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Here Is What Happens After Greece Defaults
When it comes to the topic of Greece, by now everyone is sick of prevaricating European politicians who even they admit are lying openly to the media, and tired of conflicted investment banks trying to make the situation appear more palatable if only they dress it in some verbally appropriate if totally ridiculous phrase (which just so happens contracts to SLiME). The truth is Greece will fold like a lawn chair: whether it's tomorrow (which would be smartest for everyone involved) or in 1 years, when the bailout money runs out, is irrelevant. The question then is what will happen after the threshold of nevernever land is finally breached, and Kickthecandowntheroad world once again reverts to the ugly confines of reality. Luckily, the Telegraph's Andrew Lilico presents what is arguably the most realistic list of the consequences of crossing the senior bondholder Styx compiled to date.
What happens when Greece defaults. Here are a few things:
- Every bank in Greece will instantly go insolvent.
- The Greek government will nationalise every bank in Greece.
- The Greek government will forbid withdrawals from Greek banks.
- To prevent Greek depositors from rioting on the streets,
Argentina-2002-style (when the Argentinian president had to flee by
helicopter from the roof of the presidential palace to evade a mob of
such depositors), the Greek government will declare a curfew, perhaps
even general martial law. - Greece will redenominate all its debts into “New Drachmas” or
whatever it calls the new currency (this is a classic ploy of countries
defaulting) - The New Drachma will devalue by some 30-70 per cent (probably
around 50 per cent, though perhaps more), effectively defaulting 0n 50
per cent or more of all Greek euro-denominated debts. - The Irish will, within a few days, walk away from the debts of its banking system.
- The Portuguese government will wait to see whether there is chaos in Greece before deciding whether to default in turn.
- A number of French and German banks will make sufficient losses
that they no longer meet regulatory capital adequacy requirements. - The European Central Bank will become insolvent, given its very
high exposure to Greek government debt, and to Greek banking sector and
Irish banking sector debt. - The French and German governments will meet to decide whether (a)
to recapitalise the ECB, or (b) to allow the ECB to print money to
restore its solvency. (Because the ECB has relatively little foreign
currency-denominated exposure, it could in principle print its way out,
but this is forbidden by its founding charter. On the other hand, the
EU Treaty explicitly, and in terms, forbids the form of bailouts used
for Greece, Portugal and Ireland, but a little thing like their being
blatantly illegal hasn’t prevented that from happening, so it’s not
intrinsically obvious that its being illegal for the ECB to print its
way out will prove much of a hurdle.) - They will recapitalise, and recapitalise their own banks, but declare an end to all bailouts.
- There will be carnage in the market for Spanish banking sector bonds, as bondholders anticipate imposed debt-equity swaps.
- This assumption will prove justified, as the Spaniards choose to
over-ride the structure of current bond contracts in the Spanish banking
sector, recapitalising a number of banks via debt-equity swaps. - Bondholders will take the Spanish Banking Sector to the European
Court of Human Rights (and probably other courts, also), claiming
violations of property rights. These cases won’t be heard for years. By
the time they are finally heard, no-one will care. - Attention will turn to the British banks. Then we shall see…
h/t Anthony
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When the Fed-Bernank Ponz Runs Out
Just insert US for Greece:
Any questions?
7. 15 states (Ariz, Texas, Utah, Tennessee, Kentucky, Idaho, Montana, Wyoming, Georgia, N. Carolina, etc.) secede.
8. Civil War II begins.
Texas and Tennessee currently have some of the most oppressive law enforcement abuses, Bill of Rights violations, seizures of property, seizing cash from motorists, etc. of any states in the union...
Without nary a whimper... Mister 1 week newbie...
Can someone ask ORLY to answer my eur/gbp question?
I thought I did that...
#1299469
But you should answer mine, too.
Are you suggesting that the risk-off trade is going to cause a flight to safety and out of the carry? Do you mean that the risk-off trade is going to crash commodities, including gold and silver?
If both of those things happen at once, the moves over the next few weeks in the yen are going to make the moves last week in the Euro look like a blip...and the teens are going to make the twenties look like the fifties.
:D
Absolut Athens:
http://coveringdelta.wordpress.com/2011/05/22/absolute-athens/
Absolut Athens:
http://coveringdelta.wordpress.com/2011/05/22/absolute-athens/
I want to know when I can start throwing molotov cocktails into my local J.P. Morgue "Chase the taxpayers money" branch?
I would consider it an act of patriotism and protection of the Constitution.
The Irish are way ahead of you:
http://www.bbc.co.uk/news/uk-northern-ireland-13492313
Pot calls kettle black:
-------------------------------------------
NI's First Minister Peter Robinson condemned those responsible and said they had nothing to offer society except "death and destruction".
-------------------------------------------
Wait! Maybe he was referring to the banksters.
We can joke all we want, but this IS the most likely scenario. We're probably going to see this happen in the next 18 months or so. And then we'll see it play out again in America. When that happens, life as we have known it will change forever!
BE PREPARED!
Good analysis.
"....so it’s not intrinsically obvious that its being illegal for the ECB to print its way out will prove much of a hurdle..."
Exactly. As Jim Sinclair suggests - QE to infinity. And his concept of the "violent euro" fits well with a reintroduction of the drachma.
But don't think that SHTF is off the board for the UK too.
http://www.fgmr.com/serious-problems-ahead-for-the-british-pound.html
By the by, does anyone know what happened to Ambrosius Evens-Pritch-hard? He seems to have disappeared off the face of the earth. Last telegraph article of his was march or April.
His last post suggested he was taking a sabbatical to 'the Mayan uplands'. I wouldn't put it past him to have seen te writing on the wall, put his money where his mouth (or pen) is, and moved himself and his family to a self-sufficient ranch in South America. With his life saving in auric form.
It is certainly a tempting plan to evade the coming European shit-storm.
Oh great, thanks for the info. I had speculated illness (wouldn't have wished him that) or that he got fired for the pieces like "abolish the federal reserve". Or he got pissed off with the hundreds of dumb-ass comments that got posted on each of his articles. Most curious that nothing has appeared in the Telegraph. The Blackrock hedge fund manager who turned farmer got good publicity.
South America sounds good - Uruguay? Doug Casey has moved to a luxury ranch in Cafayate (North Argentina).
I guess it has to be gold
Well, well.....
and again this must be exceptional good news for the Norwegian taxpayer.
Jumping from a Greek default to a complete Wipe-out of the Spanish Caja's
will result in 800 billion NOK haircut for Norwegian SWF or roughly one years' state budget. Nobody....NOBODY could have seen that coming.
It's not a secret that besides Greek confetti our Norwegian financial wizzards love the Spanish banking industry.
Thank you mr. Slyngstad for chasing "the high yield roller-coaster to hell".
Also, special thanks to our politicians for making this happen.
LMAO
The solution to a small problem such as losing one year's Norway state budget is to raise VAT from the present 25% to 30%. You will love 30% because even after the Greek Haircut there will be enough money to pay nice psychiatrists and pretty nurses to make sure, if you have any doubts as to the wisdom of 30%, these doubts are dispelled and you leave hospital loving the government and grateful for all the good things done for you.
*probably scouting a bugout shelter
Many thanks - just saw this after I replied to Daedalus
Is it not funny that the Telegraph NEVER speaks about exposure of BRITISH BANKS and the CITY OF LONDON to Greece, Spain or Ireland ?
Why do they constantly talk only about French and German banks, eh ?
The country most exposed to a possible Irish default is BRITAIN, my friends.
And as for Greece:
Deutsche Bank this year is supposed to make profits of $15 bn, while its exposure to Greek bonds is around a mere $1.5 bn.
So they can pay this bond default out of the "Kaffeekasse" (lit.: register for coffee expenses), which is colloquial German for describing the small commonly used purse where here in Germany with a small business everybody from the workforce in a company is paying in to pay for coffee, it's our proverb version of your "peanuts".
Here's a nice overview over the intra-european crossborder bond exposure dependency network:
http://www.ft.com/cms/s/0/c4b5f456-ee7e-11df-9db0-00144feab49a.html#axzz...
Yeah,time for the Handelsbladd to publish a rebuttal. The German financial press is just too damn tame
I'm waiting for the UK to default with a Scottish declaration of independence as the excuse.
Doubt that any publication in the US or UK would dare to upload a piece like this
http://www.faz.net/s/RubB9F638BB4E3A44949DD29BE54AD9AE55/Doc~E89B195E6E4...
Coincidental with the Greek default / Spanish protests. Or calling the PM-top in Euro already ?
Telegraph can not be printed or go online without at least one article about Euro being doomed. On another hand, as the sterling pound is one of the worst value keeping fiat currencies around, throwing mud on the neighbours is their only choice of action.
While its CDS exposure is ... ? And German banks' net exposure figures are works of art in general, no? Moreover, why did Ackermann go to Ecofin and howl about how "you must save everyone" if Deutsche is so very safe from PIIGS default? Was it purely out of public spirit?
This is almost certainly true.
I'm loving this, hope you all are too :)
Just sit back, watch the carnage and (really) enjoy.. Reality TV just can't beat this considering there's no better cast of characters (politicians, bankers, central bankers, public sector in general) i'd rather see get kicked repeatedly in the bollocks in a farce of their own making after decades of living like spoilt brat Divas
...nothing could possibly cheer me up more in a recession, makes it all seem absolutely worthwhile :)
...and a round of applause for capitalisms Grim Reaper please, what a fantastic bloke he is, respect.
UK is not going to go bankrupt due to two factors:-
1. Money printing, stopped for now, but will restart at the drop of any mishap.
2. "Inflation" - blamed by politicos on "speculators" , "China" others - but is mainly to do with factors such as VAT tax increase (Government) and resource tax (duties on oil), again govenment is the key cause.
3. Spending cuts are locked in, and due to start (proper) NOW. This means 250,000 public sector are going to get binned in the next four years.
4. There is recognition that the economy needs to re-balance - a) To manufactoring type jobs (which will be lame, as its a small sector) and more importantly b) from Govenment jobs to private sector jobs.
This is all happening NOW, and will mean we become richer, or more accurately less in debt than we are currently.
Of course, none of this is any "fun" and we will all be feeling very poor for the next few years for sure.
Once again, thanks again Gordon! (note, no backers from Britain for you IMF job application).
Economy will be saved by printing money to re-inflate ridiculous housing bubble?
Hope really springs eternal.
But they will honor my 100-year Greece bonds yielding 99%, right? Oh Crap, I bet my ant farm on those coupons.
the es will be up 80+ before 6pm est and never look back.
it will take a Natzi party sceanerio before any rality or justive is served on the world financial markets.
Global credit crisis pt 2? my default target of 16-17% has been lit like a fuse. Now back to Jerseylicious..
NO ONE is honouring anything - thats the whole point.
A debt that can't be paid won't be. In the UK's case we have picked "inflate away" the debt - we did this in the 1970's during the secondary banking crisis, and we have picked it again today.
It "works" - but obviously if the 1970s is a guide then you get faced with stagnant / declining economy / living standards.
Part of the calculation is the whole West + Japan is bankrupt in all but name. PIIGS are just more public domain and worst cases.
UK has decided I think that who ever cuts / inflates away first will be the winner, or more accurately the least loser.
..you calling £6bn a "cut" or "austerity" in a £160bn budget deficit still adding to the national debt?!!!
..let's be crystal, all these turds have done to date is windbag about cuts... the entire public sector, 4 years into recession, has done precisely fuk all but spend, spend, spend while posturing about "cuts"... these political parasites have also continued adding to the pain in the private sector by hiking their taxes and VAT and increasing the payments to the corrupt useless pigs of the EU
Westminster is the shit hole of the country ...Guy Fawkes is the only person in British history that knew what was best for the place
Zero Govt - I think the public sector is living in a dream world. But my point is that the REAL cuts are called Government sponsored INFLATION, 90% of which is in the form of stealth tax. Existing debts get devalued also.
The rest of the cuts program is about holding existing spending at least steady. Anything else is a "bonus".
On the Parlament thing, not sure I want it blown up myself. I think voters in the UK should take some responsibility and when someone says "I have ended boom and bust", "I have spent billions" , "I have save the world" or has a name like Tony Blair the we should see through them and get rid of them. One thing is true that Parliament was, and still is covered in SHIT due to the expenses scandal. Britain had NO serious economic problems in 1997, a time when many in the population had decent savings. How many can say that now ?
wait until Italy goes broke , Italy is the biggest of them PIIGS and will definately bring down the whole EU with it
"Wait until Italy goes broke, Italy is the biggest of them PIIGS and will definitely bring down the whole EU with it"
Yep but Italy's one of the largest private owners of gold on this planet... ;-)
Unlike Spain who went gung-ho into the turbo-capitalist crap (own several houses and cars, grow GMO's if you're a farmer, the "quickest possible buck" shall be your motto), Italy hasn't forgotten its rural roots. Like "don't chew more than what you can eat"...
you guys make this out as being too difficult. the solution is easy, but the bankers don't want to allow it. the insolvent banks get the money for depositors paid back with freshly printed money. the bond holders loose. the banks not insolvent to the point where they can't pay back depositors. things run fine, recovery happens now. Iceland is the model.
the only reason it hasn't happened is because the bankers will implode the market themselves to make sure it can never happen again. kinda like lehman. the people who have a vested interest in making sure there are endless state bailouts have the power to freeze up the market.
there should be not greater logic than above for the reason the entire western capitial structure needs to be changed. If after lehman we haven't leanred to make the system stong enough to deal with a sovreign default, then once more governments and regulators failed to do their job.
Disband all banks.
Hang all banksters.
The world will become such a wonderful place.