Are negotiations over Greek debt serious?
Dick Van Dyke playing Harold Hill. Source: Wikipedia
When I was growing up one of my favorite plays (and movies) was Meredith Wilson’s “The Music Man.” It tells the story of a smooth-talking travelling salesman who plans to swindle the natives of River City, Iowa by posing as a travelling band instructor–selling them marching band instruments, uniforms and music. Once he collects their money he plans to hop the next train out of town, leaving them without money or a band.
Until the instruments arrive, “Professor” Hill holds rehearsals, using his “Think System”: all the players have to do is think of a tune over and over and they will know how to play it without ever touching an instrument. Of course, it doesn’t work. But at the end of the play, instead of hearing a cacophony of random noise, the people all see their children in a magnificent marching band.
I thought of this play when I was reflecting on the Greek debt crisis. Negotiators seem to be using a “think system.” Greek government debt is over 175% of their economy. It almost doubled following the Financial Crisis of 2008-9. The economy just isn’t strong enough to support that load. But negotiators want the Greeks to cut spending and raise taxes in order to qualify for more funds. Thinking about having a stronger economy won’t create one, though. Greece doesn’t need reform, they need debt relief. And then they need to figure out for themselves how to run their economy without outside money.
Harold Hill’s think system worked because River City’s citizens wanted it to work. But there was no band, really. When it comes to Greek debt, if negotiators can’t find a way to write it down, they might as well hop the next train out of town.
Douglas R. Tengdin, CFA
Chief Investment Officer
Leave a comment if you have any questions—I read them all!