Why Would They Stay?

The Greeks have no money...no jobs...no hope.  Why would they vote to support continued austerity, and by so doing, to continue in the Eurozone monetary union?  If they leave, their tourist industry will still charge customers in Euros, and they will use Drachmas internally and, where possible, to settle outstanding debts. Otherwise, they will default and move on as best they can.  In return for leaving the Eurozone, they get a massive devaluation, which makes them extremely competitive and will help put people back to work.  They lose standard of living, but they are losing this anyway as a result of austerity.  The choice in the July 5th referendum appears to be between poverty with the Euro, over which they have no control, or poverty with the Drachma, with which they will be masters of their own destiny again.  They are a proud people.  There is a very good chance they are about to vote for the latter.  Then, when will similar referendums follow in Spain and Portugal?  When will Europe start to think about a realistic plan for the bankrupt countries in their midst?

A Greek Tragedy

What a terrible day for the Greeks.  On the one hand, if you borrow like there is no tomorrow, you will face a day like today.  On the other hand, individuals who go bankrupt lose their assets and some of their income, but when they are released from bankruptcy, they get to start again debt free.  Greece is being asked to give up assets through privatization, and to give up income through new taxation...all good and necessary.  But it is also being told to keep all of its debt so the world's bankers do not have to face the consequences of lending to someone who has no money.  Not good.  The Greeks need to hold out for real debt reduction in return for the austerity that is being pushed on them, and which Greece needs to do.  Again...what now?  Europe has NO PLAN for dealing with bankrupt countries...are Portugal and Spain next?  DO NOT buy equities.  

The Pooro Zone

The ECB may save Greece for now...likely not.  But after Greece we have Portugal...Spain...Ireland...Italy.  There is no plan.  Europe needs to move to a two currency zone - the Euro for solvent countries, and a new "Pooro" for bankrupt ones.  The Pooro could be set a a fraction of the value of the Euro - maybe 60% - allowing any country that adopted the Pooro to benefit from devaluation immediately.  Euro debt could be paid in Pooros, providing immediate debt relief as well.  However, any country adopting the new currency would have an immediate drop in standard of living equivalent to the difference between the Euro and the Pooro...the price of living beyond one's means for decades.  It is not perfect, but it is better than foundering as we stumble from crisis to crisis.

The Trigger

Will the Greece crisis be the trigger?  Something will be.  A very significant drop in stock market is looming. I'm all in money market funds, because I don't think I can make more between now and a drop in the market than I'll lose in the drop.  Invest wisely!