Stock indexes jumped in another day of bumpy trading Wednesday after European leaders renewed pledges to help Greece avoid defaulting on its debts.Ass Backwards Thinking
The Dow Jones industrial average was up 194 points, or 1.8 percent, to 11,299 at 3 p.m. It had been down as many as 112 points within an hour after the opening bell.
The leaders of Greece, France and Germany agreed in a teleconference that Greece was an "integral" part of the 17-nation bloc that uses the euro. Greece also agreed to abide by agreements to trim its debts. The statements were intended to calm fears that Greece was headed for a default on its debt or might be forced to exit the euro.
Uri Landesman, president of the New York hedge fund Platinum Partners, said worries over Greece have gone too far. Landesmann thinks European countries won't let a Greek default create a larger financial crisis. "They're just not going to let them go under," he said. "That's just not happening. I think people have learned the lesson from letting Lehman Brothers fail."
The idea of continually throwing away money to prevent the inevitable is ludicrous. We would be far better off now if more major banks had failed and bondholders adequately punished.
Instead the crisis drags on and taxpayers pay the price thrice: In a dearth of jobs, in low yields that squeeze those on fixed income, and in higher energy costs.
Three Lessons of Lehman
- Lehman was undercapitalized and overleveraged
- It should have failed and it did
- The world did not end
Instead we suffer prolonged torture and delusional hope from by those who think this situation is fixable short of default.
Greek 1-Year Bonds
Greek 10-Year Bonds
The bond market, not Uri Landesman, has this correct.
For further discussion, please see Stocks Rally on Dead-on-Arrival Eurobond Proposals, Rumors, and Patches; More ECB Emergency Funding; Why a Breakup of the Eurozone is Likely
Mike "Mish" Shedlock
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