In case you couldn’t tell: the Greeks are the Ice Climbers, the hammer is the mighty blow of impending default, and the penguin is the quite visible hand of sovereign debt savoring its day of reckoning.

So last time I wrote here, I left off on the fluffy note that neo-liberalism has philosophical underpinnings and blah blah blah. Important stuff, yes, but when events overtake analysis as the last two days have, it becomes imperative to cut through the gelatinous muck of theory and give truth to power (some RealTalk™) about what the hell is going on.

Strangely enough, Wonkette has had the most succinct and accurate take I’ve seen on what’s transpired:

“Remember when the Europeans all gave up their funny money for the sober euro, and they were One Continent, United, Forever, no more wars, hooray? Well, uh, it turns out that maybe that isn’t working out so well? Nobody wants to lend Greece any money, which in turn makes it hard for it to borrow money, and they can’t just print money anymore because they don’t have their own money, so: problems! Soon it will go bankrupt and be sold to the Italians. It is just like Bear Stearns, but with better seafood. But of course Greece is just the “tip of the iceberg,” money-wise, and soon other relaxed booze-happy euro-fringe countries will follow (Portugal, Spain, Ireland, what have you). In the old days, the countries that were owed money would stone cold invade a place that defaulted on its debt, but since the main creditor here is Germany and everyone’s uncomfortable with them invading things, that probably won’t happen. Stock markets are totally tanking, though!”

To make a long story relatively short, here’s what transpired and here’s what it means. The previous Greek government consistently ran budget deficits to fund social welfare provisions that were generous by even EU standards (retirement in certain occupations at 100% pay with mandatory retirement at 55, with civil servants receiving an even better deal). This was not a particularly new occurrence–governments of both the left and right in Greece spent beyond their means for decades, both before and after accession to the Eurozone. What’s different this time–and why the former government should be summarily rounded up and thrown in a dungeon–is that through a variety of financial shenanigans (aided in no small part by the ubiquitous vampire squid Goldman Sachs), they were able to essentially hide the debts they were running up year after year. You see, they weren’t ‘debts’ at all in this formulation; rather, the actual debts were packaged up into derivatives like credit-default swaps (yup, those again) as protection against the off-chance that Greece wouldn’t be able to pay them back. Here’s the kicker though: for accounting purposes, CDS’s aren’t counted as liabilities (though everyone knows they can very well become massive liabilities) but rather as assets (b/c, technically they are assets). So those debts the Greeks were running up like a cat lady maxing out credit cards on Home Shopping Network? Poof! They were gone, off the books–and no one was the wiser until earlier this year, when Prime Minister Papandreou decided in a noble attempt at transparency to have a full audit of the books–and was bitch-slapped with 13% deficits, a furious public wondering why the hell they suddenly have no money, and near-certain doom for his efforts.

Europe? Smoke ’em if you got ’em.

So–Greece is screwed. Nothing new there. The real problem is that its fellow PIIGS (Portugal, Ireland, Italy, and Spain) look to be next in line to receive a thorough internal massage from Bubba; and even better off nations such as France and Britain look to be in all sorts of trouble as well. In short, the dominoes are now in motion–and we now have a full-blown sovereign debt crisis on our hands. And why, pray tell, are corporate profits up in such circumstances? Simply put, Morgan Stanley (as evidenced by that article), Goldman Sachs (when it isn’t getting annihilated by Carl Levin, you beautiful bastard), D.E. Shaw and all the other hedge funds and major market makers are shorting the hell out of everything having to do with the Euro–in essence, betting on the European project to fail. What’s troubling is that if one takes the notion that these market makers are sharks who have smelled blood in the water, then there’s no mistaking that these problems indicate that the financial crisis is nowhere near over. SIGH

Next time: shitty deals, national sovereignty, and aspiring Iranian physicists’ take on the Kabbalah (seriously).