08:52 – Barbara and I put together four dozen of the test tube sets yesterday while she watched golf. We would have done more, but we ran out of test tubes. Each set is half a dozen glass test tubes, each in a 30x120mm polypropylene tube with a screw cap, with half a dozen more 16x120mm polypropylene capped tubes, all in a one-quart zip-lock bag. We’ll use these in the chemistry kits, the biology kits, and (eventually) the forensics kits, so we’ll just build a bunch periodically and keep them on hand for assembling kits.
More details about the EU “shock-and-awe” campaign are becoming available, and they’re not encouraging. One of the big problems the EU has is that the current bailout fund, at €440 billion, is much too small to backstop Spanish and Italian bonds. The FANG nations are unwilling to commit to more funding because their taxpayers/voters are already near revolt. So, the EU instead plans to use the accounting trick I referred to yesterday, which is called leveraging. (Actually, it’s less an accounting trick than a massive fraud, but we’re not allowed to say that.)
Most economists agree that €440 billion is much, much too little, and that the bailout fund needs at least five times that much to present a credible backstop to Spanish and Italian debt. So, the new plan is to leverage the existing €440 billion at 20%, which magically (and fraudulently) increases the size of the bailout fund to about €2 trillion. With such a massive warchest, the EU hopes to stop runs on Spanish and Italian bonds (and banks) before they can get started. The problem is, it’s all smoke and mirrors. There’s no more money there than there ever was, and if push comes to shove that will quickly become evident. The fundamental problem is that the EU believes it can “fool” the markets. Good luck with that.
Meanwhile, it’s crunch week for Greece. The “troika” decides this week whether to approve the next portion of bailout money for Greece. All along, the troika has insisted that Greece must meet the agreed goals for spending cuts and tax increases if that payment is to be approved. Greece has not and cannot meet those goals, so if the troika stands by their ultimatum the payment will not be approved. If that happens, it’s game over for Greece, and we find out what a disorderly default looks like.
It’s extremely likely that a disorderly Greek default would be followed immediately by Spain and Italy coming under extreme pressure. Yields on their bonds, even with ECB intervention, are now nearly as high as they were before the ECB intervened, near the utterly disastrous 6% level. If Greece topples, yields on Spanish and Italian bonds will immediately skyrocket, which will require a huge bailout to avoid an immediate collapse of the euro. The EU authorities and the IMF are as aware of this as anyone, which argues that the troika will approve the next bailout payment to Greece despite the fact that Greece hasn’t come anywhere near meeting the required goals.
If that happens, Greece could choose to default anyway, and may well do so. Greeks rightly perceive that the bailout payments aren’t for the benefit of Greeks. This next €8.5 billion bailout payment, like all of the others, is simply a transfer payment via Greece of EU money to banks that hold Greek debt. The EU doesn’t care about the suffering of the Greek people or the destruction of the Greek economy and society. They believe, with justification, that Greece brought this calamity on itself. Many Greeks understand this, which doesn’t make their suffering, now and for the foreseeable future, any the less.
I told Barbara the other night that it wouldn’t surprise me if a real, hot revolution broke out in Greece and if before long we see UN peacekeeping forces deployed there. In a country the size of North Carolina and with a population of less than 11 million, there have been about 70,000 small business failures so far this year, with many more to come. The Greek middle class is well on its way to joining the ranks of the poor, with doctors, attorneys, teachers, shopkeepers, and college professors now participating in riots (which we’re supposed to call demonstrations). Greece really is a powder keg, with the burning fuze nearing the touchhole.