A summer trio: Greece hasn’t been fixed, the Fed is in a fix and gold is being “fixed”.

 It’s summer and it’s August; the month when even the Eurocrats take a break. And so the illusion that Greece is fixed is maintained. Here are some assumptions dangerous or otherwise -

▪ The current total accumulated bailout for Greece is €326 billion

▪ Greek GDP will remain at €216 billion

▪ Interest rate on the bailout will be 0%

▪ Greece can immediately achieve a surplus of 3% of GDP

▪ Greece will hold that 3% surplus for as long as it takes to pay back €326 billion

▪ Every penny of Greek debt surplus will go to pay back creditors

Now let’s have a look at the maths courtesy of Mish Shedlock http://globaleconomicanalysis.blogspot.co.uk/

“Three per cent of €216 billion is €6.48 billion. At €6.48 billion per year, it would take Greece 50 years to pay back €326 billion. But none of those assumptions is true. The interest rate will be small, but it likely won't be zero. Greece won't come close to a 3% surplus. 100% of the surplus won't go to the creditors. The only possible favourable condition in the mix is GDP. Greek GDP will eventually rise above €216 billion, but that will take years. In the meantime, interest expense accrues, adding to the total amount that needs to be paid back. At 1% of GDP (€2.16 billion per year), it would take 150 years.”

It can’t work can it? No. But for now enjoy the sunshine and hope that the ECB deploys its €1 trillion treasure chest to good use. This chart shows just how effective goosing the Fed’s balance sheet has been for the S&P 500. Could it be the same for euroland?

David Fuller's view

Here is Clive Hale's Letter.

Greece’s once adventurous and independent spirit has been crushed by EU politics and the Euro.  How can this resolution be better for Greeks than Grexit?

Dow Jones Industrial Average (weekly & daily) back from the brink today but needs to break decisively the sequence lower highs since May to reaffirm support within this long trading range.

Clive Hale’s points on gold (weekly & daily) are valid and it is currently short-term oversold.  However, if you are a big long-term bull on stock markets, as I am for reasons mentioned in the Friday Audios, gold does not do well against that background.  (See also: Speculators Smash Gold as Dollar Squeeze Tightens, and my comments following that article)