The Greek financial crisis began precisely to the day on our model for the start of the Sovereign Debt Crisis. That was truly amazing since we protected that ideal date in 1985. It is always fascinating to see how precise the world economy truly is – that strange hidden order beneath a surface of a convincing illusion of chaos.
I have stated that the debt had to have been consolidated. Failure to do that is what this crisis is all about. People do not understand currency. They mistakenly assume a strong currency is bullish for the country. However, this introduces deflation into the mix because the debts become more expensive in real terms to repay.
I was blamed for starting the takeover boom in the 1980s that they made the movie Wall Street about. What people did not see was the fact that the international takeovers I was advising based upon currency. I would structure the borrowing in a currency that would decline against the currency in which the asset existed. In this manner, I transformed debt into a performing asset. You could borrow in a depreciating currency reducing your cost making 40%. It drove people crazy for those outside looking in could not understand what I was doing. We kept it a guarded secret.
Conversely, Southern Europe in joining the Euro experienced exactly the opposite result. As the Euro rose in value, their national debts appreciated in REAL COST TERMS. The Euro rose from 82 cents in 2000 to $1.60 in 2008. Historically, whatever national debts that preexisted nearly doubled in real terms. This was extremely DEFLATIONARY. There was no possible way the Eurozone could survive under these conditions. The problem we have is very clear. Governments are run by lawyers and advised by academics with zero trading experience. Anyone working on a foreign exchange desk could have figured this one out is under 3 seconds – the time it takes a cop to kill a citizen these days.
Greece now needs despite the 240 billion euros in loans in the coming year to still keep pace with the fact that they have been totally screwed with the euro. Greece is headed into official bankruptcy for the people have had their future stolen from them by politicians now trying to support their personal power grab in Brussels. The Troika talks of a transition process. Nevertheless, all the parliaments of the Eurozone have to agree. It can be expected that the program will be adopted because of the fact they have no known alternatives. This will be more and more of the same policy without any comprehension of what is the driving force behind this economic catastrophe. Brussels and the IMF will sneak these measures through without any major debates just before the Christmas break. They need to cover up their utter failures.
The international loan program for Greece must be expected to be extended beyond the end of the year as well. The last installment of the current loan is in question because of disagreements over fiscal policy in Athens and the upcoming pension reform can still not be paid. The Troika (EU, ECB, IMF) are incapable of even comprehending the magnitude of what has taken place. There seems to be little hope of dealing with the Euro Crisis because of the serious flaws in its design. As we head into 2015, there appears to be little hope against a rising dollar. This will be deflationary in the USA also raising the net real value of the dollar debts to everyone who has issued dollar debt in countless currencies to save interest. The contagion will spread next year and we will see the downturn after 2015.75 will be far more confusing to these people who lack any comprehension of currency and the world economy.
