Let’s talk about the Greek issue.
More than enough ink has been spilled on this from the mainstream financial media. However, I do think we there are a few key takeaways we should note from this whole debacle.
1) Elements of the financial media is either unbelievably lazy or completely complicit in helping to maintain the illusion of success for the Centralized powers (large governments and Central Banks).
2) The political class and Central Banks are unable to resolve debt issues in any meaningful way.
3) The real “bottom” or level of “price discovery” is far lower than anyone expects due to the fact that the run up to 2008 was so rife with accounting gimmicks and fraud.
Regarding #1, it is worth noting that the Greek Crisis actually first started in 2009 when the country’s credit ratings were cut by all three credit rating agencies: Moody’s, Standard and Poor’s, and Fitch.
The first actual request for a Greek bailout came in April 2010, over five years ago. Since that time, Greece has received two formal bailouts, its credit ratings have been dropped to “junk,” and its GDP has collapsed over 20%: an amount roughly equal to the economic collapse experienced by Argentina during its 2000-2001 crisis.
Throughout this entire process, the financial media media has run thousands of articles proclaiming the Greece crisis was “over” or “fixed.”
Below is a spate of headlines from this period.
ECB chief Mario Draghi says worst of euro crisis over [14] (March 2012)
European leaders say worst of debt crisis is over [15] (December 2012)
European leaders hail breakthrough in debt crisis [16] (January 2013)
Eurozone exceeds hopes in recovery [17] (February 2014)
Euro-zone crisis over; at least the financial crisis is [18] (April 2014)
Greece Exits Recession After Crisis That Put Euro at Risk [19] (November 2014)
Worst of Euro Crisis Ended in Poll With 57% Optimistic [20] (January 2014)
These are the more blatant headlines… however the entire five years period was filled with claims that the debt issues were contained if not easily fixable.
Usually the article featured an anonymous “official,” but as the below article shows, even Finance Ministers were willing to go “on the record” proclaiming that the EU had weathered the worst of the debt crisis storm:
The worst is over in the euro crisis, German Finance Minister Wolfgang Schäuble said on Friday, praising Greece and expressing confidence that France would master its problems.
Asked if the euro crisis would continue to worsen in 2013, Schäuble told German daily Bild: "I think we have the worst behind us. Countries like Greece have recognized that they can only overcome the crisis with hard reforms. I hope the progress will continue. We are moving ahead step by step."
The above article is from December 2012.
Reviewing the above headlines (or thousands of others like them)… one is reminded of what current EU President Jean-Claude Juncker once stated, “what it becomes serious, you have to lie.”
Unfortunately for investors who use the news as a source of information to guide their investment decisions, the financial media was an all-too willing accomplice for the Central Banks and statist types. Which returns us to point #1 in our list above:
1) Elements of the financial media are either unbelievably lazy or completely complicit in helping to maintain the illusion of success for the Centralized powers (large governments and Central Banks).
This has caused no shortage of harm to investors betting on Greece’s recovery. Greece’s stock market lost 85% during the first round of its financial crisis. The recovery rally peaked in 2014 right before it became clear that the first bailout hadn’t solved much of anything. Since that time, the Athens stock exchange has fallen another 52% with no indication of a bottom.
What does this tell us?
That the debt issues which lead to the 2008 Crisis as well as the 2012 EU Crisis have not been resolved. All the Central Banks have done is pave the way for even bigger crisis… a crisis that will involve entire countries, not just banks, going bankrupt.
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