Howard Marks On Why USA Is Not Greece (Yet)

Tyler Durden's picture

Oaktree Capital's Chairman Howard Marks went on a rather more politically-positioned rant in his latest missive (pdf here) but one section caught our eye more than others given the current imbroglio:


Via Howard Marks:

The First Order Of Business

What do you think of when you hear the word "Greece"?

  • An uncompetitive, low-growth economy,
  • for years, a higher credit rating than it deserved,
  • the resultant ability to borrow money it shouldn't have been able to, at interest rates that were unjustifiably low,
  • excessive public spending,
  • generous benefit promises that it can't fulfill given the realities and, as a result,
  • soaring debt and deficits.
  • Consequently, the need to cut spending and increase taxes, and
  • mandated austerity and deleveraging, with very negative implications for economic growth.

Now ask yourself what you think of when you hear the words "United States." Certainly the facts aren't the same: our economy is the world's greatest (although not what it used to be), and we can print the world's reserve currency, which Greece certainly can't. But there are similarities. The situation in the U.S. isn't a repeat of Greece's but, as Mark Twain would have said, "it does rhyme."

The truth is that the U.S. has pressing fiscal problems, stretching as far as the eye can see:

  • in the short-term, the 'fiscal cliff,' in which already-mandated tax increases and spending cuts have the potential to take 4% off of GDP if nothing is done about them within the next six weeks,
  • in the medium-term, trillion-dollar deficits unless there's radical improvement, and
  • in the long-term, entitlement promises that absolutely cannot be met. (With millions of Baby Boomers entering their senior years and living longer, we cannot afford the pensions and healthcare benefits that have been promised. The math is inescapable. If these programs are left unchanged, Social Security benefits will grow inexorably, and spending on healthcare has the potential to escalate without limitation.)

The bottom line is that if we don't want to be Greece, we can't act like Greece. Something has to be done... and soon. Every year in which we add another trillion dollars to the national debt (and tens of billions to the annual interest bill) - and every year the excessive entitlement promises are allowed to compound - makes it harder to solve the problem.

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n9lhm's picture

As long as we don't cut SNAP, EBT cards, and Obamaphones. Those are absolutely off the table :) Oh, and EMTALA.

Chuck Walla's picture

In politics, few talents are as richly rewarded as the ability to convince parasites that they are victims. ... generosity is seen as an admission of guilt, and the reparations as inadequate compensation for injustices – leading to worsening behavior by the recipients.


~ Thomas Sowell 



EnslavethechildrenforBen's picture

The United States is the same as Greece, the Bankers are enslaving us all.

odatruf's picture

If people are lining up to be enslaved or at least not bothering to step out of line, then are they really being enslaved at all?


hapless's picture

It depends on whether or not one believes that the current entitlement promises can be met; and failing that, whether or not one believes it's someone else's problem.

pain_and_soros's picture

He missed another similarity...

US political corruption soon to rival Greece's...

resurger's picture

Networth in Billions, Bitchez!

Beat that corruption ...

Tirpitz's picture

"soon"?? - Seems you live in times of President Jefferson Davis.

IridiumRebel's picture

American Nazi Party is beginning to price yard signs in bulk..........

Joe Davola's picture

Good thing BHO is from Kenya, because I hate Illinois Nazis!

James-Morrison's picture

"Low-hanging fruit" Note to WB7:  imagine a photo of Henry Gibson (Head Nazi) from the BLUES BROTHERS movie with Gibson's face replaced by Obama.

prains's picture

Another article blaming the welfare class for all the problems but NO MENTION of G paps mother sitting on $700 million dollars.


blunderdog's picture

    blaming the welfare class for all the problems

It's always easiest to blame the least powerful and least responsible members of any society for all its problems.  It doesn't risk making any "good people" uncomfortable with their own past decisions.

It makes for good comedy, at least.  Who can take that stuff seriously?

Commander Cody's picture

Social Security = Welfare Class?  I missed your point.

Welfare?  What about the real welfare queens in this country: MIC, AIG, TBTFs, GM, green technology, big oil, and all the other subsidized, pork-stuffed, kickback-resulting redistribution of wealth system.  Bring back the offshore jobs, take away the tax loopholes, eliminate unnecessary corporate subsidies and then lets talk about taking away granny's SS check.

smlbizman's picture

while they have you looking at tax rates....they are hurridly preparing the stuffing that goes into this bird, like the 1099 fiasco that was weeded when this 20,000 page piece of shit fiscal cliff bill it will be packed with things like mandatory employer ira's. so than in the next bill they can confiscate these 401ks and ira's and replace them with the good stuff..t bills....i could be wrong...nah i'm not wrong...

Chuck Walla's picture when this 20,000 page piece of shit fiscal cliff bill it will be packed with things like mandatory employer ira's. so than in the next bill they can confiscate these 401ks and ira's and replace them with the good stuff..t bills....i could be wrong...nah i'm not wrong...


You are clairvoyant, if anything. No doubt the last few rags worn by the hoi poloi are on the block behind closed doors.


darteaus's picture


As long as we have linen, cotton and ink we will have money.

Sudden Debt's picture

But will you have olives with your martini when the shit hits the fan?!

Tirpitz's picture

We just need a few digital zeros, so Shalom can mark up the Black White House overdraft account by another trillion or two.

Monedas's picture

The government probably loses money minting zinc pennies and copper nickle coins .... probably loses money on US Mint PM coins .... probably loses money on $1 and $5 FRN .... the profit they make on $100 FRNs pays for everything !  What a way to run a country ?

Sudden Debt's picture

at least the weather is nice in greece...


resurger's picture

I have couple of islands to sell if you would to buy!


doomandbloom's picture

Obamas grandmom does not have a Swiss account?

Monedas's picture

Would that be Frank Marshall Davis' mom .... or Mrs. Stanley Dunham ?

Monedas's picture

Does Maynard Keynes have a following as large as Ludwig von Mises ?

mrktwtch2's picture

im just glad im healthy and have a good woman to take care of me..(my lady friend earns almost 3x what i do)..

resurger's picture

No problem as long as we can print at Zero Cost!

Consequnces be damned, unleash the beast within you BUY BUY BUY !@#$!@#%!@#$! 

Black Friday, Every Friday!!

Best Regards,

Ben Bernanke - American-Jewish Economist.


Marco's picture

Why can't the healthcare benefits be met? Ignoring the massive corruption in the US for a moment, the predominant cost factor in healthcare is human labour ... there is an opportunity cost having more doctors and less engineers/etc, but it will not result in the country becoming unable to support itself.

It's simply a choice, obviously a choice which will have a large impact on standards of living as far as consumption is concerned ... so more flatscreen tvs and more cars per capita, or better healthcare.

Tirpitz's picture

The problem is the privatization of the entire lucrative sickness industry. As long as internatinal pharmaceutical corporations reap the billions from the sick, there ain't no interest in trying to heal them.

Roughly a million head are diagnosed with cancer each year, each new patient costing some 50,000 bucks. That's a $50 bn in growth, guaranteed, as long as no cure is permitted to be marketed.

Got to watch 'Cancer - the Forbidden Cures' to get an idea about how deeply entrenched the oligopoly has become:

lyras's picture

No, no, no, the predominant cost in healthcare is pharamaceuticals, medical equipment and the vast supplies of other "consumables".  The human labour component is laughably small in comparison.  Crony capitalist opportunities here would rival defense.  Obama is helping his mates in this industry and they will help him back.  That is how it works my frined.  Human labour......LOL

Tirpitz's picture

"the U.S. has pressing fiscal problems [...] the 'fiscal cliff,' in which already-mandated tax increases and spending cuts"

Now, do we want to do something about the balooning deficit, or are tax hikes only bad when the super-rich are affected? Steer steady right over it, and see what will happen: nothing. Scaremongering at its best.

"we cannot afford the pensions and healthcare benefits that have been promised"

So we can't keep our end of a contract as long as the population in general is concerned? All the while fat cat CEOs can suck the last million of bonus money from the companies they bankrupted, making any further operations unlikely if not impossible. Why do I see hypocrites written all over this?

"if we don;t want to be Greece, we can't act like Greece."

True. Let the Fed 'buy' the debt with fake money and write it off. An easier solution won't come along during this century.

odatruf's picture

Tirpitz - I agree that no action is the best outcome from this so called fiscal cliff.  Lower spending + higher taxes = closer to balance.  I'll take the GDP hit willingly in exchange.

Dr. Engali's picture

I have a solution...let's print a few trillion dollars and give it to the banks so they can trickle down on us and stimulate our economy. That way we can grow our way out of this mess.

forwardho's picture

Dr, there is a strange feeling of deja-vu.

azzhatter's picture

When I think of greek, I think of taking it up the ass. We are Greece

Winston Churchill's picture

No, we are not Greece.

Greece has the option to default without destroying the paper wealth of the world.

Bay of Pigs's picture

Bottom line?  Yes, the math is inescapable. There is no "solving" this problem.

Only can kicking until it all collapses in a heap of rubble.

JustObserving's picture

Every year in which we add another trillion dollars to the national debt


We will add $6.47 trillion to the debt in four years at current rates.

And $27.3 trillion to unfunded liabilities.

That works out to be $8.44 trillion in yesr increase in debt and unfunded liabilities at current rates.



odatruf's picture

Hard to imagine, but the paper the "unfunded liabilities" are written on are worth less than the paper actual debt (and money) is printed on.  These unfunded liabilities can be undone by any future law.  In other words, don't count your chickens yet. Focus on the real ball in front of you.

SheepDog-One's picture

It's cute to see guys like Howard who still actually think the 'problem' can be 'solved'....yea right.

Flounder's picture

So the EURUSD is making one of its largest moves up since Sep and the SPX is DOWN?

Luke: "Are you all right? What's wrong?"

Obi-Wan: "I felt a great disturbance in the Force... as if millions of voices suddenly cried out in terror and were suddenly silenced. I fear something terrible has happened.

Ghordius's picture

ehm... /s? ok, let's put it this way: don't mention the EURUSD, here, it's ZH's open secret weak point

Nels's picture

Why can't the healthcare benefits be met?

Because the folks in charge don't know anything.  They think that by reducing the number of doctors, the overall cost of medical care will go down, and yet we can still add 10 or 20 million new folks into the system and we'll all still get the same level of care that we've had.  They think that we can greatly reduce the pay to doctors, and still retain the best in the field.

Your suggestion is short-sighted.  If we have engineers sufficient to make us rich, we can afford more healthcare.  If we divert too many  of our brains and too much of our money into healthcare, we end up less rich and can afford less healthcare.   There's a balance that must be found, and markets work for that.  Government planning does not.

SKY85hawk's picture

Howard ignores the obvious. 

With millions of Baby Boomers entering their senior years and living longer, we cannot afford the pensions and healthcare benefits that have been promised

The benefit programs w/b ok if the gummint followed the investment rules that most other investment advisors are held to.

1- Don't commingle funds;

2- Don't steal from your depositors;

3- Invest the money conservatively.

Unfortunately FICA (Federal Insurance Contribution Act) means something different!

And none of us want to pay the tax levels needed to support these benefits.

SheepDog-One's picture

What we can't afford is the rampant corruption thruout it all. When you visit the doctor and get 2 aspirin, 5 stitches and a bandaid and the bill is $2,000, something is very very wrong, it's not just 'cost' its a totaly bullshit system from the top down.

alfred b.'s picture


       Sometime down a very short road, being Greece might be an unattainable goal for the US!

     Buy physical gold and silver!