Tuesday, 20 November 2012

09:36 – Greece is on tenterhooks today, awaiting the decision by the eurogroup finance ministers as to whether the long-overdue €31.2 billion aid tranche will be released. It won’t be, at least not today. Germany and other guarantors require approval by their legislatures, which is unlikely to occur for at least a few weeks. And the IMF is not likely to approve any IMF funds being disbursed until it can be sure that Greece’s debt pile is “sustainable”, whatever that means.

At a minimum, it means Greece must default yet again to reduce its outstanding debt burden. The IMF categorically refuses to take any loss on its loans to Greece, as does the ECB, as does the EC. The IMF simply can’t do so under the rules that govern it. Even if it could, its major non-European financial supporters refuse to take any loss, arguing that Europe is rich enough to pay its own damned bills. The ECB also simply can’t do so under the rules that govern it. The EC–read Germany, Holland, and Finland–simply can’t take any loss because their voters would crucify any politician who agreed to do so. So. the short answer is that no one is willing to pay. They’ve all written off Greece, and are concerned only with minimizing their own losses on what they’ve already given to Greece and with buying time until the next elections have passed.

Meanwhile, pity the poor private-sector investors. You remember them. The last time Greece defaulted, they lost 75% of the value of their investments. And now Germany, grasping at straws to put off the inevitable until Merkel can be reelected, has proposed that those same PSI folks take another 75% writedown. That’s 75% off the remaining 25%, taking their total loss over 90%. Even that is a drop in the bucket against Greece’s gigantic debt pile, but Germany (read Merkel) hopes it’ll be enough to stave off the eventual collapse until next autumn, when she must again face her voters. It sucks to be Angela.

And then there’s France, which Moody’s has just cut one notch from AAA. That leaves Fitch, a French company, the only one of the Big Three ratings agencies that still rates France AAA. These sovereign bond ratings are pure fantasy anyway. As I’ve said before, there’s not a single country in the eurozone that deserves anything higher than a junk rating. They will all default eventually, either explicitly or by the euro being inflated to a small fraction of its current value. Either way, investors in “sovereign” eurozone bonds are going to lose most or all of their investments.

I’m building science kits today.

11:19 – Barbara stopped by the library the other day to pick up some books she had on hold. One of the ones she got for me was Last to Die, the most recent of Tess Gerritsen’s Rizzoli & Isles series.

On page 58, Dr. Maura Isles is touring a rather special private school, asking questions of her tour guide, Lily. The following exchange jumped out at me:

Lily: “Professor David Pasquantonio. He teaches botany, cell biology, and organic chemistry.”

Isles: “Rather advanced subjects for high school students.”

Lily: “High school?” Lily laughed. “We start those subjects in middle school. Twelve-year-olds are a lot smarter than most people give them credit for.”

My feelings exactly. You’ll seldom get any more out of even bright students than you expect. If your expectations are low, so will be their performance. If your expectations are high, they might surprise you. No one’s told them this stuff is too hard for them.