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Hellene, and mean

By Owen Paine on Saturday March 13, 2010 09:21 PM

Simon Johnson -- shown above, looking a bit like Bob Newhart -- has had his manic anti-Laputa moments lately. But it seems, come the ultimo pinch -- once a guy's spent some quality time trawling the watery byways of the planet for the IMF in full B and D mode... well, you know... ya just can't take the bonecrusher out of 'em.

Here's Simon pressing our brave little grasshoppering Hellenes to morph into fiscal anorexia mode and deal with their "sovereign debt bubble" by... paying it off!

"By the end of 2011 Greece’s debt will reach around 150% of GDP... About 80 percent of this debt is foreign owned, and a large part of this is thought held by residents of France and Germany."
So? Here's the kill shot:
" Every 1 percentage point rise in interest rates means Greece needs to send an additional 1.2 percent of GDP abroad to those bondholders."
Comes now the "what if" permutation arcade:
"What if Greek interest rates rise to, say, 10% – a modest premium for a country which has the highest external public debt/GDP ratio in the world, which continues (under the so-called “austerity” program) to refinance even the interest on that debt without actually paying a centime out of its own pocket, and which is struggling to establish any sustained backing from the rest of Europe?"
Note the piling-on of rhetorical florishes there -- not just blatant signs of bad faith but downright untruths(*). To continue:
"..Greece would need to send a total of 12% of GDP abroad per year, once they rollover the existing stock of debt to these new rates (nearly half of Greek debt will roll over within 3 years).

This is simply impossible and unheard of for any long period of history. German reparation payments were 2.4 percent of GNP during 1925-32, and in the years immediately after 1982, the net transfer of resources from Latin America was 3.5 percent of GDP (a fifth of its export earnings). Neither of these were good experiences."

As if that's not enough:
"On top of all this Greece’s debt, even under the IMF’s mild assumptions, is on a non-convergent path even with the perceived “austerity” measures."
Sounds ferocious, eh? Especially since, as doc Johnson has said elsewhere, "Bubble math is easy".

These "numbers" can get a signifigantly opposite play. Enter St Paul of Nassau: "In the past, some countries have managed levels of debt that high or higher, without default...So how is that possible?

Suppose that Greece had as much credibility as Germany, and could borrow at a real interest rate of 2 percent. Then stabilizing the real value of its debt, even with a debt ratio of 150 percent, would require a primary surplus of only 3 percent of GDP. That’s certainly possible for some countries, although maybe not for Greece... this suggests that optimism or pessimism about future default can, to at least some degree, be a self-fulfilling prophecy." As if to scotch Johnson's own bitter prophecy, the Euro barons are making nice about Athens -- err, not Byronic nice; more like "them's pets of the realm" nice.

In any case these numbers are far from horrorific in absolute terms. Imagine, say, South Carolina in fiscal trouble. Could the rest of the states bail her out through the grand offices of Uncle Sap?

"Soitenly!" as "Curly" Krugman pointed out some time ago: "Overall, the group of stressed economies account for about 20 percent of the eurozone’s GDP", Krug observes -- less of a hard slog than, say, if Uncle were to bail out Dixie (though we have to put Spain aside as TBTF).

Hell, it gets to be a damn fine boat ride. If the Euro central bank can borrow at sub German rates, then...

But alas, mates, a greater fraud is in progress here, perpetrated upon a lesser fraud, and in the end 'twill all prove just another silk-hat squeeze play, a starve-the-little-critters gambit, a nifty iron-law flimflam, a way to crumple the welfare state just a tad more, foul its safety nets and crimp its feckless hu-cap squanderings. "They're in a pickle, boys, so let's squelch 'em and squelch 'em gooood!..."

To paraphrase Andy Mellon: "Starve starve starve! Starve Greece! Starve Portugal! Starve Latvia and Estonia too, and oh yes, of course, begorrah, starve that dirty little figment on the Emerald Isle."


(*) The rates on Greek sovereign debt -- as a mere fly speck out of the global total -- could be easily kept down by simple purchases on the open market by the European central bank. This fantasy of ballooning rates leading to a cascade of attacks on other weak sister sovereigns is as unnecessary as the fear of, of... the fear of wet hair when you're about to leave a hat shop in a rainstorm.

As to this straight-from-scratch bullshit --

"[10%] is a modest premium for a country which has the highest external public debt/GDP ratio in the world"
-- this alleged modest premium is in fact huge by OECD standards.

And as for Greece the debt king -- why, the chaps have a smaller GDP to debt ratio than Japan, among others.

Check out Japan's borrowing rates.

Comments (6)



simon j has more !!!!
now he's linking to " zeee german" finance minister

as well as
this earlier piece from his own hand


he adds a nice attack on the private
trans nat bankers that "aid and abet"
weirdly flabby fishy and fraudulent fiscal rascal -- if not yet failed --
rogue oecd type states


simon sez euro zoners must

"First, .. recognize that, despite all its warts, the IMF has unique expertise in designing programs that pull countries back from the brink of financial collapse. The latest indications are that the IMF could be brought in as "technical assistance plus" to comb through the books of troubled countries, work with the governments to determine what macroeconomic programs are needed, and then monitor the conditionality of such programs while reporting back to the EU (and, more informally, to the IMF executive board). "

yikes the condor legion of uncle hegemonics
laputa fleet
note the following label on the bottom

"These programs would involve some upfront fiscal austerity to bring nations on a solvent path.."

"Second, Europe must soon create a multilateral funding system that ensured adequate finance was available to each nation that adhered to these conditional programs. This could be pooled resources of EU nations, and could be supplemented with IMF financing. "

notice the camel's nose there under the tent perminently

"Relying on money directly from France or Germany is unwise. Finding a robust deal directly between hard-pressed French and German taxpayers and Greek public sector trade unions will be difficult. German voters, in particular, are fed up with subsidizing other Europeans—who they feel, with some justification, have not made the adjustments they promised when the euro was founded. Greek civil servants, on the other hand, are already pushing back hard against what they are framing as unwarranted German intervention and harshness.

The Europeans will experience firsthand what the IMF has long known. When you ride to the rescue of a financially embattled nation, your arrival is appreciated for about 20 minutes. Then people become embarrassed, resentful and even angry."
the euro leaders are no better then the imf
but at least they'd be acting on their own
not thru washington based "global intermediaries"

"Third, the European Central Bank needs to adjust its policies, lowering interest rates further and allowing higher inflation throughout the currency union. If such looser money policies are not palatable to the Germanic core, then Berlin/Frankfurt should get on with the task of admitting that the euro zone itself is a failure."

now that is the straight dope there
wouldn't change a word

"Finally, if the troubled countries cannot adhere to the conditionality attached to their lifelines, the European Union needs a graceful way out. They need "living wills"—plans for countries to exit from the euro zone. The mere existence of such living wills could lead to serious complications—perhaps inviting further speculative attacks—but failing to prepare would be completely irresponsible"
subtle club department

no intrazone solidarity
from the franco german core
to the piigs on the southern rim
" its our way or the low way high rates way... for u ie OUT scram your on your own pipsqueeks "

all this is completely orchestrated by the global financial webmasters
despite simon j 's
independent neutral technocrat
white hat sheriff like gestures
he'll fall into line
just you watch imf uber
the posse of responsible pointy heads
advising us weebles
on the outlook for
earthwide credit

Talk about "Hellene And Mean" -- Looks like the Greeks aren't wasting time reading eye-glazing wonkery; they totally understand the issues, and are hitting the streets to get down and get with it:


...and from that article, what's already one of my favorite protest fotos:


Now, all together, kids:

...Baby, what's that confused look in your eyes?
What I'm trying to say is that
I burn down buildings
While you sit on a shelf inside of them.
You call the cops
On the looters and piethrowers.
They call it class war,
I call it co-conspirators.

'Cause baby, I'm an anarchist,
You're a spineless liberal...

Germany may have at last found a way to conquer Europe.


never alone !!

the germans and the french
must be
two " qwarks to muster mark "
and not let
uncle batman
and his brit butt boy robin
fuck em both up by splittin em up

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