Bill Bonner

First, the market news.

Yesterday, stocks went up. Gold went up. And bonds went down.

It was a ‘risk on’ day…but not so much of one that you could draw any conclusion from it.

Investors still had the Greek debt crisis on their minds. But they seemed to have gotten tired of worrying about it. All the financial sweepers in Europe are working around the clock, trying to get the mess under the carpet or out the door. By the looks of the markets, they were succeeding.

But it’s not over yet. You’ll remember that we gave some advice to the financial officials who are in charge of bailing out Greece? We told them to take a page out of Gerald Ford’s book. Just tell the Greeks to “drop dead.”

Today, we give advice to the Greeks. Tell the bankers to ‘drop dead.’

A vote is expected today…which will tell us something. The Financial Times says it could be a “suicide vote.” That is, the governor of Greece’s central banks says the Greeks will be committing financial suicide if they don’t go along with the plan.

Speaking to The Financial Times, Mr. Provopoulos expressed concern that Greece’s economic crisis had been played down by politicians over the past 18 months as the country lurched towards a possible default.

“We have never really had a debate in this country about what went wrong. In Portugal the new government has come in and said that there will be a difficult two years ahead. We have not had that kind of talk here,” he said.

He added: “For parliament to vote against this package would be a crime – the country would be voting for its suicide.”

Turning up the heat, Olli Rehn, the EU’s top economic official, dismissed German suggestions that the eurozone was contemplating a “Plan B” in case the Greek parliament failed to approve the austerity cuts. “The future of the country and financial stability in Europe are at stake,” Mr Rehn said. “I trust that the Greek political leaders are fully aware of the responsibility that lies on their shoulders to avoid default.”

We’re not so sure. From what we’ve been able to make out of the rescue plan, they’d be better off rejecting it. Not that we’re in favor of people who don’t play fair. But this deck was always stacked. And the dealer had a few aces up his sleeve at the get go. The way we figure it, the politicians, the banks – notably Goldman Sachs, as well as the big French banks – were in on the whole thing from the get-go. It would be considered rude to mention it, for example at a champagne-swilling reception hosted by Christine Lagarde, but the whole deal was always corrupt. Goldman Sachs helped the Greeks disguise their debt so they could get in the EU system. Then, more or less the same bankers, advising pension funds, the IMF and the European Central Bank, urged them to buy Greek debt. And then, when the debt went bad, they organized a rescue – which spared the lenders any losses. And then, when the rescue went bad, they set to work figuring out the terms of a new rescue…and warning the Greek people that if they don’t go along, they’ll have to face Armageddon.

The Greeks would be better off calling their bluff.

Then, they could go broke with some dignity. They wouldn’t get any more credit. But more credit is the last thing they need. Besides, each time they are rescued, they end up in worse shape, with more debt to pay…and higher interest rates to pay on it.

So tell the bankers to ‘drop dead.’

Of course, the Greeks themselves were as corrupt as the bankers. They took their opportunities, too, as they came along. If they could get paid for not working, they didn’t work. If they could get a subsidy and not have to compete in the real world economy, they took the subsidy. If they could retire early, or get something for nothing, or hoodwink investors with some nonsense figures…of course, they did it.

So, there’s a pot. And there’s a skillet. Both are as black as a tax collector’s heart. And now they are both colluding to make sure neither has to reckon with his greed and errors.

Trouble is, that’s not the way it works. Debt doesn’t go away just because a knave and a fool decide they don’t want it. It’s still there. Like grinning death. It knows it will have its way.

Let’s see how things are going in the US.

We’re here in South Florida…where consumer confidence is falling, just as it in the rest of the nation.

Hey, if there were a recovery, how come consumer confidence is falling?

The answer is simple: there ain’t no recovery and consumers know it. The feds can babble about anything they want, but the typical consumer knows he is in a tough spot…and it’s getting tougher.

The good news: gasoline prices are falling. “But so are home prices in South Florida,” says the Palm Beach Post. House prices rose in 13 cities says the latest news. But not in Miami…which is in Palm Beach county.

Over on page 4 it says “Fla. Seniors insecure about income.” They ought to be. They’ve lost purchasing power for the last 10 years.

Of course, that’s just a part of the story. As we keep saying, the last 10 years has been a ‘lost decade’ – for Florida seniors as well as just about everyone else, except the rich. The middle classes have lost ground on every front.

Their houses are now back to 1990s prices.

Their real incomes have actually gone down.

Their stock portfolios too have lost value in real terms.

And the job market offers them fewer jobs than it did in 2000.

A gallon of gasoline costs only $3.64 in Palm Beach County, down from $3.85 a month ago. But it’s up from $1.30 in 2000.

“Consumers will keep their wallets closed until they feel a heightened level of confidence,” says a source interviewed by the Palm Beach paper.

When will that be? No one knows, but if present trends continue Florida seniors will have turned up their toes long before they turn up their confidence.


Bill Bonner
for The Daily Reckoning

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success in numerous industries. His unique writing style, philanthropic undertakings and preservationist activities have been recognized by some of America's most respected authorities. With his friend and colleague Addison Wiggin, he co-founded The Daily Reckoning in 1999, and together they co-wrote the New York Times best-selling books Financial Reckoning Day and Empire of Debt. His other works include Mobs, Messiahs and Markets (with Lila Rajiva), Dice Have No Memory, and most recently, Hormegeddon: How Too Much of a Good Thing Leads to Disaster. His most recent project is The Bill Bonner Letter.

  • RedQueenRace

    Miami is in Dade County, not Palm Beach.

  • Bill

    Rich or broke, there are few places as nice as Delray Beach. In South Miami Beach (South Beach) real estate prices are increasing, as I think you had reported earlier, as a result of Brazilians coming in with lots of cash. This is another consequence of a falling dollar.

  • Bruce Walker

    Actually, there is a slice of the middle-class that has made out okay. Any working stiff who had the audacity to question all the tripe fed to him about “investing for the long-run in the company 401-k” had a chance of making out okay if he contributed nothing to his 401-k. Provided, he did in fact still save, AND the savings were accumulated over a 20 year period using dollar cost averaging, AND the savings were invested instead in gold and silver. For such an individual, –someone who questioned the integrity of the financial services industry very early on after seeing young women who could pass for fashion models working the cash register in the cafeteria of one of the nations leading mutual funds… Well, I suppose the list could go on and on, but there were so very many clues for soooooo many years that no one noticed. It’s just amazing how so few people could have seen it, how so many people could have missed it…,, It seems almost impossible now to believe that someone could have gone without cable TV for 20 years along with a few other minor iritations like skipping a lawn fertilizer service, and having invested the savings in silver all those same years now has a quarter million in savings to show for it… Could that even be possible??? Ah, –actually– YES it is very possible.

  • kenn

    Stock Markets closed up for the quarter…. Boom times are here again. Hooray!

  • Scott Walker & the lame ducks

    “Of course, the Greeks themselves were as corrupt as the bankers. They took their opportunities, too, as they came along. If they could get paid for not working, they didn’t work. If they could get a subsidy and not have to compete in the real world economy, they took the subsidy. If they could retire early, or get something for nothing, or hoodwink investors with some nonsense figures…of course, they did it.”

    Wow. The Greeks sound a lot like the people who work on Wall Street.

  • CT

    “Why Greece Should Default and Go Broke With Dignity”

    Maybe you really meant to write “Why the U.S. Should Default and Go Broke With Dignity,” Oops we are already broke. Just living the Dream. Dream on.

  • Scott Walker being b***h slapped by a DMV clerk

    Scottie, he said that.

  • Bloomer

    Greece could tell the European banks to poke their loans and default. They are going to have to implement austerity measures whether they accept the bailouts or not. Why not default and make their own hard choices and keep their independence? Of course 3rd party credit swaps would be at risk (Goldman Sachs I assume), but thats the way the cookie crumbles.

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