It’s all Greek to me

Tuesday April 27t, 2010 – oh my — “ATHENS (AP) — Greece was pushed to the brink of a financial abyss and started dragging another eurozone country — Portugal — down with it, fueling fears of a continent-wide debt meltdown.”

The fruits of socialism come from the planting. Now being sown here in America.

Stocks around the world tanked after ratings agency Standard & Poor’s on Tuesday downgraded Greek bonds to junk status and downgraded Portugese bonds two notches, showing investors that Greece’s financial contagion is spreading.” Stocks go up and down for a multitude of reasons; this is whom they blame today, as if the reporter thinks there’s only one reason for a stock to go up or down. And how the biggest companies of the world, who comprise the stock market indexes, could possibly be adversely affected by Greece’s default is hard to say. It’s doubtful that Greece owes much money to Walmart, or if JC Penney has a whole lot invested in Greek bonds. Exxon probably has not been buying Greek debt and Citibank, well, they might have a billion or two in Greek bonds. As JP Morgan once famously said, when asked about the prospects for the market: “The market will fluctuate.” Greece produces virtually nothing, and it’s problems are really only within itself. If it defaults it’s almost only going to be big banks and governments, and oh yeah, taxpayers Europe-wide, and maybe even here who will suffer. But still, it’s doubtful that Greece’s problems will affect anything more than worry worts in government and the press who are forever swooning over what they don’t understand. Swell, though, to bail out the ultimate too big to fail – a country. Still, let it go under, it’s best. And it’ll happen anyway. For there’s no stopping it any more.

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Then blah blah on this or that percentage drop in the markets this wit says: “We have the makings of a market crisis here,” said Neil Mackinnon, global macro strategist at VTB Capital. And that’s the problem – macro views of economics. It’s what causes more grief than the actual whatever. Economics is micro – and if all the micros are going strong the Macro does fine. And if there’s mixed fortunes among the micros then the macro might be just fine too. And if most of the micros were struggling it’s almost always the fault of someone messing with the macros in some vain attempt to control the markets, to keep them stable, to keep something, you know, capitalist from happening without the government knowing about it. In this case mirco-greece will suffer because of what macro-greece did. Macro can’t solve this problem – Argentina has been in the same situation for the past 80 years, Greece is just getting on the treadmill.

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Its 15 eurozone partners and the International Monetary Fund have tried to calm the markets with a euro45 billion rescue package, but it hasn’t worked.” No, it can’t, for it’s merely pouring gasoline on the festing flames of bad economic ideas, aka, big government, or socialism.

Standard & Poor’s warned that holders of Greek debt could take large losses in any restructuring, but a greater worry is that Greece’s debt crisis is mushrooming to other debt-laden members of the eurozone.” It’s only a worry to governments who hold this debt – or super rich folks, and I’m not worried that some investor will lose a billion or two in paper wealth. But no factory or office will close because of it.

One bailout can be dealt with but two will be stretching it, and there are fears that other weak economies could be pulled down in the Greek spiral — including Europe’s fifth-largest, Spain. Can Germany, Europe’s effective paymaster, continue to bail out the weaker members of the eurozone?” NO! It cannot. Which is where US taxpayers come in – we’ll be the lender of last resort, as we’ve been since about 1900. But who will lend to us when we go Greek? Ah, that’s the problem, not Greece.

The crisis threatens to undermine the euro and make it harder and more expensive for all eurozone governments to borrow money.” Oh well, too bad, governments can’t grow as much. Horrors. I predicted the Euro would fail within 20 years. It’s right on schedule.

Even if it does, Greece faces years of austerity with living standards sharply reduced.” Actually, no. What they face is years of creating a dynamic economy that doesn’t rely on the government. It’s the government that’s broke, the people still have whatever they have. In fact, they’d have more if they weren’t already taxed so high. By lowering the taxes there would be more economic activity, with higher returns to the government and lower costs because people would be paying their own way. They only face sharply reduced living standards if they continue to rely on the government to pay them to do not much. There’s no living standards that need to be reduced except in the transition to a free market and less taxes. But the writers assume that government money is part of the living standard – actually, this money is in the economy and is not added wealth – it’s merely reshuffled to some capricious whim or political power, and serves no productive purpose.

Losing investment-grade status for its bonds means that Greece will have to pay higher costs to borrow if it taps debt markets again, and increases the chances that existing debt will have to be restructured.” Well, actually, the government can be so absurdly rational as to quit borrowing to pay their expenses. It’s one thing to borrow a billion to build a bridge, but that’s not what is happening there – the government is borrowing money to pay for today’s operating expenses, today’s salaries, which means the second part of the sentence here is funny — “increases the chances”? Hahahaha – like, you mean, Must change the way they are doing things or continue further into never paying their debts. Though at this point they really can’t – it’s something like 195% of GDP – so even if every euro was seized they can’t pay off their debt. All they are doing now is borrowing money to pay off the interest and debt that’s due today. No, no chance – do or die.

Speaking at an election rally Tuesday afternoon, Merkel said it is appropriate to tell Greeks, “You have to economize, you have to become fair, you have to be honest; if not, nobody can help you,” according to the German news agency DAPD.” Nice political comment that does’t quite mean much. What’s to “become fair”? Beats me. “To be honest”? — about what?

Greek and Portuguese stocks were pounded — down 6.7 percent and 5.4 percent, respectively — while their market borrowing costs went through the roof. The interest rate for Greek two-year bonds jumped to a massive 18 percent.” That’s because the companies and stockholders know that more wealth of the companies and individuals will be seized either through taxes or blatant expropriation.

“This decision will not help markets to calm down, but will, on the contrary, contribute for their turbulence,” Portugese Finance Minister Fernando Teixeira dos Santos said. Actually, no matter who does what the markets will, um, fluctuate. Why bother with markets if all they were were stable? In fact, government bonds are stable, and look what that got anyone. In fact, the markets would return Greece to sound finances and a profit if only the government would just get out of the way.

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Greek Finance Minister George Papaconstantinou said the downgrade “does not reflect the real state of our economy, nor the fiscal situation, nor the ongoing negotiations which have the very realistic propects that they will be completed successfully in the next few days.” Hopey, dopey, changey, smokey.

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Papaconstantinou said Greece will pull through. Ditto.

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“One wishes that Europe had acted a little differently. Three and four months ago we were saying that the mechanism must be ready and it must be detailed, that the markets must know what exactly is going. Unfortunately, for a series of political reasons, we are down to the wire,” he said. Egads, begging for money to maitain drunken sailor spending and he wonders why people might have hesitated? I bet the minute he gets it he’ll spend it with wild abandon on exactly what he was spending on it just before the crisis. He wants no change, he wants the money.

The crisis has highlighted the eurozone’s inability to keep governments from undermining the euro by running up big debts. Rules that limit deficits to 3 percent of gross domestic product have been widely flouted …

Hahaha, it’s been flouted by every country forever, with no exceptions to the contrary save once or twice by accident.,

… and EU officials are talking about ways to strengthen them. They’ve been talking about it for decades, tell us something new.

And so Greece will be the first to go, then the rest, until finally Germany too, since it’ll wind up owning all the bad debt. Oh well, again, such are the wonders of socialism – as Mrs. Thatcher said: pretty soon you run out of other people’s money. The political class of this country hasn’t learned this yet – so it’s just a matter of time here too.

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1 Comment

  1. What Papaconstantinou said will sound all Turkish to you from now on. The corrupted Greek politicians are now ready to betrade Greece to the Turks.

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