With all the German intellect and ingenuity, and all their expertise in science and mathematics, their government leaders have once again defied logic for the sake of social mediocrity. They’re going to bail Greece out – again. Why?
Greece is bankrupt – financially and ideologically – and to continue to transfer the German people’s hard earned money to fund the irresponsible Greek government is blasphemy. Why do it? Why, why, why???
By offering this new Greek deal Germany has once again agreed to dilute itself – and the Euro – to place Greece on temporary life support. Greece will fail, let there be no doubt, the only question is when.
How can I be sure?
Well, if a country is willing to sell-out its people then it’s only a matter of time until they sell-out their creditors. Am I wrong?
Consider the recent dynamic in Greece. In exchange for a new aid package of $90+ billion over three years, Greece will have to implement the tough austerity measures that current Prime Minister Alexis Tsipras ran against when he won office earlier this year. Those austerity measures were also voted down by 61% of the Greek people – and Tsipras himself – as early as two weeks ago in a nationwide referendum. The Greeks were so happy about the referendum results; it was like they won something.
But their delight was short-lived.
This week, and in typical socialist fashion, Tsipras and 79% of his parliamentary cohorts overruled those two consecutive national votes and governed the other way by implementing tough EU austerity measures. They did this to acquire more free money.
Socialism is indeed alive in Europe, but it is not well.
How about this absurdity: Greece must receive emergency funds from the European Central Bank early Monday morning, July 20, 2015, so it can make a debt repayment to the European Central Bank on that same Monday in the afternoon.
That must make the ECB feel just great.
Better yet, Greece has absolutely no chance to repay its current debt let alone this new bailout package. Their national debt, which is already completely unaffordable to them, is $424 billion. After this bailout package their total debt will rise to $518 billion – and interest rates are poised to move higher. Their economy is just $238 billion and it is shrinking; it’s down some 33% since its peak in 2008.
The Greeks need to fix their operating model – and their creditors not only know it, but are directing it.
As part of the austerity measures the EU is requiring Greece to cut domestic spending and raise sales taxes. Their national sales tax is already 23% – which is part of the problem. Making sales taxes higher will only make their core issue (low consumption) worse (lower consumption.) Once enacted, the Greeks on the government dole – and there are a lot of them – will receive less money and pay higher prices for goods (because sales taxes have increased.)
How is that supposed to grow the Greek economy to a healthy level where they could afford to payback their debts?
Answer: It can’t.
Heck, part of the problem in Greece is their inability to collect taxes – and the reason they can’t collect taxes is because the rates are so punitively high that people can’t survive under the current system. So they beat it by not paying into it. Higher tax rates will only make that dilemma worse.
The answer to government corruption and insolvency is liberty -- for individuals and enterprise. Market growth is about lower taxes, less central planning and spending, and less regulation. It’s about incentivizing profit, maximizing individuals, and minimizing dependence on governments and her allies.
That’s the silly part about this whole Greek thing. Germany, supposedy the smartest governing body in the Euro Zone, is advocating a losing proposition for Greece (higher taxes etc). But Greece has to accommodate, otherwise they don't get the money. And that’s what happens when you’re dependent on government. You do what they say to receive the welfare payment. Period, end of story.
And then Wall Street applauds it. And they do it while China, the world's largest economy, is unraveling.
Even though China has implemented measures to boost growth, including tax breaks, lower interest rates, and injecting billions of liquidity into the banking system, a myriad of economic indicators remain weak. Production, along with fixed-asset investments and retails sales are down, and economic growth has been on a downward trend since 2010.—Yet their stock market was up 92% in the most recent twelve months; driven by a 500% increase in margin debt.
Then June arrived and the Chinese stock market slipped on a banana peel. After closing at 5,166 on June 12, 2015, the Shanghai Index dropped 13% in the next five trading days before ending the month at 4,277, a 17% drop. By July 8 crisis had set in, the index was off 32% (to 3,507) from where it was just one month prior.
The hostile trading inspired communist central planners to implement radical new market controls. In addition to suspending several stocks from trade, China regulators forbade many brokerage houses and other enterprises from selling stocks, and established a pseudo hedge fund to purchase stocks and inflate prices. The measures slowed the spiral and helped stocks regain their footing; the Shanghai ended the week of July 17 at 3,957 – still 500 points off the central government’s target value of 4,500 – but still down 23% from its peak.
So the government measures provided an initial 400-point stock rebound – that’s good, right?
Local entrepreneur and business owner, Li Jun, said it best, "The more the government intervenes the more scared I am."
Imagine how the Greeks feel knowing that the German government is dictating their future.
One of the greatest American misnomers is that Wall Street is run by a bunch of rich, white, Republican capitalists. So not true. Wall Street is owned and operated by a bunch rich, white, liberal Democrats who lean socialist. That’s why they applaud big government bailouts like what just happened in Greece. After all, someone will have to sell all that new debt – and who better than them, right?
A free-market capitalist would deplore the Chinese action and sell-out at the first opportunity. Imagine getting stuck in a depreciating asset and risk jail time for sabotage if it was sold before the government said it was okay to do so. Who wants to operate in such a market?
Wall Street, of course, who still has a ton of their clients’ money invested in China.
When the establishment is the problem – People are the solution. Government and Wall Street can never provide the long-lasting wealth that drives individual Free People to succeed.
Case in point: the U.S. government has invested 35% of GDP over the last five years to produce a meager 2% growth per year. That poor performance will most certainly affect the future of Social Security – and like in Greece, benefits will be cut. That’s what governments do. They tax, spend, and create waste – and when they get into trouble again they raise taxes and cut social welfare programs. That’s what governments do, time and again. They are the consummate underperformer.
And right behind them is the Wall Street establishment with their gluttonous appetite for mutual funds. Mutual funds are nothing more than socialized investment products: they take investor capital and spread it around the market as they see fit. They create large bureaucracies of investments that offset gains from high performers with low producer losses, which in the end return lackluster performance that benefits the bureaucracy more than the constituent.
If the Wall Street establishment was indeed full of free-market capitalists their business model would look much differently than it does today. They would educate investors how to invest successfully and then open their markets to them.
But no, instead they convince investors that they are too stupid to invest on their own and then force them into a basket of mutual funds because of it. Dependence, in any form, is a losing proposition. Only dependent consumers purchase products that consistently produce below-average results. And that's what mutual funds are -- below-average products.
That’s Wall Street for ya’.
Compare those two establishment venues, government and Wall Street, to my 15-51 method, which has produced a stunning 125% gain over the last 5 years, or 25% per year. See below.
The performance trendlines for most mutual funds is way below the gray line shown above (the Dow Jones Industrial Average), and the long-term trendline for Social Security is negative.
The only way to maximize your investment returns is to minimize the establishment's impact on your nest-egg, and maximize your role in the investment process.
The road to financial independence. ™