Back in September and October of 08, as Ben Bernanky and Henry Paulsen were busy pulling their hair out, most of the general public had never heard of the term ”moral hazard.”  Now the term is thrown around by people with IQ’s of 60 and above.  Moral hazard is of course the idea that there is no incentive for business to behave well/ ethical when they know that the Government will not let them fail.    “Too Big To Fail” is something we hear as often as “Da Da Da Da Da, I’m lovin it,” and believe me, that’s a lot!

During the heat of the meltdown the words of Bernanke warning us that we, “may not have an economy on Monday” if there wasn’t action, made it possible for the public to stomach the 700 billion dollar Emergency Economic Stabilization Act.   Of course, this was in addition to the bailouts of such notable stars as Freddie and Fannie, Goldman Sachs, AIG, and Morgan Stanly.  In the months following, the general public started to feel the financial shivers from being left naked in an empty bathtub that was once full of warmth from over hyped “nest eggs.”  Down, Down, Down the drain.    The drop in stocks, mixed with housing prices, mixed with unemployment, has made the most recent bailouts of GMC, Chrysler, and Bank of America about as popular as __________ in the Vatican (insert your choice of unethical endeavors in the blank).

The American public has finally realized that regardless of the bailout, THERE IS NO CHANGE!  The companies who received the bailout money are still playing Wall Street like a slot machine with depositors money, Congress has been cuddling for so long with the banks that “the two” have “become one,” and the Federal Reserve’s records are about as likely to obtain as the holy grail is to be found, no knock to the great Indiana Jones.

And then there was Germany!

With moral hazard on such prevalent display for the world to see the last two years, Germany is able to make a decision in the coming days/ months regarding it.  The decisions…. will they bail out the PIGS?  While America has been spending money like a rap star with his first million… Oh wait that doesn’t make sense because the rapper actually has the money to spend, never mind how he spends it.   While America has been spending money like a kid who stole their parents credit card, used it, then stole the mall, it seems that some in Europe have been following the great “Super Power’s” lead.

Portugal, Italy, Greece, and Spain, have been thinking like a hurricane Katrina refugee the last few year, pulling in far less revenue than it cost to pay back the cheap debt they incurred.  At least the Katrina refugees had an excuse, their finances were being propped up by the federal government’s relief efforts.  When the checks stopped coming from Washington, the mortgage still did.  HUD got left with the house, and I bought it at auction for 2/3rds of the original price.  But I digress…  Portugal, Italy, Greece, and Spain right?

So while debt has been cheap, the good times were rolling, and European quasi, I take 80% of your check and then I make all decisions about your quality of  life, socialism was in full swing…. The four countries were racking up debts to support their countries life styles which they couldn’t repay.  Worse, countries like Greece were lying about the amount of debt they were incurring.  Debt to cover massive entitlement programs which were supposed to be a model that our latest greatest big man in the White House wants to follow… Remember President, I mean first lady, I mean first socialist, Oprah’s wonderful show featuring Denmark’s model socialist system?  “Oh yes we pay almost our whole paycheck to the Government, but look what we have to show for it.”  We should all ask the Greeks what they have to show for it!  In Greece, the cover up was so bad that the newly elected Socialist President George Papandreou had to take back all of his campaign promises.

The problem with the prospect of these P.I.G.S. countries defaulting on their loans is that they are all members of the EU.  Originally being a part of the EU and the Euro currency, gave these countries the access to the cheap debt which now strangles them.  If the countries default on their loans it will send shock waves through the Euro community of countries’ economies. The Euro will look like someone on acid who thinks they can fly… Those who survived the 60’s and the early 90’s can attest that scenerio never turns out good… “Cause I’m free, free falling.”  Ok, Ok enough with the bad puns.

So PIGS go down, Euro goes down, EU suffers together.  But what are the options?

#1 The EU can kick the PIGS out of their little club, but this would cause a massive splinter in the Euro from a likely domino effect of weaker countries leaving the unified currency.  No good for the Euro, and the EU politically speaking.

#2 Greece can pull itself out of debt.  Even though Ireland is looking better because they cut public sector wages, this isn’t likely to happen in Greece.  The Greeks love their labor strikes as much as they love their feta cheese.

#3 The rest of the EU, and mainly Germany,  can bail them out.

Just today the EU stated that they would take take action to stabilize Greece, but no plan was stated.  The lack of immediate action/ bail out/ Washington style pee down your pant leg when a so called “expert” tells you something is wrong/ tells me this is the old, tell em what they want to hear to chill em out, plan in EU action.  It will be a far more thought out plan, having more far reaching implications than just throwing money at the problem, that will emerge eventually.

I for one hope Germany chooses to give Greece some tough love and let them figure out their own problems.  But this is not likely to happen.  I mean, we are talking about near total socialist societies in Europe right?  More likely the main powers of the EU will see this as a way to gain power over another country.  In this day and age, a European country would not militarily take over a country… This would be too politically incorrect.  So why not apply medieval tactics not on the battle field, but economically?  Greece becomes a puppet of the EU, and more specifically Germany; and the zombies from Greece, who’s strikes led to crisis in the first place, will once again cry “yes… yes… take over any responsibility which we might have.  We wish to live the easy life of socialism in which we make no decisions, you take all of our money, and we are allowed to believe our lives have meaning.”

Hmmmm and we all thought a one world government would come through wars… We will watch and see in the coming years how many countries unite in the name of defeating poor economies.  Looks like the PIGS will be the first led to the slaughter!