"We Are All Greeks" - SocGen Presents The New World Order

Tyler Durden's picture

"We are all Greeks" - so begins one of the best reports on the unsustainability of the status quo, and on what "the new world order" will look like, created by SocGen's Veronique Riches-Flores. Her overarching observation: "No one can claim immunity from a Greek-style spiral" because "Our economies are mature, with weak potential GDP, especially post the financial crisis" and due to that old standby which everyone chooses so conveniently to forget, yet which is the biggest threat to the world's "welfare-state" stability, in existence since 1860 and which has been responsible for not only the longest period of peace in world history, but for the longest stealth plundering of middle-class wealth (there is indeed no such thing as a free lunch): "We are aging - we have no chance to see our future income improving substantially in the long run ; our savings capacities are shrinking and our health and pensions spending is increasing." That, in a nutshell, is it, no matter how many protracted essays one reads predicting the future (or war in Europe): the truth is there is increasingly less cash flow, coupled with increasingly more demands for cash.

Unlike before, where growth could be masked by incremental new debt in either the public or private sector (that strawman which for decades allowed Keynesianism and its modern versions to flourish despite its fatal flaws), this time around, there is no more debt capacity dry powder. In SocGen's words - 1) at 100% of OECD's GDP, even if the primary deficit disappeared as of today, it would still require three years to stabilize the debt ratio, and 2) the fiscal consolidation required - returning to 60% of GDP - would take a minimum of 10 years according to the OECD, 20 years according to the IMF. Here is where the report gets a slightly political twist, one which those GOPers capable of simple math, could easily use in their debates with democrats over the proper way of achieving fiscal stability: "of the 107 episodes of fiscal adjustments observed in the past 40 years the most efficient in terms of fiscal results and least costly in terms of growth have been the ones based on spending drag rather than tax increases."

And therein lies the rub: with the average age of the global developed world population older now than it has ever been in the history of the welfare state experiment, the last thing a politically unstable world can afford is to spring upon the population that there is simply "no moah money." Or at least not in a world which does not want to experience the aftermath of hundreds of millions of formerly 'entitled' people suddenly realizing they have been lied to for decades and all those golden years have suffered the fate of aaand it's gone.

It gets worse:

Fiscal austerity efforts are more accessible when they are carried out in isolation (their depressive effects can be offset by growth in the rest of the world)

60% of the past episodes of adjustment lasted less than one year; none of them dealt with as many economies as are involved today

At this point we read one of the scarier observations which SocGen reaches: "SG current economic scenario suggests that the public expenditures to GDP ratio could surge to 45% of 2015%." Yes, that means that nearly half of global economic output will rely on the government/entitlement programs and vice versa. We leave it to the 'Austrians' in our audience to explain to everyone else what this means.

With no other way out, at least fiscally (the monetary discussion is a whole different topic, and one which will be a source of ever increasing tension both in the US and Europe, where as the most recent bailout demonstrated on one hand the ECB is demanding the creation of a fiscal union and the issuance of Eurobonds to remove "money printing" pressure from it, while the fiscal authorities will hear none of it and instead demand that the ECB print ever more in order to avoid blame when it all goes horribly wrong), the next step is a substantial cut in public investment. The social response will not be enjoyable.

But probably the most damning piece of evidence for the upheaval that is coming is not some recent revelation, but the conclusion from an S&P report published 5 years ago, that is before the GFC had even come to its predictable end. It represents the long-term forecast of sovereign debt ratings by Standard and Poors by decade, beginning in 2020 and going all the way through 2040. All we can say is: Canada better prepare to receive lots and lots of immigrants (and Europe, whose entire future is now reliant on the credit rating of the world's most complex structured credit instrument ever conceived, which in turn depends on the AAA-rating of constituent countries, is done).

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Hulk's picture

Drink if ya got em...

Mr Lennon Hendrix's picture

I'll go pour one now. 


Broker NotBroke's picture

So how do we buy the dip?

Mr Lennon Hendrix's picture

Wait for the inevitable dip, and then throw your fiat into the fire.

Volatility will stay high for years, but that also means it will subside at times.  Leo, in all of his solar glory, and Robo for this matter too, are very correct when they say buy the dips; what matters most is how well you walk through the fire.

Personally, I do not care to touch equity, for who knows what can happen with a corporation.  Which will be the next BP, NFLX?  Which will be the next sector to take a hit?  Solar, tech?  Which will miss earnings or have an accident that will undermine their company?  Apple, for example, has a long way to fall.  What if they miss earnings again next quarter?

I am also not keen on debt.  Corporate debt can have the same fate as equity, and watching Europe right now reminds me that a credit event can come across the pond to the shores of the Almost an Empire.  Rates will rise eventually, and ubtil then, Bernake and Timmah will issue and print beyond our wildest dreams.

That is why I prefer to have my investment in my hands.  That is why I prefer to own precious metal.

PM is greatly undervalued, and if someone is not in the market any price will do.  But like all smart investing, dollar cost averaging into PM is wise.  Wait for the dips if you think you can.  Or just buy.

Keri at Bankster Report's picture

Off topic, but I just noticed that Bloomberg's Commodity page is now reporting the HKMex bids on silver and gold. As far as I know, this is the first time they've done that: I didn't see it listed this way on Friday, either, so it might be new.

There's a 20 cents spread on gold, with the COMEX price being higher. And for silver, there is a 27 cents spread, with the HKMex being higher.


Snidley Whipsnae's picture

"We are all Greeks now"

As Margaret Thatcher famously said... 'The trouble with socialism is that eventually you run out of other people's money to spend'...

Perhaps "We are all socialists now" would have been a more accurate title?


drand02's picture

Just like nature, if your slow, not paying attention, old, or sick you become lunch or dinner. No one can say nature is fair, only that the strong survive,

Terminus C's picture

We don't run out of "other people's money," we run out of "other people's debt."

The monetary system we currently follow is collectivist in structure and these issues that we are facing now are baked into the system.

Also, all you who idolize Reagan and Thatcher need to examine their deficit spending histories and and then make an honest determination about how much they aspired to achieve the goals set out in their rhetoric.

AdahPrice's picture

The rich play Socialism, and play it better than anyone else.

For example, a power company gets the State legislature to add a charge to every homeowner's monthly power, which charge is strictly for the building fund to build an ADDITIONAL, NEW nuclear plant.  Then after the hapless homeowners have paid for the plant, and the plant has been built, the power company gets to charge the homeowners for electricity from "its" plant.

In addition, other rich Socialists might tag on, claiming that the new nuke plant "clearly" needs more "Homeland Security", and that means spying on anyone who might drive close to the new plant, which "anyone" ends up being all the homeowners who just paid for the plant.

And that's just a power company.

The Federal Reserve Bank owners (whose name are kept secret, right?) get the ultimate Socialist benefits, "their own" currency, which they can use to pay for anything they want, backed by the "full faith and credit" of the USA, which means the dilution via inflation of every American's savings.

(And those owners might not even be Americans, right?  We don't who they are, right?)

The list goes on and on and on and on.  The real reason Socialism is hard to end is that so many rich and powerful people have their own massive Socialist pilfering schemes going.

MaggieL's picture

"We are all Greeks. Bend over."

Mr Lennon Hendrix's picture

I thought we were all Keynesians?  What happened to printing our way out of hell?

cynicalskeptic's picture

Keynes said governments should SAVE in times of good so they could SPEND in bad times.   He would be horrified at the unffettered money printing that is going on now.  Some debt would be allowable if it was needed to boost economies but the level of goverment debt now is impossible to service.  The WAY government spends is also an issue - money needs to be spent in a way that provides some form of 'value creation'.  You don't simply give out money to feed consumption..  Money creation should be offset with value creation.  If you expand the mone supply without adding additional 'value' to the economy, you guarantee inflation.

Tyler Durden's picture

The biggest problem with "Keynesianism" (whose definition we use it in its bastardized practical version, not idealized textbook theoretical), is that it never accounted for that core human drive, which ironically it facilitated: greed. Because how often do you see any of the 99%ers, or 1%ers for that matter, set aside proportionately more when faced with bumper years? Right: what ends up happening according to empirical studies is that when Wall Street bankers generate record bonuses, they simply leverage themselves even more, assuming the golden years will continue into perpetuity, a truism which the banks themselves use all too effectively by locking said bankers into submission to a given company using 60% of compensation in the form of unvested stock. The same is true for everyone else, as well as governments.

AldousHuxley's picture

Doesn't matter communism, capitalism, keynesianism....without accountability at the top, you just end up with corruption.


Antidote to corruption is transparency of the process to empower the populace to take action.


that's why wikileaks is being shut down...for exposing that the king is naked.

earleflorida's picture

julian assange explicitly stated last week that their funding apparatus has to be restructured and re-organization,... therefore it will cease temporarily the distributions of said wikileaks  downloaded files -

his life is in grave danger, and must tread carefully,... for the queen of spad's wants his trophy head -

god bless you, julian assange    

Hansel's picture

Wikileaks is too theatrical.  Why can't the new business model be this:  leaked data --> bittorrent?  It's basically free.  Why the massive funding requirement and enormous delays in leaking information (where is the BoA leak that was supposed to be released last January)?

Mr Lennon Hendrix's picture

[W]here is the BoA leak that was supposed to be released last January?

Someone threatened his life?

prains's picture

It's probably not his life that was threatened, much more powerful motivation

MolotovCockhead's picture

It's probably not his life that was threatened, much more powerful motivation


Must have been threaten by Anticorruption!

tamboo's picture

ratfaced jewlian on the cover of time? puhleeze, fake as a $3 bill.

Netanyahu: WikiLeaks cables prove Israel is right on Iran

TrulyBelieving's picture

And what causes the corruption to take place?  Could it not be human nature?  The antidote is adherance to the  US Constitution, for it limits how much responsibility the Federal Gov't has. When power is centralized and concentrated the corruption springing from it effects more people. When the power is localized and limited, or maintained by the individual, corruption is minimized.  Corruption is inherent in all mankind, this the Founders knew and dealt with it the best way by containing it. So the Constitution won't prevent corruption, nothing will, but it keeps it transparent, right in front of you where you can see it.

nmewn's picture


And knowing that people & politicians will always choose a spoon full of sugar over a spoonful of vinegar, I would postulate it to be impractical to downright impossible for government to amass a rainy day fund in the good times to have for those rainy days.

They simply can't be trusted (more than any other entity I would say) with a basket of cash sitting in front of them.

Government expenditures should match government revenue always. If revenues don't keep up with expenditures, spending must be cut just as it is in the private sector.

Snidley Whipsnae's picture

nmewn... exactly right.

...and, when governments are spending constricted by a PM currency they get rid of it and go to fiat. At first, fiat backed by PMs or partially backed by PMs, but eventually to currency backed by nothing but 'future tax revenue stream + faith'...

SOS... over, and over, and over... A war between those who want to save and those who want to spend and pull demand forward by means of 'easy fiat money'.

'Here we are with a handful of holes, a thumb up our ass and a grin on our face to pass the time of day'. Edmond O'Brien... 'The Wild Bunch'...

Who could have said it better?

nmewn's picture

"SOS... over, and over, and over... A war between those who want to save and those who want to spend and pull demand forward by means of 'easy fiat money'."

That leads to my working theory of why we have a Federal Reserve imposed on us. Politiicians have the burden of their spending votes hidden under mountains of future debt.

The bankers came slithering in saying we can fund your dreams of war & welfare and you will never be held accountable. Almost a century has gone by now. The ones who made that deal are gone...but the monster lives on.

Piss on it...I'm taking the kids to the fair.

JR's picture

Good one, nmewn. 

nmewn's picture

Thanks JR.


Poor Grogman's picture

Keynes was one of the most dangerous types of individual.

The very smart & articulate educated idiot.

Ignoring (or hiding?) just one little tiny weakness in your own favorite theory leads the whole world to ruin.

(fancy "the paradox of thrift" anyone)....

This is why we must reject the collectivist approach totally and foster individuality, as America was designed to do.

Only then can mistakes be contained to a small group and diversity among the people increase the chances of new solutions being found.

For as long as we continue to let others decide our destiny we remain enslaved by our own system. ...Why ARE we forced to use someone else's currency, to our own detriment?

nmewn's picture

Keynes knew exactly what he was up to. He said as much in the foreward to his GT...the German language edition.

As to whether the majority of the populace has been beat down to the point of ceding their individuality to the state, that will be decided when the great reset happens.

I don't believe they have or ever will.

Poor Grogman's picture

I also think that the natural state of man is to be a sovereign entity.

It is only when we are controlled and manipulated through strong leadership, mass media, religion, terror, financial mass delusions etc: That we start acting as a herd animal.

Take these things away and most people will basically mind their own business and do their own thing while getting along ok within their group.

Obviously this is unacceptable for those who would seek to control us all so the brainwashing must continue or even be stepped up.

Like you i don't think it will work however.

4horse's picture

it could not be more apparent than it has been, and utterly transparent since 9/11

                        . . . and what words heard as it happened  .  .  .


while over a century ago, better minds, using words, already knew the imperative: What is to be done?

and What then must we do?


nothin then. nothin now. nothin new


even while among us that passed torch was being handed, across time. across nations. across past history known like the-back-of-his-own-hand, while in our very midst we let it extinguish, as we all still sit here talking. typing. again cursing the selfsame dark


css1971's picture

My investment decisions are based on the assumption that people are vain, greedy and lazy and that our "leaders", politicians and bankers are the most vain and most greedy of us all.

It has been highly successful for me.


disabledvet's picture

doesn't account for manifest incompetence either. "Wall Street can't account for risk" comes to mind. I mean "i blew up Bear Stearns because the market moved against me." REALLY? Listen: no one is arguing the "we're out of money defense" because the government keeps demanding the banks lend more...and basically they do. Sometimes even that lending goes to you and me but by an large they simply lend to the same government that demands they lend more and call it "banking." The problem is that government is so expensive we can't afford it. So while the banks "money/anti-money converter" is up and humming along just fine "the State of Nebraska just blew up." That's not the problem of the banks...that's a problem with "housing" and how state and local taxes are (not) collected and inability to control "the urge to splurge." Now i do like the concept of "having Nebraska traded publicly on the NYSE" and say "your ability to run for office is dependent upon whether or not you actually own any shares in the State of Nebraska." Needless to say Warren Buffet would be a VERY IMPORTANT MAN under such a regime. And MAN let me tell ya! If you thought he was having fun running a railroad wait 'till he ran a country! Having said that everyone here including the government needs to get ready for the coming collapse not of a fiat regime but a debt regime. "Banks only lending to their respective governments" is not an economy--let alone a market and one need only see the quotes of the Prime Minister of Greece saying "it's okay to buy Greek banking stocks now." No...it's not okay to buy Greek banking stocks now. The ECB did not announce a recapitalization of the Greek banking system after demanding the haircuts "from those other EVIL banks." I mean WHO'S THE PHUCKING DIPSHIT WHO CAME UP WITH THIS THING? Indeed i wouldn't be surprised if Greek yields exploded right back to where they were on Thursday by the end of this week given this so called "solution."

Snidley Whipsnae's picture

Yor're points are all valid DisabledVet... But this is The Point:

"The problem is that government is so expensive we can't afford it"

Governments have 'run out of other people's money to spend'... So they are simply printing more money.

Anyone think that is a sound, long term solution?

three chord sloth's picture

May I add a second problem? Keynesianism was hijacked by ideologues, and twisted to suit their agendas.

The largest clique of ideological hijackers came from the left, the cradle-to-grave welfare staters, and in Keynes they saw a perfect rationale to do what they always wanted to do anyway -- spend more -- and do so under the rubric of "science".

A second, smaller faction came from the right. They saw a chance to keep taxes low (without going through the pain of actually cutting spending, and possibly suffering for it at the ballot box) and treating the resulting deficits with nonchalance.

I'm not claiming Keynesianism would work over the long term, in fact I don't think it will, but our problems would be vastly smaller if the West's political/academic classes had the slightest trace of intellectual honesty in their use of Keynes and his theories.

Kassandra's picture

Really? Explain this to all the people who socked away billions (trillions?) in their 401k's during the "good old days" only to have it blown away in 2007/2008. Really? We weren't socking it away?? We weren't doing what we were supposed to??? We were too greedy? Really????

DonutBoy's picture

+1.  Including my parents, who are now having their savings stolen to protect banks with utterly fictitious balance sheets.

Stoploss's picture

Spot on, well done. Lord Keynes as hard as he tried, simply could not factor in human nature. The never ending inner drive and necessity to find an 'easier' way, by obliterating any and all rules laid before us. Keynesian theory did not fail us, we as humans, failed Keynesian theory. Throughout time, plans have always been laid, and have always seen deviation, and have always failed. It is inherrent in our nature not to follow the rules, therefore, we reap what we sow, and deserve nothing else. Our enemy resides in the mirror.  

prains's picture

Tear it down, build it up, the cornerstone and keystones will always be greed. Can't build a culture without it, to not factor it as 1 means the equation is false. Then tearing it down only results in blood, if greed is truly factored in. Change is not the true result, but just another variation of greed only next time it's not controlled by the Red White & Blue.

buchesky's picture

I thought Canada was part of the great welfare experiment.  Why do they come out with AAA in 30 years?

Canucklehead's picture

That AAA rating won't last long.  Eastern Canada is like Europe.  Expect Western Canada to separate within the 30 year period.

All in all, this report is fluff.  Societal values within Europe will change as people roll up their sleeves knowing they now have to work.

JustObserving's picture

"The same is true for everyone else, as well as governments."

Yes, we are more Greece than Greece - the US govt has $116.2 trillion in unfunded liabilities growing at more than $6 trillion a year with Medicare going bust by 2017 if not earlier.



Terminus C's picture


Interestingly the closest example I have seen to "true" Keynesianism (in its theoretical form) is the government of Alberta.  During the 2000's the government collected significant royalties from oil production and banked it.  They cleared all of their debt and saved money, now, during a revenue slow down they are tapping their own savings to maintain services.

I am aware that being an oil rich region provides revenues that most governments do not have access to, but taxes are low (for Canada), regulations are minimal (the province is planning to strip mine an area the size of Florida) and services are significant.

The province also has a history of implementing austerity during low times.  During the 1980's and 1990's significant government cuts across all services reduced the deficit spending to manageable levels so that when good times did return the debt was able to be cleared.

Anyway, I thought I'd add a counterpoint to the anti Keynsian discussion.

(disclaimer I don't really "follow" any particular economic philosophy as I am aware of the complexities of human society and economic systems, though I lean more towards small government and more individual freedoms)


whoisjohngalt11's picture

yes and Karl Marx is also Mis-understood, but that the problem is that they Marx  and Keynes were the smartest guys in the room and they were not that smart they had false assumtions that didn't work, False premises suck... try listening to Ron Paul a little more i don't like everything he says but he makes sense. No i am not one of THOSE Ron Paul Heads but government is stupid and the bigger the more stupid because it is made up of people like the E. U. Rulers who are busy  with self interst trying to make something work that can't and doing it with Half mesures .. Governments can do almost nothing well so why put your faith in them ??? If i screw up and you don't have to pay for my mistake then your better off. But what if you were forced to bail me out would i ever learn , when will people learn that Government and Central planners SUCK??

Marco's picture

The Austrians have blinders on too ... in a resource constrained world capital will always turn to risk free rent generating assets, in the absence of any redistributionary mechanism (ie. taxation) this will inevitably result in wealth concentration without end. Austrian economics only works when there is sufficient potential for growth, ie. the past.

Chuck Walla's picture

Why didn't the young Greek man want to leave home?


He couldn't bear to leave his little brother's behind.