Friday, December 24, 2010

Greece Got Run Over By a Reindeer

What gives with Greece?  If we look at only one, narrow, set of the statistics, i.e. government debt and official GDP figures, and compare them with other nations, then by all means Greece is essentially bankrupt - just as so many fear-mongering "analysts" claim.

But... Disraeli's saying "lies, damned lies and statistics" is always a good piece of advice.  Even if he actually never said it himself.

So what should we look at?  Two facts:
  1. Greece has one of the lowest total debt to GDP ratios amongst OECD nations.  Yes, that's right, lowest;  because even though government debt is very high at 127% of GDP (end of 2009 and going higher, probably to 140% by the end of 2012) private debt (i.e. corporate plus household) comes to only 108% of GDP, making for a total debt to GDP ratio of only 235%.  That's lower than Switzerland (313%), Canada (259%) or, gasp!, ever-so-self-righteous Germany itself (285%).
  2. Greece has a very large, but very real, "shadow" economy due to widespread tax-evasion and corruption.  The IMF estimates it at 27% of GDP, by far the highest of any OECD nation (average is estimated at 11%).  This means that officially reported Greek debt/GDP ratios are grossly overstated.
Below is a table I constructed based on data from McKinsey for total debt (2009) and the IMF for the shadow economy.  The adjusted figures include the shadow economy in the total debt to GDP ratio.

 See anything grossly out of line?  

 One has to wonder how "the market" operates sometimes, eh?  Looks like Greece got run over by a reindeer this Christmas.  On purpose..?


Alan Fendrich said...

Good to see one of the few, wise voices back.

zaheer said...

Real/factual picture of Greece Economy

Crito said...

What is more important, the ratio of debt to GDP, or the acceleration thereof? Is not the perceived ability to print or produce your way out of debt more important?

Who has the next highest bond rate? Spain. Who is next on the list producing the least amount of high profit and exportable manufactured products? Spain

fajensen said...

Greece is just setting the background for whatever power-grab the unelected EUSSR politburo is plotting to do next!

Everyone knows that the Geeks will obviously lie and cheat to meet their "target figures" - what else CAN they do - and the righteous outrage can then be funneled directly into More Power For Brussels.

Look at f.ex Denmark, the most over-banked country in the EU and the second largest bailout package too!

I think the only way to short this is to save and invest in SEK. At least then one can move there when the shit goes down here - as is absolutely will. The present government is not dealing with any problems, they are just busy poisoning the well for when the "opposition" takes over.

Greece is a diversion, propaganda. IMO.


I also have to say that I don't care so much for "peace" that I am willing to just forever put up with the antics of the multicultural police state that the EU is rapidly becoming. People forget that all of Europe's little states were made through massive ethnic cleansing. The EU policy of mass immigration is exactly the thing that will start civil wars in Europe.

Maybe this is done on purpose: The East Indian Company ruled the world in this way with only 80,000 people setting immigrants against locals while The Company looted and pretended to keep the peace (their imports are still fighting the locals even today, 300 years later!). Pretty much like how we are now treated to draconian "anti terror"-laws and all manner of heavy policing to combat "The Treat" from maybe 500 Crazy Muslims; In case one was actually solving the Terror Problem, that lot is Easily held in one jail or just thrown out of the country. The preferred approach is trying to top STASI and leave the terrorists alone so "we" still need more state and more police.

The preferred outcome is therefore that the EUR breaks apart.

jkiss said...

Yeah, but...
Greeks want to spend 10% more than they are willing to fund... and, unlike the US, they don't have the reserve currency or even one that can fall. You show government bond yields but a combined debt burden... a high yield is entirely consistent with the concern of investors that the debt won't be repaid, or, as Merkel insists, that there will be haircuts. I wouldn't loan money to the Greek government - would you? If you think their rates are too high considering all the facts, doesn't that mean you think Greek bonds are a good investment? Would you loan them 10-year money at 15%?

Crito said...

Ah yes haircuts. Something American Too Big To Fail concerns don't have to worry about. That is of course unless you don't have the means to bribe the politicians. The peon class will see haircuts for years, in the form of bailouts, social cuts, robo-trading, Fed induced inflation...

The second-class citizens need to be educated. They should at least know the benefactors of their ignorance.

Hellasious said...

would I loan Greece money at 15%

Of course NOT! And no one is, that's the point. Greece is currently funding itself through the IMF/EU/ECB facility at around 5% or less.

It's the secondary bond market that is so interesting these days...

Crito said...

Even though "It's tough to make predictions, especially about the future." I am still curious how people think this economy will play out.

Will it be deflation, inflation, stagflation...?

My thought is stagflation. Reasoning? Commodities are high even though we have 10% unemployment.

The American multinationals seem to be hiring, but more in other countries than the US. This trend expands their markets and gives them a bit more pricing power even as the middle class here continues to get squeezed.

Therefore prices remain high or increase a bit to reflect increases in energy, food, and other commodities and employment remains weak. That is of course until the Fed financed BRIC bubble pops.