David Stockman saves SLL the trouble and mauls the Greek-EU debt agreement. SLL may well take a break from this topic until the agreement meets its inevitable political or economic failure. From Stockman at davidstockmanscontracorner.com:
The preposterous Gong Show in Brussels over the weekend was the financial “Ben Tre” moment for the Euro and ECB. That is, it was the moment when the Germans—–imitating the American military on that ghastly morning in February 1968——set fire to the Eurozone in order to save it.
Some day history will judge good riddance……..but that get’s ahead of the story.
According to an American soldier’s first hand recollection of the Vietnam event, it was a Major Booris who infamously told reporter Peter Arnett, “It became necessary to destroy the town to save it”.
After the massacre of Greek democracy in the wee hours Monday morning, Angela Merkel said the same thing—even if her language was a tad less graphic:
“It reflects the basic principles which we’ve followed in rescuing the euro. It now hinges on step-by-step implementation of what we agreed tonight.”
Now no one in their right mind could think that lending another $96 billion to an utterly bankrupt country makes any sense whatsoever. After all, the Greek economy has shrunk by 30% since 2008 and is wreathing [sic] under what is objectively a $400 billion public debt already in place today.
That figure follows from the fact that on top of Greece’s acknowledged $360 billion of general government debt there’s at least another $25 billion loan embedded in the ELA advances to the Greek banking system. The latter is deeply insolvent, meaning that some considerable portion of the $100 billion ELA currently outstanding is not an advance against good collateral in any plausible banking sense of the word, but merely a backdoor fiscal transfer from the ECB to keep Greece’s financial shipwreck afloat.
Likewise, as I demonstrated Friday, given the even deeper deep hole into which the Greek economy has tumbled during the last six months, the fiscal targets extracted from Greece under this weekend’s demarche are utterly ridiculous. Indeed, even if the targeted primary surpluses of 1,2,3 and 3.5% of GDP are miraculously reached through 2018, upwards of $15 billion of budget deficits after interest accruals would be incurred anyway, and a lot more than that if there are material budget shortfalls, which is a virtual certainty.
So even before the latest dose of Troika economic punishment further debilitates its economy, Greece at this very moment has a de facto public debt of $400 billion sitting atop $200 billion of GDP.
To continue reading: The Curse of the Euro: Money Corrupted, Democracy Busted
Regarding Greece and the EU: “SLL may well take a break from this topic”…
Please don’t leave us hanging like this. Big surprise coming? Or just China, Puerto Rico, Spain and all the rest of the bankrupt gang on the SLL agenda?
While the Greek negotiations went on, I published very few articles on them, other than noting that Greek debt, like oil patch debt, was on the cutting edge of what is becoming a generalized debt contraction and deflation, regardless of the outcome of the negotiations. Somebody is going to take a hit, and this can-kicking exercise is just a transparent and bound-to-fail attempt to delay the inevitable. The last two weeks I’ve published more about Greece, but my basic stance has not changed at all (see “Doomed Dinosaurs”). However, I’m tired of the day-to-day ins and outs, so I’m taking a break until something important happens, which will probably be the failure of this agreement, either for political reasons in the nations involved (somebody refuses to ratify it), or because Greece and its economy implode.
I do wish the Greeks had defaulted and left the Eurozone. It would have underscored the unsustainability of the world’s current $200 trillion in debt and hastened the inevitable debt contraction and deflation. It would have dealt a hopefully mortal blow to the statist enterprise the EU has become. And it would have reminded the world that sovereign debt rests of the productive efforts of a nation’s people and their willingness to pay it. All of this will eventually transpire, so let’s get on with it.
Amen. Insightful per usual.