Greece Sees A Way Out

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The Greek crisis continues on its downward spiral, which isn’t so much breaking news anymore…

The riots in the streets, the reports of mothers leaving their kids at orphanages unable to provide for them, the suicides, the descent into barter economies…

These events aren’t news worthy anymore, are they?

Nor is the utter failure of the Eurozone bailout efforts (in all of their austerity nastiness) to keep Greece’s head above water and in the Eurozone headline news anymore…

But latest reports from Reuters inform us that banks have been “quietly preparing” for Greece’s return to the Drachma.

That is breaking news, isn’t it?

Well, maybe not so much…

Banks expected problems

The Reuters report said that many bank sources in both Europe and the US say that they have been preparing for a Greek return to the drachma since the beginning of the Euro Crisis in 2009.

Now that is news, isn’t it?

If not, it should be.

I’m not saying that it is shocking to think that Greece would have to ditch the euro sooner or later…

I don’t think that they ever belonged in the Eurozone in the first place. They didn’t have the economy for it in 1999, and they certainly don’t have it now. And by the way, it’s not just me who’s been saying that since last July…

As it turns out, banks around the world have known it all along.

Even as far back as when the euro was created, debt problems were seen as a big possibility…

That’s why many banks never took the drachma out of their systems…

Just so they would be ready in case Greece needed to revert back to its national currency.

Knowing this, what does it say about the willingness of some of these banks to sit back watch the disintegration of Greek society at the feet of debt default and tough austerity measures that will never, ever work for Greece in the time that they need it to?

And let’s talk about austerity for a moment...

The Greek economy is shrinking. When you stop living beyond your means that tends to happen.

But really, when has Greece ever been a frugal nation with high savings rates and a stable economy?

More to the point, when has Greece ever been Germany? Never; and it never will be. Nor will Italy, Spain or Portugal.

The euro became much more of a spending spree for those countries than a currency…

The stronger economies of Northern Europe loaned the PIIGS nations money hand over fist for 10 years without controls on how much debt would be okay and how much would sink them…

And in turn, sink the euro. And that is what is really happening. Greece will only be the first of the PIIGS to leave the euro, not the last. The others are watching the social meltdown that Greece is going through and see similar fates for their countries.

It’s like that scene from the movie “Titanic,” where the ship’s architect shows the Captain the blue prints and how the water will crest the top of one compartment after another. Once it struck the iceberg, its fate was sealed. It was only a matter of time.

The good ship Euro has struck an iceberg of debt and Greece is the first compartment to go under water. And as we have seen over the past 3 years, the flood of debt in Europe will not be contained…

All of the economies of the Eurozone are either in over their heads in debt…

Or are in over their heads in owning too much of the debt that will soon become worthless…

Either scenario will send not just the individual economies to the bottom, but the entire Eurozone.

Greece is just the first to go completely underwater and the other PIIGS are waiting to see how it goes when Greece finally leaves the Eurozone.

Drachma not an easy path either

Going back to the drachma won’t be an easy task. What would the exchange rate be? Whatever it starts out as, expect it to fall to reflect the miserable state of Greece’s economy.

How would current debts be repaid, if at all? And what about new transactions for those doing business in Greece?

Which laws would apply to settlements, Eurozone laws or Greek laws? A lot of issues would have to be resolved if Greece bails on the bailout…

But as it is, Greece must see that becoming what it always has been on its own terms is much preferable to staying on the path of slavery for the foreseeable future…

One major question in all of this is “What will this mean for greater European political and economic integration?”

The spin off of Greece, Italy, Spain and others would seem to throw a wrench in those grand plans of the Eurozone technocrats who dream of a greater Europe in one form or another…

We may soon find out.

What happens with Greece may either show the way out…or serve as a warning.

And those are…The Gorrie Details.

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