"Leaving the Euro and returning to the Drachma will be catastrophic". Incredibly, this tiresome Orwellian mantra has been repeated ad nauseam, from EU "Big Brother" leaders, from the Samaras' "coalition" and from legions of naïve utopian Europhiles; effectively numbing the sense of sight and sound of all too many, to the overwhelming real-time economic catastrophe that has been unfolding in Greece; not under the Drachma, but during Greece's 10-year Euro denominated tenure.
From inception, Greece's dubious entrance to the Eurozone was both a political shot-gun marriage, and a mirage, officiated by the European Central Bank's (ECB) President Mario Draghi's former employer, Goldman Sachs (NYSE:GS). This misbegotten union between Greece and the EU was willingly consummated by both sides on a bed of statistical smoke and mirrors; and like nearly all relationships based on lies, doomed to failure. Since her independence, and prior to joining the EU, Greece defaulted 5 times or about once every 36 years. Ironically, with the Euro, and under the paternal guidance of the EU's underlying irresponsible banking and monetary policy, Greece has for all practical purposes, defaulted, and subsequently, "bailed out" twice, in ten years. Furthermore, the two euphemistically termed "bailouts" are not charity or economic stimulus; they are additional loans, albeit at reduced interest rates, largely subsidized by Eurozone taxpayers who rightfully resent being punished to reward an irresponsible profligate Greek nation that lived beyond its means to pay. No nation can borrow its way to prosperity. While this may be stating the obvious to mere mortals, it is seems to be an alien concept to an army of PhDs trolling the hallowed halls of the ECB.
Over two years and more than 300 billion euros in wasted socialist "bailout" redistribution, the Greek economy continues to implode. Coupled with the Troika's ill-conceived and ill-timed austerity, Greece's debt-to-GDP ratio has exploded to nose bleed proportions, matching her prohibitively high near 25% interest rates. Perhaps, the most disingenuous facet of these so-called bailouts is that 80% of these funds do not directly aid the Greek economy, but are instead disbursed directly to Greece's creditors who are perversely rewarded for foolishly lending to Greece. Many of these same lenders were blinded and encouraged by the astonishingly lax, zero reserve requirements, and implied, risk-free Eurozone sovereign debt. With their balance sheets now in tatters, Greece's creditors beg for recapitalization.
Meanwhile, not to be outdone by Federal Reserve Chairman Ben Bernanke, chief ECB priest, and Goldman Sachs alumnus, Mario Draghi, has been ritualistically debasing the Euro in his attempt to "inflate away" much of the Eurozone's sovereign debt, as evidenced by the Euro's continuous fall against most major currencies, including the Swiss Franc (NYSEARCA:FXF), prompting Swiss Central Bank intervention several weeks ago, and gold hitting a fresh 52 week high (priced in Euros) several days ago; providing fresh fodder for global gold bulls.
In lieu of perpetual peace promised within the Eurozone; Germany, Finland and the various PIIGS (Portugal, Ireland, Italy, Greece, Spain) nations have been beset with near interminable economic and political resentment, riots, and social strife; including calls for intra-state cessation in Catalonia, Spain, and Venice, Italy.
Adopting the Euro, we were told, would usher Greece's transformation from relatively poor Balkan nation to a modern cosmopolitan Euro state. The newly esteemed Euro would potentially attract capital and spur business activity in Greece. Instead, Coca Cola Hellenic (CCH), Fage Yogurt and others, that were headquartered in Greece for decades, and managed survive and thrive under the humble Drachma, are leaving; moving to Switzerland, Luxembourg, Russia, and incredibly - to some of the very same Balkan nations that Greece once hoped to attract investment from. Not surprisingly, these corporate mainstays, in not so many words, cited the Troika's prescribed solution Greece's economic woes for their respective departures; "uncertainty" (read high Greek debt) and "taxes" (read austerity). Needless to say, this anti-climactic exodus will only make it even more difficult to attract investment capital, adding to Greece's painful unemployment rate, and further exacerbating a tenuous economy.
As the tear gas wafting from the most recent anti-austerity demonstrations in Syntagma Square finally dissipates, the results are clear: the Euro and its EU membership are no panacea. Other than a shiny new stadium that sits mostly idle and an impressive bridge with ever decreasing traffic; the economic and political results speak for themselves. While Greece still may have the Euro, a nation can only pay its bills by drawing on its savings or economic output; Greece for has neither. Greece is insolvent.
The same Greek nation that spilled blood for her independence; survived 400 years of Ottoman rule, two World wars, a Balkan war, a civil war, a military coup and its eventual overthrow; has essentially relinquished her economic sovereignty, and is now a compliant serf to Brussels; saddled with more debt and an impotent memorandum bereft of any substantive wealth producing ideas. In a cruel historic twist of fate, those once detested Ottoman pashas are laughing in their graves as they enjoy a tragic Greek comedy replete with lies, ironies and obfuscation; a modern day dystopian masterpiece that would make George Orwell laugh, and Aristophanes cry.
Disclosure: I am long GLD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.