Tag Archives: government debt

NIALL FERGUSON: The iPIGS, don’t forget Italy!

29 May
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GDP – Grossly Deceptive Production

12 May

GDP is a very sketchy measure of economic output/performance. GDP as a measure of economic output is fraught with inaccuracies and composition errors. A better measure is to either discount those errors, which in itself becomes more of a subjective exercise, or more prudently just to look at the revenues and expenses of a nation. GDP today is simply Grossly Deceptive Production.

The GDP growth chart since 2000 shows that Portugal, Spain, Ireland and Greece for the vast majority of the last decade on average experienced robust economic growth. The fact is though, however, despite all of that, they are all bankrupt. So even with all the supposed robust growth and cheerleading, significant increases in GDP have: loaded sovereign balance sheets with toxic debt, created unfunded liabilities, a transfer of private debt to the public and a marked decrease in livelihoods. Professor Bernanke, please can you explain? 

 

Greeks now undertaking a criminal investigation of London trader

24 Apr

http://www.guardian.co.uk/business/2011/apr/21/citigroup-faces-inquiry-over-greek-debt-rumoursThe Guardian has reported that a London Citigroup trader is going to face a criminal investigation by the Greek authorities and Interpol for sending out the below email. If there is evidence to suggest that the trader has been acting on inside information then please progress, but the email reads:

“MKT NOISE Over the last 20min, there seems to be some increased noise over Gr debt restructuring as early as this Easter weekend. Spreads are moving wider now with 2y spread +100 from +35 at midday, while Gr banks are at -4%, -6% vs +2% in the morning.

The last few days the talks over Gr restructuring/rescheduling have intensified, despite the ongoing denials by Gr and foreign officials.

If a credit event takes place it is crucial to see what the terms would be as a haircut would have a much different outcome vs an extension of maturities.”

To most apt investors the email is purely a well summarised indictment of the current Greek bond market situation tied within the political complex. The note also briefly states the market reaction towards the Greek banking sector. The mentioning of widening Greek CDS spreads would have completed the rout. On the basis of the three paragraphs the email contains nothing contentious, it is alarmingly difficult to see where the problem lies. While this is undoubtedly going to cause additional strain for the Greek government, hiding or criminally prosecuting individuals who are merely highlighting facts is unwise. It was laughable hearing that the Greeks were seeking additional war reparations from Germany to soften their debt burdens, but this is now comical. Greece has become a circus and their politicians have routinely been  shown to be liars and grossly ignorant of their financial difficulties; history has also been a testament to that.

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