39 thoughts on “Weekend reflections

  1. @Ernestine Gross
    Ernestine
    I understand your point but not at the cost of privatising Greek islands. That would seem beyond the pale and lest we be persuaded that Greece through its own corruption and its own shortcomings got itself into this mess rather than a rampaging herd of global market speculators as they rushed the exits in the tidal backsurge of the GFC , which I suspect is closer to the truth…

    Either way I am inclined to suggest closed capital mmarkets, temporary nationalisation and start concentrating on rebuilding their domestic economy.

    Privatising the islands is one step too far in this privatisation game and nations and lenders have already overplayed its hand in many countries….but the zombies are still here making the same suggestions.

    Dont ever forget Ernestine that it was Keynes thatb suggested nations in short term financial trouble should be assisted through a tax on surplus countries ie not funded with debt (and the ideological austerity measures subsquent fiscal conservatives in the IMF and WB threw in later by stealth).

    He was right…again. Since Keynes said it at Bretton Woods third world poverty has tripled. Its not about helping the poor Ernestine. Its about not sitting in wilful ignorance following policies that not only dont help the poor but they fail to prevent more and more nations from sliding into the global garbage bin.

    Slavery is the penultimate privatisation Ernestine. Thats where it could end if taken far enough.

  2. @Alice

    Acoording to wiki, Greece has over 6000 islands and islets (tip of a rock type of thing). Only 227 of the islands are inhabited and only 78 of those have more than 100 inhabitants.

    Nobody has suggested to “privatise the islands” (ie all of them) but part of the inhabited islands are ‘privatised’ (just like a block of land in Sydney). Furthermore, what is the difference between digging up and selling ‘rock’ (iron ore and coal) to other countries versus selling bigger pieces of rock protruding from the sea to residents domiciled in Greece or somewhere else in the EU or outside the EU? Other citizens from other EU member countries own houses in Greece and Greek citizens own appartments or other ‘things’ in other countries.

    I am afraid, if the Prime Minister of Greece says that past Greek governments are not without blame in the financial mess then I can’t simply ignore this, even if it matches with the statements by the EU Commission.

    To the best of my knowledge, Keynes, of all people, did not offer a one size fits all solution. His insights apply to circumstances similar to those at the time but not otherwise. Australia happened to be in a situation in 2007 which allowed limited aggregate demand management to counteract the fallout of the GFC in Australia.

    The Greek situation is not the same as the GFC fallout in the U.K. even though the tentacles of Wall street had reached the Greek government. (Yes government). It is the newly elected (late last year) Greek government itself that says the internal mess has to be cleaned up. The newly elected Greek government is said to have rejected the offer of Goldman-Sachs, late last year, to have more of the same that at least partly got Greek into trouble.

    IMO, one should leave it up to the Greek to decide whether they wish to remain in the EU (if the decision is ‘yes’, then printing money is not a solution, if they say no then the debt in foreign currency denominations remains as such) and to leave it to the EU governments to decide how and to what extent they can help Greece and over what period and under which conditions. The ‘mess’ cannot be cleaned up overnight. There is also Portugal, Spain and Italy that have non-trivial debt problems and all EU countries are under some stress, due to a variety of reasons, including the USA Wall Street debacle, albeit not to the same extent as in the U.S.A. The source of the problem in Spain is very different from that of Greece and so on.

    I’d say private or public ‘excessive’ debt is a non-trivial risk to enslave people. What is ‘excessive’ is of course not blatently obvious at all times and to all people.

  3. With the northern summer approaching my suggestion is that Mr Papandreou put up all the tourist tariffs and government charges. It might cause a bit of a drop off, but there is only one Hellas for all those northern Europeans to flock to. Chances are that with problems in the Iberian peninsula that they might do the same. A suitably nuanced plea to those cashed up visitors about helping a victim of the GFC might also help.

  4. Time to nationalise the banks and the bondholders in Greece and shut the doors is my suggestion (and tell the Germans to go to hell).

    Cutting off access to foreign capital would necessitate even deeper cuts to government spending because they don’t have any other real means to continue with deficits. It is not the Germans who will be going to hell.

  5. @Ernestine Gross
    Ernestine – there is also Iceland sliding into the abyss and the icelanders are adamant by referendum they want to default on their debt and let the British investors who invested in Icelandic banks set up by foreigners (you could barely call them banks could you?) when they handed out interest rates in excess of 10% to British investors and piled them into the ponzi scheme.

    Caveat emptor Ernestine. On Icleand – Im with the icelanders defaulting. Let Greece default as well and Spain and Portugal. How else are we going to get the global financial merchants to sit up and listen about the ponzi schemes they have been only too complicit in setting up?

    Let these speculative banks wear it. Did we really think a stimulus package the size of which was dwarfed by the bank bailouts would solve the disequilibrium in global financial markets? The money should have been applied to a fiscal stimulus in countries from day one, including Iceland, Greece, the US and the EU….not a massive bank stimulus.

  6. @TerjeP (say tay-a)
    Terje – you ccut off access to foreign capital except for nationalised banks, and you use Govt debt – yes the deficit word to stimulate the economy and get jobs going again even if it means they build bridges and roads over Greece.
    Your cuts in Govt spending will take the Greeks nowhere Terje. You are part of the austerity team that just wont pass the ball here.

  7. Can exponential growth in the use of non-renewable physical resources (e.g. coal) continue indefinitely in a finite world?

    Can exponential population growth continue indefinitely in a finite world?

    Can exponential pollution and destruction of the environment continue indefinitely in a finite world?

    All other questions are trivial compared to these.

  8. Ikonoclast :
    Can exponential growth in the use of non-renewable physical resources (e.g. coal) continue indefinitely in a finite world?

    Don’t worry, if the price is right the market will sort it out.

    Can exponential population growth continue indefinitely in a finite world?

    Don’t worry, if the price is right the market will sort it out. Just get the government out of the way.

    Can exponential pollution and destruction of the environment continue indefinitely in a finite world?

    Don’t worry, if the price is right the market will sort it out. Just get the government out of the way and stop distorting markets.

    All other questions are trivial compared to these.

    Don’t worry, if the price is right the market will solve everything. The only thing the market can’t be trusted with is pricing carbon – that would just create a speculative market and be a “Great big new tax”.

  9. @Alice

    “On Icleand – Im with the icelanders defaulting. Let Greece default as well and Spain and Portugal. How else are we going to get the global financial merchants to sit up and listen about the ponzi schemes they have been only too complicit in setting up?

    Let these speculative banks wear it”

    Alice, I’ve got news for you. It is unsuspecting proverbial ‘moms and dads’ in many countries who will wear it, either via superannuation funds and pension funds, or via loss of income due to public and private enterprises going bankrupt, or indirectly via their municipal or other government agencies reducing services due to the financial consequences, or all of the above.

    The action reported in the following smh article is one that aims at sending a monetary message to a major player in the GFC.
    http://www.smh.com.au/business/super-investor-sues-sampp-over-bond-rating-20100308-pstp.html

  10. Alice – I’m not against a default by Greece. I just can’t see how it can be done without having to make even deeper cuts to spending. Even if you force nationalised banks to lend to the government it isn’t clear that they will be able to raise the funds in a post default world.

  11. But Terje…at least tey have to raise less funds than pre default world.
    Britain defaulted on its obligations to the US post 1929 crash and insisted we honour our debts to the mother country.
    How did we do the Terje. Post default world is cheaper.

    I still say default – Iceland and Greece (and the rest).

  12. @Ernestine Gross
    Bring it on Ernestine…they wanted the free market…I hope people sue Standard and Poors out of existence. If its the free market they want…let the litigants tear the ratings agencies apart.

    But when the ratings agencies fall in a heap…what do investors rely on to make sensible investment decisions?.

    Regulation Ernestine. Its only the reckless and the foolhardy who think we can do without it.

  13. Alice :
    @Ernestine Gross
    Bring it on Ernestine…they wanted the free market…I hope people sue Standard and Poors out of existence. If its the free market they want…let the litigants tear the ratings agencies apart.

    I doubt the litigants will win (unfortunately). I expect the contracts had paragraph after paragraph of “we give no warranty about anything we say” “don’t rely on our advice” “make your own enquiries” etc etc.

    Although it would be a hoot if they said those things in open court – would make a mockery of the rationale for the high fees – if their analysis can’t be relied upon and is no better than anyone else’s why use them?

  14. Alice – I think Iceland is in a better position to default. And all it is really defaulting on is it’s promise to bail out failed banks. Meanwhile the Australian government hadn’t guaranteed deposits but decided to shift in that direction (with cheers from the likes of you and JQ). Governments should not guarantee deposits and Iceland may teach lenders that even when governments guarantee deposits you can’t “bank” on it.

    In terms of Greece I think a lot hinges on how much of their deficit is interest payments. You may in fact be right. Another option other than a default is to renogotiate terms with the lenders. Maybe they defer repayment and zero out interest. That would burn the lenders but not so badly the Greece can’t borrow in the future. Still a complete default remains a viable option. The notion that buying bonds is a risk free investment is a zombie idea that should perish.

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