Has Aditya Chakrabortty gone stark staring mad?

This is absurd!

So the bankers whose excesses helped land Europe in this mess then get to sit round the big EU table, like any other government, and decide who should pay for it. And the answer, unsurprisingly, is: not them. The bigger question is: why finance has been granted such power?

This isn\’t the usual Guardian writer knows fuck all about finance. This is stark staring madness of the Eoin Clarke type.

First he tells us that the bankers only took a 20% haircut. He should have a look at the prices today: 80% is more like it.

Then he babbles on about how appalling it is that the bankers had a seat at the table when how much money they would lose was discussed.

Erm, when you can\’t pay your creditors yes, you do sit down and talk to your creditors. Because you want to make an agreement with them. You want the whole thing to be voluntary.

And why did Greece want it all to be voluntary? Because they\’re still running a primary deficit. Which means that even if they blew everyone off with an involuntary default, rather than a voluntary restructuring, then they\’d still need to continue borrowing money.

Who will lend you money if you\’ve just stiffed everyone? Not the private markets, leaving only the IMF and possibly the ECB. However, neither of those will lend to anyone who is in default. You have to be at least paying lip service to the idea that you\’re negotiating with your creditors.

So, everyone negotiates with their bankers in order to get them to agree to the haircut. Because without their agreement you can\’t go to the IMF. And you do need to go to the IMF because you still need to borrow money.

This is the sort of thing I would expect the economics leader writer of a great national newspaper to understand rather than filling his readers\’ heads with Rosicrucian style nonsense.

Finally, if the bankers lost 80% of their loans, why hasn\’t Greece\’s debt been cut by 80%? Because the official creditors, the IMF, ECB, EFSF and all the rest did not take a haircut: and they owned the majority of the debt at the time of the haircut.

Seriously, this piece would be shamefully ignorant even if it were in Socialist Worker. If Alan Rusbridger actually knew anything about the subject himself he\’d fire Chakrabortty for writing such tosh.


10 thoughts on “Has Aditya Chakrabortty gone stark staring mad?”

  1. Doesn’t matter though, does it? It’s not written to inform but to add a few more lines to the ‘narrative’.
    This is part of the decline of the traditional media. In the face of the internet, organisations are adjusting their output to what they think will keep them in business. Guardian seems to have judged there’s a core of its target audience wants to read this sort of thing so it produces what they want. Keeps bums on seats in the Farringdon Road. Other papers do slebs or sport. Graun does left wing agitprop.

  2. I also object to the frequently-expressed suggestion that “the bankers” somehow insisted that the Greek (Spanish, Portuguese, British, …) Government borrowed all the money in the first place. The governments did it to become popular. Even a few large opposition parties joined in the “sharing the proceeds of debt (sorry, growth)”.

    The mistake the bankers (pension funds, etc.) made (for Europe) was to consider Eurozone debt as being as sound as if it were underwritten by Germany.

    The real mistake was to let someone like Gordon Brown anywhere near someone else’s money.

  3. Yes, why is the European socialist establishment allowed near the table when they were the ones who spent all the money?

    Can you imagine the squeals from the Left if the banks had said 5 years ago “no more money, sorry. Your governments are not going to pay this back”.

  4. And whose money is in the banks? Households = us. I expect my bankers to be doing their best to make sure I get my money back. I expect them to stop lending to these crooks in the southern periphery. I certainly expect them to go to meetings and try to get the best possible deal.

  5. I used to read The Victor and The Hotspur when I was a kid.

    About the same level of jingoistic agit-prop (slightly different direction, I suppose) that Mr. Chakra comes up with.

  6. Chakrabortty missed some key facts – but I’m going to give him the benefit of the doubt and say that the THRUST of his rant was a fair one: “How much leeway should Banker’s reps have in the power rooms of OUR Govs” ?

    It’s a fair point to make. Of course Greece has to meet its Creditors – you’re right. But, for example, how much detailed, sensitive and powerful information should flutter down onto the desks of outright villains, like Goldman Sachs ? Especially, should case be proven, that Goldman Sachs facilitated a global cheat, to get Greece debt “hidden away” ?

    Surely, just like Corporate’s deep involvement with Nation Cabinets … there is untold competitative advantage (sometimes just with access to high-level gossip and rumour) to be had. Right the way through to actually stymieing of legal prosecution.

    There’s a need for much more than just Chinese walls between Banking power brokers and National Governments. The relationship is both way too close for Democratic justice to be served and not close enough to regulate the abuse of fractional reserve Banking.

  7. Did the IMF (et al) hold all that debt at the time of (non) default because they lent Greece money to pay off debt to banks? If so, then that would make it a little disingenuous to insinuate that the banks are feeling *all* the pain when they’ve already had a slug of the money they probably shouldn’t have lent paid back.

    Are we really looking at public money, implicitly or explicitly underwritten by Germany, used to help out various banks (whose? Germans? French? I didn’t think our lot were especially overexposed to Greece.. they were too busy setting fire to money in Ireland weren’t they?) and a situation now where Germany is unwilling to take the haircut which, perhaps, it should be taking as it was the German economy getting lots of the benefit of Greece spending itself into oblivion?

    Or, really, does this not all fall back to an argument identical to those on tax incidence where we must always find a person at the end of the line and so the IMF (for example) is no more able to bear the cost of all this than a bank is. If a public body takes a haircut then taxpayers are hit, if a bank takes a haircut then, well, taxpayers are hit. Of course.. if it’s a public body then politicians come out of it badly too, whereas if it’s a bank then we get to blame it all on Bob Diamond.

  8. @bis: The Graunie moved out of Farringdon Road about 3 years ago. They have a lovely shiny new HQ on York Road near Kings Cross, replete with concert hall and galleries. It’s much more than they deserve.

  9. Did little William actually read the post he quoted?
    The second line is
    “The IMF seems to think that Greece will run a primary surplus in 2012. This rather changes things, if true.”

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