Merkel's July 2011 Greek Rescue

Saturday 23 Jul 2011

In the UK Times today the journalist Matthew Paris has written an article called: Pay the Eurobill. Leave a tip. Result: happiness. It starts:

Barely adequate bailouts won’t end Greece’s troubles. Splash the cash and kill the anxiety before it grows. Oh boy, what a party that was! Did we really swing from the chandeliers? Did we really clear a whole edition of BBC radio’s "Any Questions" of every other topic, just to talk about phone hacking? With a thin headache, then, we return this weekend to the rest of the world. While we were partying, Europe, on which our lives and livelihoods depend, almost came apart. A “rescue” was agreed by eurozone leaders on Thursday. It was almost enough to rescue the situation. That is the pity of it. “Almost enough” is not enough. “Almost enough” is never enough. “Almost enough” has run like a thread through this slow-motion calamity since the story began with the Greek and then the Irish debt crisis. “Almost enough” was the problem of which Mr Micawber spoke when he remarked...

The more I read Plato the harder I find it to read Western journalists. It's not just the rambling banality, I find that the style automatically switches off my mind, making it extremely difficult to concentrate. It reminds me of modern cinema, lots of bright colours combined with uplifting Scottish highlands music, facial close ups, emotional moments etc. A good example of this yin/yang contrast in cinema is a comparison of the film called "300" made in 2007 and the original film which inspired it called "The 300 Spartans" made in 1962. I honestly and seriously think the 2007 film is brain rotting, and I was deeply disappointed to see China's recent "Beginning of the Great Revival" doing the same thing. Hypnotism can work when it's very heroic, such as in the film, "Crouching Tiger, Hidden Dragon" or "Hero", but as a general rule it's a form of what Plato called downmarket Poetry (eg Republic Chapter 10) that damages society and should be banned.

Still, in the interests of science, so to speak, I have developed a technique for retaining mental attention and looking behind the pictures / words of modern journalism. In other words, I am developing the ability to extract what Plato called the imagination / belief layer that underlines the cognitive processes of people like Matthew Paris (he doesn't have a pragmatism / understanding layer). Now if I translate his article into intelligible relevant opinions (remember Plato says opinion is the intermediate between nothingness and knowledge), I think we end up something like this:

(1) Greece is not a resource rich emerging country like Argentina, leaving the Euro, bankrupting the banks and being cut off from the financial markets would be totally disastrous for Greece. The Tea Party crowd who talk about Euro break-up as a solution to everybody's problems are talking a lot of nonsense. 

(2) The Euro needs to be saved, but this sovereign debt crisis is not going to end until the financial markets believe that countries such as Greece won't default. European sovereign bonds are supposed to be the sort of things you can recommend to your Grandma, but right now investing in European sovereign debt is like buying wood cabins in the middle of a forest fire. Maybe you will get rich, or maybe you will loose the lot, it's like a third world investment environment, and it's mind boggling to think how far Europe has fallen.

(3) The rescue package was surprisingly generous (more money at really cheap rates), and Merkel is going out on a limb in the same sort of way Tony Blair did in Iraq. It feels right, but it also needs to actually work. If it doesn't work, if it turns out she is just wasting more money, it's going to turn into a political nightmare for her the way Iraq did for Tony Blair.

(4) Countries like Greece have been in a bad way for a long time and they're not going to turn around quickly. In fact, this rescue is just the start, countries like Greece are probably going to need the sort of help West Germany gave to East Germany. So it's a far bigger and more costly problem than the politicians are admitting.

(5) Because Germany hasn't come to terms with all this politically, the crisis is going to drag on and on. It's really all about kicking the can down the road while the political consensus builds. At the end of the day no one believes the Greeks can look after themselves anymore, to survive Europe needs a full federal union that does two things: (a) subsidises the Greeks indefinitely; (b) dilutes Greek democracy so they can't keep shooting themselves in the head.

This isn't just the way Matthew Paris feels, I think it's probably the way a lot of journalists feel, and that pessimism is going to keep oozing out of the woodwork as time goes by. Pessimism has it's fearful end point in the belief that the bailouts are going to drag on and on, gradually getting more and more expensive, until one day the German Tea Party say enough is enough, and the politicians inflict disorderly default on everything from Greece to Belgium. So for the pessimists the constant fear is that this crisis ends the same way as Afghanistan, trillions of Euros wasted believing that all counties can thrive under democracy, even though when we look back it's perfectly obvious to any psychologist or historian that's impossible.

Anyone who reads and understands this blog knows that Matthew Paris is wrong. The correct way to look at the crisis is: Merkel once had the courage to say "multiculturalism has utterly failed", until she has the courage to say "democracy has utterly failed" this crisis is endless. It's a big race against time: will the Tea Party kill the Euro before the elite wake up, suspend democracy and impose structural reforms - or not? That's the trillion euro question. If you think reason will win and democracy will be suspended you buy European assets, if you think the politicians will never find the courage to put democracy out of its misery you sell up and move to China or Russia or Africa etc. Merkel herself is almost certainly incapable of letting go of democracy, democracy is her religion, philosophical arguments make as much difference to her as Darwin's theory did to the Pope. So what you are gambling on is the emergence of a new more sophisticated set of European leaders. A rosy outcome is most definitely a gamble, economic decline is historically more likely to create a vicious circle of increasing populism that ends in Afghanistan like tyranny. Even if you look at the successful move from democracy to authoritarianism in Ancient Rome, you realise that transformation took a long period of time and involved horrendous suffering.

At the moment European politicians are trying to project calm to both the markets and the people, but this is the opposite of what we really need. If the politicians were planning on a transformation to greater technocracy they would be shaking up their people, because public anger and fear enable bolder decisions. If you think about this crisis, you realise that they have failed to milk external public anger against Greece and they have failed to terrify the Greeks, both of which have held back the rate of progress on structural reforms. At the moment the Tea Party are screaming "kick the Greeks out", but if the politicians knew what they were doing they would have taught them to scream "suspend Greek democracy and impose reforms". The problem is that these leaders have no more wisdom than the Pope, in fact they are worse than the Pope, they are just instinctive herd like animals who go with the flow.

So the best hope for resolving this crisis is a US default / collapse, because if America fails even the stupidest journalists and politicians are going to start making connections between democracy and disaster. This year shifting geological alliances has been our theme, and default or dollar collapse would be the ultimate end point of that process. Do you realise that if America go down all these countries with reserves and investments are going to get hammered? Across the word countries are going to flip out and America in going to become the new North Korea. This conflict and disaster is necessary because unthinking people can't look ahead, so they need to experience hardship to evolve. Believe me, people like Matthew Paris are absolutely terrified of death, as soon as they start instinctively associating democracy with starvation they will stampede toward an authoritarian exit sign. This is how animals learn, by Pavlovian associative conditioning. So authoritarianism awaits, but the key question is will we get some kind of Chinese like enlightened collective, or some typically tyrannical Western vertical power structure? The longer it takes the more likely tyranny becomes.

The mood in geopolitics is just getting more and more depressing and bleak. To cheer oneself up this weekend take a look at the Telegraph today (a slavishly Conservative UK newspaper). The top opinion piece in Saturday's Telegraph is I'm starting to think that the Left might actually be right. It's about economics not democracy, but I think that's pretty groundbreaking for the Telegraph. When you see articles saying: "Democracy won't work in Afghanistan and it won't work in Greece either" or "Don't give the Greeks more money unless they agree to suspend democracy" then you know dawn is breaking. And if you fancy something really uplifting for the weekend, dream about the new Chinese submarine that can explore for rare earths 7,000m below the surface, and the experimental Chinese Fast Breeder reactor they just connected to the electric grid. I expect anyone who lives in a democracy knows all about Fast Breeders because they are so critical to the debate, but for those of you like me who have left democracy to be free from complicated decisions, let me explain that Fast Breeders are the ultimate technology, in theory a 1GW fast breeder could be fed by dropping a milk carton sized block of ordinary uranium metal into it once a month, fuel costs are negligible and they don't produce waste. So life is progressing on the other side of the world. From capitalism back into the space age, all hail the new post consumer scientific hive society Thorstein Veblen dreamed of so long ago. A generation from now we will have all the rare earths we could even want, the streets will be paved with gold, and the lights will cost nothing. Well in China anyway, I often worry the West will look more like Afghanistan.