Tuesday, March 24, 2015

The Greek Solution

Generally, if you go up to a guy and ask him for a full view of his financial status....to say on a broad scale where the debits and credits are located.....after an hour, he'll give you a nice simple answer.  He'll say he's still owing 100,000 Euro to the bank on his house, owes 8,000 Euro on his car, and has some retirement-related account worth 40,000 Euro.  There's an answer to your question.

You could probably walk up to eighty million Germans, and I'd take a guess that sixty million of them could do their calculation themselves and give a fairly honest and truthful answer.  Some folks have significant investments and it might take a week to assemble the data to say the debt/credit situation.

On a country level....generally, most countries have a number of smart guys around and if you asked them what financial level that the country itself lies in.....these guys can give you a ninety-percent answer.  It might not be perfect....but it's fairly close.

Yesterday in the Wall Street Journal....there's an interesting piece over Greece and this statistical organization that helps to explain where Greece is on debt/credit.

Greece runs this organization called ELSAT.  Their job is financial analysis....at the national level.  These are the guys who say where tax revenue is coming on....where spending is occurring within the government.....and where bank loans are covering spending by the government.

Around 2010, because of the economic woes of 2008.....ELSAT hired up this new guy who came over from the international banking sector (IMF).....Andreas Georiou.  This is a guy who studied at a regional Athens university.....went onto Amherst College in the US for a bachelors degree, and finished up at University of Michigan with a PhD in economics.

For roughly twenty years with the IMF, he had various responsibilities.  He even picked up some exterior work as a professor for the University of Michigan.

In 2010.....he came over to run the ELSAT statistics department.  He was there to crunch numbers. His results?  Fairly dismal.  His numbers drove a great deal of the trend toward austerity and got Greeks fairly negative about the whole financial situation.

Well.....some folks have hinted that he walked into ELSAT with an agenda....worked with German banks....and conspired to create this fraudulent austerity situation. This week...the Greek government is working up charges against the guy and intend to bring him into court.

The general accusation?  Well....several folks within ELSAT say that Georgiou has no background or expertise with statistics.  The same folks suggest that he can only deliver what he's told to deliver.....not necessarily the facts.

What will happen?  One might take a guess that the new political situation in Greece requires some dramatic flip to dump austerity and keep Greece within the Euro.  If they could prove that the statistical picture given back five years ago was totally wrong....that austerity is not necessary....that European pressure to reform is unnecessary, then they carve out a brief period of calm (my word for this 'mess').

The problem here.....it's almost impossible for a nation to sit down and balance their books today, and show a debt/credit situation.  You might be able to talk about yourself.....but a nation of sixteen million or eighty million?  No.

The banks will watch this soap-opera unfold and eventually say 'fine'.....go on and pretend austerity is not necessary but don't come and ask us for loans.  Countries within the EU will likely say the same.....pretend austerity isn't necessary and just work this out on your own without our pocket money.  At that point....this gimmick kinda falls apart, if you ask me.

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