What Will Greece Decide?

The Daily Reckoning U.S. Edition

Home . Archives . Unsubscribe

The Daily Reckoning | Saturday, June 9, 2012 Countdown to “disaster dominos” as Greeks head to the poles, Readers weigh in on the state of The State, Plus, all this week’s reckonings archived for your no-union-membership-required reading... --------------------------------------------------------------- Europe is the last place your attention should be right now... When Greece’s debt crisis first shook the world in 2010, people were so preoccupied by headlines about Europe many of them missed out on the big early gains being generated by America’s explosive shale boom... Now that same distraction could cause them to miss out on an even bigger moneymaking opportunity. Forget about France, Germany, Greece and Spain for a moment — something far more unexpected, important and life changing is about take place right here at home... Click here now to see what it is. Joel Bowman, checking in today from Oslo, Norway... Joel Bowman Europe is fine, Fellow Reckoner. And by “Europe,” we really mean the part west of Sweden, north of Denmark and east of the North Sea. Norway, in other words, is one of the few countries in Europe that didn’t go in for the whole monetary union thing. The rest of them? Well...they’re screwed. The Greeks go to the polls tomorrow to decide, essentially, whether to stay committed to the euro. The conservative New Democracy party promises austerity, budget cuts, layoffs and the like. The leftist Syriza party vows to tear up the bailout deal. Hmm...On which horn will voters choose to impale themselves? We’ll go out on a limb here and guess that the Zorbas won’t make the tough decision. That, after all, is the convenience of democracy. It allows voters to “kick the can down the road,” as they say, to delay the inevitable. But it’s a temporary convenience. The inevitable inevitably comes. Whichever way the Greeks go, markets will process the results on Monday...and perhaps for a long time afterward. Dan Denning’s missive on Europe’s potential “disaster domino” serves as this weekend’s feature essay. Please enjoy... The Daily Reckoning Presents Backlash Against Conformity Dan Denning This is getting interesting now. Governments in Europe are toppling like subprime lenders in the US, circa 2007. Smaller European political parties are gaining traction as they resist proposed spending cuts. This whole chain of events is part of the idea that the failed monetary and fiscal policies in Europe are now political problems. The financial crisis of the Welfare State undermines the legitimacy of the Welfare State itself. The financial becomes political. Now, financial markets have been pretty exciting the last few years. You’ve had Ponzi schemes of Madoffian proportion. You’ve had defaults, bankruptcies, “flash crashes” and more. But when it comes to show-stopping drama and social upheaval, nothing can match politics. And that’s what scares us these days. Europe’s political crisis is evidence of deep structural problems in the European Union that can’t be solved by more central bank liquidity. Europe went for monetary union ahead of political union when it started down this path many years ago. The common currency allowed European governments to borrow at low interest rates and run up large deficits. The trouble now is that there’s no way to impose a political solution on the economic problem. That’s probably a good thing, now that we mention it. Imposing solutions from on high has not worked very well the last few years. But it does leave markets with a giant question mark hanging over them. Namely, how will this European mess end? One option is that Europe will go the way of Japan. This is a best- case scenario. In this scenario, the authorities prevent a climax to the debt crisis by extending it out over time. We say “best case” in the sense that a long, drawn-out, crisis that turns the financial market into a Zombie may be preferable to a political and social crisis. But then, a political and social crisis seems inevitable at this point. Why wait? Clearly, the eurozone architects failed to account for the fact that the national identities/personalities of Europe are as diverse as any extended family. You’ve got the stern grandmother, the crazy uncle and at least two teenagers who are off somewhere trying to “find themselves.” But the eurozone architects ignored Europe’s heterogeneity in order to impose a faux homogeneity — a structure in which, as Principal Skinner on The Simpsons put it, “Nobody is better than anybody else and everyone is the best.” For a while, this fictional sameness worked...or appeared to work. But it never really worked...as the expanding crisis is demonstrating all too clearly. Even though the eurozone structure enabled the Greeks to borrow money as if they were Germans, it did not prevent them from repaying their debts like a Greek. No political authority can mandate “sameness.” There is no such thing as multi-national sameness. Besides, at a very core level, nations and individuals covet their unique identities. People don’t like being “the same.” They like being different. That’s why they get nose rings...or dye their hair blue...or vote against “austerity measures” imposed by the EU and IMF. Europe is revolting against “sameness” — the enforced sameness of the common currency is causing a backlash. The French want to be French. The Dutch want to be Dutch. The Greeks want to be Greeks. None of them want to be German. And the Germans want to stay German. All these primal, tribal, political loyalties are in conflict with the sameness and conformity required by political and monetary union. Something has to give. Regards, Dan Denning for The Daily Reckoning The One Retirement Plan Obama Can’t Touch If you’ve already retired, or want to retire soon, I urge you to watch this video presentation before we have to pull it down. This “Secret $200 Retirement Blueprint” shows you step-by-step how to grow a monster-sized nest egg with a little time and a tiny grubstake. Click here to watch this video presentation now. ALSO THIS WEEK in The Daily Reckoning... Small Package, Tons of Truth By Jeffrey Tucker Auburn, Alabama Economic trends today are a litany of awful: high personal debt, stratospheric government debt, persistent trade deficits, declining living standards, government out of control, cycles of bubbles, zero return on savings, unemployment, and the ever-higher cost of living. Everyone complains about these all the time. They make it hard to live a normal life. They produce vast anxiety. Some in this list are wrecking lives every day. They make us feel trapped with no options. And the problems are mounting by the day. Solutions seem beyond the political system as we know it. What’s the Deal With Oil Prices? By Byron King Pittsburgh, Pennsylvania What the heck is happening with oil prices? West Texas Intermediate (WTI) oil is selling in the $82 ranger per barrel — way down from recent postings near $110. Overseas, the Brent price for oil is about $97 per barrel — way down from $125 per barrel as recently as early May. What’s going on? How low can oil prices go? Are we looking at the beginning of a major price slide? Is the oil and oil service investment space under a pricing assault? I doubt it. Here’s why: 40% of global oil production comes from places where the national governments cannot afford oil prices to go much lower than they are currently. Tiny, the Mouse, Takes a Giant Step for Mankind By Severine Kirchner When “embryonic stem cell therapy” exploded into the public vocabulary a decade ago, it instantly became an emotionally charged and politically divisive issue. Although hailed as having the potential to cure myriad diseases, the creation of embryonic stem cells involved the destruction of embryos. Therefore, many people, including then-President Bush, objected on moral grounds. Bush banned federal funding for research into embryonic stem cells in 2001. Eight years later, in March 2009, President Barack Obama lifted the ban. But?the controversy remained. That’s one of the reasons why iPS cells are so appealing. They are NOT derived from embryonic cells, but rather sourced from living adult individuals, and thus, don’t raise ethical issues. Global Investing: The Next 40 Year By Chris Mayer Gaithersburg, Maryland I know that things look bleak on many fronts: the crisis in the European Union, the fiscal and monetary insanity in the US and the looming debt troubles in Japan — to name just three. For a lot of investors focusing on just these markets, it must be hard to get out of bed in the morning. But the world is changing. The dominance of these Western markets (including Japan) is not what it once was. And they are becoming less important as time goes by and as the rest of the world catches up. The Weekly Endnote... And now, it’s over to a few readers for some thoughts, ideas and rumors... First up, Reckoner T.J. writes... Somewhere in the deep, dark crevices of my mind, I recall that the Federal Government had — what was it? Oh yes, only enumerated powers granted by the Constitution. Isn’t that a hoot? When Benjamin Franklin was asked, what form of government had America been given, he replied: “A Republic, madam, if you can keep it”. Guess we didn’t. Fat chance of ever getting it back either. Too many Americans apparently approve of the welfare state. Perhaps we merely got the government we deserved. Forgive me, I have become very cynical in my old age. DR: Excellent observation, T.J. As we’ve wondered in these pages before, what if this was always going to be the case? Big or small, government is a parasite. Maybe a small parasite is preferable to a large one...but that only means a bigger, stronger host for the parasite to suck on. A “mostly free” economy with a hugely productive private sector would be like food porn for a little, “constitutionally restrained” government parasite. Just imagine how big it could grow up by feasting on, say, a mighty US economy for a few of hundred years. Oh, wait... Keeping on topic, here, in reference to Bill’s article Government Spending: Food for Economic Zombies, Reckoner W. writes... I’m not sure you understand. O is a Nobel PEACE Prize winner...for spreading PEACE throughout the world. He just does it with drones...and rendition. Kinda like a righteous husband spreads peace throughout his household with his fist and the occasional bout of hairpulling. And finally, again on the same(ish) topic, Reckoner Michael B. writes... You guys and girls must know that the real power in the world today, the unchecked power, is the military. And not just the US military complex, although we do know the US Military is the most powerful government organization in the world today. They don’t have to answer to any country, not even our own. The Pentagon is on a mission to get the whole f@ckin world into one big war. And if anyone blows the whistle on it, they get thrown into a prison, given no rights or freedoms, and treated like a terrorist, or like Bradley Manning. DR: Yes...thank good sense that we have governments in the world today. Could you imagine a state of “anarchy,” where huge gangs of thugs roam the planet killing innocent people and stealing their property? Oh, wait... --- As always, we welcome your thoughts. Email them to the address below and... ..enjoy your weekend. Cheers, Joel Bowman Managing Editor The Daily Reckoning ---------------------------------------------------------------- Here at The Daily Reckoning, we value your questions and comments. If you would like to send us a few thoughts of your own, please address them to your managing editor at joel@dailyreckoning.com Committed to Phony Growth The Disconnect Between Household Wealth and GDP Growth When Your Credit Card Stops Working What’s Greece Going to Do? US Dollar Trades Lower on Slow Growth Data Spanish Banks Downgraded The Daily Reckoning: Now in its 11th year, The Daily Reckoning is the flagship e-letter of Baltimore-based financial research firm and publishing group Agora Financial, a subsidiary of Agora Inc. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas. Published daily in six countries and three languages, each issue delivers a feature-length article by a senior member of our team and a guest essay from one of many leading thinkers and nationally acclaimed columnists. Cast of Characters: Bill Bonner Founder Addison Wiggin Publisher Eric Fry Editorial Director Joel Bowman Managing Editor The Mogambo Guru Editor Rocky Vega Editor Additional articles and commentary from The Daily Reckoning on: Twitter Facebook DR iPhone APP To end your Daily Reckoning e-mail subscription and associated external offers sent from Daily Reckoning, cancel your free subscription. If you are you having trouble receiving your Daily Reckoning subscription, you can ensure its arrival in your mailbox by whitelisting the Daily Reckoning. 2012 Agora Financial, LLC. This work is licensed under a Creative Commons Attribution 3.0 Unported License. Reproduction, copying, or redistribution (electronic or otherwise, including on the World Wide Web), in w hole or in part, is encouraged p rovided the attribution Daily Reckoning is preserved. Attribution must include a link to the original article url located on http://dailyreckoning.com. Nothing in this e-mail should be considered personalized investment advice. A lthough our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice.We expressly forbid our writers from having a financial interest in any security they personally recommend to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of a printed-only publication prior to following an initial recommendation.Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.