Details On The "Transitory" Greek Default Emerge

Tyler Durden's picture

As more news comes across the tape, we now learn that somehow Greece is expected to experience a default but not just any default: a "transitory" default. From Bloomberg: European officials are trying to orchestrate a second Greek bailout so that a default would only last for a few days, said two officials familiar with the discussions.

  • New bailout may see bondholders swapping 90% debt outstanding between now and 2020
  • 20% reduction in the net present value of Greek bonds
  • ECB would set up a special fund using money from the EFSF, which would be used as collateral during the period that Greece is in default

So, translated: Greece, whose assets will collateralize a Debtor In Possession loan funded by the EFSF, will first transfer all liens to the EFSF first, while the country is under temporary default.

And Greece will emerge from default within a few days?

This sounds like yet another ironclad European bailout plan: naturally the aftereffects of a "brief" sovereign default are so much more benign that those of a "non-brief" sovereign default.

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oogs66's picture

Merkel and Sarkozy, financial engineers extraordinaire?  Did they talk to any other particpants on this?  Other than Trichet who is up to his eyeballs on debt he bought on a whim?

TruthInSunshine's picture

OT - sorry - but this is bat shit crazy, and the sort of thing that makes me very angry. I consider myself a sophisticated person (whether it's true or not) and reserved, but this makes me 'want to break shit' - re the William 'let them eat iPad' Dudley:

07-21 10:13: US Senator Sanders says GAO found that NY Fed's Dudley received waiver to let him keep investments in AIG and GE as firms were rescued

hedgeless_horseman's picture

Fletch: Why? Did you steal the car?

Teenager: I sure did.

Fletch: Well, I'm not even sure that's a crime anymore. There've been a lot of changes in the law.

cosmictrainwreck's picture

perfect! lot of changes in Newton's Laws, too, apparently, as they're bound & determined to run all the indices towards NEW 52 WK HIGHS (soon, very soon) 

hedgeless_horseman's picture
07-21 10:13: US Senator Sanders says GAO found that NY Fed's Dudley received waiver to let him keep investments in AIG and GE as firms were rescued

"When you see that money is flowing to those who deal, not in goods, but in favors - when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you - when you see corruption being rewarded and honesty becoming a self-sacrifice - you may know that your society is doomed."

 

                                               -Ayn Rand

                                                Atlas Shrugged

Founders Keeper's picture

[...but this is bat shit crazy, and the sort of thing that makes me very angry.]---TIS

Stow that "bat shit" soldier---you'll need it later.

 

Cdad's picture

Good grief.  And by that I mean....good grief.

Would someone please politely ask the central planners in the ECB to simply sit down and shut up?  SD...you are closest...so....

HelluvaEngineer's picture

Uh, now that every short has been forced to cover, can we please roll over and flash crash already?  ZH readers aside, is anyone not balls to the wall bulltard long at this point?

Cdad's picture

is anyonenot balls to the wall bulltard long at this point?

Obviously, yes.

Bang Dae Ho's picture

ECB to simply sit down and shut up?  SD...you are closest..

once you need SD, he is not there....

but the ECB executives read and obey to my posts, so I do the job for now:

ECB, SIT DOWN and SHUT UP.

TradingJoe's picture

Meanwhile in Algo Land: NUTS ON FUMES! :)))

As to Europe: THEY ARE DEAD IN THE WATER!...And so is the US of A(bsurdistan)!

Cognitive Dissonance's picture

It is not a matter of if they fix the 'problem', only that they transport the problem to a future point in time. The assumption is always that time (aka 'growth') will solve all financial problems.

This is why there must always be growth. Because it is this growth that is 'solving' hundreds of years of 'problems' transported from the past.

Version 7's picture

One hears often times talking about how the levels of debt were much higher after the WWII and we make it out, etc etc. But that pre-supposes that a similar economic growth will again follow suit and naturally that's not the case this time around.

Cognitive Dissonance's picture

I've been thinking about this for a long time. And I suspect 'they' believe that with most of the world underdeveloped, that more growth is very possible given the right conditions.......whatever that means. Meaning there is still tremendous 'growth potential' assuming they can just get over this rough patch.

Of course this assumes essentially an unlimited energy source and of course an unlimited 'cheaper labor" source, even if that cheaper labor source rotates from country/region to country/region. This is why the so-called smart money is betting on China and India to be where the really explosive growth will be for the next 50 -100 years.

The USA will soon be considered transitory and expendable.

StychoKiller's picture

So, translated: Greece, whose assets will collateralize a Debtor In Possession loan funded by the EFSF, will first transfer all liens to the EFSF first, while the country is under temporary default.

And Greece will emerge from default within a few days?

This sounds like yet another ironclad European bailout plan: naturally the aftereffects of a "brief" sovereign default are so much more benign that those of a "non-brief" sovereign default.

 

A couple of thoughts:

1.  Transitory != Temporary (by any stretch of the imagination!)

2.  There's very few choices on how to emerge from "being a little bit pregnant":

  a. Have an abortion, i.e., debt forgiveness.

  b. Carry the child to term, i.e., enslave the Greeks for the next 18 years (until the child is fully grown)

3.  Continue to claim that everything the ECB/IMF/etc. is doing is sensible!

4.  Deny, deny, deny reality!

 

Place your bets (mine is on Au/Ag!)

 

blunderdog's picture

Greece has been around for a long time.  Maybe a 1000 year bond offering?

bigdumbnugly's picture

odysseus would just about be cashing in now...

Cognitive Dissonance's picture

:>)

Nope.

They will just force the poor bastard to roll it over for another 1000 years. Sleep tight Odysseus and don't let the bond bugs bite.

bigdumbnugly's picture

true.  most likely even the legendary odysseus would get bent over.

but he is greek after all...

FinalCollapse's picture

Yes- there was always growth to take care of this, but no more. Both EU and USA, are facing huge risks of decline or zero growth.It is uphill from this point on. They are kicking the grenade forward, it rolls back to their feet.

 

StychoKiller's picture

The EU is treating the Greeks like a bunch of blood-filled turnips!  Short of finding a vast pool of oil in the Aegean, they have NO WAY of repaying the fools that lent them all those Euros!  Skull, meet razor already!

hedgeless_horseman's picture

a default would only last for a few days

It worked for GM! *

 

 

*GM down -20.67% YTD, heading to ultimate support at $0...AGAIN!

NOTE: Does not include UAW pension savings

Dr. Engali's picture

If they would just let the sons a bitches default and get it over with we could get past this mess. Let the market divert it's capital and energy into good investments.

francis_sawyer's picture

If they would just let the sons a bitches default and get it over with we could get pat this mess. Let the market divert it's capital and energy into good investments

Ironically... That is actually what is probably happening right now...

If one is quietly exchanging their fiat into Au, Ag, food, guns, etc. as we speak, that is capital being diverted into what will prove to be a "good investment"... Others won't do so, an instead, waste their capital...

Frankly, the longer this game goes on, the more time you have to accumulate... So why fret about it?

If you use the story of Noah & the great flood as a parable... I doubt Noah himself woke up every morning wishing for the sky to open up... He was probably more than happy with the extra time...

Dr. Engali's picture

I'm loaded with all the above. I don't have as much gold and silver as I would like,but I'm getting there.

Cognitive Dissonance's picture

As much as my righteous indignation hates to admit this, there is still plenty of time to get ready. But that assumes we are getting ready on a daily basis. This is why I won't stop purchasing PMs, because others are not stopping as well.

Sooner or later supply and demand will win out.

StychoKiller's picture

Frankly, the longer this game goes on, the more time you have to accumulate... So why fret about it?

 

True enough, but we doesn't has to likes it!

No Bid's picture

What does the ISDA have to say about this?

papaswamp's picture

Ahhh the giant extend and pretend. Sorry bond holders but that bond you thought would yeild 7% will only yield 3.5%....in 15 yrs. Suka!

jkruffin's picture

This is a quote that should be on Headline News across the nation

 

If you voted for Obama in 2008 to prove you're not a racist, vote for anyone else in 2012 to prove you're not stupid!!!

gmrpeabody's picture

I like it!

Would be fun to have it on my bumper, just to see the guy behind me.

StychoKiller's picture

Sigh, miners just struck a rich vein of Stupid ore, also known as the Republicon and Decepticratic parties!

jmcadg's picture

EurUSD up 180. Complete cock.

bill1102inf's picture

What do the CDS held all over the planet say about this?????? hmmmmmmmm

Clowns on Acid's picture

20% reduction in NPV of all CDS out there? I know it is not in the original contract...but all contracts are transitory, just like inflation.

The Russians have to be laughing whilst drinking their cognac. It was so much easier (and profitable) to just default. But noooo...left wing facsist / socialist, feckin' pansies have to create the allusion that they smarter than everyone else, and deserve their DSK like status. 

Russia does not have to invade them to grab their assets, just charge them thru their gallic noses for nat gas and oil.

Nostrovia !!

 

Clowns on Acid's picture

20% reduction in NPV of all CDS out there? I know it is not in the original contract...but all contracts are transitory, just like inflation.

The Russians have to be laughing whilst drinking their cognac. It was so much easier (and profitable) to just default. But noooo...left wing facsist / socialist, feckin' pansies have to create the allusion that they smarter than everyone else, and deserve their DSK like status. 

Russia does not have to invade them to grab their assets, just charge them thru their gallic noses for nat gas and oil.

Nostrovia !!

 

magpie's picture

Disclaimer: No banker was harmed during this default.

Bang Dae Ho's picture

And there were no tests on animals or humans. Guaranteed there was no testing at all.

StychoKiller's picture

You get to figure out which ones apply to this program ;)

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cosmictrainwreck's picture

disclaimer not necessary...... it's a given

j0nx's picture

Seriously WTF? As the diceman once said, either you suck dick or you do not suck dick. There is no such thing as a partial, transitory or any other type of default. Either you default or you don't. Why are people even listening to this shit??

jkruffin's picture

Is there any such agencies left called "regulators"?  I mean, for the past 3 1/2 years now, these crooks just change the rules to their favor whenever they feel like it.  Is there any law left anywhere?  Sadaam and Bin Laden had nothing on these terrorists....

Kina's picture

My dog just took a transitory shit.

kito's picture

markets dont seem to be responding negatively about a transitory default. so does that mean they could be in the clear on this one?

spongeBOB's picture

Looks like "investors" are dumping the US treasuries to buy Greek bonds.

Wolf in the Wilds's picture

So who is going to pay for all this?  And market is a little presumptious that the parliaments in Netherlands, Finland and most important of all Germany is going to agree to this?  Changing the EFSF is tantamount to breaking Article 125 of the EMU constitution.  Doing this will guarantee Merkel getting kicked out of the Chancellor seat in Germany.  If she agrees, you are likely to see a massive rebellion in the Bundestag.  And market clearly does not know this.  This need to go through the parliaments of the above countries.  It is so easy to be stupid.

 

 

Quintus's picture

It's also likely to negatively impact the German Constitutional Court ruling in September on whether these bailouts are constitutional.  The more German money Merkel hands over, the less likely it is that she gets the ruling she wants.

Wolf in the Wilds's picture

Yes, and she knows it.  So what happens if this clause disappears from the final doc?