Greece now, America in due course
by Michael Hudson
Posted 13 JULY 2011
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Washington. In Greece, the Parliament has passed the austerity measures. And judging by the reaction of the stock markets and investors, everyone was rather pleased with that. Stock markets shot up for the next few days. The euro went up. There was even optimism about the future of the economy. But that’s kind of the whole point. It was all optimism on the stock markets and bond investors. In fact, that’s how the whole story’s been covered. It’s all from the point of view of speculators. But what does what’s happening in Greece have to do with ordinary Americans? Now joining us to talk about this is Michael Hudson. Michael is a distinguished research professor at the University of Missouri-Kansas City. He’s the author of Super Imperialism: The Economic Strategy of American Empire. And he joins us now from New York City. Thanks for joining us, Michael.
MICHAEL HUDSON, RESEARCH PROF., UMKC: Thanks for having me, Paul.
JAY: So why should ordinary Americans or ordinary North Americans care about what’s going on in Greece?
HUDSON: Because what’s happening in Greece is a dress rehearsal for what’s going on in the United States. Already, a few weeks ago in Athens, the protestors had signs up referring to Wisconsin and the problems here. What’s happening in Greece in the last week is exactly what’s happened in Minnesota with the close-down of government. And the demands of privatization–Greece sell off its roads, its land, its port authority, its water and sewer–is just what Illinois’s been doing, what Chicago’s been doing, what Minnesota’s been told to do, and what American cities are trying to do. So you have an identical strategy being used between Greece and the United States. Greece is the first domino since Iceland. And the financial interests that are looking at this post-2008 debt crisis as a grab bag think now is the chance for us to make our move. Now we can take all this debt that we’ve built up and we can get out of the financial system, we can turn it into direct ownership of property. We can own the Greek islands, we can own the Greek public domain, just like we can own what Minnesota, Chicago, Wisconsin, and California own. And all of a sudden you have a huge virtual foreclosure process.
JAY: Right, because, I mean, the alternative, obviously, would be to do something on the tax side, which is to tax, especially in Greece, where the wealthy practically pay no tax at all. Of course, the American scenario, they pay some tax, but not nearly historic tax rates. But this seems to be one of the prime objectives in the Greek situation is stripping the state of its assets and getting rid of what public ownership there is.
HUDSON: Well, this is what they tried to do in Iceland after trying to make the Icelandic government, meaning the taxpayers, liable for the bank losses that were basically a result of fraud. And that was stopped in Iceland by the president saying, wait a minute, if we’re going to push an economy into a generation of economic depression, there’d better be a vote on it; otherwise, it’s not legal. Underlying international law today is the idea that if a debt is taken on by a country, it has to be taken on democratically. Although the Icelandic Parliament went along with the debt, the Social Democratic Party, the people had voted against it, first of all, by over 90 percent, and then later they voted, a few months ago, against being liable for debts that legally they don’t owe by three to two. So, all of a sudden, England had to pay out its depositors the money that it owed them from the very beginning. It wasn’t able to strong-arm Iceland. So the Europeans said, okay, maybe we’ll have better luck with a country that already is tied in to the Eurozone, and Greece, Portugal, and Spain are the main governments in trouble. So [incompr.] the government in trouble with the socialist government. In Europe the word socialist means right wing, way to the right wing. The word conservative, if you have the equivalent of the Republicans in Greece, the conservatives, they’re to the left of the socialists. So the socialists in Europe – I won’t call them national socialists, because they’re international socialists – basically, they support the financial sector. [crosstalk]
JAY: That’s not so unlike what we’re seeing in Washington with the current Democratic Party administration.
HUDSON: Well, you can say it, but it’s a travesty of how the social democratic and labor parties began a century ago.
JAY: When I was reading the business press after the Greece Parliament passed the austerity measures and people were buying back into the EU and talking about revived confidence in the European Union and all that, it felt a little bit like Alice in Wonderland territory, because everything I’m reading is saying everyone knows sooner or later Greece will default anyway, because this really hasn’t solved any of the problems. So you’re wondering what all the elation is. But then you realize it really is so much about this privatization. They’re elated because they’re going to start picking the bones of the Greek economy.
HUDSON: Well, in between right now and the time they default, there is going to be a huge foreclosure. So what Europe, what the bankers are planning for is time. The French and the German banks want to take all of their bad loans that they’ve made to the Greek government and turn them over to their own central banks so the European taxpayers, meaning the industry and the population, have to pay, not the speculators. So, first of all, the banks are going to dump their bad loans on the government, just as what happened in Ireland. Secondly, they’re going to try to force the government to privatize the selloff, under distressed conditions, [of] everything in the public domain. Now, in the American press you have what you referred to as this feeling of irrationality. The press says, well, they’re just a lot of people rioting; what can they do? What they’re doing is laying a legal foundation for simply repudiating the debt, because if they can now argue, say, look, this debt that you say we owe and have to pay off by privatizing our assets, you knew that we rioted, you knew the whole population was there, you knew that the people were asking for a vote. It doesn’t matter if the Socialist Party people who’d sold out, they’re corrupt. The people are not behind this loan. And when we repudiate the debt, you can do one of two things. Either you can kick us out of the common market, the European Union, and you can kick Spain and Portugal out. If you do, we’re going to form our own union, and this union is not going to pay the debts to you, because no country can be expected to push itself into a generation of depression in order to pay creditors who simply create all this credit to lend to governments on computer keyboards.
JAY: And the whole thing’s a little rich anyway, because these European banks that are putting into Greece were themselves the recipients of enormous bailouts by the American Fed, which is another reason why this should matter to ordinary Americans.
HUDSON: Well, there’s another factor for Americans, and that was that pushing Europe into this right-wing position is the Obama administration, and specifically Geithner, the secretary of the Treasury. Geithner says, wait a minute, American banks have made huge billion-dollar–maybe, for all we know, a trillion-dollar bet that the Greeks will repay. They’ve made derivative plays, they’ve made cross-party insurance, and American banks would lose money. Now, if there’s a choice between American banks losing $1 and Europe going into neo-feudalism for a generation, Geithner will support the $1. He says sacrifice yourself, throw yourself on the state, so that our banks can make money on their debts and the European bankers obey.
JAY: Well, I’m guessing we have not heard the last from the Greek people or the Spanish people about all of this.
HUDSON: You can look at what’s happening in Greece when it says cut back your pensions, cut back your Social Security, cut back your medical care. This is exactly what we’re going to see done in the next two weeks by the Obama administration here.
JAY: Thanks for joining us, Michael.
HUDSON: Thank you.
JAY: And thank you for joining us on The Real News Network.
End of Transcript
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This post first appeared at Michael-Hudson.com.
Written by aurick
16/07/2011 at 12:32 am
Tagged with Bernanke, California, Chicago, debt, depression, economic collapse, economic crisis, Federal Reserve, financial crisis, Financial Disaster, Financial Meltdown, Geithner, Great Depression, Greek debt crisis, Greek riots, Greek sovereign collapse, Iceland, Minnesota, Obama, sovereign debt, sovereign default, Wisconsin