Monday, May 23, 2011

The neoliberal plundering continues!

The Greek government is considering the sale of public assets in order to pay off its debts:

--"The cabinet decided to proceed immediately with the sale of stakes in OTE, the Postbank, the Athens and Thessaloniki ports and the Thessaloniki water company in order to front-load its ambitious privatisation programme," said Greek Finance Minister George Papaconstantinou.

"To accelerate the process, the creation of a sovereign wealth fund composed of privatisation and real-estate assets was also decided."--

Give an inch and the neoliberals will take a mile!


Crake said...

So selling real assets for money, which people claim is worthless, is the current driver of policy – how mad a world – and this mode of thinking is not restricted to governments but is being entertained by corporations too because of dictation from financial markets.

For example, this recent analysis of AT&T points out that markets punish corporate investment:

(The following is in regards to AT&T announcing that it will not build out its Uverse service after its 55-60%coverage, even though it has been pretty profitable) << “I'm guessing that what's going on is that AT&T decided they had no choice but to raise capex on wireless, accelerating the LTE build to prevent falling too far behind Verizon. Expanding U-verse to 75-85% is almost surely profitable after cost of capital, which to a purely theoretical economist would suggest they would just borrow modestly and do both.

Wall Street perceptions make that virtually impossible, however. It's irrational to underlying value, but stocks get clobbered for raising capex if that has a good underlying return. Remember the madness of Wall Street crowds. Even if it's good business to invest, the current mood on the street penalizes you. One day that may turn around, and the street will re-embrace Graham and Dodd and look at the underlying value of the stock. For the last few years, they've emphasized short term cash flow instead, leading to irrationally low investment in networks.

You make money in the market by guessing what investors will actually do, not telling them a theoretical economist would disagree with them. Market distortions like this one have a dire effect on the real world, reducing investment the country needs.>>

One has to wonder, in how many boardrooms, is the above capex cutting playing out? And if government also reduces spending and investment, how much less of a future will there be than could have been, yet this majority mode of thinking thinks this money focus is making the future brighter???????

Anonymous said...

One has to wonder, in how many boardrooms, is the above capex cutting playing out?

A lot, the net private investment numbers (line 51 of BEA chart) are horrendous.

In 2006 Q1 it was $979 billion (annualized), in 2011 Q1 it was $271 billion (actually dropped from 10Q4).
The govt hasn't done much in the way of counter-cyclical public investments spending. In 06Q1, $149 billion and in 11Q1, $182 billion (all due to Uncle Sam, state/local spending actually declined).

MamMoTh said...

I personally don't see the problem with the Greeks selling off those "assets", except for the water company maybe which is the only one that serves public purpose.

The question is who they will sell them to, and whether they will do it for a fair price.

googleheim said...

We were here already ahead of this.

They are going the route of Argentina.

They will have to devalue though.

Currently we can see the Greek Drachma artificially pegged 1:1 to the Euro, just like Menem did with the Argentine Peso in the 90's.

After he sold out the utilities, then Argentina attracted some investment and then it popped once Clinton was forced to balance the budget in face of the Republicans who were impeaching him.

Therefore, this is Argentina in reverse, but somewhere there has to be a run on the banks ??

MamMoTh said...

The run on banks will come once Greeks don't believe in the peg anymore, like in Argentina.