Greek austerity: a new version of the 1919 Versailles Treaty?

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Greek austerity: a new version of the 1919 Versailles Treaty?

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Modificato: Lug 16, 2015, 11:24 am

Is Greek austerity: a new version of the 1919 Versailles Treaty?

Germany’s Destructive Anger


Jacob Soll, a professor of history and accounting at the University of Southern California, is the author of “The Reckoning: Financial Accountability and the Rise and Fall of Nations.”

In the preceding article Jacob Soll compares the austerity of Germany following WWI to that which is being imposed on Greece today.

Of course those of us who have read Paris 1919: Six Months That Changed the World
by Margaret MacMillan and Richard Holbrooke had it explained why the terms of the WWI treaty were not as onerous as the Germans claimed them to be.

Anyone out there have the final word on this? Is the austerity required of Greece today the equivalent of the austerity forced on Germany following WWI?

Lug 16, 2015, 2:00 pm

While the origin of the austerity is different (war reparations vs economy in recession), it's still going to feel the same. The question is who will the average Greek lay the blame upon? If it remains upon the previous government and they approve of the new one's direction, they can weather the storm. If over the weeks and months to come they question the current leadership - if it appears weak, ineffective or indecisive and there's no signs of improvement - that's when the trouble starts.

Modificato: Lug 16, 2015, 3:09 pm

While the origin of the austerity is different (war reparations vs economy in recession)

The "origin of austerity" is that the Greek government ran up unsustainable debts, with unsustainable suspending and a risible tax system. Those who are asked to lend to Greece again would like some guarantee that they'll get some their money back this time. They're asking for Greece to cut spending and collect taxes, because they know Greece can never pay off its loans, or even pay for itself year-to-year, without that. If Greece doesn't want foreign-imposed austerity as a condition of spending more of other people's money, it can refuse the conditions, repudiate its debts, ruin its credit and international standing, and attempt to live by its own means.

Lug 17, 2015, 3:18 pm

It takes two to tango. Every time I read something laying all the blame on the Greek, Puerto Rico, whatever country, for unsustainable debt I have to ask, "What about the bankers that approved the loans in the first place?" Isn't it their job to investigate the creditworthiness of every borrower? Don't they haul out the "risk" they take whenever they want to justify they interest rates they charge? Wasn't it the bankers recklessness that started this debacle?

Why did the EU government banks bail out the private banks that caused the problem? Has the world really reached a point where keeping wealthy bankers filthy rich is more important than keeping pensioners fed?

Fifty years ago Germany's creditors wrote off debt that was unsustainable without getting moralistic about how the debt was incurred, by starting World War II. The territory of Missouri ran up a big debt to English banks, defaulted and later wrote it into their state constitution that they would never repay the money. Haiti was forced, like Greece, to accept unrealistic terms to "repay" France after they won their independence. Like Greece they did not have power or powerful friends to stand by them at the negotiating table. Haiti did pay off that debt, over a hundred years later. Is Greece the next Haiti? Will the money they need to maintain their infrastructure and provide basic services instead go the the EU banks? Even the World Bank says the terms are to harsh for Greece to endure.

Other than some former employees who really misses Leaman Brothers? If a few more of them were allowed to fail, or if they were punished for their misdeeds as sternly as an 18 year of black man caught smoking some weed, I think they would their fiduciary responsibility in higher regard.

Lug 17, 2015, 3:36 pm

What about the bankers that approved the loans in the first place?

In the case of Greece, much of the blame falls on international institutions, not banks.

As for "Isn't it their job to investigate the creditworthiness of every borrower?" that's exactly the problem. That's what Germany the others are doing right now. They were lied to extensively the first time. They're investigating the creditworthiness and refusing to lend without changes to that creditworthiness.

Modificato: Lug 17, 2015, 4:21 pm

I am very interested in this whole issue of Greece being able to pay its creditors.

I am especially interested in why it is that the creditworthiness of the U.S. remains so high given its current financial problems.

Lug 17, 2015, 4:58 pm

No, indeed. It's high because most developed countries have huge debt, and the US is an economic giant with an incredibly stable political system. We'd be the last to fail, and everyone knows it.

Modificato: Lug 17, 2015, 5:09 pm

The Greek taxation system, which had great reluctance to taxing the rich,like Onassus, is certainly part of its problem. Another area was spending up to 58% of its budget on military equipment. It hasn't lost any wars, since 1923, and been charged reparations with resulting financial shenanigans, like Germany. Didn't the USA remit their share of WWI reparations as far as the Germans, while insisting the Brits pay up every penny of their war loans?

Lug 17, 2015, 5:36 pm

Both Spalding and Crawford right in this thread , it does take two to tango as he says, and the Greek banks and society drank themselves silly on post Euro debt. Comparisons to the US are not relevant, less having to do with our economic size and more to our dollar being the main reserve currency in the world. If everyone wants dollars all the time, then their value will remain high, notwithstanding what we here in US complain about. The Greeks , like the Puerto Rican government have a problem, and their debt levels are only are part of it. The fact is that there is little that either of what they produce that is wanted by anyone else in the world. Aside from sun, sand and surf (and some ancient ruins) what do they both offer? The combination of this fact with higher than appropriate levels of spending led them both to the edge of ruin. The problem with the Euro bail out is that it does not really address this problem and is just a band aid.

Modificato: Lug 17, 2015, 6:07 pm

I think the problem with the US is that:

1. We do have to pay it, some day.
2. The very real fact that we can go higher, entices us to go higher.
3. Black swans happen. Everyone wants dollars now. This isn't absolutely guaranteed.

I'd add that the whole debt issue is one of the most striking examples of simple incomprehension leading to injustice. Large long-term national debt is borrowing from your children. It is immoral to borrow from your children, unless your doing so somehow benefits them. Every dollar we spend now is a dollar my son has to pay. Or, actually, more than one dollar.

Honestly, I hope that my generation has its Security Security stripped down to a bare minimum, because we don't deserve it. We've reached through time to plunder out children's bank accounts.

Lug 19, 2015, 10:18 pm

Comparisons between UK 1945-1965 and Greece today are ill considered. The causes of the debt are remarkably distinct, war time expenditures vs over spending on maintaining a too rich social net combined with an unproductive economy. As has been described in various news reports, Greece was an ok, middling European country with one or two world class industries and not much else. It got by though it was still going nowhere. It over dosed on Euro inspired debt to hide its essential uncompetitiveness. Puerto Rico the same. I don't see how staying in the Euro solves anything as the Euro is an experiment gone bad and sooner or later it was bound to explode.

Re the US, I would agree that $17 trillion and counting is not a good place to be. However, this country is blessed as no other is with a currency everyone wants and an economy that, even with its gears stuck in the mud, is among the most productive in the world. This boomer worries more about the future of his grandchild and the world that he will face in 20 years. I am afraid that we will need to make adjustments in our assumptions about what is needed and how to pay for it all, just as the Greeks will have to.

Ago 11, 2015, 6:11 am

I think the question is not simply about Greek debt but the rather bigger question of the European Union and whether a single European entity is feasible in the long run . It is a grand ideal but is there not too much diversity and disparities in living standards and income levels to make Europe one country . Perhaps the example of the USA indicates that contrasts in wealth and poverty can be managed within a single country and that the wealthier parts of a country accept that you carry along the poorer parts . On the other hand another way of looking at integration is via the Euro and here the significance lies in the convergence criteria and conditions and the effective surrender of fiscal sovereignty . Simply put the Greeks bucked all of these criteria and well thought through ratios . much the best solution is to let Greece revert to the drachma , abandon the Euro and yet remain in the EU . Devaluation of their currency will bring greater economic competitiveness but then there will be other losers in the process . I would love though to revisit Greece and see for myself what is happening .

Ago 11, 2015, 2:06 pm

The best comments I've read have been on a historians' blog called Tropics of Meta. The post that most directly addresses the OP is probably this one: Greece and the Idea of Debt.

Includes a provocative comparison of public debt (so-called sovereign debt) to imperial tribute.

The foundation of any healthy human society is cooperation and reciprocity. While debt may at first glance look like a manifestation of these, it’s actually a perverted form that becomes their opposite. What’s special about reciprocity—what makes it the glue of human community—isn’t the one-for-one exchange of loans and repayments (let alone interest payments). What’s special is the blurring of the lines between the individual and the community. When you help a neighbor, you don’t expect to be repaid exactly and on time. You expect that the neighbor, who knows you and lives where you live, will help you in a different and inevitably unequal way when and if you most need it. You may give an egg, but you don’t expect an egg back. You expect sugar, or a cordless drill. Both you and your neighbor assume that you’re better off helping each other, because you live together, and cooperation makes you stronger. That’s reciprocity. That’s community.

Debt, on the other hand, is distinguished by the quantification of what’s given, and the enforcement of its return—usually with interest, though this isn’t the defining attribute. Quantification means keeping exact track, and expecting exact repayment. It implies a lack of trust in the other party’s goodwill or mutual benefit. Enforcement means police and violence, or the threat of it. This can be direct, physical, and bloody; or it can be indirect financial enforcement, via impoverishment, malnutrition, foreclosed housing and healthcare, or long-term unemployment. But because debt’s defining features are quantification and enforcement, it can’t be considered of a piece with the reciprocity and cooperation that hold human societies together. It is a perversion; it’s the opposite.

Anyone really looking to see what debt is, at its core, will find that it’s much closer to that other near-universal of human societies: war. As anthropologist David Graeber argued in his remarkable book Debt: The First 5,000 Years, debt often serves to create or restore hierarchical politics within the institutional frameworks of communities formally based on political equality. Interest on an unrepayable debt is no longer the economist’s fee paid for use, but tribute exacted by conquerors; the triumphant use victory in the market to claim moral superiority, just as victors on the battlefield inevitably do. The illusion of community and right may persist, but only because the war is hidden behind a veil of debt.

Fans of intellectual history or economic theories might also peruse Why German economic thought made the Creek crisis inevitable. And follow the blog.

Ago 11, 2015, 3:45 pm

"Anyone really looking to see what debt is, at its core, will find that it’s much closer to that other near-universal of human societies: war."

Anyone looking at that sentence can only conclude the author is a fool.

Modificato: Ago 11, 2015, 6:04 pm

>16 timspalding::
I do not conclude that the author of the book paraphased in >15 Muscogulus:: is a fool. In fact, I do find that the definitions used create a good argument for the statement quoted. Remember that the bulk of human interactions are not economically devoted to the maximization of return on direct investment of resources. One's partner doesn't directly charge for sex, parents do not usually present their offspring with a bill for their maintenance costs when adulthood is achieved, and many other activities are not related to reward for interchange of goods or services. We co-operate vastly more than we compete. But the expectation of getting profit from all exchanges doesn't lead to a sense of community, instead it does create resentment in human relations. See Margaret Visser's excellent book, "The Gift of Thanks", for a non-capitalist analysis of group dynamics. There were not many poor people led to the guillotine, the vast number of White Russian refugees did not come from the Russian lower classes, and when Greek city states dissolved into civil war, it was the former top dogs who were trying to eke out a living in their exiles. The section of Arnold Toynbee's "A study of History" entitled "The breakdowns of Civilizations" will also repay the effort.

Ago 11, 2015, 10:24 pm

I concur that the author quoted is clearly not a fool. The comment seems thought out and considered. It is however completely wrong. We have gotten a bit off track with the discussion of debt. It is not a zero sum game. Debt is an extraordinariy tool used to improve people's lives and of their communities if well used. It is leverage for people with little, and provides a real economic value to the community as a whole by circulating money in ways that would not happen without it. Countries with developed debt markets are richer, healthier and more confident than those without them. It is a form of communal sharing at a cost. That cost is the incentive people need to share their unused surplus. It's the opposite of war. It's just too much like a drug that is easy to get, feels good to use and has a hell of kick back if you overdo it.

Ago 12, 2015, 7:55 am

Fascinating to check the use of words. When funds are borrowed with the objective of investing and creating a future income stream this is considered to be desirable, advantageous , "good credit" and investment . It assumes that a country or company borrows to say build a railway, at a specific rate of interest for a long term period and that the capacity to repay the capital and the interest will flow from an additional income stream from this wise investment . However, if on the other hand a loan is contracted to sustain current life styles, pay pensions , meet social welfare benefits , squander on consumer goods and interest has to be covered by current income one quickly arrives at the situation where that sort of loan is not an investment or good credit and translates in the horror word "debt ". An investment is something whether private or public can be paid and covered cheerfully and all terms of loan met and hence good , but a debt is something that is onerous and shifts to probable or possible default territory and is bad. Or am I stating the obvious .

Re debt and war . Perhaps here one should note that few wars are affordable and a government has to contract or find finances to cover the costs of war . Wars are financed through inflation (print the money) , increased taxation (make your population pay through deprivation), liquidate past investments (dip into past savings or assets) or issue bonds ie borrow money to play to repay at some point in the future or maybe never . Often a combination of these approaches . If you win the war you have a "war guilt" clause and transfer the accumulated costs to the defeated enemy who now has to assume your debt , pay reparations , inflate their money and so the cycle goes on . Debt is not war but money and hence debt is contracted to fight and pay for a war , but just means we should work out who carries the debt and how is it to be settled.

Modificato: Ago 12, 2015, 10:37 am

I do not, of course, think the author of the fool. You are missing the obvious parodying of their very own statement.

It is, I think, silly to assert that "debt is, at its core, will find that it’s much closer to that other near-universal of human societies: war. But it is even more absurd to assert that "anyone really looking to see what debt is" would come to that bizarre conclusion.

We are all entitled to our opinions. When we say "anyone really looking at this" would agree with us, we cross from an opinion to a bizarre statement about reality, with an ad hominem sting at its tail.

If you don't agree, well, ANYONE who really looked at what I was saying would agree.

(Therefore you're not agreeing, you aren't really looking.)

Ago 14, 2015, 6:25 pm

Tim, you did tease out a weakness in the way the argument is expressed. There seem to be some implicit assumptions about what war is — probably based on some abstruse anthropology I will never read — and part of the author's chain of reasoning is not spelled out. If I had written the passage, I would have stressed the comparison with tribute, not with war.

I often find myself wishing that people would revisit their blogs and improve their phrasing — or at least correct their spelling. Sometimes they actually do. Still, it seems like one of the more slighted advantages of digital media: the ability to revise after publication. (HTML makes it easy to mark and date your changes.)

Even so, I've been impressed with this blog's coverage of the Greek crisis. Much of the passion for the subject comes from the fact that at least one of the contributors is an expat living in Greece.

Modificato: Ago 23, 2015, 6:59 pm

The fact that Greek bond prices didn't reflect the risk was that everyone assumed that, if Greece was in a monetary and political union, politics and monetary policy would prevent Greece from every getting into trouble, let alone defaulting. As often in financial matters, if everyone thinks something can't happen, everyone acts that way, and the eventuality becomes possible. (See a fall in housing prices, etc.) So Greece overspent and borrowed a tonne of money to finance that. If the political union had worked, other countries would have prevented that from happening. They would have required Greece to lower its budget deficits, collect more taxes, etc. In other words, they would have required "austerity." That reckoning was long delayed. It's happening now. And in fact we're getting what you'd predict—a mix of debt going away and new debt being offered only with stipulations by the lenders.

Incidentally, I love how these things always talk about "bankers." It's so much more appealing to imagine that Greece is fighting evil capitalists, when in fact banks got out of it a long time ago, and Greece doesn't owe "bankers" but merely the governments and peoples of Europe.

Ago 24, 2015, 10:16 am

>23 timspalding: Don't overlook the fact that it was private banks that originated this debt. The fact that government bodies, the same ones that are now refusing to toss Greece a life line, bailed them out in full years ago does not change where the debt originated.

Ago 24, 2015, 11:08 pm

Whether banks or nation states, the Greeks got money. They believed a fairy godmother would come to their rescue, or that the basic laws of economics did not apply to them, and life is truly a free lunch. Puerto Rico the same, and for that matter Italy, Portugal and others. Now The Chinese are learning the lesson and by extension, the Brazilians, Australians and Indonesians. At least those countries have products that have global value, however currently diminished.
My trips to Europe in the 70's and 80's were interesting on many angles , but many French wondered about the US; why did we work so hard? Why did we place such a priority on making money? Well, 35 years later, well those are 35 years that the French lost forever, and the Italians, et al. Without the economic base the US had in 1932, depression notwithstanding , the New Deal does not happen, for it takes resources to create cushions, and this the Greeks did not have except for other people's money .

Ago 25, 2015, 2:33 pm

#25 In 1953 Germany had its debt from before and after the war forgiven. I understand that the punitive demands of the Versailles Treaty could not be repeated but how was Germany more deserving than Greece? Maybe Greece should have murdered millions of people if it wanted to be considered for debt relief?

Ago 25, 2015, 6:47 pm

Would you care to elaborate on which of the basic laws of economics Australians believe do not apply to them? The bottom may have fallen out of the iron ore market, but the economy is still in pretty good shape. No free lunches here, never were - how do you think we came through the GFC with barely a scratch to the paintwork? Because there was a bloody great cushion.

I am of the opinion that the current stock market kerfuffle is really a necessary correction, and there are bargains to be had if you've got the funds. Certainly it was set off by the Chinese, but it seems that they view their stock exchange as a sort of casino, not causally connected to the economy as ours (and yours) is.

Ago 26, 2015, 4:57 pm

#28 Sorry but I have to disagree. All stock markets, unless very tightly regulated are a crap shoot. Currently reading Wall Street Under Oath and the BS that was being pulled in the 1920s is the same that was being pulled in the 2000s and, since we here in the USA have done nothing to punish the perpetrators of the last frauds or to re regulate the system, it is the same as the BS being pulled now. There is another book I need to read now that has what I now know is a very true title, The Best Way to Rob a Bank is to Own One. The daily trading on the stock exchanges, except possibly the commodity markets have no real connection to the economy.

Ago 26, 2015, 7:18 pm

And what if I were to say to you that the ASX is very tightly regulated? By way of example, when I was kiddie there was no such thing as insider trading, now you can go to jail for it. There are all sorts of situations in which trading in a stock can be suspended. Not saying it's perfect, but they try hard enough to give me confidence.

What sort of American doesn't believe in market based economies? Why do you make an exception for, of all things, commodity markets?

The saying here about banks is that better than having money in the bank is having shares in the bank, and that's certainly the way I approach it. If you own the bank you are assisting them to rob other people and taking a share of the loot, that's how capitalism works. Banks can be predatory, but their yield is very attractive to investors.

I think that the book you really, really need to read now is How to Speak Money by John Lanchester.

Ago 27, 2015, 3:05 am

All stock markets, unless very tightly regulated are a crap shoot.

What does this even mean?

Ago 27, 2015, 9:57 pm

#28 you are quite right re Australia, and my meaning was perhaps not clear, apologies. My point, and perhaps Australia is not the best example of it, but all commodity driven economies are subject to the whims of the global marketplace, and Australia, perhaps mainly its mining firms, have felt the great sucking sound of collapsing Chinese demand.

#27 Germany 1947 as different from Greece 2015 as water is to stones. Germany was a pre-war industrial powerhouse, making and selling globally , home of some of the biggest industrial names on the planet; and on the front lines of the Cold War. Greece , not so much. Have nothing against the Greeks or Puerto Rico. I want to visit Greece and half my family is from PR, however both played a dangerous game and both never thought that the good times (and other people's money) would ever stop.

Ago 28, 2015, 11:25 am

#31 It means Wall Street is a casino where the games are heavily rigged in favor of the house.

#29 The daily trading on the stock exchange is divorced from the economy. It is emotion driven not fact driven. People that buy stocks as long term investments have become a minority with most trades done by speculators seeking gains on small price swings that, as often as not, they engineer.

Regulations mean nothing without watchmen willing to enforce them. The tactics that created the stock speculation that lead to the 1929 crash was illegal but nobody lifted a finger to stop it. The National Banking Act of the 1860s prohibited commercial banks from dealing in stocks and bonds. In 1911 a major bank decided they could get around that by creating a new corporation, with exactly the same owners and officers, to deal in stocks and bonds. The courts ruled the arrangement was a violation of the law but nobody stopped the bankers so more banks took up the practice. The Glass–Steagall Act really several parts of the 1933 Banking Act, put some teeth into the law and the Great Depression frightened regulators enough to enforce it. In 1999 two of those provisions were removed allowing commercial banks to return to the casino and play with their depositors money. It took 18 years for these practices to bring about the Great Depression but it started slow because bankers were not sure, at first, that they could violate the law with impunity. They could and did. After deregulation in 1999 it only took 8 years for the next crash.

Since the crash we have written general regulations but not the specific rules and the watchmen are still in bed with the banks. Just like the FBI and Whitey Bulger.

Ago 30, 2015, 4:14 am

Well, if you treat the stock exchange as a casino you get what you deserve, which is what has happened to the Chinese.

There is a difference between trading and investing. If you follow the principles set out by Benjamin Graham in The Intelligent Investor - the man who trained Warren Buffet - and if you live in a country where the stock exchange is well regulated and accounting standards are high, then you can do very well. You just have to put a bit of effort into it.

I would not have thought the Australian economy was any more commodity driven than that of the USA, but certainly some of the miners are in trouble. Fortunately for the country in general those companies don't actually contribute as much as they would like you to think by way of taxes and jobs.

I think that both of you might find this informative:

Ago 31, 2015, 10:07 am

#33 It is not small participants that turn the stock market into a casino, it is the managers. They rig the system, just like casino games are set up to reward the house. Some managers take it to the extreme and milk every last cent possible to their personal accounts. It is illegal but the risk of getting caught is tiny and the rewards are immense.

In the past what a company did well its stock went up and all the workers, from the CEO to the janitor, saw some benefit. There is no longer any connection there. In the past if a company got a new contract the stock price went up on the promise of future earnings. Today it is just as likely to go down on the excuse that traders expected more.

Commodities at least still have a connection to the real world. Floods in the Midwest that reduces corn and wheat yields cause the price of corn and wheat to go up. Flocks of chickens being killed of to prevent the spread of bird flu causes the price of eggs to rise. The fracking boom has brought down the cost of oil. For commodities it is still the law of supply and demand. In the stock market two parties, in the past it has been husband and wife, can sell the same stocks back and forth to boost the appearance of desirability in the stock and drive up the price.

Anyone interested should read Wall Street Under Oath by Ferdinand Pecora, he was the lead investigator in the Senate investigations into the 1929 crash. The full report of the commission is on line at There is no equivalent for the 2008 crash because the government was not interested in justice, sorry, because they "chose to look forward not back". Several NPR shows did good investigations into the 2008 crash and I think they are still available on line.

Ago 31, 2015, 1:26 pm

Ferdinand Pecora was truly excellent however I doubt seriously that he would get much traction in today's market environment.

The closest thing we have to him is Volcker and look how little he was able to do.

I am for both men but the forces of the Market are drowning them out.

Modificato: Ago 31, 2015, 3:22 pm

The trouble with an unregulated market is that the winners of the last round in the boom and bust cycle get to set the rules. or at least the entry fees, for the next contest. The goal of those players being to provide absolute necessities such as food and water, and the appropriate level of shelter for the whole of the public while insinuating a perpetual layer of profit for a favoured few. Adam Smith did not recommend that joint stock companies take over the whole of the economy, which is but a subdivision of the ecology. We now know that the conditions of the 1800's, and 1900's when resources appeared to be endless, will no longer apply to the conditions of a one solar system ecology.

Set 1, 2015, 8:46 am

#36 I agree that the voice or reformers is being drowned out but I don't like to use the term "market forces", it seems to lead to the idea that there is an unworldly power controlling the destiny of wealth. Its people. People with money but still just people. Often spoiled, entitled brats, but still just people.

Set 1, 2015, 3:03 pm

"Markets" and "market forces" are common euphemisms for strains of capitalism. There is an associated effort, dating at least from David Ricardo, to sell the myth that capitalism runs according to natural laws. There is about as much evidence for those claims as for the claims of astrologers, who also use abstruse equations to back up their science.

Markets — real ones — are among the oldest human institutions, dating from at least the Neolithic, and the trading activity they house is as old as human society. But markets do not solely trade commodities and they do not run according to price theory. The intangible exchanges are as important as the quantifiable ones.

Set 4, 2015, 10:55 pm

Yes, but what really are markets? They are not physical places where bets are placed, nor virtual locations in the web or space, they are in our minds. Markets are inherently human derived and human influenced. That is why they are unpredictable. Yes they can be manipulated in short time frames as the history books show starting in Amsterdam and the tulip bubble , but ultimately the "market" rears it ugly head. As an investment advisor, my clients ask me about the "market", including a conversation today. My answer is it all depends or I don't know. What will the "markets" have to say about US jobs, Chinese stocks and real estate, Brazilian politics and Russian military escapades.
Greece is battling the "markets" and good luck with that. The big short is in for alot of countries who thought the good times would roll forever. Alas, 'twas not to be.

Set 7, 2015, 11:36 pm

>40 chagonz:

As an investment advisor, my clients ask me about the "market".… What will the "markets" have to say about US jobs, Chinese stocks and real estate, Brazilian politics and Russian military escapades.

Here, too, we're in the habit of treating the motions of securities markets with the superstitious seriousness our ancestors accorded to the motions of stars and planets in the spherical heavens.

My answer is it all depends or I don't know.

It's the only responsible answer. But notice how the people who make predictions on screen are almost never held accountable for them afterward. I suppose court astrologers enjoyed a similar immunity in the 14th century.

Set 11, 2015, 10:30 pm

Well who is held accountable for anything said on TV? Accountability is probably a lost concept in our national discourse. No one, and I mean no one , wants to be held accountable. Financial talking heads are just pushing an agenda or their ego. However, back to markets, they Re real and have real impact and effects. The technical definition of the stock market is the present value of expected cash flows from a business. Unfortunately, there is a lot of play in that, and many external factors that screw around with those expected cash flows. As the Brazilians are seeing now, it is relentless in its accountability . Political markets exist as well, and we are possibly seeing the effect of the "Donald" bubble right now. Markets are eventually self correcting and I don't doubt that the current froth will ultimately burst. But it will be a hell of ride until then.

Modificato: Set 15, 2015, 9:02 am

Stock markets, the ones like where we took out cattle to sell them, exist. When people talk about "the market" in relation to Wall Street they are thinking of what used to be a corporate popularity poll where the votes were cast by an informed minority. These days it is uninformed made up of uninformed wannabes and players exploiting tiny changes in prices to their benefit. The first knows nothing about the underlying value and future prospects of the companies being sold and the other does not care.

Think of American Idol where one large group of voters never watches the show but vote anyway and another group that places bets and uses large phone banks to influence the outcomes.

Edited for spelling

Set 14, 2015, 3:35 pm

You left out another large component of the contemporary stock market, the robots (Computers) which are linked only to stock price fluctuations and have no social or economic input beyond pre-programmed price parameters.

Set 15, 2015, 9:03 am

+44 But that is exactly who I was thinking of when I wrote, " players exploiting tiny changes in prices to their benefit"

Set 18, 2015, 10:07 pm

A thread on history probably not the ideal location for a discussion of the stock markets, but while trading by major institutional and computer driven players is driving much of the volatility in the markets today, the single largest holders of equities are the large, long tern oriented institutional investors such as insurance companies,pension funds and the like. Market swings, daily volatility and momentum are concepts that are dangerous to the wrong headed investor who is trying to outsmart the markets or trade along with them and feed off their volatility driven results. A fools errand no doubt. Long term players like pension funds know there is no outsmarting the market, just getting the returns necessary to meet obligations,unlike the public pensions who have decided that to have a chance to fund their generous pension obligations and reduced contributions have decided to play funny with their money. Just be glad if you are NOT a pensioner in NJ or Illinois.

Nov 6, 2015, 6:21 pm

Getting back to the thread; I would be very interested in my European friends thoughts comments on the migration of refugees from war sites and other places to Western Europe. We Americans are somewhat disconnected from the whole thing, our attention focused on the erupting political farce. But as a long time reader of the Economist, the dynamics of Merkel led European efforts are fascinating. How does a society like Europe cope with, absorb and successfully integrate 2 million people who really would rather be home were it not for the bloodshed. Your comments welcomed and appreciated.

Nov 7, 2015, 3:04 am

Short answer? We don't.

Integration is hard. The rise of far right politicians across Europe is no coincidence. Throughout the continent governments had grown complacent, dismissing the unease about previous generations of immigrants and failure to integrate. This without blaming any one for that failure.

Nov 10, 2015, 4:09 pm

Still Europe has handled it better than we have the relative trickle from the nations to our south that our exploitative policies have destabilized. At first I was going to write something about the "wall" along the Mexican boarder but when I looked up when the quote I was going to use I was dumbfounded. It was from 2006, pre Obama. Kinky Friedman was running for governor of Texas and when he was asked about building a wall he said that he would wait, in a few years we might want to get out. We have been freaking out about immigrants, talking about a wall, for almost a decade? We don't even get them in the numbers Europe is seeing.

Nov 10, 2015, 10:55 pm

Longer than that; deportees (as they were known) had folk songs written about them in the 50s and earlier. The song remains the same; businesses want labor that won't organize and can be terminated without fuss, to handle jobs that native-born Americans won't do. Local workers get stirred up and want tighter controls, but business makes sure that the new laws have no teeth. (It's even worse now, as many small communities with illegal immigrants see them as ATMs, easy to fine/ticket for extra money.)

Nov 11, 2015, 8:40 am

This immigrant scaring has been going on for 20 years now, it's not just now with the Syrian refugee crisis. 9/11 gave them an excuse and made it seem more legitimate :(

Nov 11, 2015, 9:56 pm

I don't think that's true about immigrants. My own limited experience with Latino immigrants both documented and undocumented is that they mostly work for small businesses, many owned by immigrants themselves. Their insecurity is caused by an immigration policy that criminalizes their existence. Big agriculture does employ and depend on them for sure , just as they have for 100 years. Most immigrants I know no more want to organize than they want to,return to their native countries. They want to send their children to school so their children can be the ones hiring others.
The beauty of the US is that we have always welcomed them even though we sometimes change our minds once they are here. I contrast that with Europe which has the misfortune of a tradition of closed heterodox cultures antithetical to outsiders. East LA, Washington Heights and other communities are totally unlike the banilluires of France because while they are poor, dark and immigrant based, they are also dynamic way stations for many to a different life in and yet outside the mainstream. One can only hope, if only for demographic reasons, that European antipathy to people who don't look , talk, cook and pray like them slowly changes.

Nov 12, 2015, 4:01 am

I was talking about .eu. USA will have a different dynamic as you point out.

Nov 12, 2015, 9:35 pm

>52 chagonz:

I've been alarmed to discover recently how common it is for people to employ immigrants with no papers — or even Latino citizens — and then refuse to pay them on some pretext. Been involved in a project to identify these employers and pressure them to pay workers who can document their work.

In one case, a restaurant worker was cheated of thousands of dollars' worth of labor by an immigrant boss — who was rumored to be here illegally himself. More common, though, is construction or landscape work where the boss has layers of subcontractors to insulate him or her from responsibility.

From what we've seen, most unpaid workers don't even protest; they just tighten their belt and look for their next job. They are convinced that protesting won't succeed.

Nov 12, 2015, 9:52 pm

>47 chagonz:

How does a society like Europe cope with, absorb and successfully integrate 2 million people who really would rather be home were it not for the bloodshed.

Your numbers are off. The total Syrian refugee population is estimated at almost 4.2 million as of October. The majority of them are in Turkey or Jordan. The number going to Europe does not amount to 1 million, even if you double-count those passing through the European border states (Hungary, Croatia) intending to go elsehere. Except for Germany, which has pledged to take in 200,000 Syrian refugees, and Austria, the other European states have committed to taking in only a few dozen to a few hundred each.

Some countries may end up with unregistered thousands of refugees if the crisis is prolonged. But they are unlikely to prove much of a burden. The Syrians motivated to migrate to Europe appear to be among the best educated and most prosperous people in their country, and they are likely to have median income and education levels above the median for the countries they want to settle in.

There is a tacit assumption in a lot of the reporting on the crisis that every Syrian must be poorer and dumber than the typical European. I predict that this will prove to be false.

Modificato: Nov 13, 2015, 6:42 am

Germany is already way beyond the 1 million figure, and two thirds of these "refugees" are undocumented and unregistered. It certainly isn't crying wof when one suspect that among this number there also are many escaped prisoners, career criminals and terrorists. After all it is the perfect opportunity.

30% of the registered "refugees" are completely unschooled, i.e. analphabets, by the way. Another 30% have had a few years of school. Only about 15% have an academic background, and most of these skills will not be validated without years of special training.

Nov 13, 2015, 2:22 pm

>55 Muscogulus: A few hundred? There are towns here in .nl who alone are housing over 200 refugees. Some towns are welcoming, while others are going so hard right I'm scared of them. The anti-eu/immigrant PVV party is on track to get double the votes of the next parties, which is also troubling to me.

Nov 13, 2015, 4:41 pm

Many thanks for letting us know how things are in .nl.

We desperately need people from outside the USA to share their viewpoints here.

Nov 15, 2015, 6:23 pm

Hmm, thanks for the info. All the reporting I've heard is from southeastern Europe, where crowds of refugees wait at border crossings, or official statements from governments.

We're also getting some breathless reportage about a Syrian passport found on the body of a terrorist in Paris — which will be enough, I'm afraid, to convince some Europeans that all Arab refugees, nay, all immigrants, are a menace to their survival.

Nov 15, 2015, 10:13 pm

Today we definitely need a European perspective. The Syrian passport may well put a dagger into the refugee compromise and put Merkel I don't know where. I can't say that I blame any European government from taking this view which may have been part od their (ISIS) plan from the get go. As an American I felt myself going to the immediate, emotional reaction. Knowing France to be highly centralized and with layers of police and military resources it does not take a stretch of imagination, even with a Socialist President to conceive of a very strong, internal reaction. Would welcome a French, European perspective though it may be too early and too raw at this time.

Nov 19, 2015, 4:40 pm

New figures on the numbers of Syrian refugees accepted since 2013 in other countries:

Modificato: Nov 19, 2015, 5:08 pm

Heb, accoding tot another source .NL has housed ~2500 in 2013 and ~9500 in 2014 Syrians. So those numbers seem a bit off. They're also not corresponding to housing being searched for 100s at a time.

src: (refugee charity in .NL, Dutch.)

More interesting perspectives:

Nov 19, 2015, 5:25 pm

That's a huge discrepancy between the Dutch NGO and the UNHCR: 12,148 vs. 500! And the UNHCR figure is evidently for a longer timespan, 2013 to present, while the NGO is reporting on just 2013-2014.

Maybe the difference is that the NGO is reporting how many Syrians ask for asylum ("zoeken bescherming", "vragen asiel an"; I think those mean the same thing?). The UNHCR may only be counting how many each government has promised to grant asylum to.

Nov 20, 2015, 1:10 am

I don't know. I read somewhere else that nearly all who seek refugee status from Syria get it, so that would not explain it.

Modificato: Nov 20, 2015, 1:19 am

"In 2013 en 2014 vangt Europa 16.159 Syriërs op als onderdeel van het hervestigingsprogramma van de VN vluchtelingenorganisatie UNHCR. Een klein deel van de Syriërs uit de vluchtlingenkampen in de regio worden op deze manier gehervestigd."

Perhaps unhcr is just talking about the official refugee camps and the resettlement program.

I read somewhere else that practically all who apply get asylum, because strait Syria is a warzone.

Modificato: Nov 21, 2015, 4:07 pm

Canada has not accepted that many as are shown on the bar graph, but perhaps the UNHCR is quoting the number accepted applications not the number actually moved so far. There may be some double listing to make up that figure, as the ousted Conservatives stated they would take 10,000 during the campaign.We have announced we will accept 25,000 applicants by Dec. 31, and will probably receive them by the end of February.
Our Xenophobic portion of the populace have flooded our CBC comment lines, but we are proceeding with the election promise of our new government. Shouldn't do us any harm to accept the refugees, in my opinion.