Saturday, June 20, 2015

The True Nature of the Greek Crisis - and the USA Role Ongoing

“But Europe is solid with herself. France, Germany, Italy, Austria and Holland, Russia and Roumania and Poland, throb together, and their structure and civilization are essentially one. They flourished together, they have rocked together in a war, which we, in spite of our enormous contributions and sacrifices (like though in a less degree than America), economically stood outside and they may fall together. In this lies the destructive significance of the Peace of Paris. If the European Civil War is to end with France and Italy abusing their momentary victorious power to destroy Germany and Austria-Hungary now prostrate, they invite their own destruction also, being so deeply and inextricably intertwined with their victims by hidden psychic and economic bonds.”
                                                         Lord Keynes  Economic Consequences of the Peace

Over the last 95 years since Lord Keynes wrote these words, perhaps the most prophetic analysis every provided in world history, and where after the carnage of World War I of approximately 22 million which almost brought world communism into power and did so in Russia, the European area went on to suffer another 25 million to 35 million dead out of world death of 70 million to 85 million from World War II.  Keynes was Biblical in his prophesy.  And all this took place for one reason which Keynes also nailed, a reason that is still putting Europe at great risk and which for what can only be mendacious, desire for personal gain, trite power and obscene national “gloire” reasons, that continues to rot and fester in Europe.  This is the framing for what Keynes called the “European Civil War”.  To Keynes Europe had already long become one country, one sovereignty – a Europe that is “solid with herself”.  That is still the reality and the main issue underlying the current Greek crisis and the entire chronic sovereign debt crisis of Europe.  Whether Germany wishes to recognize it or not, they are “solid” with Greece, with Spain, with all of Europe.  They are one country.  And now the shoe is on the other foot and Germany with fellow political moralist countries like Finland and the Netherlands “invite their own destruction also, being so deeply and inextricably intertwined with their victims by hidden psychic and economic bonds.” What fate that awaits Greece, then no doubt Spain and then Italy, and then the next victim of the ”spoils of trade” predatory Maastricht Treaty with the financial Ebola transmission device called the Euro, will be in the end Germany and their claque’s fate.

The Greek crisis is not financial, it has nothing to do with Greek spendthrift and scofflaw ways, nor does it have anything to do with low savings rate or tax avoidance, the crisis is only about how the answer to Keynes’s observation, the cure to the ongoing European Civil War was waylaid and sidelined by only a few.  There is no doubt that there are many tax criminals, scofflaws and corruption, but it all has little is anything to do with the current crisis.  The Greek crisis is a European wide crisis and will always be so whether or not the flippantly named “Grexit” takes place or not.  The Greek crisis has always been a constitutional crisis and the conditions that are behind it have been so ever since Bismarck left Paris with Alsace Lorraine for Germany, ignoring the Keynes reality that the nation state in Europe had already an anachronism given economic binding long in place. It has been so ever since that terrible error made by Beethoven in his 3rd , dedicated to Napoleon.

Constantly frustrated with the ego and singular French centric view of aptly named De Gaulle in the midst of World War II, the USA started to rely upon another Frenchman, Jean Monnet.  It was clear that De Gaulle was to strive to move Europe back to the ways of old, ignoring the realities of Keynes’s “Europe solid with herself.”  He meant every word when he would cite: “France cannot be France without greatness.”   Jean Monnet was very much French, but he was a person of deep international experience, took great lessons from WW I and noted how WW II was a repeat again of all that brought WW I.  That the disease of Europe was the fanatical delusion of promoting and organizing the people under the Westphalian nation state which had long died, drowned in tidal waves of gore and blood and misery.   He was a pragmatist, having conducted business with as a mundane role in the Canadian Hudson Bay Company to massively important role in effectively joining the FDR war cabinet and creating the concept of the USA  ‘arsenal for democracy”.  But unlike  others, Monnet was a realist, a pragmatist and who had  lost all interest in the French concept of “greatness”.  He was attached to the French government in exile in Algiers, no doubt to contain and impede De Gaulle as being FDR and Churchill’s “man”.  De Gaulle grew to detest him. In Algiers before the war end Monnet started to lay down his philosophy for the “United States of Europe”:

"There will be no peace in Europe, if the states are reconstituted on the basis of national sovereignty... The countries of Europe are too small to guarantee their peoples the necessary prosperity and social development. The European states must constitute themselves into a federation..."    1943

Monnet had had enough of the European Civil War and began to frame the solution, a solution as valid and necessary now as it has been since 1870. After the war he went  to France and quickly found himself with no job in the new French government, though he stayed close to Robert Schuman, the French Foreign Minister.  Monnet often used Schuman as the front for many of his schemes and devices below.  But he did find much to do with the occupying Americans and quickly became one of the authors of the Marshal Plan, and then more importantly one of those who decided how the American money  from the plan was applied.  This gave him great power, especially in Germany.  He continued to write  his plan for Europe, making what was one of the world’s first “think tanks” building a staff who dealt almost exclusively with the concept of a “United States of Europe”.  And since he had great power with his placement with the Americans he had great clout, and, in fact, his ideas started to make great sense to the neo-liberals and especially those salvaging Germany.

“Through the consolidation of basic production and the institution of a new High Authority, whose decisions will bind France, Germany and the other countries that join, this proposal represents the first concrete step towards a European federation, imperative for the preservation of peace.

                                                                                                Jean Monnet  (Speech Schuman gave)
“Continue, continue, there is no future for the people of Europe other than in union.”
                                                                                                Jean Monnet   (circa 1955)
The first step in the Monnet Plan  formed cross border authorities that weakened the nation state as they assumed “high authority” in critical areas.  Series of institutions were formed that answered large trans-Europe problems and challenges.  The European Coal and Steel Community, the European Atomic Energy Community and many others were launched.  Monnet was crafty – he made certain those that ran these “communities” were European in focus, not nationalists, and their management and governance was over wrought and larger than mere industrial authorities, but were in every way the template for a government.  Germany was eager to be completely involved with these Monnet creations.   The great European Konrad Andenauer,  the founding father of modern day Germany, immediately partnered with Monnet for the ECSC and all the Euro projects as it would help redeem Germany, speed the rescue and rebuild of Germany.
This concept of a United States of Europe became central for all German leaders that followed Andenauer, especially Kohl (supposedly Merkel’s mentor but disowned by Kohl after she turned her back on the unification of Europe.) until Shroeder.  So when the Maastricht Treaty was signed, Kohl felt it was certain this was the birth of the United States of Europe:

“European Union marks a new, decisive step in the process of European integration that in a few years will lead to the creation of what the founding fathers of modern Europe dreamt of after the last war: a United States of Europe.”
                                                                                                                Helmut Kohl
And the Maastricht Treaty carried on until it was certain the Euro Zone would be launched with the brave new Euro Dollar, with the creation of a European Parliament, and an executive, of sorts, Monnet’s “Higher Authority”,  the European Commission with a President, sitting to the side of the EP.  But the European Council, composed of the leaders of the nation states maintained supreme authority.  Still it was thought surely a sovereign Europe would emerge based on democracy and with the Treaty converted at a suitable time into a constitution.  A European Central Bank was created as well as a European Court of Justice, a supreme court for Europe. Even France was going along with Mitterrand adamantly pushing Maastricht through a French referendum and gaining a “Yes” vote. Mitterrand also freely used the term the “United States of Europe”.
But then, from 1992 onwards the entire idea of the risk of a “European Civil War” requiring a “United States of Europe” seemed to be erased, almost overnight, and rarely heard or discussed from 1992 onwards, after the passage of the Treaty, to this day.
And it is that this entire goal was scrubbed out, or attempted to be scrubbed out, the USE, why there is a Greece crisis now.  
Greece represents the fallacy and ruse that occurred post 1992 by a rather small group of actors for very narrow even mendacious reasons.  That if there had been the formation of the USE, if momentum had continued as all thought was towards an inevitable conclusion pre-1992, we would not now be having a Greek crisis.  Furthermore there would have been approximately 10% more GDP in Europe now, a 1.5 trillion dollars difference to today’s stagnation.
What happened?
German reunification. 
German reunification  with a massive subsidy to East Germans via that unification in the exchange rate of one for one for pensions salaries and two for one for loans, with a one for one cash conversions for small holdings and only a one for two discounting for large holdings.  The economic realities at the time suggest a ten to one reality, if not greater.  Then Germany went on an immediate austerity for all aspects of society so as to welcome back their long lost brothers and sisters.  Benefits were curtailed, hours of work via long extended summer vacations, salaries went down or had very low if non-existent increases and productivity while at first hit hard as the aged East German system came onboard, then soared.  Savings more than doubled and Germany suddenly flipped from being the sclerotic sick man of Europe to being the most vibrant and productive with the strongest balance sheet.  In short German supported with mass buy in and patriotic enthusiasm from all Germans did what the Troika is asking now of Greece.
Then Germany entered the Euro at the conversion rate of two DM to one Euro while it should have been one to one.  Given the above and now masked by the common currency, Germany immediately leaped to a dominant position for all of Europe.  The German machine once again ripped through Europe, only this time not with Panzer tanks, but with massively advantaged intra-Europe trade position.  The vestiges of the cost to unify Germany were quickly covered, and then Germany went on for German sake, able to accomplish in a only a few short years what Napoleon failed at and what Hitler succeeded at first but required a 50% spend of GDP on military forces to do so then of course failed. 
With the USA assuring Germany – and all of Europe – security, Germany was allowed to maintain only a token military force and spending only ¼ of the amount of GDP that the USA spent on defense.  The low saving rate countries with low efficiencies faced with availability of high quality German product at about 50% of the cost prior to the Euro, quickly bought all the could from Germany, all of it  financed from German banks or their own domestic banks who in turn borrowed effectively from Germany though with the German institutions enjoying the “ring fencing” of TARGET2 payments, moving their liabilities to the ECB facing the Central Bank of Greece.
From 1992 onwards, given the above, the mention of “United States of Europe” was no more, the referendums that tried to replace the Maastricht Treaty with a Constitution failed, and the German Constitutional Court, Karlsruhe, slammed the door on encroaching federalism that might impede this money machine Germany had become.  German went on to not only solidify their  unification, but now the “austerity” the good Germans imposed to allow for German unification – which by the way they asked and received help to finance from the world – now went on given their position of trade to create massive wealth for the German people which developed into a hypocritical smugness if not a sense of entitled superiority of the Volk over the rest of Europe.  And with the Karlsruhe “order” to prevent any transfer payments or direct assistance to those building massive trade imbalances with Germany, the Maastricht Treaty arrangement locked Europe into a confederacy.
With no transfer payments and limited internal mobility – for example a Greek cannot just move to Germany  to take advantages of the German advantages without giving up their pensions and not being able to easily take advantage of the German societal safety net or benefits, and with no drachma to change exchange values with a DM so as to eliminate trade advantages via currency, when the credit ran out Greece had to make remedy to those imbalances by seeking assistance  from the Troika and then by adjusting to massive unemployment.  While this limited trade to Germany, Germans given their power now in the EZ without pause flip the Euro down to 1.1 and replace the Southern Periphery with the USA and others as trade targets and continue to build predatory trade surpluses.  For Germany, life is great, but it is an insular thoughtless and selfish view which has always caused the European Civil War to carry on.  Only the long time USA occupation of Europe has prevented it all  to be at this point drowning in blood.
But the forge of misery and the danger of 30% to 50% now chronic youth unemployment in the Periphery is starting to shift some back to the pre-1992 thinking.

“If you really want sound budgetary policies over the long term, you need a European finance minister answerable to the European Parliament and with clear rights to intervene vis-à-vis the Member States. The vagaries of the ratings agencies cannot be a substitute!”
                                                Viviane Redding European Commission Vice President

While Greece is in the forefront, they are really not the main player in this crisis, though they are relevant.  By allowing the IMF into the house and using IMF funds to pay down German banks and institutions, Greece has lost their power as no German institution gives a fig as to what they now do – they can go hang and all Germany is doing is going through the act in expressing concern.  The amount of Greek youth unemployed is still a mind boggling 60%, the usual number required for revolutions in the past,  but the amount is small at about 1.8 Million.
Spain though is a completely different story.  Spain never did deal with the Troika and has adjusted not with IMF funds paying down German lenders, but with dropping economic activity a walloping 16% GDP per capita and has youth unemployment of 60%  that numbers 8.5 Million youth.  Debt outstanding is a very large 250 billion or so, most still to German institutions while Greece has external debt of about 150 billion, but almost all of that is now to the ECB and the IMF.  If the Spanish status is added to Italy status – Italy is almost identical to Spain in size of debt but has only 40% youth unemployment and has only adjusted via GDP per capita by 12% contraction,  but the populace is bigger, so youth unemployed in Italy is about 8 million.
The problem in Europe, the potential landmine, is not Greece but Spain followed by Italy.  If solidarity is found between Spanish and Italian youth, Europe will go to insurrection and blood as 16 million youth are justified to take action against what Germany is doing to them.  An aside is Germany has expanded, still, through the crisis by 2% GDP per capita, and youth unemployment has dropped from 11.5% in 2009 to 7.2% in 2015.

“It is a debate, ultimately, about two different visions of Spain. One side sees a country struggling with economic and political problems, but problems that are fixable within the system. Their opponents see a political and economic order so profoundly flawed that it requires not more reform, but a new beginning. It is a clash of visions that is likely to grow more intense in the run-up to a general election next year. Four decades after Spain’s seemingly smooth transition to democracy, the risk of political rupture is growing.”
                                                                                                                Tobias Buck,  FT Dec 2012                        
Greece is not being thoughtful.  Instead of appealing along financial and technical lines, they should drop all discussions with the corporatists IMF and the stumped ECB, and the silly overtures to Putin, and instead should organize solidarity and formal unity with Podemos and then USEUR in Italy.  Great effort should be expended upon this, and the axis should be youth.  If the youth in Spain and Italy can be radicalized, and then added to Greek youth, the current German confederacy harvester machine will fold.  At that same time Syriza and Podemos should stop ancient leftist clap-trap and reassume the mantle of Jean Monnet.  Unity should be sought to the edge of evoking civil strife and even occasional violence.  Greece, Spain and Italy – if those three countries’ youth have the good sense to see how they are being viciously exploited – have the ability and power to start back along the lines of the United States of Europe thesis.  I would organize, if I were Syriza, a well-financed and well provided, in terms of logistics,  “March on Berlin” and seek at least 250,000 Greek, Italian, and Spanish Youth marching to Berlin on foot.
There has to be an “edge” to this discussion for the Periphery – an aurora of violence and strife – for otherwise the real problem, the political backing to the European and Greek crisis being maintained cannot be ended until there are potentially large adverse consequences for this backer if they carry on as they are to date.
That backer is the USA.
The USA is following a strategy to deliberately maintain European weakness and to prevent their formation of the United States of Europe.  The 300 million plus USE would, if formed, be the complete equal to the USA and the current uni-polar hegemony of the USA would be lost and replaced with a bi-polar shared hegemony.  Russia and China are a tactical problem for the USA, a serious tactical problem, but compared to the USA they are small and weak.  A USE however would be a full equal.
A little less than 4 years ago I was asked to present to the nation’s intelligence agency for a full day.  Was an exciting and wonderful day and I was asked to bring the best and brightest minds on Wall St to come along, which I did.  The topic was the Euro crisis.  The staff we were talking to was seeking either confirmation or debate over the  one page memo they were to present to POTUS the next day.  They cheerfully stated that the entire organization had only one client and the main job of the group was to publish a two or three page memo every morning for the POTUS breakfast reading.  The group I brought had a career highlight day as we were grilled in turn by several groups of the smartest and most able minds I have ever met.  We went on and on, much of the conversation fixated on financial speak and details – TARGET2, borrowing capability, IMF path of action and so on.  But the reason my group was there was that I had previously made the case that Europe was not a financial problem with nothing to do with  credit rating agencies or debt or default, but was a constitutional crisis given the German led swing away from the creation of the United States of Europe.  This is why I was invited.  We found that there was great interest in financial and banking detail, but that the information presented was either to just confirm their own  information or to tweak it as they learned of some new detail or nuance. When I presented the constitutional and historical record to the crisis, that this was the complete nature of the crisis, I was presenting something “new” which almost all given their Georgetown or Harvard PHD in history or foreign affairs instantly started to model around my rather naïve (ie not classically trained) view.  I was well received and as the thesis was debated either there was immediate agreement or developed agreement that the reason for the crisis was only constitutional. There was agreement.
But then all focus went to a surprising thought, or question.  What was the potential for revolution, insurrection and civil strife in Spain?  I admitted I had not even begun to consider that, assuming the USA and Europe had no interest in the crisis becoming bloody.   All in their group kept coming  back to Spain.  Ireland was dismissed as the nature of their problem was not related to German aggression, but their own home brewed property bubble similar to the USA housing crisis.  Greece was considered a problem and the headline catalysts but too small to be a major problem for this group.  But Spain was the main focus.
I raised Mike Pettis’s excellent work on identities and adjustment - to a person,  they all knew his work well and agreed. 
So why has the USA not taken action, if the powers in DC agree completely with what I say above?
EU  military spend is  about $ 192 billion per annum, While the USA budget is about $ 500  billion per year.  The US can deploy 500,000 troops quickly and 100,000 immediately anywhere in the world.   Currently the USA has about 80,000 troops deployed of which 55,000 are in Europe.  The USA has 1.2 MM troops in reserve and active duty.  Europe can deploy 110,000 troops now but would be months before they take the field and has reportedly 1.5MM troops in reserve and active duty.  The USA Naval power is well in excess of 3 million tonnage  in ships while the combined EU naval tonnage is around 1 million tons, most of that service or coastal support ships and coastal defense.               Europe spends about 1.5% of aggregate  GDP on defense while the USA spends now about 4%, and more importantly can surge to 6% plus near immediate.  It is this low required military spend that is the source of all of Germany’s power in Europe.  Then when they frame Europe in a confederacy carefully avoiding the defensive needs of a federation with shared borders and shared defense, Germany is able to establish hegemony over all of Europe.      
The USA does not want a Europe that is spending 4% to 6% for defense, it wants a Europe kept feeble and dependent on  American NATO hard power contribution for their common defense.  They want Russian subs playing with the Danes, Norwegians and Swedish navies, mocking them.  They want the Russian excursion into Ukraine (to a point).   Why?   With the fall of the USSR and the unification of Germany they do not want to see a United States of Europe with a core capable Germany. The USA, while creating the Monnet plan, have done a 180 on that plan and are now dedicated to keeping Europe feeble, not united,  and not a hard power factor.
That is why I heard all those questions on the stability of Spain during that visit in DC.  Why the focus on Spain.  For only if insurrection starts in Spain and Italy does so as well will the USA have to rethink their strategy to maintain a Greek like crisis always on the back burner of Europe.
Tsipras opposition is not the IMF or Germany and he is foolish to see Russia as offering any solace.  Greece’s opposition is the USA and the only way he can return the dialogue to the constitutional defining crisis it truly is, has always been,  is to gain power via unity with Spain and Italy – likely via radicalized youth – and presenting the likelihood of great civil strife, of blood, to both Germany as well as – more importantly – the USA.
This focus on IMF and deals and negotiations along financial themes and lines is a ruse – Tsipras must take to the street, to the now 30 million disenfranchised Peripheral youth.  Now is the time for Syriza to start to hire 100 to 200 youth organizers from Italy and Spain, seek common front with Podemos, and strike - moving this discussion from the economic to the constitutional problem that it truly always was.

What is baffling is how the moderate right in Germany, France and other countries have not come to this realization.  The “European Civil War” is still very much with us now. 

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