Just a Stone's Throw Away

Greece's parliament passed its austerity plan. People were not so happy, but hell did not break loose either. Though the CNBC reporter decided to do her reporting while wearing safety gases and a gas mask, instead of, well, just going inside.

This Greece situation is a never ending saga. The politicians will continue to throw their verbal fictions and the police their tear gas canisters, and hopefully not stand downwind. The protesters were breaking up stairs and sidewalks because there is a shortage of common sense and stones. It was a typical hissy fit by the public. I understand why they are angry, but I don't understand the need to break into a store and steal a table lamp.

Let's move on to something new, a bit more closer to home, our own inability to balance the national budget. Ma, you're very good at this, writing down expenses and when a check is written. Our government, not so good.

The debt-ceiling, amount the gov is allowed to borrow, is a little over $14 trillion. And here we are wagging our finger at the silly Europeans. We hit that cap back in May. Now, they are looking to raise that cap, as if its not high enough. The Republicans won't budge unless they get cuts on Social Security and Medicare. The next vote will be Aug. 2, start of Ramadan. No one really know what will happen if they can't come to an agreement. If they do raise the ceiling, their all's-good answer is to basically just keep paying the interest back to the borrowers. How much interest does $14 trillion accrue?



http://money.cnn.com/2011/05/16/news/economy/debt_ceiling_deadline/index.htm

The "Can" is About to Hit the Fan

So, Ma, I might be working this Fourth of July. Apparently, on July 3rd, Good Ol' Greece may be going up in flames after the euro zone votes on its second bailout package. I was told, if Greece implodes, I'll be coming in to cover the fireworks.

Tomorrow, Greece's parliament is voting on its austerity package which includes a tax hike, pay freeze for the public sector and fuel price hike. Jobs will be lost and business will close down. But, that will happen regardless, even if the lawmakers fail to pass the bill. The Greeks are between a rock and a hard place....no pun attended to all the stone-throwers that are representing on the streets of Greece.

Reporters love their adages. This new one "kick the can down the road' was coined for the purpose of showing how inevitable all of this was. That's another thing reporters love, hindsight and tsk, tsk, tsk-ing. I visualize a boy in overalls, chewing on some hay, kicking an empty soup can down a dirt road. The 'can' being referred to is Greece's debt. The boy, I'm assuming, is Greece and/or all orgs and govs, who saw this coming and continued to ignore.

The news today showed the protesting in the streets of Greece, rocks against the tear gas. I really do empathize with the Greeks. Life is about to take a turn for the worst. The people, like all of us, trusted their government to protect their way of life. What happens when the governments fail. When parents fail, we throw a tantrum. But, eventually we forgive and move on because we're stuck with our parents. When a government fails, the people riot. It's not like they are going to be handed a clean slate, a do over. The only option on the table is reform, and the heads that will roll will not just be the politicians.

Good news. I made cod last night. Broiled the fish, added whatever spices I had on hand..which included garlic powder. It came out pretty good. I didn't get sick. Good times.


http://news.bbc.co.uk/2/hi/europe/8494849.stm

The Big Bailout

Here goes nothing.

The Greek bailout is sort of like when I took out the loans to pay off my college debt and how you're dealing with mortgage. These examples are quite laughable compared to the deep deep hole Greece (and others) have dug over the past decade. Borrowing is the life blood of students, households and governments alike.

It's a lesson we learned already a couple of years ago, when Wall Street crumbled. Greece borrowed big, can't pay back its creditors, and now needs to borrow more money to keep afloat. It's the cycle of debt.

Think of it this way, ma. You are the International Monetary Fund (IMF) and/or the European Union Commission (EUC). IMF is an intergovernmental organization made up of over 100 countries, made famous by one man, a maid and a hotel room. The EU Commission is the executive body for the European Union. It's good to know these terms, they'll be popping up a lot. I'm not going to go into what kind of power each has, that gets complicated and requires a whole lot of wiki reading. But, basically think of yourself as the entity everyone goes to when there is a squabble.

Your other daughter, my sister, will be Greece. She's the big spender. We'll call her Rani (princess) in case I actually go public with the blog. So, Rani has a job working retail at the mall. Her revenue, what she earns, is spent improving the infrastructure (her closet) and providing social services such as movies and eating out. She's not making all that much, so she starts to borrow money from me and opens opens up a couple of credit lines. The cards have dad's name on them, which means he's holding Rani's debt.

This is where you, as the walking bank, comes into the picture. You'll give Rani a loan to pay of her credit cards, if she implements certain money management strategies, an austerity plan of sorts. These strategies shut down her new infrastructure projects and cut down, severely, on the social services. Of course, she needs to confer with her friends, determine if the clearing her debt is worth giving up the life she has built.

The big bailout is basically borrowing more money to pay off debt. The alternative is letting her and Greece default, which means a lot more people, the creditors will not get paid back, and will go down like the Titanic.

The problem is bigger than just having all this debt floating around. It's that a Western country is on the verge of defaulting. Countries have gone bankrupt before. But, most of them are third-world puny countries in Africa, of no consequence, sorry, where the big superpowers can swoop in and forgive debt. This is no longer case.

Now, we're waiting to see if Greece will pass their austerity plan. Greece's government will vote in a couple of days. The people are already angry and protesting because of all the cuts in social spending, and the tax increases. It doesn’t look good and will probably get worse.

To be continued.

Ok, any questions?

Related Link: http://economictimes.indiatimes.com/news/international-business/greek-debt-restructuring-could-eclipse-lehman-ecbs-stark/articleshow/9014744.cms

And so I Begin....

When I was a kid, my mom would pay my sister and me a dollar to read and verbally summarize a story from the front page of our local newspaper. It was her attempt at trying to get us to read about the world, when all we wanted to do was play Nintendo until our thumbs cramped up. The bribe didn't work, even though this was when a dollar was worth more than four chicken McNuggets. Eventually, my parents discontinued the subscription to our paper and we acquired Mario Bros. 2 and 3. Fast forward to 2011, I'm now working for a financial newswire service, being paid a bit more than just a buck, to pick out the top news of the day. I think this is what people call irony.

I do read a bit more news now, not that much more since there's also Facebook and gchat to contend with, but just enough to keep afloat on current events and avoid total embarrassment. The purpose for this blog is to explain the world of finance to my mother. However, in truth, this is an excuse to prove to myself that I actually know a thing or two about bailouts and bonds. I'll post a couple paragraphs oversimplifying the major financial news of the day. If my mom gets it, than I've got it!!!

Only disclaimer is that my explanations may not be worth the 99 cents. I'll try to provide links, so that you can fill in the gaps. Enjoy, because I'm going to have some fun with this, writing about finance on my own terms.