Watching the Greek Debt Episode of the Global Soap Opera

A serious question, Fellow Reckoner: Would you, if given the choice, be alive at any other time?

We’ll get back to that in a second. First, our regular beat…

Markets went precisely nowhere yesterday. It was as if everyone agreed to stay home…or go fishing…or to become reacquainted with that strange person living in their house and sleeping in their bed. Among other things, investors are waiting to see what happens with Greece. We’ll save them some time. Nothing will happen. Nothing different, anyway. Here’s Bloomberg, with more news on the same old story:

Greek political leaders struck a deal on a package of austerity measures, clearing the way for a swap to cut the nation’s debt and win its second rescue in two years.

Greek Prime Minister Lucas Papademos called European Central Bank President Mario Draghi to tell him “an agreement has been reached,” Draghi said at a press conference today in Frankfurt. An announcement from Papademos’s office is expected shortly, a Greek government official who declined to be identified said today by telephone.

The accord came less than four hours before euro-region finance ministers hold an emergency meeting in Brussels to discuss the 130 billion-euro ($172 billion) lifeline and the swap that will impose a loss of about 70 percent for investors.

Oh, Papademos and Draghi said all’s well. An agreement has been reached. A deal was struck. Phew! We thought that…

…Wait, we’re trusting politicians now? Ex-Goldman Sachs politicians (in Draghi’s case), no less? When did that happen? These are people who couldn’t lie straight in bed. Everybody knows it. Notice, for instance, how these and various other furry-knuckled folk are no longer referred to as “politicians”? That word has been sullied. People have trouble even using it without nailing a “damned” or “thievin’” to the front of it. Now the papers, with embarrassing deference, refer to them as “political leaders.”

Let’s recap what we know about Greece and the euro-situation in general. For brevity’s sake, we’ll stick to its most recent — i.e. current — collapse only.

Back in May of 2010, five short months after receiving its first official credit downgrade, Greece was awarded a €110 billion 3-year “loan.” (We put that word in inverted commas just in case it mistakenly implies repayment.) And what happened? Did the government clean its act up? Did it cut expenses, as promised? Did the economy roar back to life? Of course not. Protesters had barely left their post in Syntagma square when it was time to return for more banner waving and foot stomping. By December that year, the yield on 10-year bonds had spiked to near then record highs over 11%.

Not to worry, said the Feds, who swept in with another €110 billion bailout plan…again negotiated under the strict condition that they rein in spending. But the horse had already bolted. Greece’s outstanding debt is now equal to roughly 160% of GDP. The gears have stalled. Official unemployment has reached over 20%. It’s worse for the youth. Much worse. Half of the nation’s under-24 population is without work. Growth has collapsed. Industrial output in December fell 11.3% from the year-earlier month.

Would you lend these people money? Would you lend these people your money? Only a fool would answer yes to the second question. Only a politician would answer yes to the first.

The Spartans are broke. They have been for a long time. And, as such, they will default. One way or another. All the handshaking, backslapping, hallway dealing, last minute brokering, politicking and brinkmanshipping won’t stop that. It’s just noise, playing like the soundtrack to a movie that’s already been written.

Not that the Greeks area lone sinners. The whole developed world is caught up in a debt funk. The collapse, when it arrives, is going to be truly epic. Which brings us back to our original thought: If you had the choice, would you live your life at any other time?

Take a look back through history. Most of it was a complete bore, save for the workaday melodramas played out in small, social soap operas. In fact, most of history existed before actual soap operas…and before soap…and before operas.

Sure, there were wars and plagues and the miserable collapse of empires. Currencies were debased and their masters beheaded. New lands were found and old cities forgotten. There were events that reshaped the course of history itself, delivering us the present day in which we live.

But mostly these things took many years, centuries even, to fully express themselves. Trends were slow…probably because there was nobody around to drive them. Mankind couldn’t even manage to gather a group of 1 billion people until 1811. How can you expect to get anything done when you’re still counting the global population in “millions?”

These days, contrary to the relative snoozefest of yesteryear, things happen. And when they do, they are fast…and loud…and on a scale that dwarfs any other in history.

Take economic output, for example. According to data compiled by The Economist, more than half (55%) of all the economic output generated over the past 2,000 years was generated in the 20th century. In other words, the last 100 years of the millennium produced more than the preceding 1,900. And this trend — along with the mushrooming population supporting it — is quickening. The first 10 years of this millennium account for roughly one-fifth of the total economic output achieved since BC ticked over to AD.

All this is just a fancy way of saying that big things are happening. Big booms. Big busts. Greece-, Europe-, US- and entire developed-word sized busts. And, lest we fail to mention it, a spectacle like no other in history.

Who would want to miss that?

Joel Bowman
for The Daily Reckoning

The Daily Reckoning