Greeks are Doomed for 1.250.000 reasons

Excessive Bureaucracy Choking Greece's Economy

Greece has more economic problems than just excessive government debt and a 21% unemployment rate, it's got an excessive government bureaucracy that is choking off private enterprise and small businesses.  Or maybe it's more accurate to say that it's because of the excessive government bureaucracy that Greece has excessive debt and 21% unemployment.

Here are two anecdotes of excessive bureaucracy in Greece that "get at the very heart of how Greece landed up in its current condition and why rapid change is unlikely":

Anecdote 1: "It took 10 months, a fat bundle of paperwork, countless certificates, long hours of haggling with bureaucrats and overcoming myriad other inconceivable obstacles for one group of young entrepreneurs to open an online store.

The broken-window fallacy in action

Matt Ridley on How Expensive Green Energy Destroys Jobs, While Cheap Shale Gas Creates Jobs

Matt Ridley masterfully applies Bastiat's "broken-window fallacy" to green energy jobs, writing last December in City AM, a UK financial newspaper:

"When is a job not a job? Answer: when it is a green job. Jobs in an industry that raises the price of energy effectively destroy jobs elsewhere; jobs in an industry that cuts the cost of energy create extra jobs elsewhere.

The entire argument for green jobs is a version of Frederic Bastiat’s broken-window fallacy. The great nineteenth century French economist pointed out that breaking a window may provide work for the glazier, but takes work from the tailor, because the window owner has to postpone ordering a new suit because he has to pay for the window.

The Degeneration of Bureaucracy

Charges dropped against Cyprus gambling grannies

By e-kathimerini

Cyprus authorities say they will drop charges against dozens of elderly women for gambling after reports of their prosecution triggered disbelief among the public.

Some 42 women aged between 60 and 98 had received a summons to appear in court this month after police nabbed them playing a local version of gin rummy at a private residence in 2009.

Gambling for even the smallest amounts -- in the women's case, police netted a total figure of about 100 euros ($130) -- is banned on the east Mediterranean island.

By contrast, online gambling, an industry which has an estimated turnover exceeding 1 billion euros per year, is unregulated although lawmakers plan to introduce legislation on the matter next month.

"I asked for the file on the case and I immediately gave instructions for prosecution to be suspended,» Attorney-General Petros Clerides told state television.

The women, dubbed «Supergrans» by one newspaper, say their hobby helps keep their minds alert and allows them to socialise.

"What would they have expected us to do when we are 96,» said Eftychia Yiasemidou. Now 98, the former schoolteacher says she still indulges in her favourite hobby. «I only stopped about 20 days ago, temporarily, because of the cold weather,» she told the Politis daily. [Reuters]

Why there’s a crisis of compassion

The missing practice of everyday virtue

When society doesn’t respect wisdom and experience, is it any wonder carers don't respect the elderly?

by Alka Sehgal Cuthbert 

The UK government’s Commission on Improving Dignity in Care for Older People, tasked with looking at ways care is delivered in hospitals and care homes, published its draft report on Wednesday. The commission leader and chair of the NHS conferderation, Sir Keith Pearson, said the report was ‘a call to arms to the whole health and social care system’.

Jamaica Seeks Greek-Style Bailout

Lord have mercy on our souls 

By Eric Sabo

Jamaican Prime Minister Portia Simpson Miller said the Caribbean island would benefit from a Greek-style bailout as it negotiates a new loan agreement with the International Monetary Fund.

“If we could get a bailout like Greece, lord have mercy, you would see Jamaica grow and flourish,” Simpson Miller, 66, said in an interview yesterday in Montego Bay. “The European countries got together and gave some serious aid to Greece. We know we would never be able to get the same level as Greece, but if we could get some consideration from countries or the IMF, we would be on our way.”

The Big Fat Greek Bailout

In the meantime, the debasement of paper money continues

by DETLEV SCHLICHTER

Greece was bailed out for the second time in four months. Or did it default? Well, a bit of both, I guess.

All bondholders are equal. But some are more equal than others. If you are the ECB, your Greek bonds were exchanged, par for par, for new Greek bonds, and you can go on pretending that they are worth their principal amount. You won’t have to report a loss for now. But if you are a ‘private’ entity – and that is a rather loosely used term these days as it includes the banking industry which is either now partially owned by the state or to a considerable degree dependent on ongoing support from the lender-of-last resort – more than half your Greek investment was wiped out. So Greece defaulted. But as you ‘agreed’ to the ‘haircut’ it was in fact a ‘voluntary restructuring’, although you really had no choice.

Bankruptcy is not nice. Everybody loses. The creditors take a hit as they will have to write off most of what they lent. The borrower takes a hit as he will now be cut off from new credit and will have to live of whatever sources of income the creditors could not lay their hands on. Chances are he will not get a penny of new credit for a while. In that respect Greece is not doing badly at all. Although it just defaulted on €107 billon of private credit, Greece immediately gets another €130 billion taken from taxpayers in other countries. And these new loans plus the ones that were agreed at the time of the last bailout were just made cheaper. They now only cost 2 percent per annum after 3.5 before the restructuring.

A CDS trigger event is now not only expected but welcome

As Greek CDS Hit Record, German Economy Minister Accuses Greece Of Reneging

by Tyler Durden

Remember Greece, where everything is supposedly fixed, except that nothing is until Greek bondholders all agree to get nothing for something? Or in other words, where Germany is hoping it can assign blame to hedge funds for not allowing the 75% PSI trigger threshold to be reached so there is a faceless monster that can be accused to achieving Germany's political goals? No? As the following reminder from Germany's Economy Minister Roseler shows, whose report has been acquired by Bloomberg, if not German anger then certainly confusion, is seething: "For the Greek government, the programs “obviously have no priority,” the ministry said. “This is unacceptable from the German standpoint." Wait, you mean a record February collapse in the Greek economy is inadmissable? 

Sure enough, Greek CDS, contrary to expectations for a no trigger event, just hit an all-time high earlier at 76 points up front (i.e., more buyers than sellers), as basis player are loading up on protection and preparing for the March 8 PSI deadline.

From Bloomberg:

Greece is reneging on programs to spur its economic competitiveness that it signed with Germany since July, calling into question its willingness and capacity to revitalize its economy, the Economy Ministry in Berlin said.

How Gogol, Chekhov and Dostoyevsky Explain the Post-Soviet World

Lost in Transition

BY THOMAS DE WAAL 

Twenty years ago, 15 new states emerged from the wreck of the Soviet Union, uneven shards from a broken monolith. One story turned into 15. Most Soviet watchers have been struggling to keep up ever since. How to tell these multiple stories?

In retrospect, it is evident that Western commentators failed to predict or explain what has happened to these countries: their lurches from one crisis to another, weird hybrid political systems, unstable stability.

Commentators have long tried to project models from the rest of the world ("transition to a market economy," "evolution of a party system") onto countries that have very different histories and cultural assumptions from the West and often from each other. I have read about Russian Prime Minister Vladimir Putin's "ethnocentric patriotism," his "delegative democracy trap," and his building of a "neo-patrimonial state" -- all very intelligent stuff. What I take away from such jargon is a nicely constructed model or two (for both Putin and the political scientists), but not the insights I seek into a living society.

Is catastrophic global warming, like Millennium Bug, a mistake?

Richard Lindzen exposing  the alarmists

By James Delingpole 

Professor Richard Lindzen is one of the world's greatest atmospheric physicists: perhaps the greatest. What he doesn't know about the science behind climate change probably isn't worth knowing. But even if you weren't aware of all this, even if you'd come to the talk he gave in the House of Commons this week without prejudice or expectation, I can pretty much guarantee you would have been blown away by his elegant dismissal of Catastrophic Anthropogenic Global Warming theory.

Broke, broker, brokest

A brave New World

When the young people come of age and figure out what the boomers did to them, there is going to be hell to pay. And far worse than the present is the future — as shown in an alarming government chart actually that understates debt by $3 trillion!

The Regulatory-Industrial Complex

The public is being served - on a platter

by Llewellyn H. Rockwell Jr.

Socialists want socialism for everyone else, but capitalism for themselves, while capitalists want capitalism for everyone else, but socialism for themselves.

Neither Ted Kennedy nor Jane Fonda practices a vow of poverty, nor are they taking any homeless into their mansions, while too many big companies try to short-circuit the market with government privileges. And one way they do it is through the regulatory agencies that acne Washington, DC.

If I may make a public confession: I used to work for the US Congress. I've since gone straight, of course, but the experience had its value, much as the future criminologist might benefit from serving with the James Gang.

For one thing, being on Capitol Hill showed me that, unlike the republic of the Founding Fathers' vision, our DC Leviathan exists only to extract money and power from the people for itself and the special interests.

Ludwig von Mises called this an inevitable "caste conflict." There can be no natural class conflict in society, Mises showed, since the free market harmonizes all economic interests, but in a system of government-granted privileges, there must be a struggle between those who live off the government and the rest of us. It is a disguised struggle, of course, since truth threatens the loot.

Are We Looking at the Wrong Depression?

Innovation, deleveraging  and economic realignment 

By Stephen Davies

Today a lot of people are looking to economic history for help in understanding the current world economic situation and the options open to us. (This includes economists, many of whom have finally rediscovered an interest in economic history.)

Most of this attention is being paid to the Great Depression of the 1930s. However, it is worth pointing out the important ways in which the present situation differs from that of the 1930s. Many observers (most notably Paul Krugman) argue that we are presently in a classic liquidity trap, where monetary policy has no purchase on the real world economy. The main evidence for this is that despite massive expansion of the basic money supply by the Federal Reserve and other central banks, there has not been the kind of inflation that many had predicted. The argument is that this situation is similar to the one Keynes identified in the early 1930s and that therefore the same policy response—fiscal stimulus—is appropriate.

The Americans of Europe

Europe's Clashin' Culture

By Tyler Durden

As the ECB supposedly takes it foot off the gas, and EU Summits and 'events' loom large for the careening wagon of shared sacrifice, unity, and sovereign risk, perhaps it is the nodding donkeys of Greek and Italian technocrats juxtaposed with Ireland's feistier "R" word gambit (and of course Zee German Overlords) that makes Art Cashin reflect somewhat philosophically on recent headlines. Their stereotypical interpretation has him concerned as the potential for ever-increasing culture clashes increases across the pond as sour memories and generational hatreds abound.

Sour Memories, Generational Hatreds And Stereotypes - To put this part of the note in better perspective, let’s reprise some comments from mid-month. We were writing about some folks from Europe who were kind enough to pay a visit to an irregular meeting of the Friends of Fermentation.

The conversation quickly went from the topic of the day, Greece, to the topic of the year, the existence and survival of the Euro-zone.

 As the conversation became more intense, emotions rose closer to the surface. One finally said – “Look, over the last 150 years, the Germans have tried to dominate Europe through military might more than three times. The results were horrible for all.

Strange bedfellows

A surreal commitment to Stalinism

Román Gubern and Paul Hammond’s excellent new biography of the surrealist filmmaker Luis Buñuel reveals the reactionary impulses behind his anarchical facade. 

By James Heartfield 

Filmmaker Luis Buñuel made a name for himself, along with the painter Salvador Dali, overthrowing the rules of filmmaking with surrealist masterpieces like Un Chien Andalou and L’Age d’Or (meaning ‘Age of Gold’, it also sounds like ‘Large Door’ in English). These were followed by avant-garde films like That Obscure Object of Desire and The Discreet Charm of the Bourgeoisie. But until now, Buñuel’s work in Spain, and for the Republic in the Spanish Civil War (1936-1939), has been largely unknown. Román Gubern and Paul Hammond’s brilliant and exhaustive new book, Luis Buñuel: The Red Years, 1929 – 1939, fills in the gap.

Surrealism was dismissed in Britain for many years. Un Chien Andalou was very rarely screened: the surest way to ‘see’ it was by listening to the singer and critic, George Melly, retell every one of its series of nightmarish scenes. The surrealists overturned the symbolic meaning of things, bringing together jarring images in their wilful disruption of aesthetic beauty and meaning. Nowadays it is commonly understood that this was the most interesting movement in modern art and it’s a shame that the surrealists’ ideas were diluted down to homoeopathically small doses in Pop Art and, later, in the works of the Young British Artists. As a result, surrealism has lost its shock value. In their day, and to their delight, the surrealists’ work caused outrage, like Marcel Duchamp’s ‘Fountain’ (a urinal signed ‘R Mutt’), for instance. By contrast, today, visitors to Tate Modern in London, where the urinal is on permanent display, walk reverentially around it, as if it were a holy relic.

The Perfection Of Crony Capitalism

Use Regulation To Destroy Competitors

Crony capitalism uses its wealth to impose government regulations designed to hinder, cripple and destroy small business competitors.

by Charles Hugh Smith

In the U.S. we now have the perfection of cloaked crony capitalism: corporate cartels use their vast concentrations of capital and revenue to buy the political leverage needed to write regulations specifically designed to eliminate competition.

Recall that the most profitable business model is a monopoly or cartel protected from competition by the coercive Central State. Imposing complex regulations on small business competitors effectively cripples an entire class competitors, but does so in "stealth mode"--after all, more regulations are a "good thing" (especially to credulous Liberals) which "protect the public" (and every politico loves claiming his/her new raft of regulations will "protect the public.")

This masks the key dynamic of crony capitalism: gaming the government is the most profitable business model. Where else can you "invest" a few hundred thousand dollars (to buy political "access" and lobbying) and "earn" a return in the millions of dollars, and eliminate potential competitors, too? No other "investment" even comes close.

You will hear the echo throughout the world

The Existential Financial Problem Of Our Time

by Tim Price

In December last year, the poet Alice Oswald withdrew from the TS Eliot poetry prize on the grounds that the prize was being sponsored by an investment company (Aurum, a fund of hedge funds manager).

How you feel about this principled stance may depend on whether you are a UK taxpayer. If you are a UK taxpayer, you will probably feel relieved that your tax pounds are no longer being squandered on the Arts Council's sponsorship of the prize in question "a tiny victory" but a victory nevertheless against the arrogant dissipations of the state.

Ms Oswald seems to believe that poetry prizes should be funded with everybody else's money, rather than by a private patron grown-up enough to be responsible for its discretionary expenditure (private patronage being what you might call "traditional" in the arts).

As a graduate in English Language and Literature, this commentator has no animus against poets. But I am not sure we want them in charge of the economy. They are notorious for starving in garrets for a reason.

One More Greek Tragedy

We are approaching an endgame

“The end crowns all, and that old common arbitrator, Time, will one day end it.”                                                -William Shakespeare, Troilus and Cressida

by Mark J. Grant

March 20 will mark the spot on your calendar, and while it is certainly not “the” endgame; it is one of the continuum.  During the next twenty-three days we are going to get some answers to a number of questions that have been unanswered and a number of verdicts that will set the stage for the performance. 

In the end I suspect there is going to be a decision made by Germany whether to fund the Greek bond payment independently of everything else or just to let them go and destroy the grand myth. Germany will probably end up playing chicken with itself in an exceedingly bizarre pact with the Devil. In the first instance there is more and more evidence that the PSI will not go as hoped as many institutional investors do not take the bait and are not willing to roll-over for the good of Greece and Europe. 

Burdened, Crushed, Doomed

This Is Small Business in America

By Charles H. Smith

  

If you make it increasingly costly and risky to open a small enterprise, then no wonder unemployment remains high.

You hear a lot about Kafkaesque stifling bureaucracy in Greece and other struggling European nations, but America's Status Quo is trying its best to destroy small enterprise with taxes and crushing bureaucracy. I am self-employed, and have been for most of my life. When I did take a paid position, it was in other small enterprises or local non-profit organizations.

I mention this because there is an unbridgeable divide in any discussion of small business between those who have no experience in entrepreneural enterprise (i.e. they've worked for the government, NGOs/non-profits or Corporate America their entire careers) and those who have.

There are all sorts of similar chasms that cannot be crossed and which quickly reveal a surreal disconnect from actual lived reality: for example, the difference between actually playing football--yes, with pads, a muddy field and guys trying to slam you to the ground--and being an armchair quarterback who's never been hit even once, never caught a pass or ever struggled to bring down a faster, bigger player. (And yes, I did play football in high school as a poor dumb skinny kid who mostly warmed the bench for good reason, but I lettered.)

A Quote for every day

Seeking the right Answers

"Very few beings really seek knowledge in this world. Mortal or immortal, few really ask. On the contrary, they try to wring from the unknown the answers they have already shaped in their own minds -- justifications, confirmations, forms of consolation without which they can't go on. To really ask is to open the door to the whirlwind. The answer may annihilate the question and the questioner."

                                                                

                                                                      -Anne Rice

Somebody must pay the ferryman

Greece is Just a Preview of What's Coming For the Rest of Us
By Ben Davies

All eyes are on Greece these days, with hopes that the situation there can soon be resolved and global recovery kicked into high gear.

Sadly, those hopes are misguided claims Ben Davies, CEO of Hinde Capital. In fact, he says, Greece's pain foreshadows the future awaiting the rest of the world. 

It all comes down to simple math. Greece has increased its debts at a rate far faster than its income has grown. At some point, the debt became so large that the country could no longer service it.

What makes the rest of the PIIGS immune from a similar fate? Or Japan? Or the US? Or the OECD, in general?

Nothing.

Yes, Greece had a smaller, shakier economy and doesn't have a central bank to print its own currency at will like Japan or the US. But even those countries with a printing press learn that after a certain point, expanding the money supply only complicates the problem of too much debt by inflating key economic input costs and dangerously weakening the currency.