NEW YORK (Real Money) -- Maybe the talks aren't anything like we think they are. Maybe when these various ministers get together there is a much more common theme that doesn't leak out.
It goes like this. First, the Greeks pitch: "You can't afford to keep kicking this can down the road, so you can either crush those who own our bonds in euros or we will crush them in drachmas." In return, the Germans are saying: "You haven't done what we want and you get nothing."
In other words, they aren't even having the same conversations. The Greeks want a default and are offering the Germans -- and it is just the Germans, as these other countries are bystanders -- a default that's either in euros, orchestrated by the Germans, or in drachmas, orchestrated by the Greeks.
The Greeks want the Germans to agree to cut the amount owed by Greece altogether by two-thirds NOW, and they will start getting paid back NOW in euros, or they will get 30 cents on the euro in drachmas sometime in the future when the Greeks feel like paying, if they feel like paying at all.
The Greeks think they are offering a pretty darned good deal because Greece will most likely bounce back more quickly in drachmas than in euros. The Germans just want their money back. Period.
Two different conversations. If you can call them conversations.
That's why these talks are going so horrendously. The Greeks have nothing, so they have nothing to lose. The Greeks know the Germans have everything and have way more money than they need, so they can lose something to preserve their ill-gotten, euro-derived bounty.
Think about it: There's going to be a default someday without massive forgiveness on this debt because the Greek economy, even if going full tilt, is not going to generate enough income to pay back the roughly 280 billion euros ($313 billion) it owes to the IMF, the European Union, the European Central Bank, European governments, banks and private investors. That's just a fact of life.
You could, theoretically, cut and stretch out the debt payments, and that had at one point been the offer to the Greeks, but the Greeks don't want ANY debt payments if the principal isn't slashed by two-thirds. Without that two-thirds cut -- and yes, I am being arbitrary but that's the percent that makes sense to the Greeks -- a stretch-out of payments just means another trip to the bargaining table a year from now, something I think Germany now feels is simply insufferable.