Monday, 9 February 2015

ALAN GREENSPAN, GREECE AND THE MANUFACTURING OF A POLITICAL AND BUSINESS CLIMATE!



From 2010 until the present, I have been writing that Greece will not leave the euro zone. This is not because the Greek economy of about 180 billion euro or 2% of EU GDP has had such a great experience in the EU, but because Germany as well as most of the European governments, and especially banks know that the cost of Greece leaving to the EU economy will be detrimental for all of Europe. The devastation could potentially hit the stock markets from 15 to 25% and impact the entire world economy with the euro sliding sharply as a reserve currency and imports coming to Europe dropping thus world GDP droping along with it. The psychological impact will be so severe and the psychology of fear and uncertainty that drives markets so shocking immediately after Greece exist that analysts and politicians will be asking if Spain is next, and if the EU itself can survive. In short, this is the worst possible scenario for the EU and its political leaders and financial elites know it very well. Moreover, the US knows it and is pressuring Germany not to push Greece out of the euro.

Despite this reality well known to those in political and financial circles in Europe, US,  and China which has a big stake in the Greek ports, there are well-paid spokespeople who try to influence the currency market, the bond market and the stock market by making statements without fully disclosing their employer who paid them to influence the political and business climate. I have written in the past five years that noble prize economists, former US officials acting as private consultants for financial firms, as well as “celebrity economists” on the payroll of hedge fund companies have failed to disclose their sources of income when they present their views on the euro as a reserve currency, the EU stock market and the bond market.     

On 1 February 2014, Alan Greenspan argued in a BBC program that Greece will eventually leave the euro. Fair enough because Greenspan is able to see Greece's future better than the rest of the world and has every right to share his indispensable wisdom with the innocent public. However, all news organizations around the world presented the story as one coming from the analytical mind of the former FED chairman, not the Greenspan on the payroll of companies that make money shorting currencies and/or bonds.It is one thing to have a former government official clearly disclosing his/her business links and conflict of interest up front, and entirely different to have no disclosure and project the impression that the "analysis and opinion" are "objective" and not motivated by self-interest.

There is nothing wrong with a person trying to make money by presenting a point of view in major media outlets. On the contrary, every expert has the obligation to offer a viewpoint. However, knowing that such opinions at crucial junctures of sensitive public debt negotiations mold the markets and political climate by creating a negative or positive psychology for investors and the public in general is unethical to say the very least. Is former FED chair Greenspan speaking about Greece because: a. he really cares about what happens to this tiny Balkan country with a GDP three times lower than APPLE Computer's worth; b. he is idealistic and wishes to share his wisdom with the world in order to enlighten an otherwise ignorant public; c. he was a paid consultant by financial firms, including PIMCO with a history of shorting Greek bonds? The question the media must ask when running the Greenspan story as "news" is whether he is making statements that influence the bond and currency markets as a former FED chair or as a paid consultant?

It is true that Greenspan was never enthusiastic about the euro, and it is true that he has not changed positions, paid consultant or not. The reason PIMCO hired him as a sonsultant is precisely because of his position on stocks, bonds, and the euro. However, the core issue here is about full disclosure and about how news is manipulated by private business consultants to create a political and business climate that impacts not just an entire country, but an entire continent and perhaps the entire world. Greenspan is 88 years of age, and he hardly needs the money. This raises the question that if it is not money, then is it ideological conviction, three minutes of fame he hardly needs, just be be heard again as influential now that he is old. Putting his motives aside, what about the ethical and professional responsibility of the mass media in transmitting such a story?

It is indeed tragic that news organizations do not scrutinize their guests’ comments by asking for full disclosure. Greenspan is hardly the exception, but rather the rule to what takes place. This tells us a great deal of how media is nothing more than a tool that shapes public opinion, political climate and business climate. One must really wonder why on the day that the massive HSBC money laundering was revealed did Greenspan choose to deliver a prophetic statement about Greece, knowing the highly sensitive negotiations between Athens and the EU in the next few days? Why not comment about the massive $100 billion money laundering scandal involving one of the world’s largest European-based bank (HSBC), a bank that has been laundering money for everyone from drug lords to dictators and to all types of shady characters some ? As a former banker Greenspan ought to have an opinion about how commercial banks are used for tax evasion and money laundering. Now is that not more appropriate than commenting about a tiny country like Greece that many Western analysts insist will make no difference whether it stays or leaves the euro?

When all politicians, business people, journalists, and analysts provide their opinions on the air, web, or in print, they agree that Greece with less than 2% of EU’s GDP makes absolutely no difference to the European economy. Therefore, the Greek government can make whatever decision it wishes, and it would have no impact on the EU economy. So goes the argument not just on the part of Merkel’s government, but all molders of public opinion outside of Greece. Now for a reality check. If we follow not just the European stock exchanges, but Wall Street as well as the course of the euro, we discover that the markets are actually following everything that takes place in the Greek political arena. In other words, if Greece remains firm on the issue of ending austerity and debt renegotiation to reduce the nominal value, the markets fall across the Western World. If the Greek government appears flexible on partial austerity then market rise accordingly. Why is this taking place, given that Greece is not essential to the EU economy? And how do we explain the analysis by politicians, journalists, economists and other paid consultants who argue that there is absolutely no relationship of Greece to the rest of the EU because the former’s economy is so tiny. 

The Greenspan story and the spin by those who argue that Greece has no impact on the EU and provide us with clear evidence of how the so-called free markets are manipulated by those who manufacture business news to create an investment psychology. In my view, Greece will not leave the EU for reasons I have stated in so many different articles in the last five years. When I lived in Greece, I advised my friends and relatives not to take their money out of the bank. Just because well paid consultants, like Nouriel Roubini among others working for financial firms, are shorting the euro and the bonds of across Southern Europe this does not mean that people must play along. 

Greece and all EU periphery members would be better off in the long term if they enjoyed monetary sovereignty. However, I remain firmly convinced that Greece will stay in the euro zone, unless of course it is so utterly significant for Germany and the European banks to make an example of Greece so that Spain does not follow in its footsteps opposing austerity and neo-liberal policies. I do not see such scenario, partly because Obama is also against austerity without development. At the same time, Chancellor Angela Merkel is consumed by fear of having all of Europe blaming her for weakening if not dissolving the EU in case a compromise with Greece fails. Germany and the Western EU banks have been using the public debt of the periphery EU countries as leverage to impose neoliberal policies and maintain their economic dependence on the core countries of northwest Europe. Why would they want to slaughter these cows that have been providing and will be providing milk for decades to come? 
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