Keep Watching Greece Because What's Happening There Is Coming to America

Greece to be Bankrupt by August; What Would Happen?

June 21, 2010

The Coming Depression - Why is it that most folks, in their quest to blame capitalism for all that ails global economies, they fail to notice it was actually the outrageous socialists governments policies that brought counties like Greece to the brink of financial disaster?

When citizens of Greece take more from the economy than they put into the economy, countries at some point become insolvent. Instead of attempting to clean up the widespread corruption that the citizens were engaged in for years and years, cutting back on the outrageously generous socialists programs the government provided to their employees, other workers and senior citizens, the government for years has been borrowing non stop. Indeed, other socialists countries such as Spain and Portugal are next to fall victim to insolvency.

Take Iceland -- another country with too generous social programs they cannot afford -- their economy fell bankrupt very early after the global financial crisis hit Europe big time.

For those who are a bit confused, yes the bailout is recent but the new Greek government, which came into power in late 2009, announced the fiscal imbalances then. It was still tapping the markets for debt for some time and had started making changes within the month of power. Changes that could easily be implemented in certain expenditures. Then when it announced it could no longer afford to go to the market, it still had some time until the bailout without the need of getting money but had already announced certain austerity measures such as public wage cuts and social spending.

It still has many problems and difficulties coming to agreement with certain important reforms such as pension system, and will have to wait at least till end of 2010 to see statistics with its crucial austerity measures such as tax increases, collections from tax evasion, and health costs and elimination of subsidies. These things take time to see effects and its still in the danger but has the cushion of a three-year bail out. If they can’t make the necessary corrections and implement important reforms to change the public sector and hows its managed, and its citizens and businesses need to start feeling comfortable, then it will be in big danger.

It’s pretty much do or die for Greece. So they can either get it right and make things work for the better for the whole nation hence forth, or destroy themselves completely where Greece becomes like a weak Eastern European nation.

US Economist Fears Greek Debt Default in August

Greece will eventually default on its debt because the country is highly indebted and the euro zone’s approach towards saving it is the wrong one, Carl Weinberg, chief economist at High Frequency Economics, told CNBC Friday.

A restructuring of Greek debt could happen as soon as August, when the Balkan country is due to receive another tranche of funds from its lending agreement with the International Monetary Fund (IMF) and the European Union, according to Weinberg.

“You can’t take a country that’s over-borrowed and make it more creditworthy by lending it more money,” he said. “They’re throwing Greece further and further and further in the hole by not addressing the problem directly and properly.”

Asked when a Greek default could happen, Weinberg answered:

“At High-Frequency, we are advising people to take their cell phones on their August vacation.” He said a Greek default would be “harsh” for the euro.

A lot of people are advocating higher taxes in many countries as methods to vanquish obscene spending and subsequent debt, but these people should be careful what they ask for. In the 1970’s, the UK reached the limit of this with 95% taxes for the “rich.” Debt continued to increase because no matter how high the taxes, any new money was put towards more government, rather than reducing debt.

Now dollars are worth much less than they were then. If you have/had a defined contribution pension plan, it will/would be worth a lot less when you retire, if inflation is allowed to increase (inflation is entirely under control of the government). If you want a gauge of inflation, consider oil: 10 to 20 barrels of oil has always bought one ounce of gold; 10 to 20 barrels of oil has always bought a nice wool suit. The value of goods doesn’t change; only the price. Today, you need $2,000 while in 1940 you needed $20. Same stuff, same hours to earn the money, just different numbers for the money.

It is time to go back to the tax structure we had fifty years ago. The debt rightfully belongs to the less than 1% of wealthy people who now own 90% of everything in the country and the corporations who have been on welfare too long. Working people in all western countries have paid for their pensions and benefits.

Argentinians Have First Hand Knowledge

In Argentina, our people ended up getting used to being much poorer, so when “normal” times returned, the Goldman Sachs- and Citicorp-controlled local media were able to ensure that a new puppet regime subservient to the money interests should come to power: i.e., the husband and wife pro-banking mafia team of Néstor and Cristina Kirchner… And the merry-go-round keeps turning and turning, whilst the Argentine people keep paying and paying…

Today, we look at Greece and see the same tell-tale signs:

• The IMF imposing strict austerity measures as a condition for the banks to lend more money to them (as if a country collapsing under the burden of debt can overcome that by getting into even more debt!!);


• The mainstream media speaking vociferously on the need for “Greece to do things correctly and responsibly” (as if the US FED, the Bank of England, Goldman Sachs and the US Treasury, Greenspan, Bernanke, Paulson, Brown, Geithner, Blankfein, Greenberg were examples of responsible accountability);


• Local caretaker governments doing all they can on behalf of banking interests (George Papandreou is a regular at the Bilderberg and Trilateral Commission meetings, as was Fernando de la Rúa, a founding member of the local chapter of the Council on Foreign Relations in Argentina called CARI;


• Major banks such as Goldman Sachs trying to collect their pound of flesh in the midst of all the turmoil and hardship.

All of this against a backdrop of desperate citizens taking to the streets to express what is obvious to all: that international bankers and local caretaker government form a complex association of thieves and robbers.

What would happen if Greece defaulted?

If Greece defaults, 7 percent of the entire European Union financial institution liquidity disappears. Likewise, you cannot get paid in drachmas (Greece’s original currency) that are worth next to zero, and the Greek economy would likely still operate on Euros with or without EU approval. In fact, they’d be a constant 6% pain to the system through arbitrage.

Bond holders, including foreign governments, pension plans (including Canada’s major plans, although a very small percentage amount), and other savings vehicles would be decimated. People in European Union banks would lose their deposits — unless the taxpayer bails out the banks through deposit insurance — which has nowhere near enough in the coffers to make up for these staggering losses.

Therefore, bond holders will take massive haircuts, losing both their clients’ equity as well as future interest yields. They will never get their savings back again. This includes mutual funds, ETF’s, and so on. Either way, taxpayers will foot this bill or people with pensions (including state pensions) and bank deposits will lose their assets.