Subscribe to this Feed by Email
Even if a miracle occurs and the unemployment rate in the US drops below 8%, the Greeks are still coming to spoil the President's wishes.
What all the pundits and white house strategists are missing is that the Presidential chances of Barack Obama in 2012 are tied to an unlikely and compromising source, Greece.
How is that?
Just like all Republican' candidates in 2008 were inevitably tied to Lehmann Brothers and the following financial crisis, and they didn't know it at the time, any Democratic candidate chances in 2012 - including the President's - is tied to Greece - the Lehman trigger of 2012 - and they don't know it yet. And it is not a position that any Democratic candidate (even the President) would want to be in.
We subscribe to the harsh reality that Greece's prospects of defaulting are not a matter of If, but a matter of When, and that this"when" has a 92% probability of being before November of 2012. We don't say this capriciously, or out of a hat, we are simply reading what one year credit-default swaps are trading at signaling a 92% prediction of a Greece default.
If that is true, it is ironic that the type of economic crisis that helped elect Obama in 2008 will now help to defeat him - the coming Greek default and a financial and economic crisis in the Euro-zone. Let's see first what are the chances of this event taking place:
We subscribe to the harsh reality that Greece's prospects
of defaulting are not a matter of If, but a matter of When
There are three inevitable trends that make Greece's task of avoiding default - meaning bankruptcy - a mission impossible.
- First, target deficits and budget cuts required from Greece to get Euro-zone approval for bailout money are not being met - and cannot be met without serious civil unrest and a government shakeout.
- Second, the number of private debt holders participation in the necessary debt restructuring programs is less than required by the terms of the bailout.
- And third, there is growing opposition by the strong Euro-zone economies of Germany, Britain, and Holland to provide bailout money without strict collateral control - collateral that does not exist to the amounts necessary. It is also unlikely that Germany - the strong economy of Europe - would risk worsening its own debt situation and economic growth by trying to save the un-savable. Contrary to American perception, Germany's own debt position is not all that healthy - with a ratio of public debt to GDP of 83%. The limits of German largesse are obvious.
It is easily seen that the first and second problems are fundamentally rooted to economic reality and are inevitable, and therefore, unavoidable. Only the third issue - the growing opposition from Germany, England, and Holland to provide a blank check - can be politically manipulated; but the trend of popular support is not in their favor, and is bound to get worst with time.
Andrew Lilico of The Telegraph has compiled a list of what happens when the inevitable arrives. A short view of it is:
- Every bank in Greece will instantly go insolvent.- The Greek government will nationalize every bank in the country.
- Greece will re-denominate all its debt into "New Drachmas".
It is unlikely that Greece can meet its debt obligations for 14 months before declaring a suspension of payments. The Greek scenario will be followed by Ireland and Portugal, and Italy - with Spain in the waiting list. These events will break up the Euro as we know it today and unleash a full blown European financial crisis that will spread to the United States. The inevitable recession in Europe will prolong the US Recession and will increase the probabilities of a depression.
The chances of this scenario developing during 2012 are as high as we indicated above on the probabilities of Greece declaring a suspension of payments, and are inextricably tied to the probabilities that President Obama would not be re-elected under these conditions.
There is only one thing left for the President to do - make a speech in the Greek Parliament proposing to finance a "Greek Stimulus Plan", a "Greek Jobs Plan" and "raise the Greek debt ceiling".
Or run for the exits before somebody yells "fire"!
0 comments:
Post a Comment