The Greek Tragedy has become Comedy, then Absurdity and somehow has come full circle to Normality… Our New Reality; which evidence says is the repetitious behavior emblematic of Insanity. All the things the “bailout” was meant to avert are at the door. All the things it was meant to promote have whithered. Of course the prescription can only be more of the same. More borrowing. More spending. More taxing. It is far from over and it is far from just Greek. The Greeks are merely carrying the banners in this parade. Every nation whose name you know is on the program.

Portugal is basically next though Ireland threatens her position. The UK and France might not be the next weakest but they are the most prominent of the next weakest. The anchor man, of course, is Germany… good old rock solid Germany. And the Germans are on relatively good terms, fiscally. But they can’t remain so on their own.

No need to indict the Euro-states. The United States and all our constituent parts are on at least a parallel path. The bugaboo, both in your local town hall and the cafeteria at the IMF is the same: a deterioration of the ratio between what the lender asks and what the borrower can pay. In Athens, Greece as in Athens, Ohio the people elected or appointed to pay the public bills and otherwise manage accounts have borrowed, in the flush times, right up to their maximum credit potential and in some cases managed to go further. Needless to say they have spent all they have borrowed and worse; taken on liabilities beyond that by several multiples. No less a limelight Liberal than Jerry Brown announced himself “shocked” at the state of California’s finances just days after assuming office. Is anyone shocked that his first serious examination of the books has only now occurred? I doubt it.

So the Greek/Cali/Muncie Problem, from the financial viewpoint, is that we can’t borrow billions at 5% anymore. The best we can do is 7%. Well hell, that doesn’t sound so bad, does it? Wouldn’t you like to get 7% on your credit cards? Sure. How about your mortgage? Um.

Hmm.

Yes, it doesn’t take too much thought to recognize the swirling, conical pattern this circular borrowing produces. It is the Sucking Sound first remarked by Ross Perot but recognizable to all the serious players. The current financial system, from your streetcorner to the grandest market, consists of a continual flow of hot potatoes. Everyone knows there are phantom assets but they are hard to tell from the real ones. Get stuck with too many when the music stops and you are dead. But the other players don’t want you to die. If you collapse as Merrill Lynch you may claw a few surrounding competitors down with you, encumbered as you are the way Joe Blow’s house value depends, largely, on the condition of his neighborhood, and therefore of his neighbors.

But this can continue only so long as it amounts to a mere delaying tactic. The real crunch, the Second Helping of the Double Dip is impending so now everyone in finance is concerned not with how much they can make as is usual, but with how much they can keep. All else be damned. This sort of scrambling produces nothing but can, with some luck, save something. And it is competitive. No one, obviously, wants to be the one in ten (or twelve or four) to see their fortunes evaporate. No one wants to take a haircut.

Have you ever heard that expression? It is rife in the business biz, it means basically to acquiesce to a loss, hopefully just on some interest or appreciation but it could be that you might feel yourself lucky to get twenty-five cents to the dollar of your principle. Or even a dime. You have then really taken a haircut. You have heard the clippers hit the bone. But at least you are out. And what everyone wants now, is out. And plenty of us are out, voluntarily or not. You can tell as we show the evidence of a hasty, serious haircut. But those who have not yet realized the collective losses in the nation and the world? The bonused, bailed out and rebranded? Those with “positions” rather than jobs? They don’t want to take the haircut. And who can blame them? But their avoiding of a well-deserved haircut is a large obstacle to returning energy to the economy. They will weedle and cajole, wasting our precious time while printing valueless money. They will fake tears and there may be some real tears. They will squirm and perhaps bite but in the end they will settle into the chair because at bottom they know the only thing worse than a coerced haircut is a botched, coerced haircut.

And the barber cometh for everyone. If you were as thrifty as a Quaker or profligate as a pimp it makes no difference. You may make out by buying gold (of course then you must sell it) but you will lose out somewhere else and the net, on average, will be negative. And you will know it. You just got a haircut.

You may well get another, however. It’s not one haircut and you are out. No, no. Anyone is subject to a haircut at any time. Laid off? You got a haircut. 401 crapped out? Haircut. House value collapsed? A very common haircut. And we know that avoiding a necessary haircut only makes it worse in the end, and the end is never far, so it is very important that we support haircuts where due, for others and even ourselves. The Ethanol Industry is long overdue for a close haircut. The government holders of our Treasury bonds might surprise you with their willingness for a trim. If you are drawing government benefits you could save yourself a full buzzcut in the future. Unions have grown flowing beards and luxurious locks. Haircuts for all. In Defense, well, these guys are used to short haircuts.

And after months or years of that, those who need and have not had their haircut will be few and obvious to all. They will be the last to take the haircut and could well take it hardest but in any case, only after EVERYONE has had their haircut can we start growing it out again.

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