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Review of “Adults in the Room” by Yanis Varoufakis

theguardian.com

21–30 of 133 posts

Re: Review of “Adults in the Room” by Yanis Varoufakis

#21
post #4
post #2

"The first revelation is that not only was Greece bankrupt in 2010 when the EU bailed it out, and that the bailout was designed to save the French and German banks, but that Angela Merkel and Nicolas Sarkozy knew this; and they knew it would be a disaster." The treasury departments of the French and German banks had loaded up on GGBs - Greek Govt Bonds because they yielded more basis points than eg German Govt bonds,…

Didn't Greece falsify data for years? That would explain the AAA ratings.

It borders on the impossible to fake data on this scale and in such amounts. The deficit forecast for 2009 (the year the crisis started) was 3.7 which got revised to 12.5 percent at the end of that year. Any sufficiently large institution or cooperation that wanted to have access to the real data, could have done so with minimal effort, you can't hide a 10% budget gap.

The false data Greece reported to get into the Eurozone was an open secret, I vividly remember it being talked about extensively in Greek cafes after 2001.

Re: Review of “Adults in the Room” by Yanis Varoufakis

#22
post #9
post #6

Earlier quoted context omitted.

Why? What did he do, apart from letting the Greeks believe they could choose not to refund the debt?

Morally it's on those who give out loans to make sure that they can be repaid. It's wrong that Greece took these huge loans as well, but also it's wrong to suggest that they have to pay them back. Everyone has the option to default when they are unable to pay and this was clearly the situation for Greece (and probably Spain and Italy, maybe even UK soon enough).

Morally it's on those who give out loans to make sure that they can be repaid.

Maybe when dealing with an unsophisticated or under-informed borrower which the sovereign states in question are not.

Re: Review of “Adults in the Room” by Yanis Varoufakis

#23
post #2

"The first revelation is that not only was Greece bankrupt in 2010 when the EU bailed it out, and that the bailout was designed to save the French and German banks, but that Angela Merkel and Nicolas Sarkozy knew this; and they knew it would be a disaster." The treasury departments of the French and German banks had loaded up on GGBs - Greek Govt Bonds because they yielded more basis points than eg German Govt bonds,…

We only provide ratings, they are in no way a suggestion about investing.

That is what Moody's et al always said.

We are useless but you make us profit freely! Good for you, all you stupids!

Re: Review of “Adults in the Room” by Yanis Varoufakis

#24
post #19
post #13

Earlier quoted context omitted.

As a Greek I consider him a jerk. He enforced capital controls due to his incompetence and his ideological approach to financing. Furthermore, he's a pathological liar. While in many occasions he had admitted the faults of the Greek economy he never took specific actions in correcting them. If it wasn't for the group of clowns that constitute the current government and gave him the keys to the economy, nobody would g…

> While in many occasions he had admitted the faults of the Greek economy he never took specific actions in correcting them. By doing what, exactly? The country was bankrupt. In such a situation, the only sensible thing to do is default. Instead, Greece will be a 3rd world country with almost no public assets, and mass unemployment for decades. Regaining competitiveness through decades of internal devaluation is, to…

Yesterday, there was a news that Greece has reached an agreement for a new round of money in exchange for further cuts to pensions and removal of some tax exemptions. So yeah, it is going to happen again. And again. And again.

And all to save a few German and French banks, because politicians feared the results of telling them "you wanted to play in the casino and you lost, now the money is gone" after Lehmann.

Re: Review of “Adults in the Room” by Yanis Varoufakis

#25
post #12
post #6

Earlier quoted context omitted.

Why? What did he do, apart from letting the Greeks believe they could choose not to refund the debt?

Varoufakis fought to find solutions that would allow Greece to actually be able to repay their debt. When that proved to be impossible, he refused to sit by and lend his name to a deal he didn't believe was in Greece or Europe's best interests.

> Varoufakis fought to find solutions that would allow Greece to actually be able to repay their debt.

Default is not a solution to repay a debt. You can choose to default, but you can't expect any credibility later. The message Varoufakis sent to Greeks was: "Let's just say we don't want to pay and everyone will forget about in a couple of years."

Re: Review of “Adults in the Room” by Yanis Varoufakis

#26
post #5
post #4

Earlier quoted context omitted.

Didn't Greece falsify data for years? That would explain the AAA ratings.

Were the banks truly deceived, or just hoping that they could cash in and be bailed out?

Probably both. I still remember a full-time ad in The Economist around 2006-2007 by a German Landesbank, where they were promoting themselves as the coolest of things when it came to banking and managing clients' money. Not 2 years passed and that same Landesbank was by then in very serious trouble because it had invested heavily in US mortgage derivates, I think there was also talk of its general manager doing prison time. He probably didn't.

Re: Review of “Adults in the Room” by Yanis Varoufakis

#27
post #19
post #13

Earlier quoted context omitted.

As a Greek I consider him a jerk. He enforced capital controls due to his incompetence and his ideological approach to financing. Furthermore, he's a pathological liar. While in many occasions he had admitted the faults of the Greek economy he never took specific actions in correcting them. If it wasn't for the group of clowns that constitute the current government and gave him the keys to the economy, nobody would g…

> While in many occasions he had admitted the faults of the Greek economy he never took specific actions in correcting them. By doing what, exactly? The country was bankrupt. In such a situation, the only sensible thing to do is default. Instead, Greece will be a 3rd world country with almost no public assets, and mass unemployment for decades. Regaining competitiveness through decades of internal devaluation is, to…

Greece's problem isn't the debt. It's the competitiveness of the economy, or more precisely the lack of. Even if we had all our debt erased, the way the economy is structured we'd be back in the same place give it a couple of decades, at most. We spend so much money paying pensions that it's a given we'd default one way or the other.

Furthermore, you can't just default on the debt just by saying so. There's a naivety among mostly Greeks that just by going back to drachma and defaulting on our debt will magically solve all of our problems. In a country that imports pretty much everything that would be catastrophic.

Varoufakis never came up with a plan. He admitted that there was no substantial alternative about converting into drachma. All that he did was playing bluff for six month, dragging a whole nation under his ideology. Then he moved on to greener pastures, not giving a fuck about the havoc he wrecked with his actions.

He can act as a smart-ass all he wants in his books, but we were here and we experienced first hand the results of his reign. Once we get rid of this charade of imbeciles that act as the government, he and many of his former colleagues will end up in jail for their actions. There he will have plenty of time to write memoirs.

Re: Review of “Adults in the Room” by Yanis Varoufakis

#29
post #22
post #9

Earlier quoted context omitted.

Morally it's on those who give out loans to make sure that they can be repaid. It's wrong that Greece took these huge loans as well, but also it's wrong to suggest that they have to pay them back. Everyone has the option to default when they are unable to pay and this was clearly the situation for Greece (and probably Spain and Italy, maybe even UK soon enough).

Morally it's on those who give out loans to make sure that they can be repaid. Maybe when dealing with an unsophisticated or under-informed borrower which the sovereign states in question are not.

And you are proved wrong by the fact Greece's government clearly was (still is?) "an unsophisticated or under-informed borrower". I mean the outcome of this borrowing speaks for itself.

When I take out a loan a bank usually asks for collateral but these loans to Greece are unsecured and not worth paying back. The banking system should have been left to fail but instead we live in this world where governments bailed them out. Capitalism for the poor and Socialism for the rich.

Re: Review of “Adults in the Room” by Yanis Varoufakis

#30
post #4
post #2

"The first revelation is that not only was Greece bankrupt in 2010 when the EU bailed it out, and that the bailout was designed to save the French and German banks, but that Angela Merkel and Nicolas Sarkozy knew this; and they knew it would be a disaster." The treasury departments of the French and German banks had loaded up on GGBs - Greek Govt Bonds because they yielded more basis points than eg German Govt bonds,…

Didn't Greece falsify data for years? That would explain the AAA ratings.

Greece has been cooking the books for a long time, even their entrance into the EU was fradulant. Greece is the blame here via its decades of fraud that finally caught up with it. As a Greek-American with an interest in Greece being successful I think all the finger pointing at Wall Street or Germany is asinine. Greece is horribly corrupt and tax dodging is like its national sport. Its like someone turned Chicago into a country. All of its out of control spending, unsustainable union perks, and unrealistic pensions finally caught up with it, just like its happening in Chicago right now. The difference is Chicago and Illinois can raise taxes and make appropriate cuts over the long term, but Greece won't unless strong-armed by Germany and others.

Ultimately, a shared currency with nations with such disparate levels of income and corruption just doesn't work out in real life like it does on paper. Arguably, Greece could have restructured its debt and engaged in inflation with its own currency and handled this much better, but that's not an option when you're wed to the Euro. Personally, I like the idea of the EU, but a shared currency is extremely questionable.

Credit ratings are just that, ratings, not investment advice and like all ratings should be understood to be of limited value. A nation state can hide quite a bit from organizations like Moody's and every election changes leadership, so there's no static "Greece." Instead its a handful of parties fighting for power with different agendas and goals and with differing levels of corruption and incompetence with a baseline being pretty bad to begin with. Heck even senior Moody's staff were warning investors about Greece and its dealings with Goldman[1]. You'd have to be a little thick to think that AAA rating meant no-risk. All investment involves risk.

I suspect the larger economies always saw Greece as their 'little brother' and countries like Germany had a sort of "Well, if we give them money, they'll build industry and catch up to us eventually," instead Greece blew it on pensions for people retiring at 50, questionable social programs, and other unsustainable and unwise spending.

I sense a high level of paternalism in general from other Europeans especially when I'm perceived as a native Greek when in Europe. Sadly, I think everyone would be better off if we were rougher with Greece and instead of seeing it as our tourist-friendly 'little brother,' but instead as our dishonest and thieving neighbor. I hope this current crisis has changed perception and paternalist attitudes in Europe and made everyone think about the limitations a shared currency creates.

[1] http://www.nytimes.com/2010/02/14/business/global/14debt.htm...

In 2008, Goldman helped the bank put the swap into a legal entity called Titlos. But the bank retained the bonds that Titlos issued, according to Dealogic, a financial research firm, for use as collateral to borrow even more from the European Central Bank.

Edward Manchester, a senior vice president at the Moody’s credit rating agency, said the deal would ultimately be a money-loser for Greece because of its long-term payment obligations.

Referring to the Titlos swap with the government of Greece, he said: “This swap is always going to be unprofitable for the Greek government.”

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