Customer Service 1 (888) 261-2693
Advanced Search

A Harsh Reality for the European Union

By Jeff Clark
Tuesday, April 13, 2010

Dear European Union and International Monetary Fund,
Please do the world a favor and allow Greece to default on its debt. It's going to happen anyway, and it would be better if it happened sooner rather than later.
When you loan money to friends, two things will happen...
You'll lose the money and you'll lose the friendship.
Please keep this in mind as you consider your loan to Greece. I've made four such loans to friends during my lifetime, and all of them produced the same result.
The recipient is thankful at first, and promises to reform his/her/its spendthrift ways. And for a short period of time, it seems to work. The borrower stops going out to expensive dinners, asks the housekeeper to come just once each week, and cuts back on the Tiffany and Nordstrom shopping sprees.
But in reality, it's hard to reduce your own standard of living.
As long as a lifeline is available, reform is impossible. It's just too hard to say "NO" to the forces in place for so long that have actually caused the fiscal breakdown. The easy solution is to say "YES" and continue the spendthrift, irresponsible ways that have brought Greece to the brink of bankruptcy.
Your money will provide a temporary relief. But it's the equivalent of throwing good money after bad.
Greece will keep spending the way it has all these years, and when it burns through the money you've provided, it'll ask for more. Moreover, the Greek politicians will rationalize their expenses and make you feel like the bad guy for not lending them even more money. After all, you have it and they don't. So you ought to send more money their way.
But here's the unfortunate fact of life...
The motivation for change only happens when someone stares into the eyes of his hungry children and realizes they'll die if they don't do something, anything, to put food on the table.
Yes, it's harsh. But it's reality. And it's a reality that hasn't been recognized for much of the past 20 years. Your generosity will be gratefully received at first. But then you'll be declared the bad guy when it comes time to perform on the loan.
You can lend the money if you want to. It'll provide a temporary backstop and a basis upon which to build the economy if Greece chooses to implement the necessary reforms. Based on my experience, though, it's wasted money.
It's wasted money on Greece. It'll be wasted money on Portugal, Italy, and Spain when they ask for it as well. And it'll be wasted money when the U.S. government steps up to feed at the trough.
The best thing you can do now is to say no to Greece. Tell them they're responsible for their own actions. They need to bite the bullet, cut the expenses, and lower their standard of living.
No, you won't be hailed as the good guy and as the savior of financial reform. In fact, by denying a bailout you'll likely be demonized.
But your kids will thank you for it. They'll have an opportunity to spend time as innovators and developers of economic prosperity, rather than slaves to the state of indentured servitude.
So here's the choice you have to make...
Do you loan Greece 30 billion euros with the understanding its people will continue along the path of working 30-hour weeks, retiring at the age of 50, and receiving compensation for contributing nothing to the economic environment? Or do you demand some sort of economic payment for your hardship of making the loan?
I demanded economic payments in all four of the loans I made to my friends. I was disappointed in every instance.
Somehow, I expect you, the IMF and the European Union, to experience the same fate.
Best regards,
Jeff Clark

In The Daily Crux
Market Notes
GE hits new high... rallies 16% since February.
Athletic retailers surge... Nike, Under Armour, Lululemon Athletica make fresh highs.
Worldwide shipper at new high... UPS races 15% in two months.
Earnings today... Intel, CSX, Fastenal.
Market Watch
Symbol Price
S&P 500 1221.53 +1.3% +10.1%
Oil 37.77 +1.5% -2.8%
Gold 135.20 -0.1% +13.4%
Silver 27.93 +0.4% +47.9%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 19.39 -9.2% -8.2%
Gold Stocks 564.53 +1.3% +10.6%
10-Year Yield 3.00 +1.4% -9.6%

World ETFs
Symbol Price
USA 122.56 +1.3% +10.2%
Canada 30.44 +1.3% +13.8%
Russia 21.63 +2.3% +16.7%
India 37.73 +1.9% +20.0%
Israel 16.47 +0.9% +9.7%
Japan 10.58 +1.0% +7.4%
Singapore 13.88 +1.0% +19.2%
Taiwan 14.72 +1.6% +17.8%
S. Korea 56.56 +1.7% +22.8%
S. Africa 70.85 +3.9% +22.9%
China 45.06 +1.4% +0.1%
Lat.America 52.82 +1.4% +6.7%

Sector ETFs
Symbol Price
Oil Service 136.18 +1.5% +14.8%
Big Pharma 64.13 +0.6% -3.3%
Internet 72.13 +0.7% +22.3%
Semis 16.03 +2.1% +28.9%
Utilities 31.21 +0.3% +1.6%
Defense 18.51 +1.3% +10.1%
Nanotech 9.99 +1.3% +0.0%
Alt. Energy 9.95 +1.4% -4.4%
Water 18.31 +1.1% +12.2%
Insurance 16.07 +1.2% +18.3%
Biotech 20.58 +1.1% +27.1%
Retail 19.65 +0.1% +28.4%
Software 24.59 +0.9% +24.1%
Big Tech 53.73 +1.0% +21.9%
Construction 12.99 +2.1% +13.3%
Media 13.57 +1.1% +25.0%
Consumer Svcs 67.26 +0.8% +23.3%
Financials 54.87 +2.4% +5.2%
Health Care 64.22 +0.7% +1.3%
Industrials 63.25 +1.6% +19.7%
Basic Mat 73.57 +1.6% +21.6%
Real Estate 55.24 +1.4% +23.8%
Transportation 91.17 +1.4% +25.6%
Telecom 22.48 +1.1% +17.1%

Recent Articles