So Greek Prime Minister Alexis Tsipras’s government has defaulted on its payment to the IMF.
And the world’s bankers have been put on notice. Tsipras was not elected by the ECB or IMF autocrats, he was elected by the Greek people and that’s who he is doing right by.
There is no way Greece — even if it found some way of luring robust growth to the nation — would ever be able to pay off this debt.
In 2012, 85% of Greece’s debt was reworked to avoid default. On a per capita basis the Greek people are worse off today, than in 2012.
With each financing and debt offering, bankers made their huge fees not caring much that this was going to bankrupt the country or put it back in the stone age under the burden of austerity.
This goes back to Goldman Sachs fixing the books to allow Greece to apply for membership in the euro in 2002.
What will come out of Sunday’s vote is more likely a “No” to the draconian measures needed to pretend Greece will pay off the interest on the notes.
That puts all parties back at the table for haircuts and refinancing. Tsipras and his Finance Minister Yanis Varoufakis should have additional leverage in the negotiations.
The business pundits call Tsipras loony for his actions, but as the Greek leader he is attempting to do right by his people. He did not take on this debt and really the Greek people had little say in being burdened with this yoke either.
Tsipras and Varoufakis should publicly meet with Russian and Chinese delegations to discuss options on moving out of the euro, to establish some additional leverage with Brussels and Frankfurt.
Germany has made trillions since the euro first traded. How? While it steamed along with its manufacturing and exports, weaker euro countries like Greece, Italy, Spain and Portugal kept the currency cheap in value to power the German economy.
Its time for payback for the Greek people.
US equity markets are set to soar, not on the Greek default, but because of the news funds come into the market for the beginning of the 2nd half of the year.
The Dow Jones index is down slightly for the year, with the S&P 500 flat and Nasdaq up a few percentage points.
I believe the top is in on equities, since the two alternatives for the rest of the year, don’t align with rising stock prices.
Fed Chief Janet Yellen has two options:
No rate rise: Could help stocks initially, but the bond vigilantes will take yields higher as year progresses, meaning bond prices fall and take equities down as well.
Rate rise: Not going to happen, but the threat of it on the market could see money move out to grab better returns elsewhere.