What Will Come of Greece? What Madness Will Follow?

JHK is in fine form today and comments on the long drawn out affair with the IMF, the ECB, and especially German negotiators.  As James Howard Kunstler puts it, the can they’re trying to kick down the road is now a 50 gallon drum of cement. The end game is near.

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History in Free Verse (by JHK)

History might not rhyme, exactly, but it’s not bad for free verse. Greece is this century’s Serbia — a tiny, picturesque backwater nation blundering haplessly into the center stage of geopolitics. And the European Union is, whaddaya know, Germany in drag, on financial steroids.

Nobody knows what will happen next in the struggle to wring some kind of debt repayment promises out of poor Greece. Without “restructuring” — a virtual national bankruptcy proceeding — there can be no plausible promises of repayment. Both sides seem to have exhausted their abilities to juke their way out. The European Union and its wing-men at the European Central Bank (ECB) and the International Monetary Fund (IMF) can only pretend to kick that fabled can down the road because it has turned into a cement-filled 50-gallon drum. The Greek government can only pretend to further dismantle its civil service and pension systems lest angry citizens toss it out and replace it with a new government, perhaps an ugly and pugnacious one made up of Golden Dawn party Nazis.

In the background, Spain, Portugal, Italy, Ireland, and perhaps even France wait without peeping to see if Greece is allowed to restructure, because you can be sure they will demand the same privilege to debt relief. But that’s hardly possible because the ECB has been engineering a shift of debt-holding away from the big corporate banks  — which made all the stupid loans — to the taxpayers of their member states, especially Germany, which stands to be the biggest bag-holder when a contagion of serial default seeps across the continent.

This implies, of course, that along the way to that outcome something sickening happens to the price of all the bonds that the debt is embodied in. Namely, its value craters for the simple reason that the threat of non-payment makes interest rates shoot up to reflect the actualization of risk. That would certainly set off the booby-trap of derivative interest rate swaps and credit default swaps that have been laid into history’s greatest financial minefield. Thus, the big banks that were supposedly shielded by the ECB shell game of Hide the Debt Pea Somewhere Else, will blow up in a daisy-chain of unpayable obligations.

The net effect of all that will be the disappearance of nominal wealth — it crosses an event horizon into a black hole never to be seen again. The continent discovers it is a lot poorer than it thought. Fifty years of financial engineering comes to the grief it deserves for promoting the idea that it’s possible to get something for nothing.

Read More at James Howard Kunstler’s blog.

2015. A Year of Increased Global Turmoil?

Are you optimistic or pessimistic about the nature of world events in 2015? The Bloomberg News Service has given both optimists and pessimists plenty to think about in its guide to possible world hotspots in 2015.

World Crisis
World Crisis

Are we about to enter one of histories black holes? The common view, at least for Americans, is that any difficulties will be of short duration and living standards will continue to gradually improve. Overall, things will just get better and better.

However, this view flies in the face of history, which measures human progress as a series of two steps forward and one or more steps back. Consider the dark ages in Europe which lasted for hundreds of years. Or consider the present war in Syria, which has reduced towns which survived for thousands of years to rubble and destroyed the comfortable lives of millions of Syrians.

Human strife has often made the world an unstable place. The year 2015 may bring instability to a fever pitch.

The Long Crisis appears to be entering a critical stage.

A Pessimist’s Guide to the World in 2015

By Bloomberg News

Skirmishes in the South China Sea lead to full-scale naval confrontation. Israel bombs Iran, setting off an escalation of violence across the Middle East. Nigeria crumbles as oil prices fall and radicals gain strength. Bloomberg News asked foreign policy analysts, military experts, economists and investors to identify the possible worst-case scenarios, based on current global conflicts, that concern them most heading into 2015.

Read More:2015 Flash Points