Home   Links   Editorials

The Emperor has no Clothes

Bob Moriarty
Jul 12, 2011

I don’t think this is going to come as a great shock to any readers of 321gold but the lamestreet media has done a rotten job of educating the public on the dangers of the current mess in the EU, most notably Greece. The best reporting I have read on what’s going on has come from Pater Tenebrarum of Acting-Man.com. You should go to his site daily, it’s very good.

There are two very important concepts that I want to talk about in this piece. The first is that all loans get paid. ALL LOANS GET PAID. If not by the borrower, then by the lender. Greece is a serial deadbeat. Tax evasion is a national sport. In Athens, taxes have been paid on about 300 swimming pools. Google Earth reveals over 17,000 pools in the city, all owned by people claiming to make less than 35,000 Euros a year.

The EU paid most of the cost for an underground system for the 2004 Olympics. Tickets for the subway are on an honor basis, and most Greeks simply don’t pay. The average wage for workers on the tube is about $100,000; three times the pay in the private sector. The company brings in about $128 million in revenue yearly with costs of $800 million. No wonder the Greeks are in the street rioting, they have a sweet deal going and want the good times to continue.

The EU has already turned over 110 billion Euros and is preparing to dump another 110 billion Euros down into the cesspool that is Greek finance. The money will never be paid back; Greece doesn’t pay their bills. They want the rest of the EU to pay their bills.

The lamestreet media suggests the problems are over for Greece once this latest loan is in place. Nothing could be further from the truth. Greece has done nothing to get their finances in order and they will consume just as long as anyone is dumb enough to hand them money.

The second major point that I want to make is that we focus on taxes collected when we should focus on just how much the government spends. That’s just as true of the US as it is of Greece. Everything any government spends will ultimately become a tax. It can be a direct tax in the form of income taxes or VAT or sales taxes or Corporate income taxes. But the money spent by the government all has to be collected in one form or another. Inflation is a tax, default and destruction of pensions is a tax, excess printing of money is a tax.

Here are some numbers that should jump off the page at you. These are charts showing the current yield on2 year and 10-year notes.

Greece 2-year yields

Greece 10-year yields

Spain 2-year yields

Spain 10-year yields

Portuguese 2-year yields

Portuguese 10-year yields

Irish 2-year yields

Irish 10-year yields

With 2-year interest rates above 30% for Greece, how could any reasonable person believe they can ever pay back what they owe? It’s simply not possible.

Greece and the EU face a simple issue. Either kick Greece out of the Euro and let them sort out their own financial issues or face a revolution. In the worst-case situation, when Greece defaults on their obligations, they totally lose the ability to borrow money abroad. That’s not a bad thing, that’s a good thing. A default would mean Greece would have to live within their means. But sooner or later, that is going to be the only alternative.

The EU, the Euro, Greece, Portugal and Ireland are going to blow sky high. When they do, it’s going to bring down the entire $600 trillion in derivatives. Governments around the world have been kicking the can down the road since the Global Credit Crisis began in 2007 but they forget, market forces are far more powerful than any government or collection of governments.

The Euro was a flawed concept from the gitgo. It assumes Greece and Germany or Sweden all have similar financial policies. They don’t and never well. One day very very soon the whole thing is going to come crashing down.

If you don’t want to pay heed to what is going on in Europe, dear reader, you can shift your focus to the US. The US is in worse shape than the Greeks or the EU with five wars going on at the same time and ever cent for every war being borrowed.

The US is waging war in Afghanistan, Iraq, Libya, Yemen and Pakistan. I don’t know very many Americans who could even locate them on a map. I don’t know any who could even suggest why we are fighting or what we stand to gain.

The system is crashing right under our eyes and most people can’t see it. Cash up, keep some extra food and water and prepare for the greatest financial debacle in history. The US either defaults or we face a revolution.


Bob Moriarty
President: 321gold

321gold Ltd