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Thoughts from the Frontline

Prisoner of the Bureaucracy

January 25, 2013

Choose your language

I wrote some time ago that Greece had a choice between Disaster A: staying in the euro; and Disaster B: leaving the euro. I have recently come back from four days in Greece, meeting with lots of people at all levels of society, and will share with you in this letter my analysis of their choices and the results. I’ll also have a few things to say about what the developments in Greece might mean for the rest of Europe and the developed world.

I penned these words in January of 2010:

“Everyone knows the problems of Greece. There is no political will in the country (so far) to do what Ireland has done, and really cut their budget. I think Spain is an even bigger nightmare for the EU when compared to relatively small Greece. Italy? Belgium? Portugal? All those countries (and their voters) will be watching to see how the EU deals with Greece.”

Which was good for Greece, as it gave good reason for the rest of Europe to care about what happened to Athens.

Greece Must Stay in the Euro

Let’s start with the conclusion: they have chosen to stay in the euro. If a depression meets your definition of an economic disaster, then it is reasonable to conclude that their choice has been a disaster. Greek GDP is projected to be down by 25% by the end of 2013, as measured from the beginning of the crisis. Exiting the euro at this time would only…

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Jan. 26, 2013, 3:25 p.m.

I think you forget why the EU was formed. In the previous sixty, or so, years we had two wars and in the last of those 40 million people were killed in Europe, alone, and another 20 million in Asia as well. As a modern society, we have to be far better off collaborating, as you in America discovered following the civil war. Instead of narrowing your focus, the discussion should be on the macro implications of the ever increasing effects of climate change. Possibly to a point where the world economy itself might no longer be able to afford the losses it will then be sustaining, nor the additional cost of relocating hundreds of millions of people to high ground in the next half century. If we thought about that, we might discover that life has, possibly, already changed significantly and that to survive we must act as one. Calling Greece a disaster, will then be viewed as, but a petty nuisance. But, until we can achieve a consensus on these vital issues, quick fixes like Greece will be all we can do.

Robert Braun

Jan. 26, 2013, 9:07 a.m.

I love your writing John and believe you have a rather good judgment too, wide economic culture and lots of money to travel around. And yes, great contacts and an excellent business acumen. But you are pathetic for refusing to listen to some who in 2011 said clearly and unambiguously (no hedging between “two disasters”) that Greece was NOT going to leave the Euro. The gentleman won a bet for two bottles of red wine from a client who in July 2011 was certain that Greece would leave the Euro within 12 months.

lu ja

Jan. 26, 2013, 3:26 a.m.

Great letter, a follow-up on Portugal woud be greatly apreciated,
The Economist projects Portugal to be the second worst-performing economy in the world in 2013 - may be a good contrarian indicator.
Four of the top ten expanding economies are former portuguese colonies (Angola, Mozambique, Macau and East-Timor) with strong cultural and increasing economic ties (including a shared language) and a great need for all kinds of technical assistance.
Meanwhile, fearmongers should take notice that Portuguese 10yr government bonds are up 90% up YOY and the Portugal PSI 20 Index is up 40% in the last 6 months.
Keep shorting at your own peril ...

David Oldham

Jan. 25, 2013, 11:33 p.m.

Mauldin at his best. Move ass and go look see. I look forward to pt II.

Jan. 25, 2013, 1:38 p.m.

Hummmm…. “regulatory capture.” WHERE have we heard that term before??? :-\