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69

Troubled Pilgrims

4
terms
7
notes

Varoufakis, Y. (2017). Troubled Pilgrims. In Varoufakis, Y. And the Weak Suffer What They Must?. Vintage, pp. 69-95

an arrangement established in 1979 under the Jenkins European Commission where most of the EEC linked their currencies to prevent large fluctuations relative to one another (after the demise of Bretton Woods); replaced the informal EEC agreement to prevent rate fluctuations of 2.25%+; created the ECU (fluctuations within narrow band of 2.25% or wide band of 6%); Deutsch Mark informally emerged as the centre of this arrangement

69

on the morning of 15 September 1978, they had signed a bilateral agreement to create the European Monetary System (EMS)--the Euro's precursor

—p.69 by Yanis Varoufakis
confirm
2 years, 10 months ago

on the morning of 15 September 1978, they had signed a bilateral agreement to create the European Monetary System (EMS)--the Euro's precursor

—p.69 by Yanis Varoufakis
confirm
2 years, 10 months ago
71

So, when in 1971 Europe was jettisoned from the dollar zone, and exchange rates between its currencies started bobbing up and down, some of them falling as violently as others were rising, the European Union had real trouble managing the heavy industry cartel and the common agricultural policy that were its core. Without stable steel, coal and agricultural prices across France, Germany, Belgium, the Netherlands and Italy, cartel-like price fixing was impossible. [...]

and of course that was the main purpose of the EU (well, its precursor) at the time

—p.71 by Yanis Varoufakis 2 years, 10 months ago

So, when in 1971 Europe was jettisoned from the dollar zone, and exchange rates between its currencies started bobbing up and down, some of them falling as violently as others were rising, the European Union had real trouble managing the heavy industry cartel and the common agricultural policy that were its core. Without stable steel, coal and agricultural prices across France, Germany, Belgium, the Netherlands and Italy, cartel-like price fixing was impossible. [...]

and of course that was the main purpose of the EU (well, its precursor) at the time

—p.71 by Yanis Varoufakis 2 years, 10 months ago
72

[...] nations in deficit could not sustain fixed exchange rates with the rest, especially in times of crisis. To remain within Europe's monetary snake, a country with a trade deficit, France for example, urgently needed to attract foreign money to finance its net imports. Foreign money is attracted by high interest rates and deterred by any prospect that the state will not be able to pay its bills or repay its creditors. In other words, to stay in the snake Paris had to make borrowing dearer and simultaneously reduce public spending. But dearer money would reduce investment by French business, which would in turn depress employment and private incomes. [...]

"snake in a tunnel" being the metaphor used for the allowed exchange rate fluctuation bands

this is a great illustration of the problems with austerity

(the other problem with the "snake", apparently, was the lack of bueaucratic sinecures for French graduates)

—p.72 by Yanis Varoufakis 2 years, 10 months ago

[...] nations in deficit could not sustain fixed exchange rates with the rest, especially in times of crisis. To remain within Europe's monetary snake, a country with a trade deficit, France for example, urgently needed to attract foreign money to finance its net imports. Foreign money is attracted by high interest rates and deterred by any prospect that the state will not be able to pay its bills or repay its creditors. In other words, to stay in the snake Paris had to make borrowing dearer and simultaneously reduce public spending. But dearer money would reduce investment by French business, which would in turn depress employment and private incomes. [...]

"snake in a tunnel" being the metaphor used for the allowed exchange rate fluctuation bands

this is a great illustration of the problems with austerity

(the other problem with the "snake", apparently, was the lack of bueaucratic sinecures for French graduates)

—p.72 by Yanis Varoufakis 2 years, 10 months ago
75

The only way the Franc's Deutsche Mark value could be kept constant was, indeed, for the Bundesbank to keep doing the one thing it detested: incessantly buy francs using freshly printed Deutsche Marks. Were these marks to remain stashed in the vaults of the French central bank--or anywhere else for that matter--the Bundesbank would not have minded much. Only these banknotes did not stay under lock and key, but were steadily repatriated back to Germany, as the French used them to buy more Volkswagens and speculators converted their francs into marks convinced that at some point the Bundesbank would let the franc slide, netting them a substantial windfall. And why would the Bundesbank let the franc slide? Because the repatriated Deutsche Marks were increasing the quantity of money circulating in Germany, pushing prices up and causing inflation in a nation that despised rising prices with all its heart, nation that trusted the Bundesbank to prevent this from happening.

—p.75 by Yanis Varoufakis 2 years, 10 months ago

The only way the Franc's Deutsche Mark value could be kept constant was, indeed, for the Bundesbank to keep doing the one thing it detested: incessantly buy francs using freshly printed Deutsche Marks. Were these marks to remain stashed in the vaults of the French central bank--or anywhere else for that matter--the Bundesbank would not have minded much. Only these banknotes did not stay under lock and key, but were steadily repatriated back to Germany, as the French used them to buy more Volkswagens and speculators converted their francs into marks convinced that at some point the Bundesbank would let the franc slide, netting them a substantial windfall. And why would the Bundesbank let the franc slide? Because the repatriated Deutsche Marks were increasing the quantity of money circulating in Germany, pushing prices up and causing inflation in a nation that despised rising prices with all its heart, nation that trusted the Bundesbank to prevent this from happening.

—p.75 by Yanis Varoufakis 2 years, 10 months ago
79

[...] combining high returns to financial capital (requiring high interest rates) with high profit rates for American businesses (requiring low interest rates) was never going to be easy, and Volcker knew this. It was a combination that could only come about if another way of providing that profit could be found. And one way to do that would be to reduce wages. [...]

—p.79 by Yanis Varoufakis 2 years, 10 months ago

[...] combining high returns to financial capital (requiring high interest rates) with high profit rates for American businesses (requiring low interest rates) was never going to be easy, and Volcker knew this. It was a combination that could only come about if another way of providing that profit could be found. And one way to do that would be to reduce wages. [...]

—p.79 by Yanis Varoufakis 2 years, 10 months ago

a Marxist term (though never actually used by Karl Marx himself) refering to those who receive income - usually interest, rent, dividends, capital gains, or profits - from their assets and investments

79

High interest rates are wonderful for those living on unearned income, so-called rentiers, but not so good for manufacturers, who see their investment costs skyrocket and the purchasing power of their customers plummet.

—p.79 by Yanis Varoufakis
notable
2 years, 10 months ago

High interest rates are wonderful for those living on unearned income, so-called rentiers, but not so good for manufacturers, who see their investment costs skyrocket and the purchasing power of their customers plummet.

—p.79 by Yanis Varoufakis
notable
2 years, 10 months ago

a slogan refering to globalization popularised by Margaret Thatcher; means that the market economy is the only system that works, and that debate about this is over

80

Workers were financialized, too, forced to take increasing risks in the housing market and with their pensions. A new mantra--'There is no alternative' or TINA--was born

—p.80 by Yanis Varoufakis
notable
2 years, 10 months ago

Workers were financialized, too, forced to take increasing risks in the housing market and with their pensions. A new mantra--'There is no alternative' or TINA--was born

—p.80 by Yanis Varoufakis
notable
2 years, 10 months ago
82

[...] if 'the weak suffer what they must', their very capacity, let alone willingness, to reproduce the power of the strong declines precipitiously.

on why Volcker would have opted to fix Bretton Woods (if he had the choice)

put another way, by Marquis de Condorcet later on the page, "real power lies not with the oppressors but with the oppressed" (though it's a bit misleading)

—p.82 by Yanis Varoufakis 2 years, 10 months ago

[...] if 'the weak suffer what they must', their very capacity, let alone willingness, to reproduce the power of the strong declines precipitiously.

on why Volcker would have opted to fix Bretton Woods (if he had the choice)

put another way, by Marquis de Condorcet later on the page, "real power lies not with the oppressors but with the oppressed" (though it's a bit misleading)

—p.82 by Yanis Varoufakis 2 years, 10 months ago
87

[...] unlike in the late 1960s, German inflation was less of at threat with Volcker on the loose. The American vacuum cleaner, powered by Volcker's high interest rates, could now be counted upon to suck the fresh Deutsche Marks in, preventing them from making their way immediately from France back into Germany. [...]

think more about why

—p.87 by Yanis Varoufakis 2 years, 10 months ago

[...] unlike in the late 1960s, German inflation was less of at threat with Volcker on the loose. The American vacuum cleaner, powered by Volcker's high interest rates, could now be counted upon to suck the fresh Deutsche Marks in, preventing them from making their way immediately from France back into Germany. [...]

think more about why

—p.87 by Yanis Varoufakis 2 years, 10 months ago
89

[...] The more US deficits grew, the greater the global Minotaur's appetite for Europe and Asia's capital. Its truly global significance was due to its role in recycling national circuits (profits, savings, surplus money) through the international circuits that Wall Street had established. It kept the gleaming German factories busy. It gobbled up everything produced in Japan and later in China. And, to complete the circle, the foreign (or American) owners of these distant factories sent their profits, their cash, to Wall Street--a modern tribute to the global Minotaur.

—p.89 by Yanis Varoufakis 2 years, 10 months ago

[...] The more US deficits grew, the greater the global Minotaur's appetite for Europe and Asia's capital. Its truly global significance was due to its role in recycling national circuits (profits, savings, surplus money) through the international circuits that Wall Street had established. It kept the gleaming German factories busy. It gobbled up everything produced in Japan and later in China. And, to complete the circle, the foreign (or American) owners of these distant factories sent their profits, their cash, to Wall Street--a modern tribute to the global Minotaur.

—p.89 by Yanis Varoufakis 2 years, 10 months ago

the process whereby the financial industry becomes more prominent

89

Financialization, as we now call this process, was the critical by-product of maintaining and enhancing US dominance on the back of increasing trade imbalances and in the interest of financing America's ever-expanding twin deficits.

—p.89 by Yanis Varoufakis
notable
2 years, 10 months ago

Financialization, as we now call this process, was the critical by-product of maintaining and enhancing US dominance on the back of increasing trade imbalances and in the interest of financing America's ever-expanding twin deficits.

—p.89 by Yanis Varoufakis
notable
2 years, 10 months ago