Over the past few years there have not be many subjects which have come up on this website more often than the travails in Greece which led to its current economic depression. Yesterday in an echo of the brilliant line from the film Snatch we discovered that all bets are now off at least with one bookmaker. From Digital Look.
Bookmaker William Hill has suspended betting on Greece leaving the Eurozone in 2015 after heavy betting on the ‘Grexit’.
Many see this as something to fear but I do not as I started on this road a long time ago. From May 3rd 2010.
Should her economic growth disappoint over the next 2/3 years, and there are grounds for supposing that they will, then this package will make her position worse and she will be less solvent at the end than at the beginning.
And the next day.
I still feel that a restructuring of Greece’s debt has only been postponed and it would have been better to do it now.
Of course both were right and the latter was something from my deepest fears then as it turned out a restructuring was delayed until 2012 to give Euro area banks time to unload their liabilities -in every sense of the word- mainly onto Euro area taxpayers but also world taxpayers via the International Monetary Fund (IMF).
By Christmas 2011 it had become clear to me that default and devaluation or what has become called Grexit was the best way forwards for Greece.
If I was Greece I would default and devalue this Christmas
Of course the official story was believe it or believe it not was that the Greek economy would collapse. Oh the shame of it for those who argued thus as of course it was their plan which plunged Greece into an economic depression. Later it emerged that US Treasury Secretary Timmy Geithner was troubled by the discussions taking place back then.
We’re going to teach the Greeks a lesson. They are really terrible. They lied to us. They suck and they were profligate and took advantage of the whole basic thing and we’re going to crush them.’ [That] was their basic attitude, all of them.
That excerpt is from a November 2014 article by Yanis Varoufakis, whatever happened to him?
Why is Grexit presented as something to be afraid of?
This is because for the establishment it would expose one of the misrepresentations which they have pushed for years and indeed decades. It concerns the IMF and some of you have noticed the panicky way that even the merest suggestion that Greece may not repay the IMF is treated by officialdom and by much of the media. Back on November 28th 2011 in an explainer article on Mindful Money I pointed out a fault line.
Politicians should stop implying that the help provided by the IMF is in effect free. For example US Treasury Secretary Geithner suggested that moves to expand the IMF “wouldn’t cost a dime”. This is one of those superficially true statements that are very dangerous. If you are liable for something it does not cost anything until it goes wrong. Any proper accounting system allows for the possibility of things going wrong.
Of course proper accounting systems are in very short supply these days! But as I also pointed out there is another problem as the role of the IMF was changed under the French politician Dominique Strass-Khan to allow the Euro area bailouts.
It has plainly changed from an organisation which helps with balance of payments problems to one which helps with fiscal deficits. Whilst this may suit politicians, taxpayers and voters should in my view be concerned about the moral hazard of one group of politicians voting to increase funds available to help another group of politicians which increasingly includes themselves.
The situation got even more intertwined when the next leader of the IMF was not only yet another French politician but in Christine Lagarde one who was explicitly involved in the “shock and awe” disaster.
Underlying all this is the fact that the IMF has increasingly been gaining funds from developing and emerging nations who no doubt would be as a minimum underwhelmed to find out that it was used to facilitate a first world stitch up! This from Euobserver highlights the hard bargain it is driving.
On Thursday (16 April), IMF chief Christine Lagarde ruled out giving Greece more time to pay back the €1 billion it owes to the fund in May.
You might think that the IMF should feel that it owes Greece a favour but apparently not on Christine Lagarde’s watch.
Greece versus Germany
This is somewhat unfair in a way as Germany is only a little over a quarter of the capital of the Euro area rescue mechanisms so it could be outvoted. Indeed it often is on the European Central Bank Governing Council. Also the IMF has been run by the French for some time. However you spin it though the Greek Finance Minister Yanis Varoufakis was correct to point this out at the Brookings Institute yesterday.
The problem with the take or leave it resolution is that we tried that medicine and it didn’t work…..We have the right to be heard, and we have the right to challenge the logic of a program that has clearly failed.
And perhaps the most uncompromising statement of all.
Greece went from Ponzi scheme of unsustainable borrowing to the scheme of Ponzi austerity.
A story of bond yields
Yes these are merely a financial instrument but we do learn something from the fact that the ten-year sovereign bond yields are currently 0.08% for Germany and 12.4% for Greece. A world apart! However there is another clear difference as you see Germany is funding itself at such levels but Greece is not as it is much cheaper to take bailout cash. Although the story twists again as of course new bailout cash looks as though it may be in short supply or not available at all.
If we continue with the German theme we see that it has gained substantially over the Greek bailout period from this. What do I mean? Back in the “shock and awe” days it was paying 3% for ten-year borrowing. It would be interesting to do the mathematics of how much it has gained would it not? Could it also borrow for say five-years at a negative yield and give the money to Greece? Of course the problem is one from another sphere the likelihood of repayment as Mariah Carey reminds us.
It’s so deep in my daydreams
But it’s just a sweet sweet fantasy baby
Things are going badly right now as the new government in Greece is dithering. It needs to make up its mind as whilst it is so doing the Greek economy is continuing to struggle and the Greek people suffer as shown by this report into medical care from rural Crete.
Patient 179 said “During the pharmacists’ strike I realised my symptoms got worst, but I couldn’t buy my inhalers so in the end I had an asthma attack.’’ Patient 183 said “I didn’t have the money to buy the medications for my hypertension and diabetes and this made me even more stressed.’’ Patient 246 said “I couldn’t buy my medications, and I felt my old depression reappear.’’’ Patient 283 said ‘I often have the dilemma do I pay the taxes and the electricity bills or
do I pay for medications. I know I will suffer no matter what I decide. ’’ Patient 286 said “ Doctor I really can’t afford the medication costs anymore, my bank account is close to zero, and if this continues for long I will have to ask you to select for me the most important ones to continue.’’
Whilst it would have been better to have done so before my advice is the same as I think it is the only way to shatter the Greek establishment which has done so much harm to the rest of the population default and devalue. As Hotel California puts it.
Last thing I remember, I was
Running for the door
I had to find the passage back
To the place I was before.