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May 13, 2010

This week I gained three new insights. One, courtesy of the Economist, was that the one in four Americans underwater on their mortgages simply cannot move to where the new jobs are being created (& that the unprecedented extension of unemployment benefits also reduces labour  mobility, since, with some money coming in, people also have less reason to leave their traditional surroundings). Credit for the second goes to CIBC World Markets’ Avery Shenfeld for pointing out that, despite similar-sized budget deficits relative to GDP, Britain is in a much better position than Greece; for most of its debt is held by locals & it has control over its currency, so it has the option of dealing with any excessive debt problem by the age-old means of printing money & currency devaluation, an option not open to Greece which no longer has a currency of its own & most of whose debt is owed to foreigners. The third resulted from my passing a currency exchange shop & noticing separate quotes for “England” & “Scotland”; thanks to one of you I know that this is to an antiquated arrangement in Scotland (& Northern Ireland) whereby some banks still issue their own notes, thereby picking up an estimated £100MM/year in seigniorage that otherwise would have been gone to the Bank of England.  

A week or so ago, former New York Mayor & Republican Presidential hopeful Rudy Giuliani was on Larry King Live. In the aftermath of the recent Times Square bombing attempt, he advocated vastly increasing the number of security cameras on New York city streets as a preventative measure (& Mayor Bloomberg has since gone to London for a first-hand look at how that city has been blanketed with them). This is nonsense & unbecoming a member of a party that claims to target ‘smaller government’. Security cameras have been proven very useful in ex post facto helping to reconstruct what happened, & identifying bad guys. And they are useful in problem prevention in low volume traffic situations (such as air traffic control & after hours hallway monitoring in commercial buildings. But there is absolutely no evidence that they ‘add value’ when used on a massive scale in high traffic areas on an ex ante basis; for the people monitoring them sooner or later become jaded and/or start suffering from ‘information overload’. In fact, while quite a number of potential terrorist incidents have been prevented in recent years on both sides of the Atlantic,  in every single case that has been the result of traditional intelligence/police work & not in a single case of the use of surveillance cameras. So using them at a saturation level, as Giuliani advocated, is not only labour-intensive & costly, and an efficiency killer, but also not a very good use of public funds. The most cost effective & comprehensive anti-terrorism defence mechanism still is the kind of public engagement displayed in Times Square by the middle-aged black street vendor of T-shirts. 

The UN asked Canada to supply a general officer to head up its hard-pressed, & not particularly effective, peace-keeping force in Darfur (that likely would benefit  from some better  leadership than it has had to date). The irony in the Harper government’s answer, “No Thank You”, is that, while Canada’s participation in the Afghanistan campaign has stretched the Canadian Army’s rank & file to, or beyond, its limits, the same is not true for its pool of officers of general rank. For, while the number of the former would barely be enough for a unit of division strength, & not enough to provide the number of “boots on the ground” there on an ongoing six-months’ rotation basis that it has been providing, it has significant ‘excess capacity’ at the general officer level, with enough of such upper echelon personnel for a unit 3x or 4x divisional strength. 

Attached are a review of the British coalition government agreement & some further thoughts on the Greek situation. Both started out life in this section, but simply took up too much space (but were deserving of it). So, I relegated them to the back as free-standing pieces. 



No. 360 - May 13th, 2010 

ROOT CANAL POLITICS (NYT, Thomas L. Friedman) 

    · The link between the UK election, the Greek meltdown & our Tea Part movement is this. Our parents were a builder generation whose sacrifices & investments laid the foundation for the abundance we enjoy. But my ‘Baby Boomer’ generation has been a “Grasshopper Generation ... that has eaten through all that abundance like hungry locusts.” On both sides of the Atlantic it was raised to believe that conservatives could cut taxes without cutting services & liberals expand services without raising taxes by printing money & deluding people into believing that borrowing money from China (in then case of the US) or Germany & France (for the EU Johnie-come-latelies), or against rising home values, created wealth.

    · Greece became the GM of countries, using the easy money & subsidies associated with EU membership not to become more competitive, but more corrupt, less willing to collect (& pay) taxes & less competitive; thus anyone in “hazardous” jobs, incl. hairdressers, could retire at full pension at age 50 for women & 55 for men. And in Britain, where 25% of the government’s budget is now funded by borrowed money, everyone over age 60 gets an annual allowance to help pay their heating bills & rides  local public transportation for free.

    · These two are the poster children for the wrenching post-Tooth Fairy politics that will force the Baby Boomers to accept cuts to their pensions & benefits if they want their children (& grandchildren) are to have jobs & not be saddled with impossible debts. According to the Economist’s editor-in-chief Britain’s election may have been the first ‘based on pain’ although, while all leaders warned “cuts are coming”, none were honest about how deep these would have to be : according to the Financial Times “The next government will have to cut public sector pay, freeze benefits, slash jobs, abolish a range of welfare entitlements and take the ax to programs such as school buildings and road maintenance.”

    · So after 65 years of Tooth Fairy politics that was all about giving voters things, we now face an era of Root Canal politics that will be all about taking things away from them & of hopefully a ‘Regeneration Generation’ that will launch society on a path more financially & ecologically sustainable than that followed by the locust-like Boomer Generation. 

Nevertheless in the entire 600+ word column he mentions the word ecology just once while it is a key aspect of the locust generation phenomenon. And neither does he mention another hallmark thereof, the growing income chasm in the Anglo-Saxon world & elsewhere between the very rich & the not-so- rich, and between both of them & the poor. For further insights on the grasshopper generation phenomenon, consult Aesop’s 2700 year-old fable of the Ant & the Cricket.  


    · It was up US$1.85BN (0.8% MoM) while a US$3.85BN drop had been expected. After growing 3.2% in January (the first month it did so in almost a year) & declining 3% in February, total consumer borrowing at the end of March stood at US$2.45TR, down 3.4% YoY, due to consumers limiting their borrowing to repair their battered balance sheets.  

The jump in March was due to a 3.9% rise in non-revolving credit  (incl. auto loans) that more than offset the 18th consecutive monthly decline in revolving credit (by 4.5%).  


    · Expecting future funding to be less freely available than it has been since 2001, it is agitating for more money for new weapons & for maintaining existing military equipment, while Congress has been so focused for almost a decade on improving life for the troops & their families that it often mandated higher pay raises than the Administration & the Pentagon asked for. So now many in the military are better paid than their private sector peers & health care costs have risen to the point that , according to Defense Secretary Gates, “they are killing us” (accounting for almost 10% of the Pentagon’s base budget  - i.e. ex-Iraq & Afghanistan). Since 2002  military compensation has risen 42% vs. 32% in the private sector (although at the outset it was 13% lower). And this is not the Pentagon’s only financial challenge : last February it had to cancel (but has since reinstated) a tuition-for-spouses scheme when applications hit US$2+BN, over 30x the amount it had earmarked for it.  

One fringe benefit of the higher pay scales has been a higher retention rate; thus 60% of Navy spouses now want their mates to make it their career (i.e. stay in 20 years), 3x the number only five years ago (although the economic situation since then likely also has been a factor).  


(CSM, Robert Reich) 

    · It is threatening to charge Apple with abuse of its economic power but not the big banks on Wall Street with their huge, & growing, economic & political muscle. And our future well-being  depends more on people like Steve Jobs (Apple ‘s CEO) who invent useful  things than on investment bankers who create financial products that get the economy in trouble. Apple’s supposed sin was to tell software developers that, for maintenance-of-quality reasons, they can only use Apple programming tools in developing applications for iPhones & iPads’. So what? Other firms & many, many individuals are innovating like crazy, and if, as a result, Apple finds this decision cutting into its business, it will change its mind.

    · Apple is only the world’s No. 3 smart phone supplier, with a 16% market share while the largest four US banks have assets of > US7TR, half the size of the US economy, & are so big that a bad call by one of them could take the rest of us down. But trhe agency is not really at fault; for the Federal Trade Commission Act explicitly excludes banks from its mandate to stop “unfair methods of competition” anywhere in the economy.

    · The only way to ensure no bank is too big to fail is to ensure thatn no bank is too big. So Sen. Sherrod Brown (D.-Ohio) & Sen. Ted Kaufman (D.-Del.) have introduced an amendment to the draft bill winding its way through the Senate, & being watered down as it does, that the big banks should be broken up (& a growing number of House members are about to follow their lead). 

Reich was Clinton’s diminutive (due to a genetic condition) Secretary of Labor between 1993 & 1997. He currently teaches public policy at UC (Berkeley), and at various times prior to that graduated from Dartmouth Summa cum Laude, was a Rhodes scholar, taught at Harvard & was a member of President-elect Obama’s Economic Transition Advisory Board. With that academic background it’s amazing that he compares the size of the big banks’ asset base to that of US GDP; for the former is a “stock”-, & the latter a “flow”-, number. 


    · New York Attorney-General, Arthur M. Cuomo, has launched an investigation of eight top tier banks (Goldman, Morgan Stanley, UBS, Citigroup, Credit Suisse, Deutsche Bank, Crédit Agricole & Merrill Lynch) to decide if they may have provided misleading information to rating agencies so as to inflate the ratings of certain mortgage-backed securities. He is also interested in the recruiting of rating agency employees by banks to have them use the knowledge gained, & the personal contacts made, at their former place of employment to create mortgage deals that would get better ratings than they deserved, and particularly in the case of a former Fitch employee, Shin Yukawa, whom Goldman recruited in 2005 with helpp of a million-dollar pay package, and who later was involved in the structuring of the Abacus 2007-AC1 deal that is at the heart of the SEC’s recent case against Goldman. 

Once the rating agencies had a hard & fast rule that a subsidiary’s rating couldn’t exceed the parent’s. This was watered down in the late 80's after less-than-prime credit worthiness financial entities, like Merrill Lynch, found themselves at a competitive disadvantage in swap counterpart transactions. So, due to Merrill’s lobbying, & that of others in a similar situations, the rating agencies became less dogmatic & devised numerical/quantitative standards for rating ‘stand-alone’ financial entities that those who know how the system worked could get around by exploiting loop holes (not unlike the early days of multiple choice exams when markers used overlays on answer sheets : as long as the marks on the one coincided with those on the other, nobody cared. 


    · The London-based Centre for Economic Policy Research says a 10% revaluation would cut the bilateral US-China trade deficit by half from its present US$227BN at a cost of 424,000 US jobs & lower wages in US export industries that depend on supply chains from China. 

This isn’t what Congress & the hoi polloi have been made to believe. And as Boone Pickens recently told Congress : “In January 2010 our trade deficit  ... was $37.3 billion - $27.5 billion of that went overseas to import oil.”  


    · The next G-20 Summit will be held in Toronto on June 26th & 27th, following a G-8 meeting in Huntsville, Ont., 200 kms North of that city. Prime Minister Harper will act as host & Canada as the meetings’ organizer. He has now extended invitations to attend the G-20 meeting to the leaders of Ethiopia, Malawi, Netherlands, Spain & Vietnam [Netherlands & Spain often attend, though formally represented by the EU, Malawi is currently head of the AU (African Union) & Vietnam of ASEAN (Association of East Asian Nations)].

    · G-20 consists of the EU &19 countries (Australia, Argentina, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the UK & the US); between them the 46 countries involved account for 90% of global GDP, 80% of world trade & two-thirds of the world’s population.  

Once upon a time the G-5 (the US, UK, France, Germany & Japan) was a useful place for the then major world leaders to meet occasionally to compare notes because of its intimacy, relative homogeneity & the overlapping interests of the members of the group. Then in the late 80's it was expanded to a G-7 by including Canada & Italy, and later, after the demise of the Soviet Union, to a G-8 by including Russia. A decade or so ago the G-20 was created to give wider representation to other nations of substance and last year it was announced that the G-20 would replace the G-8 as the major economic council of the world’s leading nations. But the same thing has happened to the G-whatever complex as happened to the EU : expansion entailed a progressive watering down of the commonality-of-interest factor that made the earlier gatherings so useful & increasingly turned it from a consultative cum consensus-building- into an adversarial forum, and into a ‘photo-op’ for domestic political purposes. That being the case, gatherings like the annual Davos Economic Forum may in the future well become more useful mechanisms for international economic consultation & cooperation, and policy development, because its organizers are selective in whom they invite each year & because it features a public-private sector interface, rather than just politicians posturing & officials  reinforcing each other’s prejudices. 


(WP, John Pomfret) 

    · Senior US executives representing the American Chamber of Commerce in Beijing are in Washington this week to set politicians straight on what their policies vis a vis Beijing ought to be. While the President, the Administration & Congress have focused on forcing the yuan higher in the hope of reducing the bilateral trade deficit, boosting US exports & creating more American jobs, their message is that while it would make sense for China to stop subsidizing exports & making imports of raw materials more costly with an inappropriate exchange rate, believing that America would benefit from such a move is just “plain silly”. For America has long been importing most of the stuff it now gets from China and, if China were to be priced out of the market, it will just continue importing it ... from others.

    · They think Washington should instead focus on China’s evolving industrial policy which, they say, in the long run will do more damage to the US than a low yuan rate. They quote new regulations that prevent state agencies from buying products from Western firms, new standards for telecom & other firms that do the same & new rules requiring Western companies to give up technological secrets in exchange for a piece of the Chinese market.

    · One member of the delegation noted “The Chinese government is more than happy to keep the focus on the currency because it’s not the real problem ... The real problem is China’s industrial policy and our inability to deal with it”, and its leader, Christian Merck, that “For years the Chinese government promised there would be a gradual opening of the market to foreign companies ... (while) now in a range of areas, there is increasing protectionism” and that Western businessmen arguing that an open market, not protectionism, will benefit China most in the long run,are handicapped by the fact that “the prestige of the Western economic model is at its lowest ebb.” 

America’s views of what is right & wrong commercially has long been warped by an approach to  intellectual property rights enshrined in its patent system that, once someone has invented, written composed or otherwise produced something, he or she is entitled to the exclusive financial benefits thereof for a long time thereafter, if not forever. Unfortunately for the modern day US ‘Wall Street’ system, since time immemorial the ‘Mainstreet’ system in the Western world has differentiated between “hard” & “soft” property, between the property rights entailed in land, buildings & machinery, and those in ideas. And this concept still large prevails in the financial system where the intellectual property right life span of a new idea or product is measured in nanoseconds, one reason why it has been so, albeit sometimes devastatingly, innovative. As to their observation about the pressure to surrender technological secrets, following is aan excerpt from an article in the May 1st Economist, entitled “Lights & Action” about China’s electric power industry (that hopefully will find its way into the next Special Edition) : “When foreign suppliers are permitted (sic), they are usually required to transfer technology to local firms. China’s massive expansion of nuclear power provides a good example. Over the next ten years the authorities plan to spend a trillion-odd yuan (US$150 billion or so) to increase its capacity ninefold ... Naturally, China hopes to acquire lots of nuclear know-how along the way. Half the content of a unit of the Lingao plant, in Guandong, where construction began in 2005 and is due to be completed at the end of this year, will be made at home; in the next unit, to be completed next year, the share of local content will be 70%. By 2020, China’s goal is to build advanced reactors by itself, and to export its prowess abroad.”  

WHY THE GREEKS ARE ANGRY (, Nick Malkoutzis) 

    · The conditions for the EU/IMF bailout are harsh. Public sector salaries must be slashed 15%-20%, & public service employment downsized. Closed professions, e.g. lawyers & cab drivers, must be liberalized, and employees made easier & cheaper to let go. Fuel taxes must be raised to a painful level on top of a VAT that was already boosted from 19% to 25%.  Pensions must be cut & retirement ages raised.

    · Greeks are angry because for years they were encouraged to live beyond their means (accelerated, since its joined the EU in 2001, by cheap credit), and now face the unpalatable prospect of having to service the resultant debt from reduced incomes. But what angers them most is their belief that politicians, rather than building a strong economy for the 21st century, lined the pockets of their families & friends, and tolerated rampant corruption (bribery payments supposedly equal 12% of GDP) & massive tax evasion (at an annual loss to the Treasury of 30BN Euros - US$38BN, i.e. 10% of GDP). And with half of the 3MM trade unionists in the country “inactive” & union leadership seldom consulting members before calling strikes, it is not always clear to what extent its decisions really reflect the will & the interests of the union’s rank & file.  

A rationalization of its public sector staffing & remuneration levels was long overdue; for the 1+MM public sector workers among its 11MM people have been called the “most visibly inefficient sector” of the country’s economy (in part due to its ‘limited horizontal mobility’, with many workers spending their entire career working in the same office). But one Greek paper said the bailout plan is “a slow death contract” & one analyst that “If it turns out that the economy is not able to withstand the measures, if growth falls much more than forecast, there would be social unrest, forcing the government to consider alternative moves in its asset-liability management ... This may include restructuring.” And it is disingenuous, to say the least, for Greek voters to complain about being “encouraged” to borrow more than they could afford & about the quality of politicians they themselves elected, & could have chosen not to re-elect. They, like the buyers of sub-prime asset-backed paper, or ‘investors’ in Madoff’s Ponzi scheme, want to blame someone other than the idiot they see in the mirror every morning for their predicament & for having believed in the Easter Bunny & the free lunch. But in that respect they are not unique; for it is engrained in human nature & symptomatic of an era in the developed world in which people have been brainwashed into believing that taking responsibility for one’s actions is quaintly old-fashioned.  


    · The Deputy Director of the China State Council’s Development and Research Centre said recently that the government needs to slow down economic growth to less than a 10% annual rate if it is to avoid overheating. 

By comparison, First Quarter growth raced ahead at a 11.9% annual rate. 



The six page coalition agreement makes interesting reading. Following are some key bits : 

    · deficit reduction and continuing to ensure economic recovery is most urgent - begging the question as to which of the two will win out if they were to conflict;

    · the emphasis in deficit reduction will be on less spending rather than higher taxes - empirical evidence suggests this is the more effective way of balancing the books;

    · some of the “£6BN in cuts to non-front line services can be used to support jobs” - at which point they cease to be savings;

    · funding for the NHS should increase in real terms in each year of the Parliament - laudable but not compatible with serious deficit reduction;

    · an independent commission will review the long-term affordability of pensions while protecting accrued rights - even a moderately astute person could do the former in minutes &, as to the latter, “accrued rights’ are not just part of the problem but the problem;

    · the personal allowance for income tax should be increased - this would be hugely costly in potential tax revenue terms & thus a huge ‘boat anchor’ for deficit reduction;

    · detailed proposals for robust action to tackle unacceptable bonuses in the financial sector - why limit it to the financial sector?

    · an independent commission to investigate the complex issue of separating retail ands investment banking in a sustainable way - this ain’t compex at all, it just takes guts, perseverance & a willingness to stand up to enormous pressures from one’s peers;

    · five year fixed term parliaments with the next election to be held on the first Thursday of May 2015 subject to a caveat that this won’t apply if 55% of the House votes for dissolution - the latter all but neuters the former - all it does is to move power from the Prime Minister to Parliament (which may not be such a bad idea). On the other hand, Britain already has a system for dumping no-longer-wanted Prime Ministers that is dead-easy in the case of the Conservatives & only marginally less so for Labour;

    · a Referendum Bill on electoral reform to permit an Alternative vote and fewer over-sized constituencies, with both parties committing themselves to vote for such a bill in the House without prejudice to the position they might take during the subsequent referendum campaign - i.e. no PR for Commons’ elections - see immediately below;

    · an Upper House wholly, or mainly, elected by PR. In the interim Lords’ appointments will be made with a view to having the Upper House reflect the share of the vote secured by the political parties in the last general election - i.e short-term it will be “stacked” & longer term there will be a two-chamber legislature similar to that of the US;

    · no further transfer of souvereignty or powers to the EU during the life of this Parliament, and an amendment to the 1972 European Communities Act to require a referendum on any future transfers - no surprise here;

    · no joining of , or preparation to join, the Eurozone during the life of this Parliament - see immediately above;

    · As to the environment :

      ·  a smart grid & smart meters - this is the future : differential pricing for electricity at   different times of the day or night so as to ”even out” demand ;

      ·  a “huge” increase in energy from waste through anaerobic digestion;

      ·  encouragement of marine energy; and

      ·  cancellation of a third runway at Heathrow & no additional runways at  Gatwick and Stansted - with planes already taking off from and/or landing every 90 seconds on Heathrow’s two existing runways, this all but pre-empts significant future growth for it;

    · a provision for a national planning statement with specific agreement on a Liberal Democrat spokesman speaking against it & Liberal Democrat MP’s abstaining  from the vote, and “clarity that this will not be regarded as an issue of confidence” - this gives the Liberal Democrats a license to be as obstreperous as they chose to be when the time comes & the Conservatives one to advance its own agenda without having to dance around whatever its coalition ‘partner’ may, or may not, want. 



While on May 6th French Prime Minister François Fillon told the press that the Greek bailout would “defeat and put an end to speculation which has been unleashed against this country” (i.e. Greece) & that there was no reason for markets to take aim at Spain & Portugal, after that day’s events on the NYSE, that further sullied America’s once seemingly unique financial reputation, President Sarkozy said the next day that, before the market opened on May 10th, there had to be a financial defence plan in place to protect the Euro, saying that “The Euro is an essential element of Europe. We cannot leave it to speculators ... We will not let others undo what generations have created.”  (generations? - the Euro has been in existence for barely a decade). 

And the outcome was a nearly US$1TR financial backstop proposal that its promoters hoped would have a “shock & awe” effect, & critics call a “nuclear option”, and that addresses symptoms, not the underlying disease. In the end the central bank swap network which was set up in conjunction with it (with the Fed extracting its pound of flesh by making any central bank swap counterparties  pay a 100 bps premium on any drawdowns) is likely to do more good than the EU initiative; for, without a swap arrangement to that can swiftly & efficiently ‘recycle’ speculators funds, the EU package would have been like the clapping of one hand. 

The Greek bailout, down the road & with the benefit of hindsight, will likely prove to have been a colossal mistake by policy decision makers unable to see the forest for the trees. For it addresses a liquidity cum market confidence problem whereas Greece has a solvency problem. And the bailout  idea is based on an assumption that, given enough time & enoiugh drastic belt-tightening, Greece can “grow its way out of its problems” (the same logic that in days long past prompted the doctors to “bleed” patients, thereby sometimes hastening their demise) : the risk is that ‘drastic belt-tightening’ risks an implosion of the Greek economy, causing social unrest which would negatively impact on its ability to service its debt, never mind pay it back.  

The common wisdom is that Greece defaulting would do irreparable harm to the Eurozone concept, Greece’s reputation, & capital markets. All three ideas are questionable. The Greek situation is a symptom of a potentially fatal flaw in the Eurozone concept in its present form that will do irreparable harm unless addressed & addressed promptly, namely that it can have a one-size-fits-all monetary policy without, if not a one-size-fits-all fiscal policy, then at least a much greater coordination of national fiscal policies than currently exists (as one former Canadian diplomat with European experience put it ‘It now has a choice between further integrating or disintegrating”).  In addition, bailing out Greece risks, if not encourages, the evolution of a ‘moral hazard’ mindset  among both borrowing governments & lending entities, & thus, almost as surely as night follows day, increases the odds of yet another, much, bigger crisis down the road. As to Greece’s reputation, investors cheerfully ignored its track record of having been in default on its foreign indebtedness as often as not for nigh on two centuries. And defaulting buys a country breathing room, provided its current revenues are equal to, or with some modest fiscal adjustments can made to equal, its operating budget (i.e. ex-debt service obligations); and a country’s capital market reputation is irrelevant if it doesn’t need to borrow In fact, this was the route taken in the 80's by Brazil & early in this decade by Argentina to remain financially & politically viable domestically. Both  are  now members in good standing of the G-20, with neither of them much, if any, the worse for at one point having told foreign investors they could bloody well wait for their money (in fact, nine years after doing so Argentina still hasn’t come to an agreement with all of its creditors as to the size of the ‘haircut’ they would accept). And Brazil now has an investment-grade credit rating. As to capital markets, history has shown time & again that, once fundamentals have sorted themselves out, capital markets are more interested in what they think will happen tomorrow than in what happened yesteryear. 

The real risk in the short run for the EU is that in bailing out Greece, i,e, ensuring that its lenders will get back one hundred cents on the dollar, it will whet their appetite to play the same game elsewhere (just as making Bear Stearns’ creditors “whole” contributed to the subsequent crisis at Lehman Brothers) & that over the medium term economic implosion-driven social unrest will prompt a flood of hundreds of thousands of Greek workers into the rest of the EU in search of work and/or cause a real fiscal crisis in Greece and/or cause the Greek government to fail to meet the conditionalities of the EU/IMF bailout, any, or all, of which would lead to a need to restructure under pressure, with however, the public-, rather than the private-, sector having to “take the hit.”     

Finally, the bailout plan defies the laws of nature. Any ‘dumb peasant’ knows that the solution to a horse being overloaded is not to lighten the load & make it carry it longer hours and/or have it make more trips in compensation. For all this achieves is to have the poor thing spend the same amount of, or more, energy while giving him less time to feed & rest up. What it really needs is a day of rest, & a lighter load. Ditto for Greece, what it really needs is an internationally-supervised debt moratorium (which would also help to discourage moral hazard behaviour by making lenders’  cash flow less predictable & reducing their ‘security of capital’, both of which they abhor).

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