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The Greek Disaster: State Inertia and the Market Economy
The Greek Disaster: State Inertia and the Market Economy
What happened in Attica, close to Athens, is without precedent. An ordinary fire, like the ones that occur in this area almost every other summer, met up with a terrible, sudden wind that turned it into real galloping inferno. The tragic result was 87 dead Greek citizens and more than 20 still missing. Huge questions loom on the horizon and only very limited answers are forthcoming. Are some of the lessons from this tragedy related to the wider geopolitical and political-economic questions?
Public-sector clientelism is leading to disastrous inefficiency
Why do tragedies like these occur in social environments with firmly entrenched clientelist political systems and in political entities that operate on the periphery of major, bureaucratic, modern empires? Sweden saw huge uncontrolled fires this summer. However, there was no loss of life or major disasters that befell the urban centers. In Portugal last year — and very recently in Greece — scores of people died, mainly due to the inability of the state machinery to efficiently deal with the problem. The major difference between these examples is the quality of the civil service. In Greece and Portugal there is no real ethics in the public administration, which frequently fails to meet any vigorous efficiency test .
In public bureaucracies that sprout favoritism the way trees grow branches, it is very difficult to design long-term plans to handle critical and life-threatening situations. Likewise, the political system lacks the prerequisites to draw upon informed societies that are trained to be cooperative and disciplined when there is a need for coordination. When clientelism dictates and forms the essence of the political culture, this culminates in fractured societies that are infected with spreading islands of lawlessness and limited possibilities for administrative coherence.
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Europe Has A Modest Proposal For Greece: “Don’t Pay Wages For One Or Two Months”
Europe Has A Modest Proposal For Greece: “Don’t Pay Wages For One Or Two Months”
The Greek liquidity, pardon “cash flow” problems are so bad, not only Zero Hedge, but also Bloomberg has launched a daily maturity tracker of how much money Greece has to pay either to the IMF or to prefund T-Bill rollovers. This is what Bloomberg blasted out earlier today:
Greece is preparing for another week of hurdles that ends with a ~EU2b repayment on March 20. Most economists say that it will be difficult for Greece to get past end of March without fresh EU funds. Here’s a timeline of the most important events scheduled this week:
- Monday, March 16: Greece to repay about EU577m in IMF loans
- Wednesday, March 18: Greece’s debt agency PDMA to sell 13- week treasury bills
Which explains why as we reported yesterday, Greece passed a law to plunder pension funds, one which would allow the government to fully invest reserves of pension funds and other public entities kept in Bank of Greece deposit accounts in Greek sovereign notes.
None of this is news: that Greece will run out of cash absent another check from the Troika, pardon Instituions, pardon creditors, is clear. The only question is what happens after, if Europe indeed leaves Greece hanging.
Today, the Greek media is ablaze with just what Europe’s proposed solution to this issue may be. As Protothema and Capital report, the Troika proposed that Athens halt the payment of salaries and pensions for one to two months. This, according to Europe, would promptly tackle the problem of liquidity and find a solution to Greek problem of how to pay back bailout loan tranches to creditors when suffering from liquidity problems.
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Debtors’ Prison: Global Debt Has Grown $57 TRILLION Since 2007 With 100 Percent Of Sovereign Debt Monetized
Debtors’ Prison: Global Debt Has Grown $57 TRILLION Since 2007 With 100 Percent Of Sovereign Debt Monetized
Now that the Greece default crisis is on temporary hold (they will be back again), it is time to turn our focus to the GLOBAL debt market.
Since the subprime mortgage crisis and Lehman failure, global debt has grown by $57 trillion since 2007.,raising the ratio of debt to GDP by 17 percentage points.
Here is a nice chart from McKinsey & Company that shows the relative rise of PUBLIC SECTOR debt relative to HOUSEHOLD debt. That is, governments borrowing money on YOUR BEHALF that you are now liable.
Couple this chart with the fact that Central Banks are monetizing 100 percent of sovereign debt.
…click on the above link to read the rest of the article…
