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Gross Greece certainty
May. 17th, 2011 01:49 pmBill Gross, who runs the biggest bond fund at PIMCO, the biggest bond fund investment management company, said yesterday that "Greece is insolvent and at some point the can cannot be kicked down the road any further", which was a fair indictment of the "solutions" proposed in Europe for the past two years.
He added that "Greece, even with the stringent fiscal measures, can’t get above the line in terms of real growth. It becomes a question of solvency, as opposed to liquidity".
I mention this solely because I think that it's the first time I've seen a major figure repeat almost word for word what I wrote about the banking system in March 2009 (http://peterbirks.livejournal.com/356521.html) and have been repeating ad nauseam about Greece ever since it first applied for a bail-out.
In recent days I've read some interesting "defences" of the current EU strategy of "kick the can down the road". One particularly piece of bare-faced bollocks was in a letter to the Financial Times which claimed that the solution "worked" because it enabled the private sector to offload Greek debt to the ECB at 100%. This, if you like, is a good example of how bankers look at the world. "If it stops being our problem then it stops being a problem." Clearly the "kick the can down the road" strategy has been a lifesaver for banks, but all it has done is - via the helpful aegis of the ECB as proxy for all European citizens - to transfer the problem to the taxpayer.
The linguistic contortionists within the EU appear to be softening up the markets for Greek default. We now have the words "restructuring" (= "default") and the even more wonderful "reprofiling" (= "default"). I think that I've already predicted that there would be some kind of smoke and mirrors solution to the Greek fuck-up, whereby something which walks like a duck and talks like a duck is suddenly reclassified as "a duck-like bird that is definitely not a duck".
EU monetary affairs spokesman Amadeu Altafaj was hard at work yesterday, stating that "reprofiling is one concept; debt restructuring is a different concept. It doesn't necessarily involve the same players and doesn't have the same consequence".
Yeah, right. I'm not sure how many languages the EU has to deal with when issuing official documents, but it's time to add another one - "EU-Economicseze" whereby all relation to reality is completely ignored.
This can being kicked down the road is entering heavier gravity fields. It won't travel as far, and Angela Merkel is getting more and more tied up in knots of her own making (which kind of makes kicking the can even harder, he wrote, subtly sidestepping the mixed metaphor). And the nuts of the matter are summed up by Gross. If it's a solvency crisis, and if the country is actually getting more broke by the day rather than less, no number of political agreements or linguistic contortionism can stave off the eventual inevitable - Greek debt is not worth 100% and large holders of Greek debt (e.g, some of the banks in Cyprus, several banks in Germany and a few in France) have some heavy writedowns on their hands. Not to mention the €100bn hit for the ECB (eventual bill-payers, us).
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Speaking of insolvency, America seems remarkably blasé about the fact that every man, woman and child in the US now owes more than $46,500, given that the US government has hit its debt ceiling of $14.3trn. The structure of the US constitution means that the legislature has to approve an increase in this. In the meantime Tim Geithner is adopting a solution that I seem to recall would have put Robert Maxwell in jail if he hadn't died beforehand. Geithner is to raid the pension funds. Well, what he's going to do is to stop funding them fully, but the effect is the same. Then, when the increase in the debt ceiling is approved, he borrows more, and puts it back into the pension funds. Clearly the rules are different if you are a government.
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He added that "Greece, even with the stringent fiscal measures, can’t get above the line in terms of real growth. It becomes a question of solvency, as opposed to liquidity".
I mention this solely because I think that it's the first time I've seen a major figure repeat almost word for word what I wrote about the banking system in March 2009 (http://peterbirks.livejournal.com/356521.html) and have been repeating ad nauseam about Greece ever since it first applied for a bail-out.
In recent days I've read some interesting "defences" of the current EU strategy of "kick the can down the road". One particularly piece of bare-faced bollocks was in a letter to the Financial Times which claimed that the solution "worked" because it enabled the private sector to offload Greek debt to the ECB at 100%. This, if you like, is a good example of how bankers look at the world. "If it stops being our problem then it stops being a problem." Clearly the "kick the can down the road" strategy has been a lifesaver for banks, but all it has done is - via the helpful aegis of the ECB as proxy for all European citizens - to transfer the problem to the taxpayer.
The linguistic contortionists within the EU appear to be softening up the markets for Greek default. We now have the words "restructuring" (= "default") and the even more wonderful "reprofiling" (= "default"). I think that I've already predicted that there would be some kind of smoke and mirrors solution to the Greek fuck-up, whereby something which walks like a duck and talks like a duck is suddenly reclassified as "a duck-like bird that is definitely not a duck".
EU monetary affairs spokesman Amadeu Altafaj was hard at work yesterday, stating that "reprofiling is one concept; debt restructuring is a different concept. It doesn't necessarily involve the same players and doesn't have the same consequence".
Yeah, right. I'm not sure how many languages the EU has to deal with when issuing official documents, but it's time to add another one - "EU-Economicseze" whereby all relation to reality is completely ignored.
This can being kicked down the road is entering heavier gravity fields. It won't travel as far, and Angela Merkel is getting more and more tied up in knots of her own making (which kind of makes kicking the can even harder, he wrote, subtly sidestepping the mixed metaphor). And the nuts of the matter are summed up by Gross. If it's a solvency crisis, and if the country is actually getting more broke by the day rather than less, no number of political agreements or linguistic contortionism can stave off the eventual inevitable - Greek debt is not worth 100% and large holders of Greek debt (e.g, some of the banks in Cyprus, several banks in Germany and a few in France) have some heavy writedowns on their hands. Not to mention the €100bn hit for the ECB (eventual bill-payers, us).
+++++++++++++
Speaking of insolvency, America seems remarkably blasé about the fact that every man, woman and child in the US now owes more than $46,500, given that the US government has hit its debt ceiling of $14.3trn. The structure of the US constitution means that the legislature has to approve an increase in this. In the meantime Tim Geithner is adopting a solution that I seem to recall would have put Robert Maxwell in jail if he hadn't died beforehand. Geithner is to raid the pension funds. Well, what he's going to do is to stop funding them fully, but the effect is the same. Then, when the increase in the debt ceiling is approved, he borrows more, and puts it back into the pension funds. Clearly the rules are different if you are a government.
_____________________
