Thursday, June 6, 2013


So the IMF did something what zerohedge called "admitt[ing] that not only is it an idiot (this was public knowledge) but also a liar." Wouldn't it be funny if the second paragraph in the report was in support of zerohedge's allegations? 

Here is an excerpt:

Real GDP growth  averaged 4 percent from 2000–07, higher than in all euro area countries save Ireland and Luxembourg. Although asset price inflation  and  household  indebtedness    remained   moderate, government  debt  mounted  rapidly.
Here is a picture of  rapidly mounting debt in that time frame. For some reason the IMF forgot to provide it. At least they are right about one year...

The competence of the troika is amazing:

Inflation  initially  overshot   the program  projection due to the indirect tax increases, but subsequently  came  down   as activity  weakened.

They forgot that significantly increasing the value added tax will be inflationary. Come on really? You were the ones enforcing the hike, so it might have been called for to think about the consequences of your own actions. That's just embarrassing. Of course, they got zero numbers right, and some others, as we all know, primarily unemployment and GDP, totally wrong. Still, there would not have been much thinking involved. It could have gone like this: if we increase the VAT of everything by let's say 2-4 %, and assume some price rigidity. What will happen?

In the end they ask themselves the wrong questions, since they even fail at their assumptions:

Structural reforms were clearly essential to restoring competitiveness.
NO. This should have been a question formulated like this: did structural reforms improve competitiveness? The answer is all over the report. No they did not. Look at paragraph 41 for example where the IMF hoped that a "boost in productivity" would follow structural reforms, that did not happen.  Read your own damn report. Paragraph by paragraph it is a demonstration that structural reforms delivered nothing but pain and suffering. No that is not quite right. It also shows that competitiveness (if there were only more firm level agreements, then everything would be fine and dandy wouldn't it?) was adversely affected. But hey at least the pensions are back on track so Greece does not have to worry anymore about a crisis that might  (IMF projections don't seem all that believable anymore) have happened  somewhere around 2060 [that' probably not the right tense, but you get the picture].

So what exactly has the troika achieved? It has helped tanking the Greek GDP by a staggering 20 %. The unemployment rate is unacceptable, and the debt still unsustainable, so another haircut is unavoidable. It has effectively worsened a already bad situation.

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