higher than soul can hope or mind can hide

I was in Chicago on presidential election night in 2008. I find it hard to imagine that I will ever witness an explosion of pride and elation on such a scale ever again, with throngs of jubilant supporters stretching along every avenue as far as the eye could see, celebrating the end of the Bush era and the election of a black president. I’d like to be able to say they were unforgettable scenes, but I had forgotten many of the scenes the following morning, for reasons those familiar with the effects of concentrated alcohol consumption will be familiar with.

The evening had started out normal enough. I had got stuck into a load of delectable heavy finger buffet, which among other things involved plunging fist-sized strawberries into a chocolate fountain that almost spilled over into the obscene. And then a few glasses of red wine, and discussion with a few of my (mostly Republican) fellow buffeteers about matters political. None of them was in the slightest bit pissed off about Obama becoming present. This was in the early hours of the ‘post-racial’ dawn, and a couple of them ventured that the election of a black man to the presidency emphasised the greatness and intrinsic genius of US democracy. Were the red wine not so potent, I might have subjected this claim to more critical attention.

I was thinking about this time during the Obama visit – about the people I saw out on the streets of Chicago that night, and then the ones who turned out on College Green to greet him.

Not too many of them in Chicago or Dublin would share the view of Cornel West (who campaigned for Obama) that he is ‘a black mascot of Wall Street oligarchs and a black puppet of corporate plutocrats. And now he has become head of the American killing machine and is proud of it’, which seems fair enough to me.

West, who has taken a lot of heat for his stance on Obama, has been particularly seething about how the figures Obama appointed to key positions were already well ensconced in power elites:

“I was thinking maybe he has at least some progressive populist instincts that could become more manifest after the cautious policies of being a senator and working with [Sen. Joe] Lieberman as his mentor,” he says. “But it became very clear when I looked at the neoliberal economic team. The first announcement of Summers and Geithner I went ballistic. I said, ‘Oh, my God, I have really been misled at a very deep level.’ And the same is true for Dennis Ross and the other neo-imperial elites. I said, ‘I have been thoroughly misled, all this populist language is just a facade. I was under the impression that he might bring in the voices of brother Joseph Stiglitz and brother Paul Krugman. I figured, OK, given the structure of constraints of the capitalist democratic procedure that’s probably the best he could do. But at least he would have some voices concerned about working people, dealing with issues of jobs and downsizing and banks, some semblance of democratic accountability for Wall Street oligarchs and corporate plutocrats who are just running amuck. I was completely wrong.”


In the lead-up to Obama’s visit there were murmurings of discontent here and there about the detail in Morgan Kelly’s piece in the Irish Times that indicated his appointee to Treasury Secretary, Tim Geithner, had vetoed a ‘plan to haircut €30 billion of unguaranteed bonds by two-thirds on average‘. But it made no difference to the throngs who assembled in College Green to hear Obama speak, perhaps hopeful of a sign that the long nightmare could be cut short by the sort of progressive populist figure West thought he had seen.


But as this translated piece by Alejandro Nadal shows, they were standing to face the same ‘progressive populist’ whose direct appointment had plunged them -and their fellow citizens across Europe- even further into the nightmare.

 Irish lesson for a Greek Tragedy

It seems the financial markets already take for granted that Greece will default in the coming months. The first package of bailout and austerity that was imposed on Athens failed. Its main objectives, the reduction of the debt to GDP ratio and the stabilising of relations with financial markets, seem unreachable today. There is no clear horizon in sight.

Obviously restructuring would be the best course of action for Greece. It would have a lower cost for the people of that country, and would have the virtue of placing part of the burden for the crisis on the lenders who are responsible for this debacle. Athens could devote its efforts to restoring the health of its finances without sacrificing a generation (as happened in Latin America starting with the 80s crisis).

But, of course, it is being said that if Greece is forced into a default, the cascading effect will make the debacle after the bankruptcy of Lehman Brothers in 2008 look like a picnic. According to this narrative, in the tsunami of contagion panic will not only hit bond sales of countries like Portugal, Spain and Italy. It will also hit the assets of supposedly healthier countries and even big US corporations.

All this is speculative. What we do know for the moment is that the first bailout package led to an austerity that made the recession worse and reduced tax receipts. That is why today the risk of Greek default is stronger than ever and there are two possible scenarios. The first is that of soft restructuring, with simple extensions to the repayment periods and some reductions in interest rates. This is the scenario Angela Merkel supports, because she wants to make it clear to her electorate that she is not going to spend fiscal resources in bailing out private banks. The other one is a hard restructuring, with cuts to the principal, as well as changes in repayment period and rates. As one might have expected, the financial sector, with the European Central Bank at its head, has closed ranks to avoid any sort of restructuring.

What is the deep reason for this opposition for everything that smells of restructuring of a debt that in any case seems unpayable? The experience of Ireland is instructive. Morgan Kelly, professor of economics at UCD, published an article on the failed attempt to restructure Irish debt. In November 2010 the ECB was insisting on its radical position of supporting creditors. The jettisoned Strauss-Kahn at the IMF surfaced as a supporter of restructuring and the Dublin government was grateful for the support of this unexpected ally. This restructuring meant cutting the total to be paid and changes to the repayment period and interest rates. But the arrangement was torpedoed by Tim Geithner. For what reason did the US Secretary of the Treasury oppose the restructuring of Irish debt?

For Geithner, an Irish restructuring could have provoked a contagion effect in Europe, affecting US banks that would have to pay 120 billion dollars in debt swaps (the dreaded credit default swaps). These financial derivatives were originally designed as a form of insurance in cases of debt default. But they took on their own life and became mechanisms for high-risk betting, sowing explosive mines in the financial world.

The degree of American exposure through these CDS is an estimate, since that segment of the financial market is too opaque. For its part, the ratings agency Fitch says that more than 44% of US banks’ resources in the money market is held up in European banks. No wonder Geithner is worried.

A couple of days ago Dublin tried to resurrect its demand to restructuring, at least a part of the debt incurred in the bank bailout. Once again Washington’s sabotage makes this exit unthinkable. Geithner’s position is simple: public resources are there to rescue banks, regardless of the cost for the citizens of a country. It does not matter that in the origin of the crisis the owners and managers of the banks had acted with excessive greed and negligence.

It is obvious that what is needed today is some sort of restructuring of Greek debt. The only way of lifting that country is through a new plan, with a long term perspective, which allows the restoration of growth and tax receipts. At any rate, the solution that is finally adopted in the case of Greece will be determined politicially. There is no reason to adopt a plan whose only logic is to punish the debtor. In these days of the anniversary of Bloomsday, if Joyce could see us he would surely write that the tyranny that the financial sector is imposing on us is a nightmare from which we are all trying to awake.


2 Responses to “higher than soul can hope or mind can hide”

  1. 1 ec June 28, 2011 at 11:06 pm


    Seems the Greeks might have a certain familiarity with Mr. Joyce and his history as nightmare riff.

  2. 2 Donagh June 29, 2011 at 9:39 am

    The first Greek bailout was not put in place necessarily to reduce ‘the debt to GDP ratio and the stabilising of relations with financial markets’ unless that means it provided the mechanism for European banks to exit the Greek debt market.


    And while those in College Green were singing along to Jedward and hailing the black puppet of corporate plutocrats the event itself was hosted by someone who is nothing other than a maître d of corporate capital himself. Goldman Sachs is one of the few global players that dominate the CDS market, and the presence of Peter Sutherland was never far from the shoulder of the late Brian Lenihan, and without a doubt hovers still in the background of Fine Gael.

    There is a lot of talk about different forms of debt restructuring in Greece being inevitable, but recently calls for it have been coming from those other lackies of global financial capital. The Tories are calling for Greece to leave the Euro and say that a disorderly default is inevitable. The reason seems to be that the UK banks at least have taken the EU bailout money and are now speculating on default. Markets don’t hate instability, they thrive on it.

    Leaving the Euro, followed by a hard restucturing might mean that Greece would be forced to sell many of it public assets. In the meantime, those members of the shadow non-banking sector, hedge funds and investment firms, are expanding rapidly, and are preparing themselves to buy them up.

    http://www.ft.com/intl/cms/s/0/efeb2124-a0d4-11e0-adae-00144feabdc0.html#axzz1QYgA37kK (summary here: http://www.irishleftreview.org/2011/06/28/gillian-tett-shadow-spreading-international-banking/)

    What Nadal has neglected is that not only is it necessary to see a reduction of the debt, but that a form of investment is required at EU level. At the moment Poland has managed to escape the recession almost completely. The reason is because Poland is getting large direct transfers from the EU as part of recent membership agreement. http://socialisteconomicbulletin.blogspot.com/2011/04/poland-escapes-recession-by-public.html

    “In the 2007-13 EU budget, Poland has been allocated up to €67bn in structural and cohesion funds, which is almost equal to the government’s total revenue in 2010. It has become the largest single receiver of EU funds – gaining, by February 2010, a net sum of around €21.4bn. Furthermore, over 1.4 million Polish farmers have obtained agricultural subsidies adding up to €5.3bn (in 2009 the total figure was €2.98bn, rising to more than €3bn in 2010.) The Polish government estimates that around half of the country’s growth in 2009 was directly created by investments, jointly financed by the EU.”

    Of course one reason that Germany and France are not interested in investing in the Greek economy is because they don’t see any direct benefit in terms of expanding their market. The current plans leave the majority of the wealth in the country with the top 1%, and they’re still able to buy nice German cars.

    As Michael Burke shows, even without investment from the EU, there is still plenty of money in the Greek economy.

    [In Greece] the Gross Operating Surplus (GoS) of firms is vastly in excess of the compensation of employees (CoE), that is akin to capital and labour’s relative share of value created. On this measure the GoS is nearly 53% of all value created, compared to just 36.3% for labour, and Greece is by far the most exploitative economy in the Euro Area.
    Capital’s excessively high share of income combined with an investment strike starves the economy of its lifeblood, while the excessively low compensation share also weakens its effective final demand.

    Secondly, the sums are enormous. It should be recalled than the Greek deficit may amount to €24bn in 2011. Yet taxes on production amount to just €28.4bn, even while the GoS is a staggeringly high €121.8bn. Therefore taxes on production could be significantly increased as a decisive contribution to the necessary combination of deficit-reduction and investment.

    That there has not even been the slightest mention of tapping this wealth as part of finding a resolution to this crisis illustrates the nature of power and capital.

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June 2011

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