Greece Vs Wall Street

So this is going to get interesting. The results of the election in Greece are in. The Greeks voted for killing austerity and renegotiating their debt with (basically) Wall Street vultures. This also puts the new Greek government at odds with Angela Merkel, who basically is the EU. But I believe that the Merkel clash is being overestimated and won’t be the standoff that some media outlets are predicting.

Here’s a recap of what happened in Greece. The country incurred massive debt. This is very different from what happened in Spain or the US, where the people incurred massive debt even though the result was the same, and the creditors were the same. In Greece’s case, it was the government who borrowed massively. Here’s how banking worked in the olden days of Glass Steagall: banks would assess a borrower’s ability to repay debt and decide whether extending a loan was viable, and setting the percentage rate based on viability. This made banks more prudent in who they loaned to because the goal was to get repaid with a little interest. See the interest was calculated using a formula whose two primary goals were to cover the bank’s total exposure (meaning all they loans they had made) and to create a profit for the bank. But then something horrible happened that wasn’t unforeseen, since it had happened before; banks assigned value to debt. And yes, that’s as crazy as it sounds. They took the projected profit (if everything went swimmingly) from the debt and let investors buy a piece of of that imaginary profit in the form of securities. In the interest of keeping things simple and getting to the point of this post, securities are basically trade-able debt. So now this money that doesn’t actually exist is worth something. Glass Steagall used to separate the banking assets of a bank from their investment assets. The need to do this should not have to be explained. If a bank puts these securities on its balance sheets as assets, they can sell them and still be insured against those losses in the form of the FDIC insurance that real assets (your deposits) have. When a bank can inflate their assets by making insane loans without worrying if those loans are actually viable, what do you think happens? If you guessed that they make loans to anyone and everyone they can, with no regard to viability so that they can sell those "assets" and create a profit stream out of literally nothing, you win a cookie because you’re right.

The Wall Street vultures did this anywhere they could. To the government of Greece, the homeowners in Madrid and the US, and all over south America. They did not care if the loans they made were viable because it didn’t matter to them at all. There was nothing to lose. The money that was repaid became profits, and the money that wasn’t repaid became either someone else’s problem, a repossession, or a fixed (meaning nonnegotiable) debt. That’s what happened in Argentina. A crooked judge made a chunk of Argentina’s debt nonnegotiable when the vultures decided they weren’t going to to along with all of the other creditors who accepted a certain percentage on the dollar (I can’t remember what the percentage was). These vultures demanded 100 cents on the dollar, plus all of the interest on the incredibly risky loans they had made. When only the profit, but none of the risk is an investor’s concern, they’re no longer an investor. They’re a vulture. Argentina subsequently overrode the corrupt judge’s ruling, cleared all of their debt, and are doing just fine now, after a decade of dicking around with the vultures

Greece is still wrestling with the vultures. Since they don’t control their own currency, the EU (Germany, really) decided that they were going to "belt tighten" Greece by implementing austerity measures. Here’s the thing about austerity; when you take money away from people who can’t afford to have it taken away, the whole economy suffers. You can’t shrink the consumer base and think it’s going to work out well for the economy. So Germany, who makes and sells a lot of stuff, austered the shit out of both Greece and Spain. And predictably, there were far fewer people in Spain and Greece who had the money to buy Germany’s stuff. Neither Greece nor Spain have really "recovered" financially, despite the pain that was foisted on the poorest among them. Who could have seen that coming?

Anyway, back to the newly elected government. They were elected on a platform of ending austerity and renegotiating the debt, which is exactly what fucking needs to happen in order for them to ever recover. I don’t think that Merkel is going to be as big an obstacle to all of this, as some people think. She did fuck Germany a little with the loss in sales with the austerity crap she insisted on. No, the big showdown is going to be between the Greek government and the Wall Street vultures. Needless to say, I’m rooting for Greece.

Here’s the thing; you can’t be allowed to do business without accepting any liability for your risks. Some people think that the homeowners, and the governments are to blame for over borrowing. Those people would be republicans, libertarians, or idiots. But I repeat myself. This would be like putting a box of cookies out on the counter and blaming the children who ate them all for being irresponsible. Of course they ate the cookies. They’re not in charge of cookie portioning. Knowing how many cookies should be consumed is not their area of expertise any more than knowing how much money to borrow is the expertise of the borrower. No, that’s the job of the bank. And when the bank is spinning a load of crap telling you that you’re totally within reasonable parameters of debt, you listen to them because that is their area of expertise and you want the money. There is no reason to become a subject matter expert when the experts are telling you that you can have what you want. Creating amortization tables for debt is not something that most people know, or should be expected to know how to do. It’s incumbent on the person with the cookies to determine how many cookies they should give out. I cannot believe this needs to be explained. When a kid pukes from eating too many cookies, the bank needs to clean that shit up. They overloaded Greece with debt, and they should write down their losses.

Not just because it’s the right thing to do, but because it’s the right thing to do for you. Why you? What do you have to do with the debt in Greece, or your neighbor’s upside down mortgage? When Greece or your neighbor are working their assess off to pay the vultures with their money, they’re not putting money into the economy, which puts your job in jeopardy. Let me put it to you another way: paying off the vulture debt means giving your paycheck over to the 1% instead of to the 99%. That’s how this fucking income inequality happens. The dumbest and the greediest among us will have you believe that you need to buck up and bootstrap all of your money over to the people who stacked the deck against you.

That’s bullshit. The 1% will not own a full fifty percent of all of the global wealth this year because they’re all that. This happens when the game is rigged, and anyone with an iota of sense can see that.

So I say, GO GREECE! We need your money more than the vultures do so go get em!