Saturday, 13 February 2010

greek times in piigs' land

Did anyone notice?


All these ECB, IMF, FED, BoE and more activities to fill holes and bridge gaps, alter accounting rules, invent pseudo-new measurements, install relief valves or boosting pumps, bad banks or stimulation packages - all this will not solve any of the system’s basic failures. It won't make a blind bit of a difference.

If it is not Greece that threatens to face the world’s economies with sudden death it will be any other one of the PIIGS, or Japan, or Belgium, or in fact just name any country; you will hardly fail to hit a “fit for failure” candidate.

What would it take to put a country like Greece back on track (if it ever was on one)?

That's simple: in today’s world it would be a competitive currency that allowed Greece to offer cheap labour; they would have to have low cost energy and affordable commodities at hand; a well-trained, skilled and willing workforce would be next on the wish list to not only fight but win the battles against countries like China, India, Russia…; of course, its domestic infrastructure from roads to collecting taxes would have to be sound and in working condition.


It is a pity that at the same time and just by chance every single one of the fellow countries are on the same trip enhancing the battles even more for exactly the same golden pitchers: labour, energy, commodities: growth for growth sake while facing the limited horizon of what can be stolen from the rest of the crowd.


That’s all daydreaming; in reality we have gone too far into that cul-de-sac that now does not even allow turning.


Carpe diem!


2 comments:

CrisisMaven said...

The problem with Greece runs much, much deeper than anyone outside can imagine and deeper than the Greeks themselves are aware of: for all practical purposes, their day-to-day economy runs on bribery and graft. The only other country that I have found that trait so entrenched was … Nigeria (admittedly I haven't been everywhere but dealt with many, many nationalities and believe I would have spotted it). When I was there I saw a house in the backyard of my hosts'. It wasn't quite finished but it also didn't look very profesional to me and it was in an unlikely place for getting a permit. After inquiring this is what transpired: EVERYONE at least in most areas doesn't have a building permit. They bribe some officials to turn a blind eye as in most regions the land would first have to be rezoned. These buildings are all on land where you CAN'T GET a building permit! Then the same with water, electricity, sewers – all by bribery and "fly-by-night-jobs" as officially when you can't build there then certainly you can't have pipes or cables there. Oh, I forgot to mention telephones. No wonder their statistics are wrong – THEY CAN'T BE RIGHT, there's no official basis that tallies with what is actually going on in their economy, not in a hundred years there will be! And if you don't have a clear assessment of their assets and liabilities how can you give someone money? They may well even be richer even than we suppose, however, buildings without oversight and permits mostly can't e.g. be mortgaged etc., they tend to be shoddy and so on.

Christian A. Wittke said...

I agree; apart from Greece I know of similar habits in Spain, Italy or even in France where a building is finally taxed once it is finished – so not rendering the outside avoided paying taxes.

The dominating rule is that all and any of the global market participants have in the past until this moment squeezed the statistics here and there, more or less. What was “a little” in 2000 has multiplied over time and under the pressure of artificial terms and conditions set out of touch with reality (e.g. Maastricht). In order to become part of the gang - often stay in the gang for obvious reasons - even perplexing constructions like forfeiting future fees and taxes were used to boost the balance sheets. Unsurprisingly the banksters held the stapedes and now need Bad Banks to take out the dirtiest of their "recycled to death" papers.

As you summarise in your post on China the real bubbles are yet to burst; all in all this is one huge Ponzi scheme, programmed to fail, which is what the big players are preparing themselves for; the vast majority of the rest is condemned to sit and wait, some others to discuss and learn.

The pity is that after reset we won't have new banks, new regulations, not even a new aim!

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