Here Is Why Greece's 12 Year Reopening Earlier Was A Failure

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Wed, 03/31/2010 - 00:39 | 281357 knukles
knukles's picture

Well, accuse the folks in capital markets of being thieves, threaten retribution when they just do their jobs, and sooner or later, they'll believe your screed.  

They'll act like you expect them to, and you'll pay more.

Duh.

God Bless John Wayne.

Wed, 03/31/2010 - 02:24 | 281397 williambanzai7
williambanzai7's picture

This is truly a Faustian bargain.

The CDS market provides the liquidity necessary to  satiate the cash appetite of a basket case like Greece. Liquidity that in a moment's notice can vanish and send the whole edifice crashing.

Is it better to have a less liquid market with punitive debt origination costs for undisciplined  borrowers like the PIIGS and California? Isn't a reduction in access to debt capital for Greece a better outcome? That is what appears to have happened as a result of the CDS witch hunt.

Wed, 03/31/2010 - 09:30 | 281494 boooyaaaah
boooyaaaah's picture

<<>>

This really is a problem.
You have to find a buyer.
Same with naked short selling --- forced to find a borrow before you sell.

The problem has been with us for centuries. Selling something you don't own is so much more convenient.
The Brooklyn bridge for example.
Kings could do it.
Just printing money for the good of the peasants.
Unbalanced scales in the ancient market place sure increases needed sales.
And everyone needs sales.
Yes and so what if the Greeks are crooks --- the object now is to help them.
And the best mosst convenient way to help a crook is to hire a crook.

Wed, 03/31/2010 - 03:01 | 281406 A Man without Q...
A Man without Qualities's picture

It is almost as though Greece is trying to push the market against them so they can say that unless they get a direct loan from the other EU member states, at the rate they borrow, the interest expense alone will kill them.

The other member states need to wise up and stop assuming the Greeks have changed their ways - they are still trying to game the system, in my view.

Wed, 03/31/2010 - 06:17 | 281429 Mr.Kowalski
Mr.Kowalski's picture

Now that is how to muck up an auction !! IMF by the Ides of May I'll wager. Surely the Greeks must know The End is near.. and they're right. The real party starts when IMF money is burned thru by year's end.

Wed, 03/31/2010 - 06:21 | 281430 Mr.Kowalski
Mr.Kowalski's picture

WilliamBonzai: "Isn't a reduction in access to debt capital for Greece a better outcome?"

Better than 3/4ths of Greek debt is owed to foreigners.. if they refuse to lend and the Greek economy crashes, whats to stop Greece from simply defaulting on a few hundred billion in debt, triggering another 70 billion in CDS', and watching their own banks (and their foreign debts) crumble, and setting off a crisis in EUtopia ??

 

Wed, 03/31/2010 - 10:29 | 281561 williambanzai7
williambanzai7's picture

Sounds like the club AIG should have waved at its counterparties in 2008.

Wed, 03/31/2010 - 06:26 | 281432 ZimbabweBen1991
ZimbabweBen1991's picture

Are you drowning in deficit and is you cannot pay your entitlement programs?  Are you facing riots in your streets and blame CDS speculators for your own stupid spending and borrowing habits? Are you tired of austerity cuts?Well have no fear call 1-888-IMF-CASH to get a bailout oh I mean "loan" to fix all your problems! We at IMF CASH have given cash to needy nations in Africa and that has worked fine and we helped Iceland too. At IMF our goal is to give you money to continue spending like drunken sailors. You have unfunded gov't pensions? Paid. Got deficits above 12%of GDP? Balanced budget. So call 1-888-IMF-CASH. That 1-888-IMF-CASH! Call now you will get a second package with nostrins attached. At IMF CASH we have a great history helping third world nations get of their feet. Call now and get your nation back on track!  Results may vary

Wed, 03/31/2010 - 08:23 | 281459 HumbleServant
HumbleServant's picture

That's pretty funny ZB!

Wed, 03/31/2010 - 10:31 | 281552 williambanzai7
williambanzai7's picture

Do I have your permission to turn this idea into a cartoon? :-)

Results may vary...

 

Wed, 03/31/2010 - 14:43 | 281969 ZimbabweBen1991
ZimbabweBen1991's picture

sure you can do a cartoon on IMF CASH. no patents here lol.

Wed, 03/31/2010 - 12:29 | 281757 carbonmutant
carbonmutant's picture

What a way to start the morning...

Wed, 03/31/2010 - 07:50 | 281442 ZackAttack
ZackAttack's picture

Funny how governments are allowed to control the language of the debate... if it happens somewhere else, they're "bond vigilantes" serving a useful purpose of policing runaway deficits. But if it happens to you, they're "evil speculators" denying you access to the credit markets.

Wed, 03/31/2010 - 08:51 | 281472 jedwards
jedwards's picture

I thought they learned the first time that the Easter Bunny is not their friend... he's shorting the fuck out of Greek bonds!

Wed, 03/31/2010 - 08:56 | 281474 john_connor
john_connor's picture

TD,

Does this kick off the shitstorm on the Titus SPV?

LONDON (MarketWatch) -- Moody's Investors Service cut the ratings of five of the nine Greek banks it covers -- National Bank of Greece /quotes/comstock/13*!nbg/quotes/nls/nbg (NBG 4.04, -0.07, -1.70%) , EFG Eurobank Ergasias, Alpha Bank, Piraeus Bank and Emporiki Bank of Greece -- and said the outlook on all five lenders is negative. "Rating actions were prompted by the country's weakening macroeconomic outlook and its expected impact on these banks' asset quality and earnings-generating capacity. Pressures on the macroeconomic fundamentals have been evident for the past year and are expected to intensify as the year unfolds," the rating agency said.

Wed, 03/31/2010 - 09:09 | 281480 Leo Kolivakis
Leo Kolivakis's picture

Thank those good folks at DB for explaining to all of us the virtues of CDS, and showing Greece that "we got you by the balls".

Wed, 03/31/2010 - 12:31 | 281761 carbonmutant
carbonmutant's picture

"A trap is always preceded by one's own choice of entrance."

Wed, 03/31/2010 - 09:53 | 281510 TheMacroView
TheMacroView's picture

This has only highlighted that the "pledge of aid" by Europe to Greece is a load of crap. Germany knows it, and now its become very clear that the market knows it too.

The Macro View

http://themacroview.wordpress.com

 

Wed, 03/31/2010 - 09:55 | 281513 ZackAttack
ZackAttack's picture

Greece (and formerly, Germany, right?) selling those $USD-denominated bonds has to be the ultimate contrary indicator.

Wed, 03/31/2010 - 10:07 | 281526 jm
jm's picture

I've been discussing this issue of inverted CDS curves with Professor Pinch at his blog: 

As soon as a sovereign CDS curve inverts, the entity should immediately default.

Experience showing that the only thing to be gained from dickering around further is an interest burden that reflect de facto default anyway, no?

Wed, 03/31/2010 - 10:14 | 281535 asteroids
asteroids's picture

OPA! I hear dishes breaking everywhere.

Wed, 03/31/2010 - 10:24 | 281547 Return2Sanity
Return2Sanity's picture

Serial Arsonist: I need you to loan me some money to buy a new house...no asking what happened to the first five houses I bought...and no buying fire insurance behind my back...hello...anyone there? Why are you all running away from me?

Wed, 03/31/2010 - 10:37 | 281566 1fortheroad
1fortheroad's picture

And here I was wondering why the EUR/USD was up this am. Boo-yah

Wed, 03/31/2010 - 16:15 | 282150 jippie
jippie's picture

I agree with your view that CDS traders can't be blamed for Greece's crisis and many other things. But the DB article is not as convinicng as you make it sound.

It doesn't talk at all bout the providers of CDS, and their interest. Let's assume for simplicity there is a fixed number of suppliers (sellers of CDS). If we ban naked CDS that means there is less demand for CDS. This will lower prices for people with real insurable interest! The complete opposite of what you highlighted as bold in the text above:

Against this background, a ban on naked CDSs as currently called for by many EU politicians would be counterproductive. Any CDS seller would be forced to find a buyer who is able to prove a hedging interest. Besides the difficulty to impose a uniform ban across all jurisdictions, such a measure would be associated with a considerable reduction of the liquidity and efficiency of the market. This would affect especially those who have an insurable interest. It would be harder for them to find a counterparty and they would have to accept higher costs.

That sounds liek complete BS. Similar to the arguments put forward in the case for HFT trading.

It get's frustrating to hear the arguments for any financial instrument (or "innovation") to be labelled as making everything more efficient. That argument completely ignores the increased systemic risks introduced by higher complexity, interconnectivity and self-reinforcing behaviours. There is a reason why we put up Street lights, and Stop signs in cities. To make it less efficient, but avoid excessive risks!

It seems strange that zerohedge puts articles like the Rickards interview (http://www.zerohedge.com/article/ltcm-general-counsel-us-stared-near-cat...). Or the various Taleb pieces. Yet at the same time promotes articles like the one above which may be right in this particular instance but obscure the fact that overall CDS markets are not needed. We will live happyily without them, without increased systemic risks. Overall Financial services are rent-seekers that should facilitate transactions. The fact that they capture 40% of profits (in the US) is a sad fact that the rewards for risk taking are not going to the people actually taking the risk (i.e. setting up business, inventing things, sacrificing consumption, etc.). All these derivatives in the end do is capture more rent for financial intermediaries. Yes tehy enhance "efficiency" in most cases, but at what cost?!

One should always remember to asses the counterfactual. Would we really be worse off not having all these efficiency introducing derivatives? Go back in history and compare?!

 

Mon, 04/12/2010 - 05:05 | 296130 mark456
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