For those of us
not savvy when it comes to serious money matters – which includes many more
people than you might think – these are bewildering times.
Journalists,
along with estate agents, used to be the most disreputable creatures on the
planet. Bankers, economists and politicians now hold this distinction.
The latest
avalanche of bad economic news started with yet another international banking
scandal, this time engulfing HSBC and tax avoidance shenanigans in Switzerland . Details
of the scandal and the ensuring furious political row continue to be exposed by
leading news organisations privy to thousands of pages of secret files
made available via the International Consortium of Investigative
Journalists. Feather in the cap.
Trouble is, news
of greed and corruption among the rich and powerful has become so
commonplace as to be almost boring.
While some of us
were still trying to digest the HSBC turpitude, football fans were treated to the
news that Sky Sports dominated a deal for TV rights over the next three years
in which the British Premier League will be paid the staggering sum of nearly
€7 billion. That works out at €13.5 million per game. The total is 70% up on
the last similar auction three years ago and is well over a quarter of
Portugal’s bailout debt to the IMF.
The deal means
that Premier League players will receive even bigger pay packets than the vast
sums they are already receiving. Last year Manchester United’s Wayne Rooney was
pocketing €404,000 a week. That’s more than president Barack Obama earns in a
year.
Real Madrid has
been paying Portugal’s Cristiano Ronaldo €18,200,000 per year. He
makes in seven minutes as much as an average wage earner in Portugal makes in a
week.
Someone on €1,000
a month would have to work for 1,376 years to earn Cristiano Ronaldo’s
annual salary. Put another way, Ronald earned last year the same as an average
wage earner in Portugal would have made if he had started working in
the year 639AD. Those on the minimum wage of less than €600 a month would
have had to start working in 278 BC.
If you don’t
believe it, do the sums yourself. Or seek help from the BBC: http://www.bbc.com/news/world-31110113
But all this is
small change compared with the potential cost of things going badly wrong with
the Greeks. Portugal, like the rest of the European Union, is waiting with
trepidation as finance ministers grapple over Greek demands said to be
threatening catastrophic consequences not only for the eurozone but the economy
globally.
In contrast to
the grumbling Greeks, Portugal has gained international brownie points by
forging ahead and following Ireland with an early repayment of its IMF bailout
loan.
Eurogroup
President Jeroen Dijsselbloem told a press conference in Brussels on Monday:
“Like Ireland, which recently started its own early repayments to the IMF,
Portugal is demonstrating how quickly a country can be back on its own two feet
after a successful adjustment program.”
Greece was the first of several EU countries
to ask for financial help. It accepted two massive bailouts subject to certain
conditions. Its radical new left-wing government says the conditions have
impoverished the country and so it’s not going to abide by them. Other EU
countries led by Germany say Greece must honour the deal.
“At the heart of
the battle between Greece and its EU partners over its debt crisis are
conceptions about morality over debt and economics, issues that have been
debated for thousands of years,” according to The Economist.
With the EU
perching on the edge of a financial precipice and questions of morality left
dangling, Greece’s man-of-the-moment Yanis Varoufakis sat down with other
finance ministers in Brussels to play poker.
Writing in the Guardian as the game with extremely high
stakes got underway, Anatole Kaletsky, chairman of the Institute for New
Economic Thinking, commented: “Yanis Varoufakis, Greece’s new finance minister,
is a professor of mathematical economics who specialises in game theory. But
his negotiating technique – unpredictable oscillations between aggressiveness
and weakness – is the opposite of what game theory would dictate.
“Varoufakis’s
idea of strategy is to hold a gun to his own head, then demand a ransom for not
pulling the trigger.
“German and European
Union policymakers are calling his bluff. As a result, the two sides have
become stuck in a passive-aggressive standoff that has made serious negotiation
impossible.”
The acrimonious
game collapsed in disarray on Monday and again on Tuesday. Yet the Daily Telegraph for one was predicting some kind of “sweetheart”
deal that would be “wrapped in obscure language most eurozone voters won’t
grasp.”
If such a deal
emerges, it remains to be seen if it bamboozles voters in Portugal who go to
the polls in a general election this year amid rising anti-austerity anger in
this country.
Could economists
not have foreseen all this eurozone malarkey and thus avoided it? one might
ask.
Criticism of the
economics profession has intensified since the global financial crisis of
2007-2009 leading many to wonder if economists contribute anything significant
to society.
So says none
other than Robert J. Shiller, Professor of Economics at Yale
University and a 2013 Nobel laureate in economics. He notes that economists
failed to forecast most of the major crises in the last century, including the
severe 1920-21 slump, the 1980-82 back-to-back recessions, and the worst of
them all, the Great Depression after the 1929 stock market crash.
But just in case
anyone wants to totally write off economists, Shiller added: “Yes, most
economists fail to predict financial crises – just as doctors fail to predict
disease. But, like doctors, they have made life manifestly better for everyone.”
So that’s all clear
them, isn’t it? Except, of course if you happen to be a Portuguese family on
the breadline because of austerity. Meanwhile, the eventual outcome of the
Greek mess is anyone’s guess.