Hi Guys,
Among most private citizens, a verbal agreement and a handshake are sufficient to close a deal. To enforce the articles of that deal if warranted by its value, a legal document is signed that guarantees its terms. It is almost always honored.
It is somewhat strange to me that such a signed document among nations does not carry that same weight of finality. Notoriously, nations unilaterally fail to fulfill their contractual obligations.
Over the weekend, the Greek government completed an agreement with their Euro Union creditors to secure continued financial influxes of over 130 billion Euro dollars. To secure that added loan, the Greece government promised an unpopular austerity program.
Hooray for Greece; hooray for their international financial creditors. Maybe this is an answer to the current Greek Tragedy, perhaps not. After all its just a piece of paper promising future action. Greece will surely accept the loans with grace, but will it deliver on its promises?
One can imagine a Greek commissioner turning to another at the signing ceremony and saying something like this: “Promise them anything to get the money. Once committed, they will hold to their payment schedule and vacillate when judging our progress. We need not honor our future commitments in a timely manner. Just get the gold now.”
Will Greece faithfully and efficiently implement the sweeping reforms that their Parliament promised, or is it just another empty government upcoming debacle that seems endemic to socialist dominated governments? Governments do lie and distort. Just reflect on the USSR’s sorry five decade experiment with the Communistic form of socialism.
Not possible? A false scenario. History teaches us otherwise.
We need only to think back to the period preceding World War II. The time is September, 1939. The place is Munich, Germany. The participants are Chamberlain, Daladier, Mussolini, and Hitler representing Great Britain, France, Italy, and Germany. In a conference that will forever represent an Infamy of appeasement, Chamberlain walked away thinking he had achieved a great international victory that avoided war. All that was required to potentially achieve that worthy goal was to concede the Sudetenland to Germany. Recall that Czechoslovakia was not represented at the conference. Talk about being thrown under the bus; a shameful act.
Remember what Neville Chamberlain said in a London speech soon after landing at home: “This is the second time in our history that there has come back from Germany to Downing Street peace with honor. I believe it is peace for our time”. Sadly, “our time” lasted only a few months.
There is purportedly a story about Hitler and his aids immediately after the conference that I can not verify. I do not know if it is truth or fiction. Regardless, it is worthwhile in its retelling since it embodies a hard lesson. Here it is.
Immediately after signing the accord, Hitler and a loyal insider (perhaps Hermann Goring who attended the sessions) were discussing the pact and its military constraints. These limitations would impact Hitler’s war plans (which were largely opposed by his army’s general staff).
While the ink was still drying, Hitler is said to have told his trusted subordinate that it was merely a piece of paper that can be conveniently shredded and tossed into the dust bin of history. So much for diplomacy, trust, and honor. Hitler was preparing grand invasion plans (like against Poland) while negotiating the final Munich agreement.
Hitler would later say: "Our enemies are little worms. I saw them at Munich."
I suspect such duplicity exists within many political figures and under many diverse circumstances. What is said and what is done are only loosely correlated.
In the end, not much will be accomplished in Greece. Greece has lost its persistence soul to execute a Marathon-like task; many of its people have succumbed to the debilitating impact of womb-to-tomb Socialism.
My assessment of the current Greece agreements are that they will never be fully implemented. Just look at the pervasive street rioting. Hence, the European debt crisis (the PIIGS problem in a broader scope) has not been settled. The European marketplace is likely to remain in turmoil and chaos. Greece will continue to drain Europe’s resources and energy. A full resolution remains to be discovered in the cloudy and uncertain future.
I have adapted to the broiling European mess and have adjusted my portfolio accordingly. I have reduced my European holdings significantly. I am staying the course in the developing world arena. I believe the US will recover more quickly then Europe from the current economic malaise. I am still skeptical about our own political elite. To a lesser degree, the European attitudes are shared by us. When a politician takes from Peter to redistribute to Paul, he is guaranteed Paul’s vote.
The amorphous tax cuts and balanced budgets often announced for the outlying years serve as an excellent illustration. The balanced budget illusions are myths that have rarely been executed and will not likely be executed in the future without a major shift in public perceptions and attitudes. Sweeping government cuts are hollow and empty promises.
Best of luck to all you guys; best of luck to the Greeks who were once a hardy resilient people who have been compromised by the Siren's song of erosive socialistic programs.
Even Fidel Castro recognized the inefficiencies of a socialistic system. In 1964 he said the following: “Capitalism is using its money; we socialists throw it away.”
That observation is consistent with a quote attributed to Margaret Thatcher. It has several versions. A short form goes along the following line: “The problem with socialism is that eventually you run out of other people’s money (to spend).”
As always, your insightful comments are encouraged.
Best Regards.
Comments
It's sometimes interesting to contemplate how much of Peter's wealth was obtained by manipulating a financial/political system designed by Peter and highly rigged against Paul to start with. Understanding this to some degree, politicians sometimes attempt to use tax codes to make adjustments after the fact, if for no other reason than to quell revolution in the streets and thus ensure their own survival.
With respect to the current negotiations involving Greece your observations will come as no surprise to anyone who has read a bit more history than the high school offerings. Diplomats, international politicians, and financiers are quite adept at reading "between the lines", and are either smart enough or cynical enough to adjust their negotiating positions accordingly. (Chamberlain seems to have been a major exception, but Hitler surely wasn't.)
Why do you think that Germany is taking another look at this whole proposal? Quite frequently the anticipated mechanics of an agreement bear little if any relationship to the publicly stated terms and purposes. Diplomacy isn't engineering- a whole different set of rules applies. A former working companion nailed this perspective quite succinctly, as he frequently observed that "The world runs on bull----".
Late add: If there's any substance to Scott's post (11:29 AM, below) would anyone really be surprised if Germany's position is actually calculated to encourage a Greek EU withdrawal / default? That would solve a whole lot of problems for Angela... This possibility is a good example of what I mean by "the anticipated mechanics of an agreement bear little if any relationship to the publicly stated terms and purposes."
Note: As usual, I've amended this post numerous times as I sit here thinking about stuff. My original post was less balanced, and thus some of the responses may seem unnecessarily aggressive as they are actually replying to that original version of the post. Mea Culpa...
Among most private citizens, a verbal agreement and a handshake are sufficient to close a deal. To enforce the articles of that deal is warranted by its value, a legal document is signed that guarantees its terms. It is almost always honored.
It is somewhat strange to me that such a signed document among nations does not carry that same weight of finality. Notoriously, nations unilaterally fail to fulfill their contractual obligations.
>>>>>From my recall, many Chrysler and GM bond holders got the big slap down in value; as deeded by the agreement from our dear government, in order to obtain the bailout monies. The big kids holding these bonds were in the news; but not the workers who also held these bonds. Yes, these bonds had a different "contract" versus agreements among nations; but the rules were rewritten by our government.
Over the weekend, the Greek government completed an agreement with their Euro Union creditors to secure continued financial influxes of over 130 billion Euro dollars. To secure that added loan, the Greece government promised an unpopular austerity program.
Hooray for Greece; hooray for their international financial creditors. Maybe this is an answer to the current Greek Tragedy, perhaps not. After all its just a piece of paper promising future action. Greece will surely accept the loans with grace, but will it deliver on its promises?
>>>>>Pending.....
Will Greece faithfully and efficiently implement the sweeping reforms that their Parliament promised, or is it just another empty government upcoming debacle that seems endemic to socialist dominated governments? Governments do lie and distort. Just reflect on the USSR’s sorry five decade experiment with the Communistic form of socialism.
In the end, not much will be accomplished in Greece. Greece has lost its persistence soul to execute a Marathon-like task; many of its people have succumbed to the debilitating impact of womb-to-tomb Socialism.
My assessment of the current Greece agreements are that they will never be fully implemented. Just look at the pervasive street rioting. Hence, the European debt crisis (the PIIGS problem in a broader scope) has not been settled. The European marketplace is likely to remain in turmoil and chaos. Greece will continue to drain Europe’s resources and energy. A full resolution remains to be discovered in the cloudy and uncertain future.
>>>>>The Greek Bailout, in my opinion; is really a Euro Bank(s) bailout; including the Euro Central Bank. Too many of these folks are sitting upon the old bonds, aside from hedge funds and others. Reportedly, the haircut-loss is in the range of 70% to initial issue values.
Write them (the bonds) off now, use them for starter fires for the campfires of northern Europe in the coming summer months. Greece is a failed state and forward bailouts will not likely correct and/or remove the many corrupt practices that have found their way into many facets of daily life.
Greece will go and find their way with a much depreciated drachma. One may not know who will provide any needed funding for their ongoing pensions and other government operations. Eventually, Greece will again attract the tourists; as a most affordable vacation would be had, topping that of nearby neighbors, Spain and Italy.
The short term (1 year) ramifications of Greece leaving both the Euro dollar and the EU would be pressure upon Portugal, with some more looks at Spain and Italy. This market(s) downdraft would likely pass in short order, as pricing would hit bargain levels.
Germany wants the austerity, many of the other EU countries are between this and a rock in a hard place.
The government of Greece may indeed tell the EU and others to buzz-off; as they may be for the better to be their own hostages, and no longer hostage to others, although they created their own chaos. Sadly, one may suspect their views are tainted; as it is difficult to remove the child from the comfort of the tit.
Many Americans should be able to view the German perspective; especially many here at MFO, with understanding. Many of us here fight everyday to create some wealth from the monies of our labors and skills. The financial chaos in this country over the past several years, is no less a result of similar functions that have found their way into the Greek society. Corruption in governments at all levels, the remaining hard working folks in these areas have to deal with mismanagement; and most sadly, a wholly under educated society with too many sucking upon the sugar tit of government; of which, one finds to be multi-generational.
Not unlike Europe, all of these failures in America continue to erode the wealth of this house; although we have been the prudent one's paving our own way and not expecting anyone to provide a handout. We are not a rich house; but sure as the sun will rise in the eastern sky tomorrow, someone or someone's policy in D.C. will note that (inflation adjusted numbers) we are too rich and we (the gov't) sure do need some more of that money you all have squirreled away. They (all the governments) will want us to share (some more and again) in the "shared sacrifice". As the ill placed policies and plans move along through time, and continue to kill the value of one's paper money.......and the government continues to "fix" and/or use "old" numbers of what is "rich"; well hell, we'll all be rich by their standards.
There is a most large hole along and below the waterline of the USS America; and the many captains have various opinions for a fix. I do believe some of them do not know there is a problem. Those who think they know the fix have never been below decks for a real good view of the damage.
A most sad state of affairs continues to exist.
Lastly, we should all know about Greece in 6 or7 weeks, eh? 'Course we have heard that song for more than 2.5 years
Regards................time to rest my eyes.
Catch
Hi Joe,
I fully recognize and happily acknowledge that most MFO forum participants can be counted among the cohort that Charles Murray, author of “Coming Apart”, identified as the “cognitive elite”.
I’m sure that you count yourself among that distinguished and successful group of our citizenry. I’m also sure that most MFO participants are in that category; however, a few are not.
I’m equally assured that you are intimately familiar with the stories that I selected to discuss the striking parallels between the present Greece dilemma and the upshots of the infamous 1938 Munich appeasement. Perhaps some forum members are not.
I am not so sure that the members of this august forum retain what we learned in our history classes and lifetime experiences. Time erodes the memory if I serve as a typical example.
When I pitched new engineering experiments and projects, I always committed roughly 10 % of the presentation to a historical review. History is important, easily forgotten, and needs constant refreshment. In no way do I denigrate the intelligence of my audience with that commitment. I really believe it sharpens their wits on the topic. I continue my MFO submittals with that same perspective and approach. Sorry if you find it disconcerting.
Again, as my own communication style, I like to liven and make my writing more colorful by searching for reinforcing quotations from sources such as the Oxford Dictionary. Prior to my research, I was not familiar with the specific quotes that I attributed to Hitler and Castro. I was especially amazed by the Castro statement. I hope you were too.
I will never claim myself as the originating source for almost all my assessments and submittals. I freely extract from multiple sources and resources that help inform my assessments and decisions. I try to consistently credit these fine references. I take full responsibility for my final judgments.
If I disappointed you with a too well known position, I suppose all that I can do is try harder. Being original on any subject is a very challenging assignment. Refreshing MFO member’s memory serves a useful, if less prophetic, purpose. I do not see the future clearly or with any precision.
Best Wishes.
Hi Catch,
Wow!
Thank you for your in-depth analyses. Ir is obvious that you have given this matter considerable research and assessment. Your submittal demonstrates the work commitment, and your dedication to understanding the issues.
Good for you; good for me; and good for all MFO participants. Your analyses will guide us in our private portfolio decision making.
Germany can impose all of the "agreements" and conditions it wants, but they are beating a dead horse. I would be amazed if the markets have not already factored in all of this to a large degree.
You can see a lot in a country in three weeks, especially if instead of sleeping on the bus you are looking at power grids, communication installations, construction technology, and infrastructure maintenance and condition. (My wife often says that I see a different country than she does when we travel.)
In my opinion Greece was never actually qualified to join the EU, was dragged in for political and military (NATO) reasons as much as anything, and has no business remaining in the EU at this time. In a way that's a real shame, because if Turkey still wants in, they would be much more qualified, but that's probably politically impossible if Greece isn't in also.
Taken from
FPA Crescent Fund
Year-End Commentary 4th Quarter 2011 Here: http://fpafunds.com/hc_crescent.html
Investments
We find investing especially challenging today—not that it’s ever been easy. We feel like we are forced to bet on policy, and how does one do that? Particularly when we believe we are betting that too many of the wrong people will make the right decisions. We feel a little like explorers, blazing new trails, learning about the new world we’ve come upon, charting a different path with new information, all while trying to avoid being scalped. We continue to seek the best path, even if it’s new, to both protect your capital (first) and to provide a return on it (second). It’s as the Scottish missionary and explorer David Livingstone once declared: “I am prepared to go anywhere, provided it be forward.” Along the way though, we sometimes feel a bit like Daniel Boone, who said, “I have never been lost, but I will admit to being confused for several weeks.” We’re left with the hope that selfish and uneducated views coalesce somehow to form appropriate policy. But we’re not seeing it, so we maintain our cautious positioning, with net exposure to risk assets at 70.5%, which includes 5.0% of corporate bonds that are largely lower risk. As a result, we are not positioned for the world being great, and our performance will lag should that prove the case. We continue prudently, however,
aware that the metaphor of ‘kicking the can down the road’ is misleading because it implies a problem of a constant proportion instead of what we see as more of a snowball, rolling downhill and gathering momentum and size with each advancing yard
Respectfully submitted,
Steven Romick
President
January 18, 2012
And a little more Chamberlain and a little Orwellian take on Greece.
http://www.tfmarketadvisors.com/2012/02/13/peace-in-our-time/
"Your analyses will guide us in our private portfolio decision making."
Insert my smile here _______.
Our house will feel pleased this year if our portfolio balance remains on the inflation adjusted positive side. As is normal, we all pilot our own boats, eh?
I wish you, and all here; the best with portfolio outcomes this year.
Regards,
Catch
First and foremost, I want to extend a warm thank you for contributing to The Greek Tragedy discussion. Your comments, observations, analyses, and forecasts added needed depth and context to the topic. The deepening woes within Greece, and the likelihood of a contagious pandemic not only within Europe, but even globally, demand serious attention and dedicated actions.
Your excellent postings and your references provided distinctive perspectives on a complex problem that defies easy understanding and resolution. Thank you so much for participating so energetically.
After posting, I noticed that I failed to identify the source of my Peter/Paul “quote”. After a little web search, I discovered I really only paraphrased the so-called quote. From several websites, the actual quote is "So long as you rob Peter to pay Paul, you'll have Paul's support." Although I did not provide the actual quotation, I did manage to capture its meaning. The quote is merely credited to Anonymous. Sorry about that.
While researching the Peter/Paul quote, I found several others that you might enjoy, one predictable from economist Thomas Sowell, the other somewhat surprising from President John F. Kennedy.
Economist Sowell said: “The first lesson of economics is scarcity. There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.” That pity observation finds immediate application to The Greek Tragedy.
President JFK said: “An economy hampered by restrictive tax rates will never produce enough revenue to balance our budget, just as it will never produce enough jobs or enough profits.” In economics, incentives are a dominating force multiplier. After uncovering JFK’s wise quote, I reflected on why I voted for him in 1960. He inspired trust and demonstrated true leadership qualities.
With persistence and patience, we will all muddle through this mess.
Best Wishes.
http://market-ticker.org/akcs-www?post=202112
http://hat4uk.wordpress.com/2012/02/16/greek-default-exclusive-senior-us-bankers-given-explicit-timetable-for-athens-default/
Where is Wiki-Leaks when we really need it?
Most disappointing for me; is that I am apparently no longer on the email distribution list: DL-Insiders Global
Respectfully,
Mr. Sad
"If there's any substance to Scott's post (11:29 AM) would anyone really be surprised if Germany's position is actually calculated to encourage a Greek EU withdrawal / default? That would solve a whole lot of problems for Angela... This possibility is a good example of what I mean by "the anticipated mechanics of an agreement bear little if any relationship to the publicly stated terms and purposes."
Does anyone else notice the unusual silence on the part of all of the other EU folks? No hooting or hollering that I can hear... waiting for the other shoe to drop? You think that maybe they know some stuff that we don't?
I sure won't argue against your thoughts on this. Especially with Bloomberg business tv, through most of 2011; the crawl messages at the bottom of the screen were full of blurps from any number of folks related to the ECB, EU, IMF and others. This is now mostly gone.
I recall a tv note this morning that the ECB had or was working on a plan to swap the old Greek bonds against a new issue. One may find this to be a possible helping hand.
Big Question: What becomes of the old bonds and the value; as the swap was related to bonds held by the ECB? Is the value just entered into a computer ledger and noted as worthless? Who eats the loss? Or do I presume this is just another cost of doing business from a governmental type unit and the whole event becomes an "oh, well".
Take care,
Catch
Hi Joe,
You’re kidding me; you’re pulling my chain, right?
If not, for reasons that totally escape me, somehow you wrongly construed my “august forum” statement to imply that I was referring to a monthly forum meeting. Of course that is a ridiculous interpretation. Just read the statement in context more carefully and with an open mind.
I did not reference a month, so I need not capitalized august. Even if I did, it would be picayune on your part to comment on that error considering the length of the entire submittal.
Allow me to refer you to Webster’s Unabridged Dictionary.
The word “august” is an adjective. Its primary definition is “inspiring reverence or admiration; of supreme dignity or grandeur; majestic”. Please check it out to verify for yourself. I sincerely used the term to highly praise MFO participants. I really do rate them a cut above the average mutual fund investor.
I consider MFO forum members to be among the financial cognitive elite. I still do in general, but perhaps I misjudged you in particular.
I worry that you harbor some ill feelings for me. Don’t waste your time or your energy. Several Anonymous quotes apply here: "The easiest thing to find is fault." And, "Speak in anger and you'll give the greatest speech you'll ever regret."
In an odd way, you made my day. Stay healthy.
Hey, this turned into a pretty interesting thread after all! "picayune"... I like that word... hardly ever get to use it though.
Here's another cool word-
pedantic
adjective
a pedantic interpretation of the rules overscrupulous, scrupulous, precise, exact, perfectionist, punctilious, meticulous, fussy, fastidious, finicky; dogmatic, purist, literalist, literalistic, formalist; casuistic, casuistical, sophistic, sophistical; captious, hair-splitting, quibbling; informal nitpicking, persnickety.
Sorry that I've been banned from the "cognitive elite"- didn't realize that you were chairman of the membership committee. Blackballed yet again. I'll reapply for membership at a later date.
Hi Joe,
I finally recognized your Mea Culpa in your amended initial posting.
Thank you. I believe it is sincerely offered; I warmly accept it.
Investing is too hard, too financially significant, and potentially too emotionally draining to allow for small opinion differences and/or some minor communication mischief to corrupt these MFO forum exchanges. Trust is hard to establish and harder still to verify on the Internet. Your smiley-faces helped.
I’m happy that my "Greek Tragedy” submittal stimulated such a flood of well crafted replies. It is a serious issue that received serious attention from forum members. Sometimes it is difficult to separate the serious responses from the tongue-in-cheek or dirty tricks postings. I suppose we all need to read more carefully and be more attentive to nuanced submittals.
Communication on the Internet has unquestionable advantages, one of which is world wide instantaneous connectivity. But it also has its shortcomings and pitfalls. As comic George Carlin said: "By and large, language is a tool for concealing the truth."
Joe, almost without exception, my submittals have two overarching goals: I seek to better inform our investment decisions with prudently selected references, and I want to enhance the general publics familiarity with mathematical, scientific and engineering methods and principles.
The US education system has mostly failed in this arena, and consequently we are generally very vulnerable in these disciplines. Several Asian nations generate an order of magnitude more graduates in these disciplines needed by the cognitive elite in the present marketplace. If that makes my postings pedantic, I am guilty by intent and design. I am firmly committed to my two posting goals.
But I do make a few exceptions, usually inserted to illustrate or enliven the discussion. To end on a more humorous note, George Washington once observed that "The uncertainties on the Internet are that it's difficult to judge if they are genuine.” I don’t recall who cobbled together that joke; it might have been the same George Carlin cited earlier.
Note that I have abstained from using the Pictographic format that many of you frequent Internet users deploy when text messaging. Not everyone understands the code. It requires a little education and exposure. I try to eliminate that confusion factor.
Best of Luck.