Financial Sense | February 23 2012

Listen to the empty words of the last bailout for Greece. Credibility with the Jackass was lost back on the third bailout, well over a year ago, out of the six bailouts in total. Perhaps it is seven comprehensive final bailouts. The pattern is clear. The politicians, without popular support, forge agreements on debt coverage with the Greek officials. The deals fall through, hit the ground, and expose the lack of support even from the European bankers, led by the Germans. The pattern has been vividly clear for over a year, enough for my dismissal of new accords right away on the basis that the German bankers will not conform and agree to the deals struck. The political leaders in France (Sarkozy) and Germany (Merkel) are due to lose their offices, yet they continue to march around at useless summits attempting to cut last ditch agreements that mean nothing. The people are not willing in Germany to hand over any more than the $3 trillion to date, from the start of the common Euro currency experiment. The bankers, like at the Bundesbank, should attend the summits, but that would be too obvious on where the majority of power is held. What is unfolding is a comprehensive Greek Govt debt default from the inability to contain the situation, the impracticality of the austerity budgets put in place, the wreckage that has come to the Greek Economy, and the intractable solution.

My view is the entire charade for two years has been a grand delay to enable the big banks to sell out of their bonds and dump them on the Euro Central Bank. Almost every bailout has been of bank assets in some sort of redemption, not budget assistance. The biggest question posed and not answered is: HOW ANGRY ARE THE OWNERS OF THE FEDERAL RESERVE AND EURO CENTRAL BANK TO ACCUMULATE AND OWN SUCH A MOUNTAIN OF TOXIC PAPER?? My German banker source says the Germans will make what seem like agreements or permit the politicians to make them, but the bankers will consistently obstruct them. He steadily stresses how Germany has wasted $300 billion in savings each year, is exhausted, and no longer is willing or able to provide national welfare for Southern Europe. They will write no more checks except what will successfully grab collateral prize properties. It has become obvious the Greeks will not hand over much of any property without lighting the city on fire. It is the end of the bailout road. A few months ago my firm position, stated in the newsletter, that the bailouts would end when the riots amplify.They have amplified. Conclusion: GAME OVER.

Next comes a planned or unplanned default. Let’s see how inequitable they will make it. Obviously it will be inequitable, since all accords have greatly favored the bankers. The TARP Fund was the most egregious, but it only disguised the bigger multi-$trillion grants with zero cost to the many banks, both central bank and private bank. The upshot of the Financial Regulatory Bill is that the USFed must open its books, but only after such loans take place, not to be reversed. Back to Greece. For a few months, some clarity and realism has entered the discussions and analysis concerning the burning nation of antiquity. The new theme has been that Greece will default, must default, and cannot avoid a default. Exactly. So the challenge is to avoid the horrendous collateral damage that will come. The central bankers, regional commissars, and technocrats have been working overtime, but Davos was a missed opportunity for forging potential solutions or at least elements.

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