Tuesday, February 21, 2012

Catastrophe Averted, or Just Postponed?

WSJ, 2/21/2012, "Europe Reaches a Greek Deal" by GEOFFREY T. SMITH, AINSLEY THOMSON and COSTAS PARIS

最近沒有寫什麼關於歐洲公債的東西,主要的原因是消息雖然不少,但是都不是新鮮事。 在去年 ECB 實施了他們自己版本的 QE,放出大量的三年低利貸款給銀行,同時還表示今年很有可能會追加之後,歐洲處理問題的方向大致上就確定了。不管將來歐元區會不會縮小,短時間內他們不會採用把會員國踢出去的方式解決問題。

在希臘這邊,雖說他們沒有違約,不過這只是文字遊戲而已。如果這是一家民營公司,Chapter 11 恐怕都還不能夠做到他們目前做的事情。改變他們的欠債的條件也就罷了,要債主勾消那麼高幅度的債務,這簡直就不只是剃頭 (haircut),根本是砍頭了。昨天在 Brussels 通過的紓困方案,在債權交換後,民間債權人將減計 53.5% 的希臘政府公債面額。目前他們的 公債是 GDP 的 164%,在減計之後預計將在 2020 年降到 120.5%。希臘同時得到了 IMF 以及其他歐洲政府的 130 bn euros 的紓困。當然這些不是憑白得到的,希臘政府稍早在國會通過了大幅削減預算的計畫,人民的年金、公務人員的人數都將大幅減少。

問題就此解決了?當然不是。寫這個 blog 到現在三年多,學到了不少事情。其中之一是『風險』這種東西對於政府和民營企業來講差很遠。在 2008 年 9 月的時候,投資人對投資銀行、一般商業銀行甚至傳統產業公司失去信心,市場上面的流動性(主要是公司債和銀行間拆款部份)一夜之間蒸發無蹤。即使是 Goldman Sachs 這樣體質尚稱健全的公司,也幾乎面臨倒閉的命運。金融業靠的是信心,因為金融業務的精神就是借入短期資金以投資於長期目標,他們必須要一直在短期資金到期後借新的還舊的,才能夠維持長期投資部位。最簡單的例子就是房貸,銀行從存戶、投資人手上拿到現金,轉手貸出廿年甚至卅年的房貸,賺取中間的利差。現代的高風險操作看起來不是這樣子,不過如果考慮大部分高風險資產的『高報酬』其實是長期平均的觀念,其實還是可以說是符合這樣的精神。當投資人對銀行的信心一但消失,他們就無法維持資金注入,而必須出清手上的資產。當這種事情發生的時候,往往也是銀行手上資產市值偏低的時候,所以我們會看到銀行虧損、擠兌甚至倒閉。

國家則不然,政府公債在公開市場上面賣不掉,可以由央行買(如美國、英國)、可以要求本國公營或民營銀行努力承接,甚至可以要求國際組織如 IMF 或像這次歐洲其他的國家來出錢救援。更有甚者,這次希臘還可以靠德、法元首出面扮黑臉,恐嚇民間機構『自願』減計債務。但是這次希臘的情況實在太糟,目前看起來他們是把負債壓在可維持的範圍之下,不過所謂的『可維持』(sustainable) 是在什麼樣的參數下計算我們必須更詳細的看。希臘目前已經陷入嚴重的衰退,接下來只有更嚴重。我不相信大規模的財政政策可以挽救不景氣,但是在不景氣的當下要大幅刪減預算,無論如何不像是個可行的方案,但這就是希臘所做的事情。他們別無選擇,因為如果不這樣做就無法得到歐洲國家的紓困。沒有金援的話,希臘政府很快就會付不出年金、付不出公務員薪水,甚至連消防隊員和鎮暴警察也無法維持足夠人力,每有示威暴動便會損失慘重。到時候,情況只有比現在更糟。在國會通過他們所通過的節約預算法案並不容易,可以想見在國會議員選區裡絕對不受歡迎,但是負責任的政客都應該知道不通過的下場只會更糟。

他們的計畫是在 2020 將負債和國民所得比降到 120.5%,不過這要看分母到底變化如何。如果 GDP 持續萎縮,他們不但有可能無法達成目標,甚至情況比現在更慘都有可能。New York Times 在 2/13/2012 有一篇 "The Way Greeks Live Now" (作者為 Russle Shorto),裡面用實際田野調查的方式直接觀察目前希臘庶民的處境。在目前的情況下希臘沒有辦法累積資本,技術人員和有錢人的資金外流,除了讓其他歐洲國家把希臘『買』下來,讓希臘成為歐洲的 Florida 之外,看不出有什麼出路。我認為希臘的債務問題只是被延後而已,並沒有真正解決。而且我甚至懷疑他們有沒有辦法解決。假如希臘目前的景氣狀況無法迅速反轉,他們目前的負債比仍然不能說是 "sustainable"。話又說回來,只要能夠讓希臘這顆炸彈在最近幾年裡面不會爆炸,德、法等國可以專心面對葡萄牙、西班牙,以及義大利的危機,勉強算是築了一道不太保險的防火牆。

由於歐洲有好幾個負債比過高需要紓困的國家採行嚴厲的預算縮減措施,整個歐洲地區的經濟發展如果不是一起被拉下去,就是會出現兩極化的現象。到底是哪種情況要同時看美國、日本以及中國的表現。日本大概是確定不太能夠寄與重望了,美國最近的 earnings 報告也開始出現成長趨緩的現象,而中國看起來也不太容易讓人樂觀的起來。我並不是說景氣接下來會急轉直下,應該不會的。不過我也看不到迅速成長的動力。股市有可能因為資金動能而走一段精彩的牛市,不過總體經濟的復甦將是緩慢而漫長的,我們只能祈禱不會進入一個新的衰退。換句話說,就業情況仍然不樂觀。

24 comments:

Ben said...

This Greek "tragedy" reminds me of the WSJ op-ed I posted here some time ago. Nobody is willing to let this little Greek fire burn, and eventually we will get a 100-year fire that will burn down the whole European system. Of course, people will then say that it was such a black swan event that NOBODY could possibly see it coming.

CCLu said...

I'm not too worried about the Greek bailout for now. They take the bitter pill anyway and the damage is relatively manageable for the rest of the world. I think they'll eventually default, but that's for a later date and hopefully for an easier time.

I think the dangerous thing is in the European banking system. They took a huge haircut and the credit default swaps turned out meaningless because they "voluntarily" renegotiated the debt terms. If things in Portugal, Spain and Italy turn out to be as bad as we are afraid of, the first wave might knock out some private banks and then set off a series of credit events. European leaders will regret they spent all those public and private resources in Greece.

When the problem is in the private sector, things go bad much faster. With those leadership we saw in Europe, they might not be able to control the damage soon enough. This is what I'm afraid of.

Mobi said...

I think Europe as whole is already in recession (double dip.) In US, as the gas price keeps climbing, we are likely not far away from the "R" word.

Ivan de la Isla Hermosa said...

Personally I think the public sector/debt has been given too much spotlights. The most serious problem lies in the private sector debts. While most banks use the ECB loans to buy government bond to suppress the borrowing cost, private companies are in trouble of securing their loan. Petroplus is the first to cripple this year, who knows how many more to follow?

When I wrote a short article on my blog today I found a Reuters News.
They just report today(EU time) regarding to private debt/GDP ratio. EU commission has their threshold on 160%. Leave those troubled economy, guess who are also over this benchmark? Sweden, Denmark, and the Netherlands!!

At the moment we need private sector most to create job opportunity, yet they cannot do so. They are drowning in debt as well.

Jennifer said...

I think one event worth the attention is the G20 Labor and Employment Ministers meeting meeting that will be coming in April. Are countries outside of Euro zone willing to help their global partners?

And I actually had this opportunity today to ask a US banker about the impact on the US economy if EU zone enter into severe recession. He is rather opptimistic about US economy. He said even EU enters a severe recession (they are in mild recession now actually), the impact on US ecomomy is at most 0.5% GDP in his calculation because US has its own huge domestic consumption and the emerging counties, including China and Brazil, are holding up well.

Ivan de la Isla Hermosa said...

To Jennifer,

We do not have to wait until April. G20 financial ministers are meeting up in Mexico city these days and they, well, might offer a hands if EU have clear plan. For now it is a "no"
G20 rebuff EU's calls for help

BRICS(I do not know since when they add South Africa in :P) nations are no vegetarian.They can contribute financial resources, yet they demand more says in IMF. We will see if IMF, a long time European-headed organization, will open up doors for them.

Personally I love the words from U.K. Chancellor of the Exchequer George Osborne “Until we see the color of their money, I don’t think you are going to see any money from the rest of the world.” This sentence amuses me.

well, EURO won't print in green anyway.:P

Jennifer said...

Ivan,

As the answer is a big no from G20 Mexico meeting, we can only wait for the next one in April, right? :-)

I am just happy that the possibility of losing my job because of another US recession may be relatively low. Let me cross my fingers.

Ben said...

>>And I actually had this opportunity today to ask a US banker about the impact on the US economy if EU zone enter into severe recession. He is rather optimistic about US economy. He said even EU enters a severe recession (they are in mild recession now actually), the impact on US ecomomy is at most 0.5% GDP in his calculation because US has its own huge domestic consumption and the emerging counties, including China and Brazil, are holding up well.<<

Allow me to be blunt here. If this U.S. banker person believes that a severe EU recession (negative 6+% GDP for at least 4 quarters) will only cause a 0.5% GDP drop in the U.S., I have a fine selection of bridges that I would like to sell him/her.

We live in a highly interconnected world today. With the global banking system already on the tilt, a severe recession in the world's largest economy will almost certainly result in a worldwide recession, even here in the U.S..

CCLu said...

Reply to all (for the sake of the long weekend here in Taiwan),

I agree with Ben that it is naive to believe that a huge downturn in EU will only cause a minor dent on the US economy.

The way we "forecast" the interaction between different economies is to conduct an empirical study with past information and add in our judgement for the things to come. I really doubt how much we can learn from the past because we have never seen a Euro Zone like it is. The more integrated Euro Zone, and the whole world as well, might pose a bigger collective downside risk.

Things are bad in some European countries already. I just hope Germany and France will stay resilient.

I agree with Ivan's view that not all debt/GDP ratios are created equal. Different countries have different tax structure and spending schemes. A cross-sectional comparison easily overlooks these facts.

That being said, a ballooned debt/GDP ratio from a specific country's perspective definitely spells trouble. If the said country was well balanced in tax revenue, normal government spending and interest payments. Rising debt/GDP ratio will crowd out the private sector investment and thus reduce the future tax. On the other hand, more debt will cause more interest payments when this government has to roll over short-term debts or even long-term ones. They either have to spend less or borrow more, and this downward spiral will only stop when the business cycle turns to the good side or they will eventually default.

Jennifer said...

Ben & CClu,

I appreciate your comments and I agree that how much impact would be posted on US if EU enters a severe ression (the definition may be different for that US banker, to start with)is open for debate. It was an opportunity when this banker gave a very detailed presentation about EU economic crisis with lots of calculations and graphs. He actually didn't mention the impact on the US in his presentation at all but I raised this question. He forecasts that US will have 2.5% GDP growth in 2012, and the EU impact will be at most 0.5% (in 2012). His answer is short but I believe he has his own judgement.

However, let me disclose he is not a casual banker, but a principle economist in a US national bank. He and his team were selected as the most accurate FX forecast group in US banking industry last year. I will give his judgement a benefit of doubt. If we want to challenge his view, on the other hand, we also need to do a empirical study to overturn these comments.

Jennifer said...

Happened to see this article by KRUGMAN for your reference or amusement.

http://www.nytimes.com/2012/02/27/opinion/krugman-what-ails-europe.html?_r=1&src=tp&smid=fb-share

CCLu said...

To Jennifer,

Although I don't buy that "the most accurate FX forecast" thing, I can give a person with that profile some benefits of doubt. I don't doubt his team won that outright. I simply don't buy that title because FX is notoriously difficult to predict. It involves just way too many factors, and most of them are not even economic ones. I'd rather trust a trader's killer instinct than an economist's careful analysis on FX forecasts.

That being said, I think the jury is still out there. The better way to communicate is not to do our own research, it is to examine his model and assumptions directly. That is how things are done in academia. I know it is probably not a choice in the industry because it could be a trade secret, so there is probably no conversation that could happen.

The Krugman article is interesting. I agree with his explanation to Euro-zone's failure, but I don't buy his conclusion. Yes, some people might cite wrong reasons to object US government intervene, but their objection is not necessarily wrong. There are also brilliant economists object Obama's policies with sound reasons.

Jennifer said...

CCLu,

Very good insights. I actually also asked this another question after the presentation (See how the banker needs to put up with me!) about how he got those forecasted FX numbers. (He gave us a list of 6, 12, 18 months of EUR/USD FX rate prediction.) After his explaination I said "So this is like an art not science." He gave me an awkward smile. XD

In his presentation I can vaguely see his models and thought process. Very interesting presentation.

I will come back with some thoughts after I finish Krugman article.

Ben said...

"We will not have any more crashes in our time."
- John Maynard Keynes in 1927

"Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months."
- Irving Fisher, Ph.D. in economics, Oct. 17, 1929

"I can calculate the motions of heavenly bodies, but not the madness of people," Sir Isaac Newton wrote in 1721 after he lost a fortune in the South Sea Bubble

And don't get started with Greenspan and Bernake:)

Jennifer, I am sure that this economist is a smart and capable person. But smart people make mistakes too, as evidenced by the sample quotes above. And who made an absolute killing in the 1929 crash? One trader named Jesse Lauriston Livermore. Of course he lost it all in 1932-33.

Jennifer said...

Ben,

Agreed that nobody can do this prediction job better than God. :-)

Now this reminds me of another event in which a famous US economist gave a keynote speech. He said (jokingly) that he always predict things worse than it may appear because when things are turning out better, not many people will blame him. If he does it the other way around, he will be in big trouble. XD

CCLu said...

To Ben,

Predicting the economy is a bit easier than the stock market. However, that is still a tall order nonetheless.

I think we should put ourselves in the same spotlight when we discredit other's ability to predict. We don't know that all so well ourselves either.

The gold standard analogy Krugman used was dead on. What the Euro-zone is going through seems like the 1930 US, at least for the international part. With the austerity measures put on those troubled countries, some of the Fed mistakes seem to repeat in the fiscal end. If it gets worse than we thought, it could be very ugly.

Ben said...

CCLu, it was not my intention to discredit other people's forecasting/predicting capabilities. If my previous post came across that way, please accept my sincere apology.

The message that I tried to convey in my last post was this: nothing is more difficult, IMHO, than consistently and fairly profiting in the market. I know of nothing harder to learn. And I used those quotes to illustrate how some of the most intelligent and capable people in the history of mankind had gotten it wrong. If Keynes, Fisher, Newton, and Livermore couldn't get it right consistently, what are the chances that most of us mere mortals can get it right more than 50% of the time? I am the first one to admit that my forecasting ability is decidedly below average.

Another point that I would like to make is that forecasting prowess (economic and/or market) only contributes little to one's investment success. Great investors are almost always a master risk manager first and foremost. Case in point: Warren Buffett's investment rules. A mistake that I used to make was to invest according to what my market and/or economic outlook was. Not any more, these days I try to find opportunities where the risk and rewards are in my favor. I still have my market views but they only carry about a 20% weighting in my decision making process.

Last but certainly not the least, I don't mean to imply that nobody can play the macro game well consistently. George Soros and Ray Dalio are two of the first names that came to my mind, and there are a few others as well.

Jennifer said...

I just enjoy the conversations here. Appreciate everybody's inputs and I learn a lot. I am not a trader myself and besides occasionally moving around my 401K positions, I am not interested (for now) in leveraging my hard earn money to play stock market games. I moved my equity position into PIMCO bonds when I thought the MACRO environment is getting worse, and I reposition myself into equity market when I know an upward trend is certainly on the horizon. And so far so good (finger crossed). Please keep up the good works and I will be looking forward to exchanging opinions with you.

CCLu said...

To Ben,

Nah, there's nothing to apologize for. I just thought when we reject the idea of mild impact on US economy from the Euro-zone recession, we should admit that we don't know much either. Just to be fair.

The citations you brought up are great, by the way.

On another note, George Soros also had his fair share of failure. He did his homework well on Hong Kong's economy in 1998, but he didn't factor in the politicians' will and power to "save the day". This just says how difficult for an economist to forecast the exchange rate because he/she has to consider political factors to do a good job. That, my friend, is not what we are made of.

CCLu said...

To Jennifer,

Welcome. We are just trying to exchange ideas. I'm a school nerd all my life, it is ultra fun to talk to people with different backgrounds about the issues I'm interested in.

Since you brought up your investment portfolio, you might be interested in this New York Times article:

New York Times, 2/25/2012, "What High-I.Q. Investors Do Differently", BY ROBERT J. SHILLER

Link is here:

http://www.nytimes.com/2012/02/26/business/what-high-iq-investors-do-differently-economic-view.html

Jennifer said...

Thank you CCLu. Econ is an interesting subject, especially macro. I am often fascinated by the 10 different opinions out of 9 economists. I was inspired by my graduate school macro professor, who did a very good job teaching his students with various of tools and classroom managements. Your job is very important so keep up the good spirit and works.

The article you cited will be my lunch break reading material today. Thanks a lot! (Can I ask do you invest? :-))

Mobi said...

All,

Why don't we sit back and wait? Maybe some popcorn, too. You can't hedge the end of world anyway, right? :P

CCLu said...

To Mobi,

Hear, hear, I'll drink to that.

Ben said...

>>You can't hedge the end of world anyway, right? :P<<

Of course you can hedge Armageddon. Capitalism has a solution for everything....SMH.

Click on the link below and check out the "hedge":

http://www.terravivos.com/

On a more serious note, religion, IMHO, has always served as the ultimate hedge against Armageddon. Perhaps that's why mankind created religion in the first place.