Monday Wake Up Call – June 22, 2015

Wrongologist reader Rene asks: “why doesn’t the Wrongologist say something about the Greek crisis”?

Most people believe that Greece needs debt relief. The creditors should discount some of the amount that Greece owes, since there’s no way they can pay it all back. But, that hasn’t happened and it’s unlikely that it will, since it’s politically impossible. Why? It is very hard to explain in a short post, but Forbes has a great summary of the facts:

The money is owed to the taxpayers of other European Union and Euro Zone countries. And what’s more, [their] taxpayers know this.

So, this is the issue: To solve the Greek debt problem, something like 50% of their debt has to be written off. That would equal 1.5% to 2% of GDP for each country in the Euro Zone. So it’s not happening.

Even though the money has already been lost by lending it to Greece in the first place, the response by the Euro Zone is troubling. From Ambrose Bierce in the Telegraph:

The European Central Bank, the EMU bail-out fund, and the IMF, among others, are lashing out in fury against an elected government that refuses to do what it is told. They entirely duck their own responsibility for five years of policy blunders that have led to this impasse.

Worse, Europe is now provoking a Greek bank run in their effort to force Greece to its knees, issuing a report that warned of an “uncontrollable crisis” if there is no creditor deal, followed by soaring inflation, “an exponential rise in unemployment”, and a “collapse of all that the Greek economy has achieved over the years of its EU, and especially its euro area, membership”.

So Europe’s guardians of financial stability are deliberately accelerating a financial crisis in an EMU member state, saying they are out of the Euro Zone if they don’t comply.

The IMF is forcing a contradictory austerity policy in Greece – with no debt relief, exchange cushion, or offsetting investment. Moreover, they are applying a completely different standard in Ukraine, announcing on Friday, that it will: (emphasis by the Wrongologist)

Continue to support Ukraine through its Lending-into-Arrears Policy even in the event that a negotiated agreement with creditors in line with the program cannot be reached in a timely manner.

This despite the fact that the IMF, by its rules, does not lend to nations that are likely to default.

In the case of Greece, the creditors are acting in concert. They are doubling down, assuming (possibly rightly) that terror tactics will cow the Greeks at the last hour.

The European governments must approve any bailout extension, but we are now so close to the expiration of the second bailout on June 30th that it is too late to get a deal approved by then. But IMF Chief Christine Lagarde has 30 days before she has to report a Greek non-payment of €1.5 billion on June 30th to her board, the real drop dead date appears to be July 20th, when a €3.5 billion payment is due to the ECB.

Unfortunately, it’s hard to see how the two sides will agree to anything other than a short-term deal before the July 20th date. Any “third bailout” of restructuring Greek debt as suggested in the Forbes article above, may be impossible.

In the words of Woody Allen:

“More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly.”

So wake up Euro Zone! To help with a gentle wake-up, here as we start summer, is the last in our series of spring bird visits to the fields of Wrong. Here is the Song Sparrow:

For those who read the Wrongologist in email, you can see the video here.

Monday’s Hot Links:

Dispatches from the Clown Car:

Rick Santorum says Iranians can’t be trusted because they are theocrats. Sure. We all know that Christian theocrats are trustworthy.

Jeb Bush says a tolerant country should allow religious discrimination. Day is night. Black is white. Discrimination is tolerance. Welcome to the fun house that is Conservative politics today.

Rick Santorum Argues Heterosexual Parents Are Every Child’s ‘Birthright. Really? Aren’t caring, loving parents a birthright? Why should we care about parents’ sexuality as long as they’re committed to loving and protecting their children?

Chinese physicists have developed a laser-based deep space propulsion system that harnesses more power than conventional solar sails. China is actually developing/investing in science, technology and innovation. Has anybody alerted our misleaders in Congress? Maybe we can find something else to develop besides military weapons.

Cambodia is training an elite squad of African rats to sniff out landmines. A team of 15 rats were imported from Tanzania with the help of a Belgian NGO, which trains rats to sniff out mines. The rats will try to locate the huge quantities of unexploded mines that have killed nearly 20,000 people since 1979.

Heinz says they’re sorry for a code on a ketchup bottle that links to porn site. A Heinz Ketchup buyer was exposed to porn from a website similar to www.watchmygf.xxx after Heinz allows a domain to lapse, and an adult entertainment firm buys it.

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Terry McKenna

The Greek thing is astonishing. They demand austerity and that austerity only makes it even more unlikely that Greece can repay. The losses already occurred. It may be better in the end for Greece to leave (and suffer a collapse even worse than the last several years) but regardless, the debts will not be repaid.