2ndlook

$641 billion to European banks from ECB – Santanomics

Posted in America, Business, Current Affairs, Gold Reserves, politics by Anuraag Sanghi on December 21, 2011

European Central Bank (ECB) keeping the festive spirit alive, announces a $641 billion effort to keep Euro-banks standing.

The State saves the banks, so that the banks can save us. This 'logic' now suffers from a problem of credibility. It is looking like the Big Guys look after their own. As for the Rest of Us ...  |  Cartoonist - Joel Petit; source & courtesy - about.com/d/politicalhumor  |  Click for larger image.

The State saves the banks, so that the banks can save us. This 'logic' now suffers from a problem of credibility. It is looking like the Big Guys look after their own. As for the Rest of Us ... | Cartoonist - Joel Petit; source & courtesy - about.com/d/politicalhumor | Click for larger image.

It is Christmas season

And it is every Christian’s right, to expect freebies and goodies from Santa Claus.

This year

Since appearances must be kept, the European Central Bank (ECB)  decided to become Santa Claus this year.

The ECB decided to match the US$700 billion bailout package (TARP).

The European Central Bank on Wednesday attempted to send a strong signal to financial markets by offering to loan $641 billion to 523 euro-area banks in a massive three-year funding operation.

The bank-funding move by the region’s central bank, known as a longer-term refinancing operation, or LTRO, is open to lenders across the euro zone. The figure came in well above a Reuters forecast for $408 billion. The loans run for three years.

The loans expand the central bank’s balance sheet by 20%, according to Louise Cooper, analyst at BCG Partners.

A breakdown of which financial institutions were among the bidders for the funding was not immediately available.

A representative from the European Central Bank‘s press office said that the central bank would not be releasing the names of the banks that applied for loans. Nor would it provide a breakdown of loans by euro-zone nation.

The LTRO operation was the first three-year funding operation undertaken by the central bank. The funds are borrowed at its average benchmark interest rate, which stands at 1%.

Ahead of the auction some media reports and analysts suggested that the drive to increase liquidity across the region was part of an effort to encourage banks to purchase government debt. (via ECB lends $641 billion to European banks – MarketWatch).

If the US can come out with a US$700 TARP to save their Big Corporations, Europe can do better. The LTRO is a full US$100 billion bigger than the TARP. Jai Ho!  |  Cartoonist - RJ Matson; source and courtesy - rjmatson.com  |  Click for source image.

If the US can come out with a US$700 TARP to save their Big Corporations, Europe can do better. The LTRO is a full US$100 billion bigger than the TARP. Jai Ho! | Cartoonist - RJ Matson; source and courtesy - rjmatson.com | Click for source image.

Bigger than expected, the LTRO has been received with mixed feelings by analysts.

The ECB said 523 banks requested €489 billion ($641 billion) in funding from the central bank in a bid to boost liquidity.

A Reuters consensus had predicted funding requests worth €310 billion.

“The good news is a lot more banks will be well funded throughout the next three years. They need to place the money short term and will be buying bonds in European sovereign countries, obviously,” said Christian Tegllund Blaabjerg, chief Economist at FIH Erhvervsbank.

“But on the flip side of the coin, it also signals a lot more banks than originally thought need capital and that is negative news,” he said. “It sort of implies the banking sector is far worse off than originally expected.” (via ECB funding boost short-lived in Europe – Europe Markets – MarketWatch).

Coming back to the Christmas season.

Some analysts decided to run old number through their computers. What they found is that there is some kind of ‘season’ in the market also – around Christmas.

The stock market, at long last, is about to enter the seasonally favorable period that honestly can use the name “Santa Claus Rally.” It begins at the close this coming Friday, the last trading day before Christmas, and lasts until the end of the year.

It’s not a very long period of favorable seasonality — just one week, after all — but the historical odds are quite impressive.

Consider the performance of the Dow Jones Industrial Average DJIA -0.49% during this period. Since 1896, when this benchmark was created, it has produced an average gain between Christmas and New Years of 1.07%. On an annualized basis, that works out to a gain of more than 80%.

The market’s performance during this period has been relatively consistent, turning in a gain 78% of the time. That compares to a gain rate of 54% for all other weeks of the year.

What accounts for this seasonal strength? A fascinating research study suggests that it has something to do with Christmas. Click here to read their study. (via Here comes good old Santa Claus – Mark Hulbert – MarketWatch).

In the meantime, let us also remember how gold prices in the first 2 weeks of December 2011 have been soft. And probably it is Arab gold that is being dumped into the markets.

Also remember that more noise works better than censorship.


Why are gold prices going down?

Posted in America, Business, Gold Reserves, politics by Anuraag Sanghi on December 18, 2011

The story behind the gut-wrenching US$300 drop in gold prices.

Many ways to skin a cat

Under the guise of ‘modern’ economics, some fundamental truths have not been remembered, over the last 50 years. Importance of gold in the world monetary system is one of these ‘forgotten’ truths.

This has damped down gold prices – and printing presses have been busy printing money. Especially in the last 40 years – after the Nixon Chop.

24 hour coverage of financial markets has also created an impression that financial cycles play out in a matter of hours and days. So also, the the drop in gold prices of the last two weeks.

Many people have been puzzled over the last few months by gold’s (GC2G -0.19%) behavior. It has tumbled since the start of September from around $1,900 an ounce to below $1,600. This has happened even while a financial crisis has erupted in Europe which, says traditional analysis, should be bullish for gold.

But there are a couple of other factors at play.

First: Gold hasn’t fallen as far as it looks. The gold price is typically quoted in U.S. dollars. Yet in the past four months the dollar has rallied.

At the start of September, when gold touched $1,900 an ounce, the dollar was $1.45 to the euro. Since then the euro has slumped to $1.30.

Net result? Gold, which traded at around 1,300 euros per ounce back then, has declined to 1,200 euros per ounce now.

The second factor: Sentiment.

Four months ago, sentiment was massively bullish on gold. It had just skyrocketed, in the wake of the U.S. debt ceiling debacle. According to data published by the Commodities and Futures Trading Commission, speculators and traders had taken nearly record speculative bets that it would rise further.

This usually precedes a backlash, and so it has been.

Today? Sentiment is pretty bearish. The CFTC says the number of speculative bets on higher gold have collapsed by more than a third. (via Will the Europeans have to sell their gold? – Portfolio Insights by Brett Arends – MarketWatch).

A bump on the road

The first 15 days of December, 2011, has seen weakness in gold prices – falling from roughly US$1900 to US$1600. The biggest drop, after ‘gold dropped 25 percent in the fall of 2008 — from over $1,000 an ounce to about $750’. Broad parameters of the situation were similar then – as now.

In 2008, the US economy was tanking, and gold was at psychological barrier of US$1000. This time around gold is at US$2000 psychological mark. And it is feared that the Euro-zone may collapse.

“The worst case scenario (a euro zone break-up) was pretty much ridiculous a year ago but it is now becoming more and more possible, to say the least,” Juan Valencia, credit analyst at Societe Generale, said.

This time around

So, what are the specifics now.

First are the European banks. It is reported

banks face about 320 billion euros in senior and government guaranteed debt redemptions next year. By comparison, they had issued just 12 billion euros of debt in the past six months.

With no solution to the euro zone debt crisis in sight, interbank market players say they are reducing credit lines to an ever increasing number of banks.

“It is utter madness … When we see big names paying 300 basis points over overnight rates for dollars you know something is wrong,” said the head of money markets at a bank in London, who asked not to be named.

“Credit lines have already been reduced, we are seeing the big names paying through the nose for cash from corporates as wholesale is pretty much dead. The focus now is for the core banks to raise cash through the retail/corporate space. Central banks may be called upon.”

French banks’ borrowing from the ECB topped 100 billion euros in the maintenance period ending November 8, compared to 87 billion euros the month before. French banks are more exposed than any those of any other euro zone country to Italian, Spanish and Greek debt, with holdings in excess of 600 billion euros, according to Bank for International Settlements data.

Of the contributors to daily Libor rates, French banks BNP Paribas, Credit Agricole and Societe Generale say they pay the most for three-month dollars, around 0.6 percent. But dollar rates have recently been on the rise for other core country banks as well.

In such an environment liquidity is at a premium. Some investors are even taking money out of banks and paying to keep it in short-term German or Dutch government paper, which is trading with negative yields.

Where has all that yellow stuff gone? Buried under a mound of silence?  |  Cartoonist - Dave Simonds on 18-6-2011 in guim.co.uk  |  Click for larger image.

Where has all that yellow stuff gone? Buried under a mound of silence? | Cartoonist – Dave Simonds on 18-6-2011 in guim.co.uk | Click for larger image.

Where is gold coming from

Negative yield brings us to another grey area.

Gold lending at negative rates. Europe has an organized market where gold owners can lend gold to borrowers – at rates varying between 0.5% to 2%. There are ominous whisper-reports.

The partnership between the Federal Reserve and European Central Bank to provide hundreds of billions of relatively low-cost dollars for euro-area banks should have relieved the pressure to come up with greenbacks. Yet gold market people say European commercial banks are being driven to lend gold for dollars at negative interest rates just to raise some extra cash for a few weeks. There’s not a lot of transparency about where the banks are getting the gold they are lending out, but it could be lent to them by either their national central banks or by gold exchange-traded funds.

There is also a third source of gold that is being lent in the market.  Gold that does not belong to any European Governments or to any ETF.

But obtained from deposed Middle East rulers of Egypt, Tunisia, and Libya.

Cash is king

Regardless of the source of gold, the cash situation at European banks remains a trigger for this gold sell-off.

The need for cash has overwhelmed gold’s traditional status as a safe haven in past few months, putting the metal on course for its first quarterly fall since end-September 2008 when the global credit crunch was at its worst.

“With access to liquidity being constrained, market participants have increasing problems to refinance,” Credit Suisse said in a research note. “As a result they have to sell their assets – including precious metals – to raise the much needed cash. This is the main reason why gold prices fall on days of increasing funding stress.”

This has obviously raised concerns in the Asian markets – the main buyers of gold. This extra supply of gold from European banks has led to a sell-off – led by Asian markets.

In recent weeks the gold price has fallen significantly from around $1900 to $1535 (intraday). Gold is now trading near Q3 target of $1650. The size of the move was far more significant compared to other recent unwinds, like those in May or August. One of the key factors for  long-term bullish view on gold is Asian demand – the majority of end-user demand for gold is from Asia. From an Asian valuation perspective, gold is also relatively cheap.

One way to proxy Asian demand for gold is to look at how gold performs during Asian trade. Over the past few years, gold has generally appreciated during Asian hours, reflecting strong demand for the metal. However, recent weeks have shown weakness in Asian hours. On previous occasions when gold traded poorly, such as in May and August, it remained relatively robust during Asian hours, with any sell-off tending to come in London and New York hours, suggesting that Asian investors were supporting an unwind of Western investors’ long gold positions.

This contrasts with the recent fall, noticeable across multiple time zones. In the very short term, we believe a reversal would need to be led by appreciation in Asia. Although a few data points do not constitute a trend, on Tuesday and Thursday gold rose by 2%, its largest moves higher during Asian hours since October 2008 and perhaps a signal that it could be turning back up.

Gold often trades like a risky asset. This has been evident in recent weeks where we have seen a strong positive correlation between gold and the S&P500, which we use as a proxy for risky assets. The rationale is that heavy losses in risky assets forces investors to unwind other positions to free up cash. As a liquid asset and also with heavily extended net long speculative positioning heading into this episode, gold has suffered.

The price-drop also generated sell-orders based on stop-loss triggers at US$1700. For the time being the stampede has abated. Asian markets were at the forefront of some investment demand.

Gold rebounded in thin trading during the Asian session Friday, paring some of this week’s losses with traders expecting gains to hold in the near-term with some dip buying likely amid a modest bounce in stock markets.  The yellow metal rose more than 1% in the session to a high of $1,589.90 a troy ounce after falling for four consecutive days this week.

A Hong Kong-based trader said there is some investment demand, which is driving up prices. Some speculators have also returned to the market after prices fell sharply this week.  Despite the slight improvement in sentiment, however, investors continued to be wary of the European sovereign debt crisis.

There is hardly any dissonance between various reports – which supports a belief that this may have a momentary technical correction before gold breaks the US$2000 per ounce barrier. In a year, where most asset classes have performed badly and market volatility took away whatever little was left on the table, fund managers may have locked in their profits on gold for the year. Remember, this is also the time of the year, when bonuses get calculated. The long-term fundamentals of the gold remain beyond argument.

Even in the short-term, this maybe a buying-opportunity one may regret having missed.


India finders, British keepers

Posted in British Raj, Gold Reserves, History, India by Anuraag Sanghi on November 17, 2011
SS Fort Stikine (Image source and courtesy - www.spoki.lv). Click for larger image.

SS Fort Stikine (Image source and courtesy - http://www.spoki.lv). Click for larger image.

April 14th 1944

Exactly 32 years after the Titanic sank (April 14-15th 1912), the SS Fort Stikine blew up at the Mumbai docks.

The story begins earlier – when SS Fort Stikine steamed out from Birkenhead in Britain on February 24th 1944. With valuable war time material. Gliders for air-force, ammunition, guns, etc. After unloading some cargo at Karachi, it set sail for Mumbai (then Bombay). At Mumbai the ship blew up. An anti-submarine gun, weighing a 30 tons was thrown a clear 500 feet away. It took some 7000 soldiers and fire fighters more than a week to douse that fire.

Why the secrecy

This explosion, now made out to be an accident, was hushed up – and a cloak of secrecy thrown over it. Camera footage from Indian film-makers was seized. Government clamped censorship. The blowing up of the SS Fort Stikine was made out to be a mystery.

What was the British Raj trying to suppress?

Was it incompetence that the British Raj was hiding? After all, the Bombay Docks had seen 60 fires in the 1939-1944 period. Or was it sabotage– Japanese hand suspected.

After the explosion. At the Mumbai docks.   |  Image source and courtesy - mumbaimirror.com

After the explosion. At the Mumbai docks. | Image source and courtesy - mumbaimirror.com

Gold made the wheel go round

The ship carried a consignment of explosives (1395 tons) – and gold for the Reserve Bank of India. SS Fort Stikine ‘s manifest did not list any gold or explosives – and the nature of the cargo was probably known only to the captain of the ship. The explosion rained gold bars for miles around.

The secret was out.

One thing was clear

This explosion disrupted the British Raj mint in Mumbai (Bombay then). Without gold coins, the British Raj was sunk – and two million Indian soldiers were needed badly in WWII. These soldiers, paid handsomely by the British Raj, with gold extracted from the Indian peasantry, was the spine that held the British Empire upright.

When the SS Fort Stikine blew up in the Mumbai Docks, gold bars rained all over the port. Later when some gold bars were recovered, the British claimed that this was their bullion. The Indian Govt. quietly handed over this gold – recovered by Indian Navy divers after Indian independence.

Heads … you lose … tails, I win

Recently, another small find of some 10-tola bars (125 gm) has been assigned to the SS Stikine cargo. Though other earlier reports mention that the bullion cargo was in the form of mint-sized 25 kg gold bars – and not retail 10-tola bars.

Far way from the Indian coast, off the Irish coast, in cold Atlantic waters, another WWII wreck lay, with a silver cargo, in its hold – at the bottom of the Atlantic. Silver that was being carried from India to Britain.

Fort Stikine blows up
Fort Stikine blows up

Britain claimed that this silver was British silver – and has disposed it off in a manner that they deem fit. I have not been able to locate any report if it has consulted the Indian Govt.

In December 1940, a British steamship bound for Liverpool left Calcutta laden with precious cargo, including up to 240 tons of silver worth an estimated $210 million in today’s dollars. Operating for the United Kingdom’s Ministry of War Transport, which requisitioned merchant ships during World War II, SS Gairsoppa joined a military convoy and headed northward into waters swarming with German submarines. On February 14, 1941, dwindling coal reserves and stormy weather forced the lagging vessel to break away from its escorts and make for the port of Galway in western Ireland.

Three days later, a Nazi U-boat commanded by the decorated German captain Ernst Mengersen launched a torpedo that ripped through Gairsoppa’s steel hull, toppling its foremast and destroying its wireless antenna. Unable to send out a distress call, the surviving members of the ship’s 85-strong crew came under machine gun fire as they scrambled onto lifeboats. Their burning craft, built in 1919 and designed for commerce rather than warfare, sank within 20 minutes, disappearing into the frigid depths of the North Atlantic roughly 300 miles west of Ireland. (via Silver-Laden World War II Shipwreck Discovered).

Dabbulu – Lost History of a Stray Word

Posted in America, European History, Gold Reserves, India by Anuraag Sanghi on November 11, 2011
From the book: Travels of Fray Sebāstien Manrique, 1629-1643: China, India, etc |  Sebastião Manrique, Henry Hosten, Hakluyt Society  |  Page 102

From the book: Travels of Fray Sebāstien Manrique, 1629-1643: China, India, etc | Sebastião Manrique, Henry Hosten, Hakluyt Society | Page 102

Common words – lost roots

The common Telugu word for money is డబ్బు dabbu-lu – which has no relation with either Sanskrit or most other Indian languages. The origin of this word has been long a puzzle – and even though the Telugu dictionary lists some eight other words for currency and money, it is dabbulu which is most commonly used.

After years of puzzlement, a recent visit to Hyderabad gave me some promising threads, that I decided to follow up.

Image source; courtesy; commentary - columbia.edu  |  A gold half-pagoda coin from the reign of Hari Hara II (1377-1404). Kingdom of Vijayanagar, Hari Hara II (1377-1404); gold  1/2 pagoda no date -1,7 gram; obv: Siva enthroned cross-legged with Parvati (Uma-mahesvara type); rev: Devanagari 'Sri Prapati Harihara'.

Image source; courtesy; commentary - columbia.edu | A gold half-pagoda coin from the reign of Hari Hara II (1377-1404). Kingdom of Vijayanagar, Hari Hara II (1377-1404); gold 1/2 pagoda no date -1,7 gram; obv: Siva enthroned cross-legged with Parvati (Uma-mahesvara type); rev: Devanagari 'Sri Prapati Harihara'.

Old words for new

Early European travellers to India reported a local currency that they called the dab or dub, and in a few cases even the దుడ్డు duddu or debua. దుడ్డు duddu as per dictionary is in some places, of four, and in others, of two annas. One of the earliest reports that we get are from a Portuguese priest, whose books were translated in English also – Travels of Fray Sebāstien Manrique, 1629-1643: China, India, etc. All descriptions agree that this was a copper coin – but the exchange rate varied across regions, towns, seasons and economic conditions.

Salary – by any other coin

The tankha, a common coin till colonial era, first popularized as fiat currency token, during Tughlaq rule, was derived from the Hindi word, for a टांका taanka, stitch. Widely forged, the Tughlaqs were forced to withdraw old tankhas, and replace with new standard coins, the tankha remains in use in Bengali as taka – and exists in Telugu as టంకముtankumu.

After Sher Shah Suri decided to replace the tankha, and impose his copper-silver-gold rupiya, State officials started accepting salary in tankha – now used as an equivalent to salary. Derived from tankha, is also the Hindi word for mint – tank-saal, which Telugu also uses as టంకసాలṭanka-sāla.

The Greco-Latin denarius is దీవారము (dīvāramu) or దీనరమ dīnāramu – and also used దినారి dināri, dināri. Probably derived from chavanni, but unclear etymology is చవిలె – cavile;  ṭsavile – Four dubs or coins, of the value of twenty cash each. Four cavilehs equal one టంకముtankumu. A bigger version is the చవలము cavalamu; ṭsavalamu – about half a rupee. Wealth generally can be denoted by the word లపక lapaka.

Image Source; Courtesy; Commentary - columbia.edu  |  A gold half-pagoda from Vijayanagar, 1400's; inscribed word - Shri Krishna-ji.  |  Click for source image.

Image Source; Courtesy; Commentary - columbia.edu | A gold half-pagoda from Vijayanagar, 1400's; inscribed word - Shri Krishna-ji. | Click for source image.

Oldest … after Tamil

Telugu was the language used by Vijayanagar kings extensively. Amuktamalyada (or sometimes called Vishnuchitteeyam) the book by Krishna Devaraya (reigned from 1509–1529), was written in Telugu. Telugu was also a significant language of the Satavahana kingdom, with Telugu inscriptions on Satavahana coins. The hub of wootz steel and diamond trade, merchants from all over the world came to Vijayanagar cities for trade. Portuguese horse-traders proliferated in Vijayanagar – with them came Spanish coins.

New World – and old money

India was in the Portuguese half of the world as per the Papal Bulls – and hence, we see Spanish influence in India through the Portuguese presence in India. For the medieval period, apart from extensive indigenous records, we also have European travelogues by Domingo Paes (a horse-trader), Duarte Barbosa, Fernão Nunes and Niccolò Da Conti. Tavenier was another famous visitor to Vijayanagar kingdom.

The most prominent king of Vijayanagar was Krishna Devaraya, who came to the throne (reigned from 1509–1529) soon after Spanish campaign of American conquest began (after Columbus voyage in 1492). American gold as Spanish coins attracted entire nations in Europe to encourage piracy and loot. India, the centre of world trade then, gave us the common Spanish coin that survives in name today – the peso; a close cousin of the paisa.

But the most famous of Spanish coins was the doubloon.

Tiger by the tale

The paisa has been a apart of Indian currency structure much before the peso became a part of the Spanish currency unit. India, always an importer of gold, may arguably, have also imported the word paisa. Though most Indian coins were named in India – and foreign words were not used much.

Was doubloon an import from Spain – or is it that doubloon was an export from the famed Vijayanagar bazaars into the Spanish currency. For the nouveau riche Spain to name its currency after the famed Vijayanagar word for currency could be an interesting tale to catch.

Manufacturing History – Euro Style

Posted in European History, Gold Reserves, History, India, politics by Anuraag Sanghi on November 7, 2011
State sponsored academics and a 'free' media blames the 'lazy-people', whereas the problem in the Eurozone is a overvalued Euro - which the Euro-rulers needs for their power games. (Greek protesters storm Acropolis while markets plunge over debt crisis   |  Kipper Williams  |  Source, courtesy and publication date: - guardian.co.uk, Tuesday 4 May 2010 21.21 BST). Click for source image.

State sponsored academics and a 'free' media blames the 'lazy-people', whereas the problem in the Eurozone is a overvalued Euro - which the Euro-rulers needs for their power games. (Greek protesters storm Acropolis while markets plunge over debt crisis | Kipper Williams | Source, courtesy and publication date: - guardian.co.uk, Tuesday 4 May 2010 21.21 BST). Click for source image.

After ravaging North and South Americas, Europe laid its hands on Inca, Maya gold which financed European conquests across the world. By 19th century, Europe had defeated most military leaderships in the world.

Faced with new standards of barbarity, the newly enslaved and oppressed found new leaders to confront the West. In Haiti, the slaves freed themselves after defeating the French, Spanish and English armies that tried to re-enslave them. In India, wars and battles raged continuously – forcing the British to surrender their American colonies. Soon after the London Expo of 1851, the British had to face a bloody war in India where hundreds of thousands of Indian soldiers, waged war, led by a determined alliance of leaders.

In the midst of this, ranging from the majestic Mayan achievements and of the Incas in Andes, to the spirit of the Haitians, to the ancient and continuous traditions in India, the Europeans found a barren cultural cupboard at home.

To fill up this cupboard, the West has been on a campaign of cultural dacoity for the last 2 centuries now. One of the first places to start was Greece.

Is Greece a symptom or the effect of Euro-currency problem? (Cartoon by Clay Bennett; from The Chattanooga Times Free Press; source and courtesy - http://jeffreyhill.typepad.com). Click for source image.

Is Greece a symptom or the effect of Euro-currency problem? (Cartoon by Clay Bennett; from The Chattanooga Times Free Press; source and courtesy - http://jeffreyhill.typepad.com). Click for source image.

Modern Greece has little in common with Pericles or Plato. If anything, it is a failed German project.

The year was 1832, and Greece had just won its independence from the Ottoman Empire. The “Big Powers” of the time — Britain, France and Russia — appointed a Bavarian prince as Greece’s first king – Otto. He arrived in his new kingdom with an entourage of German architects, engineers, doctors and soldiers — and set out to reconfigure the country to the romantic ideal of the times.

The 19th century had seen a resurgence of Europeans’ interest in ancient Greece. Big names such as Goethe, Shelley, Byron, Delacroix and many other artists, poets and musicians sought inspiration in classical beauty. They marveled at the white marble and solemn temples of Hellas, and longed for a lost purity in thought, aesthetics and warm-blooded passion. Revisiting the sensual Greece of Orpheus and Sappho was ballast to the detached coolness of science or the dehumanizing onslaught of the Industrial Revolution.

Otto saw to it that modern Greece lived up to that romantic image. Athens, at that time a small hamlet of a few goatherds, was inaugurated as the new national capital. The architects from Munich designed and built a royal palace, an academy, a library, a university and all the beautiful neoclassical edifices that contemporary Greek anarchists adorn with graffiti. There was no Sparta in Otto’s kingdom, so a new Sparta was constructed from scratch by the banks of the Eurotas River, where brave Lacedemonians used to take their baths. Modern Greece was thus invented as a backdrop to contemporary European art and imagination, a historical precursor of many Disneylands to come.

Despite the Bavarian soldiers who escorted him, King Otto was eventually expelled by a coup. But the foundations of historical misunderstanding had been laid, to haunt Greece and its relations with itself and other European nations forever.

No matter what Otto may have imagined, the truth was that the brave people who started fighting for their freedom against the Turks in 1821, had not been in suspended animation for 2,000 years. Although their bonds with the land, the ruined temples, the living Greek language, the names and the myths were strong and rich, they were not walking around in white cloaks wearing laurels on their heads. They were Christian orthodox, conservative and fiercely antagonistic toward their governing institutions. In other words, they were an embarrassment to all those folks in Berlin, Paris and London who expected resurrected philosophers sacrificing to Zeus. The profound gap between the ancient and the modern had to be bridged somehow, in order to satisfy the romantic expectations that Europe had of Greece. So a historical narrative was put together claiming uninterrupted continuity with the ancient past. With time, this narrative became the central dogma of Greek national policy and identity.

Growing up in Greece in the 1970s, (one) had to learn not one, but three Greek languages. First, it was the parlance of everyday life, the living words people exchanged at the marketplaces and in the streets. But at school, we were taught something different: It was called “katharevousa” — “cleansed” — a language designed by 19th-century intellectuals to purify demotic from the cornucopia of borrowed Turkish, Slavic and Latin words. Finally, we had to study ancient Greek, the language of our classical ancestors, the heroes of Marathon and Thermopylae. We were supposed to learn “The Iliad” and “The Odyssey” in the original, by heart, in case some time machine transported us back to Homeric times. As it happened, most of us managed to learn none of the three, ending up mixing them in one grammatically anarchic jargon that communicated mostly the confusion of our age.

Greece – a country designed as a romantic theme park two centuries ago, propped up with loans ever since, and unable to adjust to the crude realities of 21st-century globalization. (via Modern Greece’s real problem? Ancient Greece. – The Washington Post; parts excised for brevity; few link words in brackets supplied).

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