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The First Domino?
- Bank of America
- Bank of America
- Barclays
- Bear Stearns
- Bond
- Borrowing Costs
- British Pound
- Budget Deficit
- Cohen
- Corruption
- default
- Deutsche Bank
- Evans-Pritchard
- Federal Deposit Insurance Corporation
- France
- George Papandreou
- George Soros
- Germany
- Goldman Sachs
- goldman sachs
- Greece
- Greenlight
- Gross Domestic Product
- Ireland
- Italy
- Lehman
- Lehman Brothers
- Merrill
- Merrill Lynch
- Morgan Stanley
- New York Times
- Portugal
- Recession
- recovery
- SAC
- Sovereign Debt
- Sovereign Default
- Unemployment
- Volatility
Submitted by Leo Kolivakis, publisher of Pension Pulse.
Richard Parker, lecturer in public policy at Harvard Kennedy School writes in the Nation, Athens: The First Domino? (Hat Tip: Ken):
The
shadow of classical Greece has always loomed large over Western
civilization--whether in literature, philosophy, art, mathematics,
history or politics, it has been, in so many ways, the fons et origo of
us all. Modern Greece suddenly seems poised to play that same outsized
role, but by no means in the same civilizing way. Athens's fiscal
crisis could very well ignite the next global financial crisis--just as
the world hoped it might be starting a slow exit from the last one.
After
meeting with fellow European leaders in Brussels in early February,
where he argued the case for help in solving the hefty budget deficit
he'd inherited on taking office last fall, Prime Minister George
Papandreou flew home to Athens to tell his countrymen that he'd
returned with a half-full cup of promises--and no assurance of the
serious backing Greece needs to weather its woes. Global markets, which
had been fibrillating nervously for three months about Greece's (and
the euro's) financial health, skipped several beats after Papandreou's
speech, after already suffering a long sell-off that wiped out much of
Wall Street's shaky recovery. All eyes are anxiously casting about for
Delphic signs of what Europe's finance ministers will do when they meet
to hear Greece make its case again, this time in hard numbers.
The
situation has the makings of an Aeschylean tragedy. If help isn't
forthcoming, little Greece--whose economy is just 3 percent of Europe's
GDP--could, against its will, set off a chain reaction that pulls down
Portugal, Ireland, Spain, perhaps even Italy, and thereby throws
Europe's, and then America's and the rest of the world's, fragile
recoveries into reverse.
The crisis is, in classic Greek
fashion, ripe with ironies. Papandreou came to office inOctober
determined to clean up his country's longstanding fiscal recklessness
and widespread corruption. It was he who first exposed the scope of the
dilemma immediately after discovering that this year's deficit would be
double what his conservative predecessors had promised. Moreover,
Papandreou has consistently insisted that his government will keep the
promises it has made to Greek voters and to EU auditors to bring the
deficit, now almost 13 percent of GDP, down to less than 9 percent this
coming year and to the EU-mandated ceiling of just 3 percent within two
more. But traders and speculators, sensing the size of the task the
government faces, have forced interest rates on Greek bonds to record
highs, betting that the country is close to default. (The traders' role
is itself ripe with ironies because Goldman Sachs and other top Wall
Street firms had earlier in the decade helped Greek governments move
liabilities off state budgets by constructing the same sort of offshore
entities and complex derivative swaps that were at the heart of the US
banking system's collapse a year and a half ago. Revelations of the
deals by the New York Times generated new attacks on the Papandreou
government, despite the fact that it was his government that had
exposed the dealings.)
The question, as one very anxious
European banker told me, is "whether Greece will be the Bear Stearns of
sovereign credit." Greece's outstanding debt is more than Bear
Stearns's $400 billion balance sheet exposure in 2008, before its
collapse--but there the analogy ends. Greece is a sovereign nation, not
a company, and it isn't going bankrupt, not least because its currency
is the euro, shared by 320 million Europeans and backed by an economy
larger than America's. But if it is forced into debt rescheduling and
renegotiation, Greece could well spark a panicky stampede.
What
makes this crisis especially painful is not just that we've seen it
happen before but that its solution is far less complicated. What
Athens needs are the funds to service the gap between its revenue and
its obligations, a net deficit that gets smaller each week as it
carries out the painful cuts needed to bring its budget back to the
EU's mandated standards. Public sector salaries, from the prime
minister's on down, have been slashed; hiring has in effect been
frozen; civil service retirement ages pushed up and benefits reduced;
and social services and the military budget are being curtailed across
the board. For Greeks it is an excruciating moment. Despite a
nationwide strike called for later in February, opinion polls show the
majority still favor Papandreou's painful choices.
Moreover,
unlike Wall Street bankers, Papandreou isn't asking for a bailout (let
alone a bonus for himself or senior ministers); what he wants is help
stabilizing the market for Greece's bonds. And unlike Wall Street in
the fall of 2008, Athens isn't being frozen out of the credit markets;
in fact, it is still able to borrow. Its most recent 5 billion euro
bond offering was actually oversubscribed by 20 billion, which allowed
the government to increase the offering by a healthy 3 billion euros.
Moreover, with unprecedentedly low global interest rates, Athens is
paying 5 to 6.5 percent on medium-term bonds. That's not cheap, but
it's far below what other small countries have paid in similar
circumstances.
But Wall Street speculators have swarmed in,
playing Greece, as the Financial Times put it, "like a piñata." The
country's tiny bond market--barely a billion euros a day were trading
in Athens in January--makes an easy and tempting target for traders
with big bats; by attacking Greek bonds, the traders get to play on an
increasingly pan-European volatility in bond and currency rates,
thereby leveraging a little nation's problems into gigantic
trading-floor gains. And thanks to the Obama administration's repeated
refusal to limit such activities--despite pleas from our European
allies since 2008 to jointly reregulate global financial markets--what
the traders are doing is legal. In fact, massive immediate trading
profits are the means by which banks like Goldman, Citi, JPMorgan,
Barclays, UBS and Deutsche Bank are rebuilding their balance sheets
without providing the lending the real economies of America and Europe
need to begin their recovery.Athens desperately needs the
maneuvering room that visible European support would provide by driving
off the speculators and letting Papandreou's government focus on
domestic restructuring. That needn't cost wary German, Dutch or French
governments and their taxpayers billions; to the contrary, Berlin,
Amsterdam and Paris could snuff out, at quite low cost, the smoldering
coals before the real fire breaks out, and with very little risk.
Europe could, for example, put up no money and simply offer to
guarantee Greek bonds, much as the FDIC raised its guarantees to US
banks and then extended them to money market funds after Lehman
collapsed in 2008. European governments--with deep pockets and long
time horizons--could also help by buying some of the bonds and
encouraging public and private banks to do likewise. The $15 billion in
EU development funds Greece is eligible to receive could be expedited
and expanded, with no new burden on Europe's taxpayers.
The
price of not acting now is high--and not just for Greece. For Europe it
means a fiscal and credit domino effect among weakened EU economies,
driving borrowing costs even higher for the prudent and profligate
alike. For America, a weakened euro--which has already fallen almost 10
percent against the dollar over the past three months--means a rising
dollar. That, in turn, means a rising US trade deficit--not the best
strategy for helping America escape its own crisis, let alone meet
President Obama's dreamy goal of doubling US exports in the next five
years.
The scale of what's happening has suddenly dawned on even
the most conservative European skeptics. Ambrose Evans-Pritchard, the
influential English financial columnist, stopped his long diatribe
against Greece's fiscal policies and called for European aid. The
Economist's Athens correspondent, who's been no less relentless, has
also suddenly switched views, while the Financial Times, after
excoriating the Papandreou government for not making cuts so deep they
would guarantee a depression, suddenly has awakened to the dangerous
game that traders are playing and the risks it poses for everyone.
With
so many at last realizing just what Greeks bearing a bitter gift of
sovereign default could ultimately do to us all, there's still reason
to hope that we may not yet be facing Global Financial Crisis 2.0.
Reporting for the NYT, Nelson Schwartz and Graham Bowley write Traders Turn Attention to the Next Greece:
Even
as Greece pledged anew on Wednesday to rein in its runaway budget
deficit, briefly easing the anxiety over its perilous finances, traders
on both sides of the Atlantic weighed the risks — and potential rewards
— posed by the groaning debts of other European governments.
While
investors welcomed news that Athens would raise taxes and cut spending
by $6.5 billion this year, analysts warned the moves might not be
enough to avert a bailout for Greece or to contain the crisis shaking
Europe and its common currency, the euro.
Indeed,
some banks and hedge funds have already begun to turn their attention
to other indebted nations, particularly Portugal, Spain, Italy and, to
a lesser degree, Ireland.
The role of such traders has become
increasingly controversial in Europe and the United States. The Justice
Department’s antitrust division is examining whether at least four
hedge funds colluded on a bet against the euro last month.
“If
the problems of Greece aren’t addressed now, there is a risk the market
will focus on the next weakest link in the chain,” said Jim Caron,
global head of interest rate strategy at Morgan Stanley.
Whatever
the outcome in Athens, the debt crisis in Europe threatens to tip the
financial, as well as political, balance of power across the Continent.
With Germany and France emerging as the most likely rescuers, leaders
in Berlin and Paris could end up dictating fiscal policy in Portugal,
Ireland, Italy, Greece and Spain.
And in the months ahead,
fears about the growing debt burden elsewhere in Europe are likely to
return, according to investors and strategists. That is particularly
worrying given that Western European countries must raise more than
half a trillion dollars this year to refinance existing debts and cover
their widening budget gaps.
The way fear can spread from
capital to capital reminds Mr. Caron of how the American financial
crisis played out. “What people are doing in the markets is no
different from what they did with the banks,” he said. “First it was
Bear Stearns, then it was Lehman Brothers and so on. That’s what people
are worried about.”
France and Germany are emerging as the
crucial backers of any lifeline for Greece, but they have slow growth
and budget troubles of their own — deficits equaling 6.3 percent of
gross domestic product in Germany and 7.5 percent in France. And among
voters in both countries, “there is very little appetite for rescues,”
said Marco Annunziata, chief economist for Unicredit.
The most
vulnerable country after Greece, some analysts say, is Spain, which has
been mired in a deep recession. Facing an unemployment rate of 20
percent, a budget gap of more than 10 percent of gross domestic
product, and an economy expected to shrink by 0.4 percent this year,
Madrid has little wiggle room if investors shun an expected 85 billion
euros in new bond offerings this year.
Spain’s neighbor
Portugal is also vulnerable. Large budget and trade deficits, combined
with a shortage of domestic savings, leave Portugal dependent on
foreign investors. And, as in Greece, there may be little political
will to slash spending or raise taxes.That’s in sharp contrast
to Ireland, which had been a source of anxiety last year. New austerity
measures, including a government hiring freeze and public sector wage
cuts, have put it in a stronger position as it raises 19 billion euros
this year.
The Italian government is also heavily indebted — it
has more than $2 trillion in total exposure — but it is also in a
slightly stronger position than Spain or Portugal because its economy
is expected to grow by 0.9 percent this year and 1.0 percent next year.
In addition, its budget is not as far out of whack, with the deficit
this year expected to equal 5.4 percent of G.D.P.
According to
Kenneth J. Heinz of Hedge Fund Research, the big hedge funds are now
evaluating the response by other European countries in extending a
lifeline to Greece before they probe weaknesses and opportunities in
other countries.
Hedge funds, banks and other institutions are still wagering on a drop in the euro as well as the British pound.
Those
trades have been controversial for months in Europe. But the debate
shifted to the United States on Wednesday, after it emerged that at
least four hedge funds had been asked by the Justice Department to turn
over trading records and other documents. That request followed a
dinner in New York last month where, among several other subjects,
representatives of some of these hedge funds discussed betting against
the euro.
The funds that
received the letters — Greenlight Capital, SAC Capitol Advisors,
Paulson & Company and Soros Fund Management — are among the
best-known names in the hedge fund universe. Greenlight and SAC
declined to comment, as did the Justice Department. Paulson &
Company, whose representatives did not attend the dinner, also declined
to comment.
In a statement, Michael Vachon, a
spokesman for Soros Fund Management, denied any wrongdoing and said,
“It has become commonplace to direct attention toward George Soros
whenever currency markets are in the news.”
The dinner, in a
private room at the Park Avenue Townhouse restaurant in Manhattan on
Feb. 2, involved about 20 people and was characterized as an “ideas
round table” by several who attended. But people present at the dinner
or knowledgeable about the discussion said the idea of shorting the
euro occupied only a few minutes of the conversation.
The presentation on the euro, by SAC, lasted less than five minutes, according to these people.
Notes
provided by one of the firms that attended the dinner summarized the
discussion on the euro state: “Greece is important but not that
important; instead you have to start thinking about every other
country. What’s after Greece? Spain, Ireland, Portugal.”
James
S. Chanos, a hedge fund investor who has not been making bets on the
euro, defended the positions taken by hedge funds, calling the
inquiries into their activities “witch hunts.”
“Hedge
funds and short-sellers are being blamed for the failings of other
people,” he said. Nevertheless, the anxiety in Europe is reflected on
the Chicago Mercantile Exchange, where trading in futures on the euro
soared to a record $60 billion in February — up 71 percent from a year
ago.
“The Greek story is putting downward pressure on the euro,”
said Derek Sammann, a managing director at the CME. According to CME
data, hedge funds are in their most bearish position in a decade in
shorting the euro, said Mary Ann Bartels of Bank of America Merrill
Lynch.
“They have been short for a while, but in the past two weeks have really pressed it,” she said.
Is
Greece the first domino? Are hedge funds to blame from the euro's woes?
How will sovereign debt defaults - if they materialize - impact the
global financial system? There are no clear cut answers to these
questions. Greece is not an economic powerhouse, but if you believe in
the butterfly effect, then you don't want to risk seeing it go under.
Hedge funds are not to blame for all market evils but they are not as
benign as Mr. Chanos makes them out to be. The big funds often collude
by "sharing ideas". A wave of sovereign defaults will surely cripple
the global financial system, which remains very fragile following the
last crisis.
And what about Greek pensioners? Just like
millions of other pensioners and workers, they are exposed to the
vagaries of the markets. For every Soros, Cohen, Griffin, Paulson there
are millions of others living under the dark shadow of economic
insecurity, just a step away from pension poverty. When the bigger
dominoes start crumbling, who will bail out all of them?
»
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Leo, given this, I don't see how you can be bullish. Or are you beginning to change your mind.
However, your prescription would just make things worse.
Yes, contagion is a real problem. It destroyed my business even though we did things right. Default contagion would cause real pain
But, the band aid approach will only make things worse. By not resolving the underlying problem (too much taxing, way too much spending, and way way too much debt), the critical lesson is not learned.
Think of finding a cancerous lesion on your skin. You see it, you know it's there. But you don't go to the doctor because 1) you are afraid to hear it is cancer, and 2) you don't like the idea of having it cut off. It is too painful, and you have important things to do and can't take the time.
Ignoring it, or putting a band-aid over it will allow you to avoid the bad news and the pain and inconvenience of going to the doctor for a biopsy and excision.
Meanwhile, the cancer continues to grow and metastasize. It moves into your lymph nodes and bones and ultimately becomes life-threatening.
Whether it is Bear Stearns or GM or Goldman Sachs or AIG or Greece, we don't seem to learn the lesson. Because we are afraid of the very real pain and inconvenience, we don't deal with the problem until ultimately, it will be out of our hands. The pain we suffer then will be much greater than it had to be
The more blog I read, the less I know.
Do believe there is such as thing as being 'over-informationed'.
It all appears to be like being dropped in a jungle with a thousand people, all of whom have something pithy, witty, insightful and intelligent to say about what to do and where to go next.
I think I'll go see what Kim Kardashian is up to instead.
Video: Greece on the Brink – Anatomy of a Debt CrisisDefault - Give GS and the other banks a much needed lesson in risk management. Austerity is in the cards anyway, just eliminate the final shearing by the rich oligarchs. (What other infrastructure will they expect to be given a lifetimes revenue from?)
Reading this tripe i guess Greeks are not responsible for the hole they dig.
But Chile has 5-6% debt. How is that possible, they are poorer than the artificially rich Greeks.
Greece= Bear Stearns
?????= Lehman Bros
?????=Merrill
?????=Fre
?????=FNM
?????=WaMu
Etc...
"In fact, massive immediate trading profits are the means by which banks like Goldman, Citi, JPMorgan, Barclays, UBS and Deutsche Bank are rebuilding their balance sheets without providing the lending the real economies of America and Europe need to begin their recovery."
begin? dude i just smoked some killer green shoots;
everything's comin up roses!
"With so many at last realizing just what Greeks bearing a bitter gift of sovereign default could ultimately do to us all, there's still reason to hope that we may not yet be facing Global Financial Crisis 2.0."
damn, and i thought i was gettin the best shit.
don't bogart that spliff!
What's up Leo? Did you lose your rose colored glasses?
My theory is that both Greece and the stronger EU member states both ultimately *want* Greece booted out. If this happens, Greece can go back on the Drachma and print to their hearts content to maintain internal power for a little bit longer (all politicians ever care about), the alternative being austerity programs that would threaten the social order because the Greek economy is so heavily dependent on government spending. They will default on their Euro-denominated debts, yes, threatening European banks with Greek sovereign exposure, yes, but Euro governments like Germany will have a much easier time bailing out their banks than bailing out Greece. Meanwhile, the stability of the euro actually *improves* with the dead weight booted, leaving the rest of the EMU in a improved position. At least for a time. Then shampoo, rinse, repeat.
'Consider a turkey that is fed every day. On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. The same hand that feeds you can be the one that wrings your neck. The Black Swan is a sucker's problem.'
-Nassim Taleb
'Other than Herbert Hoover’s memoirs, I have yet to read any analysis of the Great Depression attribute anything internationally other than the infamous US Smoot-Hawley Act setting in motion the age of protectionism in June 1930. It was the financial war between European nations attacking each other's bond markets openly shorting them that led to all of Europe defaulting on their debt. Even Britain went into a moratorium suspending debt payments. This is what put the pressure on capital flows sending waves of capital to the United States that to some degree was kind of like the capital flow to Japan into 1989. This put tremendous pressure upon the dollar driving it to new record highs that were misread by the politicians who did not understand capital flow. They responded with Smoot-Hawley misreading the entire set of facts.'
-Martin Armstrong
What has been will be again, what has been done will be done again; there is nothing new under the sun.
New York Times
May 18th, 1931
The Vienna Stock exchange remained fairly calm this week in the face of the news regarding the Kreditanstalt. The comment, is made, however, that the existing valuation of most shares almost excludes further depreciation. The Vienna money market continues easy, with offers of short-term foreign credits from America at 3 and one-half per cent, but with little demand for them.
The troubles of the Kreditanstalt are quite unanimously ascribed here to the unsound policy pursued in 1929, when the crippled Bodenkreditanstalt was attached to the larger concern. But the aggravated crisis in Austrian industry has necessarily also had its influence. As a result of the peculiar development of Austrian bank affairs, both of these leading banks had well-nigh become owners of a large portion of Austrian industry.
Losses in such industries as metals, textiles, and petroleum, with many others, thus became the immediate losses of the Kreditanstalt. That institution had not suffered loss through use of its funds in speculation, but the heavy fall in prices for immense parcels of Austrian industrial shares held by it have reacted on the balance sheet, thus impairing the bank's capital.
Under the ordinary operation of Austrian law the bad showing of the statement on which Baron Rothschild, president of the Kreditansalt, insisted, would have made the winding-up of the bank inevitable. Through this process all actual liabilities would have been covered, but on the other hand nearly three-quarters of Austrian industry would have been brought to a standstill.
The contract with the governement, however, as already passed by Parliment, provides that the State together with the national bank will cover 69,000,000 schillings of losses "à fond perdu," (translation : without any chance of getting back -AM) while 31,000,000 will be made up through reduction of the present share capital and use of 40,000,000 schillings from the reserve fund. In all, the State bank and the Rothschilds together acquire 83,000,000 schillings of the new shares. Thus, after covering losses, the share capital will amount to over 170,000,000 schillings, of which the State and national bank will own 47 percent.
Since the Rothschilds and the chief shareholders this time had required that the worst should be shown by the balance sheet drawn up, it is not thought that further losses will become evident in the near future. The fact which will cause difficulty is that the Socialists welcome the compulsory of State capitalism, with control of almost all production by the government, and wish to maintain it, whereas the "bourgeois" parties and financial circles desire the speediest possible sale of the credit shares held by the State to an outside syndicate.
(Oh come on admit it, the last paragraph had to make you chuckle, if not wince ... -AM)
Greece of course will bailed out, disregard political posturing for consitituents by heads of state scoffing at the idea.
Lend them $600B it is only digits on a balance sheet that is partly ficticuous anyway, most payments are electronic transfers very little physical currency changing hands. Can this go on forever with fiat currencies?
there is NO WAY FORWARD that does not include
MASSIVE INFLATION (to attack the denominator)
or
MASSIVE DEFAULT (to attack the numerator)
*
Many say that the conditions for inflation are not present. And they may be right. But the conditions for Hyper-inflation ARE MOST DEFINITELY IN PLACE.
*
Hyper-inflation is NOT a bad case of inflation.
*
Anyone holding their breath for radical tax increases and radical vaporization of asset prices that somehow prevent the fiat pyramid scheme from collapsing are going to die of oxygen starvation.
About $20T in asset price vaporization has already happened.
I don't know if that would classify as 'radical', but it's about 24% peak-to-trough.
...then America's and the rest of the world's, fragile recoveries into reverse...
We're in a recovery? Who would've known? Thanks, Leo.
I would like the PIIGS to sell TBTF bailed out traders a boatload of CDS giving the right to buy their sovereign debt or whatever at a big discount, for cash, then them tell them to 'va fare in culo'...manipulate this, bitches. Bust that unregulated market. Just for fun, that is. Then make a movie about it.
Nope...
Capitalism IS NOT DYING...
It is just a baby just learning how to walk....
The sole problem is tax structure/govt. take....
Secondly ....is a better means of wealth distribution....
Which is proper company structure....and merit rewards via stock....
Thirdly....is a far more efficient source of capital ....which would be a new lower cost...seamless world wide securities exchange with a wiki fact based format that replaces the recently compromised rating agencies....
In socialism....the govt. owns it...
In capitalism....those who merit ...own it...
WHEN PROPERLY STRUCTURED....
Some MP's from Merkel's coalition in Germany are already looking forward to a fire sale of mediterranean real estate - http://www.reuters.com/article/idUSLDE6230BL20100304?type=marketsNews . In the end, what matters most in life?
I'm sure Turkey might have an interest in 1 or 2 or 3 islands!
Germans are already snapping up Greek real estate. Greece and Spain have become the Floridas of Europe. Great retirement destinations.
A friend of mine sent me this old FT qrticle. Please note the date it was published (nobody saw this coming, my ass!):
EU warns Greece for under-reporting deficit
By George Parker in Brussels and Kerin Hope in Athens
Published: September 23 2004 18:45 | Last updated: September 23 2004 18:45
Greece was warned on Thursday that it could face legal action for grossly
under-reporting its national deficit and debt figures but was told it would
not be ejected from the 12-country eurozone.
Revised figures revealed Greece broke the single currency's 3 per cent of
GDP deficit ceiling every year in the 2000-3 period.
The European Union will launch an inquiry to check the veracity of the
figures it provided before 2000, the year Greece qualified to join the
single currency.
The scale of the inaccuracies has sent shockwaves across the single currency
area, which relies on member states to provide sound economic data.
Joaquin Almunia, EU monetary affairs commissioner, said: "The revisions are
of a size and scope that is causing real worries to the [European]
Commission."
He promised he would soon make recommendations to ensure the "independence,
integrity and accountability" of the statistical services of each member
state.
He added that Eurostat, the EU's statistical arm, could start legal
proceedings against Athens for breaching accounting rules.
Greece, however, is unlikely to be ejected from the eurozone, even though
there are now doubts about whether it complied with the membership rules
before 2000.
"I don't think there is envisaged any kind of possibility to reopen these
kinds of decision," said Michel Vanden Abeele, director-general of Eurostat.
The new data revised the Greek 2000 deficit to 4.1 per cent from a prior
estimate of 2 per cent.
The 2001 and 2002 deficits now stand at 3.7 per cent compared with 1.4 per
cent previously. The 2003 deficit, which had already been revised up in May
to 3.2 per cent from 1.7 per cent, is now shown to be even higher - at 4.6
per cent of GDP.
Greece's centre-right New Democracy party pledged to increase transparency
in public accounting after defeating the Socialists in a general election
last March.
George Alogoskoufis, the finance minister, has several times accused his
Socialist predecessors of using "financial alchemy".
Cost-overruns on the building of venues and transport systems for last
month's Athens Olympics games, estimated at more than ?2.5bn ($3bn, £1.7bn),
contributed to a projected deficit of 5.3 per cent of GDP this year.
Mr Alogoskoufis said this week that the previous government failed properly
to record defence procurement expenditure in the budget. For example, the
purchase of 45 US-made fighter aircraft for the Greek air force did not
appear in the national accounts.
The Socialists also over- estimated surpluses reported by state-controlled
pension funds, which were calculated on the basis of samples rather than
full statements of accounts.
Yannos Papantoniou, the former finance minister who steered Greece into the
eurozone, criticised the Eurostat audit of the country's public finances
yesterday as "politically motivated accounting".
He said the new government had ignored in its revised accounts European
Commission budget guidelines on how to account for defence spending, which
call for spreading payments over several years as equipment is delivered
Nothing like a little LOL Leo in the morning to lighten the mood. Thanks for the laughs.
The first domino was East Germany. Socialism is collapsing in the order of most to least socialist. The only smart ones are the Asians countries voluntarily making the switch.
It's playing out like Atlas Shrugged too, as the socialists run around trying to bail each other out. They're all in sinking ships, but they think that by taking turns bailing each other out, all the boats will stay afloat, rather than all sinking.
Unlike the novel, you don't have to be a pirate to intercept their aid. Just get on the other side of the buckets of euros and dollars getting tossed back and forth.
Nope. This is Capitalism dying. Credit and debt are not concepts of Socialism but Capitalism.
I did not know that Goldman Sachs and Friends were Socialists! Perhaps Socialism for the Elite, Darwinism for everyone else.....
No YOU have it wrong. This is corruption not capitalism.
Decrimalizing fraud doesnt mean it is not fraud. It just means our elected officials will face the guillotine also.
So that's why the most free economies in the world, Singapore and Hong Kong, are leading the world into the abyss?
Singapore and Hong Kong are not free economies. They are highly regulated and the power is in the hands of a few billionaire families. How is that free?
Sorry, your premise is faulty. Socialists have glommed onto the capitalists' profits to fund their wealth transfer schemes. They've created a house of cards that's beginning to collapse. The longer they delay the collapse by borrowing more of the capitalists' money, the further and harder the system's going to fall and the more pain they'll have created.
You've got it backwards. Capitalism is the wealth transfer scheme here and it is cleary showing that it fails - as it must, it's in its DNA. Redefining terms and reinterpreting won't help you avoid reality.
The pain you describe would already be here if those 'schemes' as you name them would not exist or were to disapper. That would be real pain for billions of people.
Fiat dollars are not a facet of the free market, the correct definition of capitalism.
Fractional reserve banking is not a facet of the free market.
Too Big to Fails are not a facet of the free market.
Government subsidies to industries with vested interests (corn) are not facets of the free market.
Tax collection systems that allow corporations and the rich to shelter their money in various investment schemes not available to Joe Sixpack strictly because of the wealth necessary to participate are not facets of the free market.
Sustained malinvestment is not a facet of the free market, period. Nor is the continuous government intervention intended to preserve it.
No, Socialism is the wealth redistribution scheme I'm afraid. And all of those evils I listed above are necessary aspects/consequences of programs the coercive force of government must institute in order to sustain itself and the welfare programs purportedly needed to compensate for the supposed ills of capitalism.
What we are seeing are not the death throes of capitalism. But the death throes of an ideology that believes it is possible to broadly tweak and mould a system that is so complex that the sheer number and variability of all the decisions that make up an economy will be unknowable for all of the foreseeable future (and most likely the rest as well.) The instability we are seeing is the trembling limbs of the Leviathan unable to take another step forward and scarcely able to hold itself up.
This is a do-or-die moment for governments and I'm not even sure if they have any options.
Sooner or later capitalism critics are going to realize that when a government promises to take care of everybody, "everybody" includes big business. And trying to redefine socialistic ponzi schemes like Social Security, pensions, and Medicare as anything other than what they are won't help you or the welfare state avoid reality, either.
Stop deferring the management of your existence to The State and demanding that others do the same, and these "wealth transfer schemes" will go up like smoke.
You're too blind to see past your Marxist lens of history.
nice cut and paste - the article is over 1 month old and every issue has been discussed on ZH ad nauseum..... just sayin
Have you ever met a bailout that you don't at least implicitly support?
Why hasn't Greece insured itself against its own default? Given the craziness of the financial engineering such a device must exist somewhere...
Oh, do try to keep up:
http://www.zerohedge.com/article/greece-cds-hits-fresh-record-funding-cr...
:)
In the counterparty spiral a loss for one immediately leads to a claim on the other. And then straight back again. Can happen with a chain of counterparties, as in the Lloyd's of London insurance spiral in the early 90s where syndicate A guaranteed syndicate B which guaranteed syndicate C which guaranteed syndicate A.
Of course can also happen in a CDS chain.
Nice recap, Leo.
Back door bailout of some sort will be engineered, to put off the day of reckoning for another day. It is easy to fix the small problems. Once fixed, the hedge funds, TBTF prop desks and that sort of scum will move on to the next opportunity to profit on the misfortune of others, being serial sociopaths, they cannot stop themselves. So it is kind of like Bear Stearns, and this is early 2008 as far as sovereign debt. There's no stopping this process, it will just have to play out.
Follow the money.
"the hedge funds, TBTF prop desks and that sort of scum will move on to the next opportunity to profit on the misfortune of others, being serial sociopaths"
You must have seen the film "The Corporation." In the psychological profile questionnaire they applied to corporations, a corporation as that artificial person they legally claim to be when bribing pols fits the profile of a psychopath perfectly.
Tell me this....
What happens when most all countrues govt. debt payments exceed 40% of 2007 revenue ?
And what does this mean for 2012 ? 80%....
Think about it....
And then think about what 80% of tax revenue just going towards previous debt means ....
......................................
The problem...
The main problem at hand is that without exception ....the septic tank style govt. poly wonders want to increase taxes....
Now tell me this....
Do these morons understand that an increase in taxes ....is actually a decrease in taxes ?
.........................
Let me tell you who the winner is going to be....
The one who restructures to a system that will work on a sustainable basis....
And here it is....
Let's say the TEAPARTY wins...
Eliminates all individual and corprate taxes....
Rplaces all taxes....with a simple 15% Consumption tax on tangible consumables....
Then the population township by township (not lobbyists) ...then decides what portion of the 15% will go towards paying previous debts.....maybe 1%....
The first coutry to have the balls to restructure ....wins the economic game....
And no....this is no joke....
And this is nothing new....just another bankruptcy case....
whereby restructuring to a sustainable economic means is not an election....it is a requirement....
Tax on fiat currency with some degree of inflation is not going away without some kind of push back by the middle class.
YES. With caveates.
Greece is in the final innings of the Great Ponzi called Socialism. Pensions are unsustainable/money for nothing lies. The lies of Socialism and Pensions are what the Pols tell the lemmings on their way down the rabbit hole.
Not-ta-Pinata!! Ouch that little bat hurts!! Should we consider that Mexico is also upside down in debt? Canada has a real estate bubble (olympics) peaking upwards. Wait a minute, nearly every country is on the verge of insolvency, how did my (and your) little mortgage get leveraged everywhere into this mess? Now I'm upset and that little bat...ouch!