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Krugman in shock says he overestimated the competence of Greek gov’t

Paul Krugman believes that money is magic and if you believe in social justice, income equality and fairies, you can click your heels together three times and you can print all the money you want. Also he’s shocked that the Greek government had no backup plan except holding its breath.

Nobel prize winning economist Paul Krugman, a vocal supporter of Athens in their long-running bailout saga, said Sunday that he “may have overestimated the competence of the Greek government.”
The Greek government overestimated the competence of Paul Krugman and his imaginary math so it all evens out.

Krugman suggested that the ruling radical Syriza party staged the showdown without having a Plan B — “at least something they could hold up, ‘this is what we will do if we can’t get any new cash.'”

“Amazingly,” Krugman said on “CNN’s Fareed Zakaria GPS,” “they thought they could simply demand better terms without having any backup plan.

“So certainly this is a shock,” Krugman realized.

PS Greeks are in shock about the lack of Plan B, too.

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48 comments

  1. What I am missing is an article about letter from Konstantinos Michalos (enterpreneurs chambre) to MF. Lot of companies in Greece seems to finish soon as far as I am concerned.

    • keeptalkinggreece

      if you have the letter in English post it here –

      • No there was only an article about it in sme.sk, but no details, just statements that many Greek companies will close/finish soon if banks will not start working normally. Greek companies can not pay, thus they can not buy anything. Michalos is chief of trade (not enterpreneurs) chambre. MF did not react yet.

        • keeptalkinggreece

          I am sure that he did not mention that many many businesses were doing their works with money borrowed by the banks. and many never paid back loans or even their share on social security funds or taxes.

    • Giaourti Giaourtaki

      Why concerned as this is exactly what you wanted and when Greek companies go die you have your best friend “competitiveness” winning.
      It’s not new paying in advance, the letter:
      http://www.reuters.com/article/2015/07/21/eurozone-greece-companies-idUSL5N10133120150721

      • THX this is more detailed. Giaourti if I hate communists and I am upset that Greeks beleive them, it does not mean I want to see bankruptcies in Greece.
        About competitivness: another article in Slovak press today mentioned that our GDP per capita is already higher than in Greece, but salaries remained 20% (30? i can not find it now) lower. And we are not your direct competitor – Bulgaria, Romania … are even cheaper.

  2. So is the rest of Europe I am sure, or at least they are baffled by it.

  3. But there WAS a Plan B, according to Varoufakis! (take over BoG and use its 20 BEUR reserves to stay afloat; repudiate bonds maturing at ECB; pay domestic bills with IOU’s if necessary). A hazardous plan, to be sure, but sometimes hazardous plans work. There just wasn’t a majority for it.

    Or one could have accepted Schäuble’s offer: temporary Gexit (in my mind, there is no such thing as a temporary Grexit) with debt forgiveness and a huge alimony to get Drachma-Greece up and running.

    There wasn’t a Plan B to stay in the Eurozone while giving the Eurozone the shaft, but there couldn’t have been a plan for that.

    • keeptalkinggreece

      “huge alimony” – you got Schaeuble’s plan wrong, I’m afraid. it would be a ESM loan with strict austerity as the Brussels Agreement/EFSM injection

  4. According to Varoufakis there was a plan B, but Tsipras and the cabinet decided not to execute it after a vote 4-2.

    • Giaourti Giaourtaki

      Drachma is no plan B, just the other side of the coin, only exit from any currency is a plan.
      No matter if they call themselves right or left, communist or whatever as long as they keep on printing money they are in fact capitalists and destroyer of freedom

  5. The government had a plan B but were too chicken to implement it. Especially when the EU threatened with a scenario that envisages ‘tanks on the street in Athens’. According to Zerohedge, Tsipras asked Putin for 10 billion $ to support printing of Drachma but that Putin stroke that idea down the night of the referendum. That put plan B dead in the water. No confirmation on that. Greece is small fish in geopolitical games and Putin can now claim that Europe owes him something.
    http://www.zerohedge.com/news/2015-07-21/tsipras-asked-putin-10-billion-print-drachmas-greek-media-reports#comment-6337990

    • If you have a plan but no money to implement it, you have no plan. There would be money, if Tsipras didn’t take 6 month to finally give up on plan A.
      Varoufakis is too disorganized to have any plan. He has ideas but no plans.

      • The ECB does not have money either. They either print it out of thin air or borrow it from lenders who don’t have it either and also make it appear out of thin air. It is just numbers on a computer screen. They use something as collateral like taxpayers or assets or gold. Greece doesn’t really have any of that so they needed to go and ask for it somewhere else or use Varoufakis’s construction of IOU’s and what have you but they were too chicken for that so that is why they got rid of him.

      • zarjad says: “He has ideas but no plans.”

        Plan: 1. an intention or decision about what one is going to do
        2. a detailed proposal for doing or achieving something.

        Idea: 1. a thought or suggestion as to a possible course of action.
        2. the aim or purpose.

        Varoufakis clearly had a plan and he explained it in detail, not just in writing but expressed in radio and internet interviews since the referendum. He has discussed the subsequent events after the referendum and the failed support of the plan by core Tsiparis heads, all of this is documented quite specifically in interviews that are easily accessed. There was a small group of people, a think tank within the govt working with Varoufakis to work strategy related to implementing the plan and this was ongoing. So whether you like the guy or not it should be listened to. So there was a plan. When it came time to consider implementing the plan it was rejected 4 to 2 as others have stated.

        There is no basis for the comment that Varoufakis was or is disorganized. The plan was not as “GiGi” states above, to start printing Drachmas. The plan did not include leaving the Eurozone. There was no plan to print Drachmas b/c Greece has no plates, among other rather simplistic and realistic economic and legal reasons.

        There has been detailed discussion on the legal aspects of forcing a member out from the Eurozone and essentially any such attempt would be tied up in courts for years before even being remotely possible,so the notion of kicking Greece out is nothing more than an empty threat. But just as many common people fail to understand economics so do they lack knowledge related to the intricacies of the law. This is why Schauble initially offered the Greeks to “voluntarily” remove themselves, b/c he knew there was no way he could legally force it, so resorted to scare tactics to imply it was the “other option.” It set the stage that there were but two options when the true “other option” was really Varoufakis’s plan B. It would have allowed Greece to stay in the union and initially print IOU’s while taking over the Bank of Greece.
        And to be reasonable, Varoufakis’ plan B did not exist in a vacuum. Many economists discuss methods for dealing with such situations and many agree that essentially his plan B was a plausible short-term solution. The long term solution would then be dependent on whether elites capitulate. If not, then we can discuss the Drachma dilemma. But let’s put that into a mid to long-term perspective, there are a plethora of countries of similar size and gdp that manage there own currency successfully, but to confidently understand this point one has to lobotomize the eurocentric mindset of euro currency as the single means of survival for weaker states within the euro.

        So when you fully understand the Varoufakis plan B you understand that it was actionable, there lacked only the guts, or shall we say the will and intelligence to implement it. Tsiparis proved he is but a politician. He, like most politicians, understands little of economics. Perhaps he hoped, after months of failed negotiating, the referendum would resoundingly return a “yes” and then he could regretfully sign and not be held responsible. When it came back a solid “no” he wet his pants. Perhaps he believed the general public would believe the false scare of forced Grexit even though it was not legally possible, and he knew that 80+ % wished to stay in the EU -would this not result in a “yes” referendum if he called it? Well it did not work out that way.

        Any intelligent person would have known that the Germans would not back down simply on a vote by the people. This was not the impetus for calling the referendum. It was not a mandate to be forced upon the Germans, it was a mandate for Tsiparis, to reveal plan B to the people if they voted “No.” But he wasn’t expecting the result. He underestimated the people. And when it came back “No” he continued on his planned course. He should now wear his tie. Join the rest of them.

        Today the “No” vote is the only hope for the future for what is left of this situation. Now, the majority of Syriza capitulates, and those that are weak in character, or those working for the other side, wish to spread this idea, or agree to it, that there was “no choice” or “no plan B” which is but a lie that perpetuates the victim state mentality, the status quo, moving us all one HUGE step backwards.

        Side note: Krugman is but an intelligent mouthpiece. He knows the same details I’ve mentioned above that are available online in interviews, as all diligent economists of interest have accessed, he simply fails to mention those details for it is not the narrative decided upon by his paymasters as we move “forward” (heavy sarc). I would suspect none of you doubt that, but if so, then you don’t understand how the NYT works. If you are in agreement with Krugman’s “shock”, than you may want to ask yourself, as seekers of alternative and truthful news related to current events, how you have been duped into such a corner, sitting there huddled and rubbing shoulders with Krugman.

    • But there is also an information, that he asked also China and Iran. Maybe true, maybe false (I have read it now in a Russian-Ukrainian source which is quoting To Vima). (korrespondent.net)
      It would agree with other sources saying : Tsipras asked Russia and China, but they said no (I do not remember them).
      So … maybe he tried to have plan B, but he could not ?
      Just a point to discussion. Maybe I underestimated Tsipras (not having a plan B is rather pathetic, trying to have it and doing everything to have it and failing – is just a defeat).

      • keeptalkinggreece

        I’m sure the Russ/Ukrain source also mentioned …North Korea :p

        • You are exaggerating… North Korea has much more interesting news, almost always one subject. And they quote To Vima.
          This source is Ukrainian , but in Russian language , and is relatively reliable. And what if Bloomberg writes the same ?
          It is sad – Greeks wanted money from Russia, but despise sources in Russian language :). According to zerohedge and supposedly according to Bloomberg, too.

        • You can find easily the original – To Vima is in Greek. According to my experience, korrespondent is reliable, I used it many times, although not about Greece – and having no access to To Vima – because of language and lack of knowledge what it is – I referred to the source that said it quoted it.
          Of course, we have here problem of Iran – Russia and China seemed to be confirmed as reliable hypotheses. But we can forget it , it is not that important for sure.

        • I find here the typical story “oh, anything in Eastern Europe or in Russian is not reliable”. Like North Korea. The problem is … Greece is also more to the east than Germany. Does it mean that Schaeuble is always right and Greeks are wrong like half North Korea ?

        • PS. Today the Germans also quoted the story about the tanks, quoting Kathimerini. Much fun in the story :).

        • OK, you persuaded me :), no more trust to Greek sources, too much to the East.

        • What I do not understand : you had a Marxist minister and still you have a partially Marxist government. Soviet Union was Marxist in the past. Why are Russian sources not reliable ? Their beginnings were Marxist – the same North Korea.
          It was not a Russian source – Ukrainian in Russian, but no matter. Why are Greek Marxists so intelligent, but the Russian or Ukrainian or even North Korean Marxists so stupid ?
          Did really Gorbachev , Eltsyn and Putin destroy so much that what was reliable in the past is now not reliable ? And Kim ? The poor Kim is still Marxist, he should be most reliable of all.

          • ????
            Why would russian source be either more or less reliable then other ones because they started out as marxists a hundred years ago?
            Todays russia is about as communist as todays china which in turn is about as communista as the usa, only communist thing about china is the name, which they dont want to change for propaganda/continuiti reasons.

          • keeptalkinggreece

            I suppose people who were born & raised under communist regime they never get rid of it

          • René Henri Pasche

            What is your problem? wasn’t it Lenin who said that politics is war with other means?With the end of the cold war the protagonists changed, but international politics continue to be a kind of war with other means. And in war informations are mostly incomplete or false. The bad news prevail, because men believe more in bad news than in good ones. So the truth is always between the lines, everywhere.

          • thats clausewitz not lenin. and you got it upside down. war is politics by other means. or did lenin actually reverse it? if so i cant find it by google.

          • The actual quotation (Clausewitz) is that “war is the continuation of politics by other means”. One might also consider that “all war represents a failure of diplomacy” (Tony Benn).
            From my point of war, Germany has waged economic war on Greece, and continues to dress it up as diplomacy. It has been able to do this ONLY because of Greece’s membership of the eurozone. Merely from this act, one can assert that Germany has abused its power within the eurozone. However, if we examine which countries benefited financially from the eurozone, we see that it is primarily Germany. This constitutes multiple abuse of power within the system — and the logical democratic conclusion is that either Germany reforms or the eurozone (and probably the EU) has to close shop.

          • Hm so lets me reverse my usual question, what kind of reforms in ger could solve the (longterm) problems?

          • The long-term problems are that southern Europe does not have an economic structure appropriate for the high X-rate of the euro; and that Germany has too low an X-rate and exports a lot and imports too little. Therefore, southern Europe has trade (and budget) deficits and Germany has trade surpluses. This is all down to membership of the eurozone and has NOTHING to do with economic competitiveness.

            So, the first thing that the stupid Germans have to get into their thick heads that there trade surplus is not the result of hard work or better industry; it is the direct result of an artificially low currency (analogous to China). The second thing that they have to understand is that the trade surpluses cannot be “saved”, as an individual might do: they have to be spent or invested. The third thing that they have to understand is that if the euro is not to collapse, the sensible places to invest the trade surpluses are in southern Europe, including Greece.

            Of course, this situation is complicated by the disaster that has been going on since 2010. But the bottom line is that the Germans have to forgo the right to “their” money in order to continue with the eurozone. If they don’t want to, then leave the eurozone. This would probably be the ideal solution for Greece, that Germany leaves the euro. It would come down to a manageable level appropriate for the Greek and other less developed economies.

          • René Henri Pasche

            Did Germany wage an economic war on Greece and abuse its power within the EZ. I do not have an anser. But there can be no doubt that Germany (whatever political color), from the second part of the 19th century till today, considers central and eastern Europe as there natural zone of interest. What England, France and other powers could achieve beyond the seas, the Germans and their allies tried to realize on the continent.So the question is: a) is Germany the new master of Central and Eastern Europe (alone or together with other countries) b) what is the position of the smaller States? Does EU membership diminish the German influence or not; what is the impact of EZ membership etc. You see, many interesting and complex questions for the students in politics and international relations.

          • René Henri Pasche

            Probably he did not say it explicitly. But for Clausewitz the war was still a struggle between nations or states with a clear distinction between war and peace. With marxism-leninisme this was not possible any longer because the war became a struggle between the different classes and will only end with the final victory of the revolution – i.e. never. The distinction of war and peace happened to be very fluid and the war between states became an international civil war. The funny thing is that the international war on terrorisme goes exactly the same way. Final and total victory (i.e.the unconditionnal surrender) is the ultimate and only aim of war a n d p o l i t i c s). Till that end is achieved there is no room for peace or compromises. That is how things are in international matters between the big states today. Clausewitz with Lenin in his luggage moved to Washinton.

          • “Final and total victory (i.e.the unconditionnal surrender) is the ultimate and only aim of war a n d p o l i t i c s).”

            Thats exactly the opposite of what clauswitz meant. He used his statement about the nature of war too show that it is stupid to not have a clearly defined goal in any military engagement. Define the goals, then find the quickest way too achieve them militarily then end the engagement.

            People think books like the one clausewitz and sun tzu wrote must be militaristic. Yet they give descriptions of reality and not the opinion that this is how it should be. Sun tzu especially you can almost describe as a pragmatic pacifist, clausewitz isnt too far from that either.

          • René Henri Pasche

            I agree fully with you. You can interprete C. as you do. Raymond Aron (1905 – 1983), among others, was of this opinion in his book “Penser la guerre, Clausewitz, tomes I et II, Gallimard, Paris 1976”. Unfortunately C. was misused by Prussia and later Germany to justify the buildup of an enormous war machine. Bismarck, Marx, Lenin, Hitler and many others pretendet to be clausewitzens.

    • And Bloomberg citing it as a conspiracy theory, but not totally denying… Also saying that China was skeptical : “China was reluctant to help Greece exit. When Premier Li Keqiang met with European politicians and bureaucrats in Brussels in June, a Foreign Ministry spokeswoman, Hua Chunying, said China “hopes to see that Greece will stay in the euro zone” and that “members of the euro zone are able and wise enough to solve the debt problem appropriately.”
      But Tusk’s words “Seek help among your friends and not among your enemies, especially when they are unable to help you.” Hmm, really a suggestion that Tsipras asked Russia – suggests Bloomberg, and logically it looks so.
      It looks interesting… Maybe with time we will know more…

  6. How could a plan B that essentially would be an orderly grexit be used as leverage for the greek side in the negotiations when it was exactly this idea that schaubl used as (rather effective) leverage for the opposite side.
    This is why I had a problem with the unclear question at the referendum. It should have been something like do want to reject the austerity even if that means leaving the euro. If so Im sure the oxi would have been weaker or maybe even lost, but this would have given tsipras a clear mandate instead of… nothing

  7. René Henri Pasche

    Plan A, Plan B, Plan C all based on speculations and hypotheses. Why not add a Plan D with the US-Dollar as Greek currency in the future. The strength of Greece lies in its geostrategic position that will become more and more important. Maybe one day the US will start a new Marshall Plan to kick the Chinese out of Piraeus.

    • Giaourti Giaourtaki

      Under “capital controls” it’s forbidden to publish the bidders’ names in the tender for gas/oil drilling in 20 fields of the Ionian and the Libyan, the bidding ended on July 17

  8. «“Amazingly,” Krugman said on “CNN’s Fareed Zakaria GPS,” “they thought they could simply demand better terms without having any backup plan.»

    This is the basic undeniable truth. So KTG why are U upset with Krugman? Shoudn´t U and all the people that defended that an “honourable” agreement was possible without issuing your own payment instruments do an intense “soul searching”? or to use a better term perform an extensive “auto-critic”?

  9. I like to attack Syriza (being not left), but it is maybe too easy to condemn from the university level. The truth could be much more complicated, especially if Tsipras asked Russia and China and they answered “no”. I love to repeat a saying of one Polish prime minister “oh, I did not know that a prime minister has so little room for maneuver”. And in comparison to Greece, he was in a very comfortable situation..

    • PS. But I would add one thing : if they knew that nothing could be done, they should not have waited so many months, until banks got closed. It still looks like a failed gamble.

    • Giaourti Giaourtaki

      Putin will always say “no” as he is Merkel’s bedfellow since GDR times and their FDJ-Stasi-KGB network, true love!

  10. Mr Krugman, Whilst being a Nobel Prizewinner. is hardly in the position to adjudicate on the Greek demise! And why should he. He overestimated the competence of the Greek Government?? He is demeaning himself. No one in their right mind can give much credence to the Greek Government enoughless a Nobel Laureate- better to back off from our fiasco.

  11. I AM SICK TO DEATH OF EXPERTS:
    Paul Krugman won the Nobel Memorial Prize in Economic Science for analizing & interpreting the financial System & climate.
    The Financial Syatem & Climate which has failed us all.
    So how much of an expert is he really ?
    AND:
    Will he – as a result – have to return the Nobel Prize & the prize money that came with it ?

  12. It is the US Federal Reserve in collusion with the US government that has ( done the Dorothy in the Ruby Slippers routine) clicked it’s heels three times & printed money into infinity & beyond.
    The European centeral Bank has done exactly the same money printing.
    AND IT SEEMS TO HAVE WORKED FOR THE BEAUTIFULLY.
    THEREFORE IT SEEMS TO BE THE WAY TO THE LAND OF OZ & HOME.

  13. That is Krugman’s characteristic weakness – he allways overestimates competency of governments, especially their ability to handle money responsibly. His academic perfect-world theories fall apart once you introduce corruption and incompetence into the equations.

  14. While you guys debate academic economics – take a drive along Athens’s industrial zone north of the city – then start debating again PlanB.