Mr. Murphy's Greenhouse Stone throwing

In my 10 months or so on Twitter, which is arguably responsible, at least in part for the paucity of posts here which I am forever seeking to rectify, I have encountered a myriad group of 'Twitterati': the Good, the learned, the Bad and the downright offensive. However, aside from a spate of so -called 'Pornbots', I have never felt it necessary to Block anyone who has cause to disagree with me. Nor have I had much cause, despite some strong words at times, to be blocked by anyone bar two Leading Tweeters, the baby-faced (and, sorry to say, Rather immature, at least in terms of his real-world experience) Owen Jones and the almost megalomaniac self-styled 'Number 1 economics blogger in the UK', the Norfolk - based former tax accountant, Richard Murphy, author of the tome 'The Courageous State', and rumoured to be one of the Leading advisors on Tax policy and overall economic outlook of the (potential) incoming Ed Miliband Administration in 2015. I think my jibe at Jones when he made a reference that with the death of North Korea's Kim Jong-il, 'Robert Mugabe's Christmas Card list was getting a bit shorter' to the effect that I'm sure he was still on it probably rankled but I know for a fact I am not the first to get the 'blocking treatment' from Murphy. This very cocksure blogger likes to boast about his advocacy of a 'Courageous State' but his courage doesn't seem to extend to allowing dissenting voices to post on his blog or indeed even follow his Twitter feed, thus rendering his credibility immediately suspect.

Arguably his most prominent and incisive critic, is Tax exile and ASI writer, Tim Worstall, disparagingly referred to on Murphy's blog as 'Tim Worstofall' (Such cutting edge humour..) who regularly blows holes in Murphy's master plan, much to the chagrin of my fellow blogger (who collaborated on the Courageous State) . Unlike Murphy, Tim operates a fairly open access policy on his blog and critical comments there don't tend to be banned or silenced, a policy I'd argue is far more courageous than Murphy's almost medieval inquisition-like 'silencing' of counter-voices.

Anyhow, ranting aside, I wouldn't normally pass comment on anything Murphy has to say, only that to anyone taking a passing interest in Global economic news of late, the situation in Greece is becoming increasingly desperate. Mired in a downward spiral of falling demand, cuts in expenditure and prisoners of a massively overvalued currency, rumours persist of people foraging through bins for food, together with reports Many businesses have folded with many more on the brink and of children being abandoned to churches due to their parents being unable to afford to feed them. With the situation in Greece being so intrinsically linked to Europe, and a perfectly titled episode of Star Trek (Plato's Stepchildren) available, a more lengthy post on Greece is surely in the offing, but what took my eye on the 'Tax Research UK' blog was this almost unbelievable piece by Murphy on how Greece can effect recovery.

A few choice examples of how misguided the man is:

'The present emphasis on export-led growth as a key solution to the Euro crisis, whilst benefiting successful economies like Germany and China, will not be enough to enable the rest of Europe to deal with its collapsing effective demand.'

Which obviously begs the question as to where the money to pay for anything is going to come from for Greece in the First instance, with other potential 'Exit nations' (Spain, Italy and Portugal waiting by the door) - But, wait, here's the answer....

'the European Central Bank (ECB) should immediately announce a Green Quantitative Easing (QE) Emergency Programme for Greece. It has been estimated that there are more than 4 million households in Greece and so its first investment should be 9 billion Euros spent on fitting free solar panels for the occupants of one million south facing roofs in Greece, and a further 4 billion Euros to train a ‘carbon army’ to install energy saving measures in all Greek homes'

And where exactly is the skilled Labour going to come from, Richard? who is going to be training them? and more importantly who is going to be controlling them? Murphy appears to be advocating, in effect that the EU continue its policy of treating Greece like some satrapy from the Middle-Ages. Arguably the most shocking incident thus far seen in Greece was 77 year old Dimitris Christoulas, who shot himself in Athens' Syntagma Square, with a strongly-worded letter condemning the austerity pursued by the 'Tsolkagolou' government - a reference I needed to look up to explain. Georgios Tsolkagolou was a Colonel in the Greek Army who signed the surrender of Greece to NSDAP forces in World War II and was tried after the war for treason. Is Murphy suggesting that another government programme imposed (or seen as being imposed) from Berlin will be acceptable to the Greek people. I cannot read Greek but those of my correspondents that can warn the language being used to describe both the former Papademos government and the EU itself by the Greek press is inflammatory and laced with references to the German Occupation of 1941 - 45.

Also, Murphy displays his profound ignorance of the EU, which for ordinary Greeks has become synonymous with a cosy coterie of Private businessmen (who, to give him credit he will condemn) and CRUCIALLY, senior Bureaucrats, both within the Greek State and at EU level (which, due to some misguided belief shared by my fellow blogger that all Public servants have a saint-like lack of self -interest and all Public expenditure is axiomatically good he won't) who have carved up the contracts and much of the resultant money that Greece has received since joining the EOK (Greek for EEC) in 1988. The money for his solar panels will simply disappear into the same well of corruption and nepotism that it has done over those intervening two decades.

'Of course, a Green New Deal is only part of the picture to regenerate Europe. Face to face caring and wider infrastructural renewal such as housing, schools, hospitals, water and sewers systems and maintaining the local road networks will provide the backbone for a labour intensive transition for most countries. The personal care can be paid for by the state, particularly once domestic and international tax dodging are tackled. With some modest state pump priming, the majority of the funding for the rest of the infrastructure programmes can be provided by pension and insurance funds and from personal savings via bonds. The secure returns that can be earned from such investments are just what such funding sources need. The local jobs and business opportunities provided will help rebuild the tax base and allow for an eventual reduction in public debt.'

Despite Murphy's insistence that tax havens are the problem, Greeks facing down the consequences of refusing to leave the euro have been piling their money OUT of the country. Even former Communist neighbour Bulgaria, itself no paragon of economic and bureaucratic virtue is seen as a relative safe haven, with huge deposits flowing in to those unable to afford to deposit in one of Richard's prime Bete noires, Switzerland (prosperous, DEMOCRATIC and with a limited state that seems to work quite nicely for them - no wonder he dislikes them so much) Again, the infrastructure projects thus far funded by the EU have been in many cases catastrophic(Visit the Parthenon if you want evidence of this), and Good luck using either Greek bureaucrats themselves or more likely, foreign 'Independent' Tax experts to chase down tax evasion, which in Greece, due to corruption is seen as a National Sport.

In short the article completely misses the point on almost every level. It show almost zero knowledge of Greece or the Greek psyche, no respect for national boundaries or Freedom of choice and overweaning arrogance characteristic both of the Man's blog and his Twitter feed (what I can discern of it since being banned) I have said that the state most like the 'Courageous State' that I can see in historical terms is the now -defunct USSR. In advocating a key rule for that unlamented behemoth's Spiritual successor, the EU, Murphy has unwittingly (or more likely unashamedly) showed his totalitarian side. Lord help us if he has any influence over an incoming Ed Miliband administration

Greece: taking the long and painful road towards default

It's often been said that socialism is the long and painful route to capitalism and in the case of Soviet-style state capitalism that is probably right (although equally one could say that capitalism is the long and painful route to environmental catastrophe, followed quite possibly by socialism - if anyone is still alive long enough to enjoy such a state of affairs). But the economic torture which the EU and the IMF is putting Greece through in the name of "fiscal responsibility" is the long and painful route to bankruptcy and default. There is not a hope in hell of the savage austerity measures insisted on by the "troika" - including minimum wage and pension cuts - delivering budget balance; instead, they will deliver an ever-shrinking economy and a need for yet more savage cuts a year or so down the line.
The sheer insanity of the economic policies being followed in Greece at the moment is painfully obvious. This story ends in one of three ways:

1. fiscal union in the Eurozone. If the EU had a central budget and fiscal transfers between higher-income and lower-income states (like the US) for example, the Greek debt would be a relatively minor issue. The EU would be able to issue "Eurobonds" at relatively low rates of interest to fund the Greek deficit. This is unlikely to happen because Germany doesn't want Eurobonds. It wants a "fiscal compact" to bind member states into austerity but this is not at all the same thing as fiscal union; rather, it's a measure to outlaw "structural deficits" which, if anything, will exacerbate economic depressions by making Keynesian counter-cyclical spending harder.
2. Greece as a technocratic colony. This is the option that Germany and the IMF want - bypassing the Greek electoral system and putting "yes men" in place who will enact austerity measures for "as long as it takes" - perhaps in perpetuity - in a (probably futile) attempt to meet fiscal targets through spending cuts and tax rises.
3. Greece in default. I think this is the most likely option now. It's no longer a question of if Greece defaults, but rather, when it does.

I would be very surprised if plans were not afoot behind the scenes for a Greek default and the return of the drachma. (The return of the drachma is not inevitable - it is possible that Greece could default and stay in the Euro - although that raises a host of issues, for example regarding contagion, and how to stop the same thing happening again to Greece a few years down the line). But being kicked out of the Euro is more likely than defaulting in it.

It is important to make clear that although default is the best available option for Greece it is by no means an easy option. The drachma will collapse in value in the short run and Greece is likely to experience high inflation as the cost of imported goods rise. Much of the debt held by Greek consumers and businesses (as opposed to government debt) will be Euro-denominated and so its value relative to Greek GDP will increase greatly in the event of the drachma reappearing. This will most likely lead to a wave of secondary defaults in the business and household sectors.

However, readopting its own currency would give Greece the necessary flexibility to work its way back to economic health. Tourism would boom hugely as Greece would suddenly become a very attractive cheap holiday destination. The reduction in the wage and price level relative to the Euro would make Greece a much more attractive location for foreign direct investment by foreign-owned businesses. Greek exports would be much more competitive than before... and so on.

So, for me, given that a US-style European fiscal union is off the table, default followed by economic rebuilding from a vastly lower exchange rate looks like the best option for Greece.

But what does Loukanikos, the world-famous riot dog, say?