Via Mark J. Grant, author of Out of the Box,
Late last night S&P placed Greece into “Selective Default” again. This is not the first time that Athens has been placed in the jailhouse and perhaps it seems like one more ho-hum event but perhaps not. The old bonds that were restructured were governed under Greek law but this second re-structuring is governed under British law. There may be challenges in the British courts as to the legality of “reliance” and “fairness” and it may be that the legal complaints mire the entire process in the courts for some period of time. This could then stop the next round of the Troika funding and cause all kinds of rancor in Europe. Then a “Selective Default” raises the issues, once again, of the $90 billion in Greek derivatives, the Greek bank bonds guaranteed by the country and now at the ECB, some central banks and some commercial banks where some clause may get triggered. Various clauses in repos, inter-bank lending contracts and guarantees by Athens of various corporate entities could also get triggered as the time it could take to drag through the British courts invalidates any repatriation sections of some contracts. The second and multiple times denied PSI during the first go-round may not prove to be such a slam dunk as thought by many and so I bring it to your attention.
In the meantime the European mandated austerity measures for Greece have driven their unemployment rate to over 26% as they replace Spain as having the highest unemployment rate on the Continent. The youth unemployment rate rose to 57% in Greece last month as I expect, any day, for Europe to outlaw the calculation of unemployment as hazardous to goals of the European Union. You may well laugh or snicker but who knows what these people could do these days. If they don’t like it; they don’t count it. If the ratings agencies opine negatively then they must be admonished and minimized. One can almost hear Rehn or Barroso invoking the rights of a united Europe to not be marginalized by these type of calculations.
In the meantime, because Americans hate to be left out of anything, we continue to behave like fools. The raising of the tax rate on the wealthy will operate the country for about eight days and it seems like the savants in Washington have forgotten that there are three hundred and forty-eight days left in the year. There has not been one proposal from Obama that has addressed the social policies of the nation that cannot be afforded. Secretary Geithner’s ,“We are prepared to go over the fiscal cliff,” has all of the dramatics of some bluff on World Wide Poker. The focus on redistribution of wealth is a secondary consideration when you cannot pay your bills. The debt ceiling debate is no better as all we are doing is adding more debt to a total that cannot be afforded now as the Fed grinds out more money, more Quantitative Easing and more highly questionable policies for the future of our nation. I propose that unhappy Americans unite, buy the Abaco islands from the Bahamas, they need the money, and begin our own island nation and let the 46.5 million on food stamps fend for themselves. I honestly feel that way some days as the idiocy in Washington D.C. seems to recognize no boundaries.
“America’s abundance was created not by public sacrifices to “the common good,” but by the productive genius of free men who pursued their own personal interests and the making of their own private fortunes. They did not starve the people to pay for America’s industrialization. They gave the people better jobs, higher wages and cheaper goods with every new machine they invented, with every scientific discovery or technological advance—and thus the whole country was moving forward and profiting, not suffering, every step of the way.”
-Ayn Rand