1) Dijsselbloem Says “Very Pessimistic” About A Deal On Monday As Greek Deposit Flight Hits €1 Billion Per Day¹

“The game of words continues, and following reports both yesterday and today that first Germany, and then Greece would compromise, and in the case of the latter even do “whatever it can” to reach a deal, it is time for Europe’s bad cop, Eurogroup President Jeroen Dijsselbloem, to pour cold water on the party and crush Greek enthusiasm even more when he said moments ago that he was “very pessimistic” about the chances that a meeting he will chair on Monday of euro zone finance ministers would reach a final debt deal with Greece.“

Warren Mosler-en iruzkinak Y. Varoufakis-en iruzkinen gainean²

“… THE IDEA IS TO SUSTAIN AGGREGATE DEMAND AT FULL EMPLOYMENT LEVELS WITH FISCAL POLICY.”

“GDP WILL FALL AS IT CAN ALWAYS BE SUSTAINED BY DOMESTIC DEMAND VIA APPROPRIATE FISCAL POLICY.”

“FISCAL ADJUSTMENTS CAN ALWAYS SUSTAIN DOMESTIC DEMAND AT FULL EMPLOYMENT LEVELS.”

SUSTAINING INTERNAL DOMESTIC DEMAND DOES NOT REQUIRE SAID ‘INVESTORS’.
EVEN IF THE REST OF WORLD ENTIRELY VANISHED GREECE COULD STILL READILY SUSTAIN AGGREGATE DEMAND AT FULL EMPLOYMENT LEVELS VIA APPROPRIATE FISCAL POLICY.

HOW CAN A LARGE CUT IN REAL WAGES FROM CURRENCY DEPRECIATION BE CONSIDERED A BENEFIT BY PROGRESSIVES? INSTEAD IT BENEFITS EXPORTERS AS IT REDUCES THE REAL STANDARD OF LIVING OF THOSE WORKING FOR A LIVING.

IT’S FAR MORE PROGRESSIVE TO USE A FISCAL ADJUSTMENT.

FIRST, DRACHMA BANK DEPOSITS, CREDIT AND DEBIT CARDS, AND CHECKS CAN BE AVAILABLE ALMOST IMMEDIATELY.

SECOND, EURO CAN BE USED FOR CASH EXCHANGES UNTIL NOTES AND COINS ARE CREATED, AS FACILITATED BY GOVT. POLICY AS FOLLOWS:

IF THE GOVT OF GREECE BEGINS TAXING AND SPENDING IN DRACHMA USING THE SAME NOTIONAL QUANTITIES AS IT DID WITH EURO, AND THE GOVT. DOES NOT FORCE CONVERSION OF EURO BANK DEPOSITS THERE IS SUDDENLY A LARGE SHORTAGE OF DRACHMA. THIS WILL BE EVIDENCED BY AGENTS TRYING TO SELL EURO AND BUY DRACHMA, AND THE GOVT. CAN ACCOMMODATE BY SELLING DRACHMA FOR EURO ON A ONE FOR ONE BASIS.

THIS KEEPS THE DRACHMA STABLE AT THAT RATIO AND FACILITATES THE USE OF CASH EURO UNTIL DRACHMA NOTES AND COINS ARE AVAILABLE. AT THE SAME TIME THE GOVT. IS ACCUMULATING EURO WHICH ALLOWS IT TO SERVICE IT’S RESIDUAL EURO OBLIGATIONS AS DESIRED.

NOT TO FORGET THAT ONGOING TAX LIABILITIES WILL BE PAYABLE IN DRACHMA, AND GREECE IS CURRENTLY RUNNING A PRIMARY SURPLUS, WHICH MEANS THERE WILL BE A SEVERE DRACHMA SHORTAGE IN THE ECONOMY AND A STRONG DESIRE TO SELL EURO TO BUY DRACHMA.

EXCEPT THE COUNTER EFFECT OF DRACHMA DENOMINATED TAX LIABILITIES WILL RESULT IN THE OPPOSITE EFFECT- CURRENCY APPRECIATION IF LEFT UNCHECKED.

NO, THE WIDESPREAD DEMAND FOR DRACHMA WILL RESULT IN DIMITRI AND KIKI SELLING EURO TO GET THEIR NEEDED DRACHMA.

(In short, even if we neglect the devastation caused by the delay in the introduction of the new currency (something Argentina did not have to worry about), the new currency will be debased ever so quickly due to this bifurcation, leading to hyperinflation and the loss of most of the competitive gains we might have hoped for from the devaluation.)

I DO NOT AGREE!!!

(If Greece leaves the euro, however, the results will most certainly prove catastrophic for our ‘economic ecology’, and in a never-ending circle of negative feedback, will bite our struggling nation back.)

NOT IF IT UNDERSTANDS HOW TO SUSTAIN DOMESTIC DEMAND VIA FISCAL POLICY, AND OF COURSE USE A TRANSITION JOB GUARANTEE FOR SUPERIOR PRICE STABILITY.

AS PREVIOUSLY DISCUSSED, IT’S CRITICAL NOT TO FORCE CONVERSION OF EURO BANK DEPOSITS TO ENSURE A STRONG DRACHMA AT INCEPTION.

WHY SHOULD THE GOVT. CARE WHETHER CITIZENS KEEP EURO IN GREEK BANKS OR IN BANKS OUT OF GREECE?

(… the effects on the rest of the Eurozone will also be cataclysmic. Spain, already in a black hole, will see its GDP shrink by more than Greece’s current deflationary record rate, interest rate spreads will tend to 20% in Ireland and in Italy)

NOT IF THE ECB SUSTAINS IT’S ‘DO WHAT IT TAKES TO PREVENT DEFAULT’ POLICY.

(This chain of events will cause a bitter recession in the surplus countries clustered around Germany, whose currency will appreciate through the roof, while the rest of Europe will sink into the mire of stagflation.)

I DON’T SEE THAT AS THE LOGICAL PROGRESSION.

(How good will this environment be for Greece? I submit it to you, dear reader, that the answer is: Not good at all!)

NOR IS IT A LOGICAL OUTCOME.

(In short, whereas Argentina’s and Iceland’s successful default-devaluation strategy did not have adverse effects on the overarching environment in which they had to exist after their bold move, a Greek euro-exit will be the equivalent to poisoning the pool in which we must swim.)

I DON’T SEE IT THAT WAY IF DONE AS PER MY PROPOSALS.

(Epilogue
Does this mean that Greece ought to grin and bear the massive and misanthropic idiocy of the bailout-austerity package imposed upon it by the troika (EU-ECB-IMF)? Of course not. We should certainly default. But within the Eurozone. (…) And use our readiness to default as a bargaining strategy by which to bring about a New Deal for Europe …)

THIS STRATEGY DOES NOT FOLLOW FROM THE PRIOR ANALYSIS.

EU AUSTERITY HAS BEEN AN EPIC CRIME AGAINST HUMANITY, AND, UNFORTUNATELY GREECE MAY NOT HAVE THE UNDERSTANDINGS NEEDED TO REVERSE IT³.