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Goldman's Take On The Greek Bailout: The Lawsuits Are A-coming

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From Erik Nielsen

Europe this week

A few more details have come out on the Greek bail-out since I circulated my Sunday email this afternoon, specifically with respect to the potential size of the package.

Specifically, the Euro-zone finance ministers agreed this afternoon to make available – if requested by Greece – EUR30bn to be disbursed during the first 12 months, and (apparently) with a 3-year maturity, at an interest rate of either 3-month EURIBOR rates or a fixed-rate based upon the rates corresponding to Euribor swap rates for the relevant maturities.  Either way there’ll be a 300bp charge on top of the base rate (and a further 100bp for loans longer than 3 years, if that were to be the case), as well as a one-time service charge of max 50bp.   As agreed earlier, the all Euro-zone governments will participate in a ratio equivalent to their capital share in the ECB.  The ministers also said that they envisage a 3-year IMF program worth 10-12 times quota, which would be about EUR12-14bn extra.  There was no comment on the potential mis-match between 3-year money from the IMF and 12-months money from the European partners, but an unidentified senior finance ministry official said that "a logical amount for the three-year period would be significantly higher than EUR 40 billion, but this has not yet been determined."

In my view, this is good news because the amount of money is more than I had expected (although for only a 12 months period), although the program would still not be fully funded (but close.)  Even if it were to be a full EUR45bn for the first 12 months, this would cover “only” about 2/3 -3/4 of their needs during this period.  The interest rate is about the 5% I mentioned in my email earlier.  The issue of whether this is concessional or not will be debated for a long time.  My view is clear:  Sure it is concessional, so we’ll probably see some interesting court cases if the loan gets disbursed.

Beyond the size, I am not particularly surprised.  As we have been arguing for months, Greece would not be allowed to default in April-May, so money would be made available, if needed.  But as discussed before, there always were two key issues to get comfortable with: (1) the issue of actual disbursement (could we be sure it would come in time?), and (2) what about the longer term sustainability issue?

What today has brought is further clarity on the long-held assumption that Greece would indeed be bailed out, if necessary, because of today’s political commitment which is more detailed than before (as one would expect as we move closer to the deadline).
 
However, what today has NOT provided is clarity on disbursement.  Both the EUR30bn in bilateral money would have to be approved in the legislatures in each of the Euro-zone’s member states before it could be disbursed (and its not clear how long time this would take), and the IMF component would have to be negotiated with IMF staff (presumably to begin in more detail this coming week), and then approved by the IMF Board (the latter a formality), before it could be disbursed.  I presume that both could happen within days if really needed, but under normal circumstances these things would take at least 2-3 weeks.  Which bring us to the end of the month; our long held target date for an IMF/EU program.  Also, I am not sure how the officials will deal with the issue of medium term sustainability.  Even at an average rate for official money of about 4%, Greece would have to generated a 5-6 percentage point turn-around in the primary fiscal account, and then keep it there, while generating about 1% real GDP growth per year and a current account surplus to generate the transfer of interest payments to foreign creditors.

My bottom line: Good to see the additional details, and in particularly the larger amount, which further confirms that the Europeans will not allow a default this year.  I remain a tad worried about the process of making the money available in time as well as (very) concerned about the issue of longer term sustainability.

While activation (when legally ready) would have to be called by Greece, we continue to think that such official money will indeed be needed to get them through May.

Erik F. Nielsen

Chief European Economist

Goldman Sachs

And here is what Erik sees as the key events in Europe this week:

I am pleased to announce that spring has arrived in Chiswick! – come see the magnolias and cherry trees here in my neighbourhood; magnificent!  Unfortunately, I haven’t had much time to enjoy it so far because it has been another crazy week in Europe.  Here’s a summary of how I see it all:

    *More good news on the overall European growth front, although part of Southern Europe continues to struggle; we’ll be revising our GDP numbers on Thursday showing stronger overall growth but still greater divergence within.
    *Meanwhile, Euro-zone policymakers have been scrambling to respond to last week’s acceleration in the Greek crisis.  Greece has asked for the details of the offered bail-out (but not for it to be activated); the Eurogroup and Commission met this afternoon and delivered another dose of mostly unspecified support statements, other parts are likely to be negotiated with the IMF (and the Commission) this coming week.  I continue to expect an “activated” program to be agreed before the end of the month, but I still doubt that it’ll put the Greek debt sustainability issue to bed.
    *The ECB back-pedalled last Thursday and decided not to introduce a sliding scale for sovereign haircuts after all.  Apart from the substance, it was one of the most unfortunate press conference I have seen in a very long time.
    *Poland’s president, central bank governor and many others were killed in an airplane accident yesterday.  While tragic, we do not think this ought to cause any concern for Polish assets.  The accident happened the day after Poland for the first time intervened to weaken the zloty.
    *Hungary looks set to vote into power today a new centre-right government which we think will lead to important reforms and a revival of the economy; HUF bullish.
    *Looking into next week, Greece will remain in the spotlight with more European meetings and important auctions in Athens.
    *The Euro-zone will publish reasonable important IP and inflation numbers this week.
    *The main event in the UK this coming week will be Thursday’s TV debate between the three political leaders; a first of its kind in the UK and potentially very important for the outcome of the election.
    *Switzerland and Sweden both publish important inflation data this coming week.
    *Turkey’s MPC meets on Tuesday; we think it’ll mark an important turning point in CBRT’s policy stance.
    *Finally, Iceland is schedule to get the IMF’s stamp of approval (and money) on Friday.  Hurrah!

 -1            Last week delivered further evidence that the overall European recovery is well under way.  The final March PMI for the Euro-zone – the single best indicator for final GDP - was better than the already strong flash number.  Meanwhile, industrial production disappointed a bit, but I am pretty sure that that was mostly weather related (meaning that it’ll bounce back in a month.)  Part of Southern Europe is still struggling, of course, (Greek IP was down 9.2% in February), but its all part of our overall 2010 European theme of divergence, and Greece is not big enough to stem the overall European recovery.  All in all, our 2010 GDP forecasts throughout Europe (with the exception of a couple of the smaller Euro-zone countries) look too low, so we are in the process of re-working the numbers; look out for the European Weekly Analyst on Thursday which will have the details.

-2            European policymakers have scrambled this past week to come up with appropriate measures in response to the Greek crisis which began to accelerate at a frightening pace.  First, remaining investors began to throw in the towel, sending spreads wider early in the week.  Then it was reported that the domestic sector might be losing faith, causing drainage of deposits from the banking system.  Thursday night, Greek PM Papandreou called the EU presidency to request that the offer of a package get specified with respect to the terms and conditionality, which was then followed by a full-day Greek cabinet meeting Friday to discuss the government’s exact stance ahead of any negotiations.  Finance minister Papaconstantinou emphasized late on Friday that “Greece does not intend to make use of the mechanism but it is very important for our country for this safety net to exist.”  Papandreou added yesterday that “the question remains whether this mechanism will convince markets just as a gun on the table.  If it does not convince them, it is a mechanism that is there to be used … the euro is not to blame for our problems. Greece belongs in the euro-zone. Any other scenario is ridiculous."  The Eurogroup and Commission met this afternoon (by telephone) and delivered another dose of mostly unspecified support statements, although Commissioner Rehn said that the Europeans will charge about 5% in interest rate for a 3-year loan, although Juncker said that the combined program (EU plus IMF) could be about EUR30bn for the next 12 months.   I am pleased for the Greeks if the 5% gets confirmed, but I not sure how anyone can call such a rate “non-concessional”, as the EU Summit’s press release said it would be.  To put it very simple, while Euro-zone citizens presently charge more than 7% for loans to Greece (when using their savings via pension funds and bank deposits), their governments will ask for “only” 5% for loans to that same debtor when using those same citizens’ tax money.  I wouldn’t be one bit surprised if some of Europe’s courts will end up having to decide on the definition of concessional vs non-concessional.

-3            Anyway, the exact interest rate charged on the bail-out package is a bit of a red herring, because the real issue will be whether Greece can re-generate growth while cutting the fiscal deficit because without growth, the debt is only sustainable if someone will finance them at much less than 5% (or the IMF;s 3.25% for that matter) for the next decade or more.  And to generate growth, competitiveness has to be restored, and for that to happen, nominal wages will need to decline substantially, maybe by as much as 15%-20% (unless we get some sort of productivity miracle.)  Is this do-able? I suspect that the IMF’s heavyweights will be heading to Athens now to start discussions with the government on precisely this issue.  The good news is that from maybe already tomorrow, we have enough of an agreement so that Papandreou can fire his gun, if needed (but just like Hank Paulson’s bazooka needed to get out of his pocket, I continue to think that Papandreou’s gun will need to be fired before the end of the month.)  However, EUR30bn will not fully cover the Greek government’s financing needs for the next 12 months, let alone for 3 years, so Greece will still rely on commercial money beyond the April-May payments, and whether such money will become available will very depend on how credible the policy framework is and what investors think will happen beyond the program period.  Unfortunately, this thing is unlikely to go to bed any time soon.

-4            In the same vein of scrambling in response to the acceleration of the Greek crisis, the ECB seemed to back-pedal on Thursday.  Hence the ECB press conference, which was supposed to provide the details of Trichet’s pre-announced changes to the collateral system - which he had said two weeks earlier would include a higher threshold for losing eligibility as well as a sliding scale of haircut - turned out to deliver only the former.  As I argued after Trichet’s pre-announcement two weeks ago, what he seemed to suggest could be very bad for Greece, and I suspect that they ended up back-pedalling out of concern that they might otherwise trigger a collapse in Greece.  At least, I think that they decided not to introduce the sliding scale for haircuts for sovereigns.  Not that Trichet said so, but I concluded so after having re-read umpteen times this part of the press releases: “No changes will be made to the current haircut schedule foreseen for central government debt instruments and possible debt instruments issued by central banks that are rated in the above-mentioned range”.  I think that’s what it means, but I am not 100% sure, and the ECB has so far declined clarifications.  Bizarrely, while moving the threshold, they are keeping the cliff over which they threaten to throw the sovereign securities, which- of course - is entirely unconvincing; just wait and see if we get sufficient downgrades to threaten that new threshold, then we’ll have another change, possibly followed by the same peculiar insistence that it has nothing to do with Greece.  Well, we got the first step in this direction the very next day when Fitch downgraded Greece by two notches to BBB– with negative outlook.  We shall see.

-5            Saturday morning a plane carrying the Polish president, central bank governor and more than 80 other people, including a large part of the senior Polish military establishment, crashed in Russia killing everyone on board.  As Magdalena Polan explained in her note shortly after the accident, Poland's governing structures are clear and undisputed, and the policies of the personalities now taking over these key positions are well known, so – in our view - there is no fundamental reason for adding any risk premia to Polish asset on the back of this tragic accident when markets open on Monday. That said, we'll continue to monitor events very closely.  The accident came less than 24 hours after the Polish central bank, clearly fed up with months of zloty appreciation (some 6% since New Year), intervened by selling zloty against euro, pushing the FX 1% weaker.  This was the first Polish intervention since they introduced convertibility and hence a potentially very important signal for their priorities and tools going forward.  However, unilateral interventions are rarely effective longer term, so we have decided to keep our Polish FX forecast.  But the overall message is dovish, so while we also have kept our forecast of 50bp rate hikes by year-end, we now see clear downside risk to this forecast, as discussed in Friday’s note by Magda.

-6            Hungary is holding parliamentary elections today, and it looks as if the centre-right Fidesz will win an overwhelming major.  Polls close at 6pm London time, and the first results should come through a couple of hours later.  Fidesz has campaigned on a platform of fiscal consolidation (with tax cuts!) and structural reforms.  We think a Fidesz government will agree to a new IMF-backed stabilization program later this year (but probably with loser conditionality) and that this will help tip Hungary into a “positive equilibrium”, reducing the overall risk premium on Hungarian assets, facilitate capital inflows and support economic recovery.  As Magda Polan discussed in last week’s New Markets Analyst, we expect that this will result in some HUF appreciation, which will in turn help keep inflation pressures in check.  The NBH should respond by easing monetary policy further to support the recovery process.

Looking into this coming week:

-7            Greece will remain in the news, of course.  The Eurogroup and the Commission will meet again tomorrow Monday.  Then the attention moves to Athens where we’ll get an first indication of their funding power on Tuesday as Papandreou’s gun gets loaded.  The government holds a 6-months and a 12-months auction for EUR600 million a piece.  They are facing maturing T-bills and other debt related payments on Tuesday of EUR985mn and on Friday of EUR1.3bn before some EUR10bn comes due the week after next (on the 20th and 23rd).  Assuming that Tuesday’s auctions go okay there’ll be another auctions for 3-months money on the 20th.  Also, it’ll be worthwhile watching any news out of the IMF (or government) if negotiations get under way.  And finally, on Friday, there’ll be a long scheduled  informal Ecofin meeting on Friday in Madrid.  The program will begin at 9:00am with a meeting of the Eurogroup ministers, followed by a press conference at 12:30.  At 15:30 the first session of the ECOFIN informal meeting begins.

-8            Two important data set coming out of the Euro-zone this coming week: First, on Wednesday we’ll get Euro-zone industrial production numbers for February (EMEA-MAP relevance score of 5), which obviously serves as a key input into our GDP projections.  Judging from the country figures already reported from Germany, Spain and France (which came in a bit weaker-than-expected), and assuming Italy comes in line with our expectations tomorrow Monday (+0.2%mom), the Euro-zone aggregate should be roughly flat on the month. T his is slower than the pace suggested by our (so far very reliable) leading indicator of IP, but would still generate an IP gain of 1.5-2.0% qoq, which bodes well for Q1 GDP.  The Euro-zone has recently suffered from some of the same divergence between survey numbers and IP numbers, as in the UK, and as in the UK we think the surveys will turn out to be more accurate than the first prints of hard numbers.  Second, on Friday, we’ll get the full inflation report for March.  The flash estimate of the headline rate already surprised to the upside, rising from +0.9%yoy +1.5%. While we doubt that core inflation was behind the spike, the full component breakdown should shed some light on which components were the principal drivers.  This could become very important as we are heading through the ECB’s gradual exit strategy.  Unrelated, the ECB releases its latest Monthly Bulletin on Thursday.

-9            The main event this coming week in the UK will be the party leaders’ TV debate on Thursday night; the first of its kind in any UK election campaign.  I suspect that it may have some bearing on the election result.  Watch for poll reactions that evening and the following day.  The week will be thin on data releases, and both releases of some intersst will be on Tuesday morning.  First, we’ll get the results of the March RICS and BRC surveys.  The consensus expectation is for a very small decline in the first (like-for-like sales growth from 2.2% to 2.0%), a very small rise in the second (a price balance of +18 from +17 in February).   Second, we’ll get March trade data.  Consistent with strengthening surveys and with the bounce in manufacturing output in February we expect the aggregate goods and services deficit to fall from £3.7bn to £3.0bn, close to consensus (£3.1bn).

-10          The only important releases in Switzerland this coming week are producer and import prices for March (on Friday).  After firming from -1.3% to -1.0%yoy in February, we expect a continuation of this upward trend to come through, reflecting the continued influence of base effects rather than any substantial inflationary pressure at the producer level.

-11          It’s also inflation week in Sweden in the shape of consumer prices for March on Tuesday.  We expect an unchanged 2.7% for the more important CPIF (CPI excluding the direct effects of interest-rate changes, but including the effects of changes in house prices, energy and food).  The Riksbank pencilled in a 2.3%yoy, but they have been too low for several months in a row.  Further out, we are in line with the central bank and expect a sequential easing in CPIF inflation to come through in Q2 and Q3 as the base effect from last year's fall in oil prices fades and the output gap keeps underlying inflation contained.

-12          The Turkish MPC meets on Tuesday for its regular rates decision (unchanged at 6.5% but an official end to the dovish bias), followed by Governor Yilmaz’ long overdue outline of their exit strategy on Wednesday.  We expect Yilmaz to announce a series of measures that will result in gradual tightening of domestic monetary conditions.  We don’t expect the much detail on the rates trajectory at this stage, but we believe this will become clearer once the CBRT releases its quarterly inflation report on April 29.  Overall, as Ahmet Akarli has discussed, this coming week will mark an important turning point in CBRT’s policy stance – a shift away from its persistently dovish stance as they start preparing the market for a steady tightening in monetary conditions.  We continue to see a cumulative 250bps rate hike in 2010H2, and another 100bps in 2011.

-13          Finally, Iceland is getting a break.  Following an IMF statement just before the weekend that agreement has been reached on a Letter of Intent for the second review under their Stand-By arrangement, the IMF Board is now scheduled to consider it on Friday.  The FT quotes “Icelandic officials” as saying that the UK and the Netherlands have indicated that they are now prepared to support resumption of lending even without an agreement on Icesafe.  If so, Iceland will be able to draw its third tranche from the IMF, worth about $160 million, at the end of this coming week.  This is a welcome break-through in this long and bitter intra-European stand-off.

And that’s the way it all looks from sunny Chiswick on this beautiful Sunday.

 


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Sun, 04/11/2010 - 21:32 | Link to Comment marginnayan
marginnayan's picture

Futs up nicely. It looks like a done deal, then.

Check this one though:

German MOF: Euro Zone's Plan For Greece Not A Decision To Give Aid http://bit.ly/apiJaJ

 

Sun, 04/11/2010 - 23:21 | Link to Comment orange juice
orange juice's picture

But it's not a done deal. While they try to settle the balances this year, but it still remains that they're 250% over acceptable spending according to Eurozone rules.  Further austerity will be required; even E. Neilson recongnizes that.  What happens in a few months isn't of real concern, what happens in two years or three years as further cuts have to be made is of more consequence.

All in all this bought the Greeks time and nothing more. What they do with the time is far more important. It's like money in escrow, if the parties putting the money up don't like what they see they can pull out too (also outlined above).

Mon, 04/12/2010 - 08:36 | Link to Comment caconhma
caconhma's picture

<Both the EUR30bn in bilateral money would have to be approved in the legislatures in each of the Euro-zone’s member states before it could be disbursed (and its not clear how long time this would take)>

This sentence puts the entire Greece bailout process in limbo since national approvals can go forever.

However, one thing is for sure: EU members are unable of handle the reality.

Sun, 04/11/2010 - 21:41 | Link to Comment Hansel
Hansel's picture

Greece bailout announcement #4+, and still no actual commitment of money.  Same shit, different Sunday.  They might have the Greece thing sorted out just in time for 12 other debt bombs to go off.

Mon, 04/12/2010 - 02:07 | Link to Comment mezcal
mezcal's picture

Exactly. This is just a ramping up of the jawboning.

Cash? Hah!

They got nothing and I believe Mr. Market is gonna call the bluff.

Sun, 04/11/2010 - 22:01 | Link to Comment GoldmanSux
GoldmanSux's picture

Extent and pretend is THE policy of western industrialized nations. EU loans will be rolled into IMF loans a year or so hence. Bernanke's quote of throwing money out of helicopters was no joke. This is the policy. The die is cast. The sweeping arrogance of this policy continues to amaze. It is worldwide. And it won't work.

Sun, 04/11/2010 - 22:17 | Link to Comment MsCreant
MsCreant's picture

I don't know how any one can balance their books anymore. If you pretend to trust my collateral, I'll pretend to trust yours. Tee hee. It's all fun and games, no consequences at all.

Ba-ba-benny and the [ink] jets!!

Give me another hit Ben, I'm kinda low.

Here PIIGSY PIIGSY. Sooooooweeeee!

Line those pigs up at the trough. Here comes the chopper.

Slop! Eeeew! It's all slimy and keeps sticking to us. And sticking and sticking. They keep sticking it to us. Whaaaaah!

 

Iceland rocks, "volcanically" that is. No PIIGS there. "Just say no to banksters." Hope they don't get handed something they voted down as a done deal.

Sorry for the word salad, sorta. You know that's how some folks talk when they are going--CRAZYYYY!!! Bwha ha ha ha!

Sun, 04/11/2010 - 22:35 | Link to Comment Cookie
Cookie's picture

Thanks for the laugh from Thailand...we need it here!!

Sun, 04/11/2010 - 22:37 | Link to Comment Gold...Bitches
Gold...Bitches's picture

Better yet, you take this crap that is worth about a nickel on the dollar, but you'll pay me 1:1.  Then with real cash on the books, I report my finances, then, after the regulators go away, I trade you back the cash for my trash.

Sun, 04/11/2010 - 23:35 | Link to Comment RichardENixon
RichardENixon's picture

Hey keep that idea under your hat, next thing you know everybody will be trying it.

Sun, 04/11/2010 - 22:44 | Link to Comment Gold...Bitches
Gold...Bitches's picture

Balance the books?  That's, just, so 90's.  You balance your own books, I'm gonna break out one of these for my debts (ok, I admit, I got the idea from Ben):

http://www.pond5.com/stock-footage/272086/printing-money-animation-100-dollar-bills.html

Sun, 04/11/2010 - 22:50 | Link to Comment MsCreant
MsCreant's picture

His screen saver no doubt.

Sun, 04/11/2010 - 23:09 | Link to Comment Gold...Bitches
Gold...Bitches's picture

I jest though as I have zero debt.  Apparently I missed the bandwagon over the last couple decades of going into debt for stuff.

Sun, 04/11/2010 - 23:44 | Link to Comment RichardENixon
RichardENixon's picture

How could you have known the taxpayer would get stuck with the debt for the stuff? 

Mon, 04/12/2010 - 06:38 | Link to Comment Cheeky Bastard
Cheeky Bastard's picture

You've lost your shit from all this insanity.

Me likes *douchebag-grin-on-face*

Sun, 04/11/2010 - 22:45 | Link to Comment nonclaim
nonclaim's picture

Extent and pretend is THE policy of western industrialized nations.

It is. In the first rounds of the liquidity crisis there was a G-20 meeting where they agreed to provide coordinated liquidity intra and inter countries.

To my understanding there was no significant mop-up since, which means we are still in full-blown liquidity crisis. Now, on top and because of that, we are heading into a monetary confidence crisis.

Sun, 04/11/2010 - 22:07 | Link to Comment GoldSilverDoc
GoldSilverDoc's picture

The New European Community Anthem:

http://www.roughcreekranch.com/bj.mp3

 

Apologies to Billy Joel (Good Night Saigon)

Sun, 04/11/2010 - 22:08 | Link to Comment Sucks_to_be_Smart
Sucks_to_be_Smart's picture

can someone please explain the importance of Trichet's comments regarding the collateral system at the ECB and how this can affect Greece?  I'm not getting it.  Thanks everybody!

Sun, 04/11/2010 - 22:09 | Link to Comment FischerBlack
FischerBlack's picture

30 billion euros? And they think the mere promise of such a paltry sum will be enough to solve Greek's rollover problems? Paulsen and Bernanke promised our banks $700 billion, and not even that promise was enough, they actually had to use it. When Europe actually does disburse these funds (and they *will* disburse them or watch Greece blow up), methinks they won't be seeing it back for a very long time, if ever.

Sun, 04/11/2010 - 22:18 | Link to Comment MsCreant
MsCreant's picture

Feels so AIGish, doesn't it?

Sun, 04/11/2010 - 23:48 | Link to Comment aus_punter
aus_punter's picture

FB - with all due respect you are stating the obvious here. The 30 bn lets them roll till Q3 and then they roll longer and longer hoping the problem goes away.  Of course they are unlikely to ever repay the money but a lot can happen in between then and now.

Sun, 04/11/2010 - 22:17 | Link to Comment Number 156
Number 156's picture

Yeah, that alone will steepen the yield curve.

 

Sun, 04/11/2010 - 22:37 | Link to Comment 1fortheroad
1fortheroad's picture



German MOF: Euro Zone's Plan For Greece Not A Decision To Give Aid

BERLIN -(Dow Jones)- The euro zone's agreement Sunday about details on an aid plan for Greece must not be misunderstood as an actual decision to provide aid, but it does justify hopes that the country will be able to refinance its debt on its own, the German Finance Ministry said Sunday.

"This decision today was no decision on aid for Greece," Finance Ministry spokesman Michael Offer told Dow Jones Newswires. 

 

I guess that means pigs can fly.

Sun, 04/11/2010 - 22:52 | Link to Comment Gold...Bitches
Gold...Bitches's picture

or Greece could be a Tupolev 154 that still has to come in for a landing without clipping the trees.

Sun, 04/11/2010 - 23:11 | Link to Comment JR
JR's picture

I knew it, I knew it, I knew it!

Sun, 04/11/2010 - 23:09 | Link to Comment JR
JR's picture

Everything's coming up magnolias and cherry blossoms abroad, I see, for the Goldman boys. Whatever "Goldman's take on the Greek bailout," it's sure to be big.

Well, it’s good to be both a participant and an instigator, on all the ways up and all the ways down. 

And here’s the news at home that Goldman forgot (leading role by JP Morgan; bit part by Goldman).

From Nathan’s Economic Edge:

Matt Taibbi with Max Keiser – The Crimes of Jefferson County (video)

Zoom the video ahead to the 11.10 minute point to hear Matt Taibbi talk about his investigation into Jefferson County, Alabama.

What occurred there with the investment banks (JPM) was nothing short of the breakdown of the rule of law instigated by the same organizations who are basically running this country.  This is a terrific example of the type of project that a State Chartered Bank could finance forcing out the criminals who prey on municipalities like Jefferson County.  Again, the lesson to learn is that WHO controls the money is far more important than WHAT backs it.

Send the central bankers packing…FIRE THE FED. Here's the video:

http://economicedge.blogspot.com/

Sun, 04/11/2010 - 23:41 | Link to Comment williambanzai7
williambanzai7's picture

To cause the head to appear in a mass of flame make use of the following: mix together thoroughly petroleum, lard, mutton tallow and quick lime. Distill this over a charcoal fire, and the liquid which results can be burned on the face without harm.

Harry Houdini

Mon, 04/12/2010 - 00:58 | Link to Comment Grand Supercycle
Grand Supercycle's picture

 

The bear market rally wants to continue for a bit longer ... 

DOW/SP500 daily bull signals from Friday 9 April continue.

http://www.zerohedge.com/forum/latest-market-outlook-0

Mon, 04/12/2010 - 01:24 | Link to Comment vote_libertaria...
vote_libertarian_party's picture

So there are no conditions on these loans???  Spend at will???

Mon, 04/12/2010 - 01:48 | Link to Comment chindit13
chindit13's picture

"As agreed earlier, the all Euro-zone governments will participate in a ratio equivalent to their capital share in the ECB."

And when Spain and Italy come a-calling for money, will Greece participate in that bailout "in a ratio equivalent to their capital share in the ECB"?

This is merely a Repo 105 on a continental scale. 

Mon, 04/12/2010 - 02:38 | Link to Comment John McCloy
John McCloy's picture

This is nonsense. This would be similar to Paul the lazy alchoholic down the block owing me and 4 neighbors 500 bucks each and lending Paul more money to pay ourselves back. How this is interpreted as a good thing is beyond me. It does however prevent me from getting yelled at by my wife for 3 months for being stupid enough to lend Paul money in the first place. As long as I do not tell her he paid us with more of our own money smooth sailing for me. 

We have truly crossed over into imaginationland. 

Mon, 04/12/2010 - 04:11 | Link to Comment Jo
Jo's picture

S'funny to read the GS thing above.

Bailouts seem to be the most normal thing in the world nowadays.

Mon, 04/12/2010 - 07:42 | Link to Comment exportbank
exportbank's picture

People simply can't hate their kids and grand-kids this much. The plan must be a western-world repudiation of debt. No person (with any character at all) would expect future generations to pay this off - so default or HUGE inflation is the only cure.

 

Also - this GS piece could have edited to one page - 

Mon, 04/12/2010 - 07:57 | Link to Comment QQQBall
QQQBall's picture

Huge inflation = defacto default

Do NOT follow this link or you will be banned from the site!