What I've learned from several correspondents over the last two weeks is that the trouble with Greece is well understood and is a product of at least a decade of sham Eurozone manipulation of state budget deficits. The EU is 16 countries, up from the original 11 in '97-98; however they have all, save Germany, played accounting games since the first years in order to comply with an impossible mandate to keep annual deficits at 3% of GDP. The US is currently at 11%; Britain is near to same. (No deeper irony than that the People's Republic of California is much a talking point in Athens as an example of a flagrant profligate.) Only Germany has the moxie to live within its means and still make money. Germany is the dominator. Also part of the ongoing crisis is that Nicholas Sarkozy is running against IMF boss Dominique Strauss-Kahn for the French presidency, and Strauss-Kahn is ahead in the polls. Therefore France keeps the IMF out of the center stage. The Greeks must now suffer for the other EU creative accountants, such as Spain, Portugal, Ireland, Italy -- and even France. What does this mean for the US? The smart guys have bet a ton that the euro goes down to parity with the US dollar. Spoke to Katherine Burton, Bloomberg, of a now most romantic and suspicious sit-down private dinner in Manhattan on February 8 in which 23 hedge fund gurus discussed shorting the euro. The US Justice Department now seeks answers from the 23 geniuses, and French Finance Minister Christine Lagarde cries "speculators!" whenever she is asked about the falling euro. Delightful. Cry havoc. Next big bear bet is the yuan. And what does this do for the Obama administration? Nada. POTUS is sidelined with an obsession about healthcare. Nero fiddles. Lisbon, Madrid and Rome burn next. Berlin rules 65 years after the Soviets launched on Berlin.
puppet euro banks bought the greek bond issue below 7% on instructions/assurances from their governments. kicking the can down the road.
greece should be allowed to default. the alternative is to establish a precedent converting the monetary union into a union of credit. until greece shows it has fixed things, not just promised it will someday sort of good enough, a real risk of default is needed. then the markets will monitor and measure the progress and debunk the fantasies.
until the markets believe that default is a real alternative, the wayward sovereigns will continue to price like "almost germans"(+100bp-300bp to the germans) rather than junk (+1000bp to the germans).
as to california, michigan, new jersey and new york ... the same medicine.
dubai whispered an offer of 60% in 10 years with no interest its creditors. will dubai ever be able to borrow again?
default.
Today’s drive to establish an Islamic caliphate roughly approximates the drive by the Left to rule globally under a single red banner. So far, the ominous similarities have escaped notice because the two have been working largely in tandem toward more or less the same purpose. As such, they have sought to minimize the frictions between them (for now) in view of their overriding objective: to defeat western values and, especially, capitalism.
As nothing is ever new in any matter, the strategies employed here have also been seen before and are based on the domino theory. It involves flipping individual countries form one camp to the other. I first heard of it by name when our government claimed that if the spread of communism isn’t halted in Vietnam all of Asia would fall.
The latest countries to flip over to the dark side are Turkey and Greece. Increasingly, people are realizing that one can now also add the U.S. to the list. Turkey was a heartbreak. Not that it couldn’t have been foreseen. As in the U.S., there were plenty of warnings of what could be expected if Erdogan were elected. Although, I don’t understand the intricacies of Turkish politics, I must assume a similar pattern of deceit and false promises were employed there to bring radical Islamists to power.
Greece, of course, has been subject to leftist sabotage for decades. Leftist union and student pressure have managed to ruin their economy which has now put the entire EU at risk. Leftist instigators have as recently as yesterday pulled out of serious negotiations with the government and declared that the battle would henceforth be fought out in the streets.
Compromise in Greece and elsewhere is no longer on the table. Hence, the only option free market advocates have is appeasement. The latter always serves to contain the ugliest part of it, but at a cost. The remaining democracies that are still functioning now find themselves with their backs to the wall. In order to appease the Left they have to increasingly put their economic principles at risk. In time, there will be no margin left within which to pursue the fiction of negotiation with people who have no interest in solutions. At that point there will be only two options: surrender or war.
http://peterkoelliker.blogspot.com/
PK, correct as usual. Europe thought big is better, and would still continue to spend heavily on lavish social programmes and bloated layers of bureaucracy. Bills always come due eventually.
Germany would be foolhardy to guarantee the debts of Greece. France is amazingly quiet.
Socialism is a very powerful Siren call, especially to an uneducated populace. Greece listens to the sirens and will experience the consequences.