How to Reform Your Economy to Death and Enter the NWO
Georgi Stankov, February 19, 2015
In the new Orwellian world, truth is a lie, freedom is enslavement and economic reform with the aim of improving the effectiveness of the national economy means depression, massive unemployment and starvation. But, and here comes the greatest absurdity of all times – the progress of economic reform is carefully monitored by experts of the OECD, who are in fact the same banksters that sit in the IMF, the central banks and control the One Bank of Ponzi-Orion enslavement leading to the NWO. They have developed economic tools to evaluate the progress of neo-liberal reforms in each country and present them in clever statistical charts. And here is how the success of the neo-liberal reforms of austerity, to which many countries were subdued by the One Bank of Orion-Ponzi scheme in the last years, looks like.
Please observe that the following article appeared in Forbes, the mouthpiece of the dark banksters elite in the USA and the West. If this is not the beginning of true revelations, what else?
For Greece And Many Others, Economic Reform Is Bad For Your Economic Health
Steve Keen, Forbes, February 17, 2015
A quick quiz: which four countries do you think have done the most to reform their economies over the last seven years?
OK, who said Greece, Portugal, Ireland and Spain?
Actually, someone did: the OECD. Yes, I kid you not, according to the OECD, the country that has done the most to reform its economy over the last seven years—that is, from before the 2008 economic crisis until well after it—is Greece. Followed at some distance by Portugal, Ireland and Spain.
I saw this in a tweet, and even though I am a total sceptic on the value of what conventional economists call “economic reform”, I still couldn’t believe this graphic: surely it was an Onion spoof?
I simply had to go searching to see for myself. And there it was, on page 111 of the OECD’s publication Going For Growth 2015, released on February 9 (in a slightly different form, and with New Zealand pipping in between Ireland and Spain—maybe this graphic was revised later). The top economic reformers were the basket cases of Europe and the world in general. Unemployment in Greece is 27%; in Portugal it’s 15%, Ireland 12%, and Spain 25%. Those are very, very sick economies. And yet they are also the OECD’s top reformers.
Figure 1: The four basket cases of Europe are top of the reform pops for the OECD
You are, I hope, wondering “how come? Isn’t reform supposed to be good for you?”
Well, that’s the fairy story—sorry, theory—purveyed and fervently believed in by mainstream economists: reform your economies according to our recommendations, and—whatever else happens—your economy will grow more rapidly and be more stable to boot.
Unfortunately for those purveying this fairy tale, they also developed metrics by which the degree of reform could be measured, so that a decade later, we can compare the fairy story to the reality. And one quick look shows that we’ve been had. We were told to expect the beautiful Cinderella at the economic ball; instead we got one of her ugly step-sisters.
I’ll cover at length someday soon why economic reform as recommended by mainstream economists will normally make your economy more dysfunctional and unstable. For now, I want you to bear this empirical reality in mind when you consider the pressure that is being applied to Greece to get it to “stick with the program” invented for it by the EU.
The EU program that Greece is currently refusing to continue implements part of what is known as the ”Stability and Growth Pact” or SGP—which a radio interviewer last week realized has (with just a slight rearrangement of the letters) a much more apt acronym of GASP. And the other countries that are also under the control of GASP include… Portugal, Ireland and Spain.
Greece is refusing to continue with this program, not because it is “refusing its medicine”, but because the medicine is actually poison. And Greece itself is not the proof of that: the other countries on this list are—especially Spain.
Spain did everything that the GASP and mainstream economics recommended, not merely after the crisis but before it as well. The GASP required that member countries of the Eurozone have a government debt to GDP ratio of 60% or below, and run a maximum deficit of 3% or less of GDP.
Spain was doing both before the crisis. Its government debt ratio was below 60% from early 2000, and trending down—hitting a low of below 40% shortly after the crisis began—see Figure 2.
Figure 2: Spain had a falling government debt level before the crisis and below 60% of GDP
Its deficit was even better—not only was it below 3% of GDP at the introduction of the Euro, by 2001 it was in surplus—hitting a peak of 2.5% of GDP in 2007 (Figure 3).
Figure 3: A government surplus for 2001-2007, and then crashing into deficit
Before the crisis hit, Spain was being lauded as a success story for the GASP, and superficially for good reason: not only was it following the GASP program by running surpluses, and reducing its government debt, its economy was booming. Unemployment, which had always been high, trended down from 12.5% at the start of the Euro to 8% by 2007. And then it all went pear-shaped, as Figure 4 indicates.
Figure 4: From star performer to basket case
This raises two questions, the answers to which cement the case that the EU’s austerity program should end everywhere—and not just in Greece. Firstly, how did Spain appear to be doing so well, and then collapse so badly? And did the EU’s policies contribute to Spain’s problems?
The answer to the first question involves what happened to the debt that GASP ignores (as do conventional economists everywhere): private debt. While the GASP imposed strict controls on government debt, it ignored the blowout in private debt on the erroneous argument that private debt is economically unimportant (I took this argument apart in these two earlier posts: “Nobody Understands Debt — Including Paul Krugman” and “Beware Of Politicians Bearing Household Analogies”). Private debt rose from about 120% of GDP in early 2000 to over 200% by the time the crisis began, and peaked at 225% of GDP when the GASP’s austerity program kicked in, as Figure 5 shows.
Figure 5: EU ignores private debt while obsessing about government debt
The growth in private debt gave the economy an enormous boost as it financed Spain’s housing bubble, and the tax revenue from this bubble was the main reason that the government was in surplus from 2000 until the crisis hit. The rise in private debt dwarfed the decline in government debt, and the huge stimulus from private sector borrowing more than compensated for the drag on the economy from the government surplus. As the government was “salting away pennies”, the private sector was wallowing in new debt-financed spending.
Figure 6: Change in private debt swamps government debt change
But to do so, the private non-bank sector had to get more indebted to the banks—as Figure 5 shows. When growth in private debt turned around, the housing bubble collapsed and private sector borrowing went into free-fall.
Then, and only then, did government debt rise—as increased government spending slightly compensated for the plunge in private debt-financed spending. Ultimately, by 2010, the stimulus from rising government spending slowed down the decline in private borrowing. But then austerity kicked in and the government stimulus stalled. Consequently the private sector went from mild deleveraging into heavy deleveraging—reducing its debt by as much as 20% of GDP per year.
Don’t get me wrong here: I am a critic of private debt financed spending when it finances Ponzi Schemes like Spain’s housing bubble, and I believe that sustained recovery will not happen until private debt levels are drastically reduced. But when a private debt bubble bursts, government spending attenuates the downturn. To limit the growth in the government deficit makes the crisis worse, without doing much to reduce private debt compared to GDP because GDP collapses along with the falling private debt.
So these crises—in the OECD’s pin-up countries of Greece, Spain, Italy and Portugal—are the product of the EU’s policies. The only way out of the crisis is to end the policies themselves, as Greece is demanding now.
And if Syriza gives in and the EU’s policies are maintained? Then this will go from being an economic and social tragedy to a political one as well. If Syriza caves in, then the Greeks who voted for a left anti-austerity party will switch allegiance to a right anti-austerity party—the fascist Golden Dawn—because they will claim that only they have the balls to actually do in office what they promise in opposition.
This could happen in an instant too, since the only thing Syriza has in common with its coalition partner the Independent Greeks is being anti-austerity. If Syriza folds and accepts austerity, then it could lose its coalition partner, lose a vote in parliament, and new elections could be called straight away.
Yanis Varoufakis said much the same last week when meeting the German Finance Minister as I’m about to say here: the spectre of fascism, which Germany was so proud to expunge from its own soil, may sprout in southern Europe thanks to policies that German politicians are now insisting upon (What about the Nazi junta in Kiev installed by the USA and EU with Germany ahead? Note, George). For the sake of Europe, not merely of Greece, the EU should agree to Syriza’s demand that the policy of austerity be terminated.