The Greeks are rioting in the streets again. They don’t like the new tranche of austerity measures that their parliament was forced to levy on the country. This was in response to the northern eurozone countries imposing more conditions before giving Greece its next bailout check of approximately $170B in March. The north, led by Germany, is keeping a wary eye on Greece to see if these austerity measures will be made to stick.
Greece’s big unfunded liability is of the same stripe as ours – entitlements that range from public employee pensions to healthcare. We recall that in Greece one out of four workers is unproductively employed by the government. And up until now, the parliament doesn’t even want to put public sector pension cuts on the table.
The markets in Europe and America are acting insanely as they digest the daily dribble of news from Brussels and Athens. ‘Are the Greeks going to make it? Well maybe, and then again, today it doesn’t look like it.’ My long held view that Greece will tank is getting more certain by the day. There is no hint that with the March check, the Greeks will be any closer to financial stability than they are today. They’ll use that cash to service their national debt, make government payroll and pension payments, and buy time in dickering with their bond holders to take a 50% haircut. But none of this will put the country on to a path of fiscal recovery. After the March check, they’ll start rioting for the August or September check.
As a political and finance junkie, I keep asking myself as to who benefits from this silly dance with the foregone ending. The only answer I have been able to cobble together is the ruling elites and the rich guys. They are buying time to get their finances rearranged, relocated, and redoubted (hidden in places their governments can’t get it, see nearby chart). So when it finally hits the fan, and spreads from Greece around the European shore of the Mediterranean to the northern countries, the remaining visible wealth of the smart people will be small enough to surrender without really affecting the quality of their lives. The delay also gives the clever people time enough to get out of Dodge, whether that be a political office or country of residence.
Countries like Switzerland have been the monetary redoubt for the smart and wealthy for generations. But now that security is being breached by developed nations led by the US. The Swiss are now the prime target of big countries who want to know who of their citizens have how much squirreled away where. While the Swiss and others are putting up a fuss to the likes of America, they have no intention in getting out of the numbered bank account business for the rich of the less developed and muscular countries. From these countries it is still easy to pull profits from your nation’s natural resource sales, or even foreign aid from idiots in America, and get it into your secret accounts on some ‘El Dorado shore’.
The theory here being that it will be more difficult for Uncle to demand that another sovereign nation-state’s banks plunder their account holders and turn everything over to a future fundamentally transformed government on these shores. I don’t put much truck in that kind of planning – ‘nice try, but no cigar’. If our feds know you have it, they will track it, and can grab it wherever it is. There are so many ways for those sleaze bags to pull that off when the time comes.
Meanwhile, the rest of us in currency denominated securities are screwed, no matter where we keep them. Today the countries of the world owe about $45T in sovereign debt. This is a very lowball estimate that does not include any add-on unfunded entitlements, which can range up to five times this number. The only way the new world order can come into being is through a massive worldwide default of outstanding debts that will be hailed by legions of lamebrains. We have only to remember that the borrowers have the guns and will not hesitate to use them. And that creditors are empty handed when governments ultimately become openly criminal.
[Addendum] And for the true believers that some day growth will come at rates high enough to begin retiring debt, here is some more news about the EU.