Friday, May 20, 2011

Greece Will Default On It's Debts, Renewing The European Debt Crisis

Each time the European Central Bank and the International Monetary Fund tell investors the crisis is over, they are proven wrong. Greece, Ireland and Portugal are deeply in debt and the bailout each of them received is onerous and will eventually force them each to default.

The terms demand high interest rates and a stiff payment structure that their peoples can't afford. It is a little like the reparation payments the allies forced on Germany after World War l. It brought huge hardship to the German people as their government inflated their currency to pay what they owed. You may have seen old pictures of a wheelbarrow full of currency that it took to buy a loaf of bread.

Today, Greece is desperately trying to avoid a default but I estimate that their lenders will have to write-off at least 50% of their funding. But after all, these bailouts were really about protecting the banks who so foolishly loaned enormous sums of money seeking high rates of return before the 2008 global financial collapse. Now, like the peoples of Greece, Ireland and Portugal, they must share in the pain.

It is the humanitarian thing to do. The price to be paid for foolish banking risks should not rest only on the shoulders of retirees, teachers, shopkeepers, nurses and other working people in those nations. Nor should their children and grandchildren sacrifice their educations and the security of their homes to compensate the bankers and their shareholders.

To learn more, please see "Greek Woes Fuel Fresh Fears," The Wall Street Journal, 5/10/11

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