Transcript: James K. Galbraith in Greece

Today's podcast is turned over to James K. Galbraith, speaking in Greece to a conference on what the Greeks need to do or CAN do to turn the increasingly depressing economic and social situation around in that country. Galbraith's remarks come at the end, after listening to several speakers presenting on internal changes. His own remarks conclude with a phrase that calls up the full sense of desperation that is warranted.

Before we get to that, however, we want to emphasize that we do not support Greece's staying in the euro-zone or continuing to deal with the ECB, for these reasons:

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Greece has accepted austerity on false premises and under coercion. Continuing on that path ends when the situation gets so bad that one party or another takes power and repudiates the arrangements. That could well be -- as it was in very similar conditions in Germany in Germany in the 1930s -- a fascist government which gains credibility with the relief from onerous debt. Better to do it now while a representative democracy is still in charge.

Two: No amount of austerity or so-called structural reforms will produce the healthy competitiveness that is advertised. A reversion to the drachma will. Appropriate haircuts on debt will be immediate. Inflation on imported goods and services will spread the burden across the board. The balance of payments will reverse overnight. Greece has what no other nation in Europe has -- it has Greece. Perhaps the Germans will no longer come on holiday, but the rest of the world will.

Three: Somebody has to do this before the ECB and the IMF and the banks create a long-term depression monster. At present they are intent on extracting as much austerity as possible without going over the line that would force the peripheral nation's hand. Bribing the elites on one hand while beating the populations on the other. It is all about the banks and the bankers.

The ECB spent a good portion of the period since the establishment of the euro telling the banks to load up on sovereign debt, it was risk free and could even be counted as capital. Ooops. Much like the U.S. mortgage market, forcing money into these nations only meant they would find takers. Now the banks cannot take even the smallest write-down without insolvency. And the ECB comes calling as the banks' enforcer.

In the end, the Greeks will be well-served by not having sold their assets to the vulture funds as they were directed. They ought to take a long look at the evidence. No confidence fairy will visit, no matter how hungry they are.

Here, James K. Galbraith, March, 2013.

GALBRAITH