Greece: Looking Over the Edge

      Last week in nytimes Magazine, writer Suzy Hansen wrote a piece on Greece, her Minister of Finance, and the current state of negotiations with the EU finance ministry and representatives of the ECB, the IMF, and the German Minister of Finance.  The article focused on Yanis Varoufakis, the newly appointed minister.  He has been on the job a scant 4 months, but has been in negotiations most of that time in Brussels and other western European cities.  All to discuss conditions to salvage the Greek economy/the Greek membership in the Eurozone.
      It has not been a cake walk.   No decision has been reached to date.  Conditions in Greece resemble conditions in various nations in the 1930's during the Great Depression.   No single banker, no single economist, no group of either bankers or politicians has been able to convince Greece to act in a manner that satisfies all parties involved.  There are innumerable reasons for this, not the least is that it is new economic territory to a degree.  Yanis has an academic background and has never held political office unlike many of the representatives he must negotiate with.  He has been a critic of his own government and its policies.  On top of this, he was appointed by a newly elected president who represents a radical left political party, the Syriza.   He is also outspoken about his positions, primarily that the enforcement of austerity on the Greek population does not work and those who depend on pensions from the state have no alternatives to their financial plight.  He has popular support across a broad segment of the people and communicates well with many via social media.  A key point in Ms. Hansen's article stresses the population figures for Greece: it is a country of 10 millions.
      The question nobody seems to ask: how does an economy based on 10 million citizens bring down a continent with 350 million people?  There are more souls in Southern California than in all of Greece!  It appears that someone's economic theories are insufficient.
      Now let's advance one week, the last day of May, 2015.  What's going on?  More of the same desperate moves by a scared citizenry:  withdrawal of funds from Greek banks.  Yes, this could be just a continuation of past moves by account holders.  It could also be a response to the impending deadline for a settlement between negotiators over the debt.  Since the end of 2010, bank deposits have dropped by E100 billion-yes, 100 billion Euros.  Since September 2014, they have gone down by 33.3 billion Euros.  Not a pretty picture, especially if you are a Greek bank, a Greek politician, or a European banker with outstanding loans to these same banks.  But, in a case of contrary investment strategy, John Paulson of hedge fund Paulson & Co., has held 132 million shares of Piraeus Bank, making him the 3rd largest share holder.  He also holds shares in Alpha Bank, down from a high of E 140 million to about E 70 million now.  All eyes are focused on the coming weeks to see who blinks.