Who’s ready for the fall?

Courtesy of The Automatic Earth 

Ilargi: When times get desperate, people get resourceful. And sometimes funny. Let me give you two examples. First, the Greeks. You may remember that the government in Athens had demanded not long ago that the brilliant troika debt-swap plan that was supposed to see private investors entirely voluntarily lose 21% of the value of their Greek sovereign "assets", would need a 90% subscription rate by September 9, or else (I have to admit, I was never entirely sure what the "else" would consist of). 

Not to worry though. Athens now announces that it has no plans to publish any results for the plan anytime soon. That is, if possible, even more brilliant than the original plan. It’s too early, Athens says:

Greece has no plans to publish details of anticipated participation in its debt-swap program this week or next, said Petros Christodoulou, head of the country’s debt management office. The response so far has been "very positive," he said in a telephone interview. "There will not be a number coming out of Athens today or next week. At this moment, more than half of the Europeans have not even responded. It is too early."

Credit-default swaps insuring Greek government bonds jumped 701 basis points to a record 3,727 basis points, according to CMA. The five-year contracts signal there’s a 94 percent probability the country won’t meet its debt commitments.

The results of the letter of inquiry, which was dated Aug. 25, will be "useful for us to plan our liability management," Christodoulou said today. It would be "totally misleading" to describe the exercise as an offer and make the expected participation percentage public, he said. "I will know the number, but I’m not about to give it to anybody. It’s not a number that means anything because it is not binding." He declined to say what percentage of owners of the nation’s outstanding bonds the program has identified.

Ilargi: Now, if you set a September 9 deadline for a plan, and haven’t heard of half of the potential respondents, and moreover CDS markets signal a 94% chance that you won’t repay your debt (wait, there’s still a 6% chance Greece will repay?!), then perhaps don’t ask don’t tell is indeed the way to go. It’s not like Greece has any credibility left that it needs to worry about losing.

But at the same time, these actions, hilarious as they may be, are also more nails in more coffins. Europe is fast running out of time to find a solution that would leave it with even just any token credibility. It should do what it can to try and restore some confidence where and when it can. Instead, everyone seems to be rushing for the exits at full speed and without any coherent planning, women and children be damned. 

Germany is now openly preparing plans to save -ringfence- its banks if and when Greece defaults. Other countries are certainly doing the same. Times change, and fast. And just in case, you can bet they all have fresh plans on the shelf to print huge amounts of marks and francs and pesetas. And drachmas. 

The problem, of course, is that the people in charge in the various eurozone countries have consistently refused to prepare for what has now become inevitable (and, for all intents and purposes, has been for years). Which means that plans and preparations we are about to see will be haphazard and poorly organized. Get ready to see some true craziness. And soon: the status quo is not going to last much longer. 

Meanwhile, it’s the very lack of preparedness that may guide much of the European action and reaction: extend and pretend a little longer, so you can try and get ready. Remember Jean-claude Juncker’s words once more: "When it gets serious, you have to lie".

Even the G7 finance ministers meeting seemed to be losing its eternal optimism. But, granted, they did so with a fair dose of humor:

"We met at a time of new challenges to … growth, fiscal deficits and sovereign debt … There are now clear signs of a slowdown in global growth. We are committed to a strong and coordinated response to these challenges," a communique said after hours of talks between G7 finance ministers and central bankers. 

"We reaffirmed our shared interest in a strong and stable international financial system and our support for market determined exchange rates," it said. "We will consult closely in regard to actions in exchange markets and would cooperate as appropriate."

Ilargi: A slowdown in global growth? You don’t say?! And the signs are clearnow? Just now? I would suggest that if you see these signs only now, chances are that any "strong and coordinated response to these challenges" will be too little too late as well. 

It’s exactly like what happens in the US. Obama presents yet another jobs plan, and it turns out to be largely based on tax cuts. As if the government’s deficit and debt are not high enough yet. Whether tax cuts will lead to substantial employment increases is very doubtful: if private employers have no work to offer, they won’t hire people to do it, tax cut or not. The hundreds of billions involved might be better spent hiring people directly in large scale infrastructure projects; I’m sure you can all think off a few roads that could do with some repair, or perhaps an electricity grid near you (hello, San Diego!).

But no, the government shouldn’t be hiring, or so feel many Americans. Private business should. Which means public money gets thrown into a murky private pool from which very little if any may ever return. Hey, it’s a choice…. Just one question: who benefits?

Like others, I was preparing for a Greek default this weekend, and perhaps in combination with a federal take-over of Bank of America. The media focus on the 9/11 commemorations seemed like a perfect distraction to push a number of things through without hitting the main headlines. So far it hasn’t happened. Well, we have a bit of patience left still. 

But we do begin to fear the speed and severity with which the walls will come tumbling down when they inevitably do. All the time, money and effort spent to salvage a doomed and bankrupt financial and political system could be put to much better use, provided one is interested in keeping at least some basic tenets of our societies intact. The longer we keep up this charade, the harder we will fall. 

Then again, that presents a huge dilemma, the essence of our human tragedy. As long as our leaders and media deny the reality of what’s happening, we are all too eager to follow. We’re therefore pretty much guaranteed to walk, nay run, into our own traps eyes wide open. For who wants to see this all for what it is? Who’s ready for the fall?