If you are waiting for the Greek bailout you might as well be waiting for Godot. There will be no bailout. Germany and most of the EU countries want an extend and pretend ending to this Greek drama but I fear that the son has slain his father on the way to the castle. Ms Merkel should be suitable warned. Greece has received 284 billion Euros in bail out funds since 2010. Of that only eight (8%) percent has been received directly by the Greek people. The other 92% went to Greek and international financial institutions. The supposed Greek bailout has rescued only the bankers and not the people. Well, no surprise there, no wonder the majority of the Greek people want to stop the madness since they are having the bite put on them.
Greece should have refused the bailout loans in 2010 and 2011, that would have caused a default on the old Greek bonds and triggered the payouts of the derivatives that were made against them. But the ISDA, International Swaps and Derivatives Association tooth tooth and nail against that possibility. Now there is no way to stop the looming default and the Greeks must default, there is no way out. And the fact is, if the Greeks default they leave the Euro and this will start Spain, Italy, Portugal, Ireland, and one or two others whose debt to GDP has become far to onerous. Even France is at extreme risk of collapse due to their banks being over leveraged and the government debt at roughly 100% of GDP. How’s that socialist welfare state working for you, Mr Hollande?
Greece now owes 323 billion Euros, surprise, surprise. Why should anyone lend Greece any more money when it is obvious that what is now owed will never be paid back? The Greek banking system has about seven or eight days of cash left and then those institution will be insolvent, unable to pay their depositors. That should be a nasty kettle of over ripe fish for Mr Draghi of the ECB. But the real issue, the one the Germans helped to make through their own stupidity, is that the EFSF, European Financial Stability Facility pulls in the repayment of Greek borrowing from all the other member countries. Italy, Spain, Portugal, and Ireland are liable for about 240 billion Euros for their loans from EFSF. The Greek part of the EFSF is about 1/3 of that, so the four almost insolvent countries would need to come up with about 80 billion Euros apiece as their part of the backstop. Unfortunately these countries are in such dire straits they cannot go to their parliaments and secure the needed funding out of their budgets. Imagine yourself being maxed out on credit card debt and mortgage and car loans. No you make the mistake of cosigning for you childrens car loans and your children lose their jobs, no income. Are you now headed for bankruptcy?
One can see that these four countries cannot afford to back any more loans for Greece. And whether Greece can negotiate new repayment schedules is academic, the creditors can’t afford that. As for the ISDA, since is was not willing for the haircuts to be called defaults and thus triggering payouts on the various derivatives it is in a very difficult position now. The world wide financial community cannot afford the cascade of defaults that Greece would trigger it they are effectively forced out of the Euro. In fact, since Spain is facing an increase in the popularity of the political part, Podemos and the goal of Podemos is the renegotiation of their own debts that include government bonds and private bank bonds, this would well mean the destruction of the world financial community. The collapse of the Euro Zone would be catastrophic in terms of world events. It would make the Ukraine look like a garden party in terms of the lasting effects upon the world.
The irony of this situation is almost too precious. As socialistic thought has progressed through the various political parties and has become embedded in the various governments in terms of the increased number of departments, agencies, and employees, it has triggered an increase ib government borrowing. Normally Spain, Italy, and the rest of those who have borrowed their way to prosperity would have had to pay for it by debasing their currencies. Their governments would have had to have taken steps to improve the economic life of the country or fall. But once there was a monetary union, well, the ice cream and cake supply seemed to have no end. Party on Garth!. Do you want to supersize that welfare payment? And that is just what has happened. So countries in hock up to their eyeballs have now joined a guaranteed loan payback committee and think they can look the other way. Socialism only works on the other fellow’s dime. When that other fellow runs out of dimes socialism stops working. When that happens and the economic chaos is in full bloom then the left wing progressives turn to more fascist methods. Hitler’s Third Reich could only work by looting other countries and using their people as low paid production workers (remember, even slaves don’t work for free, you still have to house and feed them). Socialism works only by theft, it always has and it always will. So we now see the rise of populist progressive socialist parties who see an opportunity to restructure, or better yet, default on loans. Borrowing money and then failing to pay is a form of theft. Yes, people say they didn’t know they wouldn’t be able to pay it back but is more due the lack of good math skills and poor decision making. For that matter, stealing is poor decision making. What’s the difference between the two? When a friend borrows and doesn’t pay me back, I’ve lost a friend. When a thief steals from me I am only out the money.
What is astounding is that many in the world see Obama as a fascist, a progressive socialist willing to force individuals to act in his way of thinking. The fact that the man have a Nobel Peace prize hasn’t stopped him from starting wars when he feels like it and for little more reason that it seemed like a good idea at the time. All told, the American work force is almost half government workers. That is federal, state, county, and city or town employees. The tax payer base that pays those salaries, benefits, and retirements is getting smaller each year. And I do believe we are already at 100% debt to GDP. My god, what is this world coming to? But today Germany wants to gold in the mine and is willing to let the Greeks have the shaft as their benefit package. It all makes sense, doesn’t it.