Foreign currency traders are having a difficult time trying to evaluate the Euro against the other currencies of the world.
The Euro is a piece of paper that is being honored by 17 major European countries and 6 minor European countries. It is also a reference point for numerous other countries throughout the world.
However, we must remember that it is only paper and has only the backing of the treasuries of the various countries that use it. Its value for purchasing commodities is determined by the foreign currency traders of the world.
If you buy debt instruments denominated in Euros, the entity that sells those instruments must buy the Euro on the world market to repay your loan.
The minting of the Euro is relegated to the European Central Bank, and that bank cannot print and give Euros to any specific country in order for that country to pay its obligations. If that country sold debt instruments denominated in Euros and does not have sufficient Euros to repay its debt it must default. This means that the holders of the debt instruments have totally lost their investments.
Since it is appearing that Greece has insufficient Euros to pay the loans that it received in the last two decades by international investors its debt instruments are being devalued by approximately 26 percent. Investors are essentially saying that an investment in Greek government bonds is so risky that there is a one in four chance that the investment will not be repaid.
The Greek economy is a small part of the EU economy with estimates of 4 to 7 percent of the total EU economy. Therefore, if Greece were to disappear from this planet, the EU could continue without much duress.
However, Greece’s outstanding debt is much larger than Greece’s economic worth. If Greece owes you Euros, you can’t put a lien on one of the Greek islands and collect taxes from its citizens. If the Greek Government cannot pay you because it has no Euros, you as a lender are simply going to lose your investment.
This uncertainty of repayment reflects on the value of the Euro. If Greece defaults or, worse yet, leaves the Euro Zone and reverts back to printing Drachmas, the Euro, as a piece of paper, is worth less.
To make this quite clear, imagine that every country in the Euro zone dropped the Euro and went back to their former currencies! The Euro would be worth zero!
THE GREEK ECONOMY
The Greek economy rests on two major areas: Tourism and Maritime Shipping.
Greece, like Italy, Spain and Portugal has become a large old museum surrounded with beaches and small restaurants. Most of the workers are not Greeks, but poor immigrants from Africa, the Middle East and the poorer parts of Asia.
The Greeks are not interested in doing the hard dirty work of cleaning hotel rooms or cleaning pots and pans in kitchens. The poor immigrants do this work.
A few Greeks own and operate the restaurants and the rest work for the government in different “official” positions with good pay and many benefits including early retirement. Greek politicians cooperate with their electorate and since few Greeks pay taxes, the Greek Government has borrowed heavily on the international markets to pay the politicians and the lazy Greek workers.
The Maritime Industry, the largest in the world, uses non-Greek sailors. The work is too hard for the tired Greeks. The sailors are Filipinos, Bangladeshis and other poor men from around the world. The money from this business goes to wealthy Greek billionaires, who also pay no taxes, since their ships are registered in small African and South American countries and the profits generally end up in Hong Kong or Singapore.
The Government helps these maritime billionaires by financing the construction of their boats. Thus, the Greek Government, through international borrowing, is the backbone of the Greek economy.
Unfortunately, for the Greek parasites and their Governmental source of nutrition, the time has come to pay back the hardened but short sighted investors who loaned Greece money on the assumption that a sovereign country cannot default.
WHO WERE THE LENDERS
Most of the lenders to the Greek government were European banks. These banks were fully aware of whom they were lending to. But, they knew that their own governments would support Greece if it moved towards default.
And these banks were correct. They had connections with the German, French, Austrian and French governments and when Greece moved to default, all the strong European countries and the IMF put together a package of 750 billion Euros to pay their debts. By this time the other countries (PIGS) Portugal, Ireland, Greece and Spain were all moving towards default.
Just as Greece had used debt as a means of maintaining a high living standard, so did these other parasitic countries.
In retrospect, we can see that DEBT like a virus has infected the entire modern world. The problems of the U.S. and the U.K. are also caused by living high in the present by borrowing from the future.
CAN THE HARD WORKERS SAVE THE EURO?
The short sweet answer is “NO!”
Germany and its allies are saving their banks, not the Euro. The hard workers of Europe are not going to support parasites forever. They are already voting out Merkel and her likes from all the European countries.
Because, the world is a global marketplace, cheap workers are moving into the rich countries and will displace the high earning workers.
In Germany, Eastern Europeans from Poland, Slovenia and Romania are being brought in by the factory owners to displace the highly paid German workers. The German government is promising the German workers that they will be protected. Such protection would be illegal under EU law.
This was and is the purpose of the EU: Make the rich richer and the poor poorer.
The only two reasons the European citizen wanted the EU was for the right to travel freely and use one currency everywhere.
But, nothing is free in this particular universe, If you get a benefit, you pay for that benefit somehow.
The Europeans have one currency, so they have eliminate the complicated calculations that they used to make when they travelled across Europe when Europe had multiple currencies. Instead, they now pay taxes to solve the debt problems of their neighbors.
Which is worse? Even the cretini of Europe are seeing the answer as they sweat hours more per day so that their neighbors can drink more wine.
The end of the Euro is coming soon. My definition of “soon” is 3 to 8 years.