1578. Greece and the rest.

from this morning's WSJ.
Who is right in Greece’s standoff today with the IMF and European creditors? German leaders claim a higher moral ground. When you borrow money you are expected to pay it back. If you can’t you don’t get to borrow again. If you are living above your means you must change your style of living. If you want more money from a lender, you need to behave in ways the lender expects to ensure that money will be returned.
The question, who Is the you in that sentence? Who lent the money to whom? 
Greece’s leaders feel no less righteous about their position. Why should they suffer when lenders get repaid in full? Didn’t both make a mistake when agreeing to government loans in the first place? Why should Greece accept onerous austerity that hasn’t turned its economy around, and in fact has made it worse in the near-run? Why should Greek workers suffer more than German bankers?
And who is greece? This sliding of Personhood from the borrows, the rich, to greece to the Greek workers is not subtle, but gotten away with. 
Don’t bother answering these questions. Both sides have a point. What will ultimately dictate the terms of this debt restructuring is the desperation Greeks feel if their banks run dry of euros, competing against the anxiety European leaders feel about the prospect of their single-currency experiment failing. Who is right and who is wrong? They all are. Who wins and who loses? Stay tuned.
And both sides? Bankers, germany, european leaders banks. The other side, Grece, Greeks, Greek workers?
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1577. Another good writing on climate.

The past few days at the Vatican have been full of quite surreal moments. First I found myself introducing Naomi Klein, as I chaired (possibly) the first ever all female panel at a high level Vatican Conference. Later the same day, I was sitting on a bus beside Mary Robinson our way to an open air mass in an ancient pine forest. We were Catholics, Protestants, Jews, Mulsims, athiests, feminists, liberals, conservatives, and everything in between. As the sun set over the beautiful pine trees, and the red full moon rose in the sky, the whole thing had strange dream like quality about it. I pondered how on earth I came to be there, in that moment, giving praise to God, Allah, Yaweh, Mother Earth with such an unlikely group of people. Something very strange was happening. The occasion was the Conference “People and Planet First – the imperative to change course”, which focused on Pope Francis Encyclical Laudato Sí. I certainly wasn’t alone in sensing a surrealness at the event. What I think what we experienced was due to the disruptive power of Pope Francis’ encyclical. Someone described the Encyclical as “the most dangerous book”. Others, such as Ben Phillips, in his blog on NGO Courage made the point that we have been “out radicaled” by the Pope. He has said the unsayable, disrupting well positioned lines of defence and throwing them into disarray. This isn’t just Pope Francis mania either. The group in the Vatican were the an unlikely Papal fan club. For many who associate themselves with this, there is a cost to pay for aligning with the Pope. But the encyclical has the power to bring very divergent views together for the greater good. It disrupts because it speaks the Gospel truth, with all its raw beauty and its pain, in an uncompromising and compelling way. The Pope takes a different perspective – like opening google earth and panning right out as far as you go into space. He brings us right back to the sense of wonder of existence, calling us back to a sense of awe at life on this fragile planet. It stops you in your tracks. It resonates something deep in our hearts and moves us to care. Essentially, in changing the viewpoint to one of integral ecology, Pope Francis offers us a new vocabulary to express in concrete terms the world we want to see. He has given permission to everyone to say what has to be said. Listening to the many wonderful women speakers in the Conference, I was struck by the intensely maternal, and sisterly perspective Laudato Sí encapsulates. Mary Robinson correctly pointed out the lack of a specific focus on the role of women in the encyclical, but for me the maternal, sisterly dimension is profound and essential. The whole Encyclical in fact revolves around this opening sentence: “Our common home is like a sister with whom we share our life and a beautiful mother who opens her arms to embrace us.” Miss that, and you miss the point. In fact, the image that best sums up the new viewpoint that Pope Francis is proposing, is the image of mother feeding her newborn child. It is the image that best embodies the most fundamental, natural, intimate relationship of mutual love and dependency. It is the icon par excellance of the culture of care that is now needed. It is an idea I stumbled on several months ago, as I wrote here, but is one that seems increasingly relevant. This image of mother and child, the first tender bond of inter-generational care is the measure of the love we now need to save us from ourselves, and the perils of a climate changed future for our children. This poem of Kathy Jetnil-Kijiner from the Marshall Islands to her baby speaks volumes of the mother-child tragedy unfolding before us. The Prime Minister of Tuvalu reminded us that thousands of children are already faced with an uncertain future as climate refugees. Rather than getting lost in useless arguing, above all we need to draw our children and grandchildren close to us and make them a solemn promise to do everything in our power to change course. For me, in fact, my main motivation in the struggle against climate change and injustice , which makes me do what I’d normally not consider doing, is simply to be able to answer the questions of my children when they grow up: “you mean you knew – so what did you do?” Mary Robinson spoke beautifully at the Conference of this deeply maternal perspective. In her speech she focused on the encyclical theme of earth as our common home. She made the connection to motherhood and the need to see the earth as a home – and us as all as one family. For mothers all over the world, the concern with the running of the home is second nature. This gives women a better sense of limits, as they are the ones who usually focus on tending for the family, ensuring there is enough to go round. Extending that simple idea of being one family to the world scale can help us find new ways to care for our shared home. The word ‘economy’ in fact, comes from the greek word for home – oikonomia ‘household management’, based on oikos ‘house’ + nemein ‘manage’. Through re-imagining the economy from that image of the home, from maternal care, sisterhood, and Ubuntu we can start to build a truly transformative vision. Perhaps the encyclical’s most profound message is that the earth is our mother, with whom we need a loving relationship to survive and thrive. As Naomi Klein pointed out, we are simply realising we are not the masters of creation. The truth is we utterly depend on mother earth – in reality we are as helpless in the face of nature, as a newborn child feeding from its mother’s breast. We urgently need to feel that again. When that loving relationship with the mother is broken, the impact on the child is devastating, and often irreparable. Repairing that loving relationship once more is essential. That is a dangerous message to those who wield unscrupulous power.
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1576. Good new crisis writing

i am always on the watch for new ways of writing, new tone, mataphor, ontologicsl assumptions, views kf past history.. Irony, sarcasm, dream,  This one is a good example.
It’s too late to save our world, so enjoy the spectacle of doom by Stewart Lee. From the guardian Sunday 5 July 2015 02.00 EDT In the middle of a week of record temperatures, as if unaware of the irony, the business community celebrated the consolidation of its attempts to force the government’s hand to agree to a third filth-generating runway at Heathrow, tipping all species on Earth towards extinction. Everything will die soon, except for cockroaches, and Glastonbury favourite the Fall, who will survive even a nuclear holocaust, though they will still refuse to play their 80s chart hits. In Norfolk on Thursday, the tarmac melted, and ducklings became trapped in sticky blackness. When a lioness whelped in an ancient Roman street, Caesar thought something was up. Here, solid matter transmuted to hot liquid and swallowed baby birds whole. How surreal do the signs and warnings have to become before we stop in our tracks? Are whales required to fall from the sky? Does Tim Henman have to give birth to a two-headed cat on Centre Court? CBI director John Cridland says: “The government must commit to the decision now, and get diggers in the ground at Heathrow swiftly by 2020.” Head of the Institute of Directors Simon Walker says: “There can now be no further delay from politicians.” And Segro chief executive David Sleath merely bellows: “Get on with it!”, like some selfish Top Gear presenter demanding his steak dinner after dawdling, the planet itself the powerless BBC employee he punches in the face. The business community has thrown its executive toys out of the pram, and now there are chrome ball bearings on strings everywhere, tripping up unpaid interns and making life difficult for immigrant cleaners scrabbling under desks on less than minimum wage. David Cameron, an electoral promise to oppose the third runway sticking in his throat like an undigested salmon bone, can only duck his cowardly head and hope some terrible atrocity or a Wimbledon win wafts our attention away. When I was a child, my grandmother always referred to our pet dog’s excrement as “business”, so to this day, when I envisage “the business community”, I imagine a vast pile of sentient faeces issuing its demands while smoking a Cuban cigar, an image that seems increasing accurate as the decades pass. The destruction of all life on Earth is inevitable if fossil fuel use continues unabated. (Legal. Please advise. Are we allowed to say this now without being shouted down by Nigel Lawson?) The business community’s genius move in the third runway debate has been to change the dialogue from an argument which should have been between building a runway and not building a runway at all, and trying to restructure our society to avoid the need for a third runway, into an argument about where exactly it was best to position this massive portent of our world’s forthcoming doom. It’s like offering an innocent man who doesn’t want to be hanged the chance to be poisoned instead. As with fracking and the academification of all schools, decisions have already been made behind closed doors by forces beyond our control. Heathrow’s third runway will happen. Assurances about air quality are meaningless. The UK has already been threatened with £300m a year fines by those meddling Brussels bureaucrats for our terrible British air, and Boris’s solution in London was to spray adhesive around the city by night to try and stick the pesky pollution particles to the pavement, like a lazy duplicitous boy pushing his mess under his bed rather than tidying up his room. Facebook Twitter Pinterest Illustration by David Foldvari. And in 50 years, will there be anyone left to remember what it was like before a sterile and toxic environment gradually became the norm? Can it only be four decades ago that every summer holiday trek along A-roads to South Devon caravan sites left our Morris Marina windscreen smeared thick with now-disappeared invertebrates, that sparrows swarmed around morning milk bottles, that sticklebacks and minnows spawned in every park pond, that hedgehogs gathered at night in suburban gardens and lay flattened in their thousands on roads every morning, and that an actual hare ran out of the encroached common land of Palmers Rough, on the fringes of Birmingham, to be chased by my grandfather along Arnold Road in that same Morris Marina, a sight that would seem as surreal today as escaped hippos wandering the streets of some collapsed eastern European capital? The absence of abundance is already accepted. The metaphors of the nature poets, mapping human hearts through once commonly understood imagery, are irrelevant and impenetrable. “The sun of Winter, / The moon of Summer, and all the singing birds / Except the missel-thrush that loves juniper, / Are quite shut out.” I’m sorry. The missel-what? Can the juniper be monetised? Is this missel-thing for sale? Our children already have no stable baseline from which to calibrate the loss of all that lives. It’s game over. Bearing this in mind, I finally find myself reluctantly agreeing with the business community. There is no time for delay. Let’s build the runway. Let’s choke the Earth. Let’s get this damn thing over with, for what can be avoided, whose end is purposed by the mighty gods of business? Hasten our demise, let our children be the last of their sorry line, and spare their unborn descendants any further suffering. We will not save the rhino. We will not even save the hedgehog. How can we save the world? But, if you can purge cheap sentiment from your mind, how exciting and fascinating it will be to watch as the world becomes uninhabitable. It’s almost worth going on a health kick to survive another 60 years and see everything immolated. How many humans have had the awe-inspiring opportunity to witness such spectacle: the end of all that is But something of us should be preserved, I think, for posterity. Perhaps the village of Harmondsworth and its residents, instead of being demolished and paid off at 125% of their homes’ market values, should be sealed within a vast dome and shot spacewards, to drift on the solar winds as a museum of mankind, saving something of our society at the point where it finally became unsustainable. Under a vast skein of convex glass Harmondsworth floats beyond Orion’s Belt, its ancient tithe barn, Betjeman’s “cathedral of Middlesex”, still and safe under the stars; local resident Graham Wibrew, his once imperilled kitchen extension complete, watches the comets and thinks of home; and the bells of 11th century St Mary’s toll the eternal hours silently in endless empty space. “But far more ancient and dark / The Combe looks since they killed the badger there, / Dug him out and gave him to the hounds, / That most ancient Briton of English beasts.” Edward Thomas, The Combe....
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1574. Greece and economics

Looking at the landscape for evidence.. is the following view coherent and correct? I believe it is. The greek rich borrowed money, the banks cooperated and the funds came through mostly German Banks. The rich Greeks squandered or absconded with the money leaving ordinary Greeks to bail out the banks. Bad business.  Who now pays, who is responsible?

Over the last five years, the EU and the IMF have imposed unprecedented austerity on Greece. It failed badly. The economy shrank by 26%, unemployment rose to 27%, youth unemployment to 60% and, the debt to GDP ratio jumped from 120% to 180%. The economic catastrophe led to a humanitarian crisis with more than 3 million people on or below the poverty line. Against this background, the Greek people elected the Syriza-led government on 25 January 2015 with a clear mandate to put an end to austerity. In the ensuing negotiations the government made it clear that the future of Greece is in the Eurozone and the EU. The lenders however insisted on the continuation of their failed recipe, refused to discuss a write down of the debt, which the IMF is on record as considering unviable, and finally, on 26 June, issued an ultimatum to Greece by means of a non-negotiable package that would entrench austerity.  This was followed by a suspension of liquidity to the Greek banks and the imposition of capital controls. In this situation, the government asked the Greek people to decide the future of the country in a referendum to be held next Sunday. We believe that this ultimatum to the Greek people and democracy should be rejected. The Greek referendum gives the European Union a chance to restate its commitment to the values of the Enlightenment ? equality, justice, solidarity - and to the principles of democracy on which its legitimacy rests. The place where democracy was born gives Europe the opportunity to re-commit to its ideals in the 21st century.? Etienne Balibar, Costas Douzinas, Barbara Spinelli

The larger frame might be: the world debt situation is terrible and those on the periphery will suffer first, being powerless. But what is happening to them will migrate toward the center as the total system is more broke. In this larger frame, who is to blame? I do not know the answer. 1486? Human nature? systems effects beyond any human control?
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1573.  stiglitz on greece

This seems to me right. To a point, and then.. Germany talked Greece oligarchs into borrowing and the people are forced to pay it back, which is not posible. The idea of punishing the oligarchs, in Greece and the rest of the financial commuity, is not taken seriously though it is the serious path.
Europe’s Attack on Greek Democrac
NEW YORK – The rising crescendo of bickering and acrimony within Europe might seem to outsiders to be the inevitable result of the bitter endgame playing out between Greece and its creditors. In fact, European leaders are finally beginning to reveal the true nature of the ongoing debt dispute, and the answer is not pleasant: it is about power and democracy much more than money and economics.
Of course, the economics behind the program that the “troika” (the European Commission, the European Central Bank, and the International Monetary Fund) foisted on Greece five years ago has been abysmal, resulting in a 25% decline in the country’s GDP. I can think of no depression, ever, that has been so deliberate and had such catastrophic consequences: Greece’s rate of youth unemployment, for example, now exceeds 60%.
It is startling that the troika has refused to accept responsibility for any of this or admit how bad its forecasts and models have been. But what is even more surprising is that Europe’s leaders have not even learned. The troika is still demanding that Greece achieve a primary budget surplus (excluding interest payments) of 3.5% of GDP by 2018.
Economists around the world have condemned that target as punitive, because aiming for it will inevitably result in a deeper downturn. Indeed, even if Greece’s debt is restructured beyond anything imaginable, the country will remain in depression if voters there commit to the troika’s target in the snap referendum to be held this weekend.
In terms of transforming a large primary deficit into a surplus, few countries have accomplished anything like what the Greeks have achieved in the last five years. And, though the cost in terms of human suffering has been extremely high, the Greek government’s recent proposals went a long way toward meeting its creditors’ demands.
We should be clear: almost none of the huge amount of money loaned to Greece has actually gone there. It has gone to pay out private-sector creditors – including German and French banks. Greece has gotten but a pittance, but it has paid a high price to preserve these countries’ banking systems. The IMF and the other “official” creditors do not need the money that is being demanded. Under a business-as-usual scenario, the money received would most likely just be lent out again to Greece.
But, again, it’s not about the money. It’s about using “deadlines” to force Greece to knuckle under, and to accept the unacceptable – not only austerity measures, but other regressive and punitive policies.
But why would Europe do this? Why are European Union leaders resisting the referendum and refusing even to extend by a few days the June 30 deadline for Greece’s next payment to the IMF? Isn’t Europe all about democracy?
In January, Greece’s citizens voted for a government committed to ending austerity. If the government were simply fulfilling its campaign promises, it would already have rejected the proposal. But it wanted to give Greeks a chance to weigh in on this issue, so critical for their country’s future wellbeing.
That concern for popular legitimacy is incompatible with the politics of the eurozone, which was never a very democratic project. Most of its members’ governments did not seek their people’s approval to turn over their monetary sovereignty to the ECB. When Sweden’s did, Swedes said no. They understood that unemployment would rise if the country’s monetary policy were set by a central bank that focused single-mindedly on inflation (and also that there would be insufficient attention to financial stability). The economy would suffer, because the economic model underlying the eurozone was predicated on power relationships that disadvantaged workers.
And, sure enough, what we are seeing now, 16 years after the eurozone institutionalized those relationships, is the antithesis of democracy: Many European leaders want to see the end of Prime Minister Alexis Tsipras’s leftist government. After all, it is extremely inconvenient to have in Greece a government that is so opposed to the types of policies that have done so much to increase inequality in so many advanced countries, and that is so committed to curbing the unbridled power of wealth. They seem to believe that they can eventually bring down the Greek government by bullying it into accepting an agreement that contravenes its mandate.
It is hard to advise Greeks how to vote on July 5. Neither alternative – approval or rejection of the troika’s terms – will be easy, and both carry huge risks. A yes vote would mean depression almost without end. Perhaps a depleted country – one that has sold off all of its assets, and whose bright young people have emigrated – might finally get debt forgiveness; perhaps, having shriveled into a middle-income economy, Greece might finally be able to get assistance from the World Bank. All of this might happen in the next decade, or perhaps in the decade after that.
By contrast, a no vote would at least open the possibility that Greece, with its strong democratic tradition, might grasp its destiny in its own hands. Greeks might gain the opportunity to shape a future that, though perhaps not as prosperous as the past, is far more hopeful than the unconscionable torture of the present.
Read more at http://www.project-syndicate.org/commentary/greece-referendum-troika-eurozone-by-joseph-e--stiglitz-2015-06#bVxRiCB0qdm8CHbE.99 The problem is that governing Europe right now is impossible. Finance, migration, climate, jobs. The pressure on the rulers is intense and we need to help. History suggestrs that only a round of violence can help, but the outcome might be worse, anoher french revolution?
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1572. Notes from a full weekend. Hume, Judt, Toynbee Varoufakis..

june 28 sunday. Lots of scatter. Looking today at Hume on constitutions. Simple point: all societies claim their authority comes either from god or from the people. Not likely. Usurpation and violence always determine who rules, not god nor the people. Tony Judt, in The World we Have lost, says that we have forgotten how to think politically. All is economics. Civilization ought to be about increasing wisdom an decrease in violence. CEO Pay Up 54% Since Recovery Began In 2009, Average Worker Pay Stagnant Graeber talks of violence and the constitution: if the people did it, it was a revolution, hence unlawful. Put authority in a quandary they avoid. Yanoufarkis with Nash, interview posted to blog This is really good pro tennis, back and forth. The language of the game. But it is a limited vocabulary. Let see commodities global currency technology international trade capital flows Pareto condition bargaining China is setting up a 20B fund for growth and innovation. How to avoid money going to finance climate impact? I am thinking that Violence may be more important as we regather our humanity and take on the feelings of animals. Excessive, abusive and obsessive use of modern technologies tends to reduce one's empathy and make one having less and less direct physical interaction with others. More and more lone rangers? http://aeon.co/magazine/society/why-we-need-arnold-toynbees-muscular-humanism/ As the dreams of Silicon Valley fill our world, could the dowdy historian Arnold Toynbee help prevent a nightmare? “Rent-A-Tent - The Next Silicon Valley Startup | Zero Hedge” On animal intelligence. [Are killer whales persons?: The more we learn about orcas, the more our assumption of innate superiority looks like a presumption - Salon.com](http://www.salon.com/2015/06/27/are_killer_whales_persons_the_more_we_learn_about_orcas_the_more_our_assumption_of_innate_superiority_looks_like_a_presumption/ Are killer whales persons?: The more we learn about orcas, the more our assumption of innate superiority looks like a presumption They have big brains, complex social structures, rich emotional lives -- how can we still hold them captive? Look at Jerry’s Brain for more. Reading the art of poetry poetry and abstract thought by Paul hoor Reading the art of poetry poetry an abstract thought by Paul valery. "Consult your own experience; and you will find that we understand each other, and ourselves, only thanks to our rapid passage over words." This for use in serious conversations This for use in human nature. This for use in new economic thinking some doug thoughts Money is provisional. Very important Human society is a giant garbage, convenience, and must have producing machine. It is so constructed that it has allowed us to reproduce ourselves most of us dependent on the production of that machine for our ability to eat and sleep, to be part of society, the very society that is producing the garbage and using us. How to square that with Walt whitman? How about Leo Marx on the machine in the garden? Each of us lives in a number of different environments and we have a self that is contingent on. Each. Because the environments are different the cells are not quite the same. Who we are at our desk, our bed, or car, the airport terminal, are not the same. The elementary logic of cutting interest in order to stir the economy but failing to lower or raise when  productivity increases as in the  in the Keynesian problem of not raising taxes in better times. Beginnings: From the dictatorship of the colonialists to the tyranny of economics, This is another frame for economics. Italian trade in the 12th century was already a beginning of forced compliance on non  europeans. From David Hume. This is important as said above. [Edited and rendered into HTML by Jon Roland OF THE ORIGINAL CONTRACT David Hume 1748 As no party, in the present age, can well support itself without a philosophical or speculative system of principles annexed to its political or practical one, we accordingly find, that each of the factions into which this nation is divided has reared up a fabric of the former kind, in order to protect and cover that scheme of actions which it pursues.“The one party, by tracing up government to the Deity, endeavoured to render it so sacred and inviolate, that it must be little less than sacrilege, however, tyrannical it may become, to touch or invade it in the smallest article. The other party, by founding government altogether on the consent of the people, suppose that there is a kind of original contract, by” The sovereign cannot, properly speaking, be called his vicegerent in any other sense than every power or force, being derived from him, may be said to act by his commission“constable, therefore, no less than a king, acts by a divine commission, and possesses an indefeasible right” “constable, therefore, no less than a king, acts by a divine commission, and possesses an indefeasible right” “When we consider how nearly equal all men are in their bodily force, and even in their mental powers and faculties, till cultivated by education” r“But we trace it plainly in the nature of man, and in the equality, or something approaching equality, which we find in all the individuals of that species. The force, which now prevails, and which is founded on fleets and armies, is plainly political, and derived from authority, the effect of established government. A man's natural force consists only in the vigour of his limbs, and the firmness of his courage; which could never subject multitudes to the command of one. Nothing but their own consent, and their sense of the advantages resulting from peace and order, could have had that influence.” “They assert, not only that government in its earliest infancy arose from consent, or rather the voluntary acquiescence of the people; but also that, even at present, when it has attained its full maturity, it rests on no other foundation.” “Almost all the governments which exist at present, or of which there remains any record in story, have been founded originally, either on usurpation or conquest, or both, without any presence of a fair consent or voluntary subjection of the people.” “The face of the earth is continually changing, by the increase of small kingdoms into great empires, by the dissolution of great empires into smaller kingdoms, by the planting of colonies, by the migration of tribes. Is there any thing discoverable in all these events but force and violence? Where is the mutual agreement or voluntary association so much talked of?” “but during the fury of revolutions, conquests, and public convulsions, military force or political craft usually decides the control” “The prince is watchful and jealous, and must carefully guard against every beginning or appearance of insurrection. Time, by degrees, removes all these difficulties, and accustoms the nation to regard, as their lawful or native princes, that family which at first they considered as usurpers or foreign conquerors.” Toynbee. http://aeon.co/magazine/society/why-we-need-arnold-toynbees-muscular-humanism Human mastery of nature came at a price: in 1921, Europe’s battlefields were still cooling from the heat of industrial warfare and the blood of millions dead. They whispered the terms of this Faustian bargain to anyone who would listen. In the roaring 1920s, not many people were listening. Europeans wanted better lives and they were certain that scientific progress would provide them. After the devastation of the Great War, rationalisation ruled from London to Moscow: empirical methods and new technologies were adopted to streamline everything from cityscapes to national populations, intellectual work to household chores. Many administrators and activists believed that there was no problem (material, institutional or social) that couldn’t be engineered away. The US novelist Ursula K Le Guin put it well in her speech at the National Book Awards in New York last year when she observed that we need ‘the voices of writers who can see alternatives to how we live now, and can see through our fear-stricken society and its obsessive technologies, to other ways of being’. This is what the humanities are for – not writing better quarterly reports or grabbing a gig in corporate communications – but for posing fundamental questions of value and helping us imagine alternatives to the way we live. dc. i read that speech, need to revisit.  
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1571. Varoufakis and Nash, great interview.

not to normally post whole articles but thi is so instructive on how good economists trade ideas. http://yanisvaroufakis.eu/2015/06/02/in-conversation-with-john-nash-jnr-on-ideal-money/ In conversation with John Nash Jnr on Ideal Money Posted on June 2, 2015 by yanisv A conversation I was privileged to have with John Nash in June 2000 is posted below as a small tribute to a great man. (The conversation was motivated by a talk John Nash Jr gave in Athens in 2000 entitled IDEAL MONEY. The text of the conversation below was published in 2001 as a chapter in a volume, available only in Greek, entitled Game Theory: A volume dedicated to John Nash, edited by K. Kottaridi and G. Siourounis) Yanis Varoufakis: Professor Nash, in your talk on Ιδεώδες Χρήμα (Ideal Money, June 2000) at the Old Parliament House in Athens, you commented, in relation to the Eurozone, that membership of a club makes sense only if it is exclusive. (Greeks know this well enough since the earlier consensus among experts that Greece would not be allowed in, made the project of entry into the Eurozone particularly popular here.) Then you strengthened your claim by suggesting that if everyone joins an alliance, the alliance is absurd. But is it? Does a Grand Alliance not gain meaning if its establishment entails unanimous agreement by all members regarding its institutions? Is it not akin to a Grand Bargain over the precise mechanism for distributing gains? (Something like agreeing on the properties a cooperative solution should possess?) And if so, does a Grand Alliance not make sense as a framework for conflict resolution? John Nash Jr: The words ‘club’ and ‘alliance’ do not have the same meaning. This is why in game theory we use a third word which also differs conceptually from the first two words: ‘coalition’. It is of course true that it is possible to have a coalition between all the nations (or the states) of the world. The Universal Postal Union, with its Berne headquarters, is a good example. Mind you, it would be far fetched to refer to this union as a ‘club’. I am not sure I can recall the precise phrase I used in my talk. Nevertheless, a truly Grand Coalition, that includes ‘everyone’, is an important and natural concept of game theory. It is the means by which an efficient (in the context of Pareto’s definition) agreed resolution to disputes can be imagined following mutual concessions. Yanis Varoufakis: Regarding your specific proposal (that is, a new Gold Standard based not on Gold but on a basket of suitably weighted material commodities), is your ‘ideal money’ meant as a proxy for transferable utility (such that the outcome of exchanges can become genuinely independent of the way payoffs are calibrated)? John Nash Jr: The value of effective transferable utility is obvious. However, as far as contemporaneous transactions within the ‘walls’ of a domestic economy are concerned, the transferability of values can be eased equally well by ideal and non-ideal money. But when it comes to inter-temporal, long-term transactions, e.g. mortgages, the difference between ideal money and typical European currencies would be somewhat intense, if not dramatic. Yanis Varoufakis: If your proposal were to be adopted, much inter-state bargaining would take place regarding the weights to be attached to the various commodities making up the global currency (as nation-states would want to favour the commodities they are rich in). Given the changing conditions of technology, international trade and capital flows, are you confident that this tension would be resolved efficiently? In other words, are you confident that the Pareto condition is sensible in this type of bargaining problem? John Nash Jr: Quite. The selection of the correct base, or index, for the construction of a value standard to be used as an international consumer price unit, founded on internationally traded goods, will be difficult to agree upon and inevitably raises many political issues. However, it is not substantially different to choosing a base unit, within a domestic economy, for measuring the cost of living (taking into account manufacturing cost and the cost of raw materials). Recently I became aware of the possibility that, besides metal prices, transportation costs could play an important role in shaping such an index. You can see, I am sure, that this would give Greek shipping a say in the formation of such an index. Yanis Varoufakis: One might think, judging by your comments, that your responses of Keynesian views on money are underpinned by a strong principle of rational determinacy; that is, on the assumption that there exists a range of efficient equilibria in the global economy, and that the market will automatically, though non-cooperatively, home in on one of these equilibria. It seems to me that Keynes’ point was that there exists no mechanism which can guarantee the implementation of such an optimal equilibrium. Indeed he thought that agents’ beliefs, even when rationally deduced from the evidence available, are often inconsistently aligned. Such misalignment may very well lead investors, workers etc. to decisions which do not confirm everyone’s plans; and if there is no guaranteed process guiding beliefs onto a Patero optimal path, the economy can be locked in a steady state of low economic activity (or aggregate demand). Keynes’ point was that, under those circumstances only (and not when agents beliefs are in equilibrium with one another), to print money is not to produce ‘bad’ money. Put simply, at times of recession, the central bank prints money and, to the extent that this increase in money supply boosts economic activity and enhances belief equilibration, more goods/value will be created to correspond to the newly minted money. Is this an erroneous view of how market economies work? John Nash Jr: It is indeed a Keynesian view that there are times when it is ‘good’ to print money (or to relax the central bank’s restrictions so as to effect an increase in the money supply, regardless of how this is measured). Do Keynesians consider the possibility when the opposite holds? When there is a need for the money supply to shrink? Yanis Varoufakis: Keynes certainly did believe that the government should tighten the reins during periods of boom, including a monetary tightening. Fiscal and monetary ‘laxity’ would only work, according to him, during periods of recession, the trick being to know when to phase out the ‘loosening up’, especially viz. fiscal policy. Do it too early and the economy chokes, returning (as in 1937 in the United States) back to recession. Leave it too late and you have inflation without any gains on investment or employment. Then again there is the interesting question if capitalism allows for such an optimal switching point – a question that some of us on the Left post. John Nash Jr: This is why I think that, even if at a certain moment in time, the freshly minted money is not immediately ‘bad money’ (in Gresham’s terms), it can soon turn into ‘bad money’ when it becomes part and parcel of the inflationary dynamic and the business cycle takes its toll. From what you are saying, Keynesian analysis turns on the difference between short-term and long-term analysis. I am a little sceptical of our capacity to make these distinctions. If a revolution were to take place today, replacing one regime with another, it is possible that many will benefit. However, it is also true that in eighty years or so it will be hard to measure, or even gauge, which of the benefits experienced by the population are due to the said revolution (and which to all the events following the revolution). Yanis Varoufakis: You seem to lean toward those who place price stability above other objectives, such as full employment. Historically, price stability has benefited rentiers over wage and profit earners. Are you not worried that your proposal, assuming it would succeed in engendering near-perfect price stability, might alter the balance of bargaining power in favour of non-producers? John Nash Jr: In the sense that rentiers receive fixed nominal income, you are right. Then again, under the assumption of rational expectations over prices, there are no rentiers, really, as investors choose between uncertain investment plans. This includes pensioners or those living on social benefits. In the United States, due to constant inflation, benefits were indexed. E.g. the Cost of Living Allowance. It is a political agreement of great importance because it tries to turn benefit and pension recipients into rentiers who have access to ideal money. If national politicians, e.g. Greece’s, fear that they will not have the funding necessary to support a decent system of social security, then they will resort to certain tricks by which to short-change pensioners. In fact, there was a time when the Nobel Institute invested like a rentier, relying on constant returns. But then circumstances changed, it proved disastrous. The main change was that they were forced to stop taking for granted the value of the Swedish crown or of any other currency. Yanis Varoufakis: Lastly, Professor Nash, would you say that money plays the same role today as it did in pre-industrial, even ancient societies? John F. Nash, Jnr: I think that the study of the history of money is truly worthwhile. You are lucky enough to be located in Greece, and also close to historic Constantinople, west of Midas and Ashurbanipal, etc. In other words, you are ideally located for such a study in monetary history. Coming to your question: No, money plays constantly evolving role, despite the continuity from one era to the next. Flux and Continuity. Presently, economists have focused on the theoretical problem of replacing paper money by plastic of electronic money, as well as on the repercussion of such a replacement. All this is happening against an interesting historical background of money that is either degenerate or of good quality – over which some ancient republic (for instance, Athens) or Empire maintained control.
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