Mário Soares subscreveu mais um manifesto intitulado “Novo Rumo”, onde reitera a sua conhecida aversão à chamada 3ª via do socialismo e da social-democracia a quem acusa de terem “sido colonizadas na viragem do século pelo situacionismo neo-liberal”.
O Socialismo é uma relíquia do século XIX, que tentou encontrar uma alternativa à emergência do sistema económico capitalista que então substituía com sucesso um regime feudal baseado na servidão. Porém todas as alternativas socialistas que foram tentadas – socialismo utópico, comunismo, nacional-socialismo e auto-gestão ao estilo Jugoslavo - redundaram em estrondosos fracassos geradores de miséria e guerra.
Por isso, a maioria dos socialistas teve de se conformar à aceitação do capitalismo, endossando políticas mais ou menos sociais-democratas que visavam gerir um capitalismo regulado e com maiores preocupações sociais.
Porém gerir um sistema em que se não acredita nunca pode dar bom resultado. Quando os Socialistas não “metem o socialismo na gaveta”, como Mário Soares fez durante a sua breve passagem pelo Governo, ficam sem saber o que fazer, o que os coloca à mercê de interesses obscuros, ou então enveredam por experiências regulamentadoras ou despesistas que atrofiam a iniciativa empresarial e levam ao descalabro financeiro.
Por isso, salvo raras excepções, as experiências governativas socialistas acabam sempre por aumentar as desigualdades, a corrupção, a injustiça, o desemprego, as despesas públicas, o endividamento, a pobreza e a inflação.
Em termos históricos, não deixa de ser irónico que das duas principais ideologias de oposição ao feudalismo (o Liberalismo que apoiava o capitalismo emergente e o Socialismo que se lhe opunha e tentava criar uma alternativa), tenha sido o Liberalismo o primeiro a perder influência política logo que a supremacia do capitalismo se afirmou no inicio de século XX.
É igualmente irónico que a 3ª via do socialismo tenha dado um seguimento tão entusiasta às experiências neo-conservadoras de Reagan e Thatcher que, a partir das indústrias reguladas, criaram o emergente capitalismo de gestão. Na verdade, o capitalismo de gestão é hoje a principal ameaça ao capitalismo. Porém, tal como o corporativismo promovido pelo nacional-socialismo falhou, também o capitalismo de gestão irá soçobrar perante a superioridade do capitalismo de mercado.
Soares tem razão em afirmar o falhanço da 3ª via. No entanto, coloca-se na posição de “Velho do Restelo” tentando chamar à razão a velha guarda socialista. Porém, enquanto o capitalismo de mercado continuar a ser a máquina mais eficaz a gerar riqueza, não vale a pena tentar novas versões de um ideal socialista falhado. Da “velha guarda socialista” dificilmente podemos esperar novos paradigmas.
Tuesday, 29 November 2011
Friday, 11 November 2011
Are Synthetic ETFs a Time-bomb? A Risk Sharing vs. Risk Transferring Tale
Financial risk management revolves about two options - to share or to transfer risk with/to somebody else. The two approaches are legitimate but they are substantially different in terms of their ripple effects. There are three main types of ripple effects: moral hazard, compounding and systemic. The first – moral hazard – is common to both options, but the second – risk compounding – is specific to the transfer of risk. Two examples are enough to clarify the differences between sharing and transfering.
Imagine a group of friends where one comes up with the following proposition: I just met an actuary who told me that there is high probability that one of us will be dead before we reach 65. So, why don't we join in to begin paying a monthly conttribution to buy a pension to the family of whoever has the misfortune of dying earlier? This form of risk sharing is the basis of any life insurance policy and it makes sense to pay a small amount into a pool of money to get life insurance. Of course, by feeling safer the participants in the insurance pool may become more careless and in the end instead of one death the actuary will come back with an estimate of two of them dying before they are 65. This is the so-called moral hazard of people taking more risks when they feel safer.
Now imagine the same group discussing about buying a couple of stocks in the Dow Jones index and their fear that they may turn out losers. Then one of them comes up with the following suggestion: why don't we pool our money together and buy all the stocks in the index, this way even if a couple of them turns out a loser the loss will be shared by all and we still get a return close to the market return. Actually this form of risk sharing is the basis of index-tracking Exchange Traded Funds (known as ETFs); and it makes sense to pay a small fee to a professional fund manager and incur the costs intrinsic to the small deviation from the index (the so-called trailing cost) to achieve a return close to the index. Of course, the more people adhere to this form of investment the more the index becomes volatile because whenever a constituent stock loses the confidence of investors they will dump not just that stock but the entire basket of stocks in the index. This increased volatility means increased risk and it is also part of the so-called moral hazard.
Moral hazard is inherent to any form of risk sharing but its consequences can be priced in the insurance policy or the fund manager’s fee. However, the alternative based on risk transfer may compound rather than reduce the risk. We may illustrate this process through the following example.
ETFs are one the fastest growing financial products. While there were less than 100 ETF funds a few years ago, now there are more than 4000 ETFs - 1300 created in the last two years – attracting more than $1.6 trillion. Currently the ETF offering covers all asset classes enabling investors to take leveraged or unleveraged long and short positions. Most of the newly established ETFs are synthetic products that replicate the returns of an index without owning the underlying securities using instead swaps, futures and other derivative products.
To understand synthetic ETFs imagine that while discussing the traditional form of risk sharing through ETFs one of the friends comes up with the following synthetic ETF alternative: Instead of incurring trailing error costs, why don't we simply ask my bank to invest the money into an alternative portfolio, including up to 10% in derivatives, and swap its return for a return that matches the exact index return?
However, one of his friends felt skeptical about his proposition and asked: but then we would be transferring the bankruptcy risk in a predefined set of 30 different companies into a single bank and an unknown portfolio which must have a higher probability of going bust? Sorry, I do not believe it is wise to exchange the risk of a trailing cost of less than 1% for a 10% bet in your bank and unpredictable losses in the alternative portfolio. This transfer would simply compound the risk we are already taking on the index.
Guys don't worry! First, we will ask a smart fund manager to run the alternative portfolio. Second, we may hedge the two legs of the swap with a hedge fund capable of unloading the risk to a bunch of investors with deep pockets to support any losses. Third, our bank is too big to fail and would be bailed out by the government in case of trouble. So, trust me, there is no chance that the probability of my bank going bust will be near the 10% implicit in your fear about compounding the risk.
Another skeptical added: but what about the systemic risk? Since most fund managers fail to beat the market why would your bank enter into an agreement which is likely to underperform the market or lose money?
Man, as I told you, on top of a synthetic ETF we may make a lot of money creating and selling a number of layers of asset pools backed by the pool in the alternative portfolio.
Sorry, the skeptical replied: wasn’t that the rationale behind the securitization that led to the subprime crisis and the collapse of Lehman Brothers? I do not buy it, because you will end up using some of those extra profits to bribe regulators and rating agencies into increasing the swap size beyond the 10% limit and by filling the alternative portfolio with lower and lower quality assets. By shuffling around the risks the risk you will not be shared but transferred and compounded. Instead you will build a house of cards doomed to be destroyed in a systemic earthquake.
To sum up, with the synthetic ETFs, there is a real risk of transforming what was an excellent risk sharing device into toxic assets that create a serious threat to the financial system.
Imagine a group of friends where one comes up with the following proposition: I just met an actuary who told me that there is high probability that one of us will be dead before we reach 65. So, why don't we join in to begin paying a monthly conttribution to buy a pension to the family of whoever has the misfortune of dying earlier? This form of risk sharing is the basis of any life insurance policy and it makes sense to pay a small amount into a pool of money to get life insurance. Of course, by feeling safer the participants in the insurance pool may become more careless and in the end instead of one death the actuary will come back with an estimate of two of them dying before they are 65. This is the so-called moral hazard of people taking more risks when they feel safer.
Now imagine the same group discussing about buying a couple of stocks in the Dow Jones index and their fear that they may turn out losers. Then one of them comes up with the following suggestion: why don't we pool our money together and buy all the stocks in the index, this way even if a couple of them turns out a loser the loss will be shared by all and we still get a return close to the market return. Actually this form of risk sharing is the basis of index-tracking Exchange Traded Funds (known as ETFs); and it makes sense to pay a small fee to a professional fund manager and incur the costs intrinsic to the small deviation from the index (the so-called trailing cost) to achieve a return close to the index. Of course, the more people adhere to this form of investment the more the index becomes volatile because whenever a constituent stock loses the confidence of investors they will dump not just that stock but the entire basket of stocks in the index. This increased volatility means increased risk and it is also part of the so-called moral hazard.
Moral hazard is inherent to any form of risk sharing but its consequences can be priced in the insurance policy or the fund manager’s fee. However, the alternative based on risk transfer may compound rather than reduce the risk. We may illustrate this process through the following example.
ETFs are one the fastest growing financial products. While there were less than 100 ETF funds a few years ago, now there are more than 4000 ETFs - 1300 created in the last two years – attracting more than $1.6 trillion. Currently the ETF offering covers all asset classes enabling investors to take leveraged or unleveraged long and short positions. Most of the newly established ETFs are synthetic products that replicate the returns of an index without owning the underlying securities using instead swaps, futures and other derivative products.
To understand synthetic ETFs imagine that while discussing the traditional form of risk sharing through ETFs one of the friends comes up with the following synthetic ETF alternative: Instead of incurring trailing error costs, why don't we simply ask my bank to invest the money into an alternative portfolio, including up to 10% in derivatives, and swap its return for a return that matches the exact index return?
However, one of his friends felt skeptical about his proposition and asked: but then we would be transferring the bankruptcy risk in a predefined set of 30 different companies into a single bank and an unknown portfolio which must have a higher probability of going bust? Sorry, I do not believe it is wise to exchange the risk of a trailing cost of less than 1% for a 10% bet in your bank and unpredictable losses in the alternative portfolio. This transfer would simply compound the risk we are already taking on the index.
Guys don't worry! First, we will ask a smart fund manager to run the alternative portfolio. Second, we may hedge the two legs of the swap with a hedge fund capable of unloading the risk to a bunch of investors with deep pockets to support any losses. Third, our bank is too big to fail and would be bailed out by the government in case of trouble. So, trust me, there is no chance that the probability of my bank going bust will be near the 10% implicit in your fear about compounding the risk.
Another skeptical added: but what about the systemic risk? Since most fund managers fail to beat the market why would your bank enter into an agreement which is likely to underperform the market or lose money?
Man, as I told you, on top of a synthetic ETF we may make a lot of money creating and selling a number of layers of asset pools backed by the pool in the alternative portfolio.
Sorry, the skeptical replied: wasn’t that the rationale behind the securitization that led to the subprime crisis and the collapse of Lehman Brothers? I do not buy it, because you will end up using some of those extra profits to bribe regulators and rating agencies into increasing the swap size beyond the 10% limit and by filling the alternative portfolio with lower and lower quality assets. By shuffling around the risks the risk you will not be shared but transferred and compounded. Instead you will build a house of cards doomed to be destroyed in a systemic earthquake.
To sum up, with the synthetic ETFs, there is a real risk of transforming what was an excellent risk sharing device into toxic assets that create a serious threat to the financial system.
Thursday, 10 November 2011
How the ECB Can Prevent the Suicide of the Euro Zone
First, three facts:
1) For a currency that is in risk of imploding, the Euro has done better than the Dollar:
2) At the end of 2010 the total foreign net debt (private and public) of Italy was $0.5 trillion (26% of GDP) while that of the US was $2.47 trillion (17% of GDP); the current account deficit of the two countries was identical (3.24% of GDP); and the total central government debt was 109% of GDP in Italy and 61.3% in the US.
3) Yet the markets are pricing their sovereign debt in a way quite unrelated to these fundamentals (yesterday the 10-year Yield for Italy reached 7.48% while in the US it was at 2.01%):
This is clearly a speculative attack against the Euro itself.
Yet, the ECB seems hand-tied to do anything to repel such attack. By hiding behind its statutory limitations in lending to sovereigns; waiting for successive failed schemes of Merkel-Sarkozy to deal with the sovereign debt problems of Greece, Ireland and Portugal; and sticking to self-defeating half-hearted bond buying in the market, the ECB risks letting the downfall of the Euro occur before its own eyes.
This does not need to be so. By itself, the ECB can kill this speculative attack. First, it needs to point out to the European Union governments that if they persist in a simultaneous suicidal pursuit of restrictive budgetary policies it will need to offset them by pursuing an aggressive expansionary monetary policy. Second, it needs to send a strong message to the markets that, if necessary, it is ready to act as lender of last resort for the Governments under attack.
Here is a suggestion of how it can be done. The ECB should replace its bond-buying in the secondary market (which is fueling the speculation) by a new bank lending facility that in practice would work as back to back loan to the governments. There are various ways to structure such facility within the current lending practices of the ECB; and, as long as the loans would not feed back into the market, they would work.
1) For a currency that is in risk of imploding, the Euro has done better than the Dollar:
2) At the end of 2010 the total foreign net debt (private and public) of Italy was $0.5 trillion (26% of GDP) while that of the US was $2.47 trillion (17% of GDP); the current account deficit of the two countries was identical (3.24% of GDP); and the total central government debt was 109% of GDP in Italy and 61.3% in the US.
3) Yet the markets are pricing their sovereign debt in a way quite unrelated to these fundamentals (yesterday the 10-year Yield for Italy reached 7.48% while in the US it was at 2.01%):
This is clearly a speculative attack against the Euro itself.
Yet, the ECB seems hand-tied to do anything to repel such attack. By hiding behind its statutory limitations in lending to sovereigns; waiting for successive failed schemes of Merkel-Sarkozy to deal with the sovereign debt problems of Greece, Ireland and Portugal; and sticking to self-defeating half-hearted bond buying in the market, the ECB risks letting the downfall of the Euro occur before its own eyes.
This does not need to be so. By itself, the ECB can kill this speculative attack. First, it needs to point out to the European Union governments that if they persist in a simultaneous suicidal pursuit of restrictive budgetary policies it will need to offset them by pursuing an aggressive expansionary monetary policy. Second, it needs to send a strong message to the markets that, if necessary, it is ready to act as lender of last resort for the Governments under attack.
Here is a suggestion of how it can be done. The ECB should replace its bond-buying in the secondary market (which is fueling the speculation) by a new bank lending facility that in practice would work as back to back loan to the governments. There are various ways to structure such facility within the current lending practices of the ECB; and, as long as the loans would not feed back into the market, they would work.
Monday, 7 November 2011
Os Ricos em Portugal e na América
Um estudo recente sobre o impacto de uma taxa única na tributação do rendimento tal como propõe o Governador Rick Perry, um dos candidatos à nomeação presidencial do Partido Republicano nos Estados Unidos, lança novos elementos sobre a velha questão de saber quem são os ricos.
Como afirmamos num post anterior existe hoje uma tendência para considerar como ricos apenas 1% dos contribuintes com maior rendimento. Com base nesse critério em 2009 existiam em Portugal perto de 52 mil famílias nesse grupo com um rendimento anual superior a 100 mil Euros. Das quais, cerca de 3700 tiveram um rendimento anual superior a 250 mil Euros (isto é, €17850 mensais, se considerarmos 14 meses). Estas famílias constituiriam o grupo dos 0.1% mais ricos, ou super-ricos, que são popularmente identificados como os “milionários”.
O estudo dos Estados Unidos analisa detalhadamente os mais abastados definidos com aqueles que estão no quinto quintil de rendimento, isto é, os 20% mais ricos; que seriam os mais beneficiados com uma taxa única. O rendimento anual mais baixo nesse grupo é de 119 mil dólares enquanto no grupo dos 5% mais ricos começa nos 242 mil dólares. Já o grupo dos famigerados 1% começa nos 630 mil dólares e o dos 0.1% “super ricos” começa nos 2.87 milhões de dólares.
Comparando constatamos que nos Estados Unidos o mais pobre dos super-ricos ganha 4.5 vezes mais que o mais pobre dos ricos enquanto em Portugal o respectivo rácio é de 2.5 vezes. Se compararmos também o rendimento relativo entre o mais pobre dos 5% mais ricos (6% no caso de Portugal) e os mais pobre entre os 20% mais abastados (17% em Portugal) constatamos que o rácio na América é de 2.0 e em Portugal é 1.8. Isto é, em Portugal a desigualdade entre os membros da chamada classe média alta (entre os 17 e os 6%) é semelhante à dos Estado Unidos mas a desigualdade entre os ricos e super-ricos é bastante menor. Pode haver várias explicações para este diferencial, nomeadamente ser mais fácil ocultar rendimento em Portugal, termos empresas mais pequenas, menos artistas, etc; mas não é fácil identificá-las.
Por exemplo, seria curioso saber as razões de tal diferença entre ricos e super-ricos, nomeadamente, quanto à origem dos rendimentos de cada grupo. Isto porque o reconhecimento social dos super-ricos é muito diferenciado de acordo com a origem dos seus rendimentos.
Se dividirmos o grupo em três categorias – rendimentos de capital, rendimentos de comissões e rendimentos de trabalho – constatamos que os rendimentos de comissões (nomeadamente sobre bestsellers na musica, literatura, arte, desporto, vendas, etc.) não são muito questionados. Já os rendimentos de capital são muitas vezes injustamente considerados como parasitários, ignorando-se o seu retorno efectivo e a sua contribuição para a criação de emprego. Quanto aos rendimentos do trabalho são muitas vezes fixados numa base de comissão sobre os ganhos mas não sobre as perdas pelo que poderão ser menos merecidos do que os do capital.
Por isso, em Portugal, não existindo informação sobre a origem e natureza dos rendimentos dos super-ricos, é fácil cometer injustiças na apreciação do mérito do rendimento dos ricos.
Como afirmamos num post anterior existe hoje uma tendência para considerar como ricos apenas 1% dos contribuintes com maior rendimento. Com base nesse critério em 2009 existiam em Portugal perto de 52 mil famílias nesse grupo com um rendimento anual superior a 100 mil Euros. Das quais, cerca de 3700 tiveram um rendimento anual superior a 250 mil Euros (isto é, €17850 mensais, se considerarmos 14 meses). Estas famílias constituiriam o grupo dos 0.1% mais ricos, ou super-ricos, que são popularmente identificados como os “milionários”.
O estudo dos Estados Unidos analisa detalhadamente os mais abastados definidos com aqueles que estão no quinto quintil de rendimento, isto é, os 20% mais ricos; que seriam os mais beneficiados com uma taxa única. O rendimento anual mais baixo nesse grupo é de 119 mil dólares enquanto no grupo dos 5% mais ricos começa nos 242 mil dólares. Já o grupo dos famigerados 1% começa nos 630 mil dólares e o dos 0.1% “super ricos” começa nos 2.87 milhões de dólares.
Comparando constatamos que nos Estados Unidos o mais pobre dos super-ricos ganha 4.5 vezes mais que o mais pobre dos ricos enquanto em Portugal o respectivo rácio é de 2.5 vezes. Se compararmos também o rendimento relativo entre o mais pobre dos 5% mais ricos (6% no caso de Portugal) e os mais pobre entre os 20% mais abastados (17% em Portugal) constatamos que o rácio na América é de 2.0 e em Portugal é 1.8. Isto é, em Portugal a desigualdade entre os membros da chamada classe média alta (entre os 17 e os 6%) é semelhante à dos Estado Unidos mas a desigualdade entre os ricos e super-ricos é bastante menor. Pode haver várias explicações para este diferencial, nomeadamente ser mais fácil ocultar rendimento em Portugal, termos empresas mais pequenas, menos artistas, etc; mas não é fácil identificá-las.
Por exemplo, seria curioso saber as razões de tal diferença entre ricos e super-ricos, nomeadamente, quanto à origem dos rendimentos de cada grupo. Isto porque o reconhecimento social dos super-ricos é muito diferenciado de acordo com a origem dos seus rendimentos.
Se dividirmos o grupo em três categorias – rendimentos de capital, rendimentos de comissões e rendimentos de trabalho – constatamos que os rendimentos de comissões (nomeadamente sobre bestsellers na musica, literatura, arte, desporto, vendas, etc.) não são muito questionados. Já os rendimentos de capital são muitas vezes injustamente considerados como parasitários, ignorando-se o seu retorno efectivo e a sua contribuição para a criação de emprego. Quanto aos rendimentos do trabalho são muitas vezes fixados numa base de comissão sobre os ganhos mas não sobre as perdas pelo que poderão ser menos merecidos do que os do capital.
Por isso, em Portugal, não existindo informação sobre a origem e natureza dos rendimentos dos super-ricos, é fácil cometer injustiças na apreciação do mérito do rendimento dos ricos.
Friday, 4 November 2011
Democracy and the Euro-Greek Tragicomedy
It appears that Aristotle defined tragicomedy as a serious action with a happy ending. So can we write the recent tragedy of the Greek bailout and the ongoing comic infighting of the Greek politicians as a prelude to a plot with a happy ending?
Last night’s refusal to agree on a Greek government of national salvation might lead to either new elections or a referendum on the bailout program. This should be the democratic way to solve the current deadlock. The people should be given the last word; even if the results leave the nation divided in two almost identical camps the winning camp has the mandate to carry out his policies. That is the foundation of democracy and it is preferable to forcing the Greeks to accept the undemocratic tutelage of the shameful duo Merkel-Sarkozy.
Now, let’s imagine that the camp opposing the current bailout wins and decides to declare a unilateral default on the Icelandic-style, but decides to keep the Euro. This is the scenario feared by the “very serious people in pin stripes” and some economists who fear the contagion of a disorderly bail-out.
What can Mr. Juncker, Draghi and Barroso do about it? According to Mr. Barroso the Lisbon Treaty does not have any legal mechanism to expel a Euro-zone member. Mr. Draghi’s interpretation of the European Central Bank remit is that it does not include any responsibility as lender of last resort for any member country. Mr. Junker’s Eurogroup meeting of the Finance Ministers of the Eurozone countries was institutionalized by the Lisbon treaty without any power over its members. So, let us image also that they decide to do nothing.
Would this mean the end of the Eurozone? In principle no! For instance, in the Dollarzone (USA) when a local government defaults on its Muni-bonds the Federal Bonds barely move. Yes, I know, the USA has a Federal budget. However, its interstate transfers are not enough to justify the decoupling between the Munis and the Treasuries. What is different is that the FED (the US central bank) has an implicit remit to bailout the major banks whose failure would represent a systemic risk as it has shown in the crisis of 2008.
This is a key weakness of the current ECB thinking. Should the markets attack the other highly leveraged countries to an extent that would bankrupt some of their major banks in those countries the ECB might feel restrained in continuing to lend to such countries.
Indeed, as illustrated by its continuing purchase of low quality securities, the ECB does not need to have an explicit lender of last resort mandate enshrined in the European Union treaty. Nor does it need to take massive losses on its ABS holdings, as has been propagated by the German Press. For instance, it can simply print money to finance an off-balance sheet vehicle to park such securities and ask the EFSF and the Governments rescued to share on its capitalization.
So here is a script for a happy ending to the Greek tragicomedy:
1) Greece reasserts its firm commitment to remain in the Euro;
2) Greece defaults on its debts and goes to the London and Paris clubs for a restructuring deal with better terms than those currently on offer;
3) To support the debt restructuring program Greece applies to the IMF for a new extended facility;
4) Meanwhile the ECB extends an unlimited liquidity line to one or two of the best Greek banks to keep the financial system afloat, subject to Greece agreeing to points 1-3;
5) The ECB announces that it will provide such lines to any other member who needs them;
6) To kill any doubts about its own strength the ECB will begin selling its low quality assets to special purpose vehicles;
7) Faced with such determination the markets will begin pricing the sovereign debt spreads of the various Eurozone members in accordance with their respective risk profile; and
8) After the successful implementation of programs 2 and 3, Greece regains market access within three years.
Here is the lesson from such tragicomedy. One should never give up on the ability of democracy to find a solution. It may be convoluted; it may take some time, but it will be better than a dictatorial solution under a veil of technocracy or to a shameful begging for help from a mixed bag of world leaders gathering in the G20 group.
Last night’s refusal to agree on a Greek government of national salvation might lead to either new elections or a referendum on the bailout program. This should be the democratic way to solve the current deadlock. The people should be given the last word; even if the results leave the nation divided in two almost identical camps the winning camp has the mandate to carry out his policies. That is the foundation of democracy and it is preferable to forcing the Greeks to accept the undemocratic tutelage of the shameful duo Merkel-Sarkozy.
Now, let’s imagine that the camp opposing the current bailout wins and decides to declare a unilateral default on the Icelandic-style, but decides to keep the Euro. This is the scenario feared by the “very serious people in pin stripes” and some economists who fear the contagion of a disorderly bail-out.
What can Mr. Juncker, Draghi and Barroso do about it? According to Mr. Barroso the Lisbon Treaty does not have any legal mechanism to expel a Euro-zone member. Mr. Draghi’s interpretation of the European Central Bank remit is that it does not include any responsibility as lender of last resort for any member country. Mr. Junker’s Eurogroup meeting of the Finance Ministers of the Eurozone countries was institutionalized by the Lisbon treaty without any power over its members. So, let us image also that they decide to do nothing.
Would this mean the end of the Eurozone? In principle no! For instance, in the Dollarzone (USA) when a local government defaults on its Muni-bonds the Federal Bonds barely move. Yes, I know, the USA has a Federal budget. However, its interstate transfers are not enough to justify the decoupling between the Munis and the Treasuries. What is different is that the FED (the US central bank) has an implicit remit to bailout the major banks whose failure would represent a systemic risk as it has shown in the crisis of 2008.
This is a key weakness of the current ECB thinking. Should the markets attack the other highly leveraged countries to an extent that would bankrupt some of their major banks in those countries the ECB might feel restrained in continuing to lend to such countries.
Indeed, as illustrated by its continuing purchase of low quality securities, the ECB does not need to have an explicit lender of last resort mandate enshrined in the European Union treaty. Nor does it need to take massive losses on its ABS holdings, as has been propagated by the German Press. For instance, it can simply print money to finance an off-balance sheet vehicle to park such securities and ask the EFSF and the Governments rescued to share on its capitalization.
So here is a script for a happy ending to the Greek tragicomedy:
1) Greece reasserts its firm commitment to remain in the Euro;
2) Greece defaults on its debts and goes to the London and Paris clubs for a restructuring deal with better terms than those currently on offer;
3) To support the debt restructuring program Greece applies to the IMF for a new extended facility;
4) Meanwhile the ECB extends an unlimited liquidity line to one or two of the best Greek banks to keep the financial system afloat, subject to Greece agreeing to points 1-3;
5) The ECB announces that it will provide such lines to any other member who needs them;
6) To kill any doubts about its own strength the ECB will begin selling its low quality assets to special purpose vehicles;
7) Faced with such determination the markets will begin pricing the sovereign debt spreads of the various Eurozone members in accordance with their respective risk profile; and
8) After the successful implementation of programs 2 and 3, Greece regains market access within three years.
Here is the lesson from such tragicomedy. One should never give up on the ability of democracy to find a solution. It may be convoluted; it may take some time, but it will be better than a dictatorial solution under a veil of technocracy or to a shameful begging for help from a mixed bag of world leaders gathering in the G20 group.
Thursday, 3 November 2011
Oligopólios: Três foi a Conta que Deus Fez?
Quando eu era criança costumávamos seleccionar os membros de cada equipa de futebol contando um, dois e três e exclamando “três foi a conta que Deus fez”. A tradição cristã sobre este número advém da santíssima trindade e do conceito de família composta por pai, mãe e filhos. Qualquer um dos outros algarismos também tem a sua dose de provérbios nas diferentes culturas e religiões.
Na verdade, se procurarmos conjuntos de três elementos (ou de qualquer outro algarismo) vamos sempre encontrar curiosidades. Por exemplo, Portugal é constituído pelo continente e duas regiões autónomas e por sua vez o Continente é constituído por três regiões – norte, centro e sul. É evidente que estas trindades geográficas são meros acidentes da história; pois antes da descolonização Portugal incluía também Angola, Moçambique, etc.
Existem no entanto outras trindades muito curiosas que nos levam a questionar se não serão antes determinadas por forças económicas inexoráveis, nomeadamente as chamadas economias de escala. A tendência recente para a criação de trindades na sequência da privatização dos antigos monopólios estatais é uma dessas curiosidades.
No sector da electricidade hoje temos apenas três operadores significativos – EDP, REN e Iberdrola. Nas telecomunicações temos também três operadores – PT, Vodafone e SonaeCom. O mesmo acontece no cabo – PT, Zon e Cabovisão – no gás – Galp, REN, e EDP – nas petrolíferas – Galp, Repsol e BP - e nas vias de comunicação terrestre – Brisa (Grupo Mello), Mota-Engil e Ferrovial. Também no audiovisual, após a anunciada privatização do RTP1, teremos apenas três operadores – Impresa, Prisa e (?).
Resta saber se a mesma tendência para o domínio de uma trindade ocorrerá também nos sectores que resta privatizar – transportes aéreos e águas.
Uma outra curiosidade é que os grupos privados mais destacados em Portugal são também três – Amorim, Sonae e Jerónimo Martins, mas com excepção do Grupo Amorim que tem uma presença significativa no sector da energia, estes grupos privados não estão significativamente ligados aos sectores regulados acima mencionados.
Embora continuem a existir muitas relações incestuosas entre os grupos envolvidos nos sectores regulados e o respectivo processo de consolidação sectorial ainda não esteja estabilizado, as três questões pertinentes que interessa colocar são as seguintes: 1) será que com três operadores a controlar mais de 70% do mercado respectivo será possível ter o mínimo de concorrência necessário para limitar a exploração de rendas de oligopólio por parte desses operadores? 2) será que a político-CEO-cracia que gere esses oligopólios será suficiente para transformar o capitalismo de estado Português num capitalismo de gestão; e 3) será que corremos o risco de acumular simultaneamente os malefícios do capitalismo de estado e do capitalismo de gestão?
Infelizmente, parece-nos que as respostas serão: não, não e sim. Neste domínio não podemos aplicar a regra do “três foi a conta que Deus fez”. Somente o reforço do sector de capitalismo de mercado nos pode assegurar o aumento de produtividade que o país precisa.
Na verdade, se procurarmos conjuntos de três elementos (ou de qualquer outro algarismo) vamos sempre encontrar curiosidades. Por exemplo, Portugal é constituído pelo continente e duas regiões autónomas e por sua vez o Continente é constituído por três regiões – norte, centro e sul. É evidente que estas trindades geográficas são meros acidentes da história; pois antes da descolonização Portugal incluía também Angola, Moçambique, etc.
Existem no entanto outras trindades muito curiosas que nos levam a questionar se não serão antes determinadas por forças económicas inexoráveis, nomeadamente as chamadas economias de escala. A tendência recente para a criação de trindades na sequência da privatização dos antigos monopólios estatais é uma dessas curiosidades.
No sector da electricidade hoje temos apenas três operadores significativos – EDP, REN e Iberdrola. Nas telecomunicações temos também três operadores – PT, Vodafone e SonaeCom. O mesmo acontece no cabo – PT, Zon e Cabovisão – no gás – Galp, REN, e EDP – nas petrolíferas – Galp, Repsol e BP - e nas vias de comunicação terrestre – Brisa (Grupo Mello), Mota-Engil e Ferrovial. Também no audiovisual, após a anunciada privatização do RTP1, teremos apenas três operadores – Impresa, Prisa e (?).
Resta saber se a mesma tendência para o domínio de uma trindade ocorrerá também nos sectores que resta privatizar – transportes aéreos e águas.
Uma outra curiosidade é que os grupos privados mais destacados em Portugal são também três – Amorim, Sonae e Jerónimo Martins, mas com excepção do Grupo Amorim que tem uma presença significativa no sector da energia, estes grupos privados não estão significativamente ligados aos sectores regulados acima mencionados.
Embora continuem a existir muitas relações incestuosas entre os grupos envolvidos nos sectores regulados e o respectivo processo de consolidação sectorial ainda não esteja estabilizado, as três questões pertinentes que interessa colocar são as seguintes: 1) será que com três operadores a controlar mais de 70% do mercado respectivo será possível ter o mínimo de concorrência necessário para limitar a exploração de rendas de oligopólio por parte desses operadores? 2) será que a político-CEO-cracia que gere esses oligopólios será suficiente para transformar o capitalismo de estado Português num capitalismo de gestão; e 3) será que corremos o risco de acumular simultaneamente os malefícios do capitalismo de estado e do capitalismo de gestão?
Infelizmente, parece-nos que as respostas serão: não, não e sim. Neste domínio não podemos aplicar a regra do “três foi a conta que Deus fez”. Somente o reforço do sector de capitalismo de mercado nos pode assegurar o aumento de produtividade que o país precisa.
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