Posts Tagged ‘military spending’

“Brutal change” is coming to Athens

February 26, 2010 Leave a comment

From Reuters:

Speaking to parliament after a visit by EU economic inspectors, Papandreou said Greece did not want other countries to pay for its debts but expected solidarity from its European peers as it struggled with worse than expected fiscal problems.

“Unfortunately, history has fully confirmed our worst fears,” he said. “Our duty today is to forget about political costs and only think about the survival of our country … Past policies make it necessary to proceed to brutal changes.”

This, of course, means Greece will continue to play bitch to banksters, NATO, and its own wealthy families – ensuring the survival of the country only ensures the survival of their lifestyle.

Greecing the skids on the European social compact

February 13, 2010 Leave a comment

Lab Rat

Greece must renounce its debt.

Yes, we said it: Greece must renounce its public debt, withdraw from NATO, and slash its military budget. It is the only game changer the George Papandreou, the Greek prime minister, has left.

It will result in an attempted (probably successful) coup by the military, and expose the monstrous machinations of Washington and Wall Street to get their hands on the trillions of dollars currently locked up in the European social compact. And, it is the only move which will end Papandreou’s silly whining about the lack of real support for the Greek socialist government – as if Washington, Bonn, London and Paris gave a tinker’s damn about the prospects of socialist rule in Greece.

Papandreou, President of the Socialist International, the worldwide organisation of social democratic, socialist and labour parties, and President of the Panhellenic Socialist Movement (PASOK)  is struggling to figure out how to eviscerate social democratic institutions in order to come up with the cash needed to pay bankers on Wall Street.

According to one report, those cuts (which are said to eventually total 4 percent of Greece’s GDP – a recession level event in itself)  have already targeted some of the most important constituents of the social welfare state:

In the run-up to the conference, Papandreou proposed drastic cuts in government spending. They included cutting Greece’s budget deficit by a massive 4 percent of GDP in 2010, increasing the public sector retirement age by two years to 63, freezing wages and cutting bonuses, while imposing a 10 percent increase in fuel prices. These cuts could cost tens of thousands of jobs in private firms that work for the government.

Read more…

Greece is the WOR(L)D: February 10, update

February 10, 2010 Leave a comment

Greece military spending in context (2008)

There is a good article at Naked Capitalism that shows how Goldman Sachs helped the previous Greek government hide at least $1 billion of its public debt:

Greece’s debt managers agreed a huge deal with the savvy bankers of US investment bank Goldman Sachs at the start of 2002. The deal involved so-called cross-currency swaps in which government debt issued in dollars and yen was swapped for euro debt for a certain period — to be exchanged back into the original currencies at a later date.

Such transactions are part of normal government refinancing. Europe’s governments obtain funds from investors around the world by issuing bonds in yen, dollar or Swiss francs. But they need euros to pay their daily bills. Years later the bonds are repaid in the original foreign denominations.

But in the Greek case the US bankers devised a special kind of swap with fictional exchange rates. That enabled Greece to receive a far higher sum than the actual euro market value of 10 billion dollars or yen. In that way Goldman Sachs secretly arranged additional credit of up to $1 billion for the Greeks.

Far from blameless in this sordid tale, successive government have falsified the true picture of Greece’s debt bomb. An important part of that spending spree was on lavish military procurements:

The Greeks have never managed to stick to the 60 percent debt limit, and they only adhered to the three percent deficit ceiling with the help of blatant balance sheet cosmetics. One time, gigantic military expenditures were left out, and another time billions in hospital debt. After recalculating the figures, the experts at Eurostat consistently came up with the same results: In truth, the deficit each year has been far greater than the three percent limit. In 2009, it exploded to over 12 percent.

Another study cites the close link between Greece military expenditures and its public debt:

Greece has over the years allocated substantial human and material resources to defence. Its defence burden (i.e. military expenditure as a share of GDP) has invariably been substantially higher than the EU and NATO averages. Furthermore, during the post-bipolar period, when the defence budgets of most countries shrunk, Greek defence spending grew in real terms. This paper contributes to the existing literature on Greek defence spending and its effects by empirically estimating the impact of such expenditures on the country’s fiscal situation during the period 1960-2001 something that has largely been ignored in the relevant literature. In particular, it focuses on the effects of military spending on government debt and its two components: internal and external debt. The empirical findings reported here suggest that central government debt and, in particular, external debt has been adversely influenced by military expenditure but also by the domestic political cycle.

Deepening debt is what we would expect, since Greece was pursuing fairly aggressive military expansion without a corresponding trade surplus to offset the cost. As Krugman’s model states, such a policy had to result, sooner or later, in an attack on its currency, and corresponding collapse of the country’s economy. The fact that Greece uses the euro doesn’t alter the issue: If it cannot devalue its currency, wages must fall in any case. Government spending is a part of the surplus product of a country, if it and total profits are to be maintained at some level previously in excess of existing total surplus produced, as was the case in Greece, wages must fall.

Yves Smith points out that Goldman’s deals are often used, “to shift risk onto chumps.” It turns out that the chumps, in this case, will be the unions. The working class of Greece is going to take it in the neck on this one – exports have to expand, and this will come at their expense if Athens, Washington and Wall Street have their way. Without deliberate effort to reduce military expenditures and renunciation of external debt, Greece is going to reenact Argentina in short order.

U.S. war spending jumps 21 percent since the beginning of the crisis…

November 1, 2009 1 comment

(Click to enlarge)

This is a helpful graph, which crystallizes what is actually taking place amidst all the numbers being thrown around today. We have yet to see anything like it elsewhere.

One under-reported aspect of the GDP numbers released last week is the impact US war preparations spending is having on inflating that measure of economic activity.

Under-reported is a kind way of putting it; the actual term should be “A fucking cone of silence.”

Since this crisis began to blossom in 2007, much of the collapse has been hidden by a marked ramp up in war prep expenditures – first, by the Moron, and now by the Messiah.

This, in addition to corporate subsidies – in the form of Cash for Clunkers, and tax breaks for new home-buyers – accounts for most, if not all, of the bounce in GDP witnessed in the doctored numbers.

If, as CNBC‘s Jim Cramer informed us, and Klaus Kleinfeld, President & CEO of Alcoa confirmed, the first leg of an attempt to find a way out of this crisis is to accelerate a shift of industrial operations from the U.S. to faster growing markets like Brazil, Russia, and China, the second leg is clearly an attempt to improve profitability in the United States by increasing expenditures on those kinds of goods which have no productive use – things anyone who is not insane would consider wasteful.

War preparation, thus, serve a two-fold purpose: First, they allow Washington to fulfill its role as buyer of last resort, and second, they allow profits to be expanded in a way that it does not further increase productive capacity.

What the second point means, in plain English, is that wasteful spending like war preparations makes the US appear less productive than it really is.

Of course, the question posed by that last statement is: Why the fuck would Washington want the US economy to appear less productive than it really is?

The answer is that this has nothing to do with Washington. This is a blindly thrashing attempt to slow unemployment and over-production (the accumulation of superfluous workers, inventories of unsold goods and excess money that cannot be invested profitably.)

If work can be expanded in an area which is not productive – building machines designed to kill people – people, goods and money can be redirected from productive purposes – which only add to unemployment and over-production – into an economic dead end for the time being.

There is, of course, a connection between the Cramer observation, and the rise in war spending:

Since military spending adds nothing to the real living standard of Americans, the net result is that even as Brazil and China become more productive due to investment by Alcoa and other American companies, real wages in the United States become more like those in Brazil and China.

In the words of Tom Friedman, the world gets flatter.

But, of course, we have seen all of this before, haven’t we? It was called the Rust Belt – when manufacturing left the industrial states to move to the Sunbelt, Mexico, and other venues to lower labor costs resulting in the longest period of stagnant wages in US history.