A entrevista ao Blomberg

May 10 (Blomberg) - It is Mother's Day for most people. But for an investigative reporter like me, that is the day to go undercover, travel to faraway lands and, who knows, do the footwork that will earn me a Pulitzer. For this is the day when cognoscenti as well as commoners return to their ancestral grounds to pay homage to their mothers, and as Professore Aprile Uno wrote in the classic “The Idiot’s Guide to Stalking”: 'it is stake out time!'

So off I went to a small town in an old coffee producing area of South America, hopeful to find the story of my lifetime: the hunting of Mr. “O”.

Yesterday I may or may not have accomplished it, but for the sake of my own physical well-being, I publish the transcript of my interview with the man I believe to be a famous éminence grise of global finance.

[Saturday night, in the Bar do Rubião, a non-descript bar with red lamps in the façade]

Q: Senhor! I have been dreaming about this interview for so many years! I have so many questions to ask...

A: [with a dismissive movement of his right hand] Un minuto! [After 5 minutes...] What do you want?

Q: An interview, Senhor O! I have so many questions, my research indicates that you are one of the...

A: [interrupting briskly] Do not say that word. Do not write that name. Get it? Now, you are in great luck, because I will grant you three questions, so think thoroughly before asking. There are enormous tectonic shifts happening in the world, much more important than the secret identity of who-the-[expletive]-you-think-I-am. Now make sure you record each word and publish the transcript accurately, or else.

Q: [I pause, I cannot think about how to start, concerned with the consequences...] Senhor, all my readers would like...

A: [interrupting briskly] ... like to know about Europe? So that is what I will talk about. Nowadays I would not waste my time with anything else. Our friends in Europe put themselves in a corner. See, there is an immediate problem, the financing needs in Greece. But that is only the surface. Even if we could make Greece’s debt disappear, there is an underlying problem: the differences in saving patterns between Southern Europeans in one side, and Northern Europeans in the other. When the likes of Greece and Germany joined together under the same monetary policy, interest rates were too high for Germany, too low for Greece. As a result both Mr. Kanopaybackis and his government went into a splurge and ended up with more debt than they are willing to handle. [Sips on his drink, perhaps a martini] As you can see, the fundamental problem is that Germany and Greece should not have the same currency.

Q: So you think that Greece should quit the euro?

A: That was your second question. And the answer is no. If Greece abandons the euro, there would be terrible balance sheet effects as their government would earn revenues in drachmas and still owe in euros. If they convert their debt into drachmas, this would raise all sorts of legal problems besides the hole it would make in the balance sheet of investors in Greek bonds. There is no exit for this corner with Greece abandoning the euro. But a different solution is possible. If the likes of Germany and the Netherlands issue their own currency, the Buba, we could reach a win-win solution. Germans would be able to keep pursuing their goal of low inflation. Greeks and Italians would be able to control their own monetary policy and maybe live with higher inflation if that is what they want. Investors in euro denominated Italian or Greek bonds would have their balance sheet protected. Finally, without German membership, the euro would devalue sharply and Southern Europe would be able to recover its competitiveness and adjust their fiscal position without going through unnecessarily painful deflationary processes and high unemployment.

Q: But is that going to happen?

A: You just got to your final question. I have no idea. Who do you think I am, after all? Now I have to do what I came here for. [He nods to a woman in her twenties] Print this: “I only do it because I love her”. She will know it. Not the girl here, she is only my co-author, a graduate student. Now I have to go upstairs work on my next AER.

Posted in: Blomberg