The controversial economist John Williams once said “If the federal government were a corporation, the President and senior Treasury officers would be in federal penitentiary.” Paraphrasing his statement, I would say: if governments around the world were business school students they would gloriously fail every single subject and get kicked out of school after their very first semester. I have always been a strong believer in the idea that the socialist system was the biggest failure of the twentieth century. It is all understood that socialism does not create a system built on incentives, becoming a theory inconsistent with human nature and ultimately doomed to fail. The recent financial crisis could be considered a failure of capitalism followed by a failure of the governments’ policies. The process of socializing the private losses from this crisis has shifted the troubled liabilities of the private sector (e.g., large banks, financial institutions and households) onto the books of the sovereign. Continue reading ‘Why Bother To Vote?’
Tag Archive for 'EU'
After months of indecision, Europe’s politicians came up with a colossal rescue package for Greece, worth €110 billion, in which the International Monetary Fund (IMF) has a contribution of €30 billion. This is a revised sequel of the original bailout plan envisioned a month ago by the EU-16 finance ministers and IMF who had proposed a giant €45 billion emergency aid mechanism. In January 2010, European Central Bank President Jean-Claude Trichet said that the ECB would not change its collateral framework for the sake of any particular country. Following the events of December 2009 and April 2010, when Standard & Poor’s has downgraded the credit rating of Greece to BBB+ and BB+, respectively, Mr. Trichet changed his mind announcing that ECB would accept Greek bonds as collateral for loans regardless of how they were rated by credit agencies. The most representative viewpoint that I have read these days belongs to a German bar manager who said “The government is not telling us the truth. I think Greece needs more money than they are saying. Some say it’s to save Greece, but others say it’s to save the banks. Meanwhile, Greece is getting more broke.” Continue reading ‘Money vs. Politics’
On January 26 2010, Greece sold EUR 8 billion of five-year notes, attracting orders worth EUR 25 billion, with foreign investors buying almost 75 percent of the securities. The apparent debt issuance success has turned for the worst one day after, when the 10-year government bonds tumbled, pushing the yield up to the highest since 1999. The bearish sentiment behind the sell-off was due to investors’ concern that Greece is not acting appropriately to fix the biggest budget deficit in the European Union. Financial Times reported that China turned down an offer to invest EUR 25 billion in Greek government bonds. The yield on the Greek 10-year bond went-up 49 basis points to 6.73 percent in Athens, with the spread against German bunds increasing by 50 basis points to 354 basis points, the widest since December 1998. Continue reading ‘Greece – Another Tragedy’
While S&P 500 is having a hard time breaking the 1,111 resistance level, emerging-market stocks fell for a fourth consecutive day. Over the last couple of weeks, few events have shocked the financial world: Dubai World is struggling to restructure its debt, Greece’s bonds faced a downgrade by Fitch and Standard & Poor’s lowered its outlook on Spain to negative. The MSCI Country Index for Greece declined almost 12 percent in December, Dubai’s equity index fell 6.4 percent yesterday, while MSCI Spain sank 2.4 percent. Continue reading ‘Sovereign Debt Crisis’
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