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Here Is Why A Voluntary Greek Restructuring Makes No Sense
While on one hand nobody can predict what the downstream effects on the European financial system will be from a Greek restructuring, and if Lehman is any indication, they would be quite dramatic to say the least, the biggest reason why Greece would likely never voluntarily initiate a pull out of the eurozone (which would mean an immediate default for all EUR-denominated Greek debt, which is all of it), comes courtesy of Credit Sights: "The reality from Greece's perspective is that if it unclear why restructuring would be a politically astute option. More than a quarter of Greek debt is held domestically - primarily social security (€28 billion) and banks (€31 billion), but even Greek households are holding €6 billion in short-dated securities. While those are relatively small amounts, we don't believe that asking those sectors to accept losses on their holdings of government securities would be a vote winner. What's more, Greece has the liquidity it needs until some time in 2013 thanks to the EU and IMF loan facility. There is €83 billion within Greece' EU-IMF facility that has not yet been drawn."
And along those lines a reader submits:
I'm convinced Greece is jealous that the portuguese got a much better deal. They want the same deal arguing that they have already suffered long enough... Monday they announce that Greece is getting better terms and we are off to the races... by early 2012 greece restructures debt.
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BITCHEZ TRICKED ME!
Unsecured Credit Card, B!tchez
Agreed:
http://coveringdelta.wordpress.com/2011/05/06/der-spiegel-reports-greece...
Greece wants to leave, and increasingly, Germany wants them to leave the EZ. Everyone survives. It just looks different. Currency, credit, interest rate risk. It worked okay, not perfectly 20 years ago. Same now. Banks get hurt. What the hell? They never fixed their problems anyway. Just do it already!
Greek pension system wiped out is not really "everyone survives."
They can't be given a sweetheart deal to switch out the Euro denominated debt for Lira denominated debt at some fixed rate?
Only fertilizer sales personages can truly value the quality of shit. Only another expert understands its value is still based on shit.
"Let me introduce you to my little friend, the Yuan."
The privately-held central banks are painted into a corner. There is no easy out.
But there is another way - if Greece defauts it can introduce a printed (and not borrowed) treasury currency. It can then refund all of the domestic debt with the new currency. Not without issues, but a default does not have to 'wipe out' domestic savers. There are other constructs besides the one we live in now.
+1 you win a cigar
But is it not possible that the government give them a bit of a heads up and they have been the ones selling and pushing yields higher?
They didn't invent the "SD" rating for nothing. Pension system lives - French banks get their face ripped off.
The right combination of haircut/coupon/maturity/credit enhancement/kicker and Greek paper catches a bid. You ladies act like there never has been a soverein default. Trust me - the solar system will not implode.
Speaking of sovereign defaults--see, e.g., Argentina. Domestic creditors first at the window, foreign creditors take a number and have a seat, get comfortable because you won't be called up any time soon. When the state is running its own bankruptcy court, it can run it by its own rules--including re-prioritizing creditors. "Senior" and "junior" are what the state say they are, not what's written in the paper.
A good reason to never touch state-issued securities. At least in private bankruptcies there is an effort to adhere to pre-established priority of claimants.
What you are overlooking is there has never been a sovereign default within the context of a currency union.
So either the Greeks have to suffer the consequences of excessive borrowing and live within their means or the rest of Europe (ie Germany) kicks the can down the road by issuing more debt, making the inevitable crash later on worse.
I believe I have heard this story before. It ends with inflating the bubble even bigger than before and debasing the currency.
"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
-Ludwig von Mises
Agreed. I think leaving the eurozone would help both Greece and eurozone. Same for Portugal, Ireland and Spain. It needs to be done quickly and after some turbulence it´ll settle down. Better than this long agony.
Does Greece really have a choice?
Do the Bilderbergs have a choice?
Bilderbergs had (GDP) Thanks.
Even though we all know that pulling out is inevitable at some point. Either that Felicity type haircuts.
"More than a quarter of Greek debt is held domestically "
which is exactly why a default/restructuring makes sense!
...By pension funds and citizens.
Sure. So what's your point? The debt is held by the populace which consumed more than it produced/collected in tax revenue for many years. Get a chart of the GDP less debt. The pain has to come at some point. Why not get over it now?
The point is the politics (as in getting reelected, avoiding riots, revolutions, etc.) and common sense never mix.
To your point, sooner or later they are going to go kick that can again and find that the sucker is filled with lead.
Exactly. From the libertarian viewpoint of TDs typical posts, im quite surprised with his comment above.
Might as well get over it now, no other real way to save the widows & orphans..
"You should assume that at all times we are so totally just talking our book it would shock and awe you like the unexpected, early-morning arrival of a cluster of BGM-109C Tomahawks (were you a believer in the importance of "optics" that is)."
From the ZH disclosure policy...
"The point is the politics and common sense never mix. "
"Exactly. From the libertarian viewpoint of TDs typical posts, im quite surprised with his comment above."
Is TD merely expressing common sense and not politics? It doesn't matter about your politics, we're all human. To say "get it over with now" like it's merely ripping off a plaster - discredits the magnitude of suffering such a move will bring to the people of Greece.
So youre implying the pain will be lesser to leave the bandaid on even though knowing full well the wound is not healing and only getting worse...
No politics just pragmatic thinking: to assume that Greece would voluntarily step away from the eurozone is tantamount to political suicide for the ruling party. That it is a rational act in itself is irrelevant although notable: when is the last time politicians did something to the benefit of their constituents?
Well....occasionally some of 'em finally leave the scene of the accident/fkup/crime (.....only to be replaced by another initiate, of course....)
This is also precisely why we our on our way Weimar style. Our government will never make the bondholders take a huge haircut...that would be a "voluntary" wipeout of the system as we know it: from pensions, to money markets, to everything.
But, yes, I know that isn't exactly news. Even Greenspan already admitted the only choice is to try to reflate. We know what road this will take us down....
Great point, hadn't thought of it that way. Somewhat related, I wonder if this is why states will never secede....being tied as they are to Federal dollars?
Depends on the state...the ones that at least break even re: federal tax payment versus federal allowance could leave without most of their citizenry even noticing.
they cant just draw the money down from the imf without making the severe cuts that the imf wants(austerity) or even more rightly the privatization of Greece national assets. you assume that the country can make it another year lololololol
IMF is the U.S.S. of A.
Maybe this is just a huge defend the USD operation... they got rattled as DXY went below 73 and decided to throw everything at it: bin laden, Trichet, COMEX margin hikes... and it's working a treat. They always win...
They always win...
Non-sense. They cannot beat gravity. Laws of nature will always, in the end, prevail.
The Russell 2000 top ten:
Human Genome -- No next years earnings
Tibco Software -- 27x next year earnings
Verifone Systems -- 23 x next year
Riverbed Tech -- 29x next year
Rackgate -- 51 x next year
Brigham Exploration -- 13 x (finally a reasonable multiple)
Acme -- 51 x next year
Tupperware Brands -- okay another not so bad 13x (but raw material costs going forward?)
Nordson -- 15 x for a shit company.
Okay, right. They are winning. The 2000 goes up every single day. Even yesterday it went down what, .42%! I'm guessing we won't hear CNBC call the real bubble: the 2000.
Silver by golly is a huge raw material cost with a rationale 35 oz. normalized target alone for just industrial production. If they thought it was a bubble at 49, I wonder what they will think north of 100, and how they will win this game?
Exactly, its the euro's turn for a downturn. Re-invigorating European drama long enough may reverse QE2 damage. At some point logic will come into commmodity pricing and this G8 game of ping pong will end. A troubled euro will not erase usd inflation.
Voluntary Restructuring doesn't work in a "Culture of Corruption"
lol, nail on the head.
Yes, you can drag along...But this is no solution... Look at their Aegean competitor, Turkey is doing find with it's own currency and sovergnity..
Some suffering will follow anyhow...
dueling headlines.
Unlike a corporate bankruptcy there is really no method to ensure everyone gets the same treatment post a default. Why can't they simply offer citizens and their own pension fund much better restructuring terms?
That's exactly what I was thinking...who says all debt holders have to be treated the same and more importantly who would enforce anything like that. It seems to me these days there is no rule of law anywhere anymore. The politicians and the banksters just make it up as they go along.
Big banks holding CDS on Greek debt will be the big winners.
They could be pressing Greek politicians to take this road.
The elite have everything to gain - buy up all Greek assets for penny on the dollar.
Who sold the CDS?
AIG? They learned their lesson and don't sell CDS on CDO's anymore. Only safe sovereigns
AIG = USA, good luck!
You both had good comments!
TD : three posts on Greece + one on EUR/USD linked with Greek debt. Overdoing the pitch and zig zagging a bit. But this last post is nearer the truth IMHO than the earlier ones. Sometimes ZH shoots from the hip...not complaining as it makes "hot off the press", exciting reading...just saying.
When has a denial from any eurozone that things lead to something good? Every denial, no bailout, everything is fine all got fucked. Why would this time be different.
Fridays after they close over there is perfect time to release the news, deny and come back Sunday night and say guess what..,!!!!
How are th Greek bonds gonna do?
The only real solution is exit as any other consideration is nothing but smoke and mirrors. You will know when the get serious about fixing the matter when the impose fiscal controls and leave the constraints of the Euro. There is nothing that says they would have to default on the debt held by local banks or citizens. Credit Sights is taking the foolish creditors position versus what the masses will eventually dictate.
Why don't they exit EZ and link the new currency to Gold? Ay,,,,Oh!!!!
Hmm. Greece has 111 tonnes.
http://en.wikipedia.org/wiki/Gold_reserve
Approx $4.5bn at current prices.
Nowhere near enough to cover the amount of "New Drachmas" they will need.
Perhaps they could back their new currency with islands?
forget all that, here's where its at.
http://www.spiegel.de/international/europe/0,1518,761201,00.html
German exports were down, its feasable that the government leaked the story to provide a catalyst for Euro weakness in order to goose German exports.
GREECE POTENTIALLY LEAVING?!?!? say it isn't so, 57 years of hard work down the drain!?!?!?
Greek bailout BS it's bankster bailing out bankster at the expense of the worker. The Banks committed the fraud . The banks made the bad loans and took fraudulent bonuses . The Banksters got tax payer bailouts and took back the collateral the wokers are getting stuck with the bill from a dozens of diferent scams .
This doesn't not sound like a bad dream.
Spiegel sells populist rara; it doesn't matter what the masses want, in EU or US.
Greece is leaving EU/EUR no more than California is leaving US/USD.
Rara is on, not suicide. Move on.
Back to your chosen "asset" game-boy platform.
The standard prescription for deadbeat nations is default and devaluation. A change in terms may be the outcome. An exit from the EMU is at least as probable.
The World's Largest "deadbeat nation", USA, will default before Greece leaves EU/EUR.
Clarification is highly likely this weekend. Either there is a restructure of terms or capital controls are implemented pending EMU exit.
those who get "wiped out" yet whom greece does not wish to wipe out will be issued new slewie zH bonds for a deal w/ the public "employees" union for a small % of workers to go home, & get pensioned. greece, or any nation can augment an "austerity" program @ any time. it is called a balanced fuking budget. no new debt? let the private sector handle that, ok?
now, if the goobermint can't do this, the goobermint employees can kick down to stay in business. cash "donations" from their paychecks. they can pay the taxes on the money they're donating, too. this ain't no charity! we might, amazingly, find that these dedicated workers/public savants start figuring ways to save money, rather than spend money, while leaning on their shovels, polishing their boots & guns, and jingling their fuking cell keys.
this is a solution to a near-universal problem of essentially-bankrupt nations playing kick the can and pay us while we destroy you and enslave yer unborn with debt.
with the pi-rat logo on those new drachma bonds, and the new pi-rat austerity, the euro and the imf can go. fuk. themselves.
RICH Economy step 1:
Offer a prize of $50,000/year to any worker that designs a
machine/software/process that will replace him/her.
Offer an additional prize of $30,000/year to ALL OTHER WORKERS that get replaced.
Answering conservative objections:
1. A machine works 24/7, thereby tripling output immediately.
2. Machines do not take sick leave.
3. Machines are never late for work.
4. Machines do not form unions and constantly ask for higher wages and more fringe benefits.
5. Machines do not take vacations.
6. Machines do not harbor grudges and foul up production in sneaky, undetectable ways.
7. Cybernation was advancing every decade anyway, despite the opposition of Unions, government, and other Alpha males; it was better to have huge populations celebrating the reward of $30K to $50K/year for group cleverness than huge populations suffering the humiliation of welfare.
8. With production rising due to Cybernation, consumers were needed and a society on welfare was a society of very meager consumers.
The majority of the unemployed, living comfortably on $30k/year, spent most of their time drinking, smoking, engaging in primate sexual acrobatics and watching TV. When Moralists complained that this was a subhuman existence, Hubbard answered, "And what kind of existence did they have doing idiot jobs that machines do better?"
-- R.A. Wilson
Does anything these days make sense?
Why would they take losses? they could exchange their current debt for 100 year 1% coupon debt and hold them at par, so no losses. Non mark to market accounting is stupid, but real.
I suspect that from the Greek perspective, they're screwed either way - either the foreign bankers own their asses forever in debt servitude, or they are broke but free. I know which I'd choose - in a heartbeat.
Molon labe, foreign bankster bitchezz!
Greece has a history of defaulting. They're just trying to figure out whether to restructure in 2012/2013 while staying in the Euro, or default now and leave the Euro. Personally I'm all up for new drachma's!
Years ago I acquired a 25,000 drachma banknote.
Being young and naive at the time I thought it might be worth something.
Or they could just sell Crete to China.
All along we have seen the Greek theater of putting off any serious restructuring, just rolling debt over and over in order to avoid pain. How long is this been going on?
At some point the Greek debt is worthless so the Greeks may as well leave the EU. Stay or leave is no difference for Greeks or what remains of EU. The other countries are either broke or on the way.
Peeps say the Greeks (or Irish or French) cannot leave the Eurozone b/c the vending machines won't work or some other silly reason but events of the past year and a half have excavated the reality that there is no 'Eurozone', only a collection of bureaucrats who live in a fantasy.
The PIIGS' fantasy was that they could borrow their way to prosperity, Germany's was that they would have a perpetual and subservient customer base. The fantasy of the whole that a Euro version of the USA would emerge without sacrifice, without the culture, the hot- dogs, the NASCAR, the street crime ... and without the Federal Government.
The EU was kaput the instant Greece went to Brussels with its hand out and got a 'fake' bailout. Now Greece wants a better version but there is nothing to give. The EU is a debtor, the 'members' strive to climb the mast of a sinking ship. It's not just Greek debt that requires restructuring, ALL the debt needs restructuring ... ahead of the fact of the ongoing 'automatic restructuring' that the same EU attempts to hold off with all its might.
Nobody over there will face the music just like Americans refuse to face the music. It's not just the European version of America that is bankrupt but the American version that it's modeled upon. Nobody wants to rock the boat, to give up anything, to lose the chance @ 'winning' in the casino, to abandon fake 'luxury' or to miss the 'ship, when it comes in, any day now' ... The outcome is that nobody gets anything, that the the most devastating outcome for the greatest number is most likely, the end result is a continental version of Detroit with better ruins.
They want the gold! It doesn't matter what country if you have it they want it. I don't care if you are a trader or holder or bear it is pretty obvious that gold is being sought, bought, smuggled and stashed.
http://tiny.cc/z8v4p
http://www.expatica.com/de/news/german-news/portugal-should-sell-its-gol...
http://eyugoslavia.com/featured/06/a-new-scheme-to-be-held-out-by-europe...
And:
With the Dollar in Turmoil, Two Debates on Gold Captivate Manhattanhttp://www.nysun.com/national/amid-a-collapsing-dollar-two-debates-on-go...
Tell 'em "FUCK yEU"! Greece!!!!
i posted this comment on two more articles here at zerohedge
so... here is Greek reality...
hello i am Greek.
I am a real estate developer (with no loan obligations) and even now in the so called greek-crisis i am building 5 apartment buildings, 1 office building and 2 holiday-residence complexes.
PLEASE listen carefully what i have to say about Greece.
Greece is one of the poorest countries but the Greeks (as an average) are very wealthy.
I am not talking about wealth being happy, healthy and so on.
Greeks (as an average) own more real estate that any other,
They do not rely on lending as much as other eauropeans or americans
They have gold (especially english gold pounds) that no average european or american has
I am not saying they are good people or that they have a lot of exports i am just saying they are wealthy.
However the wealth they have you cannot find it anywhere because it is no declared anywhere.
My friend that works for 850 euros per month has 4 acres of land outside the city near the sea, 24 gold coins (worth 6000 euros) he got as a gift from his family on the day he was born 25 years ago, and his own apartment he bought with no loan for 230000 euros (i am not talking about what his family owns but what he owns). How can this happen? he gets his 850 euros, he has a second job (as a plumber-not declared) that gets him another 850 euros (where he pays no taxes-poor Greece), he has a farm in the 4 acres that gets him minimum 1000 euros (from selling produce) also not declared anywhere (so he pays no taxes-poor Greece) and some times (3 or 4 times per year) he earns another 2000 to 2500 euros doing part time jobs (like waiting or plumbing in hotels in summer-not declared and tax-free ofcourse). So he gets 10200 from his day job thatbecause in Greece until 12000 income you pay no tax he is tax free and 25000 euros from the rest that are tax free. so with a clean income of 35000 spending less that 9000 per year (no rent or mortgage) say 10000 with his vacations (health insurance and so on have been discounted from his 1050 euros pay giving him 850 euros) he gets 25000 euros in his bank each year.
That is why greek people are rich but Greece as a country is poor. The example i gave you can happen in smaller numbers (however not vry often) but at the most of time can be really magnified in case we talk about doctors, lawyers and so on that make with the same method (these are real - calculated numbers) 200000 euros at least but they declare 12000 geting away tax free.
sure there are poor people and rich people like any country, sure there are people loosing their homes to the banks like every country.
But as an average believe me
Greeks are wealthy.
So whether Greece leaves Eurozone or not, whether drachma comes back it doesnt really matter.
All that matters is that the Banksters (Rothchilds and the gang -imf fed central bank of Greece...all properties of the same families...Rothchilds and the gang) come and get Greece for a fraction of what it really costs. It is happening and it will continue to happen and the Greeks will beg for it to happen so that they continue to have theur 25000 at their bank accounts each year because they do not care what happens to the railway stations, the ports, the energy/water companies. They may even give them free like we did with Meganisi Island that the Rothcilds bought to build homes for the super rich just a cople of months ago(they bought land with value 60 mil euros for 6 mil euros).
To sum up...
do not worry about the Greeks just worry about Greece (but why should you-Greeks don't) and wahtever you do always remember it does not matter what you feel or what you do you are not in control no one except a few, very very few people are and what they want will happen and you DO NOT know what will hapen NOONE does. You just guess.