It’s been quite a week, I’m sure Monty Hall, the original host of “Let’s Make a Deal” would be very proud.
First, it was a gathering of the heads of state of the European Union in Brussels to finally (we’re sure they’ll get it right this time) solve the Greek problem. Once solved, by default, the solution will save the other problem children, such as Portugal, Ireland, Italy, and Spain.
All sorts of machinations will be employed, from swapping debt to discounting asset values, and from increasing lending powers to collateralizing junk bonds (a technique learned from our Fed.) What is most significant is the new deal that is being accepted regarding Greece’s default.
They call it transitory default, which means it only lasts for a few days. Apparently, in that window of “transition,” all sorts of games can be played in order to cover what is effectively a totally bankrupt system. Call it what you want, Greece can’t pay their bills. A little bit default is like a little bit pregnant.
But what the hay, I’ll take door #1, Monty!
This week, we’ve seen the powers in Washington, D.C. move closer and closer to a deal to raise the debt ceiling. Think about what a potential deal implies: Raise the debt ceiling now, which makes our debts an even greater percentage of GDP (S&P has to love that), then promise to revisit and revise department spending, rework the tax code, and determine the cuts in Medicaid and Medicare, all in a short period of time (without even touching Obamacare.)
Everything is being pushed to the future, which is the Washington, D.C. method of letting everyone off the hook. In addition, the programs currently under review for possible cuts are relying on new math for Social Security CPI adjustments. But what the hay, let’s make a deal.
We’ll take door #2, Monty!
Finally, if you could go back in time, I’m sure the crew on the Titanic would have been seen arguing about the deck chairs just as vociferously as they are currently arguing in Brussels and in Washington, D.C.
Take the deck chairs in; leave them out, port side or starboard, with pillows or without. Likewise, the decisions made in Europe and the U.S. will have the same significance as those deck chair decisions that were made before the sinking of the Titanic.
Yes, Monty, we will take door #3!