Useful Idiots No More: Political Hubris and Economic Realities

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Useful Idiots No More: Political Hubris and Economic Realities

Dr. John E. Charalambakis

The results of the elections held in Greece last Sunday may well have sent a powerful signal to politicians and policy makers worldwide, that has yet to be discussed by the press. That message simply says: “We are no longer your useful idiots”. It seems that for many decades – and especially since the financial crisis erupted – the politicians an

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May 08, 2012

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10 readers comments


1. Philip Vorgias wrote on May 08, 2012 11:18 PM	Interesting points, Dr. Charalambakis, but before europe 'jumps off the boat' what do you propose to replace the EURO? I'm not a big supporter of fiat currencies for the reasons you mention, but it is what it is. The EURO is as good as any and better than most. Problem with the Eurozone is not the EURO, but the fact that most-if not all-the nations lied about their fiscal performance. Some more than others, including Greece. What europe needs is not a new currency but more transparency and mature institutions across the board. Finally, is there anyone who questions the reforms now ongoing in Greece have not been long needed? And if Greece still had the Drachma does anyone question those reforms would not be pushed now? Let's not throw the baby out with the bathwater!

2. ARMODIOS PAPAGIANAKIS wrote on May 09, 2012 2:51 AM	If it’s the Damien child from the 1976 Omen movie, then absolutely - throw the baby out also!!! The Euro is A problem because it’s an extension of a severely flawed, as the author alludes to, underlying economic paradigm. Yes, reforms are needed, but they must be imposed by markets not socialist bureaucrats. Furthermore, for you to excuse an army of PhDs in Brussels, as somehow not having the wherewithal, to conduct proper due diligence and cull through Greece’s, or any other nation’s opaque finances, in order to meet the EU’s own economic criteria for EU membership, borders on the absurd. If the architects of the EU couldn’t, due incompetence, or, wouldn’t, due to political reasons, determine which nation is worthy of membership in their very own created “club”, then how can you expect them to be competent “credit counselors” and implement wealth creating reforms??? What “credit counselor” (as you’ve called the Troika) condones and facilitates the bail out of an irresponsible profligate nation, not once, but twice? Or as the author asks; “Cui bono” (who benefited?).

3. Basil Zafiriou wrote on May 09, 2012 1:40 PM	Views on the euro can of course differ, but before we condemn it to death let us at least give it a fair hearing. With that in mind, here are a few points for the defense: i) The “the monster $700 trillion derivatives market” did not originate in the eurozone, but in the US. So if a currency is to be blamed for it (and I confess that I can’t follow the link between currency choice and dodgy derivatives) then the US dollar is to blame –not the euro. ii) It does not require imagination to see states adopting the dollar as their currency, without also merging their political identity with the US –that situation already exists. Several countries have adopted the US dollar as their national currency, including Ecuador, El Salvador and Panama. They’ve done so partly for the same reasons Greece adopted the euro: to reduce transaction costs and improve monetary performance (on both of which the euro delivered). iii) The IMF/eurozone lending commitments to Greece amount to 240 billion euros, roughly the size of the Greek economy. Given that Greece accounts for about 2% of the eurozone GDP, this assistance to Greece is orders of magnitude smaller than the US TARP program and associated stimulus spending, in both absolute and relative terms. iv) In return for this official assistance, Greece has committed to reduce the size of government, privatize public assets, enhance the transparency of state finances, and liberalize product and labour markets, in order to make Greece’s finances sustainable and the Greek economy stronger. Rather than inveighing against faceless Brussels bureaucrats, perhaps Armodios can tells us which of these particular measures he is opposed to.

4. Philip Vorgias wrote on May 09, 2012 6:00 PM	An excellent challenge to our esteemed friend Armodios, Basil. But I'd settle for him answering my first question above-replace the EURO with what? It's easy to sling barbs at an existing currency, but what exists to replace it that would perform better for Greece? A new Drachma backed by whatever usurious rates the Greek Central Bank must promise in order to get people to buy it's Treasury Bonds??? Give me a break!

5. ARMODIOS PAPAGIANAKIS wrote on May 10, 2012 3:54 AM	LOL!!! Philip, I hope your “esteemed” comment is sincere…unlike Basil’s dubious “fact” filled non-sequitur in which he cites the Euro’s “improved monetary performance” vis-à-vis the USD (I assume) but conveniently neglects to mention it’s significant loss of purchasing power, from inception, ranging from approximately 15% to 40% loss vis-à-vis the Canadian, Aussie and Hong Kong Dollars, along with the Swiss Franc and Japanese Yen. The “official assistance” that Greece and Greece’s insolvent creditors UNDESERVEDLY receive via the “measures” implemented by the “inveighed upon”, and, “faceless bureaucrats”, consist of monies stolen (taxed) from other wealth producing, largely, Euro-zone taxpayers, many of whom, if not most, oppose the bailouts, or from monies created/printed by the ECB (inflationary tax). So gents, I am simply opposed to theft and/or forced wealth redistribution from the productive to the unproductive. Please tell me why you condone it?

6. Philip Vorgias wrote on May 10, 2012 7:25 AM	Absolutely sincere, Armodios. I love educated debate and those who particpate in it-even when we disagree. This forum needs more of it. Regarding your response, the EURO started at par value with the Dollar and worth approximately 100 Yen. Today the EURO trades at around 1.3 Dollars and 103 Yen-doesn't reflect the massive loss of purchasing power you indicate. I am not a supporter of fiat currencies in general, but as they go the EURO has been better than most. Finally, what exactly is Greece going to replace the EURO with? If they abandon the EURO and go back to a new Drachma how will it be funded? Nations sell Treasury Bonds to fund their currencies-and nobody is buying Greek bonds today! In point of fact, going to the Drachma would cause a massive loss of wealth for Greece. The situation in Greece today is bad, no question. But it could be much worse. Greeks better wise up.

7. Basil Zafiriou wrote on May 10, 2012 10:17 AM	Armodios, my reference point for the euro's performance was obviously the drachma, the currency the euro replaced, which used to yield double-digit inflation and correspondingly elevated interest rates and volatility measures (though as Philip points out, the euro has performed well relative to the USD also). Your premise that all taxation is theft is a tad extreme. If that is what it takes to oppose the financial support for Greece, then that support stands on firm ground.

8. ARMODIOS PAPAGIANAKIS wrote on May 10, 2012 2:00 PM	Basil; Where do I write or imply that “all taxation” (your words) is theft? C’mon Basil you can do better than that. Try actually reading and answering my question from my previous post. Philip; first, you are correct; the Euro is down vis-à-vis the JPY by “only” 20%. I inadvertently calculated from its peak but basically correct versus the other currencies. Nevertheless, my point is made that the Euro’s “monetary performance” (Basil’s words) vis-à-vis the world’s major currencies is less than stellar. Furthermore, out “performing” the Drachma is hardly praiseworthy. So in fact, the Euro has performed WORSE than most of the world’s major currencies over the past ten years. The Euro’s notable gain (approx. 30%) vis-à-vis the USD is more of a sign of dollar weakness, and it’s still the world’s (for how long?) reserve currency, not Euro strength. Secondly, thank you for the compliment but I’m left a bit disheartened since you didn’t answer my question from my previous post. Please explain to me why you, or Basil, condone forced wealth redistribution (bail-outs) from the productive (i.e. German taxpayer) to unproductive Greek (i.e. muni worker/citizen/pensioner etc.) and to unproductive/insolvent Greek creditors. It’s a simple question gentleman. I eagerly await both of your responses.

9. Basil Zafiriou wrote on May 11, 2012 2:13 PM	Armodios, here’s what you wrote: “The “official assistance” that Greece’s insolvent creditors UNDESERVEDLY receive...consist of monies stolen (taxed) from other wealth producing, largely, Euro-zone taxpayers.” The equation of taxes to theft (“monies stolen”)is therefore yours. I am happy to see you renounce that extreme position now, but your question suggests that you continue to view the Greek debt crisis as a morality play pitting good Germans against bad Greeks. A more productive way of tackling the issue is to put it on an empirical basis and ask yourself which option stands a better chance of resolving the crisis at minimum risk: a) forcing Greece into a disorderly default or b) helping the country to restructure and recover?

10. Philip Vorgias wrote on May 11, 2012 3:42 PM	I've already stated Armodios that I'm not a purist when it comes to man-created crisis, like the current economic mess in Greece. If buying them a little time to make reforms seems like an unacceptable compromise in your view, we'll just have to agree to disagree on that one. I'm not prepared to see 40% unemployment in Greece on the basis of 'let the markets decide for themselves'. Had this been a purely market created crisis, maybe. It wasn't.
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