Quotulatiousness

June 27, 2011

The Economist calls for Greek debt restructuring

Filed under: Economics, Europe, Government, Greece — Tags: , , , — Nicholas @ 10:23

A Greek default. It’s stopped being a possibility, moved into being a probability, and it’s starting to look inevitable:

There is an alternative, for which this newspaper has long argued: an orderly restructuring of Greece’s debts, halving their value to around 80% of GDP. It would hardly be a shock to the markets, which have long expected a default (an important difference from Lehman). The banks that still hold a big chunk of the bonds are in better shape to absorb losses today than they were last year. Even if Greece’s debts were cut in half, the net loss would still represent an absorbable proportion of most European banks’ capital.

An orderly restructuring would be risky. Doing it now would crystallise losses for banks and taxpayers across Europe. Nor would it, by itself, right Greece. The country’s economy is in deep recession and it is running a primary budget deficit (ie, before interest payments). Even if Greece restructures its debt and embraces the reforms demanded by the EU and IMF, it will need outside support for some years. That is bound to bring more fiscal-policy control from Brussels, turning the euro zone into a more politically integrated club. Even if that need not mean a superstate with its own finance ministry, the EU’s leaders have not started to explain the likely ramifications of all this to voters. But at least Greece and the markets would have a plan with a chance of working.

No matter what fictions they concoct this week, the euro zone’s leaders will sooner or later face a choice between three options: massive transfers to Greece that would infuriate other Europeans; a disorderly default that destabilises markets and threatens the European project; or an orderly debt restructuring. This last option would entail a long period of external support for Greece, greater political union and a debate about the institutions Europe would then need. But it is the best way out for Greece and the euro. That option will not be available for much longer. Europe’s leaders must grab it while they can.

June 21, 2011

The Athens protests as a theatre for projection

Filed under: Economics, Europe, Government, Greece, Media — Tags: , , , — Nicholas @ 09:45

Whatever may really be behind the protests, reporters are having a wonderful time using it as a blank canvas to project their own notions:

Some seriously overblown claims are being made about the anti-government, anti-EU, anti-IMF protests in Athens. ‘Syntagma Square has become the frontline of the battle against European austerity’, said one giddy British reporter, referring to the square where for the past three weeks Greek citizens, calling themselves ‘indignados’, have been protesting against the IMF/EU demand for further austerity measures before Greece can receive more aid. In truth, the most striking thing about the protests is their incoherence, even their childishness. Far from being the frontline of any kind of solid movement, the Syntagma camp-in is a confused, depoliticised, borderline petulant response to the economic crisis.

Some European journalists and activists have become so enamoured by the physicality of the protests that they seem not to have noticed the gaping political hole at the heart of them. BBC reporters, who normally spend most of their time in stuffy, smokeless offices, have written with undisguised glee of their sweaty experiences in Athens, where the ‘teargas hits us without warning’ and ‘we crush together, shoulder to shoulder’. A Guardian reporter describes being ‘jammed up against the railings’ in a ‘raucous’ atmosphere that is like ‘an open-air concert’. Hacks more used to writing about Vince Cable’s latest pronouncement on business law have leapt upon the opportunity to get stuck into a seemingly more thrilling economic story, in the process presenting the Syntagma stand-off as way more profound than it actually is.

Likewise, many amongst the European left are busily projecting their aspirations on to Athens. This is the ‘start of the European workers’ fightback’, they claim, describing the protests as the ‘beginning’ of an uprising against austerity that they knew would come. It is a feeling of profound disarray and disconnection amongst European left groups, their sensitivity to the political stasis that has largely greeted the economic crisis, which leads them to make excitable claims about Greece. Motivated by a determination to avoid having hard debates at home about the crisis, far less try to come up with any strategies for resolving it, they content themselves instead with celebrating the rowdy ‘indignation’ of Greek protesters and imagining that it represents the first stirrings of the return of traditional class politics.

May 22, 2011

QotD: The rise of the “new aristocracy”

Filed under: Europe, France, Politics, Quotations, USA — Tags: , , — Nicholas @ 13:39

A man is innocent until proven guilty, and it will be for a New York court to determine what happened in M Strauss-Kahn’s suite at the Sofitel. It may well be that’s he the hapless victim of a black Muslim widowed penniless refugee maid — although, if that’s the defense my lawyer were proposing to put before a Manhattan jury, I’d be inclined to suggest he’s the one who needs to plead insanity. Whatever the head of the IMF did or didn’t do, the reaction of the French elites is most instructive. “We and the Americans do not belong to the same civilization,” sniffed Jean Daniel, editor of Le Nouvel Observateur, insisting that the police should have known that Strauss-Kahn was “not like other men” and wondering why “this chambermaid was regarded as worthy and beyond any suspicion.” Bernard-Henri Lévy, the open-shirted, hairy-chested Gallic intellectual who talked Sarkozy into talking Obama into launching the Libyan war, is furious at the lèse-majesté of this impertinent serving girl and the jackanapes of America’s “absurd” justice system, not to mention this ghastly “American judge who, by delivering him to the crowd of photo hounds, pretended to take him for a subject of justice like any other.”

Well, OK. Why shouldn’t DSK (as he’s known in France) be treated as “a subject of justice like any other”? Because, says BHL (as he’s known in France), of everything that Strauss-Kahn has done at the IMF to help the world “avoid the worst.” In particular, he has made the IMF “more favorable to proletarian nations and, among the latter, to the most fragile and vulnerable.” What is one fragile and vulnerable West African maid when weighed in the scales of history against entire fragile and vulnerable proletarian nations? Yes, he Kahn!

Before you scoff at Euro-lefties willing to argue for 21st century droit de seigneur, recall the grisly eulogies for the late Edward Kennedy. “At the end of the day,” said Sen. Evan Bayh, “he cared most about the things that matter to ordinary people.” The standard line of his obituarists was that this was Ted’s penance for Chappaquiddick and Mary Jo Kopechne — or, as the Aussie columnist Tim Blair put it, “She died so that the Food Allergen Labeling and Consumer Protection Act might live.” Great men who are prone to Big Government invariably have Big Appetites, and you comely serving wenches who catch the benign sovereign’s eye or anything else he’s shooting your way should keep in mind the Big Picture. Yes, Ted Ken!

Nor are such dispensations confined to Great Men’s trousers. Timothy Geithner failed to pay the taxes he owed the United States Treasury but that’s no reason not to make him head of the United States Treasury. His official explanation for this lapse was that, unlike losers like you, he was unable to follow the simple yes/no prompts of Turbo Tax: In that sense, unlike the Frenchman and the maid, Geithner’s defense is that she wasn’t asking for it — or, if she was, he couldn’t understand the question. Nevertheless, just as only Dominique could save the European economy, so only Timmy could save the U.S. economy. Yes, they Kahn!

Mark Steyn, “The unzippered princelingand the serving wench”, Orange County Register, 2011-05-20

May 17, 2011

Matt Welch: BHL is a “national embarrassment to France”

Filed under: France, Law, Media — Tags: , , — Nicholas @ 10:42

Actually, I understate in the headline what Matt actually wrote:

And since we don’t want to reprint the whole quavering bag of apologia (“Charming, seductive, yes, certainly; a friend to women and, first of all, to his own woman, naturally,” etc.), let’s close with perhaps my favorite line:

     What I do know is that nothing in the world can justify a man being thus thrown to the dogs.

I’m guessing what BHL really means here is that no worldly rape can justify Strauss-Kahn’s treatment. Since if the accusations are true, a 62-year-old man known by every French person I’ve asked to have the sexual manners of a primate lunged nakedly at hired help half his age, grabbed her breast, knocked her to the floor, and chased her around his expensive hotel suite attempting with some success to thrust his penis into her body and discharge DNA evidence.

I don’t know if he’s guilty, and it would be imprudent not to consider the conspiracy theories in a case involving someone who until this week was the single biggest political threat to the sitting president of France, but the only decent way you can arrive at “nothing in the world can justify” Strauss-Kahn’s treatment is if you oppose all perp walks equally. Short of that, it’s just special pleading for a powerful dick. And another reminder that BHL is 10 times the national embarrassment to France than Jerry Lewis or even Johnny Hallyday ever was.

January 24, 2011

Investing in fine wine doesn’t diversify your portfolio

Filed under: Economics, Wine — Tags: , — Nicholas @ 08:31

Following up to this post, The Economist agrees that fine wine tracks too closely to the price of oil to offer much diversification for investors:

A bottle of Château Pétrus ’82 can cost over $5,000, whereas the equivalent volume of crude oil sells for less than 50 cents. Château Brent may taste a tad rough, yet fine wine and crude oil have more in common than you might think. Their prices have risen and fallen in step in recent years (see chart).

Wine experts usually explain price movements by supply-side factors such as the effects of the weather and age, but research by Serhan Cevik and Tahsin Saadi Sedik, economists at the IMF, finds that supply has only a small impact on prices. Instead, fast economic growth in emerging economies has been much more important in recent years — as is the case for oil and other commodity prices.

Between 1998 and 2010 there was a correlation of over 90% between changes in oil and wine prices.

January 15, 2011

Fine wine as an investment

Filed under: Economics, Wine — Tags: , — Nicholas @ 09:54

While I personally think wine is a terrible choice for an investment vehicle, I’m at odds with a lot of people with more money than sense who choose to diversify their investments to include fine wine. However, it may not be the best kind of diversification:

The search for safe investments and risk hedging has apparently led some in recent years to start investing in fine wines. “In the past, one of the attractions of fine wine as an asset was its non-correlation with mainstream financial markets,” wrote the Financial Times‘ John Stimfig in 2009. “This provided investors with valuable portfolio diversification.” What could be less closely linked to the Fed funds rate than whether or not it was a good year for Bordeaux? But now the FT reports that a new paper by two IMF economists, Serhan Cevik and Tahsin Saadi Sedik, says that if this were ever true, it’s not anymore. Fine wine prices are just like oil, they find: they go up or down depending on how the rest of the economy is doing.

December 3, 2010

Reactions to the Irish financial crisis

Filed under: Economics, Europe — Tags: , , , , , — Nicholas @ 09:09

Kevin O’Rourke sees it as almost a kind of bereavement:

It is one thing to know that someone you love is terminally ill; their death still comes as a shock.

I certainly don’t want to compare the arrival of the EU-IMF team in Dublin last week to a bereavement. But I was surprised at how upsetting I found it, given that it came as no surprise. It had been clear for a long time that the blanket guarantee given to the liabilities of Ireland’s rotten banks, in September 2008, had saddled the State with a debt that was too big for it to handle. Ten successive quarters of declining real GNP, and one attempt too many to draw a line under the losses of our banks, made our exclusion from international capital markets inevitable. But to know something is one thing; to see it actually happen is something entirely different.

I am not alone in feeling this way, it seems. The economics editor of the Irish Times, Dan O’Brien, wrote that

“nothing quite symbolised this State’s loss of sovereignty than the press conference at which the ECB man spoke along with two IMF men and a European Commission official. It was held in the Government press centre beneath the Taoiseach’s office. I am a xenophile and cosmopolitan by nature, but to see foreign technocrats take over the very heart of the apparatus of this State to tell the media how the State will be run into the foreseeable future caused a sickening feeling in the pit of my stomach.

This is not to say that we would be happy to have our country’s affairs managed by the current, disgraced, government. I yield to no-one in my loathing of the men and women who have done this to my country. What has been the intellectual low-point of the last couple of years? Was it the cash-for-clunkers stimulus package (Ireland does not produce any cars)? Or the statement by our Finance Minister that Ireland need not fear a bank run, since Ireland is an island? Or the biggest Irish joke of them all, which underpinned the bank guarantee in the first place: that if we wanted investors to retain confidence in the creditworthiness of the Irish State, we needed to make sure that nobody who invested in our (private sector) banks ever lost a penny?”

H/T to Tim Harford for the link.

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