More thoughts with Syriza in power… 

One of the common misconceptions about the rise of Nazi Germany is that it was cased by hyperinflation.

In fact, it was not.

The rise of Hitler and the descent of Europe into madness was caused by a deflationary spiral triggered by the Gold standard. The German government decided to appease the creditors by forcing the German economy into deflation. FDR by removing the USA from the Gold Standard chose differently. Imagine a different man in 1930 making a different choice in Germany and how the world and the death and misery of the 20th century would have been different.

There is an interesting question that has yet to be answered definitively of whether democracies can withstand hyperinflation but can not tolerate deflation at all. My intuition is that inflation and hyperinflation is tolerable, deflation is not. I suspect it’s because inflation is a rapid price readjustment and deflation is a prolonged price re-adjustment. And I also suspect it has to do with nominal vs real wage changes and our ability to accept loss of real income but not nominal. Just a guess.

The German – and let’s be clear it’s a German political decision – to enforce deflation has lead to the rise of extremist parties across Europe. The reason is quite simple. This is not surprising. The parties in favor of deflation and austerity are telling the electorate that they must sacrifice their well being so that the banks don’t get affected. And that after they have paid the price, the world will look a lot less miserable. It’s not like we pay this debt and we go to status quo ante-belle, it’s like we pay this debt and things remain really shitty. This may or may not be true, but it is what they are saying.

The EU has tried to avoid paying the political price of the German decision to enforce deflation. One of the most egregious examples was when George Papandreou wanted to hold a referendum in Greece on the very question of austerity. The EU was outraged. How dare he ask the voters if they wanted to pay their debts?

Deflationary politics work best if the people don’t get to vote.

In the recent Greek Elections, the vanguards of the deflationary austerity movement tried really hard to terrorize the Greeks.

Unfortunately the problem is 27% unemployment and no end in sight to misery is already terrorizing. And the promise of change, and in particular, the promise to change the equation of pain is very attractive.

At the core Syriza argues that the banks should suffer too. Yes, I know that that party contains the most corrupt elements of Greek society, but the appeal is that the bankers should suffer as well.

And so now we have change. And we have change because of democracy. and at least we Greeks picked a pro-European pacifist rather than a racist anti-European … Score 1 for a brutal Europe war…

If you are a progressive American, this victory of Syriza is cause for optimism. It shows that it is possible to change things. That democracy and the genius of democracy can break the stranglehold of power that the plutocracy has on the levers of power.

If you are an optimist about the human condition, this victory of Syriza is cause for optimism. The Greeks who were desperate chose a party that does not appeal to the worst of what it means to be a European. There was no guarantee that Golden Dawn would not be celebrating their arrival to power.

And if you are an optimist about Greece, well there are no tanks in the street.