In days of old when knights were bold the French used to call being gay, The British Disease. Of course the yobs called it The French Complaint. With today’s accusations against the Brits from the French, it amounts to a similar near stalemate. France is pushing back on the ratings agencies warning that their Triple A is about to be cut. Mes amis, cut them, not us, you know why? Blah blah. It’s the classic diverting behavior of the addict, in this case the addiction is to printing money. And that is one I can understand quite well. I’m about ten stitches away from running off a few Benjis myself at the Kinko’s. But it doesn’t “work” for me or them in that the practice, like treating anemia with leeches, makes the underlying conditions of which the downgrades and high borrowing costs are a symptom, fatally worse.

But the ratings agencies DO have it right, at least in regards to France vs Britain. Sarkozy’s peeps point to minor advantages they have over Cameron’s crew on macro numbers like debt:GDP, total size and overall growth. The margins are not impressive although some of it was surprising. I thought Britain had more growth than France even now but nothing goes with snark like a bit of cherry picking which I’m not about to try to rubbish piecemeal.

The reason France is clearly a worse credit risk than the UK is obvious. While Britain is in the Common Market they never did adopt the Euro. They are still sound as a pound. Generally this would mean that the larger currency zone, clearly the euro, has more in headcount, reserves, assets and taxing power, which they do, and is therefor a better risk. But there has been chicanery going on for decades. Sure there has been in London as well but even if the British situation IS mathematically worse than France’s, they have more control over their affairs going forward because they are NOT stuck to the Euro. France derides the British for Greek-style, if not quite level, overall debt. But Greece’s staggering and un-repayable debt is also France’s debt, at least in part. It is Britain’s and ours to some extent as well due to Credit Default Options in everyone’s hands. Not yours? Wrongo boyo. If you have a penny on deposit anywhere in any banking system of any type you ALSO have exposure to Greek debt. But Euro users have more.

What the French spokes-hommes don’t seem tu realize though is that there are an unlimited number of downgrades to go around. This is the predictable, logical conclusion of spreading the highest ratings around without limit for years. The basics of academic grade inflation and Trophies For All invaded finance long ago. This is how Greece was able to get into its famous trouble in the first place. Oh, the problem is Greece is undercapitalized because they pay 5% on their bonds. So what we will do is get rid of the drachma, have a common currency and then the Greek bonds will sell like German bonds. Because in effect that is what they will be.

The only way this buffoonery could ever have persisted is if the Greeks had altered their four thousand year old habits and become something resembling Germany or at least France in economic terms. That’s not necessarily impossible and if the world properly valued fine olive oil and knew how to use it, Greece could indeed have the wherewithal to match hard currency borrowers. The thing is they have had some twenty years to do that, counting the preliminaries to the Euro rollout, and they didn’t do it. Actually they worsened on this score dramatically. The easily borrowed money went to pad out public payrolls and entitlements, paying off cronies in limitless number. While absconding with Germany’s credit card Greece did nothing to lighten the tax burden on their own populations which would have kicked up their growth. Again, quite the reverse.

So the enterprise to make Greece more like Germany or France has instead exported Greek spending and accounting norms to the EU core. The long-ago and nearly failed escape under John Major from the euro is the one asset Britain has over all the rest. It is proving the most valuable. Admitting that fact is the one thing the Eurocrats can never do because those countries that DID adopt the Euro did so with rigged referenda served with utopian propaganda that has now crumbled under the onslaught of reality.

The whole episode is crapulent and I remark on it at length only to demonstrate the futility engaged in at the highest levels of finance and government. If you are watching stocks, they are oscillating wildly and rising overall. Remember though that nothing is better for stocks than inflation. In any case, what are these asset prices moving on? Oh, good news from Europe. Some “deal” is announced and they go up! Bad news from Europe is always the same news which is to say that the last good news we told you was bullshit. Stocks then plummet.

Just this week the DOW spikes, on what? Italy had a great bond sale. Yeah, 6.5%. Six-point-five percent! That is GOOD news! Okay, but the NEXT DAY, hmm, well turns out the Italians are NOT going to be able to cut back the way they said… And they’re back up to 7%. :-( and down goes the DOW on this pantomime when in reality, as long as there is a Euro, Italian bonds and Greek bonds and Portuguese bonds are in effect Franco-German bonds. They are all on one raft. What matter if this corner or that of it seems a bit drier for the moment?

Where does it end? and when? Simple. Somewhere someone figures out the Greek debt will never be paid and they say No to another bailout. So the Greeks go elsewhere; No, no and NO is all they hear. But their government is racking up expenses, bills, just like a household. Now they can’t borrow at a rate that does not bankrupt them. This is the point where we are now. So they hike their taxes. Guess what? that collapses their economy so they now have HIGHER tax rates and LOWER government revenue. More businesses fail, cutting tax revenues and SPIKING people on government benefits, salaries or pensions. So they have no choice. They stop redeeming bonds. Then they can’t borrow a penny, can’t send out their paychecks, much less their welfare checks. It doesn’t matter who is on strike, no one is getting paid. Not in euros anyhow.

The Greek bonds are worthless so the CDOs, the contract insurance on them (the instruments that tripped up Corzine), have to be paid from other assets, which are what? Other sovereign bonds like, say, France’s. Now France, whatever else they have done (which was not much better than Greece) is burdened with the Greek debt. Okay, big deal! What’s a little Greece? But then there is Italy. And Portugal. And Ireland; really the majority of the Eurozone. And just the ordinary debts of Germany and France are already at an absurd level. If they are a tiny bit less absurd than Britain’s, still, the euro-junkies are closer to the fire.

I hope no one is looking for advice other than the simplest; hold your babies tight. Rather this is a notice. Basically we are screwed; or the existing fiat currencies of the world are screwed. When you hear “Good News from Europe!” if it isn’t something on the order of the whole Eurozone cutting their spending in half, it is not good enough. The finger-pointing, blame shifting and plumbing theft has been going on at least five years and is now breaking out into the open. It’s hot-potato, musical chairs, blind man’s bluff, liars’ poker and russian roulette all going on simultaneously. You can’t win if you don’t play. You can’t win if you DO play and you are not invited to play in any event. We are all just sheep for the shearing; EVERY BODY! The French are desperate to escape their own encounter with the clippers. They will not. Not this time, froggie. Nor you, fritz.

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