The week-end press certainly had a fun old time on both the political and the business pages as journalists of all political hues and economic schools wrestled with the intractable issue of Greece and at last count there were 3,672 possible outcomes, none of which included suggestions of how the Hellenes might ever be able to repay what they owe.
Going back to when I first visit Greece with my parents as a young boy – it was in 1965 and age-wise I was only just into double digits – I have had a special fondness and affinity for the country and for its people. Thus I have deep sympathy for the man in the street and the frustration he must feel for the deep doo-doo the country is in. Greece is, however, the cradle of democracy and, hence, also the place where the phrase must have been born that a country gets the government it deserves.
What I did struggle with, though, was another one of those pearls of wisdom which journos seem to dream up with monotonous regularity which is, in this case, that: “We are faced with a choice between democracy and austerity”. I’m not sure who can have come up with the idea that one is the antonym to the other but whoever did is forgetting how to stand back and take a rational approach to an irrational argument.
It now appears as though Spain is far deeper in the clutches of the anti-austerity Podemos movement that we had previously appreciated. It might not be a comfortable fact that we – all of the West in general but the weaker nations in particular – spent several decades driving our economies to artificially high levels of growth on leverage and that that therefore any meaningful and sustained de-leveraging the system will lead first to shrinkage and then to some form of equilibrium at a lower level.
I have no issues with cyclical deficit spending as justified by good old Keynes. Where I struggle is when persistent deficit financing becomes an inalienable duty of government and pleading against it renders one a social dinosaur and class criminal.
Absolutely
It might not suit the general political rhetoric but seeking popular support for reduced but sustainable public expenditure is like taking a bag of sweeties away from a child before it is going to be sick and still expecting it not to cry. When the general and broad standard of living improves faster than the economy is growing, then there is trouble ahead. I am not talking about the ever-increasing differential in the wealth of the richest and the poorest – with cheap money all over and with the concomitantly soaring value of financial assets, it is clear that the haves are doing, on paper at least, infinitely better than the have-nots – but about the absolute position of even the poorest in our societies.
The much criticised “sense of entitlement” did not grow organically in the poorest regions of the like of Greece or Spain. It was planted amongst the people by those out to buy votes. Having dug into Brecht last week, I shall borrow from Goethe today and his famous Sorcerer’s Apprentice – yes, yes, the one Disney put Mickey Mouse into – in which he writes: “Now his spirits, for a change, my own wishes shall obey! Having memorised what to say and do, with my powers of will I can do some witching, too!” So much easier to give away what you haven’t got than to ask for it back again.
The support for parties of the ilk of Podemos or Syriza, is understandable but they can offer no solutions. They might offer hope, but when this is dashed, there will be little left other that the retreat into xenophobic fascism. A certain Austrian-born German politician who shall be nameless rose to power on the back of the cry that the German people had been stabbed in the back. What I am hearing now in the streets of Athens and Madrid and seeing in the political arena all around is looking uncannily familiar to historians and students of mid-20th century Europe like myself. France next?
Hardly a model
Elsewhere, President O’Bama has grandly announced his intention to tax the offshore cash balances of US corporations in order to raise much-needed funds for equally much-needed infrastructure investment. His intended raid will surely come to nought as he will probably fail to carry Congress. More to the point, it again highlights the failure of the US corporate taxation model to which fiscal imperialism is not the solution. America has written itself into a corner with its tax-system and, shy of blowing the whole thing up and starting again, I can see no way out. Was that a pig I saw flying past?
Altice and the irresistible force
Finally, the state of the credit markets was on show on Friday with Altice’s multi-tranche, multi-issuer deal which in total raised €1.25bn a and US$3.925bn. The deal was correctly priced within the context and, from where I was looking, perfectly well executed.
There was, however, so I am told, a subscription book of in excess of US$60bn equivalent. That is a lot of interest in a B3/B rated corporate credit and smacks of “Never mind the quality, look at the coupon”.
On the other hand, there’s little sense of standing in the way of a run-away train, simply because you think it’s on the wrong track. We’ve come a long way since this would have simply been called an oversized junk bond issue. That aside, full marks to both JP Morgan and to Goldman Sachs for a job well done and for first class expectations management.
