Worried About Grexit's Potential for Contagion in Your Neck of the Woods? You Should Be

The potentially history making meeting in Brussels between Yanis Varoufakis and his European Finance Minister peers started 6 hours ago. This public part [live webcam here] of the meeting will be followed by private discussions long into the night. Perhaps tomorrow at the  EU leaders summit we'll learn Greece's fate. Also happening right now, as the Finance Minister is in Brussels discussing that fate, the new Greek foreign minister is in the Kremlin, getting instant updates from Brussels and finalizing Greece's Plan B.

At this point it seems apparent to all that Greece has a simple choice: 'comply' to stay in the euro, which means living with austerity for decades to come, or leave the euro. It's that simple. After exiting the Eurozone, Greece could seek BRICS, Russian or Chinese cash for the 'bridging' it needs if Germany blocks a new deal. As Tyler Durden explains: "The majority of Greeks supposedly want to stay in the euro, but they must come to grips with the reality that the euro is a plutonium life preserver. It's one or the other: permanent austerity as the cost of keeping the euro or no austerity and no euro. You can't have it both ways."

As the world awaits it seems a perfect time to go look at two important aspects of this issue that aren't making the headlines they deserve: How Greece got into the huge debt it faces and the domino effect a Greek exit from the Eurozone would unleash.

First: Greece's debt started growing long before the EU. Since WW11 Greece's generals, bureaucrats and politicians have lived like kings on the bribes they have routinely accepted from the military contractors courting them. Greece's generals used the fear of Turkey to blackmail successive weak governments into borrowing heavily. Of course Turkey's generals did the same.

As Angelos Philippides, a prominent economist, explains, "For a long time Greece spent 7% of its GDP on defence when other European countries spent an average 2.2%. If you were to add up that compound 5% from 1946 to today, there would be no debt at all." Athens' fondness for weaponry, and the willingness of Germany and France to feed it, are the historic problem.

The 'bailout' so staunchly defended now by the Germans as sacrosanct actually bailed out the banks who made the bad loans that then turned into profit for the shareholders of the arms dealers. At least 90% of the Greek bailout has paid off reckless lenders who made the bad loans with less than 10% of it reaching the Greek people. IMO the debt itself is invalid at best.

Second: The size of the domino effect, or contagion in economist jargon, is unknown. As the video above demonstrates little Greece's decision could end up at all of our doorsteps very quickly for exactly the same reasons the housing bubble in America went boom in your town too regardless of how far away from the criminals who caused it you happen to be.

Though Greece's debt is 'only'.$300+billion the bonds issued in connection with it have been bundled, collateralized and bet on by casino capitalism amounting to, according to the Bank for International Settlements, 26.45 trillion dollars in currency derivatives [ain't capitalism wonderful]. To give you some perspective, keep in mind that the U.S. government spends a total of less than 4 trillion dollars a year. The entire U.S. national debt is just a bit above 18 trillion dollars.

Every bank everywhere, every pension plan, every mutual fund, every speculator who thinks of him/herself as an investor buys these stinking piles of crap based on the relative blessings of the rating agencies who themselves are in on the scam. The whole bunch of 'em are criminals, they'd all be in jail if they didn't bribe and blackmail [carrot and stick] the law makers in every western country.

"Greece has the potential to be the small domino that ends up toppling much larger dominoes." says Charles Hugh Smith.