Another bailout no solution to Greek debt crisis

Jun 30, 2011

Delray Beach, Florida

First, the market news.

Yesterday, stocks went up. Gold went up. And bonds went down.

It was a 'risk on' day...but not so much of one that you could draw any conclusion from it.

Investors still had the Greek debt crisis on their minds. But they seemed to have gotten tired of worrying about it. All the financial sweepers in Europe are working around the clock, trying to get the mess under the carpet or out the door. By the looks of the markets, they were succeeding.

But it's not over yet. You'll remember that we gave some advice to the financial officials who are in charge of bailing out Greece? We told them to take a page out of Gerald Ford's book. Just tell the Greeks to "drop dead."

Today, we give advice to the Greeks. Tell the bankers to 'drop dead.'

A vote is expected today...which will tell us something. The Financial Times says it could be a "suicide vote." That is, the governor of Greek's central banks says the Greeks will be committing financial suicide if they don't go along with the plan.

Speaking to the Financial Times, Mr Provopoulos expressed concern that Greece's economic crisis had been played down by politicians over the past 18 months as the country lurched towards a possible default.

"We have never really had a debate in this country about what went wrong. In Portugal the new government has come in and said that there will be a difficult two years ahead. We have not had that kind of talk here," he said.

  • He added: "For parliament to vote against this package would be a crime - the

  • country would be voting for its suicide."

    Turning up the heat, Olli Rehn, the EU's top economic official, dismissed German suggestions that the eurozone was contemplating a "Plan B" in case the Greek parliament failed to approve the austerity cuts. "The future of the country and financial stability in Europe are at stake," Mr Rehn said. "I trust that the Greek political leaders are fully aware of the responsibility that lies on their shoulders to avoid default."
  • We're not so sure. From what we've been able to make out of the rescue plan, they'd be better off rejecting it. Not that we're in favor of people who don't play fair. But this deck was always stacked. And the dealer had a few aces up his sleeve at the get go. The way we figure it, the politicians, the banks - notably Goldman Sachs, as well as the big French banks - were in on the whole thing from the get-go. It would be considered rude to mention it, for example at a champagne-swilling reception hosted by Christine Lagarde, but the whole deal was always corrupt. Goldman Sachs helped the Greeks disguise their debt so they could get in the EU system. Then, more or less the same bankers, advising pension funds, the IMF and the European Central Bank, urged them to buy Greek debt. And then, when the debt went bad, they organized a rescue - which spared the lenders any losses. And then, when the rescue went bad, they set to work figuring out the terms of a new rescue...and warning the Greek people that if they don't go along, they'll have to face Armageddon.

    The Greeks would be better off calling their bluff.

    Then, they could go broke with some dignity. They wouldn't get any more credit. But more credit is the last thing they need. Besides, each time they are rescued, they end up in worse shape, with more debt to pay...and higher interest rates to pay on it.

    So tell the bankers to 'drop dead.'

    Of course, the Greeks themselves were as corrupt as the bankers. They took their opportunities, too, as they came along. If they could get paid for not working, they didn't work. If they could get a subsidy and not have to compete in the real world economy, they took the subsidy. If they could retire early, or get something for nothing, or hoodwink investors with some nonsense figures...of course, they did it.

    So, there's a pot. And there's a skillet. Both are as black as a tax collector's heart. And now they are both colluding to make sure neither has to reckon with his greed and errors.

    Trouble is, that's not the way it works. Debt doesn't go away just because a knave and a fool decide they don't want it. It's still there. Like grinning death. It knows it will have its way. ----------------------------- A Good Time To Sell Bad Stocks -----------------------------

    It's never too late to get rid of 'bad stocks'.

    After all, you never know how bad a market crash could get.

    But what are these 'bad stocks'? How do you identify them?

    For answers to these questions, and more, click here to read on...


    *** Let's see how things are going in the US.

    We're here in South Florida....where consumer confidence is falling, just as it in the rest of the nation.

    Hey, if there were a recovery, how come consumer confidence is falling?

    The answer is simple: there ain't no recovery and consumers know it. The feds can babble about anything they want, but the typical consumer knows he is in a tough spot...and it's getting tougher.

    The good news: gasoline prices are falling. "But so are home prices in South Florida," says the Palm Beach Post. House prices rose in 13 cities says the latest news. But not in Miami...which is in Palm Beach county.

    Over on page 4 it says "Fla. Seniors insecure about income." They ought to be. They've lost purchasing power for the last 10 years.

    Of course, that's just a part of the story. As we keep saying, the last 10 years has been a 'lost decade' - for Florida seniors as well as just about everyone else, except the rich. The middle classes have lost ground on every front.

    Their houses are now back to 1990's prices.

    Their real incomes have actually gone down.

    Their stock portfolios too have lost value in real terms.

    And the job market offers them fewer jobs than it did in 2000.

    A gallon of gasoline costs only $3.64 in Palm Beach County, down from $3.85 a month ago. But it's up from $1.30 in 2000.

    "Consumers will keep their wallets closed until they feel a heightened level of confidence," says a source interviewed by the Palm Beach paper.

    When will that be? No one knows, but if present trends continue Florida seniors will have turned up their toes long before they turn up their confidence.

    Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

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    4 Responses to "Another bailout no solution to Greek debt crisis"

    Maulik Suthar

    Jun 30, 2011

    Greeks printed money (EURO) in Frankfurt printing press.
    Everyone lived happily afterword.

    Gold and silver prices could fall in near term, says Faber

    I want to buy little more gold.

    Bill says ‘buy GOLD in tons not in kilos’

    Maulik Suthar
    Gandhinagar, India


    Santosh Bhatnagar

    Jun 30, 2011

    In India, petrol is costlier that what it is in the US and the government still argues that the oil companies are running in loss. The purchase price of crude is the same for all countries, the labor cost is low in India and yet the product is more expensive. If our refining technology is poor, the government should take steps to update the technology instead of fleecing the citizens and appeasing the oil companies. Few days back I heard an illogical argument over one of the news channels that the landed cost of crude is Rs 22 per litre and after refining the yield is 50%. What happens to the other products and chemicals you get during the refining process? Where do you account for the balance items? Should we believe that Reliance is suffering loss and is being subsidized for losses whereas its bosses are rolling in money with vulgar display of wealth in the form of multistoried residence, from where they can clearly see the crying and starving homeless children of future India.


    K Rohidas

    Jun 30, 2011

    For Mr Bill Bonner
    Following my earlier comments on French Banks rolling over Greek Debt for 30 years via an SPV - one additional thought -- If all other European Banks holding the Greek, Irish, Portugese, Spanish and Italian debts follow the idea, then Goldman Sachs can be counted upon to securitise all those debts held by various SPVs, calling them "Securitised European Sovereign Debt" - bundle them into AAA rating and sell them in pieces (similar to what they did with sub-prime MBS)-- creating also a CDS market for the same.
    30 years time frame is an excellent period for the history to do what it likes, repeat itself, merely rhyme or write a new page altogether. Time becomes your friend when it is on your side.


    K Rohidas

    Jun 30, 2011

    For Mr Bill Bonner
    We have been hearing about everybody 'kicking-the-can-down-the-road' but the French Banks under French Govt support are proposing roll-over of Greek Debt for a period of 30 years (that is one full generation) - and placing that debt in a "Special Purpose Vehicle (SPV)" whose equity the banks will hold. This way Greeks get the roll-over badly needed, banks balance sheet will be cleaned of the debt, and the SPV being a separate entity either gets the principal (and interest) back from the Greeks over 30 years or that SPV can go kapoot in due course -- who cares. 30 years is a very long period of time. Meanwhile the SPV can leverage on the Greek "Sovereign" debt they are carrying and return funds to the banks in various tranches -- by buying its own equity back from the banks -- at market values if the SPV becomes a listed company.

    This idea can be adopted by every bank holding sovereign debts -- with some support from their respective Govts --- and thereby not merely kick the can down the road but moon-rocket it into 'oblivian' ! How do you like it, Sir ??!!!

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