It appears that the European Union, led by Germany, are about to pony 30 billion Euros to bail out troubled Greece. The cost for Greece? Austerity.
Don’t make me laugh. Given the widespread strikes seen these past two weeks, I very much doubt that the Greek government has enough power to enforce austerity measures. So does this mean there will be no bailout? I highly doubt it: what emerges from this weekend will likely be worded as conditional, but privately known to be unconditional.
In my opinion, what will ultimately happen will be broad unrest in Germany as unemployment benefits are cut at the same time as the Greeks are partying as usual. Think riots can’t happen in Germany?
David, what’s going on with Toyota? Is this just an instance of bad luck blown out of proportion? It seems clear to me that at the very least, Toyota is getting bad press advice, at least as regards the sensibilities of American customers.
I do find it hard to believe that all of the ex-post narratives in the press regarding Toyota’s terrible “culture of centralization” have even a grain of truth in them. What do you think?
According to Spiegel Online, Greece has been getting liar loans from everyone’s favorite subprime lender. In this case, the lying was about the exchange rate (the loans were structured as currency swaps with “fictional exchange rates”) and the national balance sheet (the “credit disguised as a swap didn’t show up in the Greek debt statistics”). As with many subprime loans, these are designed to explode in the “long term” (i.e., after the insiders have gotten the hell out). Of course, the insiders got out quickly: “Goldman Sachs charged a hefty commission for the deal and sold the swaps on to a Greek bank in 2005″ (one would expect nothing less!).
So how big are Greek debts? “In 2002 the Greek deficit amounted to 1.2 percent of GDP. After Eurostat reviewed the data in September 2004, the ratio had to be revised up to 3.7 percent. According to today’s records, it stands at 5.2 percent.” Hey, what’s a few percent of GDP between friends?
Whatever credibility Greece may have had, it’s gone now. And does anyone think that their able bankers didn’t sell similar products to other greedy piigs?
Michael Pettis calls out Thomas Friedman on his careless economic analysis–a very entertaining read. The punchline? China, with its $2-3T in reserves, has striking similarities with the USA before the Great Depression and Japan before the Bubble Economy burst. Pettis concludes:
We must be careful how we read history. The fact that the US and Japan had terrible decades following periods during which they had amassed levels of reserves that China has subsequently matched, and under conditions similar to those of China, does not necessarily mean that China too must have a lost decade or two. Chanos is not being crazy when he worries, but it is still an open question as to whether or not he will turn out to be right.
But the history does indicate that facile statements about central bank reserves should, at the very least, be measured against the obvious historical precedents. Chanos might still lose this debate, but Friedman has already proven himself to be hopelessly wrong.