Is Greece Falling into a Failed State?

According to the mainstream media and establishment experts, Greeks supposedly loathed austerity. They wanted “growth”, which is a euphemism for continued unsustainable government spending. If true, then this means that Greeks wanted free lunch.

But many Greeks may have come to realize that there is NO such thing as a free lunch. They needed to pay taxes in return for political entitlements.

Yet Greeks have been balking at doing so.

From Reuters.com/GreeceReporter.com

With anxiety mounting that Greece might vote for anti-austerity parties in the June 17 elections and be forced to leave the Eurozone of 17 countries using the euro as a currency, more Greeks – already legendary tax evaders – have stopped paying taxes. A senior Finance Ministry official on May 23 said that tax revenues have fallen 10 percent while two tax officials who declined to be named told Reuters that May revenues fell by 15-30 percent in tax offices away from the major cities and relative wealth centers of Athens and Thessaloniki.

So Greeks have been refusing to pay taxes. The left hand does not know what the right hand is doing. That’s if the establishment’s assertion is true. Greeks cannot have it both ways.

Yet Greeks realize that if they cannot pay, then they would have to default on their debts.

But the establishment says that the only way to salvation is through devaluation that can only be actualized from an exit. So their prescription: Default by devaluation.

So this ‘exit’ prospect gives further jitters not just to the average Greeks, but to foreign businesses based on Greece, as well. Foreign businesses have been apprehensive about having inadequate laws to cover or protect them once Greece decides to exit.

From the New York Times,

What can companies do when the legally impossible becomes reasonably probable?

Under European Union law, Greece cannot leave the euro. That is the theory. But in practice, any protection the law offers investors could be difficult to enforce, according to lawyers trying to protect their corporate clients against the upheaval sure to follow if Greece were to default on its debts and adopt a new currency.

So their advice is blunt: Remove cash and other liquid assets from Greece and prepare to take a short-term hit on any other investments…

But, apart from trying to ensure that debts are paid promptly and therefore in euros, legal options for companies are limited. Contracts covered by Greek law, particularly for services delivered in Greece, provide little protection against the currency’s being redenominated and devalued — a development regarded as unlikely until recently.

“Greece would, through its laws, be able to amend contracts governed by Greek law or to be performed within the territory of Greece,” Mr. Clark said. “It is the governing law and the place of performance of the contract that is most important.”

International contracts, which might be covered by British, German or Swiss law, would be more likely to be honored in the designated currency, though in some cases the wording of the legal document may be vague.

And even if the law is on their side, companies would find that to extract payment from a Greek company, they would need a judge in Greece to enforce a ruling from a foreign court.

When the average Greeks doesn’t want to pay taxes, and when foreign businesses are either closing shop or transferring elsewhere, then this means that there will be insufficient tax revenues for the current government to finance her survival.

This also means that parasites have severely impaired the hosts, which may mean the prospective extinction of the parasitical relationship.

From FT/IBNLive.in

Greece's public finances could collapse as early as next month, leaving salaries and pensions unpaid unless a stable government emerges from the June 17 election, according to Lucas Papademos, the technocrat prime minister who left office after this month's inconclusive vote.

Mr Papademos warned that conditions were deteriorating faster than expected with cash flow likely to turn negative in early June amid a sharp fall in tax revenues and a loosening of spending controls during two back-to-back election campaigns.

Mounting anxiety that Greece is headed for further political instability and a possible exit from the euro has prompted many Greeks to postpone making tax payments, and has also accelerated outflows of deposits from local banks.

Athens bankers estimate that more than €3bn of cash withdrawn since the May 6 election has been stashed in safe-deposit boxes and under mattresses in case the country is forced to readopt the drachma.

Austerity becomes a NATURAL process as economic reality has been reasserting itself. This exposes the promises of a "state based elixir" as monumental delusion.

The prescription of devaluation has been provoking a bank runs and has been blowing up right ON the faces of establishment experts calling for devaluation.

This brings us to where the Greece might be headed for.

The new Deutsche bank boss calls Greece as a "failed state".

From Irish Times,

The incoming co-chief executive officer of Deutsche Bank today described Greece as a "corrupt" and "failed" state.

"Greece is the only country, I feel, where we can say 'it's a failed state,' it is a corrupt state, corrupt as far as its political leadership is concerned, and obviously other people had to be willing to support this," Juergen Fitschen, who takes up his post next week, said in a speech at a conference in Berlin.

Failed states, are characterized according to Wikipedia.org by

• loss of control of its territory, or of the monopoly on the legitimate use of physical force therein,
• erosion of legitimate authority to make collective decisions,
• an inability to provide public services, and
• an inability to interact with other states as a full member of the international community.

Often a failed state is characterized by social, political, and/or economic failure.

In reality “failed states” are mainly products of unsustainable parasitical relationships, whether in Somalia, Chad or Sudan as rated by US think tank Fund for Peace and Foreign Policy.

But this does not necessarily mean social, political and economic failure as commercial operations exists. Otherwise logic says that these nations will have been uninhabited or deserted either through diaspora or death. But this has clearly not been the case.

Ironically, the US Central Intelligence Agency even admits that the number one “failed state” Somalia as having a “healthy informal economy”.

Thus the “inability to provide public services” does not represent reality. The difference is that mainstream cannot swallow or fathom such ideas. And the global political establishment has been repeatedly attempting for “failed states” to go mainstream through foreign interventions.

Instead, what a “failed state” means is that there is no standing government or that imposed government will mostly likely be ignored by society or what could be called “stateless society”.

I am not sure if Greece will technically become a failed state.

What is certain is that we are witnessing the accelerating collapse of a parasitical relationship anchored upon the spendthrift welfare and bureaucratic state.

This validates anew the great Ludwig von Mises who presciently warned more than half a century ago that

An essential point in the social philosophy of interventionism is the existence of an inexhaustible fund which can be squeezed forever. The whole system of interventionism collapses when this fountain is drained off: The Santa Claus principle liquidates itself.

And like Dr. Marc Faber, the collapse of the current Greece form of government should be bullish for Greeks over the long term (whether through exit or as part of the EU), as Greeks will be compelled to live within the laws of economics through greater economic freedom, and eschew feeding on political parasites.

Video: Ron Paul on Iran: Our Policy Actually Do The Opposite Of What We Intend Them To Do

The common view is that meddling with the political economy of other nations has neutral effects to the nation which is being interfered with. And that they further think that whatever evil or criminal or militant behavior seen represents as internally driven dynamics.

This view misreads or downplays or ignores the causal influences of foreign interventions.

Ron Paul addresses this popular error here on the Iran issue.

[2:15] [bold emphasis added]

You know they are a very week nation, they are responding in a natural way. But they don’t want trouble because they can be annihilated in about 40 minutes. You know even by Israel or the United States, this idea that they are looking for a fight I think that they are a concoction of the West to prepare people for a war that is likely to come when there is a policy like this. I think it makes a perfect argument for my non-intervention foreign policy that we shouldn’t be engaged in stirring up trouble, and all these things we try to do to get rid of the regime in Iran right now actually plays into their hands because once we interfere to put on sanctions this brings the Iran people together.

They are having an election in a few months, Ahmadinejad is not strong politically, but when we interfere as an outsider, those dissidents who are struggling to get control of their country and their government and have a more sensible government, we have to drive them into the arms of the government. Just as we were brought together after 9-11, we were no dissenters, we all came together, they were republicans and democrats, we have to try to understand how our policy actually do the opposite of what we intend them to do.

When we impose restrictions or culture/religion or anything else to foreigners who resist, then the expected outcome would be conflict or trouble.

Ron Paul: UN Membership No Guarantee of Sovereignty Recognition

Ron Paul’s take on Palestinian Authority's application for UN membership (bold emphasis added)

I have reservations about the Palestinian drive for UN recognition. Personally I wish the United States would de-recognize the United Nations. As most readers already know, in every Congress I introduce legislation to end our membership in that organization. The UN is a threat to our sovereignty-- and as we are the main source of its income, it is a threat to our economic well-being. Increasingly over the past several years, we see the United Nations providing political and legal cover for the military aspirations of interventionists rather than serving as an international forum to preserve peace. Neoconservatives in the US have grown to love the United Nations as they co-opt the organization under the guise of endless "reform." Under the sovereignty-destroying doctrine of "Responsibility to Protect," adopted at the 2005 World Summit, the UN takes it upon itself to intervene in internal conflicts of its member states whenever it believes that human rights are being violated. Thus under "Responsibility to Protect," the UN provides the green light for a kind of global no-knock raid on any sovereign country.

If asked, I would personally counsel the Palestinians to avoid the United Nations. UN membership and participation is no guarantee that sovereignty will be respected. We see what happens to UN members such as Iraq and Libya when those countries' leaders fall out of favor with US administrations: under US and allied pressure a fig leaf resolution is adopted in the UN to facilitate devastating military intervention. When the UN gave NATO the green light to bomb Libya there was no genocide taking place. It was a purely preventative war. The result? Thousands dead, a destroyed country, and extremely dubious new leaders.

Read the rest here

The UN has been a tool for global political-economic elites to advance their interests around the world.

War on Terror: More Terrorism Deaths Since 9-11

Since 9/11, the US government led war on terror has brought upon more fatalities and not less. This in spite of all the legal and bureaucratic inconveniences imposed on travel, finance and etc.

From the Economist, (bold emphasis mine)

THE attacks of September 11th 2001 killed 2,996 people. Despite the subsequent declaration of a war on terror, over the past ten years thousands more have been killed by terrorists of all hues. The chart below tracks the number of terrorist-related fatalities worldwide. The data is from the National Consortium for the Study of Terrorism and Responses to Terrorism, which defines terrorism as “the use of illegal force and violence by a non-state actor to attain a political, economic, religious, or social goal”.

This is just another brazen example of government failure

Congressman and US Presidential aspirant Ron Paul is right, we should stop terrorism through empathy and free trade. (bold highlights mine)

Sadly, one thing that has entirely escaped modern American foreign policy is empathy. Without much humility or regard for human life, our foreign policy has been reduced to alternately bribing and bombing other nations, all with the stated goal of "promoting democracy." But if a country democratically elects a leader who is not sufficiently pro-American, our government will refuse to recognize them, will impose sanctions on them, and will possibly even support covert efforts to remove them. Democracy is obviously not what we are interested in. It is more likely that our government is interested in imposing its will on other governments. This policy of endless intervention in the affairs of others is very damaging to American liberty and security.

If we were really interested in democracy, peace, prosperity, and safety, we would pursue more free trade with other countries. Free and abundant trade is much more conducive to peace because it is generally bad business to kill your customers. When one’s livelihood is on the line, and the business agreements are mutually beneficial, it is in everyone’s best interests to maintain cooperative and friendly relations and not kill each other. But instead, to force other countries to bend to our will, we impose trade barriers and sanctions. If our government really wanted to promote freedom, Americans would be free to travel and trade with whoever they wished. And if we would simply look at our own policies around the world through the eyes of others, we would understand how these actions make us more targeted and therefore less safe from terrorism. The only answer is get back to free trade with all and entangling alliances with none. It is our bombs and sanctions and condescending aid packages that isolate us.

Should The Philippines Wage War With China Over The Executions Of The Drug Mules?

“It is just that the Philippines is less powerful than China in warfare” remarked a neighbor in the allusion that the Philippines is powerless to impose her will over its larger and far powerful Asian contemporary following yesterday’s execution of the 3 drug mules.

Stunned by this comment I retorted, “Do you honestly believe that the Philippines should go to war with China for them?”

Such unwarranted emotional interpretation of events appears to be the offshoot of the quality of reasoning peddled by mainstream media which the vulnerable public could have misinterpreted.

From the Inquirer.net

Three Filipinos convicted of drug smuggling were executed in China Wednesday, triggering condemnation in the Catholic Philippines and despair for family members who shared their final moments...

The executions came after repeated pleas by the Philippine government for their sentences to be commuted were turned down, and ended vigils in the country where supporters of the trio had prayed for a miracle.

There are many issues encompassing this case which makes it complex.

One it is the issue of drug trafficking.

Two it is the issue of death penalty.

The populist sentiment seems mostly aligned with the position taken by the influential Catholic church which hasn’t been about the legitimacy of DOMESTIC death penalty laws but death penalty as a moral principle.

From the same article,

Amnesty International as well as the influential Roman Catholic church swiftly condemned the executions.

"We strongly condemn the executions of the three Filipinos," Agence France-Presse quoted Amnesty's Philippine representative Aurora Parong.

"The Philippines should have taken a stronger action, and it is now its moral duty to lead a campaign against death penalty in Asia."

Amnesty International says China is the world's biggest executioner, with thousands of convicts killed every year. The Philippines has abolished the death penalty.

I wholeheartedly agree that death penalty should be abolished. But this is largely a non-sequitur. As you can see from the above article, the Philippines had been suggested to take “stronger action”? But how?

The populist perspective fundamentally ignores the fact that this issue is PRIMARILY about China’s DOMESTIC policies and NOT of ours.

It is the issue of FOREIGN POLITICAL relations.

If the US hasn’t been able to successfully compel China to alter her exchange rate policies (to resolve so called global imbalances) or on other contentious geopolitical issues as the UN environment saving program called the Kyoto Protocol, how the heck can we expect that the Philippines implement “stronger action” on China to save the felons-turned-victims?

As an aside, I don’t have the full knowledge of the circumstances behind this case for me to pass any judgments. I can only deduce from what I read or hear. So I am neutral on this.

So aside from geopolitical relations, the other very important issue is the FALSE impression that the Philippine political leadership can do something at all. This is an example of the religion of politics-the errant belief that government CAN and HAS to do SOMETHING.

Where the local political leadership can hardly control or manage domestic political issues, like the Congressional impeachment of the Ombudsman Merceditas Gutierrez or for many other matters, how can we expect the Philippine government to WANGLE her interests over China? Wage war as my neighbor implied?

The fact is that territorial borders IMPOSE a limit on the sphere of political power influence of the Philippine government.

This also means that the political priorities of the Chinese government will determine the fate of the Filipino drug mules and NOT the Philippine government (as had been the case).

The most we can do is to perhaps appeal—which is what the government did! But this serves no more than as photo OP and as advertisement mileage for politicians.

But in the realization that the Chinese government has been the largest practitioner of the death penalty, mostly applied to their own citizens, Filipinos shouldn’t expect much even from the government’s appeal.

As the Economist reported (bold emphasis added)

CHINA executes more of its own citizens than any other country, and more than all others in the world combined. “Thousands” of Chinese were executed in 2009 according to Amnesty International's annual study, which states that an exact number is impossible to determine because information on the death penalty is regarded as a state secret. But this gruesome record may yet change. The National People's Congress is reported to be reducing the number of offences that are punishable by execution. Among the crimes that currently carry the death penalty are bribing an official and stealing historical relics

Fatalities from China’s death penalty have even been far larger than the composite deaths of the whole world!!!

I’d like to add that there are reportedly some 125 cases of Filipinos scheduled to be executed elsewhere in the world where 85 are allegedly drug related cases, so why pick on China?

I am not a defender of the incumbent administration. But the essential point over this controversy is that the mainstream and the gullible public don’t seem to realize that this is a foreign policy issue, subject to the whims of China’s political leadership regarding the implementation of local rules on our supposedly erring immigrants or OFWs. This is also the issue of China's political and legal system.

This isn’t an issue of nationalist schism.

Importantly, this unfortunate event exposes on the grand delusion that the government CAN do something WHEN they can’t.

Filipinos abroad should realize that they are subject to political risk environment of their host countries that are vastly different than here, and must learn to safeguard their interest than rely on the government.

All the drivel from politicians about more spending to augment legal services for OFWs represent as mere ‘feel-good-vote-buying’ postures. Remember we don’t share the same legal process, institutions or framework with China, thus any assumption for more legal spending would likely only translate to waste.

Finally, when I asked the above question to the media indoctrinated youth, he simply turned around and walked away.

UPDATE: (I forgot to include this)

What happens if the Philippine government does successfully negotiate the mitigation of the sentences of the accused? Would this not serve as moral hazard that could encourage more drug related trades?

It is bad enough for us to expect our government to patently interfere with many aspects of our lives. But it is even worst to believe that our government has to intervene into the lives of people who lives beyond our borders.

Saudi Arabia Led GCC Intervention In Bahrain

As everyone seems fixated on Japan, which seems to have eclipsed most of the world’s problems, here is one important development: Arab dictators appear to have closed ranks.

The Bloomberg reports, (bold emphasis mine)

Saudi Arabian troops moved into Bahrain as part of a regional force from the Gulf Cooperation Council, the first cross-border intervention since a wave of popular uprisings swept through parts of the Arab world.

“This is war against the unarmed Bahraini people,” said Matar Ebrahim Ali Matar, a member of al-Wefaq, the largest Shiite opposition party.

Mainly Shiite protesters in Bahrain have been demonstrating since Feb. 14, demanding democracy through free elections from their Sunni monarch. Shiites comprise as much as 70 percent of the population. King Hamad bin Isa Al Khalifa has offered a national “dialogue” toward changes in response, which hasn’t quieted protesters. Clashes escalated on Sunday with more than 100 people injured.

The deployment signals that the Bahraini regime has lost confidence it can deal with the protests and underscores Saudi Arabian concerns about uprisings at home, according to Christopher Davidson, a scholar in Middle East politics at Durham University and author of “Power and Politics in the Gulf Monarchies,”

“It is in Saudi’s interest that nothing serious happens in Bahrain, because it would embolden similar protests in its eastern provinces,” Davidson said in a telephone interview late yesterday.

Why is this important?

We get some clues from the same Bloomberg article,

The protests in the tiny kingdom have fueled fears of a regional Shiite uprising supported by mainly Shiite Iran. Many Shiite Bahrainis retain cultural and family ties with Iran and with Shiites in eastern Saudi Arabia; Bahrain’s Sunni ruling family has close links with Saudi Arabia, which holds 20 percent of the world’s oil reserves.

The U.S. is urging Bahrain, home to the U.S. Navy’s Fifth Fleet, to allow nonviolent protests and encouraging Gulf nations to use restraint, White House spokesman Jay Carney told reporters at the White House.

If the revolutions were merely local then we would be dealing with residual common factor risks, or event risk that is limited to a specific nation.

However, when domestic events includes international political interventions, then the risk factor transforms into systematic or market risk.

This is more a problem, for me, than that of Japan’s risk of a full blown nuclear meltdown (which on my assumption would eventually be resolved as others before it).

The key difference between the event risks of Japan and Bahrain is one of technical (Japan’s nuclear power woes) relative to social (religion based geopolitics).

The GCC intervention into Bahrain could well play into rival Islam Shiite-Sunni sect belligerency, particularly Saudi versus Iran, and possibly dragging more participants. At worst, there could be a regional conflagration.

This is a very important variable that needs to be monitored because further deterioration can extrapolate to a shift in the tide of the underlying market trends.