I have received frequent criticisms that I think like a (retired) banker and not like a politician. That's true! But is it really always wrong to think like a banker? At least like a non-Investment Banker?
When bankers are invited to a bankers' meeting where the borrower will present that he has run into financial problems and that solutions have to be worked out, the foremost question from the bankers to managements is:
What is your plan?
What is the plan for Greece to solve its economic problems? What is the plan for the Eurozone to solve its economic imbalances (which are at the root of the problem)?
Once there is a plan which the bankers consider as apt to solve the company's financial problems, they will evaluate financing alternatives which support the plan meaningfully. They will never start with financing alternatives before they know what the plan is.
The Eurozone still thinks that it is better to do things the other way around. That reminds me of the song of a Viennese cabaret artist which begings with the phrase:
"We don't know where we are going but the faster we drive, the sooner we will get there!"
When bankers are invited to a bankers' meeting where the borrower will present that he has run into financial problems and that solutions have to be worked out, the foremost question from the bankers to managements is:
What is your plan?
What is the plan for Greece to solve its economic problems? What is the plan for the Eurozone to solve its economic imbalances (which are at the root of the problem)?
Once there is a plan which the bankers consider as apt to solve the company's financial problems, they will evaluate financing alternatives which support the plan meaningfully. They will never start with financing alternatives before they know what the plan is.
The Eurozone still thinks that it is better to do things the other way around. That reminds me of the song of a Viennese cabaret artist which begings with the phrase:
"We don't know where we are going but the faster we drive, the sooner we will get there!"
Bankers are appointed, politicians are elected.
ReplyDeleteThe problem with the EZ is not the lack of a Plan, the problem is too many Plans. I can't see this becoming fewer than 2 Plans - the Skinflint Block Plan and the Spendthrift Block Plan
Then they have to decide which Block will Exit the Euro - would the TPTB prefer a Euro worth US$.70 or one worth US$1.70. My hunch is what its always been, the GANFS will exit and work towards forming a Thaler Zone. The rest will stick with a much devalued Euro, they will eventually hoover up the other Balkan states, Poland will join the Thaler Zone. Slovenia is a puzzle - economically it fits the EuroZone mould, but culturally, to me at least, it feels more like a Thaler zone country - but I'm biased because I have economic interests in Slovenia.
CK
maybe greece should ask the goldman-sachs bankster again. they always have big plans to solve problems....
ReplyDeletehttp://www.deutsche-mittelstands-nachrichten.de/2012/03/39309/
With a lot of respect, Klaus, but imho we shouldn't forget that in the real economy, the important decisions to be made by the CEO of a goods or services producing company mostly focus on stuff like R&D, strategy, marketing, human resources, etc. and that these are at least (imho more) as important as the financial side. Sure, a great company can be ruined by bad finances, but no company will ever become great when only the financial side is ecellent but the rest lousy. In economic reality, much too often the "beancounters" (effing controllers) prevent important strategic investments. Fact is, to create new opportunities for a company very often requires bold, intuitive decisions made under uncertainty. This ain't popular with the bankers, but if you always play it safe, you may end up one day with an outdated product and a company that has been surpassed by the competition.
ReplyDeleteSo, excuse me pls, but as I see it, this onesided focus on the finances is rather counterproductive. The most solid fiscal policies won't help Greece in the long run if it doesn't manage to become more comptetive. This requires a lot of reforms, most of which haven't anything to do with finances. The plan of the Troika obviously is to improve the economic environment in order to make the country more attractive for investment. I wouldn't say the proposals always advance that goal, and the implementation is even worse. But at least there's a vision behind that, while the idea of the bankers, to put the status quo on a more solid financial foundation, doesn't inspire any hope for a better future. I guess the artist you cited would paraphrase the bankers' approach like this: "It doesn't matter if we're on the road to ruin - if we drive very carefully and avoid all risks, our car will be fine!"
I don't get it! What you write is about the same what I have been trying to say in this blog since inception. What am I doing wrong to be vulnerable to such misinterpretation??? My quote addressed the behavior of EU-elties (and banks) and definitely not the abilities of entrepreneuers! Try the post below.
Deletehttp://klauskastner.blogspot.co.at/2012/07/seeing-erred-ways-of-my-thinking-3.html
Well, I haven't read all the stories here "since inception", only the most recent ones. So, I guess the problem simply is that this posting "What is the plan???" misleadingly makes it look as if you advocate that the bankers' approach is the right one, and that of the Eurozone, which HAS a plan that focusses on reforms like removing red tape, reducing bureaucracy, opening up closed professions etc, is wrong. Good for you if you have been trying to say this here for so long. But then, why does this story read as if you praise the bankers, and totally disregard that many Troika proposals are indeed leading in the right direction?
DeleteThere is an invetory at the top of my blog showing the more important blogposts I made last year, listed by topics. Below just 2 which I picked out at random which show you better how I think of the role of the bankers. Again, I don't see how I praised the bankers in the present post. If I come across that way, I failed in my intent.
Deletehttp://klauskastner.blogspot.co.at/2011/06/perverson-of-banking.html
http://klauskastner.blogspot.co.at/2011/06/how-not-to-manage-sovereign-debt.html
Indeed, those two stories leave a different impression on me. I can only applaud you for making a stand against the "privatize the profit, socialize the losses" policy of the banks and investors. However (and that is just my personal opinion, not meant as criticism) I would like to see a stronger focus on the responsibility of the debtor to do his best to contribute to the solution, by increasing the efficiency of government expenses and improving his revenues. After all, there can't be any doubt that preserving the status quo in Greece is a receipe for desaster in the long run. The clientelism, corruption, and outright lawlessness had grown into an unbearable burden for the economy, and this couldn't go on for any longer.
DeleteIf I haven't focused so much on the responsibility of the debtor, because that is to me - with my banking experience - so obvious that it doesn't even deserve much debate. And in retrospect, Greece had the advantage/disadvantage of having a Prime Minister at the time who came across as a most serious leader. Most people, me included, probably thought that he would really start the process of developing a "new Greece". Well, as it turned out, that was words only, for the most part. Today, we know that he had absolutely no leadership muscle.
DeleteAnother thing which can assumed to be obvious - but wasn't the case in Greece - is that the debtor must assume ownership of the problem. This has not occured in Greece, not really until this day.
So again, what is the plan to "improve competitiveness"?
ReplyDelete-keep borrowing?
-tax, tax and retax those who pay taxes?
-absolve those who have brought the country to this by voting for deficit after deficit and looking the other way at everything wrong that was happening of any responsibility?
-Pass laws to void existing private contracts in order to boost ... credibility?
-in order to (try to) gain the trust of lenders who give their money with interest de downright fraudulent with its own citizens who give the money for free?
-do nothing about the chronic ilnesses like the judiciary which can rule that they are untouchable and all their decisions are beyong questioning?
Don't know whose plan this is, but this is what is being implemented. So if that's the plan, I'd rather go with no plan...