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How Likely Is Greece to Default? It Would Be a Downright Miracle If They Didn’t! Numbers Don’t Lie, Although Some Sovereign Reporting Agencies Do! Let’s Walk Through the Math…
I’m going to cut to the chase here and skip over the theoretical
mumbo jumbo that has been thrown around the apparently untenable Pan-European Sovereign Debt Crisis.
Greece suffers from several things that, which combined and viewed from
a historical perspective, has little or no precedent in terms of a
country pulling itself out of without default (economic default, as in
not paying your bills as promised) – at least to my knowledge.
Lies have been told, retold, and are continuing to be told!
It has been caught misrepresenting the economic condition of its
county so many times in the very recent past that it has lost
credibility with the markets. This string of misrepresentations (a very
polite way of saying lies – after all I can come out and tell the truth,
this is a blog, isn’t it?) are actually ongoing. See Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse! and Here Comes Those Pan-European ‘I Told You So’ Again, Greece Busted Number Fudging for the nth Time:
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 post “Greek Crisis Is Over, Region Safe”, Prodi Says – I say Liar, Liar, Pants on Fire!…
The numbers above represent the projections that Greece used to get
the bailout package. Notice how optimistic they are in relation to the
EC’s overly optimistic numbers. They will most assuredly not be hit
without a very large swath of luck.
The sheer amount of debt to be refinanced is untenable,
particularly considering the interest rate environment and Greece’s
current and potential near and medium term economic output.
We have undertaken the brute force methodology of going through all
of the outstanding Greek bonds and calculating the interest and
principal due. It doens’t look pretty, nor possible – that is at least
without a haircut to investors. (Professional and Institutional level subscribers (click here to upgrade) may access the live spreadsheet behind the document by clicking here (scroll down after for full summary, spreadsheet and charts).
Eventually, Contagion and the Need for Greece to Choose Between Foreign Investors and Its Populace Will Come to the Forefront
?In addition, the Negative Feedback Loop from the other
PIIGS nations in heavy debt (ie, Ireland and its “overbanked” situation,
see Many Are Still Underestimating the Damage That Can Be Done By Ireland’s Bank Troubles
and Portugal) will simply reinforce the pressures on Greeks. This
pressure will both test the resolve of the government’s will to follow
through with austerity measures that will most assuredly push Greece
into an economic slowdown, recession or possible worse – and test the
resolve of Greece’s populace to force the Greek government to take the
country’s people’s side over that of foreign investors. Something’s
gotta give. In the end, when it boils down to foreign banks, bankers and
investors and your own people, who do you choose? We have taken the
time to explicitly outline this conundrum and potential daisy chain of
socio-economic and financial contagion in our proprietary global financial contagion model:
This negative feedback loop will damage the most
vulnerable sovereign nations the most, with Greece close to the to top
of the list.The math behind Greece paying its debt in whole, in time, and at
prevailing – or even bailout subsidized market rates just doesn’t pan
out! Hasn’t anybody besides the research staff at the BoomBustBlog
bothered to run the numbers???!!!
Of course, one must keep in mind that Greece will be trying to tap
the markets out of fiscal need, not want, after a nearly trillion dollar
fiscal bailout fund raised at the behest of the Greek tragedy, and it
will be offering bonds to new investors that are subordinate to the IMF
bailout funds. That means if the shit hits the fan, the IMF scrapes its
cream off the top, and then the other creditors can fight for the
scraps. Given Greece’s current fiscal situation, their reporting
accuracy (ie, honesty), and the fragile condition of everybody around
them, does this sound like a compelling low interest rate environment to
you????Of Course, All Of This Can Easily Be Solved By A Restructuing (they call it a default in Brooklyn)!
The question is when and how? This is what it looked like in Argentina (see A Comparison of Our Greek Bond Restructuring Analysis to that of Argentina)… Price of the bond that went under restructuring and was exchanged for the Par bond in 2005
Price of the bond that went under restructuring and was exchanged for the Discount bond
That’s right! Ouch!
It is highly recommended that our paying subscribers review our haircut analysis for Greece (“With the Euro Disintegrating, You Can Calculate Your Haircuts Here”) and our more likely to occur restructuring analysis for the same (What is the Most Likely Scenario in the Greek Debt Fiasco? Restructuring Via Extension of Maturity Dates).
It is recommended that these scenarios be taken into consideration in light of the info offered in the post “Introducing The BoomBustBlog Sovereign Contagion Model: Thus far, it has been right on the money for 5 months straight!” and compared to the haircut analysis as well.
Relevant Subscription Material (click here to subscribe):
Greece Public Finances Projections
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Reggie my man, are you sure?
Norway is balls deep into investing in Greek debt, raking in MEGA-Yields..... what could possibly go wrong?
You should have a talk with mr. Slyngstad and mr. Johnsen running (well...recklessly gambling away, without any oversight or whatsoever) the Norwegian wealth-fund......There seems to be a lot you don't understand.
"Norway is adament that Greece wont default..." Even Leo's uncle in Greece confirmed everything is fine.
LMAO
When Norway says "There will be no Greek default", they mean, "The ECB and IMF will have no choice but to make us whole on our Greek bonds, as a Greek default would force the disintegration of the EMU."
Leo can sing his song all he likes:
"In Greece it's always hunky-dory
That's my favorite Grecian story
The journey's always smooth for us
Until the wheels come off the bus"
But Argentina looked like a modern country with a broad middle class, right up until the government unraveled, four presidents resigned within a week, and the place turned into a nightmare of crime and poverty. And that was Argentina's seventh sovereign default.
Greece is just entering a very bad stretch of highway, on bald tires.
"California's like a beautiful, wild... beautiful, wild girl on heroin... who's high as a kite, thinkin' she's on top of the world, not knowing she's dying even if you show her the marks. " -The Motorcycle Boy (Rumble Fish)
Substitute any state/country/continent for California.
In this case, Greece.
move 'em off the euro to the gyro...mmm
:((((((((((((((
Viewpoints re: sources of trouble:
Really rich--have no attention, and anticipate not ever having to put attention, on money or assets to fuel personal lifestyle of survival.
Really rich and powerful--Really rich plus have power to select leaders/misleaders.
Really rich and very powerful--Really rich plus have power to select, or snuff, leaders, potential leaders and misleaders.
"never trust in princes nor their promises keep" -- prince Machiavelli
http://covert2.wordpress.com
Reggie, good article. One question I have is when default hits, how is this going to influence the derivatives backing the debt? How do they keep paying on the debt at this current point in time?
When Argentina gets mentioned in the same breath as our current financial conundrum, I get worried. Argentina was 4th world overnight, with many starving to death. It used to be the most prosperous country in South America -- sound familiar -- but it collapsed into poverty and has never really recovered.
What if that same phenomenon went global? Hell, we're one black swan away from just that. Think about it.
Who might benefit if the masses don't get fed? Who might THINK they'd benefit?
Stalin and Mao both used food as a geopolitical weapon, and it wouldn't surprize me to see the psychos at the top create a global famine in order to get people to go along with the system. That would be a huge distraction from the financial scandals, that's for sure. Don't want the rose buds flowering.
This has been mapped out with incredible precision by people or something in a last destructive and evil orgy to put their stamp on the planet, even if that means destroying everything. But this is no accident. Chaos equals opportunity, especially for large corporate interests as Naomi Klien likes to write about. This is a war against the middle class dressed up as a war against some far away boogie man, its just they didn't want to let us know the first volley had been fired.
The middle class is BALLOONING in BRIC countries.
Does anybody really care anymore?
What will be any holder of Greece's debt's excuse when the payments stop?
"Nobody told me?" "I'm the last one to know." "Nobody likes me anymore." "I'm a victim."
Fucktards.
Nice work, reggie. Still amazes me how far the ball can be kicked down the field before comeuppance is due.
+1 on both thoughts.