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Greece Default Risk Surges
Greece 5 Year CDS 28 wider to 269 bps. The all time high for the country was on January 20 at 292 bps, which was before Bernanke decided to have US taxpayers bailout the world.
Update: S&P just took Greek Banks to the woodshed:
S&P Takes Neg Rtg Actions On Greek Banks Re Greece Downgrade
-- On Dec. 16, 2009, Standard & Poor's downgraded Greece to 'BBB+' from 'A-', while maintaining the rating on CreditWatch negative. The 'A-2' short-term rating was placed on CreditWatch with negative implications.
-- We are lowering our long-term ratings on Greek banks EFG and Alpha to 'BBB' from 'BBB+' and placing them and the 'A-2' short-term ratings on CreditWatch negative.
-- We are placing our 'BBB+/A-2' and 'BBB/A-2' ratings on Greek banks NBG and Piraeus, respectively, on CreditWatch negative.
-- The actions also incorporate our expectation of the impact on Greek banks of an increasingly negative economic and operating environment--including capital-market disruptions and what we expect to be a more prolonged and deeper economic recession than we initially anticipated.
On Dec. 17, 2009, Standard & Poor's Ratings Services took the following rating actions on Greek banks:
-- Lowered its long-term counterparty credit ratings on EFG Eurobank Ergasias S.A. and Alpha Bank A.E. [RATED BUY AT CITIGROUP, SEE BELOW] to 'BBB' from 'BBB+', and placed them and the 'A-2' short-term counterparty credit ratings on both banks on CreditWatch with negative implications;
-- Placed its 'BBB+' long-term and 'A-2' short-term counterparty credit ratings on National Bank of Greece S.A. [RATED BUY AT CITIGROUP, SEE BELOW] on CreditWatch with negative implications. At the same time, Standard & Poor's placed on CreditWatch with negative implications its 'BBB-/A-3' long- and short-term counterparty credit ratings on NBG's strategically important Bulgarian subsidiary United Bulgarian Bank A.D.; and
-- Placed its 'BBB' long-term and 'A-2' short-term counterparty credit ratings on Piraeus Bank S.A. on CreditWatch with negative implications.
The actions follow our one-notch downgrade and maintenance of the long-term rating on CreditWatch negative of the Greek sovereign (Hellenic Republic; BBB+/Watch Neg/A-2) on Dec. 16, 2009.
Our weak near-term economic prospects for Greece incorporate a more pronounced and faster economic deterioration than we previously anticipated. Moreover, we believe that the challenges Greece faces in terms of fiscal adjustment and structural competitiveness issues increase the likelihood of a protracted hard landing for the national economy. This scenario could lead to a tougher economic and operating environment for Greek banks than the one we have incorporated into the ratings. In addition, we believe this scenario presents the risk of further deterioration in what we already expect to be compressed operating performance and weakened asset quality.
Our actions on the Greek banks also take into account our view that these institutions are exposed, albeit to varying degrees, to the current capital-market turmoil. While the banks maintain cushions in the form of liquid assets, and have access to the facility from the European Central Bank (ECB), we believe that imbalances in their funding profiles--particularly, reliance on wholesale funding and, in some cases, the existence of short-term refinancing needs--expose the banks to capital-market disruption. We will continue to evaluate the longer-term negative implications that we see for the profitability of all of the banks (though to varying degrees) of the eventual unwinding of the funding imbalances and, specifically, the strong reliance on cheap ECB funding.
Greek banks are directly exposed to the sovereign's deteriorating credit quality through their large Greek government debt portfolios. We will continue to assess how the latent market risk embedded in these portfolios materializes and affects the banks' financial profiles.
Any CreditWatch update on or resolution of the CreditWatch listing of the Greek sovereign by Standard & Poor's will likely lead to a CreditWatch update on the rated Greek banks. We could also provide a CreditWatch update on or resolve the CreditWatch listing of any or all of the banks if we revise our expectations regarding the likely magnitude and length of the capital-market disruption and specific banks' exposure to it, and/or if we anticipate an increase in the banks' vulnerability to the deteriorating Greek economy.
In this context, we have also placed under review our banking industry country risk assessment (BICRA) for Greece, which we currently include in Group 4 (out of 10, with 1 being the strongest), as well as our estimate of gross problematic assets (GPA)for the Greek system, which we currently place between 10% and 20% of overall private-sector credit.
EFG
The downgrade of EFG reflects our expectation that, given our medium-term concerns regarding a toughening operating environment for Greek banks, EFG's--in our view--already rapidly deteriorating asset quality and pressurized operating performance will likely face greater challenges than we initially anticipated. Our assessment of EFG's financial profile also takes into account our view that EFG's capital position is less robust than its Greek peers'. The CreditWatch listing and negative implications reflect those on Greece. They also reflect the risks we see for EFG's financial profile arising from the current turmoil in the capital markets and potentially harsher economic conditions over the medium term.
ALPHA
The downgrade of Alpha reflects our expectation that, given our medium-term concerns regarding a toughening operating environment for Greek banks, Alpha's asset quality and performance will likely weaken to a greater extent than we initially anticipated. The CreditWatch listing and negative implications reflect those on Greece. They also reflect the risks we see for Alpha's financial profile arising from the current turmoil in the capital markets and potentially harsher economic conditions over the medium term.
NBG
The CreditWatch listing and negative implications reflect those on Greece. In line with NBG's performance so far, we continue to view this bank's domestic loan portfolio as less vulnerable to the weakening national economy than that of Greek peers. We also view NBG as the least vulnerable to short-term pressures related to the current capital-market disruption, due to its lower reliance on wholesale funding and to its leading retail franchise. Nevertheless, the negative CreditWatch implications also reflect the possibility, in our opinion, that NBG's performance and asset quality metrics could weaken beyond our initial expectations in the context of a tougher-than-anticipated economic environment, both domestically and internationally. We also factor in latent market risk through what we consider to be NBG's sizable Greek government debt portfolio.
PIRAEUS
The CreditWatch listing and negative implications reflect those on Greece. We acknowledge that has Piraeus performed relatively well with respect to its Greek peers in the current negative environment, and has maintained asset quality deterioration within more contained limits. Nevertheless, the negative CreditWatch implications also reflect the risks we see for Piraeus' financial performance over the medium term arising from the sharper-than-expected economic deterioration. They also take into account what we view as comparatively higher vulnerability than Greek peers to the current disruption in capital markets given our opinion of Piraeus' higher--in our view--proportion of short-term wholesale financing in the funding base.
And here is proof that Citigroup has proudly desceneded into total worthlessness (from a Citi December 11 report). When even S&P is ahead of the curve, it is time to call it a career:
h/t CreditTrader
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sovereign default risk is the source of the recent dollar strength
Under the assumption that the risk passes (however hard that will be), what will that do to the $? Faster crash downward?
what it will mean is that there will be a decoupling between paper prices and real asset values.
The DXY can go to 200 and we still see a dollar crash.
The US is as inarguably bankrupt as any of the PIGS.
We just haven't properly discounted our entitlements obligations. So, right now we're only 81st or whatever in the words of the polyannas, on the debt-to-GDP list. What this fails to account for is the upcoming tsunami of entitlements expenditures. If we used NPV accounting, we're in anywhere from 6-8x as much debt.
Everyone says so what because our GDP growth is an ASSUMPTION. If you redid the models with US GDP being flat or undergrowing, it's very clear that this is a major problem.
The reserve currency's use as a debt denominator all over the globe makes these deflationary/deleveraging episodes cause DXY spikes. Last year was the MOTHER of all of them.
People don't flock to the dollar as an instrument of quality, they do so because their debts are denominated in them and they have to acquire dollars in order to deleverage.
The Fed did not allow the dollar to blow out last year; it will not do so this time. I got banned on TF for saying it, they WILL PRINT. The math is abundantly clear, you either default or devalue.
Great post, thanks for the explanation.
excellent explanation +1
The extent of devaluation you are insinuating is a type of default. They are one and the same.
True. But there's also the flight from the worse state of the "local currency" into the dollar. Not because it is better but because it is the only instrument available in quantities to swap into. Think emergency Fed swap lines if it comes to that again, though like you implied (I think), they might let a few countries fail this time.
Failure is LEH 2.0. I'm expecting they'll try it once to see just what happens.
A question I have from an EW perspective is was the 2008 dollar spike, which was totally nuts, merely an A wave of a countertrend move? If so, wave C will be off the chains and the priceless dollar fiat bulls like Douchinger should be crowing like there's no tomorrow lol.
Douchinger. Ha!
I wholeheartedly agree with your idea of devaluation. Any idea of timeline?
yes...if there is a massive dollar/DXY rally concurrent with a fall in the price of bonds
Very interesting. How would you define "massive" in the dollar movement? How much bond activity, and in what maturities, would you anticipate in this scenario? Would gold be relatively decoupled from the dollar pricing? Thanks in advance for your answers.
No analysis to back it up but my gut says gold goes in tank to 980 till end of january and then claws a cliff climb to 1500 from end of january to march. The problem is as it's tanking you put yourself at greater and greater risk of getting screwed by fakes.
massive like 2008 massive.
Maturity issues show up in the longer durations, past an anticipation of the US default timeframe. There is simply no freakin way you are going to get paid on a 30-year with our balance sheet.
Gold would decouple in that IAU and GLD can go to 0 and the physical metal still sell for a hefty sum.
Last year when gold was $750/oz, during the meat of the collapse, it was hard to get at coin shops. COMEX is subrogating GLD shares for physical delivery; the whole thing is a bit of a joke
+9000
GALF?
(Greek Asset Loan Facility?)
Oh wait. Never Mind.
"Greece's PM says Greece has no problem getting funding and has support of European Union"Problem solved.
How about Greek Yield Repo Obligations - GYRO
I love it!
This is exactly why I read ZH. There are people here with more wit than me...
+ 1,000
OPA!
The World According to GARP (Greek Asset Relief Program)
GARPopolous
Go GALT,
The Greek Automated Treasury Fail.
How about calling it "The Last GASP" (Greek A** Saving Program)
No, Greek Asset Loan Terminal, which is located at the Greek Uniform Liquidity Clearing House. Just tell everyone "I'll be back in a day, I have go to the GALT GULCH to fix some things."
EU support of the Greek banks - and, by stealth, the Greek government - is already happening. It's actually pretty likely that the Germans will openly bail out the Greek government if the sneaky bailout fails. What's going on at the moment may be to a large extent a multiplayer game of chicken.
http://www.zerohedge.com/article/piigs-moment-fracking-approaching-sp-jo...
Dubai and Greece are just the early dominoes here.
The E.U. will not bail out Greece, because the E.U. cannot bail out Greece. They have neither the will nor the wherewithal. Everybody is putting out fires at home.
The E.U. will not bail out Greece, because the E.U. cannot bail out Greece. They have neither the will nor the wherewithal. Everybody is putting out fires at home.
Someone has to bail out Greece. They can't escape this quicksand of debt on their own. Plus, if they default, the whole EU could go down.
Who then, could possibly bail out Greece?
Ben, is your helicopter fueled and ready?
Their is already conversation of Greece leaving the EU and issuing a new round of drachmas. Hello Zimbabwe.
If you're a greek citizen - wouldn't it be high time to consider moving your Euro paper assets into say, German or French banks? (On the fear that your local Euro account will someday overnight become a drachma-account with a parallel devaluation against the Euro?)
Any way to see whether this is happening?
Greece is a canary the rot is everywhere.
Spain, Ireland... eventually the UK. Nothing but dress rehearsals.
The IMF will bail out Greece, IMO. IMF bailouts rarely work though.
http://www.google.com/hostednews/afp/article/ALeqM5gz3M3PbbXFq9m-wzaRHyX...
Greece's influential unions have meanwhile warned the government that they do not intend to roll over and accept painful reforms.
"There is no way that workers will pay the cost of the crisis," the spokesman of Greece's main umbrella union GSEE, Stathis Anestis, told AFP. "We want no repercussions for pensions and taxes," he said. The Communists are taking a harsher stance still, calling their affiliated unions to war over the reforms. "This is a theatre. We will sign nothing, we are not going to fall into any traps," Communist party chairman Aleka Papariga said on Friday.
Quite possibly, but don't bet on it. First, the ECB has already been bailing out Greece (and Ireland and etc.) sneakily. And Greece is a pretty small country (11 m. people) compared to the Eurozone core states. So the ability for an open bailout is probably there given the will.
Second, don't assume the will is lacking:
"A default of a euro-group country doesn't worry the monetary policy hawks at the Bundesbank, Germany's central bank. "So what if Greece stops paying its debts?" one of the executive board members asked at a recent banquet in Frankfurt. "The euro is strong enough to take it." The real threat, he says, is if Brussels comes to the Greeks' aid. "Then the currency union will turn into an inflation union."
But it remains to be seen whether politicians can maintain such an unbending approach. The prices for Greek government bonds plunged once in the past, until then German Finance Minister Peer Steinbrück, to the horror of the Bundesbank, publicly pledged to help the Greeks if necessary. There is much to be said for the government taking exactly the same position today."
There is also the little detail that a bailout is explicitly forbidden by treaty. But stuff like that never stops the big boys of Europe from doing anything they want to do badly enough.
http://www.zerohedge.com/article/piigs-moment-fracking-approaching-sp-jo...
"don't bet on it"
Well, I didn't exactly mean that. Just don't use too much leverage. :)
They have to bail them out.
If they do not, the significance of the dollar debt in these nations and over the world will start a deflationary tidal wave. We saw this last year in the massive FX moves where 5 years of dollar decline were undone in a short period of time.
The world is facing an existential crisis as far as debtmoney goes because EROI unity is on the horizon.
Interest rate regimes FOLLOW the aggregate ROI of the economy at large.
Nobody is borrowing because nobody can find much to do that is PROFITABLE. The Fed is attempting to lower the cost of money so that people will do more things but even 0% rates cannot make a sub-unity EROI activity profitable.
Someone look out over the economy at large and FIND me the growth prospects. All I see is contraction coming. We pulled decades of future demand forward on the expectation that we could just grow enough to keep the balance of our interest obligations consistent with our then-expectations of even more growth.
A collective point of recognition has now been achieved that the future is not one of growth.
Great post! Thanks for the insight. Triggered a lot of those amorphous thoughts I've been having but hadn't solidified yet.
In the end, it all comes down to oil. The grand experiment to substitute loans for oil has failed. Adding more credit is a waste of time.
Lessee, the great oil hedging strategies: Currency unions, asset price bubbles, ultra- low lending rates, exporting of high- wage jobs/union busting/uncontrolled immigration.
They aren't doing very well ...
Bingo.
Everything revolves around energy.
All the cheap credit in the world cannot make Cantarell pump more barrels this year than last. Yes, economists really do not get this fact. They assume that man's desires will trump physics.
If we lend cheaply enough and there is enough "pent up" demand, we can all have antigravity boots.
Growth in EVERYTHING is assumed.
Each successive energy "find" is of lower EROI than the last...this means less net BOE. There is a very good reason that they went after the highest EROI fields first, because they were the highest EROI.
We can run a society on what we can produce plus alt.energy, but we have to abandon the growth expectations and growth model. If we accept that, it's pretty clear that all entitlements pyramids are immediate failures as is the entire system of debt based money which inherently requires MORE money to be paid in the future via someone ELSE borrowing to engage in their own growth projects.
Interesting insights. Start a blog.
"We pulled decades of future demand forward"
I am shocked that more people don't see this. It is transparently obvious. It is why the US "consumer" (gah I hate that) is pulled into their shell and not coming out for a decade. If ever.
Deflation happens when nobody buys anything. They can be unemployed or they can be frightened or they can be angry or they can be on the anti-consumer bandwagon but the outcome is the same; no velocity of money. And the worse things get the deeper we dive into our shells. That spiral can take you right out of the picture, at the bottom lurks subsistence economy. And I don't see how giving $700B to the banks was ever intended to reverse that.
Nice comment.
cougar
thanks.
The reason I struggle so much to get through to deflationists like Douchinger is because they are totally wrong.
Inflation *helps* the rich and the elites. Deflation helps small people who never had the credit or income to support debt. Deflation helps those of modest means, whereas inflation helps those who can engage in leveraged activities. Deflation crushes anyone who is in debt or leveraged...not the poor old woman I met once on the PATH train in Hoboken who had her life savings in a bank on Bergen Ave.
Deflation does not happen when nobody buys things, that is just when everybody is broke. Deflation represents in the monetarist formulation a decrease in the demand for new money, IOW, credit contraction. All money is lent into existence by banks and they get a coupon for that privilege.
If the future holds an inability to generate more real things that the money is a placeholder for, you have deflationary contraction. Peak oil represents the onset of just such a future.
The bank bailout was intended to save their banking system, not anything else. But money is a fiction, a faith-based instrument, supposed to placehold for real things as a commerce facilitator. If it becomes clear to everyone in a confidence scheme that the outcome is negative, you get a run on the bank, and collapse in faith.
The world is effectively bankrupt in a monetary sense because we have all made systemic money promises that cannot be kept.
Deflation is the midwife to hyperinflation ... read below...
Your last comments were gold.
I second the "start a blog" sentiment. Your commentary is some of the best on here.
http://anonymousmonetarist.blogspot.com/
lol...I've been told that before, when I used to write on TF.
I'm probably too lazy plus how many different ways can I pretty much say the same thing?
AutomaticEarth, Mish, a lot of these guys nibble around at all of these edges, but most of them don't understand oil the way people at TOD do, which is another site I frequent.
The relationship between energy and production is out there but economists do not appear to appreciate it nor draw the link between energy consumption and GDP
lol...I've been told that before, when I used to write on TF.
I'm probably too lazy plus how many different ways can I pretty much say the same thing?
AutomaticEarth, Mish, a lot of these guys nibble around at all of these edges, but most of them don't understand oil the way people at TOD do, which is another site I frequent.
The relationship between energy and production is out there but economists do not appear to appreciate it nor draw the link between energy consumption and GDP
Your comments make a lot of sense. However, you might want to consider the potential for innovation. Right now, alternate energy research is somewhat limited in that most alternatives just can't compete with cheap oil.
Once that is no longer the case, you will see an eruption (man-to-the-moon-in-this-decade) -type effort applied to solar, wind, and new as-of-yet undiscovered technologies.
I'm not entirely optimistic the effort will succeed, and even if it did there would be a few years or decades of pain transferring over. But necessity is the mother of invention...
this is Deus ex Machina...
everyone has this answer...oh well we'll just think something up.
Finite systems cannot indefinitely support exponential growth.
Really, I know what I am talking about with respect to EROI and I have already considered hail mary technological innovations.
Find me another energy source that is growable and at its outset was 100:1 EROI like oil was.
The one that is out there is fusion power; that's it. Everything else is a stopgap. Uranium will peak, NG will peak, everything peaks.
As for wind and solar, those chase an efficiency curve subject to laws of diminishing returns. The only way to grow solar power production once the entire earth is covered in panels is for it to get sunnier. Likewise with wind. Assume you have the most efficient process possible. It has to get sunnier then. This is the asymptote where your growth needs meet reality.
While I agree that we are very likely 'proper f***ed' when peak oil hits, I also realize that events of this magnitude do not take place in a vacuum. Innovations which brought about new energy sources such as fission are rare but they do occur, and they are more likely to occur when a large, focused effort is directed to a problem (as would be the case as people started to feel the effect of oil drying up).
Could such an innovation lead to a workable/cold fusion technology? Not likely without a serious breakthrough in physics - but those have happened in the past. Just sayin'.
And there is also the other side of the equation - efficiency. Not exactly a solution, but it can take the edge off and extend the period of time you have to come up the the hail mary. A lot of progress recently on things like replacing incandescent bulbs with much more efficient alternatives.
The financial war is playing out just as planned. The US banks are downgrading foreign nations, thereby winning at all cost.
Wake up sheeple. This is WW3, but in electronic form. You'll see severe retaliation in the coming years from other countries as Wall Street downgrades foreign nation after foreign nation. Who in EU was part of the vote to downgrade Greece?
Wall Street is commiting the US people to a future battle that it will not win.
retaliation is coming sooner than you may think in the form of taking COMEX Gold delivery
Very true. But the COMEX drives me crazy because it's already in default but still sets the prices of the precious metals. Of course, the recent backwardation incidents in gold and silver show that the precious metals dealers will defend prices by raising premiums. This is in clear defiance of the COMEX crooks.
Euroland CDS exploding
5 yr Mid change
Portugal 12.63%
Finland 12.34%
Greece 11.96%
Germany 11.33%
Spain 10.91%
Italy 10.73%
Poland 10.57%
France 10.33%
Can any of you big-brains estimate what it would cost the U.S. Fed to extend its endless backstop to some (or all) of European liabilities? I can definitely see that coming...I need another Big Number fix!!!
Here ya go ...
http://anonymousmonetarist.blogspot.com/2009/02/what-me-worry.html
From FEB 2009
It is not surprising that European Union finance ministers looked ashen faced in Brussels on Tuesday.
The breakfast meeting discussed how EU governments should deal with, in other words pay for, the "toxic" banking assets that triggered the economic crisis.
The figures, contained in a secret European Commission paper, are startling. The dodgy financial packages are estimated to total £16.3 trillion in banks across the EU.
The "impaired assets" may amount to an astonishing 44 per cent of EU bank balance sheets. It is a deep ditch the bankers, regulators and their friends in government have dug us into.
More on the details of this story over on business.
As discussed here on Monday, the secret 17 page paper warned that government attempts to buy up or underwrite the assets could plunge the EU into a deeper crisis, one that threatens the Union.
Everyone is terrified that a second bank bailout will push up government borrowing at a time when bond markets have growing doubts over the ability of countries such as Spain, Greece, Portugal, Ireland, Italy and Britain, to pay it back.
"Estimates of total expected asset write-downs suggest that the budgetary costs - actual and contingent - of asset relief could be very large both in absolute terms and relative to GDP in member states," the EC document, seen by The Daily Telegraph, cautioned.
Spread yields are widening on bond markets as investors judge it riskier to buy the debt of a country like Italy than the debt of another like Germany.
In line with the risk, and the low performance of some EU economies compared to others, the markets have demand a higher premium on government bonds issued to raise the cash.
The more the doubt there is over high levels of government borrowing, the more the markets have asked governments to pay to service their borrowing and all the more indebted countries become.
Ministers and officials fear that the process could lead to vicious spiral that threatens to tear both the euro and the EU apart.
"Such considerations are particularly important in the current context of widening budget deficits, rising public debt levels and challenges in sovereign bond issuance," the EC paper warned.
There is trouble ahead. Is it possible to buck a crash?
WOW. I also heard of a similar type briefing that went down sometime last year with certain members of CONgress. Essentially they were told there was no way out of this mess and to prepare for the worse---they could only prolong the inevitable..... for however long that may who can really say? I suppose this is why they don't care how they are spending right now---what does it matter when you know you are going to repudiate your debt? Spender spends on. Just get the legislation on the books with all the shady stuff tacked on page 1,279.......I guess this all but guarantees that the global printing presses are about to ramp up to hyper-dimensional overdrive.....take today's gold decimation as a huge Christmas gift.....
'a similar type briefing that went down sometime last year with certain members of CONgress.'
That was in late Sept 2008 when in closed session Trader Hank and Ben.S.Blutarsky (zero point zero) flashed the congressfolk with Section 8 of a Treasury Fact Sheet that said Treasury wanted a 700,000,000,000.00 revolver line with no oversight...
Dodd and Schumer were on Meet the Press thereafter with hangdog looks on their faces saying 'in our 25 years we had never heard such words come out of the mouths of our leaders...'
they shoulda said EFF YOU and just taken back the coinage power.
Instead they paved the road for an even more spectacular collapse where there is a risk they will be hanged
From the latest GEAB :
http://www.leap2020.eu/GEAB-N-40-is-available!-Spring-2010-A-new-tipping-point-of-the-global-systemic-crisis-When-the-slip-knot-around-public_a4093.html
SNIP 1: The ten most vulnerable countries on a debt/GDP ratio: #5. GREECE #9. USA
SNIP 2:LEAP/E2020 believes that the global systemic crisis will experience a new tipping point from Spring 2010. Indeed, at that time, the public finances of the major Western countries are going to become unmanageable, as it will simultaneously become clear that new support measures for the economy are needed because of the failure of the various stimuli in 2009 (1), and that the size of budget deficits preclude any significant new expenditures.
Reality quickly fuelled GEAB N°39’s anticipation which indicated that 2010 would be a year noted for three trends, one of which would be state bankruptcy (7): from Dubai to Greece, via more and more worrying reports from the rating agencies on US and British debt, or the draconian Irish budget and the Eurozone suggestions for grappling with public deficits, states’ increasing incapacity to manage their debts is making press headlines. However at the centre of this press ferment, all the information isn’t of the same value: certain are no more than laborious works on the « finger » of the Chinese proverb (8), whilst others really stretch to the moon.On the subject of laborious works on the « finger », this public announcement of the GEAB N°40 presents the case for its anticipations on Greece.
Greek debt crisis: A small problem for Frankfurt and a strong warning for Washington and London....FOLLOW LINK ABOVE FOR FULL ARTICLE
If timing of the Dubai default tells us anything, Greece will default after market close on Christmas eve. Just like Dubai, it will be a simple trivial "non-issue" by the time markets open again. After the Christmas break the markets will continue to go up like nothing ever happened.
The greeks are stabbing europe in the back- again. They couldnt hold back the russian bloodthirsty communist army and joined their forces. Resulting in 50 years of communist rule over most of europe. Thanks again Greece. Just wonderful. No backbone. Just kalamati.
very interesting.. I had the impression that they won the first ally victory against Fascist Italy on 1941, before being attacked by Germans on another front. I also had the impression that they had a nasty civil war till 1949 and at the end they kick out communists. Can you elaborate a bit?
very interesting.. I had the impression that they won the first ally victory against Fascist Italy on 1941, before being attacked by Germans on another front. I also had the impression that they had a nasty civil war till 1949 and at the end they kick out communists. Can you elaborate a bit?
the funny thing is that the comunists came back on 1974 as a prerequisite for greece to enter EU (no banned parties). Then leftish thinking took over greek society, and the left wings ruled greece's way into dept for next decades.
You are probably thinking Romania. Axis left flank in Stalingrad front, couldn't hold.
All you guys are right. Here is an angle that Greeks claim. The government of course will suffer a set back if it defaults to say the least.
However, the Greek middle class will not suffer.
Reasons:
High underground untaxed economy
High % land ownership (paid off)
Agriculture production has been practically abandoned and the default will improve productivity and the country will be able to feed itself.
The devaluation of goods and services will establish the Drachma as a viable currency without salary cuts. Granted though that goverment employnment % is very high and must be dealt.
Maybe the Greek middle class should talk to the Argentinian middle class of the early 90s to find out how this might go.
Firstly, if the sovereign defaults, the entire Greek banking system is gone, owing to the fact they have been hoovering up the govt bonds. There will be no deposit protection.
Secondly, they will find there is nothing in their pension pot, nada.
Thirdly, any assets held offshore or in foreign currency will probably suffer a asset tax, which could well be extended to land ownership.
The IMF hitmen will probably arrive and force the sale of any decent state owned assets, plus massive cuts to public spending. Import prices for oil and other essentials will skyrocket.
Anyway, if they believe the country can default and the middle class won't suffer, this will be the first time in history.
The Greeks (or any other country) will never put themselves in the hands of IMF, at least in the "classic" playbook rescue package form.
Everybody learned the lessons from the disastrous IMF "rescues" in the 70s, 80s and lately the 1997 Asian crisis.
The word IMF is tabu in Asia.
The European institutions will bail out Greece, no question about it...even if only as a matter of continental pride.
However I read this interesting article at the link provided by one of the ZH readers:
http://www.leap2020.eu/GEAB-N-40-is-available!-Spring-2010-A-new-tipping-point-of-the-global-systemic-crisis-When-the-slip-knot-around-public_a4093.html
Basically it says that the Greece problem is being blown out of proportion by the MSM financial media (mainly in the Anglo camp).
The country has always been a little bit of a thorn in the side of the EU, nothing new.
It generates only 2.5% of the Eurozone GDP (1.9% of the EU) compared to the 12% of US GDP for California, which is in the verge of financial collapse.
The overall Greece debt (public + private) to GDP ratio is actually less than the US
An excerpt:
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Greek debt crisis: A small problem for Frankfurt and a strong warning for Washington and London Coming now to Greece, we find a theme similar to what our team showed up in the GEAB N°33 in March 2009, when the press gave widespread publicity to the idea that Eastern Europe was going to lead the European banking system and the Euro into a major crisis. We have explained that this « news » was not based on anything credible and that it was only « a deliberate attempt on the part of Wall Street and the City to create the belief of a crack in the EU and instill the idea of « deadly » risk weighing on the Eurozone, in continually publishing false stories on the « banking risk from Eastern Europe » and trying to stigmatise a Eurozone cowardness compared to American or British « willful » measures. One of the objectives is also to try and turn international attention away from the increasing financial problems in New York and London, all with the purpose of weakening the European position on the eve of the G20 summit ».The Greek case is rather the same. Not that there isn’t a crisis in Greek public finances (that is the reality), but the supposed consequences for the Eurozone are overestimated, whereas this crisis indicates increasing tensions surrounding sovereign debt, the Achilles heel of the United States and Great Britain (9). First of all, one must remember that Greece remains the country above all others, which badly managed its EU accession. Since 1982, different Greek governments have done nothing but use the EU as an inexhaustible source of subsidies, without ever taking steps to modernise the financial and social framework of the country. With nearly 3% of GDP coming directly from Brussels in 2008 (10), Greece is indeed a country which has been on a European drip-feed for almost thirty years. The actual deterioration in the country’s public finances is, then, only another step in this drawn-out development. The Eurozone leaders have known for a long time that the Greek problem would materialise one day.
But with a country producing 2.5% of the Eurozone’s GDP (and 1.9% of the EU’s) we are far from a dangerous situation weighing on the single European currency and the Eurozone. By way of example, the California’s default (12% of US GDP) entails far more risks of destablisation of the Dollar and the American economy. Moreover, since the same analysts usually like to make lists of all the Eurozone countries facing up to a serious crisis in their public finances (Spain, Ireland, Portugal, to which we can add France and Germany), for the sake of completeness it should be pointed out that in the United States, besides the fact that the Federal State would be technically bankrupt (11) if the Fed weren’t printing Dollars in unlimited quantities for the purpose of buying, directly or indirectly, Treasury Bonds for an equal value, and besides California (the richest state in the Union teetering on the edge of the abyss for months), there are altogether 48 States out of 50 with growing budget deficits now (12). As summed up by the title of the December 14th edition of Stateline, an American website specialising in the US States and municipalities, said « Nightmare scenarios haunt the States », all the states of the United States are afraid of defaulting on their debt in 2010/2011.
The Eurozone, which has the largest gold reserves in the world (13), also includes countries which accumulated budget surpluses until last year, a foreign trade surplus and a central bank which hasn’t turned its balance sheet into a pool of « rotten or ghost » assets (contrary to the Fed in the last 18 months). So, if the crisis in Greek public finances clearly indicates something, it is not so much Greece’s situation or a specific Eurozone problem, but a wider problem which is going to become much worse in 2010: the fact that Government bonds are now a bubble on the verge of exploding (more than 49,500 billion USD worldwide, a 45% increase in two years (14)).
The deteriorating ratings published by US rating agencies since the Dubai crisis shows, as always, that these agencies don’t know how to (or can’t) anticipate these developments. Let’s remember that they didn’t see the sub-prime crisis coming nor the collapse of Lehman Brothers and AIG, nor the Dubai crisis. Because they are dependent on the US government (15), they are unable, of course, to directly blame the two at the heart of present financial system (Washington and London). However, they show from which direction the next big shock is going to come, State bonds… and in this field, the two countries with the most exposure are the United States and Great Britain.
However at the centre of this press ferment, all the information isn’t of the same value: certain are no more than laborious works on the « finger » of the Chinese proverb(*), whilst others really stretch to the moon.
On the subject of laborious works on the « finger », this public announcement of the GEAB N°40 presents the case for its anticipations on Greece. (*) " When the wise man points at the moon, the fool looks at the finger "
Maybe the Greek middle class should talk to the Argentinian middle class of the early 90s to find out how this might go.
To some degree you may be right. But, devaluation of the drachma will bring strong tourism which is one of Greece's main industries and balance things off.
Did USA really "bailout the world"? Wasn't it more like pre-emptively exporting the currency dilution / inflation that attends printing over a trillion USD in a year?
Default risk surging but NBG stock only down 2% today. Maybe people are getting a little carried away on the CDS markets???
maybe you should bet the farm on NBG?
Right. NBG down 40% in one month. Banks are toast.
http://finance.yahoo.com/q/bc?s=NBG&t=3m&l=on&z=m&q=c&c=
even the shorts are getting lazy in greece
From a foreign perspective, I'm absolutely long US dollar and short world equities.
I live in Brazil and currently I'm shorting local stocks.
The reason is exactly deleveraging, which generally involves the buying of US currency.
I advise you americans to double leverage on the dollar to capture these volatility movements.
The history tells different stories depending on who writes it. While it is true that Greece didn't become communist after world word 2,but that was largely due to British army participation. And the Greeks never forgot that(in a hostile manner). So may be we like to think that Greece didn't become communist is a good thing,for them it is probably a bad thing. The Churchil-Stalin Yalta piece of paper,divided Europe into Russian and western sphere of influence,and Greece was part of the Western sphere. But the Greeks are very nationalistic,like Serbs and Russians,and they have more tendency towards socialist economics than capitalist economics. So at the end of day,any IMF rescue has to come as free lunch. I don't believe that the goverment can accept much harsh austerity measures,since they know their populace are hot blooded,and very politically active. And judging by latest events from last year and this year, I doubt very much that people in general(and specially youth),will let the goverment pass severe rationing measures without violence errupting and the threat of civil war. I think if Aunt Angie don't provide a bridge loan,then the Greeks will probably have no choice but to exit the Euro zone.
I coudnt disagree more. What kind of reasoning is that. Russians have a tendency in socialist economics? You need carpetbombing with "black swan" books, unloaded by a tupolev 160. I can present you 100 stories ending up with a kremlin in Washington DC, NY SF or LA, having some historical events occur in a different way, timing or order.
Laungage of sience is already "heavily ascent english". Now have look to this obama stuff and let me know where Capitalism Version 2.0 would take place. In that place while drinking vodka or eating rice, they will admit that Americans have a tendency to debt? based on historical facts?
Now about greeks. They are extreme people. What they do, they do in an extreme way. If they are public workers they will strike and get lazy like there is no tomorrow. If they are shipping tycoons they will smuggle goods from hell into paradise for a profit, if they are cummunists they will burn villages for the cause, if they are priests they walk into fire for their believes. Just a nation with record entropy even for the mediteranian standards (irish could be their rival on this mess). Lending money to these people is an extreme sport.
Germany is keeping Greece alive. Yet 50 years ago Greece helped supply Stalin and allied forces leading to destruction of millions of germans and the totalitarian regimes across europe. History has the answers and it is repeating itself once again. Did the Germans/EU really trust the Greeks to act properly? Did the EU/Germans learn from history? There is no gratitude from the Greeks. Let them turn into Albania.
I see that one of their problems is that they got to many enemies along the way. Come on!!! This is a speculation site. You dont have to rape history (or anything you think is history) to make your point against greeks. Get civilized. Intelligent people are reading you. Just sell them short!!!
... just to let you know ... cause it seems you dont get it. You equilize "germans" with "nazi germany". Have you ever asked german people? And you are blaming someone that fought against nazi?
its pita time