"What we are seeing today here in Europe regarding monetary policy and the euro is a farce, Eric. Unfortunately, there is nothing funny about the consequences….


European politicians continue to throw caution to the wind and have now offered Greece another opportunity to be bailed out. I am reminded of a blunt broadside that Milton Friedman once fired against politicians: "One of the great mistakes is to judge policies and programs by their intentions rather than their results."

Rather than looking at the results of their past decisions, European politicians are foolhardily rushing in prepared to throw good money after bad, rather than face facts and the hard decisions that are needed. 

The first two Greek bailouts were clear failures. Nothing has been fixed. So why would any reasonable person expect that a third bailout is going to be any different, particularly given that Greece's debt mountain has soared making its problems even worse?

The €110 billion Greek problem European politicians tried to solve in May 2010 is now a €320 billion problem. What's worse is where those debts now rest. The €110 billion was owed to banks that stupidly loaned the money to Greece. The banks and other private lenders were let off the hook in that first Greek first bailout and made taxpayers responsible for bad decisions by bankers.

The €320 billion is now owed to taxpayers, and not just those in Europe. European taxpayers are responsible for the money loaned to Greece by the EU and the ECB, but taxpayers of countries that belong to the IMF are responsible for the money it loaned to Greece.

ECB To Print Money For Another Take-It-Or Leave-It Deal

Now for the umpteenth time Europe has offered to Greece yet another deadline for a take-it-or-leave-it bailout proposal that would put even more debt on Greece's shoulders. This third bailout has been sweetened by making it even bigger than proposed just a couple of weeks ago. The current total is now reported to be €80 billion, of which €25 billion will be recorded as new shareholder capital put into Greek banks. 

The rub is that this proposed bailout money is not really capital in the true sense of that word. It is not accumulated savings. Rather, it is €80 billion of new money printing. The EU, ECB and IMF combined do not have this much money in their bank account and ready to spend on bailing out Greece. They need the ECB to create out of thin air all of these euros the politicians want to lend to Greece. 

This money printing will further damage the euro. And sadly, it won't help Greece either because, as the saying goes, it is just kicking the can down the road. The fundamental problem is that Greece's debt load is already overwhelming that country's ability to service its debts. Adding more debt is just making Greece's problem worse when the day of reckoning finally arrives. Yet, that is what their prime minister, Alexis Tsipras, has just done.

After months of taking a hard-line approach asking for debt relief to reduce Greece's debt mountain, Mr Tsipras totally caved in to EU demands. In fact, with this capitulation he is now agreeing to terms even harsher than what he had turned down before.


The Will Of The People Means Nothing These Days

What's more, the Greek referendum rejecting the previous European bailout proposal means nothing. Mr Tsipras apparently cares little for the 61% of the people who voted no in the referendum. It's just like the 80% of Americans who polls said were against US Treasury Secretary Paulson and his bazooka to bail out US banks in 2008. The will of the people means little these days. 

The result of this, Eric, is that the Greek people remain in debtors' prison, with little hope for release from their confinement, let alone parole. It means that every Greek citizen is responsible for €31,000 of government debt, soon to be €38,000 if the new bailout is imposed, when average income in that country is only €22,000 per person.


Greek Tragedy Coming To A Bank Near You

But there is still another twist to this latest bailout proposal. It is just that — namely, a proposal. It first has to be agreed by the Greek Parliament by Wednesday evening. So as the Greek banks remain shuttered for the third week, keeping the Greek economy in a standstill, there are still more acts to come in this Greek tragedy. 


Greece Capitulates

But coming back to the subject of the Greek capitulation, I would strongly urge your readers to look at the comments of Yanis Varoufakis, the ex-Greek finance minister who resigned after the Greek referendum a week ago.  I think he summed up things beautifully, and there is most assuredly no acceptable ultimate outcome to this.  So Greece is totally broke and the EU can’t recognize this fact because of the financial implications, which means that the saga will continue.




What's Happening In China Will Reverberate Around The World


But on an altogether different subject, I thought that was an absolutely brilliant piece that Michael Pento contributed to KWN over the weekend on the true status of the Chinese economy and financial system.  It is the best analysis I have ever seen on the subject.  


And when you think about it, Greece is of little importance compared to what is unfolding in China.  The effects of a Chinese implosion will reverberate around the world. For example, you can already see the impact that it’s having in South America, as the commodity-driven economies are deteriorating at an alarming rate.


I also want to talk with you about something a little closer to home.  As you know, Eric, I am currently speaking to you from my cottage on Lake Winnipeg, Manitoba in the heart of Canada.  Ironically the province's debt was just downgraded by Moody’s late last week for what appears to be a very good reason.



A World That Is Drowning In Debt


The socialist government continues to run significant deficits.  The net debt in one of Canada’s poorer provinces now exceeds $20 billion and there are less than 1.3 million people in the province to service it.  If you do the math, the province is clearly headed for disaster, and this is just a microcosm of what is going on globally. 


The world is drowning in debt and the implications of this are obvious.  We are either going to experience a debt deflation driven depression that will dwarf anything previously seen.  Or we will experience the complete destruction of the current currency system and some form of hyperinflation.  This is inevitable and I think people should be extremely careful these days with their debt exposure and should focus on owning real things.”