How Market Sentiment Moves With the Greek Debt Crisis

Reporting from Waipara, New Zealand…

A couple of hours south of Kaikoura – and the most famous crayfish picnic tables on the South Island’s east coast – you’ll discover the fastest growing wine region in New Zealand; 80 vineyards sprawling across more than 1,200 hectares of picturesque plantings…

Alas, Fellow Reckoner, there are far less important things to worry about than shellfish and Chardonnay. So, let’s get right to them…

The official line when markets (any market, it seems) rally is “optimism surrounding the [latest] plan to solve the Greek debt crisis.” The name of the rescue package changes from bailout to bailout, of course, as do the conduits through which other people’s money funnels, but the general thinking is always the same… “the same” being, oddly, “this time it’s different.”

Predictably, the converse is also true. Whenever markets are in the dumps (as they were on Tuesday), Greece finds itself the convenient whipping boy of elsewhere investors.

How is it, Reckoners must be wondering, that global market movements seem to hinge on the fiscal vitality of a nation that kicks in just 2.4% of Europe’s total GDP? Surely there are Black Swans with far bigger wingspans to concern ourselves with, no?

But, as our colleague Dan Denning explained in these pages recently, “Greece isn’t about saving Greece.”

As usual, there’s more – much more – to the story. So, what’s at stake here?

“The only reason something so small and insignificant could matter so much,” observed Dan, “is that it matters in a way no one is willing to say.”

Do tell, Mr. Denning…

“It’s about the subversion of sovereignty and democratic processes by removing decisions from people and giving them to trans-national financial elites. It’s about preserving a global system that’s based on the accumulation of debt and growing government power because there are two groups of people who benefit tremendously from that system, even if most people don’t.”

But isn’t the rescue package about debt reduction? Isn’t it about maintaining the integrity of the euro currency and viability of the eurozone itself?

C’mon, Fellow Reckoner. This isn’t our first Zeibekiko. We’ve all danced these steps before.

Not only is the euro better off without Greece, Greece is surely better off without the euro too. It’s a mutually-abusive, hate-hate kind of relationship; the type you wouldn’t want even your closest frenemy to suffer through.

“With its own currency,” observed Dan, “Greece could default, devalue, inflate and start over. Argentina did it in the last 10 years. It’s not rocket science.”

So too did nations from Austria to Zimbabwe (and those starting with almost every letter in between) default during the past century. If the likes of Guyana and the Solomon Islands can manage it, then why not Greece?

Moreover, had Europe simply cut the Zorbas loose when they strayed from their expressed commitments, as outlined under the Maastricht Treaty, the EU might have maintained some credibility in its own fiscal responsibility.

No. Saving Greece is not about saving the euro. Nor can a plan to reduce Greek debt to “only” 120% of GDP…over the next eight years…be taken seriously as a motivation for keeping Greece tethered to the union.

Concludes Dan, “This is simply the latest example of corrupt government operatives colluding with the financial elite to steal money, liberty and big chunks of ‘the pursuit of happiness’ from ‘we, the people.'”

But are you really shocked, Fellow Reckoner? Even mildly surprised?

Whichever way markets go this morning – and tomorrow…and for the foreseeable future – one thing is certain: Those who write and enforce the rules are not in the habit of leaving unwell enough alone. Capitalism – both the creative and destructive forces therein – must be contained, controlled and contorted, they contend.

Anything to prevent the insiders from becoming the very outsiders they affect to serve.


Joel Bowman
for Markets and Money

From the Archives…

Carry Trade Currencies and the World’s Most Expensive Cities
2012-03-02 – Joel Bowman

Why the ECB and the Fed Have China Laughing
2012-03-01 – Greg Canavan

Burma’s Economy: The Next Big Story in Asia
2012-02-29 – Chris Mayer

Anatabloc – A Game-Changer in Medical Treatment
2012-02-28 – Patrick Cox

How Australian Banks Use Covered Bonds to Play a Dangerous Game
2012-02-27 – Dan Denning

Joel Bowman
Joel Bowman is managing editor of Markets and Money. After completing his degree in media communications and journalism in his home country of Australia, Joel moved to Baltimore to join the Agora Financial team. His keen interest in travel and macroeconomics first took him to New York where he regularly reported from Wall Street, and he now writes from and lives all over the world.

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Well said – insanity prevails – Japan slips into recession, market goes up, a bit of creative number crunching by the BLS in the US, markets go up, Greese gets less then more debt & Europe slipping into recession, markets go up, every central banker printing money furiously, markets go up

Anyone with half a brain must know this will not end well – so why are so many supposed experts so positive about our economic future – are they being paid off or are they so scared shitless they would say anything to keep this farce going

Eventually new money has to sit somewhere, it has to be allocated to something. If this new money is allocated to one particular asset class (Stocks) the demand side of the market will be inflated against the sell side of the market as more money chases the same pool of shares. This will drive up Stock prices, which if you think about it is a natural reflection of inflation. If a company is valued at 100 Billion this year and the money supply is inflated by 10% over a year, as sure as eggs is eggs, without any other fiscal… Read more »
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