Recently in Naples we saw the classic pea and shell game being played on the street. The shell master wasn’t always winning, either, and sometimes he had to pay out to his sharp-eyed betters.
The markets are now playing a similar game with the banks around bets over where the debt will be hidden when the sleight of hand with the European Central Bank comes to a halt.
The governments want to cover up Greece’s debt in ways that don’t make it too obvious that they, too, are vulnerable. They want every shell to conceal a pea: the Greek government should appear to be solvent, the banks should retain a shell of profitability, and the Euro-zone funders, especially Germany and France, should give the impression of having acted prudently for their electorates.
This smooth shifting of debt and blame is also intended to cover up the way those same ‘responsible’ countries allowed Greece to enter the Euro in the first place, and then neglected to ensure that the Greek government lived up to the privilege.
Thomas Friedman describes Greece as similar to a petrol-soaked economy, except that the goodies came from the EU, not petrol. But Greece squandered the opportunity, and used the largess coming its way to create lots of fluffy government contracts with little improvement to productivity or entrepreneurial capacity.
Now all the shells have been lifted, and it seems there is just a puny single pea that has to cover a lot of bets, and save a lot of faces.
A similar game is playing out in the US, where the nearly inevitable partial (or ‘technical’) default of the government on August 2 will put another notch on the stranglehold that debt has created for that country.
Overreach and collapse. Lack of reality checks and boundless, foaming at the mouth assumptions of endless growth, without putting in the necessary hard yards to make that dream possible.
I wish a better grip on reality would take hold in those Australians who, like the American Republicans, just say ‘no’ and keep denying that we desperately need to show leadership and bite the bullet on de-carbonising our economy. The resource party won’t go on forever, and we need a plan for how Australia will face the freight train that is coming at us from the future and the challenges of the next 30-50 years.
Cadel Evans has put in the hard yards: we saw him arrive in Paris today and gave him a rousing cheer. I just hope he isn’t paid in Euros.