György Matolcsy and Goldman Sachs: November 17, 2011

Exactly a month ago I wrote a post about Helga Wiedermann’s forthcoming book under the title “‘Secrets revealed’: Memoirs about the financial attacks on Hungary.” Wiedermann, about whom nobody knew much, turned out to be György Matolcsy’s chief-of-staff when he was minister of national economy. At the time I had to rely on a fairly lengthy excerpt from the book that appeared in Magyar Nemzet because the book was set to be released only about three weeks later. The excerpt concentrated on the heroic work of Matolcsy against bankers, speculators, and western politicians who wanted to see Hungary in ruins and Viktor Orbán toppled. Since then the book has reached bookstores, and now the talk is about something else: the incompetence and irresponsibility of György Matolcsy.

So, what happened? Chess and Poker: Chronicle of the Victorious Battles of the Hungarian Economic War of Independence was released with great fanfare on March 11. Present at the book signing were Viktor Orbán and György Matolcsy as well as members of the Monetary Council. We learned that the idea of writing a book about Hungary’s economic battles came from Viktor Orbán himself. He thought that the Hungarian people should know more about the heroic efforts “we undertook together in defense of the country.” György Barcza, who used to be a respected financial analyst at ING Bank, today is the editor-in-chief of Napi Gazdaság, recently acquired by Századvég, an economic and political think tank close to the government. At the book signing Barcza hailed Chess and Poker as a reference book on how a government should negotiate with the IMF. He emphasized the importance of “economic independence” and cited Turkey and Russia as good examples.

But after the high-profile book launch people went home and actually read the book. And this is where the troubles started. It didn’t take long to discover that one of the leaders of Hungary’s war of economic independence committed a serious indiscretion if not a criminal act. On November 17, 2011, four hours before the Hungarian government’s official announcement that it had after all decided to turn to the IMF for a loan, Matolcsy had lunch with three representatives of Goldman Sachs. He told them that in the morning the Hungarian government had approached the IMF for a loan. According to the detailed description of Wiedermann, one of the three visitors immediately excused himself to go to the rest room, not to relieve himself but presumably to inform, directly or indirectly, Goldman’s forex trading desk of this piece of news. The lunch, Wiedermann recounts, was unusually short. The guys from Goldman had gotten their inside information and presumably had more follow-up work to do.

The EUR/HUF chart from that day shows the immediate buying pressure after Matolcsy’s indiscretion. When the official announcement was made at 3:52, forex traders not privy to its early “release” piled on. There were thus two waves of buying, with the early buyers having a decided advantage.

Matolcsy, who a couple of days earlier had been praising the book as an accurate chronicle of events, found himself in an uncomfortable position. He changed his tune and now claimed that “Helga Wiedermann wrote nothing but fiction in her economic novel. Naturally the head of the National Economic Ministry did not inform the investors about Hungary’s plans concerning the IMF. Instead he told them that this was one of the possible options.” This is pretty much of an admission as far as I’m concerned.

There are many questions one can pose in connection with this sorry affair. In my post a month ago I set forth the possibility that György Matolcsy himself may have written the book, at least in part. After all, Helga Wiedermann was not present at many of the meetings she talks about in detail. But whatever Matolcsy’s role in writing the book, I think one can be certain that he read the manuscript before it went to press. The scene at the restaurant with the Goldman Sachs people is quite detailed:

After ordering, Matolcsy mentioned in passing that at 8 a.m. he had informed the IMF delegation that Hungary is beginning negotiations with the International Monetary Fund and the European Union. Moreover, we already sent the letter to Washington and Brussels. The butter knives froze in the hands of the guests. One of the guests immediately said that he was in need of a restroom and got up. It is not known how many telephone calls he made, but after he returned they finished lunch in record time. Instead of the normal one and a half hours, they finished all the courses in 40-50 minutes.

After this meeting Matolcsy became convinced that all the paranoid rumors were true: the big international investors had launched a life threatening attack against Hungary. What can one say after reading this? Is Matolcsy that ignorant of the financial world in which he is supposed to operate? From the description this seems to be the case, because the message is that Matolcsy thought he had tricked the men from Goldman Sachs into revealing the true intentions of the entire international financial world toward Hungary. This really boggles the mind.

The guys from Goldman did what any smart employee would have done: having received information about an official move of the Hungarian government that hadn’t yet been made public, they rushed to tell their friends in London and/or New York that it was time to buy the forint. There is nothing sinister about this. As Boris Schlossberg, managing director of FX Strategy for BK Asset Management, said, “If your biggest Japanese client, who also happens to golf with the governor of the Bank of Japan, tells you on the golf course that BOJ is planning to raise rates at its next meeting, you could go right ahead and buy as much yen as you like.” This is not illegal; there is no such thing as insider trading in the forex market. Moreover, in this case Goldman Sachs’s purchase of forints was not an “attack” on Hungary. In fact, it helped to strengthen the Hungarian currency, which was to the advantage of the Hungarian government.

I think we can safely say that Hungary had an economics minister and today has a governor of its central bank who not only is unqualified but talks too much. Until the news was officially released, it was a state secret which you don’t talk about to anyone, especially not to representatives of Goldman Sachs.

News travels fast nowadays and yesterday at a press briefing by Gerry Rice, director of communications for the International Monetary Fund in Washington, a reporter asked him about this affair.

QUESTIONER: On Hungary, this is kind of a book that came out this week saying that the previous economy minister spoke to Goldman Sachs before making public that it was going to the IMF for a program, and that this resulted in currency trading that some people, rightly or wrongly, are attributing to this sort of speaking in advance to an investment bank. So it just made me want to ask you whether the IMF — obviously there’s Hungarian legal issues that exist or don’t– have any rules on the ministers and governments that it speaks with how they should convey that information? Either if they could trade on it, for example, or if they can convey it to others and then in turn could trade on it?

MR. RICE: I don’t have any information at all on the case you’re referring to, so I don’t have any comment on that. But we do have, of course, confidentiality understandings on information that we would consider confidential in the discussions that we undertake with any authority.

Although the opposition wants to see Matolcsy resign, nothing of the sort will happen. Especially since it would be the task of the governor of the central bank, György Matolcsy, to investigate the case of György Matolcsy, the minister of national economy. The oddity of the whole situation is well illustrated by the fact that the denial of the particulars of the affair came from the Hungarian National Bank, which had nothing to do with it.

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61 comments

  1. Spectator, I am going to post my comments on the speech shortly. I didn’t say anything about the onions in it but you imagine what I thought when I heard it. Especially when I found out that an onion “szárba szökik.” But what about “televény,” “vajha,” “koldus tarisznyája,” or “keresmény.” I don’t know which one I like best. ;-)

  2. NEED TO ARCHIVE TROLL-FAQ FILES

    Some1 :
    Eva: Would it possible to remove posts from trolls who use different user names over and over again and keep repeating the same darn discredited information again and again and again.
    I wanted to reply in detail to “Gone with the wind” about all the corruption of Fidesz, the legislation Fidesz brought in about money laundering to legalize the Fidesz mafia millions, the Fidesz building that was sold under suspicious circumstances, the freud committed by Fidesz’ Scmitt Pal who Orban put is a president, the incompetency of Matolcsy (and his misleading the Hungarin public), the Orban’s Azeri axe murderer’s affair, the extras hired by Orban to make him look popular, the secret tenders where Fidesz gave millions of Euros to Fidesz best friend’s, Simicska’s company, the “solid” basic law that Fidesz keeps rewriting, making Hungary a laughing stock on the International scene, the Fidesz privatization (stealing) of millions of forints from retirement savings and loosing the money, the awards that Fidesz gave out to anti-semites, the revisionism attempts by Fidesz, Orban’s peacock dance where he sucks up to the EU for fun and profit but rewards those who march against the EU, how Orban holds back info about how much money the EU gave to Hungary (much to Simicska via Fidesz), how the whole Oszod speech deal as it turns out was organized by Fidesz to bring down the government at the time and how they lied about it.
    I can go on Eva, and the above info misses all the details. If we have to reread all the troll accusations over and over, you see I would need to reply in detail as I do 90% of the time quote, and post a valid link to a valid, factual information. Unfortunately this would take up hundreds of lines of valuable space for valuable discussion.
    Please consider removing repetitive troll posts. I am not saying that do not allow diverse opinion, for the contrary, let discussion go on various subjects, but please, please, please do not allow the same stuff to pop up over and over again. (Can we limit the user names to two words also?)

    Completely agree that Professor Balogh should block trolls as soon as they’re detected. But a complementary strategy would also be to post and save TROLL-FAQ response files, and re-post them every time each canonical piece of troll-trash gets posted. Each FAQ could have a self-explanatory name and number, and can be re-posted each time the same point gets raised. It’s almost better to leave the troll-trash up and re-run the FAQ each time, so people see that the same tired points keep being posted over and over… Just name the troll-FAQ in bold the first time you post it, and note the URL of the posting too, so when it pops up again, you can post the FAQ name, the URL, and the full text of the FAQ itself. Worth doing till the election at least. (And make the troll-faq names not only self-explanatory but deservedly derisive too.)

  3. Stevan Harnad :
    NEED TO ARCHIVE TROLL-FAQ FILES
    Completely agree that Professor Balogh should block trolls as soon as they’re detected. But a complementary strategy would also be to post and save TROLL-FAQ response files, and re-post them every time each canonical piece of troll-trash gets posted. Each FAQ could have a self-explanatory name and number, and can be re-posted each time the same point gets raised. It’s almost better to leave the troll-trash up and re-run the FAQ each time, so people see that the same tired points keep being posted over and over… Just name the troll-FAQ in bold the first time you post it, and note the URL of the posting too, so when it pops up again, you can post the FAQ name, the URL, and the full text of the FAQ itself. Worth doing till the election at least. (And make the troll-faq names not only self-explanatory but deservedly derisive too.)

    Love this idea!

  4. Hi kyuties! My comput’r in wepair… and a week gone by. I looked back at the blogs posted and appreciated all the logical effort taken by Éva to promote the cause of truth. An effort NOT to be underestimated !!!

    Methinks would be TIME for Word-Press Co. to organize the resulting comments to belong to comments that each answer to.

    Without that you get a seeming mumble-jumble that is MOST difficult to decipher and is COUNTERPRODUCTIVE to the requirements of the most ELENTARY dialogue…

    I know that the above is VERY pertienet and I ask Éva to bear on Word press to design its comment dialogue accordingly. In this day of technical competence it is NOT too much to ask from a concern which is supposed to be committed to DIALOGUE.

    That is my commenty for the day.

  5. I am deeply concerned that the account of Stevan Harnad was hacked, and taken over
    by a troll. I have concluded that the real Harnad cannot possibly be the poster.
    This is because only a full retard would think that this website (read by 0.00000001% of
    voters within Hungary) actually influences the Hungarian elections. Therefore only
    a retard of this magnitude would demand special defensive action to be put in place
    “until the election”. Never go full retard, that is a basic rule.

  6. Obviously Harnad was hacked is a real troll. But proves trolls can make good points once in a while!

  7. Eva S. Balogh :

    Jean P :
    Who is bank employee working for? Orban´s friends or Orban’s enemy the International Capital?

    He doesn’t know what he is talking about. Most likely a nut.

    That’s what I thought as well, it must be Matolcsy himself!
    After all there was that telltale clue “bank employee” too..

  8. Eva S. Balogh :
    Spectator, I am going to post my comments on the speech shortly. I didn’t say anything about the onions in it but you imagine what I thought when I heard it. Especially when I found out that an onion “szárba szökik.” But what about “televény,” “vajha,” “koldus tarisznyája,” or “keresmény.” I don’t know which one I like best.

    The whole thing even more frightening when you read it.
    Once I made one of his loud supporters actually read a couple of passages from the very speech what he listened to and was thrilled by.
    He just couldn’t help himself but admitted – when he faced with it black on white, how idiotic it really was, – that he didn’t really get it while listening, just how badly written the speech was.
    That’s what Orbán counting on too as I see it, his people most certainly will get an ‘eargasm’
    just hearing his voice, and a couple of easily digestible buzzwords will do the trick for substance.

  9. TROLL-FAQ #1: “IS ORBAN’S MEDIA-CONTROLLED HUNGARY IMPERVIOUS TO WORLDWIDE OPINION?”

    Yet another Fidesz Troll wrote:
    …only a full retard would think that this website (read by 0.00000001% of
    voters within Hungary) actually influences the Hungarian elections…

    Orban currently controls most of the TV, radio, billboards, media ad revenue, media laws, constitutional amendments, banks, livelihoods and judicial system in Hungary, but he does not control the Web. Nor does he control the media outside Hungary.

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