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Thursday, April 8, 2010

A thought on Greece

Greece needs to change, but no-one is strong enough change it. From the top down it is riddled with problems...

1. The leadership wreaks of corruption and half-hearted attempts to right the (gross) wrongs. With out a clamp down on corruption and implementing the proper tax policies, to the wealthy that already avoid paying taxes, Greece is going no where fast.

2. The people must break from the entitled state mentality.

But #2 will not happen unless #1 takes place. And #1 is simply not taking place, and very difficult to prove. This problem can be solved in a lot of different ways, but if the Euro is going to be saved I only see few things happening.

1. The EU and IMF bailout Greece. If Greece is bailed out via the IMF, a very real civil unrest can take place due to the tough resolutions. The Greek citizens will not accept the tough, and needed, terms with out seeing the wealthy pay their share. Strike after strike will take place, further reducing the economic situation. The downward spiral may cause Greece to leave the Euro or force the hand of the EU to kick them out of it.

2. The EU kicks Greece out of the Euro. (Greece does not walk away. Instead Brussels says 'due to their complete negligence, Greece has been suspended from the Euro Zone.)

The first two situations has the Euro saved, if the EU leadership handles it correctly. But if the EU leadership lets Greece simply walk away from the Euro, a domino effect may take place, and others walk away. Destroying the experiment.

3. Brussels begins to print money. Devaluing the Euro for the sake of Greece, and the other PIGS.

The above scenarios may be utter crap. But the one certainty I do know is this:

Europe has a fear of inflation, as it led to the rise of Hitler. Unfortunately for Europe, a persistent civil unrest can also give rise to a ruthless leader. Europe needs a sustainable solution, and all the probable solutions point to a much lower Euro. (I am talking at par to the Dollar.)

Short the FXE

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