Twilight Of Europe… And Guess Where Else

Paul Krugman’s post Eurodämmerung examines what is liable to happen if Greece votes NO to a referendum authorizing a new round of austerity programs. That vote seems likely, as past austerity programs in Greece have been understandably unpopular. But if the referendum indeed takes place, and Greece votes NO, Krugman says “a recession seems almost certain, aggravating all of the continent’s problems”:

… the euro was an inherently flawed idea that can work only given a strong European economy and a significant degree of inflation, plus open-ended credit to sovereigns facing speculative attack. Yet European elites embraced the notion of economics as morality play, imposing across-the-board austerity, tightening money despite low underlying inflation, and have been too concerned with punishing sinners to notice that everything was going to blow apart without an effective lender of last resort.

Economics as morality play… a deeply stupid concept if ever there were one. But that seems to be going on, over there as surely as over here.

Jon Walker of FDL responds to Krugman’s thesis by reminding us that Obama’s political survival probably depends on this vote in Greece:

While I suspect in the long term Greece and other parts of Europe would be better off without the unworkable structure of the Euro, in the short term any chaos or prolonged uncertainty about a possible break up of the currency union seems likely to cause further economic downturn on the Continent.

For the Obama campaign though, what matters is how the US economy is going in the short term. Presidential elections are heavily based on the state of the economy. Obama’s job approval numbers have been slowly moving up thanks in part to a modest improvement in economic optimism.  But if economic turmoil hits Europe’s economy over the next few months, a contraction there could easily spill across the Atlantic and destroy the very modest growth the American economy might otherwise see. A crisis in Europe, a huge trading partner of the United States, could end up pushing the US unemployment rate back up.

I am far from certain Obama cares whether he has a political future: it may well be that he has done what he was paid to do what he came to do, and is ready to hit the lecture and book circuit for literally tons of money in the manner of George W. Bush. And I am uncertain of the situation in Pennsylvania, where the GOP is apparently trying to change the way electoral votes are counted in presidential elections (yes, that is legal; there are a couple of states already which do not use winner-takes-all, but that’s for another post), so it may be that even if Obama actively wants the presidency, it could be taken from him by a change of the rules of the game and an unfavorable vote in Pennsylvania. But if he’s in it to win it, he’d probably better keep an eye on Greece and the fate of the Euro.

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Comments

  • upyernoz  On Tuesday November 1, 2011 at 7:46 pm

    the proposal to change the way that PA assigns its electoral votes is pretty much dead. the GOP realized that the plan could backfire as the expensive media markets in the state (philadelphia and the suburbs) would suddenly become safe EVs for dems under a proportionate system. so then the democrats could pour their entire state budget into a bunch of low-population swing districts in the hopes of swinging the EV to the dems there. those media markets are very cheap so it will be relatively easy for the state dems to blanket the entire market with pro-dem/anti-GOP ads. as it happens every one of those swing districts are currently held by a GOP congressman (thanks to the GOP wave in 2010). once those congressmen realized the proportionate EV plan could put their seat in danger, they worked pretty hard to get the republicans in the state legislature to drop the plan.

    • Steve  On Tuesday November 1, 2011 at 7:54 pm

      Thanks, upyernoz. Dems… and GOPers… and you… have obviously thought this one through.

      I confess I find the notion of proportional EVs appealing, but only if all states had them, i.e., by constitutional amendment. Never gonna happen!

      • upyernoz  On Wednesday November 2, 2011 at 8:57 am

        yeah, i agree. proportionate EV is better. have you heard of the national popular vote campaign? they are trying to get each state to pass a law to assign their EV’s proportionately. however, the law will not kick in until the proportionate represenation law has been passed by states possessing a total of 270 electoral votes (half of the total). 9 states have passed their draft law (the EV total is 132, almost halfway to the trigger). it’s a clever idea to get us to a more direct vote without having to amend the constitution.

        • Steve  On Wednesday November 2, 2011 at 10:20 am

          Thanks again, ‘noz. No, I hadn’t heard of that project. I wish it success, though I suspect GOPers would rather take their chances with a winner-take-all system on the assumption that they can rig the vote in enough states. I was very surprised that Obama won in 2008; I’ll give credit to his campaign (in which I did not participate) for making that happen. If only we’d known then what we know now…

  • L'Enfant de la Haute Mer  On Wednesday November 2, 2011 at 4:39 pm

    Greece, the guinea pig of Europe … probably will go for elections, hopefully, we will see Friday night ..
    Meanwhile the recession deepens more and more.
    However, before Greece, the IMF, the ECB and the EU rescued also Latvia with the same lethal cocktail: result a 27% of recession.

    • Steve  On Wednesday November 2, 2011 at 5:43 pm

      Sea Child, your nation does indeed seem to be the leading edge which other countries will necessarily follow. I did not know about the “rescue” of Latvia; that certainly does not bode well. I can’t help the feeling that the lot of us are headed for… austerity, at least, and possibly truly hard times. I’ll be watching Greece on Friday night; I hope you get the outcome you want.

  • L'Enfant de la Haute Mer  On Wednesday November 2, 2011 at 6:13 pm

    Papandreou received orders:

    1.-the referendum is for the 4th of December and,
    2.-the dilemma is about: “in or out of the euro”

    Τhis “socialist” government has achieved in no more than two years (among other things) the full deregulation of the labor market, as well as the complete dismantling of the welfare state

    • Steve  On Wednesday November 2, 2011 at 8:05 pm

      And over here, the “Democratic” government has achieved in about three years things that not even any Republican government had dared before: the things you list (not including the euro, of course), plus completely ignoring the ever-growing problem of joblessness. I feel as if I have no representation in Washington these days from either major party.

      • L'Enfant de la Haute Mer  On Thursday November 3, 2011 at 3:25 am

        I think B. Clinton had already started dismantling the Glass-Steagall Act..

        The Papandreou government on the brink of collapse: then remembered that Greece is a Democracy, and people should have their say, when it comes to issues that affect their lives, their future, and that of their children.

        Demonstrations get more and more populous, and at the same time, more and more violent.
        Greece is paralyzed with strikes and work stoppages (not to mention the rising numbers of suicides, especially men -we, women have children to raise and strive to continue -)
        Unemployment roars at never seen before levels, but self employed people who have failed in their business cannot join the unemployment lists.

        Heavy taxation and wage cuts up to 50% for the time being.

        Homelessness on the rise (perhaps you are more competitive with your shanty towns and tent cities)
        Middle class is being systematically wiped out, reaching the point where they have nothing left to lose.

        And the, the PM goes for a REFERENDUM.Too bad that he forgot that when he and his government signed off collectively and with no objection or even negotiation the national sovereignty of Greece to the bankers on July of 2011, in a deal that will go down in history as the greatest Fire-Sale of a country.

        Greece is stuck in a vicious cycle of insolvency, low competitiveness and ever-deepening depression. Exacerbated by a draconian fiscal austerity, its public debt is heading towards 200% of gross domestic product. To escape, Greece must now begin an orderly default, voluntarily exit the eurozone and return to the drachma. But the PM has a job to finish.

        You may probably not follow the situation here (we are a small country, with particular and controversial ties with the U.S.), but we have been following you, really close:

        http://inconue.wordpress.com/2011/10/08/where-is-my-bailout/

        http://inconue.wordpress.com/2011/10/06/yeswecamp-and-jpmorgans-chase-little-donnation/

        We prefer to default and drop the Euro, and to be allowed to rebuild our ruined economy, sending away the IMF, the ECB and the EU., whom we’ll never be able to repay.

        I feel also, as if I have no representation from either major party,
        but in my case, this has always been that way, it is chronic!
        🙂

        • Steve  On Thursday November 3, 2011 at 9:48 am

          Enfant, first an historical note: the Glass-Steagall Act was repealed in 1980 (the first year of Ronald Reagan’s presidency, and long before Bill Clinton’s). As far as I know, Bill Clinton had nothing to do with its repeal, but my knowledge could be incomplete. The prime mover in the repeal was Senator Phil Gramm (R-TX). And the results have been about as disastrous as repeal critics predicted.

          Violent social unrest often accompanies economic hard times; the U.S. is beginning to see the leading edge of that right now. Ironically, the protesters (in the Occupy Wall Street movement) are not the violent ones; it is the police in a number of large cities. I admit that police violence scares me, because there is always some popular support for more violence.

          Homelessness is increasing here as well. Fraudulent repossessions of people’s homes (and now even their cars) have increased beyond belief, as some bankers intentionally set up situations that will lead to default and repossessions… and often enough, the bank that repossesses cannot even prove that it owns the note. I rent a house, and my very old car is paid for, so I am not personally vulnerable to that, but it is wreaking havoc on many people’s lives. The middle class is quickly disappearing here.

          People here who follow the print news (papers and online) are typically aware of what is happening in Greece; those who depend on television for their news are doomed to limited awareness of most of the world.

          A word about the name of my blog. Originally it was The Yellow Doggerel Democrat (“Democrat” in the sense of “member of the Democratic Party”), a word-play on the old expression “Yellow Dog Democrat,” which means someone who always votes for Democrats, and “Doggerel,” which is rough, rude poetry… which I used to write. About a year into Obama’s term, after over 30 years in the Democratic Party, I pointedly dropped my membership, being greatly dissatisfied with Obama’s track record on civil liberties. Now I do not belong to any party; the Republican Party is completely unacceptable to me. Only time will tell what I do next; I don’t know that myself.

          • L'Enfant de la Haute Mer  On Thursday November 3, 2011 at 10:08 am

            Thank you Steve,
            I managed to finally find out what “GOP membership” really meant, kind of ‘faithful dog’, isn’t it?

            Is is normal that we follow you, more the you follow us: that is the way things are.

            All my life, I have been politically homeless.
            My vote is pretty “conjunctural”, often extra-parliamentary.
            (found your blog searching online who else has been writing about EU-twilight: that is what brought me here)
            fyi
            Is seems that the referendum belongs already to the past. We are headed for a “Government of National Salvation” (LoL)

            • L'Enfant de la Haute Mer  On Thursday November 3, 2011 at 10:26 am

              a small complementary info:
              To be exact, on November 12, 1999, President Bill Clinton signed into law the Gramm-Leach-Bliley Act, which repealed the Glass-Steagall Act of 1933. One of the effects of the repeal is it allowed commercial and investment banks to consolidate.
              http://mortgageblues.us/news/398
              and
              http://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Act#Repeal

              • Steve  On Thursday November 3, 2011 at 12:07 pm

                Enfant, my apologies; indeed you are correct about the date and Clinton’s signing it. I was staring at the information on repeal when I wrote that; I have no real excuse other than that my eyes skipped up a line and read the date for some other act. Getting old has its challenges! 🙂

            • Steve  On Thursday November 3, 2011 at 12:18 pm

              Enfant, heaven preserve us all from someone else’s notion of salvation, governmental or otherwise! 🙂

              Political homelessness is a new thing for me. My parents, both schoolteachers, were what I would call FDR Democrats, with a few exceptional votes like Eisenhower… a returning veteran could hardly have voted otherwise, but my father eventually regretted it, preferring Stevenson, but too late. My young adult years saw me supporting JFK and eventually RFK, may they rest in peace. The Vietnam war shook my faith in the Democratic Party; LBJ seemingly couldn’t get past the domino theory to see what would eventually happen. But I stuck with the Democrats through Bill Clinton (vastly more conservative than I am) and Al Gore (yes, he was robbed!). I voted for Obama in 2008 with great reluctance; I shall not repeat that mistake in 2012. So I am, as you are, politically homeless now.

              Politics aside, if I weren’t a cripple, I might take to the streets with Occupy. The fact that the movement is mostly young people gives me some hope.

  • L'Enfant de la Haute Mer  On Thursday November 3, 2011 at 12:20 pm

    Come on, this is MY excuse and legitimation !
    🙂

  • L'Enfant de la Haute Mer  On Thursday November 3, 2011 at 12:49 pm

    btw,
    I “stole” this nice red ribbon on the top of your blog.

    • Steve  On Thursday November 3, 2011 at 12:53 pm

      Enfant, if you click that ribbon on my blog, you will be taken to the site at which they actively promote its distribution. It’s awfully hard to steal something if the owner wants to give it away. 🙂 The distribution site also has it in blue, and in left- and right-handed versions. I’m more of a leftie (politically… regarding my hands, like many musicians, I’m ambidextrous).

      • L'Enfant de la Haute Mer  On Thursday November 3, 2011 at 1:03 pm

        Of course I did click that ribbon and followed the link…, but for some reason I could not make it… so I grabbed it and decorated my header (red is better)

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