Inquiring minds are making note of the current state of affairs in Greece. Here is a quick 10-point synopsis.
Current Sorry State of Greek Affairs
- Greece did not meet the IMF’s criteria for more aid
- The Greek government is collapsing
- The Greek prime minister threatened to resign
- An emergence meeting of the Greek Parliament could not gather support for more austerity measures
- An emergency meeting of EU ministers produced “no results”. The EU has no consensus about what to do
- Two-year interest rates in Greece topped 30%
- Germany wants bond holders to take a haircut, France does not
- Greek unions are on strike
- Riots and violence have escalated
- Credit default swaps are pricing in an 80% chance of default
Logic would dictate that given the current sorry state of affairs in Greece that the IMF would not be willing to lend Greece more money. Indeed point number 1 alone would seem to be sufficient to settle the hash.
However, once must not attempt to apply logic to decisions made by the IMF, by ECB president Jean-Claude Trichet, or by Euro-Zone officials in general.
IMF ’Ready to Continue Support’ for Greece
Please consider IMF ’Ready to Continue Support’ for Greece
“We stand ready to continue our support for Greece subject to adoption of the economic policy reforms agreed with the Greek authorities,” Caroline Atkinson, the director of IMF external relations, said in an e-mailed statement today.
“Progress is being made in the discussions to ensure the full financing of the program, and we anticipate a positive outcome on this at the next Eurogroup meeting,” she said.
Progress? What Progress?
Progress is being made? What progress? Where? Will the Greek government go along or has the Greek government had enough of these austerity measures?
Caroline Atkinson also said that the IMF board will still have to approve the “conclusions of the pending program review.”
There is nothing to approve. The papers are signed, stamped, and sealed already. The only open question, and it’s a major one, is “Will Greece Go Along?”
Logic Cannot Be Used on Pathological Liars
Attempts to apply logic to what pathological liars say is useless. How can you possibly believe that known liars will do what they say?
“When it becomes serious, you have to lie,” said Jean-Claude Juncker, chairman of the regular meetings of eurozone finance ministers. The IMF, the ECB, and the Fed are the same.
To get things correct you cannot believe a thing pathological liars at the IMF, ECB, and Fed say. Instead, simply bet they will kick the can down the road until the market kicks it back in their faces, smashing some teeth in the process. Brute force and a lick in the teeth by the market is the only thing liars react to. Even then, it takes multiple kicks before they get the message.
In regards to politicians, in many instances they are kicked out of office, never understanding the message at all.
Market Repeatedly Calls Foolish Bluffs by IMF, ECB
Recall that Trichet loaded up the ECB’s balance sheet with garbage from Greece and Ireland. Trichet thought that bluff would lead the markets to accept his idea that Greece would not default. His move stabilized bonds for about 2 weeks. Then the market kicked that can back in Trichet’s face, bruising his forehead, but unfortunately leaving his arrogance intact.
More recently, ECB executive board member Juergen Stark threatened the “nuclear” option of refusing to accept Greek debt as collateral if there was a restructuring of Greek debt. This was a foolish bluff that was supposed to bring the market into line.
Instead, yields and CDS shot up and continued higher. In simple terms the market kicked that can back into the ECB’s face.
The bluff was not remotely believable. The ECB would trash its own balance sheet if it did what Stark suggested. Moreover, it would also destroy the balance sheets of French banks who are the primary bag-holders of Greek garbage.
Solid Kick in the Teeth in Progress
A solid kick in the teeth of the ECB and IMF appears to be in progress right now. However, Jean-Claude Trichet, the IMF, and Christian Lagarde (running to head the IMF), still have not gotten the message.
Expect to see more teeth kicked out in the weeks or months to come if the fools at the ECB, IMF, and EU try to kick the can down the road one more time.
Running Greek Recap
- Investors Bet on Accident: 2-Year Greek Bond Yield Hits 28.15%; Investors Bet on Prospect of ‘Greek Accident’
- Papandreou’s Days Numbered: Riots Images from Greece; Prime Minister to Reshuffle Greek Cabinet, Seek Vote of Confidence on New Government
- Papandreou Offers to Resign: Opposition Tells Greek Prime Minister to Step Down; Papandreou Offers to Resign With Strings Attached
- Emergency Session Fails: ECB Divorced From Reality; What is US Exposure to EU Mess?
- Irish Finance Minister Flip-Flop: Yesterday Noonan Vowed to Screw Irish Taxpayers; Today Seeks Haircuts on Senior Irish Bonds; Lessons From Iceland
Mike “Mish” Shedlock
Click Here To Scroll Thru My Recent Post List