Why Greece won’t sink yet
I went to a lunch this week where we talked about who is ultimately in control of things these days. Is it our governments? Or is it the markets? Most capitalists like to think it’s the markets. They are only sort of right.
Take Greece. It will go bust in the end. That’s just what happens when you have a debt to GDP ratio of over 150%: it costs you 25% plus to raise money in the markets; and your population considers paying tax to be an unusual lifestyle choice. But it didn’t go bust last year, last week, or even this week, as it would have had the markets had its way. And I’m not sure it even will this year. Governments have endless instruments in their armouries to postpone reckoning days.
They’ve got opaque central banks through which they can do all sorts of incomprehensible things. They’ve got endless secret meetings. They have control of interest rates and, to a degree, currencies. They can change the rules on regulations more or less at will and, in the short and medium term at least, should they fancy it, they can go for full-scale financial repression and regulate the free flow of capital.
• Read the full editor’s letter here: Why Greece won’t sink yet