The Fiscal Cliffs of Santorini

The fiscal cliff is doing the job that the election, August vacations, and various other events also performed: It's taking our minds off Europe. In the standoff between Greece and the Troika (European Commission (EC), the International Monetary Fund (IMF) and the European Central Bank (ECB)), the Troika once again blinked, allowing Greece to slow down the implementation of the next wave of austerity measures. It is all tedious and predictable, because any "solution" that gets that country's debt down to 120% of GDP in 10 years -- when anything above 100% is basically unsustainable -- indicates that the authorities have no answer. They are simply going to let things fly apart of their own accord.

The only question is when the last emergency infusion will be made, after which Greece will default and revert to the drachma. The recently announced buyback was progress for the country. However, it only reinforces the inevitability of default, since there is no effective difference between default and buying back debt for $0.40 on the euro. If you define default as "bondholders take a loss," it is happening now....285 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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