The bailout package for Greece should keep it from having to tap the open market for capital for about 18 months, says economist John Hussman — but it’s easy to see that owners of Greek debt will likely to receive only a portion of the face value of the bonds they hold.
“What European leaders seem to be attempting is to buy Greece more time,” Hussman writes in a note to investors.
“If investors are at all forward looking, the window of relief about Greece (and the euro more generally) is likely to be much shorter than 18 months,” he says.
“European officials deny the possibility of contagion that might call for additional bailouts, but my impression is that Greece is the focus because its debt is the closest to rollover.”
The bottom line, Huffman says, is that aid from other European nations may prevent the markets from provoking an immediate default, but is likely throw “good money after bad and inducing higher inflationary pressures several years out than are already likely.”
Greeks borrowed money they couldn’t reasonably expect to pay back, says financial author Bill Bonner.
“Foreign bankers – largely French and German – hoped to earn outsized yields by taking a risk on Greek debt,” Bonner writes in The Christian Science Monitor. “A just ruler would let them all collapse, and give them the boot on the way down. Instead, the knaves enjoyed their loot,” he says.
“And, under the terms of the bailout, the fools are supposed to get their money after all; it will be squeezed out of taxpayers all over Europe.”
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