply. And who will argue that communism , or any other system , is not also absolutely corrupted by elitism?
I think you nailed it, very logically : the elitist corruption has rotten also the old socialist system. The system itself in his approach is still progressive, there was still place for further advance. The corruption ended that advance. In a capitalist system, the central bank and other banks are owned by private persons, their scope is to make profits – thus corruption is there. In a socialist system, the central bank and other banks are state owned, their scope is the benefit (or profit ) for the entire country and population. The corruption of the leading political elites – their willingness to be “equal” with their counterparts in the west in terms of wealth (power through money) has led to the bankruptcy of the socialist system, the latter becoming their enemy Nr.One, as being viewed as an obstacle to achieve their dreams of being “elites” and “partners” of the old family of the capital (Money)
The old European Union dream ? A Confederation under the banner “Liberty, Fraternity, Egality”
I agree that elitism is a problem in all cultures and systems, but socialism is designed to avoid this far better European bourgeois democracy based around capitalism. Socialism is based on listening to the people and giving them constant input and power; bourgeois democracy its based on one election granting enormous power.
I would also say that elitism as destroyed modern European liberal democracy – the Eurogroup being perhaps the apex – and I would say that its been destroyed because there was not “place for further advance”: it was always set up for the 1% to checkmate to the 99%, whereas Socialism is set up to guarantee the opposite outcome.
As far as a definition of capitalism, that’s a very tough one for me to answer. Capitalism, I would say, is defined by its rejection of central planning of the economy, it’s rejection of inequality in favor of individual freedom, and its tolerance of antiquated, reactionary ideas. This is probably not a very good definition, but at least its short! To me, countries like Cuba, China, Iran and a few others reject these three fundamental tenets of capitalism.
” bourgeois democracy its based on one election granting enormous power.”
The current NZ triennial election for Parliament was held on 23 Sep.
This week the MPs will attempt to form a government, either a coalition majority , or a minority government , that in some way reflects the proportionality of the new Parliament.
Enormous power seems unobtainable in this system unless the people decide that they want a single party with a large majority , and with an increased ability to lead the legislature in a certain direction.
I’ve noticed that ADD is a huge problem in america, the rest of the zionazified (or zionazi fried, take your pick) west is not that far behind, either. This has been intentionally orchestrated, btw.
Skimming an article to extract the main points seems to be another skill that is no longer being taught in our schools.
However, I do think it is easier to skim one of more printed pages or than the same amount of text on a computer monitor.
But, I see no value in dumbing down articles on complex issues because some readers don’t have the time or the skills to absorb the material.
Thanks, very enlightening. Look forward to reading the next one in the series.
There is another basic constraint between ECB and fed repurchase capacity .The fed can print unlimited frn’s whereas the ECB has to get approval from an effectively constraining German central bank and their obsession with money expansion constraint will eventually ensure that the ECB runs out of money then what ? I leave that to the Doomsday Theorists !
“…Dr. Schauble and the Eurogroup had succeeded in overthrowing our government by asphyxiating us enough for Prime Minster Tsipras to surrender…our newly elected government could choose any policy mix it liked as long as it was virtually identical to the calamitous one imposed by the Troika on previous Greek governments.”
The above passage by Varoufakis is quite ridiculous. There are two possible interpretations to choose from. Either Tsipras believed these oligarchs were going to subscribe to Syriza’s funny ideas about “EU without austerity” (at least for Greece, please) or else he didn’t believe that but chose to gamble, secretly hoping for a (ideally narrow) defeat in the referendum, thus boosting Syriza’s and his own reputation as an “anti-austerity” force. It failed, hence instant capitulation. Social democracy is pro-imperialist to the core with phoney promises to the masses and sincere, usually secret, promises to imperialism.
Most valuable information !
Very interesting critical analysis of central banks and their policies:
Shifting from Central Planning to a Decentralised Economy: Do we Need Central Banks?
Some excerpts from section V of Werner’s article that are relevant to Ramin’s discussion of the Eurozone:
“The job of central banks has been to engage in monetary policy in order to deliver stable prices, stable growth and stable currencies. However, central banks have thoroughly failed in this, as the frequency and amplitude of business cycles has increased during this time period, and more traditional cycles of growth and recession have been replaced by boom-bust cycles.”
“The creation of the newest major central bank, the European Central Bank, is a case in point. The treaties that established it granted it unprecedented powers, unchecked by any democratically elected assembly.”
“[T]he ECB was not modelled on the successful Bundesbank in Frankfurt, but the disastrous prior German central bank, the Reichsbank, which created asset bubble and bust, deflation, hyperinflation and essentially caused the economic chaos that helped bring Adolf Hitler to power”
“While the Brussels centralisers, when pushing the Maastricht Treaty (signed in 1992), portrayed the ECB as having been modelled on the successful Bundesbank (also situated in Frankfurt), the truth could not have been further from it. Instead, the ECB was made independent from and unaccountable to any democratic assembly, as well as to governments. The ECB had in fact been modelled on the disastrous Reichsbank.”
“Based on this analysis, I warned in 2003 that the ECB was likely to abuse its excessive powers by creating vast credit booms, asset bubbles and banking crises in the Eurozone. This it duly did, from 2004 to 2008 in Ireland, Portugal, Spain and Greece, as well as other parts of the Eurozone. As it turned out — and as we know from former ECB head Jean-Claude Trichet’s speech in Aachen in 2011 — the goal of ECB policy was not to create stability. Instead, it was the insidious plan to cause havoc, by creating asset bubbles that could then be pricked, all the while blaming greedy speculators and bankers. The ensuing recession could be used as justification for deep structural reforms (as the Bank of Japan has done in Japan, the Bank of Thailand after the Asian crisis), and, more importantly, in order to introduce a United States of Europe with centralized monetary and fiscal powers.”
BTW, Richard Werner is the economist who originally coined the concept of “quantitative easing” back in the mid-1990s, but there is a very interesting backstory to this idea of QE.
Interesting, because in fact the central banks — starting with the Bank of Japan — basically stole his language and applied it to their own policies, which are not what Werner himself originally proposed.
Here’s a general summary, from 2013: UK QE has failed, says quantitative easing inventor.
And here’s Werner’s own account (in §2) of the origins and history of the concept, which is more detailed: Quantitative Easing and the Quantity Theory of Credit.
In addition to the article to which I linked above, I highly recommend these two articles. Not simply because they are written by a serious economist who offers a very clear critique of the system of central banking, but because he also offers a proposal for going beyond it.
Werner argues that “The truth of the matter is: We don’t need central banks“, he explains why, and he has ideas for very concrete solutions in the near term.
Richard Werner is truly a must read economist, like Michael Hudson and Peter Koenig.
Werner’s work in East Asia is indeed very relevant and I discuss it in the coming parts of the series.
I don’t want to get into it, because I’ll just be repeating myself and I don’t have the space here, but ignoring people like Werner is totally crazy to me. I honestly think a large part of it is because Westerners view non-Western societies as being totally alien and having no applicable parallels to the West, therefore why study them? As if we have not already lived in a globalized world for nearly 2 modern-era centuries!!!!
So kudos, Acacia, for predicting a key economist in this series!