The Greek tragedy

In many ways the greek tragedy is a play about modern monetarism theory or MMT and its relation to politics.

For those that don't have the time or inclination to follow the details, it appears the pied piper has finally caught up with the hellenians.

A debt crisis threatens the ability of Greece to raise cash and sell its EU bonds. Some cry foul, calling it mounted attacks by hedge-funds, other see a proverbial justice in having socialist countries pay for their profligal sins. Deficits don't matter?

So when the rubber meets the road, the EU politically backs the debt of its participants fearing a debt contagion to the rest of the member countries. But in practice no nation wants to fund the greek bill. Germany knows re-unification and the prospect of paying through the nose for socialists in the south that are not even grateful is un-appealing. In holland they have passed a bill that they would provide no help.

And here the reality of the Euro hits home. It is a monetary authority without the fiscal authority. The EU is no US. Political authorities are still local and can be at odds with the unified monetary system. There is no central treasury. Someone wrote, you can have any 2 amongst these 3: democracy, monetary union, sovereignty. Europe wants all 3. Either regional sovereignty gives or the EMU gives. That's an interesting one and a good test of democracy (assuming that one stays :).

The FT this morning has a great article calling for a "leave of absence" from the EU for greece. The technicality says they would re-enter with a devalued exchange. This is akin to a monetary policy effect by printing money. How easy it is to do it within the US.

Consider California, it is waaay bigger than greece and it too is in bad financial shape. A fiscal crisis looms, can CA sell new bonds? Does anyone care? I haven't seen the muni market implode yet.... the implied assumption is that the federal government would fly to the rescue of the states and they would get their bailout monies just like the rest of them.

Do you hear Texas threatening to secede because they are tired of paying for those pretty boys socialists over there on the west coast? The political landscape is very different and the FED has been doing massive printings of money to rescue its economy and the world financial system. Ironically, the dollar is rallying, the US assets being a refuge value when the shit hits the fan. Go figure.

On that note, I was told to trade the EUR/DOL in the 1.35-1.55 range by a trusted advisor. I was holding at 1.53 and rode it to 1.43 where I sold some and it is now at 1.36... time to buy back?