#81 Unsk:

Gonna try this again. The first time I tried to post it, either PJM, the Interwebtubes, or my ancient machine went awa’ w’ the cyber-fairies.

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I heard an interesting proposal of how they want to deal with the Greek problem. Keep in mind that it may well be a trial balloon.

The IMF [using US funds] will “loan” Greece enough to cover its budget problem. This will give cover for the EU to give a “loan” that is enough for them to try to take credit for things if a miracle happens and it works, and to limit their exposure if it does not.

This has a number of advantages for all.

a) Greece is no longer under immediate pressure to make drastic cuts and can put off the problem for another day. If a miracle does happen, they are good. If not, at least for a while the governing elite is not at risk of being held responsible through the mechanism of civil disorder. Something about lamp posts and/or hemlock. I more than half-way expect that Greece will then increase social subsidies to compensate for the civic distress at the past suggestion of possible cuts.

b) If the miracle does not happen, either the process gets repeated, or if it does not then the villian is not the EU, but rather the evil IMF and American bankers. Win-win for Greece and the EU.

c) Once a precedent has been set, either the same process is used to bail out the rest of the PIIGS, or the blame gets placed on the evil Americans again. Another win-win.

d) Would Buraq Hussein Obama go with this? Quite likely, because the costs would be borne by the American taxpayer, who he has nothing but contempt for, and it would bail out Goldman Sachs, which is the real employer of that which he is pleased to call his economic team.

Something to watch, but keep in mind that the PIIGS are in fact just the leading edge of problems in the Eurozone. I have mentioned the Baltics and Eastern Europe before.

I am neither an economist nor a broker. While I have some concept of macro and micro economics [which is more than 90+% of the world's population has] I am far from an expert. But looking at this installment of a series on the debt exposures in the EU to the functionally in depression Baltics and Eastern Europe. When going through this, I commend to your attention the chart showing the percentages of GDP of bad loans that Austria and Belgium have. If in an inflexible single currency zone, government bonds and fiscal imprudence can bring things down like a house cards just coming out of Greece; what happens when Austrian banks have loans of up to half the Austrian GDP go non-performing? There are a lot of problems that have to be wrung out of the world economic system, and it is going to hurt us all. The more so as we keep trying to postpone it for small increments of time at greater cost.

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Subotai Bahadur