Move Along, Nothing to See Here…
So we awake to the news that all is fixed in the Euro spurring the Dow Jones up 1.2% overnight. Gold fell 1% too, for a while, then largely rebounded as if ‘someone’ thought, wait a minute…. The $96b fresh bailout comes with a not so small caveat. Because we have been through this many times previously the Euro leaders want the deal passed by the Greek Parliament before they hand over a cent. And what is the deal? Well it is the very same austerity measures (some say worse) that were resoundingly rejected in the referendum as those to date have brought this little country literally to its knees! There are already early signs that this may not get through – so then what? Also it was made very clear by Merkel in particular that there would be no ‘haircut’ to the EUR320 owed, just a ‘restructuring’. Well that EUR320 represents 180% of Greece’s GDP, GDP that is falling under the weight of austerity measures, bank closures etc. So on any ‘restructured’ level it is unsustainable and all of this merely delays the inevitable. Don’t get us wrong, despite the odds being offered amongst economic commentators we don’t think a “Grexit” is likely as the Euro leaders know it would be disastrous for the Euro despite Greece’s scale. It would trigger Spain, Portugal etc to threaten the same. So it will take more extraordinary measures to prevent it, and it is those very extraordinary measures (just as we saw in China last week to turn around their sharemarket crash) that just inflate this global bubble further until suddenly and unpredictably it bursts taking all ‘paper’ financial assets down in a heap.
On a lighter note (pardon the pun)…