Thursday, May 17, 2012

Société Générale's Dylan Grice: "The simplest way to overcome a budget constraint is through theft"

From FT Alphaville:
Dylan Grice on sovereign comeuppance
Maybe all the Anglo-Saxon central banks have done is create the illusion that our sovereigns are more solvent than they are, and that our budget constraints are really a safe distance away. But I don’t think they are. And I think the truth gets out eventually. The Enrons, the Allied Capitals, the Bernie Madoffs … they all get their comeuppance.
That’s from SocGen’s Dylan Grice, who seems more than a little bit annoyed by government’s abilities to fiddle with the amounts they can borrow (their budget constraints).
For Grice:
The simplest way to overcome a budget constraint is through theft. Thus, taking a leaf from the government of Argentina no doubt, the Portuguese government raided its own pension fund to meet its 2011 deficit targets, having raided Portugal Telecom’s pension plan the year before. All in the name of the common good.
And a more subtle way is to misrepresent your underlying financial health to give the impression of being comfortably inside your borrowing capacity…  a conceit which Grice says has come home to rest in the eurozone periphery....MORE
March 2012 
Société Générale's Dylan Grice on Japan, Mugabe, Central Bankers and Demographics
Feb 2012 
Société Générale Dylan Grice: "On The Failure Of Inflation Targeting, The Hubris Of Central Planning, The "Lost Pilot" Effect, And Economist Idiocy"
Jan. 2012 
Société Générale's Annual Strategy Seminar: Albert Edwards, Dylan Grice and a Cast of Thousands
Jan. 2012 
Financial Times Interview: Société Générale's Dylan Grice