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Tuesday, October 11

Guest Post: Greece and the Poor + linkfest

Guest post by Mr Hannu Visti, translation by MoreLiver:

Greece and the poor
A word on Greece based on this article from BBC. The Greeks are very, very angry that “wrong” people end up picking up the bill – the common Greeks.

I understand this kind of anger in countries where the taxpayers have to fund banks that have offloaded their balance sheets to Greece. The middle class in Germany can righteously moan about being put to pay in one way or another the risks taken by the banks. It does not matter to them if they end up paying via worse public services, higher taxes or increased debt that has to be serviced later, they still end up picking up the bill.

The anger of the Germans is understandable. They built a system where the profits are kept by the owners of the banks and losses are always covered from the public funds. The same system was erected in all the other European countries as well. Even if that system would now be dismantled, it would not matter, as only the governments can cover these losses amounting to hundreds of billions.  The bankers do not have the money to pick up the bill, regardless of one’s views and hatred of the bankers.

In Greece the situation is different. The people are not being taken to the cleaners for “someone else’s” losses. The money that is taken away should never have been given to them in the first place. Actually, not much is taken away from them, only less is given to them. Their economy has been based purely on debt – public sector wages paid by debt, subsidized businesses paid by debt and even absolutely normal and healthy businesses that were based on the customers’ funds paid by debt.

When even the operators of healthy and market-based businesses cannot claim they have perpetual rights to make the revenues like those in the past, how could the Greeks have an eternal right to the funds that never were theirs in the first place?

Of course the life of the common Greek will get worse – a lot worse. Greece’s economy is on par with the developing countries, and in developing countries the commoners rarely have the opportunity to splurge. People starve there. Greece’s economy, its structures, corruption, nepotism and inefficiencies similar to the weaker Arab nations, but in those places there is some sort of honor to the state and the political power. Only the Mediterranean Sea and wrongly understood history differentiate Greece from these countries. Why should the level of income in Greece be substantially different?  I don’t know, does anyone know?

The BBC article tells us something about the Greek mentality: paying taxes is not fun and avoiding them is almost obligatory. The state should support the people, pay the salaries and pensions (also to the deceased), offer public services and many other things. If the state does not do these, the Greek will take it to the market squares. Is there any sense in that? Of course not.

Greece has managed to ride a surprisingly long way with the idea that Western democracy and civilization originate from there, so Greece must be part of the Western family. The Western civilization, arts, sciences and culture originate mostly from the area of modern Italy and the Western democracy was invented in England. Greece has not invented or internalized much of any of these, and not much of anything else either – except one very long run.

Oh yes – even that run’s length was decided in England.


Summary: For new visitors, a good place to start is my new weekly post Best of The Week. Standard linkfest follows below (poor harvest, only couple of truly inspiring reads). The Steve Jobs page just updated with 10+ Newsweek articles from their latest issue. Feedback is appreciated: leave a comment, follow me on Twitter, Facebook or email me.


FX options: Vols, Risk Reversals & Pin Risk – tradingfloor.com
Markets Live – alphaville FT
Debt crisis: live – The Telegraph
Eurozone crisis: Live blog – The World / FT

EURO CRISIS
Sarkozy Bets Big on Cannes SummitThe Source / WSJ
France has elections next spring. Domestic situation is not great, so G20 triumph is Sarkozy’s all-in bet.

Taking the stress test to sevenalphaville / FT
How will the sovereign debt risk be included in the new stress tests?

Why Greece, Spain, and Ireland Aren’t to Blame for Europe’s WoesThe New Republic
Current account imbalances.

EFSF
While Everyone Is Making Fun Of The Slovak RepublicZH
Peter Tchir: 29bn of debt, only 46%/GDP, rated A1/A+ on positive outlook. EFSF share 7.8bn, 10%/GDP, 27%/total debt: “about 1,000 euro per person that they are using to support countries that have more benefits than they provide their own citizens.”

Slovak euro fund vote hits snag, seen passing soonReuters
A Slovak ruling party said it would abstain on Tuesday from a vote on expanding the euro zone's EFSF rescue fund, forcing the government to turn to opposition parties

French Credit Rating Worries for the EFSFThe Source / WSJ
EFSF relies on triple-A, if France loses its, EFSF in trouble, unless other triple-A’s increases their share.

GREECE
Troika statement on fifth review mission to GreeceECB

The translated Troikaalphaville / FT
“Tune in next time – , same place, same failure, same old jargon covering it up!”

Troika concludes Greek mission warning more austerity needed in 2013euobserver.com

Setting Up the Greek DefaultThe Source / WSJ
“Inspectors recommended that the Greeks get the next payment of €8 billion from its 2010 bailout agreement. The decision was never in doubt because there wasn’t any other choice”, default in planning

Buying time. For what?Fintag’s Newsletter
“The Greeks should become Investment Bankers. They just know how to rape foreign taxpayers better than Wall Street.”

OTHER
Is the global economy facing a global banking crisis?The Curious Capitalist / TIME

Quarterly Outlook Q4 2011Saxobank (pdf)
macro, FX, EM, monetary policy, 24 pages.

Russia-China: still gassing about gasbeyondbrics / FT
Huge 30-year gas deal is done – except the price.

Goldman: "We Doubt The Current Market Optimism Can Be Sustained Over The Medium Term"ZH
Ok review of the current themes.

DIVERSION

The solution to market-related noiseAbnormal Returns
Discussion and collection of links to why financial news is so bad.


Perversion for Profit: When Bankers Blamed Pornographers for Domestic Decaybrain pickings

Media digitization: Book transubstantiationBabbage / The Economist