My Two Cents - "Timeo Danaos et dona Ferentis"

6/30/2015

I’ll leave a link at the end of the article for those who are interested in the translation of the title of this week’s installment of ‘Two Cents’. Well folks, it’s game on once again in the Eurozone and the shenanigans have once again escalated to another bank holiday – this time in Greece. ATMs were drained over the weekend as the Greek populace was mildly jolted from its collective stupor and lazily made its way to get a few precious Euros from bank accounts. The politicians postured, a referendum on the IMF cabal’s terms for yet another bailout is scheduled for this coming Saturday, and once again many are claiming that the end of the folly of the Eurozone is once again at hand.

Sitting roughly 9,000 miles away on the edge of the American heartland, I wonder again how it is possible to have a crisis occur in such a docile fashion and anxiously await firsthand reports from the land of plenty to see if what we are being fed is true or if the very fabric of Greek society is being ripped apart. I suspect it is somewhere in the middle though, as sadly, these crises have happened so often now that people barely blink an eye before going on, business as usual.

On the surface, this is a good thing as maybe there aren’t scads of people breaking each other’s heads over essentially worthless paper tickets. However, there have been stories about hoarding of food and gasoline. Let’s be real clear that the Greek economy has been in a shambles ever since this crisis first bubbled over all those years ago. Unemployment rates, particularly among the young, have consistently read well above depression level. The economy is trashed. This is not the kind of situation where people are going to have a lot of wiggle room, especially if the Brussels Robber Barons decide to play hardball and withhold the next installment of digits from the banking computers in Greece.

Reminders of 9/14/2008

Late on a Sunday night, I am reminded of that Sunday night, September 14 back in 2008. It was about this time that the blowout of Lehman Brothers was first really leaping into the forefront. I remember getting a few emails from clients asking what was going on and if what they were hearing was going to be a problem. I remember chuckling to myself and thinking ‘Oh yeah, it’s going to be a problem’. Fortunately we had read the establishment’s tea leaves fairly accurately and adjusted well in advance. Back then there were plenty of signals. And they were fresh signals, which we hadn’t seen in decades, and it was fairly simple to make the argument to adjust towards safe harbor.

Today it isn’t nearly as simple. Why is that? Because we keep getting those ‘signals’ over and over again. Not a week goes by without some story somewhere about this debt metric, that derivative bubble, some bond bubble, or all of the above. And nary a month has gone by without this whole Eurozone mess percolating at least a little and causing at least a day or two of grief. We’ve been absolutely inundated with these little signals for the past 7 years almost non-stop. Which ones are real? Well, most of them. Which one or ones will cause markets to move? Who knows. Which signals might indicate that the crisis is crossing the ocean? Hard to say. Are we here in America in a compromised position with our own debt? Absolutely. Are we vulnerable to someone slamming down the gauntlet on us? Absolutely. Will that happen this week? I have no idea.

I kind of doubt it because if you’ve spent any time looking deeper into all of this nonsense, you’ll quickly notice that this banking cabal enjoys fleecing until it feels it has gotten everything it can get. Then it starts cutting off the lifelines, sucking you into an even more precarious position with the intention of getting a pledge of even more down the road in exchange for another lifeline. That’s the game that has been going on in the EU for years now. We’re on that same path for sure, but we are much further back. America is intent on blowing off each of its toes with a 6-shooter loaded with VISA, Mastercard, Discover, AMEX, insane auto loans, and home mortgages.
 
Learned Helplessness

The theme the night of September 14, 2008 was helplessness. People who watch such things kept an eye on Dow and S&P Futures, with a knot in their stomach knowing full well that the next day could very well cause carnage the likes of which the world had not seen since the crash in 1987. Myself as well as many, many other analysts pointed out that the weekend theme was not to be taken lightly and was not an accident. That has borne out both in Cyprus a few years ago, and now in Greece, when the blowout happens over a weekend when the banks and stock exchanges are already closed, thereby preventing Joe Average from doing a single thing other than running to the local ATM.

The whole idea behind all of us pointing out the weekend theme was not to encourage people to take on the attitude that they might as well just party up and ignore the goings on because there wasn’t anything they could do anyway. The call to arms so to speak was meant, at least on my part, to be a call to proactivity. If you’ve taken some logical, common sense steps to protect against such things, when our ‘weekend’ here in America finally arrives you won’t have to wring your hands or dodge bullets to take those steps then.

But for some reason, even those folks in the Aegean corner of the world just haven’t gotten a handle on it and this crisis has been cooking for years right in their own back yard. This is only one of the many problems with rampant socialism and the criminally insane notion of cradle to grave government coddling. People become so dependent that they are absolutely incapable of doing even the least of things to help themselves. The Eurozone has been living off the hard work of Germany almost since its inception, with the rest taking 2 months and change vacation, getting ‘free’ government benefits, healthcare, and the like, and just sucking it down. Now the party is over and look at them. They stand with foolish grins on their faces while getting turned away at the ATM. Their spirit of independence, their yearning for freedom has been stripped away by the cancer of runaway socialism.

America Has Become Europe

The sad truth in all of this is that America has in fact become just like Europe. This is by no means a slap at those in this country who work hard. There are plenty of you, just like there are in all of these other countries that have been decayed by socialism. After all, someone has to work so someone else doesn’t have to. From each according to his means to each according to his needs is the mantra after all, isn’t it? I won’t sit here and spit numbers out because if you’re reading this there is an excellent chance you already know the magnitude of the situation or at a minimum are aware that there actually is a problem.

That is the trouble with socialism. All of these people who have been living off the hard work of others in Greece and the rest of the Eurozone have no clue there is anything wrong until someone flips off the switch on their benefits, then they want to spill into the streets and demonstrate. The truth is that hard-working people all around the globe know that something is terribly wrong. You don’t need a degree in economics, business, or finance to understand that. People who used to live on one income now need two or they find themselves now carrying debt they never had to carry before. It has manifested itself in many different ways, but they know things are changing for the worse.

America, with all its technology, innovation, and progress, has still managed to squander it in the span of less than two generations with the failed economic policies of Keynesianism, and of the great equalizer – socialism. Interestingly, we have an election cycle upcoming and I’m sure myself and many others will go into virtual hibernation to avoid having to listen to ‘the reason why it didn’t work is because a) we didn’t spend enough money or b) give the government enough power’ tripe. The American taxpayer has been a veritable human piñata for decades now, taking a beating every day and continuing to spit out fruit-flavored candy. If the recent trade deal doesn’t convince people that they haven’t got a single friend in Congress, than nothing will, yet our beloved politicians will spend several billion dollars over the next year and change trying to convince you that Diet Pepsi is better than Diet Coke or vice versa. There is a point to this rabbit trail – take a look over at our European cousins and see how their governments work – if you can even call what they do ‘work’. The similarities are too many to be ignored.

Take a long hard look at where Europe sits tonight and know that is our fate. No amount of Madison Avenue marketing, TV cosmetics, or network news spin can change that.

Right now the Greek government is planning a referendum on the IMF’s proposal and the terms thereof. The Greek government is allegedly going to allow the people to have their say on whether or not the country will accept the proposal that will further hamstring the Greek economy and only prolong the already inevitable. The recommendation from the government is that the people vote ‘nay’ and shoot down the IMF’s package. It’ll be interesting to see if their tune changes as the week progresses.

You see, there is a little Greek in everyone. I remember a time back in the fall of 2008 when our own “Greeks” had a little vote on a Monday about a $750 billion bailout package for the filthy banks that plunged America into her very own financial crisis. The vote Monday was ‘No bailout’ and the fixers went right to work. Henry Paulson – where is good ‘ol Hank anyway? – went right to work bending the ears of Congressman about 3,000 point drops in the Dow and so forth in an effort to get them to change their votes. By the end of the week, the tide had turned and the vote was ‘Yes’ for the bailout and then good ‘ol Hank went and did exactly what he wasn’t supposed to do and yet miraculously escaped prosecution or even a letter in his file, but that’s another matter. The point is watch for the fixers in Greece this week. Watch them work over the MPs in the government and watch them work on the masses through their media outlets. I’ll do my best to post as much of it on my blog as possible to watch it unfold. I guess at end of the day we’ll see if we can trust these Greeks – even when they come bearing gifts.

The etymology of the phrase “Timeo Danaos et dona ferentes” may be found here. For those of you who receive ‘My Two Cents’ via email, please confirm your subscription here due to an upgrade in the software I use to email the newsletter.

Graham Mehl is a pseudonym. He is not an ‘insider’. He is required to use a pseudonym by the policies of his firm when releasing written work for public consumption. Although not an insider, he is astonishingly bright, having received an MBA with highest honors from the Wharton Business School at the University of Pennsylvania. He has also worked as an analyst for hedge funds and one G7 level central bank.

Andy Sutton is a research and freelance Economist. He received international honors for his work in economics at the graduate level and currently teaches high school business. Among his current research work is identifying the line in the sand where economies crumble due to extraneous debt through the use of economic modelling. His focus is also educating young people about the science of Economics using an evidence-based approach.