Last week, everything looked pretty good. US GDP came in at 2.5% -- not great, but certainly not terrible. And the leaders in Europe actually came up with the framework of a plan to deal with the Greek situation. Frankly, I breathed a sign of relief, and thought, "this looks like the end of the turmoil."
Little did I know the Greek leader would announce he would put austerity measures to a public vote. Now, I understand what he's getting at -- he wants the tough measures to meet with public approval so he can move forward. Theoretically, this will give him the mandate to continue making the tough cuts that Greece, frankly, needs to make.
But what he didn't consider (or maybe he did and simply looked the other way) was this: "what are the effects if the vote fails, and what will happen to the financial markets in the interim period?" The answer is pretty damn ugly -- or, at least more of the same high volatility trading we've been seeing for the last few months. And more importantly, if the vote fails, Greece has probably guaranteed a very messy default which threatens a large number of financial institutions. In short, failure of the vote would really hurt the markets and the macro-economic environment in an incredibly negative manner right at a time that we really don't need it.
In short, this is a bone-headed move that has little upside and massive downside. Thanks. No, really, thanks for this.
STTG Market Recap May 24, 2013
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8 comments:
At the same time, while I doubt the motives, one way or another this is the right thing to do.
Greece is a sovereign nation and a democracy. The fate of Greeks should be decided by Greeks, not the effin' Eurobanks.
It's a strange case where a decision can be stupid and right at the same time, but if everyone's asking Greece to suffer for the sake of the rest of the world, I'm perfectly OK with the decision being theirs.
They might say no. Fine. They'll probably default, get themselves in a world of hurt and bring down a large chunk of the financial world with them. The Eurozone will most likely fragment. But if this was America, this would be a vote the American people would be screaming for the right for, saying otherwise our troops died for nothing, blah blah. And they'd be right. Again, I'm not saying the Greek PM is necessarily competent or principled; from what I understand this is his countermove to the minority party's call for snap elections. In any case, he's doing the right thing here. The people throwing the loudest fits are bean-counters who don't give a rat's ass about the Greeks. Well, they can shut up and watch.
I'm worried, but I'm not so selfish and hypocritical that I'd take away the self-evident rights of millions of citizens for my personal financal security. If any vote should be made a referendum, it's this one.
DC - Greeks have a voice here via their parliament which, if I understand correctly, would need to approve the package. This is purely the PM trying to provide political cover for himself.
I don't want to know what would have happened if TARP was put to a referendum.
"I don't want to know what would have happened if TARP was put to a referendum."
I want to know.
Personally, I don't understand why we can't have more national referendums here in the United States. We have the technology to get those kinds of things done pretty quickly if we wanted.
I think it smacks a little too much of hubris to claim you are a democracy. Then turn around and say "the people" are too stupid to make decisions for themselves.
You think the people we elect aren't stupid? I beg to differ. Corrupt? Yes. Intelligent? No.
The reason we don't have referendums is because we are not a democracy. We are a constitutional republic whose politicians have been corrupted; hence why we are lorded over by the financial sector.
Which is exactly what all the ruckus is about.
We should get more of a say. Directly. That way, WE THE PEOPLE own it. And have no one to blame for the outcomes but ourselves.
I would encourage anyone who thinks we need more direct democracy to see how well the States functioned from 1776-1787.
There are good reasons to not take a poll on everything. Politicians do need to be able to make unpopular decisions for the good of the country from time to time.
Ask yourself how a national referendum to raise the debt ceiling would go.
If anyone should know that direct democracy doesn't work on a large scale, you'd think it would be the Greeks.
I hate it when people say, "I wish _____ had been put to a direct vote." Either you don't understand what works long term, or you just didn't like the outcome of whatever _____ was. If you believe the system is corrupt, then the goal should be to fix it rather than tear it down and replace it with something that won't work (direct democracy).
Are we sure the referendum will take place. I think it needs a majority in parliament right? And the Greek PM has only a two seat majority.
I have to agree mostly with the 1st comment, not because I believe in direct democracy, but because the Greeks themselves need to take ownership in whatever they do. They need to make there own decision (pay or default) based on their own interests (though all options are awful) and to hell with everyone else.
A more interesting question, I think, is how did we get into a situation where a small country with a history of poor credit worthiness is able (by predictably following the same behavior) to blow up the whole world economy? Put more generally, why are we trending toward an economic system where relatively predictable problems are causing greater and greater crises?
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