Britannia Radio

		April 13, 2010

A Harsh Reality for the European Union By Jeff Clark 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 Bond King Bill Gross is dumping U.S. bonds Says massive new supply will overwhelm demand, drive rates higher. The worst made cars on the road Surprise... lots of GM products on the list. Porter Stansberry: Big signs of a bottom in natural gas The best way to play it right now.