Greece "Discovers" $40 Billion Of Previously Unknown Debt, CDS Gaps
It appears not even one day can pass without some new and improved indication of Greece's economic collapse. The latest comes from website Kathimerini.gr which discloses that the recently appointed "Committee on the Reliability Of Statistics" has uncovered $40 billion of previously hidden debt (one wonders when America will get a comparable commission: no question we are in dire need of one). A loose Google translation of the data is as follows:
Hidden debt of 40 billion euros revealed the findings of the Committee on the reliability of statistics which has created a Finance Minister Giorgos Papaconstantinou.
The outcome refers to emerging political interference and charged responsibilities in a manner of cooperation of services.
Indeed, the findings indicate that the possibility of political interference is mainly associated with the close relationship of NSS with the Ministry of Finance and the inability of the General Accounting Office to work independently and responsibly.
Lets clear peaks and political responsibility to the inaccurate financial information sent to Giourostat election, noting that the data sent does not correspond to the data were sent to the NSSG various bodies and agencies.
The findings revealed that the "K" from January 21 already sent to the House.
Record the disconnection of the principles, errors in charting of financial data, suggestions for correcting the situation and the political responsibilities that have arisen from time to time.
Greek CDS has immediately gapped on the news of yet another hole that will need plugging with ever more debt. At last check Greece was trading 380/390 and pushing wider. One wonders at what point will investors realize that the deeper they dig, the more dirt they will uncover. It appears this news has not yet spread to the broader equity market, where no volume algos are lifting every offer indiscriminately, while the cash to fund this buying is as always oddly missing.
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Ouch - Oops - get an agreement in principle with
whoever your bailout sugar daddy is and THEN
nickle and dime them with little extras like this.
Finding an additional 40B euro debt is definetly
worse than Florida dem election officials finding
boxes of "uncounted votes" in the trunks of their
cars, but it still sends you the same message on
the quality of your negotiating partner.
Hmm you mean america's off-balance sheet wars could contain oh say about 4 trillion of hidden debt. I know it's not 40 billion but still 4 trillion is a good chunck of change.
Hmm you mean america's off-balance sheet wars could contain oh say about 4 trillion of hidden debt. I know it's not 40 billion but still 4 trillion is a good chunck of change.
True, and $4Tn could theoretically really hurt when it is realized. However, we'll deficit $1.5+Tn just this year, and that $4Tn is over a decade.
The excitement comes with the $100+Tn unfunded liabilities in Social Security and Medicare ... that's so far outside of any proportion, that you can't even begin to think about printing that away.
The excitement comes with the $100+Tn unfunded liabilities in Social Security and Medicare ... that's so far outside of any proportion, that you can't even begin to think about printing that away.
Anyone who thinks any significant proportion of that can be "printed away" doesn't understand the nature of those outlays when they come due. They are outlays in "current dollars" whatever "current dollars" are worth. If we have hyperinflation, doctors treating Medicare/Medicaid patients aren't going to be charging them $100 for an office visit, they'll charge them whatever the inflation-adjusted price is, whether that be $150, $2000 or $50000 for an office visit. You can't inflate away a cost that rises with inflation. Yes, the government has some negotiating power and can try to set prices, but the government can't force health care providers to accept those price and many are already dropping out of the Medicare system (including one of the Mayo Clinics, which Obama cited as a model for what he'd like to see. Oops.).
Similar with SS COLAs. Yes, they are imperfect representations of inflation, but they capture probably 75% of inflation in that formula, so if inflation were running 10%, let's say, SS liabilities would rise by 7.5%. I'm pulling these numbers out of the air, but the basic point is that printing money does nothing or practically nothing to reduce that $100 trillion in unfunded liabilities.
I wish more people who talked about these liabilities understood this (not meaning you, per se, but others I've spoken to about this).
Anyone who thinks any significant proportion of that can be "printed away" doesn't understand the nature of those outlays when they come due. <snip>,
I wish more people who talked about these liabilities understood this <snip>
You make a very good point: There is a distinction between repayment of debt, and the promise of future services.
The mortgage company is "stuck" with a fixed number of dollars owed. Rapidly increasing inflation benefits the home buyer and screws the mortgage company, because the mortgage company cannot adjust the number of dollars the home buyer owes.
That's not Medicare: The government promised future services. If the government devalues the dollar through inflation, then the price of those future services will merely go up with inflation. As you point out, printing does nothing to get people to provide those services.
BS Inc. said: "I'm pulling these numbers out of the air, but the basic point is that printing money does nothing or practically nothing to reduce that $100 trillion in unfunded liabilities."
Then Mikla said: "If the government devalues the dollar through inflation, then the price of those future services will merely go up with inflation."
You're both partly correct. If the net present value of those future services can be locked in to a dollar amount, then they can be inflated away. Say the government were to lock retirees into fixed-premium annuity plans, for example.
This business reported elsewhere here at ZH of the Treasury seeking to move people into annuities makes perfect sense in this context. What we see is the development of the actual endgame plan: fix the obligation payments in dollar amounts, then hyperinflate them away into meaninglessness. This becomes a useful tool for predicting the timeline. The "benefits" part of the equation is simple to deal with: start a wage-price spiral, and increase medicare etc provider reimbursements more slowly than inflation, blaming the drop in service levels on inflation; service levels will definitely drop.
What we see is the development of the actual endgame plan: fix the obligation payments in dollar amounts, then hyperinflate them away into meaninglessness.
Yep and the best way to do this is to sucker people into it by providing a "guaranteed" benefit which isn't indexed to inflation, which I think is the gist of the Treasury's proposal.
It's an absolute travesty.
Devaluation and/or default are simply two different sides of the same coin. If a retiree is locked into a $5k/mo stipend, and the value of that payment is worth no more than a loaf of bread 5 years hence, then the net effect is no different than if he lost his principle investment (ie default). In each case, he is broke.
The point is that no one seems to focus on is the "asset" side to these incredible 10, 50, 100 $trillion obligations: they are assets to someone else, that someone else being private, public & foreign bond holders. When the value of those "assets" plunge to -0- via either default and/or devaluation, there is going to be a veritable army of destitute Boomers.
My oldest son is 11 yo; I've been telling him that when he is eligible to vote in 7 years (hard to believe) he will be among the forefront of the coming generational wars. These kids will form an incredibly radical group that are going to use scorched earth tactics to destroy every empty government promise being touted today.
"My oldest son is 11 yo; I've been telling him that when he is eligible to vote in 7 years (hard to believe) he will be among the forefront of the coming generational wars. These kids will form an incredibly radical group that are going to use scorched earth tactics to destroy every empty government promise being touted today."
...and that concludes our bedtime story. Now sleep tight, junior!
We agree - Social Security could somewhat be inflated away, because it's merely some vague promise of some future check with some future value. That's an annuity program, and the government might scale up with another annuity program like the Treasury's current interest in people's IRAs and 401Ks.
While I agree that at some level it's *possible* the government might inflate faster than Medicare adjusts its fixed prices (and thus the government might benefit from that differing change in rates), Medicare is such a huge number ($50Tn-$80Tn in today's dollars), that I think after only a short time you'd merely result in currency confidence crisis: People just wouldn't get out of bed in the morning to trade their labor for what Medicare promises to pay. Service providers would figure out quickly that it is merely a constantly losing proposition. Medicare as a program would "fail" because individuals could not get any services, and IMHO that could happen quite abruptly.
So, we agree, except that I don't see any scenario where the "endgame plan to fix the obligation payments in dollar amounts" could work. However, I *completely* agree with you that this is, in fact, the plan.
That's not Medicare: The government promised future services. If the government devalues the dollar through inflation, then the price of those future services will merely go up with inflation. As you point out, printing does nothing to get people to provide those services.
Exactly. For practical purposes, my planning assumptions assume that Medicare will be useful for basic medical necessities like band-aids and rubbing alcohol by the time I'm eligible and even that reimbursement will probably be means-tested. Anyone providing anything more complex than that will have already run as quickly as they can from serving the Medicare crowd, due to the paucity of the payments.
Actually, given what the Feds spend their money on, that hidden debt would more likely be caused by Medicare/Medicaid or Social Security.
They're about 40% of the budget and Dept. of Defense is about 17%.
http://en.wikipedia.org/wiki/File:Fy2009spendingbycategory2.png
But, don't let facts get in the way of an anti-military snark.
If a mort were to magically uncover $40B in mysterious debt that person would go "missing" with a pair of matching concrete shoes. When a sovereign does it, it's considered an "error"
Hidden debt.... Hysterical!!!
Oh shit, I forgot that I borrowed that 40 billion... I was at the bar, and ran out of money, and homeboy came through...
And I agree with Hephasteus' assessment of the wars.
Hell, it's only 4 trillion. Mere pocket change.
Can't they just open a few diners to pay back that debt?
shit happens right? I think they even mention it in their anthem :)
"Committee on the Reliability Of Statistics" - paging Mr. Orwell, George Orwell to the white courtesy phone.
2008 Greece GDP ~$350 billion. $40 billion would thus make up 11%. I'm no Central Bankster, so I have no choice but to conclude that $40bil is a material amount of money.
You just can't make this stuff up. It's too good to be fiction. No self respecting novelist would ever show up at her/his publisher with a cockamamie story of this magnitude and expect anything other than to be laughed out of the office.
And yet the daily live presentation hits new heights of absurdity and we just shake our heads and press onward. This is how the insanity grows and grows. We become numb to the disclosures, the lies and deceit. Think back to the wonder years of the early 2000's when the biggest scandal was the disclosure that the big brokerage houses were pushing bad "investment" research to pump favored stocks.
How quaint. The good old days really were better when measured by today's standard of insanity. Tick tock, time for my next meeting. Oh well. <sigh>
Very well said. I find your comments can apply to such a wide variety of things in our society; we're living in the reign of Romulus Augustus waiting for Odoacer to arrive.
Personally the (economic) world began to make more sense to me when I began to study and then apply psychology and philosophy to everything I hear, read and see, starting with myself. Ever wonder why the ancient Greeks (not the current hopelessly in debt crop) always talked about knowing thyself?
Everything that has to do with being human is connected to everything else in this world/universe/consciousness and once I began seeking these connections, I began to see them everywhere. Once we step back and see ourselves and others are we really are, there is no more need to play the games, to fit in, to be accepted and respected. By turning inward to begin the journey of exploration and learning, I've become a better citizen, father and husband.
Narcissistic dalliances of this type are quite healthy because you begin to recognize the futility of naval gazing. All the power and knowledge we need to solve all our problems lay within. I personally believe all the problems we have are the result of our denial of that power. The old "be careful what you ask for because you might just get it" conundrum.
It was Mark Twain who said, "Fiction is much harder than non-fiction; it has to be believable."
How do the greeks react? Are there queues in front of the banks?
Riiiiight. Something tells me every state and municipality in America will be 'discovering previously unknown debt' as well.
Too many horses at the trough. That's about the size of it.
-MobBarley
Not to mention the trough is shrinking....
Why bother? The known debt is enough to sink the USS Titanic by itself.
I can't believe that the party that routinely passed deficits in the hundreds of billions of dollars over the last decade was actually the more fiscally conservative of the two. If you wrote a fictional book like this years ago, it'd be rejected for being too outlandish.
Will this hit the major newswire soon? Or is this posted on someone blog? How reliable is the source? $40 bils extra would really push the Greece into the IMF's hands.
"$40 bils extra would really push the Greece into the IMF's hands."
During more "normal" times I might agree. But don't forget that each and every nation has crossed over into the Twilight Zone and is now on full tilt Ponzi. Greece will not be allowed to fail unless the powers-that-be believe failing Greece would somehow extend and pretend the Ponzi a few more days, weeks, months whatever.
The game is rigged, the deck is stacked, the cards are marked and the fix is in. It's all or nothing. The line has been crossed and there is nothing to lose by pushing all the chips into the center of the table and everything to lose if they hesitate in the least little bit.
The problem we "sane" people have is we have not fully comes to grips with the extent and degree the powers-that-be will go to keep the game going. They will go to the wall. They have pulled out all the stops, the engine is past red line and it doesn't matter if it blows because it's gonna blow if they DON'T do what they're doing.
For the powers-that-be, it's hanging day. What have they got to lose? We "masses" are not ready to do what ever it takes to stop this Ponzi. They have clearly demonstrated they will do whatever it takes to continue the Ponzi. We have been measured and we have come up short. They are still being measured and so far, they are winning.
Holy Metaphor Madness, Batman!
Cheers -
It's not stupidity, or even hubris. It's not even a Dr. Strangelove deathwish. I am convinced that some (not all) of the Russian Roulette Deer Hunter psychopaths are planning around a big reorganization when TSHTF or, they throw it at the fan on purpose to trigger a game changer.
Is that why the Bush family bought the 90,000 acre ranch in Paraguay on the Guarani aquifer???
"It's not stupidity, or even hubris. It's not even a Dr. Strangelove death wish."
I agree. To be extremely blunt, it's raw power being exercised by those who have it over those who have handed it over to them willingly. Regardless of who, what, where, when or why it's clear "they" are ready to go "balls to walls" and we aren't.
"....they throw it at the fan on purpose to trigger a game changer."
I happen to agree with you. They are willing to do this. Are "we" willing to stop them? What are "we" willing to do to stop this? We can't even get half the voting population to vote, let alone get 1% to attend a protest. Do you think "we" will revolt?
Nope. We have been measured and we have come up short. I'm not saying give up but I am looking at this thing realistically. You can't throw a revolution and only have 12 guys show up and expect to stop the present power structure.
I'm willing to call myself a coward. I don't have the balls to stand up to these bastards alone. That is suicidal. I will organize and lead the pack but I have no suicidal death wish. And here is the problem. I can admit I'm a coward. Most people aren't willing to do so. What they will do is pull out every single excuse in the book not to go "balls to walls" and this is exactly why "they" are getting away with this shit.
We Americans need to experience a much higher level of pain before we will begin to consider alternatives. If the present power structure is smart, and they are most definitely smart, they will make sure the level of pain ever exceeds that threshold.
You're not alone. This is one reason why it is so important to participate in ground-level meetups and grassroots political meetings. We must put into place some relationships and even organizational framework to deal with the events to unfold. The pain is coming. We have to be ready; the alternative is to allow the established political powers to put their measures into place as events unfold. Like TARP on steroids, for example. And "Crush the Patriots" Act.
As an aside, have you read yet about breast-implant bombers? No joke; pretty soon TSA will be doing breast exams prior to boarding.
SWRichmond,
I admit it. I didn't believe you. So I googled it. And there it is, on www.Forbes.com, "Boob Bombers" in all it's glory. Talk about going that extra mile to "cop a feel".
If there's such a thing as jumping the shark into ridiculousness with regard to the "terrorist" farce, consider that Fonzie is now astride 10 sharks and counting.
http://en.wikipedia.org/wiki/Jumping_the_shark
Clearly the black arts Psyops people are hitting their stride with their false flag attack patsy hysteria.
http://en.wikipedia.org/wiki/False_flag#Examples_of_false_flag_attacks_as_pretexts_for_war
Does it really matter anymore. We are fucking all doomed.
Change (or correct) letter B into M: Billion into Million or Obama into Omama...
Problem solved...
Chaos to ensue shortly, or more accurately, elevated chaos.
SELL ALL EQUITY RIPS.
Wait wait wait, false alarm!! It's 40 billion euros, not 40 billion dollars as in the post title. We can all resume whatever it was we were doing.
Oh, wait....that's equal to 56 billion dollars. OK, we can all start panicking again.
details, 16 billion dollars more or less... soon inflation will kick in and that will be the price of a apple and I'm not talking about the Ipad :)
Deflation is always the endgame when it comes to money created by debt. Didn't you read Thomas Jefferson?
"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."
Marketwatch headline: "Dollar slightly lower versus euro as Greek worries ease".
See, nothing to worry about!
From Kathimerini, English version:
Cabinet split over economic measures
Ministers clash over need for austerity
MARIA MAROYIANNI/ANA
Prime Minister George Papandreou (r) and his deputy, Theodoros Pangalos, prepare for a parliamentary debate on corruption yesterday. Papandreou blamed the previous conservative government for a rash of corruption scandals.
As the government finalizes the provisions of its tax and income policy, top ministers and aides are reportedly divided over the austerity of the measures it will include, with some anxious to allay the European Commission and global markets, while others fear the social unrest deep-reaching reforms may provoke.
According to sources, the ministers attending an emergency meeting at the official residence of Prime Minister George Papandreou late on Sunday night fell into two camps. On the one hand, Finance Minister Giorgos Papaconstantinou, Interior Minister Yiannis Ragousis and experienced PASOK cadre Petros Efthymiou, a former minister, called on Papandreou to herald exceptionally strict tax and income provisions, possibly including a rise in fuel tax, ahead of the premier’s scheduled visit to Brussels for a European Union summit on February 11. According to this group, tough measures are vital if Greece is to send a clear message to Brussels that it is serious about plugging a gaping deficit and reassuring the markets of its ability to bounce back from the brink of bankruptcy.
On the other hand, a group of equally experienced and influential ministers – including Deputy Prime Minister Theodoros Pangalos, Economy Minister Louka Katseli and Christos Papoutsis, PASOK’s parliamentary secretary – reportedly advised Papandreou against the imposition of “socially unfair” measures, firstly because they might not be necessary, and secondly because these additional measures in themselves would not be instrumental in swinging the markets one way or the other.
Pangalos sought to strike a firm but diplomatic stance. “We should declare war but on those who have gotten away with not paying all these years, not on the lower income classes,” he said.
The debate, which continued yesterday among top-ranking government cadres, was sparked by reports of plans in Brussels to ask Greece for a so-called “Plan B” – to feature additional reforms – if the government fails to implement the provisions set out in its crisis plan.
According to sources, the government would be expected to submit this Plan B by March 16 or risk handing over the responsibility for financial decision-making to Brussels.
Leo, I'm sure we can settle this over a round of Ouzo.
Germany could annex Greece and the steady influx of our overaged population with pensions and retirment funds would bring your economy back to life.
We're back in the business since 1989 ROFML
How about it?
The greek market is up 1 %, so it's probablly no big deal.
Move along nothing to see here
http://quotes.ino.com/chart/?s=INDEX_GRDOW
Ahhh, Brussels takes over economic decisions for a fierce tribe of people who have very nationalistic feelings. Are these idiots crazy? The money they hope to recoup for the bond holders will quickly get eaten up by paying for peacekeepers and repairing infrastructure damage. What a fucken powderkeg that they will light in their hubris.
Could be negative mtm on derivative contracts, which would be off balance sheet as sovereigns are exempt from IAS rules...
This is great news. The Dow is up!!! Let's break put the Gen. Patton war charts and see where us shorts could get burned again!!
THIS IS MADNESS!
NO, THIS IS SPARTAAAAAAAAAAAAAAAAAAAA
Twice as big appears to be half as bad. NWO calculus.
To discover this did they stand in the room full of spreadsheets with an ancient medallion ontop of an ancient staff with a window behind them?
Keep walking, just keep walking forward
Whatever you do
DON'T TURN AROUND
Oops
(not obscure i dearly hope)
When will they "discover" the unfunded liabilities in the US?
Well... In a "Culture Of Corruption" it's easy to lose track of the details...
an ft alphaville comment
Greek speaker | February 2 5:32pm | Permalink
A more extensive article can be found in ethnos.gr. In short, it says that an independent committee formed by Mr. Papakonstantinou to check the reliability of economic data revealed that the stats sent by the Greek statistical service to Eurostat in Oct 2009 had been altered by various political interventions of the previous government (New Democracy). It also showed that the stats did not correspond with the data ESYE (the Greek Statistical Service) had received from the individual public services. This shows that the real data had been intentionally altered by ESYE.
It is also reported that around €40bn of concealed debt related to government guarantees, SWAPS, and credits to suppliers, were left out of formal stats.
It later goes on with an example of data manipulation revealed by Eurostat where the debt of public hospitals was reported to be €2.2bn while an inspection showed that in reality the amount was around €5.22bn.
Hope this helps
http://ftalphaville.ft.com/blog/2010/02/02/139566/caveat-venditor/
OK, time to slightly come out of the closet and admit I'm a bean-counter. In fact, you can look me up @ the CA licensing board web site.
The reason for this admission is to note that over the course of my career, there is one iron-clad rule that applies to 99.9% of all individuals, businesses & governments: assets are always over-valued, liabilities are always under-valued, revenue expectations are always over-stated and expenditures are always under-forecast.
If you know this going in, then you know everything you are seeing & hearing is being characterized and spun to make the situation appear less worse than it actually is. End of PSA.
Remember the us bonds found on a train from italy to switzerland by the italian custom...yeahh, sure, they were fake...;-)
Sign of the times -
UK:
NEARLY three-fifths of the growth in jobs under Labour during a decade in power was directly or indirectly created by the state, new research shows.
Across the country as a whole, it says 57% of new jobs created during the period 1997-2007 were state or “para-state” — dependent on government spending.
http://business.timesonline.co.uk/tol/business/economics/article7009695.ece
LA County:
27% of California's population. Most populous county in US. Larger than 42 other states and larger than the bottom 11 states combined. In terms of GDP, if it were a nation it would be in the top twenty in the world.
http://en.wikipedia.org/wiki/Los_Angeles_County,_California
Los Angeles County's six leading employers now are government entities: L.A. County employs 93,200 workers; the state of California has 30,200; the city of Los Angeles clocks in with 53,471.
http://www.latimes.com/news/opinion/la-oe-rutten27-2010jan27,0,6572019.c...
Figure 12% or just over are unemployed. Shadow stats has unemployment for LA County over 21%. More here - http://www.laedc.org/businessscan/index.html
How big can the government tit get before the foundation of the pyramid collapses?
ARROYO GRANDE, Calif. (MarketWatch) -- Retire? You can fuggetaboutit if the new Global Debt Time Bomb is detonated by any one of 20 made-in-America trigger mechanisms.
Yes, 20. And yes, any one can destroy your retirement because all 20 are inexorably linked, a house-of-cards, a circular firing squad destined to self-destruct, triggering the third great Wall Street meltdown of the 21st century, igniting the Great Depression II that George W. Bush, Ben Bernanke, Henry Paulson and now President Obama have simply delayed with their endless knee-jerk, debt-laden wars, stimulus bonanzas and bailouts.
http://www.marketwatch.com/story/our-debt-time-bomb-is-ready-to-go-ka-bo...
"Greece "Discovers" $40 Billion Of Previously Unknown Debt, CDS Gaps". I hate it when that happens.
They could export 10 billion baklavas to China or whatever and have this shit payed in no time ...
Cheeky, you Bastard, how have you been? We miss you here on ZH. Your wit and humor is sorely missed among the regulars and the newly arrived.
Nice
http://www.businessinsider.com/40-billion-in-hidden-greek-debt-discovered-cds-spread-spikes-like-crazy-2010-2
EITHER THE 40BN IS A BULLSHIT STORY OR THE MSM HAS COMPLETELY MISSED IT ??
Capital.gr notes that the Committee said it cannot guarantee the predicted 12.7% figure (deficit/GDP) will turn out to be accurate. http://www.capital.gr/News.asp?id=899758
According to capital.gr, the committee notes that even current measures of debt do not account for liabilities to suppliers and of course interest rate swaps, liabilities under PPP contracts or allowances for losses on quango loans guaranteed by the government.
Frankly a lot of this is not new but being able to put a number to the misplaced liabilities will makes some people worry even more. Bear in mind the hidden liabilities are stochastic to some extent so several different estimates will be cited depending on how charitable the journos feel.