Oh, how the Greeks have fallen.
And fallen.
And fallen and fallen and fallen.
Today’s is a situation common in Greek history. Look, here are some old, broken statues that prove it:
Yes, the Greeks are used to falling on the field of battle, and into foreign subjugation. These warriors were probably felled by the Persians. Or maybe by fellow Greeks during those many pre-Alexander days. There have been few societies that have soared so high as the Greeks in their better moments – Homer! Socrates, Plato and Aristotle! The early Christian faith! The glories of Constantinople! Aristotle Onassis’ glasses! – and fewer that have thudded harder so many times. Conquered by the Romans. Slapped about by caliphs. Conquered, stripped and scourged by the Ottoman Turks. Bashed about by Nazis, communists and military strongfellows for much of the 20th century. For all the glories of classical Greek civilization, the beautiful mysteries of Orthodox Christianity and the fabled learning and treasures of the Byzantine empire, the poor Greeks have spent much more time on the bottom end of history, licking others’ boots.
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Worrisome drop in grain prices
Prices had been softening for most of the previous month, but heading into the Labour Day long weekend, the price drops were startling.
One of those boot-licking times is occurring as we speak, and the poor Greeks are once more having to prostrate themselves at the feet of their lords. They’re doing this proudly, and defiantly. Â As if they aren’t doing it. Here are the words of their well-spoken prime minister, George Papaconstantinou:
“The worst possible signal which we could send out is one calling for outside help.”
Well, they may not be squealing like pigs for a bailout, but they’re certainly quietly allowing one to be put together. Today’s stock markets surged on speculation that Germany and other European Union heavyweights were about to step in with a bailout for the beleaguered Greek government, which is trying to deal with a massive budget deficit that it can’t seem to get under control. By the laws that govern the Euro – the currency the Greeks have adopted – they’ve got to have a deficit of under three percent of GDP and they’re far over that. It’s no surprise that bond traders are demanding a massive premium for buying Greek bonds. Look at this chart of what’s happened to the yield on Greek bonds. (High is bad, low is good.)
That’s not just undermining Greece, which is having trouble funding its deficit, but also undermining the Euro, which is not just beset by the Greeks, but also by the rest of the PIGS. Who are the PIGS? That’s the fun term being used for the past few months about the Eurozone’s deficit-plagued southern states: Portugal, Italy, Greece, Spain. They all have crippling deficits and are having trouble biting the bullet, cutting spending and getting back in line with Eurozone requirements. Unlike countries who own their own currencies, like the United States, Canada or the United Kingdom, the PIGS don’t have the (rather unpleasant) option of printing money to pay off national debts denominated in their own currencies. They don’t have their own currencies. They use the Euro. And the big Euro bosses – Germany and France – aren’t likely to destroy the continental currency for the sake of a few sad sack southern profligates.
The Euro has always been a bit of a wacky concept. With no one really in control, how do you manage it effectively? That’s the question the market’s going to decide in coming months. Some aggressive currency speculators have already decided what they think the result will be: a slumping Euro and chaos. Bloomberg is reporting that huge speculative bets have been made against the Euro, with short positions the highest they ever have been. Today’s surge in the markets, on the hope that the German sheriff will ride to the rescue, has hammered those shorts and many have stopped-out, but many of the specs are hanging on. Sometimes these speculative attacks work. Just look at what George Soros did successfully to the Bank of England.
What the heck does this have to do with the price of grain, you ask? Simple: currency volatility isn’t going away – at all. It’s likely to get much worse and there’s every chance of a major currency crisis erupting in the world. What that could mean for grain prices is as clear as mud. Most ag prices are based on the U.S. dollar, so whatever alters the relationship between the U.S. dollar, the Canadian dollar, the Euro and heck – maybe even gold – will have a significant impact on the price of crops and livestock in Canadian dollar terms. Maybe it’ll be good, if people flee into hard commodities to avoid currency wobbles. Maybe it’ll be bad, if people flee all asset classes and tumble into the dollar, like they did in 2008.
Who knows? But one thing’s clear: today’s relief rally is unlikely to wipe away the spreading stain of currency instability any time soon.
Prime Minister Papaconstantinou is speaking defiantly in the face of those who consider his fight doomed. I wonder if he’s descended from the great Constantine Palaiologos, the heroic emperor of the Byzantine empire who faced down the Sultan Mehmed’s Turkish army in 1453. Constantine refused to give way in the face of the enemy, even though he was greatly outnumbered. He and Constantinople – named for Constantine the Great, the first great Byzantine emperor – never surrendered.
He was last seen hurling himself into the Turkish horde that had breached Constantinople’s walls and would soon loot, pillage, burn and rape its way through the guts of that Greek civilization. Perhaps the currency speculators will be gentler.
