Put A Fork In It - Greece Seems To Be Done

If you have not seen it yet, then you must be living under a rock; Greece's Prime Minister Papandreou took the nuclear option and is letting the citizens of Greece vote in a referendum on whether to proceed with the just approved bailout package.

http://online.wsj.com/article/SB10001424052970203707504577012161940303868.html?mod=googlenews_wsj

While the EU scrambles to deal with this and the markets around the globe take a dive because of it, my hat is off to him. To him (assuming he is not taken out of office before the referendum), it is a win/win situation. If the citizens vote to approve the package, the heat is off him as the bad guy and he can tell protesters that the people have spoken. If they vote against the package, Greece takes a hard default, financial repercussions ensue, Greece probably has to leave the EU and being the first in line for default may well become the first to recover from this mess. You see, those buying your bonds seem to forget pretty quickly about your default, and if the default makes you a much more solid country for paying debts in the future, all the better. They would rather lend to you after a default than before an expected default.

I view our financial morass as a lot like gangrene. Earlier efforts cut some of it away, but not nearly all of it. "Let's leave some and try to treat it with antibiotics or other treatments." Well, it has not worked and will not work and, to me, the sooner we cut it out the sooner we will be on the way to recovery. It will be quite painful, but better a few years of big pain than perhaps decades of slow pain. Not that I like either, but I think getting it over with is better. Sure, financial institutions will go under, but last I checked most corporations out there are in pretty good shape (financial institutions aside) and there is plenty of capital to fill the voids. Moreover, the big banks are not exactly doing a lot of lending or other activity to help the average Joe out, so who needs them. Seriously, $5 a month to have a debit card so you can spend your own money.

We will see what happens. I tend to doubt the referendum will ever happen and then Papandeou can point the finger at someone else for nixing it. Nevertheless, it is just a matter of time before the voters in some country get so fed up they vote in whoever is against the EU plans and this house of cards comes tumbling down. Do we really want that hanging over our heads for many more months to come?

Disclosures: None