Academic

Blame It On Derivatives, Blame it On Goldman Sachs, Blame It On the Nazis. But Don?t Blame the Greek Crisis on Greece

By Kim Krawiec

In an earlier post, The Greek Crisis: Economic Meltdown or Mental One?, I took issue with a recent New York Time?s article which contends that ?Wall Street tactics akin to the ones that fostered subprime mortgages in America have worsened the financial crisis shaking Greece and undermining the euro by enabling European governments to hide their mounting debts.? For a variety of reasons elaborated in that post, I conclude that, ?this article might be one of the least persuasive pieces of financial reporting I?ve seen since the start of the financial crisis, and that?s saying a lot.?

Since then, the Times has run two more articles, including one yesterday, blaming the Greek financial crisis on derivatives and the banks that sell them, and reporting that the Federal Reserve is investigating Goldman Sachs and other banks.  According to the same article, the SEC:

could ?neither confirm nor deny the existence of an investigation,? but added that it was cooperating with United States and international regulators in examining ?potential abuses and destabilizing effects related to the use of credit-default swaps and other opaque financial products and practices.?

Whatever that means.

In two interesting posts here and here, Felix Salmon takes on another Times piece on the topic, Banks Bet Greece Defaults on Debt They Helped Hide. Says Salmon:

Ben Bernanke said today that he?s looking into the issue of whether the CDS market is enabling some kind of run on the Greek government. I sincerely hope he was just being polite to his Congressional overlords, rather than buying in to this theory.

It?s worth looking at the NYT story in some detail, to see just how little sense it makes.

But today?s news brought the blame game to new levels.  Via TIME.com:

It's not quite World War III, but tension over Greece's debt crisis has ignited a battle of words between Athens and Berlin, reopening old wounds and raising the specter of Nazism. . . .

Greece's deputy prime minister, socialist stalwart Theodoros Pangalos, told the BBC that Germany still owed Greece for stealing its gold during World War II. . . .

Vassilis Tsimpidis, a Greek dockworker who protested this week against government austerity measures, echoed the sentiments of many Greeks when he said Greece's modern problems could be traced to German's wartime sins. "German people believe bad things about Greeks, but we want to remind the German people that they destroyed Greece in the Second World War," he said. "We haven't had a good life the last 40 or 50 years because of the war." Using a figure widely brandished in Greece as an estimate of Germany's war-related debt to the country, he called for Germany to "give us ?70 billion to pay us for the war. That would solve all our problems."

German taxpayers, though, aren't buying that argument. In an open letter published in a Greek newspaper, German journalist Walter Wullenweber of Stern Magazine compared Greece to an ungrateful child and Germany to an aunt who is never thanked for her gifts. He calculated that if all the aid Germans have given Greeks was added up, since 1981, Germans have given each Greek $12,200. In return, Wullenweber complained, Greeks swindle the European Union and retire early. "You are by far our most expensive friend," he wrote.

No comment.

Related Posts:

The Greek Crisis: Economic Meltdown or Mental One??
The Modern Greek Drama: Comedy, Tragedy, or Both?  ??
The Modern Greek Drama, Part 2 ?
Verge of the Unböring (The Modern Greek Drama, Part 3)?
Is 2010 The Year of Odious Sovereign Defaults?

Full post as published by The Faculty Lounge on February 27, 2010 (boomark / email).