I don't write about politics, because political opinion is like fart: everyone has it and no one wants to experience the other guys. I make an exception today. Not because I believe I will change anything, I won't. Only to foretell what will happen, maybe help some guys to save their own money and to increase my credibility by linking this post back from half year from now: "I told you".
The leader of Hungary, Viktor Orbán is clearly disliked in Europe and the US (and not without reason). However both the EU and US leaders are beyond mere dislike, they choose to make him go, like they did with Silvio Berlusconi and Georgios Papandreou. They made it clear to the whole leading elite that they will not help the country unless the leader is replaced. And they were. What works there should work in Hungary, right?
Wrong, because while Orbán clearly has no clue about the economy, he has an unmatched talent understanding and manipulating the socials, vast majority of the voters. For this reason, despite the country being in deep crisis and people getting poorer by the day, he would still win an election today according to all opinion surveys. The reason is simple: socials seeks responsibility instead of results. If you are totally unsuccessful but manage to shift the blame to others, you are clear, while you can reach any result if you are pictured evil in the head of the socials and they will still hate you. Orbán could clearly shift the blame for the crisis to the banks and "speculators" while picturing himself as a tragic hero who fights against the odds for the people. His narration of the situation is widely accepted by public. Please note that this setup was used many times in history, always with disastrous results, yet without the loss of popularity for the perpetrator, on the contrary, often elevating him to a legend.
What will happen? Since the Hungarian budget is clearly not self-sustaining and the investors are leaving (and forced to leave by their written standards to liquidate assets that are devalued by at least 2 rating company), the bankruptcy of Hungary (inability to pay their debts) will happen in half, maximum one year without external help. The EU and US leaders think that at this point Orbán will have no choice but to surrender, accept all their terms and leave. He won't. He will let the country go bankrupt.
When Hungary defaults, the 88000B HUF (about $360B) Hungarian dept is lost to the investors. They are mostly banks in the EU. And God knows how much papers running around with repacked Hungarian state bonds and CSDs. At this point the EU leaders can do two things.
One is that they surrender and help Hungary without conditions. This case Orbán would not only look, but be an epic hero, the first in history who won against the "evil speculators". The more likely scenario is they help their own banks, which is the same "paying instead of Hungary" without the loss of face. Hungary, due to having its own currency will auto-adjust, the HUF will fall to the point when the import of consumers goods is decreased enough and the export increased to make the budget balanced. In this case Orbán can uphold his narrative that "we" stood our ground and survived the brutal attack of the evil ones.
The above could be avoided if the EU-US leaders would understand the social animals who vote. They assume that poverty will make the Hungarians hate Orbán. Well, they will clearly hate someone but I'm 100% sure it won't be him. It will be the speculators, the EU, the USA, the capitalism or even worse, the jews. Seen it already, didn't we? For these reasons Orbán does not play chicken game, so he won't turn away in the last second. Simply he doesn't care if he is driving a car or owning a junkyard.
PS: "bankruptcy" has a bad name, due to for a person it means being without any property, for a company it means the end. For a country it merely means no more loans and maybe that they have to pay for imported goods in advance and in foreign currency. The investors can't come and confiscate the Parliament building or even the luxury cars standing front of it.
The leader of Hungary, Viktor Orbán is clearly disliked in Europe and the US (and not without reason). However both the EU and US leaders are beyond mere dislike, they choose to make him go, like they did with Silvio Berlusconi and Georgios Papandreou. They made it clear to the whole leading elite that they will not help the country unless the leader is replaced. And they were. What works there should work in Hungary, right?
Wrong, because while Orbán clearly has no clue about the economy, he has an unmatched talent understanding and manipulating the socials, vast majority of the voters. For this reason, despite the country being in deep crisis and people getting poorer by the day, he would still win an election today according to all opinion surveys. The reason is simple: socials seeks responsibility instead of results. If you are totally unsuccessful but manage to shift the blame to others, you are clear, while you can reach any result if you are pictured evil in the head of the socials and they will still hate you. Orbán could clearly shift the blame for the crisis to the banks and "speculators" while picturing himself as a tragic hero who fights against the odds for the people. His narration of the situation is widely accepted by public. Please note that this setup was used many times in history, always with disastrous results, yet without the loss of popularity for the perpetrator, on the contrary, often elevating him to a legend.
What will happen? Since the Hungarian budget is clearly not self-sustaining and the investors are leaving (and forced to leave by their written standards to liquidate assets that are devalued by at least 2 rating company), the bankruptcy of Hungary (inability to pay their debts) will happen in half, maximum one year without external help. The EU and US leaders think that at this point Orbán will have no choice but to surrender, accept all their terms and leave. He won't. He will let the country go bankrupt.
When Hungary defaults, the 88000B HUF (about $360B) Hungarian dept is lost to the investors. They are mostly banks in the EU. And God knows how much papers running around with repacked Hungarian state bonds and CSDs. At this point the EU leaders can do two things.
One is that they surrender and help Hungary without conditions. This case Orbán would not only look, but be an epic hero, the first in history who won against the "evil speculators". The more likely scenario is they help their own banks, which is the same "paying instead of Hungary" without the loss of face. Hungary, due to having its own currency will auto-adjust, the HUF will fall to the point when the import of consumers goods is decreased enough and the export increased to make the budget balanced. In this case Orbán can uphold his narrative that "we" stood our ground and survived the brutal attack of the evil ones.
The above could be avoided if the EU-US leaders would understand the social animals who vote. They assume that poverty will make the Hungarians hate Orbán. Well, they will clearly hate someone but I'm 100% sure it won't be him. It will be the speculators, the EU, the USA, the capitalism or even worse, the jews. Seen it already, didn't we? For these reasons Orbán does not play chicken game, so he won't turn away in the last second. Simply he doesn't care if he is driving a car or owning a junkyard.
PS: "bankruptcy" has a bad name, due to for a person it means being without any property, for a company it means the end. For a country it merely means no more loans and maybe that they have to pay for imported goods in advance and in foreign currency. The investors can't come and confiscate the Parliament building or even the luxury cars standing front of it.
21 comments:
Sadly, politicians who do understand "the socials" lead to the stagnation of the whole system. Every party/candidate becomes just like every other.
When you know the majority of voters are ignorant of your actual policies, then your only real policy becomes "don't offend the ignorant majority". Which is why your Orban does so well.
The non-ignorant do not have the numbers to tip the scales.
This is the big flaw with the "one man, one vote" system. That "one man" is usually an idiot.
I would still take the "one idiot, one vote" over the alternative.
That being said, is there no 2nd party or media pushback on the Orbán cult of personality? Or is it too far past that point and is literally Hungary vs The World?
@Azuriel: there isn't much cult of personality here, rather cult of the system or the nation. The other parties are weak and divided. One is right-wing extremist (called nazi by others), one is new and rather a punk protest-party than real party, and the socialists are considered thieves by almost everyone.
An excellent piece this morning which I really enjoyed reading.
My only observation is as Azuriel has noted, you haven't really offered much of an alternative. Whilst Orbán may not be bluffing if the EU and US give into him how many other country leaders will take the same approach and just stand their ground until the bitter end ? Even if the EU and US realise how the social animals vote they can't afford to give in, it would reduce their strength as players in their own political arena.
As Orbán is playing a political game so are all the decision makers in Europe.
And somehow the guys who used their power to make the system what it is and drove into colapse, intentionaly or not, are blameless?
Whenever I hear a polititian talking about debt management I know he will never get my vote. I don't want to live my live by mortgaging the future.
@Chewy: there is no alternative. The problem is systemic and cannot be solved within the "one guy one vote" system.
Not being particularly aware of Hungary's political situation but having time to spare this week I've just been reading about the Fidesz party. In particular their changes to your constitution, laws and government this article in the New York Times is particularly interesting.
I think the potential bankruptcy of your country is the least of your worries. Next year your government might decide that blogging about WoW is illegal and there would be very little you could do about it. Their rules, their judges, their constitution.
I see what you mean about it being systemic.
You know, Venezuela works exactly like that and no one ever let that country default.
I wonder if they will do the same with Hungary or not. Maybe not. Oil and all that jazz.
Gevlon, I'm not actually sure why this would be a problem in your eyes. If Hungary is a bad investment, then no one should invest there, its currency should devalue the point where it meets its real world value, and then continue on from there. Yeah, that would suck for a lot of people in Hungary, but from a goblin point of view, that isn't typically something you would concern yourself with. As far as the external banks and such, losing money on bad investments is what should happen, so while there is economic harm there, at least it should lead to more sound investing in the future. Also, a massive welfare state won't work without loose credit, so this should be a major long term win in your eyes, shouldn't it?
The ultimate flaw of any democracy is that everybody get a say in things. Leaders are chosen by their appeal to the masses, not by their skills or how suitable they are for the job.
You don't get the right person for the job, you get the most popular amongst those who volunteered. And the most popular one usually became the most popular one by gaudy gimmicks and a huge amount of money put into public relations. The leading political party in Norway (where I'm from) hands out waffles and roses each Christmas, or prior to elections. There are a lot of old people who vote on them for these very reasons; They're voting on "the friendly folks by the shop that really cares". And what the H has their waffles and roses got to do with their politics and ability to lead the country? Nothing of course. It's a shallow jest to gain the favor of the general public. And it works.
A system like this requires the masses to be highly knowledgeable and educated if it is to work properly. But since when did the average citizen of any democracy qualify to the description "highly knowledgeable and educated"?
Public opinion is the most powerful tool there is. Public opinion can be swayed and manipulated regardless of what the actual truth of the matters are. Power in any society is defined by the ability to sway, manipulate and lead the masses, the sheep that follow when you call them.
The ideal political system is the all-knowing all-wise dictator... and that's very likely to happen. Ever.
/sarcasm
Hungary cannot go bankrupt. They have their own sovereign currency and the ability to print their own money.
While their currency value will decrease over time as more money is printed (i.e., inflation), they will always have the ability to pay off debts by printing their money.
I would like to extract a couple of very good examples from Cullen Roche at http://pragcap.com/resources/understanding-modern-monetary-system:
"It might help to think of the [sovereign country with an ability to print money] as an alchemist. The alchemist can create as much gold as she pleases (from nothing) in order to buy up productivity and satisfy the growing monetary demands of the people she supplies currency to, but she has to be very careful not to debase her gold (you’ll notice that our trusty alchemist is female in this example as males have proven throughout history that they are not trustworthy overseers of government money). Most importantly, there is no solvency risk for the alchemist – only a pseudo form of default via currency collapse (hyperinflation). The alchemist only debases her gold when she issues an amount of gold that is in excess of productive capacity (inflation). But most importantly, she can never “run out” of gold. Therefore, she is never constrained in her ability to spend as a household, business or US state is. And more importantly, there is no solvency constraint on the state in the traditional manner that we think of for a household or business. That is, there is no such thing as the state becoming insolvent or not being able to meet its obligations – all of which are denominated in a currency that it alone can create."
"On a journey around the world with members of the [Greedy Goblins] we become shipwrecked and find ourselves on a beautiful island. There is a wonderfully productive citizenry there and they are accepting and generous of us. They are impressed by our combat training, weaponry, etc and hold us in high regard. We form a pact and what will later be known as a “government” whereby my men offer protection and safety in exchange for acceptance into their society. We agree to a government by the people and for the people and I am elected as their President. Economic activity is the heart of this country and the people are innovative, enjoy hard work and reap the benefits of their labor.
The people of this island once transacted with sea shells, but luckily, these innovative folks were wise enough to create a computer system just recently. I propose that we modernize our economy and begin transacting in a fiat currency so as to make trade more convenient and efficient. Lugging around sea shells grew tiresome. I issue “Reserve” notes and initiate an electronic system that tracks each citizen’s transactions. These notes, on their own, are not worth more than the paper they’re printed on. However, they serve as a convenient medium of exchange.
It’s not free to live on the island, however, with all of these new resources and organized services. So, we create a tax. This acts as the glue that binds our monetary system together. This makes the citizens beholden to government via the “Reserve” notes. They MUST have them in their account on April 15th of every year. I’ve created demand while also fulfilling their desire to transact conveniently and reliably. Why would they agree to this? Because I am offering them protection among various other services in exchange for this small tax burden. Because this island has a long standing feud with a neighboring island they are happy to pay this tax and sleep well at night. Our currency union is bonded by this pact that was created by the people for the people’s benefit."
Currency has no intrinsic value, but serves as a medium of exchange that allows the citizenry to exchange various goods and services. Because Hungary prints its own money, they can never go bankrupt unless they become revenue constrained by using a single currency system like the Euro or gold.
@Dar: Hungary can go bankrupt as they got loans in Euro, not their own currency.
@Kobeatris: who said I have problem with it?
Meh. I'm thinking the solution to this particular problem is to break up every bank that's bailed out.
'break up' translates into...total loss to shareholders.
After a while, lending to countries with poor economic policy will be accurately priced - which will force proper budgeting.
Other trick would be to require that government bonds specify their default conditions.
Eg...this bond pays 10%, unless government tax receipts fall below...
then 8%...
..6%
..4%. This'd really simplify bond pricing and improve currency stability.
Hopefully you'll publish this comment so other people can see an alternate view of the situation.
Talking about Victor Orban, and Hungarian politics in general, without the context of the Hungarian history of the 20th century is mis-informed and unacceptable. I take offense that you label the followers of Victor Orban's party as "socials" comparing them to your "M&S" of World of Warcraft.
If you want to talk about politics in Hungary, you cannot separate it from History. If you do, you're being untrue and you in fact are the one manipulating people to agree with you. The fact is, whether you like it or not, that the other options apart from Victor Orban and his Young Democrats are clearly worse. As a Hungarian, I would never on principle vote for the Communists or Socialists. I don't care what you think, I had relatives who were exterminated in gulags in Siberia and other relatives who experienced decades of terror under Rakosi. Voting for the current lineup of Communists and Socialists would be betraying what they fought and died for. Because, like it or not, they are the same brutal people who were never punished for their war crimes, or the children of the same brutal people who suddenly became "capitalists" overnight when they "inherited" the various Hungarian national businesses (transport, communications, utilities, etc.).
Are you claiming that the Socialists and Communists who were in power had more understanding about monetary policy than the current government? The only difference I see is that the former people in power under Gyurcsany were no more in-the-know than the current lineup; it's simply that they kow-towed to whatever Brussels would tell them and agreed unconditionally to anything even if it went in the face of Hungarian national interests and lined their pockets.
The problem is in Europe itself. A culturally unified Europe works and should be encouraged, but trying to force 30 something countries under one economic and political umbrella, demanding them to lose their sovereignty will NEVER work.
At least Victor Orban (and more strongly, Krisztina Morvai) have the chutzpah to stand up to imperial European domination of our sovereignty and economy. Hungary might not be self-sustainable as an economy, but it certainly has a lot of things that could be changed to make it so. For instance, we could start taking control of our fields again and producing various crops for European markets. We could start developing the millions of cubic meters of natural gas under Zala county, alleviating the need for buying Ukrainian and Russian natural gas. We could encourage building wind farms and more hydro-electric dams on our rivers to sell power to the rest of Europe. We could start investing more in the local economies and encourage people to have small hobby farms or community gardens so we need to rely less on foreign imported food.
Victor Orban and his Young Democrats are a family-oriented, conservative, local-economy centred, small community focused political party. I've disagreed with them in the past and they would not be my first choice for government, but they are certainly more credible and in line with what actually works than Communists or Socialists that seek to undermine the fabric of Hungarian society.
@Cyrell: who said I did not vote for Orbán? Or that I wouldn't on the next election.
If I had the choice between letting bankers Austerity Nuke my country, like Greece, or defaulting, like Iceland, both history and my own personal preferences make my choice clear.
You should consider yourself fortunate to live in a country where the leader is mildly concerned whether his people suffer and die or not.
You do know how Iceland is doing right?
How about Greece?
Or have you listened to the screaming whores of the Bankers a little to much?
I think that the world would be better place if investors could confiscate the Parliament buildings, or at least the luxury cars in front of them.
Just once I would like to see the Parliament operate from a school auditorium and the parliamentarians walking to work.
@Cyrell: You wrote a lot of "we could..." sentences, suggestions to change the current situation for better. One question: why doesn't the State do any of this? Also: if average people (like You and me) can think of such things, why can't the politicians?
Sadly, and I'm going to use a WoW-M&S-slang term, they "cba".
Interesting post. The comments concerning why Democracy is flawed make me consider even more the possibility that the Chinese are on to something. They have taken the advantages of a capitalist democracy without the social limitations. Which doesn't make for a very level playing field.
Same argument can be made for why religion of any kind is popular. The reasoning that things happen due to gods will or karma or any type of divine intervention let people off the hook for their daily actions. It allows people to shrug off responsibility so they don't have to accept full responsibility for their own actions.
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