(09h) Damaging effects of austerity - and a possible way to lessen the pain

UK

Here a must-read article about how quickly a few years of austerity in one of the richest countries on our planet can disintegrate a society whereby people start to fight with each other for almost expired food and other cheap goods.

Indeed, people who are poor and hardly can afford anything, including food, become hungry and, as long as they still have fat reserves and some savings, they can continue to buy some food and forget the hunger for a short period (and this period can be extended by avoiding to meet friends and family and thus spending money). But after a few months, when savings are starting to melt away (and the less money someone has, the quicker it goes down) while the numbers of people who become desperate and need to buy cheap food grow, the more likely it becomes that people start to fight with each other in order to be able to get the cheap products. Certainly when people have children who are hungry, people will start fighting for the cheapest things available, because many of these things keep people alive but also because people want to have happy children by for instance buying a TV as also ordinary and rich people do. When in real need, people will even eat expired food and eat out of bins. And that people are in serious need and some are dying can be assumed.

Of course, this fighting can be condemned and others can look down on these people, claiming they should get a job and behave well. But be careful not to mention this when they can hear you as then their anger and hunger may turn against you. Indeed, a society that makes its people poor to force people 'try to find a job' should expect dangerous situations. And many of these people even have jobs, but wages are too low to have a decent living. Of course, if unemployment continues to rise, employers can think they are lucky as they can reduce wages (some out of necessity to survive as the company is struggling) because the desperate will take whatever job in order to have something. Certainly when benefits are cut, even for the very disabled ones while it seems the terminally ill are asked when they expect to be gone, people will become more desperate to get that one job and thus may become aggressive against others who are trying to get the same jobs but also towards employers who may hire someone else.

One should always think about any possible consequences for others but also for oneself. Each society (and certainly rich nations) where people are fighting over almost expired food should question itself about inequality amongst the civilians. That doesn't mean people should be able to cheat on benefits but most don't and even feel humiliated to admit they have no job. Still, the new measures to balance the budget were announced, hitting the youngest and weakest in society most.

Greece

Concerning Greece, there were recently new talks between Greece and its creditors the EU, IMF (International Monetary Fund) and ECB (European Central Bank), the so-called troika (but probably with banks in the background giving advice) to try to find a way out of its problems.

 

Simple map of Greece in yellow (handdrawn to give an impression) with its curved coasts and many islands, some big while others too small to show on this map. The star represents the capital Athens while dot 1 suggest Sparta and dot 2 Thessaloniki. Triangle 1 suggests Mount Parnassus while triangle 2 suggests Mount Olympus. Crete is the island at the bottom of the map. The black lines suggest the presence of land while the blue lines that of water.

And problems are serious for the Greek. For instance, on the Flemish radio a journalist working in Greece spoke about his wife who is a teacher in Greece and only receives about €1,000 a month after she lost two months of income (of which one was the 13th month); for this sacrifice she has to teach larger classes and more hours (and thus other teachers were less lucky as they lost their job) while she will have to work more years in future. Still, because tax revenues were lower than anticipated a few months ago (of course, the rich claim because people are avoiding paying taxes as they probably know very well they would avoid paying them), the creditors demand higher taxes and a higher retirement age. In how many countries would people accept to loose their 13th month, let alone two months of wages? In Belgium for instance, people already demonstrate if the retirement age is increased with only 2 years, something we expect would happen one day but many still refuse to accept.

As a desperate PM Alexis Tsipras refused to give in by announcing a referendum in which the Greek decide not to accept the conditions of the creditors (and thus afterwards people can't blame the Greek government for not having consulted those who suffer), Greece may still give in as they are desperate enough to get some funding, if only to pay their employees. The prediction of an old woman may become reality when she said after the last Greek elections, that after about 6 months the Greek government may collapse and then after new elections many people may vote for the extreme right Golden Dawn who may take revenge but may also install terror. Or the army may step in to prevent further chaos and re-install the old parties. Still, it is a divided society with family members and friends becoming opponents who may blame each other when one or the other result may still result in more hardship.

The latest news (I have to update my text each time I reread it before publication) is that it seems the Greek government capitulated and accepts more severe austerity, even after the people rejected more austerity during the referendum and thus may feel betrayed. Indeed, the outcome of a referendum should be accepted as this was the will of the people or should not have been organised. Did the previous finance minister Varoufakis expected a U-turn as he resigned even after the people agreed to no more austerity as he also favoured? Or was the speech by MEP Verhofstadt the turning point in which he spoke about a politician who may be remembered in future as an electoral accident and false prophet who made his people poorer by not accepting more austerity or may be remembered as a great reformer when he accepts? And PM Tsipras had only two minutes to respond? - why did he waist his time? Still, I think the Greek PM should now resign as he will be worthless because he became weak as he gave in to the demands of the creditors but mainly for his people who now may regard him as a coward and cheat after they gave him a mandate to not agree with more austerity although they may understand that he failed because he was exhausted fighting against the whole world while the country needs money or the economy will collapse (video - and notice, here too people almost start fighting).

The demands of the creditors are really a joke if they were not that tragic and just shows how out-of-this-world these people are. In almost every (rich) country, investors (including bankers but also other businesspeople) are demanding lower tax rates as they claim this will stimulate the economy. But Greece is an exception and should raise its taxes while already the economy shrunk with about 24% and in certain areas unemployment is as high as 60%. Also taxes on products should go up while many people earn little. How can this economy ever recover in this way? When people have to pay more taxes, even if only raised on products so they become more expensive, they can buy less and thus the economy will probably shrink even further. Still, as some German politicians in newspapers already suggested, in exchange for the money Germany gave to Greece, Germany should get some Greek islands.

Is this really the reason for this economic crisis? To impoverish people, steal their land and belongings while make the rich even richer? Indeed, with every possible deal whereby Greece may give in shares go up as more money can be expected.

It seems any deal between Greece and its creditors must start with a budget surplus target (just as also the UK chancellor George Osborne claims the UK budget should do while he suggests other countries should follow) while, as we noticed before, a surplus may even result in a higher contribution fee for Europe and thus even more troubles for Greece and other countries. In addition, both a surplus on a country's budget and large savings by its citizens are not possible unless the money comes from elsewhere (such as colonies).

Are Europhobes and the Mafia really ruling Europe to robe and destroy it? A very dangerous situation. Still, temporarily it may be that creditors run some sections of Greek society such as schools and hospitals so these can continue to work but not other businesses as this will cause unfair competition with the surviving local companies (be sure, otherwise foreign companies will employ people at low wages and export goods expensive while local companies will be out-competed). The locals should best run their businesses but maybe more locally sell instead of exporting their food.

The way forward is not by simply giving more money to Greece so afterwards even more repayments can be demanded but by restructuring debts and making sure the money reaches the people so they can have a job and eat and live in a house. Europe should not pay banks via countries if banks need more money so countries are not burdened with debts or at least countries should not pay interest on the money paid when it is clear a country can't repay.

Indeed, in Belgium politicians claim already many decades that we will soon see the light at the end of tunnel (i.e. debts go below a certain threshold so repayments decrease). Still, one financial crisis threw us back many years as deficits increased again after banks were saved while now those responsible for this crisis but also the EU are demanding more is done to reduce the debts.

Greece is now suffering but everyone else may one day feel the heat unless we find a solution. Indeed, we should tell certain important individuals that they should behave or face imprisonment and loss of belongings instead that they further remove the money from the economy into a few safe deposit boxes by betting against Greece and other countries (of course, if some corrupt are imprisoned, their family may receive compensation such as a small house so they don't need to live on the streets). Sometimes the nice way is not an option.

The myth that people are poor because they get help and for that reason don't look for a job and become lazy while they will only be lifted out of poverty when any help is stopped to force people into work seems to have been born about 200 years ago. Of course, some people abuse the system but even what should be a decent wage (such as €30,000) can't compete any longer with people who earn 10 or even 100 times more and can buy whatever they like at always a slightly higher price so others can't buy it or the biding drives prices up.

And when at a certain moment wages go down while even house prices may go down, it may become even worse when people have a mortgage on their house because, after wages go down, the mortgage may be too high to repay so people have to sell their house at a price too low to pay back the mortgage and thus become poor (or even face imprisonment for not being able to repay). This is not unrealistic as at the start of the crisis many Americans abandoned their homes after having lost their job and as a consequence mortgage repayments but even rent became too high; still, the wealthy could buy the houses cheap (and even camping areas) while now, as the economy recovered slightly, the wealthy can sell the houses at a (slightly) higher price (or rent out camping spaces). Indeed, the rich became richer after the crisis of 2008.

The current situation is real comedy if it wasn't deadly (yes, already about 11,000 Greeks committed suicide plus people living on the streets who may have died but don't exist plus in future all those who may die in a local and later maybe worldwide revolution).

First, at the start of the banking crisis, banks needed to be saved by countries so these countries impoverished. And thus countries needed to balance their budgets and oh, so many politicians and bankers who congratulate each other as they claim that good governments managed to decrease the number of civil servants (including teachers and police officers) and thus saved millions while the services become better (because less control on businesses).

The second stage was that quite a number of countries that saved banks needed to be saved as they overspend by saving those banks. Because afterwards the situation in quite some countries was bad, banks decreased the rating of these countries so borrowing became more expensive for the worst hit countries. Organisations that formed the troika but probably also banks than lent money to countries such as the Greek government with parties directly responsible for the bad economic situation after they allowed corruption within the banks for many years. About 90% of this money was then used to pay the banks (why if they already received billions to be saved from those countries?). If this money was only given to Greece in order to further finance banks, then why didn't the donors give the money directly to the banks? If they did, then the banks should have to repay the money and not Greece that didn't benefit at all except for the 10% while it is now forced to repay plus interest something it didn't receive as the money was given to the banks (the amount of money Greece received would have enriched it). And the bankers, they celebrate because years of austerity for Greece ensures years of income for the banks at the expense of the Greeks and thus many more years of bonuses.

The third stage is that the international organisations, backed by the banks, demand that Greece implements even more austerity to repay it debts so these organisations can then donate this money to the banks who can do good deeds such as investing in new development in cities to make them beautiful so they can be worshipped as our saviours while we should forget they originally ruined the world economy. Indeed, the ECB released billions of euros to banks to stimulate the economy (although they excluded Greece) and I am sure banks will charge interest if they agree a loan (so banks gain). As Greece is impoverished to such an extend that people voted for a party that normally would never win, European leaders are angry, certainly after the Greek PM decided people should be able to decide in a referendum whether or not they accept more austerity (and thus now some European leaders feel betrayed).

As people are considered stupid, certainly when they may decide against more austerity, they need to be punished by making sure Greek banks have no money and thus need to close so people understand what it feels like when the euro will no longer be their currency (but probably this closure would have happened anyway as the reason for the referendum is that Greece is no longer able to repay its debts but has to). The IMF also released figures to show hardship will last until about 2030. And although years ago IMF President Lagarde seemed to admit austerity was too harsh, they continue to demand more of it and refuse to listen to other options although they claim they do (Mrs Lagarde says the IMF has to follow rules that can't change according to the need of individual countries (video) - as if God himself wrote these unchangeable rules in stone tables).

Some European leaders also claim they offered a good alternative by suggesting Greece spend less on its army (just at a time when NATO is having exercises near the Russian border and demands more protection against incoming immigrants). Was this suggested because the EU wants to remove Greece's army so it will be easier to conquer or because they fear the army may take over the government (that I now start to distrust the EU to such an extend)?

So, why should people have voted 'Yes' for a project (i.e. the EU) that brought them doom? Indeed, when Greece joined the euro, our leaders knew the country needed more help than other countries and thus if the EU wasn't prepared to provide this help, they should not have accepted Greece into the euro. In addition, people who defend the EU as a uniting project, the young, are those who also voted for Syriza while those who may loose their advantages are in support for more austerity and may vote for the old traditional parties or worse the extreme right Golden Dawn. And while the older generation may claim they vote for parties who will reduce the immigration problem and benefit fraud and give powers back to old institutions, many of their children may oppose them as many will prefer to defend the innocent poor than the guilty rich. Indeed, at the start of the crisis, protests by the Indignados demonstrated that mainly young people demanded a change in the broken system.

Still, the EU and Greece should publish their proposals so we know what each side proposes while both sides can no longer accuse each other of betrayal. At least, I think more openness will be the end result at the end of this crisis so people no longer have to distrust their governments.

Thus, Greece had to pay the banks three times: the first time to save them at the start of the banking crisis, the second time because most of the money that was supposedly given to help the country ended up with the banks and the third time because the money that was given to Greece during the second time now needs to be repaid together with its interest. The next stage may be that Greece is forced to sell out such as seaports but maybe even islands and art to finance its debts.

But the rest of Europe may one day feel the troubles when desperate Greek join the immigrants of Africa and the Middle East to reach the richer Europe (although countries are starting to take their precautions).

Or worse, some angry Greek who can no longer accept to see friends and family dying in suicides or because food and medicines are no longer available may come to take revenge.

However, the worse may be when the banking system may one day focus on another victim while the Greeks may be blamed for causing another crisis in these countries as they didn't pay their debts to countries and banks.

Evil is genius in destroying others and convincing people that the others (i.e. the weak) are to blame. But support evil and it will always return to punish both the good and bad in the society that supported the bad. Still, I have to admit I start to admire the people who convince most people to believe that the victims are the guilty while they are to be trusted.

Possible solution

Therefore, it may not be bad to have a dual currency in the country as already used in some cities although often the higher powers don't like this unless they can control it by fixing the exchange rate and thus the later should be controlled by governments.

Internally a local currency (linked to the Greek gold reserves) could be used that is of little value for the international community; still, it is sufficient to buy locally produced goods such as food but also pay for education or healthcare. This money has value and can be changed for other currencies so people can travel abroad or trade internationally.

Taxes on this money can be used to pay people's wages within the country (such as teachers and civil servants). Even exchange of locally-produced goods may be encouraged. This money will be relatively weak but as the people are already impoverished and many unable to travel abroad, even a weak currency will allow them to buy products, as long as the products are not bought abroad for high prices - indeed, the economy should revert more on itself (although partially open trade markets is something the IMF opposes as they claim free trading is the Second Commandment after the First Commandment that says the rules and only these unchangeable rules.). And thus those in favour of re-introducing a local currency are happy.

But tourists have to pay with international currencies such as euros (linked to the eurozone gold reserve) and thus foreign money enters the country while also trading with other countries will be done with the use of the euro (what foreign country wants to accept payment using a weak currency?) although during trade foreign money will both enter and leave the country. This allows that Greece remains a country with a connection with the rest of the world and thus allows that tourists and traders continue to visit the country.

Taxes raised on trade that uses this currency can then be used to pay back international creditors, but at a slower rate. Of course, people should be warned not to try to avoid paying taxes or they will be punished although many have no choice as it is taken when they are paid. Doing so, the people who prefer to remain in the euro are also happy while this way there is no loss in money due to the necessity to exchange money before trade can be done.

Already many people are so poor they are unable to pay high taxes or even to buy essential goods and thus the local currency can be used. International money can then be used to travel and buy or pay internationally.

Whenever tourists visit Greece, they should bring euros with them so strong foreign money enters the country (and not a weak local currency by changing before they enter) while people can pay back in local money (there should be total transparency about an easy exchange rate, determined by the government and not bankers who would use it to enrich themselves). When tourists or businesspeople leave the country, they can exchange in Greece the local currency for euros, at a fair rate. Tourists will leave with less as tourists always do while those doing business may gain.

International traders however use euros to buy and sell internationally while buy and sell within Greece with local money and thus they have both foreign and local money so there should be little need to exchange between both currencies as that always result in losses. Of course, if people prefer, they can pay with either one or the other money but people should remember that paying with foreign money will result in losses as the taxes will be used to repay debts while paying with local currency results in money for the country. This also stimulates tourism and trading as foreign countries want Greece to be able to repay it debts and thus countries will prefer tourists travel to Greece with euros.

But I don't think only a local currency (in case of a Grexit) or only one international currency such as the euro (in case Greece remains within the eurozone) are the solution as a local weak currency needs to change for an international one during international trading (in the past the dollar) while internally it is not important which currency is used as long as a currency can be used to buy and sell goods locally. Already in many developing countries tourists buy goods in their own currency as locals prefer this than to receive a weak currency. Each currency doesn't need to weaken the other one by exchanging some of the gold reserves unless the financial sector may decide Greece should sell its reserves to pay them and thus a very weak and worthless currency will be the result unless the currency is linked to other things than gold such as the heritage, both natural as cultural (unless these are also sold so the country is left with nothing as may be the case).

Those destroying the EU claim Syriza and its leader PM Tsipras and the people who voted against more austerity are against Europe. I think they are not, they want to stay in the European project as it was in the past: support work and not destroy it. Invest in good (business) ideas, stimulate that people from different countries work together by financing projects over borders so understanding can increase. However, no longer.

Concluding comments

The Greek did what every normal person (except maybe those trading abroad) would have done in similar circumstances: they voted 'No', thus against more austerity but not in favour of leaving the eurozone or the EU as they want to remain part of a larger community.

But equally, expect the markets to condemn this by using measures to punish Greece and push it even further down until it accepts the conditions of the creditors as it seems it now did. Still, although the outcome of the referendum was as requested by the Greek government, the controversial finance minister Mr Varoufakis resigned from his position, maybe to allow a more moderate voice to chair the department, maybe because he didn't believe the outcome of the referendum will change the outcome of the negotiations with the troika but maybe also because he hopes to survive a possible collapse of the government.

Maybe the best for Greece may be to leave the eurozone and turn upon themselves for a moment although even than the IMF and others will force their market policies on Greece as they have done before on other countries.

It also demonstrates why at this moment it is stupid to even want to be elected on the promise of a different way out of the crisis. Indeed, although many people agree a different way with more involvement of ordinary people in politics needs to be followed, the old powers are not yet willing to change and may never be. The dinosaurs think the large companies are good for business and need more freedom (i.e. TTIP). And although I agree that countries don't need to have government-owned TV and radio stations when this can be done by the private sector, simply stopping them within a few months without any alternative is unacceptable.

In addition, certain companies have become so big and are allowed to follow other rules than small companies (e.g. a PM of a certain small country helped big companies to avoid paying taxes in their own country while in a new job promised to fight tax avoidance in countries with hardship). Also, large companies can buy products much cheaper or they refuse to buy anything to force the price down while small companies have to pay higher prices and thus sell more expensive, unless equal rules are forced upon the companies.

But in general, people blame the Greek for irresponsible behaviour (and probably there was) and condemn Syriza for not accepting the terms of the troika and thus one has to wait before offering a solution until also other countries may experience what Greece experiences now. Only then people may accept not the poor have to pay more taxes but the rich should not get more tax reductions 'to stimulate the economy'. In the meantime, one can also find the people who have ideas to help to build this new society.

Thus, first let the old powers try to solve the problems they allowed to happen while refuse to accept other (sometimes even older) rules need to be accepted (e.g. the financial sector can't control itself and needs to be forced to follow the rules as set by society as it did in the past - still, one day the old powers may force this upon this sector when they loose money, just as they now force ordinary people to pay taxes while in the past they allowed some avoidance). If the old powers fail or need to use too much violence to force their policies upon the people, then people will accept taxes should be paid or troubles follow but equally they may accept more solidarity to help each other.

In addition, smaller businesses will flourish again as businesses will no longer be allowed to grow to such a seize they are too big to fail while international organisations will check multinationals and no longer defend any unacceptable behaviour.

Indeed, Greece is a laboratory to show the rest of the world what may descent upon them before a NWO can arise that is better for everyone. Unfortunately, during the transition many people may die and probably mostly the young while the older generation may curse themselves for having agreed with criminals and for not having listened and defended their children more.