Greek bailout.


Can we have a bid please?

One decidedly negative outcome of the resolution of the Greek bailout would be that we would lose all hope, after all this farce has concentrated our attention for quite some time now while we wait , time after time, for the “deus ex machina” to come on the stage to resolve this tragedy. We are not quite there yet but this farce is starting to resemble that other story, “one thousand and one nights”, where the sultan’s wife tries to delay her execution by telling fascinating to-be-continued stories.

This whole thing is a wonderful example of sophisticated political engineering. There will not be a default but right away you can whistle good-bye to 70% of your money if you are a creditor. The remaining 30% will be exchanged for 30-year bonds paying an interest rate of, reportedly, 3.6%. As soon as interest rates in the world, and the Eorozone, normalize (if they ever do) to say an interest rate of 6% (the basis of the last 30-year US bond futures contract), you will lose  one half or more of that 30%, leaving only the hope of getting back 15%.  Straight out of Alice in Wonderland?