Seven Red

I didn’t really have time today to follow up on all that backchannel business, but I do want to take a minute to point to two curious New York Times stories from the weekend. First, probably one of the more interesting unfolding situations is the impending collapse of the Greek economy (“Is Greece’s Debt Trashing the Euro“), which – if the Times and various NPR outlets are to be believed, threatens the very existence of the euro. Apparently, according to the radio, the German taxpayers aren’t particularly keen on bailing out Greece, which they’d be bound to do to avoid a collapse of their own currency, should Greece default on its debt. The Times story is interesting because it presents the the more or less unvarnished perspective of the investor class on the root of the problem: outrageous spending on the part of the Greek government (even called, openly, “largesse!”), “appeasement” of the Greek unions – including, the Times writer notes, even the “prostitutes’” union, which protested “unlicensed competition from Russian and Eastern European immigrants.” Well, we all know the solution to such problems: immediately deploy the austerity measures! The problem is that – and I’m quoting NPR to the best of my memory – policy-makers fear “massive unrest” should that happen. The Times story says the same, wondering whether the 1 million public employees will accept that “the state can no longer meet its commitments” (I suspect “afford their sinecures” was cut by the night editor purely for reasons of vocabulary). Needless to say, the claims of the unions on the government are totally ridiculous, while the claims of the bond-holders are utterly sensible. The article ends with this quotation from Panagiotis Vavougios, the “head of the powerful, 200,000-strong retired civil servants” union: “It is not the workers that should be blamed for this; it is bankers and large capital.” Inverted pyramid arrangement tells you all you need to know about what the writers think of that, but in case you weren’t sure…

The Times does not neglect to inform us that Mr. Vavougios happens to be 80 years old, the suggestion on that point being rather clear. Just the facts, n’est-ce pas?

So, who’s presiding over the current and future Greek bonds that have suddenly been called into question based on the new deficit discoveries? None other than our friends at Goldman Sachs, of course, where Gary Cohn has “positioned his firm to be the leading underwriter of Greek debt — a role that will require it to convince investors that Greece will institute the [...] budget-tightening measures.” Lady, short the euro! If Goldman’s mixed up in this, you can expect a massive downside…for everyone but Goldman.

But that leads to the other long story in the Times from this weekend, which describes in some excruciating detail the goings on between Goldman and AIG that certainly contributed to financial meltdown (for everyone but Goldman, as it were). We already know that AIG was selling insurance like the proverbial Seinfeld car rental joint takes reservations, never expecting to have to pay out on these wacky hedge policies. We also already know that Goldman was buying up insurance like a dude who’s taken out a contract on his wife, which the article portrays as “negative views of the housing market.” Put another way, the people at Goldman believed the housing market was going to crash, and they structured their deals with AIG around that belief. Fair’s fair, right? If somebody’s dumb enough to insure my house with the hurricane bearing down, why not take out the policy, right? But if we may read between the lines on the Times story – in the manner of Russians reading the old Pravda – there is an unstated suggestion in this article (the AIG execs who bothered to be quoted practically hiss it) that it wasn’t merely a belief on Goldman’s part, or merely negative views. It’s a very interesting article that says a lot while also saying very little.

Let me irresponsibly suggest further by returning to our example of the dude and his wife. Suppose you were in a jury trial, and heard that the defendant had taken out large life-insurance policies on his seemingly healthy wife. Then she died inside of six months. Maybe he had a better sense of her wheezing at night? Or maybe it was just a standard insurance buy. That alone would be insufficient for most people to convict. Now, suppose he took out a policy with quadruple indemnity should she be run over by a Zamboni between April 4 and April 8, and lawd but didn’t she step right in front of it on April 5! With nobody else around but the Zamboni driver, with whom our defendant seems to have developed a close relationship in the months before the terrible accident. Yeah, that’s kinda like what the article is saying happened with GS’s insurance buys. “But ladies and gentlemen,” the defense attorney notes, “my client simply had negative views of his beloved wife’s Iceborne Survival Rate!”

Oh, by the way, you, me, and our children’s future?  That’s the icy, flattened wife.

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