Monday, August 27, 2012

Open Letter To Tsipras and Samaras

To: Alexis Tsipras and Antonis Samaras
Re:  Attempts to de-rail the global economy and humiliate your great nation en route to winning a few miserable votes

Dear Sirs,
Thank you for your concerted efforts at ruining the global economy in order to try and game Northern European taxpayers into bailing out your insolvent country and ultimately shuffling the risk for your profligately accumulated debt onto their taxpayers.

Your plan appears to be working. You see in recent days a slew of companies have been coming out and warning of a drop of in orders and visibility, much of which seems to have accelerated in Europe around the time in between the two Greek elections in May and June.


Companies Are Starting to be Affected by the Uncertainty You Created

Adtran Inc (NASDAQ: ADTN) missed estimates and warned of a tightening spending environment amidst decreasing visibility. Acme Packet (NASDAQ: APKT) has its own issues but it is hard to conclude that orders decreasing in Europe weren’t a big part of their own miss. The same thing applies to Advanced Micro Devices (NYSE: AMD) which talked of weakness in Europe amidst weak PC sales.

To prove that this isn’t just about technology, Nike (NYSE: NKE) warned that its inventory in Europe would be higher than originally planned due to weaker sales. In addition Alcoa’s (NYSE: AA) CEO spent a fair amount of time on the recent conference call explaining how European Purchasing Manager Indices (PMI) were affecting his company. He even produced charts highlighting the increase in correlation between his company’s prospects and the macro-economic environment.

CEO’s are just like the rest of us. If they read newspaper reports talking of another ‘Lehman’ moment inspired by a disorderly Greek exit, they will hold back on investing. They will hold back hiring. They will stop creating wealth. Your plan is working.


Mr Tsipras Goes to Athens

A particular commendation is due for you Mr Tsipras. Your policy of continually reminding the rest of the globe that you might engage in a hard default and therefore possibly trigger off a financial crisis in Europe and ultimately the US was very effective. Indeed, your choice of language belies your intent. Quoting from an interview you gave with the UK’s Channel  4.
“On the other hand, our advantage is that if the funds stop coming in, we will have to stop paying our creditors. That would result in a domino effect in the financial markets all over Europe and create a devastating storm all over Europe.
 Both sides have nuclear weapons in their hands. And the big issue is to try and find a solution so that neither of the two sides pushes the button, because if something like this happens, no-one will benefit”

That’s the way to show them! Threaten Mutually Assured Destruction (MAD) on the other countries in Europe who have been giving you generous aid in order that you reform your economy and get back to a sustainable debt path. Why not reward the ECB for buying your bonds and lending you money by unilaterally defaulting and creating a black hole in their balance sheet? Why not thank the Europeans who voluntarily wrote off a huge part of your debt by threatening to ruin them unless you get what you want?


Turn Greece Into a Bank?

It doesn’t matter a jot that MAD was a doctrine used by mortal enemies in the Cold War. It has morphed into the de rigueur strategy between the best of friends in recent years. However I have a suggestion for how you might tighten your ‘game.’

The banks gamed the taxpayers by pointing out that the global economy would collapse if they weren’t bailed out in order to start merrily creating the conditions for the next crisis. Like Greece, the banks have a small number of people earning an inordinate amount of money and coming up with no end of –dare I say it- Byzantine methods of tax avoidance. The benefits of the arguments of ‘trickle-down’ (even if the reality is a myth) work equally well with banks and Greece’s not tax-paying wealthy. Why not turn Greece into a one big bank and apply for TARP?


Let’s Not Forget Prime Mnister Samaras
For you Mr Samaras the spoils! No I mean literally the spoils. The phrase ‘to the victor the spoils’ refers to an election winner gives government jobs to its voters. Or rather, in this case, promises not to sack any public workers.
This stroke of genius and your election victory, comes after a few years of voting against bailout proposals including the initial May 2010 deal. You even sacked prominent figures from your party when they voted in favor of the bailouts.  You are now holding together a shaky coalition having garnered political support by voting against restructuring measures that the Troika( ECB, IMF and European Commission) have asked Greece to enact in order to get bailout money. Meanwhile the second biggest party - led by the hard left Mr Tsipras- is merrily campaigning and marching against every reform measure.

Well done Sir!  Now precious few believe in you or that your Government will hold or even countenance making measures that might give your creditors a chance of being paid back the money you owe them. 

The good news is it doesn’t matter. You can always use the MAD doctrine to have another pop at blackmailing Germany, Austria, the Netherlands, Finland et al into taking on collective responsibility for your mismanagement, corruption, profligacy and non-tax paying elite. The worse the economy gets, the stronger your MAD bargaining position will be. Right?


Beware the Shark’s Finn

All is going well. You are getting what you want. However be careful, it might not be safe to go back into the waters of debt accumulation. Those pesky Finnish (who contribute more per capita to the bailouts than anyone else) are not happy. They keep raising the issue of collateral. In other words, the pests appear to think that imposing some conditions in order to actually try and get their money back is a good thing. How dare they? They clearly don’t understand how this is supposed to work!

What makes them dangerous is that if they agitate the situation and make noises about leaving the Euro (as they did recently) then the Troika might start crystallizing a choice in their minds. A choice between keeping a contributing nation in or removing a nation that doesn’t appear able or willing to pay any debt back and is threatening to destroy the economies of the rest by taking MAD action.
You never know, the Euro Zone might do something ridiculously silly and decide to throw out the serial debtor and keep the creditor in!


Cheer Leaders on the Sidelines?

On the sideline sit a multitude of investors who are pointing out that, according to BIS figures, Greece’s total debt held in foreign institutions is less than Ireland owes the UK. These investors think that if Greece is removed, then the uncertainty will be too.

These people think that markets hate uncertainty and so do CEOs. When it is removed then firms will invest again. Markets will move strongly higher and pent up corporate investment spending will be released. Be careful. These people are not afraid of your empty threats and they are sitting and waiting for your exit in order to get back in to the business of not rewarding blackmailers and investing, creating wealth, employment and good will.

Look out for them. They might get what they want soon.

Kind Regards,
N. Machiavelli

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