The Center Cannot Hold: Kleptocracy Delegitimizes The Status Quo

Tyler Durden's picture

Via Charles Hugh-Smith of OfTwoMinds blog,

The center cannot hold because it has failed the nation by defending the Status Quo kleptocracy.

Let's start with William Butler Yeats' (1865-1939) poem, The Second Coming:

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

Though the poem was penned in 1919, it speaks presciently to our era. If we take "the center" to be the political machinery at the gravitational center of the Status Quo, Yeats is suggesting the center cannot hold as things such as the economy and living standards fall apart.

As a case study, let's look at Greece, a nation that is the leading-edge of Status Quo delegitimization and destabilization. As I noted last week, ( In a Dysfunctional Status Quo, Reform Triggers Collapse), corruption isn't a feature of the Greek Status Quo: it is the Status Quo. Any reformation that eliminated corruption would dismantle the Status Quo and bring down the Elites who have been looting the nation at will.

Corruption Continues Virtually Unchecked in Greece:

How can someone who has declared an annual income of €25,000 ($32,400) transfer €52 million abroad? What kind of supplementary income must an individual have who, according to his tax returns, earned €5,588 in 2010, yet still managed to move €19.8 million abroad? And how can it be that a Greek citizen sequesters €9.7 million abroad although he supposedly earned exactly zero euros?

The "Lagarde List" contains the names of 54,000 Greek citizens who have transferred major assets out of the country. The Greek Establishment is (naturally) doing nothing to investigate these 54,000 people, because the 54,000 are the Greek establishment.
I have long held that Greece Is a Kleptocracy (June 28, 2011). This chart is the acme of unsustainability.

By all accounts, these tax revenue figures are wildly optimistic, and so the actual current deficit is much higher.

To cut to the last act: the Status Quo of Greece is expending the last dregs of its legitimacy and cash defending its kleptocratic Elites from their fellow citizens and from the nation's creditors. As noted above, it is impossible to "reform" a Status Quo whose foundation is corruption, just as it is impossible to wean an economy based on debt and leverage for its "growth" of excessive debt and leverage: financialization isn't a feature of the economy, it is the economy.

The entire eurozone is a kleptocracy as well: 500 Million Debt-Serfs: The European Union Is a Neo-Feudal Kleptocracy (July 22, 2011).

Here are the key dynamics of delegitimization:

1. The consequences of austerity. The kleptocratic "fix" is to divert more of the debtor nations' national incomes to debt service. In other words, money that once went to labor (wages) and social services now goes to debt repayments and interest.

What are the consequences of this massive diversion of income? The economy shrinks. Less income means less spending, which means negative growth.

The Eurozone's "solution" of debt-on-debt depends on debtor economies "growing their way out of debt." If labor's share of the national income is falling, and both private and government spending and income are falling, precisely where is the "growth" supposed to come from? As private income falls, tax revenues fall, causing the government to raise taxes and junk fees. This further reduces private income, and so on in a self-reinforcing feedback loop of contraction.

Austerity sets up a positive feedback loop of less income and less spending. The people in these debtor economies can look around and see the consequences: everyone has less money, and less confidence that the "austerity fix" will do anything but put debt-junkies into fatal withdrawal.

Once an economy becomes dependent on debt that rises faster than the resulting "growth," then that economy is set on an unwavering path to implosion. (The Cycle of Dependency and the Atrophy of Self-Reliance).

When Belief in the System Fades (March 12, 2008), institutions lose their legitimacy(The Three Ds: Delegitimization, Definancialization, Deglobalization July 1, 2011) and people naturally save more as insurance against an uncertain future. Fewer people are willing to risk their capital in new ventures, and as the economy loses vitality then these trends reinforce each other.

2. This loss of faith and confidence triggers hoarding and capital flight. As Ludwig von Mises noted long ago, the only way to organically "grow" an economy is for capital to accumulate faster than the population, that is, capital increases on a per capita basis. Capital means savings/cash, not debt, that is invested in productive assets and enterprises.

So what happens when you skim more of a nation's income to service debt? There is less capital accumulated, and thus less capital available for investment.

What happens when people lose faith in the financial institutions and their coercive "fixes"? They move their capital to less-risky, more productive climes. In other words, capital flight is another positive feedback: as people move their capital out of the country, then there is less available per capita for productive investment. Toss in a kleptocratic government which increases taxes while misallocating precious capital on crony Capitalism and corruption, and you get a death-spiral of capital flight and risk avoidance.

The irony of a loss of faith is people instinctively place their capital in non-productive savings: in gold, Swiss lock boxes, and so on. This instinct removes capital from the pool of investments in productive assets.

As the Status Quo fails to protect the national interests and the citizenry from the neofeudal kleptocracy, faith in the political center fades. The centerist parties cannot "reform" corruption because they are the embodiment of corruption. In desperation, people move from the center to the extreme left or right, seeking a party that is willing to overthrow the corrupt, failed kleptocracy.

This is of course the pathway to dictatorship and fascism: Love or nothing: The real Greek parallel with Weimar.

These were the men who tried and failed to use a mixture of austerity, tough policing and what we might now call "technocratic" rule to save German democracy. They failed.Horrified inertia is now seeping from the world of the semi-outlawed young activists into the lives of ordinary people.
On the streets of Athens there is already the answer. You can feel what it is like when the political system - and even the rule of law - becomes paralysed and atrophies.
The "hopeless inertia" begins to grip even the middle classes, as the evidence of organised racist violence encroaches into their lives.

My Greek sources report that the abandonment of the failed political center is well under way as austerity is tightened while kleptocrats maintain their grip on the machinery of governance.
The solution has long been obvious: Greece, Please Do The Right Thing: Default Now (June 1, 2011).

The same holds true for every nation ruled by kleptocratic Elites that has attempted to "grow our way out of debt" by piling debt on debt. Doesn't that include Spain, Italy, China, the U.S. and a host of other nations?

For more on this topic:

The First Dominoes: Greece, Reality, and Cascading Default (February 13, 2012)
Do We Really Know Greece's Default Will Be Orderly? (February 17, 2012)
Greek Theater Double-Feature: A Farce and a Tragicomedy (June 19, 2012)

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fonzannoon's picture

I can't wait to get this farce over with tomorrow night. I am eager to find out if we are going to have four more years of this shit or four more years of this shit. I'm on pins and needles.

Oh regional Indian's picture

The Fonz has power, all is well with NY.

As for this post, this is what I "saw"

Choice 2012

America: From Status Quo to Quo Vadis?

hopefully, the Apocalypse is nigh...and all shall be revealed ;-)


Silver Bug's picture

Tails I win Heads you Lose, both of them are going to be the same. May be some time although when we find out who actually wins. The polls are insanely close and I would say there are going to be many recounts.

fonzannoon's picture

Thanks guys. It's same shit here. I had another family just move in with me. It's astonishing. I don't want to hijack every thread with updates. I appreciate the karma on here though. I may hit this up later with one big final thought assessment. This site really helped shape the way I see things.

Dr. Engali's picture

It's good to hear from you. Sloane checked in earlier., she is doing pretty well staying busy helping out with the clean up. I haven't seen kito post in a while. Good luck.

fonzannoon's picture

Good to hear about Sloane. I am convinced Kito is in Equador. Good for him if he is.

LawsofPhysics's picture

If you know the history of sharecropping, having family members come to move in isn't such a bad situation.  Well, at least around here it has been as we have a strict "if you don't work, you don't eat" policy.

fonzannoon's picture

Yeah I hear you. Everyone is chipping in. If anything my house is running more efficiently. I do feel for the other family and especially their kids.

Dr. Engali's picture

I hear you...I don't know how much more I can take. When I have conversations with friends and they start talking about "their guy"I just want to tell them to shut the hell up. Thank goodness that 13 years of raising children has given me good selective hearing so I can tune them out. My eyes glaze over like a person when you try to explain options to them.

TahoeBilly2012's picture

Waterboys recently recorded via phone cam. the new "WB Yeats tour" in Europe. Here is "Mad as the mist and snow" ends the song with "THE SECOND COMING".

THIS MIKE SCOTT CHANNELING OF YEATS IS THE SHIT! Listen to the lyrics and think about these days we live in...this is cranking in the F150 through the Focals every day this fall.

NotApplicable's picture

Too bad Yeats wasn't smart enough to know the difference between chaos and anarchy. Doubly so, given his status as a well-renowned wordsmith.

How can we ever live in peace when the only path to it has been obliterated by such men?

Orly's picture

I know.  "...full of passionate intensity," is completely out of meter and doesn't rhyme with anything.  Like he suddenly decided he was drunk enough to write prose at the end of a poem.


linrom's picture

I have their Pagan's Place from the early eighties. Red Army Blues was my favorite.

TahoeBilly2012's picture

Waterboys helped me stay a free thinker all these years. The non conformist Mike Scott, unlike Bono and Sting (NWO pimps), has stayed true to the rugged individualism ideals, self expression, spiritual enlightentment through travel, music, art and cultures. This video sums it up and Wickham is my favorite fiddler of all time.

firstdivision's picture

Here in the US, lets see if Chris Christie did derail Romney's train so that Chris can run in '16.

vix is for kids's picture

Unless he makes some lifestyle changes fast, Christie won't be around in 2016.

firstdivision's picture

Hey, take it easy on the guy.  After he tastes running for the White House, then, and only then, has he tasted everything.

Ghordius's picture

and yet still some 60% to 70% of the Greeks want to stay in the eurozone and keep the EUR

a small thing, and yet CHS has no explanation for it. Greeks ain't Americans and ain't Brits

Winston Churchill's picture

Not enough misery  for them to want out of the EURO yet.

Maybe a cold winter(forecast) will be the tipping point.

It can get cold there on occaison, even in the lowlands.

SMG's picture

Problem is even if people want change,  they have trouble identifying exactly who the Elites are, why they need to be brought to justice, and exactly how to change the system to stop Kleptocracy. 

I hope this time around with information flowing more freely, that the exact idenity of these people and their crimes become widespread public knowledge.  And a system that doesn't allow pschopaths to secretly run everything gets put into place.

Jack Sheet's picture

2 conclusions here
1. Greece is fucked to the third power
2. Tyler Durden (n) = Charles Huge Smith

Ghordius's picture

I disagree


1. fucked is when you have to pay 20% of your tax revenue for debt servicing. CHS's number is 14.2%

2. different style. CHS is practically a lefty. TD comes over as nihilistic, perhaps, but sure not a lefty

CPL's picture

Tyler Durden = FinAnons

Oh regional Indian's picture

The latest Anonymous Psy-op/SuperWikileaks/WHistleblowingvia P2P is called....drum roll...




Dr. Engali's picture

Charles Hugh is a statist through and through. Probably the only person posting here further away than Tyler from being a statist is pods.

Overfed's picture

I'm pretty non-statist. I'm just stingy with words or mentally lazy, perhaps both.

BTW, glad to see that fonz made it through OK.

Orly's picture

You know, sounds like what we really need is a White Knight to ride in on his charger and grasp this thing by the horns, right the Ships of State and Finance.  He'll be lauded as a hero the world over.

Whew!  Just in time, too!


Zadok's picture

Ahh yes, the king with a military to roll the dice with it by going forth subjugating and to master those other people.

Any time now...such exquisite timing.

Almost worthy of honor, beyond the fact the if I don't he'll come forth to master me.

Seems to me this story has played out before, must be déjà vu.

Orly's picture

Yeah, and his name is "R," too!

What a coinky-dink!


Addo:  Believe me, they pay a lot of attention to such stuff...

Zadok's picture

How inspiring!
Willing to sell his soul AND a name that starts with "R".
Cool, let's make him a king!
Madness I say!
'But of course' is the response.
Bottom line is because we can and we want to.

Wow, I just can't wait to see how this unfolds! /sarc off/

Jacks Cold Sweat's picture

I'm really tired of this bullcrap here in Greece, any single fuck that participated the last 38 years in those govement must get imprisoned ASAPOR

SilverCoinLover's picture

38 years, that goes all the way back to the end of the military junta in 1974. You don't really want to go back to living in a police state do you? I was in Greece as a 16 year old tourist in 1973, and could clearly see just how much the Greek people hated and feared the junta. Made a real impression on me about the dangers of living in a country where the people and the government despise each other. Sadly, I see the same thing on the rise in America today.

nofluer's picture

I had the enlightening experience of spending 3 hours looking down the wrong end of a Thompson SMG in Greece in '71... alls well that ends in release, tho... And it was such a small thing that got me invited to the party!

CrimsonAvenger's picture

Is there some reason the text gets lighter and lighter? I thought I was going blind for a minute.

vix is for kids's picture

cut back on you-know-what that causes blindess.

knukles's picture

Gotta wash your hands after you shave them before you rub your eyes.

Racer's picture

And when countries allow corporations like Amazon and Starbucks to pay little if any taxes, but leave the tax paying to their own people instead, then the end will come all the sooner

NEOSERF's picture

Your graph could represent any Western country in any future time period.  The game at the highest level here is simple and faulty:

1.  Take garbage loans off books of banks or allow them not to write them down

2.  Wait it out..years if necessary for when the "growth" comes back and the assets can be disposed of without crushing losses.

3.  Keep long as it takes until that magical 4% growth number pops up on the reports.

The problem with this is that all the growth of the last 20 years has been fueled by debt without going back to ridiculous loans on ridiculously risky people and companies this game is over.  We will either need to 1. Fake the numbers and create false euphoria allowing bad debt owners a window to get out 2. Allow banks never to take losses while sticking it to the taxpayer and hope for no revolts.  3. Print forever and ignore rising debt levels because "everyone is doing it". 

buzzsaw99's picture

greek kleptocrats are pikers when compared to usa maggots

ebworthen's picture

Yeat's poem is as true for the Western World now as it was then.

Each generation seems to forget the lessons of the past.

WWI was the biggest waste of life and resources ever, until WWII came after the great depression and money printing by Germany (and excessive speculation and consumption elsewhere).

What have we learned since then? 

Seemingly nothing, other than to allow new generations to forget the wailing and gnashing of teeth and death brought about by the lust of mammon and abandoning humility and simple living.

blunderdog's picture

I'm solidly anti-war, but even I believe there was a compelling reason to prevent Germany turning Europe into an empire of vassal states again.

Other than WWII, though, yah.

THE DORK OF CORK's picture

The story of the Greek railways - a slow but functional service that was shut down



Due to the financial problems of Greece TrainOSE has come to suspend regional services on following lines:

  • Athens - Alexandroupolis (although the connection Thessaloniki - Alexandroupolis remains in service)
  • Edessa - Florina
  • Patras - Pyrgos - Kalamata
  • Kalamata - Messene
  • Corinth - Nafplio - Tripoli

Since 13 February 2011, due to the Greek financial crisis and subsequent budget cuts by the Greek government, all international services have been suspended,[9] as outlined below.



The european experiment is a full frontal attack on the nation state concept of banks perhaps really in charge but restrained by political they are unrestrained.

This is the Modern market state.


Meanwhile their current darling Turkey is getting sweetheart deals until they turn the debt screw that is.


DutchMadness's picture

They changed their donkey for a Porsche far too fast in Greece..

Marco's picture

The problem with defaulting is that they can't pay their way ... economies have become far far too fragile to be able to catch a sudden shift from 10s of percent of trade deficits to trade balance, especially with the poor leadership we have nowadays, it would be absolute chaos and fascism would still win out.

cranky-old-geezer's picture



Hmmm.... CHS uses phrases I use frequently, like "looting the nation",  "feudalism", "serfs".   Maybe there's hope for him after all.

Please folks, stop drinking the QE koolaid. 

It's looting, plain and simple.