![\"TenYearS&P\"](\"https:\/\/www.technologyinvestor.com\/wp-content\/uploads\/2015\/06\/TenYearSP.jpg\")
<\/a><\/p>\nAs the weekend started, I had begun to think that tech stocks were over-priced, ready to tumble and I ought to loosen up. I had already sold FEYE and CYBR on Friday. And I was beginning to think I ought to be selling some tech high-fliers short.<\/p>\n
Then came Greece.<\/p>\n
The first thing to know about Greece is that it lied its way into the EU. Had the EU really known what a mess Greece was in, it would never have been admitted. It would still be happily muddling around with the Drachma. Savvy Greek politicians figured that EU was a rich Daddy, with oodles of money which could trickle down. Ripe for the taking. The Greeks took the Europeans for suckers. Had the EU bothered auditing Greece’s application for membership — like my application to join a New York apartment cooperative is audited, they would have immediately seen the Greek mess and said “NO WAY.”<\/p>\n
Greece’s problem today is no different to you or I borrowing heavily and pissing the money away on frivolities — like nice life style, fancy cars, fancy houses, etc. When it comes time to pay off the money, you simply declare bankruptcy. Your creditors take a hit and everyone moves on.<\/p>\n
That’s how it works with people. that’s not how it works with countries, like Greece, where there are other issues, like NATO, China and Russia.<\/p>\n
Over the weekend, I read all the usual suspects on Greece — the New York Times, The Economist, The Journal, etc.<\/p>\n
The best explanation is Michael Lewis’ piece in Vanity Fair<\/em> from the last Greek crisis — 2010.<\/p>\n Here’s a few excerpts:<\/p>\n +\u00a0The tsunami of cheap credit that rolled across the planet between 2002 and 2007 has just now created a new opportunity for travel: financial-disaster tourism. The credit wasn\u2019t just money, it was temptation. It offered entire societies the chance to reveal aspects of their characters they could not normally afford to indulge. Entire countries were told, \u201cThe lights are out, you can do whatever you want to do and no one will ever know.\u201d What they wanted to do with money in the dark varied. Americans wanted to own homes far larger than they could afford, and to allow the strong to exploit the weak. Icelanders wanted to stop fishing and become investment bankers, and to allow their alpha males to reveal a theretofore suppressed megalomania. The Germans wanted to be even more German; the Irish wanted to stop being Irish. All these different societies were touched by the same event, but each responded to it in its own peculiar way. No response was as peculiar as the Greeks\u2019, however: anyone who had spent even a few days talking to people in charge of the place could see that. But to see just how peculiar it was, you had to come to this monastery.<\/p>\n + As it turned out, what the Greeks wanted to do, once the lights went out and they were alone in the dark with a pile of borrowed money, was turn their government into a pi\u00f1ata stuffed with fantastic sums and give as many citizens as possible a whack at it. In just the past decade the wage bill of the Greek public sector has doubled, in real terms\u2014and that number doesn\u2019t take into account the bribes collected by public officials. The average government job pays almost three times the average private-sector job. The national railroad has annual revenues of 100 million euros against an annual wage bill of 400 million, plus 300 million euros in other expenses. The average state railroad employee earns 65,000 euros a year. Twenty years ago a successful businessman turned minister of finance named Stefanos Manos pointed out that it would be cheaper to put all Greece\u2019s rail passengers into taxicabs: it\u2019s still true. \u201cWe have a railroad company which is bankrupt beyond comprehension,\u201d Manos put it to me. \u201cAnd yet there isn\u2019t a single private company in Greece with that kind of average pay.\u201d The Greek public-school system is the site of breathtaking inefficiency: one of the lowest-ranked systems in Europe, it nonetheless employs four times as many teachers per pupil as the highest-ranked, Finland\u2019s. Greeks who send their children to public schools simply assume that they will need to hire private tutors to make sure they actually learn something. There are three government-owned defense companies: together they have billions of euros in debts, and mounting losses. The retirement age for Greek jobs classified as \u201carduous\u201d is as early as 55 for men and 50 for women. As this is also the moment when the state begins to shovel out generous pensions, more than 600 Greek professions somehow managed to get themselves classified as arduous: hairdressers, radio announcers, waiters, musicians, and on and on and on. The Greek public health-care system spends far more on supplies than the European average\u2014and it is not uncommon, several Greeks tell me, to see nurses and doctors leaving the job with their arms filled with paper towels and diapers and whatever else they can plunder from the supply closets.<\/span><\/p>\n + Oddly enough, the financiers in Greece remain more or less beyond reproach. They never ceased to be anything but sleepy old commercial bankers. Virtually alone among Europe\u2019s bankers, they did not buy U.S. subprime-backed bonds, or leverage themselves to the hilt, or pay themselves huge sums of money. The biggest problem the banks had was that they had lent roughly 30 billion euros to the Greek government\u2014where it was stolen or squandered. In Greece the banks didn\u2019t sink the country. The country sank the banks.<\/span><\/p>\n + When Papaconstantinou arrived here, last October, the Greek government had estimated its 2009 budget deficit at 3.7 percent. Two weeks later that number was revised upward to 12.5 percent and actually turned out to be nearly 14 percent. He was the man whose job it had been to figure out and explain to the world why. \u201cThe second day on the job I had to call a meeting to look at the budget,\u201d he says. \u201cI gathered everyone from the general accounting office, and we started this, like, discovery process.\u201d Each day they discovered some incredible omission. A pension debt of a billion dollars every year<\/em> somehow remained off the government\u2019s books, where everyone pretended it did not exist, even though the government paid it; the hole in the pension plan for the self-employed was not the 300 million they had assumed but 1.1 billion euros; and so on. \u201cAt the end of each day I would say, \u2018O.K., guys, is this all?\u2019 And they would say \u2018Yeah.\u2019 The next morning there would be this little hand rising in the back of the room: \u2018Actually, Minister, there\u2019s this other 100-to-200-million-euro gap.\u2019 \u201d<\/p>\n This went on for a week. Among other things turned up were a great number of off-the-books phony job-creation programs. \u201cThe Ministry of Agriculture had created an off-the-books unit employing 270 people to digitize the photographs of Greek public lands,\u201d the finance minister tells me. \u201cThe trouble was that none of the 270 people had any experience with digital photography. The actual professions of these people were, like, hairdressers.\u201dBy the final day of discovery, after the last little hand had gone up in the back of the room, a projected deficit of roughly 7 billion euros was actually more than 30 billion. The natural question\u2014How is this possible?\u2014is easily answered: until that moment, no one had bothered to count it all up. \u201cWe had no Congressional Budget Office,\u201d explains the finance minister. \u201cThere was no independent statistical service.\u201d The party in power simply gins up whatever numbers it likes, for its own purposes.Once the finance minister had the numbers, he went off to his regularly scheduled monthly meetings with ministers of finance from all the European countries. As the new guy, he was given the floor. \u201cWhen I told them the number, there were gasps,\u201d he said. \u201cHow could this happen?<\/em> I was like, You guys should have picked up that the numbers weren\u2019t right.<\/em> But the problem was I sat behind a sign that said GREECE, not a sign that said, THE NEW GREEK GOVERNMENT.\u201d After the meeting the Dutch guy came up to him and said, \u201cGeorge, we know it\u2019s not your fault, but shouldn\u2019t someone go to jail?\u201d<\/p>\n As he finishes his story the finance minister stresses that this isn\u2019t a simple matter of the government lying about its expenditures. \u201cThis wasn\u2019t all due to misreporting,\u201d he says. \u201cIn 2009, tax collection disintegrated, because it was an election year.\u201d<\/p>\n \u201cWhat?\u201d<\/p>\n He smiles.<\/p>\n \u201cThe first thing a government does in an election year is to pull the tax collectors off the streets.\u201d<\/p>\n \u201cYou\u2019re kidding.\u201d<\/p>\n Now he\u2019s laughing at me. I\u2019m clearly na\u00efve.<\/p>\n The costs of running the Greek government are only half the failed equation: there\u2019s also the matter of government revenues. The editor of one of Greece\u2019s big newspapers had mentioned to me in passing that his reporters had cultivated sources inside the country\u2019s revenue service. They\u2019d done this not so much to expose tax fraud\u2014which was so common in Greece that it wasn\u2019t worth writing about\u2014but to find drug lords, human smugglers, and other, darker sorts. A handful of the tax collectors, however, were outraged by the systematic corruption of their business; it further emerged that two of them were willing to meet with me. The problem was that, for reasons neither wished to discuss, they couldn\u2019t stand the sight of each other. This, I\u2019d be told many times by other Greeks, was very Greek.<\/p>\n The evening after I met with the minister of finance, I had coffee with one tax collector at one hotel, then walked down the street and had a beer with another tax collector at another hotel. Both had already suffered demotions, after their attempts to blow the whistle on colleagues who had accepted big bribes to sign off on fraudulent tax returns. Both had been removed from high-status fieldwork to low-status work in the back office, where they could no longer witness tax crimes. Each was a tiny bit uncomfortable; neither wanted anyone to know he had talked to me, as they feared losing their jobs in the tax agency. And so let\u2019s call them Tax Collector No. 1 and Tax Collector No. 2.<\/p>\n Tax Collector No. 1\u2014early 60s, business suit, tightly wound but not obviously nervous\u2014arrived with a notebook filled with ideas for fixing the Greek tax-collection agency. He just took it for granted that I knew that the only Greeks who paid their taxes were the ones who could not avoid doing so\u2014the salaried employees of corporations, who had their taxes withheld from their paychecks. The vast economy of self-employed workers\u2014everyone from doctors to the guys who ran the kiosks that sold the International Herald Tribune<\/em>\u2014cheated (one big reason why Greece has the highest percentage of self-employed workers of any European country). \u201cIt\u2019s become a cultural trait,\u201d he said. \u201cThe Greek people never learned to pay their taxes. And they never did because no one is punished. No one has ever been<\/em> punished. It\u2019s a cavalier offense\u2014like a gentleman not opening a door for a lady.\u201d<\/p>\n The scale of Greek tax cheating was at least as incredible as its scope: an estimated two-thirds of Greek doctors reported incomes under 12,000 euros a year\u2014which meant, because incomes below that amount weren\u2019t taxable, that even plastic surgeons making millions a year paid no tax at all. The problem wasn\u2019t the law\u2014there was a law on the books that made it a jailable offense to cheat the government out of more than 150,000 euros\u2014but its enforcement. \u201cIf the law was enforced,\u201d the tax collector said, \u201cevery doctor in Greece would be in jail.\u201d I laughed, and he gave me a stare. \u201cI am completely serious.\u201d One reason no one is ever prosecuted\u2014apart from the fact that prosecution would seem arbitrary, as everyone is doing it\u2014is that the Greek courts take up to 15 years to resolve tax cases. \u201cThe one who does not want to pay, and who gets caught, just goes to court,\u201d he says. Somewhere between 30 and 40 percent of the activity in the Greek economy that might be subject to the income tax goes officially unrecorded, he says, compared with an average of about 18 percent in the rest of Europe.<\/p>\n When you read Michael Lewis you begin to understand the problem, the Greek politicians can’t fix the problem. If they try to, they’ll be voted out of office.<\/p>\n The voters will say Yes to the upcoming referendum. Take the bailout money and pay lip service to the EU-mandated reforms. Have another crisis in maybe five years.<\/p>\n It’s clearly not a way to run a country. The good news (for us) is that Greece is only 11 million people. Its impact on the world is far, far smaller than the outsized publicity it’s getting.<\/p>\n The good news is that while our markets opened heavily down this morning, sanity reigned. And I wrote this — around 9:55 AM — they’d regained much of their early losses.<\/p>\n For now, read Michael Lewis’ piece in Vanity Fair. Remember it was published in October 2010 — nearly five years ago. Nothing has changed.<\/p>\n