Greece is going to secede and break away from the European Union and the euro currency. This is not a current headline. It is a prediction. I am not one to make a lot of predictions, but this really seems inevitable to me.
Greece basically has a couple of choices. The Greek government can balance its budget and remain a part of the European Union or it can separate. What do you think the chances are that the Greek government is going to balance its budget with a declining economy and riots in the street?
Greece will break away from the European Union so that it can form its own central bank. Using its own currency, it can default through inflation. This makes it easier for politicians to make big promises and avoid actual cuts.
Greece is being bailed out again. The Greek Finance Minister said, "It is maybe the most important (deal) in Greece's post-war history." This is a joke. It is another waste of 130 billion euros worth of capital. It is prolonging the agony.
The other European "leaders" say they are going to keep a tight grip on Greece and its spending. So what? They've been saying this all along and it hasn't changed anything. The Greek government will continue to spend money until the rest of Europe finally says "no more". That is when Greece will break away. It may threaten the entire European Union. That is fine with me.
If you think an announcement by Greece to break away will cause a huge drop in the American stock market indexes, then you better take your money out or short the market.
I can't stress enough that a Greece departure is virtually inevitable at this point. They are not going to cut spending enough to balance their budget. The U.S. government would be just as incapable of doing this right now. The U.S. government can get away with deficit spending for longer because of the Federal Reserve. That's why Greece will break away and form their own central bank.
The bailouts for Greece will eventually stop. The day of reckoning is coming. It would not surprise me if it happens in the next few months, but these things often drag out for longer than expected. The rest of Europe has to be growing tired of paying for the recklessness of the Greek government and its citizens.
I don't know how much this will affect the American economy. If and when Greece separates, it will be interesting if other countries quickly follow. I hope they do.