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Wednesday, 21 September 2011

Will Greece run for longer than Agatha Christie's Mousetrap?

I get the feeling that the Greek tragedy is being played out at such length that it is bound to end in farce, not to mention some more deaths on the streets.

Really, it is now all about protecting the interests of those banks, like BNP Paribas, whose very highly-paid and supposedly very highly intelligent suits thought it was a jolly good idea to buy lots of Greek bonds, thus encouraging the Greeks to take advantage of their stupidity and issue even more bonds.

At no point, as far as I can see, were the Greek economy, Greek tax revenues, Greek budget surpluses growing at the kind of rate which would make it possible to service the debt, let alone repay the money. The suits at BNP Paribas clearly did not feel it necessary to look into such matters. I guess they assumed that in case of difficulty, they would be bailed out. This, unfortunately, is a reasonable assumption. We can't have bankers having to pawn their suits.

So both Greece and the bankers were taking each other for a ride. They both deserve to fail.

My humble suggestion is that we should stop feeding the bond market. Governments should not normally run budget deficits and, indeed, should run surpluses in order to pay down existing debt. If the volume of accumulated debt is just too vast for repayment to be feasible, then governments should default and vow never to borrow again.

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