According to Seeking Alpha last week: “Yields on two-year Greek government bonds reached 46.84% recently. This is roughly comparable to yields on Argentine bonds in early December 2001 – only a month before the country defaulted on its debt.”
Other signs of the Euro crisis: The Euro hit a six month low against the dollar, and a ten year low against the yen.
Now Walter Russell Mead is reporting that markets around the world have a serious case of the jitters due to the possibility of a European meltdown. “Creating a monetary union without a true federal government is looking more and more like the biggest European policy mistake since Britain and France let Hitler have the Sudetenland.”
It’s not just Greece. Investors are now worrying about the potential solvency of French banks.
Last week, Powerline linked to this cheerful piece over at Zero Hedge, which outlines some consequences of a Euro breakup: “Were a stronger country such as Germany to leave the Euro, the consequences would include corporate default, recapitalisation of the banking system and collapse of international trade.” Lovely. Other possibilities: The rise of authoritarian or military governments to contain the crisis, or civil war.
Despite all this, the EU itself, when not pushing for further austerity, denies it’s preparing for a Greek default. Should we be more worried that the Eurocrats running the show are liars or idiots?
Here’s Peter Morici calling Greece to default and abandon the Euro, although comically, he’s saying that it’s Greece that is the exploited nation “at the mercy of Germany and other rich states who exploit European unity to live well at the expense of their poorer brethren.” Of course this is an inversion of the actual situation, with wastrel cousin Stavos living high on the hog off of Uncle Fritz and Aunt Helga’s credit rating.
But that might be coming to an abrupt end. Despite a slew of austerity measures introudced over the weekend, the Greek government only has enough money to last through the middle of October. There are technical obstacles to still more bailouts from Germany, assuming Uncle Fritz was even willing to extend more credit. Signs are that he isn’t. Indeed, German Chancellor Angela Merkel is openly discussing “an orderly bankruptcy of Greece.” The bond market is already treating a Greek default like a near certainty. It seems like the plan to prop up Greece until banks can stick European taxpayers with the bill may be coming undone.
So, you think gold prices would soar, right? Wrong. “Gold futures slumped as traders cashed out of the perceived refuge asset to cover losses in other markets while Europe’s debt crisis seemed poised to take a turn for the worse.” So it’s gotten so bad that traders need to sell gold in order to cover losses in everything else but gold.
Hang on, folks. We could be in for a very rough ride…