Sunday, March 24, 2013

Serious as a Heart Attack

Sometimes, even I have trouble believing how stupid, venal, vicious, brutal, ignorant, miserable, petty, incompetent the bourgeoisie really are.  Not often, but sometimes I have to shake my head and say "You cannot be serious." or "You're putting me on."  or  "Are you out of your minds?" or "You must be kidding me." or "You cannot make this stuff up." or simply "Wow."

Sometimes too many things, too many incidents, too many stories, actions, plans, programs, quotes occur all at once, or nearly all at once, to just be a coincidence.  And that's how I know the bourgeoisie are just that stupid and more; just that venal, vicious, brutal, ignorant, miserable, petty, incompetent, and more.  That's when I recognize just  how arrogant the bourgeoisie are in their venality, their ignorance, their incompetence; how comfortable they are in their obsolescence.  They've been around so long, so too long

So having reduced the economy, that is to say the social reproduction of human life, in Greece to ashes, literally, as hillsides have been denuded of trees for firewood; having driven Greece's economy to levels below the lowest point of the Great Depression of the 1930s; having forced Ireland to re-up for another tour of hell; having readied Spain for the killing floor... having done all that and emerged intact, relatively, regaining access even to the commercial paper and money markets; having done all that and emerged, relatively, unchallenged for power, the European bourgeoisie just had to do something.

They did it all right, and it's called Cyprus,  and it's a thing of beauty.

Cyprus has an annual economic output of about e18 billion.  It also has banking deposits of about e70  billion.  Cyprus is a member of the EU and a member of the euro currency union.  It also has a destination for deposits made by various wealthy individuals from Russia.

Given its extensive trading and banking ties with the EU in general, and Greece in particular, the sustained contraction of the EU economy in general, and the EU enforced collapse of Greece's economy in particular,  the admission by the Cyprus government two years ago that the island's banking system (outside the Turkish occupied northern zone) faced collapse was belaboring the obvious.

"Take a number, and wait your turn," replied the EU, which Cyprus did, but not exactly.  In the interim it floated a loan with a substantial dollar value, estimate at $2.5 billion,  from Russia.

Soon enough, it was Cyprus' turn.  The money from the Russian loan was pretty well exhausted, and the EU,  ineptly deft at the tasks of deconstruction, liquidation, impoverishment and having turned Greece into Romania now decided it could turn Cyprus into Haiti..  

So here's what happened.  Cyprus, its president, Nicos Anastasiades,  its finance minister, Michael Sarris,  pockets out-turned, empty hats in hand, and clown noses firmly in place, appealed to the European Union for a bailout.  Hurriedly the finance ministers of Germany, France, Finland, Germany, the Netherlands, etc. etc.. along with representatives of the European Commission, the European Central Ban, and with Christine Lagarde, she of the IMF, gathered to plug the leak, fix the sail, repair the mast, utilizing whatever and how many nautical metaphors it took in their tireless efforts to save  "lifeboat Europe."

What the finance minister and president of Cyprus did not yet know was the fact that "saving" lifeboat Europe meant chumming the waters with body parts from Cyprus.

When told that without the bailout, Cyprus would no longer be able to pay for food imports, Lagarde, channeling Meryl Streep channeling Margaret Thatcher channeling a hipster Marie Antoinette declared "Let them eat local!" She then proposed that 30-40% of all amounts in bank deposits in  greater than e100,000 be confiscated to collateralize any bailout.  Joining the spirit of Occupy to the shadow of Eva Peron, Lagarde demanded that Cyprus "make the rich pay!"

Excited beyond all belief by the thought of a French woman making a whole country of swarthy non-Aryans beg,  and by the prospect of authorizing a preemptive drone strike on an entire island if Cyprus refused the deal, or if not that, at least waterboarding its finance minister and president,   Wolfgang Schäuble, finance minister of Germany and winner of the recent Doctor Strangelove look-a-like contest, popped a wheelie on his armor plated personal personnel carrier,  the SS Totenkopf, spun around twice, visions of a whole new meaning to "V-E day" dancing through his death's head, broke into the hochdeutsch version of New Order's "Shell Shock":

Halten Sie an! Es ist nie genug
Es ist nie genug, bis dein Herz aufhört zu schlagen
Je tiefer man wird, desto süßer der Schmerzen
Geben Sie nicht auf das Spiel, bis dein Herz aufhört zu schlagen

Sarris, the Cypriot finance minister, recognizing that he was running out of room to maneuver, phoned home and had his wife electronically transfer all their savings to Norway, (which, because it has a lot of oil, doesn't think it's really part of Europe), leaving just enough in their checking account to not have to return the Ipod Touch they received as a gift when opening the account.  Ipod safe, Sarris then froze all electronic transfers into, out of, and within Cyprus.  ATMs were fried by remotely controlled digital pulse weapons which the president could plausibly blame on Chinese hackers.

Sarris then countered the Lagarde/Schäuble/Draghi axis, attempting to persuade his president to impose a 7.5% "tax" on deposits less than e100,000 and a 12.5% tax on deposits greater than e100,000, but Anastasiades refused, citing his moral objection to harming the life-savings of the hard-working millionaires who called Cyprus, if not home, at least a clearing house.

Anastasiades wondered about devaluing the local currency. "Let's do what Iceland did, only in reverse," he said.  "We'll protect the accounts of the international depositors, sacrificing those of the local depositors."  When it was pointed out to the president by the finance minister that Cyprus no longer had a local currency, the president replied,  "Now you tell me?"

Sarris returned to the conference room, offering instead a 3.5% confiscation rate on deposits less than e100,00 and 7% on accounts larger than that, only to have the  troika reject the offer.

It was at this moment that the "troika" played its ace.  The European Central Bank advised Sarris that the collateral offered by Cyprus' private banks under the EU's Emergency Liquidity Assistance (ELA) Program was no longer of sufficient quality to secure additional loans.  While the ELA is technically administered by the national central bank of the EU country, the ECB retains right of approval over the loans.  The program restricts its loans to "illiquid but solvent" institutions.  In addition, while the program cannot be used to finance a country's government, the government is on the hook as the guarantor of the loans made to the private banks.

Upon receipt of this advice, Cyprus agreed to confiscate 6.75% of all deposits equal to or less than e100,000, and 9.9% of amounts greater than e100,000, the president apparently pleased he had kept the rate below 10% on the wealthy.

In the isolation of their conference room, the troika congratulated itself for once again having vindicated vindictiveness as essential to accumulation.  "The operation will be a success," said Dr. Draghi to Dr.Schäuble, "The patient will die."  Both scanned the room for Ms. Lagarde, expecting to see her wearing her customary post-negotiation victory party black vinyl cat suit.  But Lagarde was gone, flying back to Paris to welcome the police as they raided her apartment in their official search for evidence of  "improper influence." While she was France's minister of finance she approved the award of several hundred million dollars paid by Credit Lyonnais  to a close personal friend of her then boss, French president Nicholas Sarkozy.  It pays to have a friend in the business, or government, doesn't it?

Lagarde tossed off the accusations, as did the IMF press department.  Their press release openly "wondered what's all the fuss about?  It's not like Christine is accused of sexually assaulting a hotel maid, is it?"  Or.. is it?

Anyway, while the troika was celebrating, others, and not just Cypriots weren't.   "Scandalous! Arbitrary! Capricious! Illegal!" said depositors all over Europe and Asia.  "How could they?"

How could they?  Because they could, that's why.  Just as,  five years ago, they, the same collection of finance ministers, bankers, I-MFers, could "guarantee" deposits up to 250,000 dollars/euros; just as they could guarantee bank debt; just as they could proclaim that Greece would never default on its debt; just as they drove down living standards in Greece as the condition of that default, the EU, the IMF, the ECB could confiscate deposits that were supposedly guaranteed, insured, against loss or confiscation.

The Russians were upset, having already loaned Cyprus a couple of billion.  The Russians were incensed that the "troika" had not even consulted with Moscow before this "rescue," before precipitating the electronic freeze-out of all money transfers routed through Cyprus.  The Russian Prime Minister Medvedev likened the proposed "rescue" to the confiscation of private property under Soviet rule.

Russia calling the IMF "Soviet"?  Be still my libertarian, anti-trilateral, beating heart!

Indeed, Russia has reason to feel aggrieved.  In 2012, investment transfers from and to Russia routed through Cyprus amounted to $120 billion.

"Russian?  Where's that?" joked the high-spirited Schäuble.  "Last time I checked, Russia wasn't part of the European Union.  Actually, isn't Russia but a mongrelized mixture of Slavs and Asians with reserves of natural gas?"

"Let me worry about the Russians," Schäuble told his fellow troika-ites.  "I'll have my personal assistant,  Frederick Barbarossa, and my military advisor, General Plan Ost take care of the Russians."

And that worked out so well for the cause of Europe last time, didn't it?

Now what's really stupid about all this... all this "rescue," all this "haircutting"?  The amounts involved are literally trivial.  The troika's confiscations amount to less than six billion euros, while the amount to be "secured" by the confiscation is about ten billion euros.   Six billion, ten billion?  The ten billion amounts to less than 1% of the amount offered by the ECB to banks for extended periods at low interest through its Long Term Refinancing Operation.  

The ECB could probably provide the entire 16 billion from the profits generated by its purchases, and preferential treatment of its purchases of the very sovereign debt of Italy, Spain, Portugal and of Greece, the general devaluation of which put Cyprus between Schäuble's anvil and Lagarde's hammer.

Is it a matter of principle?   For the bourgeoisie?  For bankers?  Come on.  Do we look like we just fell off a truck of pumpkins?

Is there a purpose to the troika's demands?  The demands are the purpose, that's the significance and the stupidity of the program.  The irrationality of capitalism as a relation among human beings for organizing social life overwhelms quantity, size; mocks its own method of accounting; accumulates risk without possibility of reward; engenders cost without benefit; destroys the very notion of private property that gives it half-life. 

Irrationality is the necessity of capitalist reproduction.  Stupidity, arrogance, blindness are the agents of capital's progress.

S. Artesian
March 24, 2013

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