Selling Greece's money market
Once upon a time, television commercials for treasury bills and bonds were a thing
Recently I’ve been having fun looking at YouTube videos of old Greek TV adverts selling treasury bills to retail investors.
I linked to one from 1989 last month. It shows a series of actors asked how much they would pay for 1 million drachma, then fainting and spitting out coffee upon hearing that they could buy that sum for 816,327 drachma — a nominal return of 22.5 percent.
Here it is again:
I love how this highly fastidious man appears to have never heard of discounting.
Of course, it’s worth remembering for a moment why rates were so high. If you saw that advert on your TV and rushed to the bank buy some bills, your real return on it would probably have been negative since the inflation rate in 1990 averaged 22.9 percent. One of the most popular comedians of the time, Harry Klynn, parodied the commercial, ending with the line: “easily exchangeable for 12 clothes pegs”.
That was a different economic era. And it’s worth keeping in mind just how different it was in light of the current inflation rate in Greece reaching 7.2 percent. Even some of us that are firmly in our middle age haven’t experienced prices rising this fast in our adult lives — but prices would need to go up much more, for a lot longer, before comparisons bear out with our childhood era.
Nostalgia for adverts from the past is both fun and also more evocative of the prevailing zeitgeist than lines on charts. So I’ll share more videos (but also more lines on charts). It helps to know Greek, but you get the feel even without understanding what they’re saying.
What led me down this path initially weren’t T-bills, but rather an advert for bonds (basically certificates of deposits) from Greece’s state-owned Hellenic Industrial Development Bank, known by its acronym ETBA.
Again, you don’t need to understand the language as it’s self-explanatory: goose lays golden egg of 21 percent interest on a bed of fixed-income securities.
It’s quite hard to place the decade here (the YouTube post says 1980s, but another one says 1970s) — but the low-tech black-and-white vibe it gives belongs to a different era from the later ad, closer to the developmental state behind Greece’s industrialisation and the “economic miracle” that ended with the 1973 OPEC crisis.
In fact, Konstantinos Loizos published an interesting paper a few years ago that examined Greece’s three industrial development banks against the background of distinct shifts in the country’s financial and macroeconomic regime. These were the 1960s and early 1970s period of high growth rates and macroeconomic stability, underpinned by a regime of financial repression; the crisis and stagflation decade of the mid-1970s to the mid-1980s, when financial repression remained in place; and the gradual reduction in inflation and macroeconomic stabilisation that took place between 1987 and Greece joining the euro in 2002, which was accompanied by a liberalisation of the country’s financial institutions.
For our purposes here, this periodisation can be seen quite clearly in the chart below that shows the interest rates offered on time deposits — the products for retail savers that T-bills and ETBA bonds were marketed as an alternative to — and corporate lending rates.
Rates are relatively low and stable until the oil shock, after which they spend the rest of the 1970s stepping up to a higher level, where they stabilise for much of the 1980s. Then there’s a clear break in the series as rates are deregulated in 1987 — they jump initially, but by the end of the period they return to where they were in the 1960s.
One of the points that Loizos makes in his paper is that ETBA — which played an important role in Greece’s development state era — was poorly adapted for profitability in the post-1987 liberalised regime, given that its public sector ties made it liable to carry out politicians’ bidding in taking over failing companies. This contributed to its eventual demise.
That’s a good topic to explore further in a future post, but our core mission is nostalgia for old ads, so here’s ETBA selling retail paper in 1994:
There’s a knowing reference in the ad to the golden egg, which is juxtaposed against this one’s slicker, 1990s feel. Meanwhile images of refineries and container ports connect it to the bank’s industrial roots. The slogan “you have money? Turn it into ETBA bonds” rhymes in Greek and gets annoyingly stuck in your head.
Eight years later, ETBA was merged into Piraeus Bank, with a cloud hanging over it from an embezzlement scandal.
Deposits didn’t play much role in ETBA’s funding mix, so it’s easy to see why the bank would have been at the forefront of selling credit instruments to retail investors — especially given that the state-owned nature of the bank meant that they would have at least had the aura of being backed by the public sector (though I don’t know how explicit any central government guarantees were at that time).
It seems funny now that this should provide reassurance, but in 1994 Greece hadn’t defaulted for a while! That’s why we have gems like this one, from the same year, advertising sovereign bonds.
Here we follow a Eurobond trader in meetings, on the trading floor and putting his feet on the table after a hard day of working later than everyone else. Everyone, that is, apart from that one colleague who finds him irresistibly attractive. The “secret of his success” is his international mindset, which leads him to buy Greek sovereign bonds denominated in foreign currencies.
Let’s be frank here. This guy looks disturbingly like a Greek-bond-trading Patrick Bateman. It’s hard not to feel a little worried for the love interest. The slogan at the end of the advert is “Greek public sector bonds: realise your dreams”. Well, we know how that dream eventually turned out, but I do hope that at least the girl was ok.
Greek Psycho vibes notwithstanding, the marketing pitch here is clearly one of optimistically looking to a better future.
The 1990s were a time of fiscal and monetary tightening as the country strove to meet the Maastricht criteria for entry into the single currency. Inflation was high, but it was coming down, so it was easier to pitch this as progress, with a vision for a better future ahead.
That narrative feels palpable in this advert for T-bills from 1997, which shows the ranks of Greece’s bourgeoisie marching purposefully into a new era (and to the stock market to buy some short-dated government paper).
Certainly that’s how it seems looking back on this advert a quarter of a century on. However, there’s another YouTube version of this from 1992, when inflation was still higher and euro-membership wasn’t quite so tantalisingly close — so this must have been a long-running ad (somebody who remembers it might set me straight here).
One thing that’s interesting about the 1997 version is its timing. It advertises T-bills that were on sale in October of that year — in the midst of a bout of money market turbulence brought on by the fallout from the Asian financial crisis. This volatility can be seen in the spike in the overnight drachma interbank rate (though it’s made to look small in the chart below by the jump in the preceding 1994 bond crisis).
It may just be a coincidence that one of the few versions of the ad that’s around happened to come out at this time, but I’ll speculate that the goal might have been to convey a message to the public that there was nothing to worry about.
The centrepiece of Greece’s monetary policy at this time was an exchange rate anchor against the deutschmark, adopted in 1995, and this ultimately stabilised the country’s money markets and helped it to join the currency bloc.
What came next is another story.
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