I asked frequent contributor Zeus Yiamouyiannis to comment on the coming Greek default. Here is his insightful response.
Greece is the epicenter of a drama that threatens to unwind with all the intrigue and subterfuge of ancient Greek myths and tragedies.As with the legend of Icarus, big, and now bigger, transnational banks provoked the gods with their wax-and-feather financial fabrications to create the appearance of soaring wealth. Now that they have flown too close to the sun and their wings have melted, these banks are being brought to earth by the obligations and consequences imposed by their fabrications.
Rather than take responsibility, these banks seek to appease the gods by sacrificing taxpayers. In fact, if one looks closely, these banks aspire to be gods themselves. They clothe themselves in their indispensability and shield themselves from accountability with tales about how many innocent citizens will be hurt if they don’t get their next bailout. It is as if they say, “We are above the law… We are the law.” Mathematics, legal enforcement, restraint, humility all must fall under the sword of their hubris.
In the end, just as with a Greek tragedy or a Yeats poem, this center cannot hold and things fall apart. When one abuses the laws and principles of mathematics and capitalism, claiming to be a faithful servant, consequence and accountability eventually catch up. The breaking point inexorably nears. Citizens are beginning to think, voice, and act: “We can do without the false idols that call themselves banks. In fact, we need them to be dissolved for us to survive and thrive.”
Reality is the revenge of the gods.
Not just about fairness: Everything unwinds
This is not just about fairness anymore; it is about the exposure of central, global illusions that affect everyone, not just banks. For the last three plus decades, debt-fueled “growth” has instilled a life sense that everyone gets rich, values always go up, and no one has to pay. If those illusions evaporate than those citizens complicit in this failed fantasy may actually join forces with the realists (those who knew it was a scam all along) to produce unified citizen revolt. Hell hath no fury like the people spurned and lied to, even if many had some responsibility in welcoming and fanning those lies.
The implicit deal was this: We will collude so everyone gets rich going forward. We will collude so no one has to pay if there is any unwinding. (But, hey, it’s a new era, and that’s not going to happen!) Open default breaks the illusion, and austerity breaks up the collusion. This is why default has to be hidden, deferred, restructured. It is not just about chaos around party/counterparty risk (in particular, cascading claims that are not backed by anything). It is not even just about finance. It’s about all the other things that will unwind, culturally, politically, and psychologically, if Greece defaults and sets into motion the necessity of someone actually paying up. In short, recognition of reality has disastrous consequences for the status quo and its control myths.
The infinite growth meme unwinds: The cancerous economic obsession with infinite growth in a finite world is already unwinding, but will hit full force with cascading defaults. It is one thing to have a “slowdown,” and another to have your economic brakes lock up on you and your gears slammed into reverse. About the only thing that seems to be growing currently is the number of people partially employed or permanently unemployed. As a humorous aside, the situation is getting so pronounced that quality of life might actually have to replace quantity of possessions as the cultural indicator of the good life, and what would that do to the economy?
Politicians’ power of the purse unwinds: Greek politicians, like many other Western politicians, will do almost anything to get re-elected. The easiest way to do this is to pay people off, particularly government workers and constituents, in the form of generous benefits or pet projects. What happens if your tax base will not support this? You sell your political soul, defer, and/or hide the true costs of your largesse behind undisclosed derivative deals with Goldman Sachs that eventually put your entire country’s sovereignty in jeopardy. As a result, Greece’s former prime minister, George Papandreou, is now out after a very short term in favor of a unity government. Shady deals funded unsustainable perks that not only inflated popular expectations but created catastrophic debt and risk.
Guaranteed entitlements unwind: So now that the illusion of infinite growth is being exposed, the corresponding ballooning entitlements that enticed the larger public to become complicit in the illusion are becoming unglued. It would take almost a decade of gross national product to pay off the U.S. unfunded liabilities for Social Security, Medicare, and Medicaid, which exceed the staggering sum of 100 trillion dollars.
Retirement and health benefits cannot be paid out of fake prosperity and “notional” (i.e. imaginary) values. They require real services and products and an accepted public medium of exchange. (I will leave off the argument as to what constitutes “real” and “accepted” since even fiat currencies are dubious in this regard.) People will be forced to adjust their expectations and adapt their realities. With public and private pension plans also complicit in derivative scams to fund benefits, it will be no surprise if many pensions simply declare themselves bankrupt in the next decade.
The maximum profit mandate unwinds: We have reached such heights in our hysteria about growth and our psychological addiction to more-more-more, that we have seen stock prices fall, even with record revenues, if the corresponding company doesn’t meet expectations of even higher growth and revenue. It is getting to the point where a company cannot simply have a solid year and just pay out its dividends and maintain its good health. Instead companies have to be ever hopped-up on economic steroids and cost-cutting (i.e. shipping jobs to virtual slave labor in China) so as to not fall short of expectations.
These steroidal practices are destroying the companies and the means by which consumers can afford products and services. A relentless short-term focus serves no one in the end. “Maximum” less and less corresponds with “optimum,” because present assets can be cannibalized or revaluated to give short-term boosts to numbers, creating medium- and long-term systemic and foundational deficits that destroy the health of a company and its surrounding society. Hopefully the idea and practice of optimum profit will replace maximum profit as the Great Unwinding continues.
The central question:
The central question, obscured by all the hand wringing and crocodile tears is simply this: Why should public citizens who have no stake in private enterprises, who received no profits or dividends, who had nothing to do with creating losses, be forced to pay for private losses? The only legitimate answer is, “They shouldn’t.” Period. Anything that does not acknowledge this tenet is not functioning capitalism, and if it is functioning capitalism it cannot violate this tenet.
Yet we witness apologist expert after expert excusing this fatal breach in capital practice as “regrettable but necessary to save the system.” They seem not to have noticed that the system has already killed itself by violating its own foundational laws and principles. If anything, current conventional practice might be accurately described as an all-out anti-capitalist assault on democratic free enterprise.
So now the follow-up question is easy to answer: “Why are we paying for something we did not buy and had no hand in creating?” The answer: We no longer have functioning capitalism. Call it what you want— corporate socialism, crony capitalism, cancer capitalism, plutocracy, kleptocracy, oligarchy, neofeudalism— the system we have now is the equivalent of an individual going up to a complete stranger on the street and shaking that stranger down for “protection money” to pay for the individual’s underwater house mortgage.
As this simple fact grips the population, and people wake up to the present economic reality, there will be increasingly organized moves toward civil disobedience and alternative economy. “Cannot pay” will merge with “will not pay” since the only way to re-establish health and integrity in a corrupted economic system is to starve the cancers that have taken it over. This has already started with Occupy Wall Street, strategic defaults, and riots in Greece.
So if someone asks you, seeking to appeal to your fear, self-interest, and need for approval, if you are willing to “be responsible for bringing down the global system,” your answer should be an emphatic, “Yes.” “Are you asking if I want to bring down fraud, theft, abuse and the cancer that global finance has become for me, my neighbors, my children, and my children’s children? Are you asking me if I want to replace the current broken system with something that serves actual people? Not only, ‘yes,’ but ‘heck, yes.’”
By Zeus Yiamouyiannis – For Of Two Minds