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So Mr. Tsipras has sold out his countrymen.  He called for a referendum fully expecting a “yes” only to receive a resounding no vote.  No matter though, what was already “planned” has already gone forward to kick the can down the road.  As overwhelming as the referendum was and as in your face the following proposed agreement is, outright rioting, violence and even civil war has a high probability of resulting.  A “convenient  coup” (remember Ukraine?) could even be in the works?

Looking at Greece from a grand standpoint, what’s the deal?  First, Greece is really not much worse off than Portugal, Spain (the West’s newest police state), Italy or even France.  Truth be told, Greece has less debt per capita than us “rich” Americans.  No doubt Greece is symptomatic of the West’s position of too much debt …not enough GDP but this is not really what I’d like to talk about today.

Greece initially was bailed out in 2010 and again in 2012, two can kicks if you will.  The current episode has been going on for well over six months, it is not a surprise to anyone by any means.  My point is this, we have seen lines outside of ATM’s for over two weeks but the situation has been known about and well publicized for quite some time.  Other than pensioners who are trying to retrieve their latest monthly or bi weekly payment, who else should be standing in these lines?

Certainly money has bled from their banking system over the last year, a number around 100 billion euros …but there is still over 100 billion euros left?  Who would have left any cash in Greek banks as wide spread and “early” as the bad news on the banks has been?  Were the Greek people sleeping?  Did they have the American “can’t happen here” syndrome?  Who would have been stupid enough to leave capital in the bankrupt banking system of a bankrupt nation?  Mindboggling isn’t it?

Let’s switch gears and now look in the mirror.  Have we not had enough information here in the U.S. to understand we face the same fate …only much bigger and far worse from a leverage standpoint?  Yes I know, mainstream media works overtime to keep the cattle penned in their “everything is fine” corral, but isn’t it obvious to anyone who bothers to wipe the fog from the window?

Think about it, the financial world almost ended in 2008.  Nothing was fixed, nothing even changed.  In fact, the only change has been the degree to which unsound monetary, fiscal and banking practices have been since then.  It is as if we hit a brick wall in 2008 yet pressed the accelerator harder ever since!

This article is not about groundbreaking thought, it is meant to ask “why”.  Why is there no panic or fear?  Why if the real global economy is slowing and shrinking do we not see any financial reaction?  Why if the financial markets are far more levered than they were in 2008 have the wheels remained in place and few questions are asked?

I think the answer to this is pretty simple and can be summed up with the old saying “nothing matters until it does”.  Over the last two or three months I have fielded so many questions like “why can’t this go on forever with the central banks just papering everything over”?  I believe your answer lies in this question!  “Papering” being the key word.  There is such a thing as “reality” or “truth”.  Yes this can be hidden for a time but always, water will seek it’s own level.

Let’s take a look at Greece again, a “deal” has been struck and the fear in the “reality community” is the can got kicked again and it will go on forever.  First, has a deal really been struck?  If so, what is it exactly?  Think about what has come out this week.  Their banks are still closed (and will most likely be bailed in), “safe” deposit boxes cannot be accessed, talk of a 30 year extension in debt has been tossed around and the IMF now says they may not be able to participate in any bailout because they cannot give aid to an insolvent entity.  Is anything fixed?  Has anything been done to make Greece an ongoing concern?  What sort of deal can be made that even looks doable?  The answer to the above of course is nothing can be done and no deal is really doable because Greece is broke and simply cannot pay.  You see, any deal that is done must at least appear feasible, there is no such thing!

Markets so far have been kept fairly well under control.  This has been done via the use of derivatives but these are what caused many of the problems in the first place.  How do you think Greece, a financial deadbeat, was allowed into the Eurozone to begin with?  Derivatives!  Derivatives were used to hide much of their debt.  (Now Goldman Sachs may be sued for their aid in the fraudulent entry of Greece via bogus derivatives).  Though it was hidden, did the debt go away?  No, the debt and the service on same has jumped up and brought forth the reality of bankruptcy.

To finish, you can call dog crap whatever you would like.  Call it a rose, call it beautiful, call it whatever.  No matter the name, it is unpleasant to look at, smell or especially step in.  Greece is simply the first one to be realized, all the others up to and including the U.S. are in the same insolvent boat.  If you are sitting tight and believe “it can’t happen here”, you are making the same mistake the many Greeks who are standing in line made.  It can and will happen here, it mathematically has to as there is no other alternative.  Anyone with enough sense to step around a pile of dog pooh should have enough sense to get out of the system NOW to the best of their ability.  Ask any Greek if this is good advice!  They are no different from any other Western nation except they cannot print what they need to pay.

The final question then is this, does printing actually create “value”?  Can printing turn anything insolvent in to solvent?  The only thing printing (or borrowing more) can do is allow for current payment …which only makes future payments larger.  This is the state of the entire West and being previewed by Greece, only digging the 2008 hole deeper and deeper!  Greece is merely a symptom of bad policy, they are also the poster boy the world will see as not having any real solution.  If there is no real solution to Greece, how can there be a solution to any other bankrupt nation from that very same flawed policy?

Standing watch,

Bill Holter

Holter-Sinclair collaboration

Comments welcome!  bholter@hotmail.com