The Treachery Of Images Artist

Debt surrealists defy reality: What looks like default not default

Government after government is stumbling head on toward bankruptcy. The latest bailout package put together by the Europeans to support heavily indebted Greece (as well as Ireland and Portugal) involves a lowering of interest rates charged on the bailout loans, longer maturities on those same loans and a grace period of 10 years thrown in for good measure. Private-sector creditors have been asked to bare a share of the rescue burden by taking part in various bond-exchange schemes and existing loan rollovers. Estimates have it that the private sector stands to lose some 21 percent or so on the face value of their bond holdings.

In the real world all this would be more than enough evidence to declare default. The rating agencies, for all their inability to come to grips with reality in the runup to the Lehman crisis, seem to have got it right this time round by making it clear that a call of default is required once private creditors incur losses on their sovereign loan portfolios. The writing on the wall is all too clear for nations that cannot honor their debts without restructurings and forgiveness.

And yet the writing under the latest package reads: "This is not a default."

It looks like default, it sounds like default and could very well be declared a default once the impact on the private sector becomes clearer. All this notwithstanding, the surreal designers of the deal are choosing to adopt the Rene Magritte method. In fairness to Magritte, his declaration of nonpipehood has perfect legitimacy in the sense that what we see is a painting of a pipe and not the pipe itself. But this kind of semantics has no place in public finance or schemes for dealing with government indebtedness.

Meanwhile, even Magritte himself would surely not think of writing, "This is just a borrowing ceiling problem" beneath a scene of President Barack Obama and U.S. congressional leaders slogging it out over how to avoid a federal government shutdown in August. That is so emphatically not the problem.

A government that can't pay its debts on time without resorting to new borrowing has no business staying in business. A government that has to resort to borrowing from the public to fulfill its pension obligations to the public is clearly dysfunctional. Even the most surreal of the surrealists would surely balk at declaring this pipe a nonpipe.

The Treachery of Images | WHAT WE DO IS SECRET

The first prize of the International Creation of Limoges Porcelain Award was given to the 33-piece suspended sculpture of porcelain, Ceci n’est pas (70 x 100 x 70 cm) by Bertrand Fèvre, invoking the infamous Rene Magritte painting, La trahison des images (1928–29). The artist, playing with materiality, utility, scale, volume, symbology, and perspective, confronts the inherent duality and contradictions of the quotidian, while praising issues of universality, heritage and craftsmanship. For three generations, the Raynaud family has created the renown Limoges porcelain chinaware.

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