Notes From Underground: Plus Ça Change, Plus C’est La Même Chose

The translation of the French title says, “The more things change, the more they stay the same.” We at Notes From Underground thought it was appropriate as 2015 has just begun and we’re still consumed with the Greek tragedy, which we first wrote about on December 9, 2009, a little more than five years after we started blogging. (The old entry is also posted below.)

Notes From Underground: History’s Timeline

In a famous exchange between Chou En Lai and Henry Kissinger, the U.S. Secretary of State asked Chou what he thought of the French Revolution. Being 1972, Chou answered it was too early to tell.

The reason we bring this up is as the Greek tragedy unfolds, it will take a German-led bailout to keep the Greek government from defaulting. Today, the German/Greek 10-year-note spread widened to 245  basis points and the German/Irish 10-year-note spread widened out 20 basis points to 200 basis points. Being that the European Union has no statue for a bailout, it will take a massive amount of transfers to show up the Greek economy, let alone the rest of the PIIGS. Several pundits have imagined that the Greeks will cut public sector wages to get their debt situation under control,but they seem to forget that this is a democratically elected socialist government. The chances of squeezing the unions has as much chance as going a day without seeing Obama making a speech on television. From a trading perspective, the only way to play in this arena is to use the bund futures and the recently re-listed Italian bond futures, both at the Eurex and denominated in EUROs. Check your system provider for the appropriate symbols–and no this is not a paid advertisement but a public service message. The question facing Europe is what political price the Germans will exact for any aid they may provide. So maybe it is too soon to determine who in fact was victorious in World War II.

The calendar is heavy tomorrow with three central bank meetings. The Kiwi bank has already announced and they stayed at 2.5% but changed some language to suggest that they move earlier to tighten then previously thought. The KIWI went bid against all the crosses but we think that this is an overreaction. The BANK of ENGLAND and The SWISS NATIONAL BANK both meet in the early morning but no change is expected from either. The Brits presented the pre-budget plan and it had to do with raising taxes and few budget cuts. The middle class in Britain will carry the brunt of the hike but some red meat was tossed to the torch and pitchfork crowd by supertaxing bank bonuses more than 25,000 pounds.

We will never defend the pay of bankers but this tax will go a long way toward subverting the role of London as a financial center. French President Nicholas Sarkozy and German Chancellor Angela Merkel are laughing in their Reisling. Europe is a mess and not getting out of this predictament anytime soon, yet the EURO held up fairly well today.

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6 Responses to “Notes From Underground: Plus Ça Change, Plus C’est La Même Chose”

  1. asherz Says:

    Will bailing out Greece lead to give them the time to make the structural changes they need to do, or is it more likely throwing good money after bad? This is the question that the Germans are weighing and is the center of the conversation taking place between Jens and Mario. And if the Greek ship sinks because of no bailout will the PIIGS continue their austerity programs?
    The Euro making a 9 year low today seems to be telling us how this race to the cliff will play out. Not everyone agrees that bailouts which only buys some time is the way to go. Either route will be painful and the Poseidon deity will not appear to save the day.

  2. arthur Says:

    (Euro) Deflation + Populism + Political Divergence = ?

  3. Blacklisted Says:

    The tax will subvert the role of London as a financial center, almost as much as much as the fraud and unequal enforcement of the rule of law, which is exactly the same reason capital will flee NYC and head east.

    The euro’s bacon is already cooked, and if it’s not Greece, which I think it will be, then Spain or Portugal will start the contagion. The first leader with the cojones to make the bureaucrat’s in Brussels find a real job and says they will tear up the debt, will win.

    (Euro and EM’s) Deflation + Populism + Political Divergence = sovereign defaults, a rising US Dollar (until the debt bubble pops), civil unrest & separatist movements, and war. Why? Because the west is run by psychopathic morons, so full of self-interest and hubris they have no chance of becoming sober…and we keep sending them bottles of booz?!?

  4. Chicken Says:

    “And so we ceased, and asked no more,
    As the Hangman tallied his bloody score;
    And sun by sun, and night by night,
    The gallows grew to monstrous height.”

  5. Yra Says:

    blacklisted–that was written 5 years ago so it will be seen in perspective from today and yes the more things change the less they do.Europe is front and center so there is no more hiding for the Eurocrats–the European economy is stalled at best while the politics are in motion and changing dramatically

  6. SacredReich Says:

    “I hold it that a little rebellion now and then is a good thing, and as necessary in the political world as storms in the physical.” //// Well, I can only presume that most American’s know the meanings. And I’m sure much of the European do not — in whatever local language there might be an equivalent. It’s playing with fire here in Europe on people who have perhaps never seen light, and any emerging political/ideological couleur is only seen by it’s silhouette. So dangerous. (worrying piece in FT:

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