See below Prof. L Randall Wray’s interview for the Greek newspaper (Eleftherotypia) about Greece’s debt crisis.
By Chronis Polychroniou
*This is an english translation of the greek publication.
This is why we have used the term “war” to describe the nature of this conflict. No country should sit idly by and allow financial institutions to bring it down. If Greece cannot secure the support of other Euro nations, it will have to unilaterally declare war on those institutions operating on its soil—those actively engaged in undermining its economy.
1.Why isn’t the Obama administration doing something about Wall street’s manipulation and destruction of the world’s economies?
Wray: That is of course a difficult question to answer because it is not possible to get inside the heads of administration officials. We can only look at this from the outside, and from the outside it stinks of scandal. I am beginning to think that this will go down in history as one of the worst scandals the US has ever seen. The triggering event will be seen as the AIG bailout—in which the NYFed led by Timothy Geithner gave billions of dollars to AIG that it funneled to counterparties like Goldman to pay off CDSs at one hundred cents on the dollar. There was and is absolutely no justification for that action. But far worse is the cover-up, in which the Fed and Treasury are still engaged. It is always the cover-up that brings down administrations. This one looks like it ranks with a Watergate cover-up. I repeat that we do not have the facts, so the appearances might be incorrect. But that is all the more reason for the Obama administration to come clean. It must release all internal documents, and all emails, and account for every dollar spent. It must name names and it must then prosecute all fraud—even if that goes right to the top of the Treasury and Fed.
2.How do you explain the hysteria against Greece by major European financial newspapers?
Wray: There is of course always some sensationalism in the press. And Greece looks on the surface like an easy victim. And there is some residual belief that “Mediterranean nations” need more discipline (I have lived in Italy and am aware that even some Italians welcomed the Euro on the belief that it would discipline their own government). But leaving all that to the side, this story of Greece has elements that are sure to grab the attention of the press. A “profligate” government that spends well beyond its means. Shady backroom deals with huge Wall Street firms who help to hide debt and deceive the public as well as the rest of Euroland. And then a turn-coat Goldman that bets against its client (a normal practice at Goldman). The government now proposes austerity, and the population predictably reacts against cuts to pay and services. Civil unrest always makes headlines.
I think there is probably also a fear that they may be next. When bullies beat up a hapless child on the schoolyard, a crowd circles and cheers them on—in the fear that one of them might be next. I repeat, no Euro country is safe. So there is no doubt some perversity in the financial press’s attack on Greece, a sort of marveling at how easy it is to bring down a nation and an uneasy recognition that a similar fate awaits their own.
Greece’s real problem is the set up of the Euro, it is not due to failings of national character. In a sense, the arbitrary unfairness of this is what makes the story so much more exciting for the press.
3.What’s your assessment of the Greek government’s fiscal austerity program?
4.Aside from Greece seceding from the EE and defaulting on its euro debt, what other options may have been available to the government other than the austere fiscal measures it introduced last week?
Wray: Seceding is, I think, a last resort. It would be quite costly. If Greece does secede then of course it should default on its debt and reinstate its own sovereign currency. In the short run it will be painful; in the long run it would be the correct strategy only if there is no hope for changing fiscal arrangements in Euroland.
Some have argued that stronger Euro nations might bail out Greece. I do not think that will happen, for reasons discussed above. Greece is only the first victim. The stronger nations might take over Greece’s debt, but then they would need to take over Portugal’s, then Italy’s, then Spain’s. That is not possible as markets would then attack Germany and France.