Reading Between The Lines
Via Mark J. Grant, author of Out of the Box,
Tomorrow the Wizard turns 620. I was out with him last night in a little pre-birthday celebration and I asked him how it felt to have that many years under his belt. He laughed and replied that being a Wizard had it occurred to me that he might not have started at one? No, I admit, I had not thought of that, which opened up a realm of possibilities that the old codger could actually be far older or far younger than was generally presumed. I then asked him if he planned to be around for his 630th birthday day and he replied that the odds were good. He said he had done a whole statistical model and that very few people died between 620 and 630 and so he was likely to make it to the next milestone. At the end of the evening, with a twinkle in his eye, he informed me that he would not be here on Saturday in any event. He said that he had learned something from the Europeans and that he was going to follow their lead. He informed me that he was going to get on his broomstick, fly across the international dateline and so never have an actual birthday. Then he will return to America and claim that the damn thing never happened. I guess he is still learning a thing or two!
Reading Between the Lines
One of the great faults with paying attention to Europe is to take what they tell you as factual. The media trumpets what they are given by the various sources of information in Europe but a quite skeptical eye is what is needed. They claim that they do not have the “Final Troika Report” on Greece because they have not stamped it “Final” yet and so they blame their indecision on the magic trick that they are performing. Everyone on the Continent has the report but since they can agree on almost nothing they have blamed the lack of the rubber stamp as the culprit. They should just come out and say that, “It is the rubber stamp’s fault” and be done with it.
Every easy trick has now been exhausted when it comes to Greece. You may feel worn out and tired by the length of time this process has taken but that is a remarkably short-sighted viewpoint. You should be happy that you have had the time to carefully consider and plan for what is about to take place because ugly is about to get uglier and you will see retching in the streets; not just in Athens but in Berlin and Madrid. I would say that the odds are about 60/40 that what is happening is that the European Union is trying to force Greece out of the EU by having Greece refuse any more of the austerity measures and not get funded. It is a “Game of Houses” because Germany does not want to take the blame and they want Greece to throw up their hands and leave so Berlin can say, “What can we do?” To actually force Greece out would be a violation of principles that Germany cannot politically afford and so a quite complicated ruse is underway. The severity of the situation is indicated now by the Red Lines that have been drawn by all of the major constituencies so that there is no compromise to be found. As I have stated before we are at the Crossroads, at Breakpoint, because every proposal is met with a hard line drawn in concrete by someone in some corner of the deliberations.
The IMF will not provide any more funds without a 120% debt to GDP ratio by 2020 they claim but what this really means, and what they have come closer to saying recently, is that they will not dish out any more money unless they feel that they will get paid back (Red Line). The IMF has suggested that perhaps the ECB could take the loss and Mr. Draghi has said while they might forego the profits on their Greek Bonds, estimated at about $16 billion, that they will not take a loss as it would violate their charter of not financing individual nations (Red Line). The IMF has suggested that the Stabilization Funds could take a hit which Germany and several other countries have said is impossible because it would probably cause several governments to fall in Europe (Red Line). The Greeks have asked for a two year extension in payments which would require another $40 billion to be handed to Greece as Austria, the Netherlands and Finland have all publically stated “No more money for Greece” and another wall (Red Line). The markets all think that it is just another moment to muddle through but I am telling you, having examined the evidence and considered all of the possibilities, that this is not the case and that my conclusion will very soon prove to be correct. The length of time this process has taken may have numbed some people’s sensitivity to the danger but with $1.5 trillion in total debts that could go into default; the danger is quite real and the shock will be systemic. The ticking time bomb has been loaded and it is about to explode whether you realize it or not.
It is going to be either “debt forgiveness” or “more money” or “brute force” and there are quite serious consequences for many nations and many governments whichever path is chosen. “Debt forgiveness” is a sacred promise broken and “more money” is politically impossible in some countries at this point. Europe may have concluded that it is far better to force Greece out by continual demands and ever increasing austerity measures and that the losses from a Greek Exit, which would be borne by all, are a better alternative to the other two roads as the Germans and others could blame the Greeks and not take the responsibility. Three roads, all ugly, which is why the length of the delay and the hesitation to engage. Any of these three paths will lead to extensive pain and a lot of contagion and so I conclude that the Greeks will get forced out by increasing European demands as that is the least politically damaging alternative for many of the nations in Europe. “Blame it on the Greeks” will be the secret password while the Greeks will call Berlin every name in the book.
“The summer day is closed - the sun is set:
Well they have done their office, those bright hours,
The latest of whose train goes softly out
In the red west. The green blade of the ground
Has risen, and herds have cropped it; the young twig
Has spread its plaited tissues to the sun;
Flowers of the garden and the waste have blown
And withered; seeds have fallen upon the soil,
From bursting cells, and in their graves await
Their resurrection. Insects from the pools
Have filled the air awhile with humming wings,
That now are still forever; painted moths
Have wandered the blue sky, and died again”
-William Cullen Bryant