What is really going on with the Euro? Part 1

By Michael Skywood Clifford.

Like everyone else these days I read a lot of articles about the troubles of the Euro. I enjoy reading about it, always thinking I am understanding what I am reading, and then when detached from the article or radio/ TV analysis I find myself confused, sailing around in the sea without a compass, still wondering exactly where Euro land lies.

It doesn't take a lot of browsing over the internet to find articles to say that we must no longer 'kick the can down the road', meaning that we must face up to the enormous amount of debt that has been racked up by the West. We must stop borrowing and pay off what we owe, even if it means we have to lose all our services, go back to living in a cave, wear a hair-shirt, eat in soup kitchens and earn less than the Chinese poor. This compulsion to pay back impossible debt has never happened in history before. In the past, odious debt and impossible debt have been written off. Think of Germany and Japan at the end of the 2nd World War. Now, however, in the 21st Century, the creditors – like loan sharks banging on the door – are demanding if the debt is not paid back in half an hour then the interest upon the principle will increase by another 5%.

To me 'baling out' seems like a well orchestrated game of 'Heads I win, tales you lose'. Prior to any success of a country getting a 'bale out', the media paint a picture that another 'bail out' will be impossible and this time everything will crash. Stocks go down and people sell cheaply. Yet, astonishingly, at one minute to midnight a 'bale out' arrives!  The markets go up. The banks and investors cheer because they have bought cheap stock which is now worth more. They also get richer because the interest on the Greek bonds (which they have received from Greece as IOUs for the deficit) has now gone even higher.

However the nation of Greece does not cheer. It has got poorer in this process – the Greek people see none of the money because it goes into Western banks to pay off the deficit on their enormous debt. The Greeks don't cheer because their deficit has increased and they now have to pay back an even more self-throttling tranche of interest in the next few months. And the whole thing starts again: the media says that Greece will never get another 'bale out' and the markets go down and….

The problem for the banks is that this game cannot go on indefinitely, especially if ruined countries refuse to play the game. And this is where the fireworks begin.