vendredi 30 avril 2010

Greek Finance

A Ponzi scheme remains a Ponzi sheme whether it is run by an individual, a company, or a soverign state.  Inevitably a Ponzi scheme damages all those who are involved directly or indirectly.

European Leaders ... Incompetent or Relucant?

No one doubts the incompetence of European leaders in sectors that require a European vision. The selfish provincial attitudes they evince are typified by their long running failure to create European adequate financial and monetary institutions. They are also illustrated in the failure to create a unified authority for European Airspace. Both these situations have continued for decades, despite appropriate proposals being made by the European Commission.

Such selfish provincialism has continually plagued the construction of the European Union. Repeatedly the 'political 'leaders' of the member countries of the European Union and the Euro-zone have used the European Council to frustrate any effort to delegate their geographically limited authority, or create the European agencies and instiutions, required to accomplish the tasks that can only be realised by adopting a coherent common policy.

Again and again, the political 'leaders' of European countries have deliberately sabotaged efforts to create coherent policies, objectives, and the institutions required to implement them in a timely fashion. One is forced to ascribe ignorance, stupidity, or wilful blindness, to many of the attitudes,  and limited vision demonstrated by our self-styled leaders. All too often, using honied words and elegant phrases, they also evidence an absence of political courage.

Too often, and since the creation of the Community, they have collectively failed to recognise the need to contribute more than words to the resolution of many pressing European issues; fearing their elctorates rather than leading their countries to contribute to constructive policies confronting real world problems.

Fortuately, there have been many individual exceptions who have recognised the need for Europeans to combine forces in the interest of all. And this, combined with the imperatives generated by the urgent need to urgently resolve crises has led to a gradual strengthening of Europe and its Institutions.

Neverteless, these observations shouldn't be construed as a criticism of the German Chancellor Mrs Merkel respecting the Greek crisis. Her caution and insistence on strict conditions being imposed on Greeks and the Greek government are entirely justified; even within the framework of the most generous European financial assistence. Again, even a desire to act purely in the interest of a wider Europe does not imply that one should necessarily accede rapidly to an alleged need to assist profligate liars who have difficulty in recognising their need for assistance, initially appeared unable to specify the funds required, and still need to acknowledge the need to reduce their expendirures appropriately.

Evidently Europe has to protect the interest of Europeans, but that does not mean that irresponsible spendthrifts have to be protected from the consequences of every caprice and self-ndulgence. European assistence, when extended, has to be in the interest of the whole; particularly when one attempts to help the manfestly incompetent. Mrs Merkel deserves much credit for not precipitately ceeding to market panic and the lobbying of interested lenders (recieving high interest for accepting risk they now want others to assume).

There is a need for careful reflection concerning the best way of handling the Greek financial crisis. In any case, in the interest f all Europeans, the minimum necessary conditions must be imposed. These require Greek recognition of the need to radically revise their expectations. They cannot expect, and cannot be allowed, to continue to run their 'Ponzi scheme' at the expense of fellow Europeans.

Links
http://www.nytimes.com/2010/04/30/world/europe/30europe.html?ref=global-home
http://online.wsj.com/article/SB10001424052748704302304575213850620375566.html?mod=WSJEUROPE_hps_MIDDLETopStories
http://news.bbc.co.uk/2/hi/business/10093758.stm

mercredi 28 avril 2010

Greek Finance a Ponzi Scheme?

The Greek government appears to have been running a Ponzi scheme.  A Ponzi scheme remains a Ponzi sheme whether it is run by an individual, a company, or a soverign state.  Inevitably a Ponzi scheme damages all those who are involved directly or indirectly.  One solution adopted, in the case of individuals responsible for running such fraudulent schemes, is to jail them !

Unfortunately it is difficult to imagine such a resolution being applied to the Greek politicains, electorate, and their bankers; all responsible for the Greek crisis.  Nevertheless, many innocent parties are going to suffer as a consequence of their irresponsible behavior.  Germany is right to insist that help must be extended only on a basis that prevents a repetition of such profligate spending. An satisfactory resolution for the Greek crisis must  also convincingly demonstrate to all who might evisage running  Ponzzi shchemes, ie 'living on tic', that there is no 'good fairy' duty bound or obliged, to bail them out.

Those involved in financial markets should note that Greek bankruptcy does not necessarily involve Greece leaving the Euro zone or the European Union.  Such suggestions can only be made by those with a complete ignorance of the facts.  California or Detroit, could go bankrupt wuthout being forced to leave the US dollar zone or the the United States.

Ref:
http://online.wsj.com/article/SB10001424052702303491304575187712463200360.html?mod=WSJ_article_RecentColumns#articleTabs%3Darticle

lundi 26 avril 2010

GDP Growth is a Poor Measure of Increasing Living Standards

GDP growth is a truely awful measure of improving living standards. Tje definition excludes all non=monetarised considerations such as environmental damage, climate change, pollution of atmosphere, contamination or shortage of water, even destruction of food species.

The definition of GDP growth has no useful relationship to the fruits of technology development, such as the introduction of colour television or the introduction of cheaper digital technologies.

Externalised costs are ignored in the calculatrion of GDP growth.  Increased disease and it treatment can contribute to GDP.  Obesity contributes to GDP in the course of its acquisition and again as we pay for attempts to cure its adverse effects.

The concept GDP suffers from the limitation of not being usable as a basis for comparison in changing environmental, political, social, and technological conditions.  No account is taken of the negative effects of devotng resources to war and destruction. Billions spent of invading Iraq, fighting obesity, of education children, contribute in like fashion to GDP.  Similarly a productive workers wages contribute to GDP just as those of an unproductive civil servant.

Indeed, on close examination of the definition of GDP it is difficult to conceiva a more flawed
measure of living standards and their growth.

Ref:
http://www.economist.com/debate/days/view/506

Greek Bankruptcy or Inappropriately Reward High-Risk Lenders?

Unless Greeks and the Greek government demonstrate that they have changed their profligate financial behavior, and also demonstrated they have changed their attitude to continuing financing of deficits by increasing borrowing, it will remain in the wider interest of the Euro Zone to allow the Greek government to go bankrupt. It would be fatal, in the longer run, to encourage others to follow the Greek example, and to inappropriately guarantee funds lent as high risk funds charging high interest rates.


Refs:
http://online.wsj.com/article/SB10001424052748703465204575207662667002760.html?mod=WSJEUROPE_newsreel_markets
http://online.wsj.com/article/SB10001424052748703465204575207662667002760.html?mod=WSJEUROPE_newsreel_markets#articleTabs%3Dcomments

Do the Greeks Understand the Need for Budget Discipline?

The worrying aspect of the 'Greek Financial Crisis' is the apparent inability of the population and government to understand that they must radically change their pofligate behavior.

Demonstrations on the streets of Athens reinforce the impression that Greeks do not understand that they must cease to spend funds their country does not earn. The Greek government must cease thinking or suggesting, that a few kind words and gestures by European governments and Euro Institutions will solve all their financial problems.

There is, and can be, no solution to the Greek financial problems until Greeks and Greek governments demonstrate they have reformed and changed the irresponsible behavior.that has got them into trouble. Fundamental reforms, including reductions in expenditures, must be made and accepted.

If the Greeks do not grasp the nettle and modify their attitudes and behavior, the Greek government should be allowed to go bankrupt in order to better protect the integrity of the Euro Zone. Otherwise, purile efforts to express solidarity will simply encourage others to follow the Greek example, and Greece to repeat its egregious financial habits. Supporting, or rewarding, inappropriate Greek expenditures will simply lead, in the longer run, to greater dangers for the euro.

samedi 24 avril 2010

Mr Micawber... A Financial Lesson Greeks Must Learn

Greece should not be assisted unless it radically reduces government spending, including social benefits, salaries, pensions, benefits, etc.. Greeks cannot be allowed to believe that others will always bail them out no matter how irresponsible their expenditures.

The present unrest on the streets in Greece indicates, unfortunateely, that many Greeks have still to learn the elementary lesson: live within your means.. Never borrow more than you can afford applies to individuals, companies, governemts, and nations.

The lesson is not new. In 'David Copperfield' Charles Dickens used his fictional character Mr Micawber to illustrate the principle:

"Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."


A similar expression Greeks and Greek Institutions must be brought to undierstand might read: "Annual income, 10,000 euros, expenditure 9,999 euros, result happiness; annual income 10,000 euros, expenditure 10,001 euros, result misery."



Refs:
http://online.wsj.com/article/SB10001424052748703876404575200013667934980.html?mod=djemEditorialPage_h
wsj.com/article/SB10001424052702304198004575171283233672498.html#articleTabs=comments%26commentId=1080862

vendredi 23 avril 2010

Greek Bankruptcy is Desireable?


In an ideal world Greece should be allowed to go bankrupt as only prolifigate Greeks and iresponsible lenders would in fact be damaged. Yet, unfortunately there is a market failure to understand that a government, bank, or company using euros can be allowed to go bankrupt without damaging currencies such as the dollar or the euro.
Undoubtedly, ill informed markets would regard a Greek default as endangering the euro. Yet in reality bankruptcy can force necessary change, in government, a bank, or a car producer without damaging the currency it uses. Indeed an economy or financial zone can be strengthened by a weak element being forced by bancruptcy, or its threat, to radically restructure expectations and expenditures. In the long run the economic impact of bankruptcy can lead to a healty reassignment of economic resources, or change in management.
Nevertheless, given the present lack of sophistication in financial markets; it is probably necessay to protect confidence in the euro and, subject to strict conditions, bail out the Greeks. This will cause difficulties, but no sympathy should be extended to profigate Greeks or their foolish financiers. Indeed the latter have already recieved more than adequate compensation for any risks they incurred in the high interest rates they charged, and the former have already benefited from living beyond their means.


Refs:
http://community.nytimes.com/comments/www.nytimes.com/2010/04/24/business/global/24drachma.html?sort=oldest&offset=1
http://www.economist.com/daily/news/displaystory.cfm?story_id=15980711&fsrc=nwl
http://news.bbc.co.uk/2/hi/business/8639440.stm

samedi 17 avril 2010

UK Election Choices concerning Europe


Apparently the choices available for the electorate fail to address the attitudes of the major parties to Europe and European institutions.
Our future requires the nature of the Conservative Party's attitude to Europe, and Brown's resistance to membership of the Eurozone, to be debated.
Even during a national election it can be important to avoid becoming obsessed with domestic issues alone.

samedi 10 avril 2010

German Export Surpluses are Harmful?

The suggestion that a German export surplus is harmful, is unmitigated rubish. You might just as well suggest that the world is unduely dependent on German exports.

The successful German export figures demonstrate that the world appreciates German products and services and considers them better value than those produced and provided by others. The only legitimate conclusion to draw is that  Germany's abilty to attract willing customers is greatly to be admired. Those vho criticise such successes, are sticking their fingers in their own eyes.

The real solutions for deficit problems is to produce more goods and services others desire, and/or to reduce the consumption of imports.

In no circumstances should the successful German economy be required to accept culpability for the failures of those who wish to rest on their laurels, and who in addition seek to blame the successful for their own failure to align their consumption with their ability to produce saleable products.

jeudi 8 avril 2010

Should Europe help Greece?

Remember, it is perfectly possible for the Greek government to go bankrupt withour affecting the value of the euro. Just as it is possible for rhe Californian State government to go bancrupt without causing the dollar to collapse. A perspective needs to be kept to properly evaluate the Greek situation. The problem is that no one wants to reward fiscal irresponsibility and encourage a contiuation of living beyond one's menas.

In a family sitation it would involve trying to decide how to help a younger brother or sister who insists on spending more than he/she earns. Can the sybling be reformed, or is it best for all concerned to let bankruptcy and/or high interest charges serve as a deterent and hopefully a corrective discipline

samedi 3 avril 2010

Is it Responsible to Vote for David Cameron?


When the Euro-sceptic Conservative Party rejected Ken Clarke as leader, it demonstrated it had lost contact with the real world. It's continued failure to understand European issues and the need for Britain to involve itself in the development of European political, economic and social environments demonstrate its continuing need to acquire some political maturity.
A party leader that only grudgingly admits the necessity of recognising the existence of, and necesity for close, intimate participation in the building of the most powerful institutions that will shape our future European environment and protect or damage our interests, can expect a responsible citizen to vote for another party. To do otherwise would be to jeopardise the UK's future welfare.
Mr Cameron and his collegues must demonstrate they are able to handle relations with the world, including Europe, as it is in the 21st century, not as it might have been in the 19th century.
Mr Cameron must acknowledge that the attitude of his party to Europe is even more important than any other issue he must be prepared to meet should he ever be invited to form a government.
I have yet to be convinced that the Conservative Party and it's leaders have any real understanding of Europpean issues, and this disqualifies them. Their euro-phobia makes it doubtful the Conservative Party could forrm a credible government capable of responsibly managing our relations with our European neighbours and European Istitutions.