It's the debt, stupid.

The Eurozone is toast.  It’s game over.   Despite all of the posturing and promises and threats, interest on Greek 1 year bonds is now well over 250%.  As in 10x the rate of an individual consumer credit card for someone with questionable credit.  Or to think of it in the simplest terms, invest $10,000 today and hold it 

 for 6.5 months and the Greek government promises to pay you $10,000 in interest AND still owe you your initial 10k.  In other words, loan sharking rates.  Or, more to the point, the type of interest rate that you would have to charge a deadbeat based on the very likely chance that he will default on the loan.  Greek debt is clearly a form of economic arsenic.  Touch it and you die.  Greece can’t afford to pay those rates.  It also cannot afford to pay off the principal.  It must roll over debt.  1 year bonds must be rolled over each year or the principal must be paid off (which there is no money to do).

Now, for preexisting debt, the rate has nothing to do with Greece.  What it really means is that the street value of the bonds that Greece already sold has tanked.  Greece got the cash and investors got screwed.  The initial interest rate that was offered by Greece was probably well under 10% for these and that never changes.  But if the lower street prices for the bonds means I can now buy (from existing bondholders/suckers) 10x the number of bonds than I used to be able to do for a given amount of money, it means that I will collect 10x the interest relative to my invested capital and so the interest rate to me is now 100%.  Or in the case of Greek bonds, 267%.  Where interest rates do matter to the Greeks is when it comes time to roll over that 1 year debt.  After having gotten burned there will no longer be any buyers at 10%.  They will all want the street interest rate of 250+ %.  Greece cannot even begin to offer bonds at that rate and so Greece is effectively locked out of the credit markets.  If the European Central Bank (ECB) wants to loan them money then fine, but the ECB is backpedaling on the whole “lender of last resort” mandate.  The only other recourse is some form of default and there really is no such thing as a little default.  If you are going to default, go big.  Throw in the kitchen sink.  Default on everything and start over.

Of course when Greece defaults then anyone it owed money to will be left holding an empty bag.  Those creditors who claimed to be rich because deadbeats owed them money will get Madoffed.  One day their account statements will show that they are rich.  The next day the account statements will simply stop coming forever.  What cannot be repaid will not be repaid.  Of course, if Greece gets away with stiffing its creditors, why shouldn’t Spain, Italy, Portugal, and a host of other debtor nations including eventually the USA.  As Mish points out, the interest rates on the other PIIGS are rising.  They have entered the debt interest rate spiral.  Interestingly, France’s name is in that list as well.  As I have written many times, France and Germany are no better off than the PIIGS.  The regional relative prosperity of France and Germany was driven by “selling” stuff on credit to people from other countries who could not afford to buy it.  Enabling that credit was the only purpose of the EU and the Euro.  When they get stiffed for the debt then they will be nearly as poor as anyone else and the EU will fall apart.

Meanwhile, Obama is blathering on about the Eurozone lacking the “political will” to fix the problems: "Until we put in place a concrete plan and structure that sends a clear signal to the markets that Europe is standing behind the euro and will do what it takes, we are going to continue to see the kinds of market turmoil we saw".  Earth to Obama: you can’t fix an insolvency problem by sheer force of will, whether political or otherwise.  Who do you think you are, the Green Lantern?  This is not a comic book where a guy in a green, dollar colored suit can change anything he wants to simply by force of will.  That is just rhetoric from the elite who sold us down the river in the great debt Ponzi a long time ago.  It falls into the same category as wishing upon a star and the American Dream.  Those of you who have done any study on the monetary elite will understand those references.  The rest of you won’t think much of it even though these things have been controlling our lives for decades.  But to the point, the old “bazooka” in the pocket threat is now the laughing stock.  The markets are no longer being herded around by the will of the elite.  The market has run out of suckers to fleece.

And so in light of this, the con men are coming clean as I predicted they would.  I wrote,” Unfortunately for the con men, organized crime rings are generally brought down from within, not from external forces.  The con men and criminals take to infighting about who owns the right to fleece the people.  The numbers of con men grow and grow until there is not enough fat on the sheeple to feed all the wolves and then the wolves start infighting.  Eventually some of them start telling on the other ones and the whole thing unravels.”

They aren’t beginning to admit the truth because they feel guilty but rather as a shield against blame that they know is coming when the whole debt Ponzi just collapses.  They want plausible deniability.  They want to identify with the victims and to have the victims thank them for their honesty.  Of course this is only happening after the damage is done.  When the con men were rolling in the easy debt based money there was no negative talk or truth telling.  It was strictly taboo and anyone like Ron Paul who had the guts to tell the truth was labeled whacky or odd.

In the most recent Con Man Confession, Bond King Bill Gross of PIMCO states that “we’ve discovered that debt driven growth is a flawed business model when financial markets no longer have an appetite for it”.  So, Bill, it was a good and true business model as long as there were suckers willing to lend but when all the suckers got fleeced and the lending dried up it suddenly because a bad “business model”?  No Bill, it was ALWAYS a bad business model.  In fact it was never any kind of “business model” at all.  It was a debt Ponzi from day frigging one.  You knew it.  You ALL knew it.  Greenspan, Bernanke, Paulson, Goldman Sachs, JP Morgan… ALL of “you”.  You knew how it must eventually end yet you sold us down the debt Ponzi river anyway in order to make a buck.  You and people like you have betrayed the United States.  You belong with Greenspan and Bernanke with the title of traitor.  You are all part of an elite organized crime syndicate which has taken over the world using your scam ridden money supply tricks which are all powered at their root by the fraudulent concepts of fiat currency and fractional (fictional) reserve banking.  You all deserve the punishment of traitors.  And of course you already know that which is why you are now trying to feign ignorance.

Sorry Bill, you can’t fool all the people all the time and sometimes you just can’t fool anyone.  Keep making up the fairy tale stories about how you are just figuring all of this out along with the rest of us.  Keep trying to convince everyone that you have just been a misguided old fool all this time while sitting on your Bond King throne.  That story is not going to fly at the end of the day.  You will be better off finding a non extradition country to go create a new “just in case it all unravels” residence in just like GW Bush did back in 2006.