Mullings An American Cyber Column By Rich Galen

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Spray it with Windex

Rich Galen

Friday April 23, 2010

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Remember that wonderful little movie, "My Big Fat Greek Wedding" where the father played by Michael Constantine insists that just about anything that is wrong can be put right by spraying it with Windex?

"My dad believed in two things: That Greeks should educate non Greeks about being Greek and every ailment from psoriasis to poison ivy can be cured with Windex."

Greece needs a lot of Windex because Greece is B.R.O.K.E.

The European Union and the International Monetary Fund (IMF) will provide about $60 billion in Windex to bail out Greece.

This is a matter of enormous import, because international bankers would prefer that whole countries not go B.R.O.K.E. Other countries would prefer that whole countries not go B.R.O.K.E.

I would prefer that whole countries not go B.R.O.K.E. and I only have about $1.47 in a 401(k).

Keep in mind that the $60 million which will go into bailing out the whole country of Greece is less than the $63 billion that the U.S. and Canada tossed over the transom at GM headquarters to bail out that group of industrial geniuses.

Every country needs to borrow money to pay bills. The U.S. government issues Treasury bonds to fund the day-to-day operations of the country and they generally sell pretty well and at pretty low rates because investors believe that the "full faith and credit" of the United States will be brought to bear to repay the debt those bonds represent.

No one believes in the "full faith and credit" of Greece. According to the Wall Street Journal:

Athens needs to raise $320 billion in the next five years, $200 billion to pay back maturing bonds.

Apparently the eight people on the planet who understand all this don't think Greece will be able to borrow that kind of money because they don't thing Greece can pay it back.

Why is this important to us?

Because we are borrowing money at an astonishing rate our own selves.

The Greek debt-to-GDP ratio is 120 percent. The U.S. debt-to-GDP ratio is about 94 percent (which is up from 57 percent in 2007).

Throw in the U.K. and Japan, which also have debt-to-GDP ratios at or above 90 percent, and you see that sooner or later we will find ourselves in a Bernie Madoff situation: The world's largest economies will run out of places to sell their bonds.

Countries selling bonds - sovereign debt - are no different than you or I borrowing money. If we have a good credit rating the interest rate will be lower than if we have a dicey credit score.

It's one thing to borrow $15,000 for a new car. A percentage point one way or the other is not that big a deal. But if you need to borrow, oh, say, $1.7 TRILLION (which is the amount of U.S. debt some economists believe China holds) then a percentage point is a very lot of money.

Countries buy U.S. debt because it is a safe place to put their money. If you are the Chancellor of the Exchequer of Upper Iguana, you can either keep the nation's money in gold bullion and look at it every day or so; or you can put it to work by buying U.S. Treasury bonds, get paid a decent interest rate, and sleep soundly in the knowledge that the U.S., unlike Greece, is not likely to go B.R.O.K.E.

The members of the European Union are straining under the burdens of all of the social programs which have been instituted over the past few years, plus the burdens of bailing out banks, car companies, and just about anyone else who came crawling to Paris, Berlin, or Brussels.

They don't have a lot of extra cash lying around to bail out Greece much less Portugal, Spain and Italy which may be next on the Oliver Twist "Please, sir, I want more" food line.

The IMF has some extra money, but a great deal of that comes from you and me, and we have already seen that we're not exactly walking around with $100 bills falling out of our national pockets.

What is the answer to all this? Governments - especially the elected legislators - are going to have to admit there is not enough money in the world - literally - to fund every program for every person, in every place, every day.

At some point Members of the U.S. House and Senate are going to have to earn their pay and tell their constituents that the free money window is closed and they are going to go to family members, churches, or local agencies for help because we're out of money.

No one will say this out loud, but the United States is only one failed Treasury auction from being Greece, and there is not enough Windex in the universe to fix that.

On a the Secret Decoder Ring page today: A link to a real time "debt clock" and to that Oliver Twist reference. Also a Mullfoto of an "attack Frisbee" and a Catchy Caption of the Day.

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