Monday, 12 September 2011

08:41 – Yesterday, I went ahead and upgraded our Netflix account to 2-discs-at-a-time. We watch a lot of streaming stuff on Netflix, but a glance at my disc queue told me we needed to get more discs. There are about 30 discs at the top of the queue that have just released or will release this month, covering new seasons of six or seven TV series that Barbara follows, including Gossip Girl, House MD, Sons of Anarchy, Brothers & Sisters, Castle, Grey’s Anatomy, and one or two others. With the one-disc-at-a-time plan, it’d take us about four months just to get all those discs, not counting anything else we added.

The markets are expecting a Greek default, possibly as early as this week, and certainly before year-end. Given a CDS price, it’s a straightforward calculation to determine what the market estimates the probability of a default to be. Based on current CDS prices, the market estimates the likelihood of a Greek default in the short- to medium-term to be in the mid- to high-90% range.

Meanwhile, it’s pretty obvious that Germany is about to bail, so to speak, on the Greek bailout. Rather than sending more money down a rathole, Germany seems to intend to use that money to bailout its own banks, which will all be bankrupt if (when) Greece defaults. The German position seems to be that if that money must be spent, better to spend it recapitalizing Germany’s own banks than pouring good money after bad into Greece.

There is no longer any serious debate even within official EU circles that Greece will default. The questions are when and how. There has been a lot of talk about expelling Greece from the EU and the eurozone, which simply isn’t going to happen. For that to happen, the founding EU treaty would have to be modified, which would require the approval of all EU members, including Greece. Nor is there any mechanism for Greece leaving the EU and/or eurozone voluntarily. As a sovereign nation, Greece could of course simply announce its departure, but that would result in a chaotic bankruptcy.

And that is exactly the trump card that Greece holds, its only trump card. As I commented some months ago, the Greece situation reminds me of the scene in Blazing Saddles where the guy takes himself hostage and threatens to shoot himself unless everyone backs off. That is exactly the position Greece is in right now.

The thing is, at this point Greece is really immaterial to the euro crisis. Whatever Greece does or doesn’t do won’t affect events in any significant way. The real euro crisis is much, much larger than Greece. What matters are the debt crises of the larger nations, which started with Italy and Spain and have since expanded to include France and Belgium. Whether Greece departs the eurozone, voluntarily or involuntarily, those larger economies are also going down, and there’s simply no way to bail out even one of them, let alone all of them.

That’s why I’d bet that there are serious back-room discussions going on right now among the FANG nations, Finland, Austria, Netherlands, and Germany, about withdrawing from the current euro and forming a new eurozone comprising only nations with stronger economies. The cost to the FANG nations of doing that would be huge, but they pale into insignificance compared to the costs of continuing to subsidize the poor nations. A breakup of the euro is inevitable. The only question is the timing and form.

Our friends Paul and Mary were out of town over the weekend, so as usual I went over to pick up their mail and newspapers. When they had their security system installed, Paul gave me a personal numeric code for the keypad, as well as a codeword to give the monitoring service if anything ever went wrong. Fortunately.

So, yesterday I picked up their Sunday newspaper in the driveway and unlocked their front door. The system started beeping, as usual. I walked to the keypad and punched in my numeric code, as I’d done a hundred times or more before. The system went, very loudly, into intrusion mode. I stood and waiting for the alarm monitoring service person to challenge me, which she did. I gave her my verbal password, which she accepted as valid. She asked if I wanted her to call the police, and I told her no, that I was just taking care of the house for friends. I then told her what had happened, and she said I must have entered the wrong numeric code. I thought that was pretty unlikely, given that I tend not to forget numbers, but I tried it again, along with several permutations. No joy. So I asked her if she could reset the system so that I could just punch the Away key when I left. She said she couldn’t do that without permission from the homeowners and suggested I contact them. I told them that Paul and Mary had no land-line phone, that I didn’t have a cell phone, and that I didn’t know their cellphone numbers anyway. She said in that case she couldn’t help until I contacted them somehow and got them to authorize her to disable the system.

She disconnected, and I was left standing there with the alarm screaming. So I locked up the house and headed back to my house to call Paul or Mary and get things straightened out. By the time I got home, there was a phone message from Paul on our answering machine. As I was about to call him, he called me and said he’d talked to the security company and told them I was authorized to be there. He asked if I’d mind driving back over to their house and disarming the security system using their own numeric code. So I drove back over and found that the alarm was no longer sounding. Paul and Mary were already on their way back home, so I punched the disable key and entered their numeric code to turn off the system.

When Barbara got home from her parents, her only comment was that I needed a cell phone. I don’t have one now because I seldom leave the house, and the few times I do I’m usually with Barbara or a group of friends, all of whom carry cell phones. I figured if I got a cell phone, the battery would inevitably be dead any time I actually needed it, so I haven’t bothered. I suppose I should order a Boost Mobile prepaid phone, something like the Sanyo Mirro.