Skip to comments.Greece Is Burning and Nobody Cares (The market celebrates. Maybe endgame is finally coming)
Posted on 02/14/2012 5:56:22 AM PST by SeekAndFind
Greece is burning. Not that this is a new phenomenon. But it sounds so sinister, so ominous.
When you find out why it's burning, it becomes a tragicomedy. The Greek government -- led by unelected economist Lucas Papademos -- promises to slash the safety net of many Greek citizens for a big sack of bailout money. Ordinary Greeks, whose futures are being mortgaged, are very angry. Things burn. Then everyone goes home and waits for the money to arrive.
The process repeats with such frequency that a lengthy Wikipedia page has sprung up to catalog each outburst, hence the tragicomedy. And why shouldn't the country erupt in flames every so often? The country is a tinderbox with half its young people unemployed and 20% of the broader populace jobless.
Greece has never been much more than the first domino. One is all you need, and few of Europe's dominos are stable at the moment. How many fall, and how far the chaos spreads, is not something anyone can predict with accuracy. But this repetitive charade of punishment and protest has done nothing to steady the pieces. At some point, European leaders will have to decide whether unity is more important than stability.
Lined up and ready to fall
More important issues have been pushed to the back pages by the struggles of Greece, a small rocky nation of professional tax dodgers that contributes about as much to the global economy as the state of Maryland. Take the upcoming French elections. Nicolas Sarkozy may lose badly. With four major candidates in the running, Sarkozy is polling second, 8 percentage points behind a politician once mocked as "Mr. Pudding."
The threat is so dire that German Chancellor Angela Merkel will actively campaign for Sarkozy ahead of April's vote. This international political alliance has sparked a countermovement, with Francois Hollande -- Mr. Pudding to you -- stumping for Germany's anti-Merkel Social Democrats and lending his support to Spanish Social Democrats as well.
The Merkel-Sarkozy (or Merkozy, if you prefer) alliance has been crucial to a unified EU. Despite cultural and social differences, Merkozy have moved mountains to bring the EU closer together. Already this year, a fiscal stability treaty has been approved, further empowering Europe to directly influence its member states' economies. The French government will not ratify the treaty until after April's elections, and Hollande has gained popularity in part because he refuses to do so. If France rejects the treaty, there's little reason for other member nations to uphold it. But Merkozy's fiscal austerity has done little to fix the EU's problems, so perhaps there's little reason to continue down that road.
It's all downhill from here
This Wednesday will offer critical information on the state of the eurozone economy. Fourth-quarter economic estimates for eurozone nations will be released then, which may well corroborate earlier predictions that the region is sliding into recession. Other indicators bear out this belief. Eurozone retail sales fell during the holidays. German factory orders plummeted. EU-wide unemployment rates are testing heights not even reached during the last recession.
Total Unemployment, October 2009*
Youth (16-25) Unemployment, October 2009
Total Unemployment, December 2011
Youth Unemployment, December 2011
Source: Eurostat via Google Public Data. Seasonally adjusted. *October 2009 represents highest unemployment rate in the U.S. during current period.
Many Europeans may not have noticed the slide. The EU's anemic GDP growth rate collectively nudged above 1% just once in the past decade and suffered a shallower plunge by far than the United States in 2009. The EU recession has been one wrong step away for years. Now that a recession is imminent, the effect on global commerce might be more of a glancing blow than a knockout punch.
So what comes next? The long-term consequences of a possible Sarkozy defeat are uncertain. Events in France could cascade across the continent until leaders decide to emulate the evident success of American stimulus efforts instead of tightening the austerity vice. Or little may ultimately change. Political rhetoric rarely survives whole once the heat of campaigning gives way to the reality of governance.
Whatever happens, the EU is in no shape to be the engine of future global growth. Its birth rates are too low to support population expansion. Abysmally high unemployment isn't likely to encourage immigration. The economy may face recession for a period of time or bounce back toward mediocrity. The consequences of systemic unemployment at this scale take years to fully play out.
The markets don't really care about any of that for the moment. Many Greek stocks have bounced to the moon since the start of the year, with National Bank of Greece (NYSE: NBG ) up 94% and DryShips (Nasdaq: DRYS ) up 58%. It may be many months before the full measure of Europe's efforts can be known, but investors can still try to make that dead cat bounce.
American markets might fall when Europe accepts its harsh reality, but probably not for too long. 1997's Asian Contagion dropped the Dow (INDEX: ^DJI ) 1,100 points in October from highs set that summer, but new records were set by the following February. The Mexican peso crisis offered barely a speed bump. Russia's 1998 default set the Dow back all of four months before it resumed its march toward five-digit territory. If Europe had followed this familiar script, the Greek crisis would have been resolved a long time ago, quite possibly with fewer riots and less extended pain.
Granted, the eurozone has greater global economic importance than did the Asian nations, or Mexico, or Russia. Things may decline more sharply than most expect. But the eurozone has been more a rusty machine cranked by -- and feeding into -- Germany, and less a long-promised engine of continent-wide economic growth. If one of its many gears pops out, we might not notice as much as hysterical headlines might have you believe.
Today, Greece burns and the market celebrates. Maybe the endgame is finally coming. We can only hope.
Maybe collapse is the medicine Greece needs?
Coming to a country near you.
Coming to a country near you.
The liberal mainstream media is not covering the burning of Greece.Instead they cover Whitney Houston. Face it the media has been controlling the U.S.A for the last 100 years.
“Events in France could cascade across the continent until leaders decide to emulate the evident success of American stimulus efforts instead of tightening the austerity vice.”
Yeah, good correction. I really don’t have a heck of a lot of sympathy for people who thought they could live on fairy tales and other people’s money.
I’m saving the fire extinguishers for our country.
We’re going to need them around mid 2013.
The financial house of cards is about to collapse.
"The evident success of American stimulus?"
Just because there was a stimulus and, some three years on, there are a couple signs of recovery does not mean the stimulus caused them. Keynesians will find validation of their theories anywhere.
Obama’s Greek columns were truth in advertising!
At this point everybody knows that Greece can’t and won’t repay its debts. The hand wringing is the bankers and their puppet politicians trying to figure out how best to cover those bad loans by making taxpayers and their central banks repay the banksters.
The bigger problem is that other, larger EU countries are also over indebted and similarly at risk for default, which will become obvious once the debt bubble house of cards in the western world begins its inevitable collapse.
I suspect those statistics are every bit as bogus as the numbers the US Labor Dept. puts out every month, and that the unemployment numbers are double what the EU is admitting.
The fuse is lit and it’s only a matter of time before the whole thing goes “BOOM”!
RE: Im saving the fire extinguishers for our country.
Were going to need them around mid 2013.
I just cannot help but wonder why people are still willing to lend to America at less than 2% interest rate.
The 10 year yield today is just 1.99% ...
Or maybe, most of it is the Fed printing money to buy up US treasuries...
The fat lady has sung. Finally.
what? WHY WORRY!
Obama’s Plunge Protection Team will TWIST the markets with your tax money, buying stocks to prop up prices, until the election is over.
“Greece has never been much more than the first domino”
“But this repetitive charade of punishment and protest has done nothing to steady the pieces.”
“At some point, European leaders will have to decide whether unity is more important than stability.”
“Francois Hollande — Mr. Pudding to you —”
“The Merkel-Sarkozy (or Merkozy, if you prefer) alliance”
“Many Greek stocks have bounced to the moon since the start of the year, with National Bank of Greece (NYSE: NBG ) up 94% ......but investors can still try to make that dead cat bounce.”
“But the eurozone has been more a rusty machine cranked by — and feeding into — Germany, and less a long-promised engine of continent-wide economic growth. If one of its many gears pops out, we might not notice as much as hysterical headlines might have you believe.”
(me) Just rip the darn band aid off! Painful, but the healing can finally begin.
“The liberal mainstream media is not covering the burning of Greece.Instead they cover Whitney Houston. Face it the media has been controlling the U.S.A for the last 100 years.”
I can’t say I blame them in this case. It’s such a routine there. Here we have kicking and screaming in talk radio when the government does something unpopular - there they go out and burn buildings. A week later...no difference, the stuff passes...and life moves on.
It like the Ralph and Sam cartoons.
That line also jumped out at me. How can anyone possibly term the profligate “stimulus” spending — with its paucity of positive results — as an “evident success”?
Do some reading on Credit Default Swaps. And watch as we approach the 20th of March. The issue will be if Greece technically defaults, the CDS’s will kick in and much more than 130 billion would have to be paid out. This is what killed AIG back in the day.
THAT will kick off the dominoes.
This is why the Merkozy group is scrambling to avoid default.
Can you even imagine NYC, Chocago, or LA when the EBT cards run out.
That is going to be a scary day.
Lurking in the hearts of every career politician is a dictator waiting for a chance to emerge. Defaults will provide that opportunity galore. I expect to see elections and constitutions suspended by defaulting nations, and they won’t be returning to politics as usual when the crisis is over. It all comes down to political power, and who keeps it. ...Greece is just the tip of the iceberg.
If the dominoes start tumbling in Europe and the US, the ChiComs and the Saudis lose all of their customers. And if that happens the unrest in those places will make Greece look like a Sunday church picnic.
A big, foul, smelly, corrupt deal is in the works. Everyone will sign on and the world will go careening on as before.
There is a phrase for what is happening in the US right now. It is not a good thing:
Bread and Circuses.
I cracked up about this line calling it the standard cycle:
“Things burn. Then everyone goes home and waits for the money to arrive.”
‘Cept this time the money never arrives and the buildings sit there, as though they think they are in New Orleans.
There ya go...
Just visit Greece and observe the culture. Then you’ll understand why all of this is going on.
I have to pause when I read a name like "Papademos." I mean, really. The Greek can throw you, but "Papa Darkness?"
[until leaders decide to emulate the evident success of American stimulus efforts instead of tightening the austerity vice.]
Dear Lord, do they have any idea how idiotic that statement is? Let’s all spend our way to prosperity!
When you are that far in debt, you are the problem. It’s a bit late to blame the banks, especially when it is the people who regulate the banks who are complaining.
Hint: stay out of debt
Bankers caused it with their ever loving usury and cheap money and their bribed politicians who put governments deeply into hock. It is a world wide phenomenon since the beginning of time. The crooks in our 1913 Congress gave the Federal Reserve the right to print our money and put us into perpetual debt.
The people don’t want this but are stuck with crooked politicians and greedy bankers who create bubbles and then profit when the bubble bursts. When the USA bubble bursts the bankers who caused it will be owning our roads, our Grand Canyon, our military, our prisons and as always our politicians. The problem comes down to crooked greedy politicians (both Parties) who work for their own instead of the people.
I blame crooked crony politicians and banks. I purposely have stayed out of debt but I feel a giant sucking sound thanks to both banks and pols that will eventually affect national stability and my life, and a long effort to stay away from the clutches of the usurious thieves who diligently try to profit on the backs of a society kept in ever more debt.
The owners of our society understand exactly how easy it is to keep the sheep strapped and in debt with a blitz of mass media advertising.
I don’t pay any attention to the MSM and this is why I’m neither beholden nor captured, but many are.
The alternative is watching their money disappear. 2% is pretty good by comparison.
The author makes much - too much, IMHO - of the "success" of the American stimulus spending. In fact, we are the beneficiaries of the situation being worse elsewhere. That tends to mask our own outrageous misbehavior and will until there is literally nowhere else to turn. What happens after that will not be pretty.
You are a passenger on a crashing plane, but your stuff is all in order.
Millions of entitlement zombies on the rampage will be pretty scary.
Could be. But why isn't the market pricing this in?
Not for me. I'll be sitting in Mayberry, locked and loaded, watching the farce on TV.
How does one price in a melt down. As we get closer you will see it come into play.
By why bother? Just buy apple. /sarc
They aren’t. That’s why the Fed is buying our Treasury bonds.
Which, of course, just means that inflation is growing, as there is more and more ‘little green pieces of paper’ floating around to exchange for the same amount of goods and services.
And to fool people, our government has decided that the best way to track inflation is to *NOT* count things like food and fuel. You know, the types of things people buy on a daily basis...
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