Once again it didn’t work.
Last night Greece “apparently” voted to (somehow) keep to “the program” and not immediately toss all the bonds they have issued into the paper shredder and send the pieces to Merkel.
It didn’t matter. Spain’s bond yields continued to rise this morning, are at this point over 7% and the overnight rally in the futures disappeared.
There’s a not-so-silent bank run in Greece. This will spread.
In Greece, and elsewhere in Europe, there is a developing story (not yet reported) where people are simply charging everything on their credit cards and have no intention of paying any of it — ever.
This will of course get cut off (as soon as it is publicly recognized that it’s going on) and the market will revert to cash-only. And when it does, the contraction will hit the markets and the public recognition like a freight train.
This morning CNBS’ Liesman continued to play the “bazooka” game, claiming that someone “needs to do something.” He’s at least getting some pushback from the others on the set.
Well, yes, someone needs to do something.
Arithmetic has to be faced.
And arithmetic is quite simple:
The government cannot spend more than it taxes. No government. Not here, not in Spain, not in Greece, not anywhere.
Until and unless this is recognized there is no answer.
I have been pretty damn rough on Gary Johnson, Libertarian Presidential Candidate, despite being a Libertarian. The reason is simple — even though he’s promised to send a 43% cut federal budget to Congress he has utterly refused to stick one 8-word sentence into his platform on his web site or reduce the questions on his intent with vetos and such to the following 8 words.
“UNDER MY ADMINISTRATION DEFICIT SPENDING SHALL BE PROHIBITED.”
No weasel words, no room to maneuver,no games, no bullshit, nothing but 8 words.
8 words that have to be government policy here, there, everywhere.
Five of those words are in the Libertarian Party of Florida’s Constitution. (“Deficit spending shall be prohibited.”) Those 8 words form the basis of sound government here, there and everywhere.
Until those 8 words are part and parcel of every government there is no solution.
At the same time in the United States we must answer the question “how do we stop — right here, right now — the growth of federal medical spending?” It has expanded at 9.3% annually since 1980 and in that time has gone from $53 billion to $820 billion last year. This too is an exponential series and without stopping it right now no promise to cease deficit spending is truthful. Therefore, in order to make the above 8-word statement you must also, at the same time, explain how you are going to accomplish this. If you don’t you’re lying about your promise to cease deficit spending.
Math just is. Exponential growth on an indefinite forward timeline is mathematically impossible.
This isn’t about what I want, what you want, or what anyone else wants. It is about arithmetic, not politics, and it is utterly immaterial whether you politically agree with it or not.
The math is never wrong and if we do not face it our markets, our economy and our government will collapse.
This is not speculation.
It is mathematical certainty.