The World Series wasn’t the only event in the majors to be postponed because of inclement circumstance. The crisis in the EU, originally scheduled to culminate last night, was deferred when President Sarkozy, Chancellor Merkel, et al. discovered a large cache of cash in the pockets of a small group of private citizens who had arrived to witness the event.
Suspicious that any private citizen should have money and wary of anything untoward occurring, the assembled leaders of the EU persuaded this group of citizens to “voluntarily” surrender half of what they had. The crisis was then immediately called for the night and is rescheduled to begin again in two years’ time.
The money that was confiscated then traveled back through time (via a mechanism too complicated to explain) to Greece, where it was discovered by that country’s ruling Socialist party. The members of that party said to themselves, “My! Where did all this money come from? A gift from Pluto! Let’s use it to employ as many of our own people as possible. It’s better then forcing them to fend for themselves. If we don’t do this, we will anger the Gods.”
But the Greek leaders were unwise and employed far more than were possible. Eventually, nearly half the economy was dependent on government handouts. The leaders knew they had nothing more to give but promises, but were unconcerned and assumed that the Gods would deliver more gifts of cash from the future to replenish the empty treasury.
Then one day, one of the socialist leaders, after a night of lurid dreams guided by Eros, hit upon the idea of selling the Greek promises to non-Greeks. “Of course!” the rest of the leaders agreed, “We can generate promises endlessly, without limit. As long as we can persuade somebody to pay us for them, we can employ more and more of our people in government.”
They began issuing these promises, which they called “Bonds”, forthwith. Aroused by the compassion shown by Greece’s socialist leaders, and in truth partly by the hope of personal gain, many of Europe’s citizens gave their private money to own the Greek promises.
Each promise was crafted to guarantee that the purchaser would receive his cash back, plus a little more, sometime in the future. The purchaser was assured that the money for this scheme would be made available by Greece’s selling more promises even further in the future. Masses of German, French, and even British citizens, who had never heard the legend of Charles Ponzi, said to themselves, “What could go wrong?” and bought large a number of the promises.
The plan might have worked, too, but Greece’s neighbors looked on the success of that country with jealous eyes. The leaders of these countries said, “If they can do it, we can too. Have the Exchequer start drafting promises now!”
And so Italy, Germany, Portugal, Spain, Ireland and many other countries flooded the market with promises. Alas, they were also bought by the citizens of Germany, France, and England. These private citizens reasoned with themselves, “We got our money back with interest when we bought Greek promises. We’ll get even more money if we double, triple our bets and buy Italian and Spanish promises.”
Soon, the inevitable happened. Each of the countries that sold promises employed as many of their own people as they could, which had the effect of rapidly depleting each country’s treasury. More promises were issued, but none could be found wanting to buy them. The citizens who had previously bought promises finally saw that their promises could only be paid with other promises, which themselves would be paid by promises made by other countries. Hard currency—money itself—was nowhere to be found. The whole was a sad, tangled mess.
And so the leaders of Germany, France, England and others called for a World Crisis. It was off to a good start, with Germany taking an early lead. Greece bravely fought back and called the Germans Nazis and rioted in their own streets. The score was tied until France abused Great Britain, and that once-great empire responded with a collective, “Well!”
The battle was even and might have gone for the full seven games when the shocking events which opened this tale occurred. All was quiet for one hour after the money traveled back in time. And then Greece and the other promise-selling countries realized that if they could send money back in time by a show of petulance, and knowing their stock of petulance was infinite, immediately began selling more promises.
And they are being bought, too, by the now-poorer-by-half citizens who mistakenly believed the postponement was a victory for their side.
See you in two years for the conclusion.
Mr. Ponzi was promising investors 50% profit in 45 days, if I recall. The first investors got it and that encouraged everybody to invest. The last investors got nothing.
I think that should regard money as being a complex variable.
While the EU’s real account is somewhat negative, I can assure you that its imaginary account is in credit.
If the following (from the embedded link at “called the Germans Nazis”) is any indication of their negotiating prowess & capacity for setting priorities at this time, the Greeks deserve to be bankrupt:
“Deputy Prime Minister Theodoros Pangalos stoked tensions in the same month by saying gold taken away from the Greek central bank by Nazi Germany had never been returned. “I don’t say they have to give back the money necessarily but they have at least to say ‘thanks’,” he said.”
I’d stand in line to steal gold from Greece if all I had to do to keep it was to say “thanks.”
Experienced adults in the financial industry say, “Take your losses and move on.”
Financial idiots say, “It’s not a loss until you sell it.”
Other financial idiots say, “I’ll hold it a little longer — the market will bail me out.”
Guess which is calling the shots in the EU.
“Suspicious that any private citizen should have money”
Why am I reminded of the Riders of the Purple Wage? Not to be confused with Riders of the Purple Sage. “Sage” is not the word to apply to the way the EU is acting. Is it possible the honeymoon is over and divorce is looming? Perhaps not if they promise to be nice.
Ray,
If Ponzi was smart and doubled his promise then this original promise would come true. Just think! If a promise of 50% profit is worth X dollars what would a promise of 100% profit be worth? You do the math. For extra credit, what is a CO2 Indulgence worth in the 50%-profit-promise market?
In the movie The Great Waldo Pepper one of the passengers asked what would happen if the passenger didn’t like his $5 ride. Waldo told him he the second would be free. Promises, promises.
Of course, if Ponzi was talking in terms of ROI then he promised his investors they would lose 50% of their investment in 45 days. It’s all in the semantics.
Can’t resist paraphrasing a quote from Honest Abe:
The philosophy of the classroom in one generation will be the philosophy of government in the next.
Mr. Briggs, it will not take two years.
At the end of the day, the productive German worker has to work to pay for Greek government workers — and I’ll leave readers to assess how productive they are. An ironic sidelight is that many of these German workers are Turks, who hold no admiration for Greek folk.
@ DAV asks:
Actually, the marriage is kaput but they are still fighting over who has to keep “the children”. Neither side wants ’em.
Briggs,
Would you care to comment on the application of this article to climate models?
http://www.scientificamerican.com/article.cfm?id=finance-why-economic-models-are-always-wrong
Latest from Daniel Hannan.
The EU’s latest bailout will fail, as all previous bailouts have failed
From today’s (Friday) WSJ.
Re: Greek petulance. This link, with pictures.
Frédéric Bastiat, 1801-1850
from What Is Seen and What Is Not Seen
You would think that this internet thingy would have educated people about that which is unseen. On the other hand, a college education has taught at least one valuable lesson about the unseen — college loans can be a burden for life.
Speed,
Love the quotation!
Studio 360 has an interview this week with Walter Isaacson, biographer of Steve Jobs.
Jobs was like this to prevent a “Bozo Explosion” within the organization. I think we’re suffering from a Bozo Explosion in government.
Matt. As a Scotsman, I would argue with your use of the term “England” when you mean the United Kingdom. Apart from that, a very entertaining piece, as usual. Regards, Craig
Craig B,
No slight intended.
This is worth a look. The Germans are becoming unhappy.
http://www.youtube.com/watchv=5CZr17HLH5U&feature=player_embedded
Youtube video:
The question remains what will happen if one of the bigger countries like Italy or Portugal defaulted? The economic situation in those countries is not positive at all and the possible default would surely destroy all hopes placed in the EFSF and other rescue packages recently approved by the EU. This only shows that the countries which were in favor of looking for other solutions and refused to make their contributions were right. Now it’s too late and there clearly are no more good options that would put a halt to this crisis.