Greek Austerity = Disaster

A bottomless pit is threatening the entire European Union and most particularly its wealthiest, most successful member, Germany.

Every time the European Union comes to the "rescue" of Greece, the situation worsens. The imposed austerity measures are destroying the Greek economy. With each passing month, tax revenues decline - way beyond predictions. As the economy staggers, so do revenues. At the same time interest rates on Greece's debt continue to escalate. Greece is stuck between a rock and a hard place: revenues to pay that interest are battered by the austerity measures required to secure the debt.

The resulting demand for the European Union (read France and Germany) to cover the spread is beginning the threaten the two strong economies in the union.

The prescription written to solve the crisis is the problem. It is treating the wrong disease! The time has come for the institutions that hold the debt and charge the ever increasing interest rates to actually experience the risk implied by those rates and take a haircut. In fact, all governments need to insist that devaluation of the debt is a prerequisite of any rescue package from here on out.

Ireland had a BUDGET SURPLUS before their banks failed and the EU pressured the country into rescuing the financial institutions. The result? Ireland's national debt spiraled out of control and the country's economy crashed and burned. A similar situation is occurring in Greece and threatens to spread to Spain, Portugal and Italy. There is ABSOLUTELY NO WAY that the European Union can rescue all these economies. The almost inevitable result is the imploding of the European Union, the Euro and disaster to the still-viable economies of France and Germany.

The time has come (actually it came 3 years ago) to herd rogue financial institutions into Chapter 11, restructure their balance sheets, write off their "toxic assets," break them up and reissue their stock. The debt would be written down, not increased, as solid assets are separated from the drecht and the drecht is valued at pennies on the dollar. Too big to fail must be sent into the history of failed economic initiatives. Control, supervision and separation of the speculative from the custodial roles of financial institutions reconstituted.

The alternative? A total, catastrophic meltdown of the global financial structure.