From Zero Hedge:
Submitted by Simon Black of Sovereign Man
Three years ago today, my best friend called me and told me to turn on my television. I remember the way he described it– “Lehman is finished.” The TV showed guys packing up their desks on Sunday afternoon, moving out of their offices forever.
That was the precipice from which financial markets plunged the following day, taking the global economy along for the next three years.
We appear to be at that moment once more.
Greece is out of cash. Again. The Greek Deputy Finance Minister said on Monday that his country only has enough cash to operate for a few more weeks.
As I write this note, French, German, and Greek politicians are all on a conference call, feverishly trying to figure out a way to avoid default. Everyone seems to understand the consequences at stake… given the chain of derivatives out there, a Greek default will completely dwarf the Lehman collapse.
Unfortunately for the bureaucrats, dissent against the Greek bailout plan is spreading across Europe… and leaders can no longer ignore the growing wave of opposition in Finland, the Netherlands, Austria, and Germany.
It’s no wonder, when you think about it. Why should a German hairdresser who retires at age 65 stick his neck out so that a Greek hairdresser can retire at age 50? This, from a continent that was perpetually at war with itself for over a thousand years.
Europe’s great benefactor over the last several months has been China, whose treasury has been buying up worthless European sovereign debt to ensure that Greece doesn’t default.
It’s a testament to the absurdity of our failed financial system when the highly indebted rich countries of the world have to go to China, a nation of peasants, for a bailout.
Speaking at the World Economic Forum this morning, Chinese premier Wen Jiabao delivered a stern message: there is a limit to Chinese generosity, and it will come at a price.
The Chinese will undoubtedly use any further investment in European bonds as leverage to influence western politicians. They already bought Tim Geithner. The US government refuses to label China a ‘currency manipulator’. Similarly, European politicians will now be forced to acknowledge China as a ‘market economy’.
Ultimately, this charade will fail. It’s a simple matter of arithmetic. China could buy every single penny of Greek debt and it still wouldn’t solve the underlying problem: Greece would still be in debt! And more, still hemorrhaging billions of euros each month. Throwing more money at the problem only makes it worse.
Then there are those Greek assets for sale… like state-owned Hellenic Railways Group. It lost a cool billion euros last year. Or the notoriously inefficient, highly unionized, traditionally lossmaking Greek postal service, Hellenic Post. Any takers?
These are not exactly high quality assets… nor can Greece expect to get top dollar in what’s clearly a distress sale.
Over 200 years ago, Napoleon was forced to sell France’s claim to 828,000 square miles of land in the New World in order to cover his war expenses. US President Thomas Jefferson happily obliged, paying the modern equivalent of around $315 million (based on the gold price), roughly 59 cents per acre in today’s money.
According to US census records, there were around 90,000 people living within the territory during that time who literally woke up the next day to a different world. This is the sort of thing that happens when governments go bankrupt.
With the Lehman collapse, a lot of people got hurt… but it was mostly a financial and economic issue. When an entire nation goes bust, the pain is felt much deeper: the most basic systems and institutions that people have come to depend on simply disappear.
Argentina’s millennial debt crisis is a great example of this… suddenly the power failed, the police stopped working, the gas stations closed, the grocery stores ran out of food, the retirement checks stopped coming, and the banks went under (taking people’s life savings with them).
European leaders (with Chinese help) can postpone the endgame for a short time, but they’re really just taking an umbrella into a hurricane. It would be foolish to not expect a Greek default, and it would be even more foolish to not expect significant consequences. The only question is– how are you prepared to deal with what happens?
The Daily Mail reports that the comments were "too vulgar to repeat but referred to sex and Mrs Merkel's physique" and were made during a phone conversation with a newspaper editor last year.
The conversation was picked up during an investigation about a plot to blackmail Berlusconi, and was subsequently leaked.
The comment was made in the same conversation where he labeled Italy a "shitty country" and said it made him feel physically ill