Wednesday, January 20, 2010

Greece Stuck in a Chastity Belt

Greek government bonds tumbled, driving the yield on the two-year note up by 40 basis points to 4.16 percent, after European Commission President Jose Barroso said the region’s economy is at a “delicate moment,” reports Bloomberg.

Greece is stuck in a financial chastity belt. There is no indication that the ECB will print euros to bail Greece out of its dangerous debt predicament. But because of its membership in the eurozone, it has no currency of its own on which it can go on a wild, reckless money printing binge.

Anyone holding Greek government debt securities is truly expecting Greece to somehow perform with this belt wrapped around it. In the end, the debt holders, regardless of what the tantalizing allure of the interest rate will climb to, will likely find themselves unsatisfied.

1 comment:

  1. I wonder if there is a Greek translation of "The Wizard of Oz". You know, the part where Dorothy and crew get their green glasses held in place by the 2 gold bands that clasp together on the back of their heads?

    How ironic! The Euro as a Gold Standard!