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Saturday, August 31, 2019

Manipulating Adults In The Room

The official trailer of Kostas Gavras' new movie "Adults in the Room" is out (the movie itself will be released on September 28). The movie is based on the book with the same title by Yanis Varoufakis.

There is one statement by Varoufakis in the trailer which displays the gigantic manipulation of Greek public opinion which was his trademark throughout:

"The rescue plan was to save the German and French banks. Their colossal debt was transferred upon the Greek people."

Yes, the rescue plan was to save German, French and very many other banks. But the colossal debt of Greece was not transferred upon the Greek people. That colossal debt had already been with the Greek people. What happened was that the risk from that colossal debt, previously carried by German, French and very many other banks, was transferred from those banks upon the tax payers of the lending countries.



ADDENDUM per 02.09.2019

The question has been raised in the comments in which countries those banks which had purchased Greek bonds were located. The graph below provides some clarification:



ADDENDUM per 02.09.2019

Below is a review of the above-referenced movie:

Venice Film Review: "Adults in the Room"

16 comments:

  1. True, also annoyed that such statements always ignore that the biggest holders of Greek debt were in fact Greek banks and other Greek financial institutions.
    They needed to be recapitalized several times by EZ and private money to be kept alive (although zombi-like for a while) and protect the deposits of Greek people.

    ReplyDelete
    Replies
    1. Unless you're talking about pre Euro and in fact pre 1996 times this is NONSENSE.
      The Greek public debt post EZ-entry was and is predominantly foreign(-held), not domestic.

      Delete
    2. @ Anonymous at 2:30
      You are correct that pre-Euro, Greece's sovereign debt was predominantly (not wholly, of course) held domestically whereas post-Euro that switched completely. But even during Drachma-times, a good portion of Greece's debt was held abroad because Greece developed some 'interesting mechanisms': double-taxation treaties with other countries provided that interest received on Greek bonds was tax free in the other country. Austria was a case in point. During the 1990s, Greek bonds denominated in Drachma were the most attractive asset for Austrian investors. Why? Even after the cost of hedging Drachma into Austrian Schillings, the gross return was 1-2% higher than on Austrian debt and gross was net because of the income tax waiver.

      Actually, the greatest trick of all was the transfer from domestic to foreign ownership of Greek debt. That way, Greece's debt became a problem of other countries whereas the Greeks smartly invested their savings abroad instead of in Greek bonds. Had, in 2010, Greece's debt been predominantly owned domestically, there would have been very little excitement between Paris, Brussels, Frankfurt and Berlin.

      Still, Druesne is not wrong. There was still a substantial portion (guestimates are up to 30%) of Greek debt held by Greek institutions (banks, pension funds, etc.). In fact, the 100 BEUR haircut of 2012 damaged foreign investors only to the tune of 60 BEUR. The remaining 40 BEUR damaged Greek investors.

      Delete
    3. To Kleingut:

      1. Note use of "predominantly".
      This was a rebuttal of Jerome Druesne's "biggest holders of Greek debt".

      2. As far as "the trick of Greeks investing abroad" that's MORE than predominantly NONSENSE because you're talking about a tiny part of the population.
      Most Greeks have tiny or zero savings in the banks let alone investment portfolios; of the ones that do have substantial banksavings and/or portfolios, only a small part does so abroad (if most of them did, much more would be in favor of Grexit ;-) ).
      You're generalizing about Greeks when you're actually talking about a tiny population percentage high up in the income and wealth distribution.

      As I am certain that you do know, most of Greek Public Debt has become in the past 25 or so years external and de facto in a foreign currency.
      If you think that this us cunny trick the typical Greek citizen planned and did, well...

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    4. Addendum:
      Just to be clear, forgot to mention where PREDOMINANTLY, over the many last decades, the typical Greek family (rich and poor) has actually put their money in:
      housing and land (self ownership is very high as you know) .

      Delete
    5. "2. As far as "the trick of Greeks investing abroad" that's MORE than predominantly NONSENSE because you're talking about a tiny part of the population.
      Most Greeks have tiny or zero savings in the banks let alone investment portfolios; of the ones that do have substantial banksavings and/or portfolios, only a small part does so abroad (if most of them did, much more would be in favor of Grexit ;-) ).
      You're generalizing about Greeks when you're actually talking about a tiny population percentage high up in the income and wealth distribution."

      Thank you very much for that, i. e. explaining what should have been... selbstverstaendlich, but apparently...

      Delete
  2. " What happened was that the risk from that colossal debt, previously carried by German, French and very many other banks, was transferred from those banks upon the tax payers of the lending countries. "

    And how terribly they suffered for it!
    Truly they're the true victims of the crisis, as they always are...

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    Replies
    1. No tax payer in the lending countries has yet suffered from the rescue loans which the EU put on their shoulders. Why? Because the structures of the loans are such that they do not burden the national budgets. In fact, so far the national budgets benefit from the loans because they receive interest income.

      Say you are a banker and you have a bankrupt customer. Instead of going for bankruptcy and taking your losses, you make new loans to keep him afloat. On the new loans, of course, you charge interest and the bankrupt customer pays you interest out of the money you lent him. So as long as this systems stays alive, you are really doing quite well by having kicked the can down the road because you are still booking profits instead of taking losses. Unless a miracle happens and your customer recovers economically, you will eventually face a moment of truth at which point your losses will be much higher than they would have been before.

      Greeks seems to have a tendency to see the world in terms of victims and perpetrators. There are no victims or perpetrators. There were political leaders in Greece and the EU who have made terrible decisions and when that happens, it is always the population that ends up with the bill.

      Despite all the sufferings, Greeks also had a lot of benefits from the rescue program. Just think of the 130+ BEUR which Greeks could withdraw from banks post-2010, savings which would have been lost without the rescue program. Just think of all the money Greeks could transfer into safe havens abroad post-Euro because foreigners put Euros into Greece. If that was done intentionally, one would have to consider it as a stroke of genius.

      Delete
    2. "Greeks seems to have a tendency to see the world in terms of victims and perpetrators. There are no victims or perpetrators."

      You obviously don't follow very closely (or at all!) recent political developements in German-speaking countries...


      "Just think of the 130+ BEUR which Greeks could withdraw from banks post-2010, savings which would have been lost without the rescue program. Just think of all the money Greeks could transfer into safe havens abroad post-Euro because foreigners put Euros into Greece. If that was done intentionally, one would have to consider it as a stroke of genius."

      Indeed, you can't throw a stone in Greece without hitting one of these people...
      Oh, well...
      Guess, you're right: no victims or perpatrators here!

      Delete
    3. I have added an addendum in the article which provides some clarification to the question as to which countries had built up the Greek debt.

      Delete
  3. According to a Greek I met today, the movie "Adults in the Room" was sponsored by the Greek government to the tune of 1,5 MEUR. Responsible for that decision was allegedly Nikos Pappas. Obviously, I have no way of verifying this information.

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  4. On the sponsorship.
    "But opposition to the film was heightened this weekend when Nikos Papas, the minister for digital policy, telecommunications and media, revealed the project would receive €630,000 in state funding. The funding is what the project will receive at the end of shooting via the country’s 25% cash rebate scheme, which started operating last year and has since been increased to 35%. It is administered by the National Scheme of Audiovisual Media and Communication-EKOME, overseen by the ministry headed by Papas."

    https://www.screendaily.com/news/cash-rebate-for-costa-gavras-adults-in-the-room-sparks-heated-political-debate-in-greece/5138595.article

    ReplyDelete
  5. I had erroneously deleted the below comment.


    Anonymous has left a new comment on your post "Manipulating Adults In The Room":

    Thanks Klaus, admittedly I saw this already a couple of weeks ago.

    Reminded me of Yanis' keynote speech in 2010, Brisbane, Australia:
    https://www.yanisvaroufakis.eu/2010/12/07/varoufakis-brisbane-talk-crisis-us-europe/

    And the tight PR comment controlls on his blog + our old friend who surfaced here, Kerberos guarding matters. And yes, Yanis' otherwise high profile connections to the US celebrating him and UK finanical circles.

    Take care, be well, don't leave us completely. ;)

    sometimes ago LeaNder

    ReplyDelete
  6. I had erroneously deleted the below comment.

    Nothing to worry, Klaus. But glad you noticed.

    Does Google help you? Not sure if I want to hide inside Google's big insight.

    ReplyDelete
  7. Google offered me a more comfortable login, maybe that would have helped your admin task.


    But one 'central' question that was on my mind, beyond many others as curious economical nitwit, other then that "adults in the room" was an interesting title choice. Surfaced elsewhere a lot too.

    Ok long way to get at one question: Were did you get that bond purchase grafic from?

    And what percentage of overall national finances do those bond purchases represent, ironically speaking in the age of Trump?

    Of much lesser importance: to what extend should we Germans have celebrated Yanis' grand offer of 1.000 Euro paid by the ECB to every not so well off German. That was quite generous, wasn't it?

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  8. I have now seen this movie. Judging from the movie, there was - at all times - only one adult in the room, Yanis Varoufakis. Everyone else came across as not playing with a full deck of cards. Also, I would have to see the movie again to verify this but to the extent that I can recall, there was not one single scene without Varoufakis. So it was really a movie about Varoufakis.

    ReplyDelete