Posts Tagged ‘European Debt Crisis’

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“Greece is not salvagable”

Friday, September 30th, 2011

That’s the rather bracing judgment from this Stratfor overview of Greece’s problem. Moreover, they’re saying that about its existence as a nation-state, even absent the European debt crises. Also: “Greece has to be kicked out of the Eurozone if the Eurozone is to survive.” Problem? They don’t have enough “firebreak” funds to do it. “Until the Europeans have 2 trillion Euro in funding stashed away, they can’t kick Greece out of the system.”

I’m not sure I share the pessimism about Greece in the long run. After all, nation-states can exist for an awful long time, despite crappy conditions (see, for example, Haiti). Of course, that assumes that a newly Islamic Turkey doesn’t decide to settle old scores by conquering them outright. (Assuming, of course, that Turkey is still predominately Turkish rather than Kurdish. Claire Berlinski is a little more sanguine about that prospect.)

Honestly, of the two, I think Greece will outlast the Eurozone by a good measure. The question isn’t the whether Eurocrats can prevent the Eurozone from breaking up, but rather how long they can delay the inevitable, how much sovereign debt can they put taxpayers on the hook for, and how much harder will the inevitable market correction be when it comes? It seems to be a race between how much European taxpayer money can be wasted propping up Europe’s bankrupt welfare states vs. how much of American taxpayer money can the Obama administration waste channeling payouts to well-connected Democratic cronies. The Eurocrats may be winning the race to insolvency, if only due to the lack of a European Tea Party.

In other Euro Debt Crises news:

  • Europe votes to throw more money down the rat hole.
  • But don’t take that as any kind of victory for the Euro. Quite the opposite. “The furious debate over the erosion of German fiscal sovereignty and democracy – as well as the escalating costs of the EU rescue machinery – has made it absolutely clear that the Bundestag will not prop up the ruins of monetary union for much longer. Horst Seehofer, the leader of Bavaria’s Social Christians, said his party would go ‘this far, and no further’.”
  • Greece passes the tax increase the Eurocrats say is necessary to stave off default.
  • How broke is Europe? They’re considering a tax on every financial transaction. This is great news…for stock exchanges outside of Europe.
  • How Charles de Gaulle foresaw the Euro crackup.
  • The German finance minister says that a leveraged Euro-TARP is dead. I would say why U.S. regulators were pushing such a scheme was puzzling, except of course it isn’t. The goal is to put off the Euro-collapse until after the 2012 elections.
  • Meanwhile, liberal moneybags mastermind George Soros says that the Euro crises is dragging us toward another depression. His solution? I know you’re going to be shocked, shocked to learn that it’s bigger, more central government. “The governments of the eurozone must agree in principle on a new treaty creating a common treasury for the eurozone. In the meantime, the major banks must be put under the direction of the European Central Bank.” To be followed shortly thereafter by the formation of the First European Airborne Swine Squadron.

    • Is there any other place desperate Eurocrats can get money to prop up their falling welfare states? Are they perhaps hoping that Obama will bail them out? After all, what’s a few more trillions in unsupported debt between friends?

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    Posted in Budget, Democrats, Economics, Elections, Foreign Policy, Jihad, Waste and Fraud, Welfare State | No Comments »

    More Greek Default Rumblings

    Sunday, September 25th, 2011

    Actually, less rumblings than the roar of an approaching train. And since I temporarily seem to be ahead of the latest Ace of Spades Doom roundup, I’m going to try and give you a nice clear view of the coming crash.

    “No longer a question of if, but when – that is the tone of discussions over Greece which has dominated the summit of finance ministers in Washington over the weekend.” Former Britain’s former finance minister Alistair Darling agrees, calling default “only a matter of time.”

    The talk now is of how to put in a “firewall” to prevent the contagion of an inevitable Greek default from spreading throughout the European banking system.

    The Euroskeptics have been completely vindicated:

    Very rarely in political history has any faction or movement enjoyed such a complete and crushing victory as the Conservative Eurosceptics. The field is theirs. They were not merely right about the single currency, the greatest economic issue of our age — they were right for the right reasons. They foresaw with lucid, prophetic accuracy exactly how and why the euro would bring with it financial devastation and social collapse.

    I think at this point UK residents should be feeling vrey glad indeed that they didn’t abandon the Pound for the Euro.

    Bret Stephens talks about the long line of deceit and fraud that lead Europe to the current crises. “What is now happening in Europe isn’t so much a crisis as it is an exposure: a Madoff-type event rather than a Lehman one.”

    Mark Steyn, using the ever popular music and political metaphor gambit, compares the breakup of the Eurozone with the breakup of R.E.M. while bringing the usual Steyn goodness: “Attempting to postpone the Club Med welfare junkies’ rendezvous with self-extinction will destabilize internal German politics (which always adds to the gaiety of nations).” And this:

    As its own contribution to the end of the world as we know it, the Obama administration has just released a document called “Living Within Our Means and Investing in the Future: The President’s Plan for Economic Growth and Deficit Reduction.” If you’re curious about the first part of the title — “Living Within Our Means” — Veronique de Rugy pointed out at National Review that under this plan debt held by the public will grow from just over $10 trillion to $17.7 trillion by 2021. In other words, the president’s definition of “Living Within Our Means” is to burn through the equivalent of the entire German, French, and British economies in new debt between now and the end of the decade. You can try this yourself next time your bank manager politely suggests you should try “living within your means”: Tell him you’ve got an ingenious plan to get your spending under control by near doubling your present debt in the course of a mere decade. He’s sure to be impressed.

    Germany is near the limit of their willingness to bail out Greece.

    There may even be a taxpayer revolt brewing in the Aegean.

    And if the other PIIGS are doing better than Greece, it is only a matter of degrees: “Italy is the new Lebanon, Portugal the new Venezuela, Spain the new Vietnam, Ireland the new Argentina and nothing is more risky than Greece, according to today’s credit default swap market.”

    But it’s not just Greece and Europe that are hitting the wall. China’s housing bubble may finally be bursting. Worse still: “growth in China may be zero [and] China has ‘European kind of numbers’ when it comes to debt.”

    And the Chinese housing bubble isn’t just affecting China. It’s also affecting Canada.

    And at least one observer has drawn parallels to a certain hopemonger currently residing in the White House:

    Obama has no intention of really solving the debt crisis. And that brings us back to Greece. That government has been doing the same thing for a decade and the chickens have now come home to roost. Greece’s debt is 150 percent of its Gross Domestic Product. Our debt has just reached 100 percent of GDP and the debt is accumulating faster than it ever has. If we were looking out the windshield down the road, we could see the crash that’s just up around the bend.

    But rather than put on the brakes, the president has chosen to pick a fight with the other passengers in the car he is driving. Talk about distracted driving! He is gambling that this fight will convince the passengers to let him stay behind the wheel for another four years. But we certainly can’t wait that long. He’s turned up the radio in hopes we won’t hear the ambulance sirens.

    It looks like its going to be another rough week for world markets…

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    Posted in Budget, Economics, Foreign Policy, Waste and Fraud, Welfare State | 1 Comment »

    Greece Getting Ready to Default?

    Monday, September 12th, 2011

    According to Seeking Alpha last week: “Yields on two-year Greek government bonds reached 46.84% recently. This is roughly comparable to yields on Argentine bonds in early December 2001 – only a month before the country defaulted on its debt.”

    Other signs of the Euro crisis: The Euro hit a six month low against the dollar, and a ten year low against the yen.

    Now Walter Russell Mead is reporting that markets around the world have a serious case of the jitters due to the possibility of a European meltdown. “Creating a monetary union without a true federal government is looking more and more like the biggest European policy mistake since Britain and France let Hitler have the Sudetenland.”

    It’s not just Greece. Investors are now worrying about the potential solvency of French banks.

    Last week, Powerline linked to this cheerful piece over at Zero Hedge, which outlines some consequences of a Euro breakup: “Were a stronger country such as Germany to leave the Euro, the consequences would include corporate default, recapitalisation of the banking system and collapse of international trade.” Lovely. Other possibilities: The rise of authoritarian or military governments to contain the crisis, or civil war.

    Despite all this, the EU itself, when not pushing for further austerity, denies it’s preparing for a Greek default. Should we be more worried that the Eurocrats running the show are liars or idiots?

    Here’s Peter Morici calling Greece to default and abandon the Euro, although comically, he’s saying that it’s Greece that is the exploited nation “at the mercy of Germany and other rich states who exploit European unity to live well at the expense of their poorer brethren.” Of course this is an inversion of the actual situation, with wastrel cousin Stavos living high on the hog off of Uncle Fritz and Aunt Helga’s credit rating.

    But that might be coming to an abrupt end. Despite a slew of austerity measures introudced over the weekend, the Greek government only has enough money to last through the middle of October. There are technical obstacles to still more bailouts from Germany, assuming Uncle Fritz was even willing to extend more credit. Signs are that he isn’t. Indeed, German Chancellor Angela Merkel is openly discussing “an orderly bankruptcy of Greece.” The bond market is already treating a Greek default like a near certainty. It seems like the plan to prop up Greece until banks can stick European taxpayers with the bill may be coming undone.

    So, you think gold prices would soar, right? Wrong. “Gold futures slumped as traders cashed out of the perceived refuge asset to cover losses in other markets while Europe’s debt crisis seemed poised to take a turn for the worse.” So it’s gotten so bad that traders need to sell gold in order to cover losses in everything else but gold.

    Hang on, folks. We could be in for a very rough ride…

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    Posted in Budget, Economics, Foreign Policy | No Comments »

    More on the Greek Euro U.S. World Debt Crises

    Monday, August 8th, 2011

    The Moody’s downgrade of Portuguese debt link was a quick blipvert for a current event, but I wanted to do a somewhat longer roundup of pieces on the Euro debt crises and the potential for more shocks down the line. Unfortunately for both me and pretty much everyone in the world, things have been moving too fast to get a good handle on before the next crisis erupts. And after the Obama downgrade, things are moving faster than ever.

    Which is pretty fast indeed. The Eurocrats, in best shoot-the-messenger style, have decided to start ignoring bond rating services in the wake of Moody’s downgrade of Portugal. If that weren’t enough, Italian police raided the offices of Standard & Poors following their downgrade of Italian credit ratings.

    How did Greece get in the position of being the first domino to fall in the Euro crisis? The election of Andreas Papandreou as Prime Minister helped start the ball rolling:

    On October 18, 1981, a charismatic academic with rather limited government experience and with a one-word slogan, “Change,” was elected prime minister of Greece. His name was Andreas Papandreou. Greeks may now wish that 30 years ago they had had a Tea Party movement. Things could have turned out differently.

    Thirty years ago, Greece was in an enviable position on the matter of national debt, with its debt just 28.6 percent of GDP. Few advanced countries can manage that kind of debt-to-GDP ratio. By the end of Papandreou’s first term in office, that ratio had nearly doubled, with debt at 54.7 percent of GDP. By the end of his second term, the figure was in the mid 80s.

    But that was just the first step. The second was letting Greece join the Eurozone in 1999 despite their patent unwillingness to get their financial house in order. “Repeatedly, and for 30 years, the Greeks have played Europe like a harp.”

    June’s European Union summit illustrated the chaos perfectly: a last-minute deal with Athens to raise the Greek income-tax threshold and increase levies on heating oil was hailed as a breakthrough even though everyone involved knows that this will buy, at best, a few months’ respite from Greece’s creditors. Thus are deck chairs rearranged, as the Greek pleasure yacht (classified, of course, as a fishing boat to escape taxes) sinks below the waves. The markets duly marked up the five-year probability of a Greek default to 80 percent.

    The advice to Margaret Thatcher decades ago from the Foreign Office mandarin charged with European policy was clear: Greece was unfit to join what was then known as the European Community. The backward, chaotic archipelago would be an enduring drain on European coffers. Not only that: once through the door, Athens would bring nothing but trouble.

    That foolish decision to allow Greece to join lies at the root of the crisis engulfing the euro zone and lapping America’s shores. Consciously, among its pampered political elite — and subliminally in society at large — Greeks got the idea that being Europe’s backward, indulged delinquent was a highly profitable game.

    A piece quoting and summarizing two different Financial Times pieces (behind their paywall, alas), both of which predict a bad end to the Greek debt crises, albeit partially from differing reasons.

    Andrew Butter makes parallels with Weimar Germany. Don’t agree with everything the author says, although you I do admire this sentence: “It’s getting harder to do the austerity thing these days, now that it’s considered politically incorrect to shoot at rioters with live ammunition, which wasn’t an issue in 1923.”

    So if pretty much everyone agrees that Greek default is inevitable, why keep shuffling the deck chairs? Simple: So they can stick taxpayers with the bill. “Foreign financial institutions currently own 42 per cent of Greek debts, and foreign governments 26 per cent, the rest being owed domestically. By 2014, those figures will be 12 per cent and 64 per cent respectively. European banks, in other words, will have shuffled off their losses onto European taxpayers.”

    So an effort to shield Euroelites from the worst effects of the debt crisis may end up destroying the Euro entirely.

    Given the already considerable length of this post, I doubt I have time to address some of the ramifications of the Obama Downgrade, so that will have to wait for another post…

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    Posted in Budget, Democrats, Economics, Foreign Policy | 1 Comment »

    Portugal’s Bonds Downgraded to Junk

    Tuesday, July 5th, 2011

    By Moody’s.

    Between strikes in Greece, constitutional challenges to the Greek bailout in Germany, and other agencies rating the latest Greek bailout as tantamount to default, efforts to prevent a Euro-default contagion may fail sooner rather than later…

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    Posted in Economics, Foreign Policy | 1 Comment »

    Update on the Coming Euro Collapse (and Our Own)

    Monday, June 6th, 2011

    Andrew Lilico in the Telegraph (via McArdle, via Insta) has a sobering look at what will happen when Greece defaults (“It is when, not if”). It starts out:

  • Every bank in Greece will instantly go insolvent.
  • The Greek government will nationalise every bank in Greece.
  • The Greek government will forbid withdrawals from Greek banks.

    • And then gets even less pleasant, including martial law and the European Central Bank going insolvent. The real European crisis hasn’t happened yet, and when it does, it will probably be much worse than the current U.S. recession.

    Meanwhile, Greeks continue to protest long-overdue austerity measures. I am doubtful Greece is willing to actually implement real austerity. After all, the Greek government only recently decided that it might want to stop paying pensions to the dead. instead of solving the problem of an out-of-control welfare state, the ECB and the IMF have decided to let Greek slip even further into debt in exchange for implementing reforms and austerity they’ve shown no signs at all of being willing to implement; in other words, to kick the can down the road and hope that gives the other PIGS time to get their respective houses in order before the Euro collapses.

    Meanwhile, Ireland’s crisis is so severe that not only are they going to start taxing private pension funds, they’re actually going to start fining trustees that don’t hand over pensioner’s money. “Threatening scheme trustees with huge fines that are not covered by trustee indemnity insurance if they refuse to or cannot collect the levy, is a guaranteed way to stop anyone coming forward to be a trustee. I expect the other consequence of the Finance Bill (no 2) 2011 will be the resignation, post-haste of hundreds of scheme trustees.”

    The chances that various transnational and euro bureaucrats will succeed in rescuing all the PIGS (and thus the Euro) is slim to none: “The ‘troika’ [ECB, IMF, EU] is doubling down on its losing bet in Greece and is playing with the dice loaded against them.”

    How bad is it going to get?

    Austerity is going to mean hellishly bad deflation, high and rising employment, and depression in the indebted countries.

    There is $600 trillion in derivatives now loose in the world. Who knows which banks have written them and to whom? Who are the counterparties? We did not fix this with the last political fix. The next crisis has the potential to be just as bad or worse than 2008, which is why I think Europe’s leaders are so dead set on avoiding a day of reckoning. If you look under the hood, as they most assuredly have, it must be frightening. And with pushback from voters?

    Contagion, thy name is Europe. And with the US economy slowing down, it might not take much to push us over the edge

    And that’s the best case scenario, the one where the PIGS actually bite the bullet and implement austerity. It’s entirely possible that one or more of them will reject austerity measures and, in doing so, set off a run on the Euro.

    Also via Insta comes news that China has divested itself of 97% of its holdings in Treasury Bills. As Mark Steyn has pointed out, where Greece is now is where Obama wants to take us, with ObamaCare as just the down-payment on a full-blown European welfare state. We’re not nearly as far along as Greece is to financial collapse, but our debt is already starting to look like a bad bet.

    Certainly we’re not so far along that we can’t turn back, but the Paul Ryan Roadmap is probably the minimum we need to be doing to get our debt under control. Less than that and we’re asking for serious trouble. It’s already looking like Carter era stagflation is here.

    As the recent Texas legislative session showed, it is in fact possible to actually shrink the size of government, not just slow the rate of increase. Or at least it’s possible when you have Republican Supermajorities in the House, Senate, and Executive branch. By contrast, the Obama administration and Harry Reid’s Senate have shown no sign of being willing to address the problem, or even to admit it exists. They too want to kick the can down the road and keep piling blocks of debt onto the backs of your children. But, as the Euro crises shows, such actions have a way of catching up with you sooner rather than later.

    You can only kick the can down the road so far before you run out of road.

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    Posted in Budget, Economics, Foreign Policy, ObamaCare, Texas | No Comments »

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