This Is No Flight To Safety!

Out of the fire and into the frying pan, is more like it.

Greece and Portugal, to the surprise of no-one who both is paying attention and understands, have just had their credit ratings cut. Greece is looking at 18% interest to borrow money (up from 13% YESTERDAY) after their bonds were officially labeled as "junk" grade. Portugal is faring hardly better.

I know two people with loans at 17%+ interest. They have horrible (400-500 range) credit scores. If they get a call from a creditor, they hang up. Bills go unpaid. This is what the world bond market thinks of Greece right now. Not surprisingly, the US dollar, Japanese Yen, and gold were all trading higher today.

Bloomberg's article on the subject has a typically-clueless quote from someone who should probably know better: "People are flocking to security," said Michael Franzese, managing director and head of Treasury trading at Wunderlich Securities "They’re seeing how inept the EU is in handling this Greek thing. If Italy, Portugal or Spain has the same problems this could be a real bad situation."

The term PIGS was invented because economists who go deeper than yesterday's equity index numbers know that Portugal, Italy, Greece, and Spain are all in the same (sinking) economic boat. It IS a "real bad situation."

The buy-ups of US treasury bills is being reported as a "Flight to Safety." This is very far from the truth. Anything as short as 5 or maybe even 10 years is probably a decent place to park money, in light of the fact that Greece is going to give you $0.30 for every $1 you lend them. But we waste in a day what Greece would need to rescue their entire national economy. They are undertaking austerity measures to face budget pressures in a nearing-realistic approach to balancing their budgets.

We are going to be $14 Trillion in the hole this year. The IMF couldn't bail us out if they wanted to. The ONLY way out of a $14T hole is to dig with a teaspoon, or just pretend the hole was never there. For us, that means 2 lost decades like Japan, or defaulting on our sovereign debt.

Never happen VFD, not in a million years. The US pays back T-bills but but always.

Really? Why?