Saturday, January 20, 2018

Who will buy Greek bonds?

Nobody in their right mind.  The Greeks have racked up debts equivalent to several years of Greek GNP.  They are still spending more than they take in with taxes.  No way are they going to be able to pay off what they owe right now, let along pay off any future borrowings.  All sensible people know that lending more money to Greece is like pouring the money down a drain.  The Greeks just don't have, and never will have, the ability to pay it back. 
   For some reason, unclear to me, the EU (Germany mostly) has been giving the Greeks bailout money to keep them from outright default on their debts.  Why the EU feels this generous is a mystery, but they do.  And, for some years, the EU has run a Greek supervision operation that tries to tell the Greek government what to do to balance their budget.  The Greeks hate this.  They have been rioting in the streets of Athens to show their displeasure.  But the EU has been saying, "Do it our way, or no more bailout money." 
   And just last week, the EU began talking about getting out of the Greek supervision business in August and letting the Greeks do their own thing.  Not discussed was whether the bailout money would continue after August. 
   Greeks don't have their own currency, they are on the Euro.  Greeks cannot print their own Euros like they used to do when they were using their own drachmas years ago.  Now the Greek government has to borrow money when expenses exceed tax revenue, which they do, every year.  And what sensible person would loan the Greek government a dime?  Fortunately for the Greeks there are plenty of sucker banks who will buy anything, no matter that the borrower will never be able to repay. 
   It will be a good sideshow to see what happens to the Greeks after August.  Bring popcorn. 

No comments: