Greece Reports: “Circular Reasoning Works Because Circular Reasoning Works” – Or – Here Comes That Default!!!

Reggie Middleton's picture

For all of those who felt I was too bearish on the Euro region in 2009 and 2010, thus far nearly every proclamation that I have made has come to light or shown a direct path to doing so. I believe I was unequivocally clear in my assertion that Greece will default at least a year or so ago (even if said default would be marketed by some other name for the sake of political expediency). I would consider this a must read for anyone in the mainstream media reporting on this topic, or any investor/stakeholder who may fear the Grecian domino effect, even if you feel you have seen some aspects of it before.

Well, now its time to call Greece out on its perversely circular  reasoning being used to justify its alleged stance that it will not default. I read a humorously crafted ZeroHedge article this morning which immediately cause the following image to pop into mind…

For more on the origin of said circle, I first refer you to an article ran yesterday in Bloomberg:

Fitch Cuts Greece to B+, Says Voluntary Maturity Extension Is Default:

Greece’s credit rating was cut three levels by Fitch Ratings, which said that even a voluntary extension of its bond maturities being studied by European Union policy makers would be considered a default.

Fitch cut its rating to B+, four levels below investment grade, from BB+ and said that the country could face a further reduction in its creditworthiness. The yield on Greek 10-year bonds rose 57 basis points to 16.6 percent, more than twice the level of a year ago when Greece accepted an EU-led bailout.

“The rating downgrade reflects the scale of the challenge facing Greece in implementing a radical fiscal and structural reform program necessary to secure solvency of the state and the foundations for sustained economic recovery, Fitch said in an e- mailed statement.

… “The B+ rating incorporates Fitch’s expectation that substantial new money will be provided to Greece by the EU and IMF and that Greek sovereign bonds will not be subject to a ‘soft restructuring’ or ‘re-profiling’ that would trigger a ’credit event’ and default rating,” Fitch said.

… “An extension of the maturity of existing bonds would be considered by Fitch to be a default event and Greece and its obligations would be rated accordingly,” Fitch said.

Even if Fitch or other rating companies determined that extending maturities constituted a default, the ruling wouldn’t necessarily trigger credit swaps insuring Greek debt. That decision may be made by the determinations committee of the International Swaps & Derivatives Association.

Yeah, Okay! I guess then maybe when they default it won’t really happen?

The country missed its target for last year, reporting a shortfall of 10.5 percent of gross domestic product, versus a goal of 9.4 percent.

The country missed every target for the last four years. For those who read BoomBustBlog, credibility is done, trust (or the lack thereof) is a wrap – Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse!:

Let’s take a visual perusal of what I am talking about, focusing on those sovereign nations that I have covered thus far.


Notice how dramatically off the market the IMF has been, skewered HEAVILY to the optimistic side. Now, notice how aggressively the IMF has downwardly revsied their forecasts to still end up widlly optimistic.


Ever since the beginning of this crisis, IMF estimates of government balance have been just as bad…


The EU/EC has proven to be no better, and if anything is arguably worse!




and the EU on goverment balance??? Way, way, way off.


If the IMF was wrong, what in the world does that make the EC/EU?

The EC forecasts have been just as bad, if not much, much worse in nearly all of the forecasting scenarios we presented. Hey, if you think tha’s bad, try taking a look at what the govenment of Greece has done with these fairy tale forecasts, as excerpted from the blog postGreek Crisis Is Over, Region Safe”, Prodi Says – I say Liar, Liar, Pants on Fire!


Think about it! With a .5% revisions, the EC was still 3 full points to the optimistic side on GDP, that puts the possibility of Greek government forecasts, which are much more optimistic than both the EU and the slightly more stringent but still mostly erroneous IMF numbers, being anywhere near realistic somewhere between zero and no way in hell (tartarus, hades, purgatory…).

Now, if the Greek government’s macroeconomic assumptions are overstated when compared with EU estimates, and the EU estimates are overstated when compared to the IMF estimates, and the IMF estimates are overstated when compared to reality…. Just who the hell can you trust these days??? Never fear, Reggie’s here. Download our “unbiased, non-captured, empirically driven” forecast of the REAL Greek economy – (subscribers only, click here to subscribeGreece Public Finances Projections Greece Public Finances Projections 2010-03-15 11:33:27 694.35 Kb. Related banking research can be downloaded here:

Greek Reporter (hat tip to ZeroHedge) reports: Government Finalizes Privatization List

The Greek government will proceed with the acceleration of the privatization of state property and companies, setting a target of at least €15bn by 2015. [Reference the highlights of the BoomBustBlog subscription document below.]
The decisions are expected during the week, probably on Wednesday, at the meeting of the Biministerial Committee on Privatization. The government will finalize a list of companies and property for utilization, which will be presented by Prime Minister George Papandreou to the European leaders in Brussels.
Special Secretary for Privatization G. Christodoulakis and bank representatives have been preparing the content of the list at a meeting yesterday.
National Bank and London-based CC&C Advisors LTD have been assigned the task of financial servicing related to planning, monitoring, coordination and implementation of the restructuring and privatization program.
The Committee will have to approve the award of the of the utilization program to the qualified Greek banks, but also to the consultants who will carry each project.

Sources note that consultants for Athens International Airport have already appointed, while the proposed list includes:
• The concession of ports and airports with long-term contracts
• The extension of concession period for Athens International Airport

• The sale of a stake of Public Gas Corporation
• The sale of a 49% stake of Casino Mont Parnes
• The privatization of state lotteries through concessions
• Finding a strategic investor in Hellenic Post
• The sale of a stake of OTE, Hellenic Defense Systems and Larko
• Renewal of OPAP’s licenses
• Licenses for online betting and “slots”
• The concession of Egnatia Odos
• The sale of TRAINOSE
The sale of state stakes in banks (Hellenic Postbank, ATEbank, Consignment and Loans Fund)
• The privatization of water supply companies (EYDAP, EYATH)

This is a tragic Greek comedy. Professional/institutional subscribers should reference the Greece Public Finances Projections Greece Public Finances Projections 2010-03-15 11:33:27 694.35 Kb in its entirety. For those who chose not to subscribe, I am posting excerpts from pages 5 and 6 from said document, don’t read this while eating or drinking for fear of spitting up your lunch!

Any subscribers who would have went heavily bearish into these banks when I first commented on the would have done quite well:

As usual, yours truly,

The wielder of the Fiery Sword of Economic Truth, cutting through investment related Bullshit in a country near you!


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sgorem's picture

Bet ya China will be visiting the "Big, Fat Greek yard sale", with CASH by the way, Ports, etc.= Strategic position in the middle of Hell-ena......middle east, Mediterranean, OIL?

Caveman93's picture

Makes sense.

I use cocaine so I can work harder and make more money so I can ...use cocaine so I can work harder and make more money so I can ...

NewThor's picture

Adderall is a much wiser investment choice.


nah's picture

i think therefore i own

carbonmutant's picture

Greece won't be any more "contained" than subprime mortgages were in 2008.  Reprofiling is another word for default.

ebworthen's picture


Little different than the circular reasoning of all modern governments and economies, which reminds me of a phrase that occured to me the other night:

"three-dimensional Euclidean econometric masturbation"

I won't throw in any famous economists names because it takes more than two to engage in such high horsepower wheel spinning that the PhD's and TPTB are engaged in.  They arrive at their own conclusions.

We have reached the point where theory, policy, and binary machinations swing reality about their head on the end of a rope; rather than the other way around.


Ancona's picture

If Greece defaults, they will start an avalanche. This storm will circle the globe and take out a lot of businesses, pension funds and banks.

None of this looks good for us.

agent default's picture

Forget about rioting there will be blood.


NewThor's picture

You can have rioting and blood.

falak pema's picture

They should hang the ECB barons and the political bosses, as the TBTF banks, from the branches of the same tree...after due diligence and trial for gross negligence and collusion...obviously...Not that the future will be any rosier... but it does no harm to prune the rotten branches.

RM : what size of haircut are we talking about for greece? (% gdp).

Jasper M's picture

The profligate enslave themselves. WHoever ends up holding their chains is just an agent for what was, in essence, their own choice. 

Nothing To See Here's picture

Or is it? As Jefferson said, democracy is pointless without and educated and informed people, and that's what happened to the Western world. The elites took control of the brains before anything else. Thus it is not through fully conscious choices that peoples elect morons and slavemasters to power, but through ignorance and propaganda.

Ponzi Unit's picture

Yes, how else can you sell the 2003 Iraq War and trillions transferred to banksters?

A triumph of ignorance and propaganda, indeed.

aerial view's picture

The bankruptcy sale begins

Further enslavement of people continues

The thirst for power and control never ends

williambanzai7's picture

Who will benefit from this privatization bonanza? Hint: the same guys who make money doing parking meter deals in Chicago.

Commander Cody's picture

So, when the raping and pillaging of Greece is over, what is left?

tradewithdave's picture

There goes Reggie with his "new math" again.  Doesn't he know that the GAAP answer to the classical accounting question has always been the same.

Q:  What does two plus two equal?

A:  What do you want it to equal? 

Now that's old math. 

Dave Harrison

MarketTruth's picture

Ok, i'll say what many are probably thinking.

It is one big worldwide circle jerk. (They don't call him Ben Shalom BUKAKE for nothing).

As always, great work Reggie as your articles are always informing and well thought out.

topcallingtroll's picture

We can't default because default is unthinkable.

Yep..sounds logical.

Zero Govt's picture

circular reasoning (logic) works if it doesn't include reality

...sounds like the Greeks have got the message now though, they're soon to be flogging airports, islands, telecoms and sewage facilities (no shit!)

Herne the Hunter's picture

Reggie, nice to see you on VPRO's "Tegenlicht"... Which episode was that?