May 25, 2015
By: Kelly Diamond, Publisher
I was going to write something to do with Memorial Day, but decided against it. As they say, don’t look back unless that is where you are heading. And there is so much in front of us, I can’t be bothered to turn my head for a second only to anger myself over the lives lost to countless government lies.
Ron Paul has been warning the United States for years about the dangers of our reckless fiscal and monetary policies. We can’t afford to keep spending more than we bring in, and scare off producers of tax revenue with higher taxes and greater regulations. It seems rather obvious, right? Apparently not.
The US has had a few red flags in the last decade ranging from a drop in our Moody’s credit rating, to “government shutdowns”, to repeatedly needing to raise the debt ceiling, to not even having a budget at all! We’ve watched as China raced past us on just about everything but raw GDP. And while libertarians continue to warn of the fiscal cliffs and collapse of the dollar, the political class has managed to keep the illusion going just strong enough to keep the masses either sedated or fooled.
Ever wonder what the real “brink” of total economic collapse would look like? I’m talking weeks out from doomsday… not years. The US is in a bad way. So is Japan. But the one staring directly into the economic clouds of Armageddon is none other than… Greece.
Greece received a 240 Billion Euro rescue package and the strings attached were plenty. Some serious policy changes including various austerity measures were among those demands. Greece is struggling to meet those requirements and what’s more their new and current political leadership won on breaking nearly every one of those promises to the Troika.
What’s more, because of this populist direction Greek Prime Minister Alexis Tsipras has taken, Greece doesn’t have the means to make good on their payment to the IMF.
So Greece’s finance minister, Yakis Varoufakis, puts forth a six-page proposal to the 18 Eurozone countries and the Troika. It backs out of PM Tsipras’ promises, but gets conditional approval for an extension on their 1.6 billion Euro debt payment.
Bottom line: they have until the end of June to foot the cash.
It eked through May using some seriously circular – albeit totally unsustainable – method. I can’t even describe it and I had to read it several times to get it, so I’ll just post it here for you to read:
“The IMF paid itself on behalf of Greece and will now be forced to pay itself back for paying itself later this month. Or, put differently, Greece has prepaid the IMF with IMF money it doesn’t have.” (Source: Zerohedge)
Greece tapped into its reserves and IMF holding account.
It was endearing to watch how Jack, Janet, and Chrissy managed to just barely make their rent each month in every episode of “Three’s Company”. But this isn’t a 70’s sitcom. This is real life. At least the writers of the sitcom had the tenets doing what was necessary to pay their debts. Greece… where “democracy” was born… overwhelmingly does NOT want new austerity measures, refuses to give on the pensions, wants a raised minimum wage, and balks at the idea of privatization.
So what is the politician to do? Stand his ground and default on his debt to the Troika? Or give in to the terms of the Troika and default on his promises to Greece? Clearly the Prime Minister did NOT know what he was getting into when he threw his hat into the ring for this job. But this is how it looks from the politician’s side. Given the heated protests Greece has seen in recent years, to break his promises to them would be more than political suicide, but likely would entail physical exile! I would expect nothing less than a storming of the castle.
What does it look like from the EU’s side? The cynic in me thinks that pity only runs skin deep and more countries than just Brussels and Germany would not lose much sleep over the idea of Greece losing its place in the EU.
If the EU continues to show leniency with no evidence of real responsible reforms, other struggling countries like Ireland might grow to resent the fact that while they put forth a sincere effort to get themselves back on track, Greece gets away with whining its way out of its contractual obligations. Countries like Germany might very well grow weary of its producers paying for the lack of production or concession on the part of Greece. Countries like Spain and Portugal might use Greece as precedent and follow in its footsteps expecting the same leniency?
What does it look like for the Greek people? Not good. Imagine a morbidly obese individual who was just diagnosed with heart disease. That person has been consuming without regard for future consequences for years to get to that dire place. Now imagine what it would sound like to tell them, “You must reduce your caloric intake to 2,000 per day, rather than the 10,000 you are used to. You cannot remain sedentary. You must walk for 15 minutes per day. You must adopt a more sensible diet with less sweets.”
From an average healthy person’s perspective, it sounds quite reasonable. From the perspective of the obese patient, it is offensive and draconian. This is what the incredibly left wing constituency in Greece is feeling. Unlike the US which has managed to get by kicking the can down the road by printing its own money – while calling a 9,000 calorie diet a tremendous win for its morbidly obese fiscal situation – Greece doesn’t have such a luxury. It has burned through nearly every last option, and is staring default square in the eyes.
No doubt Greece is sick. Terminally so. The prognosis is 4 weeks tops before it collapses. The next month will be interesting because, as the great Ella Fitzgerald once sang, “Something’s Gotta Give”. Does the EU offer an extension? Does Greece step up its fiscal discipline? Both? None?
If you think it can’t happen in the US, you are dead wrong. Part of Greece’s bailout package was recapitalization of their banks to the tune of 10 billion Euro. Are you prepared to have your hard earned money replaced with a note saying “Sorry for your losses, but thank you for banking with us!”? Do we really need to be where Greece is now to take individual initiative to protect our assets? Or are you willing to blithely sit by and hope the political powers that be or will be will take that initiative on your behalf when they get a moment?
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