Nice of them to mention this after the S&P 500 went on a tear based on the assumption that the Greek bail out avoided a default – at any rate, the Financial Times is reporting that S&P is considering the bail out to be a “selective default”. In other words, it is just a bit of financial chicanery to keep people thinking that all is well as Greeks drops in to complete bankruptcy.

The one thing the Ruling Class doesn’t want is a gigantic financial melt down – not now, not with so many members of the Ruling Class up for re-election in 2012 (it isn’t just about Obama). Something needed to be done last week because if Greece went, it looked as though the whole, global financial system would go with it. That was and remains a correct assumption – if Greece goes, it all goes. But, also, if Spain goes, it all goes; if Portugal goes, it all goes; if Italy goes, it all goes. The problem is, as I’ve said, too much debt – governments owe far more than they can ever repay…and that is even if their people agree to be poor and work very hard for a generation to repay. It still wouldn’t work.

So, a melt down is inevitable – and anyone out there thinking that China can rescue the Euro or that China is an engine of real growth, think again: they, too, teeter on the brink of insolvency and only European and American bonds stand between them and the abyss. Its all good, if those bonds retain their value – if the Eurozone doesn’t have a default and if the United States doesn’t get a bout of inflation making our paper worth less. Not only is the melt down coming, but it is the most healthy, long term thing which can happen. We have to clear out the morass of bad debt, find out what things are really worth and then start to rebuild. The longer we keep up this extend and pretend fiction, the worse it will get.

Save money, get out of debt – and then just watch the show.