Great to read your thoughts. Good stuff. Let me chime into this interesting discussion by saying, Goldman Sachs covertly funneled billions into the Greek economy and mis-labeled what were actually loans as “currency trades.” The rest of the world had no idea things were so bleak inside of Greece. The countries debt bubble got bigger and bigger when it should have been long popped. Meanwhile, GS bet against the economy it was supposedly “helping” by buying up truck loads of Credit Default Swaps, which exponentially increased the resulting debt obligations after the collapse.

The sub-prime crisis was made infinitely worse because large banking institutions were doing the same thing to the housing market- the bubble expanded with fast and sleazy debt and suppressed rates (which have and will continue to discourage personal savings). Why would large banks want to do this? Like you said they got pennies on the dollar for this real estate- to drive out the smaller competition, consolidate their influence / wealth and collect the insurance money on all the junk debt. Besides, the banks always knew, with insiders like Paulson, Rubin, and Greenspan whispering in presidential ears, that they would have a safety net.

Greece is like the sub-prime crisis for this very reason. It is a representation of what is happening all over the world. Everyone now knows the worlds wealthiest banks have been manipulating entire economies. We still don’t know how much debt is out there (or if we do we haven’t psychologically digested it). I think this is one reason why Bernanke has made sure reform legislation does not have reserve requirements in it. Reserve requirements would require audits, and the Fed is surely scared of what we will find. Not to mention the scam known as fractional reserve banking is the lifeblood of international finance. There is no more trust in the system.

Banks have been consolidating wealth by expanding then retracting the money supply (or manufacturing collapse) since the days of the Roman Empire. Currently the US is paying 500 billion dollars a year in interest on the National debt (and this is with interest rates at record lows!). There is no excuse for this. The Federal Reserve, a privately held corporation run by the aforementioned bankers, has driven the dollar to 4 cents of its 1913 value and kept the US in a state of perpetual debt. It needs to be abolished right this second.

Keep up the good work Joe. We should definitely link up for coffee or a beer sometime soon.

All the best,
Rory Fanning

Any issues that are raised after reviewing the analysis,would be welcomed!

Joe,

Another great post – keep them coming,they are so few and far between!

Interestingly there’s not a lot of sympathy from the more conservative economies in the Eurozone like Germany. I’m not talking about politicians I’m referring to the guy in the street. I remember seeing a road sweeper being interviewed who commented that he didn’t see why he should work up to 65yrs of age to pay a fat final salary pension to Greek civil servants at 55yrs.

I have to agree there with guy, and who wouldn’t. That ultimately leaves Greece with some stark choices.

-1 leave the Euro and refloat their own currency but don’t sort out the problems (I can’t see them taking that route honestly). Imagine borrowing dollars or euros with drachmas that have less value than toilet paper, imagine the coupon on those bonds!

-2 Tighten the belt, cut costs, and welcome to the land of hard work and reality.

-3 Print money like the UK did (£200 billion “quantitative easing”, great term for printing money that). Oops, they can’t do that because the printing presses are in Brussels and the French, Germans, Dutch and Belgians hold the keys.

All in all, it’s got to be option 2 and I think the fallout will be very positive for equities, going a long way to keeping inflation in check. I could be wrong in that, it wouldn’t be the first time.

Casey Mattson, CPA
http://www.jmpcpas.com

On second thought, maybe this is a discussion for another website!

One in four people work for the government, full retirement at 55, etc. All financed by debt.

I wonder why that wouldn’t work?

For me the bottom line is government fiscal discipline is good for capital. If we have a nice media circus to shake up the politicians it means that they have to start saving money, and that’s bad if you’re dependant on the government for your living, but good if you’re not, and happen to pay taxes and dread inflation.

Now, if the markets get spooked, as they evidently have been, not over a short period but over weeks now, we, or at least I start to see some value breaking the surface.

In terms of timing, I’d say I wasn’t buying (for the six month run up to the current slump) simply because I couldn’t find a compelling enough situation to allocate capital to. Now all of a sudden a few have broken the surface and I’m buying again. I don’t think we can judge the market as a measure of buy or sell not unless things get ridiculous in either direction and then solid company valuations still win.

As for the esteemed members of the press, I liken them to Caesar’s henchmen keeping the crowd under control in the coliseum by throwing them bread. Is the bread they are throwing a real indication of the state of Rome’s finances? Sorry that’s a bit esoteric, but basically if someone’s going to whip up a whole lot of fear, or a whole lot of optimism I’m happy to take the opportunity to profit from it.

J

I’m sat in the middle of it here as a Brit in France, and I’m cheering the new UK government along as they start to slash public spending and idiotic government departments that serve no purpose whatsoever, given I’ve been focusing my investment attention on the UK of late and a short list of really great quality value plays this cheers me no end.

As you say, these are countries not out of work home owners and they do have huge scope for cutting costs. I don’t want to insult the Greeks either, but when someone who lived there tells me that the red tape in the public sector is so bad that you have to visit three offices, to have your paperwork stamped, just to get a driving licence it gives a strong indication that some streamlining is in order. These same paper stampers retire in their 50s on nice final salary schemes all paid for by the budget deficit. Would I be rioting if someone took those employment terms away for me? you betcha.

Add to that tax evasion in Greece is apparently rampant, and people actually paint their pool covers green (grass is green) to avoid the tax man seeing that they have a swimming pool via Google earth and we have yet another avenue for saving a few quid.

Ken Fisher has recently described what we’re going through as a wall of pessimism, where any excuse is used by people to jump out of the market, this “debt situation” being a prime example I suppose. All power to em if that’s the case.

Do I think this is an opportunity? Well I’ve been buying.