"'It has dawned on investors that solvency is a major issue--not a minor issue,' says Stephen Jen of the hedge fund BlueGold Capital Management. ... European Union President Herman Van Romply told several European newspapers on Friday that the bloc 'will be ready to step in if the Greeks ask.' French President Nicolas Sarkozy and Italian premier Silvio Berlusconi echoed those remarks, saying at a news conference that their countries were ready to help. ... The country's debt load totals more than 113% of its annual economic outpout and is rising. ... If Greece needs to restructure its debt, bondholders would find themselves sitting on big losses. ... The fundamental problem is that Greece is adding to its debt every year because of its big annual budget deficits. ... If that situation persists, Greece will never be able to pay off its debts without creditors agreeing to cut the amount they are owed. ... A big package could give Greece time to do a 'real devaluation'--a painful program of wage and price cuts, and a sharp drop in economic output, that could put it in a better position to pay off its debt, says Uri Dabush, director of the Carnegie Endowment for International Peace. ... But restructuring comes with a downside: A country that reneges on its debt would likely be shut out of global markets", my emphasis, Charles Forelle & Marcus Walker at the WSJ, 10 April 2010, link: http://online.wsj.com/article/SB10001424052702304703104575174203024119926.html.
Government officials frequently blame "speculators" for causing their problems. No. Speculation against Greek debt results from Greece's imprudent policies. Is Papandreou so stupid as not to understand that price stabilizing speculators make money. Price destabilitizing speculators lose money absent government bailouts. Now it's time for a war story. In 1974 I was auditing a subsidiary of a Midwestern utility for a Big 87654 firm. The subsidiary manager complained of a "cabal" of "Jews and speculators" who made the price of copper rise. Copper hit $1.44 in 1974, about $10 per pound today. I didn't have the heart to tell him, if the "Jews and speculators" were wrong about future copper demand they would lose their shirts. Does His Obamaness understand this? Who cares?
Why is Greece a worse credit than Uncle Sam? Because Unc issues debt in his own currency. Now. Got gold? Get more. Got any government bonds? California, Ireland, Greece, Unc, even Germany, yes Germany. Sell now! Now people realize Greek solvency is an issue. Where were they for years? Does Unc add to his debt annually? Greece will never pay its debts. Unc defaulted on his obligations to pay gold for dollars in 1971. So? Imagine, some people think Unc is a better credit than Exxon. They probably also believe in the Tooth Fairy and Easter Bunny. See my 15 November 2008 post: http://skepticaltexascpa.blogspot.com/2008/11/forbes-capitalist-fool.html.