On the Ridiculousness Known As Greece and Alcoholism

It’s official: the Greeks might as well take columns from the Parthenon down to the local pawn shop to see what kind of credit they can get. According to an article from Bloomberg, Greece “may borrow privately through banks for the second time in as many months.”

Pawnbrokers and payday lenders lend out cash for about the same duration, so I’ll stand by my analogy.

So let’s take a look at Greece in pictures, as a refresher. Here’s one chart I’ve used before: Debt-to-GDP. As Dennis Gartman say, a chart with solid movement “from the lower left to the upper right” as debt approaches 180% of GDP:

They also run persistent current account deficits:

So what do they do, with all of the indicators pointing to a desperate need to pull back and show fiscal restraint? The government decides to go the private placement route and borrow more. The use of private placements is a clear signal the Greek government doesn’t want anyone to know just how dire the situation is there. Why else would you look to privately place debt instead of floating it in the debt market? Because as the article explains, in private placements, borrowers place debt with investors instead of using market mechanisms in order to reduce “the risk that inadequate demand will drive up borrowing costs.” Translation: assessing the health of Greece just got a lot more opaque. There’s no registration requirement for these things, so it’s not like you can just look up a CUSIP.

I really have to wonder if they can service the interest on the debt they have. It sounds to me like the Greeks aren’t even sure they can. And as GDP has fallen, again, like Spain, there’s no clear-cut reason to invest there so foreign direct investment is not even on the table as an option.

I wish I could say this was like trying to cure alcoholism with more alcohol, but it’s worse. It’s more like they acknowledge publicly they have a drinking problem, but privately they’re getting more and more desperate to get the same fix. Whereas once before you went to the liquor store to get beer & wine…

Now you’re going to the liquor store two counties over and you’re settling for Thunderbird or NightTrain. Or you’re downing NyQuil constantly “because you have a cold.”

Brusslels, Berlin, and Frankfurt need to intervene if there’s going to be any chance the Euro survives the short to intermediate term.

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Filed under finance, government, International, macro, Markets, Monetary, Way Forward

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