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Wednesday, September 14, 2011

"Weekend At Bernie's"- Greece/ European Union edition

Been observing what happened in the market today.. 140 spike based on hope that the EU would step in and prevent Greece's default' and eventual destruction of the European Union.  Yes I know, Investors putting money INTO the market based on Hope is pathetic..   I know..  Investors are parasites.. but lets' move beyond that..

Stocks jump on hopes for progress on Greece's debt (AP) --  "US stock indexes rise sharply on optimism that Greece will be able to avoid a default... European leaders renewed pledges to help Greece avoid defaulting on its debts... statements were intended to calm fears that Greece was headed for a default on its debt or might be forced to exit the euro."

What's going on in Europe reminds me a lot of a cheesy 1980's movie called "Weekend At Bernies".  The premise was basically two friends invited for a weekend to a luxury island with their boss. The boss gets shot and nobody seems to notice, except for the two friends. In order not to become suspects of murder they treat the body as a puppet and make people believe he's still alive. 

And that's what is going on in Europe-  Germany and France basically carrying Greece, an economically Dead nation around like it was alive while everyone else pretends not to notice anything.

Let's put this idiocy in everyday terms:  Let's say someone who made $20k a year ($1,666 a month) owed you $500k in debts, and the monthly payment of those debts to be paid to you were $5,000, would you feel "Hopeful" you were getting your money?

Greece is Broke.  Here are some basic statistics on the nation-  In the US, we worry because our 2Q GDP was +1.5% growth.  In Greece, it was -7.5% which if you place that figure in a major nation, would equal Catastrophic Depression.   Its GDP, converted to US dollars is $310.3 billion.  Its public debt is $469.8 billion (142.8% of GDP) and gets larger by the month due to combination if harsh austerity and increased interest rates on the loans.   We in the US bitched and complained that S&P lowered our credit rating to AA+ from AAA.  In Greece, their credit rating is F, and whether its banking or a grade on a term paper, it means the same.

The leaders of Europe are Liars.  A putrid filth escapes their mouth with each word uttered.  To save Greece from default is going to cost Europe (mainly Germany) hundreds of billions of Euros that will be essentially taken from the people of those more prosperous nations to pay for the failure of others.  There's Italy with a GDP to debt ratio of 120% that's in such bad shape, it had to beg on bended knee and opened mouth for China to financially save them (which so far they haven't).  And then Ireland and Portugal..  and Spain is in very weakened shape.   

To prevent the destruction of the EU will take Trillions of Euros.  And if you're thinking, 'Eh, I'm an American- I don't care & it doesn't affect me',  you better get it through your head that ultimately, the United States bails out EVERYONE.   After 2008's crisis, Bernanke spent $1.5 Trillion in taxpayer dollars to go to European and Asian banks as well as private corporations to supposedly save the world.   

The US will do it again if need be.  How can I tell?  This sentence from AP:  "Highlighting the threat to the global economy, (Treasury Secretary Tim) Geithner is to exceptionally attend talks between European Union finance ministers and central bankers in Poland on Friday."

Why would a US cabinet member attend a European finance talks?  Or more specifically, why would any American be invited to attend?   Because ultimately, just like America has become the policeman of the world, we also have decided to be the financial backstop of last resort too.

The very best scenario for those in power clinging to EU and keeping Greece breathing is to come up with a financial package to kick the can down the road again until maybe the current leaders are out of power and a new batch of know-nothings take power... and the fall.

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