I set off a bit of a firestorm on Twitter this afternoon when I said Greek Prime Minister Papandreou should not shrug off his duties to understand the EMU’s monetary system and his country’s economy onto his people via this referendum.  Steve Randy Waldman, Edward Harrison and several others took issue with the comment saying that Democracy should decide.  I actually agree.   But let me explain.

The role of elected officials within a Democracy or a Representative Republic is to understand complex issues and act on them at times when the country is in need of decisive leadership.   Papandreou has failed in this regard.  He has failed to understand what is ailing his country and he has allowed the northern nations to impose austerity on his country with the false belief that this would fix their problems.  This all leads back to a fairly basic misunderstanding of the EMU and its flawed construction.

The EMU is incomplete in that none of its members have the ability to create their own currency, but are interlocked in a single currency system whereby they are essentially currency users without a floating exchange rate.  This has resulted in inherent imbalances between trade deficit and trade surplus nations.  How can you rectify this imbalance?  It is my opinion, that there are only two reasonable options.  They must complete the union via the formation of a full fiscal union (as the USA did in 1790).  Or they must revert back to the system of old where each nation has its own currency and can utilize that currency in the manner that best benefits that particular nation.   My personal belief is that the USA has provided a fairly stellar model for this system and if implemented in Europe, could be quite beneficial to all involved.  Of course, there are the hurdles of history here and this is all easier said than done.

What’s clear from the last few years is that the leadership in Europe has continually misunderstood this system and its operational aspects.  Papandreou has had a fair amount of ammunition at times during this crisis, but his misunderstandings have led him astray.  He holds the fate of the EMU in his hands to a large degree.  This system has failed the Greek people and their leaders should understand exactly why it has failed them.   Their decision should never have been: “do we accept austerity or not”.  It should have been: “Dear Angela Merkel, we demand a full fiscal union or we are leaving.  The ball is in your court”.   In this regard, there has been a massive failure in Greek leadership.  And I believe Papandreou has displayed consistent ignorance and now cowardice in putting this decision in the hands of a public who cannot be expected to fully understand the complexity of the issues Greece confronts.  In other words, Papandreou has failed to execute the role that he was elected to perform.

Some have called me “elitist” for implying that the Greek public cannot be relied upon to understand these matters and formulate rational decisions.  This is, in my opinion, our unfortunate reality.  The monetary system is complex.  I have literally spent years of my life trying to understand all of this.  At many times, 24 hours a day 7 days a week.  It has been a full-time job.   And I still don’t understand it all.  And I think it is unreasonable to expect your average citizen to understand the breadth and scope of all of these issues.  After all, the average American thinks the USA is bankrupt despite the fact that this is categorically false (there’s no such thing as a sovereign currency issuer “running out” of money it can freely print and becoming insolvent in the same manner as Greece or a household).  Can we really expect the public to always make rational decisions about such complex issues?  Or should we demand that our elected officials understand these issues well enough to make competent decisions on our behalf?   I think it is absurd to believe that our leaders (elected or not) should not command a better understanding of these issues than your average citizen.  There’s nothing “elitist” in expecting that.  It should be common sense.   I expect Ben Bernanke to have a better understanding of banking than your average citizen.  I expect Tim Geithner to understand the impact of government spending.  I expect Barack Obama to understand the modern monetary system (or at the very least, have advisers who  can keep him well informed).  Is that too much to ask?

This is not your average political issue.  It is about the construction of the system that is going to influence every European citizen’s life for the rest of their life.  And while it might be idealistic to sit around and think that the average Greek citizen can understand these complex issues and formulate rational and logical decisions, I think that is a bit naive.  Instead, I believe that the average Greek citizen should elect officials with the understanding and expectation that they will understand these issues and act on them when needed.  This does not absolve the public of their responsibility.  In fact, it is the very essence of Democracy.  And if that leader should fail the people then he/she should be thrown out and replaced with someone that the public feels can better perform those duties.   This is how Democracy works.  We should have very high expectations of our elected officials (and those who are appointed by elected officials).  We should expect that they understand highly complex issues better than your average citizen so that they can be prepared to act in the best interest of those who elected them.

Greece’s leaders have failed the people.  But that does not justify Papandreou’s decision to absolve himself of his responsibilities and place such complex issues in the hands of the public.  Papandreou should have better understood these issues long ago and his failure to do so has directly led to the unrest in Greece.  He is unfit to serve his people.  But that does not justify his recent actions.

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  1. I think that Papandreou is finally a realist, not necessarily a coward. He sees his majority in Parliament eroding, almost to the vanishing point. He probably would prefer a referendum to civil war, which is just what is likely to happen if the thinly constituted government keeps imposing EU austerity mandates on the people without their consent.

    I am NOT saying that the Greek government, or people, or the EU, are entirely blameless here. But continued austerity measures will stifle economic growth in Greece, impair the country’s ability to pay off its debt, and prolong the agony of the nation. In the face of increasing interest rates, that means that hopes of Greece’s avoiding default are doomed. The Greek government and people, as well as the EU financiers, governments, and central banks have been studiously avoiding recognition of that increasingly likely outcome. Nobody wants to take the hit, but the longer they delay it, the worse the hit will be. This last negotiated solution from the EU powers that be lasted what, three days?

    The EU might be able to absorb the losses from a Greek default, but the Greek default will accelerate a financial crisis involving the inadequately capitalized and overly exposed finance and banking systems of Portugal, Ireland, Italy, Spain, Belgium, and France, in approximately that order. Wonder why people are buying gold and dollars lately?

  2. It is called “representative democracy” for a reason. Cullen is 1,000% spot-on in this post.

  3. one interesting development arising from the referendum call is whether the troika will actually disburse the current tranche of funds to greece this month. while greece has never truly met the austerity budget targets, at least the greek parliament has approved them, and the troika could disburse funds to a debtor country which is on the program, even if they are having trouble meeting the objectives of the program.

    the call for the referendum seems to be for a date well after the date scheduled for the latest troika disbursement. typically the imf doesnt disburse to a country that has not approved the program. one assumes that the imf will hold its nose this month and hit the send button.

    just another instance where this eu crisis management condcuted by the eu is a fly by the seat of the pants operation.

    • now things may get verrrry interesting. this is a quote from imf offial today:

      “The board would not want to give money to Greece and then wonder what will happen [...] The board will want comfort that Greece will fulfil its commitments and right now Papandreou is unable to give that.

      The sooner Greece holds the referendum, the sooner the sixth tranche will be paid. But right now, it isn’t going to be paid.”

      now, didn’t greece say they will run out of money mid-november, and haven’t i read that the referendum is likely to take place late december-early january?

  4. Hi Cullen. I really enjoy your thoughts on everything financial. You obviously have a super grasp on the problems facing Europe, the US etc. But I think your solution to Europe is unworkable. A single fiscal union between all Euro member states is a pipe dream well beyond that achieved by the US back in the 18th century. It may be a political ideal here in Europe, but at citizen level no one cares about being European. Most of Europe has fought for centuries to preserve and regain sovereignty from oppressive states. What makes you think they will suddenly relinquish this for the sake of a few euros from Germany and the handiness of having the same currency when you go on your holidays (to most countries). And I havent even mentioned the cultural, language, public sector, health, educational, taxation, legal differences throughout the region. My own personal feeling is sooner or later the ECB will buckle and crank up the presses and this will force Germany to exit, maybe taking a few stronger economies with it. We will have 2 ‘Euros’ for a while before sooner or later we all revert to our own. It will be painful, volatile, political landscapes will change. I’m not sure people should be throwing the war argument out as a threat. It seems a little scaremongery to me. Lots of political gesturing sure and lots of incriminations but i think thats about as far as it goes. We have a big recession/depression (already in peripheral countries for what its worth) followed by a new dawn and a period of prosperity and hopefully we all learn some lessons the main one being you need autonomy to look after your people. Tying yourself to a strong ship only makes you a toothless jester.

  5. Papandreou’s move is brilliant, IMHO. He is essentially telling the malcontents to put up or shut up. If the Greeks vote yes, with full knowledge that doing so means years of struggle and reduced pensions and government goodies, then obviously they must see some real benefit in remaining in Europe, and the costs of staying will have been agreed to and accepted (in large measure). If, on the other hand, they vote to go back to the drachma, no one can say they weren’t asked.

    A step of this magnitude requires a (perhaps grudging) acceptance by the Greek population that they have made their choice, and there will be a resolution–at least for a time. Will they make the “right” decision? There is no “right” decision–but there does need to be a decision.

  6. So much to agree with in that article,but I’ll condense it down to this special part…

    “Dear Angela Merkel, we demand a full fiscal union or we are leaving. The ball is in your court”.

    Basically ,they are going to ALL have to sign up to long term transfers linked to structural reform ,or at some point this thing they call the Eurozone is going to fragment. Only a shared process of absorbing all the prio years of misallocation can hold this thing together. German austerity as it stands is simply a ‘big brother’ approach to loading the ‘pain’ in one direction…away from them.

    • No worries, the German austerity is bi-directional. First it kills of growth in the EU countries, which causes German exports to drop. This causes job loss in Germany which increases the cost of Welfare/Unemployment benefits (already over a quarter of the budget). The result will be for Germany to cut spending, or more likely raise taxes so they too can enjoy the fruits of austerity. It’s even part of the German (version of a) Constitution.

      So the Euro ship is sinking and everyone tries to get a seat as far away from the leak as possible so as to be the last to drown. I just hope I can leave the EU before the worst hits.

  7. I’m reminded that the founders of the USA agreed w/you Cullen – the “people” cannot be trusted w/making the right decisions, that’s why only property owners (and male) could vote. They feared the mob having such power, being uneducated generally.

    However, this same group that one would expect doesn’t understand many important issues, is responsible for voting in those who do. No wonder those voted in don’t know.

  8. Can any comparison to Iceland defaulting be drawn here if Greek does or are they so different that the outcome will be unpredictable? Other than the people in Iceland voting default I suppose.

    • Cowpoke:

      Iceland government decided to let their BANKS default (rather than bail them out ala US, Germany France, Japan). Owners of Iceland bank debt (bond holders) got a pretty serious haircut for their folly, and foreign depositors were stiffed as well. Many foreign depositors were from the UK (about $4B, spread over 300K depositors).

      Not sure that their government borrowed to the extent that Greek government did. Iceland was not and is not a member of EU, and has it’s own floating currency.

      This article was quite helpful. Makes you wonder if we had a more effective democracy if we would not have chosen the same solution.

      On a side note, I remember getting paid investment advice (but not acting on) a tip to put my savings into Iceland’s banks (paying about 14% at the time), based on the assurance that they would be backstopped by the EU. HAH!

      I could be wrong, happy to hear from more knowledgable folks

  9. Papandreou’s move is nothing to do with democracy. I am continually aghast at the way people on this blog analyze issues. It is pure self preservation on his part. He is trying to prevent himself from being lynched, either metaphorically or physically. I very much suspect it has got to the point in Greece where he knows the people are not going to follow him…………

      • Cullen,

        For me dereliction of duty is not a point of view that carries any weight in this situation. Are you thinking along the lines that Papa should end up in some court somewhere and be tried….?

        As for Papa doing it to negotiate better terms with the other members, I do not think that is reason either. It is simply getting too hot for him in his own country and he needs to find a way to survive. He could have of course just bolt and hide somewhere.

        Took your survey by the way.

  10. I think I understand what you’re saying and I agree, that is what he’s doing.

    But he shouldn’t be. His job (as an elected representative) is to act on behalf of the populace that elected him by democratic vote. To simply turn back to them and say ‘Uh… hmmm… so… uh… what do you guys think?” Shows not only how weak a leader he is but that (as Cullen aptly put) he is acting cowardly. He is in a difficult position, but so are the people who put their trust in him to lead.

  11. This isn’t about democracy, it is all about politics. It is about saving Papa’s job. Unless Papa can keep certain members of his coalition from bolting, he is in danger of losing an upcoming confidence vote. The referendum idea is designed to keep those politicians from bolting, so that Papa can keep is job, pure and simple.

  12. ” They must complete the union via the formation of a full fiscal union (as the USA did in 1790). Or they must revert back to the system of old where each nation has its own currency and can utilize that currency in the manner that best benefits that particular nation. ”

    From what I have seen to date of the current account surplus nations in the Euro region their only real option is revert back to the old system. Being in bed with a bunch of conservatives (Germany etc ) will not be helpful as they believe now more than ever that the pan European budget would have to be balanced. That is a step backward not just for Europe but everyone in the West.

  13. Re: local currencies:

    “I was a speaker at an “alternative” conference in Sydney on Saturday. I see these functions also in terms of my role as an educator. In this case, the participants were broadly well intentioned with solid democratic values and a penchant to redress societal ills and advance equity and inclusion.

    But a strong shared sentiment among this group (which I detect among the Occupy movements around the world) is that they are demanding governments to balance budgets, the banks to be prevented from issuing credit and the economy to be returned to a gold standard with fixed exchange rates. That would be the more moderate “progressive” desire.

    The more vocal “progressives” want local currencies to spring up and run parallel with national currencies and to “share the unemployment” by cutting the wages and hours of work of those currently employed and introducing income guarantees.

    My talk on Saturday was that if they pursued these policy agendas they would deny the economy the capacity to deliver progress towards their aspirations and goals and would be playing right into the hands of the power elites.”

  14. Barroso – a civil servent has threatened famine and pestilence on Greek women & children if they vote no.
    I am sorry Cullen but further transfers of power to a Caligula’s Rome will just not do I am afraid.
    We don’t want any further integration.
    We just use the currency – the ECB is more like a currency board that sets interest rates and prints non govermental euros anyhow.
    Most of the Euro debt is internal – they can cancel the debt easily without financing any goverment and the continents wealth will not vanish.
    They can just bid up the price of Gold to the M1 and beyond.
    Job done, at least the Italian job done anyhow.
    Not very good for the Dollar though.

  15. I feel that it is high time Papandreou involved the citizenry. I don’t think the highbrow
    attitude that “they can’t understand the complex issues” is applicable here.

    Actually from what I’ve learned it is really quite simple.

    Greece and the other members of the PIIGS are in a position similar to the individual states of the United States.

    They use a fiat currency issued by another party.

    They have been a captive market for goods produced in Germany and France. This has been implemented through various laws which made production of local foodstuffs, textiles, and other goods impractical.

    To finance these purchases they have run deficits financed by borrowing in a currency they must buy through sales of goods and services.

    Their current government inherited this mess.

    There are two choices, as follows:

    a. The currency issuer supports Greek deficit spending by purchasing Greek bonds indefinitely at a level sufficient to restore full employment to Greece and the rest of the EU.

    b. Greece issues it’s own currency “the drachma” on a par with the EURO, Legislatively converts all foreign debts to the drachma, then makes the drachma unconvertible, or lets the drachma float where it will, while issuing sufficient currency to return the country to full employment, including of course, jobs for everyone.

    Greece could also stop supporting Nabucco, and play ball with Russia on South Stream, earning millions in transit fees, which it desperately needs. Greece could also stop playing ball with Israel, and side with Iran and Hezbollah, which could supply her with petroleum on the cheap.

    I don’t see any of this as being too complicated for citizens to understand.


    Dr. George W. Oprisko
    Executive Director

    Public Research Institute

    • Dr.,

      Thanks for the excellent comment. Perhaps I am being a bit “highbrow”, but I think you’ve actually explained quite a complex issue that most people do not understand. The average American does not even know what a current account or non-convertible currency is. International trade is extremely confusing. I don’t think it’s fair to expect the common man to understand the issues in Europe. But we should expect Greek leaders to understand it by now. It should be their duty as representatives of the democracy to understand this. But they have failed in this regard and they have shrugged their responsibility off on their people in what I believe is an act of ignorance. Papandreou has continually misinterpreted what is in the best interest of his people. And now, instead of shooting them in the foot, he is handing the gun to them so they can do it themselves. He should know better.



      • Cullen,

        you just give too much credit to politicians. Politicians are not “problem-solvers”. Problem-solving skills do not get you a public office.

        It’s extremely optimistic to think that the usual selection process for a political leader weeds out those who can — in times of needs such as now — apply reason and intelligence to sort through a highly complex issue such as this one in the short amount of time that is available. You have conceded yourself that it took you years to get to grips with the workings of the system.

        Also, there is cognitive dissonance and decades-long misinformation at work here. Very smart people who are NOT impeded by holding a public office are at a loss here.

        Do not expect office holders to make any meaningful contribution.

        • I don’t expect them to be great problem solvers. I expect them to understand things better than the avg citizen though. I don’t demand perfection from politicians. But I expect more than mediocrity.

          • Well, by expecting them to “understand” things, you expect them to be problem solvers. I do not.

            Politicians are *way* better with words than the average citizen. They are way better with “being popular” than the average citizen.

            That’s what got them into their respective positions.

            If it comes down to deciding if a certain, dangerous technology is going to be employed or not, those decisions end up being made by the outcomes of lobbyism and if it can be “marketed” to the voters — decidedly NOT by the pros and cons of the technology.

            The same applies to high finance: it’s JUST TOO HARD for 99%, and that includes 99% of congresspeople. It’s IMPOSSIBLE to make a 60-minute TV show where you can even begin to explain the PROBLEM to people, let alone discuss good solutions. That already disqualifies the issue to politicians who are doing there job (which is “looking good on TV”).

            “Peak Oil” is another instance.

            • I don’t expect people to be perfect problem solvers. I am far from a believer in the idea that humans are rational creatures. I do expect politicians to grasp important concepts better than your avg Joe. If for no other reason than the fact that they have access to better info and sources than your avg joe. This doesn’t mean they will always produce optimal policies, but I expect them to at least be better informed. I don’t think that’s an unreasonable or naive position.

              • The reality is that while we can expect all we want we are stuck with those who are in charge right now.

    • “They have been a captive market for goods produced in Germany and France. This has been implemented through various laws which made production of local foodstuffs, textiles, and other goods impractical.”

      This is pretty interesting. Can you elaborate on that point? While Greece receives more from the EU than it pays in (to the tune of 9B EUR I believe) the EU naturally gets to decide what the money is used on. I could imagine them building infrastructure in Greece to better move the agricultural and industrial output from the northern states instead of building the local industry like it’s supposed to work. At the same time the EU doesn’t permit countries to subsidize areas of the industry they choose. The Euro then eliminated the only way to correct those imbalances (other than starvation). Am I on to something?

      The Irish were a bit smarter about it of course, instead of turning their country into a handout welfare state they lowered taxes to attract investment, which wasn’t really popular with the other members.

      This seems a pretty short sighted policy to say the least, it’s clear that this has to blow up some time. Who would sign up for that?

  16. The point MMT makes is macro economics is not “high brow”. It is the application of
    double entry bookkeeping to the national accounts.

    Basically MMT says that the domestic sector plus the govt sector equals the current account sector. All must balance.

    If the domestic sector must save, as it must do at the moment, the govt sector must run deficits, which are exacerbated if the current account is in deficit.

    In the case of Greece, the current account has always been in deficit since accession to the euro. Therefore, given the necessity for Greeks repairing their balance sheets, the govt of Greece must run deficits, or the economy will spiral into oblivion.

    The ordinary Greeks understand this, their PM who is a socialist should intuitively understand this.

    Lacking, is the moxie to tell Merkel and Sarkozy to their faces that it is time to “shit or get off the pot” as my father would say.

    So, the Greek crisis can be resolved simply and quickly. As I mentioned above, either
    the ECB underwrites deficits as needed to get the economies going again, or it’s the drachma.

    Going back to the basics:

    GDP = C + G + I + (X – M) ; Y = C + S + T ; GDP = Y

    (S – I) + (M – X) = (G – T).

    where Savings minus Investment plus Imports minus Exports equals Govt Expenditures minus Taxes.

    So if the domestic sector must save as currently and if Exports exceed Imports as currently, Govt must run a deficit.


    The domestic sector sheds jobs, which causes a decline in demand, which feeds back into more job losses, which again causes a further decline in demand until everyone is at a subsistence level.

    Using the US as an example:

    It is possible to subsist on about $500 / month. This buys food, cooking gas, clothes at Goodwill, and not much else.

    150 million households X $ 6000 / Yr = 9 X 10^11 = $ 900 billion

    I believe this to be the bottom asymptote of the US economy, given no govt support of the economy. Note: this is smaller than the DOD budget.

    Dr. G

    Dr. G

    • I love your faith Dr. G, but I don’t think the general public understands double entry bookkeeping. Trust me, I am trying to make it more prevalent, but this is by no means widely known in my opinion.



      • MMT says that inflation is the true constraint on money creation by the sovereign currency issuer that is indebted in its own currency (solvency is not an issue), and that the productive economic capacity of the sovereign nation is the baseline for measuring the value of the sovereign’s currency and thus the potential for inflation.

        Given that Greece’s current productive capacity is low, and further given that Greece will have little or no access to credit markets if it defaults and readopts the Drachma, and further given the ingrained sense of entitlement in contemporary Western populations including Greece, a new Drachma will likely collapse in short order as the Greek government issues fiat money and transmits it to favored constituencies with little or no restraint and without regard to the productive capacity of the nation. The economy will then become informally dollarized and/or Euro-ized, and new Drachmas will be like Soviet rubles were in the USSR; useful for tax payments and limited daily exchange, but eagerly traded at brutal exchange rates for hard currencies (i.e., “real money”).

        Papandreou is expecting to win the referendum and thus be able to crack down (with military support if necessary) and get the country back to business. If he loses the referendum, the Greek population will have made its soft currency and inflationary choice and cannot really complain about life under the new Drachma. Inflation rather than austerity will reduce the Greek standard of living closer to par with the nation’s productive capacity, but either way it will be reduced.

        What could change this outcome? The ECB purchasing sovereign debt of the periphery to target interest rates, which is de facto fiscal union in the sense that Greece can then continue to tag along on the productive capacity of the entire EU while Greece enjoys the benefits of the Euro and its credit markets. The foregoing may explain why polling shows an overwhelming majority of Greeks favor the Euro but oppose austerity; that is the win-win position for Greece. It also explains why the Germans are warning the ECB against full scale QE; they know that full scale QE by the ECB to bail out the periphery is de facto fiscal union, and that is NOT what they agreed to in the Maastricht Treaty.

        The Greeks are much smarter than TPC realizes. The Greeks have gone all in on the biggest poker hand in world history and believe that the French and German banks will make Germany and France (and the ECB) blink, thus allowing the Greeks to blunt austerity while keeping the Euro and its benefits. The Italians are playing the same game as the Greeks.

        I think that the Germans were the dumb money at the Euro table; the Greeks and the Italians were the smart money. This is what makes the situation so volatile. Beware of angry Germans who think that they have been swindled and betrayed.

        • I have no confidence in Greece increasing it’s productive economic capacity, they didn’t do so in the past when they were handed money by idiot creditors. Of course the EU also ties your hands a little, you can’t subsidize industries directly for example. I think we also have the issue of moral hazard here…

  17. The Pound Sterling is free floating after George Soros and others busted it out of the ERM.

    The first ERM let currencies float within certain ranges. This prevented single governments from using their Central Banks to get a trade advantage by manipulating their currency, but it also wasn’t a very free market way of determining exchange rates (keep in mind that there are a lot of *actual* socialists in Europe who don’t like the free market).

    If we were to revert to a free floating system we would probably see drastic changes in currency valuations, look for example at Switzerland and how their currency kept on appreciating until they basically pegged to the Euro. This is especially dangerous for trade deficit nations who import a lot of agricultural products who might see their import costs rise heavily. You can do without a Porsche or BMW, but not without food… The issue with agricultural markets is of course that they are heavily influenced by subsidies so they are also not a free market. But that’s a rant for another day.

  18. Now, something very interesting is happening. Greece is supposed to run out of money (literally) by mid November and won’t get a dime before the referendum is passed in early December.

  19. The way this is developing is interesting and may mean the Greek pm is playing a smart game.Up to this point he’s had to deal with many Greeks striking and showing their dislike for austerity to the point where his govt clearly won’t be able to sustain such a policy ongoing.However ,because of his proposal ,and the expected response from Europe on further loans the Greek people are now being offered a stark choice.It becomes a vote either for acceptance of austerity which means less for them ,or some of them not getting paid very soon. It’s surprising how less can suddenly look appealing when the alternative is nothing.

  20. During my many travels, I met a man from Macedonia.

    Before accession to the EU Macedonia made it’s own cheeses, sausages, and other manufactured items. Most of these were made by small establishments, who had been in business for decades.

    Upon accession these outfits found to their horror, that their products no longer met EU standards, only German products did. They went out of business, or were put out of business.

    Same thing happened to the Greeks.

    The country was flooded with German and French products, local products were deemed not up to standard, and local production was curtailed, putting many out of work.

    I hear many claim that the only thing the Greeks are good at is tourism. This is tantamount to saying they make good servants, and little else.

    I hear some say that Ireland’s reducing their corporate tax to attract businesses, was good policy. I think that guaranteeing the offshore deposits in full of one’s private banks is foolish.

    Ireland should have put the banks into receivership, and in receivership gone after the personal assets of all their employees, including the ones living elsewhere, and paid the depositors the proceeds, likely returning only a fraction of their deposits. They should have created a central bank, insisted it have a window at the ECB, or else, and made the ICB lender of last resort for a full reserve banking system, newly created. Yep, only the ICB could print money, sent it from the ECB.

    If the ECB or Merkel, Sarkozy etal wouldn’t play ball then stuff the depositors.

    This is called hardball politics.

    It works.

    Dr. G

    PS: Similarly, each and every EC country should have it’s own Central Bank, with a window to the ECB. The ECB should be limited to providing funds to member Central Banks, and no other firms. The member CBs should be lenders of last resort to banks within their system, and no other firms. The member CBs should have an account for the treasury of their host govt. The Treasury of their host govt should be able to credit funds into that account up to the limit necessary to produce full employment. It should be the job of the ECB to counsel each member state regarding this.

    Also, members should be able to impose their VATs in such manner as to protect local industries from predatory attacks of industries beyond their borders.

    Dr. G

  21. Europe is not the US: the genius of the US system works because of the homogeneity of American culture, and its ability to integrate different nationalities into one American ethos. Notice how quickly the different ethnicities gave up their languages to speak English. Europe cannot coalesce in the same way: there is no “Europe” in the same sense as there is “America” (or North America –i.e. the US)– with due deference to our Latin neighbors). The most unity Europe ever had was a cultural unity as “Christendom” prior to the Renaissance and the Protestant Reformation. I believe Europe will continue to remain fragmented, unless a spurious and necessarily fragile unity is imposed by military and/or financial force.

    As for the idea that “I don’t see any of this as being too complicated for citizens to understand,” I believe this is wrong. By definition a collectivity is mediocre or average. In any group, the majority will instinctively look to leadership, for good or ill. Democracy does not mean that one looks to a quantitative majority for wisdom and guidance, but that a responsible representative government has the best interests of the whole in view. This may mean going against the wishes of a majority, because of greater expertise, certain information, etc. The point is that the representatives of the people, ideally, should be guided by the interests of the whole and not by self-interest or the interests of a particular faction. Therefore, I think Cullen’s point is actually more in accordance with the spirit of a real and concretely possible democratic orientation.

  22. Wall Street vs. Greece: G20 Opens as Greek PM Pushes for Referendum on Bailout and Austerity Measures

    The Greeks understand very well, as does the Wall St. Occupation, that they are being pushed unjustly into austerity measures. Papandreou, who is acting as a traitor-wolf–but in sheep’s clothing–is failing in his job as the overseer of his country’s well-being, by demagogically calling for a referendum but at the same time failing to explain to his people what is really going on in this clever reframing of the issue, and in his failure to exercise real leadership and decisiveness. The bankers are increasing their stranglehold on all government, and no one has the guts or the lucidity to cut their heads off.

  23. Cullen,

    I think your republicanism is laudable but overly idealistic and unrealistic here. First, as many others have pointed out, the “elite” representatives elected by Zorba/Josef/Joe Sixpack may be smarter than the average voter, but they are only smart enough to be more dangerous. When push comes to shove, they’re dilettantes in the face of the complexities in the system you yourself claim to not fully understand after often studying it 24/7.

    You fail to understand that societies work more like art than science, as much as we may wish otherwise. No politician can be trusted to “explain/understand” the deep meanings of some great work of art, nor will Zorba Sixpack, nor will even many of those great artists who produced that work themselves. They just “feel” it resonate through all the complexities of being human and our shared perceptions. If there is something rotten in Denmark, I think the populace as a whole will smell it before they know how it’s rotting. I say trust the wisdom of crowds. It could fail like a mob, but it’s better than relying on a few outliers elected by those same “stupid” people.

  24. Re:They just “feel” it resonate through all the complexities of being human and our shared perceptions. If there is something rotten in Denmark, I think the populace as a whole will smell it before they know how it’s rotting.

    Yes, they do smell it, but then it is often too late. Recall that the same “gut feeling” public elected the crooks that got them into trouble in the first place. No government will work if the system has been allowed to legalize criminality. Americans have this mystical belief in quantity. It is absurd. The collectivity by definition is always, always passive: it reacts in relation to either positive or negative stimuli. This is what advertisers and politicians understand very well–again, for good or ill. Obviously a group of scoundrels without principles can be counted on to game the system. A few year ago, Bill Black and company were able to put over a thousand crooks into jail. This time, since criminality became legal, it is quite different.

    Take a look at the Youtube with that master demagogue Newt Gingrich working the crowd in Iowa, then take a look at the rapt imbecility of the average face there, applauding like trained seals each time he hits a knee-jerk reaction phrase. It is remarkable. These are the faces and reactions of a TV-besotted population, which spendss its time working, shopping and so forth, but certainly not studying complex issues in depth, in relation to first principles and in view of possible consequences. We have a perfectly nefarious media controlled by the same corporate forces that are currently strangling government. Our media are there to entertain in an often very decadent and vulgar manner a very dumbed-down population. An active minority initiated a reaction and is gathering followers. They more or less get the big picture: 99%-1%; but don’t push it. They will need intelligent and alert leadership that truly has their best interests at heart.

  25. “It is the minorities who have made the history of this world. It is the few who have had the courage to take their places at the front; who have been true enough to themselves to speak the truth that was in them; who have dared oppose the established order of things; who have espoused the cause of the suffering, struggling poor; who have upheld without regard to personal consequences the cause of freedom and righteousness. It is they, the heroic, self-sacrificing few who have made the history of the race and who have paved the way from barbarism to civilization. The many prefer to remain upon the popular side.
    Eugene Debs

  26. “They will need intelligent and alert leadership that truly has their best interests at heart.”

    Yep. Like Bill Black, for instance. Bill Black for President!