Plato’s Beard Dulls Occam’s Razor
Courtesy of Marla Singer
This morning is sovereign morning here on Zero Hedge. Having looked into Dubai the United Kingdom, and Moody’s non-assessment assessment of the Aaa gang, we explore the popular notion that treating with deep skepticism the economic pronouncements released by the sovereigns of developed, “western” economies (or their nearest approximation) is something for the “tin foil crowd.” Despite the tremendous temptation presented to sovereigns in their role as not only issuer and regulator of debt, but the supervising authority overseeing financial reporting (and the absence of an authority empowered to enforce creditor’s rights) it apparently seems quite beyond comprehension to wonder if a bit of rose colored lensing isn’t being applied. Well, sure, there might be some fudging of unimportant figures like “jobs saved or created by stimulus,” but:
- The very definition of the statistic makes it unfalsifiable.
- Who the hell are you to say that eight pairs of work boots didn’t save eight jobs?
- The really important stats just aren’t the kinds of things that get “fudged,” in developed countries.
Ah, but how short memories are.
Indeed, it’s easy to brush off some sell-side antics when one is talking about Dubai. (Isn’t that in Iowa somewhere?) but things take on quite a different moment when you start to wonder if wholesale data manipulation isn’t going on for a member of the “developed world.” A founding member of the OECD, for instance. Maybe a nice, stable parliamentary republic. One of those places that let women actually vote back before it was even fashionable. How about a NATO member? A member of the United Nations Security Council (for what that’s worth)? Even, a member of the European Union (for what that’s worth).
You know. Someplace like Greece.
Not the place you would expect to, suddenly, reveal a budget deficit of almost 13% of GDP, after having predicted 6% just months earlier, and in spite of the fact that the European Union is supposed to be enforcing a limit of 3%.
Der Speigel is being polite today when they breezily point out that:
In 2004, it was discovered, completely by accident, that Greece had only managed to qualify for entry into the currency union by massaging its budget figures. The Greeks have only complied with the Maastricht criteria once since the introduction of the euro, in 2006.
Even those figures may have been doctored. At the time, the Greeks managed to increase their official gross national product by a hefty 25 percent, partly because they included the black market and prostitution in economic output. This brought down the deficit rate — on paper, at any rate — to 2.9 percent.
The figures representing Greece’s budget deficit are constantly being revised upward. The most recent uptick, by close to 7 percent, is a record for Europe — and it comes in a country that was relatively unaffected by the financial crisis. This year, the Greek economy will have shrunk by only 1.2 percent, say Greek economists. Next year they expect the economy to return to grown, albeit modest.
Consequences? After a long string of denial (self and otherwise) they are finally all over the financial news today. Surprise! (That is, unless you read about it here on Zero Hedge back in January).
Yeah well, Greece. Tough break. But that could never happen here.