The terms of Germany’s proposed bailout of Greece were sketchy at press time, but you can bet that the sums involved will not be covered with hard cash.  Rather, it is “financial guarantees” that will be used to shore up Greece’s finances, much the way the more nebulous “guarantees” of the U.S. Government have come to buttress practically every piece of worthless paper held by an American bank. Not surprisingly, the EU bureaucrats are spinning this fraud exactly the way Tim Geithner would have: “As long as it is very clear that any support only comes with very, very stringent conditions attached, it would not affect the moral-hazard question,” said Fabian Zuleeg, chief economist at the European Policy Centre, a Brussels think-tank.  Before Mr. Zuleeg came along, we might have thought it was only Mr. Obama’s economic spinmeisters who took their audience for imbeciles.

Stock markets around the world rallied ebulliently on Tuesday, even as a credulous press rolled out a story with only vague concerns about how the bailout of Greece would be perceived by such other potential wards of Brussels as Spain and Portugal, as well as by Eastern bloc nations that were forced to beg from the IMF when their backs were up against the wall last year. But if such questions worried global investors, they didn’t show it.  In fact, they greeted the news the same way they do whenever some new, trillion-dollar claim is piled on the dollar – i.e., they bought euros hand-over-fist, treating the currency as though it were good as gold.

Germany’s Burden

The rescue package is being sold as an EU effort, but in reality it is almost entirely Germany’s burden, since Germany is the only member of the EU that is perceived as able to write a very large check that is unlikely to bounce. But if  Germany’s own banks should falter anew, requiring the kind of bailout smoke-and-mirrors that have kept America’s make-believe financial system afloat, the fallout will redound to the serious detriment of the euro if not its demise. In the meantime, equity shares around the world have been spared a confrontation with reality by short-covering bears. As is the case with nearly all rallies these days, it was mostly over before the NYSE opened Tuesday morning. Index futures had rallied all night into paper-thin volume, presenting bears with a harsh choice at dawn: bite the bullet now, or risk annihilation trying to resist the madness. In the end, they went along with the absurd fiction that Greece, and therefore Europe, had somehow been “saved.”

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