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Page added on July 11, 2015
Neither Crowdfunding, Nor Oxi, Nor Anything Else Can Stave Off Greece’s Systemic Collapse
In case you missed the media hubbub, a one-week Indiegogo crowdfunding campaign was started back on June 29th with the goal of raising €1.6 billion to pay off Greece’s most recent debt repayment and set it back on the road to prosperity. The campaign of course came nowhere near the repayment amount, and although it amassed a massive reaction across the Internet, it barely made it past the 0.1% mark of its goal – €1,930,366. But seeing how it had no realistic chance of achieving its goal in the first place, it’s inherent that its failure isn’t its biggest disappointment. That mark of distinction goes straight to its existence in the first place, and in particular the dumbing down it has foisted upon a very serious situation.
The brainchild of a Mr. Thom Feeney, a marketing co-ordinator in London, the Indiegogo campaign came with the tagline of being “by the people, for the people,” a great gimmick if there ever was one. Since Feeney stated that he was “fed up with the dithering of our politicians” and that he “would have prefer[red] that we had governments that listened and connected with the public,” it seems that European politicians forced his hand in the matter and left him with no choice but to single-handedly save Greece. Or so one gathers from his statements. Furthermore, and being the 21st century with all its techno-wizardry, the idea behind the crowdfunding campaign he started was that
The beauty of the internet and social media means that a campaign like this can become possible by word-of-mouth and people all across the world can get involved very quickly.
In other words, slap up a page on the Internet, put in your dues in the right social (media) circles, and whammo – you’ve suddenly saved a country! As Feeney then put it,
The chance to use a crowdfunding site for social good is really exciting and I hope that others will follow my lead in future and start or get behind projects like this.
This is of course completely absurd, and is actually little more than an exercise in 21st century techno-fuelled do-gooder naïveté, which got a marketer his fifteen minutes of fame and crowdfunding website Indiegogo a massive amount of free advertising (at one point its servers were so overwhelmed that the website crashed).
For hypothetically speaking, and supposing that the campaign actually did succeed, it still would have only bought Greece a few months of respite until the next chunk of money was due. For not only did the IMF recently point out that Greece will need another €10 billion over the next few months, but that it will need another €50 billion over the next three years, followed by tens of billions every few years after that. In other words, if €1.6 billion is such a tough amount to come by now, how can it be expected that tens of billions of euros, never mind hundreds of billions of euros, ever be paid off? Truth be told, Greece’s debt is not really expected to be paid off, largely because there’s no way that it ever can be, and and partially because some people would rather them not be paid off. I’ll digress.
In short, not only is the vast amount of “money” in circulation not created by governments, but it is created by private banks, as debt. That is, when a person goes into a bank to get a loan, the bank does not lend out money from other depositors – it creates the money, there and then, out of thin air, under the fractional-reserve banking system. Furthermore, not only do private banks create the vast majority of “money” that we use, but they then expect interest back on those loans they make. In effect, because banks don’t create the interest but only the principal, there is actually more money owed back than exists in the system.
In other words, even if we wanted to, we can’t actually pay back all the loans. Yes, some loans can be paid back, but not all of them can, and so some people/entities must remain “losers” in this scheme. In this case, the biggest eurozone “loser” of all is Greece. (On top of that, it’s safe to say that some people like the system just the way it is, thank you very much, and prefer to keep their debtors in debt peonage for perpetuity.)
That’s a bit of a tangent to be going off on, but the applicable point is this: since there inherently isn’t enough money in existence to pay back all the loans, more loans must be continually made out to at least pay off the interest, lest the current system implode in on itself (that is essentially how Ponzi / pyramid schemes operate). This is a large reason why one continually hears politicians of pretty much every stripe – including Syriza’s former finance minister, Yanis Varoufakis – repeatedly calling for growth, so that loans to banks can be serviced. That being said, this penchant for economic growth leads to another problem, and which has now come home to roost.
In order to increase economic growth, a corollary increase of energy supplies is needed to power it. However, as the reality of peak oil is now showing, the peak of conventional oil supplies occurred back in 2005, with the peak of overall supplies expected to occur by 2020, if not sooner. This has all put a damper on growth.
With high oil prices deemed by some as the trigger for the bursting of the housing bubble back in 2008, the effects of the ensuing US economic crash rippled across the world. And not only were some countries hit harder than others, but some have had a rather hard time making a recovery – getting out of contraction and returning back to growth. Although the reasons vary, a significant contributor to a country’s lack of growth can simply be low domestic energy supplies.
Modern industrial economies run on plentiful supplies of concentrated energy, which predominantly means oil. If you don’t have oil, or very much of it, you don’t have much of an economy (or at least an industrial one). On top of that, nor are you generating much income to pay back loans, if not just the interest. (Greece has racked up €2.5 billion in interest charges to the IMF since 2010.)
(graph: The Global Economy, data: EIA)
As you may have guessed by now, Greece is one of the countries out there that doesn’t have much of a domestic energy supply. In effect, and as put in a recent post of mine, (Is Greece Planning to Print Energy?), “Greece isn’t short on money, it is short on energy.” Similarly, and as Ugo Bardi recently put it, what’s going on isn’t simply a financial collapse, but a systemic collapse. In other words, this is what happens to economies, and eventually the world economy, when they are forced to cope with decreasing supplies of energy, all of which are seeing their EROEIs (Energy Return Over Energy Invested) decrease as well.
(graph: The Global Economy, data: EIA)
So while tightening energy supplies are currently hitting Greece, they’re eventually going to take their toll on the European economy as a whole, and eventually the entire world economy. As inevitable as this is, governments of all kinds (and their corporate overseers) tend to avoid acknowledging this, and have all become quite formidable at fighting over who can kick the can down the road first and furthest.
Ultimately, and since growth is essentially deemed the main factor here, the current issue with Greece isn’t about the survival of Greeks, but is about saving the banking system (and whether it’s going to be done in a left-wing fashion or a right-wing fashion). As Ambrose Evans-Pritchard recently put it,
This default is doubly shameful given that the original IMF-Troika loan in 2010 was not intended to save Greece. The extra debt was imposed on an already bankrupt Greek state to buy time for the euro, against Greek interests. Leaked documents leave no doubt that the real purpose was to save monetary union and the European banking system – and to avert a “Euro-Lehman”, in the IMF’s own words – at a time when the eurozone had no defences against contagion.
A new drachma spec (image courtesy of Pavlos Vatikiotis)
That all said, is it possible then that with the recent “oxi” vote in Greece, and a possible expulsion from the euro, that a Greek reversion to a new drachma could fix things? Unfortunately, no. While the “no” vote will avoid “depression almost without end” and what would effectively be slavery under the euro, the outcome of it will likely amount to little more than further starvation thanks to vanishing subsidies of money to import increasingly costly fossil fuels to maintain Greece’s modern industrial way of life.
In effect, Greece is essentially a second dry rehearsal (after Cyprus) for what is first going to happen to weak economies – Spain, Italy, Portugal, etc. – then eventually to all other economies.
Can anything be done? Well, to stave off the collapse of industrial civilization, no. Industrial civilization is based on copious amounts of cheap concentrated energy which can’t be replaced with other sources, no matter which way you look at it. What is going to be required then, to a very large extent, is the localizing of most facets of our economies and ways of life, to go along with a drastic cut in energy usage, that then supplied by wind, solar, etc. Furthermore, seeing how money has been the hot topic that everybody’s been clamouring on about, it should be pointed out that currencies can be created at the local level (such as the Tem in Volos, Greece), while agitation for the nationalization of our currencies can also be undertaken.
Otherwise, a good question is to wonder is, if the collapse of industrial civilization is upon us, is it ever going to stop? Of course it will, and as Ugo Bardi also put it,
it will stop when the size of the world’s economy will have become compatible with the quality of the energy supporting it (that we can measure in terms of the energy return on energy invested, EROEI).
So while the Indiegogo crowdfunding campaign accomplished little else than obfuscating the underlying issues of Greece’s (and the world’s) systemic collapse, and in light of what has just been mentioned, it’s hard to deem the crowdfunding campaign as being much more than a rude joke. Oddly enough this seems a bit fitting, seeing how the campaign’s originator, Mr. Feeney, is a marketing coordinator for a comedy festival. But supposing that the campaign wasn’t intended as a massive joke, and as things stand, it nonetheless appears that a vast joke is being pulled on us.
Note: Upon completion of the Indiegogo campaign a new one has arisen in its place, this time not seeking the entire €1.6 billion, but any amount of which will be donated. Although it is apparent that the campaign is not a joke, it is nonetheless a band-aid.
18 Comments on "Neither Crowdfunding, Nor Oxi, Nor Anything Else Can Stave Off Greece’s Systemic Collapse"
penury on Sat, 11th Jul 2015 5:14 pm
Coming soon to a nation,city or locale near you.
Boat on Sat, 11th Jul 2015 5:32 pm
Japan and N Korea seem to do ok with little energy. Do they just work harder for less?
joe on Sat, 11th Jul 2015 6:10 pm
Japan has effectively stopped growing for the last 20 years, maintaining nominal growth. Japan is not a country that has done ‘well’. Japan maintained it’s gains and did not over indulge itself with massive deficits, it’s financial system put itself at the disposal of people recycling petrodollars via the carry trade. Creating demand for yen paying higher interest allowed them to spend, also having the US acting as your champion allows you to save on bullets. Working hard and doing more with less implies efficiency but Japan is unique in its position, a developed economy which has not globalised and does not want to grow by importing cheap foreign labour, yet participates in global trade and financial markets. Japan is like France and Germany and UK in that it uses nuclear, but nuclear will run out faster than oil.
Northwest Resident on Sat, 11th Jul 2015 6:25 pm
Neither Crowdfunding, Nor Oxi, Nor Anything Else Can Stave Off (put any country’s name here) Systemic Collapse.
Fishman on Sat, 11th Jul 2015 8:24 pm
North Korea??? They barely survive with significant elements of the population at starvation levels, and a large prison/slave labor component.
Makati1 on Sat, 11th Jul 2015 8:47 pm
Greece is just another crack in the capitalist global banking cartel. Eventually, it will fail and take down the economy of most of the world’s ‘developed’ countries, and severely curtail global trade, especially that requiring long ocean voyages and air transport.
When the dust settles, only real infrastructure and natural resources will remain. Look at the countries and their remaining natural resources, the condition of their infrastructure and the culture of their peoples, and you will see the leaders of the new world.
apneaman on Mon, 13th Jul 2015 1:05 am
OECD Report: U.S. one of the most indebted nations in the world
“Greece is making headlines lately for its debt crisis, but the United States isn’t that far behind when it comes to federal debt.
According to a new report released by the Organization for Economic Cooperation and Development (OECD) the United States ranks number six on the list of the most indebted advanced economies in the world.”
http://watchdog.org/228539/us-sixth-highest-debt-oecd/
Davy on Mon, 13th Jul 2015 1:18 am
China is a powder keg of debt. In fact, some $28 trillion of it. And, according to the bean counters at McKinsey, upwards of $21 trillion of that was created in just the last 90 months—–during which time China’s GDP rose by only $5 trillion.
http://davidstockmanscontracorner.com/why-chinas-market-isnt-fixed-and-the-global-bubble-will-keep-imploding/
Davy on Mon, 13th Jul 2015 1:22 am
Now, China’s continuing slowdown is dragging them too, exposing weaknesses across the region, from Indonesian borrowing needs to record Korean household debt and the bureaucratic and corruption hurdles in the Philippines that hold back its infrastructure projects.
http://www.bloomberg.com/news/articles/2015-07-12/asia-s-rising-economic-stars-lose-luster-as-china-s-growth-slows
joe on Mon, 13th Jul 2015 1:36 am
The US debt is in the unique position of being more or less owned by the Treasury and more or less owed to the FED. Sure, other countries own US bonds but that’s nothing compared to the growth in demand for dollars under the exponential growth model….
Other countries and currencies do have limits and they seem to believe this globalist IMF is the way to ensure world peace. Maybe it is. The West German Holocaust generation got ALL its debt cancelled to create the Germany of today. Greece is simply asking to give it’s creditors a ‘hair cut’. The other alternative that the likes of Ireland got was to imposes taxes and charges (impact of these still not fully implimented) and pay over long term. In Ireland they imposed a deeply unpopular property charge then they froze the rate for 3 years, this year it unfreeze, let’s see if Ireland still likes AUSTERITY then.
apneaman on Mon, 13th Jul 2015 1:42 am
The whole world Davy. Except me, I’m a freak. I owe $0.00 Cut up my last credit card two years ago. Beholden to no one. The only little piece of freedom left. Still working on the cigarette slavery thing….it’s been 4 days for my latest attempt, so I feel like punching someone in the face. I usually last 3-4 weeks and start again, smoke for a couple months and quit, been doing that for a couple of years now. Maybe it’s all my dooming?
joe on Mon, 13th Jul 2015 2:03 am
Even the so called ‘good’ Eurozone Austerity countries are cheating. The imperialist nature of the Euro is obvious. It might even be Ok if the European workforce was actually mobile, but it’s not. The language and cultural differences are too great not to mention cheap immigrant labour and uncompetitive minimum wages. The peripheries of Europe are paying to buoy up Germany and French industry because the weak areas depress the price of the Euro. Portugal is doomed, Spain and Italy can’t compete with Central Europe, Ireland is nothing but a place to use as a tax haven and for US companies to hide profit and taxes from Uncle Sam. The EU is a basket case, but people ignore all this because the rich are getting richer, not through their good endeavours but by extracting a greater portion of profit from the economy and using it to fund ever more pointless lifestyles. Yes I’m looking and the antics of Bruce Jenner , but more than that, it’s those with the time to pay attention to that, and the scary bit is that I’m included, even though I try to ignore it, the fact I’m aware of it says everything I need to know about the society I’m living in.
joe on Mon, 13th Jul 2015 2:51 am
Just came out. Banksters take total victory. 50bln ransom fund and Greece to total change its culture to adopt free market neo-liberal policies. For Greece the last 5yrs have been nothing but a waste of time.
Boat on Mon, 13th Jul 2015 6:26 am
Apeman….The whole world Davy. Except me, I’m a freak. I owe $0.00 Cut up my last credit card two years ago. Beholden to no one
I feel sorry for those who have to cut up a credit card to stay fiscally fit. I have had cards for decades and never missed a payment(no interest). I find credit cards very useful and convenient.
The rule is simple, emergency or not don’t use money you can’t pay back when the bill is due.
Boat on Mon, 13th Jul 2015 6:33 am
Apeman, …I am happy your fiscally responsible but, if you dollar cost average and put your money in the stock market you will come out ahead. The way to judge this is look at the interest on your home and car etc. If you can make more money in the market than the interest is on your debts it is smarter to buy stocks or mutual funds than pay debt down or leave it sitting around in cash.
Even doomers should know cash will be useless and debt free will mean nothing.
Davy on Mon, 13th Jul 2015 7:39 am
Ape Said “Still working on the cigarette slavery”. Ape, I chewed Skoal pretty hard for 10 years. I gave up all those enjoyments (Beer, wine, whiskey, homegrown, and chew) 10 years ago. I am glad I did I save allot of money. More important my health is great now. I was living hard 10 years ago and it was a just matter of time before my health suffered.
If you only knew the money I blew on alcohol/women related screw ups. Had a blast but at a point it was time to turn a new leaf. I had a bar for 4 years and I learned how to turn a large investment into a small one. Lost my friggen ass until I stopped drinking and I ran it like a business. When I quit drinking it was then “why have a bar?”. Of course I bought the place high and sold it low in 07 when property was dumping. Live and learn. Life to me is about a journey not money.
Yea, dooming has a way of allowing yourself to say “Frig we only got so long might as well enjoy life!” We all know cig’s kill eventually. I remember nicotine and its wonderful enjoyment though. I am thinking when shit hits the fan it is the small pleasures that will be left just like the old days. A good joint, alcohol, and tobacco will always please and are cheap if you can get the .Gov out of the equation. If it were me I would quit the cigs because of the cost and the damage it will do to your physical fitness. We are going to have to work our asses off once SHTF. OTOH tobacco is a cheap friend that always pleases.
Davy on Mon, 13th Jul 2015 8:01 am
Joe said “EU is a basket case”. Joe the global system is a basket case. I know of “NO” region or power that isn’t and can decouple from this situation. It is just peak entropic decay of economy and society. Simple really.
I just got back from 2 weeks in Northern Italy in the Dolomites north of Belluno. I went and spent some time with the wife’s family. I go there every other year. It is a family duty thing because I would not leave the farm if I could manage it. I have seen the world and don’t care to see it anymore. I hate being a carbon hog but “that’s the shit”.
What a wonderful and beautiful life these Northern Italians have. I went to the farms in the mountains where they milks the cows and make the cheese. The grass is fine and the water good. The cheese is some of the best I have had anywhere. The people there still do things the old ways and I really admired that. They have mechanized but only to a point. They still cut grass with a scythe and stack it in their old barns as a tradition. They mostly burn wood for heat. They are excellent forest managers and still collect wood much like they used to in small communal wood lots.
Yet, I had to do some work on my wife’s family house there and it was a nightmare. It is so hard and complicated to get anything done in Italy. The regulations and the impediments to efficiency of labor and productive activity are high compared to the US. The places to buy tools were poor. Materials were expensive. The whole process was so much more difficult than the States where stores are 24/7. You got online next day for anything you need in the States. Italy is just a different animal. Their houses are built so much better though.
These Northern Italians are rich in so many ways. They have high personal savings rate even if the government is in debt. When SHTF and these people reintroduce animals back into the equation they will do OK. They still retain many of the old world ways. They were a pastoral people and that is what must come back and I believe it will soon. I am talking a villages of a few thousand for example having 500 animal mix type thing. Everything is there to do it and the animals can be bred back IF this collapse does not happen too fast.
joe on Mon, 13th Jul 2015 10:53 am
In terms of the Euro, there is no scenario where it’s coming out smelling of roses. It’s good that the banks are getting their money, good for them, but as I wrote already, the so called ‘good’ austerity economies are cheating, and imagine what the Greeks will do. They will put the 50bln aside, make some ‘changes’ then cheat the he’ll out of it when they think they can.
I agree that these problems are symptomatic of a greater thermodynamic trend, but we also live in the present and as we drift on this deadwood amongst the sharks we must forget to swim just because we know eventually well probobly get eaten. Already politicians are asking for a ‘flexible’ approach to government spending as the ECB floods markets with Euros nobody really wants. They are just laying the basis of the next recession. Avoid inflation by tying everyone up in personal debt call that ‘growth’ then pull the plug when you’ve lent so much you risk your own ass. What a great future.