Europe’s Fiscal Dystopia: The “New Austerity” Road to Neoserfdom

[Rajiv]

Europe’s Fiscal Dystopia: The “New Austerity” Road to Neoserfdom

Michael Hudson

Europe is committing fiscal suicide – and will have little trouble finding allies at this weekend's G-20 meetings in Toronto. Despite the deepening Great Recession threatening to bring on outright depression, European Central Bank (ECB) president Jean-Claude Trichet and Prime Ministers from Britain's David Cameron to Greece's George Papandreou (president of the Socialist International) and Canada's host, Conservative Premier Stephen Harper, are calling for cutbacks in public spending.

The United States is playing an ambiguous role. The Obama Administration is all for slashing Social Security and pensions, euphemized as "balancing the budget." Wall Street is demanding "realistic" write-downs of state and local pensions in keeping with the "ability to pay" (that is, to pay without taxing real estate, finance or the upper income brackets). These local pensions have been left unfunded so that communities can cut real estate taxes, enabling site-rental values to be pledged to the banks of interest. Without a debt write-down (by mortgage bankers or bondholders), there is no way that any mathematical model can come up with a means of paying these pensions. To enable workers to live "freely" after their working days are over would require either (1) that bondholders not be paid ("unthinkable") or (2) that property taxes be raised, forcing even more homes into negative equity and leading to even more walkaways and bank losses on their junk mortgages. Given the fact that the banks are writing national economic policy these days, it doesn't look good for people expecting a leisure society to materialize any time soon.

The problem for U.S. officials is that Europe's sudden passion for slashing public pensions and other social spending will shrink European economies, slowing U.S. export growth. U.S. officials are urging Europe not to wage its fiscal war against labor quite yet. Best to coordinate with the United States after a modicum of recovery.

Saturday and Sunday will see the six-month mark in a carefully orchestrated financial war against the "real" economy. The buildup began here in the United States. On February 18, President Obama stacked his White House Deficit Commission (formally the National Commission on Fiscal Responsibility and Reform) with the same brand of neoliberal ideologues who comprised the notorious 1982 Greenspan Commission on Social Security "reform."

The pro-financial, anti-labor and anti-government restructurings since 1980 have given the word "reform" a bad name. The commission is headed by former Republican Wyoming Senator Alan Simpson (who explained derisively that Social Security is for the "lesser people")
.
.
.
.
.
.
.
.

[don]

Re: Europe’s Fiscal Dystopia: The “New Austerity” Road to Neoserfdom

In the early '30s in Germany austerity was the program of choice. There were alternatives being offered. One was central bank funding of massive infrastructure projects- the autobahn, rural electrification, new electrical generation, nation-wide telephone updating, etc. That would have provided useful employment for 2/3 of those out of work. The remainder would find employment in the peripheral jobs created by the larger projects. The chances of the Nazi Party coming to power would have been nil.

[don]

Re: Europe’s Fiscal Dystopia: The “New Austerity” Road to Neoserfdom

Hudson is scheduled to be on the Keiser Report tomorrow.

[chr5648]

Re: Europe’s Fiscal Dystopia: The “New Austerity” Road to Neoserfdom

In the early '30s in Germany austerity was the program of choice. There were alternatives being offered. One was central bank funding of massive infrastructure projects- the autobahn, rural electrification, new electrical generation, nation-wide telephone updating, etc. That would have provided useful employment for 2/3 of those out of work. The remainder would find employment in the peripheral jobs created by the larger projects. The chances of the Nazi Party coming to power would have been nil.

Otto von Bismarck is the father of the modern welfare/social state. His massive social/welfare state which eventually fell apart capitulated in the disasters of ww2. If the welfare state never existed it wouldn't need austerity, would it?

http://en.wikipedia.org/wiki/Otto_vo...al_legislation

[gnk]

Re: Europe’s Fiscal Dystopia: The “New Austerity” Road to Neoserfdom

Europe is lightyears away from any other country when it comes to social safety nets, healthcare, vacation days, etc... This is a continent that is not nearly as entrapped by big business as the US is. Something else is up.

I think Hudson is wrong here. In my opinion, Europe knows very well what it's doing. The "austerity" goal is secondary. The primary goal is killing off the US paper dollar international standard. That's what's got Obama, Geithner and Summers et al in a tizzy.

Just my tinfoil humble opinion. It may be strengthened or weakened depending on the results of this weekend's G20 "show."

[ASH]

Re: Europe’s Fiscal Dystopia: The “New Austerity” Road to Neoserfdom

In my opinion, Europe knows very well what it's doing. The "austerity" goal is secondary. The primary goal is killing off the US paper dollar international standard. That's what's got Obama, Geithner and Summers et al in a tizzy.

Just my tinfoil humble opinion. It may be strengthened or weakened depending on the results of this weekend's G20 "show."

In my opinion, Europe is probably too politically fragmented for them to be pursuing any sort of subtle anti-dollar strategy in unison. More likely, they are talking 'austerity' for the mundane reason that they won't be able to borrow otherwise, and are at risk of their currency falling apart as it is. Sure, they talk about a cultural bias for saving (in Germany, maybe), but they all share the common currency... what other course of action could they realistically take? What would happen to the Euro if they heeded Obama's advice and announced fresh stimulus measures, and damn the fiscal consequences?

[gnk]

Re: Europe’s Fiscal Dystopia: The “New Austerity” Road to Neoserfdom

In my opinion, Europe is probably too politically fragmented for them to be pursuing any sort of subtle anti-dollar strategy in unison. More likely, they are talking 'austerity' for the mundane reason that they won't be able to borrow otherwise, and are at risk of their currency falling apart as it is. Sure, they talk about a cultural bias for saving (in Germany, maybe), but they all share the common currency... what other course of action could they realistically take? What would happen to the Euro if they heeded Obama's advice and announced fresh stimulus measures, and damn the fiscal consequences?

Europe is no more fragmented than the US. In the US, we have Republicans and Democrats. In Europe, they have the French and the Germans. The rest have no choice and just follow. The Euro area may also change, with a separation of the PIGS... but that's extreme conjecture for today, we'll see how things progress.

Europe's self imposed austerity itself shows it's not as politically fragmented as people believe. Maybe the "European political fragmentation" view is an Anglo-American Banking/Media construct?

They know a severe depression is forthcoming. They're not following the US's lead and that speaks volumes to me. Europeans still speak of the US exorbitant privilege. And the US wants Europe to deficit spend not just on an economic philosophical level, i.e. Krugman, Geithner's views. But the US wants Europe to be in the same boat - debt wise. The Europeans are refusing to play the game.

The US does not want to be the only Western significant economy printing away. But it just may be.

[shiny!]

Re: Europe’s Fiscal Dystopia: The “New Austerity” Road to Neoserfdom

It's my understanding that all the austerity measures in the world won't be enough to get out of debt, and all the printing in the world won't do the trick, either. My question is, what would happen if every country just said to heck with it and defaulted? Could the world's economies reset at 0 and start up again? I hope I'm not derailing this thread- I just really want to know.

[gnk]

Re: Europe’s Fiscal Dystopia: The “New Austerity” Road to Neoserfdom

It's my understanding that all the austerity measures in the world won't be enough to get out of debt, and all the printing in the world won't do the trick, either. My question is, what would happen if every country just said to heck with it and defaulted? Could the world's economies reset at 0 and start up again? I hope I'm not derailing this thread- I just really want to know.

It all depends on how that scenario you describe plays out. A disorderly, or, if possible to any degree, an orderly and planned scenario involving bank holidays, price fixing, etc...?

Keep in mind, no country needs to pay off their debts 100% - ever. They just need to pay them down to a manageable size. Or partially default to a manageable size. Lots of ways to skin that cat.

[ThePythonicCow]

Re: Europe’s Fiscal Dystopia: The “New Austerity” Road to Neoserfdom

It's my understanding that all the austerity measures in the world won't be enough to get out of debt, and all the printing in the world won't do the trick, either. My question is, what would happen if every country just said to heck with it and defaulted? Could the world's economies reset at 0 and start up again? I hope I'm not derailing this thread- I just really want to know.

That debt lays claim to your property, your future earnings, your future "rent" (on land, buildings, utilities, toll roads, ...), your retirement savings, ...

Any sufficiently large debt jubilee, such as you consider involving just national debt, would most likely sweep over other debt as well, given the enormous system interconnections. Let's say your retirement savings are invested in the stock of a nice solid bank which is overly leveraged in mortgage backed securities, such as to your neighbor who occupies a house he got three years ago on a No Income, No Job, No Assets liars mortgage, on which he has paid nothing in over a year. If the debt on his home is forgiven, granting him the home Scott free, then does that mean that the banks solvency and your retirement savings are also "forgiven" (er, eh, vanish?)

It's a really, really big ball of tangled twine we've got here, with ten claims to every piece of real property or stuff or "saved wealth", and to every bit of actual productivity for decades into the future. Everything, now and long into the future, is "owned" ten times over.

I don't think that there is a Big Red Reset Button for this entangled financial mess, short of one which appears as a major extinction event to whatever intelligent life comes next on this planet.

[shiny!]

Re: Europe’s Fiscal Dystopia: The “New Austerity” Road to Neoserfdom

What if, right away, sovereign nations starting issuing sovereign currency from their treasuries instead of borrowing debt-based money from their Central Banks? Would there be a way to simply erase the debt and start over with new currencies that aren't debt-based?

I'm reminded of a passage in one of my favorite books, Skinny Legs and All by Tom Robbins:

"Whenever a state or an individual cited 'insufficient funds' as an excuse for neglecting this important thing or that, it was indicative of the extent to which reality had been distorted by the abstract lens of wealth. During periods of so-called economic depression, for example, societies suffered for want of all manner of essential goods, yet investigation almost invariably disclosed that there were plenty of goods available. Plenty of coal in the ground, corn in the fields, wool on the sheep. What was missing was not materials but an abstract unit of measurement called 'money.' It was akin to a starving woman with a sweet tooth lamenting that she couldn't bake a cake because she didn't have any ounces. She had butter, flour, eggs, milk, and sugar, she just didn't have any ounces, any pinches, any pints. The loony legacy of money was that the arithmetic by which things were measured had become more valuable than the things themselves."

The current economic system is so distorted, so broken. Seems to me the only meaningful, positive solution will require jumping into an entirely new paradigm of consciousness. Or not. It's late and I'm loopy...

[ThePythonicCow]

Re: Europe’s Fiscal Dystopia: The “New Austerity” Road to Neoserfdom

What if, right away, sovereign nations starting issuing sovereign currency from their treasuries instead of borrowing debt-based money from their Central Banks? Would there be a way to simply erase the debt and start over with new currencies that aren't debt-based?

I think you're asking if a lumpectomy will cure a metastasized cancer. I think the answer is no.

Debt and promises of future payments and derivatives thereof have infused our society. They have infected the finances of all manner of individuals, corporations, institutions and governments, large and small in an entangling web of claims and counter-claims.

[shiny!]

Re: Europe’s Fiscal Dystopia: The “New Austerity” Road to Neoserfdom

I think you're asking if a lumpectomy will cure a metastasized cancer. I think the answer is no.

Well, piffle! That's discouraging.

Debt and promises of future payments and derivatives thereof have infused our society. They have infected the finances of all manner of individuals, corporations, institutions and governments, large and small in an entangling web of claims and counter-claims.

Thinking waaaaaaaay outside the box, if you had the power to make sweeping changes that would cure the problem, what do you think would work? Short of a mass extinction event. Money is a concept that people have agreed to incorporate into their daily lives to facilitate the transfer of goods and services. But it's still a concept, an abstraction, not the goods and services themselves. Money was invented to make life easier, not kill us.

Experimental solutions in the past century involved central planning, redistribution of wealth and centralized control, and they failed because they run against human nature, are inefficient, and have all-to-often fostered gulags and concentration camps. Throughout most of history, humanity lived under an oligarchy. I see the world now moving towards living under a corporate oligarchy, and in the USA at least, to a sick combination of these two systems. The recent transfer of wealth has been from the working middle class to the government to the oligarchs, while the government seeks to control more and more aspects of our lives.

The only ones who will benefit from the austerity we are heading towards are the oligarchs. As long as we choose to live in this paradigm we have to play by their rules, and their rules say that there is no escape but to pay them in eternal debt servitude.

So, is there a way to say "A pox on both their houses!" and create something that will work at the grassroots level, rather than from the top down? Not saying it would be an easy, painless transition, but is there a better solution to the monster we have now?

If you watch a flock of birds wheeling through the sky and wonder how they move so perfectly in unison, here's the reason: They don't follow orders from a leader bird in front, they're simply tuned in to what the birds on either side of them are doing.

[ThePythonicCow]

Re: Europe’s Fiscal Dystopia: The “New Austerity” Road to Neoserfdom

So, is there a way to say "A pox on both their houses!" and create something that will work at the grassroots level, rather than from the top down?

I'll be danged if I know.