Weekend reading: It’s all Greek to me

Some good reads from around the web.

I am sure there are some ordinary Greeks who are being taken to the brink by the crisis, but you wouldn’t know it from most of the news reports.

Invariably the street scenes in Athens look as prosperous as you can imagine, all BMWs and gushing fountains – more Rodeo Drive than road to hell. Interview after interview is conducted in a shiny cafe stuffed with prosperous clientele.

I saw one on CNBC yesterday held on the sunny apartment balcony with a chap who’d lost his job, who lamented that they were struggling to get by on his wife’s 35,000 euros a year (plus whatever benefits he was receiving, which were not cited by the program).

“Sometimes we run out of money,” he said. Maybe when he had to buy new filters for the chrome coffee machine or the other consumer treasure we saw dotted about his home.

Pay day looms

These people undoubtedly feel miserable, relative to where they were. But where they were was in the economic fun house – the equivalent of a kept mistress in pied-à-terre on borrowed time.

As one Greek businessman writes on Bloomberg:

For 30 years, these two [main Greek] parties competed in an orgy of jobs and entitlements for votes. In the span of a generation, the composition and ethos of Greek society were transformed.

Where there had been a mostly self-reliant and hard-working body of citizens, we got an army of state-supported employees with guaranteed job security and early pensions.

As the UK state’s own largesse is gradually withdrawn (despite all the debate about cuts, public spending is still at record levels) we will surely face more trouble here, especially as the deleveraged animal spirits of the private sector seem about as likely to pick up the slack as my mate Graham to pick up a bar tab.

And that’s bad news, because it’s a breeding ground for crackpot extremists, as we’re seeing in Greece:

The troika insists on structural reforms, such as less job protection, limiting trade union privileges, and opening monopolies and closed professions in the service sector.

In short, Greece’s creditors are asking the country to dismantle what was built during the last few decades and led Greece to bankruptcy.

The intent is to make the economy competitive, but those affected don’t see it that way, and they are many.

Close to one in four of the working population depends on the state for his or her salary. Add to them the unemployed at 23 percent, double among the young, plus all those whose salaries and pensions were reduced by the troika’s austerity measures, and you get a large pool of very unhappy and insecure people.

The interview with the jobless chap ended with him saying he might have to rent out his property and take his family back to live with his parents for a while, which he found intolerable at 40-years old.

I agree it sounds miserable (not least on the parents!)

And I’ve heard personal stories from people close to Greece that paint a much darker picture than those the TV news reporters are able to unearth within 20-feet of the lobby of the Athens Hilton.

Yet I’ve heard no reports of Greeks calling for measures like the six-point plan of privatisations and restructuring that Germany is apparently working on to try to save Greece.

Instead, I see people marching for free money to pay for unsustainable pensions, benefits, and tax perks – all to be paid for by foreigners.

Even the IMF’s Christine Lagarde this week called for Greeks to pay their taxes:

“I think more of the little kids from a school in a little village in Niger who get teaching two hours a day, sharing one chair for three of them, and who are very keen to get an education. I have them in my mind all the time.

Because I think they need even more help than the people in Athens.”

While anyone with a heart would feel sorry for Greek children and others who can’t be blamed for the country’s predicament, I’m with Lagarde in tiring of the sob stories from Greece, and also here at home.

I have never been in debt. I didn’t lie to buy a property early on in the housing boom. I refused to pay 10-times average earnings by the time I didn’t need to. I didn’t shop til I dropped and make millionaire footballers or Sex in the City‘s heroines my financial role models. I’ve saved and reinvested a big chunk of my disposable income like most people pay their taxes. I’ve bought some nice things along the way, but I never thought I was entitled to everything.

I’m nearly 40, too, like the unhappy Greek on CNBC. And I rent my home.

So no, we weren’t “all at it” as the journalists keep saying, no doubt because they were all at it themselves.

Some of us avoided getting into debt, worked, saved, and invested. And being held ransom by the millions who didn’t in Greece and here at home (whether as a nation or as individuals) is starting to grate.

There was always another way. Most people ignored it.

Cradle to grave in debt

So as we go into yet another weekend wondering whether European leaders will surprise us on Sunday night with a radical plan D, I am wondering again how this will play out in the UK, too.

Previously I’ve been relatively optimistic. But faced with the political delusion apparent on the continent, I wonder if I’ve been too focused on the narrow economics?

We’re not in the same precarious financial position as Greece – we can print our money, intervene to bolster our banks, devalue our currency, and do a few things the world wants to pay us for – but the ludicrously carefree attitude most people had until recently towards debt, from the former Prime Minister to the average Brit in the high street – is not so far removed.

Few people seem to want to face up to the bill for the party, anymore than they do in Greece.

Shove it to the next generation is the order of the day, whether the choices be spending cuts for the undeserving, tax rises on the wealthier, or pensions curbed for everyone.

Years more of this (if we’re lucky)

For an investing perspective on the unfolding drama, you could do worse than read this interview with hedge fund manager Ray Dalio in Barron’s:

Deleveragings go on for about 15 years. The process of raising debt relative to incomes goes on for 30 or 40 years, typically. There’s a last big surge, which we had in the two years from 2005 to 2007 and from 1927 to 1929, and in Japan from 1988 to 1990, when the pace becomes manic. That’s the classic bubble.

And then it takes about 15 years to adjust.

Unlike the Athens we see on TV, there are many places in the UK where life is tough, shops are boarded up, and people have very low expectations – and that’s after over a decade of easy money from the State and banks alike. I dread to think how bad things could get if it continued for a decade.

Overall I’m still not too worried about the economic situation in the UK – I think it is manageable, as I’ve said many times before.

But I do wonder if I’ve underestimated the political risks?

On the other hand, the sun is out which always makes me feel glum at first, and I had dinner this week with by far my gloomiest friend – a man who reads Grant’s Interest Rate Observer to his kids before bedtime.

Fingers crossed for plan D, then.

From the money blogs

• Rebalancing: Should you bother? – Can I retire yet?
• Investing in a world of Black Swans – Investing Caffeine
• Do mutual funds have hidden costs? – Oblivious Investor
• Embracing the nagging voices of success – Mr Money Mustache
• Happy people make terrible traders – The Psi-Fi blog
• Why I have no faith in market timing – Canadian Couch Potato
• How much is enough to be happy? – DIY Income Investor
• Grexit: Ambulance chasing ahoy? – Simple Living in Suffolk
• 5 financial benefits of being over 50 – Totally Money

Book of the week: If you want to scare yourself as to how bad things could get, there’s always the classic When Money Dies, which dissects hyperinflation in 1920s Germany. I guarantee you’ll have more sympathy for Angela Merkel and the Bundesbank after reading it!

Mainstream media money

• Why Facebook’s own underwriter was shorting it – Reuters & DealBreaker
• The cult of the non-equity… – FT
• … and why it’s not a contrarian signal – FT
• Europe looks good value on CAPE basis, but risks abound – FT (Japan too)
• Falling Euro weakens UK savers protection in European banks – FT
• Lock into a longer term mortgage deal – FT
• My first million: Levi “Reggae Reggae” Roots – FT
• Average Briton pays 149 days salary to the taxman – Telegraph
• Should investors switch from bonds to shares? – Telegraph
• Banks are pulling long-term best buy savings deals – Telegraph
• Free banking should end, Bank official says – Telegraph
• £2,600 bill for data roaming on iPhone in Istanbul – Guardian

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