Boiling Frogs

Boiling links

Stanislas Jourdan — Thu, 23 May 2013 11:03:29 +0000

Happy reading!

Boiling links

Stanislas Jourdan — Sun, 12 May 2013 10:37:18 +0000

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Boiling links

Stanislas Jourdan — Mon, 06 May 2013 07:45:00 +0000

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Boiling links

Stanislas Jourdan — Sat, 27 Apr 2013 05:30:27 +0000

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Should Germany repay Greece on war reparation?

Stanislas Jourdan — Thu, 18 Apr 2013 15:21:14 +0000

Just like Greece should not repay its current public debt to foreign investors, Germany should not repay Greece for war reparations debts.

Greek newspaper recently unveiled that a special commission mandated by the greek government has calculated how much money Germany owes Greece form the World War II. From Der Spiegel:

The [greek] newspaper offered no concrete figure regarding the possible extent of reparation demands outlined in the report. But earlier calculations from Greek organizations have set the total owed by Germany at €108 billion for reconstruction of the country’s destroyed infrastructure and a further €54 billion resulting from forced loans paid by Greece to Nazi Germany between 1942 and 1944. The loans were issued by the Bank of Greece and were used to pay for supplies and wages for the German occupation force.

Now, it is said that 80% of the Greeks want their government to pursue Germany to get the money back.

Opening Pandora’s box…

But there is a little problem. If we follow the reasoning, should Germany also repay the reparations debt that were owed to France after World War I, as ‘agreed’ in the treaty of ‘peace’ of Versailles? After all, these debts too were never fully repaid by Germany, which eventually caused the Occupation of the Ruhr by the French and Belgians, choked off production and led to the so-called Weimar inflation period. We all know what these war-related debts result in: more resentment, more crisis, and eventually fascism to rule a country.

Do we really want to open this Pandora’s box?

Really, it’s not about having Germany repaying these debts. Rather, what History tells us is that some kind of debts should not be repaid. Or, as Michael Hudson puts it:

Debts that can’t be paid, won’t be

And this is valid as for the greeks claims on Germany as for the Greek current public debt. Let’s not distort the debate around cross-border resentment, and try to understand the very nature of debts: mere promises made at a certain point of time, under certain circumstances. Therefore, when circumstances change, so do the promises made beforehand.

Now, if you wonder how to get out of this mess in an orderly and peaceful way, I recommend you to have a look at some proposals such as the Modern Debt Jubilee or quantitative easing for the people.

odysseasgr

Emergency liquidity assistance in Cyprus: 10.2bn euros

Stanislas Jourdan — Thu, 11 Apr 2013 07:58:33 +0000

Since many of my readers from Cyprus seem curious about the so called “emergency liquidity assistance” (ELA) that have kept the banking system afloat for the last 18 months, I have updated my chart according the latest information released by the Central Bank of Cyprus.

Here it is (ELA in red):

At end-february, the level of emergency liquidity assistance stood at 10.19 bn euros. This is higher than ever, but still lower than some others estimations. Obviously the next data releases will be even more interesting when the bailout plan is actually put in place.

The time has come for basic income

Stanislas Jourdan — Fri, 05 Apr 2013 10:36:16 +0000

With the launch of the european citizen’s initiative for unconditional basic income, the time has come for basic income supporters to take action for one of the biggest battle of History: the one for Human Rights, Dignity, Democracy, Commons… All at once reunited in the demand for a basic income.

I first heard of basic income three years ago. I was not looking for anything like this, neither interested into swapping my quiet life for the one of an activist. Rather, the idea came to me – and I immediatly adopted it.

Not that I personally needed a basic income. I am certainly part of this class of priviledged people who had the chance to born in a family that doesn’t live in luxury but lacks of anything. My parents could afford to pay my scholarship in a Grande École, pay my rents for five years, and eventually, there was a computer at home since I was a child, which got me very used to type on a keyboard, surf on the internet and accomplish a personal shift in my way of thinking.

I had nothing to worry about the future. My own future, at least, was secured. I would graduate in Entrepreneurship, launch my own business, and if it ever fails, with some efforts I would end up as a business executive in any company.

Why would I sacrifice this shining future for a vagabond life, rambling around, looking after avery single opportunity to change the World?

Because basic income is one of those “virus idea” that sows in you brain and keep reminding you how a better place this World could be “if only” we understood several simple reasonings such as:

political democracy cannot go without an economic democracy
we are all dependent of each others – hence the need for solidarity, redistribution, collaboration
life is a gift, not supposed to be a permanent competition against each other
the concept of meritocracy in a fully monetized economic system is bullshit.
Most of our wealth is not produced by our own effort, rather the one of our ancestors
Given the level of wealth our societies gave there is no excuse not to make everyone meet his basic needs without having to fall into ridiculously inefficient means-tested programs, without stigmatizing those in need.

Kickstarting a basic income movement in France

Three years ago, we were no more a couple of guys around the web corner talking about basic income in France. Some of them called it “life income”, citizens’ income or “universal allowance”. Post after post, we would discuss hours and hours on the best way to finance it, the killer argument EVER to convince anyone.

But we had not understood yet the whole dimension of basic income — a Cultural Impulse.

Basic income is a cultural impulse in the sense that the idea itself not only gives hope, but also convey a lot of values such as citizenship, trust, the Commons, freedom, dignity… Once you understand basic income, all these others concepts emerge as an avalanche of new perspectives on how society, economics should work.

“Basic income — A cultural Impulse” is also the title of a swiss movie you can see on youtube and here in 23 languages. Most of all, the movie was an important driver of the basic income movement in Germany, Switzerland, and France, thankfully to the french dubbed version provided by the Swiss Basic Income Earth Network.

Gradually, people started to gather on the internet. Every new article in the blogosphere created new connexions between people, raised more awareness. Eventually, it stimulated ‘in real life’ meetings, and very often ended up with strong friendships. Finally emerged a community of people sharing the same values, regardless of social background, political opinions, personal lifestyles.

For a long time, we had a common goal without a common strategy. With the presidential elections coming soon, many of us were expecting that finally some of the candidates would show up and bring the basic income on the table. No one did.

Then an email from Hambourg dropped in my mailbox. A european citizen’s initiative is being prepared on unconditional basic income. French folks, are you in?

That was back in january 2012. My contract at ‘La Tribune’ had just ended, therefore I found myslef with some more spare time than ever, and some money on my back for a year.

The first meeting was held in Brussels in April, with about 50 people from all over Europe. We got back in France with a concrete goal to challenge, and since then we have been working a lot France to organize the movement in France. We launched revenudebase.info, a news website about basic income. Every article we published by then attracted new supporters, or old ones that before were scattered on the internet.

While waiting for the green light from the European Commission regarding the initiative, local groups were forming, events popped up here and there. We brought together people beyond political clivages. The success of the website even got some official recognition, when it was recently nominated for the “Best of Online Activism” Awards.

Learning by each others, we gradually turned our passion into positive action. We swapped impatience with courage. Our diversity became our stronger force. The community mutated into a movement.

At the forefront of the european battle for basic income

With the european citizens’ initiative being launched, I am now more than optimistic for the perspective of the basic income idea in Europe. Not that figures as so impressive. With 2% of the signatures required yet collected, we still have a long way to go.

But at least, a strong and positive signal was sent in Europe: an alternative idea is finally emerging in Europe to address the crisis.

Basic Income (aka Citizen’s Income), soon to become the fastest-spreading idea on the planet: youtube.com/watch?v=lqXXO0… (Short video)

— News Frames (@NewsFrames) March 25, 2013

We were 14 countries participating in the european campaign, yet now Portugal, Bulgaria, Romania, Hungary, joined their forces in the movement. Local groups are popping up all over Europe and beyond. In Tunisia, where a workshop about basic income was held at the World Social Forum, people are now starting to work to raise the attention on the topic in a country which is still in the process of a revolution.

In the UK, where the government have declared war on welfare, people are waking up for more radical ideas, People have started a guerrilla campaign in the streets of Hackney to promote basic income. Even famous columnists like George Monbiot are now pointing out the relevance of such an idea.

Of course, many countries are still not organized. But from my experience in France, I can tell you there are lots of simple things to start with and get the ball rolling. It’s just a matter of doing.

The bright side of basic income is the inclusivity of the idea. Even thought they think different on many other topics, radical leftists, degrowth partisans, ecologists, libertarians, conservatives and sovereignists, all of them will usually find some grounds that justify basic income. Hence the opportunity for basic income supporters to cooperate with each others and build up the pressure.

While I have been on tour for two months already in different cities of France and Europe, I have not met yet a single opponent to the idea. Of course, many people still have a lots of questions, some of them still doubt about feasibility and have concerns about some collateral effects. But they are not opposing the idea, more often they want to learn how to convince their friends.

So I wonder: who are the ennemies of basic income? Of course, here and there you’ll find people who don’t believe at all in Humanity neither in Democracy – and therefore will never agree on basic income. How many are they? I bet there are very few actually. After all, our ennemy might be in ourselves, hidden in our fears.

As Victor Hugo once said, “there is nothing more powerful than an idea whose time has come.”

Now is the right time to overcome our fears and turn the idea’s power into a wide grass-root social movement, a coalition of european citizens from right to left in order force our policymakers to have a say on the question of basic income. Only this kind of movement can be powerful enough to heat such an irresistible pressure onto our blind and deaf politicians — until they backpedal on obstinations for failure.

The European Citizen’s Initiative for unconditional basic income is only a first but necessary brick in the wall. Sign it here!

Credit picture ruSSeLL hiGGs

Boiling links

Stanislas Jourdan — Mon, 01 Apr 2013 21:27:33 +0000

Happy reading!

No surprises in Cyprus

Stanislas Jourdan — Sat, 30 Mar 2013 14:53:05 +0000

As I said, in my previous post on the matter, Cyprus had two choices: either refuse to bail-in its banks, which implied directly to be ejected form the eurozone, either to balance better who would pay. Therefore Cyprus’ final deal is probably close to a good one.

With reason, Cyprus’s policymakers finally chose to go back to the bail-in option which imply deposit contribution. But this times, several features of the agreement make the deal different – and way better:

Contrary to previous plan, not a single deposit under 100k euros will be touched
Contrary to previous plan, depositors from others banks than Laiki and Bank of Cyprus will not be taped at all
Contrary to previous plan, Laiki bank will be wound down, its bondholders and shareholders will make full contribution
Same should happen at least partly for Bank of Cyprus

Someone has to pay for the crisis

What I find very revealing with the deal is more the people’s reaction. Cypriots go in the streets refusing a deal which is actually one of the best their governments could find out. What were you expecting? It’s like everyone wants the crisis to be over, but no one wants to have someone pay for it.

Put it simple, in Cyprus you have a black hole of 10billion euros, mostly from restructured greek sovereign bonds. This means 10 billions euros are missing in the cypriot banking system. It’s mathematics! Someone has to bring the numbers to balance the spreadsheet!

Now of course there are many different ways to resolve the equation.

One could choose to get more a greek-style bailout from the UE, but obviously this will only pile up more debt without any concrete results except more austerity for everyone in order to pay back the new debt.

Another solution would be to exit the euro and this way be able to print money to fill in the gap – something impossible within the eurozone because of the European Treaty. This is something I have always stated would be the best thing to do, especially if this is implemented as a quantitative easing for the people. Unfortunately though, most people tend to reject this option, for irrational reasons such as the one of inflation. Another reason is the great uncertainty that comes with a euro exit.

So if you reject both austerity and printing money, what are the remaining options? At least the current plan takes a large part of the money ‘where it is’ without creating so more public debt.

Uninsured deposits are errr… unsecured

Where the money is? In the case of Cyprus, mostly as deposits in the banks.

What are deposits? Deposits, contrary to what most people think, is nothing like a property. A deposit is merely an IOU form the bank to the depositors. “I promise i’ll pay back the money” says the banker, “and meanwhile you money is in my hands i’ll pay you a small fee called ‘interest’ for the service of providing me resources.”

Everything is fine in principle, but like any promise though, changes of circumstances eventually make it impossible to honor.

Because this perspective is very scary, and because markets and banking need stability and confidence, States have create “Deposit Guarantee Schemes”, which are supposed to protect all deposits below 100k euros. This basically means that deposits above 100k are not insured.

No Secret, no surprise

One year ago I noted how bad the situation was for the cypriot banking system, reporting about the emergency loans from the eurosystem. And i’m not an insider: my only merit is to know how to read a central bank’s balance sheet! In other words, the desperate situation of the cypriot banking system was no secret.

So I wonder… Should anyone be so surprised of what is happening in Cyprus?

Perhaps the real surprise is how badly people are informed, and lack of basic economic knowledge.

Cyprus at crossroads between Europe and Russia

Stanislas Jourdan — Wed, 20 Mar 2013 23:30:55 +0000

While the idea of bailing-in the Cypriot banks was good idea in principle, the way the Cypriot government and the troika implemented was very badly designed – not to say scandalously unfair. Now it’s up to the Cypriot People to demand a better plan. But which one?

Everyone is blaming the troika for having tried to imposed a levy on deposits held in Cypriot banks. Many argue this measure is very unfair given many modest Cypriot resident would have been asked to pay a tax of 6,8% on their deposits – often the fruit of years savings, while the depositors above 100k€ would only pay a levy of 9,9% – which is not much indeed.

Other claim this measure is anti-democratic. Indeed, the Cypriot representatives were – like always when it comes to bailout plans – bypassed by the eurocrats and their ECB / IMF fellows. Which partly explains why the deal was finally rejected by the Cypriot parliament on Tuesday – a decision many applauded.

However, from a pure financial point of view, the very principle behind the deal, the bail-in, is probably the best compromise possible when it comes to fixing a bankrupt financial sector. Indeed, like I have said in the past, this resolution process is supposed to protect the taxpayers and depositors by forcing the creditors of the troubled bank to forget their claims, in exchange for shares of the bank. As Bloomberg’s Clive Crook explains:

You want bank bondholders to be concerned about the safety of their investment, so that they exert some discipline over the banks, and you want small depositors to rest easy about the safety of their savings so that an uncontrollable run doesn’t destroy a solvent bank.

Hence the need for making the bondholders responsible for their bad investment. In practice, the idea is to make the subordinated bondholders take their losses beforehand. If necessary, then come the senior bondholders. If the debt writedowns are not enough (ie. in extreme circumstances) you might finally have to tap depositors.

A good idea turned evil

Unfortunately, Cyprus belong to this category of extreme cases were deposits have to be solicited because of the absence of any significant bondholders. Cypriot banks were mostly funded through deposits.

But still, the first plan was far from optimal. As Bloomberg says, the deal “fails to explain why senior bondholders were excluded from the deal and above all why the levy was applied to insured, and not just uninsured, deposits. It’s the very opposite of what makes sense.”

A missed opportunity?

There is a good news still. The bail-in plan, however unperfect it is, opens the door for new radical solutions in the resolution of troubled banks. Indeed what this plan reveals is the fact that policymakers could perfectly take the money ‘where it is’ and use it to fill the gap that has to be filled in – if only they want so.

Then after all, it’s up to the Cypriot People just to demand a different way of sharing the burden – ie. make the richest depositors pay more. However, by refusing the principle of the bail-in deal on Tuesday, the Cypriot parliament might have missed a good opportunity to fix radically a significant part of the issue.

At crossroads between Europe and Russia

Of course this is not the only solution. A more radical one would be to go default on the national debt, write down the emergency loans provided by the Central Bank of Cyprus. Problem solved, except that you need to prepare to get ejected from the eurosystem – a decision the conservative and pro-european government is very unlikely to take.

In comparison, the bail-in option, if renegotiated appropriately, may still not be ideal, but is at least much more fair than the purely stupid austerity measures imposed to Greece, Portugal and Ireland not so long ago. It is also the most realistic one given the troika’s stake.

In any ways, Cyprus has to choose a clear direction. Which means either confronting Russia by taping more foreign-held deposits and bondholders, either confronting Europe by writing off public & eurosystem-related debts (ELA), with the risk of jeopardizing Cyprus’ eurozone membership. I can hardly see how to handle to satisfy both sides, especially when you are short on time, having crowds in the starting-blocks for the bankrun.

It would be probably easier if the People of Cyprus show clearly the way.

Credit picture: Spiros Vathis