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Buiter On “Unnecessary, Undesirable and Unlikely” Sovereign Defaults, And The IMF's Triumph Of Dogma Over Evidence And Logic
A month ago we discussed a recent paper by the IMF's Carlo Cottarelli titled "Default in Today's Advanced Economies: Unnecessary, Undesirable, and Unlikely"which we noted had "conclusion that are at best questionable, and at worst, completely worthless." Today, Citi's Willem Buiter does a much more eloquent job if dissecting the paper yet at the end of the day, reaches precisely the same conclusion: "A recent IMF study argues that sovereign default in today’s advanced economies (AEs) is “unnecessary, undesirable and unlikely”. We do not agree with this unqualified blanket assertion...the study represents the triumph of dogma over evidence and logic." And since sovereign default will be the primary topic for years and years to come, as more and more countries go tits up, here are Buiter's key disagreements with the IMF.
Buiter asks rhetorically if there are any completely safe sovereigns, and answers his own question:
The short answer is: no. We believe the common practice among financial analysts of treating the term structure of interest rates on the sovereign debt of most AEs countries as being free of default risk to be no longer appropriate, if it ever was. ‘Rates analysis’ has to be done simultaneously with ‘credit analysis’. Japan lost its Moody’s Aaa rating in May 2009 and is currently rated Aa2. Moody’s downgraded Italy in May 2002 and it is currently rated Aa2 (see Figure 19). Even the fiscally best-positioned G7 countries, Germany and Canada, face major fiscal challenges. Germany would not be able to join the Euro Area (EA) today, because it would fail to meet the deficit criterion (no more than 3% of GDP) and the debt criterion (no more than 60% of GDP). Indeed, the aggregate EA fails both criteria by wide margins, and of the 16 member states, only Luxembourg and Finland qualify on both criteria (see Figure 18). The reasons for the absence of completely risk-free sovereigns, despite the massive growth in sovereign tax capacity, are threefold.
First, demand for public spending has grown even faster than the capacity to tax, and has outstripped the capacity to raise revenues in a way that: (a) is politically acceptable and (b) does not materially damage incentives to work, to educate oneself and to take risk as a saver, investor or entrepreneur. Second, in a number of countries with high public debt burdens and large primary structural deficits, political polarisation has increased to the point that even if everyone recognises the unsustainability of the fiscal programme and the need for and desirability of early fiscal tightening, agreement on such a programme may be postponed as each interest group tries to minimize its share of the total burden of adjustment. Third, as part of the widespread erosion of social capital (in the sense of trust between government and citizen, and between citizens), tax administration has become less effective in many advanced economies, with rapid growth of the shadow economy and in tax avoidance and tax evasion (see e.g. evidence in Schneider and Buehn (2002) and Figure 20).
Next, Buiter touches on a topic that was discussed earlier by the CFR: how many credits will trade through the spread of the sovereign, or in other words, how and why do companies trade with less risk than their host nation.
The sovereign has the monopoly of (legitimate) taxation. It follows that, in a world with full information, effective tax administration and no legal or other constraints on the capacity of the sovereign to tax any entity in its jurisdiction, any sovereign that wants to have a credit rating at least as high as that of any entity in its jurisdiction can achieve this objective by appropriating the resources of that entity through taxation. But the capacity of the sovereign to tax faces at least two obstacles. The first would be the rule of law. There are likely to be constitutional or other legal or conventional obstacles to taxing private entities merely because they have a better credit rating than the sovereign. The second is weak tax administration.
We suspect that the capacity to tax has been eroded in a number of advanced economies to the point that we may well see a higher incidence of private entities from the advanced economies ‘trading through the sovereign’, starting with internationally operating companies and multinationals domiciled in one of the fiscally challenged EA member states. Foreign subsidiaries of western multinationals operating in emerging markets have frequently traded through their ‘local’ sovereigns. We would not be surprised, for instance, to see leading Spanish banks trading through the Spanish sovereign and we have already observed such instances for Italian or Greek companies (see Figure 21).
Next, the Citi strategist deconstructs the IMF statement alongs it core components lines, asking is it truly "Unnecessary, undesirable and unlikely?"
Unnecessary?:
We assume that default is necessary if the sovereign does not have the ability to pay, even if it gave its best effort to the endeavour, without this involving inflicting cost on the nation and its inhabitants that a fair-minded, independent observer would consider impossible or intolerable. Ability to pay is a fuzzy concept, which gets tangled up with willingness to pay in any real-world application. Even the least well-off countries among the advanced industrialised nations, like Portugal and Greece, are ‘rich’ as regards their ability to restore fiscal sustainability by raising taxes or cutting public spending without forcing standards of living down to levels that would threaten health, housing, education and a reasonable social safety net – provided the polity can agree on, and the domestic policy institutions can implement, a reasonable and fair distribution of the fiscal burden.
Undesirable?
We would argue that the undesirability of a sovereign default is not obvious, at least for the most highly indebted EA sovereigns, especially once their primary budget balances are positive or close to it. This would include Greece, Italy and even Ireland (if we consider off-balance sheet liabilities). Any breach of contract damages the rule of law, but we believe there are circumstances where default may be the lesser evil and there may indeed at times be positive externalities associated with a reminder that sovereign debt is not categorically safe.
The outcome of a cost-benefit analysis of sovereign default depends on what the alternatives are. For Greece, the only options are fiscal pain or default. This is because, first, it is unlikely that there will be significant cross-border fiscal support for fiscally challenged sovereigns within the EA, second, growthpromoting reforms are neither easier nor more urgent when sovereign insolvency threatens, and, third, as a member of a currency union, Greece does not have national monetary policy as a discretionary source of finance.
Sovereign default redistributes resources from the creditors to the taxpayers and the beneficiaries of public spending that would be cut in the absence of a default. These competing claims carry different weights in different times and circumstances. With Greece likely to have a general government gross debt not much below 150% of annual GDP by mid-2013 (if the debt is not restructured before that time), an annual interest bill of between 6% and 7% of GDP would represent a significant permanent fiscal burden.
The main penalty for default is temporary exclusion from the international, and sometimes domestic, capital markets. Default will be more attractive, other things being equal, the larger the initial stock of debt, the smaller the current primary deficit and the lower the likelihood that the government would wish to access capital markets in the future. If defaults are partial, then rational defaults will likely only occur when a sovereign runs a primary surplus large enough to service the debt it does not default on.
Default can have adverse effects even when capital market access is regained, as the cost of new borrowing for a country that has previously defaulted will be higher. Evidence on the duration of the exclusion is mixed. Uruguay defaulted in May 2003 and regained access to the international capital markets in October of the same year. The NPV haircut for the creditors was relatively small (between 13% and 20%). Other recent defaulters, such as Russia, Argentina and Ecuador, also regained market access quickly. Provided the restructuring is managed in an orderly and not too confrontational manner, the period of exclusion from capital markets thus tends to be measured in months rather than years.
There can also be systemic externalities from a sovereign default, such as subtle ‘rule of law’ externalities that may occur when the sovereign, the ultimate enforcer of contracts in its jurisdiction, engages in a breach of contract itself. More easily identified are possible contagion externalities – an increase in the likelihood of default by other parties, sovereign or private, as a result of a sovereign default. But the cost of not defaulting and continuing to carry a high public debt burden can also be significant. Thus, the March 2010 Fiscal Monitor of the IMF presents econometric evidence suggesting that, on average, a 10 percentage point increase in the initial debt-to-GDP ratio is associated with a slowdown in annual real per capita GDP growth of around 0.2 percentage points per year, although the impact is smaller (around 0.15) in AEs.
Unlikely?
Default can be likely even if it is not necessary, as the likelihood of default also depends on the sovereign’s willingness to pay. We interpret willingness to pay broadly, to include the ability of the political system to deliver a sustainable fiscal burden sharing solution that makes the creditors whole. Our analysis of default risk is not based on what market spreads may or may not tell us, but on fundamentals: the initial debt and deficit (including off-balance sheet contingent) liabilities) and the capacity of the country to generate future primary surpluses. In our view, markets may well overestimate the default probability of the sovereign for a number of advanced countries, but at least in the case of Greece, the market probabilities are likely to underestimate the sovereign default risk, at least at horizons longer than 3 years.
Default, if it occurs, occurs in countries with extremely high government debt and deficits, the countries whose polity and society at large are the most polarised, with the weakest political institutions and leadership, the highest interest rates and the lowest growth rates. Fortunately, such countries are outliers. But Greece very much looks like such an outlier. According to Cottarelli et al, its cyclically adjusted primary balance is -10% of GDP, while the debt-to-GDP ratio stabilising primary balance is 5.5% of GDP. Greece therefore has to engage in a permanent fiscal tightening of (at least) 15.5% of GDP. The size of the tightening is enormous, and possibly without precedent. What is more, this increase in the primary surplus has to be maintained permanently for sovereign solvency to be maintained.
It is probably worth pointing out that 70% of Greek general government debt is held abroad. If national governments value their national constituencies more than they value foreign holders of their debt, the degree of foreign ownership of the debt will have an impact on the likelihood of default. In the case of default, creditors pay; taxpayers and beneficiaries of public spending shoulder the burden if the fiscal adjustment route is chosen.
It is politically difficult for a national government to impose possibly heavy burdens on its taxpayers and on the beneficiaries of its public spending programmes if the answer to the question: “why do we have to bear this burden” is: “we impose this burden on you to make the creditors whole”. Clearly, fiscal adjustment is more likely to be supported by the polity if the creditors share in the pain and take a haircut.
At this point Buiter takes a detour to mock the Greek structural reform process which has been praised so highly by the IMF, which we won't comment on as it is so blatantly obvious that Greece is making up virtually all its economic data, that even a cavemen should get it by now, even one whose ultimate shareholder is the demented Omaha duo. A far more interesting discussion focuses on Ireland and we will leave it to you to read up on why the "Irish Government will want to prepare and position itself optimally for the eventuality that it might have to choose between imposing a haircut on the holders of (some of) the unsecured bank debt it guarantees and imposing a haircut on the holders of Irish sovereign debt."
Buiter's conclusion so much more elegant than the IMF's it requires no commentary.
Sovereign default depends on many factors – initial conditions, the country’s external environment, economic, social and political institutions and its policies. In the case of Greece, this set of circumstances suggests that default (by which we mean any restructuring with maturity lengthening or an NPV haircut) is not just a distinct possibility, but a high probability event. The size of the required adjustment needed just to stabilise the burden of public debt, the eventual size of the burden of interest payments and the lack of a strong social and political consensus on domestic burden sharing that might make the extreme fiscal austerity manageable, make it unlikely, in our view, that the Greek sovereign will only impose fiscal adjustment costs on its citizens. Instead, we expect that the country’s creditors will be invited to share the burden.
Greece is certainly an outlier. We emphatically reject the notion that an average of advanced AEs (or the median AE) is likely to default. But when it comes to default, outliers matter. Ireland may yet be forced by the size of the explicit and contingent liabilities it has taken on (through its guarantee of most of the unsecured debt of its banking sector) to choose between saving the unsecured creditors of (some of) its banks and saving the holders of Irish sovereign debt. Fundamental structural reforms that would boost the sovereign revenue base are few and far between in Portugal, Spain and Italy. Although financial markets may, in our view, overestimate the probability of default for the peripheral European countries bar Greece, they would certainly do well to recognise that sovereigns can default anywhere, and that one or more are likely to do so during the decade to come, even in the EU.
Nothing is absolutely certain in human affairs. It is possible that Greece succeeds in the economic, political and social transformations that would permit it to get out of its current predicament without a sovereign default. But in our view, the blanket statement that sovereign default in today’s AEs is unnecessary, undesirable, and unlikely represents the triumph of dogma over evidence and logic.
Is Sovereign Default “Unnecessary, Undesirable and Unlikely” For All Advanced Economies? (pdf)
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ICE ICE-LAND Baybee.
Pay now, slave later.
On reading her all the the upbeat news since her birth, my two year old today came at me with a confidence model of finance. She postulates 3 rules of finance -
1. Confidence (C) :proportional to: 1/Leverage
2. Leverage (L) :proportional to: sumofall(Deceit and Disinformation)
therefore rightfully concluding
2a. Confidence (C) :proportional to: 1/(sumofall(Deceit and Disinformation))
and
3. Confidence (C) :proportional to: Deleveraging (D)
since
3a. Deleveraging (D) :proportional to: 1/Leveraging;
We spoke for a while after that, and I asked her how the Fed Res and Treasury actions fit into this. At this point she emptied her bowels. Point taken, I can see the similarities.
when debts become unpayable economists become philosophers
philosophers-1st/historians-2nd/economists-3rd. don't mess with the order of things, buster.
Your daughter is clearly awesome :)
Just one question, did you consider other interpretaions of her final answer?
1) That the FED and TREAS are ... excrement (as you surmised)
2) That she was frightened by their arrogance
3) That she was demonstrating that no matter what they do, you will end up cleaning it up?
.... I bet you still could sing that song front to back.Lol'
http://www.bing.com/videos/watch/video/vanilla-ice-ice-ice-baby-live/184...
Check out my swiss francs as the banker revolves it. (Into a interest-bearing account.)
*Great Info*
Chris Whalen on BoA trouble brewing ...
http://kingworldnews.com/kingworldnews/Broadcast/Entries/2010/9/24_Chris...
Thanks for the link. Interesting that CW thinks BAC will hit the morgue before WFC. Jim Willie has it handicapped the same way.
Jim Willie mentioned BofA troubles but was short on specifics. Sounds to me like there is a lot more going on here than we know.
http://maxkeiser.com/watch/on-the-edge/episode-71-17-september-2010-guest-jim-willie/
Chris Whalen interview had more detail, but still feels incomplete.
Great Keiser episode. Willie details the heretofore unreported story of multiple and simultaneous demand calls for physical gold by several billionaires from their allocated funds. An exercise that was executed with military precision and shut the LBMA down in July. Amazing stuff.
JW mentioned BAC's "death experience on the weekend of July 24th, the same weekend that the London Bullion Market Assn went dark on reported data."
http://www.24hgold.com/english/news-gold-silver-the-ominous-silent-canar...
Way more going on than we know--for the time being.
Everyone is at the end of their rope, everyone. The next leg down will come like a theif in the night, and I think hes coming soon. Its going to be like Russia default,out of nowhere... boom, market drops 2,000 over 2 week span, everyone shitting bowling balls again. And we have world war 3 on our doorstep. This movie has already played out,no?
cool. never forget women make the best thieves, though. that what i used mine for. ahh, the good old days. one of these days i'm gonna spring that girl from the big house.
The IMF is made up of many of the members who own the private Federal Reserve. Therefore the IMF is the Federal Reserve 'in drag'. So expect SSDD mentality.
Right about the time you are convinced we will pull off the impossible and be able to print endlessly with no blowback, the whole thing is going to collapse.
every time I think I did something good & pulled off some kind bullshit while i'm pattin myself on the back,it usually blows up in my face...
AMD just warned on 3rd Q because of weak sales, Dollar index falling and the market futures are ramping up ?
wtf is going on here ?
http://www.thestreet.com/story/10870493/1/amd-cuts-3q-guidance-blames-weak-consumer-sales.html
Weakening dollar helps exports while increasing cost of imported commodities priced in dollars.
Cost push inflation may increase if the dollar drops too much...especially if oil takes off again.
The last thing the Fed wants now is the dollar to weaken so much that oil goes over a hundred bucks...Fed would have to attempt to strengthen the dollar...Ooops
Like whack a mole.
scaricity young man. SCARYCITY! FYI--the Grateful Dead saved my life when i recalled the words "it ain't no luck...I LEARNED TO DUCK!"
Associated Press today.
Brazilian President Luiz Inacio Lula da Silva hailed the finds as the nation's future, a second declaration of independence and an economic savior for 57 million Brazilians living in poverty -- 30 percent of the population. The military wants new submarines and jets to protect the crude. Leftist groups want it all nationalized.
Petrobras shares ended 3.2 percent higher on Brazil's Bovespa exchange Thursday in anticipation of the sale. Shares that trade in the U.S. gained 2.5 percent.
Brazil's government -- which already controls 40 percent of the company and more than 50 percent of its voting stock -- will receive $43 billion in shares in exchange for allowing Petrobras to drill for 5 billion barrels in reserves. The other $36 billion will be cash raised from investors.
Context of time.
The Golden Gimmick refers to a foreign tax credit deal enacted in November of 1950 by the US Government under president Harry Truman between King Ibn Saud of Saudi Arabia and the Arabian-American Oil Company (ARAMCO), a consortium dominated by three US oil companies and one British oil company. King Ibn Saud was being influenced by Juan Pablo Pérez Alfonzo of Venezuela who cut a similar 50/50 deal with Jersey Standard Oil and Royal Dutch Shell. This 50/50 deal accorded the American oil companies a tax break equivalent to 50% of their profits on oil sales, the other 50% was diverted to King Ibn Saud via the US Treasury. The King agreed to this 50/50 splitting of Aramco's oil profits instead of nationalizing Aramco's oil facilities on Saudi soil. Venezuela eventually led the effort in forming OPEC and Saudi Arabia gained full control of Aramco by 1980.
======================================
But the only concern of the rank-and-file Fascist was to get a government job. In the time of the Ethiopian war the present writer asked some graduate students of one of the great Italian universities for an explanation of their hostility to France and Great Britain. The answer was amazing: "Italy," they said, "does not offer enough opportunity for its intelligentsia. We want to conquer British and French colonies in 'order to get in the administration of these territories the jobs which are now in the hands of British and French bureaucrats."
Consequently, this thought from Cicero in 55 B.C.:
“The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance.”
Old discussion
Capitalism was killed by Socialism long ago.
You have not convinced me that markets can anticipate future events that do not affect market prices in the present time.
I gave it a shot. That's your business.
Your response to my statement that markets are not capable of auto-regulation was to argue that governments aren't capable of such auto-regulation either. I didn't say that our government has been capable of such auto-regulation. I said that free markets are not. I also said that no market system - nothing - can protect humans from themselves.
However, I see no possible mechanism in a free market for anticipating and responding to such events. That doesn't mean it's not there.
What you fail to recognize or acknowledge is that a free market capitalist system is doomed to fail.
You fail to understand that we are not operating under a free market capitalist system in any sense of the word.
I understand markets and economics well enough to have this discussion with you.
I find you have no understanding how markets work.
I'm just not a true believer in the religious cult of free market capitalism as you seem to be. Religious cult? Don't make me laugh. Free market economics is formally known as the Austrian School of Economics. Mises.org is stocked with books from as far back as the twenties describing in great detail how markets work and how government interference screws them up. Lord Acton reasoned to the future and seen the leviathans from old and new to posit the future also. I know I've been watching the events that built up to these crises for decades. Not because I needed an education but to protect capital, which has, been done to date. We moved all production from todays news some time ago. History you never see.
Not sure who said this but they are really stupid.The entire post hard to follow ...
How many companies like , McD's,Microsoft,Apple,IBM,Cat,HP,Google,NFLmost of the industry leaders spring forth from Capitalism.
workforce is disgusted, downs tools and walks
innocence is injured experience just talks
everyone seeks damages, everyone agrees
"these are classic symptoms of a monetary squeeze."
+1
The supreme keepers of the public myth must, under every and all circumstances and despite all evidence to the contrary, continue to keep the public myth. No matter what. This is done not to convince those who are skeptical or even to turn the mind of the non believers.
No, the sole purpose of this exercise is to tell those who wish to believe, who desperately wish to be told that what they believe is really true and that it's OK to continue to believe it, what they want to believe. The seduced, rather than face their own self deception and denial, want to know that all will be well, that their ultimate protector, the all powerful and all knowing authority, is here and that we are safe. And that he will protect us from our own silly folly and childish mistakes.
The more frightened the mind becomes, the more childish are it's responses. One can't see this from our own point of view for you and I have pushed through this barrier. Rather this is how those who are still deeply immersed within the carefully woven Matrix of illusion and subterfuge see the world when the ends start to unravel and the self doubt begins to mount.
Daddy, tell me another lie so that I may believe its the truth.
And how they so want to believe. Especially public pensioners....
Human's fear of change is right up there with the fear of death...according to Jung.
"The supreme keepers of the public myth must, under every and all circumstances and despite all evidence to the contrary..."
Founded on the Myth Narrative
When a country is founded on the myth narrative of exceptionalism ("Doing God's work) and comes wrapped in Sacred and Satanic symbolism...
And the misfits of middle classdom and the fallacious left right paradigm cry out:
"Same as it ever was..."
"Same as it ever was..."
"The Myth of the Rule of Law":
http://faculty.msb.edu/hasnasj/GTWebSite/MythWeb.htm
Very nice piece. It was a very good early morning read. Thank you.
those who wish to believe, who desperately wish to be told
I would include another cohort, those who are oblivious, for whom the subject of Buiter's essay might as well be ancient Sanskrit. The myth-keepers do not want these issues to come on to the radars of the great oblivious, for that is the great bulk of the populace, emotional and poorly-read, which can lash out in fury if unpleasantly awakened from its slumber.
Well done ZH.
Deck chairs drinking, waiting and almost finished the financial chan.
Ad free and log free coming soon, spend now at 2010 prices while they last and retards are willing to offer them on hosting services (shit its all so cheap). Looking for ghostship partners
this is the same guy who advocates digital currency and negative interest rates (not defacto) - pass the beernuts
Buiter also made a vicious attack on gold purchasers a few months ago. His rationale for that attack was total bs...really, just a rant.
Buiter needs a salt water and habanero enema with icy hot smeared on the insertion applicator...
Pass those beernuts back, would ya?
Stop watching what the left hand does, your eyes should veer to the right hand. Central Bank magician trick.
2010 FSI Survey on the Implementation of the New Capital Adequacy Framework
http://www.bis.org/fsi/fsipapers09.htm
Sneezes. Blows my nose. No worries, Basel III has discharged in my tissue.
President Obama's Remarks to the BIS Update Conference on New Efforts to Reform Export Controls
http://www.bis.doc.gov/
Yep, more progressive rhetoric under the sore asses of the peasants. I'll bet you saw this on your local cable/satellite TV channel.
Back to coin clipping I see...
"as more and more countries go tits up" ... this Tyler is an Aussie :)
Labeling problem or Enron accounting?
http://noir.bloomberg.com/apps/news?pid=20601039&sid=a97reuqEO44I
"A cynical but witty Englishman said, in a book, not long ago, that it was a mistake to say of a conspicuously successful man, eminent in his line of business, that you could not bribe a man like that, because, he said, the point about such men is that they have been bribed - not in the ordinary meaning of that word, not in any gross, corrupt sense, but they have achieved their great success by means of the existing order of things and therefore have been put under bonds to see that existing order of things is not changed; they are bribed to maintain the status quo."
- Woodrow Wilson, 1913
that makes it sound worse than a bribe. why not just be happy with your face on a $100,000 bill and leave it at that? crusty bastard. who innovates around here? YOU?????
Even the commodity countries like Canuckland and AussieShampoo are going to digger if the rest of the planet goes "tits up".
You can't eat GOLD/SILVER/IRON/RED DIRT.
Hey Aussies..... GOT WATER? i.e. FRESH WATER? Or are you long a ton of de-sal plants?
Mad Max will probably be throwin' the nitrous switch to get a bottle of Aquafina soon enough.
As a matter of fact, Australia's got the biggest groundwater aquifer in the world - the Great Artesian Basin.
Default on the debt.
Default on discussing the debt.
Default on what's on the table what's not on the table.
Default on the table.
Default on whether the table ever existed.
No partial pay, slow pay, Just walk away.
If Buiter "gets the job" he'd be the biggest blogger ever. Perhaps he's thinkin' of it as he "get's less wise ass." As for bringin' "Fight Club" into the White House, well...."honey, keep the silverware tied down--we got gold bugs in da house!" Sure would make Andrew Jackson laugh, tho.
It's funny that someone from Citigroup criticizes "too big to fail"...
Not that I dont agree, "too big to fail" is a disaster that should have never happen, but someone from Citigroup is not the best person to speak against it.
Just like every other 2 yo in the country who can see and smell the economy as the contents of a diaper. :o)
She wants to marry Greenspan when she grows up. I said what! why? She said he's very comfortable despite being clueless, is at ease being wrong in public, is on TV even when he makes lots of mistakes, never listens when people tell him what to do, travels the world talking to people he shouldn't and gets paid lots of money to stuff everything up. He's every young girls dream!
So if Greece has a structural deficit of 10% but needs to run a 5.5% surplus to stabilize, what are the comparable figures for the US? Oh so slightly better? I don't see how you can look at the behavior of either the Greek or US government and imagine that either of them are heading anywhere other than default.
(I know, I know, the US could try to hyperinflate out of its debts instead, but that's really just a dumber and more destructive way of doing the same thing.)
http://keynesianfailure.wordpress.com/2010/09/10/delayed-deleveraging-meets-the-keynesian-endpoint/
Seems everybody knows what is going to happen. The West will crash and the East will rise from the ashes on the other side. The only question is how it will play out. Fast or slow. Unevenly or evenly.
--"and the riders are jockeying into postition as they come into the final turn...."
Its a great shame that the Irish people have been so misled by their government. Would you believe there is a seminar going on today in Dublin accusing the media of being pessimistic. I kid you not...
Meanwhile I read this.
"It has turned out that the real problem for Ireland started with her banking sector becoming as large as 400% of her GDP. Combining this largely domestically focused banking sector with a property boom which turned to bust left her in trouble. The real villain of the piece is her guaranteeing of bank assets which has combined bank and sovereign debt together and left her struggling for a way out. In a nutshell she tried to kick the can down the road hoping for an economic recovery which so far has not emerged."
http://notayesmanseconomics.wordpress.com
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