"I saw my problems and I'll see the light
"We got a lovin' thing, we gotta feed it right
"There ain't no danger we can go too far
"We start believin' now that we can be who we are.
"Grease is the word…"
That's the opening verse of the Bee Gees' title track from the movie "Grease."
They go on to sing "Grease is the way we are feeling." Well, if you change the spelling of the word to "Greece," that's how I'm feeling about America's debt.
Both Greece and the U.S. are on a slippery slope, greased by too much debt.
And, like the song says, we are both in danger of thinking that because we see the problems, we see the light. We are both feeding it right – our debt, that is.
We're similarly deluded in believin' there ain't no danger we can go too far.
But that's wrong. The danger is incredible.
You see, something just happened in Greece – something that is going to happen here and, in fact, is already happening, but doesn't have to. We can still stop it.
In fact, what's brilliant is that Greece is an easy lesson for us.
We now know how to solve the riddle about how to fix the debt mess we're in and what exactly to do about the dreaded fiscal cliff.
Jump off of it…
That's right. Man up, get behind it, and stop "believin' now that we can be who we are." We already are who we are – hopelessly in debt.
Let me haircut this for you right here: We aren't going to fix our debt and spending problems in the next couple of weeks, or in January, or by the first quarter of 2013, or next year. We aren't going to fix them by the next mid-term elections.
So let's all hold hands and jump off the fiscal cliff.
Don't be afraid. Yes, it's a long way down, and we may never hit bottom. In fact, there is no bottom. We won't get there.
We will feel our stomachs rise in our throats on the way down, and we may even vomit a bit. But once that passes, something remarkable will happen. Something thousands of Wall Street Insights & Indictments readers tell me they want more than almost anything.
I'll get to that.
But first: Here's the reality about Greece. They're "you-know-what" (rhymes with "screwed," kind of). They can't get past the debt they've accumulated. They keep adding to it, in fact.
The ECB, the Eurozone euro currency group, the IMF, and Europe's banks are all playing the "extend and pretend" game with Greece. As if the country is going to pay back its debt. Newsflash: It can't – EVER.
Greece's debt-to-GDP ratio is now more than 170% (the U.S. ratio is around 102%). By now it was supposed to be down to about 140%. Who are they kidding?
What happened is that politics intervened. Politics and another thing called reality – which is kind of like politics, only not as surreal.
After several rounds of bailouts, and restructurings of those bailouts, and the buying back of new debt that Greece issued by Greece itself at a discount (which means the buyers of that debt got screwed), so they had less debt outstanding (for a second), so they could issue a ton more debt (at lower interest rates, of course), so their debt burden and debt-to-GDP ratios would fall… all because they had to fall to meet IMF and ECB and lender criteria to be able to borrow more in the future (because by then, of course, they would be a better bet to pay back what they were then going to borrow), after all that jockeying of debts and bailout loans, and even after two general elections and a lot of political backstabbing…
Greece hasn't done anything to meet the criteria that its lenders demanded for them to get any more loans.
So, what happened? Consequences? The end of the road?
No. Greece just got approved for another bailout tranche. It starts now and runs through March.
There's no need to get into the specifics. It's always the same.
The banks that borrow the money from central banks (who print it or say they have promises of member governments to pony up the money if the central banks get into their own trouble with all their lending) buy the debts that Greece and the other sick Eurozone countries vomit up to keep the extend and pretend game going so they don't all end up insolvent, which technically most of them are.
How so?… Because they don't have anything near to the amount of money they've lent out and never will. That's not how they work. They work on the belief system.
You know, if you believe they have it, they are safe and solvent. Yep, it's kind of like: "We start believin' now that we can be who we are, grease is the word…"
So here's what we have to learn from Greece.
The extend and pretend game sucks the life out of everyone. Except the bankers, of course, they get a permanent reprieve, kind of like a perma-stay of execution for their criminal lending policies.
Greece has been in a recession for seven years. That's what's ahead for us (or worse).
The U.S. had a more diversified economy, to be sure. But so does Japan, and look what happened there. They're well into their second "lost decade."
The funny thing that isn't funny is that Japan ended up where it is because of what happened there. What's not funny is that what happened to Japan is exactly what is happening to us.
First, an uncontrollable housing and property boom made people feel rich. So they borrowed against their property to invest in the stock market, which, of course, rose with all that money chasing rising share prices. Then the bubble popped and the markets collapsed, both of them, the stock market and the property market.
The same thing happened here in the U.S. The only difference here is that the Fed pumped so much money into the banks – which has gone into the stock market – that the stock market recovered. And now the property market looks like it's starting to recover. So far, so good.
But then there's all this debt. We're looking like Greece, playing a never-ending game of extend and pretend.
But it does need to end.
So I say let it end here. Let's jump off the fiscal cliff.
Our politicians make Greek politicians look like Greek Gods. There's no way our federal fools are going to get us out of this without getting themselves into a position to be elected or re-elected. It's about them, not us.
So let's all be the brave Americans we are and jump together.
If we do, again, we won't ever hit bottom. We will find a cloud somewhere on the way down that will break our fall and we will start floating. Why? Because here's the amazing silver lining…
Once we stop stupid spending, once we raise enough revenues, our debt problems will diminish. They won't go away completely. But if we go over the cliff, do you really think we're not all going to look at our politicians, all of them, and take them all to the woodshed?
This could be our chance to change the way we are governed.
This could lead to the revolution we need to throw all the bums out, to shut down the Federal Reserve (so it doesn't keep printing money for the banks to get into more and more trouble that we end up having to bail them out again by, guess what, having the Fed stuff them with more money), and to revisit what kind of America we want for the future of all our children and their children, and the world.
There, I said it. Let's all go jump off a cliff.
Who's with me?
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About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
He helped develop what has become known as the Volatility Index (VIX) - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of 10X Trader, Shah presents his legion of subscribers with the chance to earn ten times their money on trade after trade.
Shah is also the proud founding editor of The Money Zone, where after eight years of development and 11 years of backtesting he has found the edge over stocks, giving his members the opportunity to rake in potential double, triple, or even quadruple-digit profits weekly with just a few quick steps.
Shah is a frequent guest on CNBC, Forbes, and Marketwatch, and you can catch him every week on Fox Business's "Varney & Co."
He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.