Europeans Playing Chicken With A Ponzi Scheme


With a new banking week fast approaching in the Euro Zone and Greece, tensions are high as the Ponzi scheme grows. Greeks have been forming lines at banks this week withdrawing billions in savings and preparing for a "bank holiday" or worse, "capital controls."

There is an emergency summit to be held Monday. Both sides, the Greek government on one, and the Troika on the other (International Monetary Fund (IMF), European Union (EU), and the European Central Bank (ECB)) have both said their final proposals are on the table and only awaiting the decision of the other. Greece is threatening default and exit from the Euro, and the Troika is threatening the ruin of the Greek banking system and let Greece leave the Euro. At risk is the Euro Zone experiment, financial chaos and social unrest, and contagion around the world.

Greece wants more money from the Troika to pay back the Troika. The Troika wants Greece to get serious about their true financial and economic situation and take the tough steps needed to stabilize the Greek economy and demonstrate their ability to make good on their loan obligations to, get this, pay back the Troika and the banks of Euro member nations. Greek PM Tsipras, the Socialist leader, promised Greeks the misery would end and he would stand up to the lenders. The Greek Finance Minister keeps poking Germany in the eye, and the Germans are just about fed up.

All the while, financial markets, and in particular the bond market, is whipsawing back and forth on each related rumor or headline. Those institutions and market players most at risk from a Greek default and exit from the Euro are doing all they can to calm things down and suggest there is nothing to see here, all will be fine. Conversely, objective observers can see that Greece has already defaulted multiple times and the whole game is a giant Ponzi scheme waiting to implode.

Greece will leave the Euro, Greece has already defaulted, and any deal arrived at over the coming days will only be extending the time until the fateful day arrives. Greece has over promised her citizens, the Euro experiment has no political structure to support the monetary challenges, and central bank printing won't solve the problem.

The Greek banking system has been living off the Emergency Lending Assistance (ELA) program run by the ECB taking in close to $1.8B per day. Once the ELA program is not extended for one day, Greek depositors will be left empty handed.

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