I was discussing yesterday's post with a hedge fund manager (HFM) who gives that useful (and false) impression of being not too bright.
I starting explaining the Swedbank thing to him. You could tell he was only half listening.
Until I got to the statistics for Latvia. His ears pricked up when I said the current account deficit was well over 20 percent of GDP.
HFM: "Who are they stealing that from?"
HFM: "So why didn't you say so?"
Well there is a reason that I didn't say so - which is that you wouldn't believe me if I posted the short hand. But what a 2o percent current account deficit means is that the AVERAGE PERSON spends 20% more than they earn.
This is of course impossible unless they are not going to repay it.
Borrowing without intention or ability to repay is the economic (but not moral) equivalent of stealing... and it doesn't matter what currency that borrowing is in...
This "theft" is so large that Swedbank is nearly insolvent.
And Swedbank management are steadfast in their belief that nothing is fundamentally wrong. Well they would say that, wouldn't they...
Wednesday, July 30, 2008
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