The crisis in Greece is getting worse. Its people on July 5 voted against the terms of the most recent bailout deal in a referendum, rejecting austerity. If a new deal isn’t reached soon, its government won’t be able to pay its debts and will run out of euros, which many expect it will mean exiting the euro zone. This 2010 Michael Lewis classic for Vanity Fair, “Beware of Greeks Bearing Bonds,” helps explain the current situation:
For most of the 1980s and 1990s, Greek interest rates had run a full 10 percent higher than German ones, as Greeks were regarded as far less likely to repay a loan. There was no consumer credit in Greece: Greeks didn’t have credit cards. Greeks didn’t usually have mortgage loans either. Of course, Greece wanted to be treated, by the financial markets, like a properly functioning Northern European country. In the late 1990s they saw their chance: get rid of their own currency and adopt the euro. To do this they needed to meet certain national targets, to prove that they were capable of good European citizenship—that they would not, in the end, run up debts that other countries in the euro area would be forced to repay. In particular they needed to show budget deficits under 3 percent of their gross domestic product, and inflation running at roughly German levels. In 2000, after a flurry of statistical manipulation, Greece hit the targets. To lower the budget deficit the Greek government moved all sorts of expenses (pensions, defense expenditures) off the books. To lower Greek inflation the government did things like freeze prices for electricity and water and other government-supplied goods, and cut taxes on gas, alcohol, and tobacco. Greek-government statisticians did things like remove (high-priced) tomatoes from the consumer price index on the day inflation was measured. “We went to see the guy who created all these numbers,” a former Wall Street analyst of European economies told me. “We could not stop laughing. He explained how he took out the lemons and put in the oranges. There was a lot of massaging of the index.”
Which is to say that even at the time, some observers noted that Greek numbers never seemed to add up. A former I.M.F. official turned economic adviser to former Greek prime minister Konstantinos Mitsotakis turned Salomon Brothers analyst named Miranda Xafa pointed out in 1998 that if you added up all the Greek budget deficits over the previous 15 years they amounted to only half the Greek debt. That is, the amount of money the Greek government had borrowed to fund its operations was twice its declared shortfalls. “At Salomon we used to call [the head of the Greek National Statistical Service] ‘the Magician,’ ” says Xafa, “because of his ability to magically make inflation, the deficit, and the debt disappear.”
In 2001, Greece entered the European Monetary Union, swapped the drachma for the euro, and acquired for its debt an implicit European (read German) guarantee. Greeks could now borrow long-term funds at roughly the same rate as Germans—not 18 percent but 5 percent. To remain in the euro zone, they were meant, in theory, to maintain budget deficits below 3 percent of G.D.P.; in practice, all they had to do was cook the books to show that they were hitting the targets. Here, in 2001, entered Goldman Sachs, which engaged in a series of apparently legal but nonetheless repellent deals designed to hide the Greek government’s true level of indebtedness. For these trades Goldman Sachs—which, in effect, handed Greece a $1 billion loan—carved out a reported $300 million in fees. The machine that enabled Greece to borrow and spend at will was analogous to the machine created to launder the credit of the American subprime borrower—and the role of the American investment banker in the machine was the same. The investment bankers also taught the Greek-government officials how to securitize future receipts from the national lottery, highway tolls, airport landing fees, and even funds granted to the country by the European Union. Any future stream of income that could be identified was sold for cash up front, and spent. As anyone with a brain must have known, the Greeks would be able to disguise their true financial state for only as long as (a) lenders assumed that a loan to Greece was as good as guaranteed by the European Union (read Germany), and (b) no one outside of Greece paid very much attention. Inside Greece there was no market for whistle-blowing, as basically everyone was in on the racket.
And in this essay published in mid-June, Wall Street Journal correspondent Matina Stevis shares her feeling of impotence as she watches her country struggle.
Elaine Brown is an American prison activist, writer, lecturer and singer. In 1968, she joined the Los Angeles chapter of the Black Panther Party as a rank-and-file member. Six years later, Huey Newton appointed her to lead the Party when he went into exile in Cuba. She was the first and only woman to lead the male-dominated Party. She is author of A Taste of Power (Pantheon, 1992) and The Condemnation of Little B (Beacon Press, 2002). She is also the Executive Director of the Michael Lewis Legal Defense Committee and CEO of the newly-formed non-profit organization Oakland & the World Enterprises, Inc.
Her 1992 autobiography A Taste of Poweris a story of what it means to be a black woman in America,tracing her life from a lonely girlhood in the ghettos of North Philadelphia to the highest levels of the Black Panther Party’s hierarchy. The Los Angeles Times described the book as “a profound, funny and…heartbreaking American story,” and the New York Times called it “chilling, well written and profoundly entertaining.” Our thanks to Brown for allowing us to reprint this excerpt here.Read more…
Michael Lewis examines the psychological effects of income inequality. “There is a growing awareness that the yawning gap between rich and poor is no longer a matter of simple justice but also the enemy of economic success and human happiness. It’s not just bad for the poor. It’s also bad for the rich.”
An adaptation from Michael Lewis’s new book, Flash Boys: A Wall Street Revolt, about high-frequency trading and the rigging of Wall Street:
“As the market problem got worse,” [Brad Katsuyama] says, “I started to just assume my real problem was with how bad their technology was.”
But as he talked to Wall Street investors, he came to realize that they were dealing with the same problem. He had a good friend who traded stocks at a big-time hedge fund in Stamford, Conn., called SAC Capital, which was famous (and soon to be infamous) for being one step ahead of the U.S. stock market. If anyone was going to know something about the market that Katsuyama didn’t know, he figured, it would be someone there. One spring morning, he took the train up to Stamford and spent the day watching his friend trade. Right away he saw that, even though his friend was using software supplied to him by Goldman Sachs and Morgan Stanley and the other big firms, he was experiencing exactly the same problem as RBC: He would hit a button to buy or sell a stock, and the market would move away from him. “When I see this guy trading, and he was getting screwed — I now see that it isn’t just me. My frustration is the market’s frustration. And I was like, ‘Whoa, this is serious.’ ”
Willie Wood and the Making of the Modern Game: Michael Lewis on America’s first Super Bowl
The game itself lives only in memory: no filmed record exists of the first Super Bowl. It was broadcast on two networks but both of them lost or erased the program. All that remains are the few highlights culled by the N.F.L. before the tapes vanished. Their feel is archaic, of a game from a lost era. The lockers have metal grates and locks. Daring personal behavior consists of sneaking out of the hotel after bed check to dance with airline stewardesses. The kickers kick with their toe, and a sack is just another tackle, not an expression of personal domination to be followed by bestial gesturing. The biggest player on the field is the Chiefs’ Buck Buchanan, who at 6-foot-7 and 287 pounds is regarded as freakishly big. (Today the average fan would wonder why he hadn’t filled out.) It may not be a better time, but it certainly is a more credulous one. Everyone is readily believed, and so everyone is more easily deceived, or assumed to be. The example of the deceptive football mind at work is the play-action pass, in which the quarterback fakes a handoff to freeze the defense before making his throw.
Programmer Sergey Aleynikov was sentenced to eight years in federal prison for downloading 8 megabytes of code he worked on from Goldman Sachs’s high-frequency stock-trading system. Financial journalist Michael Lewis investigates how Aleynikov was punished for something only a few people understand, and holds a “kind of second trial” for Aleynikov so he can be judged by some people who actually do:
“The story the F.B.I. found so unconvincing—that Serge had taken the files because he thought he might later like to parse the open-source code contained within—made complete sense to the new jurors. As Goldman hadn’t permitted him to release his debugged or improved code back to the public—possibly in violation of the original free licenses, which often stated that improvements must be publicly shared—the only way to get his hands on these was to take the Goldman code. That he had taken, in the bargain, some code that wasn’t open source, which happened to be contained in the same files as the open-source code, surprised no one. Grabbing a bunch of files that contained both open-source and non-open-source code was an efficient, quick, and dirty way to collect the open-source code, even if the open-source code was the only part that interested him. It would have made far less sense for him to hunt around the Internet for the open-source code he wanted, as it was scattered all over cyberspace. It was entirely plausible to them that Serge’s interest was confined to the open-source code because that was the general-purpose code that might be re-purposed later. The Goldman proprietary code was written specifically for Goldman’s platform; it would have been of little use in any new system he wished to build. (Two small pieces of code Serge had sent into Teza’s computers before his arrest both came with open-source licenses.) ‘Even if he had taken Goldman’s whole platform, it would have been faster and better for him to write the new platform himself,’ said one juror. Several times he surprised them with his answers.”
“The dateline is Elyria, Ohio, a city of 55,000 about 30 miles southwest of Cleveland. You know this town, even if you have never been here. A place buffeted by time and the economy, a place where the expectations have been lowered, but not hopes for better days to come. A place where politicians, in this election year, say the American dream is still possible.”
“A bunch of songs later, after a run-through of the set-ending ‘Thunder Road,’ Springsteen hops off the stage, drapes a towel around his neck, and sits down in the folding chair next to me.“ ‘The top of the show, see, is a kind of welcoming, and you are getting everyone comfortable and challenging them at the same time,’ he says. ‘You’re setting out your themes. You’re getting them comfortable, because, remember, people haven’t seen this band. There are absences that are hanging there. That’s what we’re about right now, the communication between the living and the gone. Those currents even run through the dream world of pop music!’ ”
“On Feb. 17, 2000, Rae Carruth’s attorney filed an answer to Saundra Adams in Mecklenburg District Court. It was one of the more brazen counterclaims in the annals of U.S. jurisprudence: a demand for permanent custody of Chancellor Lee Adams. ‘The Defendant,’ the filing read, ‘is a fit and proper person to exercise care, custody and control of the minor child and it is in the best interest and welfare of the minor child that his care, custody and control be vested with the Defendant at the conclusion of the Defendant’s legal proceedings.’
“No, it wasn’t enough that Saundra Adams had to spend 28 days watching her only child die. Had to watch her grandson spend the first six weeks of his life in a tangle of wires and machines. Had to become a single mother again at age 42. Had to hide from reporters day and night. Had to worry about more than $400,000 in medical bills that her descendants had racked up while fighting for their lives. None of that was enough. Now she would have to draw from the little time and energy and money she had left and fight to keep the sole remaining heir to the Adams name away from the man who had wanted him dead.”
“After the autopsy, when the doctor found white blossoms of scar tissue on Wes Leonard’s heart, he guessed they had been secretly building there for several months. That would mean Wes’s heart was slowly breaking throughout the Fennville Blackhawks’ 2010—11 regular season, when he led them in scoring and the team won 20 games without a loss. It would mean his heart was already moving toward electrical meltdown in December, when he scored 26 on Decatur with that big left shoulder clearing a path to the hoop. It would mean his heart swelled and weakened all through January (25 against Hopkins, 33 against Martin) even as it pumped enough blood to fill at least 10 swimming pools.”
“The most infamous roster decision in high school basketball history came down 33 years ago on the edge of tobacco country, between the Cape Fear River and the Atlantic Ocean, in an old town full of white wooden rocking chairs. The decision took physical form in two handwritten lists on a gymnasium door, simultaneously beautiful for the names they carried and crushing for the names they did not. A parade of fragile teenage boys passed by, stopping to read the lists, studying them like inscriptions in stone. Imagine these boys in the time of their sorting, their personal value distilled to a binary question, yes or no, and they breathe deeply, unseen storms gathering behind their ribs, below their hearts, in the hollows of fear and exhilaration.
“The chief decision-maker loved those boys, which made his choice all the harder. He gave them his time seven days a week, whether they needed shooting practice at six in the morning or a slice of his wife’s sweet-potato pie. His house was their house and his old green Ford Maverick was their car and his daughter was their baby sister, and he liked the arrangement. He was tall and slender, like the longleaf pines that covered Cape Fear, and when he smiled in pictures, his dark eyes were narrow, hazy, as if he’d just awakened from a pleasant dream. His nickname, Pop, evoked some withered old patriarch, but Clifton Herring was only 26, one of the youngest varsity coaches in North Carolina, more older brother than father to his boys, still a better player than most of them. They’d never seen a shooter so pure. One day during practice he made 78 straight free throws.”
There are no wide-open spaces in presidential life, only nooks and crannies, and the front of Air Force One is one of them. When he’s on his plane, small gaps of time sometimes open in his schedule, and there are fewer people around to leap in and consume them. In this case, Obama had just found himself with 30 free minutes.
“What you got for me?” He asked and plopped down in the chair beside his desk. His desk is designed to tilt down when the plane is on the ground so that it might be perfectly flat when the plane is nose up, in flight. It was now perfectly flat.“I want to play that game again,” I said. “Assume that in 30 minutes you will stop being president. I will take your place. Prepare me. Teach me how to be president.”
“Most people think perfection in bowling is a 300 game, but it isn’t. Any reasonably good recreational bowler can get lucky one night and roll 12 consecutive strikes. If you count all the bowling alleys all over America, somebody somewhere bowls a 300 every night. But only a human robot can roll three 300s in a row—36 straight strikes—for what’s called a ‘perfect series.’ More than 95 million Americans go bowling, but, according to the United States Bowling Congress, there have been only 21 certified 900s since anyone started keeping track.
“Bill Fong’s run at perfection started as most of his nights do, with practice at around 5:30 pm. He bowls in four active leagues and he rolls at least 20 games a week, every week. That night, January 18, 2010, he wanted to focus on his timing.”
“There are, however, some brief periods in a person’s life when old routines fall apart and buying habits are suddenly in flux. One of those moments — the moment, really — is right around the birth of a child, when parents are exhausted and overwhelmed and their shopping patterns and brand loyalties are up for grabs. But as Target’s marketers explained to Pole, timing is everything. Because birth records are usually public, the moment a couple have a new baby, they are almost instantaneously barraged with offers and incentives and advertisements from all sorts of companies. Which means that the key is to reach them earlier, before any other retailers know a baby is on the way. Specifically, the marketers said they wanted to send specially designed ads to women in their second trimester, which is when most expectant mothers begin buying all sorts of new things, like prenatal vitamins and maternity clothing. ‘Can you give us a list?’ the marketers asked.”
Best Obligatory Stories from David Grann and Chris Jones
“One day in the spring of 1958, while Morgan was visiting a guerrilla camp for a meeting of the Second Front’s chiefs of staff, he encountered a rebel he had never seen before: small and slender, with a face shielded by a cap. Only up close was it evident that the rebel was a woman. She was in her early twenties, with dark eyes and tawny skin, and, to conceal her identity, she had cut her curly light-brown hair short and dyed it black. Though she had a delicate beauty, she locked and loaded a gun with the ease of a bank robber. Morgan later said of a pistol that she carried, ‘She knows how to use it.’
“(Sargent Steve) Blake was parked near downtown Zanesville, sipping his coffee, when his radio crackled shortly after five o’clock, two hours into just another shift. ‘I had no idea that was going to be one of the worst calls of my life,’ he says. He flicked on his lights and sirens. Maybe ten minutes after five he was at the start of Thompson’s driveway, where the fence narrowed into a pipe gate, still locked in place. Deputy Jonathan Merry, an open-faced twenty-five-year-old, arrived only a minute or two after him. They stood at the bottom of the driveway and saw the bear, now circling down by the gate. The lion was farther up and to their right. Blake told Merry to go to the Kopchak house, the second house down the road, and take a statement from Dolores Kopchak. She might help them form a clearer picture of what they now faced, and clarity was important in a situation like this. He also told Merry that if the bear or the lion pushed its way through the fence, he should shoot it.
“Sam Kopchak could see across to the bottom of the driveway from the little window in the door to his tack room, tucked away in a corner of his barn. He saw the officers talking to each other and thought, They’re going to need more than two.”
“ ‘The favor of your company is requested,’ read the invitation, ‘for the most local of harvest meals.’ I sent this to a healthy mix of 30 eaters both adventurous and particular, and set a date. On the menu: juleps made with the mint growing from my compost pile, coconut curry simmered with the mysterious squash that had taken over the backyard, dinosaur kale, cornbread, and the main event: a thick burgoo, featuring ‘heirloom tomato, tree nut, and alley-fattened wild caught game.’
“I didn’t expect nearly all of the invitees to accept, but evidently curiosity about urban squirrel’s viability as a protein source isn’t merely a weird, solitary obsession. A few days before the event I defrosted and cut up the legs and saddles, seared them off in a pot, and deglazed it with Madeira, a la James Beard. I sauteed diced bacon, onions, and garlic, added homemade chicken stock and the squirrel pieces, and braised them slowly.”
“Many times, I had to skip a question because I couldn’t figure out the answer, and then I got that paranoia that’s unique to someone taking a standardized test. I became fearful that I had failed to skip over the question on my answer sheet. So every five seconds, I’d double-check my sheet to make sure I didn’t fill out my answers in the wrong slots. One time I did this, and so I had to erase the answers and move them all forward. Only I had a shitty eraser, which failed to erase my mark and instead smeared the mark all over the rest of my sheet.”
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