On the Euro-Global Crisis: Four lectures in Australia and one in London, October 2012

During the coming next fortnight, I shall be on a lecture tour of Australia and Britain. The first lecture will be delivered on Monday 15th October in Melbourne, at the Greek Community Centre (which will, fittingly, be demolished soon after!). Then, I shall be speaking at two CPA conferences, together with Lord Lamont (formerly Chancellor of the Exchequer) in Melbourne and in Sydney on 16th and 26th October respectively. Between these two I shall address a lunch time meeting at the University of Macquarie, in Sydney. Finally, on 29th October Professor Marcus Miller and myself will speak at the House of Commons (London) on the global economic outlook (in the context of Europe’s troubles).  In summary,

Monday 15th October 2012, in Melbourne: Greek Crisis: Why There Is No Such Thing (And How To Escape It)19.00, 3rd Level – GOCMV Building -Melbourne. Click here for more information

Tuesday 16th October 2012, in Melbourne and Wednesday 24th October in Sydney: Keynote speech at the CPA Conferences– by invitation or professional accreditation only. On both occasions the session will be held between 8.45 and 10.00am and the speakers will be:  Rt Hon Lord Norman Lamont, former Chancellor of the Exchequer, United Kingdom , Sandro Momigliano, Head of Public Finance Division, Bank of Italy, Italy, Yanis Varoufakis, Professor, Economic Theory and Director, Department of Political Economy, University of Athens, Greece (Facilitator: Michael Pascoe, Finance and Economic Commentator)

Monday 22 October, in Sydney: Lunchtime address on the global economic crisis, jointly organised by CPA and Macquarie University. By invitation only (see here: Final Invitation)

Monday 29th October, in LondonEuropean and Global Recovery: What Will It Take? Featuring Marcus Miller (University of Warwick) and Yanis Varoufakis (Athens and LBJ Graduate School of Public Affairs), The Grand Committee Room, The House of Commons Chairman: The Rt Hon The Lord Hamilton of Epsom. For more information click: European-Atlantic Group, Grand Committee Room, House of Commons.

19 Comments

  • “Why there is no such thing as a Greek crisis” – I take it you use that title only as a figure of speech or to provoke attention to the seminar!

    There is obviously a crisis of the Greek State of Law and the enforcement of laws (just one case in point: 165.000 pending tax law suits). I keep reading that the Greek economy is controlled by monopolies, cartels, cronies, etc. That sounds to me like a Greek crisis. I read that laws passed by parliament are not always implemented. That, too, sounds to me like a Greek crisis. Not to mention all the corruption which I would also consider part of the Greek crisis. Etc.

    I guess one could cover up the various Greek crises by dumping another 300-400 BEUR on the country in the 2010s like it was dumped in the 2000s but all that that would accomplish is that the bill by 2020 would just be so much larger whereas the crisis would still be there.

    Or am I seeing something wrong here?

    • No, I mean it. Literally. There are chronic problems in Greece, something akin to a diabetes patient whose health is always iffy. But there is no such thing as a Greek Crisis – at least, not more so than in 1931 there was such a thing as an Illinois Crisis in the USA (even though Illinois was engulfed in a broader crisis, also known as The Great Depression).

    • Klaus, all these things that you mention are the reason why Greece was the first economy to be hit by the euro crisis.They surely arent the reason of the crisis.

      It shocks me that people are still talking about “individual” crises while at the same time nobody can deny that the EU economy as a whole is going down.Unless ofcourse you like to believe that the 2% of EU gdp is what caused all of this.

  • Dear Yanis
    Wow – you are all over the place!
    One thought crossed my mind: Though I not always fully agree with your analysis, I certainly think that they are very interesting, intelligent ant thought provoking. They may also appeal to a German audience! Have you ever thought about that – may serve your cause well!
    The Social Democrats, The Green Party and the (very left) Left Party would probably be very open.
    Maybe try to speak there – and give some interviews to The “Zeit” , “Spiegel”, “Frankfurter Rundschau” etc.
    I think the situation is desperate enough to ensure many people in Germany would be open to what for them would be unusual but very interesting thoughts.
    When you’re in London anyway, it would just be a shrt flight!

    • Dear Yanis
      The public mood in Germany is obviously not too helpful in ordern to promote your suggested solutions yet.

      However, there are some thoughts around in Germany that are not too different from your ideas.
      E.g. the German Council of Economic Experts, a prominent think tank in Germany, has come up with something that is fundamentally pretty similar to your Modest Proposal.
      One major difference: They suggest to leave the individual Eurozone countries with the debt not exceeding 60% of their respective GDP. All debt above the 60% would be shifted to the “European Redemption Fund” with joint liability. Here’s their proposal (in English):
      http://www.sachverstaendigenrat-wirtschaft.de/fileadmin/dateiablage/download/publikationen/special_report_2012.pdf

      Wouldn’t that be something you could refer to when you discuss your proposal with German magazines and political parties (some of which I mentioned in my previous post). Or discuss with the German Council of Economic Experts directly? They are in the city of Wiesbaden which is very close to the main German airport hub of Frankfurt, so you could fit that in from London within one business day flying out to Frankfurt and back the same day!
      Here’s their website (in English):
      http://www.sachverstaendigenrat-wirtschaft.de/index.html?&L=1

  • I’m quite disappointed you won’t be giving a public talk in Sydney. There must be more of us Sydney-siders following along from home… Maybe another reader has access to a suitable venue?

    • Just accepted an invitation to address the Greek Community in Lakemba on Wednesday 24th. Not sure whether they want me to speak in English or Greek. Will keep you posted.

  • Yiannis – Im sure you know Sandro and Norman, if not some links for perspective – http://www.bruegel.org/fileadmin/bruegel_files/Events/Event_materials/AEEF_Dec_2011/Sandro_Momigliano_PRESENTATION_UPDATE__Compatibility_Mode_.pdf – & –
    http://www.nowpublic.com/world/norman-lamont-newspaper-review-economic-crisis-19feb12 .

    Sandro is under the impression that a government credit crisis (like in Greece) is not a sufficient motivation to other EU governments to balance their books hence the desire for additional “sanctions”, an idiot with obviously. An idiot with a dislike for democracy hence the solution of “closer integration”

    Lamont is clued up on the idea behind the Euro, ie it being about bringing together the people and not the creation of a federal Europe. He says closer integration will not happen, for all of our sakes I hope he is correct although I am sure you will disagree….. –

    If I can leave you with some words from the Iron Lady, she was not perfect but I think she had the ECB figured out before most of us even knew what it was. https://www.youtube.com/watch?v=U2f8nYMCO2I&feature=player_embedded

  • Dear Prof. Varoufakis, on behalf of the EuroMemo Group, I attach the declaration of solidarity approved by the recent annual meeting in Poznan and would be grateful if you could circulate it in any way you see fit. Many thanks and kind regards, Marica Frangakis

  • Mr. Varoufakis,
    I follow your blog and I admire your ideas. I would like to know if you could possibly advice me on a PhD programme. Perhaps I could send you by mail my CV. Thank you in advance.
    With respect
    H. Fransis

  • The euro crisis is a crisis orbiting the UK (malinvestment of the North Sea oil via stuffing oil / credit down the PIigs throats) while under Lamonts leadership anongest others – they have skillfully projected this monetary crisis outward.

    What people don’t get it is the productive investments that Spain made as well as the housing Junk.
    In some areas its richer then the North.
    es.wikipedia.org/wiki/MetroValencia

    However the North has conspired to extract currency units and transport them north of the Pyrennes.

    Spain needs to be come sovergin again.

    Public transport number declines in a energy crisis is almost strictly a monetary flaw (see below) i.e. the people don’t have enough national tokens.
    Although the external shock of less tourists plays a part.

    What British town of this size has 146.7 KM of metro and tram lines ?
    It ain’t Edinburgh thats for sure.

    Yet its passenger numbers have declined from 68.275 inY2008 to 65.074 in a so called energy crisis.

    Once Spain learns to ditch the private car and thus its internal car industry and external imports from the North it will be fine under a sov system

  • It was £100 billion in 2011 and 28.1 billion in 2012 Q2 although God knows what goes on in the hidden Gold market.

    ITS THE NORTH SEA DUMMIES

    The UK ONS has some mildly interesting documents on capital accounts

    entitled
    Capital stock, capital consumption and non financial balance sheets, 2003 ,2004 ,2005 etc etc.

    The caveats are interesting
    These Chronicle the change from a nation state war economy to a extreme market state.

    1961 : British telecom & post office reclassified as public corporations

    1983 :start of privatisation era (1984 – Uk enters current account deficit ,coincidence ? )

    1989 : water and sewage privatised.

    1992 : NHS restructured into trusts.

    Heres how it works : the UK goes into current account deficit , in particular real goods deficit – the real resourses from these external goods is used to bid up the price of non productive assets such as houses and stuff via credit hyperinflation.
    The capital assets of the country appear to increase but the internal productive capacity of the country tanks. (the house price rises are the result of external increases in productive capacity)
    Eventually after 30~ years of this policey the external resourses from other countries is exhausted (also the North Sea oil the conduit states were consuming) , to keep up its “asset” prices it must lay waste to other countries consumption – think Ireland & Spain.
    This surplus consumption is directed into UK asset prices ,sustaining the Ponzi for just a bit longer.

    It may just be in the UK & US narrow interest to sustain their monetary policey if you are of a zero sum like game disposition given their extreme real goods trade deficit.
    The UK for example has got Germany by the balls as so much excess luxury car capacity flows into the streets of London.

    This is game theory played at the highest level possible.

    Once banks played nation states off against each other , now its playing market states against each other – at its core it is the same Phenomena

    http://www.ons.gov.uk/ons/dcp29904_241335.pdf

    refer to 1. : A more detailed stat bulletin

    The first graph is very interesting.
    Residential buildings & financial assets of households forms the bulk of these assets.

    But if you think of these assets as claims on external wealth or productive capacity outside the UK the extreme nature of the UK becomes all too real.

    This is why the Q2 net drop in income of £5.5 billion is so important for the UK.

    It must destroy Ireland and Spain to sustain real goods coming into the UK but this action also destroys its income.
    Its a Catch 22.

    We are witnessing the failure of the Anglo model ,the Anglo world.
    It has stripped Europe of its wealth…….the jewel of its crown , the eurozone is now a deadzone.

    Its clearly in the short term interest of the UK to continue its policy of burning every village as long as its internal asset prices rise faster then its loss of external income.

    But that is a Malthusian dynamic……in the past it lead to a thing called WAR.

    What happens in this world of market states is anyones guess but most states were market states prior to the Great war.
    That war was caused by a run on the BoE as America became both China & Saudi Arabia in one monster package.
    No such country exists today.

    Just because the UK is not in the Eurozone or is not offically “Europe” in some people eyes does not make it go away…
    Much of German surplus production flows into the streets of London.

    I can’t believe how this is ignored by these “economists”

    Its all
    “For Christ sake, John. Don’t be scared.  Go on and eat your cookies.”
    EAT YOUR FUCKING COOKIES

    UK sucked in a Net 28.1 Billion sterling or 42 billion Francs worth of stuff and fuel in Q2.
    France is also in major real goods deficit…..

    Hello – anybody home ?
    They are sucking the PIigs dry.

    Forget about the claims on wealth which is mixed up in the current account figures – these claims are showing negative figures in the UK anyhow.
    Look at the real goods trade balance , and I am not talking about banking “services”

    This is a race for real goods
    http://www.tradingeconomics.com/france/balance-of-trade (go to Y2000)

    Real Resourses are simply crossing the Pyrennes.

    http://www.tradingeconomics.com/spain/balance-of-trade (go to 2000 again)

  • The Nobel Prize in Economics is not a real Nobel

    The award’s real name is the “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.”.
    It is awarded by Sweden’s central bank, foisted among the five real prizewinners, often to economists for the 1% — and the surviving Nobel family is strongly against it.

    It’s Nobel Prize season again. News reports are coming out each day sharing the name of the illustrious winner of the various categories — Science, Literature, etc. But there’s one of the prizes that’s a little different. Well, that’s putting it lightly… you see, the Nobel Prize in Economics is not a real Nobel. It wasn’t created by Alfred Nobel. It’s not even called a “Nobel Prize,” no matter what the press reports say.

    The five real Nobel Prizes—physics, chemistry, literature, peace, and medicine/physiology—were set up in the will left by the dynamite magnate when he died in 1895. The economics prize is a bit different.

    It was created by Sweden’s Central Bank in 1969, nearly 75 years later. The award’s real name is the “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.” It was not established by Nobel, but supposedly in memory of Nobel. It’s a ruse and a PR trick, and I mean that literally. And it was done completely against the wishes of the Nobel family.

    Sweden’s Central Bank quietly snuck it in with all the other Nobel Prizes to give free-market economics for the 1% credibility. One of the Federal Reserve banks explained it succinctly , “Few realize, especially outside of economists, that the prize in economics is not an “official” Nobel. . . . The award for economics came almost 70 years later—bootstrapped to the Nobel in 1968 as a bit of a marketing ploy to celebrate the Bank of Sweden’s 300th anniversary.” Yes, you read that right: “a marketing ploy.”

    “The Economics Prize has nestled itself in and is awarded as if it were a Nobel Prize. But it’s a PR coup by economists to improve their reputation,” Nobel’s great great nephew Peter Nobel told AFP in 2005 , adding that “It’s most often awarded to stock market speculators …. There is nothing to indicate that [Alfred Nobel] would have wanted such a prize.”

    Members of the Nobel family are among the harshest, most persistent critics of the economics prize, and members of the family have repeatedly called for the prize to be abolished or renamed. In 2001, on the 100th anniversary of the Nobel Prizes, four family members published a letter in the Swedish paper Svenska Dagbladet, arguing that the economics prize degrades and cheapens the real Nobel Prizes. They aren’t the only ones.

    Scientists never had much respect for the new economic Nobel prize. In fact, a scientist who headed Nixon’s Science Advisory Committee in 1969, was shocked to learn that economists were even allowed on stage to accept their award with the real Nobel laureates. He was incredulous: “You mean they sat on the platform with you?”

    That hatred continues to simmer below the surface, and periodically breaks through and makes itself known. Most recently, in 2004, three prominent Swedish scientists and members of the Nobel committee published an open letter in a Swedish newspaper savaging the fraudulent “scientific” credentials of the Swedish Central Bank Prize in Economics. “The economics prize diminishes the value of the other Nobel prizes. If the prize is to be kept, it must be broadened in scope and be disassociated with Nobel,” they wrote in the letter, arguing that achievements of most of the economists who win the prize are so abstract and disconnected from the real world as to utterly meaningless.

    The question is: Why would a prize that draws so much hatred and negativity from the scientific community be added to the Nobel roster so late in the game? And why economics?

    To answer that question we have to go back to Sweden in the 1960s.

    Around the time the prize was created, Sweden’s banking and business interests were busy trying to ram through various so-called “free-market” economic reforms. Their big objective at the time was to loosen political oversight and control over the country’s central bank.

    According to Philip Mirowski, a professor at the University of Notre Dame who specializes in the history of economics, the “Bank of Sweden was trying to become more independent of democratic accountability in the late 60s, and there was a big political dispute in Sweden as to whether the bank could have effective political independence. In order to support that position, the bank needed to claim that it had a kind of scientific credibility that was not grounded in political support.”

    Promoters of central bank independence couched their arguments in the obscure language of neoclassical economic theory of market efficiency. The problem was that few people in Sweden took their neoclassical babble very seriously, and saw their plan for central bank independence for what it was: an attempt to transfer control over economic matters from democratically elected government and place into the hands of big business interests, giving them a free hand in running Sweden’s economy without pesky interference from labor unions, voters and elected officials.

    And that’s where the Swedish Central Bank Prize in Economic Sciences came in.

    The details of how the deal went down are still very murky. What is known is that in 1969 Sweden’s central bank used the pretense of its 300th anniversary to push through an independent prize in “economic science” in memory of Alfred Nobel, and closely link it with the original Nobel Prize awards.

    The name was a bit longer, the medals looked a little different and the award money did not come from Nobel, but in every other way it was hard to tell the two apart. To ensure the prize would be awarded to the right economists, the bank managed to install a rightwing Swedish economist named Assar Lindbeck, who had ties to University of Chicago, to oversee the awards committee and keep him there for more than three decades. Lindbeck’s famous free-market one-liner is: “In many cases, rent control appears to be the most efficient technique presently known to destroy a city — except for bombing.”

    For the first few years, the Swedish Central Bank Prize in Economics went to fairly mainstream and maybe even semi-respectable economists. But after establishing the award as credible and serious, the prizes took a hard turn to the right.

    Over the next decade, the prize was awarded to the most fanatical supporters of theories that concentrated wealth among the top 1% of industrialized society of our time.

    In 1974, five years after the prize was first created, it was awarded to Friedrich Hayek, one the leading “laissez-faire” — enrich the rich — economists of the 20th century and the godfather of neoclassical economics. Milton Friedman, who was at the University of Chicago with Hayek, was not far behind. He won the prize just two years later, in 1976.

    Both Hayek and Friedman were huge supporters of the political independence of central banks. In fact, they built their careers on bashing government intervention in economic matters. Hayek developed a whole business cycle theory that blamed government and government-controlled banking systems for all economic ills. He also equated all government intervention will inevitably lead to totalitarianism.

    Friedman with a whole new subsection of neoclassical economics called “Monetarism” that had a scientific formula worked out, specifying exactly how much money central bankers needed to keep floating around in the economy to keep inflation low and unemployment high enough to keep big business happy. No democratic control over banking policies needed, just let the free-markets do its thing. The Swedish central bankers couldn’t get better spokesmen for their cause.

    But Hayek and Friedman’s usefulness went way beyond Sweden.

    At the time of the prizes, neoclassical economics were not fully accepted by the media and political establishment. But the “Nobel Prize for Economics” changed all that.

    What started as a project to help the Bank of Sweden achieve political independence, ended up boosting the credibility of the most regressive strains of free-market economics, and paving the way for widespread acceptance of libertarian ideology.

    Take Hayek: Before he won the award, it looked like Hayek was washed up. His career as an economist was essentially over. He was considered a quack and fraud by contemporary economists, he had spent the 50s and 60s in academic obscurity, preaching the gospel of free markets and economic darwinism while on the payroll of ultra-rightwing American billionaires. Hayek had powerful backers, but was out on the fringes of academic credibility.

    But that all changed as soon as he won the prize in 1974. All of a sudden his ideas were being talked about. Hayek was a celebrity. He appeared as a star guest on NBC’s Meet the Press, newspapers across the country printed his photographs and treated his economic mumblings about the need to have high unemployment in order to pay off past inflation sins as if they were divine revelations. His Road to Serfdom hit the best-seller list. Margret Thatcher was waving around his books in public, saying “this is what we believe.” He was back on top like never before, and it was all because of the fake Nobel Prize created by Sweden’s Central Bank.

    Billionaire Charles Koch brought Hayek out for an extended victory tour of the United States, and had Hayek spend the summer as a resident scholar at his Institute for Humane Studies. Charles, a shrewd businessman, quickly put the old man to good use, tapping Hayek’s mainstream cred to set up and underwrite Cato Institute in 1974 – called the Charles Koch Foundation until 1977 – a libertarian thinktank based on Hayek’s ideas. Even today, Cato Institute pays homage to the Swedish Central Bank Prize’s role in the mainstreaming of Hayek’s ideas and Hayek’s influence on the outfit:

    The first libertarian to receive the Nobel Prize was F.A. Hayek in 1974. In the years leading up to the prize announcement, Hayek had reached a professional and personal nadir. Unable to maintain an appointment in the United States, Hayek had returned to Austria to take up a position at the University of Salzburg, Austria. With the announcement of the prize in 1974, however, Hayek’s work, and the fortune of Austrian economics, took a remarkable turn.

    Hayek’s influence on Cato is profound. Two of Cato’s first books were by Hayek: A Tiger by the Tail: The Keynesian Legacy of Inflation & Unemployment and Monetary Policy: Government as Generator of the “Business Cycle.” Perhaps more than any other intellectual in the twentieth century, Hayek has inspired Cato and its researchers to develop policies that ensure a free society. When Cato moved into its current location in 1992, its auditorium was named in Hayek’s honor.

    Friedman’s Nobel Prize had a similar impact. After getting the prize in 1976, Friedman wrote a best-seller, got his own 10-part PBS series Free to Choose and became President Ronald Reagan’s economic advisor, where he had a chance to put the society-crushing policies he developed in Chile under Pinochet.

    Friedman would spend the rest of his time denying it, but he was deeply involved and invested in the Pinochet’s totalitarian-corporate economic experiment. Chilean economist Orlando Letelier published an article in The Nation in 1976 outing Milton Friedman as the “ intellectual architect and unofficial adviser for the team of economists now running the Chilean economy” on behalf of foreign corporations. A month later Letelier was assassinated in D.C. by Chilean secret police using a car bomb.

    Friedman’s monetary theory was used by Federal Reserve Bank Chairman Paul Volcker to restrict the money supply, plunging American into a deep recession, doubling the unemployment rate and had the added bonus of getting Reagan elected President. . . . And Hayek and Friedman were just the beginning.

    For instance, in 1997 two economists won an award for their derivative risk models that minimized risk, just before the derivatives would explode in the 2000s real estate bubble.

    The award was shared by economists Robert Merton and Myron Scholes for their work in figuring out how to value derivatives so as to minimize risk. The two economists used their Nobel-worthy economic models to run “the world’s biggest hedge fund,” which was called Long Term Capital Management (LTCM). And the fund really lived up to its name. Nine months after winning the Swedish Central Bank Prize in Economics, LTCM went belly-up, racking up over $1 billion in losses over a period of just two days. It was of course bailed out by then-Federal Reserve Chairman Alan Greenspan, who considered LTCM “too big to fail.”

    Then there’s Vernon Smith. In 2002, Vernon Smith, adored and funded by Libertarians like Charles Koch, won the “Nobel” — his patron looked at the money he spent funding Smith’s academic career as a good investment, saying simply: “The Koch Foundation’s gift was an excellent investment.”

    Smith’s research basically entailed setting up theoretical “wind tunnels” to test how, for example, the privatizations of markets would respond in various conditions all in a way that has nothing to do with reality. It will take a brave act to bring this sham to the attention of the public.

    One year, one of the prize winners will have to speak out, and explain this ruse to the public as he wins the award.

    http://www.alternet.org/economy/there-no-nobel-prize-economics?page=0%2C3