The Chinese and Greek economic crises: nothing’s solved

I’ve been dumbfounded to read headlines like ‘China stocks bounce sharply for 2nd day, markets calmed by support measures‘.  They’re utterly ridiculous, because at the height of the crisis last week trading in more than half of all the stocks in China had been suspended!  When you can’t trade the most risky and vulnerable stocks at all, so that their falling prices can’t drag the market down with them, is it any wonder that the rest of the market stabilizes?  That’s not a recovery – that’s a fraud!

In the same way, I can’t understand how people can regard the proposed bailout package for Greece as anything but a fraudulent attempt to deceive the people of Europe and the world.  As Karl Denninger trenchantly points out:

Now Greece is being forced to transfer €50 billion into a “fund”; the only concession that Tsipras got was to keep the “title” in Greece, instead of sending the “assets” to Luxembourg.

Note that Greece only has about $230 billion in GDP annually, and yet now, with this new “bailout” has roughly double that in debt!

Let’s look at the numbers on this and make a few reasonable assumptions.

We’ll assume an extremely low 2% interest rate on the entire roughly-400 billion Euro debt.  That’s €7.7 billion annually in interest payments.  We’ll also assume that over 30 years the debt will be paid down.  That’s another €12 billion, more or less.  So now Greece has to come up with about €20 billion, more or less, in payments to international bankers out of their economy every single year.

Greece has about half of their GDP coming from government spending.  This means close to 9% of every euro in GDP goes to those creditors and about 17% of the government’s spending goes there too!

It’s never going to happen.  Never.

The claim that we can do this with a new “three year” deal is an abject fraud and anyone that believes otherwise is a lying snake.

. . .

This is reason for financial market euphoria?  It ought to be good for an all-on market crash; that it is not tells you everything you need to know about what passes for a “market” these days.

There’s more at the link.

If the Greek parliament votes to accept this deal, they’ll have betrayed their country.  If the people of Greece acquiesce in that betrayal, they’ll deserve all they get.  As former Greek Finance Minister Yanis Varoufakis said bluntly to the New Statesman:

Varoufakis, who resigned a week ago, has been criticised for not signing an agreement sooner, but he said the deal that Greece was offered was not made in good faith – or even one that the Troika wanted completed. In an hour-long telephone interview with the New Statesman, he called the creditors’ proposals – those agreed to by the Athens government on Friday night, which now seem somehow generous – “absolutely impossible, totally non-viable and toxic …[they were] the kind of proposals you present to another side when you don’t want an agreement.”

Varoufakis added: “This country must stop extending and pretending, we must stop taking on new loans pretending that we’ve solved the problem, when we haven’t; when we have made our debt even less sustainable on condition of further austerity that even further shrinks the economy; and shifts the burden further onto the have-nots, creating a humanitarian crisis.”

Again, more at the link.  You can read the full text of his interview here.

The Chinese stock market ‘recovery’ isn’t.  The Greek ‘bailout’ in its presently-proposed form will, in fact, sink Greece rather than save it.

That’s reality.

Peter