What will happen with the return to the drachma, our national currency?

Obviously, the sky will fall on our heads and crush us.  Greece will become Enver Hoxha’s Albania or Kim Il Sung’s North Korea.  Just as it was before we became member of euro-zone.  If I remember correctly, Greece did not came into existence on the day euro became our currency. We knew how to look after ourselves before the almighty euro came along. We had international relations before the euro, and indeed far better and more profitable, with a wider range of countries. And despite the fact that the national currency, that is to say the drachma, was managed by governments whose main objective was to facilitate inward and outward speculation and increase of the so-called competitiveness through continual devaluations, there were certain consequences not to be sneezed at:

·       The country’s external deficit never reached the levels it has attained under the euro. The state of the poor little drachma was a matter of indifference to the countries with which we traded.

·       Despite the inflation and the successive devaluations, the country’s external terms of trade were much better than in the decade of the euro. The same is true of the economy’s internal purchasing power.

·       Because of the drachma the debt was entirely manageable, and despite the explosion under Mitsotakis' and Simitis' governments, it did not lead us to bankruptcy. Neither could we be led to the bankruptcy we face today, for as long as we kept the drachma.

These are the facts. If one wants to ignore them, that is his or her problem.  Let us just bear in mind that from the time of the devaluation of the drachma against the dollar by Markezinis buck in 1954, the national currency lost 1000 percent of its value by the time we joined euro.  Did that destroy the economy?  Did  we go bankrupt without realizing it?  Did we lose our bank deposits?  Did our currency disappear?  Did our external economic transactions collapse?  Nothing of all that. Why, I wonder.

Did Greece ever go bankrupt on account of its national currency?  Never! In 1893 Greece went bankrupt because of overborrowing in gold francs, because of the country’s entry into the Latin Monetary Union, which was advertised at that time as an ideal source of cheap public sector loans.  In 1932 Greece went bankrupt again because of the gold drachma and overborrowing in gold sovereigns, because at that time the country was in the currency union of the pound sterling, the gold sovereign.

None of these facts play any role in the discussion, because they have no role in economic studies in this country, given that all the hotshot professors in the economic schools who browse through the mass propaganda media and then proceed to tear their hair out at the prospect of return to the national currency are entirely illiterate when it comes to the subject of economics. The only thing they know is applications of quantitative methods in Business and Finance.  Economic studies lost every trace of the classical economics education that was once the cornerstone of economic science. The intellectual repression to which the study programs subject students of economics robs them of any capacity for critical thought, turning them into Aristotelian "automaton" in the service of an economic theology where all that exists is the pursuit of easy money. 

The English philosopher Carlyle once described economics as “the dismal science” because it could very easily be employed  to justify every inhuman and anti-social practice. Today, even the well known American economist James Galbraith, son of John Kenneth, says very aptly that economics has become a form of menial, and indeed dishonorable, labor.  The truth is that it has lost every characteristic of science and should be placed under the supervision of criminologists. Perhaps it would be best for economic theory to be classified together with other forms of economic crime.

I will not go into the strange fact that economists such as Nouriel Roubini, the Nobel Prize winner Paul Krugman, in fact the global economic community as a whole, with the exception of the servants of US and European banks, together with everyone else on European payrolls, reiterate what was once regarded as self-evident in public finances: that in the event of a crisis of over-indebtedness you write off the whole or at least the greater part of the debt, especially if it is public debt, and employ your own national currency in order to get out of the mess. I will not go into it because all this, in fact the entire history of public finance, has been written by “eccentrics” by “nonentities”, who could not hold a candle to today’s Stournarases, Hardouveloses and all the other proponents of “hard currency” on right and left of the political spectrum.

Just for the sake of it, it might be worthwhile referring to what John Maynard Keynes, a favorite source of quotations for ignorant people in university posts, said and did in a similar global crisis of overindebtedness. When, after the first World War, all the warring states were deeply in debt, primarily to the only creditor country that remained, the United States, Keynes surprised the  economic and political establishment with two well-timed proposals. He said on the one hand that it was impossible for the debts to be serviced and in order for the peoples in revolt to be able to write them off it would be better to persuade the United States to write off the demands for repayment.  

He said on the other hand that the golden rule of fixed exchange rates and privately issued money should be abolished and economies must introduce as rapidly as possible national currencies issued by the states themselves on the basis of their own particular needs. Keynes called for "national self-sufficiency" as the only way out of a world depression like the one European and US economy had back in the '30s. 

We face a similar situation today world wide, more aggravated than ever before and while euro has become the focal point of the devastation produced by the world depression, we are to believe that we must seek only supranational solutions through bureaucratic supranational bobies which all these years have been identified with the most predatory circles of banking and finance capital. We are to believe that the same architects of the worse mess the world economy is facing today, will deliver the solution too. Is like believing that a gangster can deliver law and order. Yes he can. Only at the expense of the innocent.

When Keynes dared to make this proposal for the first time in 1920, he was seen as an “eccentric” and in fact nothing less than stupid.  Is it possible for the economy to operate without a stable currency with international backing? International trade will disappear. People’s savings will be lost, and nobody will want to enter into transactions with an inflationary national currency, which will just keep on devaluing and devaluing.  This, and much else, like today, was invoked by those who thought Keynes was crazy, eccentric and stupid to make such proposals. 

Of course Keynes thought that he could persuade governments, and above all the government of the United States, to make these adjustments themselves, before they were imposed by the people in a revolutionary manner. Just as some think today that they can persuade the EU and  the European Central Bank to implement policies different from those it implements and to have a stance different from what it has.

The clue to the story is that the crisis of 1929 brought everything that the opponents of Keynes had portrayed as ostensibly inevitable consequences of his proposals for the writing-off of debt and restoration of the national currency. The peoples did revolt finally and the same people who didn't want to see the loss of their financial profits introduced fascism and Nazism, leading the world into the holocaust of the Second World War. The same will happen today if we allow the powers that seek the open dictatorship of finance capital to insist on servicing the debt and support the “strong euro”.

In any case, the proposal for return to the national currency has to do with two immediate conditions: non-recognition and writing-off of the debt on the one hand, and on the other restoration of the national currency within a radically different socioeconomic and political frame from that which existed in the era of the old drachma.

What is going to happen?  For a start, we are not going to keep it secret. It is not possible, and in any case not necessary, for that to happen. The knowledge, the vigilance and the participation of the people is the basic component of such a drastic change. Also, adoption of the new national currency is not something that can happen over a weekend.  Six to eight months preparation is necessary. During this interval of time, in order to keep the circulation of the currency in banknotes as low as possible, the following immediate steps must be taken:

·       The Bank of Greece must be nationalized and the country’s monetary gold returned.

·       There must be nationalization of the largest private banks, which in any case are at the moment very generously subsidized by the state. There will be a freeze on all servicing of loans and external liabilities. The banks must be left to go bankrupt.

·       Disposable liquid assets and gold in the possession of business   enterprises and in private hands must be blocked. This will be done through installation of control commissions inside commercial firms  comprised of state and workers’ representatives.

·       All forms of tax-evading business practices  (offshore companies, portfolio investments, etc.) will be abolished and all fixed and current assets in their possession on Greek territory frozen.

·       The export of capital will be banned until further notice and a capital levy imposed, to be paid within two months by all large private companies, and in particular multinationals.

·       Fraudulent closure of businesses will be prevented through imposition of special prohibitive fines and confiscation of assets.

·       There will be a drastic reduction in the volume of wastes that can be introduced into Greece by multinational companies, and imposition of high tariffs on the introduction of luxury goods and products.

·       Special programmatic agreements for intra-state collaboration will be concluded covering such imported goods as are necessary for the economy and for domestic consumption (fuels, raw materials, foods, medicines, etc.)

·       Advantage must be taken of the potential for production of 9 tons of processed gold annually, following nationalization of the mines, with issuing by the central bank of special gold bonds to attract foreign currency.

·       Nationalization of the country’s mineral wealth (nickel, bauxite, lignite, etc.) and its utilization for contracts with foreign countries for its productive exploitation and for immediate  stimulation of foreign currency inflows.

·       Establishment of interest-free open accounts with exporting companies, which will also be placed under direct state, and workers’, control.

Measures such as these are aimed at protecting currency circulation during the time interval necessary for us to be ready to reintroduce the national currency. From the moment that the national mint replaces the euro as internal currency, it will become possible to implement, immediately, certain policies:

1.    Recovery from the currency “black hole” caused by the euro, amounting to approximately 30 billion euros annually.

2.    A drastic increase in popular incomes and payments to workers for the purpose of generating a corresponding increase in market turnover and encouraging habits of saving.

3.    Guarantees and gradual restoration of citizens’ bank deposits, which today comprise nothing but registrations for accounting purposes not backed by any assets.

4.    Writing off of all private debts (of households and small-to-medium businesses) that cannot be paid off and institution of a ceiling on payments for the remainder to the amount of 25% of initial capital

5.    Independent funding of self-sufficient development of production (above all, and with a priority on, primary, agricultural, production) on the basis of the most immediate vital needs of the population, the economy and the country’s international relations.   

6.    Imposition of a regime of regulation of the movement (import-export) of capital and of foreign trade so as to introduce drastic restrictions on the excesses now prevalent in these sectors.

These policies will make it possible to ensure that the issuing of a national currency and additional currency circulation will not cause inflation. Moreover support of the currency through such measures, and also the fact that it is not going to be converted into an object of speculation on the international currency market, will enable the currency to be stable and to reflect the real needs of the Greek economy.

Finally, we should make it clear that in the framework of such policies it will not be necessary to pursue the politics of continual devaluations, nor will the currency be exposed to tremendous pressure to devalue.  In any case, the value of a currency that is not a plaything of the international currency market is determined by the dynamic of internal production and the extent of international economic links and relationships, which today are at a tragic level.  

This process will secure a smooth transition from the euro to the new national currency, without violent dislocations and in correspondence with the needs of internal transactions. That being achieved, the way is open for a broader plan of productive reconstruction of the economy on the basis of full employment. We will finally have the financial means, and also the macroeconomic tools, to make it a reality.

Speech to U.S. college students and faculty members through Skype in April 2011.