The Greek Debt Crisis Explained

Key Takeaways

  • The economy of Greece is back in the spotlight as an impending repayment deadline on its outstanding debt becomes due in July. Talks on refinancing these with further bailout funds are once again stalled. Seven years on, the Greek debt crisis continues to be unresolved.
  • The root cause of Greece’s economic crisis can be found in the profound structural economic inefficiencies that were borne out of the 1980s depression the country suffered through. As the country came out of brutal fascist military rule, the country embarked on a public sector-led economic boom that sowed the seeds of the crisis the country faces today.
  • Many argue that Eurozone membership is to blame for the current debt crisis. Nevertheless, we disagree: Euro membership in fact provided a means, by way of both funding and structures, to spur the Greek economy’s development. Unfortunately, the opportunity was not taken advantage of.
  • Instead, Eurozone membership created a way of sweeping the problems under the carpet, and caused artificially low borrowing costs that allowed the various governments of past decades to continue the expansionary public sector policies of the previous periods.
  • The straw that broke the camel’s back and precipitated the current crisis was the global financial meltdown of 2008. But in many ways, the economy of Greece was already insolvent before then.
  • Despite the immediate future looking bleak, we believe the Greek Debt Crisis can still be resolved. If the underlying structural problems that have plagued the economy since the 1980s are finally tackled, the situation could turn around. These reforms must be centered around five key areas:
    1. Fixing investment and business scale disincentives
    2. Reducing the size of the public sector’s contribution to the economy
    3. Addressing labor market inefficiencies
    4. Improving the legal and judicial systems
    5. Curtailing the size and role of the “shadow” economy
  • If something is not done soon to address the situation, it risks deteriorating from an economic crisis to a humanitarian one.

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Three Core Principles of Venture Capital Portfolio Strategy

Key Highlights

  • Growth in startups worldwide has seen an influx of new professionals into venture capital. $3.8bn across 32 first-time manager funds was raised in 2016, continuing the trend over the last 5-7 years.
  • Returns for the asset class as a whole continue to be lackluster. VC returns haven’t significantly outperformed the public market since the late 1990s, and, since 1997, less cash has been returned to investors than has been invested into VC.
  • A driver of these returns is the decreasing barrier to entry for the industry and the basic mistakes made by many new entrants.
  • VC is a game of home runs, not averages. Strikeouts are extremely common. 65% of venture deals return less than the capital invested in them. But strikeouts don’t matter. The best performing funds actually have more strikeouts than mediocre funds.
  • The vast majority of a venture fund’s returns come from a few home run investments. For the best performing funds, less than 20% of their deals generate 90% of the returns.

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