The Greeks forget Economics 101: There is no such thing as a free lunch


July 15, 2015

The Greeks forget Economics 101: There is no such thing as a free lunch

by Suzan Sommer (via-email)

Greece PMIf you are a normal citizen and you owe the bank, you do not  go around accusing the bank of being a Nazi for setting conditions on you. Of course your creditors will set their terms and conditions to get some of their money back. Are the terms and conditions suffocating? Of course, compared to the freedom you had before you started owing money and your creditors know you are bankrupt and have no intention of reforming your ways.

Reasons for Greece’s debts:

Greece’s problems started in 1984 when it started massive economic expansion, then they cooked the books in 2001 (thanks to Goldman Sachs) to get into the Eurozone.

http://www.spiegel.de/international/europe/greek-debt-crisis-how-goldman-sachs-helped-greece-to-mask-its-true-debt-a-676634.html

Everyone knows but no one dared to challenge Greece. To do that, you will be sticking your head out and accused of being “unEuropean”. As a German, it will not do you any good on  the world stage to keep your head down or stand accused of being a Nazi (still happening in the UK whenever UK does not agree with Germany. By the way, Waterloo would not have been won without the Prussians’ aid.

Countries-most-exposed-to-GreeceThe Greek crisis is due to massive tax evasion, irresponsible public spending and corruption. From 2001, Greece’s “GDP per capita nearly tripled, from $12,400 in 2001 to $31,700 in 2008” (World Bank Data). Public spending soared and public sector wages doubled while benefits rose. Greece was living like a first world economy when it is actually has a third world economy.

In 2004, Greece spent USD 11 billion for the Olympics. Money they do not have. Greek taxpayers were on the hook for €7 billion, which did not include the cost of extra projects such as a new airport and metro system.

Greece is also infamous for tax evasion.http://www.wsj.com/articles/greece-struggles-to-get-citizens-to-pay-their-taxes-1424867495 Tax debts in Greece equal about 90% of annual tax revenue, the highest shortfall among industrialized nations, according to the Organization for Economic Cooperation and Development.

Shipping magnates do not pay tax. Somehow, this is enshrined in their constitution. Strangely they have tax collectors who physically collect taxes from small businesses. High level of bribery means the government hardly get to see any taxes. Businesses are often done in cash and tax evasion is made easier.

In Greece, their pension system is highly complex. There are 580 occupations that have special privileges allowing for early retirement, for example, a hairdresser, because he uses chemical to dye hair, can retire at the age of 45.

A civil servant’s spouse and unmarried daughter (irrespective of age) can inherit his/her pension which is 90% based on last 5 year’s salary. In Germany, we have to work 45 years or until the age of 67 to be able to retire with full pension based on all our years of working life and only 60% of net average. Spouse receive 60% on the demise of the pensioner. If he has his own pension, deductions are made. Children do not inherit their parents pension’s.

Record keeping is terrible in Greece. About 120,000 long dead pensioners are still collecting pensions.http://www.dailymail.co.uk/news/article-2048385/Greek-finance-sham-120k-families-claiming-ghost-pensions.html

Until the crisis hit in 2008 and the EU came in to question,  the Greek government did not know how many civil servants they have on the payroll, and their monthly expenses. Answer: 768 544 recorded staff for a country of 11 million. Sixty percent of Greece’s civil servants apparently do not know how to use the computer.

http://greece.greekreporter.com/2013/10/18/greek-civil-servants-lack-basic-computer-skills/
http://blogs.lse.ac.uk/europpblog/2014/08/06/the-problems-in-the-greek-public-sector-cannot-be-solved-simply-by-reducing-the-size-of-salaries-or-the-numbers-of-staff/

“Underlying cause of the situation is that, in order to secure electoral support, Greek politicians have traditionally viewed the provision of  public sector jobs and benefits as an important way to grant favors. In order to do that, Greece continued to borrow heavily from international capital markets to finance public sector jobs,  pensions and other social benefits. Government expenditure has therefore been extremely high, billions of euros higher than government revenues.” (http://www.academia.edu/8272839/The_Greek_debt_crisis_Causes_Timeline_and_Bailout_Programs)

Until today, Greece do not have a complete land registry so no taxes on a lot of home owners. Eighty seven percent of Greeks have homes (even 2nd homes) compared to 53% in Germany.

According to Transparency International Greece’s National Integrity Assessment 2012, the problem of corruption in Greece is the confluence of many factors, including a weak enforcement of the law, a lack of audits, the absence of codes of conduct, the non-transparency of government activities, an inefficient bureaucracy, government impunity and broad discretionary powers and a lack of public awareness.

Transparency International’s Global Corruption Barometer 2013 showed that 90% of surveyed households consider political parties to be corrupt or extremely corrupt—ranking Greece as the most corrupt . Furthermore, 39% of the surveyed households believe that the level of corruption has increased a lot, and 46% of surveyed households find government efforts in the fight against corruption to be very ineffective.[” (https://en.wikipedia.org/wiki/Tax_evasion_and_corruption_in_Greece)

Since the crisis and the injections of money from the Eurozone, notably  Germany with 68 billion Euro, there has been no change to Greece’s structural reform despite promises after promises upon receiving the bailout. Everyone has good reason not to trust the Greek government to initiate any reform based on past 7 year’s experience and the new government.

(As a side: Tsipras and Varoufakis upset the punctual Germans when the Greeks arrived 45 mins late for a meeting that was called up again and again in Brussels to help solve Greece’s problems. Both of the Finance Ministers of Greece came twice without any proposals but lots of rhetoric and presentations. Varoufakis thinks he is a great economic lecturer who had to teach the other “stupid” Finance Ministers a thing or two about economics by lecturing them instead of concentrating on a good proposal for Greece.).

What sovereignty can you demand if you are bankrupt and depend on your creditors to help you? Why is your country in worse shape after 6 months of your rule if you are capable of turning your country? Why have you done nothing good for your country the past 6 months?

As a proud nation, start paying taxes, stop asking for more money  from your creditors but help yourself instead if you are humiliated and asphyxiated by them.  Creditors may make mistake but it is to their detriment if their debtors come out worse because of their action as then they will not be able to recoup their losses.

Germany is certainly not unreasonable in its demands to Greece. Germany does not want a Grexit but Germans must also think about their own future. We could certainly use the Euro 68 billion ourselves. Our autobahn, schools, bridges etc. are falling apart in our drive for austerity. Our salary has been kept back the past 15 years so we can compete globally. We have suffered and we are not happy to give our money to others who are not willing to be as frugal and willing to accept pain to succeed as we have..

Take home pay for ordinary citizens in Germany after various taxes (health insurance, solidarity tax to help former East Germany, health care insurance etc. ) is about 60% of gross pay and we have VAT on goods and services too, even tax on profits we made from our after  tax savings above a certain amount.

Germany and GreeceThe Eurozone is not a transfer union that is we should not have to prop up weak countries financially. As such, Merkel and Schäuble have to be very careful what they can do after so many of the Maastricht agreements have been bent to breaking point to save Greece. The Eurozone consists of 19 countries but Germany is the paymaster and yet abused. Is this reasonable?

Greece could sell its gold to finance itself but it prefers to use other people’s money rather than its own sweat and money (assets). Its time Greek government tells its people the truth and stop the propaganda blaming other for their situation. It is time for the Greek people to face the truth.

Greece is not the only democracy in the Eurozone. It may be the oldest but its contribution to the world was 2,000 years ago. Nobody owes the Greeks for their living. We Germans work hard and live frugally. If we were to have a referendum in our respective countries,citizens  will vote for “NO” to further financial assistance to Greece. We may be sympathetic to the poor Greeks,and are willing to help from citizen to citizen on a voluntary basis. Someone calculated that each citizen in the Eurozone now has a debt of Euro 47,000 on our loan to Greece forced on us by our government .

Yes, the banks should bear their losses but not our expense.They took their profits but, why must be left holding their losses. Germans are not against ordinary Greeks. We feel for them and we are the biggest contributor in sending assistance to Greece but we want the Greeks to help themselves and show some appreciation, not  to condemn us for the sins of our grandparents.

34 thoughts on “The Greeks forget Economics 101: There is no such thing as a free lunch

  1. It’s like everything I wrote on the other thread except the whingeing and whining about the consequence of plutocrats using other peoples money. The Godwins from both sides of the debate is expected but nothing in this pieces makes me wanna’ go Ich bin ein Berliner.

    And yeah if you are a too big to fail company, there’s always bail out money which is exactly a free lunch….. but…. no such luck for the average Greek, no, he or she has to be content with the bank analogy, which is cool and all, because any functional bank would most probably check, your credit history when the subject of loans comes up, but why explore analogies, when your vantage is from a high horse.

  2. The Greeks forget Economics 101: There is no such thing as a free lunch.

    Malaysians are all out to prove that there is a free lunch and it will continue.
    Just look at all the open houses held every year at taxpayers’ expenses and the daily distribution of duit raya/goody bags/others being given out and the source of which is again others’ funds be they public/corporate/others.
    The best part could be the lack of accountability as there do not appear to be any records of the recipients of the duty raya/goody bags/others. Ideal for possible fraud and corruption opportunities.

  3. No such thing as a free lunch?

    Not if you are a too-big-to-fail financial institution that is rescued using tax payer money (as in USA where some big financial institutions were rescued using tax payer money, and their senior managers were not punished by Obama at all — textbook example of promoting moral hazard)

    Not in 1Malaysia — where free lunches are aplenty for UMNO Baru and BN cronies.

    Free lunches are possible — if you (corrupt elites) can get away with getting the other guy (ordinary people) to pick up the tab, or clean up the mass left behind 🙂

    Political Science 101 –> those who bear the costs are not necessarily the same as those who reap the benefits

  4. The Greeks are highly critical of others, has a grandiose sense of entitlement, incapable of accepting blame and lashes out at criticism ……with an ever expanding public sector payrolls and obligations, sounds close to home.

  5. I won’t win any popularity contests, but let me try to counter some of the banker-bashing here. It is a myth that there were no consequences to top bankers from the 2008 financial crisis. I repeat, a myth.

    The shareholders of Bear Stearns lost big time. To put some numbers on this, JP Morgan paid for $10 per share of Bear Stearns when it took it over, which is less than 10% of its pre-crisis 52-week high of $133 per share. 30% of Bear Stearns’ stock was actually owned by its employees, so these people not only lost their jobs but saw the value of their pension holdings plunge >90%.

    It was worst for Lehman Brothers, which went bankrupt, meaning that its shareholders were basically wiped out. The employees also owned about 30% of all outstanding shares, so these people lost their jobs and most of their pensions too.

    I work in finance. Before the crisis, bank employees were heavily encouraged to keep and buy their company shares. I know people who had virtually their entire investment/retirement fund wiped out.

    Yes, it is true that no senior people have gone to jail. But there was no 100% bail out. It is a myth that there were no consequences for bankers. You can say that there should have been more severe consequences, but that is not the same as saying or implying that there were no consequences.

    Finally, taxpayers actually made a profit from the various bailout measures. The US TARP programme (which was used to buy bank and auto company shares), for example, was closed in December 2014 with a US$15 bln profit to the Treasury. Yes, you heard that correctly, a PROFIT. If you exclude the auto companies, TARP made a profit of US$24 bln on the banks.

    Even in the UK bailout case which has not yet been fully closed, it looks likely that there is a profit (at this point) from the GBP107 bln that was injected into various banks during the financial crisis, if you add in the taxes, repayments and fees that the banks have paid to the Treasury since. Admittedly, it is less clear cut in the UK because RBS (largest single injection) share price has not recovered much.

    It is true that bankers are well paid by and large, but that alone is no reason to criticise them in my view. We are after all not communists.

  6. The supposed banker bashing here is a reaction to the rather jaundiced and patronizing view of the author of the piece, who is selective in placing blame with regards to this particular crisis.

    It may seem cavalier to dismiss the fallout of financial crisis when it comes to bank employees but the reality is, the damage done to communities which have very little to do, unlike those middle and upper income bracket strata that does, is far more severe and has a profound impact that last far longer than the next job.

    The question is not if bail outs work or not but rather the selective application of it. Big Business apparently gets a free lunch but everyone has to pull their socks up . Tax money or relief funds, only are good for the financial elites of a country but all others have to get by on their own initiative.

    I worked ten years, in commercial law, two in America, and the so-called white collar crime which has a far more devastating impact on society is defined (legally) and accepted (morally) with much less thought and clarity, than all the others crimes put together. Experience has taught me that this is done on purpose. See my Clarence Darrow, quote on the other thread.

    It’s no point building a straw man with regards to the wages of bankers, because that’s not the issue here and never was. You don’t have to be a communist to appreciate the nuances of the Greek financial crisis or cast a weary, sceptical eye on Bankers. You just need to be a self aware capitalist.

  7. Bailout of bankers and financial guys in USA was arbitrary.
    Some were rescued and some were not.

    Did any senior managers go to prison? After destroying the lives and jobs of millions of ordinary people? And causing millions to lose their homes?
    Were they compensated adequately for all the harm done to them and their families?

    And stop using the “communists” label on critics of regimes that use
    tax payer money to bail out bankers (or “banksters” as some have called them) without sending any of them to prison!

  8. Analogy with 1Malaysia — tax payer money will be used (actually already being used viz. the MoF scheme) to bailout the guys who created the 1MDB mess. In a fairer society, these guys would be prosecuted and sent to prison.

  9. There are no laws against making mortgages or debt. Usury laws in the West were abolished long ago. If no laws are broken, then you will send people to jail arbitrarily because of their profession and dare you say “class”?. How is that different from the communist revolutionaries arbitrarily shooting landowners and other “elites” for simply being “class enemies”?

    If laws are broken, then people get sent to jail. The US is very well known for extremely tough insider trading laws, and many have been sent to jail (and fined heavily) for that. But if there are no laws broken, then what do you do?

    I understand in the Borders case in Malaysia, a statute was applied retroactively. That is traditionally unjust. Do you advocate passing and applying retroactive laws? Might as well just single out an entire profession and put them against the wall, and call it revolutionary justice.

  10. “… to bailout the guys who created the 1MDB mess. In a fairer society, these guys would be prosecuted and sent to prison,” Phua Kai Lit.

    Why is creating the 1MDB a crime, again? Huh …. may be not supporting a fairer society is a crime of not meeting socialism ideal? If that is the case, I guess communist insurgency with force is a virtual.

  11. “The Greeks forget Economics 101: There is no such thing as a free lunch”

    Just to share this…

    July 3, 2015 – When Greece forgave Germany’s debt – Pan Pylas and David McHugh

    Germany once benefited from other countries forgiving its debts and should have sympathy for calls to do the same for Greece today…

    Lessons learned

    Still, there are echoes from the German case that are relevant to Greece today.

    The deal to help Germany was based on a realistic way for the country to pay its debts – Mr Varoufakis has suggested debt repayments be linked to growth. Over the bailout years, Greece has had to meet debt commitments even though its economy was in a depression.

    Germany’s deal also acknowledged that mistakes after World War I in imposing punitive conditions helped boost extremists. In its misery, Greece has seen votes go to radical parties of left and right, including Nazi-inspired Golden Dawn.

    “It’s deeply ironic that it’s forcing Greece into a position that’s prompting the rise of extremist parties,” Professor Guinnane said.

    Change ahead?

    One of the reasons why relations between Greece and European creditors deteriorated is the disagreement over what to do about the country’s debts.

    Still, there are signs of hope for Greece.

    Cyprus has said it could consider writing off €330 million ($480 million) in rescue loans to Greece. The US, while not directly involved, has consistently advocated debt relief.

    The IMF came out most forcefully on Thursday, arguing in a report that Greece needs large-scale debt relief alongside €50 billion in new financing through 2018. That sum could be even higher given the economic pain of the recent limits on money withdrawals controls and the increased uncertainty.

    It blamed the current government for being slow on reforms and privatisations, but said it was clear that the debt needed to be made more manageable.

    “A significant haircut could possibly do it,” an IMF official said, on condition of anonymity in line with department rules. “So could an extension, so Greece would not have to go back to the markets for a very long time.”

    One option the IMF mentioned was doubling the grace period on Greece’s loans from EU countries to 20 years and the subsequent repayment period to 40.

    “Greece needs a sort of breathing space,” the IMF official said – AP

    July 3, 2015 – When Greece forgave Germany’s debt – http://www.smh.com.au/world/when-greece-forgave-germanys-debt-20150703-gi43a0.html

    Mar 18 2015 – “…Yet debt forgiveness has an established historical precedent in Europe. Poland, for example, had accrued external debts of about 57% of GDP by the time the Communist system had collapsed, with the majority of that debt (around $33 billion) being owed to Western governments.

    Poland’s largest creditor at the time was Germany, which reluctantly agreed in 1991 (under pressure from the United States) to go along with the “Paris Club” of creditor nations and forgive half of Poland’s debt to the West (though this was less than the 80% write-off Poland had originally been seeking).

    An even more dramatic example is provided by Germany itself.

    Historically, Germany has been described as the biggest “debt transgressor” of the 20th Century, with restructurings in 1924, 1929, 1932 and 1953.

    Total debt forgiveness for Germany between 1947 and 1953 amounted to somewhere in the region of 280% of GDP, according to economic historian Albrecht Ritschl of the London School of Economics.

    Today, Greece has an external debt-to-GDP ratio of roughly 175% (by comparison, Germany’s external debts currently stand at about 145% of GDP)…”

    Mar 18 2015 – http://www.debatingeurope.eu/2015/03/18/parallels-greece-today-german-debt-relief-1953/#.Vaa7jfnMY9o

    You be the judge.

  12. I think we should let the Europeans sort out the Greek mess themselves and be more worried
    and concerned with what is happening in Malaysia right now and how we are to solve our own problems as we are about to become another Greek tragedy in the making..

    Someone must be cooking our books. Perhaps, Rafizi Ramli and Tony Pua should investigate where all of Malaysia’s revenues are leaking to? How else do we explain a country that is abundantly rich in natural resources like Malaysia can end up in a situation whereby Idris Jala, the Minister in the PM’s office and CEO of PEMANDU had famously said that Malaysia will be bankrupt unless the GST is implemented and government subsidies are removed!

    We are now in a dire situation where on one hand, the government implements GST, and other IMF sanctioned “abelt tightening measures, to increase government revenue, they claim, but in reality it is to squeeze more out of the long suffering rakyat to bankroll the massive corruption and government wastage and thereby increasing the cost of living in the process; while on the other, the credit bubble enables more and more people, now being forced to make ends meet, to borrow from the banks to finance their household debt.
    And to top it off, as if it is not bad enough, we now also have 1MDB debts and the missing billions…………

    http://www.consumer.org.my/index.php/personal-finance/debt/465-household-debt-in-malaysia-is-it-sustainable

    http://www.themalaymailonline.com/malaysia/article/malaysias-soaring-household-debt-feared-unsustainable-may-trigger-crisis

  13. It is up to the blog readers (intelligent, some even from outside Malaysia) to judge whether they find the arguments of “veritas” (the financier and Harvard grad (?) ) and “Shiou” (the Ayn Rand, free market libertarian) convincing and morally acceptable:

    1. “veritas” argues that it is OK if no laws are broken by the financiers who almost brought down the financial system of the USA. Critics of these financiers are “communists” (or pro-communist).

    (My comment: Nothing wrong if no laws are broken or as long as one keeps within the letter of the law? Not even if sub-prime housing loans are pushed onto financially-illiterate people, with the risks passed on to others through
    securitization and quick sale to willing buyers (or suckers)? Not even if this resulted in the near collapse of the financial system of the USA and other countries, and the loss of jobs and homes by millions of ordinary people?).

    2. “Shiou” argues that creating the 1MDB is not a crime

    (My comment: Did anyone say that the creation of 1MDB is a crime?
    We are criticising the actions of the senior management of 1MDB and its political masters. Dr Mahathir also said that abetment (i.e. turning a blind eye or keeping quiet when crimes are being committed. In return for being richly financially rewarded) is itself a crime.
    Neither does the “I was just following orders” argument hold water)

    3. To “strengthen” your argument, turn to red-baiting
    i.e. accuse your critics or critics of runaway global
    neoliberal capitalism of being communists 🙂
    (By the way, readers who have been following this blog for a long time would know that I am a Social Democrat and follower of Keynes and heterodox economics (post-Keynesian, neo-Keynesian, as exemplified by the World Economics Association), with some sympathy for Marx.

    I wonder if “veritas” and “Shiou” actually can differentiate between
    Social Democracy and Marxism-Leninism (Communism), let alone the differences between Stalinism, Trotskyism, Anarcho-Syndicalism, Maoism,
    Titoism. Then there is this ignoring of contemporary communism in
    China where there is a combination of free market capitalism, state-owned industry and one party dictatorship. I guess this uncomfortably violates the right-wing dichotomy between capitalism and communism!

  14. “If no laws are broken, then you will send people to jail arbitrarily because of their profession and dare you say “class”?. ”

    Could you cite the passage here or on the other thread where I made such claims. Again, please stop with these constructions of straw men. In this thread you stated, “Yes, it is true that no senior people have gone to jail.”, the implication being that there was some form of illegality with regards to the financial melt downs and my reference to white collar crimes, was in the same context.

    “Class” has nothing to do with this and certainly by your own admission on the other thread both parties were to blame , only that you took offence at “banker bashing”.

    “The US is very well known for extremely tough insider trading laws,….”

    No. The US is well known – depending on your perspective – for extremely ambiguous insider trading laws. No federal law defines insider trading. See the case of State attorney Preet Bharara for context.

    “I understand in the Borders case in Malaysia, a statute was applied retroactively.”

    Incorrect. There were numerous issues at play in this particular case. The clash of two separate legal system. The unconstitutionality and illegality of the actions of the Religious department. The list goes on.

    “Might as well just single out an entire profession and put them against the wall, and call it revolutionary justice.”

    Or you could stop making these elaborate straw men. I have no idea why you would wish to turn this into a thread about the class dialectic. I could make the claim that, you are perpetuating class oppression simply because you are defending “bankers” but that would be, ridiculous and disingenuous, hence I refrain from doing that.

    Kindly extend the same courtesy to me.

  15. The current Greek tragedy is relevant to us in 1Malaysia.

    If the 1PM and his courtiers go on with their serious mismanagement of the
    economy, we may one day have to go hat in hand to the IMF and the ADB for rescue. The IMF will force us to undergo “structural adjustment” and austerity just as the Greeks are enduring. Basically, it is moving resources from non-tradeables to tradeables to generate a surplus and accumulate foreign exchange to pay debt to foreigners. Meanwhile, ordinary citizens will be subjected to cuts in social services spending, job losses, subsidy reductions and greater misery all round. (Some will benefit i.e. those with access to foreign exchange — such as those who have relatives overseas who can send back hard foreign currency during the economic crisis, and who can use this to snap up real resources).

  16. For clarification, my penultimate posting was not in reference to Conrad but to Phua Kai Lit’s ridiculous point about “banksters” and advocating that “senior managers” of banks being thrown in prison arbitrarily. Thank you.

  17. See my comment 7:53 am

    Follow due process of law, and then throw senior managers of financial institutions in prison. Including for consumer fraud.
    Mana ada “arbitrary” ??

  18. /// Shiou July 15, 2015 at 10:49 pm
    “… to bailout the guys who created the 1MDB mess. In a fairer society, these guys would be prosecuted and sent to prison,” Phua Kai Lit.

    Why is creating the 1MDB a crime, again? ///

    Shiou, first, learn how to read.
    PKL said creating the 1MDB MESS; not just creating the 1MDB.
    Again, the key word is MESS.

  19. If indeed there was widespread and obvious criminal activity by the major banks pre-2008, then why hasn’t there been a single charge much less a single conviction of a CEO/Chairman/President of a major bank, not just in the US but in Europe, for this alleged widespread fraud leading to the mortgage crisis?

    Do bear in mind that the US has a history of aggressive policing of financiers in insider trading and fraud. You have heard of Rajaratnam, Milken, Boesky, Madoff cases no doubt. Actually, prosecuting financial crime has become a well-worn route to national political prominence for NY prosecutors. Giuliani and Spitzer for example rose to national prominence partly on their zealous prosecution of Wall Street. Former Deutsche Bank CEOs were also charged in Germany for fraud last year over a previous civil case. There are moreover ongoing investigations in the US and Europe over FX and Libor manipulation. In my mind, there is little evidence of a lack of vigour or interest in prosecuting financial crime in the West.

    You imply but you don’t say it outright. One explanation for the lack of any charges for the financial crisis is that you have far greater insight and evidence than any US or European prosecutor, who are all clearly incompetent. The other possible explanation (if there was in fact widespread and obvious criminality as you claim) is that the banks have corrupted the governments of the US and Europe.

    Extraordinary claims should be supported by evidence, otherwise you must forgive me if I think it is simply an ignorant rant. So you have this evidence, either of incompetence or corruption or both? And if it is true, then why have you not forwarded this evidence to the appropriate authorities, unless you believe they are all utterly corrupt? Furthermore, if this criminality is so obvious then why isn’t there massive protests about this in well-established democracies with free press, since millions of people’s lives were “destroyed” by the banks according to you?

  20. Oh please. You weren’t clearly referring to Icelandic banks in your earlier demands to jail senior bank managers. In fact, you referred directly to US banks. Please do not evade the issue with side facts and issues that bear no relation to your original claims. Let me remind you…

    {Phua Kai Lit July 15, 2015 at 1:07 pm …in USA where some big financial institutions were rescued using tax payer money, and their senior managers were not punished by Obama at all…}

    Next, you will be telling me about the Nigerian bankers arrested in Nigeria!

    And what with that laundry list of the European debt crisis? And the news item of a paltry protest organised by a UK organisation? That’s your evidence, really?

    Please. Where is your evidence of widespread criminality? So I asked again if you are you claiming widespread incompetency by the authorities in the US and Europe in prosecuting the banks’ in their criminal behaviour that led to the 2008 financial crisis? Or are you claiming the Western governments are all corrupt? Why don’t you send your evidence to the NY Times/WSJ/Washington Post/The Guardian etc. so they can publish your expose?

    Look if you are anti-capitalist, that’s fine. I have no problem with you having your own opinions. I do however have a problem when you advocate the arbitrary jailing of people simply because of their profession. If a crime has been committed, then it should be prosecuted. And if you have evidence of said crime, then please forward it to the appropriate authorities, or the free press if you don’t trust the authorities.

    You claim to be a “Social Democrat”. There is nothing “democratic” about jailing people arbitrarily when no crime has been committed. That only happens in “People’s Democracies” like North Korea. That’s my point.

  21. PKL,

    I can see that this thread is getting somewhat childish. There is no point continuing in this vein. So if I offended you by my reference to “communists”, then I apologise. To be honest, I can’t understand why a person who claims to be a Marxist should be offended by a reference to communism. Nonetheless I apologise.

    My first post on this thread was to correct some misconceptions, that (1) bankers did not suffer from the financial crisis of 2008, and (2) that tax payer monies were lost when the banks were bailed out during the crisis. Both of these are myths. And I see that you have not countered either of these factual points.

    “…where some big financial institutions were rescued using tax payer money, and their senior managers were not punished by Obama at all — textbook example of promoting moral hazard…”

    And I also took exception to your assertion (original post above) that bankers should be imprisoned arbitrarily simply because they were bailed out. You claim to be a Social Democrat. I know enough Social Democrats personally to know that throwing people in jail because of their profession and extra-judicial punishments generally are anathema to the principles of social democracy.

    And if you will allow me to make a final (factual) point, the major US banks were forced to accept the government TARP bailout. In the infamous meeting between Secretary Paulson and the CEOs of the 9 major US banks on 13 Oct 2008, the Federal government forced the banks to accept the bailout funds in the form of preferred stock purchases. Some banks may indeed have needed the capital injection, but some did not. In the UK, the British government tried to force HSBC and Barclays to accept bailout funds too in 2008, but these two banks successfully refused to do so (and were indeed never bailed out by taxpayer monies). Deutsche Bank too refused to accept a German taxpayer bail out.

    These are all documented facts, which you may verify for yourself. In my mind, it is unjust to punish bankers who had been forced to accept taxpayer funds, on top of being simply unjust to imprison anyone because of their profession. It is neither democratic nor just.

    Finally, no one in finance would ever consider any Icelandic bank to be a “major” European bank. To say that would be akin to comparing CIMB to the likes of Tokyo-Mitsubishi and Bank of China. Just for your information.

  22. Hello “veritas” my friend. A FINAL comment from me:

    1. In intellectual debate, never create strawmen and then attempt to destroy these e.g. calling Phua Kai Lit a “Marxist” when I have clearly said that I am a disciple of Keynesian thought in its latest incarnations. So I am a Keynesian lah ! (Actually post-Keynesian or neo-Keynesian) Some sympathy for Marx means simply that, nothing more. (Just like I have some sympathy for the social thought of Emile Durkheim).

    Another strawman created by you is that I am advocating imprisoning bankers ARBITRARILY.
    Did I not say that the rule of law should be followed? The jailing of Icelandic bankers follows the rule of Icelandic law. The same should be carried out in the USA i.e. prosecute financiers and banks responsible for the near collapse of the US financial system, FOLLOWING THE RULE OF LAW !

    2. One should never make strong statements and then have to back down from these.

    You wrote ” If indeed there was widespread and obvious criminal activity by the major banks pre-2008, then why hasn’t there been a single charge much less a single conviction of a CEO/Chairman/President of a major bank, not just in the US but in Europe, for this alleged widespread fraud leading to the mortgage crisis?”

    My comment: The Icelandic banks are major banks in Iceland lah!
    No need to quibble over the term “major” (or minor) when actions of banks and financiers can threaten to bring about the collapse of an entire national economy.

    You wrote “Furthermore, if this criminality is so obvious then why isn’t there massive protests about this in well-established democracies with free press, since millions of people’s lives were “destroyed” by the banks according to you?”
    My comment: you did not read about the Occupy Wall Street protests in the USA? And similar protests in Europe? I guess you would try to get around this by saying that the protests were small and not massive!
    And that the protests were probably organized by Communists 🙂

    As I said, this will be my last response to you. No matter how much you continue to rant and rave on this. 🙂

    P.S. By the way, my wife is a high level banker in the private sector in Malaysia 🙂

    Phua Kai Lit (non-Marxist, neo-Keynesian, believer-in-punishment-for-financial-crimes-following-the-rule-of-law)

  23. “.. then why hasn’t there been a single charge much less a single conviction of a CEO/Chairman/President of a major bank, not just in the US but in Europe, for this alleged widespread fraud leading to the mortgage crisis?” – Veritas

    You can’t be serious, sir!

    http://www.irishexaminer.com/breakingnews/ireland/ex-anglo-bosses-face-sentencing-on-apr-28-key-questions-remain-628168.html

    http://www.anphoblacht.com/contents/23980

    http://www.irishexaminer.com/breakingnews/ireland/cowen-accuses-bankers-over-economy-684763.html

    And if I may refer to you earlier posting on the previous thread -https://dinmerican.wordpress.com/2015/07/13/killing-the-european-project/

    “It is a fact that poll after poll in Greece show an overwhelming majority wanting to keep the euro. There has never been a single credible poll in Greece in the past five years that show a majority wanting to leave the euro. Fact.”
    – veritas July 15, 2015 at 4:24 am

    Isn’t it bloody amazing that despite the results of all the polls that you claimed as “fact,” the Greeks still voted “No” at the referendum. The Greeks must be mad then. 🙂

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