Bloomberg's page about the Athens Stock Exchange informs us about the significant changes in the Greek market in the wake of the catastrophic elections three days ago. The main index has dropped from 1,300+ in March 2014 and 840+ on January 23rd, 2015 to 711 today. The total damages of the elections on the capitalization of the companies exceed the total effect of all Greco-Persian wars by many orders of magnitude.
The Greek banks were doing worse, of course. They dropped by almost 70% in the recent year and by almost 40% years since the elections. Thankfully, the markets are behaving much more rationally than in 2010 or 2012 and most people seem to realize that Tsipras et al. is only a cataclysm for Greece, not so much for Europe or the world in which Greece is a small, unimportant, and largely disconnected territory. All major market players seem to be aware of the fact that Europe is pretty much ready to disconnect Greece formally, too, and it may be almost as smooth as the dissolution of Czechoslovakia, at least on the European side.
Yields on 10-year bonds have jumped above 10%. It means that after 10 years, one has to return about \(e=2.718\) times more than what he borrowed. Some shorter-term bonds have yields above 16%. Update: three-year bond yields went to 18.5%.
The decreases of the stock prices make perfect sense. Tsipras and his comrades have promised to pretty much liquidate every company and every individual who is not one of the millions of borrow-a-lot-never-return parasites that are called the Syriza electorate. So far everything suggests that they are going to be tough. Banks won't be allowed to effectively demand their money to be returned from the borrowers. Foreclosures on houses up to €300,000 will be impossible, too. Everyone who is productive will be forced to contribute – thanks to an insanely progressive tax – to crazy programs such as 13th salaries for the government employees, free electricity and fuel for the poor, and tons of other things that Greece obviously can't afford even if the debt is completely erased. And of course, all the privatization has already been stopped. China is particularly angry that a privatization of a port was cancelled. The Chinese officials – who are clearly the pro-capitalist side of this dispute – have informed Greece that Tsipras is a new Phaeton, a mythological chap given powers exceeding his abilities who has to be killed by Zeus-issued thunderbolt in order to restore order (the original ancient Phaeton couldn't control horses which raised the threat of global warming).
It's very obvious that this system will collapse soon or later – probably soon. So Greeks have taken €8 billion of savings in cash from the banks since Sunday, in the hope that these euros will keep their value. This is a significant part of the Greeks' savings. Fortunately, Greeks are not big savers, so the savings are negligible relatively to the Greek public debt.
A potential silver lining of the aggressive attitude of these Marxist šitheads is that the Greek alphabet is somewhat similar to the Russian Cyrillic alphabet – well, instead of alpha, beta, gamma, delta, Russians start by alpha, beta, vega, gamma, delta (at least the first four were the names of 4 identical pieces of the Izmailovo Hotel in Moscow where I live in 1992, during the International Mathematical Olympiad). More importantly, they share the Orthodox Christianity.
Wouldn't you expect this religious proximity to have consequences? You should have.
Greece has made it clear that they disagree with an EU criticism of Russia in the wake of some shooting in Mariupol, a port that Novorussia may want to conquer in order to connect mainland Russia with Crimea. They seem to oppose new sanctions and in March, they may even veto the existing sanctions against Russia. Yes, a veto is enough. None of the relative cowards who largely oppose the sanctions has used the right of the veto but the Marxist šitheads in Greece are not cowards.
I think it would be great. About €50 billion of the Greek debt should be forgiven if they manage to end the meaningless EU-Russia sanctions war. And when the relationships with Russia improve again, the EU should donate Greece to Russia as a gift, in order to try to heal the scars that were made in 2014. It won't be a terribly expensive gift but it will be a gift, anyway.
More seriously, there exists a U.S. self-described economist who has praised Syriza's policies. These policies that make Vladimir Lenin look like Adam Smith in comparison have been hailed as fairly conventional economics. Today, Krugman wrote another op-ed whose title is Syriza should ignore calls to be responsible. I guess that Syriza hasn't been irresponsible enough so far!
Krugman is clearly a raving lunatic. It is insane that many people in the U.S. still like to connect communism with Russia – but they happen to overlook Paul Krugman who lives in the United States.
His blog is full of absolutely incredible rants. For example, the newest one asserts that the collapse of the Greek stocks is in no way a verdict about the new Greek government! It is only an expression of the high risk of a disorderly breakdown of the whole process, an event that will surely have nothing to do with the new government, Krugman teaches us! ;-) The breakdown will have to be a consequence of the planned invasion by the extraterrestrials that Krugman unmasked a few years ago in order to cover the U.S. with new useless railways.
I can't believe that someone may be so incredibly stupid, especially if some bureaucrats gave him the "Nobel memorial prize in economics".
Make no mistake about it. Markets are pretty much sensible and they are much more sensible and calm now than they were years ago. They know that the world won't end because of Alexis Tsipras – markets are already able to avoid silly myths about domino effects and the idea that everyone depends on everyone else and everyone shares everything with everyone else (a myth that the fans of redistribution want everyone to believe!) – but some companies may die or lose much of their profits and this is exactly expressed in the prices of the stocks. Of course that unless someone neutralizes Tsipras and lots of other people very quickly, certain companies are pretty much doomed.
All companies in Greece, led by those traded at the Athens Stock Exchange, are the places where the profit is generated and the Greeks ultimately live from this profit. The drop of the index by 15 or so percent in three days approximately means that the expectations about the profits that the companies – a representative part of the Greek economy – may make in coming years has dropped by the same or similar percentage. This drop will be inevitably translated to the drop of the Greek living standards.
Of course, Syriza are hysterical communist loons so they believe pretty much any toxic Marxist conspiracy theory you have heard in your life. The idea that banks are bad and not needed is surely one of them. But banks are absolutely essential in anything we call a national economy in the modern sense. Even some of the very poor countries have banks. They need banks like everyone else. The more advanced a society is, the more dependent on banks it is.
Banks are playing the role of the intermediaries in between the lenders and borrowers (and borrowers include almost everyone who builds something for the future, as an investment), and for doing this matching rather effectively, they are earning the gap between the two interest rates which is some fraction of the higher interest rate (paid by the borrowers). If banks didn't exist, the individuals and companies would have to do the same job – looking for funds and/or looking for ways how to invest the funds to get some return – themselves and of course that they would do so less efficiently (and the work for the lawyers would be tougher and more chaotic, too). The only reason why banks still exist is that banks are doing these things more efficiently than what the lenders and borrowers could manage to do "directly".
The profit they earn is as deserved as the profit made by any other company.
There is really no conceptual difference between the work done by a bank or a brewery or a software company or any other company – and their revenues, profits, their relationship with the service done for others, and the relationships with everything else in the economy. Every selective intervention against a sector of the economy is guaranteed to be harmful. Sometimes, others may benefit. But we see that no one has really benefited from the fall of the Greek banks. Other stocks have also fallen, albeit less dramatically. After all, if banks are in trouble, other companies that depend on their services will also face some troubles.
Various populist parties across Europe – sadly, this list includes Front National in France – are excited about this chaos and damage that has already been done and that will be done by Syriza. Syriza has given the finger to the EU so it's great, we are told. This is a very short-sighted attitude. Some of the leaders of these parties may be decoupled from the real economy but most people – and even most voters of these populist parties – aren't. To one extent or another, the decrease of the capitalization and profits of the Greek companies will be translated to a lowered ability of the Greeks to repay any debt and to their lower living standards. And if a similar party with a similar program had won in another country, it could cause a similarly devastating impact as Syriza in Greece.
(Minutes ago, the Bank of England governor published a Syriza-like anti-austerity, pro-redistribution rant, holy cow. This šit is almost everywhere.)
It is silly to link these controversies surrounding the new Greek government with the EU. The EU hasn't invented the concept of loans. The EU hasn't earned the money that were largely wasted in Greece. It was the taxpayers elsewhere, mostly in Germany. If the EU didn't exist, the situation would be almost the same in principle. The lender side wouldn't use letters such as the EU and perhaps not even the IMF, but it would represent pretty much the same people and their interests. Hard-working people from nations that are more likely to be savers, like Germany. Long before the EU existed, it was assumed that people should return the money they have borrowed. This principle isn't an invention of the EU. So if Marine Le Pen celebrates a Marxist aßhole for his claims that one doesn't need to repay any debt because it is silly (and it is a rule invented by some evil EU bureaucrats or bankers), she is not fighting against the EU. She is fighting against the principles of the Western civilization and the capitalist economy as we have known them for centuries.
People are often talking about Grexit – the Greek exit from the eurozone and perhaps the EU – and about their new independent currency, and so on. We also discuss whether their debt will be lowered again. Pretty much everyone in the rest of Europe says that the repayment may be delayed and perhaps the interest rates may be artificially lowered or something like that but the principal can't be slashed. Of course, none of the people in Europe is as loud as Tsipras so we can't be sure that he won't push them to some currently "silently unacceptable" positions.
But all these things are relative details for Greece. The currency a country uses is a technicality. Czechia still uses its crown, Slovakia has switched to the euro but the differences are mild and technical. I think that sensible people understand that the crown is artificially kept undervalued which affects Slovak hoteliers and many others. But it's just about a dozen of percent. The membership in the EU is a technicality, too. Switzerland and Norway are not members but they don't differ from Austria and Sweden much. And even those €300+ billion in debt – while it's a large amount expressing the accumulated Greek irresponsibility in recent decades – is a relatively minor issue.
What is at stake is the future of Greece, even in the long run, and as you know, the future in de Sitter space is basically infinite (if we ignore the Poincaré recurrences). What is at stake is the risk that it will produce €50 billion deficits every year, for decades, if it is allowed to. And if it is not allowed to, which is hopefully more likely because the irrational fear of the divorce has largely evaporated from Europe, the question is whether anything may work and become productive in the post-bankruptcy Greece.
Even if you imagine that the Greek debt is completely erased, Syriza's policies are so anti-market, anti-capitalism, anti-production, and anti-growth that pretty much all people who do something useful or who are talented or who are anything else than a worthless pile of fat and protein that voted for Syriza will simply escape from the country, legally speaking. They may still have a nice villa over there, if it is not nationalized, but their citizenship or residency will be changed so that they are not subject to the terrifying rules that these hardcore communists want to introduce. Only the unproductive people will remain there.
When isolated from other facts, this could just mean that Greece will fall to the level of Albania during communism or something like that which is not a "complete tragedy". But the extra problem is the dramatic downward slope that will be so psychologically devastating for many of them. In the recent 2 years or so, Samaras and pals were governing Greece more or less sensibly, as a generic center-right party in Europe. That meant that there were almost no "flagrantly anti-capitalist" policies in place. And Greece actually lived comparably to what is sustainable within the capitalist framework given its current situation, abilities, and wealth.
But Tsipras and his comrades are going to destroy most of the "ability to produce" that still has survived in Greece up to the present day. And they will be disconnected from the "extra subsidies" that the Greek governments had gotten used to, anyway. So when it becomes clear that new budget deficits won't be financed by other Europeans anymore because everyone recognizes that those loans to an untrustworthy country such as contemporary Greece were a mistake that shouldn't be repeated, it's guaranteed that the living standards will be far lower than during Samaras' years. Tsipras may lie 24 hours a day and "promise" that he won't allow any austerity anymore. Most people in Africa and elsewhere in the world want to live in luxury, too. But the laws of Nature impose austerity upon them, whether they like it or not, whether they prefer the Marxist, Stalinist, or Maoist wing of Syriza or any other pile of crap.
You simply can't fool the laws of physics.
If Tsipras will reject to repay the debt, and it seems that his demands are going to be vastly incompatible with anything that the lender side considers acceptable, there will be a full-fledged dirty default. That will mostly mean that some €250 billion will disappear from the EFSF, the eurowall fund, which is a largely abstract warehouse with banknotes that doesn't directly affect anyone else. The eurozone, EU, IMF, and other officials should already start to clearly speak about their approximate plans for this event. They should already start promising exports of putrid food into Greece that will reduce the number of Greeks who will die of hunger in coming years, to emphasize how humane the EU is towards its troubled neighbors.
When Greece is incorporated into Russia, maybe the Kremlin will be kind and will extend its laws such as the minimum salary to the new Russians in former Greece, too. Let me just point out that the minimum salary in Russia is €83 a month, slightly less than €751 a month that Syriza promises to introduce (because they probably believe that they are 9 times more productive than the Russians). So some details may be a bit different than what these individuals have been promising. But otherwise, life in Russia is good enough and I doubt that Greece will want to live as a separate country.
At any rate, the reality can't be masked and denied indefinitely.
And that's the memo.
P.S.: A comment about the pathologically bloated bureaucracy. Left-wing NGOs and media have criticized Syriza's new government because only 6/41 of the ministers are women. That's politically incorrect and blah blah blah. But none of these idiots has noticed the stunning information that the Greek government has a whopping 41 members. To compare, the Czech government – the government of an equally large country and economy – has 17 members. Is it hard to estimate that the average Greek government employee does 2.5 times less work than his Czech counterpart – and is getting a 2.5 times higher salary for that? And Czechia is no ultimate example of efficiency, either...