Assorted Greek links (Greece lost)

1. The new Greek deal and trustDie Welt (in German) says that Greece has four months to get its act in order, otherwise prepare for an orderly exit.  Here is the comment of the Greek government issued at the end of the Eurogroup meeting, worth a read.  Here is a Rubens painting of Achilles.

2. Numerous sources suggest that without a deal, Greek banks would have been broke on Tuesday (Monday is a holiday there).  Given game theory, does this raise or lower your opinion of the quality of the deal that was cut?

3. Peter Spiegel notes on Twitter: “Morning after: still not sure why picked this fight. Got v little, & spent lots of political capital they need for 3rd progm negs”

4. The struggle resumes on Monday, with further negotiations required to define the actual substance of the policy reform part of the agreement.

5. It seems to me that if you put aside the talk, and the creative ambiguity on the primary surplus numbers, that overall Greece is on a shorter leash than before.  The Germans have shown credibly that they are willing to live with Grexit, Syriza showed it doesn’t have a Plan B, doesn’t have so much support within the eurozone, and it is revealed that Greek deposit flight is on a trigger-sensitive path at any moment.

6. Should you be afraid of dark matter?


I want to thank you for making me money on a Greek etf. Without your statements that Greece would default or exit from the EC, I would have not made as much money on my Greek etf. (Grek)

Special thanks go out to Angela Merkel.

You were falling all over yourself to type out your humblebag and couldn't even jam it into haiku form? Actively trading stocks is a great signal of a gap between actual and self-perceived IQ.

Trading on some stocks is trading on the gap between public opinion guided by politicians and economic reality.

My haiku is broken, and is in the shop being repaired.

Nonsense. In a global capital market, opportunities frequently arise due to the big emotional swings of under-informed, over-excitable Anglo-Saxon traders.

EMH: If you are aware of these opportunities, how are better-informed investors not aware? HFT: How can you exploit opportunities against faster investors?

In other words, chalk Bill's win up to a gamble that paid out. What is it that some people call lotteries? A tax on stupidity?

HFT and longer term investing/speculating aren't really competing with each other. HFTs are just looking to make the bid/ask, do arbitrage or earn liquidity rebates. It would make no sense for them to take large directional bets.

"opportunities frequently arise"

Joe, when the opportunity has been capitalized, is it the intention of the active trader to hold the purchase at its now market-corrected price? Of course not. If such opportunities exist, money sitting in accurately valued funds is nothing but a drag on possible return.

Common sense > EMH. Only the weak EMH even remotely plausible.

Common sense = EMH. If the sense is common, how can you take advantage of it. That's the point. Active investors bet they are better than the market - the majority of them are wrong every year. All of them are wrong over sufficient time periods.

Just because active investors do it for a living doesn't mean that someone who isn't an investor can't beat them by being smarter. As you say, they drop the ball all the time. They sell bullshit and people eat it.

Jan, we don't disagree. Active investors are either suckers, inside traders, heavily advantaged, or professionals who make money fleecing customers.

I'd like to invest in your fund, Millian

Millian's fund is closed, but I invite you to join VTSAX. 15.86% average annual return over the last 5 years with an expense ratio of only 0.05%. >50% to beat active investors.

What is the Straussian reading of the choice to add the link to Rubens painting on #1? Is it suggesting that this is ... Achilles' (aka Greece's) last stand? Cue the Led Zepplin.

Now to speculate of dark matter and The Troika...

#6 pure speculation evidence, even

Does this confirm or deny the following from 1-1-2015 - 'So I think Germany will play brinksmanship with Syriza and, when the time comes, simply pull the plug and leave them high and dry.'

Either the German government hasn't pulled plug after engaging in brinkmanship (essentially "no money without out terms"), or the time to leave the Greeks high and dry is still whenever the time comes.

Much like predicting eurogeddon - still valid at some point in the future, with the certainty that over the long term, the death of the euro is definite. When the time comes, that is.

Like this statement from 2-1-2015 does - "So why, then, do I believe that Greece will leave the eurozone?"

Luckily, forecasting economic future is not a science, so one should not take it too seriously, as noted at the end of that post - ' I don’t consider this kind of prediction to be very scientific, but still we proceed by engaging in discourse and, next time around, seeing what we got wrong the time before.' Well, years of predicting immiment eurogeddon would seem to be enough discourse, but hey, tenure is provided at taxpayer expense in part to ensure that those holding it are free from being held responsible for their words and predictions.

Neither. We'll now in 2016

It seems to me that a lot of people are quite badly misinterpreting Syriza's decision making.

Syriza's first priority is ending austerity, and there's no backup plan for going against that priority. That's what they ran out, that's what large majorities of Greeks want, that's what the protest movement in the street is demanding, and that's the one issue their governing coalition is based on. If its government is to survive at all, and especially if it's going to be seen as any kind of success, Syriza needs to succeed in reversing austerity. It would love to do this while staying within the Eurozone, it's all about whether Germany / the ECB are going to let that happen, or if they'll force Greece out of the Eurozone in retaliation for Syriza's anti-austerity measures.

We will see what happens on Monday, but Varoufakis has already said they don't plan to back down in pension reductions or VAT increases. Given that, I think it's unlikely that Syriza will make many major fiscal concessions, especially since they know that their own economy, and thus their own popularity, will improve pretty much in proportion to how much they're able to increase spending. A 4 month breathing period for Syriza to consolidate its position and start making its own kind of reforms before hitting the next high-stakes debt negotiation deadline seems like just the outcome Syriza would want.

The agreement is clear the the only fiscal policies allowed are those that are budget-neutral. "Austerity" proceeds as it has and Syriza can implement almost none of its program.

Simple. To show that their actions are budget neutral, they need to hire a Republican economist who can do dynamic scoring to get them out of this.

Uh-huh, and ACA is going to save a trillion, Bill. Booooring.

Savings already accruing in Medicare. You will lie and say it can't possibly have anything to do with the ACA. Cue dueling R talking points about the ACA being a cut to Medicare while simultaneously making it cost more. You will lose this argument every time but still love having it.

Still waiting for the tax cuts to trickle down.

Jan, are you ascribing demographic trends created over 50 years ago to the ACA?

Syriza’s first priority is ending austerity,

The ratio of public expenditure to domestic product is 0.59 and their debt load is 175% of domestic product. What would 'non-austerity' look like?

The "comment" issued by the Greek government is absolutely did these clowns get elected?

Hey, I know your "mood affiliation" is strong... but calm down son!

Syriza just bought 4 months to load up the cannons of νέα δραχμή.

If the next months of negotiations go nowhere productive ¡BOOM!

It takes a while to prepare for your own currency. Here comes the gyro!

X-Files kinda' anticipated Tyler's link about 20 years ago, with a mad scientist whose experiments turned himself into dark matter or dark energy (that really wasn't clear). ;)

"Geece lost"

Beg to differ; yes a complete defeat, but for the creditors. Greece got her bridge financing, in exchange for a "negotiation on reforms", to be mutually agreed between the Greek government and the "institutions". So no firm conditions but new money. The more crucial issue, IMHO, is the removal of the 4.5 budget surplus requirement. Yep, never reasonable, but a necessary window dressing to pretend "Greece will repay her debt in a timely manner". The removal is akin to further debt relief in everything but name. So who was defeated here - I rather think it was not Varoufakis.
Secondly, I would like you to consider Ambrose's view -
"The interim accord gives Greece breathing room to flesh out its economic agenda and reform plans, and effectively scraps the draconian fiscal targets imposed by the EU-IMF Troika. " and

"The rhetoric is intended to assuage German public opinion and smooth the passage of the legislation through the Bundestag. The eurogroup text is drafted in such a way that both Germany and Greece can spin it differently at home. "

Basically, Varoufakis 1 Schaeuble nil. I just wonder why everybody tries to spin it the other way round - so to delay the news for the German populace who is fleeced - time and again?

Dark matter causes volcanism? That's silly. Global warming causes volcanism.

Bullshit! Everyone knows Scott Walker causes vulcanism!

He isn't that bad a musician - though he and his "brothers" did sing "The Sun Ain't Gonna Shine (Anymore)."

So he did badly in French, he sure did smoe bang up interpretations of Jacques Brel.

We need Republicans to get out of the way of the President. We need to pass the Democrat's Universal dark Matter Bill, to stop anthropomorphic matter-dark matter annihilation.

Only racists don't agree that Scott Walker causes vulcanism!

Greece has four months to get its act in order, otherwise Mummy will be really, really cross.

Given the strane statements of various folks here,
what did the 18 other Euro members, including Germany want, but not get from Greece ?

What specific?

"Only approval of the conclusion of the review of the extended arrangement by the institutions in turn will allow for any disbursement of the outstanding tranche of the current EFSF programme and the transfer of the 2014 SMP profits. Both are again subject to approval by the Eurogroup. " (comment, without that Money the Greek government is bankrupt)

"The Greek authorities reiterate their unequivocal commitment to honour their financial obligations to all their creditors fully and timely.

The Greek authorities have also committed to ensure the appropriate primary fiscal surpluses or financing proceeds required to guarantee debt sustainability in line with the November 2012 Eurogroup statement. The institutions will, for the 2015 primary surplus target, take the economic circumstances in 2015 into account. "

I'm not afraid of dark matter or fire and brimstone cast down from the heavens.

My opinion is that the optics say that Greece lost, but here is the thing- Greece simply can't pay back the debt, and that hasn't changed. Nothing in this deal at the moment indicates that Greece is going to do anything to increase or even continue efforts to pay back that debt (the primary surplus, if it ever existed, is gone at the moment). Now, the interim agreement seems to indicate that Greece still hasn't secured further funds from the Troika, just a promise of a bit more over the next four months if the Troika approves whatever Greece says it is going to do in the next few weeks- this sounds like an agreement to work on an agreement to cover four months at which time they will have to come to another agreement.

I think Syriza realizes (now) that Grexit would leave them in the position of having to break all their promises of new spending anyway- the promises were always ridiculous unless the Troika agreed to send even more money to Greece, which was never going to happen. If I were a Greek citizen or business, I would use this window, starting Tuesday, to get all my financial assets out of danger of a future Grexit. I don't know if this can can be kicked again this Summer- I doubt it.

Yancey, You might want to read this from a swiss macro economist:

Yeah, that all sounds pragmatic if we can find beings other than humans to implement it and live by it.

I think Syriza realizes (now) that Grexit would leave them in the position of having to break all their promises of new spending anyway.

They could spend all the Greek fiat money they wanted. What it would buy is another question, of course, but Greek voters probably won't figure that out right away.

Syriza and the Greek parliament are not up for reelection soon, so their time horizon might be a bit longer - unless their situation deteriorated so much that they face defections in parliament or a coup or revolution. Do they have the party discipline to avoid suicidal defections on noconfidence votes?

I will bet you the more democratic the mess in Greece gets, the more likely Greece repudiates the debt. This is what the people demanded, and they deserve to get it, good and hard.

Democracy is a learning process. I don't think Syriza are anything like as bad as the Chavistas or the Iranians, Greece will still have real elections. Elections have consequences, consequences have elections.

Honestly even without Syriza, Grexit may be their best option at this point. The ECB is not Europe's friend, they've practically created a recession. Let them retire $250B and swear they'll never do it again. Not shedding any tears for the ECB in all this.

Greece simply can’t pay back the debt,

Were public expenditure in Greece were of sensible dimensions (say, 30% of gdp absent debt-service obligations), they could pay back the debt.

That is "Mood Affiliation"... If you look at EU stats Greece is not such a huge outlier...

No, it's just sense. Can't help it if Eurotrash politicians are lousy at managing their country's political economy.

When are we going to create a dark matter reactor? Massive in size to pull in dark matter and causing it to anihilate itself, then use the heat created to boil water, run turbines, and make electricity.

I'm not seeing any downsides here. PATENT!

Why Grexit simply won't happen—two strong reasons.

The argument seems to be "Syriza made lots of impossible promises but never said it would leave the euro" but that's unpersuasive -- once they say that, there's less chance of the EU throwing concessions at them.

Syriza would like to repudiate Greek debt, but cannot do so without leaving the euro.

Detroit repudiated a lot of debt; did it leave the dollar?

If Detroit had printed its own money and used that to repay all its debt would it have solved its problems?

Detroit's profligacy was backed up by 500 billion dollars in annual defense spending. Can Greece say the same?

Yes, actually. Greece until recently spent a larger proportion of GDP on arms purchases than any other country in the EU. In fact in 2006 it was the third biggest arms importer in the world. Those arms imports came principally from French and German suppliers (and please don't tell me that as private sector suppliers the governments weren't involved - governments are ALWAYS involved in defense procurement, even below the counter). Purchases have diminished somewhat in recent years, but even when Greece was being bailed out in 2012 France and Germany still held it to previously-signed arms purchase contracts. Germany and France knew perfectly well that Greece did not meet the criteria for entry and was lying about its true financial position, but they chose to ignore it because of the benefits to their defense industries. Papandreou's crime was that by revealing Greece's fraudulent accounting, he broke the conspiracy of silence. That was why the German and French governments wanted to "get out the bats" (according to Geithner).

Detroit filed for Chapter 9 bankruptcy in a Michigan court. Has Greece tried that? I'm open to any options, but I worry that's going to be a tough case to win.

Sovereign currency won't solve any significant fraction of Greece's current problems, but it will allow them to avoid the government going out of operation entirely for lack of funds, if no one is willing to lend to them.

>Nobody can expel Greece from the eurozone according the valid EU law. Also, no external force can make Greece printing its own currency.

While the first sentence is true, the second one is completely false. Greek banks are only alive because of liquidity assistance from Europe. Pay attention to yesterday's agreement: they moved all the money in the HFSF to the EFSF so that the Greeks can't control it. There are also a bunch of issues with the kinds of collateral the ECB would accept from Greek banks. In any case, the point is that the ECB can unilaterally kill the entire Greek banking system in a second.

How do the Greeks recapitalize the system in such a scenario? They obviously can't borrow from anyone, so they either stay in the Euro but without a banking system (not happening), or they leave the Euro.

As for the party's proclamations, keep in mind that leaving the Euro is very unpopular in Greece. Even if it was their goal, they would not advertise it.

How do the Greeks recapitalize the system in such a scenario?

Depends on what their liabilities are.

If Greece printed drachma, would you accept payments in drachma for goods you sold to Greeks in the past (ie, repay loans in drachma) or in the future?

The Grexuberance is certainly amusing.

Looks like the EUrocrats are giving themselves a few months to make the exit a bit more orderly and some political room to say "we gave them every chance we could." Hopefully no one seriously expects a far left coalition elected on virulent promises to repudiate fiscal responsibility to do exactly the opposite.

Even if they did somehow manage to wrangle addditional concessions, its hard to fathom how they could enact the massive spending cuts required. And even then, voters would just throw them out.

Rip the band-aid off, Europe. You should have done it $250B ago, or better yet never invited under-dressed Greece to the party in the first place.

Pollyanna Rosser says this looks sort of like what I expected. We have an agreement that can be spun to look like "victory," or at least not defeat by both sides. Greece has a four month extension, and despite all the talk of people here or that Tyler has linked to, it does not look like anything is being demanded of them during the next four months. Will Germany or the Eurogroup or the ECB be any more eager to see a Grexit in four months than they are now? I do not see why, although, of course, Tyler is convinced that this is what the Germans want, and it would seem that probably at least some of them want it. But does Merkel and does the ECB? Both of those remain unclear.

If what some here are accurately reporting what the Greeks are planning to do internally, it does not look all that much like an end to austerity. They may be planning to spend more and end all kinds of fiscal restrictions and so on, but if they are going to raise the VAT, well, that will presumably pay for some of this. I have seen on other sources that they are expected not to be paying more than 2.6% of their GDP, although that may be what they are paying now. They may not have gotten any formal give on what they are supposed to do in the long run, but they did get their extension, and it does seem that they are taking some actions that are not obviously either insane or totally irresponsible.

Oh, and the markets were pretty quiet yesterday, with the 10 year bond yield falling slightly and a bit below 10%. That is clearly no triumph, but it is also not nearly as high as it has been. The situation seems to be stabilized for now, if not wonderful for the Greeks. But then, I don't think anybody, including them, thought that they would be in a wonderful situation right now. If not being in a wonderful situation right now constitutes a defeat, well, so be it. But they certainly do not seem to be accepting that characterization of it, which is, hack cough, exactly what I predicted would be the outcome: both sides spinning it their way.

I don't know anything about this situation and I guess I am temperamentally inclined to see the glass half full. So I am willing to grant that I might be missing a lot.

But all I see is the Greek Prime Minister making dramatic announcement of what he would not sign and why. Next day I see him sign the very thing he said he would not sign (presumably with a gun to his head in the form of a threatened complete destruction of the Greek banking system). I see that the agreement simply continues the current situation (which the Greeks said was unacceptable) for four months. I am guessing this is because the Greeks would not agree to go on for any longer in spite of the gun to their heads. What is the resolution to this?

I know the pessimist are rarely right (as with the optimists for the matter), but all I can think of is the time right before the Lehman's Brothers were not bailed out. Optimists thought the relevant authorities had it all in had up to the movement that happened. And I see the basic problem as being the same in both cases. The authorities felt strong pressure for no more bailouts both from the public and from moral hazard concerns just as with Greece. But just as with Greece, Lehman Brothers could not be save without another bailout.

A gun? Maybe, but I wonder what one could learn by looking at the foreign bank accounts of some new Greek leaders.

>it does not look like anything is being demanded of them during the next four months.

Surely we have to wait until they reveal the planned reforms in Monday to determine what is being demanded, no?

And of course they remain committed to the program as agreed on in 2012.

#5: I guessed Syriza would deal, but I'm not so sure the Germans had good reason to think the risk of Grexit worth taking. For reasons I've made clear in the past, Grexit was in nobody's interest. The geopolitical costs alone were potentially catastrophic.

You may tell a strong-willed teenager that he's free to move out while he still knows everything, but both he and you know that's not a realistic option.

Syriza did drive a harder bargain than previous governments, and has, apparently, won at least a little more flexibility. So they've made at least a little headway. Let's see what they come up with this weekend and what the Germans make of it.

For reasons I’ve made clear in the past, Grexit was in nobody’s interest. The geopolitical costs alone were potentially catastrophic.

Catastrophic to whom?

I think #5 sums up the situation very well.

Tsipras has caved on accepting troika control over Greek economic policy. Now the question is how much flexibility will they give him and how well will he perform in at least getting the fiscal balance back to where it was last year. This is a tentative short-term deal that depends on him doing the opposite of what he promised.

There is no such thing as dark matter, it is just an absurd mathematical shim to support the current thinking.

What's so absurd about it? Quantum mechanics sounds pretty absurd but is well verified.

Which inherently makes it not absurd. The absurdity of dark matter is that it has no reason to exist but for the theoretical convenience of particle physicists and astronomers, it may exist but it is up there with phlogiston at the moment.

It's physicists aether. It's God. It's AGW.

Looks like Merkel yanked back hard on Schauble's chain at the last minute.

I think you have number 5 backwards. As deposits flee, they are replaced with reserves. That's how the payment system works. The more reserves, the greater the exposure of the ECB, and the greater the Greek negotiating power.

That's a fair point, though you've stated it a little oddly. As deposits flee, they're paid out with increased central bank credit to commercial banks, which increases the contingent liability that could fall on other currency union governments if Greece quit the euro. That's why the ECB limited such lending in early February, though it then relented somewhat by twice raising the ELA limit.

Though with Greece directly owing about €230b to EU governments, the EFSF, the ECB, other Euro NCBs and the EIB, the difference between a €56b contingent liability from Eurosystem lending to Greek banks at the end of December and roughly €80b now probably doesn't give Greece a whole lot of extra leverage.

"The Germans have shown credibly that they are willing to live with Grexit, Syriza showed it doesn’t have a Plan B, ..."

Germany is willing to be repaid in drachma??

How is that different than Syriza's plan A of repudiating the entire debt?

Of course, none of this addresses the Greek trade deficit that Greece printing drachma will not solve; no one is going to accept drachma in payment and will demand Euros or dollars.

"Of course, none of this addresses the Greek trade deficit that Greece printing drachma will not solve; no one is going to accept drachma in payment and will demand Euros or dollars."

In a convoluted way, could be argued that this is the mechanism whe Greece printing drachma will solve the trade deficit

Do they have a trade deficit? I would be shocked if that were the case today- might have been true prior to 2010, but very unlikely today.

All the troika debt was issued under English law. The Greeks can't unilaterally default on it and can only pay it in euros, make no mistake. I remind you that during Greece's first default, holders of debt under English law that did not voluntarily take the haircut were paid fully and in time.

If they try to default they're stuck in an Argentina-like situation where they have to repay the debts if they ever want to access international markets again.

Hm, mythology.

"I'd hammer in the morning - I'd hammer in the evening"
The angel of hammer, avatar of Thor who is famous for fighting serpent.

The first king of Athens was from the serpent cult

A certain ex-PM has a mural of a large serpent in front of his mansion.

A certain ex-PM whose surname was derived from the name of a serpent goddess, mother of Apollo.

Cyprus was the ancient Greek Serpent Island.

What is the avatar of Thor going to do with the dragon by her side ??

1: As to who "won", at teh end of the day, the Greeks are still getting one metric shit-ton of cash and the Europeans are getting promises from the oh-so-credible Greeks to do better in the future, as long as the EU isn't mean and lets them do what they like. You can say the terms favor the EU and the Germans, and that may be true. But they got promises, and the Greeks got money, and that is really all that matters. If you give me a billion dollars, I promise to revolutionize the US economy and repay you with interest at some future point. Any takers?

2: Even if Syriza does manage to thread this needle and avoid a grexit (which I think they will), what stops the Greeks from just electing an even-more anti-EU government and demanding a renegotiation in a year or two? This is the problem with negotiating with such an unstable democracy. You can never know who will be across the table in a year's time. Could be Golden Dawn. Given the mood of the Greek public, it seems unlikely it would be anyone more tractable than what they have now.

The greeks led by an alleged game theorist were badly led - if you paid University fees for the game theory knowledge of folks involved in this debacle you should demand a refund

In India the average mutual fund outperforms the index.

I would like to see some academic studies about why that is so.

My mutual funds have beating the markets after fees and taxes since 2000.

I have kept a public record since 2006 on

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