Baseball91's Weblog

March 30, 2010

The Tip of the Iceberg in Greece

Ayn Rand wrote in Something to Reflect On (1959), “Money is the barometer of a society’s virtue. When you see that trading is done, not by consent, but by compulsion—when you see that in order to produce, you need to obtain permission from men who produce nothing—when you see that money is flowing to those who deal, not in goods, but in favors—when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you—when you see corruption being rewarded and honesty becoming a self-sacrifice—you may know that your society is doomed.”

Troubles in Greece, representing 2% of the EU’s economy, have weighed heavily on the Euro. Following a downgrade last Wednesday of Portugal’s credit rating, comment s reported from Hong Kong were that “Greece is only one case,” said Zhu Min, deputy governor of the People’s Bank of China, “but only the tip of the iceberg. We don’t see decisive action that tells the market, ‘We can solve it, we can close it,’ so the market is very volatile.”

Fitch Ratings cut Portugal to AA-minus and said a further slide was possible if the country doesn’t do more to bring down its budget deficit. The downgrade in the credit rating of Portugal was due to weak fiscal figures—though not as dire as Greece’s. The Euro has been off 7% against the dollar since the beginning of the year, taking another hit Thursday in Asia after Zhu Min’s criticism of the EU’s handling of Greece. He warned that the “U.K. is weak. America itself is weak, because in a two- to four-year horizon, U.S. debt will climb to 110% [of GDP] and stay there for a while.”

Referring to the large amounts of government debt issued to bail out banks and funding stimulus programs in the West since September 2008, he said, “The governments tried to put every burden from the financial sector onto their own children. Now they find nobody can save them.” High levels of debt throughout the developed world, he added, would keep growth low for several years. Chin as the world’s largest holder of foreign-exchange reserves is a major investor in the Euro. He stated his belief that fiscal problems could spread to Spain and Italy.

“Bonds have seen their best days,” Bill Gross, manager of the world’s biggest bond fund at Pacific Investment Management Co, said in a March 25 interview with Tom Keene on Bloomberg radio. Alan Greenspan warned that rising yields on government debt will drive up American borrowing costs is resonating with the world’s biggest bond traders, who say this month’s losses in the market for US Treasuries are just the beginning. Yields on 10-year notes, the benchmark for everything from mortgages to corporate bonds, climbed as high as 3.92 per cent last week from a low of 3.53 per cent in February. A February survey of 10 dealers showed that budget deficit, which hit $1.4 trillion in fiscal 2009 will drive Treasury sales to a record $2.43 trillion this year.

After Fitch downgraded Portugal, the dollar rose as the euro tumbled raising fears of continent-wide contagion from Greece’s troubles. However, U.S. Treasuries did not. The 10-year Treasury dropped 1 7/32, driving its yield to 3.829%, its highest level since Jan. 4. At other moments of financial panic, U.S. government debt has been a safe haven. No more.

Economists and strategists also predict rising yields in Germany, the UK, Canada, Japan and the rest of world’s major economies, Bloomberg surveys show. Breaking Europe’s diplomatic etiquette, Luxembourg’s Foreign Minister Jean Asselborn told German radio station Deutschlandfunk that the European Union and its single currency are “a peace project, a community of destiny,” adding Germany has a duty to act if a fellow Euro member needs help, writes Andrea Thomas and Adam Cohen in thee Wall Street Journal.

Bill Gross of the PIMCO funds said investors should invest in shorter-maturity US and Brazilian securities and longer-term German and “core” Europe bonds, avoiding the debt of the UK. Higher yields are the “canary in the mine,” Alan Greenspan said, where historically there has been “a large buffer between the level of our federal debt and our capacity to borrow. That is narrowing. And I am finding it very difficult to look into the future and not worry about that.”

Daniel Bell is a sociologist who is listed by the New York Times Literary Supplement as among the authors of the 100 most important books in the second half of the twentieth century, with his books End of Ideology and The Cultural Contradictions of Capitalism. He thinks that a new kind of society was emerging, post-industrialism, information-led and service-oriented, which will replace the industrial society as the dominant system, resulting in a shift from manufacturing to services; the centrality of the new science-based industries; and a rise of new technical elites and the advent of a new principle of stratification.

The news this week. About off-shore oil-drilling. The news this week that forgets the hope and change theme. That theme addressed to a young audience that forgets so soon. Forgets the sins of Kobe Bryant, who got a new contract. Forgets Tiger Woods who will be making his comeback at The Masters. And forgets the betrayal of America whose leaders of Wall Street were rescued in September 2008, by tax dollars. And with this comes news of the release of a sequel by Oliver Stone to his 1987 movie “Wall Street: Money Never Sleeps.” Gordon Greeko delivered a great speech in the original “Wall Street” About greed in all of its forms…in love, in life,in sex. It was, this greed, present in much more than just money. And this society in deep trouble. As the illusion has become real..and the bigger the illusion, the more that they want it. With the census that is due back, with all the census workers, the new census workers, hoping to pump up the economy. After the more than 8 million jobs lost since this recession began, there were the temporary U.S. Census positions.

“I create nothing. I own. We make the rules,” said Gordon Grekko. Oliver Stone was talking about the bubble. In 1987.

Did you believe in the devil? Did you think history repeated itself?

Tom Brokaw wrote a book about the Greatest Generation. The one born at the very end of the Roaring Twenties. Daniel Bell was one of them. He discussed the intellectual movement of his time. In academia. Bell wrote in The End of Ideology that “The twice-born” generation which found its wisdom in pessimism, evil, tragedy, and despair, after the optimism based upon an ultimate faith in the rationality or common sense of men was shattered by war and the Great depression. That greatest generation was, writes Daniel Bell, “both old and young ‘before our time.'”

Money is the barometer of a society’s virtue. When virtue was determined not in the short run, but in the marathon. It was the admission by the Greek government in 2009 that the government in power had lied about budgetary matters. Not unlike what happened in Bulgaria, where were now forthcoming that the government had lied about money, in the past in order to be admitted into the European Union. Not all that dissimilar to what had happened to those items in the budgets approved by Congress that was keeping the cost of war in Iraq off the books.

Yes, money is the barometer of a society’s virtue. \


1 Comment »

  1. Comment by paperlessworld — April 8, 2015 @ 12:18 AM | Reply

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