If you want to know why rule by the Great and the Good doesn't work


Consider this from Simon Jenkins as an example of why rule by the Great and the Good doesn't work.

But such is the political arthritis now afflicting Europe’s “technocratic” rulers that they ignored the fact. They concentrate on their one concern: somehow extending Greece’s repayments so German, French and British banks could have even larger loans underpinned. It is bankers, not Greeks, who are being “bailed out”. They want Greek taxpayers to go on paying interest even if the principal is as beyond reach as a tsarist bond.

No Sir Simon, just no.

Of Greece's some €320 billion in debt a couple of percentage points is owed to foreign banks. That's actually what the problem here is: there's no bankers that anyone can go and steal the money from.

The debts are owed to: the IMF, which in effect means the governments of the countries that own the IMF. The ECB, which means the countries that own it (ie, the eurozone governments). The EFSF, which is guaranteed by the eurozone governments. Then there's bilateral loans from ...yes....the eurozone governments.

The Greek banks do own Greek Treasuries, both bonds and bills: and these are all pledged to the ECB as collateral for the cash they need to remain open. This is actually what the problem is in the negotiations. If there were any rapacious capitalists holding any appreciable amount of the debt then they would be haircut without anyone caring in the slightest. That near all of the money is owed to taxpayers of other countries is the problem.

This would have been a valid criticism of the 2010 to 2012 actions, where the banks' debt holdings were largely unloaded onto those taxpayer guarantees. But it's simply incorrect to claim that banks have anything beyond the most minimal exposure today. Whatever this is this isn't a crisis about protecting bankers.

And that, of course, is why that rule by the Great and the Good, by the wise Solons, by a technocracy, doesn't in fact work. For the obvious reason that all too many of them haven't a clue about whatever it is that they're supposed to be managing or making public policy upon.

This is not to say that they're all idiots, of course it isn't, but rule by the ill informed isn't a great step forwards now is it?