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The Greek Depression, the Troika, and the New York Times (videos)

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Ed. Note - Economist Yanis Varoufakis is a well-known expert on Greece and international trade. He criticizes the Greek dependence on the Euro from the Left perspective of failing to create economic demand* and of promoting austerity.

Bill Still is a former Libertarian candidate, award-winning film-maker and Monetary Reform expert. He criticizes dependence on the Euro form the Right, citing the loss of national sovereignty and inability to create jobs under record debt levels.

* Economic demand differs from normal demand in that it requires not just demand for goods and services, but the ability to pay for them. Normal Demand is high and constant in Greece, but the people have been starved of money, and cannot pay for goods and services, nor create the jobs that would fulfill that economic demand.

The following article from William Black is Reprinted from

As I have explained in prior articles, there is an excellent chance that the Troika's infliction of austerity on the eurozone's periphery could, as with the austerity inflicted under the Washington Consensus continue to produce such long-term rolling recessions that it creates a political dynamic that discredits such economic malpractice and brings to power leaders elected on the promise that they will adopt economically literate policies. The first case of this in the eurozone could be Greece. (Hollande won office on a platform of opposing inflicting austerity on France, but purged his government of those that most strongly opposed austerity and implemented policies that moved increasingly toward austerity. The French economy stagnated and Hollande's approval ratings are dismal.)

Greece's coalition government led by Prime Minister Antonis Samaras failed, in multiple tries, to garner enough support to continue to rule. The result will be national elections on January 25, 2015. The results of the election are uncertain, but the leader in the polls is the Syriza party led by Alexis Tsipras, which is running on an anti-austerity platform.

The New York Times'web version has four recent articles on Greece dated December 27-29, 2014. I'll begin with the only one that is not a complete embarrassment, Suzanne Daley's December 29 article titled "Greek Patience with Austerity Nears Its Limit." While the journalist often does not select the article title, as I will show Daley either chose or inspired the title. Her title signals the central problem with the article. "Patience" has nothing to do with the issue and is most assuredly not a virtue in this context. The title suggests that if the Greeks were simply more German, more patient, all would be well. The reality is that the Greek people, as with their counterparts in much of the eurozone, have been far too patient with the economic equivalent of bleeding the patient (austerity). All other factors held constant, the longer austerity continues the slower the recovery and the greater the misery.

As Bill Mitchell always emphasizes, governments choose the level of unemployment -- and the Troika and the Greek leaders who succumbed to its extortion have chosen to create catastrophic rates of unemployment in Greece that continue a full six years after the peak of the crisis. Greece is suffering from Great Depression levels of unemployment and lost GDP. Indeed, Greece suffered relatively less from the Great Depression, which reduced per capita GDP (peak-to-trough by approximately 6%). In the case of the Great Depression, Greece was able to return to pre-Depression GDP levels within four years. The troika, and the Greek leaders who gave to the troika's threats condemned Greece to a crisis that is far more severe and far longer than was the Great Depression. No people worthy of being a Nation would be "patient" with seeing such horrors gratuitously inflicted on their fellow countrymen. They would rise up and put a stop to such depraved policies.

Greece has neither a sovereign currency nor any true sovereignty. The troika, at the insistence of the Germans, successfully extorted the Greek elites into cancelling the referendum on austerity and forced a de facto coup. Germany is the EU's hyper-power. It dominates the EU's political and economic policies and institutions. Syriza calls for the restoration of Greek sovereignty and ending the economic malpractice known as austerity. If it succeeds in the election, and if it holds true to its campaign promises, Syriza poses a grave threat to German rule. Germany openly opposes Syriza coming to power through democratic elections and any resumption of Greek sovereignty.

Germany's hypocritical demand is that Greece must honor agreements that the troika extorted. Germany, after World War I, threw off reparation agreements extorted through foreign diktats that were economically self-destructive to Germany and Europe. Unfortunately, Germany delayed too long in repudiating those agreements, which helped spark the Great Depression. Germany launched World War I and much of the war was fought on French and Belgian soil. The moral case for reparations was substantial. Greece certainly had many flawed economic policies but the moral case for Germany inflicting a Greater-than-Great Depression on Greece was nonexistent.

Daley's article demonstrates these points extensively in these passages.

"Nowhere have austerity policies been more aggressively tried -- and generally failed to live up to results promised by advocates -- than in Greece. After more than four years of belt tightening, patience is wearing thin, and tentative signs of improvement have not yet trickled down into the lives of average Greeks.

Last year, the national unemployment rate reached 27 percent, and the vast majority of out-of-work Greeks have not had a paycheck in more than two years.

In 2010, with Greece crippled by debt and threatening the survival of the euro, the European Union, the International Monetary Fund and the European Central Bank [the troika] began imposing German-inspired austerity on the country. The aim was to slash the budget deficit and address fundamental problems like corruption and a failure to collect taxes. Such policies, they promised, would get Greece back on its feet, able to borrow again on financial markets.

Greeks grudgingly went along, assured that painful reform would return the country to growth by 2012. Instead, Greece lost 400,000 jobs that year and continued on a decline that would see a drop in the gross domestic product since 2008 not much different from the one experienced during the first five years of the United States' Great Depression.

Greece's unemployment rate was supposed to top out at 15 percent in 2012, according to International Monetary Fund calculations. But it roared to 25 percent that year, reached 27 percent in 2013 and has ticked downward only slightly since.

But at the street level in Greece, there is little debate anymore, if there ever was. The images of suffering here have not been that different from the grainy black and white photos of the United States in the 1930s. Suicides have shot up. Cars sit abandoned in the streets. People sift garbage looking for food.

About 900,000 of the more than 1.3 million who are out of work have not had a paycheck in more than two years, experts say.

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William K Black , J.D., Ph.D. is Associate Professor of Law and Economics at the University of Missouri-Kansas City. Bill Black has testified before the Senate Agricultural Committee on the regulation of financial derivatives and House (more...)
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