SERVING THE QUANTITATIVE FINANCE COMMUNITY

trackstar
Topic Author
Posts: 27504
Joined: August 28th, 2008, 1:53 pm

### Creative Thinking on Greece

If there was a little more time and less bureaucracy to deal with, how could Greece get out of this predicament?Is it possible to earn or innovate your way out?Could Greek billionaires form a consortium and launch a business/non-profit to employ the employable and help the elderly and others who cannot work?Philip Niarchos alone is worth about $2.5 billion according to Forbes as of June 2015, just as one example.Could derivatives somehow be put to good use here? I understand about the market price of risk, but seriously...It would be interesting to come up with some solutions that do not involve the global financial system and these interminable discussions with the IMF.Some facts:National Debt Clocks: Greece Current Greek debt: 340 billion euros/380 billion USDPopulation: 11 millionFor comparison in the US:Population Massachusetts (whole state): 6.8 millionPopulation New York City: 8.4 millionMarket cap of Microsoft:$366 billionMarket cap of Apple: $730 billion(No arrogance here: the national debt of the US right now is$18 trillion and counting, but at least the US has broad, deep markets and lots of assets.)If we can come up with some good ideas (with sufficient level of detail), I will write a short piece on this and post it somewhere exciting.
Last edited by trackstar on June 28th, 2015, 10:00 pm, edited 1 time in total.

Cuchulainn
Posts: 62913
Joined: July 16th, 2004, 7:38 am
Location: Amsterdam
Contact:

### Creative Thinking on Greece

a) No more Olympic games.
Last edited by Cuchulainn on June 27th, 2015, 10:00 pm, edited 1 time in total.
Step over the gap, not into it. Watch the space between platform and train.
http://www.datasimfinancial.com
http://www.datasim.nl

Cuchulainn
Posts: 62913
Joined: July 16th, 2004, 7:38 am
Location: Amsterdam
Contact:

### Creative Thinking on Greece

.. b) or other flights of fancy. + c) smaller army/defence budget. QuoteOne of the oddities of Greece?s bailout programme has been that, despite five years of punishing austerity, its military budget remains amongst the highest in the EU.Early in the crisis, the issue became controversial during a dispute over whether Athens should follow through on a contract to purchase German-built diesel submarines ? a move that was criticised as a way to curry favour with Greece?s largest creditor. Instead of screwing the average Greek. Mr. Dijsselbloem is barklng up the wrong tree IMO.
Last edited by Cuchulainn on June 27th, 2015, 10:00 pm, edited 1 time in total.
Step over the gap, not into it. Watch the space between platform and train.
http://www.datasimfinancial.com
http://www.datasim.nl

trackstar
Topic Author
Posts: 27504
Joined: August 28th, 2008, 1:53 pm

### Creative Thinking on Greece

Yes, thank you for those ideas and I can include a section on cuts, but we need growth!One thing I would love here would be a healthy quasi-fast food chain that served Greek salads, falafel sandwiches, gyros, yogurt-based meals, moussaka, and baklava...There are lots of little shops that do this in places like Harvard Square, but we have no national chain for Greek/Mediterranean food with drive throughs.The Mediterranean cuisine (beyond pizza) is exotic to us too, so that would be great for marketing.
Last edited by trackstar on June 28th, 2015, 10:00 pm, edited 1 time in total.

Cuchulainn
Posts: 62913
Joined: July 16th, 2004, 7:38 am
Location: Amsterdam
Contact:

### Creative Thinking on Greece

QuoteYes, thank you for those ideas and I can include a section on cuts, but we need growth!You first need a root cause analysis of the problem. Growth is not the issue. Please review. You see it in economic terms. This is missing the issue by a country mile.
Last edited by Cuchulainn on June 27th, 2015, 10:00 pm, edited 1 time in total.
Step over the gap, not into it. Watch the space between platform and train.
http://www.datasimfinancial.com
http://www.datasim.nl

trackstar
Topic Author
Posts: 27504
Joined: August 28th, 2008, 1:53 pm

### Creative Thinking on Greece

QuoteOriginally posted by: CuchulainnQuoteYes, thank you for those ideas and I can include a section on cuts, but we need growth!You first need a root cause analysis of the problem. Growth is not the issue. Please review.I think the root cause of debt problems is pretty clear, don't you? The problem with the cuts approach to solving a debt crisis is that there is only so far you can go before you hit the bone. Eventually there is nowhere else to cut.Maybe less military spending is a good idea, particularly when it comes to weaponry and submarines, for example.But I think for now at least, you would want to keep the military personnel employed.Employment is at the center of my thinking. And education for others, while the job market is trying to open up.For example, perhaps all young and/or unemployed Greeks past high school age should be able to go to trade school/voc tech or college right now.
Last edited by trackstar on June 27th, 2015, 10:00 pm, edited 1 time in total.

Cuchulainn
Posts: 62913
Joined: July 16th, 2004, 7:38 am
Location: Amsterdam
Contact:

### Creative Thinking on Greece

QuoteOriginally posted by: trackstarQuoteOriginally posted by: CuchulainnQuoteYes, thank you for those ideas and I can include a section on cuts, but we need growth!You first need a root cause analysis of the problem. Growth is not the issue. Please review.I think the root cause of debt problems is pretty clear, don't you?To me, as I have just said. Just please don't answer a question with another one.
Step over the gap, not into it. Watch the space between platform and train.
http://www.datasimfinancial.com
http://www.datasim.nl

trackstar
Topic Author
Posts: 27504
Joined: August 28th, 2008, 1:53 pm

### Creative Thinking on Greece

QuoteOriginally posted by: CuchulainnQuoteOriginally posted by: trackstarQuoteOriginally posted by: CuchulainnQuoteYes, thank you for those ideas and I can include a section on cuts, but we need growth!You first need a root cause analysis of the problem. Growth is not the issue. Please review.I think the root cause of debt problems is pretty clear, don't you?To me, as I have just said. Just please don't answer a question with another one.Simplistically, untenable debt comes from overspending, particularly in areas that were not going to deliver any growth, and lack of revenues from taxes and other sources.This goes for personal debt (ex taxes) and government debt - the dynamics are more or less the same. Don't confuse consumption (or corruption) with investment. I do see the issue in economic terms, because I am solution-oriented. If we see it only in political or moral terms, we are not surpassing the current discussions at EU/IMF level. Moral hazard at the governmental level is lurking everywhere, but let's look at ordinary citizens and what should be done for them.
Last edited by trackstar on June 27th, 2015, 10:00 pm, edited 1 time in total.

Cuchulainn
Posts: 62913
Joined: July 16th, 2004, 7:38 am
Location: Amsterdam
Contact:

### Creative Thinking on Greece

QuoteDon't confuse consumption (or corruption) with investment. It's hard not to.
Step over the gap, not into it. Watch the space between platform and train.
http://www.datasimfinancial.com
http://www.datasim.nl

trackstar
Topic Author
Posts: 27504
Joined: August 28th, 2008, 1:53 pm

### Creative Thinking on Greece

QuoteOriginally posted by: CuchulainnQuoteDon't confuse consumption (or corruption) with investment. It's hard not to.Hmmm - not sure I can agree on that.We have major public works projects going on here for the past few years - fresh paving for highways, assessments and repairs of bridges, and other modernization of infrastructure.This is investment and will keep us going for another 30-40 years (typical lifespan of infrastructure). Very much like the WPA of Roosevelt's time.Corporate and scientific R&D and improvements to education systems are investments.We could debate the efficacy of bank bailouts and it is reprehensible that in the US, some IBs turned around with TARP money and awarded huge bonuses, but money has been trickling into the countryside on productive projects and keeping workers employed as well.I imagine that there is no shortage of infrastructure improvements and general environmental clean-up that could be done in Greece.
Last edited by trackstar on June 27th, 2015, 10:00 pm, edited 1 time in total.

trackstar
Topic Author
Posts: 27504
Joined: August 28th, 2008, 1:53 pm

### Creative Thinking on Greece

Have to get back to a more pressing project, but here is an interesting report from PWC:Infrastructure: Funding the Future - Greece - December 2014Bullets from Executive Summary:According to OECD, global infrastructure needs* are expected to increase along the years to around $55 trl by 2030- Oxford Economics study estimated that the global infrastructure spending* will reach$ 44 trl up to 2025 - In Greece, the infrastructure investment gap is between 1.2 pp of GDP (against the European average) or 2.4 pp of GDP (against historical performance) translating into 2.5bln to 5bln Euros in new spending per year- Infrastructure investments have an economic multiplier of 2x which can boost demand of other sectors. The construction sector will be enhanced creating new employment opportunities on a regular basis, attracting foreign investors and improving economic growth- Greek infrastructure backlog has grown enormously during the crisis - amounting to Euros 20bln- 34% accounting for energy projects, while 55% coming from rail and motorway projects- Announced tourist infrastructure and waste management projects (latter are financed through Public Private Partnerships - PPPs) are estimated at 11% of total pipeline budget are key to development and improvement of quality of life- Traditional funding sources, such as loans and government contribution are becoming less sustainable over the years, shifting the financing focus to the private sector. Historically in Greece, private funding was limited to about 15% of total budget, while public sector (State and EU) accounted for around 40%- PPPs and Project Bonds will provide a significantly higher private sector participation in infrastructure funding adding a low risk element in institutional financiers' portfolios.- Project bond issuance have been growing in Europe as an additional source of funding for infrastructure projects
Last edited by trackstar on June 28th, 2015, 10:00 pm, edited 1 time in total.

Posts: 23951
Joined: September 20th, 2002, 8:30 pm

### Creative Thinking on Greece

Debt-to-equity conversion!The irony of an IOU is that lenders choose the debt contract structure because the lender thinks it's the lowest-risk structure. They think that because the contract says "thou art first in line to get (1+i)^t Euros-per-Euro" that they face the least amount of risk. HA! Debt is a horribly unstable structure in the face of volatile cashflows and it's doubly disastrous if those volatile cash flows are also being used to support the economic/business/social activities that, in turn, will pay future installments on the debt. In essence, debt puts the lender first in line to get cash in the near-term ahead of the lender themselves at a later date. If I may be so crude, debt is too often a structure by which the lender fucks themselves in the ass.Rather than insist on fixed payments on a fixed term -- an inflexible structure that induces failure in the borrower -- there are alternative repayment term structures that are much less likely to destroy the lender before they repay the loan. The most obvious one is profit sharing by which the "lender" has potentially unbounded returns (and a strong incentive to promote the growth of the borrower). Venture capitalists love this structure but it may not work too well for an entity with deficit spending (a negative profit rate) and abysmal aging demographics.A better term structure that is more certain to deliver a cash-flow to the lender with less risk of destroying the borrower is the revenue share structure. It's a structure often used in micro lending. Under this structure, the lender gets a fixed proportion of the entities' revenues (e.g., tax revenues) so the payments are flexible in good times and bad. There's some alignment with growth, too. I'll leave it to the clever quants to model the correct %-of-tax-revenues and duration to provide a palatable NPV to Greece's borrowers.I can think of some more outrageous term structures (e.g., debtors get voting shares in Greece), but I think I'll save those for later......
Last edited by Traden4Alpha on June 27th, 2015, 10:00 pm, edited 1 time in total.

trackstar
Topic Author
Posts: 27504
Joined: August 28th, 2008, 1:53 pm

### Creative Thinking on Greece

Appreciate the ideas on the debt side.I have been thinking of more opportunities on the revenue side and came up with advertising (naming rights) and antiquities. Lay out the schedule of payments due over the next few years and court a select group of wealthy individuals and corporations.For a few hundred million, your name can appear on a large historic building or Greek aircraft or ship, for a billion, a logo could be placed on the Greek flag.It would be a shame to sell antiquities (and could hurt the tourist industry if it were done on a massive scale), but Sotheby's could run an extreme-elite auction, raising hundreds of millions as well.Further to that - places that have Greek treasures already should pay a retroactive tribute for them - large donors could probably be found for this on behalf of the museums that are curating the artifacts and their contributions could be tax deductible in their own countries.And finally, in a word, crowd funding.Well, not necessarily practical or sustainable, some blue sky thinking...you never know when it might lead to a real solution. On a serious note, Cyprus has made an offer (based on Cyprus' own recent experience with debt and capital controls) and is trying to pull a coalition together on behalf of Greece for debt forgiveness.
Last edited by trackstar on June 28th, 2015, 10:00 pm, edited 1 time in total.

Cuchulainn
Posts: 62913
Joined: July 16th, 2004, 7:38 am
Location: Amsterdam
Contact:

### Creative Thinking on Greece

Banks closed for a week.
Step over the gap, not into it. Watch the space between platform and train.
http://www.datasimfinancial.com
http://www.datasim.nl

Posts: 23951
Joined: September 20th, 2002, 8:30 pm

### Creative Thinking on Greece

QuoteOriginally posted by: CuchulainnBanks closed for a week.Is this a practice session for the Grexit?
Last edited by Traden4Alpha on June 28th, 2015, 10:00 pm, edited 1 time in total.