The Greeks said NO to the referendum.
Two other times they said NO – in 1940 against the Axis powers (German, Italy and Turkey) and in 480 BC in the Battle of Thermopylae (the famous 300) against the overwhelming Persian force.
Markets
Markets logically will react badly. The first back stop for the ASX is 5,150 and then 5,000 and 4,800. SP500 1,970, 1950 and 1,870. At the moment 5,150 and and 1,970 are the most logic.
So A 10% drop is the worst case scenario. At the moment there is no sign of contagion. Gold and currency moved, but not in an alarming way.
US future (n a illiquid market since the holidays and the time) are down 1.35% at 2,035
Politics
Well everybody is scrambling. Already European Parliament President announced that there is no intention to immediately cut assistance to Greece.
The Greek banks are already running out of money (apparently they have just Euro 500 million of cash).
If money really runs out….or there is a bail-in Cyprus style (the Government seizing money) or a New Drachma (already it has forecasts to lose at least 40% of its value)
There are already emergency meetings scheduled all over Europe.
The Greeks will ask for debt forgiveness – which Germany will oppose. If it is a referendum is all it takes to have better conditions Portugal (election in October, Spain (election in November/December) will follow suit. And probably Italy too. Already the anti Euro parties in France, Spain and Italy are cheering.
Syriza will have its own problems as the extremist wing of the party will be emboldened and a closure of banks and riots could make the Government fall, even with a chance for the military to take over.
The two most likely scenario are
– Syriza will need to cut off the most extremist left wingers and form a new Government and agree with the Euro creditors on a new deal
– A Grexit. Probably starting with a “suspension” until something is formalized (at the moment there is no legislation in regards to a Eurozone exit”
– The ECB will expand its QE program
Personal
Usually I try to keep personal opinions to myself. But not today.
Logically I am not happy about the market reaction, even if we took precautionary measures since April and our portfolios are in better position than ever to withstand this storm.
But this is the fair conclusion of a mad Greek debt binge sponsored by money crazy German lenders.
Disclosed and intercepted calls (from Reserve Banks speeches and Wikileaks) made it clear that the first Greek bailout was to transfer the Greece debt from the German banks to the European Central bank – so in reality was a German bank bailout.
Also other conversation pointed that since 2011 the EU leaders were aware that further austerity would not save Greece. As Marie Le Pens (Front Nationale, France) says it shows that that Europe is now dominated by a Financial Oligarchy that has very little in common with the concept of democracy.
Moreover, even in economic theory (Fischer, 1933) austerity in a debt/deflation environment cannot work.
So why they did it? It was a easy way to keep the Euro down and help German exports, while kicking the can forever.
Until Syriza came into power which is not part of the Euro Financial Oligarchy.
As the Game Theory (police versus 2 accomplishes) teaches….the game is successful for the police, unless the rules are changed. And the referendum changed the rule.
Europe will try to keep them in, as a Grexit could open the Gates of Hell for Europe, but now is just RED ALERT
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