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Thread: international financial trend - 'It Pays To Riot'

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    Banned Melonie's Avatar
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    Default international financial trend - 'It Pays To Riot'

    (snip)"Ireland must now pay more than Greece to borrow.

    Dublin has played by the book. It has taken pre-emptive steps to please the markets and the EU. It has done an IMF job without the IMF. Indeed, is has gone further than the IMF would have dared to go.

    It has imposed draconian austerity measures. The solidarity of the country has been remarkable. There have been no riots, and no terrorist threats.

    Yet as of today it is paying 5.48pc to borrow for ten years, or near 8pc in real terms once deflation is factored in. This is crippling and puts the country on an unsustainable debt trajectory if it lasts for long.

    Yet Greece is able to borrow from the EU at 5pc and from the IMF at a staggered rate far below that (still too high for the policy to work, but that is another matter). These were the terms of the €110bn joint bail-out.

    To add insult to injury Ireland is having SUBSIDIZE Greece to meet its share of the rescue fund.

    I am sure you can all see the absurdity of this. It has moral hazard written all over it, and shows what happens once a dysfunctional system twists itself into ever greater knots rather confronting the core issue.

    Yes, I know that the Irish and Greek maturities are different but the fact is that Greece has extracted better terms by letting matters get further out of hand.

    George Papandreou’s PASOK has benefitted from dilly-dallying on the first set of austerity measures, and – not to be too diplomatic about it – by insulting the Germans with demands for war reparations. Hotheads also set fire to downtown Athens and Thessaloniki, improving the effect.

    If I were Irish – (and I suppose in a sense I am: Sir John Parnell was my great, great, great grandfather) – I would be a little annoyed."(snip)

    from


    Before the ubiquitous question of 'why does this matter to us' crops up, I would point out that the situation being discussed relative to Greece vs Ireland in the EURO zone is also potentially applicable to any 'federal' economy where some states or provinces conduct their economic affairs 'irresponsibly' yet benefit from the 'involuntary' economic assistance that other more fiscally 'responsible' states and provinces are forced to provide.

    It's also a testament to 'moral hazard' i.e. the probable success of high profile news events causing actions by 'the powers that be' to stop the bad publicity. In the article, the high profile news events in question were Greeks rioting in the streets, setting fire to the parliament building etc. In America, the high profile news events might be foreshadowed by the recent near-riot in Atlanta over Section 8 public housing. We can only hope that the 'it Pays to Riot' M.O. isn't too widely recognized !!!

    ~
    Last edited by Melonie; 08-26-2010 at 03:49 AM.

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    Banned Eric Stoner's Avatar
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    Default Re: international financial trend - 'It Pays To Riot'

    Quote Originally Posted by Melonie View Post
    (snip)"Ireland must now pay more than Greece to borrow.

    Dublin has played by the book. It has taken pre-emptive steps to please the markets and the EU. It has done an IMF job without the IMF. Indeed, is has gone further than the IMF would have dared to go.

    It has imposed draconian austerity measures. The solidarity of the country has been remarkable. There have been no riots, and no terrorist threats.

    Yet as of today it is paying 5.48pc to borrow for ten years, or near 8pc in real terms once deflation is factored in. This is crippling and puts the country on an unsustainable debt trajectory if it lasts for long.

    Yet Greece is able to borrow from the EU at 5pc and from the IMF at a staggered rate far below that (still too high for the policy to work, but that is another matter). These were the terms of the €110bn joint bail-out.

    To add insult to injury Ireland is having SUBSIDIZE Greece to meet its share of the rescue fund.

    I am sure you can all see the absurdity of this. It has moral hazard written all over it, and shows what happens once a dysfunctional system twists itself into ever greater knots rather confronting the core issue.

    Yes, I know that the Irish and Greek maturities are different but the fact is that Greece has extracted better terms by letting matters get further out of hand.

    George Papandreou’s PASOK has benefitted from dilly-dallying on the first set of austerity measures, and – not to be too diplomatic about it – by insulting the Germans with demands for war reparations. Hotheads also set fire to downtown Athens and Thessaloniki, improving the effect.

    If I were Irish – (and I suppose in a sense I am: Sir John Parnell was my great, great, great grandfather) – I would be a little annoyed."(snip)

    from http://blogs.telegraph.co.uk/finance...iot-in-europe/


    Before the ubiquitous question of 'why does this matter to us' crops up, I would point out that the situation being discussed relative to Greece vs Ireland in the EURO zone is also potentially applicable to any 'federal' economy where some states or provinces conduct their economic affairs 'irresponsibly' yet benefit from the 'involuntary' economic assistance that other more fiscally 'responsible' states and provinces are forced to provide.

    It's also a testament to 'moral hazard' i.e. the probable success of high profile news events causing actions by 'the powers that be' to stop the bad publicity. In the article, the high profile news events in question were Greeks rioting in the streets, setting fire to the parliament building etc. In America, the high profile news events might be foreshadowed by the recent near-riot in Atlanta over Section 8 public housing. We can only hope that the 'it Pays to Riot' M.O. isn't too widely recognized !!!

    ~
    Ohhh ? I recall a pretty raucous demonstration by out of work construction workers in downtown Manhattan in the early 1990's. We've seen some demos from state and local workers facing cuts to their cushy pay and benefit packages. Especially in N.J. where Christy managed to put the wood to them. Wait until the states and cities no longer have any alternative to serious lay-offs.

    In light of the economic damage being done, and the price being paid by the middle class, I think we are still in Act I. Nobody except a few governors and mayors has had to get serious about controlling public union pay and benefits.

    Look what Krugman, Sanders et. al. did to Alan Simpson for telling the truth about Social Security i.e. it is actuarily unsound and needs radical reform. Wait until current workers find out what MUST happen to their retirement age and benefit levels.

    To date, with all the bailouts and the cushioning of extended unemployment benefits, I don't think most people have yet grasped the gravity of the current mess or appreciate what will be necessary for us to dig ourselves out of this hole. Nobody, NOBODY has yet leveled with the American people. Obama hasn't. The Dems haven't. Most of the Republicans haven't.

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    Banned Melonie's Avatar
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    Default Re: international financial trend - 'It Pays To Riot'

    ^^^ yeah agreed ... for instance ... the headline says 'US Jobless Claims Decline More than Forecast" - but this really means ...

    (snip)Applications for jobless benefits fell more than forecast last week, easing concern American employers are again slashing payrolls as the economy slows.

    Claims dropped by 31,000, the first decline in a month, to 473,000 in the week ended Aug. 21, Labor Department figures showed today in Washington. The total number of people receiving government payments exceeded 10 million for the first time in four months, reflecting an increase in those getting extended benefits.

    The average number of claims over the past month climbed to the highest level since November even as the latest reading provided some relief to the drumbeat of negative economic data in recent weeks. Employers have delayed hiring plans and some have renewed firings as the year-old recovery shows signs of petering out, raising the risk consumer spending will weaken further.

    The trend “is consistent with a lackluster pace of job growth,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “The private sector really hasn’t recovered enough.”

    Stock dropped as growing concern over fiscal stability in Europe wiped out earlier gains following the drop in claims. The Standard & Poor’s 500 Index fell 0.8 percent to 1,047.22 at the 4 p.m. close in New York. Treasury securities climbed, sending the yield in the 10-year note down to 2.48 percent from 2.54 percent late yesterday.

    Less Than Forecast

    The median estimate of 48 economists surveyed by Bloomberg projected claims would drop to 490,000. Forecasts ranged from 475,000 to 510,000. The government revised the prior week’s claims figure up to 504,000, the highest level in nine months, from a previously reported 500,000.

    There were no special factors influencing last week’s data, a Labor Department spokesman told reporters as the figures were being released.

    The four-week moving average of claims increased to 486,750 from 483,500 the prior week.

    The number of people continuing to collect unemployment benefits dropped by 62,000 to 4.46 million in the week ended Aug. 14 from 4.52 million the prior week.

    The continuing claims figure does not include those receiving extended benefits under federal programs. The number of Americans who’ve used up traditional benefits and are now collecting emergency aid rose by about 268,000 to 5.86 million in the week ended Aug. 7. The figures reflect Labor Department revisions that were not included in today’s report. "(snip)

    from


    hmmm, is my math wrong - or does an official reduction of 62,000 among those claiming 'official' unemployment benefits, offset by a gain of 268,000 among those collecting emergency federal unemployment benefits ( that are not counted in the official figure ), net out to 200,000 additional unemployed Americans who have 'disappeared' from official unemployment figures but who are collecting very real emergency US taxpayer funded federal unemployment benefit checks ?

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