I'm not sure what it is politicians (European and U.S.) don't get, and it's even scarier that the markets act so naively when it comes to delaying the inevitable. Folks, we are going to pay the Piper, one way or the other.
I had written an article a few weeks ago titled, "Why Greece Will Fail and a Greek Default is Inevitable" and the fundamental issues, just like with the U.S., is that the only thing they have accomplished is to kick the can down the road...AGAIN!!!
Look at it this way, if you bought a house on the beach in Del Mar, CA for $3,000,000 and financed 100% your monthly payment would be approximately $20,000 per month (30 year, 5%). Your financial situation is that you can actually afford to pay $5,000 per month (30% of a monthly salary of $16,675 per month, $200,100 annual salary). So, you fall behind in your monthly payments and you meet with your bank to work out your own personal debt crisis. You are able to bring your political connections with the Obama administration to put pressure on the bank and they agree to cut your mortgage in half. You have now succeeded in reducing your mortgage to a mere $1,500,000 and your payment is cut to $10,000 per month! You celebrate and party like you've just won the lottery, right!
If you do, you're an idiot because you still can't afford to pay this adjusted mortgage and you're still upside down. This is EXACTLY what the European debt crisis is doing...and the markets are partying like this is some miraculous solution when in fact all they've done is forestall the inevitable.
The Greek Debt Reduction deal isn't enough to save Europe, and the problem is likely to come back to haunt investors in the near term. Just like with the story of your mortgage above, you're going to get another visit from the bank wanting to know how you're going to pay the $10k per month and when they realize you aren't even capable of paying that...you're going to be going through another negotiation, just like Greece and other EU members are going to do. Greece and many other EU members are flat broke, it's just that no one is willing to speak the truth and call it what it is.
Most EU members continue to increase their debt, only following the horrible example of the U.S. The fact that there is an organization called the "International Swaps & Derivatives Association" should be scary enough, but the fact that they project $3.7 billion of debt-insurance contracts won’t be triggered should have you asking the question...how much debt is still outstanding and when does that come due?
IF you follow the advice of Robert Kiyosaki, author of "Rich Dad Poor Dad" and the new book, "Unfair Advantage" you will be out of the craziness of the markets and focusing on the 5 G's. Gold, Ground (Real Estate), Grub/Groceries, Gasoline and Guns.
In my article titled, "The problem with the EU crisis is that no one really knows much of anything" I stated, "At some point, the Europeans are going to be forced to either default honestly and painfully...or to bail themselves out boldly and fraudulently, like we Americans.
As Americans we are already on the path to financial self-destruction, it's not a question of if...only a matter of time. All Europe is doing is following our horrible example and delaying the inevitable. Our financial implosion will pick up speed, until we finally reach our destination."
