 Socialist George Papandreou
This is another sad tale of shooting the messenger.
Without fail, governments always blame speculators for their economic woes. I can’t think of a time when that has not occurred. In fact our own government is engaging in the same thing. Speculators are called “wolves,” “jackals,” “parasites,” and even “capitalists” on occasion.
But for Mr. George Papandreou to have the gall to blame the wolves for Greece’s problems is not only an outrageous lie but is a display of ignorance. One could correctly conclude that he is just another slimy politician trying to hold on to power.
Here’s what he said on “Fareed Zacharia GPS” on Sunday:
Greece is considering taking legal action against U.S. investment banks that might have contributed to the country’s debt crisis, Prime Minister George Papandreou said.
“I wouldn’t rule out that this may be a recourse,” Papandreou said, in response to questions about the role of U.S. banks in the crisis, in an interview on CNN’s “Fareed Zakaria GPS.” …
“Greece will look into the past and see how things went,” Papandreou said. “There are similar investigations going on in other countries and in the United States. This is where I think, yes, the financial sector, I hear the words fraud and lack of transparency. So yes, yes, there is great responsibility here.” …
In the CNN interview, Papandreou said many in the international community have engaged in “Greek bashing” and find it easy “to scapegoat Greece.” He said Greeks “are a hard-working people. We are a proud people.”
“We have made our mistakes,” Papandreou said. “We are living up to this responsibility. But at the same time, give us a chance. We’ll show you.”
That is pathetic. They’ve never lived up to their responsibilities, they have defaulted before, and I believe they will default again. Mr. Papandreou and his (and his father’s) socialist PASOK party (Panhellenic Socialist Movement, or Panellinio Sosialistikó Kínima) were responsible for the massive spending and welfare programs that are now hobbling Greece.
… Continue reading Wolves vs. PIIGS
Courtesy The Financial Times
The eurozone is those countries in the EU that use the euro as their currency and have given up francs, marks, drachmas, pesos and the like. They also gave up a certain amount of independence because the money supply is now controlled by the European Central Bank (ECB), which, while representing all countries in the eurozone, are “influenced” more by the big guys: Germany, France, Italy, and Germany (not a typo).
When member governments run into economic problems, say, for example they run big deficits to fund social program, they borrow the money from banks, mostly French and German banks, to pay for it rather than raise taxes. Greece has this problem and its deficit (13.6% of GDP) and government debt (150% of GDP) is too high for a sluggish little country. Especially since its GDP declined 3% in the first quarter.
If they default on the debt, the debt is either wiped out or restructured into something more manageable for them, and they are cut off from further access to the credit markets. This is difficult, but economically better for them because it forces them to put their house in order.
Governments would rather inflate than default, that is, print money, which devalues the debt relative to the price of their currency and pay off the debt in inflated fiat money.
Greece has defaulted before and they came back. Lots of countries do this: Russia, Argentina are two that come to mind. Everyone is poor for a while, they stop inflating, and issue new money for old money, banks forget, and off they go. Unless there are fundamental economic changes, the cycle repeats itself. … Continue reading Greece: The One Solution They All Ignore
A couple of good articles on the euro bailout this morning. This first one is from Barry Ritholz’s Big Picture, an article by Lee Quaintance and Paul Brodsky of QB Partners, a private macro-oriented investment fund based in New York. Also, see their excellent article, “We Are All Austrians Now.”
The lead in this morning’s paper WSJ provides all necessary guidance for global wealth holders: “The European Union agreed on an audacious €750 billion ($956 billion) bailout plan in an effort to stanch a burgeoning sovereign debt crisis that began in Greece but now threatens the stability of financial markets world-wide.” This weekend’s behavior demonstrates without equivocation the thesis we have been following: naturally occurring credit deflation will be met with an overabundance of monetary inflation that will hyper-inflate the global economy. (Please see the piece we distributed last week for a comprehensive analysis of our thesis and our expected outcome.)
Global policy makers continue to demonstrate that when push comes to shove they will forcefully apply policy that sustains the near term nominal values of financial assets. They continue to choose to use their unique powers to cover all bad bets with paper money and credit that only they can manufacture. In doing so, they claim victory when nominal financial asset prices predictably rise, as they must, and they hide the loss of real wealth denominated in their diluting paper currencies. The stock of real wealth is the same as it was a week ago and at every point between then and now, though there is a trillion more dollars (€750 billion) in the global system. … Continue reading Save The Euro By Destroying It
“The message has gotten through: the euro zone will defend its money,” French Finance Minister Christine Lagarde told reporters in Brussels early today after the 14-hour meeting.
The eurozone, those countries that use the euro as their currency, is in serious trouble as evidenced by Sunday night’s (here) announcement of a €750 billion [...]
I watched George Papandreou last night on PBS being interviewed by Judy Woodruff. He lied the whole time. She did a pretty good job of trying to get him to admit that the Greek economic system is screwed and the Papandreous in particular had the most to do with it. Instead he just kept up with his rant against “speculators” who are conspiring against Greece.
This is nothing but a crock. Yesterday at Zero Hedge where I am a contributor, my co-blogger, “Tyler Durden” pointed out an article from Dow Jones yesterday that said:
German market regulator BaFin said Monday that so far, it doesn’t see any sign of massive speculation in credit default swaps against Greek government bonds, despite some recent press reports suggesting this.
A significant reason behind widening CDS spreads is the increasing demand for insurance against Greek risk, BaFin said in a statement, adding that it closely watches the government bond and credit derivatives markets for selected euro-zone countries.
In other words, the Greeks are fiscally incompetent and the markets are responding to this in a rational way. So George wants his fellow sovereigns to regulate these speculators so they can’t drive up the cost of the debt that Greece must sell to try to stave off default. In other words, the Greeks shouldn’t be punished for their fiscal stupidity.
Tyler Durden in an accompanying piece summed up Papandreou’s speech on this perfectly, and hilariously: … Continue reading Greece Cries Wolf, Again
Martin Wolf, dean of economic writers and chief economics correspondent for the Financial Times, is a confirmed Keynesian. He’s also a very bright guy so I like to read his stuff. Occasionally I correspond with him and that is fun. I think he takes me for being a conservative.
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