[QUOTE=S485122;207255]Ernst,

Unless you know how the total package of the Greek public employees compares to that of employees in the private sector, you can not start screaming... Partial comparisons can be very misleading indeed.

Jacob[/QUOTE]

Here`s an article about that - note that even if Greek civil servants are underpaid (or better, less-overpaid) than their counterparts in other countries, the sheer proportion of the public sector in the Greek economy makes the math untenable:

[url=http://www.startribune.com/opinion/commentary/84264862.html?elr=KArksc8P:Pc:U0ckkD:aEyKUiacyKUzyaP37D_MDua_eyD5PcOiUr]Public sector: An anchor as we sink[/url]: [i]Want an example of what union muscle and big deficits can do? Greece.[/i]
[quote]Greece's plight is due largely to the fact that [u]one in three Greeks is employed by the government and is guaranteed lifetime employment[/u]. According to the New York Times, [b]public wages and pension payments make up fully 51 percent of the country's budget -- a huge drag on the economy. Over the last decade, Greek public-sector workers' pay has doubled and their numbers have exploded[/b], thanks to union muscle.[/quote]

Joseph Stiglitz: Federal Reserve System 'Corrupt'
 

Really brief summary of the week's key econ-events:

- Greece finally came to market with a bond issue covering roughly the next 30 days' expenses ... happy vague talk of "support for Greece" by its EU buddies allowed it to issue at "only" 6%, i.e. roughly double what German Bunds yield. Now: Show ... us .. the ... austerity ... so far, it's still been 100% talk, 0% action.

- Today's U.S. unemployment report looked to indicate a leveling-off, even after discounting the usual bullcrap fudge factors applied by the BLS ... however, even "flat" means around 150,000 jobs per month short of keeping up with the ever-increasing number of would-be-workers resulting from population-growth. Also, the numbers got a boost from census hiring (that will only last until June) and more importantly, the deep job cuts needed to get budgets toward semblance-of-manageable status at the state and municipal level across the entire country have barely begun. I suspect this is a temporary respite, but the markets were lovin' it hard.

--------------------------

[url=http://www.huffingtonpost.com/2010/03/03/stiglitz-nobel-prize-winn_n_484943.html]Joseph Stiglitz: Federal Reserve System 'Corrupt'[/url]
[quote]One of the world's leading economists said Wednesday that the very structure of the Federal Reserve system is so fraught with conflicts that it's "corrupt."

Nobel laureate Joseph Stiglitz, a former chief economist at the World Bank, said that if a country had applied for World Bank aid during his tenure, with a financial regulatory system similar to the Federal Reserve's -- in which regional Feds are partly governed by the very banks they're supposed to police -- it would have raised alarms.

"If we had seen a governance structure that corresponds to our Federal Reserve system, we would have been yelling and screaming and saying that country does not deserve any assistance, this is a corrupt governing structure," Stiglitz said during a conference on financial reform in New York. "It's time for us to reflect on our own structure today, and to say there are parts that can be improved."

Stiglitz made the remarks at a conference held by the Roosevelt Institute. He and other speakers, including Harvard Law Professor and federal bailout watchdog Elizabeth Warren and legendary investor George Soros, had bold ideas about reforming the nation's financial system.

After the conference, Stiglitz said that his remarks on the Fed were "maybe a little hyperbole," but then again made the case that if another country had presented a plan to reform its financial system, and included a regulatory regime that copied the makeup of the Federal Reserve system, "it would have been a big signal that something is wrong."

To Stiglitz, the core issue is that regional Fed banks, such as the New York Fed, have clear conflicts of interest -- a result of the banks being partly governed by a board of directors that includes officers of the very banks they're supposed to be overseeing.[/quote]

What is this Ernst? Do you Seriously object to the fox guarding the henhouse?

DarJones

Fox-guarding of henhouses has much to recommend it. The fox is motivated to guard against depredation by rivals. The fox has motivation to keep the hen population stable by practicing only sustainable culling. And so on... :smile:

Oh, wait ... the fox doesn't protect the interests of the henraiser and intended consumers. Never mind.

Icelanders Tell Ponzi Financiers to Get Lost
 

[QUOTE=Fusion_power;207613]What is this Ernst? Do you Seriously object to the fox guarding the henhouse?

DarJones[/QUOTE]

That depends whose interests I am describing ... Vigilance by Voracious Vulpines is a wonderful thing ... for the bushy-red-tailed Vigilantes and their Vixens, that is.

------------------------------------

[url=http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a79L24mIpisI]Iceland Rejects Icesave Depositors Bill in Referendum[/url]: [/i]Icelanders rejected by a massive majority a bill that would saddle each citizen with $16,400 of debt in protest at U.K. and Dutch demands that they cover losses triggered by the failure of a private bank.[/i]
[quote]Ninety-three percent voted against the so-called Icesave bill, according to preliminary results on national broadcaster RUV. Final results will be published today.

The bill would have obliged the island to take on $5.3 billion, or 45 percent of last year’s economic output, in loans from the U.K. and the Netherlands to compensate the two countries for depositor losses stemming from the collapse of Landsbanki Islands hf more than a year ago. The island’s political leaders say they’ve already moved on to talks over a new accord.

“The government’s survival doesn’t rest with this Icesave vote,” Prime Minister Johanna Sigurdardottir told RUV after the preliminary count was announced. “The government coalition remains solid,” Finance Minister Steingrimur Sigfusson told RUV.

Failure to reach an agreement on the bill has left Iceland’s International Monetary Fund-led loan in limbo and prompted Fitch Ratings to cut its credit grade to junk. Moody’s Investors Service and Standard & Poor’s have signaled they may follow suit if no settlement is reached.

...Voters rejected the bill because “ordinary people, farmers and fishermen, taxpayers, doctors, nurses, teachers, are being asked to shoulder through their taxes a burden that was created by irresponsible greedy bankers,” said President Olafur R. Grimsson, whose rejection of the bill resulted in the plebiscite, in a Bloomberg Television interview on March 5.

The Icesave deal passed through parliament with a 33 to 30 vote majority. Grimsson blocked it after receiving a petition from a quarter of the population urging him to do so. The government has said it’s determined any new deal must have broader political backing to avoid meeting a similar fate.

Icelanders used the referendum to express their outrage at being asked to take on the obligations of bankers who allowed the island’s financial system to create a debt burden more than 10 times the size of the economy.

Protests

The nation’s three biggest banks, which were placed under state control in October 2008, had enjoyed a decade of market freedoms following the government’s privatizations through the end of the 1990s and the beginning of this decade.

Protesters have gathered every week, with regular numbers swelling to about 2,000, according to police estimates. The last time the island saw demonstrations on a similar scale was before the government of former Prime Minister Geir Haarde was toppled.

Icelanders have thrown red paint over house facades and cars of key employees at the failed banks, Kaupthing Bank hf, Landsbanki and Glitnir Bank hf, to vent their anger. The government has appointed a special commission to investigate financial malpractice and has identified more than 20 cases that will result in prosecution.
[/quote]
[i]My Comment:[/i] PM Sigurdardottir is putting on a brave face, but there is no way in Hell or Valhalla there will ever be a "new accord" which involves any significant compensation to foreign depositors or concessions to the IMF or the global credit-
ratings cabal. Would that ordinary American citizens showed similar outrage and spine ... well, we can hope they will, yet. That`s the great thing about democracy in a small island nation ... there is no way for the ruling class to isolate themselves from the peasantry. Note that this does not make the getting the citizenry to accept hardship impossible - it just means that for a politician to convince them to do so, he or she had better have a damn good explanation for why hardship is necessary, and the hardship had damn well better be shared. In the "major economies", the ruling class and financial elites enjoy the splendid isolation of their armored limousines, fortified bunkers and glittering towers, and forcing them to get the message is a whole different ballgame.

Also, given the arrogant comments by PM Siggie, I`ll be very interested to see where that "solid government coalition" touted by the PM and her Finance Minister is come this time next year ... my bet is on the metaphorical "ash-heap of history".


Denninger [url=]takes serious issue[/url] with a Krugmanesque op-ed in [i]The Nation[/i], "In Defense of Deficits", by James K. Galbraith (son of "the" [url=http://en.wikipedia.org/wiki/John_Kenneth_Galbraith]J. K. Galbraith[/url]), whose thrust - sorry, I could`t resist a bit of [strike]fore[/strike]wordplay related to KD`s titular reference to sheepskin condoms - is the neo-Keynesian "deficits don`t matter, government must spend and banks must lend, for the new prosperity to come around the bend". What caught my eye was a very pithy summary of speculative bubbles related to housing:
[quote]Over time we have thought of homes as financial assets, but they're not. They're shelter. They perform an essential function and as such allowing the nation's banks and other financial wonks, like Galbraith, to get their teeth into them has been incredibly lucrative - for the wonks. For the rest of the nation it has spelled ruin every time it has occurred - 1873 (and before), 1929, and now in 2007. In each case "real property" became the object of monstrous speculative froth unrelated to the utility value of the asset, and in each case economic malaise inevitably followed.[/quote]

Claiming that homes are shelter may be true but misses rather a lot. It's rather like claiming that La Gioconda is a piece of painted wood. By that I don't mean only that some would pay quite a bit of money to own it.

Paul

Of course they are financial assets. It is stupid to pretend otherwise. The problem was the ease with which people were allowed to leverage these assets and the lack of consideration given to the basic principle that what goes up must come down.

BTW, James K Galbraith is NOT the type of person who approves of any of the banker shenanigans and you can see the ideologue in KD coming out in his criticisms. It is morally very satisfying to say liquidate, liquidate, liquidate but we don't really know if it would be a better solution. Oh wait! We do. That's what Hoover's Treasury Sec. did from 1929 to 1932 and look how effective it was in tackling the depression. The problem with right-winders like KD (and ZH and Mish) is that they don't really come up with a clear plan of what to do after liquidating/de-leveraging. They think that growth will return as if by magic once all the bad debt is out of the system.

[quote=garo;207809]That's what Hoover's Treasury Sec. did from 1929 to 1932 and look how effective it was in tackling the depression.[/quote]Can you direct us to a good online description/explanation of that, for reference?

The Greek PM Speaks, By George!
 

Greek PM George Papandreou [url=http://www.brookings.edu/events/2010/0308_greece.aspx]spoke at the Brookings Institution[/url] yesterday - I caught his speech last night via C-SPAN rebroadcast. He`s a very well-spoken guy, fluent, nearly-accent-free English ... but the substance of his talk was rather less tha impressive, in fact downright laughable in places which I shall detail.

First (from the speech), a brief explanation of Mr. Papandreou`s worldly ways:
[quote]I am used to change. I was born in Minnesota and raised in California, before eventually moving to Athens, and then when my family was forced to flee Greece during the dictatorship we lived in exile in Canada and in Sweden.[/quote]
There were lots of words about Greece`s "commitment to fiscal reform":
[quote]I stood for election last fall before a country that was demanding deep changes. During the preceding five years, our public had grown increasingly alienated as Greece’s national deficit ballooned, wasteful expenditure mushroomed and our GDP shrank.[/quote]
"Our public" here presumably refers to a different portion of the populace than the "our public" which goes on nationwide strikes and riots at the mere mention of any real reform.

To his credit, he does mention the "credibility deficit" Greece suffers from:
[quote]And we know Greece faced not only a fiscal deficit, but I would call it a credibility deficit. As a matter of fact, I call that the biggest deficit we had as a result of the fabricated budget figures our predecessors had published. So our partners in the European Union were understandably skeptical about our promises to rein in the deficit and crack down on issues such as corruption, but today we are demonstrating the decisiveness of Greece.[/quote]
...and the problem of endemic tax evasion - note that GP's chat today with U.S. Treasury Secretary Geithner, a Jedi master at using the undocumented TurboTax "Evade" feature, was surely unrelated to this issue:
[quote]I’ve told the Greek people that 2010, this year, must be and will be a year of drastic reforms across all levels of government -- changes in our tax system, our social security system, our public administration, our education system, our health system and our development model.
At the top of the list is tax evasion. To give you just one measure of the scope of that problem, fewer than 5,000 Greeks declare incomes of $100,000 Euros or more, and that pattern must end, and it will end. We will be prosecuting offenders, no matter how rich or powerful, to show that we mean business. The rule of law means that the law applies to all. Such changes, we are sure, will bring in billions of unpaid taxes and help underpin our return to fiscal health.[/quote]
The rooting-out of corruption goes beyond tax evaders, but curiously does not seem to include the aforementioned budget-number fabricators:
[quote]We’re also tackling the challenge of corruption head-on. Within the first weeks of my administration, I dismissed a deputy minister and friend who was trading minor favors for voters. Corruption, of course, is hardly unique to Greece, but it is a problem we are determined to address as part of our broader reforms.[/quote]

At this point the blame finger shifts to point at every financially troubled enterprise`s favorite scapegoat, "greedy speculators" - the shift is nicely rhetorically done, however:
[quote]Europe, on the other hand, needs to recognize that the measures we have put in place and those still to come need a certain time to take effect. Countries are not like financial markets. Social change cannot be executed as swiftly as credit default swaps. You cannot sell short on social commitments and political responsibilities.
...
So Greece may be doing all the right things to revive our economy, but not everyone may want us to succeed, and this brings me to my second point -- the need to address the threat of speculation and ill-regulated financial markets, a threat that imperils not only Greece but the entire global economy.[/quote]
Now he gets to the real crux of the matter, namely the expense of rolling all that maturing debt - and all those "investors in Greek sovereign debt" back when Greece enjoyed artificially low borrowing costs due to its ongoing balance-sheet fraud have suddenly morphed into "speculators and rumormongering market manipulators" now that the jig is up and they are demanding higher interest rates:
[quote]I see that threat every day as we manage this crisis, for the immediate problem we face is not dealing with the recession but in servicing our debt. Despite the deep reforms we are making, traders and speculators have forced interest rates on Greek bonds to record highs. Many believe that there have been malicious rumors endlessly repeated and tactically amplified, that have been used to manipulate normal market terms for our bonds. Partly as a result, Greece currently has to borrow at rates almost twice as high as other European Union countries. So when we borrow 5 billion Euros for 5 years, we must pay about 725 million Euros more in interest than Germany does.[/quote]
Sounds more than fair to me, especially in the wake of the revelations about Greece`s decades-long accounting scammery. And now we get to the (unintentional) laff-riot part of the talk:
[quote][b]It would be like let’s say California having to borrow at a rate with 5 billion Euros which would mean that they would have to pay 725 million U.S. dollars more than another state in the U.S.[/b]
And when you have a common currency that is simply not viable. So we will have a very hard time in implementing our reform program if the gains from our austerity measures are simply swallowed up by prohibitive interest rates.[/quote]
So his argument here boils down to this: Germany gets to borrow at 3%, and despite Greece`s budget being a nightmare flood of red ink compared to Germany`s, Greece deserves to borrow at the same low rate because it is part of the same currency union, just like California gets to borrow at below-market rates because it is part of the Mighty Dollar Union ... good grief. The Greek PM is apparently blissfully unaware that U.S. states get to borrow at rates reflecting the market`s perception of their *individual* balance sheet strengths (by way of credit ratings set by the well-known players in that field), that California`s credit ratings has plummeted to "junk" status in the past year, and its borrowing costs reflect that. How do you say "Good grief! Buy a frickin` clue, already!" in Greek?
[quote]This whole affair has a horrible sense of déjà vu. The same financial institutions that were bailed out with taxpayers’ money are now making a fortune from Greece’s misfortunate [sic] while those same taxpayers are paying the price in deep cuts to their salaries and social services. So unprincipled speculators are making billions every day by betting on a Greek default.[/quote]
Would those also be "the same financial institutions" which helped Greece defraud its way into the EU by way of accounting trickery? Also, his estimate of how much the "greedy speculators" are making each day by betting against Greece seems just a tad unlikely, given that (as pointed out by ZeroHedge) the DTCC notes that [url=http://www.zerohedge.com/article/can-someone-please-finally-explain-what-cds-are-mainstream-media]the net notional in Greek CDS is only $9 billion[/url]. But hey, why let ugly "factual numbers" spoil a good partisan rant?

Of course since this was a talk to a "friendly" - probably largely hand-picked - audience, the ensuing Q&A was laughably soft-ballish. The Turkish audience plant asked about Cyprus (GP answered via bland vague reassuring-sounding stuff), the Carnegie Endowment fellow asked about unit labor costs in Greece quite possibly being a tad on the high side (GP answered via bland vague reassuring-sounding stuff), and the executive director of the American Hellenic Institute (not to be confused with the American [b]pan[/b]-Hellenic Institute, which concerns itself with stuff like pledge-hazing incidents on fraternity and sorority row at the local college, whether Gamma Phi needs to go back on double-secret probation for a Toga party gone really wild, that sort of thing) asked about "enticements" for American investors to invest in Greece (GP answered via bland vague reassuring-sounding stuff, possibly involving belly-dancing lovelies cavorting for the pleasure of would-be-American-investors in Greece).

[quote=cheesehead;207882]Can you direct us to a good online description/explanation of that, for reference?[/quote]

Google him or read [url]http://en.wikipedia.org/wiki/Andrew_W._Mellon[/url] The Great Depression section. And remember this was at a time when there was no social security, minimal to no unemployment benefits and no FDIC.

Moron of the Week: Romano Prodi
 

Been several months before we here at Ponzi Finance Watch bestowed a MotWee, but this week's self-nominated candidate is simply too worthy to overlook - In fact we have decided to create a special version of the award just for him, the Moron of the Year-to-Date or MotYTD, hereafter to be more formally known as the [i]Romano Prodi Memorial Economic Prize for Self-Serving Delusion[/i]. On to the particulars surrounding the current bestowal:

[url=http://www.bloomberg.com/apps/news?pid=20601087&sid=aFr6MFrhkAeg&pos=4]Greek Crisis Is Over, Rest of Region Safe, Prodi Says[/url]: [i]The worst of Greece’s financial crisis is over and other European nations won’t follow in its path, said former European Commission President Romano Prodi.[/i]
[quote]“For Greece, the problem is completely over,” said Prodi, who was also Italian prime minister, in an interview in Shanghai today. “I don’t see any other case now in Europe. I don’t think there is any reason to think the euro system will collapse or will suffer greatly because of Greece.”

Greek officials are trying to convince investors they can cut the nation’s budget deficit, which at 12.7 percent of gross domestic product was Europe’s largest in 2009. The government last week announced spending cuts and tax increases totaling 4.8 billion euros ($6.5 billion), the third round of austerity measures this year.

French President Nicolas Sarkozy said on March 7 the 16- nation euro region must support Greece, which has more than 20 billion euros of debt falling due in April and May, or risk destroying the currency. German Chancellor Angela Merkel, who runs Europe’s largest economy, has so far refused to give the green light to any aid package.

Intervention by European nations to date “was enough” and countries such as Spain and Portugal have “plenty of time” to get their finances in order, said Prodi. As Italian prime minister, Prodi in 1997 introduced a “euro tax” that helped cut Italy’s budget deficit to 2.7 percent of GDP and qualify to join the euro. Italy’s shortfall in 1997 was equivalent to 7 percent of the economy.[/quote]
[i]My Comment:[/i] This is doubly hilarious - firstly because of the Bernanke-esque "the crisis is completely contained" hubris, secondly because we now know that Italy has been playing the same kinds of decades-long budget-figure-fraud games as Greece and God knows who else, and that some well-reasoned skeptics of the EuroParty line [url=http://www.zerohedge.com/article/euro-creator-robert-mundell-greece-not-biggest-threat-euro-italy ]rank Italy right up there[/url] with Greece, Portugal, Spain, Japan et al in their list of countries in most imminent danger of a debt-funding crisis:

[url=http://www.zerohedge.com/article/columbia-prof-who-called-argentina-crisis-corruption-reason-italy-will-be-next]Columbia Prof Who Called Argentina Crisis: "Corruption Is The Reason Italy Will Be Next"[/url]
[quote]The spreads that we saw in Greece at their worst in the CDS market were about 4%. Based on what we know from the history of sovereign crises given the current fundamentals in Greece if anything that is a very muted response in the market. I would have expected a much greater response and I think we will see a much greater response.
...
This [the vilification of "greedy speculators"] is just a case of shoot the messenger. I think we need to focus on the unsustainable situation that Greece has gotten itself into, with the highest consumption to GDP ration in Europe, one of the lowest labor force participation rates in Europe, one of the highest government social protection rates in Europe, and deficits that have been outsized for several years during the boom, and the of course the fraudulent accounting. I should also note that within the Eurozone, Greece has the worst corruption score according to Transparency International which is a problem because it is telling you is that the institutional quality of the Greek government for reforming itself is very low.
...
The real concern right now should be on Italy. Italy is the country that is most like Greece in this current situation. Highest Debt to GDP ratio, not as high deficits so with smaller changes they can stop the problem. They also, however are very corrupt. They are second to Greece in the level of corruption within the Eurozone.[/quote]
[i]My Comment:[/i] One ZeroHedge reader`s comments on the above story echo my own feelings about "let the crisis come, preferably sooner than later":
[quote]I am not sure why, but I'm more than ready for all the shoes to drop. My motivation for feeling this way is of paramount importance to me, lest I think myself a cad. I think it might be simply that I can only last for so long, and the Fed et.al. can go on printing money and bailing themselves out 'till infinity comes. I'm a survivor, but I don't know how much longer I can make it!

Another reason, I guess, is that I just want to see the assholes who got us into this mess, along with the OTHER assholes who keep telling us that everything's going to be O.K., finally meet [the results of] their hubris. I'm a big 43 year-old dummy, but I've known something was wrong since I was 14. I just didn't know what it was. I always trusted that those in authority and the Obligation of the Noble would keep things on the straight and narrow.

Now I see I was right all along. 2+2 DOESN'T = 5, no matter how many progressives it takes to screw in a light bulb.

I'm ready for the reset button. I want to see, as Tool calls them, the "Thousands of Dumbfounded Dipshits" standing around wondering what happened.[/quote]