"Greece itself is nothing"

28 posts / 0 new
Last post
orange.ruffy
Offline
Joined: 23-10-09
Feb 9 2010 18:00
"Greece itself is nothing"

'Mounting deficits in weaker European economies including Greece, Portugal and Spain have raised questions about the health of the global financial system. That compounded concerns about growth in China and proposed U.S. bank regulations took the market down from a 15-month high reached in January.

Greece's finance minister said Monday the government is preparing to boost some taxes to shore up its finances. But civil servants opposed to cutbacks have pledged to strike on Wednesday.

Brett Hryb, a portfolio manager with MFC Global Investment Management in Toronto, said the latest concern is that the financial troubles in a country like Greece, whose economy is small compared with the rest of Europe, will spill into other countries.

"Clearly Greece itself is nothing. It's just a blip. It's what the contagion could be," he said.'

from the AP

http://news.yahoo.com/s/ap/20100208/ap_on_bi_st_ma_re/us_wall_street

There have been a few discussions on here about the relationship between austerity measures proposed by PASOK and the various social struggles (see http://libcom.org/news/strikes-greet-austerity-measures-greece-04022010). I haven't seen anything yet on this indirect relationship - the pressure, however small, placed on the global economy by these local struggles.

This connection seems simultaneously very clear and very abstract. On the one hand, the steps that most governments take in this economic situation are at least partially blocked by the level of class struggle underway in Greece (though I don't know enough about the specifics of the debt and the possibility of default). There seems to be some state of stasis that has been entered into, where no one has a completely decisive advantage. This stasis might be brief, but it's still gone on longer than most comparable situations in the West in my lifetime, and is thus a bit of an unknown variable.

On the other hand, the connection between global financial markets and any one intensity of class struggle seems necessarily vague. I'm at least somewhat convinced by autonomist analyses from the 70s, that pose a circuit between variations in the real economy and various interests on either side of the class struggle (e.g. the use of inflation and energy prices to attack wage gains), but am still totally hazy about the relationship between the official representation of the economy and the class struggle in a period in which fictitious capital seems much more dominant. Suggestions on readings in this area would be appreciated.

My final question is whether this idea of "what the contagion could be" has any interesting content. Behind the concern for deficits and financial market, does it express the possibility of an international spread of social struggle? If Greece (along with other smaller economies in the EU, like Spain and Portugal) succeeds in shaking larger markets, does that in any way imply something more interesting than when the market is shaken by, say, a spat between Google and China?

jef costello's picture
jef costello
Offline
Joined: 9-02-06
Feb 9 2010 18:33

I'm no expert but the level of debt in several eurozone countries is reaching the point where they are placing strain on the currency. The problem with Greece is basically that the government can't pay its bills but can't cut costs either (it's faced defeat when trying to 'reform' pensions and cut staff. Basically if Greece can't avoid these problems then bigger countries with similar levels of debt and deficits might follow suit. The bigger countries might be able to help Greece get through this but not much more (for example if Spain had trouble). The UK has avoided having its debt rating changed which would increase the cost of borrowing and compound the problem. Other countries like Spain or Greece could cause a major problem. Someone would have to pay the debts or the entire eurozone would have to basically be willing to go to war with its creditors. The strain of supporting of Greece say could push Germany for example into financial trouble.
I'd appreciate a bit more expert knowledge on the subject.

RedHughs
Offline
Joined: 25-11-06
Feb 9 2010 22:08

What keeps the Eurozone from printing money? If the Euro nations pay their debt in Euros, what does a "credit rating" mean? As long as all the largest state are printing money, what does a lack of confidence in a currency mean? Inflating currencies seem to be the only game in town.
(Gold, sorry, no, not a serious proxy at this point)
(or perhaps there's something here I don't understand)

It's not stable, it's not sustainable but the conditions that the papers report as moving "investor sentiment" just seem rather senseless.

I agree the present regime is headed for collapse but my gut seems to say it will be a year or two more but my gut could easily be wrong.

I mean, you're talking the most powerful states in the world. There are already reports of the US covertly supporting the US stock market. One assumes that the massive hands of the state will be extending in a variety of directions.

It's possible that one or another player will stupidly decide to just let some piece of the financial system just "fall on the floor" - like when Paulson let Lehman Brothers die - but that will likely be some combination of random events and outside pressure rather than one or another entities finally acting on some principle of financial responsibility. Dubai might have died but the fix was mostly in before the shouting began and all the movement was a great excuse to collect commissions. Greece sounds similar.

But the thing is that this stuff can also fall apart when the distortions caused by massive monetary intervention become unsustainable. Perhaps this will more pressure for some player to "crack" and stop the merry-go-round. There was a recent article - China PLA officers urge economic punch against U.S. This kind of thing seems like the way the unstable financial system will unravel. Some interest group somewhere will be unhappy about the direction of things and ignorant of how fragile this is. I mean, people talk as if the Chinese state would slit the throat of its own economy by dumping the dollar merely to "preserve the value of it's assets". That doesn't seem like the way the far-thinking high officials of the Chinese Communist Party would think but if "other forces" take over then a decision like that could make the financial system fly apart.

I suppose, you could also describe the way this goes as more countries playing more games of chicken within less room to maneuver. A final fall is inevitable at some point, unlikely at any one point.

The Wolf Report had a good blog on this too, though I suppose I'm more "optimistic" than him at this point.

jef costello's picture
jef costello
Offline
Joined: 9-02-06
Feb 10 2010 17:35

demo in Athens with at least 7000 people present. March split into two groupings, one of which protested outside of the parliament building.
There's no numbers so far for how many of Greece's 700000 civil service employees were on strike but Adedy which has 300000 members was calling for action. The strike is for at least 9 hours.
Teachers, air traffic controllers, rail workers, local government workers all joined the strike and there was a skeleton staff on duty in /Athens to deal with emergency cases.
Workers in government make up 32% of the workforce but their pay is equivalent to 11.8% of GDP. Salaries in the prefecture of Athens, for example, are lower than 1100 euros a month for the vast majority of workers.
The government plans involve a 25% drop in real salaries, a hiring feeze and loss of other benefits (including an attack on pensions)

oisleep's picture
oisleep
Offline
Joined: 20-04-05
Feb 11 2010 13:54

a bit of the main topic of this thread but i'm a bit baffled by the way things have gone re this over the last week or so - not so much the stuff with greece in itself but how quickly countries like spain, and to a lesser extent portgual/ireland, have been dragged into things as though all four countries are about to go tits up next week. I'd say this is nowhere near the case even for greece let alone the others - spain for example, despite a currently high budget deficit, has a far lower level of borrowings compared to GDP than both the eurozone area average and the wider EU average as a whole, something like 60%. Considering japan at the moment has a debt/GDP ratio of something like 240% and has been in recession/depression pretty much for 2 decades without a peep from the 'market' about default concerns etc it's a bit difficult to see why all of a sudden concern is homing in on countries like spain. The UK is in a much worse financial situation than portugal/ireland/spain and isn't too far behind greece in terms of fundamentals, and has so far imposed nothing like the austerity/cost cutting measures that those 4 countries have been doing to bring budget deficits/debt levels down yet no one is talking about the UK (or the US) in the same kind of terms as greece/ireland/portugal/spain.

I wouldn't be surprised if this situation is being artificially stoked (or even largely created) by those in the EU who would prefer to see a more unified and stronger political/fiscal/economic union rather than the current loose monetary union that exists at present - this kind of crisis that is being talked up would be pretty useful in creating/accelerating the conditions that would lead to the potential for that kind of thing happening more quickly/more easily than it otherwise would. Maybe that's being a bit too conspiracy loon, but it's hard to even see the 'market logic' for a lot of the fuss that's being made at the moment

jef costello's picture
jef costello
Offline
Joined: 9-02-06
Feb 11 2010 13:54

There was a thing on the BBC website showing that the UK's level of debt was about the same as Greece's which was amongst the highest in the EU at about 12.9%. Spain's looked to be about 8-9%
I still haven't seen the point of the single currency myself, certainly not letting in Greece et al. That's pretty much off topic too though smile

oisleep's picture
oisleep
Offline
Joined: 20-04-05
Feb 11 2010 14:00

those percentages wouldn't be debt, but budget deficit percentages

jef costello's picture
jef costello
Offline
Joined: 9-02-06
Feb 11 2010 14:16
oisleep wrote:
those percentages wouldn't be debt, but budget deficit percentages

oops.
I did come across this, where they explain how Greece has managed to keep debt off of its balance sheet
http://www.spiegel.de/international/europe/0,1518,676634,00.html

Joseph Kay's picture
Joseph Kay
Offline
Joined: 14-03-06
Feb 11 2010 14:24

on a purely ideological level doesn't the threat of whole countries facing collapse play into the austerity agenda? i mean the first objection to striking against cuts is always 'but where will the money come from', this can only be heightened if the media's full of stories about whole economies going down the pan (i think the headline of the Mail or the Express today reads 'now WE have to bail out the EURO'. funnily enough the top 5% owning 60% of the marketable wealth is never mentioned amidst all these pleas of near bankruptcy and the 'all in it together' bollocks.

oisleep's picture
oisleep
Offline
Joined: 20-04-05
Feb 11 2010 14:58
jef costello wrote:
oisleep wrote:
those percentages wouldn't be debt, but budget deficit percentages

oops.
I did come across this, where they explain how Greece has managed to keep debt off of its balance sheet
http://www.spiegel.de/international/europe/0,1518,676634,00.html

same thing would apply for PFI obligations in the UK, these are not included as govt liabilities/debt in official figures due to the UK ignoring EU guidance on accounting for such things

oisleep's picture
oisleep
Offline
Joined: 20-04-05
Feb 11 2010 15:12
Quote:
on a purely ideological level doesn't the threat of whole countries facing collapse play into the austerity agenda? i mean the first objection to striking against cuts is always 'but where will the money come from', this can only be heightened if the media's full of stories about whole economies going down the pan (i think the headline of the Mail or the Express today reads 'now WE have to bail out the EURO'. funnily enough the top 5% owning 60% of the marketable wealth is never mentioned amidst all these pleas of near bankruptcy and the 'all in it together' bollocks.

this is true, however for most of these countries the big cuts are already being put into place or at least the specifics of them have been laid down (unlike say the UK and the US), so if this hyping up of the potential of these countries to collapse was specifically to makes these measures more palatable, then the timing of them is a bit odd as you'd think they would have been hyping up this kind of thing for the last few months to create a more agreeable backdrop for the announced austerity measures.

The other thing as well is when you see say anyone from the spanish govt being interviewed on the telly they are clearly fuming about the hype given their reasonably solid (in relative terms at least) economy - they are quick to real off a whole load of stats about how they have a sound economy compared to others and how for example the rating agencies are more than happy to confirm their AAA rating (in marked contrast to their views on say the UK or US). Clearly any govt minister is going to talk up their economy in these kind of circumustances, but i reckon if all this recent stuff was purely for austerity measures alone the various representatives of the govts concerned that are doing the rounds of the media at the moment wouldn't be quite as thrustful in their rebuttal of the fearmongering. then again maybe that's just all part of the theatre

Joseph Kay's picture
Joseph Kay
Offline
Joined: 14-03-06
Feb 11 2010 15:21

in terms of the austerity agenda i meant how it plays here in a sort of 'Britain soldiers on' way, rather than softening up Greeks or Spaniards for the cuts. If 'the market' is largely anglo-american influenced, then it's going to speak in those national interests to the chagrin of the rulers of the 'lesser' economies, and the propaganda model does the rest. after the elections we're going to see some of the most serious attacks on working class conditions and the social wage for a long time, so the drip-drip of 'at least the British ship has braved the storm, don't rock the boat' propaganda is important. either that or i'm a paranoid conspiracy theorist, meh.

oisleep's picture
oisleep
Offline
Joined: 20-04-05
Feb 11 2010 15:45

yeah who knows what's at the root of it all, personally i'd be inclined to suggest the reverse though, in that any UK (or UK market) involvement in stoking the fires would be to deflect attention from the perilous state of the UK economy and shift the focus onto smaller european rivals, even if this means losing a chance to play up the need for austerity measures here etc.. - plus it looks like the UK is a good year or so away in terms of making serious cuts (note the latest tory u-turns on their supposedly bolder austerity measures etc..) so the timing of this, if it was to soften up folk for cuts, seems a bit misjudged

although i suppose neither yours or my theory is mutually exclusive

(edit: i just reread your post and think i might have read the meaning of it differently to what you intended, so my reply probably doesn't make sense in light of that now)

jef costello's picture
jef costello
Offline
Joined: 9-02-06
Feb 11 2010 18:52
oisleep wrote:
same thing would apply for PFI obligations in the UK, these are not included as govt liabilities/debt in official figures due to the UK ignoring EU guidance on accounting for such things

There's no other way to explain them.

fatbongo
Offline
Joined: 28-01-09
Feb 11 2010 20:00
Quote:
funnily enough the top 5% owning 60% of the marketable wealth is never mentioned amidst all these pleas of near bankruptcy and the 'all in it together' bollocks.

can you give me a source for this statistic? i thought it was worse than this?

Joseph Kay's picture
Joseph Kay
Offline
Joined: 14-03-06
Feb 11 2010 20:22

http://www.statistics.gov.uk/cci/nugget.asp?id=2

from a cursory look, and that's 2003 data, so might be worse today

cantdocartwheels's picture
cantdocartwheels
Offline
Joined: 15-03-04
Feb 12 2010 00:43
fatbongo wrote:
Quote:
funnily enough the top 5% owning 60% of the marketable wealth is never mentioned amidst all these pleas of near bankruptcy and the 'all in it together' bollocks.

can you give me a source for this statistic? i thought it was worse than this?

I think thats in the UK, where wages and property prices are relatively high, thus a large percentage of the population has a lot of money tied down in mortgages.
The top ten richest in britian have a combined wealth of £50,000million. Compare that to house prices and your probably talking about 250,000 odd family homes. The richest 1000 in britian have a combined wealth of about £300,000million and so on, so extrapolating from those figures 60% sounds about right.

Joseph Kay's picture
Joseph Kay
Offline
Joined: 14-03-06
Feb 12 2010 01:05

the 60% figure (actually 58% in 2003, according to the source above) is marketable wealth excluding properties.

cantdocartwheels's picture
cantdocartwheels
Offline
Joined: 15-03-04
Feb 12 2010 08:56
Joseph Kay wrote:
the 60% figure (actually 58% in 2003, according to the source above) is marketable wealth excluding properties.

Ah, well that seems like a confusing way of calculatig things since surely property is marketable wealth since it provides income and stock/share value aswell as retaining its own value. Meh i guess theres no perfect way of calculating these things. Anyways all this is somewhat off topic i suppose.

oisleep's picture
oisleep
Offline
Joined: 20-04-05
Feb 12 2010 10:02
Quote:
Ah, well that seems like a confusing way of calculatig things since surely property is marketable wealth since it provides income and stock/share value aswell as retaining its own value. Meh i guess theres no perfect way of calculating these things. Anyways all this is somewhat off topic i suppose

there's two sets of figures in the link - one being the distribution of 'marketable wealth' and the other being the distribution of 'marketable wealth less value of dwellings'

For overall marketable wealth (which includes domestic property value) the top 5% own 40% of all wealth

For marketable wealth excluding home values, the top 5% own 58% of all wealth

so the figures are not saying that the value of a home is not marketable wealth, their just providing two different views of wealth distribution

I'd say there's a lot of merit in focussing on the measure that excludes home values as it strips out what for the majority of the population is something that is acquired principally as a use value (bit of a generalisation but even for house price obsessed middle classes it's still a home) , and the only way for them to actually derive true 'marketable wealth' from it is, like any other commodity, to give up it's use value (or remortgage but that isn't deriving value from it). so it focuses on a measure of wealth which is more based on the accumulation of value for the sake of value rather than bringing in the value of use values that are predominantly used for their utility and which just happen to have a large value. The marked difference between the 40% and 58% i presume reflects the widespread extent and distribution of home ownership (both mortagged and mortgage free) across UK society - so that when the overall value of homes are removed from the calculation the cake that's left is much more unevenly distributed than that which includes home values - i'd presume the gap between these two measures would be much less for european countries for example

Including home ownership/value in these kind of figures masks the true extent of 'commandable' wealth inequality in the country

Joseph Kay's picture
Joseph Kay
Offline
Joined: 14-03-06
Feb 12 2010 11:55

Exactly. A lot of people's only net worth is the equity in their property but it can't be realised without giving up the use value. You wouldn't include the black market value of human organs for much the same reason wink

ideally you'd exclude only the residential address as excluding dwellings per se underestimates the wealth of buy-to-let landlords, a significant element of capitalist wealth (although the last ones on the bandwagon have probably slipped into negative equity in the last 18 months, that's a temporary blip). You'd need to have a good look at the methodology and ideally the dataset to reach a clear conclusion, but as a headline figure it gets the point accross.

Wellclose Square
Offline
Joined: 9-05-08
Feb 13 2010 00:22
Quote:
Exactly. A lot of people's only net worth is the equity in their property but it can't be realised without giving up the use value. You wouldn't include the black market value of human organs for much the same reason wink

Never thought of it like that before, but you're right.

cantdocartwheels's picture
cantdocartwheels
Offline
Joined: 15-03-04
Feb 13 2010 08:13

For sure I agree with leaving out residential addresses but i think exclding property altogether gives a distorted figure. The majority of the duke of westministers 5000 million fortune, for example, comes from owning property.

oisleep's picture
oisleep
Offline
Joined: 20-04-05
Feb 13 2010 09:51

where does it say it excludes all property though? In my post i referred to excluding 'dwellings', 'domestic property values' or 'home values'

about 80% of his overall (global) property wealth is from retail & commercial property so that wouldn't fall under that category

even for the 20% that relates to residential, given that most of it's in mayfair & belgravia etc.. i'd presume a bulk of that would relate to owning the leasehold of the land rather than the value of the actual property itself, so if done properly i'd expect that not to fall under the value of dwellings either, although it probably does

http://www.grosvenor.com/About+Grosvenor/Report+and+Accounts.htm

oisleep's picture
oisleep
Offline
Joined: 20-04-05
Feb 13 2010 12:48
Quote:
ideally you'd exclude only the residential address as excluding dwellings per se underestimates the wealth of buy-to-let landlords, a significant element of capitalist wealth (although the last ones on the bandwagon have probably slipped into negative equity in the last 18 months, that's a temporary blip).

true - i'd imagine it's pretty hard to separate all of this out so probably a lot of these are just classified as homes rather than but to let assets - but even if it is i don't think it has that much impact on the overall stats. the amount of buy-to-let mortgages in issue in the UK is something like £150bn - obviously can't derive the value of rented property from that figure as some will be owned outright and others will have varying levels of borrowing attached to them, but assuming say, on average, a generous 50% equity in the overall value of buy-to-let homes (obviously some will be owned outright so 100% and loads with next to no equity and then loads in between) that would give an overall value of about £300bn, then assuming it's net (of borrowings) wealth that's included in those figures that would amount to £150bn This only represents about 4% of the £3.8trillion figure that is shown as the total overall wealth figure in those stats for 2003. This proportion would obviously be higher when compared to total wealth exluding dwellings but still wouldn't have thought it would be much more than say 10%

Joseph Kay's picture
Joseph Kay
Offline
Joined: 14-03-06
Feb 13 2010 15:48

yeah, in terms of making a polemical point the difference between 5%/60% and 5%/70% is kinda moot.

RedHughs
Offline
Joined: 25-11-06
Feb 14 2010 05:12
Quote:
a bit of the main topic of this thread but i'm a bit baffled by the way things have gone re this over the last week or so - not so much the stuff with greece in itself but how quickly countries like spain, and to a lesser extent portgual/ireland, have been dragged into things as though all four countries are about to go tits up next week. I'd say this is nowhere near the case even for greece let alone the others - spain for example, despite a currently high budget deficit, has a far lower level of borrowings compared to GDP than both the eurozone area average and the wider EU average as a whole, something like 60%.

Hmm,

You can see the same effect in California.

I think this comes because bond speculation has become a prime source of income for the largest chunks of capital. Any negative story will move the market and with a huge pot of speculative capital seeking profits, the news' effects are hugely magnified.

from_gr
Offline
Joined: 17-01-10
Feb 14 2010 08:31

The most horrid scenario would be for us to be saved

http://www.occupiedlondon.org/blog/2010/02/12/horrid-scenario-for-us-to-be-saved/

I think it's a fact that the economy can't grow enough for the capitalists, if there is a strong class struggle in a country. Of course, workers in one country can't really smash capitalism, and i doubt that it's contagious. It's not only the crisis that made the struggle so strong.