I commented as follows on a post at HPC about the Greek hair cut/bail out nonsense, which is "all paid into the mouths of the very same bankers who cooked Greece's books to get them into the Eurozone. It is one fraud after another with these folk.":
Yup.
1. I see it thusly - car manufacturers and car repair workshops are, let's assume, owned and operated by two completely separate groups. Car manufacturers want to make the most reliable cars so that people buy them, and workshops like unreliable cars because that's how they make money. As long as ownership of the two branches is completely separate, and there are competing car manufacturers and repair workshops, we get reliable cars and reasonably priced repairs.
2. But if the all car manufacturers consolidated into one corporation and owned all the workshops as well, then they have an interest in making cars which break down all the time, because that way they can build unreliable cars and earn money from repairing them. (The manufacturers do this in practice by wildly overcharging for spare parts, separate issue.)
3. So Goldman Sachs is like the monopoly car manufacturer who owns the repair shops. It has cornered every end of the market
- GS stampeded the EU into this single currency nonsense (earning massive great fees for itself during the set up) which was a pure vanity project;
- GS charged Greece a load of money to cook its books so that it would qualify for entry;
- GS made a shedload more money by then speculating against the Euro-zone;
- GS then charged the EU a load more money for sorting out the bail outs, the EFSF and so on;
- GS even appointed several of its own people (Monti, Draghi, Papademos) to run things (it's even worse in the USA - Tim Geithner springs to mind);
- GS, having made a shedload by selling 'credit default swaps' or 'credit default insurance', is now hoping to add insult to injury by getting Greece and its creditors to agree a voluntary debt reduction (see original article), which, according to their small print, is not a 'credit default event' and hence GS will not have to pay out to investors who paid the big premiums and suffer the big losses.
4. So GS had every interest in the launch of an inherently unstable monopoly currency, in the same way as a monopoly car manufacturer who owns all the repair workshops would have an interest in making unreliable cars. And GS' efforts have paid off handsomely, for them at least.
Here endeth.
A grim document
14 hours ago
18 comments:
Agreed. So since you and I both know how it works and how GS made shed loads of wonga, should we not go into business in competiton with GS?
Apropos car repairs the estimable and late Bill Boddy wrote that he wonce worked for a motor repair business retold that the foreman of said establishment would turn up in the mornings, start all the customers cars in for repair and rev the bollocks off them from stone cold, so knackering the bearings. He then told the customers that their motor cars needed major engine rebuilds...
L: "The foreman would turn up in the mornings, start all the customers cars in for repair and rev the bollocks off them from stone cold, so knackering the bearings."
Yes, that's like GS then speculating against e.g. Greek bonds, French banks etc.
The price of parts is getting ridiculous, a family member of mine is a plumber and reliably informed me that 15-20 years ago you could make a living just by replacing boiler parts. Now these companies are actively rent seeking, so a fan alone for example will set you back £250 for a boiler that initially cosy £500. It's a fan for God's sake! And makes up maybe 3-4% of the unit's total materials.
At 435%, how long would it take to get your money back in bond interest alone? If it was continuous compound, it would be just short of 6 weeks, but obviously bonds don't work like that. I'm not sure how often interest gets paid out.
There's an outfit in my town that specialises in sourcing spares for domestic appliances and they do seem to be able to find quite a few 'pattern' parts at realistic prices for most appliances.
People (that fuckwit Ed Milliprat for one) keeping moaning about the 'failure of capitalism', and it isn't that at all. It's the failure of cronyism.
CD, there's a funny overlap, or possibly lacuna, between 'patents' and 'registered designs' (which are protected monopolies, for better or worse) and yer basic components (unprotected). There is also an overlap between registered designs and copyrights; and between those and registered trademarks.
There's an intermediate stage called 'must match' or 'must fit'. Boiler or car manufacturers do their damndest to ensure that you can only use their spare parts - either by managing to cross the line between 'must match' and registered designs/patents, or loading them up with entirely unnecessary patented electronics (see e.g. printer cartridges, car bumpers) so that only original and expensive parts can be used.
But yes, it is all rent seeking.
F, Greek bonds are pure gamble, normal IRR rules are out of the window. If you buy them this week for 40 cents in the Euro and the post-hair cut payout is agreed at 45 cents you are laughing; if the payout is agreed at 35 cents, you are sobbing.
L, yes, they are making use of the 'must match' exemption.
L, no it's a success of cronyism. Cronyism never fails because it is money for nothing.
Great post Mark, spot on.
Can but agree with Lola & yourself in comments as well
Kind regards
DM, thank you. My point being, while the Euro is decried as a vanity project imposed by EU leaders (which it is), the real driving force behind it was probably GS.
Another trick of car manufacturers/repairers is to tell you some malfunctioning component can't be repaired and must be replaced in its entirety so a huge chunk of your car ends up being replaced when only some tiny component has actually gone wrong. I don't know how this trick manifests in banking, but I'm sure they've got it covered.
MW - 12.54 Quite I was just looking at it from my point of view.....
Bayard. Yep. I had a client who worked for Ferranti, on their military side. His Maestro's computer failed and was told it'd cost him several hundreds for a new one. So he reverse engineered it using military standard components. Car went better than ever....and it didn't cost him much at all. Even if he'd bought the bits it'd still have been cheaper. And he assured me he didn't nick the bits - his boss had encouarged him to do it, in his own time, as eddicayshun.
I had a similar experience with a windscreen wiper motor: "No, mate, it can't be fixed, you'll have to have a new one, be here Monday" (this on a Friday). I went round to a mate's, borrowed some tools, took it apart, unseized and lubricated the seized bearing that was preventing it working and it is still working today.
" GS even appointed several of its own people (Monti, Draghi, Papademos) to run things (it's even worse in the USA - Tim Geithner springs to mind); "
Geithner working for GS is an internet myth. He was never employed by them or any other private sector bank. His full employment history including his time at the New York Fed was in the public sector.
Richard, did I say or imply that Geithner had officially been a paid employee of Goldman Sachs? Nope. I said that he was one of theirs and this is borne out by the facts.
Up until the day he resigned as PM, would you have considered T Blair to be "one of J P Morgan's"? No, probably not and me neither, but what happened next was most illuminating.
Fair enough if you were not implying that he previously worked for GS. I just read it that way. It is a common internet myth that he is a former GS employee. A few members of the U.S. Congress even embarrassed themselves by questioning him about his time at GS. Red faces all round when he replied that he had never been employed by GS.
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