The Greek can continue their wayward ways. The write off of half the sovereign debt is proof that the world want’s to pretend that all is well. Lend the Greek more money. They can buy more stuff produced in China and elsewhere. If you call their bluff, make them default, then their buying could grind to a halt. Not very good. How wonderful! Mortgage finance all over again. Lend so that they can buy. Lend more and they buy still more. Finally when they cannot repay, write off some. The balance? Well, we will reschedule it for tomorrow. Now, there is clear hope for the other PIGS that they can continue with their wanton borrowing and not worry about default. No one is going to take them to the poorhouse. So what does it matter whether the credit rating is C or D? Investment bankers in search of bonuses ensure that sovereign paper can be placed with some sucker or the other. You hold my hand, I hold yours and we play ring-a-ring-a-roses. Germany is worried. To Euro or not to Euro? How long will they continue to pay for the excesses of their euro brothers? UK is breathing easy. No PIGS to bail out. Of course, their bankers will want to get in to a piece of the action. The famed “City” paychecks have got thinner. Play East India Company all over again. China is watching and wondering. How long can they keep their riches to themselves? If their buyers go bankrupt, what happens to the factories that keep shipping goods under every label? Publicly they say that they will lend only to Germany. But, if Italian paper or Spanish paper comes floating around, with everyone having had their fill, it is a Hobson’s choice. Banks who bought the lovely Euro paper, now find that they will need a Basel III and IV to bring capital adequacy to the levels which the Japanese originally wanted (zero). The funny regulations will make you take a hit if there is a default. But, if you take a forced hair cut (there ought to be a better term for a 50% robbery) then the accounting rules let you remain healthy. If you have terminal cancer, all will be well if we change it’s name to ‘flu’. That is what the banks are doing. John Maynard Keynes had famously said : “If I own you a pound, I have a problem: but if I own you a million, YOU have a problem”. India has a big lesson to learn. Default is fashionable and in fact if we default, we get better terms from the world. There is no need to pledge gold with someone to meet some stupid financial commitment. After all, the investment banker who made money when he arranged for the loan, is now looking for another fee when he restructures the loan. And if we default, we can cut our external debt by half! Think about it. Greek have a new anthem. Courtesy Bobby McFerrin- “Don’t worry, Be Happy…”

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