Who will follow if Greece collapses?

ATHENS, Greece (PNN) - April 21, 2015 - Since at least 2011, Greece has been living on borrowed time. One EU/IMF bailout after another has somehow kept the bankrupt nation afloat, but now time is running out and so is its cash.

In an unprecedented move, the government commanded all state-owned enterprises to transfer their cash reserves to the central bank (Bank of Greece), ostensibly so the government can pay mundane things like government wages to government workers. This confiscation of cash reserves is estimated to bring about 2 billion euros to the table, but then what?

As it stands now, Greece has no ability to raise more funds through bond issuance. In fact, 3-year Greek bonds have spiked to a whopping 28%!

In the short-term, Greece has only two alternatives: default on its creditors - like the IMF - or default on its citizens. The confiscation prevented a default on its citizens, at least for another few weeks - it owes another 1 billion euros to the IMF in the first two weeks of May. Having swept up all the loose cash, and having collateralized every possible state asset against other loans, Greece has nowhere to go but down.

Economists are warning the EU to "not play with fire" by forcing Greece into collapse. It would be better, they say, to just give them the money and hope for a better solution somewhere down the road. If that happens, that would be tossing the money into a black hole, and everyone knows it.

The other unseen ramification of swiping cash from state-owned enterprises is the hole that this leaves in the commercial banking system that is already underwater. Instantly removing 2 billion euros from commercial banks will undoubtedly crush Greece’s reserves, putting some of them over the edge into collapse. In any case, don't the "state-owned enterprises" have their own obligations to pay?

EU bankers and politicians may find a way to kick the can down the road one more time, but the fact remains that Greece is finished and its ultimate collapse is a foregone conclusion.

Total debt owned by Greece is over 360 billion euros. What's going to happen if that debt can't be repaid? Well, that's what the fight is over right now; all those creditors want their money back! These include the European Union, other world governments and central banks, the IMF, and an assortment of commercial banks. If the money goes "poof", what will be the ripple effect? Can the banking system withstand such a shock with no repercussions? Not likely.

Greece is not merely the "canary in the coal mine" as some have suggested. It is the atomic financial explosion that could blow the entire coalmine to smithereens.