From Crisis to Crisis
Jun 30, 2011
Posted by Jody Eisenman | Filed under Uncategorized
The potential Greek default was averted today, as the parliament narrowly approved the austerity package needed to get their bailout package approved by the IMF. Meanwhile, crowds in Athens continued to riot throughout the day and night. Taxes are going to increase in several areas, such as property, luxury items, fuel, and of course, income. Meanwhile, there will be cuts in public sector salaries, education, and defense. Greece now holds the dubious “honor” of not only having the most expensive debt to insure, but also the lowest credit rating for a sovereign state. There is believed to be rampant unfairness in the tax system. According to the Minister of Labor, a quarter of the economy pays no tax at all! The average “John Doe” in the street, who is being forced to bear the brunt of these painful measures, is obviously not thrilled. About 2500 years, Greece ruled over one of the world’s great empires. Today, they are a financial mess, living off loans supplied by nations in territories they once dominated. See how the mighty have fallen.
Now that this crisis has at least been temporarily averted, the financial markets are turning their eyes to the next potential area of concern, namely, the US debt issue. Based on current expenditures, we will hit our debt ceiling on August 4. On that date, $30 billion of short term treasury debt comes due. If congress cannot agree on some sort of compromise of tax increases and spending cuts, then we will have a technical default. According to Standard and Poor’s managing director John Chambers, those binds would be rated “D”. Other treasuries would be downgraded as well. It’s hard to believe that we could actually get this point, but we are only about a month away. This will certainly make for an interesting summer.
