This post has been updated in line since it was initially published on July 23, 2012. This update includes two additional footnotes, disrupting footnote numbering. The publication date has been modified to reflect the change.
My mother has been toying with the idea of selling her house. I really don’t think she wants to sell; the place is more than just money to her, but rather an incredible amount of the turmoil, toil, and trauma that any middle class homeowner experiences over the twenty-plus years since she purchased it with her now-deceased husband. But she has to consider the idea. When she divorced my father (not her second husband, with whom she purchased the house), who would never permit her to work as anything other than a secretary, she was finally free to follow her calling into journalism, which while immensely satisfying to her as a profession, never paid much. I’m far from being in a position to criticize, even if I were so inclined; I did follow my father’s advice, and went into computer programming. It was the wrong path for me, I’ve bounced out of the high technology industry and landed hard three times now, I have never recovered financially, and though I’ve returned to school, I haven’t improved my career prospects. Meanwhile, for several years now, the newspaper business has faced stiff competition from the on line world. My mother, I think wisely, accepted a buyout from the Santa Rosa Press-Democrat in 2007 and retired as it began its spiral to evisceration and presumptive doom, but her savings and her ability to help me through my prolonged bout with apparently permanent unemployment are limited.
One problem with delaying a decision is that events may make the decision for you. And it may be that today is the day that my mother’s decision about selling or keeping her house has been made—for her.
Germany has made the political decision to let Greece go bankrupt. The International Monetary Fund is also cutting Greece off. Germans increasingly see the cause as hopeless; they blame the elite in Greece even as the German elite impose a draconian austerity on Greece that victimizes Greeks of more modest means and has pushed many to suicide. UPDATE, July 24, 2012: The comments made by Germany’s Economy Minister and Vice Chancellor Philipp Rösler on which this conclusion is based have been criticized as irresponsible and can be argued to have been premature. Unfortunately, other members of the German government seem to share Rösler’s sentiment, casting significant doubt on any attempt to accede to Greece’s request for more time to fulfill the terms of the bailout. This doubt is enhanced since Moody’s has cut the outlook for Germany’s AAA credit rating to negative, prompting politicians to say that the move makes further aid to Greece more difficult.
The Greeks aren’t lazy — on the contrary, they work longer hours than almost anyone else in Europe, and much longer hours than the Germans in particular. Nor does Greece have a runaway welfare state, as conservatives like to claim; social expenditure as a percentage of G.D.P., the standard measure of the size of the welfare state, is substantially lower in Greece than in, say, Sweden or Germany, countries that have so far weathered the European crisis pretty well.
Spain may soon be getting aid for its troubled banking sector, but that appears to be of no comfort to the Spaniards. After Madrid passed another round of tough austerity measures on Thursday, tens of thousands took to the streets in some 80 cities around the country. . . .
The nation remains mired in a crushing recession, with more than 5.6 million unemployed. At a record of around 25 percent, the level is on par with the unemployment rate in the United States during the Great Depression. Meanwhile, it is becoming increasingly difficult for Madrid to access financial markets, as it continues to pay ever-higher interest rates in sovereign bond auctions.
So with Greece thrown under the bus, attention now turns to Spain, whose problems largely originate with the country’s banking crisis, stemming from its own version of a property bubble. As dubious as the moralizing from Northern Europe may be for Greece, it is largely inapplicable to Spain, which is nonetheless being compelled to add the cost of bank bailouts to its own debt, and which had gotten a final push into accepting a bailout from the apparent downfall of Greece. Spain has also been suffering from austerity, an approach which, according to the New York Times, “has failed in Greece, Ireland and Portugal.” Spain now suffers something like 25 percent unemployment.
Investors unnerved by Spain’s deepening financial crunch, pushed Italy’s funding costs sharply higher at a bond sale, with 10-year yields topping 6 percent for the first time this year [in May].
In a sign of heightened anxiety in Washington, top U.S. Treasury official Lael Brainard was dispatched to hold talks in Greece, Germany, Spain and France “to discuss their plans for achieving economic stability and growth in Europe”, the Treasury Department said.
A sudden economic deterioration in Europe would pose a serious threat to the U.S. economy and hence to President Barack Obama’s re-election prospects in November.
The fear that underlies all of this is of contagion, that as one country in Europe falls into bankruptcy, others will see their borrowing costs rise, potentially precipitating further bankruptcies as interest rates become prohibitive. It combines with a morality that protects banks even while throwing workers out of work and homeowners out of their homes while utterly failing to prosecute the fraudsters that precipitated this crisis and utterly failing to resuscitate—and possibly preventing recovery of—the economy.
Greece does indeed have a lot of corruption and a lot of tax evasion, and the Greek government has had a habit of living beyond its means. Beyond that, Greek labor productivity is low by European standards — about 25 percent below the European Union average. It’s worth noting, however, that labor productivity in, say, Mississippi is similarly low by American standards — and by about the same margin.
Just because Obama attacks “fat cat” bankers in one of his egalitarian rants doesn’t mean that Romney should refuse to excoriate those bailed-out, over-bonused executives when their behavior warrants it. Ever since the days of Adam Smith, believers in the virtues of free markets have known that “people of the same trade seldom meet together . . . but the conversation ends in a conspiracy against the public.” It’s bad enough when these conspiracies aim to fix prices on, say, construction projects. But when the conspirators are bankers who label themselves “dudes” and “big boys,” and promise each other bottles of Bollinger for manipulating prices, and when the price they fix is the interest rate that the Wall Street Journal estimates governs $800 trillion of loans and derivatives worldwide, including almost one million U.S. home loans indexed to Libor carrying an unpaid principal balance of $275 billion, we have an assault on the heart of capitalism, not to mention a potential bonanza for class-action lawyers. The CEO of one multinational bank told the Economist, “This is the banking industry’s tobacco moment,” referring to that industry’s $200 billion claims payout.
This is a rather interesting morality. It punishes homeowners, who purportedly shouldn’t have accepted the fraudulent loans offered them, or who were caught with declining property values and tightening credit standards in the economy’s downward spiral. It punishes students who, crushed by student loans, graduate to an eviscerated job market. It punishes the unemployed, who purportedly should “just get a job,” as if there were jobs for more than a few of them. It punishes the poor who have, we are to understand, not seized the opportunity which allegedly exists for all. It justifies itself by blaming “others” for not being “us,” the colonized for not being the colonizer, the ruled for not being the ruler, and the materially poor for not being materially rich. But it embraces moral hazard while it coddles and refuses to prosecute the criminals who created a mess all around the world. It prioritizes return on investment—never mind that investment is supposed to entail risk—over people.
Morality is supposed to be what makes it possible for us to get along, to live with each other in a human society, and in some views, in accordance with religious or spiritual prescriptions. It exists for humans and maybe for gods and goddesses, but certainly not for profit. When a system is so badly broken that it causes so much suffering, the moral choice is to abandon it. This system must be replaced with something else.
But instead, I remain unemployed, with food stamps as my only income and not a job in sight. And my mother, even if she decides to sell the first house she ever bought, the house she has invested much energy and love in, is more likely to watch its value crash for a second time while zombie banks make it more difficult for any potential buyer to finance its purchase.
There is, I’m told, more to life than money. But the obsession of the elite with acquiring ever more of it at everyone else’s expense compels the attention of anyone who doesn’t have enough.
- Nikolia Apostolou, “Athens suicide: a cry for dignity from downtrodden,” Christian Science Monitor, April 5, 2012, http://www.csmonitor.com/World/Europe/2012/0405/Athens-suicide-a-cry-for-dignity-from-downtrodden-video; David Crossland, “‘Acropolis Adieu, You’ve Got to Go!’,” Spiegel, July 23, 2012, http://www.spiegel.de/international/europe/review-of-german-press-commentaries-on-greece-and-euro-crisis-a-845903.html; Teo Kermeliotis, “Austerity drives up suicide rate in debt-ridden Greece,” CNN, April 6, 2012, http://articles.cnn.com/2012-04-06/world/world_europe_greece-austerity-suicide_1_pharmacist-dimitris-christoulas-shot-suicide-note-anti-austerity; Nicholas Kulish and Liz Alderman, “German Patience With Greece on the Euro Wears Thin,” New York Times, May 8, 2012, http://www.nytimes.com/2012/05/09/world/europe/german-patience-with-greece-on-the-euro-wears-thin.html; Spiegel, “Berlin, IMF To Refuse Fresh Aid for Greece,” July 23, 2012, http://www.spiegel.de/international/europe/germany-and-imf-to-refuse-greece-further-financial-aid-reports-say-a-845860.html↩
- Spiegel, “German Minister Criticized for Greece Comments,” July 24, 2012, http://www.spiegel.de/international/europe/german-economy-minister-roesler-criticized-for-comments-about-greece-a-846110.html↩
- Spiegel, “Outlook Cut Could Stiffen Berlin’s Opposition to Aid,” July 24, 2012, http://www.spiegel.de/international/europe/german-reaction-to-moody-s-outlook-cut-for-german-triple-a-rating-a-846172.html↩
- Paul Krugman, “Greece as Victim,” New York Times, June 17, 2012, https://www.nytimes.com/2012/06/18/opinion/krugman-greece-as-victim.html↩
- Kristen Allen, “‘Merkel Is Driving Europe into the Abyss’,” Spiegel, July 20, 2012, http://www.spiegel.de/international/europe/protests-in-spain-as-eu-bank-aid-approved-a-845547.html↩
- Michael Birnbaum, “In Spain’s bailout request, Greece’s crisis played key role,” Washington Post, June 10, 2012, http://www.washingtonpost.com/world/europe/after-spains-bailout-crisis-returns-to-greece/2012/06/10/gJQAe5kwSV_story.html; Paul Krugman, “Finally, Spain,” New York Times, March 7, 2012, http://krugman.blogs.nytimes.com/2012/03/07/finally-spain/; Krugman, “Greece as Victim;” Raphael Minder, “Giant Lender in Spain Asks for Billions to Fend Off Collapse,” New York Times, May 25, 2012, http://www.nytimes.com/2012/05/26/business/global/spanish-lender-seeks-state-aid-ratings-cut-on-5-banks.html↩
- Landon Thomas Jr., “Spain Is Still Waiting for the Payoff From Austerity,” New York Times, April 27, 2012, http://www.nytimes.com/2012/04/28/business/global/spain-pursuing-austerity-still-waits-for-the-payoff.html↩
- Julien Toyer and Karolina Tagaris, “Spain rattles markets, Greeks warned of catastrophe,” Reuters, May 30, 2012, http://www.reuters.com/article/2012/05/30/us-eurozone-strategy-commission-idUSBRE84S1GD20120530↩
- Allen, “‘Merkel Is Driving Europe into the Abyss’;” Birnbaum, “In Spain’s bailout request, Greece’s crisis played key role;” Paul Krugman, “A Foolish Lack Of Terror,” New York Times, July 23, 2012, http://krugman.blogs.nytimes.com/2012/07/23/a-foolish-lack-of-terror/; Michael Snyder, “Europe: They Are Actually Going To Let Greece Default? (VGK, EWG, EWI, FXE, IEV, EPV, EUO),” ETF Daily News, January 20, 2012, http://etfdailynews.com/2012/01/20/europe-they-are-actually-going-to-let-greece-default-vgk-ewg-ewi-fxe-iev-epv-euo/; RTT News, “Fitch Cuts Portugal Ratings To Junk Status,” November 24, 2011, http://www.rttnews.com/ArticleView.aspx?Id=1768186; Toyer and Tagaris, “Spain rattles markets, Greeks warned of catastrophe.”↩
- Washington’s Blog, “Failing to Break Up the Big Banks is Destroying America,” July 21, 2012, http://www.washingtonsblog.com/2012/07/11869.html↩
- Krugman, “Greece as Victim.”↩
- Irwin M. Stelzer, “When Bankers Behave Badly,” Weekly Standard, July 23, 2012, http://www.weeklystandard.com/articles/when-bankers-behave-badly_648560.html↩
- Edmund L. Andrews, “Fed Shrugged as Subprime Crisis Spread,” New York Times, December 18, 2007, https://www.nytimes.com/2007/12/18/business/18subprime.html; Joe Nocera, “Subprime and the Banks: Guilty as Charged,” New York Times, October 14, 2009, http://executivesuite.blogs.nytimes.com/2009/10/14/subprime-and-the-banks-guilty-as-charged/; Michael Powell, “Bank Accused of Pushing Mortgage Deals on Blacks,” New York Times, June 6, 2009, https://www.nytimes.com/2009/06/07/us/07baltimore.html↩
- Vikas Bajaj and Louise Story, “Mortgage Crisis Spreads Past Subprime Loans,” New York Times, February 12, 2008, https://www.nytimes.com/2008/02/12/business/12credit.html↩
- Ellen Brown, “Students loans fail usury test,” Asia Times, May 16, 2012, http://www.atimes.com/atimes/Global_Economy/NE16Dj03.html; Mike Dorning, “Obama’s 2008 Young Voters Find Little Hope In Job Market,” Bloomberg, June 14, 2012, http://www.bloomberg.com/news/2012-06-15/obama-s-2008-young-voters-find-little-hope-in-job-market.html↩
- Susan Heavey, “Over 55 and jobless, Americans face tough hunt,” Reuters, May 15, 2012, http://www.reuters.com/article/2012/05/15/us-usa-aging-workers-idUSBRE84E04Y20120515; Catherine Rampell, “Nearly 5 Workers for Every Available Job,” New York Times, http://economix.blogs.nytimes.com/2011/07/12/nearly-5-workers-for-every-available-job/↩
- Binyamin Appelbaum, “Even Critics of Safety Net Increasingly Depend on It,” New York Times, February 11, 2012, http://www.nytimes.com/2012/02/12/us/even-critics-of-safety-net-increasingly-depend-on-it.html; Michael Cooper, “Lost in Recession, Toll on Underemployed and Underpaid,” New York Times, June 18, 2012, https://www.nytimes.com/2012/06/19/us/many-american-workers-are-underemployed-and-underpaid.html; Stacey Patton, “The Ph.D. Now Comes With Food Stamps,” Chronicle of Higher Education, May 6, 2012, http://chronicle.com/article/From-Graduate-School-to/131795/; Scott Sernau, Worlds Apart: Social Inequalities in a Global Economy, 2nd ed. (Thousand Oaks, CA: Pine Forge, 2006); Thomas M. Shapiro, Introduction, Great Divides: Readings on Social Inequality in the United States, 3rd ed., Thomas M. Shapiro, ed. (Boston: McGraw Hill, 2005), 1-7.↩
- Chandra Talpade Mohanty, Feminism without Borders: Decolonizing Theory, Practicing Solidarity (Durham, NC: Duke University, 2003); Edward W. Said, Culture and Imperialism (New York: Vintage, 1994).↩
- William K. Black, “Banking System Rotten to the Core,” Financial Sense, November 25, 2011, http://www.financialsense.com/contributors/william-black/2011/11/25/banking-system-rotten-to-the-core; David Dayen, “49-State Foreclosure Fraud Settlement Will Be Finalized Thursday,” Firedoglake, February 8, 2012, http://news.firedoglake.com/2012/02/08/49-state-foreclosure-fraud-settlement-will-be-finalized-thursday/; Michael J. De La Merced and Ben Protess, “New York Fed Was Aware of False Reporting on Rates,” New York Times, July 13, 2012, http://dealbook.nytimes.com/2012/07/13/barclays-informed-new-york-fed-of-problems-with-libor-in-2007/; Tyler Durden, “Roubini On 2013’s “Global Perfect Storm” And Greedy Bankers ‘Hanging In The Streets’,” Zero Hedge, July 8, 2012, http://www.zerohedge.com/news/roubini-2013s-global-perfect-storm-and-greedy-bankers-hanging-streets; Zachary A. Goldfarb and Jia Lynn Yang, “Geithner did not show evidence of rigged Libor, British bank official says,” Washington Post, July 17, 2012, http://www.washingtonpost.com/business/economy/geithner-did-not-show-evidence-of-rigged-libor-british-bank-official-says/2012/07/17/gJQA7RIFrW_story.html; Gretchen Morgenson and Louise Story, “In Financial Crisis, No Prosecutions of Top Figures,” New York Times, April 14, 2011, https://www.nytimes.com/2011/04/14/business/14prosecute.html; Kathleen Pender, “Financial regulations gutted in new bill,” San Francisco Chronicle, April 24, 2012, http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/03/11/BUPU1NIGVF.DTL; Washington’s Blog, “Failing to Break Up the Big Banks is Destroying America;” Matt Taibbi, “Why Obama’s JOBS Act Couldn’t Suck Worse,” Rolling Stone, April 9, 2012, http://www.rollingstone.com/politics/blogs/taibblog/why-obamas-jobs-act-couldnt-suck-worse-20120409; Matt Taibbi, “Yes, Virginia, this is Obama’s JOBS Act,” Rolling Stone, April 12, 2012, http://www.rollingstone.com/politics/blogs/taibblog/yes-virginia-this-is-obama-s-jobs-act-20120412; L. Randall Wray, “Right Now, A Complete Collapse Of The Financial System Is Not Out Of The Question,” Business Insider, November 4, 2010, http://www.businessinsider.com/complete-collapse-not-out-of-the-question-2010-11↩