Greece’s Choice, And Ours: Rule By Democracy or Finance?

GreeceBank575A number of nations, including Greece and the United States, are in the process of deciding between being governed by democracy or by finance, Bill Clinton’s Secretary of Labor Robert Reich writes:

Greek Prime Minister George Papandreou decided in favor of democracy yesterday when he announced a national referendum on the draconian budget cuts Europe and the IMF are demanding from Greece in return for bailing it out.

(Or, more accurately, the cuts Europe and the IMF are demanding for bailing out big European banks that have lent Greece lots of money and stand to lose big if Greece defaults on those loans—not to mention Wall Street banks that will also suffer because of their intertwined financial connections with European banks.)

If Greek voters accept the bailout terms, unemployment will rise even further in Greece, public services will be cut more than they have already, the Greek economy will contract, and the standard of living of most Greeks will deteriorate further.

If Greek voters reject the terms and the nation defaults, it will face far higher borrowing costs in the future. This may reduce the standard of living of most Greeks, too. But it doesn’t have to. Without the austerity measures the rest of Europe and the IMF are demanding, the Greek economy has a better chance of growing and more Greeks are likely to find jobs.

Shouldn’t Greek citizens make this decision for themselves?

Of course, if Greek defaults on its loans, global investors (fearing that a default in Greece sets a dangerous precedent) may yank their money out of Italy. This would almost certainly bust several big European banks—and generate panic on Wall Street. That’s why Tim Geithner has been pressing Europe to bail out Greece.

We’ve been here before, remember? Specifically, here in the United States—at the end of 2008 and start of 2009. Wall Street had made lots of bad loans, and the question we faced then was whether to bail out the Street.

The difference is, we didn’t hold a referendum. Instead, the Bush administration told Congress the nation risked “economic Armageddon” if it didn’t immediately authorize a giant bailout of the Street—with no strings attached. Of course Congress hastily agreed. Hank Paulson, Ben Bernanke, and Tim Geithner (as head of the New York Fed) then doled out the money. And the Obama administration (with Geithner installed as Treasury Secretary) gave out more.

If Americans had been consulted about the 2008-2009 Wall Street bailout, I doubt it would have happened the way it did. At the very least, strict conditions would have been placed on the banks in return for the money. The banks would have had to eat the losses of the predatory mortgages they sold, and help homeowners reduce those mortgages. They’d be required to improve the capitalization of small banks in communities across the country. They’d be forced to accept stringent new regulations, including resurrection of Glass-Steagall.

, , , , , ,

  • http://pulse.yahoo.com/_LC3Q6H6P46RXN2NCNBI43W3M3M Mad Man Mikey

    I beg to differ with what Reich concluded there.

    “If Americans had been consulted about the 2008-2009 Wall Street bailout, I doubt it would have happened the way it did.”

    To remind, the first TARP Vote failed –

    “Skepticism regarding the plan occurred early on in the House. Many members of Congress,
    including the House of Representatives, did not support the plan
    initially, mainly conservative free-market Republicans and liberal
    anti-corporate Democrats.[58] Alabama Republican Spencer Bachus has called the proposal “a gun to our head”[59] fear-inflicting policy of the administration to stifle proper debate and affect decision.[30] However, many sources have reported that for this crisis there are many alternatives and options,[60]
    and other less risky and more profitable solutions to use the
    taxpayers’ funds that aren’t being debated, but ought to be debated, in
    the rush to the sudden deal.” (http://en.wikipedia.org/wiki/Emergency_Economic_Stabilization_Act_of_2008 – see the section “First House vote, September 29″)

    It was passed after spin and fear and arm twisting was applied to our selves and our representatives.As for this article in whole, thank you for sharing it. Though I fear it is just preaching to the choir, people need to hear and hear again that there is an alternative to giving in to the financial terrorists who have structured, carried out and are now swooping in to benefit from this entire mess.Thanks.

    • http://www.ContraControl.com/ Zenc

      I was going to post something very similar to what you posted.

      Fact is, it was reported by some legislators that the phone calls they were getting were 1000 to 1 against a bailout.

      After Paulson threatened “Martial Law in the streets” and economic Armageddon the call ratio dropped to somewhere between 10 and 100 to 1 against.

      We rejected a bailout when given a chance and when we “didn’t get it right”, the “right thing” was done for us.

      Imagine how insufferable those assholes would be if they had actually convinced us to support a bailout instead of just suborning our elected officials.

  • http://pulse.yahoo.com/_LC3Q6H6P46RXN2NCNBI43W3M3M Mad Man Mikey

    I beg to differ with what Reich concluded there.

    “If Americans had been consulted about the 2008-2009 Wall Street bailout, I doubt it would have happened the way it did.”

    To remind, the first TARP Vote failed –

    “Skepticism regarding the plan occurred early on in the House. Many members of Congress,
    including the House of Representatives, did not support the plan
    initially, mainly conservative free-market Republicans and liberal
    anti-corporate Democrats.[58] Alabama Republican Spencer Bachus has called the proposal “a gun to our head”[59] fear-inflicting policy of the administration to stifle proper debate and affect decision.[30] However, many sources have reported that for this crisis there are many alternatives and options,[60]
    and other less risky and more profitable solutions to use the
    taxpayers’ funds that aren’t being debated, but ought to be debated, in
    the rush to the sudden deal.” (http://en.wikipedia.org/wiki/Emergency_Economic_Stabilization_Act_of_2008 – see the section “First House vote, September 29″)

    It was passed after spin and fear and arm twisting was applied to our selves and our representatives.As for this article in whole, thank you for sharing it. Though I fear it is just preaching to the choir, people need to hear and hear again that there is an alternative to giving in to the financial terrorists who have structured, carried out and are now swooping in to benefit from this entire mess.Thanks.

  • Anarchy Pony

    Rule by calculator and billy club then?

  • Anti-Citizen1

    Rule by calculator and billy club then?

  • Marcy

    You actually believe the Greek prime minister actually intended to go through with the referendum?

    It’s a load of bull. The only reason he said he would do a referendum was to get the people on his side. Then, couple days later, after an easily predictable outrage by the EU, he would withdraw the idea, telling his people the EU forced him to. But at least he was willing to give them the choice. It’s the EU that took it away, not him. So really, he’s on the side of the people. So you should vote for him next election.

    Too bad for him that he’s totally out of touch with the people. He assumed from day one that the people still had sympathy for him, but they don’t. If it’s up to the Greek citizen, all 300 members of parliament should be lynched. No exceptions.

    • Jin The Ninja

      utterly correct and cogent.

  • Marcy

    You actually believe the Greek prime minister actually intended to go through with the referendum?

    It’s a load of bull. The only reason he said he would do a referendum was to get the people on his side. Then, couple days later, after an easily predictable outrage by the EU, he would withdraw the idea, telling his people the EU forced him to. But at least he was willing to give them the choice. It’s the EU that took it away, not him. So really, he’s on the side of the people. So you should vote for him next election.

    Too bad for him that he’s totally out of touch with the people. He assumed from day one that the people still had sympathy for him, but they don’t. If it’s up to the Greek citizen, all 300 members of parliament should be lynched. No exceptions.

  • Mr Willow

    At the very least, strict conditions would have been placed on the banks in return for the money.

    You mean things like not loaning them money at zero percent interest!!

  • Mr Willow

    At the very least, strict conditions would have been placed on the banks in return for the money.

    You mean things like not loaning them money at zero percent interest!!?

  • Anonymous

    utterly correct and cogent.

  • Nunzio X

    LOVE is supposed to make the world go ’round, but sadly, we all know it’s actually MONEY (and its worshippers / accumulators / controllers) that make the world go ’round.

    Democracy doesn’t exist in any meaningful way when all the plutocrats have to do is throw money at our “leaders.”

  • Nunzio X

    LOVE is supposed to make the world go ’round, but sadly, we all know it’s actually MONEY (and its worshippers / accumulators / controllers) that make the world go ’round.

    Democracy doesn’t exist in any meaningful way when all the plutocrats have to do is throw money at our “leaders.”

  • nathan willard

    We Americans are to passivistic, the occupy X movement are for those who feel they have nothing left to lose, while anyone with a family a job and roof over their head may agree with the cause and support it they will not however jeopardize what little they do have for a teargas canister to the skull. Sadly it is only when we have nothing else to lose and everything to gain that people will step up in masses, but then is usually too late.

  • nathan willard

    We Americans are to passivistic, the occupy X movement are for those who feel they have nothing left to lose, while anyone with a family a job and roof over their head may agree with the cause and support it they will not however jeopardize what little they do have for a teargas canister to the skull. Sadly it is only when we have nothing else to lose and everything to gain that people will step up in masses, but then is usually too late.

  • http://www.ContraControl.com/ Zenc

    I was going to post something very similar to what you posted.

    Fact is, it was reported by some legislators that the phone calls they were getting were 1000 to 1 against a bailout.

    After Paulson threatened “Martial Law in the streets” and economic Armageddon the call ratio dropped to somewhere between 10 and 100 to 1 against.

    We rejected a bailout when given a chance and when we “didn’t get it right”, the “right thing” was done for us.

    Imagine how insufferable those assholes would be if they had actually convinced us to support a bailout instead of just suborning our elected officials.

  • Godozo

    I heard on WBBM 780 during the noon “financial hour” that Europe was going through “a coupe d’etat by the banks.” Wish I remembered who said that (was one of the guests),but it does seem to fit what’s been going on there…and here.

  • Godozo

    I heard on WBBM 780 during the noon “financial hour” that Europe was going through “a coupe d’etat by the banks.” Wish I remembered who said that (was one of the guests),but it does seem to fit what’s been going on there…and here.