Ireland Cut to Junk Rating by Moody’s

[Tani Coyote]

The fact that a few members of the ruling elite can make bad decisions and screw half the world is absolute proof that capitalism has failed.

Come now, that's not fair. Any system can be ruined if someone within it gets too much power.

Overlords are either malicious or incompetent. Pick your poison.

 

[GamezRule]

Yes, but Capitalism the way it has always worked has been highly centralized and the ones truly in charge are never changed.

 

[Tani Coyote]

Yes, but Capitalism the way it has always worked has been highly centralized and the ones truly in charge are never changed.

Today's liberators always become tomorrow's oppressors.

The capitalist class can be usurped, but that new class will entrench itself just as quick.

To prevent such dangerous centralisation of power, you would require a vigilant populace, willing to throw you out if you dare try to become the new overlord, as well as a general consensus that people shouldn't treat eachother like dirt just because the opportunity presents itself.

The best way to try socialism or communism would probably be in a first world nation; it's in line with traditional theory, and the already-existent democratic ideology would keep the state from becoming malicious, though incompetence would stay a constant, logically.

 

[innonimatu]

Or rather, if the Greeks end up paying their taxes like the EU average, the Greek state should be solvent. Getting there however seems to require the breaking apart and complete rebuilding of the Greek political system. And doing that while servicing that debt in such a fashion that the lenders that be don't go bananas isn't really feasible. The possible traditional way of doing this might be to have a revolution, an possibly a civil war, while defaulting on all payments.

You misunderstand the situation of Greece, and of the wider EU. Greece was running a trade deficit and EU rules pretty much made that unavoidable. No trade barriers, no financial regulation, low interest rates: the unavoidable consequence was an explosion of debt, for so long as there were lenders willing to lend. Public debt was accumulated as a consequence of sustaining that trade deficit while still appearing to "grow".

The public debt in Greece was accumulated because the state was supporting economic "growth" over the past decade with deficit spending. Running deficits was a subsidy to consumption, which both keeps people happy and shows up as an increase of GDP. And its governments did that because without it there wouldn't be any "growth" and any "convergence with the EU". The political project of the EU required it!

The same is true of... well, I guess about half the EU, some states are just further along the path to default - the scheme is unsustainable.

In other news there are analysts betting that in the end Germany will man up and pay for it all regardless, since that's the only sure way to prevent a possible (not sure how likely, but still) implosion of the Eurozone. It's not as if Germany would be better off without the EU, so a bit of informed self-interest would seem to be the only thing required.

With Germany, it's not so much about preserving export markers (Germany can afford to lose part of those) as preserving the "Euro project" in its international financial aspect. It's a bit like Japan and the USA in the 1980s: if a country can inflate the assets of its banks, they (and the corporations they will support) can go on a buying spree abroad. That was the goal of the Euro project. In a sense, it was an attempt at copying certain english/american methods which had worked in the past: the privilege of controlling world finance is worth a lot. The idea for the Euro was driven by the French, and they signed up most of the EU for it. Many people in Germany were, I believe, really reluctant about it because they understood it was inherently unstable. And now that things are going bad as they did with Japan by the end of the 1980s, they may feel vindicated and just want out.

Now that the Euro is going to hell, what are the options? Either make it last a few more years in the hope that "something" (I'll get to that below) happens to solve the problem, of abandon it before things get even worse.
Now, I'm going to speculate a little: I don't think that there are any true believers in the Euro any more, not among the elites in power. Just two camps: those who want to roll it back and return to tried things (national currencies, financial controls), and those who regard the current crisis as an opportunity and a war where the first to exit will be the loser. The later group actually may have a point: people know that the US financial sector is also on the brink of ruin, the dominance of the Dollar in worldwide finance endangered. Some people may figure that the EU is far larger than Japan, it can probably keep bluffing and playing the debt game: in the end the Euro will still fail, but it will bring down also London's City and New York's Wall Street - a worldwide financial götterdämmerung. Go down, but make sure that no rival gains from it. With this strategy default becomes a wait game, the first to quit loses the most. If the Euro is just abolished now the european countries will have to go begging for financing in dollars, to the benefit of the US's financial system - giving it some more years before it has to deal with its own imbalances, and a lot more influence internationally. But if the EU can kick the can a little further down the road, by creating "eurobonds" and transferring a portion of the national debts to those, it can be the last player in the game. Eurobonds are not a solution within the present EU arrangements, of course, debt would just be re-inflated, but they may buy the EU enough time to see the dollar collapse first - then the EU would be in a better position to dictate most of the rules for a new worldwide financial system. This, of course, assumes that at that point a unified EU would arise to act as a single political actor and fix its own internal problems - a federal Europe.