"the marriage between capitalism and democracy is over."
- Slavoj Zizek
Politics is never in a static state. It is always in transition.
Thousands of years ago Aristotle wrote how monarchies become aristocracies, become tyrannies, become democracies, become monarchies, and so forth.
The United States, being both a young country AND one of the oldest continuous democracies, doesn't have the cultural maturity to see the change when it approaches.
For instance, Americans are still in denial how the country went from being a democracy to an Empire in 1945.
We are also in denial about the changes the political economy has underwent since the early 1990's.
I use the term "political economy" because that was what the study of economics was called until about a century ago. It's what Adam Smith and David Ricardo studied.
The fact that the study of economics fails to take politics into account today is probably its biggest reason why it has become a total failure.
[ ... ]other governments weren't falling into line. They actually had the nerve to use real democracy. This time it was Hungary.
The currency's 40 percent slump against the franc has raised repayment costs, pushing mortgage arrears to a two-decade high and prompting Prime Minister Viktor Orban's government to brand the loans "debt slavery."Make no mistake - this is a large step beyond what Iceland has done. This is real democracy that is helping the working class at the expense of the bankers.
To help homeowners, Orban imposed currency losses on banks including Erste Group Bank AG and Raiffeisen Bank International AG (RBI) that may total 900 million euros ($1.2 billion), according to Cristina Marzea, an analyst at Barclays Capital. Faced with the risk Orban would impose further measures, lenders have offered to accept $2.2 billion of additional losses if the government promised to take no further action. If it doesn't, banks are threatening they may withdraw from the country...
Almost 18 months after Orban was elected in April 2010, he passed a law allowing Hungarians to repay mortgages denominated in foreign currencies at discount of about 25 percent to today's exchange rate. As long as a client applies before Dec. 31 and repays the entire loan before Feb. 28, the banks have to make up the difference.
"I paid it back last week," Bod said. "I'm free of debt slavery," said the former industry minister. The plan "is easy to explain from a political viewpoint. It's cheap for the government, expensive for the banks, good for voters."
This is a threat to the status quo and to bank profits. The EU and IMF have broken off talks with Hungary in response to this defiance.
Hungary's deficit is below the treaty imposed limit of 3% of GDP and their current account is in surplus. It'll be hard to justify the IMF and EU cracking down on them. Hungary, by standing up for their citizens against the international bankers and forcing them to take losses, could be setting a precedent. You can be sure that the rest of eastern Europe is watching closely.