The Days of Greek Compassion are Over

Over the weekend, the Euros came to a decision to bail out Greece. The total amount is supposed to cover about two years worth of lending and comes to around $150B. The IMF has the largest load, followed by Germany, France, Spain and Italy, not necessarily in that order. The requirements on the Greeks are quite strict and are forcing large, unpleasant budget cuts on the Greeks almost none of which will land on the Greek military as there is practically no military in Greece at all. It's all going to hit civil service pay, retirees and welfare.

The days of Greek compassion™ are over. I would bet that they've ended in precisely the way Greek capitalists predicted - bankruptcy. The poor, the elderly and the disabled have all been torpedoed by their erstwhile political saviors. The ravening parasites in Greece have finally killed their host.

Here are a few thoughts, in no particular order, on the bailout and its potential aftermath.

• Spain and Italy joined in the bailout? Where are they going to get that money? They're just a few months (weeks?) away from the same fate. All Germany did was to raise the price of the Spanish bailout by the amount Spain donated.


• If I'm one of the idiots still holding Greek bonds, I'm selling them now. Prices will stabilize for a bit now that there is a big sugar daddy to buy the things. Nouriel Roubini pointed out last week that the IMF and the Germans will automatically become senior bondholders through this action, so any private individual holding Greek bonds will get paid off last in the event of a default.


• In a way, this bailout just holds the exit door open for investors for a little while longer.


• The bailout includes money for Greek banks because there's been a run on their deposits as well. If I still had money in a Greek bank, I'd get out while the gettin' was good.


• All of which will leave the Germans holding the bag. The IMF has no money that it doesn't get from nations around the world.


• The conditions of the bailout are familiar. Cut spending drastically, privatize government-owned businesses and cut regulations.


• Is anyone in Washington watching this thing implode? Has anyone asked President Obama about this? Does he show even the tiniest glimmer of comprehension?


• This was supposed to stop the contagion. So let's say you hold Spanish bonds and this has just happened. Do you feel better or worse about your holdings today? What has changed in Spain that makes you want to stick around? Has their ability to service their debts changed in any way?


• This action will probably stabilize Spanish, Portugese and Italian bonds for a time as well.


• ... giving you a chance to sell yours at as small a loss as you can manage and get out of town!


• When markets collapse, governments don't have enough money to stop the fall. The scale of investments is way off. $150B may seem like a lot, but it's dwarfed by the total capitalization of the bond market (plus stock market plus bank deposits). If just a moderate percentage of private investors decide to get out while the door is open, that $150B will be vaporized in short order.

There. I didn't mean to be so pessimistic, but the thoughts built on themselves as I went along. These kinds of government bailouts all seem to follow the same trajectory. A brief moment of hope and a slight uptick and then the fall continues. The Euros are betting that the size of this is sufficient to stop the slide, but that $150B, which is actually spread over two years, could vanish pretty quickly if investors decide to take the opportunity to flee.

And of course, unaccounted for in all of this are the Greek lefties, doing what they do best -

- demanding someone else pay their bills.