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Generational Dynamics Web Log for 13-Jan-2010
13-Jan-10 News - Greece may be near financial collapse

Web Log - January, 2010

13-Jan-10 News - Greece may be near financial collapse

The UK debates the Iraq war.

IMF visits Athens as EU accuses Greece of fiscal dishonesty

Question: What are the most terrifying ten words in the English language?

Answer: We're from the Government, and we're here to help you.

Well, perhaps Greece is hearing something even worse: "We're from the IMF, and we're here to help you."

Bloomberg reports that a team from the International Monetary Fund (IMF) arrived in Athens to help the government with "pension reform, tax policy, tax administration and budget management."

These are just some of the areas where Greece's budget has been growing uncontrollably.

This comes at a time when the European Commission is essentially calling Greece a liar, with "severe irregularities" in the nation’s statistical data. Other accusations claim that Greece used dishonest financial data in order to join the euro currency.

It's pretty clear that there's widespread distaste for the idea of bailing Greece out, and preventing the government from defaulting on its debts. The reason is that Greece's government is so out of control with spending, and apparently does not have the political will to cut back sufficiently.

Adding to Greece's troubles, Reuters reports that the major Greek civil servants' union has called a strike for February 10, to protest against the government's austerity measures.

There's apparently a big game of "chicken" going on. In American in the 1950s, the game of Chicken was quite popular among teen hot rodders. Two teenagers would drive their cars full speed straight towards each other from opposite ends of the field. The first driver to swerve to avoid an accident is the "chicken." If neither driver swerves, then both drivers die.

That's what may well happen in Greece. If the EU and the IMF refuse to bail Greece out, and if the Greek government and unions refuse to cut spending, then the repercussions of a Greek default will be worldwide. It'll be interesting to see which side swerves, if any.

Paul Krugman says that the euro currency was a mistake

According to Krugman's blog,

"Europe lacks both the centralized fiscal system and the high labor mobility. (Yes, some workers move, but not nearly on the US scale).

To be sure, America has at least minor-league versions of the same problems: we are having fiscal crises in the states, and the housing slump has depressed mobility in the recession. But we’re still better able to cope with asymmetric shocks than the eurozone.

Was the euro a mistake? There were benefits — but the costs are proving much higher than the optimists claimed. On balance, I still consider it the wrong move, but in a way that’s irrelevant: it happened, it’s not reversible, so Europe now has to find a way to make it work."

This guy has absolutely no sense of history. Since the end of World War II, there has been an increasing movement towards a European Union and a European currency. The momentum was unstoppable, because nobody wants to see a new European war.

From the point of view of Generational Dynamics, a new European war is inevitable. The European Union and the euro currency will not survive in anything like its current form, and both may collapse completely.

But that's not the end of the story. Once the war is over, in the 2020 time frame, Europe will enter a new generational Recovery era, and this time the European Union and the euro currency will succeed.

Did Iraq war make it harder to talk to Iran?

The UK is currently conducting a highly contentious inquiry into the history of the UK's involvement in the Iraq war, with the objective of assigning blame.

On BBC's Europe Today program, former Labour Party minister Frank Dobson made the following comments (my transcription):

"It must be obvious to anyone with a grain of sense that the invasion and occupation of Iraq has been disastrous, quite substantially for large numbers of people in Iraq who've died or been injured, and certainly for peace and security in the middle east. ...

It's also made it more difficult to deal with problems arising from Iran attempting, if they do, to get nuclear weapons.

All that has been made more difficult as a direct result of the stupid decision to invade and occupy Iraq."

If Dobson can call his political opponents "stupid," then that gives me leave to call Dobson a total moron, almost incapable of coherent thought.

Let's assume the counterfactual that there was no ground invasion of Iraq in 2003. Then we'd have to assume that Saddam Hussein was still in power today, and we STILL WOULDN'T KNOW whether he was deploying weapons of mass destruction.

In that scenario, Iran would be saying to us, "Saddam Hussein has already attacked Iraq with weapons of mass destruction (WMDs), during the Iran/Iraq war of the 1980s, and he may do it again any day. We need nuclear weapons to protect ourselves from Saddam's WMDs. If you want to stop the spread of WMDs, then you'd better start with Saddam!"

And so, contrary to Dobson's argument, without the Iraq war it would have been MUCH MORE DIFFICULT to talk to Iran about nuclear weapons.

Of course, Iran would be developing nuclear weapons capabilities under any scenario. The Iraq war made no difference, except that they might have gone faster without the Iraq war.

This is a good time for me to remind readers that I've never taken a position on whether the Iraq war was "right" or "wrong" or "good" or "bad." (See "The Iraq war may be related to the bombing of Hiroshima and Nagasaki.")

Dobson's statements illustrates the incredibly ignorant quality of most political discussions about the Iraq war.

Congress to skewer bank execs over bonuses on Wednesday

First the bankers who created trillions of dollars in near worthless "toxic assets," and used them to defraud investors while paying themselves hundreds of billions in commissions and fees. Now that they've been bailed out by the government, they're forcing their own customers 30% interest, and they're using the money to pay themselves more billions in bonuses. This is criminal extortion, but it's the norm for the financial community these days.

I've been expecting something like this for years, since the same thing happened in the 1930s, but I've been sickened by the extent of the corruption being exhibited by these bankers.

On Wednesday, bank executive will be testifying on Capitol Hill before the Financial Crisis Inquiry Commission.

It is grossly loathsome and disgusting that these people are paying themselves million dollar bonuses after all the damage they've done. As I've said before, I truly believe that many of them are going to go to jail before this is all over.

Google threatens to pull out of China

The NY Times reports that Google has discovered that the e-mail accounts of human rights activists had been hacked.

According to the report, Google said that it had found a “highly sophisticated and targeted attack on our corporate infrastructure originating from China. ... These attacks and the surveillance they have uncovered — combined with the attempts over the past year to further limit free speech on the web — have led us to conclude that we should review the feasibility of our business operations in China."

Google has been criticized for years for agreeing to censor its search results to exclude anything that the Chinese Communist Party objects to. The company now says that it is no longer willingo to continue this censoring.

(Comments: For reader comments, questions and discussion, see the 13-Jan-10 News - Greece may be near financial collapse thread of the Generational Dynamics forum. Comments may be posted anonymously.) (13-Jan-2010) Permanent Link
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